ML19350A943
| ML19350A943 | |
| Person / Time | |
|---|---|
| Site: | Waterford  |
| Issue date: | 02/15/1980 |
| From: | LOUISIANA POWER & LIGHT CO. |
| To: | |
| Shared Package | |
| ML19350A937 | List: |
| References | |
| NUDOCS 8103170627 | |
| Download: ML19350A943 (29) | |
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P To Our Stockholders and Employees: ever,70% of this income was made up requested by LP&L CWIP is generally of Allowance for Funds Used During regarded in the industry as providini; p'*< _[ Construction ( AFUDC). This non-cash revenues necessary for a company to I item amounted to 545.9 million in 1979, pay financing costs on capital supplied lha , an increase of 514.8 million over IW8. Operating revenues for 1979 totalled by investors for its customers' future elec-tric power requirements. We believe
- 5557.5 million, 22% greater than the revenue for CWIP eventually must be
\ :7 3978 operating revenues of 5456.4 included in establishing fair and reason-million. However, operating expenses able, rates for electric utilities in rose more sharply, amounting to 5483.6 1.outstana, or we will reach a pomt at million,25% more than 1978's operat. which facilities needed for the future ing expenses of 5387.1 million. Chief growth and development of this state The electric utility industry cele- among these spiralling operating simply will not be able to be constnicted.
brated its 100th anniversary in IW9, expenses was purchased power which On January 7,1980. LP&L amended and during the year Loussiana Power cost LP&L $140.1 million in 1979, its application to the New Orleans City .
& Light Company began its 53rd year slightly more than double the 569.7 Council for a rate increase to its cus-of operauon. million spent for purchased power the tomers in Ward 15 (Algiers). This Two important developments oc- preceding year. Fuel for generation amended application requested the curred during the year-the connect- also rose from the $168.2 million in same rates be applied to its Algiers cus-ing of the Company's 500.000th electric 1978 to 5190.2 million in 1979, a 13% tomers that bad been granted by the customer in December, and a measure increase. LPSC, and had the effect of reducing of rate relief which, based on today's For only the fourth time in its his. the Company's originally requested inflationary pressures, is far from tory, LP&L registered a decrease in the 53.2 d.!! ion to 51.3 million. On Feb-adequate. annual kilowatt hour use of electricity ruary 21, 1980, the City Council in closing the Seventics and looking by its average residential customer. granted ,LP&L the 51.3 million re-The average residential customer used quested in the amended application.
to the Eighties, LP&L successfully completed a decade fraught with 13,758 kilowatt hours in 1979, con- The Company's customer count siderably above the national averat;e of reached the 500,000-mark in mid-serious problems and challenges for the Company, chief of which was its finan- 8,826 kilowatt hours, but down 205 December, and ended 1979 at cial situation. Although many of these kilowatt hours from the average resi- 500,710. This was an increase problems remain with us, including the dential consumption for 1978. This 17,326, or 3.6% more than the end critical financial distress, we are cau- decrease is attributed largely to suc- 1978 total of 483,384 customers. T tiously optimistic about the Eighties. cessful efforts by the Company in its increase was due in part to the addi-Promodon of censervation of energy, tion in July of over 2,400 customers in Following the Three Mile Island a nu:d summer, the operation of mume- the Town of Rayville. Citizens of incident March 28, the 1979 Louisiana Rayville had voted in January 1979, by IPal systems whose customer use is legislative session included 12 severely below the LP&L average, and the con- a six to one ratio, for LP&L to serve anti-nuclear bills, which ranged from versi n of numer us master metered electric power to the community. Also, calling for an outright nuclear mora- accounts to individual meters. the Town of Jonesboro held an election torium in Louisiar,a to shutting down in December 1979, voting by a ratio of nuclear generating trations already The Company was granted a 559.6 mne to one in favor of LP&L serving under constructics Acting res;ca. million increase in its electric service rates December 18, IW9-only the the electric needs of its citizens. An sibly, the legislature defeated or second increase in its history. The application has been filed with ,the, cieferred action on all these bills. It did Secunties and Exchange Commission, pass resolutions calling for study com- Iouisiana Public Service Commission, mittees to look into the safe and or* in approving the increase, did not and LP&L should begin operating the allow the Company the additional rev- Jonesboro eteetnc properties before derly development of nuclear power mid-1980. facilities in the state. enue for Construction Work in Progress (CWIP), which the Company had re- A new computer-operated telephon The Company's largest construction quested ,m its rate fihng December 18, system was installed m the Company,e s project,its Waterford 3 nuclear unit at 1978. The Company had asked for a General Office and its three division i Taft La., continued approximately on rate increase of 5114.7 million,but the offices during the year-one which schedule in 1979. The 1,165,000-kilo-watt unit, which will add about 25% LPSC approved only 52% of the promises, to provide n,ot only greater amount LP&L had requested. While commutucations efficiency through-to LP&L's current generating capa- out LP&L, but also to be less expen-bility, is scheduled for completion the, Company appreciated the LPSC facing up to its responsibilities and sive to operate than the previous in early 1982. acting en the Company's rate request, system. Net income of the Company ,m 1979 we were disappointed that the LPSC was 565.1 million, an increase of 511.4 did not see fit to grant the entire re-million over net income in 1978. How- quest, which was badly needed to restore financial health and stability to the Company. *.Ve were particularly disappointed that the LPSC ruling did not include the revenue for CWIP as 2
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I i i The employee benefit program con-tinued to be improved by the Company in 1979. At the end of the year, a total 9' I. 4
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btilities System Savings Plan begun ~ y g '- --^,t
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w __ the Company to contribute 50 cents for j ~" g 4.. 1.~ , each dollar an employee puts into the i i - -*- Savings Plan, up to a maximum of 6% i I Y.y%- of the employee's earnings. The Com- 4 . pany's share of funds contributed to p 4 l this plan in 1979 was $765.000. In November. LP&L provided an 8h% ;(
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I I earnings increase for its hourly em- , jf IP jD }' ployees, and awarded salary increases ! for tl ose employees covered by the - Salary Administration Program. In ) /-S- "*"I .
\ gi 1979 the Company increased pension . '
benefits for LP&L retirees who retired .
\ t i prior to January 1,1978. ' ig_ . -
I' For the fifth consecutive year, LP&L has had the lowest expense per yot W,. PC~' 1 y h. x ; '. y t customer, excluding production ex-penses, among the five operating com-ii wr ' s g .
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_4 , panies in the Mid.lle South System. , i 1'
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This not only indicates the high caliber _ . , i , of LP&L employees, but also theircon- f - O,?", 6 sistently high performance record. Its f.'~ y.g.- ~.s .j 7 '. , employees are obviously the Com- 4'/,-r - .. pany's greatest asset, and are the
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reason for optimism in the years ~j y ?,] ] ,,
. - $4 ahead, despite the problems that ,,
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Mg',a' ~ . W..'L,'N l Projections and predictions forewarn F l of a difficult year ahead as we enter the
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Eighties. The higher cost of borrowed I ? ' 7 '. ' * ' k - -- - , i capital and inflationary price increases i h';?**-
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will demand a conscientious effort from 4' '. all of us to conserve cash and to press ,k y ) ' -
- for rate relief whenever and wherever r* g '
t .- .C D k. - h ' 7 M G- ~ - ' it is necessary. LP&L has weathered economic storms before, and 1980 will be another challenge to our team effort l-( .. Mw .A]i g'- s/- .Vf . a and managerial skills in coping with - - - - - - - --- --- - adverse economic conditions. These Waterford 3 opemtortmi:wes get 2.500 hours of emining before being licensed. For the Board of Directors February 15. i980 L l O N f; d d d )
/ J.M. Wyatt President 3
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c.;i l caa,ie,-a. _ 2t . . . t . ... . ; . l Net Income The Company's net income for 1979 was $65.1 million, an increase of $11.4 million over 1978 net income of 553.7 million. Although this was a 21% f increase,70% of net income was represented by Retail Enerity Sales Allowance for Funds Used During Construction (AFUDC), a non-cash item. In 1978, AFUDC "M oN7s (N obiYrs g amounted to 58% of LP&L's net income. s emiet.... .. .... s.ess 2 st as.4 2 Operating Revenues From Retail Customers CommereleL . . . . . . . . . . . 2.721 4 as.O 2C isenaries. . ...... ... it. ass is 212.s so Operating revenues from retail customers in-e d ....... . 44s n 11.7 sa creased $126 million in 1979-to 5490.9 million in 1979 from 5364.9 million in 1978. This was a 35%
*NcM nm . . . . . . as sse . it seso.s as increase. These sharply increased operating rev-Ope rating Expenses enues were primarily attributable to increased energy sales to industrial customers and higher M, M 'o,Ye, levels of fuel adjustment in customer service bills Feel Peressees ter semerases. .. . . . 31 ss.2 31ss.2 la due to increased Cost of fuel for generation and Power reW . . . . . . . . . . . . . . . 14s.1 ss.7 101 power purchased.
De8evred Feel Ceete. . . . . . . . . . . . . . . . . . (1s.1) - Tese .. ............ . ....... as.7 34.s 14 Operating Expenses Ospre ssaa ........... . ...... 40.s as.4 s
- Pwras esersesse opersees snesene .. 27.s 24.4 is Operating expenses in 1979 totalled 5483.6 mil-omer........................ st.
- s2.4 11 lion, an increase of 25% over the 1978 operating j 7esi..... . . . . . . . . . . . . . . . . seas.s saar. 2s expenses of $387.1 million. Contributing primarily to this increase were sharply increased purchases of l fuel for generation as well as additional power pur-chased from outside sources.
4
l l m Operating Taxes Company spent for purchued power in 1978. This 14 cal, state, and federal taxes in 1979 amounted sharp increase in purchased power resulted pri-to 538.7 million. This was an increase of 54.7 marily fre ti increased demand for electric service million over taxes paid in 1978, a 14% increase. and from 'ditional purchased power required to re-Pl ace oil-a..ed generation. Construction Costs Second Rate Increase The Company's construction casts in 1979 totalled $280.3 million, an increase of 57.4 million . The Company was gras..ed a $59,60'7.000 increase over the 5272.9 million spent on construction in in ts electric service rates December 18,1979,by 1978. During 1979, 5228.5 million was spent in the the Louisiana Public Service Commission. The continued construction of Waterford 3, LP&L's LPSC, which granted the Company only 52% of the nuclear generating facility at Taft, La. Waterford 3 5114,721,000 LP&L had requested in its December was 74% complete at the end of 1979. 18, 1978 filing, did not allow the Company the a na rewnue fr nstructi n W rk in LP&L Now Has More Than Progress (CWIP) which it had requested. 500,000 Customers The increase, which affects all LP&L customers LP&L connected its 500,000th customer in mid. except those in Ward 15 of New Orleans, amounts December, completing 1979 with 500,710 cus. .o approximately 54 monthly, or about 13c a day, tomers, an increase of 17,326 over the custc>mer for LP&L's average residential electric customer. total of 483,384 at the end of 1978. This is a 3.6% In approving the increase, the LPSC directed that increase. This included more than 2,400 new cus- an additional 3.3 mills be added to each kilowatt tomers added when LP&L began serving the Town hour used by residential, commercial, industrial, of Rayville July 27. and government and municipal customers. The rate Energy Sales To Retail Customers increase became effective immediately following the LPSC ruling, and is only the second retail rate Electric energy sales to retail customers in 1979 increase granted in the Company's 52-year history. amounted to 20.6 billion kilowatt hours. This was During that same period, LP&L has put into effect an 11% increase over the 18.6 billion kilowatt hours 29 rate reductions, 9 of which have been major sold by LP&L in 1978. decreases in its retail electric rates. The Company's retail electric service bills, even with this 1979 Average Residential Use increase, are still among the lowest in Louisiana as t At the end of 1979, the average annual use of well as the remainder of the nation. l electric power by residential customers was 13,758 Concerning its customers in Ward 15 (Algiers) of kilowatt hours, a decrease of 305 kilowatt hours from the average of 14,063 kilowatt hours m, 1973. the City of New Orleans, the Company had filed 14tarch 6,1979, for a similar increase in retail rates This decrease was attributed to the successi;l pror otion of energy conservation by the Company and others along with the rising cost of energy and a IJ V i mild summer. In addition, the dilution due to assum- .: -, 9 g % W.jMJ3 ing operation of mumcipal systems whose customer 5t-~ . l use is below the LP&L average as well as the con- .r - version of numerous master-metered accounts to l l individual meters reduced average consumption I considerably. . i 4 . - l LP&L Peak Imad A new LP&L system peak load of 4,091,000 kilo- [ !!i! watts was established at 4 p.m., July 5, topping i.P&L's 1978 peak load of 3,852,000 kilowatts by 6%. ! Fuel for Generation 7 __ j - Fuel purchased for generation of electric power g". Mg by LP&L in 1979 amounted to $190.2 million, an a, ~ % l increase of $22.0 million, or 13%, over the previous ?.. ' ' ; __. A year. Fuel for generation amounted to 39% of the .- Company's 1979 operating expenses. , Purchased Power m Checking system componentsfor the computer being installed
\ In 1979, purchased power cost LP&L $140.1 at waterford 3 are. from left: Joe Langois. Monroe Frasier
. (Q mil' ion-101% more than the 569.7 million the
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to the one it had filed in December 1978 with the -- LPSC for customers under its jurisdiction. LP&L originally had requested 53,191,000 in additional _
% ..d, revenue from its Ward 15 customers. As a result of I" 3,M. . 2 the LPSC ruling, the Company filed January 7,
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,I 1980, an amended application concerning its New '
'(I Orleans customers, decreasing its request to l[fMfQ~[ e 51,298.000 (based on the test year of 1978), or 41% I 'lH 4 /y{lIl )% ) l3 ll of the amount originally requested. This was done Il[ 1[ ;-g-}"' jj j E 3 to bring the rate increase for Algiers customers [W 'a l1[, taet; -
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granted for other LP&L customers in the state. This amended request was granted February 21 [; l I j.. by the City Council of New Orleans and became & effective on all bills rendered on and after February u
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25,1980. .. _,w First Rate Increase ~ M9h--Dl,h.%, QA On November 23,19n, the Louisiana Public Service Commission granted the Company a rate in-
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4 h. crease of 55 million out of the 554 million which , LP&L had requested in the first rate increase it
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Sad ever filed. In addition, the LPSC ordered the 4]g . f g,.y entire increase to be allocated only to the Com- ,, g
- s pany's mdustrial customers.
V \' LP&L appealed the LPSC decision to the 19th % '_ Judicial District Court. In July 1978, the district - court ruled that the Compa.sy should be granted an increase of $13.8 million, but that the increase (FERC), formerly the Federal Power Commission, should be allocated to all classes of customers. In with which LP&L had filed an application for an addition, the district court ordered the Company increase in rates to rural electric cooperatives and to render an accounting of the amount it had col- four municipalities which it serves f'an electric . lected from industrial customers in excess of the power. LP&L filed the application July 29, 1977, amount which would have been collected if the 55 requesting an increase of 57,489.000 from the co-million increase had been allocated to all classes operatives, and $1.055.000 from the four municipal-of customers. LP&L appealed this ruling to the Loui- ities. Among other things, the application from siana Supreme Court, which upheld the district LP&L asked for the inclusion of Construction Work court ruling. in Progress (CWIP) in the rate base on which it ' Based upon the accounting rendered, the district would be allowed to earn a cash return instead of court ordered the Company to refund approxLnate- setting up the non-cash item. Allowance for Funds ly 52.9 million to LP&L's industrial customers. The Used During Construction ( AFUDC). Numerous Company appealed this decision to the Louisiana delays and adverse decisions, still under appeal, Supreme Court and requested that if the refund have prevented LP&L from receiving any ap, reci-order to ind :strial customers was upheld. the Com- able increases regardless of the final FERC decision pany be allowed to recover the amount of the becaus,.: the cooperatives and two of the four mu-refund from other classes of its customers. nicipalities will go off the LP&L system in 1980. The Supreme Court upheld the district court Financing again, and also denied LP&L's request that it be in 1979 LP&L sold first mortgage bonds, pre-allowed to recover this refund from other classes ferred stock, and common stock, resultmg in pro-of customers. The Company's request for a rehear, ceeds to the Company of approximately 5310 ing was denied by the Supreme Court, and shortly '*Ili0n-afterward, the Company credited its industrial customers with approximately 52.9 million, the In M:y, LP&L sold $45 taillior, of 10-year,1073% amount it had collected during the eight months first mortgage bonds at a net cost to the Company of 11.15%. In November, LP&L sold 555 million of of litigation. 30-year,13h% first mortgage bonds at a net cost Wholesale Rate Case of 13.68%. In 1979, the Company fared poorly in its treat- Three issues of preferred stock were sold by the ment by the Federal Energy Regulatory Commission - Company in 1979: 535 million of 11.48%,5100 par 6
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_ ,. f . h 'l ! value,in hierch at a net cost of 11.46% to the Com- amounted to approximately $15,054,000 as of De I pany: 560 million of 10.72%, 525 par value, in July cember 31,1979, and increased net income for 1979 ! at a net cost of 11.27% to the Company; and 540 by 57,765,000. This new procedure more accurately million of 13.12%, 525 par value, in October at a accounts for fuel costs, and allows the Company ; net cost of 14.61%. to recover only the actual costs of fuel used for ! l LP&L's parent, hiiddle South Utilities, Inc., pur. generation. i chased 7,576,000 shares of the Company's common . stock in April for 550 millien, and in October, \\.aterford 3 Construction j NIiddle South purcl ased 3,788,000 shares for $25 At the end of 1979, Waterford 3, LP&L's nuclear i million. e arating unit under construction at Taft, La., was - Proceeds from these sales of stocks and bonds 7c. comp'ete. During the year, an additional four- ! were used for the payment in part of outstanding short. month delay was announced for the tentative l term borrowings, for financing the Companis licensing of the nuclear facility. Slippages in the construction program, and for other corporate pur. overall project schedule were caused by a shortage l poses. Also, LP&L obtained additional funds for its of skilled craftsmen as well as regulatory staffing l construction program through the sale by certain Problems of the Nuclear Regulatory Commission i Louisiana parishes (counties) of tax-exempt, pollu. following the Three 51ile Island incident i- Penn-tion control and industrial development revenue sylvania N1 arch 28,1979. As a result of this delay, ! bonds which totalled 54.3 million, the estimated completion date for the nuclear unit is now February 1982, and the cost is expected to Deferred Fuel Account.mg & about 51.2 billion. Fuel loading is scheduled for In January 1979, the Company received authori- September 1961. ; zation from the LPSC allowing and requiring the Company to credit or charge customers, through the Research and Developinent fuel adjustment clause in future billings, for net Since its beginning, LP&L has invested in research i over or under collections of fuel costs in excess of to find ways to improve the quality and continuity l those hcluded in base rates. Concurrently with this of its service as well as keeping the cost of elec- l change in billing for fuel costs, the Company began tric energy as low as possible. In 1979, the Company ; deferring on its books fuel costs to be collected spent 52,851,000 on research, 52,088,000 of which through the fuel adjustment clause until such went to the Electric Power Research Inststute, prin- l amounts are billed to customers. This deferri.1 cipal research arm of the electric utility industry. I 7 l l l l l - . - _ - . . - . _ . - __ - _ . . . . ._ . _ - - _ _ _ _ _ _ _ _ _ . .
Local research cost LP&L 5549,000 in 1979, with this LECOPA being directed to engineering projects, consumer
, In 1979, a political action committee-Louisiana services, electnc pcwer production, and miscella- Employees Committee on Political Action neous research activities. In addition, LP&L direct-(LECOPA)-was organized by LP&L employees, ed $214,000 toward development of a breeder with 275 salaried employees becoming involved.
reactor, a project under direction of the Edison In just five months, LECOPA generated enough Electric Institute. funds to make meaningful contributions to legisla-Energy Conservation tive candidates LECOPA members wanted elected. A major LP&L objective in 1979 was the con- Mimicipal Developments tinuance of its efforts to assist customers in mak- 1979 was a busy year for LP&L in its efforts to ing the best and wisest use of electric energy. This help Louisiana communities which have operated is a goal the Company has had smce it started in their own electric municipal operations in past business in 1927. Major programs included its own y* Energy Efficient Electric Home and Energy Effi-cient Commercial Building programs as well as the . In January, citizens of Rayville voted by a ratio of industry-sponsored National Energy Watch. A total six to one to accept LP&Us proposal to operate the of 557 Energy Efficient Electric Homes were added I wn's electric utility system. Ap roval was ob-in 1979 along with 68 Energy Efficient Commercial tamed from the Secun, ties and Exchange Com-Buildings. These are included in LP&L's 1979 sales mission, and the Company started operating Ray-of 8,083 total electric living units and 679 total ville's system July 27,1979. In December, Jonesboro electric commercial customers. Also important in v ters passed by nine to one a proposal for LP&L promoting electric efficiency and energy conserva- to operate that community's electric utility system. tion are the Company's Zip Up Your Home pro- An application was filed January 9,1980 with the gram and energy-saving heat pumps. SEC for the Company to operate the Jonesboro system: LP&L ,s t currently awaitmg SEC approval LP&L's Greatest Asset:Its Employees to proceed. While employees of any company are obviously Also during 1979, LP&L made similar proposals important to its successful operations, LP&L is to the Cities of Natchitoches and Ruston, and has especially fortunate to have the high caliber of men agreed to make a similar proposal to Morgan City. and women it has. Its average employee has 12.5 None of these proposals has yet been voted on by years of service with the Company. Among a family the electorates of these communities. of 2,329 employees at the end of 1979, 308 em- Outlook for 1980 playees were promoted dun,ng the year. In an intensive manpower utilization improve- Although LP&L can anticipate continuing infla-ment program, a nationally recognized firm looked tion al ng with unemployment peaking at about carefully into ways the Company might increase the 8% nationally, Louisiana is less likely to feel the efficiency of its operations-a study which con- depth of the expected recession of 1980. In par-tinued into 1979 from the previous year. It dis- ticular, petroleum and petro-chemical mdustries covered few opportunities for increased efficiencies should remain strong. Not much of Louisiana's agri-which the Company had not already put into its cultural production will be affected by President routine operations. LP,:1L will continue to monitor Carter's decision to reduce gram, shipments to the its achievements in this area, and it has appointed S viet Um,on. However, a dismal 1980 appears to be a full-time administrator to conduct a continuing in store for residential construction. High, interest rates may result m a 30% drop in residential study aimed at further improvement in the use of our construction. Company's human resources. In November, LP&L announced an 8%% earnings In 1980, an important political year, the nation increase for its hourly employees, and soon after, faces a tough choice between more mflation and a ward awarded salary increases for its employees in higher degree of unemployment. It appears that the its Salary Adminstration program. In addition, admimstration is presently willing to risk further retired employees who retired prior to January 1, nflation rather than accept higher unemployment. 1978, have been awarded an increase in their pen-sion benefits to assist them in coping with inflation and the rising cost of living. O
f I
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. (Thousands) From Retail Custones s (Mdlions of Collars) l a i1 j 4
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( 1970 71 72 73 74 75 76 77 78 79 i 1970 71 72 73 74 75 76 77 78 79
.; Energy Sales Average KWH Use ! ,. .;s 7e Retan Cnetemets (Bdlions of Kilowort Hours) For Residentiel Customet (Thousands of Kilowatt Hours) 1
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i c a ( , Construction Expenditures Utility Plant 'j; (Millions ofDollars) (Millions of Col:ars) A ,:\ -
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PDDR DRIBlNM 1970 Edison Electric Institute c panies with 1.279 to reach 11.220 Jimmy Carter emerges as a political KWH for its aserage residential figure in Georgia. .LP&L an- customer. . Tex R. Kilpatrick of nounces its decision to build Water- West Ntonroe and H. Duke Shack-ford 3. its first nuclear generating elford of Bonita and J. ht. Wyatt plant then estimated to cost 5230 of New Orleans are elected to million and be completed in 1977 LP&L's Board of Directors. . . E. A. Rodrigue becomes president LP&L begms to see the first of of LP&L as Floyd Lewis is elevated mariy large increases in fuel costs to chairman of the board and re- and the cost of money for first mort-g ey g mains chief executive officer: Lewis also is named president of htiddle gage bonds hits a high mark of 7h*.. . Work begins on LP&L's at the South Utilities. Inc., and htiddle South Services. Inc. . . . Lionel J. Sterlington 7. .The Electric Power g esearch Instituie ,EpRi> is or. Cucullu and Harry hl. England, both ganized and LP&L becomes a char-Seventies ef New orieans. are eiected te LP&L's Board of Directors...J. ht. te, memeer. Wyatt is named senior vice presi- 1973 dent. War breaks out in the Sliddle East 1971 Watergate grabs the headlines... Vice President Agnew resigns and Eighteen year-olds get the vote.. Gerald Ford becomes vice president Anti-Vietnam marches claim na- .LP&L's Customer Service Cen-
m tional attention and 12.000 are ter is operational. . Fuel for genera-
" ., f I3 **
arrested in Washington. D.C. . tion becomes a major expense item of'" ) E. A. Rodrigue becomes president .The Arab embargo prompts a
}g
. and chief executive officer. .Floyd nation-wide appeal for energy con-
+
h h l W. Lewis remains chairman of the board of LP&L. .LP&L is growing servation by President Nixon . . . LP&L inaugurates its Consu
^
11 q, at an annual rate of 10 to 12?. in energy sales...The Company com-Energy Team. .Ninemite Point completed.
/ .. J* pletes its fourth generating unit at
# Ninemile Point and starts work on i 1974 t 3 Waterford 1 and 2... William Nic-f{/ '
\
1{ -[ - Collam Jr., of New Orleans is elected to LP&L's Board of Direc-tors, replacing Lionel J. Cucullu.. President Nixon resigns and is suc-ceeded by Vice President Ford... Nelson Rockefeller becomes the na-d J LP&L acquires a 600 acre site near tion's vice president...U. S. econ-htyrtle Grovein Plaquemines Parish omy ::ontinues to suffer double-
, as a site for a future generating digit inflation...LP&L reaches the a station...The Company's Southern 51 billion mark in total plant in-Control Center in Gretna is com. vestment. .. LP&L's Sterlington 7
- m. / h p!cted and work is started on the Customer Service Center at the is completed... Atomic Energy Commission is reorganized and
/
/ same location. emerges as two separate bodies: the Nuclear Regulatory Commission
? 1972 and the Energy Research and De-
/ .
velopment Commission...LP&L be-g President Nixon visits Red China... Ei nslegalsteps to become a Louisiana Former President Truman dies. corporation af ter having operated as Modem equipment makes line work easier President Nixon and Vice President and safen a Florida corporation since its Agnew are reelected by a landslide begi ming in 1927. . . LP&L ex-
...Floyd W. Lewis steps down as periences its first decline (345) in chairman of the board of LP&L and kilowatt-hour consumption in 22 becomes president and chief execu- years. .The Company is finally tive officer of htiddle South Utih- awarded a construction permit for ties. Inc.. and Middle South Serv- Waterford 3 after nearly 4 years of l
ices. Inc. . . . LP& L registers the
, delay, and the Company anncunces second largest merease m res,iden- plans t.) build two more nuclear tial kilowatt-hour sales among units at St. Resalie plantation in l Plaquemines Parish.
( '
l P00R ORIGINAL 1975 requesting sii4.7 million in addi-tional revenues. . James hl. Cain of e.' Vietnam and Cambodia fall to the New Orleans is elected to LP&L's i communists...The cruise missile is Board of Directors, replacing
- l added to the Il. S. defense arsenal. . . William AlcCollam, Jr.. .LP&L i n .
Waterford I and 2 are completed, begins operating the electric systems ? LP&L cancels its plans to build the of Alonroe and Homer...The halfway "I i l two St. Rosalie nuclear units be- mark is passed on Waterford 3 I
' . . s'N cause of severe price escalation as construction. i well as anticipated environmental '
p and regulatory delays...LP&L be- 1979 comes a Louisiana corporation... louisiana Public Service Com. LPSC finally acts on the Company's mission orders monthly hearings on second rate increase, awarding the 73
~ ~
utility fuel adjustments. Company only 52% of its request for rate relief... Louisiana elects its 1976 first Republican governor. David C. Treen. in 103 years...LP&L reaches ':
~~-.
i Jimmy Carter narrowly defeats the $2 billion mark in plant invest-Gerald Ford to become president of ment.. ?ther accomplishments of the United S tates . . . U.S. con- our Company are reported on other tinues to increase its reliance on pages of this annual report. -
*?""
foreign oil and watches oil can' The cidplantation bellstands infront of the tinue to rise in cost. .. United Waterford 3 administration building. com-States celebrates its bicentennial.. plated in 1979. i LP&L files for its first rate increase in Company history... Lake Provi-dence and Thibodaux vote to ap- ,, _ _ _ _ ,
- i. c_ _ ,r_
prove operating agreements with
, . . . , - 3 p C. y;. . PO.g i.pg,,c-
, Q #f . ; ; , g our Company. .J. St. Wyatt be- : j. ,i *'
comes LP&L president and chief %- y - W, ~^ wh .c -
;esecutive officer...E. A. Rodrigue 70.' ' 'WO c#
becomes chairman of the board. ~~ ;
% ~
., . + , p -- .~ ?.
1977 N / . i_f # 'h
. -. ~
g g-Inflation continues to be responsible er for higher fuel and energy costs.. -"'T .
'p
~
A tax revolt develops in California
- f- _
l over Proposition 13. .LPSC finally s E i ! acts on LP&L's request for rate relief granting the Company only - h e-C3 ., 7p R( . "" B ' ( , ?# "~" i l
~(-
6% of a requested $54 million and q s LP&L is forced to appeal the LPSC g ,4 _ f. 1 Cl ' . . decision to the courts...LP&L d / - l observes its 50th anniversary with a 2 ~..
~
{
,.= S.. h ,
% u.'.. M eg l commemorative history of the Com- g e WA ' 5 pany...E. A. Rodrigue retires as ';( %
chairman of the board... Gerald : M '
- I hicLendon becomes senior vice I president... Citizens of Homer and * - f N" - p <.,_ = =- - --
Stonroe vote to join the family of communities served by LP&L Custor.;er service lecter Larry Steinkamp dis. usses a response procedure with customer service operator Bess McGuire. 1978 The American dollar continues to buy less and less and LP&L sees the . cost of financing construction con- i j tinue to rise. .LP&L is compelled I to apply for a second rate increase. u l l
--- -. ---y-- ..e+ .,n.- - - , ,9 -,-g -- ,.g -
RECORD OF PROGRESS 1%9-1979 1979 1978 1977 Estimated population served. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I,509,000 1.455,C00 1.345,000 Electric customers-year end R eside n tia!. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443.527 4 K938 395.479 Comm e rcial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,848 44.884 404)96 Ind ustrial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,162 7.518 Other.................................................. ....... 3.173 3N4 7.651 2.770 Total electric customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,710 483.384 445,996 E!actric operating revenues ($000) Resiential. . . ................................ .....<.... 3 180.364 5 146.326 5 124.500 Com me rcial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,983 68.328 55.398 Ind ustrial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,853 141.803 114.874 Other.................................................. ......... 78.276 99.918 84.179 Total electric operating revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . S 557,476 5 456.375 5 378.951 KWH sales (millions) R esiden tial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,996 5.862 5.334 Co m me rcial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... .... 2i/21 2.624 2.268 I nd ustrial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.388 9,685 9.028 Other................................................. ....... 3.147 4.541 4.322 Total sal e s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.252 22,712 20.952 Residential customer data Average annual use-KWH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,758 14.063 13.680 Average annual revenue per KWH. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.01c 2.50c Commercial customer data Average annual use KWH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59.363 60.498 57,502 Average annual revenue per KWH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.16c 2.60c 2.44c Peak System demand (MW). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,091 3.852 3,515 System input (KWH in millions) G e n e ra tio n. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,429 21.251 20,204 Pu rchased power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5J@0 2.799 ,,, 19Q1 Total system in pu t. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,289 24.050 22,105 Fuel cost for generation (5000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 190,226 5 168.117 5 141.236 Generating capability (MW). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,612 4,603 4,447 Heat rate BTU Per KWH generated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,625 10,185 10.202 Gross electric plant (5000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,069,106 51,792.952 31.509,785 Capirstiration (5000) long-t erm de b t. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S 827,430 5 728,748 5 566.315 Pre ferred stoc k. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238,872 110.809 110.809 Co non stock eq uity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487.441 417.192 363.763 Total capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.5 53.743 S I _25%7,4.2 51 N O.887 Em ploy ees year end. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,329 2.216 2.129 0
N 1776 1975 1774 1773 1972 1971 1970 1%9 1,3N,000 1,250,000 1,225,000 1,187,000 1,150,000 1,130,000 1,115,000 1,100,000 384.213 366,242 356,479 346,088 334,375 318,740 308,056 298.570 38,632 36,166 35.014 33,839 32.608 31,254 30,735 30,035 6,586 5,824 5,424 5,733 6,333 5,872 4,777 4.306 2.634 2.4% 2.425 2313 2.247 2.167 2.099 1.950 432,065 410,728 399,342 387.773 375,563 358,033 345,667 3M,861 5 93,712 5 87,319 5 85,791 5 78,809 5 71,622 5 61,292 5 56,093 5 51,150 e1,505 39,789 3 8,05,2 34,N9 30,793 27,384 24,990 22,778 77.278 64,366 65,264 53,453 44,827 37,682 34,878 32,535 117.782 72.850 53.605 , 43.085 34.980 27.285 22.885 22.722 5 331,277 5 264,844 5 242,752 5 209.3 % 5 182,222 5 153,643 5 138,846 5 129,185 4.597 4,346 3,956 3,951 3,664 3,105 2,814 2,536 1,965 1,2,52 1,671 1,596 1,468 1,298 1,168 1,043 8,068 6,600 6,133 5,823 5.215 4,482 4,292 4,018 6.921 6359 6.73 _ 6.627 5.576 4.565 4.743 5.681 21,551 19,157 18,548 17,997 15,923 13,278 13.450 13J067 12.328 12,028 11,249 11,594 11,220 9,H1 9,239 8,579 2.04c 2.02c 2.17c 1.99c 1.95c 1.97c 1.99c 2.02c 53,115 51,940 48,447 47,986 45,865 42,286 38,241 35,0M 2.16c 2.15e 2.28c 2.13e 2.10c 2.11c 2,14c 2.18e 3,180 2,883 2,692 2.563 2,389 2,096 1,872 1,779 21,541 18,931 17,904 17,832 15,768 12,8M 9,669 10,663 1.077 1.154 1.594 1.034 1.145 1.464 4.081 3361 22,618 20,085 19,498 18,866 16,913 14,271 13,750 11.024 5 135,211 5 85,134 5 7(,846 5 56,597 5 41,760 5 27,878 5 19,955 5 21,271 4,392 4,346 3,569 3,481 2.580 2,654 1,887 1,892 10,036 10,198 10,345 10,198 10,105 10,199 10,160 10,2M
$1,309,439 51,172.911 51,(T77,798 5 933,393 5 826,139 5 729,064 5 657,734 5 584,363 5 575,809 5 519.088 5 468,987 5 389,186 5 342,197 5 292,197 5 267,197 5 247,197 80,776 80,776 80,776 70,760 70,760 60,720 50,678 43,654 332.725 3073Al 247.174 235.2"6 208.914 177.768 159.577 __140,12) 5 989310 5 907.225 5 796.937 5 621.871 5 530.685 5 4M.974 5 695l@ J_477A52 2,118 2,104 2,0rM 2,090 2,003 1,962 1,395 , 1363
,Ch > l M , 13
a
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES A. System ol Accounts amounted to approximately 3.5% on average de-The accounts of the Company are niaintained in Preciable property in 1979 and 1978. accordance with toe system of accounts prescribed by the louisiana Public Service Comn.ission (1.PSC) D. Pension Plan which substantially conforms to that of the Federal The Company's pension plan is non-contributory Energy Regulatory Commission. and covers substantially all employees. Pension costs in 1979 and 1978 amaunted to $4,654.000 and C. Revenues 53,639.000, respectively, including amortization of The Company records revenues as billed to its unfunded prior service costs over remaining periods customers on a cycle billing basis. Revenue is not up to 27 years. The policy of the Company is to accrued for energy delivered but not billeJ at the end fund pension costs accrued. Assets of the plan are in of the fiscal period. The rate schedules of the Com. excess of vested benefits. pany include fuel adjustment clauses under which fuel costs above or below the levels allowed in the E. Income Taxes various rate schedules are permitted to be billed or The Company joins its parent in filing a consolidated required to be credited to customers. Federal income tax return and income taxes are in January 1979 the Company received authoriza- allocated to the Company in proportion to its con-tion from the LPSC allowing and requiring the Com- tribution to the consolidated tax liability. pany to credit or charge customers through the fuel Deferred income taxes are provided for differences adjustment clause in future billings for net over or between book and taxable income to the extent per-under-collections of fuel costs in excess of those in- mitted by the regulatory bodies for rate-making cluded in base rates. Concurrently with this change in purposes Investment tax credits allocated to the billing for fuel costs, the Company commenced de- Company are deferred and amortized b95ed upon the ferring on its books futi costs to be collected through average usefullife of the related property beginning the fuel adjustment clause until such amounts are with the year allowed in the consolidated tax return. billed to customers. The effect of the deferral of fuel costs, net of deferred income taxes, was to increase F. Allowance for Funds Used During Construction net income m 1979 by 57,765,000. In accordance with the regulatory system of ac-counts, the Company capitalizes, as an appropriate C. Utility Plant and Depreciation cost of utility plant, an allowance for funds used Utility plant is stated at original cost. The costs of during construction. This allowance (a non< ash item) additions to utility plant include contracted work, represents the net cost of funds used to finance direct labor and materials, allocable overheads, and construction. The effective rate of such allowances an allowance for the composite cost of funds used was 6.94% in 1979 and 6.75% in 1978. during construction. The costs of units of property ! retired are removed from utility plant and such ecsts G. Reserves plus removal costs, less salvage, are charged to ac-it is the pob,ey of the Company to provide aerves cumulated depreciation. Maintenance and repairs of for uninsured property risks and for claims for injurt:s property and the replacement of items determined to and damages through charges to operating expense be tess than units of property are charged to operating on an accrual basis. Accruals for these reserves have expenses. Substantially all of the utility plant is subject been allowed for rate-making purposes. Effective in to the lien of the Company's mortgage, January 1979 the Company commenced recognizing Depreciation is computed on the straight-line basis deferred income taxes on these reserves. at rates based on the estimated service lives of the various classes of property. Depreciation provided O I
N STATEMENTS OF INCOME For the years ended December 31,1979 and 1978 79 78 (In Thoanands) OPERATING RE VENUES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $147.476 5456J7,5 OPERATING EXPENSES: Operation: Fa el. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190.226 168.177 Pu rchased power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140.111 69.730 O th er. . . . . . . . . . . . . . . . . . . . . . . . . ... .................... .......... 38.318 43.430 Maintenance. . . . . . . . ................................................ 31.269 29.213 Depreciation. . . . . . . ................................................ 40,863 38.389 Amortization of property losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,101 4.101 Taxes other t han income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.977 14.106
'vome taxes (Note 1). . . . . . . . . . . . . . . . . . . . . . . .......................... 22.750 19.919 To tal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481615 7 065 O PERATING INCO M E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,861 69.310 OTHER INCOME:
Allowance for equity funds used during construction. . . . . . . . . . . . . . . . . . . . . . . . . . 30.722 20.823 Miscellaneous income - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.920 2.422 Income taxes (Note 1). . . . . . . . . . . . . . . . . . . . . . ........................... 11.751 9,058 Teat........................................................ 47.393 JR INTEREST CHARGES: fN) g Interest on long term de bt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.263 Other int erest - nu. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.993 51.959 U 6.166 Allowance for borrowed funds used during construction. . . . . . . . . . . ........... I15,131) (10.256) Total......................................................... 56.125 47.869 N ET INCO M E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S 65 129 5 53,744 3 STATEMENTS OF RETAINED EARNINGS For the years ended December 31,1979 and 1978 RETAINED EAttNINGS, January 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S 63,292 5 59.863 AD D - Net inco me. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65.129 53.744 Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128. 4 21 113.W7 DEDUCT: Dividends-cash: Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,749 8.138 Commo n stoc k. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.673 42,1 % Capital stock ex penses. etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458 13 Total.......................................................... 69.M0 50.315 RETAINED EARNINGS. December 31 (Note 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S 58,541 5 6A292 See Noses to F1mancial Senseuseets. A -
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O BALANCE SHEETS December 31,1979 and 1978 N.3ETS 79 78 Ila nomaandsi UTil.ITY PLANT: Elec t ric plan t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,237,269 51,193.456 Construction work in progress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 831.837 599.4 % To tal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,069,106 1.792,952 Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353.994 317.583 U tili ty plant - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.715.112 1.475.369 OTHER PROPERTY AND INVESTMENTS: Investment in associated company-at equity (Note 4). . . . . . . . . . . . . . . . . . . . . . . . 36,997 20.802 Other.............................................................. 382 358 Total....................................................... 37.379 21.160 CURRENT ASSETS: 11,078 13.559 Cash ( No t e 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S pecial deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,289 10.015 Temporary cash investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 - Not e4 receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 938 698 Accounts receivable: Customer and other-less allowance for doubtful accounts of5135,000.............................................. 26,267 17,651 Associated com panies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 64 Deferred fuel costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,054 - Materials and supplies-at average cost. . . . . . . . . . . . ...................... 10,795 8.04' Pre payme n ts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 1,020 1.220 Other............................................................. 3.955 2.923 Total............................................,.......... 87.4 % 54.173 DEFERRED DEBITS: U namortized debt expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,378 2.354 Extraordinary property losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- 4.101 Total....................................................... 2,378 6.455 TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M& M65 Sjl.15,_d52 5 See Nosee to Mt Sassensents.
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79 78 LIABHJTIES (In Thomsends) CAPITALIZATION: Common stock, no par value: authorized,1979-150,000,000 shares: 1978-100,000.000 shares: outstanding, 1979 - 65.140,000 shares: 1978 - 53.776,000 shares.........................$ 428,900 5 353.900 58.541 63.292 Retained earnings (Note 3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487,441 417,192 Totst common shareholder's equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,809 145.882 Preferred stock and premium, without sinking fund (page 18) . . . . . . . . . . . . . . . . . 92,990 - Preferred stock and issuance expense, with minking fund (page 18). . . . . . . . . . . . . . 827.430 728.748 long-term debt (page 19). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5 5 3.743 1 256.749 Tota 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CURRENT 1.1ABII.ITIES 11,871 1.783 Currently maturing long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes payable (Note 2): 32,375 59,675 Banks............................................................ - 24,415 Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable: 22,902 7,757 Associated companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,698 e.268 t Other............................................................ Customer deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,159 3,459 11,837 1,485 Tax es accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,289 - Accumulated deferred income taxes (Note 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,825 17.727 Interest accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,156 2.027 Dividends declared. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634 545 Other............................................................., 154.368 170.519 Total......................................................... DEFERRED CREDITS: 91,221 Accumulated deferred income taxes (Note 1). . . . . . . . . . . . . . . . . . . . 28,382 . . . . . . . . 90.032
.29,400
. .I Accumulated deferred investment tax credits (Note 1). . . . . . . . . . . . . . . . . . . . . . . . 7.729 5.602 l Other..............................................................
127.332 125.034 Total......................................................... 6,922 4,855 RESERVES......................................................... COMMITMENTS AND CONTINGENCIES (Note 4) TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81.842.365 51.557.157 Se e Neees to P1mmacial 5 a=*=--===
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17 1 l l 1 1
O SCHEDULES OF PREFERRED STOCK 79 78 Current Call Price Shares Outstanding Per Share Cumulative, $100 par value, authorized,4.500,000 shares Without sinking fund: 4.%%......................................... ........ 60,000 60.000 51N.25 4.16%............................ ..................... 70,000 70,000 IN.21 4.44%.................................................. 70,000 70.000 IN.06 5.16%.................................................. 75,000 75,000 104.18 5.40%.................................................. 80,000 80,000 103.00 ' 6.44%.............................................. ... 80,000 80,000 102.92 9.52%.................................................. 70,000 70,000 108.% l 7.34%................................................. 100,000 100,000 1M.70 7.36%. . . . . . . . . . . . . . . . ................................. 100,000 100.000 1M.M 8.56%.................................................. 100,000 100,000 1M.42 9.44%. . . . . . . . . . . ............................ ......... 300,000 300,000 111.44 11.48%.................................................. 350.000 None 113.98 To tal. . . . . . . . . . . . . . . . . . . . . . . . . ..................... 1.455,000 1.105.000 Cumulative,525 par t.due, authorized. 12,000,000 shares With sinking f:md*: 10.72%....................................... . . . . . . . . 2,400,000 None 27.68 13.12%.................................................. 1.600.000 None 28.28 Tota!. . . . . ......................................... 4.000.000 None Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,45 5,000 1.105.000 (in nousamb ! Without sinking fund: 1 S tated at 5100 a share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 145,500 5 110.500 Premium. . . . . . . . . . . . . . . . . . . . ........................... 382 309 Total preferred stock and premium without sinking fund. . . . . . . . . S 145.882 5 110,809 With sinking fund: S tat ed a t 525 a share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 100,000 - Issuance expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.010) - Total preferred stock and issuance expense, with sinking fund. . . . . S 92.990 -
'These series are to be retired in full through the series is to be redeemed at the rate of 120,000 shares operation of sinking funds at a redemption price of each year through 2003. Beginning October 1,1984 525 per share plus accumulated dividends to the date the 13.12% series is to be redeemed at the rate of of such redemption. Beginning July 1,19M. the 10.72% 80,000 shares each year through 2003.
See Notes to FImancial Statenients. l G
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SCHEDUIES OF LONG-TERM DEBT f i FIRST MORTGAGE BONDS: 79 78 (la "Il-m i) Series Due 3% 1980.................................................. - 5 9.900 9%% 1981...... .........................................S 50,000 50.000 9%% 1983... ........... ...... .. ..................... . 50,000 50,000 3%% 1984............... ................ ................. 18,000 18,000 9% 1986............ ............ ....... ................ 75,000 75.000 4%% 1987..................... ............ .............. 20,000 20,000 10%% 1989. ............... ................. ............. 45,000 - 5% 1990........ ......................................... 20,000 20,000 4%% 1994................................... .......... .. 25,000 25,000 5%% 1996..... .. ... ........ ............................ 35,000 35,000 5%% 1997...... ......... .... ............................ 16,000 16.000 6%% 1997.................................................. 18,000 18,000 7%% 1998.................................................. 35,000 35,000 9%% 1999...... . .. .............. ....................... 25,000 25.000 9%% 2000...... ........................................... 20,000 20,000 7%% 2001. ................. .. .......... ........... .... 25,000 25,000 7%% 2002.. ..... ............ ...... ..................... 25,000 25.000 7%% 2002.......... ....... ............................... 25,000 25.000
/ 8% 2003................... ............................. 45,000 45,000 (NV), 8%%
8%% 20M............ ....... ..................... ....... 2006................. ..... .......................... 45,000 40,000 45,000 40,000 10 % 2006............................................... .. 60,000 60,000 13%% 2009.............. . .. ...... ... ............ 55.000 - Total first mortgage bonds (annual sinking fund requirements, which may be met by certification of property additions at the rate of 167% of such requirements amoum to $6,720.000 for 1980). . . . . . . . . . . . . . . . . . . 772,000 681,900 OTHER: Principal amount of municipal revenue bonds-1%%-8% due serially, 198120N and i other obligations. . . . . . ........................................ 39,473 39,681 Pollution control and industrial revenue bond obligations. 6.40%-8% due 1938-2009 (net of $1,333,000 held by trustees at December 31, IW9: 51,632,000 at December 31,1978). . . . . . . . . 14,967 5,368 Unamortized premium and discount on long-term debt. . . . . . . . . . . . . . . . . . . 990 1.799 TOTAI.......................................................S 827.430 $ 728.748 See Notes to Fl===d=3 Sameensents. m / \ t l - v 19
O: STATEMENTS OF SOURCE OF FUNDS l l FOR UTILITY PLANT ADDITIONS i For the years ended December 31,1979 and 1978 79 78 (In nousands) SOURCE OF FUNDS: From operations: Ne t income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S 65,129 5 53,744 Depreciation. . . . . . . . . . . . . . . . . . . . . . . . .......... ....... .. ...... . 40,863 38.389 Amortization of property losses. . . . . . . . . . . . . . . . . . . . . . . . . ... .. ........ 4,101 4,101 Deferred income taxes and investmem tax credit adj ustments - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... ......... 10,8 % 4.915 Allowance for funds used during construction. . . . . . . . . . ........... ........ (43.853) (31 M9) Total from operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,136 70.070 Dividends declared: Pre fe rred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... (16,749) (8,108) Commen stoc k. . . . . . . . . . . . . . . . . . . . . . . . . . ...................... .... (52.673) (42.194) Funds retained in business. . . . . . . . . . . . . . . . . . . . . . . . . ................ 5,714 19,768 From (increases) decreases in working capital (excluding short-term securities, currently maturing long-term debt and deferred income taxes included in current liabilities). . . . . . . . . .. ..... .. .... (7,136) 3,187 Investment in associated company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ (16,195) 1.7'O Other-net. . . . . . ..................................... ... . ......... 979 2.3c6 Total.......................................................... (16.638) 27.101 From financing transactions: Common stock. . . . . . . . . . . . . . . . . . . . . . . . ............................ 75,000 50.000 Preferred stock. . . . . . . ............. ...... . ......... .......... . 128,M3 - First mortgage bonds: Issues. . . . . . . . . . . . . . . ..............................
. . . . . . . . . . . . . 100,000 135,000 R e tireme n ts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......
- (10,000)
Othe r long-term de bt - ne t. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,579 29.017
- 13,044 Sale and leaseback of nuclear fuel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term securities-net. . . . . .. ...................................... (59.715) 23.923
- To tal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.927 240.984 TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 236.289 5268.085 UTILITY PLANT ADDITIONS (excludes allowance for funds used during construction)
Construction expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3234,493 5242,269 Other plant . additions. . . . . . . . . . ........................................ 1.7 % 25.816 TOTA L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 236.2 89 5268,085 See Notes to Timancial Statemeets. O
l l i LOUISIANA POWER & LIGHT COMPANY Y []n
\ %SENOTERI'GFINANCIXIESTATEME@
- 1. INCOME TAXES Income tax expense consists of the following:
1979 1978 (In Thousands) Current: Federal. . . . .$ 1% 5 5.149 State. .. (3) 797 Total. , . . 103 5.946 Deferred-Net: Uberalized depreciation. 7.674 8,494 Deferred fuel costs. . ... . 7.289 - Amortization of property loss. . (1.986) (1.986) Other. ... ... (1.062) (388) Total.. .... . . 11.915 6.120 Investment tax credit adjustments-net. (! .019) (1205p Total income taxes. . . . . . . 510.999 510.861 Charged to operations. . . . . . 522.750 519.919 Credited to other income. . . . . (11.751) (9.058) Total. . . .. . . . 510.999 510,861 i Total income taxes differ from the amounts computed income before taxes. The reasons for the differences are as by applying the statutory Federal inecme tax rate to follows: l 1979 1978
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k g (la Thousands)
% of % of
( ) Pre. Tax Pre. Tax (,/ Amount Income Amount Income Computed at statutory rate. , ........ . . .. . . 535.019 46.0% 531.011 48.0% Increases (reductions) in tax resulting from: Allowance for funds used during construction. . . . (21.092) (27.7) (14.918) (23.1) Taxes capitalized on books and deducted on tax returns. .. (1.797) (2.4) (1,799) (2.8) Other-net. . . . . .. . . .. (1.131) (1.56 f3.433) ( 5.3) Recorded income tax expense. , . . . . ... . ., . 510,999 14.4*. 510 R61 16.8% Unused investment tax credits at December 31, 1979 the basis of such credit contributed. Effective in 1979 amounted to 566,140,000, of which 510,130,000 may be the method of allocating investment tax credit was changed carried forward through 1984, 524,269,000 through 1985 so that it is allocated on the basis of each company's portion and $31,741,000 through 1986. of the consolidated tax liability; any additional credit Prior to 1979 the investment tax credit utilized in the ut3ized is allocated on the basis of the remammg tax credits. consolidated tax return was allocated to the Company on l 2. SHORT. TERM BORROWINGS The Company has arrangements with certain banks and December 31,1978) with respect to the amount of its loan a commercial paper dealer providing for short-term borrow- commitment and/or vath respect to the amount of its loans ings of up to 3150,000,000 (5120,000,000 in 1978). Accounts to the Company outstandmg, but m no case does any are maintained with tin Louisiana tending banks and, compensating balance o- the total of such compensating although immaterial bal:nces in some of these accounts balances so required exceed 20%. The amount of unused may be deemed to be compensating balances, most of these short-term borrowings as of December 31,1979 was accounts are working accounts and fluctuations in their 5117,625,000 ($35,910,000 as of Decemher 31,1978). l , balances do not reflect or depend upon 11uctuations in The short-term borrowings and the applicabia interest the amounts of bank loans outstanding. Each of the non- rates (determir.ed by dividing applicable interest expense Louisiana lending banks requires a compensating balance by the average amount borrowed) for the Company were 'a (511,862,500 at December 31,1979 and $12,950,000 at follows as indicated at top of following page: l \v} - l 21 l (
1979 1978 (Tn ThousaEsi Maximum aggregate amount outstanding. . .. .. .. . 5114.628 584.090 Average borrowing: Bank loans. . . . . . . . .. . .. . 5 52,773 522,340 Commercial paper. . .. . .. . . . . 5 29,503 528,476 Average interest rate during the period: Bank loans. . . . .. . . .. . ... ... 12.1% 8.8% Commercial paper. . . . ... .. .. .... . . . . 11.5% 8.8% Average interest rate at end of period: Bank loans. . . . . . . . . . .... . . .. .. .. . 15.3 % 11.8 % Commercial paper. . . . . . .. .. .. ... ... . - 11.5 %
- 3. RETAINED EARNINGS The indenture provisions relating to the Company's long- dividends on common stock. As of December 31, 1979, term debt provide for restrictions on the payment of cash 544,419.000 of retained earnings are free from restrictions.
- 4. COMMITMENTS AND CONTINGENCIES The Company's construction program contemplates ex- and costs of capital and,in return, will receive the power penditures of approximately 5284,936,000 in 1980. available from MSE's Grand Gulf Plant. The completion dates of the two units of the Grand Gulf Plant, on which The Company has a 33% interest in System Fuels, Inc.
(SFD, a jointly-owned subsidiary of four of the principal 51.4 billion has been expended through 1979, were changed operating subsidiaries of Middle South Utilities,Inc. SFI by MSE in December 1979 to 1982 and 1985 from 1981 and operates on a non pront basis in plaruung and implementing 1984, respectively. Under certain circumstances, payments programs for the procurement of fuel supplies for the may be required to be made commencing December 31, generating units of these operating companies: its costs are 1982 if the first unit of the Grand Gulf Plant has not been primarily recovered through charges for fuel delivered. completed by that date. The CompanyN liability under these arrangements is not prospectively determinable. To finance, in part, its fuel supply arrangements, SFI has entered into various loan agreements with the SFI On June 1,1978, the Company sold its interest in a stockholders. As of December 31,1979 the Company had supply of nuclear fuel for 58.210.000, representing cost, loaned 536,990.250 to SFI pursuant to the loan agreements. and simultaneously entered into a 560,000,000 nuclear fuel Such outstanding loans have various maturities through lease. Lease payments, based on nuclear fuel used, will be December 31,2004. At January 1,1980 the loan agreements treated as cost of fuel. The lease, unless sooner terminated authorized SFI to borrow from its stockholders up to by one of the parties, will continue through June 1,2028. 5213,000,000, and the Company's share of the unused loan The unrecovered cost base of the lease at December 31, commitment is approximately 550,310,000. 1979 was $13,425,000. Other lease commitments are not sigmficant. in connection with certain financing arrangements by SFI totaling 594,723.000 at December 31,1979 the Company The Federal income tax returns for the years 197' and the other SFI stockholders have covenanted and agreed through 1976 have been examined by the Internal Revenue reverally in accordance with their respective shares of Service (IRS) and adjustments have been proposed. The owriership of SFI's common stock, that they will take any principal issue is whether customer deposits are includable i l and all action necessary to keep SFI in a sound financial in taxable income. A formal written protest has been filed conditiori and to place SFI in a position to discharge, and and conferences are being held with an Appeals Officer to cause SFI to discharge, its obligations. of the IRS. Any final liability for taxes resulting from ement wMi the IRS would not have a rnaterial eHect on I SFI has ei.tered into a contract with a joint venture for a net inc me. Inc me taxes on customer deposits would be supply of cod from a mine to be developed in Wyoming n rmalized. Most of the other issues have been settled and ! which is expected to provide 150 to 210 million tons over a adequate provisions have been recorded. l period of 26 to 42 years. The Company made a filing with the Securities and The Company, together with the other Middle South , Exc,hange Commission for the purpose of obtaining author-System operating companies,is obligated under arrange- izau n t sell 15,152,000 shares of common stock, no par ments with Middle South Energy, Inc. (MSE) to make value, t its parent company for $100,000,000 dunng 1980. l payme,ts adequate to cover a!! of MSE's operating em l
$. TRANSACTIONS WITH AFFILIATES l
The Company buys from and sells electricity to the Operating revenues include revenues from sales to l operating subsidiaries of Middle South Utilities, Inc., its affihates amounting to 529,366,000 in 1979 and 541,655.000 l parent, under rate schedules filed with the Federal Energy in 1978. Operating expenses include fuel cost and purchased i Regulatery Om=M=.1n addition, the Company pm diases power charges from affiliates totalling $158,788.000 in 1979 fuel from System Fuels, Inc. and 5119,408,000 in 1978. 22
. ._-- - . . ~ - - _ _
f [ (
- 6. QUARTERLY RESULTS (Unaudited)
Unaudited operating results for the four quarters of 1979 and 1978 follow: Ouarter Ended March 31 lune 30 Scot. 30 Dec. 31 , 1979: tin T~oousands; Operating revenues (n). . ....... . .. .. . .. .. . . . 5109.885 5121.435 (b) 5169,192 5156.964 Operating income (a). . . . ........ ... . ... . . .. . 20.973 15.525 (b) 22.668 14,695 Net income (a). . . . . . . . . . . . . . ....... ....... ... . . 17.031 12.569 (b) 20.966 14.563 1978: i Operating revenues. . . . . . . . . . ..... ...... . . . . $112.993 5 88.757 5148,957 5105,668
- Operating income. . . . . ..... .... ....... .. . . 13.692 4.195 28.368 23,055 Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... .. 9,0(T7 639 24,432 19,666 (c) l In the opinion of the Company. these operating results (c) A reductioninincome tax expense of 51.730,000was include all adjustments necessary for a fair representation recorded in the fourth quarter of IM8 for the excess of the amounts shown. Such adjustments consist of only taxes proMded for the years 1%7 through 1770 over normal recurring accruals except for the following: the settlement amount reached with the Internal (a) Reference is made to Note B of the Summary of Revenue Service.
i Significant Accounting Policies with respect to the The business of the Company is subject to seasonal l deferral of fuel costs. fluctuations with the peak period occurring during the
! (b) A refund of $2.880.000 to industrial customers was summer months. Accordingly, earnings information for any I made in the second quarter of 1979 pursuant to a three-month period should not be considered as a basis of rate-making proceeding. estimating the results of operations for a full year.
I i 1
- 7. CHANGING PRICES (Unaudited)
'l' The following supplementary information about the Changing Prices"(FAS No. 33). It should be viewed as an effects of changing prices on the Company is provided in estimate of the effect of changing prices rather than as a accordance with the requirements of Statement oi Financial precise measure.
Accounting Standards No. 33. " Financial Reporting and
. (3 s Statement of Income from Operations and Other Financial Data Adjusted for Effectsof Changing Prices For the Year Ended December 31.1979
- l. (In Thousands) t As Reportedin Adjusted for Adjusted for Changes
( the Financial GeneralInflation in Specific Prices
, Statements (Constant Dollars) (Current Costs)
! Operating Revenues. . . . . . . . . . . . . . . . . . . . . . . ..... 5557.476 5557.476 (a) 5557.476 (a)
I Operating Expenses (excluding depreciation). . . . . . . . .. 442.752 442.752 (a) 442.752 (a)
! Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.863 84.144 8pp9)
! I Total Operating Expenses. . . . . . . . . . . ............. 48h61) 526.896 577 #47 l 1 Operating locome. . . . .......................... 73.861 30.580 29.629 l ! Other income. . . . . . . . . . . . . . . . . .. .... ........ 47,393 47,393 (a) 47,393 (a) , I
- Interest Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56.125) (56.125Xa) (56.1251a) 1
! Income from Operations l
, (excluding reduction to net recoverable cost). . . . . . . . j,,9),g $ g (b) SM !
Increase in Specific Prices (current costs) of Utility Plant held During the Year (c). . . . . . . . . . . . . . . . . ... . .. 5201,029 Reduction to Net Recoverable Cost. . . . . . . . . . . . . . . . . . . 5(151,872) (21,094) Effect of increase in General Price Level. . . . . . . . . . . . . CL30.356) l Excess of increase in General Price Level over increase in Specific Prices After Reduction to Net Recoverable Cost. . . . . . . ......... (150.921)
. Gain from Declinein P - '- - ;Powerof Net Amounts Owed. , 139.841 139.84i Net. . . . . . . . . . . .... ........ .................. 5g 511J,0E}
l (a) Assumed to be " average for the year" dollars and thus (c) At December 31,1979. current cost of utility plant. net are not restated. . of accumulated depreciation, was 52.902,015,000, while (b) Including the reduction to net recoverable cost, the historical cost or net cost recoverable through de-loss from operations on a constant dollar basis would preciation was 51.715,112,000. have been 5130,024,000 for 1979.. i
/ '
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23 I an. T - se 1 w- e v - - ei. .ww w w e
Five-Year Comparison of Selected Spplementary Financial Data Adjusted for Effects of Chariging Prices (la Thousands of Average 1979 Douarst Year Ended December 31. M M 1977 1978 g Operating Revenues. . ..................... . 1357,178 5422.402 5453.906 55(77.758 5557,476 filstorical Cast laformation Adjusted for Generalinflation income from operations (excluding reduction to net recoverable cost). . . . 5 21.848 Net assets at year-end at net recoverable cost. . . . . 5461.943 Current Caos Informados income from operations (exduding reduction to net recoverable cost). . . 5 20,897 Excess of increase in general price level over iccrease in specific pnces after reduction to net recoverable cost. . 5150.921 Net assets at year-end at net recoverable cost. . . 5461,943 General Intormadom Gain from decline in purchasing power of net amounts owed.. 5139.841 Average consumer pnce index. ... . . 161.2 170.5 181.5 195.4 217.4 Constant dollar amounts represent historical costs ad- As prescribed in FAS No. 33, inccme taxes were not justed for the effects of general inflation. The effects are adjusted. determined by converting these costs into dollars of equal The regulatory commissions to which the Company is purchasing power using the Consurcer Price Index for all subject allow only the historical cost of plant to be recovered Urban Consumers (CPI U). in revenues as depreciation. Therefore the excess cost of Current cost amounts reflect the changes in specific plant stated in terms of constant dollars or current cost prices of utility plant from the year of acquisition to the over the historical cost of plant is not presently recoverable present. The current costs of. utility plant which represent in rates. This excess is reflected as a reduction to net the estimated costs of replacmg existing plant assets, are recoverable cost. While the rate-making process gives no determined by ' applying t'.te Hand"-Whitman Index of recognition to the current cost of replacmg utility plant, Public Utility Constructios Costs iVWI) to the cost of the Company believes, based on past experiences, that it surviving plant by year of acquisinon. Land and certain will be allowed to earn bn the increased cost of its net other plant assets which are not included in the HWI investment when replacement of faculties actually occurs. were converted using the CPI-U. To properly reflect the economics of rate regulation in The difference between current cost amounts and con- the Statement of Income from Operations presented above, stant dollar amounts results from specific prices of utility the reduction of net utility plant to net recoserable cost is plant (as measured by the HWI) changing at a rate different offset by the gain from the decline in purchasing power than the rate of generalinflation (as measured by the CPI-U). of net amounts owed. Dunng a period of inflation, holders The current year's depreciation expense on the constant of monetary assets suffer a loss of general pure,hasing power dollar and current cost amounts of utility plant were while holders of monetary liabdities expenence a gain. determined by applying the Company's depreciation rates The gain from the decline in purchasing power of net to the indexed amounts. amounts owed is primarily attributable to the substantial The cost of fuel used in eneration has not been restated amount of debt which has been used to finance,the utility from historical cost. Regufation limits the recovery of fuel plant. Since the depreciation on this plant is hmited to the costs through the operation of adjustment clauses or ad. recovery of histoncal costs, the Company does not have justments in basic rate schedules to actual costs. the opportumty to realize a holding gam on debt.
- 8. ACCOUNTING POLICIES The st mmary of significaat accounting poli (:les on page 14 is an mtegral part of these notes to financial statements.
ACCOUNTANTS OPINION Louisiana Power & Light Company: We have examined the balance sheets of Louisiana Power & l.ight Company as of December 31,1979 and 1978 and the related statements of income, retained earnings, and source of funds for utility plant 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, such financial statements present fairly the financial position of the Company at December 31,1979 and 1978, and the results of its operations and source of funds for utility plant additions for the years then ended. in conformity with generally accepted accounting principles applied on a consistent basis. f New Orleans, Louisana - February 15,19E0 24
DIRECTORS (m ) t
\
James M. Cain, New Orleans, Louisiana OFFICERS AND DEPARTMENT HEADS J. hl. Wyatt
%J President. New Orleans Public Service Inc. President
' Charles J. Cassidy, Bogalusa, Louisiana G. D. McLendon Chairman of the Board. First State Bank & Trust Co. Senior Vica President-Operations
' Harry M. England, New Orleans, Louisiana ^s e President. Coastal Cannmg Enterprnses. Inc.
hl,ff,,s de t-Power Production
' Tex R. Kilpatrick, We9 Monroe, Loun. .stana K. M. Brumfield Vice President- Administration President. Central American Life Insurance Co.
9 Floyd W. Iewis, New Orleans, Louisiana vic, President and Chief Engineer Chairman of the Board & Chief Executive Officer. g, y, 9,3,
&Iiddle South Utdities. Inc.
y;,, y,,,,g, , _ (,,,,,,, 5,,,g,,, E. A. Rodrigue. New Orleans, Louisiana J. H. Erwin Retired-Former Chief Executive Officer Vice President and Treasurer and Chairman of the Board of the Company J. M. Mooney H. Duke Shackelford, Bonita Louisians Agriculturalinterests Vice President-Goverrrmentaland Public Affairs and Assistant Secretary J. M. Wyatt New Orleans, Louisiana W. H. Talbot President of the Company Secretary and Controller N. J. Briley i Member of duait Commutee ^##'###"# '#####7 T. W. Boatright Assistant Treasurer R. N. Garrett, Jr.
' Assistant Treasurer E. A. Frisch blanager of Corporate Services DIVISION MANAGERS D. E. Knowles, Jr.
bfanager of Duruic ns J. Q. Cipriano
- 0. K. LeBlanc
[) West Bank Division (") J. J. McClosk ey, Jr. Southeastern Division Director of Public Relations L F. McCrocklin Director of Personnel C. E. Vaq;han, Jr. 2W. C. Montgomery Northern Civision Director ofRates andResearch 2S. G. Cunningham, Jr. Director of Rates and Research M N'**8 2 Retired from Company January 31.1979 142 Delaronde Street 3 Named Director of Rates and Research January 31.1979 P. O. Boa f006 New Orteens. Louisiana 70174 Telephone t 504) 366 2345 Transfer Agent der Preferred Stock: Hibernia National Bank of New Orleans 313 Carondelet Street New Orleans. Louisiana 70130 Registrar for Preserved Stock: Whitney Nationa! Bank of New Orleans 225 St. Charles Avenue New Orteans. Louisiana 70130 Trussee for First %eegese Beads: Froen cover-l.P&L's Waterfsrd 3 I Chase Manhattan Bank.N. A. nuclear unit is scheduledfor completion i
- The Corporare Trust Administratior Division in early 1982, 1 New York Plaza-14th Floor New York.New York 1008' Back Cover-Oak Alley Plantation. '
This report is prepared primarily located on the River Road near V-cherie. for the saformation of security holders is one of many points ofinterest in South and employees of the Company. and Louisions. is not transmnted in connection with the sale of any security or offer to sell or offer to (g buy any secunty. i \ *
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Middl3 South Utilities, Inc. Performance Highlights ! Percent i 1979 1978 Increase
)
Total Operating Revenues $1,823.1 million $1,622.2 million 12.4 Total Operating Expenses $1,604.9 million $1,393.9 million 15.1 Fuel Costs $ 697.6 million $ 623 4 million 11.9 Net Income $ 182.1 million $ 185.4 million ( 1.8) Earnings Per Share $ 2.13 $ 2.46 (13.4) Dividends Paid per Share $ 1.52 $ 1.44 5.6 Customers (Electric - Year-end) 1,520,142 1,489,188 2.1 Electric Energy Sales (Total) 53.0 billion kwh 52.0 billion kwh 1.9 System Peak Load 10,687,000 kw 10,648,000 kw 0.4 Gross Utilig Plant (Year-end) $ 7.0 billion 5 6.1 billion 14.8 Construction Expenditures $1,024.7 million $ 901.0 million 13.7 MSU Common Stock $16 3/8 High $17 3/8High Market price per share $121/4 Low $141/4 Low Contents 2 Letter to Stockholders 4 Board of Directors & OtYicers 5 Customer & Stockhol der Information 8 Load Management,Research
& Development 10 Construccon 14 Fuels for Electric Generation 16 Financial Review 20 Consolidated Financial Statements 32 Management's Discussion and.tulvsis of the Summary of Operations 341%9 - 197 Financial Record 36 System Electnc Staustics Cover:
AP&L's Arkansas Nuclear one, unit one, the System'sfirst nuclear generatsng factitty, has beenin commercialservice
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utihty holding cornpany, owns 100 percent of the common stock ;&3 , of five operaung companies - Arkansas Power & Ught $ ', u 3 r J ;b j l ,
> g' 4 Company, Arkansas 4bssoun Pouer Company, Louisiana Power
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& Light Company. .\ hssissippi Power & Light Company, and New j r
! Orleans Pubhc Seruce Inc. The two other prinopal subsidiaries . hy0 ' 1 7 .% ~ 1f'l l of the Company are Middle South Services, Inc., a service ; n,.5 *O!Y company, and Middle South Energy, Inc., which is undertaking
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! of Grand Gulf the construcuon, finanang, and ownershibtv located in Nuclear Stauon, a 2.5-milhon-kilomutt faci +p' Mississippi. Sntem Fuels, Inc., is a fuels procurement subsidiary of Iy - Vf, Arkan3as Power & Light Company, Louisiana Power & Light 4 4 ., 6b
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Company, ab ssissippi Power & Light Company, and New Orleans *Q - M Pubhc Service Inc. 'i Awoaated Natural Gas Company is a gas distribunon subsidiary of Arkans.as-Shssouri Power Company. With Nbddle South Cuhues,Inc., these companies consutute S 1 y the Middle South Utihties Sntem. ne common stock of Shddle South Cuhues, Inc., is hsted on , the New York, Midwest, and Pacific Stock Exchanges. Re stock s 3 hn O exchange symbol is MSU. He commonly used abbreviauon di .' . A' MWt] gp in stock hsungs is ShdSUt. Annual Meeting: he Annual Meeting of stockholders is '%O r - 9h 2-M NEM
.~d3' scheduled to be held in New Orleans, Louisiana, at 10.00 AM (CDT). May 16, 1980.
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Transfer Agents: Morgan Guaranty Trust Company of New York. New York 10015; The First Nanonal Bank of Boston, y g, - ' t, .;@r a yKnOE..r the. e.,g Fa~ cts , -( g e*c Boston 02102, Continental !!hnois Nyional Bank and Trust ;; ; y
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- y l Company of Chicago, Chicago 606% Hibernia National Bank .
i) ,- in New Orleans. New Orleans 0161; Bank of America National V! Trust and Savings Assoaauon, San Francisco 94120. , k%. 15$uaDep6ft, M ~ % . k U i Registrars: Morgan Guarantv Trust Company of New York, New York 10015, State Street Bank and Trust Company, Boston I[i f
^ :f aturt%..t3Ch f O 3.1 sb k 02102. The First National Bank of Chicago, Chicago 606 0. M i- .
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Whitner National Bank of New Orleans New Orleans ~0160; CI - 5 Wells Fargo Bank NA. San Franosco 94120.
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dildtiUTAwnh. r r 7- ' Additional Information: For persons who desire 5"
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,Q emp" his fbni N $g'd addinonal 3tattstical informat.on, a 1979 Finanaal and ' 1. % .'
Statsnail Report is available on request. J' t e b-- pn&, s-
}je,, 4-ey W j ,'Qy th ' n? Yg1 The 1979 Annual Report is prepared for the informaacn of stockholders, employees, and other interested persons. It *f
@ ha hf S is not transmitted in connection mth the sale ct, or offer to sell or buy, any secunty.
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3%jiMfa (, The Company's 1979 Annsd Report to the Scamties and ' f{ ';g ~' tu yh. :7b Erdvange Commissson on Form ZO.K is asa Lible to any
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~ a}*bDl k stockholder upon rajuest u ubout charge. Persons intenstedin >Gr' .de ke':s%ene'szwtlly gr e obtaimng a copy shouls ume ro nin e stmp. secretarn et the additss below-kt d.
MIDDLE SOUTH LTILITIES, INC. ~ M
.-- .fd Bo.t 61005 h 4+ n New Orleans, toutsiana '0161 >~%. W; M 5[f - 6i[NDU - , M e. "M .
4 $' d" ', ' (504) 529-5262 - 3; y w e" p. W v.yvirtually. .gmposstbteto" . ., j 5 ~y3 eaprovide anin-depth'studdof %A Abbreviationsi in this report, references to companies in the Abddle South Utihties System are as follows.
,hh [MpClehrlp W)eriQue[inQMWd ~*
k t, . .r; that SI l OII3 Sp3CE li S80p'ed t 44 ii 7.L MSU or the Company . MSS . MSE..
. . Middle South Utahties, Inc.
Middle South Services. Inc
. . . . . $ . Middle South Energy, Inc'. Y
$,h !' %g #
- 7
% PFab dstudy Of theTealities of t,he (/J,x ,j 3PPede"thess
-^
gW .[ug'earticles "2",&a
- 4 4 AP&L. . Arkansas Power & Light Company C Arkalo . Arkansas 4hssourt Power Company -
1N DP ;national "and world
'k
- f
-^ " *
. . Louisiana Power & Light Company we ' ' 4 ^ -
If&L - MP&L. . Mississippi Pouer & Light Company .. M , N dD_7MW .4v. Q. , ' ' ' 'N [;. .-4
$P.hf'0* ~
- N OPSI .New Orle ns Publia Service Inc. 7 j' +!-
Q QMt ,']
- SFl .
Associated
. . . . . . . . Setem Fuels. Inc.
. Assocated Natural Gas Company -
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s 4 N$hd- NM.f M Th$.h
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.. Lux a -
i +
Dear Fellow Stockbolders:
l t i f
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f' f[\[[ l y l' The year 1979 was are of mixed results This was the first year in the i. for tfie Sliddle South Utilines System. history of the System in which l Although consolidated net income was capital expenditures exceeded the year closed with $1 billion. For 1980, we expect e W[ 8
.c i
down indications slightly,long-awaited of progressthatcapitalexpenditures in forour Fi 1 f'
; the area of rate relief. In addition, the construction program will be Q i System looked forward to 1980 as the approximately $928 million. M l year in which our second nudear. fueled Ourprincipalcommitment t.'
generating unit and our first modern continues to be to maintain the U coal. fueled uns, both located in System's ability to serve its cus- g, Arkansas, will go into commercial tomers' needs for electrical v operation. The .Jdition of these units energy abile proculmg a fair t will be a significant step in the direction rerum to our stockholders. To of further fuel diversification, a course accomplish the senice portion of that commitment, timely con- L[ f"k uponwhidiourSystem embarked more than a decade ago-long before OPEC, struction of addition.d facilities IL ,
! natural gas shortages, and growing is essentul. To achieve the fair L i dependence on imported energy return, the System companies
; resources became the dominant facets seek from regulatory authorities rates for outstanding record of safe operation
! of the energy picture of America. electric senice that adequately will be even further improved. One Our financial results for 1979, as compensate imestors on the capital of the special artides in this report i reflected in the statistical highlights on investments they have made. The key to presents specifics on our response to i the inside front cover, were adversely appropnate rate levels which will be Three Stile Island.
af'ected by higher operating expenses most beneficial to ultimate customers' If America hopes to keep the lights
; which were not offset by rate relief~
interests as well as those of shareholders burning and the factories running, and bv a small decrease in residenual is the inclusion in the rate base on shich nudear power must play a larger and
. kilow-itt. hour usage. Despite this de :!ine allow 2ble earnings are computed of the larger role in the overall energy mix for
, and substantially level energy current cost of capital invested in the balance of this century and into the requirements in the commercial sector, projects under construction. Such capital next. In the Sliddle South I'ulities
, the Svstem's ultimate customers must, of course, be seniced, and those System, wr feel an obligacon to present i required six percent more electric costs are an appropriate part of the the facts supporting this condusion to energy in 1979 than in the previous year, current costs of meeting customers' you, our shareholders, to our customers, as there aus a 13-percent increase in electric senice needs. We will continue appropdate governmental authorities, industrial requirements. Total electric our efforts to persuade governmental and the general public. Our industry energy sales increased a modest two agendes who set our rates of the sulidity must take the offensive in informing the percent, however, because of a dedine of this approach to rate-making. See page American public of the essential part
; in sales to other utilities. As you may 19 for a detailed discussion of the rate nudear energy must play in our energy recall,1978 sales to other utilities situation as it now stands for System future.1 hope that you will read th e short 9
; were unusually large because of the companies. " mini-artides"in this report which
! nationwide coal strike, and 1979 sales to The Starch 28,19~9, accident at the relate w this subject.
utilities reflected a return to a more Three 5 tile Island nudear plant in I'ltimatelv,it is the American people normal level. Pennsvhsnia was certainly the most who will deciide the fate of nudear i Ourstudiesindicate thattheenergy public'ized utility subject in 1979. power and, of course, our energy supply. requirements cf our customers will Although this was the most serious LawTnakers and regulatory authorities, l experience growth in the years ahead at incident in the history of America's who write the rules, may be expected in
}
a rate significant!v above the national nudear power industry, there were no the final anahsis to reflect the mil of the i figure. To ensure'the ability to meet the injuries or deaths to either employees at people. Todiy, the maiority of Americans needs of our customers, the System the plant or to the public. The electnc support nuclear energy and recognize its l spent just over $1 billion in 1979 for utility iridustry, along with other importance. It is essential that this new energy facilities. industries invohed in nudear power, majority be maintained and increased. l has moved ssittiv to analyze the accident The hiiddle South Systera and apply the le'ssons le'arned from it. companies haw played an active role,in Immediately after the accident, the cooperation with others in our industry, electric utility industry established an in seeking to protect the legitimate
! executive. level committee to coordinate interests of our customers and our effective and appropriate responses to shareholders in the realm of energy the accident. As chairman of that legislation and regulations. Numerous committee. I can attest to the diligent -
efforts which have been, at I are being, expended to ensure that nuciear power's 2
P00R ORIGINAL O' ? y s-e s 2 eW h a%thEf" l p' )+ . g ( 3 sla ' Erd $.L 4 I [R d '~ 33 V 69 e
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pf.3 ergy Qs&,* l ipuM,& major proposals have been carried over 3 oc tust into the second session of the 96th Congress and will require continued h]. N & * - [ attention. "/ ~M ' + Nianagements of Arkansas-511ssouri Power Company and Arkansas Power & be g e 3.? l?
- g. g I.ight Company are currently seeking regulatory approval of the planned k; n consolidation of operations of the two j' w4 companies, which was first announced .
1 in last year's annual report. )y, Q InJanuary 1980,you wereinformed c %g g, ~ that a ponion of your 19 9 common ^ c. stock dividends represented a d7 & nontaxable return of capital. The major '?. reason for this is that the substantial 't- ..Du portion of book income which results g gn gg% from the capitalization of the costs of the capital funds mvested in projects under 4 y g. 3 g Qy pA .4
.Q . j r
el ,, .c .w w : construction does not constitute taxable : [c #g ,fM91 income under the Internal Revenue Y M _ puita ydroel tea 2t gehera n Code. Hen :. dindends paid from such e , wated. er can be relet i upop an sm tion d ti6nal ie e tfic future" r?5Wt y moi 'ifnq a 9 . ' earnings are, for tax purposes. treated as g a return of a portion of the stockholder's
*t ^( g 8;c* *
- i i*gthbl ind N th th dividend payable on
.. @ dW gWQNj January 2.1980, your boar'd of directors
- ' I g , Nl'{ pad 4
! ,' MM increased the quarterly rate to 39%c per b rfey m' a> ~ 4tian t
share, equal to an annual rate of $1.58. . g* % s .q f M;.tr*i .j 2 lemy . as ran u M horu Tith one exception, the Company 2 . has been able to increase the dividend iM ne' t ' pad i ah 'F'sTQR f -, " * ' P. ' 5 N Mik. I rate every year since its inception. stany stockholders have elected to 3
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3, have their dividends automatically applied touard the purchase of 'y D additional shares of Aliddle South l q g - [ y cfg gigy* common stock mthout brokerage or , 4
% p; O ,
other fees. If you are not availing yourself of the savings and convenience of y ~ i reih
.s .
.;E -M E
parucipation in the Dividend . Reinvestment and Stock Purchase Plan, 7 eqti s'e #. /*z
'A fN you may obtain information concerning c7 s this plan by writing to Dan E. Stapp, .
r~hi Secretarv of the Company. On behalf of mv 12.000 fellow a Sliddle South Systerri employ es, I want - to thank you for mur continued interest - y. y %.t-
.g re and supti ort. We pledge mu our ogh.i ectly t neiths uppe nor t1 w ngig upth%eh;,g ,y .
sustained best efforts to assure that if i your Company plays well its role in the doylegeru( . en , f tt e pte tw nuclea owrgy developrnent, y g i l energy picture of our service area and e M [gy y %Q[M-p.y the natioa . an: ibis hae ' chiaig ehemic a'ad'piditical c ueacQ.1-Sincerely'
, - arid @genhd kicQ1MndengfjhcTprenWgyL,,,Cudich countrws are proud'of."
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- tne loss tw a!! neiues '. -
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- to I e is sh/Gerthe Amerfran peoplehavelhe widk>m to ce% rout:h veN1
'N Floyd W. Lercis - all' ? ~ ~ and^~ ize thb tw* fact; ette cour' %$Aw.7 Chairman and ersur 'tilat th ods entiakafn : po%e 'rea!iz 8' ; W A 1.i Chief Execuuve Officer ay i 7 Q.$ '>$! f 7 - 'f , j 5. ^. d3'% ' f 3 %w r.
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;t gaQ- 1'L ; y ;y y: g, .Qg a. py Customer information Ga.A5 ped Report '. 7 ~ :;.
cawm.,a n.m n.ne ~. ~ P% w:d % tNuclear Power in theo % l J
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m - IL o w x,5 % am y Epst Three Mile Island E'ra ;- e yJl u y@.%e .m L. ,g, ..f t- < . .
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, .Q m 20 . en a nas trdddia at the 11ireeMle Ida'nd '(TMlin r
n ' L '1, p South Uithtres and others in the electricf ' icanke of $c accident and inmie4telyJ.J d i .ardi sec the -
' ' -
- j ' g1 the to h(lessed from the,acddenr1i f.* q l w eif -
isteo
'pr "
. ;i . mpW vivett NV
'ipatch}QN :ngM persomlikM M WW z, j ,
e ,S, L_ e e v' 'the to' -
- wiwance*y 510 trop 6htm' Y ;g i
amr m aum cm
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tki ' - - curr+- utdu- xmeda Wr q eg yg q. p Customers d a t o. The Sptem's five operating comparues . .k aG
-g 8 The
[Q - ]b immt t . . ual , j is.M% 3 serve some 1.5 milhon customecs in L H ghN prWse!6nai th d Qdi;t 4pd* d; -i t parts of Arkansas, Louisiana, Stississippi, .^ and southeast Stissouri. Approximately
'ci 4
sarc'ty' y whath c nr hiu wrcieveaTe p4 dt.by R happef
.yM 87 percent are residential customers.
The rate of ultimate customer growth
% 11 4 f ~
g ~ge ' ggggg .gg [ g ggy;f.g],$p$c ut ba'r h, within the Sliddle South System amounted to 2.1 percent in 1979' pg 1 4 h k# w'erp[ operadoc kthxque .. marb niet, _ impfow th@e training c( pLnt fnoperat q Electn.c Energy sys .
,e wp ed w ymem aceeleanota uns ,,f . y Requirements ransec.
Y
>s , <
* " **'@"w4 "W. ks y++= d!!o"wd Pu"~er + "
- estric . 9 ..
l
-?W4r * "^ M . ~~k .s, The System's residential, commercial, a m$'e , nry re pe4 apdd emcpqam. ?atwe pbd for . p. ;
b - ( j\ indust' rial, and governmental customers used 47.5 billion kilowntt-hours of electric energy in 1979, nearly six nt, k, W Wr@mt se p any, mm . (e nucleatscodert An 9 usefulifr ecovert fro;en;.entor) in .f quclear ert F eich nudeatLplant in the t'nited Sches, N r Q acciderty0 cf techmca
'I percent more than in the presious year.
Reflecting customers' energy 7( ' te %U ptd@mene fasda p. l l conserution and summer te'mperatures D #.w . @ D,
-g
? da @"". .Cq1th d - the
' .. . , I partf6thr P C' M .. pbns
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that were somewhat more moderate l i. ;,'lV de pr on fo. m.r nddi cf the presently unimored financra! <' ' than normal. residential usage in 1979 ?^ hereo4g repbcement enerh)of a nudeat mident ' 'l
' impeaiptf rdarilythe' un ~
d its erw me mduary has fo[n ed a nstu.d s was 14.6 billion kilowatt-hours down 1.2 3, to cb(4: .. N. . _ rrra ~yt percent from that of the previous year. E irt)ts ria fgr acir% rvthis mutu d in ' ~ nceca W
~
Commercial usage rose 1.4 percent, to '*' w1!! W t excellenteja nudear Lufopdr s* ; 4 6 .s 8.8 billion kilowatt-houts; industrial usage increased 13.3 percent, to 22.3 LPe *" M * * . :>.+N *t M M^ ')E e mdtem responseslo & MEciperd 2 A' in % 3WM7 billion kilowatt-hours; and a;.i@e 4 N * 'f4 pWuve at ps to f6:ther improd, ,. ;4 A 4 y.!-c 1
""CC'" #
governmental usage was up 2.6 percent' - - l
];mckerp dt' *ety , thme,hyonewe41JlledorinittredatDtt,ftwould I to 1.8 billion kilowatt-hours.
lhe nse in industrial usage was to a 4 ' "C4 mys gfp M'* 1, e @l. ne ratimpf
' the sadnficance d tfic everitJabo ti m the dear. power plantun l
I large extent attributable to plant ed ~ nce fecqd expansions, the location of new jjleccet !! will, ,.eady impregge -, safer! 5 yy 4.% industnes within the Svste n service area, and improved business conditions. ,~' 16 y Sales to municipalities. ) i '-he , bbr.
~o d
~u9%
ch :.
>P ,=
T '& -* . cooperatives, and other unfity systems c - s cific recomm.endations Of the Kemeny Comrmtong,.; in 1979 amounted to 5.4 billion ! w.yA 568 *
- he n.ewtl'm regulaw.n alone will not guararaee safety Me agree. L aum.u dy, , .4 kilow itt-hours,23 percent lower than e the report statesth6 safety of operation c(nuclear pont plan i!'the , ,3 4 those of 19 8. Sales to unlities other ,
i re gpW Ql -,-o'pek,Kth@e{ay j . ;, 4 4.M; a W,i Wd. , Fw e @M , -Gi4i < 7 U.Yhf ,4477 than municipalities and cooperauves declined 80 percent from those of sib (1 w a ,,.k x ,- }, .M i I 19~8. when the nationwide coal stnke prompted some coal-dependent utilit"s gg3 1 Q~.' M M & 3 M3 %'3 gr . /d ,*)?.'.. .j-. to call on the Sliddle South System pp- , % 5 m .e o y:..gzw. 4
. ( AQ M]4 W@ V h t g p-@f g gO{.
l .. for substantial amounts of energy. 4 system of contgors at 'L * ? ?? W' M ib T Hb l l'! N.M *' ^~
- M AP
)gew&L's tTbste B!reff g "' 'YW %.$yl^t * "~? T'~h.: -
^ '$, wC * *:,' . ~5%AW % * .*
aring station q ~?' ^ $y*~ ' "' 2 P TM '*- Q , % ~ 1^ transports coal directly _1 1. %, from the coalyard to a I. . % ',', M E , .P j'je ', f *.h . ; g , '* $ ',; ' Q,. ~~~Q-9^g
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. 3 ' oC *7fy f)- .,
serres of crusbers arbach orepare the coalfor $ * ' . g , p , N*{ey f ', .p>
-v 4n a i Q, ,
combustson.
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- - - - - _ - - _ i i ; Customer & Stockholder Irtformation <connnuess , 'the 1979 System peak occurred j on August 6, when usage of 10,687,000 i
, ! loloratts was recorded. This uns j h only slighdv above the 1978 peak of 10,648.000 lolowntts. In 1979 there were no extended periods of high sumrr.er - t temperatures throughout the system semce area, such as generally accentuate peak power requirements. k
; Industrial Growth 3 i All of the companies of the Middle '
South System are active in promoting '
, economic development w1 thin their ,
s respecuve seruce areas. The System - also coordinates with the state tourism / ,
\
departments a cooperative travel development program for Arkansas, j '
; Louisiana, and Mississippi. <
f
-/ , During 1979, industries announced .
plans to locate or expand 245 facilities ~ h/
?
in the System semce area, creating 'p 7,367 new jobs and adding an estimated / / l annual payroll of $76.9 million. When in full operation. these additions and expansions should produce l - 7 l approx 2mately $50.4 million in additional annual revenues for the a
/( /
j System companies. - I i :
- r. e -cene .<utrey brings to the n' stem 30 years of electne attitty indusay
._ &w y
- 2. '
-1 t.
v l l apenence. , T ** y ' s .s - g , ! .4 s s Y ,a , ' ,
\ ,. D New * .' \+
Presidents d \t
.D(
for MSU, AP&L [
' 'l
[. # - Frank Eugene (Gene) Autrey became i, s
, president of MSU and M;S onJune 1. ? ' k
. ; 1979. Floyd W. Lewis, president of MSU .
i, I
i i since 1970, became chairman of the g . 'eh l board of MSU and continued as chief Fa
- g'
~
gh ?'y . * &(- j l executive officer. He holds the same ..q l positions with MSS. Prior to joining the .venescfstectandconstant S)3 tem, Mr. Autrey was executive Mce attention to safety are s president of Florida Power & Light required ofsystem Itnemen Company, Miams, Florida. ubo often nurk at beights Jerry L Maulden was elected '" "C'88 of100/"'- /r , president of AP&L on Apnl 30. Mr. 1 Maulden, who began his Middle Sotr.h y ,- l Career at AP&L. retu med to that company 4_ , , after semng as president of MSS.
~
6
l r u Post-Three M island Era % h S ;,. g . r s; #q t-ye. ew f3 i 4 g ; 3M
- a. et c o V Annual Meetin8 of :.
p.n w ":a l Stockholders ve ww Q The 30th Annual Steeting of I he Stockholders nas held in Little Rock on , ;J stay 18,1979 Holders of 67,388,787 shares were represented in person or by b q
- 5 pros.y. This was 79.4 percent of the shares outstanding. an t 3 Stockholder Growth i
'i M
At the close of 1979,5tSU had 144,068 T j stockholders, or 31,600 more than a Q f
,j
- year earlier. The number of shares of - . ow .g r T cornmon stock outstanding increased from 76.098,232 at the end of 1978 to 3
~
, _ _ _ et i8[0E *fG 90,432,998 as of December 31,1979 .' e :
Dividend ' ,3 Y r "7Y p
- n w:3 O f Yn I M,s t a w mMT ai e case e A
Reinvestment and does n Stock Purchase Plan l['- jr % % be, M g, [st.//] i gnum As ofJanuary 1980, there were 20,7"'6 st ;, stockholders participating in the r _ ,,
'J n
# g,; J'c' j ,
Company's Dividend Reinvestment and ,
$[fu'el's kerbraiNk M W @ - d tg i '
Stock Purchase Plan, under which hiddth isitne prop 6rtion'of Ts5iecisble m madinrichsd 608.875 shares were sold in 197. Under : the plan dividend payments are used to L. bdg n%nw i ' Rod ~,4>- '- buy new shares of StSU common stock. -d " 8T Cash purchases of additional shares rI 1 % ." may also be made by plan participants. ?; flifi ?!d There are no fees or transaction coc G ef' E. 9 feet i.i J . charged to stockholders using the p!an. . . Aai errar.ged el C+J e- -
' ' 700 ci
~d-" ,q 4 .
Y , I [+ , s.. . t
~
{ M .p L %. . 4
.: .a s -2 " eftschnergy by nuct wer 'p y'tlihmostW ';
Dity ddhe United States todar.Lety step'of the.iavV.;13'6 p S ,,
- from 2- -
tonstrucuen, to o don, to,decommissionfng -, {isfQ t j Q
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7 ;, Putting tbrfinishing touches on the sbag of .: .w-y , ..sm the curstne at waterfont ,5
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E Load Management / Research & Development At the system operatsons j; # ? * ! ~ &: j .i ~J **., \ $ i W" Y \ Center an Pine Bluff, ' Yr f';- '3
& ' $?- 7*' h$ff*
N1 #,\ 'S * !<W Arkansas, SitJJte South L'
'* I .
,pfy 5'G * , . .
dtspctches monitor and y. ,; . ' y , control the disttsbutton of s --. pou ergeneration ussng the r: W4iWW P9? %A'P- .,, 9ng latestcompu *er technology. si
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y y p gi. , _ _ _-# uo , is . l Load Management i k ' , and Conservation
~
" J With escalating construction costs. I .-.
i
~
W. ~ linured access to the financial markets. higher customer bills, and uncertainties as to the continued availability of q-- g- ~ traditional fuels for electric generation. I p - Mps' " # p === utshties must look to load management r
.=g for some of the solutions to energy
(- m y problems. This necessarily involves a dntamic and continuous program of research and development. The 51'ddle
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South Utilit.es System is recognized as a 1 ;g *g* ' j progressive leader in this field. All of the System companies are ( l'
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dedicated to helping their customers ,_, , , conserve energy, especially during yi . .g g g , Il, .
),) ;p perio<1s of high usage. Both customer 3,,, s3 S; y - 1 2 A r,;,J,,
-QM ,dAh @ 3 and stockholder benefit from this ,/~ .
l attitude-the customer through iower '] ; ' - _g / . A electric bills and the stockholder L. 'e # e AN ' N. ? i '* , 4 through reduced requirements for s .## ' / 3 S ' q ' >. M P
'.' 'Kl@ -
]
additional capital. Such programs as the energy fm'>Nf A_
" .w ,,, ;4W 4 '.,; d, td; yb 4
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'A %
7 - 1 etTicient home, computerized energy [ ,, 49 $O I M 4 uhf * ^-i , !
-? 4v audits under " Zip-Up Your Home," and =
l< ',h h v 4ads Wg m i ] :' the Consumer Energy Team, voluntarily d'
~
c N l adopted by System companies long a &2 - ,u_
< 1 's l, before federa'. mandates entered the picture, have given the System a head actually using less electricity, but it also y-k?gS*.<
~
s
~<
start in implementing residential audits improves the efficiency of the air s e; 3 d.p [-. .h* required under the National Energy conditioner. In the System's continuing effort D. ~ t N _ Conservation Policy Act. N, Sprem wide testingis under way on solar wuter heaters and on even more to reduce die rate of growth in peak demand severalinnovative rate N promising heat recovery wuter heaters, which appear to offer excellent schedules have been adopted or proposed. Already in effect at AP&L and Research and possibihties for conservation within the SIP &L and under study at NOPSI are Development, Fuel Sptem service area. This appliance reduced rates for customers who allow recovers warm air norrr .ily discharged the utility to install a remote-controlled E Y.loration bv the air conditioning compressor, switch on their air-condiconing SFl in 19 9 continued work on lease
! using it to heat water in a conventional compressors. This allows the companies acquisition of land in southern Louisiana water heater. Not only can this system to briefly off-cycle the air-conditioners on which to implement its experimental provide all of the summer hot water during periods of high demand, thereby project to extract natural gas from needs of a tvpical family of four while reducing electricalload without material hvdro. pressured salt water formations discomfort to the customer. u'nderh-ing the Louisiana Texas coast.
In its pending rate case AP&L has Federal estimates indicate that the ps proposed to offer optional time-of-day dissolved in this unter may exceed all of rates to residential customers in order the natural gas heretofore discovered to encourage them to shift some of in the t'nited States. A detailed article their use of electric energy to periods on this subject appeared in the August of lower demand. 2",19'9, issue of Banon's. The job of finding, purchasing, and delivering fuel for System generating plants belongs to SFl. Becau3e 5FI operates on an at<ost, not-for profit basis, benefits derived from this experimental project would accr6e to the customer. 8 1
I Apecial Repprtm W "hfaYy
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.). , .M f[.U . N$$1 isithiem p Researth Insutute a EPRI). ei ahich C . 1E 4'.C. tic' " 4 i W + .mfinemar di e
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itsU Guirman and Chief Executive /*4 1 lord W Lewis is currentiv duirman. 4 3e c A. i
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In So 419] tae system contributed over mu hon to the cost of EPRI s i.n hena( p iad q'9k y y ( ' # V. ./ [,)'%q
, W 4, rs. 9 c , hu irem$r A a comprehensive research program. ,
b }a laug4,;; k. Q % /E e.$?f' Y which includes inve neauon of a number or alternauve tuel des elopment Jet
. ,ie{
A a s . g . . .h 7 , fgy'. i..p g DF nulbrems ('Tinbrem/g@*t 1 .1 technologies such as coal ga3tftcation u cou p . g J O .
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6 i ,L. ., . * ' . ym( y nulien;g $ - a and hqueramon solar. biomass, and ft aJ ' i+ N, .vf .p g nuclear fusix L g .I , a +dsgrk ff t Be system has an acave program $,e 1 'A * * " /*4 e e1 :: nu le r - *to e t e public rnm , Jxh , $ner i , tuel area. AP&L ts working with dee p y m. a nspmanon arid srexageJ(rdm<e mawThlate
- 4 habcod & Wilcox and the tederal radtructne mxerfah h om the pu,nhc, nudear pd ver pl5c:s use Derie< J ,
Department of Energv < DOE > on a Qadd bar'rters. .illmr which are surrounded h;:: mash, rmforced , research proiect directed at increasing uranium utthzanon and extending *'"" W O N #'"N D O.C'b Y N '.#MYM [" O FM" 'I " 3%" D4i nuclear *uel hfe. Be etehtaear project. fu..ded prinapallv bv DOE. hopes ' ** l . [-%. M h'N'PPf"M *1 7. %$ f* MC"MU " Y" D WCUY . ,. - to develop an improved ruel design @ M,;~N 9 7f7/7
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~
that could sase as much as $10 milhon to $2 0 nalbon per reactor per vear. 7 'O ' l'i* @ ., 1 y., ,l 1;ye ' 7f
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Construction
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- Q Waterford j uas apprastmately ~4 pscent complete at s ear-end 19~9 P00R ORIG NAL Construction unrkes travel by crane to el l l
s *u Here. uvrk contsnues on the the top of the contasnment buildung at l
.~
=
,= yy unst's turbane generator. LP&L's Waterford 3 nucleur unut. ,
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- ___; y 1, i isioe 6 normung urets . :.M,b,f,'j f _
% $5 Ey e~i.s-
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n . g g . l 1m 1 1 j a f,t' . 51 :::ll: N'r' ' 1 l5. D . I's R M' i i k Grand 2 MS Ndear t. * * - i 4 l L h *2 , MR ,h. 422* ., .,1985 l 1 j l , l l q y M ', ) f -- _:::;:;d;${::::iW~ ~ g [ i L .. 'm .2
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m 8 0 v 's 're i,75 26 2,77 iets i e's % i s's in 3 in:: i e term ll33 E:ecane m Teens mtm l 10 1
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v,_h, 81 .~ ' 1h m.f %, M C a- -%. . - n. f f ... ;3 e 4 %-t *y ymlear. M d To serve the projected electric energy 'daua
~
iO em?T i needs of our customers, the Stiddle .' p ~ South t'tilities System plans to install some 8.7 milliorilolowatts of generaung ,3
.Q ^g*K~
f g capacity within the decade of the 1980s. Reflecting management's clear recogrution of the pohtical, economic, jg 3 j e .-
, a j, 9.3
~'
g yg- T,,, E) and supply re.dities mth respect to i 4 energy alternatives, all of these planned generation additions will be either b@.* nuclear or coal / lignite fueled. 9 The System's construaion expenditures in 19'9 approximated M r .e ii 31.02 billion, altno<t all of which were 'Mr 1 for additions to electric facilities. For O1 i " id 2 - 1980, planned construction is expected @ ~ /g. to cost some $928 million. (' j; g gyy
.D q n g' d tNkat as5i Nuclear Umts ;e , i see p a w good W <
# }#P'#"'I"*d do ng already. 'O cD H The System s second nuclear unit, N ;rtries AP&I/s Arkansas Nuclear One unit two, Ih#IM "" ?# "u. 5 began generatir=g power in December
" # 5 - =_ - 1"d " " *4E" i##d"D'h'h'i-d I I i
19~8 and by year-end 19?9 had carried d -q yr m t ma M$ted. g r power levels'as high as 50 percent of 'N fp *kke k( (. ' %fIa'dhEnve'M I capacity. The 912,000.kilowntt nuclear
- uI(tiewtsetb4 2 mm os nognis store yis?[y urut is expected to go into full tv 2 4mes e ad .wegtp
~ '~
on h.tht(c. -.
, than95pisrtees b b commercial operation in the first quaner dear lpowcrplams3. r~.l m of 1980. Its total construction cost will ' ' prciactawoulp'
. mb e
'* * " C approximate $617 milliort The System has three additional f .
' nErM' (M2Ych6b!cm.
M M ed al I [
' d nuclear units under construction and A .-
d b '
- p. whic the
- e di ~ 11,has)e to m,ake *'A e a scheduled for commercial operanon .- .y between 1982 and 1985. f 'r - L' ? M 'j . JE8 1.P&Ils 1.165-million-kilontt 1a,'
n tasit.ftiarirr sodMfof.'Q a q.D d ' Taterford 3 unit,74 percent complete at E' s "g sevepIhupdred ;v-year-end, is located at Taft.I.ouisiana,25 nuli n miles up the Stississippi River from New
- yeari,@tre 2 r:I i abat nattfcli u(isnium b .3
'.s
~ '
Orleans. The total cost of that facility, n- is"a"1png time ' ii bot an inst' ant.%y,g scheduled for commercial operation in s - v4 , 1982, is estimated at $1.23 billion. <
~
,. g-ggg;% *h'l J
Grand Gulf units one and two are b tiong i!di ha . being built for A15E near Vicksburg, l Stississippi. I' nit one us 80 percent (; d, ' D complete at the close of 1979, while the M* d*p second unit stood at 24 percent. M- thboalike event s i 4
'L -
Regulatory uncertainties and delays in p ' licensing of nuclear plants have catised a that'soineshould { lts W the sc5faWidteTIhe1krified mass would $ i one. year postponement of the then be ic'aled in inics< 56el pr^othet'hutabl8 caniserts as a furth'er- % l commercial operation date of Grand precauttonandbuttedinstableg'e ' nutionssudsasb - l Gulf al, which had been scheduled for .vgrarg iQgy Q'g.g.5g%(hh 4J
" C;1.
Ih lume seguire un e st" ls a uall yery small i n de e v ap r . m telv e reprocessmg, th Mumev , ,raQake wdtes that would bey -g I vear, with the'new operation date' set pr ducedin the@4+yearlifeume@ot 300(operaung nuclear,rextc v to 8 : for ep s e s on o up o a fill to a depthgfigeet art arg equivalentgsize to a}lngle football field. l ten percent interest in the Grand Gulf One important thing to keep in mind when discussing radioactive waste f 4 units by associations of electric power is that, unhke numerous taxic products 'prpsh,2ced through other industrial m cooperauves in Stississippi. StSE's processes, which retnain datigers foreitr,,nudear wastes decay ov 90 percent share of the estimated project cost is $2.79 billion. and eventually bect,me instgrnf tely.
~
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- _ . - . _ ~ . . ._ -- - - - . . ~ . - - . . - _ . _ . . - - - - _ _ ~ , - _ - _ _ _ . . - -. _ _ . ._. . - _ . . - - _ . ~ - .
Construction <contmucJ) l l
~
l E00R.0RlB M ? .. . -
.____.. 4
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l Coal Units l APES White Bluff *1, the Sntem's Srst coal-fired umt, was 84 percerit complete "I}a
}f
!f l
j
- i at i ear's end, with commerctal operation scheduled for the summer of 1960.
The second White Bluff unit. 30 percent I I 1 complete at December 31,19 9. is expected to go into commercial .~" ~ ~ " ~ ~8 service in 1981. The System will have b '-- --N ^****"
*5 %
f approximately 57 percent ownership of these two 740,000-kilowntt units, which
- ;.. n
~d: . w -~
Q _":8p' E-
- are estimated to co3t APE a total of $391 Wr .. A n ,,. . . ;;
Construction on the two 740,000 kilountt coal units at APES ggsp .f h_ 'MVAM G tQ -p** [gg d ! Independence Steam Electnc , . . ;s- --
' T',
Generaung Station was begun in 19 9. :*w+} ; 7 ,
-g' The Independence units, which are C
,,, W' O f.Q
-5: 4 ;1,g 4 a
- 1 d
k: ' ' ' ' ~ . M" h. -M N. f substantial duplicates of those at White i BlutI, will cost APE an estinuted $482 ~A, y gJ '%::: million, with completion scheduled N 5 N [ Ug. ,# h for 1983 and 1985. As with White Bluff, h'/Ij'9 3 the Sntem will own 5' percent of 9. -L /d f.- [$ j- { h }h;k iN , these units. Y % IL"(-1 ..y 3 '3 ~ ~;i s Ii R ,,,, A4. l The White BlutY and Independence . . plants, using low-sulfur coal as fuel, will
' 3 'E l be able to meet all applicable air 5 "N,) .-- M~^*^u iQT standards without having to1 insta1uality
- p. ;f,.Y. '/: f, '
~
'u [ g A stack. gas scrubbers. Customers and stockholders will be beneilted by sittue jC p glg g > r jg ui./ l g
m g-of not having to par the additional b ;
$2% million of added capital and $15 6 9 ib;.,.,e[-
%' 4[ - p
? $ s e, ~ ..*.
nullion annual operating and
- _e 7 b _
nturcenance expenses which . '.b
. n' K
) [# 4.g g
scrubbers would have entailed. .; W" , Standardized Coal
~'
cooting towes are often
, .7
~
pg ~.- 4li ~ 1 Plants associates warb nuacar power plants. but many Om . -
~~ ~
c-- m. A number of additional coal-fired ututs coaf.fueles generatang' - are planned for commercial operation stations use them as uvii. in the latter half of the 1980s and early nite Bluff writ bare tuo _
=-
1990s. In order to effect savings in cooling towers. one of design, construction, and mairitenance, abach was srsti under
' "3"8'C" " d*' dO
V L. ? these 750,000-kilowatt units n,ll be i of a standardized design. #/ #U N Mt v W-1G l The first of these stardard coat units '
~
I will be built by I.PE at a vite in south I.ouisiana on the Mississippi River for , , W@ Em ' l
' ' M a-,.
t commercial operauon in 198'. Tbefirst unit of.ec.rs - - APE has announced its intention nite stuff genwaring [r station is expected to go @ *: i to build two of the standard units in Calhoun County, Arkansas. The first is into commercrat operation k N[Oi Q. e scheduled for completion in the latter en the summer of 19so. . half of the 1980s. The units are expected - ta be fueled bv Arkansas tignite, which is 'io a local, low-h' eat. content grade of coal. N l _ l . l 12 h
. _ _ . , . . . . . . , , , , _ _ . . _ , . , . . - _ . . , . _ . . - _ . - _ . _ _ _ _ , , . . _ . . - _ . . _ . . . _ . . - - --. -------~y- -
FUUn UnlulHHL -
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\ \ A Special Report :,3 L ;q ^
- . + .
in . i" - Nuclear Power in the 1 he $. L ,- :w 4 $ : 'n. 3 '.I' Post-Three Mile Isla l 3 l l
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' q eo,un; recovdable' dent o ild to Wve(Estimges all she rmneshjeJoal itsthe United States, or all of the world astohowlong this.*magicar* energy sou rce k .C "I.d (oppm Qwpy- mpya%m ir(cemuries, buty,,niHplia. , ;1
@ cartedh %reeM .
yh , g rts bse and de7elopment are limitId. p , oniv, . e'smetiM W yW. % 7 Nu 3 j' A : M.whkisa6 LLrH6as ' I tyOof n6ciear poMir pla nt that 'praf uces , 2 elect : ~~ ear - breefjerprodufes or "breedf mo're'
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,eloutof, cre.aed ,, iroyed Actually,thebreeder ; ' i gig L is a
e-Jn t airrit tonverts s type d u raniu m (Uj230 t, hat did ihloa, reactors into pluromum , ? - l ]
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d r eactoris a vi elopmer% 1 1 (. 952.'the world's first 1
' ' " 9: ' tiiic ' mvr~ nr th g ' electricity was a breeder reactor. It vaa not 1
.) 1 -
further* wl challeng6 wer tommerctalfr becauw the technical and enpr'eering' , j
.y' eater than shpe of normal finion reactors, the industry ,
! '- ; had more ex , ence w..h lightyater reactors through the Navy's program.
2.c ,; . 1
'g and thgeed top. erve urmum had not yet been fprecae
[']$ y" .4 7'-
. ?Tod,ry, we y e enough utaniurn idemified in this ccentry to fuel all of the operaung ansplanned tis @n reactors throughout their 40-year life imes '
j 9 Mr With breeder reRiors, the uranium already mmed in the U5. would be 1
~
P- sufficient fuel ursil well bey 6dd thehtr IO50 Additiomi mining hould 4
. ' :L . . 4- '
provide. fuel enough for,tbousmds of yearr -; ( .
]
' ' NthEn$e'ni Niln/thihentiaI endall slolation to the energy {
> 4"; crisIsMfie ans" Vir cone stnd,is government. '
. I
~
Cirte trunistrati h.is c6biste$tly c d cununued T$ develohent cl ,, e only breeder project in this country. the Clinch Rner , Breeder,Reactocaat Oak.EidgeqTen lessee /Congre3s b4s wisely overridden
]. M' ,
attempts dv the sikninistration to stop fundiag the proyect, but as long as the
- I I presio'grs 6pposit ft. Clinch Re er lapgui@es. Meanwhile, the USSR, France, GrerJritain, Iqigs"Ge-many,Jipan, and 1:dy are surging ahead in breeder .* ]
; develgentl, igtsinj the(rjechnological, lead over,the United States.- g
[ f ; r;: ; -' Presidepr Caper opposes the breeder because he believes it willlead to' T i the prbitferation)(' nuclear weiponLThe plutonium created by breede s ' j . ,* ~ y$ , . could be made into seapons-grade material. -There are, however, numerous j y ..x ,4 .gf safegt.ards to prennt the plutoniu m from falling into the wrong harids,and the , ma , g fact that other nations continue with bretxler development makes Amenca's unilateralstand ' s less'cr ' !nfaut.bystayingout thebreederpicturea s
~
abil% W.agacise' trol over actess N. ,,,'1 .- )
. to'p! in" th 16 ~e ishicrrhave h p0&pr,oducingy # '
4 s '
- m. '
~&
( resear reactors'could cale'ep their'operanon3 sufficiently to produce enough nuclear weaponograde material to produce bombs - all in a shca ter i r.' - 7G +', :,.. '
;' time and at a low r cost than could be achieved through use of the commercial J dL I 'E ] 37.-Q l poner breeder,re.ator; ,
, N a . Breeder reactors share thehtstanding safety record that has O , . s characterized the nuclear industrv since its meeption. There has never been a <
f~i'#11 Q: m j e >1- single radiarfon-related death resulting from the commercial nuclear power
$' , , ~g >w.k --
t 5} program. Such, a safe y record is unmatched by any other high. technology industry. 4! { I l - J 4]] The tremendou s energy putential of the breeder deniands that we loosen
." ' E-- , ,3* .- the ties that bind our imagination and begin to employ thu vital technological ,
tr . . FG resource while we still have time to wran ourselves from petroleua X ~S. , dependency. , . g , A
- i X
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, --. . ~ - - , , - , . - , , - - - - - - . - . . , . - . . - . - - - - . . - . - - - - - - - - - - - - - _ _ - - - - - - - - - - - - - -
Fuetsfor Electric Generation The contasnrnent *>ust.tsng of Arkansas Turenne gens ~ator at Arkansas .Vuclear One. .Vuclear One. unst one o C g' j fgig. @ p g g * - m
~
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A.9Dk
't
/
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#- l ( % i ~ r M.y 1
. %' 135.q i 7
g Historically, te Middle South t'tilities System uns fueled almost entireiv by Natural Gas of this requirement was under firm contract at the beginning of the year. Any rOtural gas. In the 1960s, management Federal programs aimed ar discouraging addinonal requiremenis will b'e met ' deaded it would be wise to diversify the unlities trom burning natural gas as a through short-term contracts or System's fuel base, and plans were rnade fuel for electric generation were at least purchases on the spot market. If natural temporan;v moderated in 19~9 due gas becomes available on an for the addition of nuclear. powered to an untoeeseen abundance of gas. generating facilities. Later. this interruptible basis in greater volumes ' diversification uns expanded to include This henom than anucipated, the $ystem's oil oil and coal. These decisions took on gs ubble ,enon, enabled known as thet the mtem requiremen*< could be further reduced. new meaning when. beginning in 19'0, displace almost 8.5 million tiarrels of under federal regulatory rules on natural nettasingly expensive fuel oil dunng gas prionties, certain o'f our suppliers 19'9 by bumira natural gas which became asuilable, some under new, Nuclear Fuel declined to perform under our contracts Nuclear fu?.! accounted for 10 percent of for long-term gas supp;ie3 for System relauvely snort-term, interrupuble g . contracts but the majority by reduced s generation in 19'9 as power plants. Many exisung generating compared with 11 percent in the pnor facilines had to be converted to oil, curtailment under existing contracts with interstate pipeline suppliers. vear. It is expected to account for 20 the only pracucable ahernauve fuel. Natural gas in 19 9 accounted for percent Eccnomic legal, and suppiv The of generation 5vstem has under in 1980'ntract co considerations now require that for the approximately 47 percent of the System s sufficient tiranium to meet proiected foreseeable future new base-laad generation mix. up from 42 percem year ear ier. needs through the vear 1984. A portion generating uruts be either nuclear or d'h h e's d u M M coal-fueled through'1994 is also under firm contract. pg 3FI's uranium expleration program. During 1979, approximately 33 percent launchedin 10 8,progr ssedin 19 9as of the System's v.ect-ic generation aus leases and claims were acquired on fueled by oil, aggregating some 21 prospective mine sites in 11 states. million barrels. By comp rison,in 19 8 Testing to dete mine the extent and oil's < hare was 47.2 percent, amounting qual;tv of ore deposits is already under to 39.1 million barrels. way at a number of the sites, at ! east Approximately 21.4 nullion barrels three of which have exhibited f:vorable l of oil are expected to be used in 1980. All results to date. Actual and Estimated Percent of Not Generation by Fuel Source 5 Matural Gasp d Fuel Oil F
'94cWg Coal 7s l v ,
.V %
- s. \ , v fam 0
l 7
% . . 6 g,
c
~
19t9 1974 1979 1984 1989 1969 1974 1979 1984 1989 1969 1974 1979 1984 1989 1969 1974 1979 1984 1989 won
- moo .-s% e Ione l
14 S' T' e~w or,r------- , . , , . ,_m .
4*d*%* $<s'+
. e. Ev <e 1,.
TEST TARGET (MT-3) l.0 lt EM EL g M gu a su
'l,l $ * !!!b 3 1.8
)
1.25 1.4 1.6 bi
+4 4 #4#
4y b;,' g,,/// , R+Q. y m
;~ 4
7 AV%
'+4
) 4+0%$*f i+f _eE E_1. TEST TARGET (MT-3) O l.0- 'dE4 RM o g., mm gn l,l h,D bb
. ,)
.8 1.25 1.4 1.6
= 6" =
#4 '4S 4$' 44
+%f,,,,
A//f b A. ,4 m .
<-js
,. t..,,
"""" """ ~ '
l N ORlGW One of thefirst traintoads of coal amt sng U#wggg%UWM
) " Q .tj ~.;n ..[' ?.N -- S'I ,
i' at APC-L's Whste Bluff plant. M 7 jj e c %'. f .,/e Dh e MA t **"M5 2 - ~ iT 1
- x$27. u. . m e. ., c , 4 ee is'
E%% h*
- i ,.* * . ~ :? , 3 -3 j y >
t$ 4 ( l ' ' ' , ..MY.1 f e
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y pPfyr _ unorteethe p ure a nly., *
.4
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' -- >v h n'd T"e.r ?<,f T.. + e
. m ,.
t i p .
.Jd. J 4 Coal Vf e 1% ;
+ ^
In preparation for the Svstem's first coal Sy,te 4< %. .- g id- rst ! unit. due on-line in the summer of 1980. F m 1 ' :rt ie ' - SFI took deliverv of 600 rail cars. SFI d I d .s 1 tof thESpyn's ience? began transporung low-sultur coal from 4 thu , cehdiry*Cc5 J.;- j ' 7+ -"' 4j i l Tvoming to the White Bluff plant in Arkansas in December. 7d 'by
*ts
- '- 4 D,
5-will we as el ceal stbpped t 4
% rtunte . >vmmg coalburn< cleanly; i
The 5mem has a contract with , Kerr-McKe' e Coal Corporanon for the O.. M$ .
,a@mopp! app!!
aio@ndependeme cable emironmer.ta! j supply of coal to the two White Bluff dra h 3n smG p tWeyf d -
"#
- 1 units over a 20.vear period. with an
[i
?
'm e a W
. "N3mnt - 44 y to re nwer p j opuon for an additional 10 vears. The m two units at AP&L s Independence 3' % #
$ije icjehardinthe dr:,!:ed r 1 Station will be supplied with low-sulfur : Stm e . qilh.t bngits114 devel4pment. . 1 Wyoming coal under a contract with '*
Forem .o erd environmelital re3trxtions.. 4 North Antelope Coal Company, which is [. wtudt en ry ur _ 'ive wher'rweigh,ed against a joint venture between Powder River the .
.h t"
A.
^ 6 M D.
W i Coal Company, a subsidiarv of Peabodv
.[.@? [e and nece Coal Company, and Pan Eistern Coal - de ci n rea m iab .',
reguhin r emson ., But bur emironmc.nul ; Company, a subsidiary of PanhancJe ~ s ,. Eastern Pipe Line Company. F CO U. - - ME NC'C j The two standard coal units planned .; idsid ongentahtandardi. iouly 'f, for AP&I. are expected to be fueled bv e ear x
$' Qpg[ged do., Sct4 _ q; lignite obtained from mines adiacent t'o J9,@'usdfp ,tr q gg.*g, q e, , ,.
the plant site. _.. .) dy Aush,N others ill y ' J J iridi4 T e for ng the .pduv. ; , _ Purchased Power Djg % [, Purcha.ses of energy from other unhties jin ti,se h y ,f
- e"d(
tn af@icJtream, i i y ]! are made to augment System capacity and whenever it is less costly than the A ,$ gc g ','Aeg wj C.G p System's own incremental cost of energv. In 19'9, some 23 percent of the t p 7te y , , pot 00^ 7c.b ]y Svstem's total energy was purchased for~b e and (emtwions of sul'uraides amf'uther.. p'ower, and a large portion of such pdlu.i er@1af pc M the manhn2re Spuheac fuelg pr l purchases were to take aduntage NF*1eE 8T9d jn4 xthtdare reme! 4 promaing4 , j t of lower-cost gas- or coal-fueled f " en ' '& r ~ st it 5 -- and containic ~ - -8 l generation anilable from other unlines. .. -energt 2!! . It's'b . 1980 tFthe Middle more ith ' ,M
.Cuhues muiem lhc i .dmostlose third of rtte electrictv generated on the 4
; , Middle Sodth 5pt'estnutthe c6Jf.gilM and tfut prcoortion will coiuinue
~n f N .
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,1.
Financial Review O . E a*,e==aeoe i.-i.a a
- sn , OPeratin8 Revenues Consolidated Net co aso The Sprem's total operaung revenues InConle in 1979 were $1.8 billion,12 percent g i higher than those of the preuous vear. Net income of $182 million in 19'9 retlected a two-percent decrease from
, Electric revenues were also up in l'979, I h climbing 12 percer.'., to $1.7 billion. 19~8 income. We decline in ea nings
' with oniv moderate increases in resultedPrimari!vfr m*sm22 decre2^e
' 5^
E I - in residennal kilow itt-hour sales and i ,
] energy sales, the pnncipal reason for the rise in revenues can be traced to flat sales to commercial customers, in 3 ' '!
i recovery of higher fuel costs. combinanon with higher operating
* ' expenses not offset by rate relief. Del.ty
; I Restnues from sales of natural gas
? ,
l l' increased 22 percent in 1979, totahng in bringing unit two of Arkasas Nuclear One (ANO) on-line also had an impact
' i -
approximately $117 million. Most of tile Ill increase is attributable to recovery of on earnings.
,, i J higher costs for purchased gas. Earnings per st.are declined from
$2.46 in 19~8 to $2.13 in 19'9 when o Transit revenues for NOP5I rose
'" '" "" '" '" 1.6 percent in 1979, to $37 million. there was a 13-percent greater average e a, s=m ===-ia. number of shares outsanding.
The increase resulted primarily from increased ridership in the wake of Revenues. Expenses ana substantially higher gasoline pnces. In Ewgy Costs im macq W D iam December 1979 the New Orleans Cin. Dm. .dends axo Council adopted a resolution stating 'a Dividends of $1.52 per share were paid policy objecure of achienng owTiership on Middle South common stock in 19 of the transit system at an unspecified This was up from the 19~8 rate of $1.44
, , , ume in the future. The council als per share. Due substantially to the large granted a 10e fare increase and certain portion of book earnings a'ttributable to other changes to help otTset the transit capitalizing the costs of capital invested 1 deficit in 1980. In January 1980 NOPSI
~
in projects sul! under construcuon,
'So ,
, and the city once again entered into a which is not considered taxable income,
, t transit subsidy and indemnity agreement the Company's tax position in 1979 was
; i
} to guarantee that company its authorized such that 4904 percent of the July 2 sa ; return on transit rate base.
l dividend payment and 61.75 percent of ( , the October 1 diudend payment are I i estimated to be non-taxable as dindend
,m I
in .n irs in Operatin8 Expenses income to the stockholder. The portion of a dividend payment which does Higher fuel prices and maintenance not represent income is treated, for E*****"'.,,,,,,.,,,,,,
.,,,,,,c costs incurred during scheduled and federal income tax purposes, as a
. - - - unscheduled generating unit outages return of the shareholder *s capital and .
** helped push the System's total operating necessitates a reduction in the tax basis expenses to $1.6 billion in 19~9. These of the shares on which these dividends 2-
, .e m ; expenses were $211 million, or 15 were paid.
Ih .M.. Dei ' 'a iY' Percent above taose recorded in 19'8. The quarterly dindend paid on j *
- ~m ; .-
W TJ The cost of fuel and purchased power increased a dramatic 26 percent January 2,1980, was increased by I b c to r 39%e per share. This is equivalent to an t N=* 5=d Nrd ' N'"8' during 19'9, totaling $956 million for annual rate of $1.58 per share. With only 19*9 1 the year. one excepuon. the Company has been
*J,n'"'" ia -in in in Expenditures for natural gas able to increase the dividen'd rate I to. in .iss in 12% - purchased for resale were $89 million paid each year since its organization.
m3a m3s m3s m3s during the }rar, up 29 percent.
! N'oems ca.4
, The costs of fuel, purchased power, i 19 s '
and gas for resale accounted for $1.04 "u'e'" ' ia billion, or 65 percent of 19'9 total
~
n in m i6 ,
,4 g g 4sg - gg operating er nses.
9 16
i I t ot> P00R ORLSIEL i ! l in x vember 19 9 the C mpany MsE s emanang sus accomphshed ! 1979 FinaneinE had a second otTenng. this ame selbng through its term bank loan agreement. i The Company had two common stock to underwnters at conventar biddmg increasing the balance owed by $310 i offenngs dunng 19'9. The first. in five million shares 2r $12.62 per share. milhon. and drough the sale d $113.- I january, raised $12' million as 8.5 nemng $63 milhort Shares arte milhon of MSE commorntock to MSU at million shares were sold to undersTiters resold to de public at $13 00 per unous cmes dunng tne year. through compentnr bidding at a pnce of shre. Proceeds from this sale were LP&L in Februarv sold $35 million :
$1+94 per share.for resale to the public used to reduce outstanding bank loans. of $100 par ulue 11.48% preferred i at $15.30 per share. Proceeds from Of the M5U subsidixy companies, stock. In Apnl. that company sold $45 I the sale, along with other anilable MSE raised the greatest amount of capital mt! bon of 10-7/8 %. 10$ ear first funds were used to reure all of the in 19'9. followed closely by LP&L and mortg2ge bonds. IP&L retumed to the Company's then outstanding bank loans. AP&L. preferred market in July, sellmg
$60 milhon of $25 par ulue 10.72%
preferred stock. In October that company sold an addinonal $w r.ilhon i i of $25 par ulue 1312% preferre ' stock. I Finally, in Nosember, LP&L sold $55 t
.Tullion of 13S%. 30$ear first mor g2ge bonds. The cost d money s2s a mapr l
- area of concern to LP&L dunng the
- year. Due in part to the unresponsnr
,% ga regulatory chmate m Louisiana, the ,
eW w
; overall cost d money for these fh e sales of secunnes by LP&L s2s 12.3' percent.
l However,in its December cpinion on > g[j, ?O[' ' j* s LP&L's $111'milhon retailrate c:Le(see RJter. page 19). the Loutsuna P5C for the l rc6 - first time recognized LP&L's "difScult i Qt .Q + 9 ( jd 5 .Nj g financal position" and made a concerted effort to address the problem d l
~c* a h ..
+ i
'J '-'f -f
'.' ? , -
g,,g CA. 3 earnings attnoon f2ang dat company. I Q g".4 QM. f.1 AP&L made three tnps to the , C , l
. ; .yf p.WA finano21 markets in 19'9. resulting in an !
t I .y e 4 average cost of monev d 10.1 percent. InJanuary 19~9 AP&L sold $15 1 E [ gy [RJ d million of $25 par ulue 10.40% ;
" *R-j ".*~]'
preferred stock. Concurrentiv. that 7 it D i* J l 5
-4q %p% ." company sold $60 milhon of 10%%.
30->rar first mortgage bonds. Returning
-tt Mb)S
. t 2 t
~ E R @0 l
(g. l -@- to the market in June. AP&L sold $40 million of $25 par value 9 92% l 7: ) , . FP7 '..d preferred stock.
] : " ;g
- rg Ci$.Q % .f MP&LinJanuarv reured a matunng
$.' 5-mtllion. 3-1/8% first mortgage 8 l
- q.7. (ggN bond issue. In March Ark-Mo reured l
,j-i- _w e4< m$3.3 ortgagemillion bonds.of maturing 35% first !
! Fi y.if$ h Equityimestments bythe Company in the common stocks of MSE.LP&L,and
'}~6~- f 4 l ;
AP&L totaled $218.' million in 19~9. [
~
. A :.g tr.r.
.aa Funds for these investments sure raised l
e - thror#. short-term bank loans, which F d have been or mill be repaid from ! proceeds of MSU common stock sales to
*g = -
]
+
the public. {Q &a p ~~*=- g -;' ..
~ '
-W WSj "
% V.;' q- ; ,
l [,}
~=v; st's aluars rasnsng at the
[s~~~} p' %y.mg a - Q 1 base of. Arkansas Nuclear
" ~
.,--m
* ., ". 3-
~, One's guant cooling touw y -. ;
^
~
h4
- g 17 ;
. "2 .. 6 P
Financial Review mwnwa? P00R ORIGEL 8
!1980 Financing The baiante . it pr1 4eced cape o, CapitMizaten mtem construcion expenditures for requirement- an estimated 519~ Thesntems . ns. > hated capu.ata n 1960 are esumated to be 5928 minu >n. milhun will 5e met bv the wstem with ran< >s at sear end 19N were .ungaerr excluding nuclear fuel costs 3F1 expects internaih generated runds dent. M per ent preterred st.d lu percent. and a >mmon equity $2 to increue its invevment in ruel+ related T, iui ins eements Kv \tsE in me progrants 1 4her than nuclear hs lo2 wmm( >n stooo < >t wstem companies in percent These ratii rs are signific.intiv i milhon Nudear fuel costs ther tnan 10% are estimatec at approximateh impacted bs tne reuuseh nign dent ran > (
l $216 miihon Funds for such msestments of NtSE A:ter tne tirst NisE generaung l tnose already provided or under existing leax agreements will amount to are expected to ne raised trougn unit goes into commercui aperation m
$4 milhon The Mstem expects to raise ; snurt term borrowings which wTil be 1962. the Ms E capital struaure is l approximateh $622 milhon of the repaic through the sale of additional expected to be brought more m hne with l required funds from exterrul sources. {sharessst M5U common stock dat of me aner sntem comparaes l induding the vie or first mortgage bonds and pre erred stuck. long- and ,
short term bank borrowings vies and 7 1 !edebacks or property. polluuon controi
- t d and industrial reve Tue bond 3 's The Compant expect 3 t< > raee y approximateh fl' milhon in 14% 5 through the .ssuance et new common I?
stock A portion or these funds 2111 be i s 'e l '
; raised through a puhhc common i stock orfering at competiuve bidding.
k , l tentauseh scheduiec .ar late Apnl 19% 3*
%;- I 3
c";(*:. w .
~
e
! O a.'
50 Kni$ s%i e=. ~E 3niMdb W = , imn, p g gy -
- n
^- s* l fh $f_~
ye : - < i,q;f w .
, .4, ,7 %
g I .. -
* ~
l
+lim , , ~.
e
~
Inssde the control room at Arkansas Nuclear One, unst We tuo To assure safety and
~
reIsable opwatson. extenssse tests are made at ~}s p' vanous pouvr letels long ~ before a unst goes snro _. :*h .
?#
commeraat operatson. e 9 , , Workmen unssde a ~ losc-pressure turbsne shell h- z at Arkansas Nuclear One. - < L 7# ..
;[6J %.
18 ry " p_ -
'Qdh~
~:%
. g
P00R ORIGINAL
/ (Pending Rate lacrease Applications (u Decenher 31iI979).
- w;- w. . r .- , , n ' _a - .]
q / .'%
' ' ' ' z ] Date FUed ' ; Type *w . g' ' Annual Amount Here Pendig ;
?5 n,. n ,, r u .;tm m. v v unmaa m ; m,,;_
? AP&I. < w25ne ? nana E M ^ 827.o d m, g , : _ . g';t,.JArsc3 1'
% g N
- n . - , m m.. . .,;.m. o 4 I 5.~kN7 popfb' amme%?i M b RN brecMNN , ,i a AA-Ado f -. ; ww.%
@M Gr v.M h. .WMp
,gyg p W
***!** U yk f M &y W A..
S&GfW *MM6 eMhiruncN wesw-m 'WX Rate Matters 71. at e m M, Pat M A7/asq* @vmi ,iM M W~- 7 m g % *i Tid y py aseme cw c..auwor The Sntem's efforts to achieve needed scw4w;,e.gys% i AIDF rate iricreases continued in 1979. On Decemtvr 18, tb Louisiana Public Qy h*N" [Jd%g@$*j k.w(QgM
"*'hMM.SO 5ervice Comm. .an (LPSC) granted LP&L the second general retail rate As previously mentioned LP&L in increase in that company's history Approval was given to implement new Ark-Mo December received a decision from the rates to produce an additional $59.6 Ark-Mo and its subsidiary, Associated, LPSC on its $114.7 million retail electric million annually based on the 1978 test each had one retail application pending case. which haa been the System's year. at the end of 1979. In July 1979 Ark-Mo largest pending application.' Although Tith this cav resohed, at year-end filed with the Public Service Commission the Company was disappointed that the 1979 Sprem companies had pending or of Missouri (PSO!) an application for entire $114.7 million requested by on appeal approximately $53 nullion $5.9 millic.n in additional annual LP&L was not allowed, the net effect in electric and gas rate increase revenues. Of this amount, Ark Mo of the $59.6 million increue granted applications. During 19~9, rate cases requested approximately $2.7 million on should allow LP&L to rai e the opital were under way at all System operating an emergency basis effecure AJgust required for its Construrdon pt %tt companies except MP&L and NOPSI. 1979, in order to offset the effect of a during 1980.
Missouri Supreme Court decision that Of particular note in that case disallowed the collection of fuel was the LPSC's willingness to address adjustment revenue. Consideration by the problem of earnings attrition APE the PSO1 of both the onginal and ' emergency requests has been facing LP&L. In response to the recommendation of LPSC consultants, At 3rar's end AP&L had two pending i m') < rate cases. AP&L requested a $27-million suspended untilJune 1980. Pending before the APSC at year's some $15 mi' lion sf the $59.6 million granted was in the form of an attrition v retail rate increase in October 19. 8. On end us a 5'1.5-million retail gas allowance. This amount was added 2PPli cation filed in September 1979 by to give LP&L an opporturry to earn the P&L an in $f14 m lhon t be Ass ciated. Completed during 1979 10.5 percent rate of retun. on rate base Pl aced in effect when that company's were two Ark-Mo rate cases and one held appropriate by the commission. second nuclear unit. ANO #2,is placed application by Associated. In May the Pending befor'e the Council of the in commercial operation. This is PSO1 allourii Ark-Mo $3.85 million in CityofNewOrleansatyear-end19 9was expected to occur tourd the end of the additional annual revenue, of a a $3.2 milhon LP&L retail case filed in first requested $4.3 million in a retail electric March 1979. LP&L amended the filing in er of8980'N Pe ,t a a E7 case dating from August 1978. In June January 1980 to reduce the pro sed million wholesale rate case filed in April 1979 the PSO! settled a 1978 Associated increase to $1.3 million annual . 19~9. A tentative settlement agreement retail case, mproving approximately in line with the rates approved by the in the amount of $4.7 million us $1.2 million annually of a requested $1.4 Louisiana Public Service Commission reached with the affected customers million in higher gas rates. Finally in December 1979. In late February l and the Federal Energy Regulatory . August, the FERC issued an order', in the Council granted LP&L the 1980 Commission (FERC) staff. The case ts granting Ark-Mo approximately $354h00 full $1.3 million requested under the still awaiting the decision of an annually in higher wholesale electric amended filing. admirustranve law judge. rates. Ark-Mo had requested $568,000 in Awaiting a decision by the FERC AP&L in January 19 9 received that 19 8 filing. was an $8.5-million wholesale rate appront of a settlement agreement nerease application filed in July 1977. on a 19 wholesale rG[uest for approximately $1.4 million. 'Ihe FERC
. order authorized approximately $1.2 LPE Management recognizes thatfair and million in additional annual revenues. timely rate reliefis vital to tlxfinancial Early in 1979 the LPSC allowed LP&L to adopt deferred fuel accounting, thus bealib of the System and uilt acmely rmitting deferral on that company's prusue rate increases as they are needed ks of the uncollected portion of its fuel expense until these costs are reflected in billings to customers through the fuel adjustment clause.
l ry ( , 19
3 fiddle South Utilities, Inc. pr gpo B C Us phbp1 % (t L f Sununary of Significant Accounting Policies l r l A. Principles of Consolidation '
-{ }
t The xcompanymg consolidated financial statements include the accounts of Middle South Utiliues, Inc (the Company) and its j wholly-owned subsidixies. All significant inter-company transactions have been eliminated. - i , - f B. Systern of Accounts , . [ The accounts cf the Company and its service subsidiary are maintained in accordance with the Public Utility IIolding Company [ Act of 1935 which has adopted the systems of accounts prescribed by the Federal Energy Regulatory Commission (FERC). ne acctrants of the operating subsidiaries and the generating subsidiary are maintained in accordance mth the
! systems of account' prescribed by the applicable regulatery bodies, which sprems of accounts substantially conform to '
[ those prescribed b5 'he FERC System Fuels. Inc. (SFI) casitalizes a'I costs rebted to its exploration activities. These costs are I. amoruzed by the unit-of-produ aion method in the period in which revenue is recognized on oil and gas rc. serves produced and; et ' W 7N W t~5C [ sold.. NewOrleansPublicServiceInc.(NOPSI)opefatespizrsuanttoordinances'andorderi.
,=Vr;--(. . . .w - 3) . . .es .' n
~ oftheCityofNewOrleans relaungto i regubtion,::upervision and control. Under these ordinances the city has an option to purduse the com;iany's properties ands ,
> ~ * "r, C,A'c-b
' " wM' &. 7 t _, ' t ' '
operations- ; g" p q s. % 'Q A' 1
+y
[ C. Revenues and Fuel Theoperaungsubsidiaries recordelectricandgasre;W Costs fg g Q : GO J.r9%%g Q$r ' ,3. n rr venues as billed to their customers on a cyde billir.g basis. Revenue is not. , p accrued for energydelimred but not billed at thEend of the fiscarperiod. The rate schedules of the operating subsidiariesb p include adjustment dausestunderwhichfthe cost'of fuef used forgeneration and gas purchased for~resaleabom.br belokJY v l specified Two operating base.subsidiaries levels ishave permitted fuel adiustmentto beclauses billedwhich orrequired allow current torecovery'of be credited ~ fuel costs; to customers.M. Two 2 Q4 "'M'o t adopted, prior to 1979, a deferral method of accounting forthose fue! costs recoverable under fuel adjustment cbuses. Under" ' * ~ i this method such costs are deferred until the rebted revenues are billed. EffectheJanuary 1,1979, pursuant to an order by its . t regubtory commission, the remaining operating subsidiary comr,enceduerernng it:el costs recoverable under its fuel [ ad;ustment clauses;the effect of which was to increase net income in 1979 by $7,765,000, nst of deferred income taxes.
;J ne fuel adjustment factor for one subsidiary contains an r. mount for a nudear resen,e fund, esumated O Q, ' y,~ %,
to cover the costs of repbcement energy when the nuclear pinnt is down for scheduled rnaintenance and refueling.' , l The fund bears interest and is credited , to the ,fuel and purchazed power expenses durir.g the shutdown peri.od y ~ ;? 1 D. Utility Plant and Depreciation i ^ . & ~c . _
. Utility plant is stated at original cost. The cost of additions to uti'a r phnt includes contacted work, direct bborand materials, i allocable overheads and an allow 2nce for the composite cost of funds uxd during construction The costs of units of property l retired are removed from utility pbnt a nd such costs, plus removal costs, less salvage. are charged to ac cumulated depreciation.
. Abintenance and repairs of property and repbcement of items determined to be less than units of property are charged to ll l l operstmg expenses. M.- -
. y , . ,. , *- ., -
l Depreciation is computed on the ' straight.line basis at rates based on the estimated service l'.ves of the various classes of ' [ property. Depreciation rates for tne nuclear pbnt include a provision for nuclear plant decomndssioning costs (See Note 4). Depreciation prodsions on average depreciable property approximated 3 5% and 3.4% in 1979 and 1978, respecure!y. l their respective first mortga3.;e bond Aindentures.Substantially 2j j all of the utility
- plant of the Co
+
.- v, . .. ~ r a ,
..w>
E. Pension Plans d ' M4 'sa m . 6 ::- . F Gt ?c,Qd "
, The Company and its subsidiaries have various pension plans covering substantiallyall of their employees. Pension cuts in 19-'9
; and 19 8 amounted to $18,605,000 and $16B43,000, respectively, including amortizauon of unfunded prior. service costs ov -
E periods of 10 to 30 gars.Thepolicy cithe Comp.myandits subsidiaries is to fund pension costs accrued. Assets ofthe plans are in d excess of vested ben _efits; . g ggg.g 4.g7 c q.7 b q #[@ s
'tf3 g.g a F
F. Incorne' Taxes The Company and VW its subs!diari5s H%"
- coitsolidatedFed fdEa N M M@E-alincome tax return. Income tates a
, ~
based on their contributions to the consolidated tax liability. Deferred income taxes are provided for differences between book and taxable income to the extent permitted by the regulatory bodies for ratemaking purposes. Investment tax credits utilized w are deferredind amoruzed over the average useful life of the related' property...g .r.,s.Znrr uw p. w w w . e u g G.~ Allowance Fdr Funds Used During Construction . ': a WW+ *4U 2F&WY In accordance with the reguhtory system of accounts, the Company's subsidiaries capitalize, as an appropriate cost of - g utility ralant, an allowance for funds used during construction. This allowance (a non cash item) represents the net costs of , funds used to finance construction The effecuve composite rate for the Compar4y's operating subsidiaries was 7.5% and I 7R for 1979 and 19~8, respectively. l i 51iddle South Energy, Inc. ( AtSE) determines its accrual rate for allow 2nce for funds used during construction based on an l l 11.6% return on average common equity, plus actual interest costs, net of related income taxes. .c. .. , , He Company's subsidiaries continue to capitalize allowance for funds used during construction on projects du ring periods l I of interrupted construaion when such interruption is temporary and the continuation can be justified as being reasonable l under the circumstances. , t H. Reserves f It ts the policy of the Company's operating subsidiaries to provide reserves for uninsured propern risks and for claims l ' ;} for in;unes allowed for and damages ratemalang through charges to operating expense on an accrual basis. Accruals for these reserves have; been ' lI purposes. l I
' i 20 n I -
E
- 1 __
l l
~'
Middle South Utilities, Inc. D00D AD EUUn Un ] j ' (L I a ~c n -. .. -
., a . ~ , .
, .g g, x., e. m.- 4 -a
!' Statements of Consolidated Income -t NMT .c 4- s
\_ for the years ended December 31,1979 and 1978 A *
,.. g. %; .
...e.,
.r
~
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ra. ~ r &. , 2 .;. ,
. .. - - .v* . . &- . . .
f$N -# . . , ' - ' e P -N f . J . l c.ee g ' 4.r 1i , F
}-
m V a. # ..:1979' , . 1978 , -, A Mgg 4gg M r hg. e.,.W.:.cqu s . 3 n,,
.m.w. _ m t ' p-v m .,
,. ,. q,%,, g w .g,..,. w , a** .. a n.~ -c Operating Revenues: . . m y 1
, ElectricW.4 /. .dc.U
/ Natural gas w.Md.h/w 1N. %.YJ$k@ifM 3.,hfu 5 d C-:M. .:5/iG[$ .1 N.oJ. 116,612 ! $1,669451 : 195,863.h i$1,489,91'5
, N.r %n4J. WW.v..Mr.ic! % 236,9% - :36,399,
; GTransit,. . ;.Q. ..*dir.'id'.2. d ,_
h W iTotil ?.T.MM.W.I.9%fMD V$i. M.T e 1,823,059 i c1,622,1777 7 d { W. mL. 4:.&_yWEe .hY j&$h$.k. k :s
.s .
,._!gM. .Q. _
@g.. -
^ Operating'E.xpensesQO 'h, @i3;...$.Q nW $f & h,O+k,,g,$> @M6Mj l
i Q*y M;' l 40perationi.h $d&Q'" f QGT .wW g 697,606 &?'a623,402%;?? ph. s.& on jQQf N"f&gd.,9 4* Edi Fuel forelectrie ' MPurchask ~ .T '7s
.b
- h4M 88,801D.68,65%'f
$ Gas pu' chased r y Q' A.y s ...m.MD.58,377%I33,929A./
>i,AWw a
.n dt Othec. w . r.gy 1.E . q ws200,26.rW199,406%
111,394O:x.nJ9,941.,.u.,, e e
?
g
-Mainienaines . .% . &
7 Depreciationr. .a f@$F t.d r- .n B157,8r . s . m.s., w.%y.,.
- 4 n:4g.Ddn19,304gR112,805Dr.
. t Taxes othertari1ncome taxes< - W @. 7 @ ; M77,849p ted1 m u i.. bc.Off%. n,,.,e n ..i'fW.... EW; M77M.,xe 51,266 &c';69,7.71%Q., 86,004y c Income. taxes -
o (Noe )A. e. .n< .. .A.m,.. . vy 5~ 3 +, r. ~ A. . ...<- - - . r -n
- N Total ".t;.qkhurce 2. r./.fc:4U. . M%g@ 1,604,8610 01,393,915 4 : V, M.)5%
$rr 4. % dy W.Mn y@.gv&.-. w+ , g%r , 6:3' , .n.. m t!. ke.:.y
;<. & 4 Mwp&+w g # y ~x.:
+ ..
Operating IncomeO.!C.1.:.i [.%;;c:'%.:
.. ,m m .,-1
. $. ..f.'.it m
.9,Mn , a Ap. Q O:?.Y2.W.T.%. .D., . 4 .aA 218,1987 . i ? 228.2622. w ,
.;* l .y hh. [ W' .
i[ wy [; ma r m L.N. P.* ' i OtherIncome y -oflw. @ AM .MN ,c Me p ! Allowance for equityTnds used during construcionh:O.;M. .e.
! .,Miscellaneotis incomd and dedu2rions Jnet .27,940 ;lc.mI.M a6,239 *.$u:L - g UM
! . Income taxes - cr:fNote 1) . O.a w 4. h f.1d.la . , ...W .i.
~
176,232a A 50,105.7&a i _ , , Total S E. . C..n-A'
, h.~W. .,'L. .N 4. . .#M. .b.. . .' . .mr
- w ., .g .n-tu . g s~. y y p : w< -< ;m , 9~. ns
. ...E.,. SC.E. .o . ,\.T..^. . 2208,258. ' ' 149,917' L'
. u . - w. . .> n -
i - * - .-
- n. W . n e.y
.p-
- a. m.s ,., u .m. n w , .u .c. a ;
s 2 ~,.
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a sen,+ p.w:, _ ,. ;. >.
+ > .. ,
- A" We E "M v wm .e - 4 & .,
; Interest and Other chargesnt Interest on long-term debt . , id c c-d c . .t.. if.$t. . M2. 255,242 '199,212 e i Other interest - net of debt premium . .it . @. . .MW.!p4. . Arc / A:W 42,139,s ,22,7 69 W,
[ (
- . construction.(ci)pQg!gph Allowunce for borrowed M.! funds hN used during @ M@4 @W;.QG
- 2 Preferred dividend requirements of subsi[iariesIRa@m.MW. . W -36,264}: A:g5h 25,47E4 (89,247)W(54
, y,jgp g ggp qw b 244,398 - v192'741~' S T
=g.g~eg* p
- . wn;e,
[-
- 3. ~
- y. m -?
l c$^d + ;f W,% .~g QQf5 ;;n:: &ay: ; Qa:. w & )d W 1&QQAPh@&3$q[ Net Incomet.'&WM;d.d G 4: .W. ; f. . A $ t 182,058 p $ . ~185,438 a w . l ! - n .u.M. v Yl?.# .u .L/: y e n ye. 6 .iy,,w,, w_m n.., . ,rda n o C,. .a,
~ . >, : ~
,.~=. y. 4 4. ,,
s s a s. y . s
,8 n~.
,~
q, -=ey.f.u, r.us ww,%r. n.< -:-. ar.x 1 v , J7 , . p; . ,.x,v.. . n , ;.p
. - - t e .r n.m, u' y ,m.n. m+ a
* , .y.m.. ;w .. s x- . * + ,7 9 Earnings Per Share,of Common Stock - QW.f g . yw
$2verage numberf#shnici(cggW ~
W4(197g'On weightedM+h%#@gM MMONMl1% ? Jp%. h i' P $2.134* . $2.46* N r-e. 85,444,691-19784' U522179)9. 6'.". . *. ... . .M._. ,e
%s P $1.535)g.",W $1A6C-, .
Dividends Declared Per Share of Cominon'StockT.. Mit Wr M.m
- WW i
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. jfTy
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xl.
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I x"/' 5 See Notes to finar.:talStatements. -. G , 1, 4 p-i w..
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ofiddle South Utilities, Inc.
?00R3RIGlm f . .c , _ .
- w. -
., ~.
n.
,y._m - -
F ConsoUdated Balance Sheets. ' e CD - W ', i, ' .i p'i -? _ 'f M at December 31,1979 and 1978 , L, i ' /
.i '
- m. a r ;.a, .; . m .- ' %. ~ . '- - J 4
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- ' r~ - s. : s.
u.. . g ,; %1<<L. A. ' .w s &. .t- . '<..k .y m n *
- V c
- + ,
- m. .,
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'@ ' ~i h .J'$~
f' .d A . '*,
. "y .csw.O ,,[m'[ g f t . fg . ! w -
_ s v, av ~an . ,
., 1-w'.,P Assets- m ? . a. Q g, M. - my :QJ q % f . w.g Q 1979 t f Q... Q _ Q,6.Q.q . g. g, .InJhousandsi ' x g' - ,-1978
. - i-WQje ;M..
4 ty w. r.cQ. Q. n:s _yq.
. 3
- 9(
Utility _ Plant,(Notes '2 and S- y
,n__
mElectric J.%f.1.k?lp !:. y;4)(y'Z.pd;p;Q.g.g@gL .. ;.3 W ; ,; , .,>i.y.Wy;G & Affc..g$3,397.923 ,y $3,472,059" n.
.,s '.
. Natural gas .
Q . - .102,878' 1 [11 19,049 O21,0810 i) f 93,366 !
' s Transitj l.2.g; ggg.MNg,;f _.0;gg.%.M-L.jQfA@g;doggeg. g4Q k s a d ;;,7 - me,g? y3;282,202X 12,465,517' ~mM e,.
-- ~y Construct!ormerief, sgg.grg, < > .gg%.M
- m. wg.A g Q; ,
1e. w; '
.a.c .& z.r.w W 7,602,052 s l6.052.023 :
*J ;N: Lessgccumulated deprect' s alon % ?.2 AJ.n ". '? # dWDQ 1l139,1g 4 1,038.256; 'y;y I igti 4 * "
? "7 { ' 7"d 5,862,888 T ' 5,013,767? g?j
) 2,
- s. w3g .lity Pf - irfner-2
. m y
.,IW:Y;-
egA.pg y .,,,,g.,-
,q. g, y * . r ,
f wm.
'R . _ 2.aci; w "y -
' D;'fn 3 Qy! %&:Mr &~%
x -
+ n w*%9 e
-~ M i-Mg/Mi,806MMn+MS
' Other
, . : w.+> ,
a:m and'Imid-- aats -,. a m. I@m -h.W?
.- n J9952E,c. ,!
+P -W p' x . p2sh ; p Mq g..s b ,.
2.m:N .x ' Aw -:, (NiyQg~h, -xv. ~ 1 vQvkWgh' %' &%w i%& **W'C-. ,m
. t e WLf.d&RQf M
- y. lflVMP 'Qy&ptt Qf.w.fh??f;: &w@w&^W QQD. %:%".hg
".CurrentAssets:$i
- Cash (Note 3%icf1 J.;y;-q.IJP 1g 9-S.fyjyi,.g,W i52,038 ' ~ ?51.321' .
Special. deposits ! . <l@f.gA : hi;f.g4. ;j .r.pi (,'-M i. - ,13,341. f11,17o 7 - g
^ -approximates Temporary investments, market ary;ost g m.34p.y whichEl gg;;c. g VWM7 Mc1;;y.W ROf;. ., 69,839 , O w ,.2.r ' 64,525 ?
g Receivables - cu.stomer and other:--less y f mf; O i W'mw 4M2 . iallowance for doubtful aM
' w 3 t ,
.M INf . 141,051 1 .98,8627
, Deferred fuel cost . @.Q L;ft, S g'Md@.W f '?f;M;;.;;,;_" s.. / 45,714 ".' JC ~
I MSD 137,058 ~
' 72,478 "'
Materia and supplie!,12t sveisgdcostE. . .M;1 28,332 Ia Prepayments o and othe,rs.m d'.";.N.g...;g.. n J'J.G,h.T.ML y *** cJh. m- EM. ,.Wd" 7 21,M4
.;L.'.iY 'l36,488 : '32.303,? ~ #.
, , . Total g"...3..'
. , ~
s +
#-'*+*' - --- m
~
_g, c * ,- )y -
-364,..05s -
n...%.r';;C M Q'--?J%4 3? f"%?:Vi &r 500,488
, .< ~ 6<% . , '
t
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, $ ;Y 7' Y .* f '* f ' $ '; e * * *
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~, ' Deferred Deb ~its- ?~.3.., <* m. eW- ...
n m&A.wW . , Ny @ nfwwn"% w W, 4e %.-~c 9' ~ s e 4+. wg wm. ir: q: W + .
;/ 'Am 2? '-.w4,s'g.%p%,. .M. . .M.M. uw jr%g&,. .m g s
ean-r q.we.iw,886 wys . >u w
*g .2
. s-l7.j.< ., RRQ Q.f .
y,y k Q9$50C;-y2,.%tqs) g t;g ,,; j QiQ G.y., a J ^ !g -p p y ; ,
& a . w% t' w / 2W;%-a h p w%.1m ~r?;& a; , , , .
- g. S f.AN N_%, , $4O. ' ~mh [ '--* *(* %_b r
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m See Nota to financial Statemenn andpqn 25 and 26 r
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+
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.c y 47 - Ms M6M'JirWhk w.,w.+ny rMhgtM e A*a y%dcy;a e.+ . a*mt.. wg eWM~+ v,. -
Liabilities
.m omw i:w) ' ,p.ya- 5 m4-. 4.<.u . k r. 3.Ww p41979 4: .t,1978
< . ~ -s* MJ Q,.g+M, W .
3]n.-']hcggsand7
.G , m -,-..
.. . 4 +e wsa. j a ;' g L ,, .
..,Wy (
u
, . -+ - ,,A
< u '
m L ;* .;:g4Medy,1. , . g,w mye -gg @wg;q.g % gpyv 4, ,, par v'"gg433' ~@g
.y Capit2Hntio_n: Common Stock;y$5 d 50,000,000;g
'W %* a1
,:. .s c.eares i:t1979;and:1 .1
- p@.w.:L s$.W a 4 f ' # a issued'and dutssands 4[- < 76N $YW ."
*. 'and 76,098,232 ilrres- 52;16n.d380,49r av (
Paid-in' surplus ~.%'.C~ .
.a .as - i e d630,450% 1499,855~- e i
- F581,445; 37534.893. 41 Retained ~ (Not ., .
.m .w - g .
s,
..m. vuTo <l ta u,. 3 5,239@N-R A:N.~ .
.j;Q%sinkirig Subsidisiai[nd f WW fu
- p -
? Subsidiaries'. preilstred:
MsQ ' i ..'
. ekmg fundg3e 2 -
93,508 017,816_7,55 7629,711 y ., o 60,063Cy L ..Subsidiariesilogterm - v ._ -
;a . yTo<al Q&4n .
- w. .m. 4l gnat,...s :;{,- . c5;206,350n ; 4,,385,7237. 3 ,
[.- t m_ # %..w. op,, .e. w..~, w ym c. , . . ; _ . ,f_a e neMt:,g; i Ur 7- gg 3-WQi,jhM W ~ Current I. labilities:M ~ ue ~ sp-/S$w 4~ -M?Mt 4? Si Notes payabley~.%.o,teii( Banks m.m g .s.~ . . . g &.5
- s.4s
# A[p -. ,.
t;ww$3* $ ' '122'.7.,575 ' 4
' Commercia,l paperQfJyf See f.
' . . . .,._ . .q.y. z.p , M17 500F_.267,405' /~p00.865 l .
Currendy maturmg long:ternr -
@y%;y@W F; r Mpt.f@y.Q .
g210.1231l49,830 . ~ 2 23,034
~#
[x Accounts payable < b.M n; ') r
..EWJM.y/11%~d..Mg R .r 33,289.M33,815 J 125,634 l
) - Customer depose 1.21 Ekh .y.g.ly;iG4.i "
f;. (/ Taxes accruedq..;w Jiw M.I. M g."pfeh 4;g. ve4 M @sg.E M . :.4 55,435 H.249J32 6- .ar%.y..# ? AghC75,737 J/2 65,606 ^ [ Interest accrued 4 jim ~ 2@{.1 Dividends decbr@l~p jQ.hg 7.l.dw.ic.u .M*?47,594 - t. 35,287 i 40,629 ~s. 23,686 '> Other ..... .. w . m.w~ .. {V~3,.M,.m+ -
@.4 - 3M.- j _e? @
eu - J. rd. h m.W&, sQuM7.g.y; A . . . , d~ F 897,542 eE680,234' ' ' " ' j
- - Total n. 'T.a.?d.h, x. $ r.'.
.v .
w u J*w,e,q - e,.s. n- % qy gy.g .: . a AN.
.x y[ Q~Q
- w w- u, vs %x yx t- . ...
a .ha - Deferred Creditsr.p. , ,. Q ;} M p.c M WA .- g , ,
! Accumulated defermi.incomme. wq , T e @MLW1)t? q.:s'dWQ.k kl04',835 '.
K Accumulated deferred uiwwtenttiireiedits'6 om.er . ......w n. . .w. . - ?.e x. , ~ p .. 4,t ybi.st 1h. m Q Hs,282 A,... 4 ,, ; 4 .75._245. nn. d <
._ v . 7 Y -
n Tc/a! N. EdM ' M L 2 TfM$3A & 379,716f 1422.158 ' O . ' m gap m @a u# dr; 4 4 cv -w m.m ,y a ~ V ., .t p c da '.; M n .A V: 9 .r - +n Reserves .wwh@.E 1
- M ,,19,460 ' $ .12,910 t .,
W~ %.%,.L&.c'.h Q wh-X
,' Commit
.. W41. M Q. c e3 U. . , .x
" Q' w.ng.:g,m, n gby'*f44 *,1
- k $ '~%. 9-x;R f, a
- f. w .w glents wand'CO m gy E( n v ~ 4yTotadyV.
$6*,503,068 . - $5:50I,027 (nr &
. y ; ..
- . ~
n >. c .w. . . , , ., - m-
.w ,LG &~Qt'.f ,r} $ s f ")f % f.b.c.d b,* f 1 v.mx&([?!,
, Y.0j M) 6
^
f,' a J
- j. - QRi Q Q :y.f:9fyW&gh QMJi .,.,,.,a
, .M fa . .
~..im..mpg as 9. y 3.; g3 y 4 y- 4..y. w .3, t ., % t
.<,,.h .. ~ >
- Te
- . yQ,ai Wk. _h'.r ':. %m $,C .?."~. h %~ > d.;. . M, ' C k ! a<
, h. .m g & .$ y%pe s~f W G 4 b.e M eb U ':* .- h% -, &
- s w , *. M m M, 4 %.C /4 '* .%4 ' *; W* 9,. Mr thr' A.:' > ,*/ N ** . -
- J**-
' ~ '.
'.""s.-.~.
e.
,s4 - .?4a.- f.7 ' % . WY ~ f *3 hs ==eswwea.s.> *N ' % 9 "er' w 4%.* ,s na 'o c e ,'.' = ,*e >-
E ~
.&*m.v W e. 2 r . 4 .a.( v b..r.Sw w V r*.,c **
( /M.74V* ; QMh'[*,* l g 8 -"%
- 1 Q ' VN j! ? d >" " p 7 * 'A J.? 7* ' L . [, ^]-- '
i, .s ,- 1,.. N. i. @. . f. %, - . . 3. . * % fn . r , A. . ~ ' O r , ; ; . .%
. . c
** ? , ' , '" . ' *. , , y i* ],
$ - ~ [*. _.."*.
,4
: .? ? L L L q
. Q . L, , i '4' g. (l v .
~
b^% ,
..o.A - , .. 'g,
. .. ,. O 4 'Il . y 1 jo 9
) A. , ).*- . . . ,
'a ' .
' ' +. --
s , , _ ,
. . , 4.
4 %, ' [ .. g
. .j e - -
t d E , , .O
- j. Q; * '
a
% 4 ,
*e L ,
g j _, . . < - [e 4 _
usatatte south uttitties. Inc. i k k 0 k, , p
- c. _
Staternents of Consolidated Source of Funds .~ , for Utility Plant Additions for the years ended December 31,1979 and 1978 . I,! l
... # .- ~ ' , i
.f , ., % g, < ~ * <
'* ' ~ ~-
)
n'.. s.v , w- $g s > n - p( .
, w
- . m
?
4 r.,. a y e ' 2. v. s ~.
- ..; 3 .
- . + .y
.c.:.7, - .*
. . u. e
.~ .
,x h.
. 3939: ... 393g
~
e an u . r, rn W. , . - r ~s~ -
./ . . d + '- ^ In 1botaands r Source of Funds:.:. 4. - r, < .~ +
c s .
,From operations:.g , fg m
. . -Net incomeg. : . . ;9.n. ; e.p?,M yr.; '. .W . . . ..
....ngw ,:q a : n . a. j'a. . . .unr. ;m,n,;,rgw9:,-
. $182,058 e . . .
- $185,438 9- y 6 ? u,i . w . .
Depreciation . 3,@I.6i.M.M;.L.i... A. 2.CT, ZI. .S.J. 112,805. Deferred income taxes and investment tarC M ' 'Q ~,E G., @ >1119,304
,M; V s , ..
9 . ;g credit. adjustments k net (Note.1)M.4, C.:.M.A. .. W:W (24,856)r,l:36,427?.. [ 1 Amorrimrion of property losst . frimT.C; F d 6. . "@.V.. .$~cf.W4,101 i r ~4,1017 "k u Niowance forcns funds .use'd,during tonstructiori . . .W;L. M, .'NU.V (213,333) ., ,
... w. a ~. - 4, w w . ,. m u; m . 4 a
. . t. s .: ,- % ,U,;
Tot 2 - n
.~ : Cc. a g.$. fyf y,;;se .nRf s p(.s flZ &fi PrQ,.m . 4 .,r,.c.r
%. e#
W:d*W.cu op 4.g63274ww&190,481,- g, e... yu. . E' l .iW ,. - *
. @bDivid' wbk.. Q Q.W h &common V M ;'& sto[ deP @ T C ;y . g.f,3C Q$i @_E Q @j!d$-0.$C & w 1Wat:032 ends,declaredan .
. [ WFbn'sd*retaIhed in businisiN:Fih.iMIMT.$7!.@.22hTC';$(65,311)D79,632D M
,h,kMMTCWklDQ 4f.' "
= Frontincrease in working capital (edluding[short-termMMt*/h.% E -rea o
<. Z. .Asecurities, tax :s'inchided in currentliabilitidsMW' current matudries~and /.J2 , creferredQ q&@%4@@.I:.Qm Deferred charges relating to SFf fuel'yQ 1.M dyy F 'acquisitiorr WQ'V 21,736):' programs (9.045) A.:=.iJ/$ .(..C2.
' Advance for other property adinvestments T&.L. . P.V.0;. 9dE B * ~14,737 U (14.737) .
i s
'. Miscellane.ous'- net'. ; ,C . . . M,. .QIt.,J. Q. . . ;.1 W ha, r.o. .m (14,658) } 15,805
- 2. . . '. , . ., Jf. ..I.._,'J .,'P ' . i ...iii' '(99,605)
. Totalu . .J . . .,;
! 8.901 1 s
.m,# .c -.
c l ,
,. .. a 4 s ,
m . %, ,
..- c, - ..m.,.
u . a1 .cs u-t ..s uM .pa [ - From financing transacuons:
. - y4 . . .
.~
/ m.*.# '.d,. . . . 3. 2. . . . .* i G . . ?.5:. 143,147-1 f- Common stock Preferred stock . . . i. .c . . .L. i .W..c... . . . .
_. . .C.~. . . :. : i . M.&. M.V.;
, -' 1* '202,269 g
$ . '183,699
{ First mortgage bonds:) cW.,.i.QW$ glj b g , .- - i J Issues . . . . W. I.% . .G.O.Q.".-P.3$ .3.T.y . i . : . . . 4 J160,000 242,000 l Retirements . . ' Jr . . '. . . . '. . 1. . 4. .u. . .J.h. . .v. . _ J.. f.7 . (19,802). (27,854) n,. s <- - Pronussory Issues and assumptions notes and other long term debt: ez. :1. ... d .......
. . .. GJ.J ..' x ' 378,863 " ?.D "235,623 l . Retirements r. . . .> ; . . 2. . . .'.i. . . W.). . . . . . O.Y .42. .R. L (3,313)l (2,177)
Sale and leaseback of nuclear fuel; ZJGt.%.r.t r, .a .:. .?.i /.v.; . , . 65,359 ' , ,8,210,
. A , Book value of utility phnt sold.d.6*i.x; ?f.f.);i. G uJ.. i..d 5W 34,199 r c., ; , + ,
.' 'Short.. term s.v.e. curities f3
.- net i.Y.W.'. @gg,g.lM,,.,l..';:.".. C.,2.W. Q43,849) " 135.575, x- x,a , a n :
m 57- \ - n j y -Totale.; . , J. 2.: ~.w.'.1.?. o
. o..Z.,t. V.v. 2 0,.W.;. w .. ..fi . ~ .-. . 957,425 / 734,524
.c y .-- %. .e-. t J. M . dI.i.W.154.^,J . .Mb d . e.C .d .c.3 $857,820 , $743.425
+,
t = till 4 g'$tal?J.M.f ef.? %pQpgi.pp"{WQ
~
r I OY W4j? ig/q. 6g' . - ! . , .qfun ~ Plant used duringAdditions construction).. 4f/m - Y%QTM'$[if,i.Q.t g (excIEdes allodince fo' f. 'M@ 't s
*I P , ' . /;{p. Construction.exp'endituresN~6re;%. 4;h Myd*%W* ith'fW.3$812
" .,.~. Fabrication' costs of nuclear, .N. c*N.- a-.z .Oy. #.C.,p . ..q' '". . .". 7S~@t(1,718) :(18,151),r46,8031 M7,1
~
;- Othert _
nee. . . .W. . ... yy._M. . g".'
- '*- 2.'. . R. - $857,820 $743.425 l
'- 9Total .*; . . . 2. . c;l.
. , i.< K. EQ; , :m'Q. .P* _
. } : ../. . . . 1,
, . .a= .
, , The 19 9 net increase tn working capitalis primanly due to increases l'n afcounts recen able and fuel oil inventory reduced bv an l c ;iincrease in accounts pavable,.ind the 1978 net increase is prtrnarily ,.w due to an increase in cash and special deposits and a d g n taxes accrued. . ,a -u
, y - . pw. O + t> - w 3. , e . ,y3
. , 2 :.t. w .
-,c +.. ;w...,. w ., .. n . s .. a +
. ; . w- . s.
Re b~~~' s . 4' ',** . t g . . ;i , # , IC, ' - . l
'. ! ^
,f ,
See Notes to Financial Statements.
^
24 .
- l, _ .
u _ _ _ _ A r
Middle South Utilities, Inc. Statenients of' Consolidated Retained Earnings
& Paid-In Surplus for theicars enaed oecember 3i, i979 ana 1978 19 7,y 730ms,[
{ )-t ,
. - $534,893 _ $460.608
! Retained Earnings, January 1. . . . . . . . . . . .. ... . .
Add: i i
- Net Inco me s. . . . R , . . . . . . . , . . . . ~.a . . . . ._. . . . . . . . . . . . . . 182,058' '185.438 e i jotal:: .N 7c . f." . .Ds " . .,. . 3/.h c c. .. . .. .. ... . '716,951 646.046 <
r .. - L T .' W ,-a ' T Deduct:M JY.OA . . m M /. 1 < : [ Dividends declared on common stock - $1.535 , . L
.;a share in 1979 and $1:46 a share in11978.N?. . . . . I.s.C.C. .... . 2.i .s. d 132,585 : ~ 110,849 i Excess of preferred dividend declarations by subsidiariesM 0 - N b.t -P MH' c;over requirements recorded by I Capital stock.e. xpenses, etci -: z. 4.,~ .2.2+
parent 7d m
.T; . 3.W.,E,. dg. . .s.",.
. E.w.M.M.1.
g _gg*. J. ;7.1.h., ;.2R.1,614 .i.O I.1.1. .d/T 304 4 1,307 @T 135,506< 111,153 X. t ';.<T. ot.a. l;' #. f .".R= /r. S. M M._..c. .m Retained Earnings,DecemberJ31 (Note Y,!c2 . ~.$581,445 ; . '.cc. L .$534.893
. ccc. ; .w.~.S.. .
.1. .,i.UO .~. 71'.D.
m , a w ..c, g.v q q 41 m; : j . .. % . -g ypJ.g::( A / MN $.499,85 T. ; $401,15,%_ .#a< Pald.In S,MS3^tm, . ., JMgg .A. v..M+.w urplus, January.1. . M.4. . f.Q. ./.u,. 3 as g
.A c- @eg. y . .. n. a..J1 W4. pgpg.
r q; Excess of proceeds over par-valuemy MJ.a,1pE.g c. M ,:q-L.y#4 <f M_ [ shares of common stocid sbld'in*1979.C c.Mc.p;WM(c.M122,583.1
;n i;. . . ---? b'-
#13.500,000 l / 8,500,000 shares of,comn.on stock sold in 1978 . /.%irm.;.d G.A:' gn;,--Q94,460 n -
p A. . 1 i TCommon stock issued in connection with dividendWOMU ~
' MP2 W ' 5V.4
,"T 865W
~ reinvestment
' 4,053 . - and stoc Common stock issued in connection withe M " U.? i e 2 L eniployee stock ownership plan . . .'J.C.L .1.ic J *.E .. .:.;.; P. w b ?I26 , .
. 54 ,
i Com. mon.s.tock issued in connection.with smployee savings phn d c. c.c; - 2,0210 L + 132 ; o .
, .- . . . . . '. . J . l . $630,450 ' $499.855 .
g ' Paid.In Surplus, December 31. . . . .a._JL - sshares . Shares outstanding a Current Preferred Stocks
; , , p.g,A, /: oecember 31 a CaH Price
[ b ' Per Share of Subsidiaries ~ wv December 31,1979' 1979 . 1978 j Cumulative, $100 Par Value ' Without sinking fund 5 C " - ,_ .; n>:.- 1, -
- S?f- h f -
*5 4
! 4.16 - 9.52% . . f. .
~ .'l. l . ;. . . . . N. .,a & s l2,695,106 ' .2.695,106 '$102.50 to $111.44 I 11 A8% ' . . . . . : . . . . . . . . !; i S.",2,695,774
' 350,000 ' W -350,000 ' -I .1C $113.98 j :. .
y W., N.c .3,045,774 .. 3,o45,106 - ' 2.695.106 :
- With sinking fund . 'A. d >y
. ."/. '
' _. ' 600,000 -% 600,000 600.000.. $112.04 to $112.54 l 10.60 11.04% l . . ..) ... * .
' 'l' 5,756,500 ' '
't;nissued 1/. . ir*. . .d,!. . . .. . . G . .'l. ..L ..J
,%A 9,402,274' / ' .3 . .",, ? DMM. 3.;M ' . ' " ?'r i ';M.
g.ic
. m. . 1... 0.;.t.. W. .;.mg.7. a. . s # g ,.a .
Cumulative, $25 Par Value .' ja QQ,
# f :^ / , " - M 4h? we:'
..~
1 T V :W P' A J W "*M .. 1 Cy 7400,000 4 ' J400,000 -
$ 28.21. .;
i [ Without sinking fund e f 2.4 SA. S.Z )y'M Q 8.84% i .
- 10.40% . . . . c; .
... . G . . . .r c.
- d. , . . .:. . f O ,Q~ 600,000 ? 600,000L ; 400,000 ; . [f $ ' $ 28.60
-w '
,4
*h#
..or ' a71 Q. 'ci b
j : . s
.;%, m
- 1,000,000 l 400.000
- .Wsth sinHng fund. -l- ,000,000
.w-9.92 m
13.12.% . " y f, . Jd ~W ' / w.,600,000,M.
# e i5 s v ... '5,600.000 y ; n. .s:w,. ;
y n $ .27.68 to $ 28.28 L,
.' I!*dd,.M.:.4%.
. 4. . . ..
6'K. . . ,. . .hW15,400,000.y eM j. M ,}Q Z M?ii7 i , .t r i CTcial a ' 1 :7.l.7.W:.;... . 1 hj /4;f,$.@MW ,
%22000 000 gp? $NQ.0 V i ;m.:- a
' yn {gQW6tM;mn ,
. #7 In moreands lJ ,-
'f -AG Without sinking fu'nd.
Stated at $100 a share . . .. .. c1.5 . .. $304,511 $269,511-l Stated at $25 a share .......... ..:..... .... .. ....p. 25,000 10,000 .- 1,455 1,201 Pre mi um . ; . ., . . . ., . . . . .. . . . . . . . .g . . . ., . . . l '
$330,966 = $280.712 l . Total without sinking fund . .,.
With sinking fundc .
'*' $' 60,000 Stated at $100 a share . .............'.,;;c.. .. .. $ 60,000 Stated at $25 a share ... ..... . . <;... . . . .. .
140,000 - Premium . ... . ..... ... . . _ . ..... . . . . . . . . 518 63 I Issuance expense .... . . ... .. . .. .. ... (7,010) - Total with sinking fund . . .... . .. .. $193,508 $ 60.063 Annual preferred stock daidend requirements .... . . .
$ 46,703 $ 25.477 Average annual preferred stock diddend rate on par value . . 8.82% . 7.50 %
25 See Notes to Finwrcial State.-.u.
3 fiddle South Utilities, inc.
~
onn DMGlE g
,.+-
m..;. . .. .,. . . u x: . ma ,. 4. i , . mm, w-us m2 4.g t > Long-Terms.Debt of Subsidiaries , . . ~v w ~ws. , gg+- Q. v > tc .n n m.
~w
.x,
-4 ,. a+ m. 4.,.,..~,,y+g.,
c .v v i ~ r 6 . r . .s ,- , g g- . v s g .. < .o jj ~ ,. t.;o a. ? n#, % '.ry*4s,4 - p ' Outstandin8 -
,lr.e j- a w . %_ . ,.. ~ <m
- L u -
t . 6.~* e& ,;4. c r 4, * % - 9~ . x.u.w., sK%t O.3o7aCy 4 5Ar.& December 318 ' 3 '. a t' b .:- .. s ~W % y&eme:
.- e t ~ h-' Q.*:,. 4W Q :". / ioJA Q, ~
M?&hW RMW > Mfin hidandr # - First . Maturity 1980,21a; Mortgage g ; 3% , . , , .g.h n~ ..Bonds:jP@Q% n...,,. n..-.,.- ..r..w . ~ 9 ..p &... s .,.. w.. ,$ , =.. _t e,; n y:g B.TP'fM;Wl# . . s
,1981,3% . 9%%nic.SgfH 6;r., ~ WMM% dMGM11L,000 Q .118,000' #.
c 1982,3% ; 5%%1f. .~.Mf 22. Rh?MR Tch L.Mbl5,57L r *;15,680L V 1983,3% ; 9%% d. .wiP. %
- C;h".&htE.h$69,202 c . - 69,232~ . . ~ .
%~ ~ 1984,3% i 3%% A.11 ff41 P *
'* " ~ WW631,500@ 31,5002.7:
l7 - 1985 2009; 3%.,;13.%% ,. ~ w b 1:W a
#y * ". M ,";
- i,c.. WM2,087,35841,927,902%
q - .
'f... '
1 Total First Mertgage.BondsQpC. . QA. , s
- yy..Da wweM,,a .X w- ~ %.%
J 3f" f&M - M1N* Q.. $. .2,321,632 3 2,185,714gg R & & r >w w iV,'.yz% yl-
- T' m..atures q Qg o -
fmz: y;. - .
- g[.,
( Y a . V & L f y*bY ' p a .. L~ t b 1983i5%% na -
- ~i
?,
.2 g.. F3,50e M 9,e a " J4 T "1993?7 N:T6tal deb t % @N d $ N1-d h [
g tggy gg g g' g6E3,840MM4,0$$$ ;: i f PromIw]ory Due. - y ;. y y Notes %y +G&%g6'4 9~ ty; yng Wd 4.A@g@g g.yyn6 m 9 Q W .. W J n. r 1980. Prime rate :o 110% of prime ratem:W r., . . CAW. M frqtygy%;?81 ba-1982 . Prime prime rate plus lus
%' ofrate 1%to '?
., , M.v. ; & .. 'h2;df p%'of 310T6fMsuin 1%.
~
of'NQ
$L.13.::x" n 548,527 e--M .681.
.M, ?M091 n.W.W/U -l Total Promisso,ry Note. s Jr.".3 S .bc:.2
- 548,527 = ' .-
. , , . . ".%p%.o- I Qa -;v 'O s=.1:
7.'M. et.% x y. N w L . f<,yg
, .-ex L
. . .g.
x p :: .nu 9 Q,nup.m ,y 5 :. .a .W. ~? %fu ' &n i Other: Capitalized 1. ease udue seria M.,;; w@lly%n throug'h; V M ia4.X;gf.&; . h;V lp-. jj% 1993i8%.'C.2 + Q #p[~ 7,648 wwCQQA. J9F av . - Municipal Revenue Bonds-due serially th-ough A)04,0
..Q,.n g}.39,473 ' 4;3..M 5
~
1% . 8%; . .a . >. .a .h. 8 ?. .d.r.4 W.2.W.ya . RG$ 03p,68G kM ..Dd : L Pollution Control Revenue Bo.nd, s . - .- s and. InstallmentM_ o -,...&.( ,,m_ . ai ,%,M.s W 3.$'y ~i'd :M. _ M N' M, i Purcime Contracts . - n m o ve py m.';
- 2. ; 1 vm m :c; . -
' Due serially through 2009/6.- 8% . 'M ..wNer.?.t.CA.:t.1, ; M.Y17,451F ^i ",25n/ J e Due 1995 - 2008,6% - 8%%c.d. . "
t b.Less - Funds on deposit with. trustee Q*i ff' *T ..ec: m .d.c.v.w ;;d 94,625r .. M1,625D x 36.2
;.Q,7M...VM19,580 p
, . Total Othei ..@a . n.Mvh2Gt6 .n u md.sim,1MD:4
. d ayc rQf.3139,617$.g ~ c 114,248.@- A. -
Unaniorthed Premium and Discount - Net...s.4'J.m&. q.s :
~
Total I.ong-Tehm se.>z4; Y Dhbt:
- v. w ym .$I.D. . a.h. M $NM. x.D.D.D$
9
' Annual interest requirements on Long-Term DebtW.CL _r._,mw'p.e.n +" p 298,277.3 R $ J 226,892;ss ;~ ;g .4
~ Average annual interest rate on total 1.ong.Ter'm Debt 4 l 9,#%g.h... .Z , -
^
- (excludingv una,mortized w w m w r- a e s premium and discount c net)J .J..w.c.K..gL,. If.j /g.i R
( 4
,, m /ns m% mC9.90% O
. 4,n.La
- $ W. y m g e. p y ^ g Nep a m wn 4 ' @aiw est m T W L w ,e.sa.o. ,O M 4.. d ($ %ex . ? t i g4Maturkies+.6Snking Fund Requrements b , h>a-4..d.y 2 (p g December 31,"1979 e December 317191 [
w ;>. , 4,,m 4in, ,.m, g . m, ... ? CashY A Other.N.- . < Cash - Other* f, .g.
. :;4 :In 7hbusands -ofDollars ?* t *M b ~.
1979 ......-.. ......e............,.... . t-- 1 :-- % . -
. - 411N 16,245c t ..
p' 1980 . . . . . . .. _. . 3 w. . m.a # . . .gl49,830, . 861 7 16,992 - 9 681Q 16,672y d.;,
,- 1981 .... . ......w.... ...;. .. ... .120,488 '(~ 861.417,912.. 68v 16,592 .
P 1982 ~ . . . . . '.'. . . ,~. . . Uci.'. U. . '. t.~. . . ~.- . .. 3 51,548 4 32,8077 ' : 16,662 32,573L 15,842.Y 5 ' i 1983 .. . . . . . ? ce .. . Tc.e .n . . . - 112,142 40,833 - 16,446 40,683 . 15,626' A, l 1984 . . . : . c. . . . . ....s...4 . ,,... ~ .82,360 - 48,903 ~ 13,571 . 48,753 , ,15,371 iO .c4 s,- m g, y. . .e F 'Sinkmg fund requiremens may be met by certdcation d property addicons at the rateYf 16'"5 of the riquared amount. l
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7 See Notes to FinancialStatements. ~ ' *' - '
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P00R OR G NL 1 fiddle South Utilities. Inc. _ i
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[n,), Notes ton Financi$1 s,,tatements . _ __ e.
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currem. PC.q *745 -@M/ @d . o 1 1 l 6 Federa!. !!.i f w ^due - ' -Qr-b.....g q:6.$ Tc42I. .;d b. F. Q.,..s c,. @$ d o ?- M M h; %
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'resrt. . - - d n . R tax >s; g?.;b. 1 f*q .7.f W'*% y- .- *g %.T M" p.p%y prQ .s ^- pJ-acw- 1 e %-i a Absr.ce ioc 6nds eed.
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.m.3,3 The tut efects of.the ,. .e dud 1F;8 an1193 federal tax lasses.s $2121>S5Lc') have been recorded as reducnces consch cf de#errd incc me taxes. Urmed,inwmrrners t.zr. credi:s at December,31/1979 amoursed :c, $231,'*31.0CO. cf shch .S
$38,459,0M=ry be* carded forward throc#. 19% $92,966,000 thrcwi 198(2nd $100.296p O t! rcedi 19E i N i O ' - : yi.Q t.;s.:%2W n x s. . . ~ - u gt% * %. . $^ y ;t -4.}.f e Qj,"[" +. n. . h%
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4 snr5nr3jies F N , Tt.e brI:panf% scbss&3 ries m rradusdenbes en h' atc( thatinsed.brIdiT:spect Tei ai.us g l p 3in.55e rsre -*= process sh!ch 'drie- arna 15c rrvernes unhed L_ iWftzWQtan'- overi.Mleafe W1 cos
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f 7A.ppliC2tiOO C4 C* iter'1used to dc60C 7,C2pitafIc25c wcukfperTnsbeccT6cp. ' > thell.hCsing assets
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3 fiddle South Utilities, Inc. P001310 NR w n -- n. :,: s . ;- ~
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le. . iX,ld not matenally affect the amounts ns 2 reponed 25. .either _. { expense l l ases wou 3 .. [ At D--dw 31,19-'9 there weste.oncmcelable leases, mth y,,w:.L N: mamum 1m]hupands rental commitments yW a.s followw$ T ':
= Lr.3W R hd 1960 . g[4* nm Q RSl'-6-< i . . . M 13 2 27.26FA '. f N 7 ' l M ~*.g'.l ..hM k c? '
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T Re$2dTi[eEse"am==g , g,, [ r 1 nreesobw - vesinn c ra Fnoc . fu.I Nuclear? gs2:aceanosep was ?)
~ includedinthetabo -. a , "$
I~ charged to operations 1979 and ~ L ' ' IneJesses, unless * ~m'resani - ar ts( the ' willi '. I conanue tarough 2018;2928 W of 03,0 ati
. December. ~
Lw y, N M a &x' T4 - CNote 3rI1nes' = s esigs- wo&,.)1
,4 . s -.c sym ,.-;
L f , .., [- ne Company hora of ag, J900 South Energy.15c any ^ heniss' '
.arx9eEncept$ahescunder' ~
- Deces'aber3R
" # ="- . " _Z < <
j 1982;In * % <- - fe ; te an beisdwinuWeestiniBanie egahegnernd.7 f- may bonow up to $60JD00.000Aviar 1 --scosapematma;babecesmesuunnuned not- -medN. , 4 as' to mthdrawal'and cornmassent . T,' 6===f,portkrs therMp cra^ ';- --ad PMgi i
! Re operaung C M . #, nossequinns nupashs d ibinha p ng% y I for short. term borroMags thrempir 1 1sidaesiitmercial pa .deutengt f6dfe .-.uJpaper; 7
[ Two of the System opeseting subsi< fesses mammin. compensating bahy. wit!rrww2W ding banks shich S are not re Inced as teiwithdrawal.i ' '7 ' WR @ i ' j.. ' L Sp, tem Fuels,Inc 's%a 3@nngs*up bewo to $50,000.000yp MW &a M '" QN . toalimit
;. Nalent to6W of the, M saleofcomjnercalG ; t' air mar ket valuc of 5ft% fuel od iavens&y.14' ton,SFi mav_borrowup to $60,000,000through paper. Borrowings under thesc4 c.c cacs e<=ncred~as,to userand are b,.SHb ~ and. fueF y
p imentones and.accounstrecervableMsugbeiin'she' sales af theseFinventeries" ,g Nv / 7 (* *'
- ne Tmest creak, ' ' ' Mnf c ' hnres of the companies >werdits fo! .S
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- Balwicez yM M gh%t mBdence y -
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. ndJle S<mnht
.. Aep :: T 1 9rk145 g. ,La.1N ^.v .al .3W f, e e Smem Eels. IW1
-. Cperato,rsubdan t10,DetW'; MS 3" .. %s,505%. -MESI (
.eSo% 7IU63 1127.290 rww ' '
INhh3Nk N hdh Mb MC [ $ ,
. t Rddle South .,
Q 257.00E ; IIA 10 $ j 4 090 Aq t Smera Fuels;InnV- c)
. N.3L7.000'Qf$3
.i 195.59M000g"4~p h 65 0
~
5ggw@/ j, (
'jiddle, South,5erri '
~. ? & ;eath w t&v& > %, g:yf Q '
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. @I, d ) ' . ..
. y IM*9W1978 R .
P
. ') i % PQs # .*s ,g - %- 4 4-h 4 7 Jn 72'ouwr.4 s. o a Averaae Borrosing ..d. '
f e mumum nocrosmg c &J mr; f 'yy. 7
. m;.4.;x:d .i.Rf e. ' d.;.g.i,n.h 4.u.. d. den M , .[l.y*rs
"* [[L TQ.gf..p;w y.
c98,015
. s %
sm.uo' < wM b #ng "period"7M ,ya, k M. N.,
. $eS-i y j _3.'. h d:$,$,$ _N. h:; e
,.W_,.A.. Aw h. .t6, . .116%, y10h
. d,1 Y, .h2, 7 . PN. MbM4.O,ME I Dank Luns A L%. .as4eR.;;4 ww 4
+w . 2 8 .*v +.e. cm/. p ---e m .*. . h. n ~.dL~M, 1 L.M .' r<< 18 6,% .
i
- r. At c:h of per.ud - . g .m w
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- ' Com, mercal paperww N A*.Cs".y w5me.v. .e.-4.m ,tc,/. , .@i .. .c g q.g , j%
a % p %.
. Banklu m .. + 4. % ."; A .J.u.g E. W w .a;*h
. L ,_ .t . . ..b a;.v-10% j% 12.1%
commercal super a r.'.nJn .a .n .%.u. . .ww.: ; a. . r.,'ea m. . ... . . M',;' 15.4% ,* 10p l
, u :.- e c:w "J . ~c p3y =m' *: %)1 ,-
N'.x pent to year-end several changes have been propmed in the credit lines discussed above StSE is applpfw to
! the SEC to increase theircredit line for long-term borrowings to 5808,000.000. 5155 is seeking authonzation from the SEC for a new $30.0CO,000 Ne of credit forlong-tenn borrowmgs and SFI has reques.ed the SEC's approval fora $150.000,000
; borromng arrangement to be u;.ed primaniv to. finance its fuel oil inventoiv. Q _ y- J.cd% _ ,,
y i .
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i,. 3 fiddle South Utilities Inc. i :I I,q L s
~
l Note 4. Commitments and Financing he Middle South 5ptem's construction program contemplates expenditures of approximately $928 million in 1%0, of which $272,917.000 i3 for SiSE's Grand Gulf Pbnt. As a result et anticipated delav> m licensing and other factors,
' i MSE. in December 1979 changed the scheduled commercial operation dated from 1981 and 1964 to 1982 and 1985 for I the first urut and second unit of this plant, respectively. In connecuen with this plant, the Company has undertaken, i to the extent not ot tainui by MSE from other sources, to furnish or cause to be furnished to 515E sufficient capital I for con 3truccon and operation of the plant and related purposes Brough December 31,1979. the Company had invested $385.7 million in the cc:- mon stock of MSE. At December 31,19~9, MSF had outstanding bank borromngs and first mortgage bonds ir. the amour:t of $947 milliott in the event that Urut No.1 of the Grand Gulf Plant is not completed by December 31,1982, the bonds and bank borrowings sill become due and payable unless extensions of time can be arranged. In this case, the Company would be required to provide MSE sith sufficient funds, to the extent not obtained by MSE from other sources, ta meet these obligations.. Aihe % W.% o
%e Federal income tax returns for the years 1971 through 1976 have been examined by thE Internal Revenue Service (IRS) and adiustments have been proposed. Re prinapal issue is whether customer deposits are indudible in l
taxable income. A formal written protest has been filed and conferences are being held mth an Appeals Officer of the IRS. Any final liability for taxes resulting from settlement with the IRS would not have a material effect on net income. L - Income taxes on customer deposits would be w.malizect Most'of the other issues have been setded and adequate provisions have been VQPK &Mfor Wv W to' SFl
' System Fuels;Inc. has arecorded.
long-term od KcQC4 M '*C MNgi[l supply agreement with acompany cujor oi pronding the sale ' of 50,000 barrels of oil per day for a twenty-year period with the opdon, upon two years written notice, to reduce the
. _ m _.t. ( .. $. 3,
- contract quanuty to no less than 35,000 barrels.SFI has contracted with a joint venture for a supply of c to preside 150 to 210 million tons over a period of 26 to 42 years. An operating subsidiary of the Compam%as agreed to i
purchase an additional 100 million tons of coal over a twenty-par period. SFI has executed a letter of intent, subject to regulatory approni, to purchase five hundred cad cars for* dehvery*in late 1980 at an estimated cost of $21,000,000 for use in transporting the coal ' - *
.t
'~ ~
.."- . * '. T ,-'?- .
A subsidiary,under the terms ofits nudear fuel lease,is responsible for storage or disposal of3 pent nudear fuel. The subnaharv is re-evaluating its policy regarding any sahnge clue as oppowd to possible storage or disposal cost for spent nudear fuel. The subsidiary expects that all costs, de:ermmed to be its liabihty in connection mth the use of nudear fuel,
!. are proper components of nudear fuel expense, and rousions to recover such cost 3 have been made in ;:pplicanons
) to regulatory commissions. We subsidiarv is present recovering approximately $35 million of nudear plant p* -
decommissioning costs through increased deprecation charges over te life of its nudear plant. Based upon a study performed by the subsidiary, deco.nmissioning costs are now prcv*cted to be in excess of this amount. The subsidiarv is j ! , j~ ~~ requesting recoserv cf these incrr.tsed costs in applicanons to its regulatory commission and intend 3 to file similar 1
- requests for future inceases Subsequent to year-end the subsidiary received an order from its regulatory commission I regarding its then-pendmg retail rate case. Induded in that order was approval of the collecion of the addiconal costs
! I assocated with the storage or disposal of spent nudear fuel and decommissioning the nudear units at the end of their
' ~ '" - '
l service hves. - s . t The Company has requested u.e SEC's approval of the sale of up to 7,000,000 share of common stock in May 6 1980. he proceeds will be used to reduce the Company's outstandmg bank borrowmgs at that ume. InJanuary 1980, MSE entered into an agreement to sell $98.5 rmllion of first mortgage bonds. The proceeds from f the scheduled sales si!I be ttsed to reduce borrowings outstand ng under their loan agreement and for construcuon purposes. In February 1980, SFI contracted with a vendor for a thirty-year supply of lignite to be used at a proposed APE generating station. The nu, contract covers approximately 247 ,ymillion,. tons.xand is subject
-u to receipt of regulatory approval.
'. a _ t. : , - w, -
t cma ,
.y. -4 wu Note 5. Retained Earnings , y. . , -
~
, (c & MNG 3 K f.y ~je i ne indenture prosisiorirel'tiriga to the operating subsidiarie's' h)rherm" debt and thadsfers'by such subsidixies from retained earnings to the stard "dut of common stocle and the prosisions of the MSE bank loan agreement and
. indenture restrict the amount of consohcated retained earnings available'for cash dnidends on common stock. As of l December 31,1979, $378,023,000 of consolidated ietamed earnings were free from such restricionsa l f.J@p .C ' $tMQMfg,Qgjg^p ~
W ^ 'M Q3p ^ Qdig11j Y'
~
D g@%
- L .
Note 6. Rate Matter , I The Attorney General of Arkansas filed a complaint with the Arkansas Public Service C M- (APSC) on April 23, 19 9. in which he alleged that Arkansas Power & I.ight Company (APE) had erroneously applied the tnen existing fuel adjustment clause to retail customers from April 19-* through March 1979 cnd thereby overcharged these customers l
; $17,297,000. Re complaint alleged that such overcharges would continue as long as .D&I. continued to apply the fuel 6 adn. tment clause in the same manner. AP&L does not believe that there wns any erroneous application or overcharge. On
[, July 3,19 9,the APSCissued an interim order directing AP&I.to modify its application of the fuel adjustment dause. TheJuly l ! 3.1979 order stated it was not deadi ng the propriety and legality of ordenng refu nds by AP&f. for its ad ministrat:on of the [ fuel adiustment clause from May 21,1976 to the date of theJuly 3,1979 order and stated that decision would be made later. A F peuuon for rehearing of the Lssues in theJuly 3,1979 order was denied and AP&!. hs appealed th decision to the Circuit Court of Pulaski County. i n L 1I } l \ , r Note 7. Accounting Policies
" ne summarv of sigruficant accounting policies on page 20 is an integral part of these notes to financial statements.
29 i l
u j MiddU South Utilities, Inc. YD1A v b *i ' '"
; Note 8. Quarterly Results (Unaudited) 6 Consolidated operating resuhs for the fou'r quarters of 1979 and 19'S follow- l l
* ' . ~
Quarter Ended
. 19'9 19'8 mrch 'Ame September December mrch Nne September December
! . In ThommW Operating rewoues * ^ i .' $401.5'9 ^ $4T.25' '
$538.121 m $476,102 $415339- $345.8% $4M662 $372.250
[ Operating income . d ., 58399 ~ '* 43.5 % .70. 64 44.9-'9 52.740 32.043 - 80.929 62.5W Net income . . . . . . . .. F 50.247 s .13 1 - 61,m 35.933 e1.814 21.9 2 70.'80 Wh'2 Earnings per shne . ' . . . . , : $0.60 - '. $0.40 ' $0.73 $0.40 ; $0 % $0.29 10.94 $0.67
! ... . . flJ~ 9 % ~ w m. cr.t b s : , a. - - .
c The business of the Middle South System is subject to seasonal fluctuations with the peak ~ period occurring during the L summer months. Accordingly, earnings informanon for any three. month period should not be considered as a basis for i ( estimaung the results of operanons for a full year., . y. yjj 7... , l -4 . 3.. Jg:3 g **.g.4 a ? , , w-
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. . , 4d 2 m .s m: s..
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,- Note 9. Changing Pricesm.(U.n naudi.. w ted)S . /T, w ~-m. ,
, z.ce . - f% d
- m. >
'Ihe following supplementaryinformation about the effects of changing ' prices on the Company is provided in
! ascordance mth the requirements of Statement of Fina..cial Accounting Standards No.'33, TFinancial Repc-ting and t' Changing Prices' It should be yiewed as an esti:nate of the effect of changing prices, rather than as a precise measure.
'.c ..
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pn7 z% qA:, , , _ ,4 . ,,
? , . 6 Statement din'come*froin Operations and Other Financial Data l . 9 '( ~ ~pM Ad,usted for Effects of Changing Prices '
. - . - J for the year ended December 31,1979
. In Tbowar:ds
~
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."* Ad;usted For 4usted For
- e :- . , 1 77 1 A^ ' c. , As Reported in" General . hangs In
! ,- iu -
.e y.. ?; 2 u +j.. l t .. .
;The Financsal.
. Inflanon N - - , (Constant Dollars) SpeficCosts) Pnces
'/ *. ><; T--.6 e f . 1 W. ' Stateme. (Current ;
Resenues' . ...u . "N'.~...<,.'.. . .... . $1323.059 ' $1E23.059 - $1.823.059
~ . ~
Operanng expenses ..j. (excludmg deprecia: ion)L . ,, ,, i : . ~ . . . d' .
. .. .... - ' t.485.557 ^ ~ 1.485.557 1.465.5 r Depreciation . . ..c... ,. . ....% g...a... ~... .o.. . 119304 2 % 134 _26* W3
; s Total operatmg expense . . ._ . m. :... :.s. . . . 1.604361 1.721.691 1.7n360
- g. Operaung income . . . . a. . . , . . . . .,. ..Q . . . . , -. . . . , . . ..n. .1 218,198 1013 68 2 699 y Other incom9 . . . i. .' .Y.'U ;,'. r2Z ;'pg;.' ai". J. . . , . . ". . . .. C .208.258 - a 208.258 208258 Interest & other charges %. j . 4A. 4n.j g...s. , m .
^'
. 3 -(244398) , , - (2+4.398 (2++.3 48) m ... . v.y i '. - '
Income fromcostf.. operations gexduang reduction to net c a p ,h . . ; $ 182.058 R o s " 65.228 ' l L recoveraNe . :.m.; d.a.!.C. y nI. ..~ . a. .. cif, ;, . 2; :- .c ; '
'$ 36.559 i
y . -_ . Increase in specific prices (Current.Gm;tsid propern,. p ,* JN,.. . . ' - t' . e , ' r. .- t plant and equrpment held during the year *:4. Q.. ff.l..:.O ;, . fa f ; #
- J %~ , , ' .. ' '
" , $' 921,384 i
-~
g Reducnon to net recoverable cast . 2..: g.e. ..... - f$ (233.434) 1 Effen d increase,,in. . n general . - price !c.wlr$.T
- o. a. -'.d/.7,4. 2. ..!. it.,,t, a,
,M .
, M.'v.4.1..J 4 ~ .s' P.
W($49.2463 4,y -e, , ' (1.158.526) . -
. Exces of increaseln.general . 'pnce. level over increase in P.g : %N'1~ 4i 1
spedfic prices after reduction to net mune.2decost &. s. t '.m. , ~ m ceA....+ 4 . n g ; G /i!C 4 .
~
c ~ , (520,5?6) Gam frorn dechne in purd124ng pour cf net' C. l. , " .a.? ^ < W <y" + ~ , i [ .,. l amounts owed ' . . ~ . . ...... ... J .'.' ... . . . . . . . 2h2.46 2'2.46
~
l
; Net . . . . .. .... ... ,
'.'.... .7. '. , . . . . . . $ (2'6."'0) $ (248.100) i I t . .
, .. .* p w.' .n. _%.v. }r'
- j. .L3 **
- f' -
I A35urned to De in ~2TerJye IW the }d d0lI2r$ ATX! thtL9 age DLt ret?ed , , j {, 'Induding the re&ction to net recowrable et, the loss from operaouns on a curat2at dollar es .ould have been $484.018,ono for 19'9 l . w om+- 3w9-ovam.*una ewmm.naa-aea er- 2a s9.5 4.oco..hi:e rw.tarwat co ,i or nei m l recoverable through deprec12t en sas $5.863.00a [ y ' l t . r -
, r .Ls ,
t
3 fiddle South Utilities, Inc.
?DDR ORIGIWiI =
f 1
> s e.. - l
', f. - '
- c:
Five-Year Comparison of Selected Supplementary Financial Data ;
' ; - Adjusted for Effects of Changing Pnces In Tbou. sand, ofArerage 197.9 LMW .
7 . 4, e. .
<.>.. %4 ,. ,t, se m,. - i. , ,,
,,:'e.
~6..
s .'4
, y - .
Years Ended Decenter 31 ' r -. , . . e<; - , . 1976 1975 l ,
,'- e <
19 9 19"N 1977 I . . . i g 1,823,059 ;1.nO4,81r 1,728,488.m ,1.459,208 : 1.255.295
.* Operating revenues . . . .i.~. .ca, . . . . f. z ... .,.
. . . . .v . .. _ , . , . .
if tW " ***
'E' ~
Illstorical fncome cost informatI<m from operations P.xdudmg reducion adjusted to net f. r general 37 G4 inLation ^,p. .f .,". f s 1( g Qg[ 'g.gy ' ]/ f, q. recoverable cost) . T. . . . . a p.c.y'. . . 5 L. .%y 4W. mny s 63,228s-W e - y - q .y , p P. , ' p Income per con. mon %:.re (after dindend requirements -M9 9 S41Pf p%. M 49,19Qrg h h g. + r on preferred stock and etduding reduction to net %M4% W+% .4p%. ?"'MWp* F f W i e s recowrable cost) . . M. . . . fm. .QC a
%c assers at year end at ner retoserable cost y.4.Mr.Qfp,Q -D $ ~ 0.761 r g -$%f-Ng'Q g; ' '
- _
l1 . M:pm C . o 4 . *- - O+ -* 4.@ .' 1' : @W th.i % ng,lp,.4.6 Y76%C 'E*
- Current cost information . f M w. W t E \ q. cd , M & ;1... erg AC2J.. . .; 21.577,012 f
. Inavne y$54p!14 recoverable.from operations 2W.$.1fC#A..(exr 2.p uding reducnong to @ynet ggIm.gr4 4 )W ;Lr vry/;w.,$g@
)*- p!dy cost) pJJ.0 Y,bQ&"%
- h. Income per common share (after dinthnd requirements onibe b.n 4 s l'n % A n e, g , a M i > ~ r ?. g
! preferred stock) JM'. . . .w . . .i.% r.Csr. Y, M: '
speofic pnces after-reduction to net WMM
? Excess & increase in general price level ovEr increase,an j < N
* '?
recowrable MTVP costM4.@[520, i- Set assets at year-end at net recoveraNe cut . , 9at h r -* . y e v m -a; s.ef. e't 3.c.',G, -ig v3gv. g. ; g.p I,577A12u fg;g, y .*<nrgpcrym, rs n,,z. .~
' General information '-
t < . m ;W- p,'4 ;gy:g:.~m 4 'q_, Gain from decline in purdiacing power cf net f .amounts. a a.4g,2 .< W. .'% . owed f.- g c ' 2 ,
;f . Cash dmdends dedared per common share. .., W.'.p% 1.53Q .a $O.D $. '2,476 t i . *M.62V$[el.#.[]$.11.'CM '"
Marketprice per ccenmon share at 19 %
}
<, Average consumer price indes' i ' year-end etT,.,,f ;k.M. ..M $9.12% ($., ;16%7 161.2.$119% 2 $ '. -
., ~ om ay _(~z W V! Y. , W wy.y _ ; ; ;' ; -
. NOTE Tt.e Sureraent requires th.ir hi.storical cost mformanon adpaed for general irdladon and current cost inforur.aion be provided for 19'"9 and sutocquent yeart Comparabic informauon is not readdy available for the years prior to 19'9 arnt thus is rme provided * " g "
t
% ey s.42 A i. J Q N , WWW W G M..
Constant dollar amounts represent historical co..w k,.sil for the effects.cf~ general infhtibrt %e effects are - i sts adiitste determined by converting these costs ino dollars'of equal purdusing power using the Consumer Price Index for all :
-1;rban Consumers (CPI-U). n 7. ; yGi g, a 4 w; t< q ; , Wufrey @w;.4-4 M va- '
+ : Current cost amounts reflect the changes in specific prices of property, plant and equipment from the year of-p acquisition to the present. De current costs of property, plant and equipment, which represent the estimated costs of t - replacing existing piant assets. are determined by applytng the Handy-whitman Index' of Public Utility Construction Costs (HWO to the cost of the survising plant by year of acquisition. land and certam other plant assets which are not included in
- the HTI were converted using the CPI-U, . W n p w.- . 9.n O.e n WJ V s- m -
I , The difference between current cost amou~s and constant dollar amounts results from specific prices of propert 8 fj . _ plant and equipment (as measured :- .f Q;; by the G sf IIana, y'=Mpeg,& Anitman m. Index) ,. chang o I l 6 lequ
-(ipment were determined by lying-%e current year's the Companys depreciaticn depreciationrates to the, expense indexed amounts, on the econstant ' 6 . ,<'a l ,
~
, Fuel inventories, the cost of I usec' in generation,;and gas purchased fer resale haw not. been restated from -
i
- their historical cost in nominal dollars.: Regulation limits the fecove y of. fuel and purdiased gas costs through the f , "
I c operation of adjustment clauses or adjustments in basic rate schedules to actual costs For this reason fuel 7:inventories
;e'" - ' 7>
l g t are
+ 3. effectively As prescribed inmonetary Financial Accouniing assets..
t Standard OM No7. L 33,
, fNN..lsuc income" taxesMMAher" wereIN adjtSted.2) %W'm%.Y, M4 8 I :wj
[b ._In rewtmesas he regulatory commissions to which the Company is subject allow ot the historical cost of plant to be recovered deprectauon' %erefore the excess costof nt.statedin. terms"of constant dollacs or current cost # over the historicali:ost siplant.isf not preserslyw.= ' in rates Wis excessiis' reflected %sireduction.co net k ;._ , R.y'
}
recoverable cost. While the rate. making process giyes ncr recognition t'o the' current' cost of replacing property, ,, plant r and equipment, the Company believes, based on' past experiences, that it will be a!! owed to earn on the increased cost i of its net imestment when replacement of iacilities actually occurs. 1 P V' Me 1
- To properly reflect the economics of rate regulation in the Statement ofIncome from Operations presented above,
[ the reduction of net property, plant and equipmem to net recoverable cost is offset by the gain from the decline in j purchasing power cf net amounts owed. During a period of mfbtion, holders of monetaq assets. suffer a loss of
- general purchasing pow r while holders of monetay liabilities experience a gain.De gain from the decline in purchasing power of net amounts owed is primar:ly attributable to the substantial amount of debt utlich his been used
. 1 to finance properw. plant and equipment..Since the depreciation on this r! ant is limited to the recovery of historical l osts, the Compa ty does not have the opportunity to realize a holding gain ori debt and is limited to recovery only Qe ??. ^
~
of the embeddeo cost of debt capital. j s 4i ,
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, ,- + s c ( ,, l . l ; ' ,t = . 31 5 4 l l l
* ~
Afiddle South U2ilities, nc. Pp0R ORlGlNI4t
.n. .
=. - , .
_.m Opinion ofIndependent ' Management's Discussion an ~ n 1 Certified Public Accountants Analysis 'of the Consolidated l
. Summary of Operations .
3_
. . t t m. , ;
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s . ** h a DELOITI'E HASKINS & SEILS , The following factors, which may not be indicative of d Certified Public Accountants futureoperationsorearn.ngs havehadasignificanteffect? One Shell Square upon the results of operations of the Middle South S N New Orleans, Louisiana 70139 x System during the years 1979 and 19781 Q@5%M@ O Q&#y;%;:y3 l$.N[4 p Middle South Utilities,Inc. Its Directors and Stockholders: iT 2 perating - - -~ Revenues u m.we.m ? %a WN % 0,4WmMM 7 : u he principal components of theincreases in eIcaden - We have examined the consolidated balance sheets of L Mf Operating revenu.es are.shown in the following tableQj Middle Sout' Utilities, Inc. and its subsidiaries as of De- [,'MFT MY%$g;y$$$ MQl 3 cember 31,1>79 and 19 8 and the related statements of .Jonth - WS.t . Amount.
. , %ef %
income, retained earnings, paid-in surplus, and source of ,g- &.%g _.4,4,9ygoog,) y.%of%. s,rd Amouno. Noove M w a funds for utility plant addiuons for the years then ended. mv < vw + S Our examinations were made in accordance with ene 'A W ale's d~ energy qy.?0.8@M 1el5) m2 W W $ 63, m 4 ? ally accepted auditing standards and, accordin y, in- .r- ',- Rateincreases
% cg g g er.F. cg.( 'W2,p c . 4. _
eg cluded such tests of the accounting records and such other 8.034 4 v4 J .
! %, fuel cow'2.d d'183.505 .1102 3 60,4N @7 2,3h,,
auditing procedures as we considered necessary in the *Stiscellaneousi : ck ~6.562 &4 7 10,515 e 7 , circumstances. _ M, }TL, j gag .. pM, g.M? $179,536' 100 "$162.5961100 C J 1' As more fully discussed in Note 6, in April 1979, the
- e 3*. <m i maMuci W e*M9Y at momitiegw @ch .
m#usunem AP' Q, Attorney General of Arkansas alleged that Arkansas Power
& Light' Company (AP&L) had erroneously applied its fuel adjustment clause to retail customers and thereby over- ~.-
- f.
** j j r .--
; -Q1[Q -
m gseS p.' Qde charged these customers $17,297,000. On July 3,19'79, the , y E[ectric
~
Arkansas Public Service Comnussion issued an intenm gr nues increased $180 irill5cib I order modifying the application of AP&L s fuel adjustment d "I12% in 1979 principally due to increased fuel cost h fueladj'ustment clauses and new clause. The order stated it uns not deciding the propriety : ? i.vi. rates. recoveries In 1978, ethroufectric operating revenues increa and legality of ordering refunds and stated that decision - nuuld be made later. In our r ort dated February 16, L .N, cenergy $163tomillion otherutilities or 12% as a result principally of a n:rional duecoalF to incr-as l 19 9 our opinion on the 19 8 2nancial statements sus unqualified; howeve , in view of such rate matter, our y T miners'strikeintheearlypartof1978. AlsocontributingtdS d present ruon as expressed herein is different from that ~'6the increase sus the reconry of higher fuei costs througM h expres in our previous report. [: fuel adjustment clauses md base ratesc < ' :*T
- ' The increases in gas revenues for the 7 ears 1979 and ?
- 19'8 ($21 million,22 I In our opinMn, sublect to the effects, if anv, of the outcome ,
n - of& y 1 i of the matter discussed in the Precedin'g Parag h,the J ^ y(re5Pealmly) are pn. %. and $12 millio ncmally increased costs :brough purchased gas adjustment clauses.1, due to the recovery c above. mentioned financial statements present ly the consolidated financial position of the companies at De- , y. 7W. Transit revenues increased in 1978,by $5 millire 1 cember 31,19 9 and 19 8 and the results of their opera- ' "v&' ' .T( A%) primarily due to a change.in the reponing of M
.of opetunons of NOPSI 4 1 c l Eions and source of funds for utih.ty plant addin.ons for the years then ended. in conformity mth generally accepted
- 4. - l. revenues anddt. 90 amountsrecerved among the three t) the OtyofNewOrleans "8 j accounting principles applied on a consistent basis. . w , y 3 .c as part.1the - % ;g:
transit subsidy agreements. gr,J: S ~ ~yafsigj p1 Y DN.: ; Myl&%p g%;%;& % wg% , February 15,1980 e [._w3 9 4 9 a _M@EA94 M N 2#" 4 At"a$
. .b I ,)
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.. y ._,y . .a w,,.. 8 ee - +. ' t m?.g
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- Fuel for Electric' Generation andff . . , c AFDC ' 7' 'J %
t Purchased Power , - f , ~ t f ' . De M in 1FDC are due pri rily to increased : ( ne increase in' fuel expense for.1979', $74 million,'is .' g levels of constructiori work innprogressc4; ,,
'._ My s 't % +
f; 19 primarily oil-fired due generation.ne to 8, $54 million, reflects marional'generationto meep : higher increase inaverage fuel expense unit costs forg[ Income for gas TaxesIncomed and:NW TsE;ITQQ.i d a m .@? ~J ,eVJgQM Op y mcreased energy requirements.,. s ue -+ p. Wsm- t .*- ~en~m . . e ne increase in purchased poArr.-weoexpense in 1979,g he fluctuations in total income tax expense included itr i b $124million,ispnmarilyauributabletoreducedvolumes Vo o peratingexpensesandinotherinccmeinthe>rars1979 y . ,,
~ of oil-fired generauonYmd the outagds of ANO NoJ1.ggand 19';E are attributable primarily to changes in incomei @ -
. ~ ne increase in the cost of purchased power ini; before incometaxes and to differencesin timing betweeni t W -
f taxes werenot provided. See also Note [*toG,the y , Financial L cost 19~8, per IN of$48purchased million, pourr is in order attributable tc meete' to the Statements.< . j 93 y Q. esmhring unith@g.s w " wh r . y,
% * .% J.
r, g customer major generaungdemands units irithe andsecond to additional quarter;of shut-dcwns 1978. 4- ofD@ q -e 4Wg4W ;% %gm%:n+a.&~ v bs- k r #p;y& W %p'WA4 1 3_ I h is the pohcv of the Sliddle South S)ste.t to buy GTaxes Other That1 Income Taxes . ..Q* i . > b available power from neighboring unlities whett the cost i- - .e n .c ~. ~ aw .. . N.~ _ x , I thereof is less than the incremental cost of generatmg gne mcrease intaxes We'g. h. st anincanetaxesfo:r h'theirar 5 I with the Sliddle South System 3 generating units: N. 31979 $8 mdlfon or 12%) a,s due primarily to increased ; i
-7 (, ,<..c ;up.aw w+, ad vaforem taxes, local franchise taxes and FederalO M c c' p +
.- y,
, -contribution Act taxes . - - c 4
- n+ ; ' ' 'o i Gas Purchased for Resale - Insurance >v - +
, ,.,a = :, . , , .'.. ,.
j ne increases in gas purchased for res;Ue in 1979 and 19-'8. - -- *= Interest- -. .id Fr'eferred Dividends '
- I. * . ,
( $20 million and 510 million, respectivelv) 2re attributable t .- the rising cost of purchased <s gas. e<. - ' 'W2 <; . Interest expense and pr'eferred dividend requiremenu
- mcreased during'each year as a result of additionatx s '
6 ' a ;sa .- e c
; .~y. w A. , y*issuancesnfdebtandpreferredstockinconjunctionwith' ther Operation Expenses and ;-)t .; Ni the construction program oftbe 5fiddleSouth System and
.mintenance -(<{expenses /ti d $0.9'r inchea'se$Af'nillio'n M. Srising interest and c%idend rates; , i i b 67 7
~
+
Other operation W 'Mkin 4# l'979"' Y l N~ I
; Yc "
^
l t and $19 million in 1978. Excludmg the effects of the w Net Income an.1 marnings Per Share ' nuclear fuel resent and deferred fuel cost accountin 'O NetincoNdec e:ded $3 million or2% fortheirEr 19h , ~ policies, expenses increased $31 milhon or 15% for e . . and increased $40 million or 24% for the year 19~8. '
~
vear
- 199 and $29 million or 17% for the year 1978. Rese . _ e. In each year the percentage cnange in earnings per .
increases are primarily attributable to the MHdle South m 4 p System s growth and to mflanonaq pressures on wages.Sincome duefprimarily to cbmmon stock sales in Jan I ; I i1 ne increase in maintenance e' xpense for the war [g employee benefits, senices and materials r r
- .y - y es~~y and supp!Ies..yland o.<. .a y November o i
[b gener(ating and infhtionary The increases in maintenance unit, W Mthe pressures? e
. -;nO continuous AM. W'expens' d Mg use of oilas a boiler-fuel
'for qiW3CNS the yearM@, OCr; 4 .'87. *M '
W/ 1% l i. 193($27million)isductomorescheduledmaintenance g
- 4cn y .. 1
. yn s g4W j *y Cg O9 m.pm g useof oilasageneratorfuel oefuledmaintenaice'Ty p on generaung umts required bp continuous and greater
%*y,ggyj ;h(nygW 4
F GR ? 5 / ~ " l j and intutionarp pressup pgggK.;ggggp6[p;%g(W,3 ygy- 6 ; . x , ;n , .. .. ., . a .
; y, .: .
's ab ,
s
. g . . , - r
.-es Q- 9- $
d e_ . .6
': am 3
x : w.n . . . - ym,. c . m e.k<- 1
,. , -4
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p,
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-( .
s v .s,1 f , < ,e
,. t
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- p t, a l e. ,.g _' gg g _
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, 4
., / $ . . , . . .-sp- ' ,
, 4 me%g g 4
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- +
v . - 33 l .
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4 Middle South Utilities, Inc. hi
.. - . . _ ~
,m. _ s .. ,
, 1969-1979 Finariciai Record of Middle South Utilities Systern S thousahds ' '!
< m , s
. Consolidated Summary of Operations 1979 1978' f197 l . - Operating Revenues:
~
> C ,
- 3. - M. I ,. :- ?D j r Electric , ... . . $1,669,451 $1.489,915 . $1,327,319 4 3 o Natural ga.s . . . . . . ... .k.9c.dt, .y. . . . . s c. .tm.W: _. ,2. .c. J. .m. .;v: . /. . . .. y. w. .
i 116,612 95,863 ' N 83,910
- 4
! L s,. .i 4 736,996 36.399 A W31.828 j
. T.c ransit '. . . . . ,c ms.2, ct. yo
, i JM .,h,,?.@a'W. .;,i. .We,m, j h . )
t: J Total .a .. .:. .#.M.7.M . . . J,, . u,. _. ; . ~ 1,823,059 b i m 1.622,177- - 1.443.05 j ,
+ AOperating Expensesib. . .e a.?. :t@., 20 h.- w- % , > W. : ~ y> ;
..-y n 1 '
<* +** - '([{ Q* %i ,. TN .g $ + Y, *[ ' , [ #
y, ~' I , *-k ~
,',y y, .f ,
,'9;Q gFuel for electiic generstion 3M#Mj M.7Q697,6067. ' l 623,402 [ f 568,990
$ $N258,3772 133.929. ' '86',087
'J 4d".2W 7 Purdiased Gas purchassd power for resaleT. L.'i,%GMX f M W $ ld QQ:. 9;$h68,801% >' ) 68.657"*d58,5774
,' . dig 2.$0therW.di .d.$.f%g%.QHhhikr# 200,2M % 199,406 i H~WM. HM@VMaimenance Depreciation. .n, .Off W.~4sMDM.fi,.,'QfMs 4~.$Uf?Mg Aa I +%.s.4.M. .Sc;W WW4. D19,304=i5112.805 f ,er 2 -72.7081
%I06,748 '
111,39
!. . M,W 4dmaacs'other .w than income taxes a -
m.r .wg,.g a M77,849 p ; 69;7710.c (7.306 < ['.^ .Y!f*W I~ w s ,cy. L . . < ; a. 4 8V W: @ Es? tar n tixEsE>?.-"M ' lv' A'M E 7d...'-
. $TikNJ'* Mm.-lt.
}*
c& M51.266M 86,00. 4 S v , 96.09 0 -
<.c w g . h @t k- . p
-m h'I
- w3 e ,604Mi '153 916rT1@. MW w c .:y
-- - - com%e p,:WW...
.., e t K.s A+i . %.-..t. RW+HheMP D 218,'198.
M.28.26.). .
- 203,6634
,m%y s. ,
Op'eratin%g g..m.iOther p , y , . _ . . A
.c - .
m. t 4 y gy pt @ue3 oW nwa,2 <. c.-: w e7.m.w x . . .~~,q.mp . , c ,g . ,
'.w ,.m Miscelhneous s:.e@:, ance for^AlicwIncome equnv funds used~during - ma W/g,u;;y . ... . +A65,346. ..
h constructiond ,%g,s124,086V 93.57k $ t income and deductions - netr M tawww.7,9401 % 16.239e? 6,910 s ( . t [ 6 Inconw
. m. &%. %,h7uTotal p.ta.xes--cr.M. W, ~Mi.C% <. mm%. L*.G. l.9.Mt ^76,2325 4 '50.1 M+hg t 1/ /; . h. ,N~%w .
t t t e .Intere* : and Other. Charges:.ep y n . e..v' wrs,1,%,_e<w;w .m4'208,258 ' s -. s M-@<- 149.917; m101 t . a4
's Y Interest .on long-term debt . . drAp.p-lA MM,. .~m.. . ..;y 199,2121 g.L .U$.255,24 A153.005l
'!M .t42,139 ' ? 22,769 i ?
+-.WPAllowance-for J. Mc 'Otherinterest-netborrowdfurids,us'ed4Qb@W,'7 of debt premiums.M'M. h -p W(89,247) W. k'-18,260.
W, ua da Wduring construction -(cr.) . 4 n.M.%.//.g.:4.r. :MP 1(54.717) A (34 36,2 r eA Par ,64 s .. . 2,5,476M 23
, " Y,<a.gtna.n,ty ,1 M.m.erest .erre. d. divide.nd r~equirem. e.nt.sWsubsidia,riesC a tw m. - nc /M. m;W e . .. . . .
..: .y, a .
. m .. < .,. a .ine .y subst.
_wm. y- e . m *Q . - .
.c.t;-
s - 192.7415 C160.3434.
~ ,vy .wdMMw.w ATotal $ 2.W, +;h,zImd.,. m . p.c.S, .'My i, ;f .
244.198. -, J W;. ,1 Net Income". ;. .W.%$, h ':,4. eM .;d ,u.!r l,f., Q,a
=
, e L .. . w .. .; s. .
. .Q$~ 182.0W f $ ~ 185.438 " Ci44.969 3,
[
#.A. q@ Easings . number.of Per sh Sh,are res outstanding)w (on weighted f.?W;avenge; Q.t .L, Wn@4$2.13 ~4'd.g;, j, ,
+- (ap JQ L'$2.46' E vaq
> M52.18.?
s
, L Q$, O DividendsofDeclared AveFageEumber Common SharQJ3h Per share. fdMMeicqi2.%EQMh
..%11 4@g%g@cf .2%
~ r 85,444,6912' 75
- 3
- ew i g# Outstanding g w w w ,.yg ($5% ParValue}g.+.Wf.ctN.
w % ep m da i Met te;g p s.%.522;179Z~66;598,876'" .
.* m 3 n , apa w.% 3.3 Utility PInnt and Capitalf7mtion Dati'(at December 31F J
- WRh
' BCtFixed wwm Assets:@m.qu 5pm$m$y'rW QMgMMM@m w;g.ngd: .q w.wms.u ~
!G ., 'h +
M eQ?QW .&&
@k..i c/.J. lisdcumulatEl n Utility pI2ntr.ch depre'clatidh hdieam M EW.W$7,002,052p' $6,052.023
%.935,702 4 arid 3imoniza'tiorNI.@' .p 11,139,164 < 1,038,256K
, MA hMt/ pia $t$ci.IF@M1JMDM.' ' *[E $5,862,888V$5.013.767584,247 5 M Empida55atid:b% % y M,Ng WMdh 52,629,711.' elIN1 $2,175,471 W.dJ
$ M[ED Long1 erm deb 6.'.M.h.%.a.M3h:%
- E t
; Preferred stock (including premium andh # .
% * . ' D'Y ? ='}MF 't'
' y dissuance expense)- * "mQU;Sc H N .O f ,' u....t . * .
l ., _ Jithout sinking fund . . . . . C . dc. . . - '. ;m . . - 330,966 280,712 n 280.712 l ,
' .~ /# #ptth sinking fund. .J.
h , 9 T,...y a C6mmon equity " "
- M* / 'MC,. .d.c . . c. J.%
l .hi:;!c.S ; .,M, ...n, . .: & 193,508 I,664,060 - U15,239,(. 3 _ 60,063 I,197,80 , n .i60.0
.3.,%.
} . , _ , .
. nority interest in the common. - . equity.of,., ya1 ,s.t, -s m. _ .
l l -y
"*M;@r, kansas-Missouri Power, CompanypJ;p.'
. '7-, 2-V ' --%
. 3. 5 . . ,J. f;p@g.N. *7' l
I, .. W.% . . ~ Total . . .s e, . . '.;b,
; . .TMZ'
' $5,206.350 $4.385.725 - $3,714.053 '4
. .J _' , , . ; Capitalization Ratios: . . x- * *
"., N.
1 \
. ~ > Long-term debt . . . . . . . . . .t.... ...r.......s ~..... 58.0 5 60.0 W ' ' ' '
; "'
- Preferred stock (including premium and ;
; ^
; ' ' ; y. m .' . , .
~
10.1 7.8
. , ~ fssuance expense) . . , . . , .......l... ... .....
[ t, . - Common equity . . .: . . . . . . c . . n . . c. ; ..!..'... 31.9 32.2 . 32.2 j 3.;
; 3: .e. 2; . > *
- is. ; . . -
q [
,g'y.Certain amourus have been restated for comparame purpmes and to ret!ea ratemaking deosions af'ecung pnor w.u -
_ - - _- _ . _ ; _ _ -_ . _. w., ,d
POOR ~0RB NM
..r .
4*, . ,,- w .,. .. .-
, :. 1 '
A: ._;- . ~ , w f .* A. A
'] )
t
'*D
' O )f . , . , 7 sp I
[ , s
. ,.' "1971;
- s y
l v 1976 1975 1974 ;. 11973 1972.- 1970 ,c 1%9 .
, . .s ...
- . . ;%a. c.:
- . 1. ., . .
, ;y .r. - +
$1,063,036 $ 868,100 - $ 768,297 . $J 609,082 ,$ 550,089 $ 473352 - $ 420,937 J $ 386,063 62302 49,513:e a38A09. 3 38362 .o 31,884 - %21,267- ? 17,885 '- 17,542 ,- .
18.873 , 13,176' ' 11,091. a ' 10,933: . ~ 11 A08 A
- 11,646 ' 211,668i ** 8,884 -
! 1,144.411 930,789' 817,797 A + 658,377). 593381 , ; 506,265: S f 450490[ 412,489., y ,
y,w
- . .~., ww;. 7y , s u. - p v x, v ,. - m , -
,2. x w % .j p .c gp p g... ,% w., #
c
. q' ~ y
. , ~ ,
t .- ? m . . . . , 92do9 '2M.4 a. :. w . , . 422,2K a_149,8 0 -r " 61,439 V35,075% d3,880@Q;j22.45& l,5::2 37,852: $30,994fl$21,807 19,936%+D8,7749D
#18J054 . ;b f
672q,638,4134(gCJu
$,4 78W 145A89 1139,708: 6116486 d r107,776' M s 102,968 M '92J92. S ,232&M74,,297M .s P
) 58,6M
. 50,729 M40,776: Q 36,8934 ,391 W d5,090 % 1 & i# !'
192,770W, .M6,662L : .IM ' 101.045 , 61,561- A56,48tQ49,127@N9.224%fgf46,068$ '.774*635Vy68,781litfl64,439h' $31,540 d%@ 926 I' T50,20@QO%pMZ
,5M f,w 54,207MM W > - l 36,51G O' 68,795-. f 55,5607 a31,632 mi352,952w. i32.801M53J82E, ~ .
957,079 . 755,7995 16434649 Sil,790*f?461388N 394,W454,246%t@321.444UDG " 187,332 1174.990.j ' 174,133h'f 146,587 UQ 131,793 bd111',949 bOIN.244ME.91.0451 u,. $N-N Z. p
- . u ,~. . . .
A %@ $ %kh,yp % ~ pyd Q: w.. . an.n w a . c.~hhQ&nhy
.h c v , g,.
,080 g g s,920 pK (- ;4 l<
J,7 46,064
- m * ' p%.;9,509 : g,31,H8 .6 2.22,188 y ,. S a t
62,169 . 44 . 3,..# 8329 p 4,3974 2,885 W.2A2r. ..,.s , is.zd% <14,175,>y(1,7887 4 - W(1.069) - - (455); pyW?913.fM"d590 >(304M. ~-M, ,pg ,485Lg3371;-;4801F7 1 V 88.785 ( 64.636 , ,< 50,606 'N.33300j U - 22.646' *14,914N10,764W>.'5,927's.f .
^ * '
.. . . :., nWD. < : e ,. . , , . .x ~~ 9; y. Qk , ' % .
g 132,719 113486 L " 105,532 ~ 072464 .$ 61,110 $50l662 ;y S.40,209 M<33,728 . f - 15,571 > 870 % 7 r m 19,177, .. . w,n1.wu f;- 8,094 3..> o, ..g 5
- QW3,723: W.
t , 2,gx,"%21.j53 ng. . ,%e.,4 . ? g. 726 %> y ' . ' . s C :
..t 21. 3,8481'f _n.,,
> m
~ ~ ~ , . i
. W ; u s". M M W Q... ti h. ;@.W l!!,#W i.w;4,.: :L'
.,y,-
M... .:*k w .: ~
) _
M 21,780 ' :16,660fE,*15,0j0Yd.{13,181; W 710,642T r % 8;$33 -NkT,287@q ' 6,875t ' . g wmyvqfvsmn , 4f f Mg3g %g yw;; sy I 170.070 149323, # 128.666 -
- 89.368 M74.668 ' C61,066i ' ^50,222 ' '%44,4517 - - i l , _$ 106.047 $ 90303 ' $ r 96,073~ $ : 90,519 ? $- 79,771 $ T ' 65,797 J 1$460,786 TS F52.521
-r n 1 s
; v 3, . :+. , , . .. :. .+.w- A.J . e g g . . . . ,~.
$1.78 5 *Q $2.175.T $2.09 " "- $ 1,981., i$1:68; '(CIA 17 s .
$1.82 a-J $1.275 g O,
$1335
. ?.
.+ ; w W ' 7 6*w. .en M e. n( m.eps;n
$1.23 M*/$1.15P S$1.07 > fu;p$1h3P$10.975l %
erJ w .34 %.e' ,=w.wv tWww uys 4 hT;,rs h
,W- 2.$0.90, -. ....,..e m.
40 885135354,280,'. w . U - 58395,628 .'.,
; Y~ my-wx .50,733,782
.rO.;.
k 8p ;;2ll. - Ledd M4,279d81943376,255~ b *.g* w a; . W. &.;L:. ' ^ gs, ;Q !w n: w,257,053.:
.. f. ;: Q y r.q;tg. " Q~ & p.e
,z r> m. ; 2. e237,-J
- y. 3713,614 .
.:: %', ';*-t Q ~, .N 3.-**.;~"p,.: n'f 5,N l -
s
' , y ,'; m. 4 n .p. W ,,y y p % g$j k{ $
h; fh$$j. jh M h [ $4539,891J $3,953,814D $3,470,598 / l[3,054,867d $2,672,46 i $ 7 h $1,866,800 /. 3m ( 831,930 ~747,612y 1668,148~ :e 608,613hC546,373 & Q502,740 M436,579 # t-' 4 l 1.- $3,707,96193,206.2c2)$2,802,450$$25446,254f5 $ 2,126,086 , #,wi,75/4$r&27808k$1;470.288MNd " w.a.g e w h .> & m W W m & & W 1 R ,7 % -
,i
$1,965,98; $1,751,328 $1,529.958 $1,341,637 . $1,147,127 ; $ 9.83,94,1. $ 82>,_53 ~ . , ',' $. ~ 766,,778 , , .
's n yn p: i . ,
- c. 5 m : . j . g :.g .. y g.
. ." :^ -V ..!
g A . . ,
- 250,679 '240,627 : 240 230 ,611' 205,558 .i160,431 -150389 ~ 135 848 '
,d + -0'
[ 60,063 - - 60,063 ~ :v .627c-(' $ -:-M Y.<;.= M- W P5.-3W , l 1,010,2N ' 864,035, , 746'6,28. ~.-705,212 ,. - 576,262.- ~.' 538,93.,,5 . 494,5M .., 407,275_ n.p - ,,,.,Jw s > ..y, ,.4 r." .=n. 2 --J. s
-(ps 49 m _:5 , . :;_
- 4637. ~ " - i --
l $3.287.005 $2,916,053 $2.517,213 $2.277d60 $1.928.947 $1,683,M4 $1373,%6 , $1309,901
.% ~
60.1% ~ 60.8 % 58.9 % 59.5% 58.5 % i 56 3 % , ' , 58'.N [%s ._. -)" 10359.8% x
; 9.5 , 9.5 .
10.1 10.6 . 9.5 10.2 10M _ l
~
l 30.7 , ,29.6 ~ , 29.7 31.0 29.9 ,32.0 . 335 - - .s , 31.1 .
. . , _ n n l
l
o. Middle South lItilities, Inc. System Electric Statistics 1969 to 1979 P00R 0 N
..< =. ; 4. ... . u Y , ; , u ;<;_ y a, -
; +- ;. -n , ;,
. , . . . 4. 1 -
m. 7, m ..w., a9m 3 m , -
- r. - 77
.,n , ,
~. s
.- e l Sales in Kilowatt.nours usas . * +a1 a ?,
,. .4 .-- +,in 1
.,', . .,i s q .3 ' - %,; 7 .
. .-' y_ .jn . .=a f . ; 7( 1 y ( ~ ' ' Total 1 Re'sidential Commercial' " Industrial Other j f' C ~
- I '* '
1979 . 6 52',946,799 [.14,60',178 6 . [8,754,087 ! 22,329,201 7 7,257,333 - I %:
' MMY 19 3 / ' '14,-'81,680 - '.8,635.615 !19,714,164: # 8,842,246 ' , '7 ;
' 1
-1977.. . g(, , e'/ 151,973,705 A 48,477,281 313,852,810 n7,972364.118,712.127 7,939,980 42,957,761 $12,232,611 .i'7,240,843 ~36,831,622 6,652,685 ~' ,'a ' = >5 Nr e 37.
1976 . . . W. @'v38,742,993 ^ ~ 11,942,436 ,g6,906,944 ' 13,619,710 a 6,273,903 e . 1
- f1975.....N.1 5,431',530 'c M,.c A mg* ./ ,i R/W^
1
- 1974. . .y.737,-'79,407. V 11,0I2,164 36,370,308 U; .14,965,405 7.
M 6364,193%14,530,792 i 5,706.499 1., 7 3', 11973. M i1972a Al.5p , 2 17,862,524q 37,808,576 % 10 21;261,040 291,403 N5334,029V'!13519.543t 7 %66 P -6 [S4.$pn
.9,084,563 .hP.* %, 4inDaM%.-
4 m 1971.A.J.Q%35,136,681#8,8BB,078d D S,214,614GK12,029,426#e.8,173fiO1. 2 dd M&hp' 11970 *8,M29J35,6857W,
' .1969j.. .z. . .yW 32,531,614M8,0W,34044J61.833 ,888 3 4336,216' 410,872,686 % 7335,893,. W11.267s636@ E 8,496,805 w
'4 WCmn
.+,k. % n d f w;a& y-$ M 'W: w?y m&;gM&
w; ?%mWM nMnm y.me n&w. ~t m "h r xRevenue fr'orn#El .. EnergytSales7' - y" W. )p5 % 'y+ /* I
- s
< C.m+wN L % p pap -
a
--w
&w- tp Aa t.e L. %g .Ac.,,-
y ~ hw,..
.u. 44 e = g
- . 9, NW'W Np.< yy
@ 7"L
.+
. 9c %.w'w u,,n
. otab.' -4;,It.e.sWenti.st /Co m 6pr ww . e - --
4 -g
- 1979 .g . W : $1,659,192 fa;.$553,746 y.r . mmercia_mindu. strial. @. ~. CO,the - .
I - 1978 @. ! C 1,479,759 $ W ,790SG 317,412, e6 408319MN248g.38, a MR Qdh M A* J 1977 2. h.W 1328,983 % .299 k 29I,807MP369,405tN+'201,472MWhM2 .?* 290 558 ? #'- l~ "' 19751976 l. 62 C'.2.IMM1,051,270*'373,631? 0 D 856,009 %W5i25M4 /N199,050 ' 243,480'@W209,506t%: 121309. PAW d <143,601 'Q 87,e85, iqV
' 1973 1974 ..A G. .yO'Z%:.';766,541M$289,776'.?
1972 . (. . ..c. .{ *y 602B42' N 237,990 :O543,221I WO6.086 N,:141,969* . 157,173 % 131,318^ *120.853 # ' 84 w m 1.*3M 9M "" %WD M.E % 174553 %
; 1971: . . O A ? 4 467,548 T l74,859 .Q J05,795. '@"~ 110,172gj276,722, .5/A,3.'liV9MQ:
1970 c c. .M fa415,543 ?:158.579gg96,169 h @y,lW5,56I+ eg : 98,476s mg 88,788 g62319. , & <- v: q hi' W W4 yg.p ,n. y. nmms w p m ,219 7,;,j .D j, Q . p$. 1969.. . ,.';.Yl, n.381,363;dp: .n n - 9.4.789 7 T. 52, 7 ~ . v,
- 4.a,uw m n,9,':=,q.+mp, Residential Cdsto inersind"Use?W ..j78+f9MyWi.4 M .
VMMM@wd M f P'MM* i't N M M. f
- i. .e i #.% M y:Wshyp4fW cye ,:a qfp.Wh@1 M"Revenueq3. Revenue per% .W N 3
.._ 'f$~ Average 347. Kilowatt- hours per ,(;; QSC perN ~ T4 kilowatt-a
(' i f , .
&q C th. Q 1'".a@
{, .- ;g number of y m w.w' W-- K>
* + ' s customers x m custo.m. e. r, W .w. customer .we- 2 % . . ~e.. hour., n
%.!w @> N. v.
N 1979 f._..L,efcf 1314,028 W?'~A11,116- . .'W $421.41P C f-I- -
" " 3.79e ~ ' ~ . M
.197a ,~...J.J. W 1 O fil,542'S M1,238597F .dO11;184 M@M27J376.4T&l:f.394.93 CG@$ ,,280,694' C N P337 A 4- W WMM,F SA233 f'0 fG- 1*S W 3
A1977M.V.24
, '1976' . .:.2*E ?il,208.140M M 610.125 Cg309.26% 49505U. d40 4M-1975 d ..eM.M.,'$ 1,182,9254 QQ 10#9642.631SM Q.#275.54 %WM:.k'7@M,t E v,7@.&2.73 'C 9 '
g - - i1974 Ut.diFNML159,536 WMM9,t97- VM Q249.91%b;'}4
' %211,594 V E.<2.11)4MWj M[Mgpig Q
- 4. -,1973;;..i. N 4 -
1972 id.".;d?dM.? 31,124,746TN7' MT M54210#12. NI,077,509 I'd$ 191.26 i 8772007.$ / .
- ~1971 ,. b444;99% AMC's/
F d.,,$MdEN,973.62L .1970'.....M:.iQ 8U' 3M .M1,014,735M$ W i, '{ 8,6 Q.,.IJ'Mhy$ v
~
@, 1
. s;. hfg .'. 4: - A 4 C M. ' S _ M % p % X. i. .c h. O*M nn l .
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*%
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- k 24 $ . b %. . - Y. !f,"O x . .{ l: ' Yl
- . a .
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- 4-% .<. . %e. 4=1 s -- -1 h W..
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The Middle South Utilities System
\
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.a '* MISSOURI J - -
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% ARKANSAS .
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,/ SISSISSIPPI k$
l MN11;'f rJjy. "Ni h . . 3.. 23 N Pine BIL# j ,.
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O - SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Enced December 31, 1979 Comunission Registrant: Se * ' taeorporation, LR.S. Employer File Noacher Address: and Telephone Namiber Ideatinestica No. 1-3517 MIDDf_E SOtrrH UTH. FRIES, INc. 13-5550175 (A Florida Corporation) 225 Baronne Street New Orleans, Louisiana 70112 Telephone (504) 529-5262 0-375 ARKANSAS POWER & licht COMPANY 71-0005900 (An Arkansas Corpc5ation) P.O. Box 551 Little Rock, Arkansas 72203 Telephone (501) 371-4000 0-1236 LOUISIANA POWER & licht COMPANY 72-0245590 (A Louisiana Corporation) 142 Delaronde Street New Orleans, Louisiana 70174 Telephone (504) 366-2345 0-320 MississIPPt POWER & LIGHT COMPANY 64-0205830 (A Mississippi Corporation)
; P.O. Box 1640
] Jackson, Mississippi 39205 Telephone (601) 969-2311 j
4 l 1-1319 NEw OnLEANS Prauc SERVICE INC. 72-0273040 (A Louisiana Corporation) 317 Baronne Street New Orleans, Louisiana 70112 Telephone (504) 586-2121 Securities registered pursuant to Section 12(b) of the Act: O --m-, et December 31, Namie of Each Fueha=ge Registreme Title et Class 1979 on which Resistered Middle South Utilities, Inc. Comcton Stock, 90,432,998 New York Stock Exchange, Inc. l 55 Par Value Midwest Stock Exchange ! Incorporated Pacific Stock Exchange Incorporated Secur1:! s registered pursuant to Extion 12(g) of the Act: Resistrant Tiele etclass Arkansas Power & Light Company Preferred Stock, Cumulative, $100 Par Value Preferred Stock, Cumulative,325 Par Value Louisiana Power & Light Company Preferred Stock, Cumulative,5100 Par Value Preferred Stock, Cumulative,325 Par Value l Mississ Si Power & Light Company Preferred Stock, Cumulative, 5100 Par Value l New O.ieans Public Service Inc. Preferred Stock, Cumulative, 5100 Par Value l Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes ,4 No _,, ! /'N ! ( Qs') l
l t 3 TABLE OF CONTENTS Page Number Dennitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. I Part I e Item 1. Business . . . . . . . ................... .. . .... ... 1 Item 2. Summaries of Operations . . . . . . . . . . . . . . .... . ... 38 Item 3. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 : Item 4. Parents and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Item 5. Legal Proceedings . . . . . . . . . . . . . . . . . ... . ...... 51 Item 6. Increases and Decreases in Outstanding Securities and Indebtedness . . . . ..... ...... ........ ....... ... 52 Item 7. Changes in Securities and Changes in Security for Registered , Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Item 8. Defaults upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . 55 Item 9. Approximate Number of Equity Security Holders . . . . . . . . 55 Item 10. Submission of Matters to a Vote of Security Holders .. .... 56 4 Item 11. IndemniF ' ion of Directors and Officers. . . . . . . . . . . . . . . . 57 , Item 12. Financial Statements. Exhibits Filed and Reports on Form 8-K.......................................... 58 i Part II . i
\v Item 13. Security Ownership of Certam Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . 1I.1 Item 14. Directors and Executive Officers of the Registrants . . . . . . . . . II.4 Item 15. Management Remuneration and Transactions . . . . . . . . . . . . II.9 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II.16 I;
Index to Firancial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1 (. Index to Supp> mental Schedules and Additional Information Required by i the Securities cnd hchange Camrnmion . . . . . . . . . . . . . . . . . . . . . . . . . . . . S.1 I r. i. I I l [
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This combined Form 10.K is separately filed by Middle South Utilities, Inc., Arkansas Power & Light , s Company, Louisiana Power & Light Company, Mississippi Power & Light Company and New Orleans i Public Service Inc. Information contained herein relating to any individual company is filed by such I company on its own behalf. Each company makes no representation as to information relating to the other companies. DEFINITIONS The following abbreviations or acronyms used in the text and notes are defined below:
- Abbrenessen Abbreviation or or Aeronym Ters Aeronym Tere AEO . .. .. . Atonuc Energy Commission Jonesboro . City Water and Light Plant of the AECC... . Arkansas Electne Coopeentive Cor. City of Jonesboro, Jonesboro. Ar.
poration kansas AFDC. . . Allowance for Funds used During LP&L. Louisiana Power & Light Company Construction LPSC.. Lommann Pubhc Service Commission ! Ambient Air Standards National Ambient Air Quality Stan- MEAM., . Municipal Energy Agency of Missis-dards sippe ANO . . . . The two units at AP&L's Arkansas Middle South System . The Company and its vanous direct Nuclear One Generating Sta- and indirect subsidianes tm MP&L. . Mississippi Power & Light Company ANO No.1. Unit No. I of AP&L's Arkansas Nu- MSE. . .. Middle South Energy. Inc. clear One Generaung Stata MSS . . Middle South Services. Inc. ANO No. 2. . Unit No. 2 of AP&L's Arkansas Nu-clear One Generating Station MSU or Company . . Middle South Utahties. Inc. AP&L. . . .. Arkansas Power & Light Company New Source Standards. New Source Performance Standards Arkansas Public Service C===w NOPSI . . . . New Orleans Public Service Inc. APSC . . . . . .
. . . Arkansas. Missouri Power Company NPDES . . National Pollutant Discharge E:imi.
Ark-Mo. . Associated . .. . Associated Natural Gas Company
"*" " SI'***
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Company or MSU . Middle Sm.th Utihties. Inc. City of Osceola. Arkanns
. Osceola . . .
Conway . . The City '. Conway. Arkanams N
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Council.. . .. Council of the City of New Orleans sourg CPI.U . .. . Consumer Price Indes for a!! Urban Reynolds .. .. Reynolds Metals Company q Consunms Secunties and Eachange Commission SEC. . CWIP . . . . . . .. Construction Work In Progress p,,,,, g,,, l*
- DOE. .. . . . Department of Energy 3 73 , ,
SMEPA . Sy,,,, South Mississippi Electnc Power As. EPA ... . .. Environmental Protection Agency sociation EPRI . . . . . .. . . Electric Power Research Institute SPA. . . . Southwestern Power Administration ERDA.. . .. .. Energy Research and Development State Plan . ... State Implementauon Plan
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System Agreement.. . Agreement among the Eve System FERC.. . ... .. Federal Energy Regulatory Commis. operating compemes relating to tt.e 5" shanns of genermung capacity and FPC.. .. .... . Federal Powerc = =i" " other power sources FWPCA . Federal Water Pollution Control Act System operating com-Grand Gulf Mant. .. MSE's Grand Gulf Generating Sta. panies . . . . . ... AP&L. Ark-Mo. LP&L. MP&L and tion (nuclear) NOPSI HoldingCompany Act . Public Unhty Holding Company Act TVA... . ... Tenaamaa Valley Authonty of 1935 United . , .. .. United Gas Pipe Line Company HWI . . . . .... .... Handy. Whitman Index of Public Waterford No. 3. . Unit No. 3 (nuclear) at LP&L's Wa-Utahty Co.-h nuo Costs terford Steam Electnc Generating Irwispadance Plant . AP&L's I~a--h Steam Elec. Stanon enc Generanas Station (coal) West Memphis .. . . City of West Memphis. Arkanama l White Bluf Plant . . .. AP&L's Whit Bluf Steam Electric Generating Station (coal) P A R'I I ITEM L BUSINESS GENERAL MSU, incorporated under the laws of the State of Florida on May 27, IM9, is a holding company registered under the Holding Company Act and neither owns nor operates any physical properties. MSU is the owner of all the outstanding common stock of its principal operating subsidiaries, AP&L, Ark-Mo, LP&L, MP&L and NOPSI. A.
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The two other wholly-owned principal subsidiaries of MSU are MSS, a service company, and MSE, a generating company formed in 1974 to undertake the construction, financing and ownership of certain base load generating units. In 1972 AP&L, LP&L, MP&L and NOPSI formed a special purpose company, SFI, to plan and implement programs for the procuronent, delivery and storage of fuel supplies for the Middle South System. In addition, Ark-Mo has a wholly-owned subsidiary, Associated. INDUSTRY AND COMPANY PROBLEMS The electric utility industry in general is currently experiencing problems in a number of areas, including increasing costs of fuel, wages and materials, greater capital outlays and longer construction periods for the larger and more complex new generating units needed to meet current and future service requirements of customers, increased reliance on capital markets with higher costs and limited availability of both equity and borrowed capital, frel shortages, compliance with environmental requirements, controversies over the use of nuclear power, regulatory lag in granting needed rate increases and the inadequacy of such increases when granted. In additien, Federal energy legislation enacted in 1978 may adversely affect electric utilities, including the Middle South System. Summarized below are certam factors currently affecting the Middle South System. Construction Program and Financing Requirements and Restrictions Construction expenditures (exclusive of nuclear fuel costs) for the Middle South System during the period 1980 through 1982 were estimated at March 1,1980 by MSU to be 52,632 million (including 5626 million in AFDC). During this period the Middle South System will need to obtain a substantial portion of these funds in the fmancial markets, which have been characterized in recent years by high interest rates. Moreover, the System operating companies' ability to issue additional bonds and shares of preferred stock is limited by certain earnings coverage tests. Under the respective carmn;s coverage tests as of December 31, 1979 LP&L would have been precluded from is aing additional first mortgage bonds, except for refunding purposes, and from issuing additional preferred stock and AP&L would have been precludui from issuing additional first mortgage bonds, except for refunding purposes. Based upon the same coverage tests and assuming the availability of bondable property AP&L, after adjusting for the sale of preferred stock in January 1980, MP&L and NOPSI, after adjusting for a proposed sale of preferred stock in March 1980, could have issued, in the aggregate, approximately 579,000,000 of preferred stock at an assumed annual dividend rate of 15% or 273,300,000 of first mortgage bonds at an assumed annual interest rate of 15%, plus any first mortgage bonds issued for refunding purposes. (See " Future Financing" for the amounts of bonds i and preferred stork issuable at December 31, 1979 by AP&L, LP&L, MP&L and NOPSI un6er their l respective coverage tests, and for future financing requirements, including those of SFI and MSE.) The future ability of AP&L, LP&L, MP&L and NOPSI to issue additional first mortgage bonds and preferred stock is contingent upon increases in earnmgs and may be contingent upon the ability to obtain adequate rate relief. (See " Rate Matters".) A Presidential Commission, Congress and the NRC bave been investigating the cause of the incident which occurred at the Three Mile Island Unit 2 nuclear power plant located near Harrisburg, Pennsylvania. The report of the Presidential Commission has recommended, among~ other things, that the NRC be reorgamzed and that the NRC or its successor should, on a case-by-case basis, before issuing a new l construction permit or operating license in respect of a nuclear generating plant: (a) assess the need to introduce new safety improvements recommended in the report, and in NRC and industry studies; (b) review the competency of the prospective operating licensee to manage the plant and the adequacy of its trammg program for operating personnel; and (c) condition licensing upon review and approval of state and i local emergency plans. MSU cannot predict the extent of new regulations to be imposed or design changes to l be made applicable to nuclear facilities now under construction as a result of these invatigations or what l additional effect, if any, these investigations may have upon the construction schedule, licensing, in-service 2 l
date or cost of Waterford No. 3 and the Grand Gulf Plant. (See " Regulation and Litigation-Atomic Energy Act of 1954 and Energy Reorganization Act of 1974," with respect to the December 1979 revision of the scheduled commercial operation dates of the Units at the Grand Gulf Plant.) Additionally, MSU cannot 4 predict whether new regulations or design changes applicable to currently operating nuclear facilities will be required or what effect, if any, these investigations may have upon the operation of nuclear facilities, including ANO, in the future. Since April 1979, the NRC has developed an extensive list of requirements for nuclear plants through the activities of its " Bulletins and Orders", " Lessons Learned" and Emergency Planning task forces. The requirements include plant design modifications, accident analysis and procedural
!* changes. The affected Middle South System operating companies have committed themselves to implement these items within the time frames requested by the NRC. Certain other modifications which have already
) been required are referred to in " Regulation and Litigation-Atomic Energy Act of 1954 and Energy Reorganization Act of 1974." Fnel Supply f The Middle South System's primary source of fuel has traditionally been natural gas. Curtailments of ' natural gas deliveries have required the System operating companies to burn large amounts of higher priced oil. To diversify the Middle South System's generating fuels base, the first nuclear-fueled generating unit went into operation in December 1974 and the second unit is expected to be in commercial operation in the first quarter of 1980. In addition, the Middle South System presently has under construction three nuclear-fueled units and four coal-fueled units (see " Construction Program"). The first coal-fueled unit is scheduled for commercial operation in 1980. For further information with respect to supplies of (i) natural gas, (ii) fuel
- oil, (iii) coal and (iv) nuclear fuel, see " Fuel Supply".
,, Need for Rate Relief and Rate Matter To offset increasing costs and to maintain earnings at acceptable levels, certain of the System operating companies have recently requested, and will in the future request, increases in retail or wholesale electric and gas rates from state or municipal regulatory authorities or the FERC. (See " Rate Matters".) The Attorney General of Arkansas Aled a complaint with the APSC on April 23,1979, in which he alleged that AP&L had erroneously applied the existing fuel adjustment clause to retail customers from April 1977 through March 1979 and thereby overcharged these customers $17,297,000 ($2,205,000 in 1977, 512,945,000 in 1978 and $2,147,000 in the three months ended March 31,1979). The complaint alleged that such overcharges would continue as long as AP&L continued to apply the fuel adjustment clause in the same t manner. This matter is discussed in Note 10 to Financial Statements and in " Rate Matters-AP&L", to which reference is hereby made. r'n yan==== With Eavir=====*=1 Standards Oil, coal and nuclear-fueled generation require vanous types of pollution control equipment. While the Middle South System generally is not experiencing sigmacant delays attributable to environmental standards, j it is incurnng additional capital costs and operational expenses to meet such standards and may, in the future, incur additional costs and expenses. The System operstmg companies have had no difficulty in ' complying with present air quality standards when burning solely natural' gas as boiler fuel. (See " Regulation and Litigation-Environmental Regulation".) Federal I age =R=ei== Federal energy legislation enacted in 1978, among other things, (i) requires state public utility cammissin=. to consider standards relating to retail rate design, restrictions on automatic adjustment clauses ami timed-day and seasonal rates, (ii) requires states to develop residential energy conservation plans, (iii)' grants the FERC authority to order wheeling and interconnection in specined situations and to limit v 3
automatic adjustment clauses for wholesale rates. (iv) deregulates the first sale pnces of natural gas in 1985, (v) extends price regulation of natural gas to the intrastate market, (vi) provides for incremental pricing of higher priced new gas to industrial customers (other than electric utilities) of interstate pipelines. (vii) prohibits existing power plants from using natural gas as boiler fuel after 1990 with provaions for exemption from such prohibition until the year 2000. (viii) prohibits the use of natural gas in an existing electric power plant in greater proportion than the average yearly proportion of natural gas which such power plant used as a primary energy source in calendar years 1974 through 1976 with p ovisions for exemption from such prohibition. and (ix) grants the Secretary of Energy the authority to limit or prohibit the use of petroleum and natural gas in certain existing power plants. See " Fuel Supply" with respect to exemptions granted to certain of the System operating companies in 1980 relating to their use of natural gas as power plant fuel. Certain of the System operating companies are petitioners in litigation, which has been set for hearing on September 22,1980 before the United States Court of Appeals for the Fourth Circuit, seeking judicial review of rules promulgated by the DOE to implement the portions of such legislation which would prohibit and regulate the use of petroleum or natural gas as a primary energy source in electric power plants. (See " Fuel Supply".) DUSINESS OF SYSTEM OPERATING COMPANIES As of December 31, 1979, the System operating companics furnished electric service to 1,432 communities, of which 26 were served at wholesale, and to extensive rural areas at wholesale and retail, in the States of Arkansas. Louisiana, Mississippi and Missouri. In addition, NOPSI fumished gas and transit services in the City of New Orleans and Ark-Mo's subsidiary, Associated. provided gas service in certain areas of the S:ates of Arkansas and Missouri. For information with respect to the proposed disposition cf the gas properties of Associated, the proposed divestiture of the transit properties of NOPSI and the proposed consolidation of the operations of Ark.Mo and AP&L, see " Regulation and Litigation-liolding Company Act". The aggregate population of the Middle South System area is approximately 5,000,000. Although the area is predominantly agricultural. it has a large number of natural resource industries and has had a continued growth ofindustry. As of December 31, 1979, the System operating companies provided electric service to 1,520,147 customers and NOPSI and Associated provided gas service to 240,454 customers as indicated below: Customers at December 31. 'a979 Area Served Electric Gas l l AP& L . . . . . . . . . . . . . . . . . . . . . . Portions of State of Arkansas 463,087 - ' # L P& L . . . . . . . . . . . . . . . . . . . . . . Portions of State of Louisiana 500,710 - l M PA L . . . . . . . . . . . . . . . . . . . . . Portions of Sate of Mississippi 303,723 - ( NO PS I . . . . . . . . . . . . . . . . . . . . . City of New Orleans with exception of one 193,769 177,136 l ward served electricity by LP&L Ark.Mo . . . . . . . . . . . . . . . . . . . . . Portions of Sta:es of Arkansas and 58,858 - l Missouri Associated . . . . . . . . . . . . . . . . . . Portions of States of Arkansas and - 63,318 Missouri Consolida t ed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . l.520,147 240.454 4
. .m Selected 1979 sales data for the registrants is listed below:
( Selected Electric Energy Sales Data-1979 Ceasolideeed AP&L 1.P A L SfP&L NOPSI Otillions of KMll)
- Sales to ultimate customers . . . . . . . . . . . . . . . . . 47,479 13,684 20,550 7,275 4,602 ~
Sales for resale-amliates . . . . . . . . . . . . . . . . . . . - 1,739 1,132 3,637 1,166
-others . . . . . . . . . . . . . . . . . . . . 5.468 2.465 1,570 1.316 59 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,947 17,888 23,252 12.228 5.827 Average use per residential customer (KWH) . . I1,116 9,778 13,758 10.801 9.049 Selected Natural Gas Sales Data--1979 Co udjse soPst Sales to ultimate customers (Million Cubic Feet) . . . . . . . . . . . . . . . . . . . . . . . 45,933 33,067 The efect of natural gas and transit cperations on consolidated operating revenues and income for each of the five years ended December 31,1979 is immaterial on a consolidated basis, but signiScant for NOPSI.
The following table shows consolidated operating revenues and operating income by type of business (expressed as percentages) for each of the Ave years ended December 31,1979. (See "NOPSI Industry Sc6ments" for a similar description of NOPSI's business segments.) Because it is impracticable to allocate
,, interest charges and other income and deductions, the contribution to net income by type of business is not shown.
U Year Ended Deceanhar 31.
- s^ 1979* 197s* 1977* 1976 197s Conwiedated Operating Revenues:
Electric ..... ... 91.6% 91.9 % 92.0 % 92.9 % 93.3 % ! Natural gas . . . . . .. . .. 6.4 5.9 5.8 15 S.3 l Transat. .... . ....... .... 2.0 2.2 2.2 I.6 f.4 Total . . . . . . . . . 100.0 % 100.0 % 100.0 % 100 0 % 100.0 % Operanas I- (Loes): E.sectne . .. . .... ... 99.5 % 97. tar, 98 4 % 101.2 % 103.9 % Natural gas . . . . . . .. ..... 1.5 2.0 2.1 30 1.5 Traansa and other . . . . . . . . . . (l.0) 0.2 (.7) (4.2) 85 4) l lonos 100 0 % 100 0 % Total . ..... .. ... 100 0 % 100.0 %
- Includes adjustment for transit subsidy. See " Regulation and Litigation-Holding Company Act" regarding the subsidy of NOPSI's transit operations by the City of New Ortsana and Note (a) to Summaries of Operations concermng the reclassincation of certain revenues in 1979,1978 and 1977.
. The System operstmg compames generally are not in direct competition with privately or municipally owned electnc utilities. However, a few municipalities distribute electrx4y within their corporate limits and l
environs, and some of these generate all or a portion of their requirements.
- A number of electrw cooperative associations or corporations serve a substantial number of retail customers in or adp:ent to areas served by the System operating companies. With the eaception of those in p Arirma=== most of these cooperatives purchase all or a major portion of their energy requirements at t
( i .
wholesale rates from certain of the System operating companics. During the year ended December 31,1979, the total revenue received by Oe Middle South System from service supplied to rural electric cooperatives was 5.1% of consolidated ebtric operating resenues. Certain cooperatises in Arkansas, Louisiana and Mississippt are participants in arrangements for the construction and ogration of steam electric generating stations which have superseded in part and may supersede, in whole or in part, the Middle South System as the supplier of their power requirerrents. Revenues derived from certaic power supply contracts with Reynolds constituted approximately 11.3% of AP&L's total operating revenues for the year ended December 31,1979. The contracts, one with Reynolds covering four plants located in Arkansas and the other with Reynolds and the United States of America. acting through the Secretary of the Interior, in connection with Reynolds' Paiterson Reduction Plant, provide for AP&L to supply Reyncids with both power and energy to meet a stated amount of firm demand and also to supply a variable amcunt of non. firm demand to Reynolds during off-peak periods. Both contracts with Reynolds extend to December 31, 1983, with Reynolds having the right under the first to cancel, upon 48 months' notice, if the energy charge thereunder exceeds limits set for a consecutive 12 month period or upon 24 months' notice after any adverse rate adjustment, while the second contract allows Reynolds to cancel with one year's prior notice. (See " Regulation and Litigation--Other Regulation and Litigation" for litigation in regard to AP&L's contract with Reynolds and the United States of America.) A total of !!,959 persons were employed by the Middle South System at year.end 1979. Included in the above number are 259 part-time employees. Details follow: December 31.1979 Fall Part Total Time Time Employee: MSU . . . . ..... ....... . . 3 _ 3 A P& L . . . . . . . . . . . . . . . . . . . . . 3,668 46 3,714 LP&L.... .. .... .... . ... 2.274 55 2,329 MP&L . ...... .. ..... ... . 1,691 85 1,776 NO PS I . . . . . . . . . . . . . . . . . . 2,945 44 2.989 Other subsidiaries ... . 1,119 y 1,148 Total . . . . .... .. ..... . 11,700 g 11.959 CONSTRUCTION PROGRAM The 19801982 construction expenditures (exclusive of nuclear fuel costs) for the Middle South System were estimated at March 1,1980 by MSU to total $2,632 million. The estimates by years are as follows: 1980, 5928 million; 1981, $960 million; and 1982,5744 million (including AFDC of $245 million for 1980,$248 million for 1981, and $133 million for 1982). These estimates by company are as follows: 1990 1981 IM2 (la Millions) ! Registrants: AP&L......................................... $285 $227 5210 LP&L.......................................... 285 269 169 ! MP&L............................... ....... 47 45 41 i NOPSI..................................... .. 30 26 28 Other subsidiaries: h{SE 273 384 287 Ark.Mo and Associated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9 9 Consolidat ed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5928 5960 5744 6
The estimated construction expenditures for 1980 for AP&L, LP&L, MP&L, NOPSI and MSU's other (A
) subsidiaries, and on a consolidated basis, include:
U Treme. Production missies Distributies Plant Other
. tia Milliosa)
Registrants: AP&L....................................................... 5 203 5 36 5 37 5 9 LP&L................................................... 234 15 35 1 MP&L....................................................... 5 25 14 3 NOPSI...................................................... 10 - 10 10 Other subsidiaries: MSE......................................................... 273 - - - Ark.Mo and Assoctated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 3 4 Consolidat ed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 725 5 77 5 99 5 27 The above table includes estimated environmental expenditures of $21 million fcr AP&L,533 million for LP&L,51 million for MP&L,51 million for NOPSI and $6 million for MSE. The following tabulation shows certain details with respect to certain planned generating facilities ncluded in the estimated construction expenditures for 1980 1982. s&4 Net Total mied symen Es, _ 37,,,, y,,, Cape. Com. Case of Feel bility Before pany Per Com. f ar=eise Type MW 1980 1900 1981 1982 Ceesti) Kw(2) g tMiuises of Deilarowscept Cost Per KW) AP&L Wlute Bluf.Na l(3) . . . .. ItedSeid. Art Coal 422 5 207.3 $ 23.0 $ 2.9 - $ 229.6 5 544(4) 1980 [ White Bluf. No. 2(3) .. . ... ... Red 6 eld. Art Coal 422 101.5 41.9 12.5 . - 154.1 365(4) 198I (A Independence.Na I(5). . .... Newark. Art Coal 422 35.5 78.2 95.0 $ 50.0 262.6 622(4) 1983 I - l< '==. Na 2(5) . . ... . Newark. Art Coal 422 6.9 5.0 36.5 60.I 219.3 520(4) 1985 Sub-total . . . ..... . 351.2 148.1 146.9 110.1 $ 865.6 LP&L Waterford No. 3 . . . . . . . .. . Killona. l.a. Nuclear 1.165 819.3 214.1 166.7 29.I $1.229.2 1.055 1982 Sub-total .. ... .. ... . . . 819.3 214.1 166.7 29.1 $1.229.2 MSE Grand Gulf. Na l(6) . . . . . . . . . . . . Grand Gulf. Miss. Nuckar 1.125 1.147.3 210.3 227.1 67.1 $1.651.8 I,468 1982 Grand Gulf. Na 2(6) .. .... ... Grand Gulf. Miss. Nuclear 1.125 272.1 62.6 157.3 220.1 1,140.5 1.014 1985 Sh .. . .... . . , .. . 1.419.4 272.9 384.4 287.2 $2.792.3 Total . . . . . . .. .... ... $2.589 9 $635.1 $698.0 $426.4 l (1) The costs shown include AFDC. Costs of acquiring nuclear fuel (net of amounts already provided l for under existing leases) excluded from construction expenditures of the nuclear units are estimated to amount to (in millions) 54, 592 and $45 for the years 1980,1981 and 1982, respectively. For information with respect to the sale and leaseback of nuclear fuel by AP&L, LP&L and MSE, see Note 8 to Financial l Statements. In 1978, SFI entered into an arrangement for the financing of $60.000,000 of expenditures in l, connection with its nuclear fuel procurement and services program for the Middle South System, see " Fuel l Supply-Nuclear Fuel". l l (2) Common costs are identined with the Arst unit of each station. Therefore, the Cost Per KW is l substantially greater for the Arst, as compared to the second units. at the White Bluff, Independence, and Grand Gulf Plants. i
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(3) In IP7 AP&L sold a 35% undivided interest in the White Bluff Plant to .tECC and a 5% undivided interest to Jonesboro. The expenditures for these Units reflect AP&L's 60?c share of the cost of construction through June 30, 1979, no expenditures except AFDC through September 10,1979 (during which period Conway paid 60erc of the cost of construction) and thereafter 58?c, based upon an exchange of properties which was made with Conway pursuant to a contract effective July 1,1979 under w hich Conway became the owner of a 2% undivided interest. West Memphis has paid 589c of the cost of the construction of the White Bluff Plant from February I to March 7,1980 and has paid 1% of such cost since March 7 under a contract which obligates it to exchange the property so acquired with AP&L for a I?o undivided interest in the White Bluff Plant. Construction expenditures in 1980 are not reduced by the initial participation amount by West Memphis. The Total System Company Cost shown is 577o of the total project cost, including coal handling equipment costs. In 1979, AP&L determined that the net capability of each of these Units is 740 MW instead of 700 MW. On December 20, 1979, AP&L exchanged a fractional undivided interest in the White Bluff Plant for the entire undivided ownership interests of AECC and Jonesboro in the coal handling equipment for Unit No. I and Unit No. 2 of the White Bluff Plant. Concurrently, AP&L sold a portion of such equipment to a trustee acting for several institutions and leased back such equipment under a net lease having a primary term of twenty-five years. The proceeds from such sale to AP&L were approximately 524.7 million. During 1980, AP&L expects to sell and lease back the remainder of such eqwpment, which is expected to result in the receipt by AP&L of additional proceeds totaling myroximately $18.8 million. The estimated expenditures for these White Bluff Units have not been adjusted to reflect the sales of the coal handling equipment. (4) Costs of sulfur dioxide removal equipment for the White Bluff and Independence Plants are not included in the abov: Costs Per KW, The Plants have becn designed and are being constructed so that such equipment could be installed should it become econor-ically feasible and should AP&L be required to make such installation in the future. AP&L has estimated that the Cost Per KW would be increased to approximately 5649 and 5440 for Unit No. I and Unit No. 2 of the White Bluff Plant, respectively, and to approximately 5722 and $593 for Unit No. I and Unit No. 2 of the Independence Plant, respectively, should sulfur dioxide removal equipment be required. AP&L expects to burn low sulfur coal from Wyoming to operate the White Bluff and the Independence Plants. For information with respect to existing agreements for fuel supplies, see " Fuel Supply" (5) On July 31, 1979, AP&L transferred to AECC, Jonesboro and Conway a 35%, 5% and 2% interest, respectively, in the Independence Plant. In addition. AP&L sold and conveyed a 1% interest to West Memphis on January 24,1980 and a 0.5% interest to Osceola on March 3,1980. The expenditures fn these Units reflect the full cost of canstruction through June 30,1979, and 58% thereafter. The amount , shown for 1980 has not been reduced for any payments by West Memphis and Osceola. The Total System Company Cost shown is 100% of coal handling equipment costs and $7% of all other project costs. In 1979, AP&L determined that the net capability of each of these Units is 740 MW instead of 700 MW. l (6) Negotiations are currently being conducted for the acquisition of a 10% undivided interest in the l Grand Gulf Plant by SMEPA during 1980. The expenditures for these units are estimated to reflect the full l cost of construction through May 31, 1980, no expenditures except AFDC and taxes capitalized through February 28,1981 (during which period SMEPA is expected to pay for the basic cost of construction, see
" Regulation and Litigation-Atomic Energy Act of 1954 and Energy Reorgamzation Act of 1974" for information concerning the acquisition by SMEPA of 10% of the Grand Gulf Plant) and thereafter 90% of the cost of construction. Assuming consummation of this acquisition,90% of the capability of the Grand Gulf Plant, or 2,250 MW, would be available to the Middle South System. At December 31, 1979, construction of Units No. I and 2 of the Grand Gulf Plant was approxi.nately 80% and 24% completed, respectively, and engineering was approximately 91% and 43% completed, respect;vely.
Construction of ANO No. 2 is complete. An operating license for this unit was issued in the summer of 1978. Testing of the unit is coatinuing and it is expected to be in commercial operation in the first quarter of 1980 (see " Regulation and Litigation-Atomic Energy Act of 1954 and Enggy Reorganization Act of 1974"). For information with respect to the fuel supply for ANO, see " Fuel Supply-Nuclear Fuel" 8
. = _ _ - .. .-- -. . - . - ._, .
The foregoing are only estimates of construction expenditures for the various facilities referred to. Actual expenditures and dates of completion for the various construction projects may vary from the O estimates because of availability of financing, changes in the plans of the respective companies, cost fluctuations, sales ofinterests in projects, availability oflabor, materials and equipment, licensing and testing delays and other factors. The Middle South System is continuing to experience increases in costs for construction of new facilities as a result of continuing rises in the costs of material, labor and capital, increasing requirements of expenditures for environmental and ecological purposes, and deferred completion dates of projects. (See " Regulation and Litigation-Environmental Regulation" for the estimated r. mount of environmental expenditures during the period 1980 82.) In addition to construction of utility plant, SFI expects to increase its investment in its fuel procurement and exploration programs. SFI's increased investment (excluding fuel oil inventory) is expected to be 562 million in 1980,542 million in 1981 and $135 million in 1982. Middle South System expenditures for nuclear fuel not already provided for under existing leases will amount to 54 million in 1980,592 million in 1981 and
$45 million in 1982.
FUTURE FINANCLNG Construction expenditures (exclusive of nuclear fuel costs) for the Middle South System during the period 1980 through 1982 were estimated at March I,1980 by MSU to be approximately $2,632 million I (including 5626 million in AFDC). During the period 1980-1982, increased investment in the fuels programs net of amounts provided for by existing leases will add $380 million to total capital requirements (including nuclear fuel cost not provided for under existing leases). MSU estimates that $1,513 million will be raised from sources outside the Middle South System through the sale of additional bonds and shares of preferred stock, long and short. term borrowings and pollution control revenue bond financing and through the ale and l Icasebacl. or repurchase of property. Approximately 5521 million is expected to be raisui from the sale of
. MSU Common Stock. The balance of the capital expenditures for the period 1980 through 1982, presently estimated at $978 million, is to be met with internally generated funds (including 5626 million in AFDC-see Note (e) to Summaries of Operations).
\
l1 I In addition to the financing requirements needed for capital expenditures, MSU estimates that during the period 1980-1982 the Middle South System will need to raise capital funds from external sources to refinance maturing long. term debt, or to make sinking fund redemptions. totalling $322 million and to l redeem 39 million of preferred stock pursuant to sinking fund requirements. See Notes 2 and 3 to Financial Statements. The coverage provisions of the indentures and charters of the System operating companies generally require minimum earnings coverages of twice the pro forma annual bond interest charges for the issuance of additional bonds and minimum earnings coverages of one and one-half times the pro forma annual interest chargea and preferred dividends for the issuance of additional shares of preferred stock. ! On the basis of the formulas contained in the indentures and charters of certain of the System operating l companies, the earnings coverages for the years ended December 31,1975 and 1979 would be those statu! in ! the following tabulation: AP&L IFAL , MP&L NOPSI l Preferred Preferred Preferred Preferred Year Beads Stock Beads Sesek Beads Stock Beads Stock 1975. . ... .. . l.80 1.38 2.45 1.81 2.86 1.81 1.92 1.33 1979... .. . ... .. l.56(a) 1.58(a)(b) 1.71 1.36 3.00 l.87 2.46 1.54(c) (a) Includes in earnings the effect of those revenues which are the subject of a complaint filed by the Attorney General of Arkansas with the APSC and those which were mentioned by the APSC in a l preliminary order and referred to under " Rate Matters-AP&L". l (b) As adjusted to give effect ' 3 the sale in January 1900 of 2,000,000 shares of 13.28% Preferred Stoek, Cumulative, $23 Par Value. ( 5 i ! A , 9 i : ) l \d I e
. . . ., , ., t- - - _ _ .-. .. .
(c) As adjusted to gne effect to the proposed sale in March 1980 of 150.000 shares of Preferred Stock. Cumulative. 5100 Par Value, at an assumed annual disidend rate of 15c'c. Based on the above earnings coverage tests as of December 31.1979, and assuming the availability of bondable property, AP&L LP&L. MP&L and NOPSI could have issued first mortgage bonds er preferred stock amounting to the following, at an assumed interest and di idend rate of 15c'c: nru M wtance Prefemd Boeds Stock
- $39.000.000 AP& L . . . . . . . . . . . . . . . . . . . . . . . .. .
LPAL . . . . . . . . . . . . . . . . . . .... ... . 560,000.000 38,000,000 MP&L . . . . ........... .... .. . ... . . 13.300.000 2.000.000 NOPSI . . . . . . . . . ....... . .. . .. .. . ... . .. Total . . . . . . . . . . .. ... . . . . 573.300.000 579.000.000 In addition to the above first mortgage bonds these System operating companies could issue additional first mortpge bonds for refund.ng purposes. The amounts of additional bonds and p Terred stock which can be issued by the System operating companies in the future are contingent upon earnings and may be contingent upon the ability of the System operating companies to obtain adequate rate relief. Certam of the System operating companies have arranged and are attempting. to the utent practicable, to arrange in the future for the financing of certain of their estimated expenditures for pollution control facilities through the issuance by local governmental units of pollution control revenue bonds. MSE estimated at December 31,1979, that the total cost to MSE. assuming a 90c'c ow12ership interest, for the Grand Gulf Plant, excluding nuclear fuel, will be approximately 52,792.3 million. See " Regulation and Litiption-Atomic Energy Act of 1954 and Energy Reorgamzation Act of 1974' for further information with respect to the pending acquisition of loc ~c of the Grand Gulf Plant by SMEPA ar'd the December 1979 revision in the scheduled completion dates of Unit No. I and Unit No. 2 of the Grand Gulf Ph.at from 1981 and 1984 to 1982 and 1985, respectively. In connection with the Grand Gulf Plant, MSU has undertaken, to the extent not obtained by MSE from other sources, to furnish or cause to be furnished to MSE sufficient capital for construction and operation of the Grand Gulf Plant and related purposes. Through December 31,1979, MSU had invest-d 5385.7 million in tne common stock of MSE. At December 31,1979. MSE had made inte-im-term bank borrowings of 5547 million, which are due December 31,1982, under a 5555 million revolving loan agreement with a group of banks. In March 1980, MSE entered into an amendment to the loan agreement to increase the total amount of borrowings permitted thereunder to 5808 million and to extend the term of the borrowings thereunder to December 31,1985. At Decem5cr 31.1979. MSE had issued and sold $400 million ofits First Mortpge Bonds,9%?c Series due 1989. In January 1980. MSE entered into an agreement under -hich it has issued and sold $15 million and will issue and sell on or prior to July 1,1980, an additional 583.5 million ofits First Mortpge Bonds,12%% Series due 2000. MSE is oblipted to make annual cash sinking fund payments with respect to the 9%fc Bonds commencing July 1, 1982 designed to retire 5328 million of those Bonds by maturity and with respect to the 12%c'o Bonds commencing in January 1,1985 designed to retire about 593.5 million of those Bonds by maturity. Also, MSE has covenanted with the bondholdeq and the banks that it mill complete Unit No. I no later than December 31,1982. MSE has also covenanted with the bondholders that Unit No. 2 will be completed no later than December 31,1986. In the event either of these covenants is not fulfilled or MSE defaults in respect cf either the Bonds or the bank bon owings, the Bonds and the bank borromings will become due and payable unless extensions of time can be arr.nged. In these cases, MSU would te required to provide MSE with sufficient funds, to the extent not obtained by MSE from other sources, to meet these payment obliptions of MSE with respect to any of the foregoing 5498.5 million of Bonds and bank borrowings under the 5808 million revolving loan agreement, which are then outstanding. 10
i MSE and the System operating companies h. <e entered into a series of agreements (collectively,
" Availability Agreement") whereby (i) MSE has agreed to complete the Grand Gulf Plant, to join in the System Agreement (see " Property-Interconnections" for information with respect to the System Agreement) on or before the completion of the first unit of the Grand Gulf Plant and to sell to the System operating companies power available from the Grand Gulf Plant under the terms of the Systa Agreement, (ii) the System operating companies have agreed to pay to MSE (on the apportionment bases provided for in the Availability Agreement) such amounts as (when added to any amounts received by MSE under the . System Agreement or otherwise) will be at least equal to MSE's operating expenses or an equivalent amount if either unit is not in operation (including scch expenses as might be incurred by MSE for maintenance and surveillance in the event of shutdown of either or both units), including MSE's interest charges and an amount equal to an assumed depreciation rate for 27.4 years of 3.65% per annum applied to MSE's gross investment in the Grand Gulf Plant (exclusive ofland and land rights), (iii) the System operating companies have agreed to make subordinated advances under certain circumstances to MSE in amount- Aualto payments which would otherwise be owing under the payment formula of the Availability Agreement describeit in (ii) above and (iv) the System operating companies have agreed that their obligations to make paymentr or advances to MSE are absolute and unconditional. The requirement to make payments under (ii) above ecmmences on the date on which either unit of the Grand Gulf Plant is placed in commercial operation; provided that if Unit No. I is not placed in commercial operation prior to December 31,1982, the commencement date is December 31, 1982; and provided, further, if Unit No.1 is placed in commercial operation prior to December 31,1982 then, with respect to the assumed depreciation charge related to Unit No. 2, the commencement date is the earlier of the date of commercial operation of Unit No. 2 or December 31,1986.
Dividends of $1.52 per share were paid by MSU on its Common Stock in 1979. MSU's tax position in
. 1979 was such that 49.04% of the July 2 dividend payment and 61.75% of the October i dividend payment are estimated to be nontaxable as dividend income to the stockholder. These percentages are subject to l O verification and approval by the Internal Revenue Service at a future date. The portion of a dividend payment which does not represent income is treated under the Federal income tax law as a return of the shareholder's capi'al and necessitates a red. tion :n $e tax basis of the shares on which these dividends were paid.
l . Dividends paid by AP&L on its preferred stock in recent years have been fully taxable ar dividend income to recipient shareholders. AP&L's tax position in 1979 was such that 100% of the preferred stock dividend payments in 1979 are estimated to be nontaxable as dividend income. This estimate is subject to verification and approval by the Internal Revenue Service at a future date. The portion of a dividend paymew which does not represent dividend income is treated under the Federal its eme tax law as a return of the shareholder's capital and necessitates a reduction in the tax t> asis of the share on which such dividends were Paid. RATE MATTERS General As of March 1,1980, certain of the System operating companies had pending applications before their 4 ( state et municipal regulatory autho ties or the FERC or on appeal before the courts, for electric Ond gas rate j increases. Certain of the applicatior ; also request authorization to modify other provisions of rate schedules. For details as to various e:ectric and gas rate increase applications of the System operating compantes, see below under this heading. i l l O)
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AP&L AP&L, on April 30,1979, t. led with the FERC an application for an increase in its wholesale rates. It is estimated that based on a projened test year ended December 31,1979, the request would increase resenues of AP&L approximately $6,700,NO per year. On March 7,1980, AP&L placed these rates in effect, subject to refund. Under the terme a settlement agreement entered into in January 1980 between AP&L and its intervening wholesale ec ncrs, subject to the required approval of the FERC, AP&L's proposed rate increase would be chas.pd to approximately $4,700,000. AP&L has agreed with its intervening wholesale customers that in the event ti it the increased retail rates authorized by the APSC's February 29,1980 order (discussed in the o t paragraph) have not been implemented by AP&L by April 7,1980, AP&L will refund to its wholess'- : ,.ners a portion of the increased rates implemented March 7,1980. In addition, AP&L has agreed to seex FERC approval of the use at wholesale of a fuel djustment clause similar to whatever fuel adjustment clause the APSC approves in AP&L's pending retail rate increase proceeding. On October 23,1978 AP&L filed with the APSC an application for an increase in its retail electric rates which would produce approximately $29,000,000 of increased revenues based on a June 30,1978 test year. The 529,000,000 was subsequently changed to approximately 527,000,000 primarily because of changes in the Internal Revenue Code. Tne filing included: optional time-of-day rates for residential customers; a lower residential rate for customers with low year-round usage; air-conditioning load control switch programs for commercial customers; and stand by service for customers who desire to generate their own electricity. The application primarily involves rate structure changes for the commercial operation of ANO N9. 2 which is now estimated for the first quarter of 1980. On September 12, 1979, AP&L and the Staff of the APSC executed a written stipulation recommending to the APSC that AP&L's rates be increased to produce additional annual revenues of $13,578,000 on the test year basis; that decommissioning costs for nuclear plants be determined and added to the rates described above; and that an agreed fuel adjustment clause be adopted and negative salvage value of nuclear fuel be recovered under that clause. The APSC has ruled A no part of any increase in rates in this case will be placed in effect until ANO No. 2 is in commercial operation. On February 29, 1980 the APSC entered an order granting rate increases designed to produce additional revenue of 514,695,000 on a test-year basis; requiring mandatory time-of-use rates for all industrial, commercial and special class customers whose loads exceed 100 KW; permitting optional time-of-l l use rates for residential customers; requiring AP&L to make the air-conditioning load control switch program available on an optional basis to customers who elect time-of-use rates; requiring tariffs for charges l to qualified cogenerators to be the same as tariffs for payments to cogenerators; requiring the use of a three base fuel adjustment clause until one of the nuclear units has been out of service for 30 consecutive days for a t reason other than refueling, after which AP&L will go to a single base fuel adjustment clause with 90% of the l added expense being passed to the customer and 10% being absorbed by AP&L; permitting AP&L to add to the rates amounts sufficient to pay the costs of decommissioning the nuclear' plant and transporting and storing spent nuclear fuel. The APSC found,in the order, that there was no evidence to support the difference in risk as to classes of customers which AP&L has used, and ordered AP&L to cease using risk multipliers, if l this portion of the order is not changed, it will result in a substantial increase in rates for residential customers I and a reduction in rates for industrial and commercial customers. On March 6,1980, the staff of APSC filed a ! petition for rehearing requesting the APSC to modify this portion of the order. On March 7,1980, AP&L filed a response requesting a similar modification, and the APSC entered an order directing AP&L and all intervenors to file any responses they have to the staff's petition for rehearing by March 17,1980. l The Attorney General of Arkansas filed a complaint with the APSC on April 23, 1979, in which he alleged that AP&L had erroneously applied the existing fuci adjustment clause to retail customers from April 1977 through March 1979 and thereby overcharged the.e customers a total of $17,297.124 and that such overchages would continue as long as AP&L continued to apply the fuel adjustment clause in the same manner. The Staff of the APSC filed a Motion concurring in the Attorney General's conclusion that AP&L erroneously applied the fuel adjustment clause and alleging that the overcharges from April 1977 through March 1979 totaled 5U,Uo,719. AP&L does not believe there was any erroneous application or overcharge. On July 3,1979, the APSC issued an interim order directing AP&L to begin and continue in the future applying its fuel adjustment clause according to the Attorney General's interpretation when the nuclear 12
o
\ generating units are not down for refueling and in accordance with AP&L's interpretation when the nuclear j generating units are down for refueling. The July 3,1979 order stated it was not deciding the propriety and legality of ordering refunds by AP&L for its administration of the fuel adjustment clause from May 21,1976 (which was the date or a final order of the APSC under which a new fuel adjustment clause similar to the clause which was the abject of the Attorney General's complaint was placed in effect) to the date of the July 3,1979 order and s .ted that decision would be made later. AP&L has appealed the decision to the Circuit Court of Pulaski County, Arkansas.
All of AP&L's present retail rate schedules, with the exception of the large power supply contracts with Reynolds, have a multiple base fuel adjustment clause which provides for the recovery of the cost of nuclear fuel in excess of 2.557 mills per KWH, fossil fuel in excess of 15.246 mills per KWH and purchased power in excess of 16.444 mills per KWH incurred in the second preceding month. In addition, the fuel adjustment factor contains an amount for a nuclear reserve fund, estimated to cover the replacement cost of energy which would have been gen - *
- by nuclear fuel when the nuclear plant is down for refueling. This fund bears interest and is credited to the fuel and purchased power expenses incurred during the time the nuclear plant is ectually down for refueling. The February 29,1980 order of the APSC in the retail rate case of AP&L wJ change the fuel adjustment clause and collection thereunder. The actual effect of the order will not be knowc until rate design discussions have been concluded with the APSC. Energy charges to Reynolds on energy not supplied by SPA under a contract, dated January 29,1952, are based on the weighted average cost of fuel and purchased power and therefore do not contain a fuel adjustment factor. For information concerning the power supply contracts with Reynolds, ,ee " Business of System Operating Companies."
The wholesale rates to municipal and distribution cooperative cWomers contain a single base fuel adjustment clause, which is based on the weighted average cost of fuel and purchased power in the second preceding month in excess of a stated base. Reference is made to the first paragraph under " Rate Matters-AP&L" for a proposed change in AP&L's wholesale adjustment clause. [_) V All rate schedules (including contracts fixing rates), except the large power supply comracts with Reynolds, the service schedules under interconnection ngreements with other u ilities and those applicable to rural electric cooperatives, contain a tax adjustment clause to cover increases and decreases in taxes whkh is operative only by approval of the APSC. A municipal tax adjustment rider is in effect whereby bitmgs to customers of AP&L within a municipality will be increased by an amount equal to the excess of any charges (other than special millage or general taxes applicable to all taxpayers) levied by that municipality upon AP&L over the standard franchise tax. On February 7,1980 the APSC entered an order requiring that AP&L, on or before December 31, 1980, eliminate from base rates an amount representing municipal franchise taxes and collect from customers residing in each municipality all of the franchise tax levied by that municipality on AP&L. Ark Mo and Associated On September 14,1979, Associates nied with t'ae APSC an applicatior sr an increase in its retail gas rates which would have produced approximately 51,500,000 ofincreased re<enues if the proposed rates had been in effect during the twelve L 4ths ended May 31,1979. The application requested e2nergency interim relief. The APSC held a hearing on the matter, and subsequent thereto, Associated received authorization from the APSC to put into effect rates which will result in $1,258,000 of additional revenues on gas consumed after October 17,1979. This increase is subject to refund with interest, pendinF final determination of the matter. Ark-Mo's Arka.nas retail and resale fuel adjustment clauses allow fuel cost recovery on their respective sales. On April 14,1976, the PSCM issued an order effective June 1,1976 which continued automatic fuel adjustment on all classifications of customers but excluded recovery of fuel costs related to oil-fired generation and purchases. The Public Counsel appea_ed from the PSCM order. On June 29,1979, the D 13 L .
Supreme Court of 'dissouri ruled that the PSCM did not have statutory authority to permit automatic fuel adjustment for r'.sidential and small commercial customers. In addition, the Court ruled that a surcharge authorized by the PSCM in its 1976 order be refunded and remanded the case to the Circuit Court to determine the amount of the refund and the persons entitled thereta. A motion for rehearing filed on behalf of all Missouri electric utilities was denied on September 11,1979. The decision is now final and Ark-Mo will be liable to refund 5351,000 to its residential and small commercial customers and $949,000 to its large industrial and commercial customers. The Circuit Court ordered the payment ofinterest on the refund at the rate of six percent per annum from September 11, 1979 until paid. The Public Counsel has appealed the interest computation alleging that interest is due from the date the surcharge was collected. As a consequence of the Missouri Supreme Court ruling, Ark-Mo 'n July 17, 1979 filed revised permanent electric tariffs with the PSCM, which would increase revenues by $5,900,000 on an annual basis. Simultaneously with the filing for permanent rates, Ark-Mo requested an emergency interim rate increase of 52,700.000 on an annual basis. The PSCM has suspended both the permanent rates and the interim rates until June 14, 1980. However, on September 27,1979, the PSCM authorized Ark-Mo to increase its retail electric rates $2,094,559 on an annual basis effective October 1,1979 after which automatic fuel adjustment will no longer be applicable for any classification of customers. Of this amount, 51,260,671 is subject to refund pending further action by the PSCM. At the same time Ark-Mo agreed to withdraw the request for t.n emergency interim rate increase fcr $2,700,000 upon fmal order from the PSCM approving the October I rates. The Office of Public Counsel is seeking a refund of all revenues collected under the fuel adjustment clause from the date of the Missouri Supreme Court decision on June 29,1979, to the date on which those clauses were eliminated on October 1,1979. Such revenues totaled $1,257,776. LP&L In July 1977, LP&L filed with the FPC an application for an increase in LP&L's ra'es to rural electric cooperatives, which would result in additional annual revenues of approximately 57,489,MO. LP&L's application also requested an increase in LP&L's rates to the four municipalities to which it serves firm power, the effect of which would result in additional annual revenues of approximately 51,055,000 above the revenues produced by rate schedules currently in effect as to these municipalities, based on a test year ending December 31,1977. The application proposed, among other things, (a) the inclusion of all CWIP in the rate base, based upon FPC Order No. 555 which permits such inclusion "where the utility is in severc Enancial stress", and (b) the concurrent cessation of capitalization of AFDC on the CWIP so included. Decision on the application is currently pending before the FERC. In November 1976, LP&L filed with the LPSC a general rate increase application, asking authorization to put into effect new retail rate schedules designed to provide additional revenues of approximately l i 554,000,000 annually on the basis of pro forma 1976 test year data. The application proposed, among other things, the inclusion of CWIP in the rate base ar d the concurrent cessati ori of capitalization of AFDC on the CWIP so included. On November 23,1977, the '.PSC issued its order thereon allowing LP&L rate increases ! only to industrial customers designed to produce additional revenues of approximately 54,970,000 annually on the basis of the test year and denying the proposed treatment of CWIP On appeal by LP&L to the 19th Judicial District Court for the Parish of East Baton Rouge, Lomstana, tha'. Court, on July 24,1978, signed a judgment setting aside the LPSC order, permitting LP&L a rate increase of 513,790,000, allocated in the manner which the LPSC, acting at the direction of the Court, had therr.tofore found to be in order, which allocation incluoed rate increases to industrial customers of approximat:ly $4,970.000, and ordering LP&L i to render an accounting as to any refund or credit due the industrial castomers for amounts paid by them pursuant to the LPSC order of November 23,1977, from the implementation thereof by LP&L to July 24, 1978, in excess of the amount which would have been allocable to them T the increase permitted by the LPSC order had been allocated among all classes of customers in the proportions cstablished by the Court's judgment. On March 20,1979 LP&L filed with the District Court a motion for allocation, rendering an i , accounting showing a refund or credit of approximately $2.880,000 ta be due the industrial customers and l asking for an order authorizing such refund or credit and an offsettirag surcharge ir :'.e same amount to be allocated among and collected from LP&L's other c8ssses of customers. On May 11,1979, the District Court 14 1
N signed a judgment ordering such refund or credit and denying such offsetting surcharge. On appeal, this judgment was affirmed by the Loutstana Supreme Court on November 12,1979 and a rehearing was denied by that Court on December 13,1979. In May 1979, LP&L recorded on its books a reduction in owrating revenues of 52,880,000, which amount has been refunded to customers. On December 18,1978, LPAL fded with the LPSC a general rate irteresse application with rr spect to customers under its jurisdiction, asking authorization to put into effect new retail rate schedules deigned to provide additional revenues of approximately 5114,700,000 annually on the basis of the tes' jear ended August 31,1978. The application proposed, among other things, the inclusion of CWIP in the rate base and the concurrent cessation of capitalization of AFDC on the CWIP so included. On December 18,1979, the LPSC, by order, granted LP&L a 559.6 million increase in its electric service rates, but the LPSC did not allow the inclusion of CWIP in the rate base as requested in LP&L's application. On March 11,1980, a group of industrial customers filed in the 19th Judicial Dtstrict Court for the Parish of East Baton Rouge, Louisiana, an appeal from the LPSC order of December 18,1979, asking that such order be annulled insofar as it grants a rate increase allocated on a flat kilowatt hour basis and that the increase be allocated among customer classes on a cost of service basis, and asking further that LP&L's industrial customers be given credit or reimbursement for amounts paid under the LPSC order in the interim in excess of what they would j have paid had the increase been allocated among customer classes on the basis of cost of service. LP&L l intends to seek expedited handling of :he appeal and affirmance of the LPSC order. The matter is pending. l The rates of LP&L's retail customers in the Fificenth Ward of the City of New Orleans are regulated by the Couned rather than by the LPSC. On March 6,1979, LP&L died with the Couned a rate increase application with respect to such customers askiis authorization to put into effect new retail ate schedules designed to provide sdditional revenues of approximately $3,191,000 annually on the basis of the test year 1 i ended August 31, 1978. On January 7,1980, LP&L filed an amended application asking at&dzation to implement the same rates authorized by the LPSC on December 18,1979, which would provide additional [
\
t revenues of $1,298,000 annually on the basis of a test year ended December 31,1978. After holding hearings on the matter, the Council, by resolution adopted on February 21,1980, authorized the implementation of the rates requested in the ==,W application, and such rates have gone into effect. All rate schedules include adjustments for changes in the cost of fuel (which generally results in a two ' month lag between dianges in fuel costs and billings therefor) and directly allocable taxes such as salm or eacise taxes. In January 1979, LPAL received authorizanon from the LPSC allowing and requiring LP/,L to reflect in future WZings to customers through the fuel adjustment clause net over or under<ollections of fuel costs in excess of those included in base rates. Concurrently with this change in billing for fuel costs, LP&L a === =" deferring on its books fuel costs in excess o(bene rates until such costs are reflected in billings to l
- customers pursuant to the fuel adjustment clause. See Note (c) to Summaries of Operations for the effect of this deferral on net income. l MP&L MP&L's electric rate schedules for sales to ultimar, customers include fuel adjustment clauses which j permit MP&L to recover from customers each month any increase or decrease in the estunated cost of fuel and purchasert energy appbcable to sales to ultimara customers. The calculanons of the monthly fue!
. adjustment rate involve the use of ygipad sales and energy costs for the month, adjusted for any over or l . under recoveries due to differences between the actual and estimated costs of energy and sales levels for the second prior month. MP.kL's whale = ale rate schedules for mumcrpal and rural cooperative distributors include a fuel adjustaunt clause which also allows the recovery from customers of any monthly increase or decrease in the cost of ftel and y .-ha energy. The e-le=I=daa of the wholesale fuel adjustment reflects such increase or decrease used upon the second prior month's cost of energy. ( v) . 15 s v . , . . - - . _ .
NOPSI NOPSI's electric rate schedules include fuel adjustment clauses which allow for the full recovery of increased power plant and purchased power fuel costs above the fuel costs collected through the basic rates. Similarly, NOPSI's gas rate schedules include a gas cost adjustment clause which allows for the full recovery of increased purchased gas costs above the Fas costs collected through the basic rates. Both adjustment clauses allow for the monthly reconciliation of actual fuel or purchased gas costs incurred and billed. Any difference is included in the determination of the adjustments to be billed in the second following month. Two months' interest at the prime rate is paid on any resultant overcollections. PROPERTY Generating Stations The net capability of the Middle South System's generating stations at December 31,1979 by location is indicated beiow: Net Capability NfW(t) 9eam Turbine Fossil Internal Iecation Total (2) Fueled Nuclear Combustion lg Arkansas . . . .... . ..... 3,390 2,200 836 285(3) 69 Louisiana . . . . . . . . . . . . . . 5,649 5,614(4) - 35 - Mississippi . . . . . . . . ...... 2,763 2,752 - 11 - Missouri . . . . . . . . . . .... 35 35 -- Total . . . . . . . . . . . 11,837 10.601 836(5) 331 69 (1) " Net Capability" as used herein is the present dependable load carrying ability of the station, as demonstrated under actual operating conditions based or. 'he primary fuel which each station was designed to utilize. (2) Ownership of capacity, by location, is as follows: Arkansas, all capacity is owned by AP&L except for 188 MW of gas turbine capacity leased by Ark.Mo; Louisiana,4,373 MW of fossil fuel:d capacity and 19 MW of gas i _ bine capacity is owned by LP&L and 1,241 MW and 16 MW, respectively, by NOPSI; Mississippi, all capacity is owned by MP&L; and Mtssouri,35 MW is owned by Ark-Mo. (3) Includes 188 MW of capacity leased through 1999. (4) Includes 203 MW Combined Cycle (Gas / Oil-Fired). (5) The Middle South System's second nuclear. fueled unit, ANO No. 2, with a net capability of 912 MW is expected to attain commercial operation in the first quarter of 1980. Interconnections The electric power supply facilities of the Middle South System consist principally of steam electric production facilities strategically located with reference to availability of fuel, protection of local loads and other controlling economic factors. These are interconnected by a transmission system operating at various voltagc: of up to 500 KV. With the exception of MSE's Grand Gulf Plant, ownership cf facilities is in each instance in the System operating company located in the area in which the facilities are located. Under the terms of the System Agreement among the System operating companies, gene ating capacity and other power resources are shared. Among other things, the System Agreement provides that parties to the System Agreement who have excess generating capacity will sell the available excess to those parties to the System Agreement who have deficiencies in gen: rating capacity and that for this entitlement the purchasers will pay to the sellers a capability equalization charge sufficient to cover the sellers' related operating expenses, fixed charges on debt and a fair rate of return on related equity imestment. Generating facilities are operated with a view to realizing the greatest economy. This operation seeks, among other things, the lowest cost sources of power from hour to hour. The minimum ol' investment and the most efficient use of plant are sought to be achieved in part through the coordinated scheduling of maintenance, inspection and overhaul. Where energy 16
I l is galied ,ith respect to which capability equanzasn payments have been made, the purchaser is required u pay only the cos' of fuel consumed in generating suci. -nergy. For other energy generated and supplied s
*) under the System Agreement, the purchasers are required to pay the cost of fuel consumed in generating such energy plus a cham to cover other incremental costs.
The System operating companiez have direct interconnection, with neighboring utilities, including, in in lividual cases, Gulf States Utilities Company, Mississippi Power Company, Southwestern Electric Power Company, SPA, Central 1.ouisiana Electric Company, Inc., Oklahoua Gas and Electric Company Empire - District Electric Company, Union Electric Company, AECC, TVA and SMEPA. The System operating companies are members of the Southwest Powe Pool, which has 41 members. The primary purpose of the Southwest Power Pool is to ensure the reliak ty and adequacy of the electric bulk power supply in the Southwest Region of the United States. The Sc west Power Poolis a member of the National Electric Reliability Council Arrsngenents have been made under which a group of eleven investor-owned utilities, including four of the Systen operating companies, and TVA exchange capacity and energy which is available for such purpose because of diversity m the periods of peak demands. The irrpose of these exchange arrangements is to effect economics for the benefit of each of the systems involved. From November 15,1979 through November 1980, the infes:or-owned companies are supplying 1,100,000 KW to TVA during the winter exchange period. November 15 through March 15, and TVA is supplying a like amount of power to the investor-owned companies during the summer exchange period, June I through October 1. After November 1980, the amount exchanged will be 700,000 KW unless changed or termmated by one of the parties after 4 years' notice. Of the total amount to be exchanged, the Middle South System's share is approximately 30%. Each participant in the arrangements is prcviding the necessary transmission lines and related facilities in its terntory at voltages up to 500 KV. The annual costs of these lines and facilities are shared among the participants in the exchange substantially in proportion to their respective benefits. rm The Middle South System peak demand of 10,687,000 KW occurred on August 6,1979. Ai the time of the peak, net firm purchases available to the System operating companies amounted to 782,000 KW resulting (v' ) in a requirement for Middle South System generated output of 9,905,000 KW. System owned and leased capability, adjusted to reflect curtatlments of pnmary fuel (natural gas) and the use of alternate fuel, plus
$19,000 KW of available non-firm purchases, amounted to 11,637,000 KW. The reserve margin at the time of peak was approximately 18%. Continuing capability evaluations by the Middle South System indicate that during the 1979 peak load season its loss of generating capability due to natural gas curtailment and the substitution of fuel oil was approximately 720,000 KW. (See " Fuel Supply".)
Representatives of the Middle South System regularly review load and capacity conditions in order to coordinate and recommend the location and time of installation of additional generating capacity and of interconnections in the light of the availability of power, the location of new loads and maximum economy to the Middle South System. The Middle South S stem presently is planning additional generating facilities designed for s 16% reserve at the time of a Midd. South System peak. The Middle South System anticipates that it will have the s'oility to supply its presently forecasted load, subject to its ability to install presently planned capacity, to the receipt of purchased power under various contracts, to the magnitude, duration and timing of equipment forced outages, to the availability of fuel as required and to other factors. Other Electric F.Wy At December 31, 1979, the System operating companies owned and operated 11,086 pole miles of electric lines of 33 KV and over (including 993 pole miles of 500 KV) and 66,610 pole miles of electric lines under 33 KY. These companies also owned and operated 797 substations. Gas P.ym.;y At December 31,1979, NOPSI distributed and transmitted natural gas within the limits of the City of ~ New Orleans through a total of 1,422 miles of gas distribution mains and 39 miles of gas transmission lines. Deliveries of natural gas for distribution purposes by NOPSI are received at eleven separate locations or p i ! V 17
" City Gates". Gas from United is received by NOPSI at six of the City Gates and intrastate gas from other suppliers is received at the other gates. At December 31,1979, Associated owned approximately 576 miles of gas transmission lines ranging in size from 2 inch to 10 inch and approximately 1,268 miles of gas distribution mains. In addition Associated leases approximately 22 miles of gas transmission and 23 miles of distribution mains from four Arkansas towns. Trarmit Property At December 31,1979. NOPSI owned or leased 493 motor coaches and 35 streetcars which operate over 488.5 miles of motor coach routes and 14.6 miles of single track equivalent of street railway track. In 1973, the City of New Orleans, in cooperation with NOPSI, secured a Federal Urban Mass Transportation Administration capital grant of aperoximately 53.3 million to pay two. thirds of the cost of 108 new transit motor coaches which replaced a like number of rotor coaches owned by NOPSI. The City owns the motor coaches and has leased them to NOPSI for a period of ten years. NOPSI advanced the City one-third of the ecst thereof,51,700,000, as prepaid ent. An application by the City for an additional grant was approved in September 1978, which has resulted in the consummation of a second lease between the City and NOPSI for an additional 185 replacement motor coaches. Eighty percent of the at of hese buses has been provided by a capital grant of $15.7 rillion from the Federal Urban M ss 'ransportation Administration, with the remaining 53.9 million paid by NOPSI as prepaid rent for a ten year lease of the vehicles. At December 31,1979, NOPSI had received the 185 buses. Titles The Middle South System's electric generating stations are generally located on lands owned in fee simple. The greater portion of the transmission and distribution lines of System operating companies have been constructed over lands of private owners pursuant to easements or on public highways and streets pursuant to appropriate permits. The rights of each company in the realty on which its prope-ties are located are considered by it to be adequate for its use in the conduct of its business. Minor defects and irregularities customarily found in properties of like size and character exist, but such defects and irregularities do not materially impair the use of the properties affected thereby. The System operating companies generally have the right of eminent domain whereby they may, if necessary, perfect or secure titles to privately-held lands used or to be used in their utility operations. Substantially all the properties of each System operating company and MSE are subject to the lien of the mongage and deed of trust securing the first mortgage bonds of such company. FUEL SUPPLY The Middle South System traditionally burned gas as its primary fuel but has in recent years because of curtadments generally burned increased amounts of oil. Fuel usage in 1979 did not conform to this recent trend because of two basic factors: (1) the increased amounts of natural gas available for use in power plants during 1979, and (2) the higher cost of fuel oil during 1979. 18
I i p The following tabulation shows the average cost of fuel and the percentage of natural gas, fuel oil and nuclear fuel used during the past five years: Noteral Gas 00 Nuclear Feel Feel Feel Percent of Casa Per Percest of Cost Per Percent of Cost P.r ( Generarios KWH Generation K%R Generarios KM H' I _ Year 1975 " . . . . . . . . . . . . . . . . 62 % .49c 24 % 1.87c 13 % .26c 1976 .................. 53 .57 37 1.87 10 .25 1977 .................. 43 .66 46 1.97 11 .24 1978 .................. 4~. .74 47 1.94 11 .27 1979 .................. 57 1.31 33 2.45 10 .37
- Credits for sale of tjent fuel (including plutoniten and uranium residuals) pursuant to an existing contract are taken in corpputing item costs and amounted to approximately .02c per KWH for the year 1975 and .01c per KWH for the years 1976 through 1979. He costs of reprocessing of spent fuel are not included in computing item costs. For information with respect to the unavailability of reprocessing services. which will not be required until 1985 at the earliest, see " Fuel Supply-Nuclear Fuel" and Note 12 to Financit!
Statements.
"The balance of the Middle South System's total ger.eration (approximately 1% during 1975) was provided by hydroelectric pcwer.
De Middle South System's percentages of generaNon by type of fuel were, during 1979, and are estimated to be, in 1980. the following: Notores cas WI Nacieer coal I
- 1979 1980* 1979 1980 1979 1988 1979 1980 l '
Consolidated . . . . . . . . . . . . 57 % 44 % 33 % 20 10 % 20 % - 7% l d AP& L" . . . . . . . . . . . . . . . 23 15 37 15 38 52 - 17 g Ark-Mo . . . . . . . . . . . . . . . . 61 98 39 2 - - - - LP&L . . . . . . . . . . . . . . . . . 82 84 18 16 - - - - ! M P& L . . . . . . . . . . . . . . . . . 40 34 60 66 - - - - NOPSI . . . . . . . . . . . . . . . . . 75 75 25 25 - - - -
- These percetages reflect the receipt by certam of the System operating companies of exemptions from restrictions on the uac ef natural gas as boiler fuel prescribed in the Powerplant and Industrial Fuel Use Act. That Act, among other thnas, prohibits the use of natural gas in an existing electric power plant in greater prvporten than the average yearly proportion of natural gas which such power plant used as a primary energy source in calendar years 1974 through 1976. In view of the recent increase in the availability
! of natural gas supplies (including SFI gas), AP&L, LPAL, MP&L and NOPSI petitioned the DO.E in April 1979 for exemptions from these natural gas use restrictions so as to allow these companies to burn increased l
- quantities of natural gas in replacement of fuel oil AP&L, LP&L, MP&L and NOPSI were permitted by the DOE during the pad y of their petitions to burn increased quantities of natural gas. In February 1980, the DOE granted the compemes' petitions with respect to certam generating units requesting that they be allowed to continue to burn, through October 1981, quantities of natural gas in excess of the restrictions '
contamed in the Powerplant and Industrial Fuel Use Act.
" The helmace of AP&L's generation is provided by hydroelectric power.
l Additional nuclear units under construction by LP&L and MSF, AP&L's coal-fueled units under construction at the White Blut and IW Plants, wooscial operation of AP&L's ANO No. 2 and additional coal-fueled units now in the design phase are expected to alter these percentages substantially in future years. Factors which may also afect the percentages in future years include availability of supplies of natural gas and oil, customer power d==ade; avadabdity and price of purchased power, restrictions on coal v)
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mining, environmental protection requirements, requirements of the NRC, and the effect of the provisions of Federal energy legislation enacted in 1978 restricting the use of natural gas as boiler fuel. System Fuels,Inc. SFI was organized to plan and implement programs for the procurement of fue; supplies for the Middle South System. AP&L owns 35%, LP&L owns 33%, MP&L owns 19% and NOPSI owns 13% of the common stock of SFl. SFI operates on a non-pro 6t basis; its costs are recovered through charges for fuel delivered. SFI supplies fuel for the Middle South System primarily through purchases from third parties. SFI is also engaged in oil and gas exploration activities. As of March I,1980, SFI had participated in the drilling of 102 wells, of which 41 resulted in natural gas wells capable of commercial production. SFI's [ investment in developed and undeveloped oil and gas properties, however, amounted to less than 1% of the i consolidated assets of the Middle South R r-n at m'irch 1,1980. During 1978, SFI initiated a program of exploration for uranium ores suitable for potential future extraction and conversion into nuclear fuels. Uranium exploration efforts are largely in the preliminary stages and results to date have not been significant. At March 1,1980, SFI estimated gross expenditures in 1980 of approximately $36.2 million for oil and gas exploration and development and for uranium exploration. As of March 1,1980, SFI had chartered a number of towboats and barges for the transport of fuel oil. For details of other fuel supply activities of SFI, reference is made to the subheadings, " Natural Gas",
" Fuel Oil", " Coal" and " Nuclear Fuel" under this heading.
To finance, in part, its fuel supply arrangements, SFI has entered into various borrowing arrangements with its parent companies as follows: Maximum Borrowings Amosat Period la Term of taas Authortud Outstanding ENect Outstanding At 3/1/90 At 3/1/80 toan Agreement dated January 4.1972. 1/4n212/31/73 10 years from date of borrowing - 5:6.500,000 ( Loan Agreement dated January 5,1974, j as amended . . . 1/5/74-12/31/77 25 yet s from date of borrowmg - 13.000.000 Loan Agreement dated January 4,1978, as amended . . . . . 1/4M8-12/31/80 due 12/31/2005 5173.500.000 56.500.000 596.000.000 l MSU and SFI's parent companies have certam commitments with respect to other borrowing l arrangements, contractual commitments and long-term leases of SFI, including the guaranty by MSU of payment and performance by SFI under certam leasing and credit arrangements. For further information with respect to SFI's othe.r borrowing arrangements as well as its contractual commitments, including long-term leases, and any related commitments by MSU or SFFs parent companies, see Notes 1 and 9 to the Financial Statements and "Ft.el Supply-Fuel Oil", " Fuel Supply-Coal" and " Fuel Supply-Nuclear Fuel" herein. N!.tural Gas l For 1979, approximately 68% of the natura' gas used by the generating stations as boiler fuel was obtamed from intrastate sources and approximately 32% was obtained from interstate pipeline companies which have been deemed to be subject to regulation under the Natural Gas Act. Deliveries of natural gas 't'y these interstate pipeline companies are subject to curtadment programs in effect and in the process of development under that Act. Under the provisions of Federal energy legislation enacted in 1978, curtailments of natural gas by intrastate suppliers may be made by the FERC in national emergency situations. j 20 O
^ During 1979, AP&L received less than 22%, and for the year 1980 estimated (at March 1,1980) that it will receive less than 19% of requested quantities of gas from Arkansas Louisiana Gas Company, AP&L's principal supplier of g*.s. United is the principal interstate supplier of natural gas to MP&L and NOPSI and its contracts with LP&L provide for approximately 10"c of LP&L*s total maximum generating capability.
For 1979, LP&L and MP&L received approximately 22cc and 32%, respectively, and, during 1980 LP&L and MP&L, respectively, estimated (at March 1,1980) that they will receise approximately 11% and 35%, respectively, of contracted quantities from United. During 1979, NOPSI received approximately 38% and for 1980 it estimated (at March 1,1980) that it will receive approximately 20% ofits base requirements assigned tc it by United for power plant gas from United. Due to uncertainties of United's curtadment plan currently bd.re Federal regulatory authorities and the courts, it is impossible to predict with certainty anticipated 198f Aliveries from United. 1 In July 1973, MP&L executed an agreement with Mississippi Fuel Co., a non-adiliated company, under which Mississippi Fuel Co. will transport gas purchased oy MP&L to MP&L's Rex Brown Steam Electric f Generating Station. Mississippi Fuel Co. has financed construction of an approximately 203 mile pipeline system by the private placement of $9,500,000 ofits n ces (guaranteed by MP&L) to be amortized over a 20-year period at 8% interest per annum, and by an advance of $1,069,000 from MP&L to cover the excess cost of the pipeline above the aramnt provided by such notes. MP&L has installed approximately 123 miles and SFI has installed approximately 16 miles of pipeline to bring additional intrastate natural gas to the Mississippi Fuel Co. pipeline. Natural gas produced and/or purchawd by SFI in Mississippi is primarily being sold to MP&L and energy generated by MP&L with such gas is shared among SFI's parent companies in proportion to their respective investments in SFL la large part, as a result of curtailments of natural gas, the System operating corspanies will be required to supplement natural gas with oil during 1980. However, as a result of burning od, the generating units
, ) require greater maintenance and restoration work. The anticipated oil usage is expected to continue to reduce the net generating capability of the oil-burmng generating units. (See " Property-Interconnections".)
lV Feel OH The System operating companies expect during 1980 to obtsin an adequate supply of fuel oil. Such supplies have been and will, during 1980, be supplied primarily by SFL As of March 1,1980, the fuel oil requirements of the Middle South Syst.:m for 1980 were estimated to be approximately 21.4 million barrels, for all of which the Middle South System has contracted. At March 1,1980, the total fuel oil inventory of the Middle South System was approximately 7.2 mdhon barrels. The Middle South System's storage capacity at March 1,1980 was 10.2 million barrels. SFI is currently seeking authorization from the SEC to enter into a $150,000,0001,vuvag arrangement to be used to inance its fuel oil inventory. In connection with this arrangement, SFI's parent companies would agree, severally, in accorda.we with their respective shares of ownership of SFI's common stock, that they will take any and all action nece==ry to keep SFI in a sound fmancial condition and to place SFI in a position to dieharge, and to cause SFI to discharge, its obligations under this arrangement. Dunng 1976, SFI entered into a long-term oil supply agreement with Marathon Oil Company providing
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for the sale of 50,000 barrels per day for a twenty-year period with the option of SFI, upon two years written notice, to reduce the contract quantity to no less than 35,000 barrels per day. Deliveries of oil to SFI under this agreement ca--d in January 1977. On February 21, 1979, SFI filed suit in the United States Distnct Court for the Eastern District of LW- chargmg that Marathon had breached the contract by failing to meet .he quality spec 4Acadnna of some of the oil delivered under the contract and refusing to make appropnate adjustments to the price of the oil to re6ect such quality deviations. SFI is seekmg money damages and spectac enforcement of the contract. On April 9,1979, Marathon filed a counter. claim agamst SFI weinns dammmal of SFI's action and the reformation of certam parts of the contract. The counterclaim
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alleges, among other things, that the refmery from which the oil is to be provided is not capable of producing oil up to the specifications set out in the 1976 contract. Discovery has begun and trial has been set for September 8.1980. Coal AP&L estimates that each unit of the White Bluff Plant cill require approximately 2.5 million tons of coal annually. AP&L has made arrangements for coal for the White Bluff Plant. Thereunder, AP&L has agreed to purchase, over a twenty-year period,100 million tons, and has the option to purchase, over a further 10 year period, an additional 50 million tons. The coal to Fe purchased under this arrangement is to be supplied by surface mining in the State of Wyoming from a mbe which has been operational since January 1978. The weighted average sulfur content of the coal to be rarchased under this agreement is estimated by AP&L to be 0.48%. On September 26,1977, AP&L and 8FI instituted proceedings before the Interstate Commerce Commission to determine a fair rate ta be pod to the railroads for transporting this coal from Wyoming to the White Bluff Plant. Various issues arising out of these initial proceedings and SFI's challenges to the applicability of subsequent general or specific tariff additions proposed by the railroads are either pending before the Commission or on appeal to the Courts. Coal deliveries into the White Bluff Plant began on December 22,1979. As of March 1, 1980, 269,449 tons of coal had been delivered. On December 22,1976, SFI entered into a contract with a joint venture consisting of a subsidiary of Peabody Coal Company and a subsidiary of Panhandle Eastern Pipeline Company for the supply from a mine to be developed in Wyoming of an expected 150 to 210 million tons of coal over a period of from 26 to 42 years. Coal so supplied is expected to be used in the Independence Plaat. AP&L, LP&L, MP&L and NOPSI, each acting in accordance with its present share of the ownership of SFI, joined in, ratified, confirmed and adopted the contract and the obligations of SFI thereunder and Peabody joined in, ratified, confirmed and adopted the contract and the obligations of thejoint venture thereunder. Under the contract, investment in the mine for leases, plant and equipment is the responsibility of the joint venture. However, in order to limit the joint venture's investment rights and, hence, the amount to be paid to it as a component of the price of coal, the contract provides that SFI invest 50% of the funds for plant and equipment in excess of
$43,800,000 up to 549,000,000 and 100% of any funds required for such purposes in excess of the latter amount. SFI also has, under the terms of the contract, the option of investing funds in certain rail facilities at the mine and certain coal leases to be mined by the joint venture. Through 1979, SFI made such an investment in the amount of 54.8 million, which was borrowed from its parent companies. In addition to this j
amount SFI anticipated, at Man h 1,1980, that its total additionalinvestments would be approximately $15 to $20 million in current dollars over the 26 go 42 year life of the contract. Any funds supplied by SFI under l its options in the contract will be obtained ei ther through borrowings from its parent companies or other I methods of financing. The joint venture management has recently advised SFI of difficulty experienced in its initial attempts in obtaining permits for the mine. Should delay of the mine opening date result, it is SFI's opinion that alternate coal supplies can be secured at reasonable cost. On February 29,1980, SFI executed a contract with Shell Oil Company, subject to regulatory approval, for the purchase of an estimated 247 million tons oflignite in Calhoun County, Arkansas over a thirty-year period. By separate agreement, AP&L guaranteed SFI's performance of the contract and agreed to purchase the lignite from SFL The lignite is to be used at a planned lignite-fired power plant. l SFI is involved in negotiations with various non-affiliated parties with respect to possible arrangements for the transportation of coal from Wyoming to the Middle South System, including transportation by a coal slurry pipeline system and by rail cars. The transporting of coal through a slurry pipeline system is dependent upon, among other things, the availability of adequate supplies of water and the ability to finance a project of this mrpdtude, to obtain necessary rights-of way and the comparative economics of pipeline versus other modes of transportation. On November 2,1979, SFI entered into an agreement for the lease of 600 coal hopper cars (see Note 9 to Financial Statements) to be used initially to supply coal to the White Bluff Plant. m l
Presently, SFI is contemplating the additional leasing of approximately 700 coal hopper cars to be received in the third and fourth quarters of 1980. On September 27,1974, SFI exercised its option to purchase a 3,840 acre ranch in the Powder River Basin of Wyoming under which coal is believed to be located. The total purchase price for the ranch was 51,920,000. The actual mining rignts to the coal are owned by the Federal government and would have to be bid on competitively by SFI. Neelear Fuel Generally, the supply of fuel for nuclear generating units involves the mining and milling of uranium ore to produce a concentrate, the conversion of uranium concentrate to uranium hexa 8uoride, enrichment of that gas, fabncation of the nuclear fuel assemblies and reprocessing of the spent fuel. Begmning in 1978, SFI assuaied the responsibility fer contractmg for the acquisition, conversion and enrichment of those nuclear materials required for the fabrication of nuclear fuel which may be utihud for l any of the present or proposed MiMle South System nuclear units and for establishing an inventory of such matenals during the vanous stages of processing. Each Middle South System company having nuclear capacity is respcasible for contracting for the fabncation of its own nuclear fuel and for purchasing the required enriched uranium hemanuoride from SFI. When possible, SFI will arrange for reprocessing of spent fuel and will purchase the uranium and plutonium residuals from the appropnate Middle South System company, unless such company is contractually obligated to sell such residuals to a third party. To 6 nance a portion of this program, SFI is selling commercial paper backed by an insurance company bond ofindemnity a up to a maatmum amount of 563,000,000 at my one time outstandmg of which 57,550,000 was outstanding at March 1,1980. SFI's parent companies as sole stockholders of the common stock of SFI, have covenantai
. and agreed, severally, in accordance with their respective shares of ownership of SFI's common stock, that they will take any and all action necessary to keep SFI in a sound Snancial condition and to place SFI in a position to discharge, and to cause SFI to discharge, its obligations under this arrangement.
Based upon the scheduled completion dates and planned fuel cycles for the Middle South System's
. nuclear units (including the one in service), the following tabulation shows the years through which existing contracts will provide matenals and services for the continued operation of the respective units.
! aeet er Gh= Mad t'remium Conversie is Repressmeing Commelsden i t'=====a=nes HemaAmeride Earteement Fahrtendes 't) _ Dese ANO No. 1 . . . . . . . . . . . . . . . . . . . -{2) 1994 2001 1994 1974 l ANO No. 2 . . . . . . . . . . . . . . . . . . . -(2) 1994 2001 1990 1978 Waterford No. 3 . . . . . . . . . . . . . . . 1985 1983 2007 1991 1982 Grand Gulf No.1. . . . . . . . . . . . . . 1983 1983 2008 1985 1982 Grand Gulf No. 2 . . . . . . . . . . . . . . 1984 1984 2010 1985 1985
' (1) It is the Company's unders*==d'"E that no contractor is presently available in the United States who is able and withng to supply this service for the nuclear fue! involved. In the event reprocessas services do not become avadable at the time required, which is not earher than 1985, additional arrangements will be
====ary for the storage of spent fuel, the extent and cost of which cannot at this time be predicted. If the apa8=hty of full core discharge is not reeasaad then reprocessmg or disposal services or additional storage capacity would not be needed until at least 1988. (See Note 12 to Financial Statements and " Rate Matters-AP&L".)
(2) Under its existing contraca AP&L acquires uranium converted to hemmenonde directly from the vendor. 23 l l
Additional arrangements for segments of the nuclear fuel supply assembly process beyond the dates shown above will be required. At this time % Middle South Syste n cannot predict the ultimate availability or cost thereof, which will probably be higher thac existing costs. Natural Gas Purchased for Resale Associated and NOPSI obtain deliveries of natural gss for resale from various natural gas pipeline companies. Such deliveries of natural gas are subject to curtadments. As a result of shortages of natural gas for resale, Assoctated has had some reduction of gas service to interruptible and certain industrial customers. Associated and NOPSI have also experienced increases in the cost of gas purchased for resale. Gas rate schedules for these companies include adjustment clauses for changes in the cost of gas purchased for resale. During the year ended December 31, 1979, natural gas entitlements, subject to curtailment, of Associated amounted to approxirrately 18.0 billion cubic feet. Actual curtailments during this period amounted to approximately 2.8 billion cubic feet. It was estimated at March 1,1980, that curtailments for the year ending December 31,1980 based on the same contract entitlements, will amount to 2.6 billion cubic feet. NOPSI's principal supplier of natural gas for resale is United. On January 31,1975, NOPSI entered into a service agreement with United extending its contract for the purchase of gas for resale from June 1,1975 to June 1,1985. The annual base requirement for resale gas from United is approximately 37.2 billion cubic feet. As a result of curtailment by United during the year ended December 31,1979, NOPSI was allocated 33.2 billion cubic feet of gas for resale. NOPSI and Associated anticipate as of March 1,1980, that they will be able to obtain an adequate supply of gas to meet the requirements of their " Human Needs" customers. The ability of NOPSI and Associated to serve their industrial customers in the future may be affected by Federal energy legislation enacted in 1978, the severity of future winters and decisions by regulatory and judicial bodies. Because of United's inabi'ity to serve NOPSI's entire requirements, NOPSI has contracted for supplementary supplies of intrastate natural gas to lessen the possibility of having to curtail deliveries to its natural gas customers. Research The Middle South System is a member of the EPRI and is actively supporting this effort. The Middle i South System and EPRI are working cooperatively with the Federal govmtment on. segments of the energy f research and development needs of the nation. 1 l MSS is one of three companies selected nationwide by the ERDA to design an experimental energy storage system. If proven economically practical, it would ultimately reduce energy costs and oil consumption by stering compressed air in underground caverns for later use in producing electricity. 'Ihe compressed air energy storage system would use ex:ess power available during times of low customer demand, to pump r.ir, under pressure, into a large und:rgr ound cavity. During high demand periods the air would be released, then heated by burning about one-thirt. the amount of oil normally needed for driving a turbine to generate a like amount of electricity. MSS' desi m will use as the storage facility one of the many salt domes that underlie much of Louisiana and Mississipp . The design si te location will depend on a number of factors, including its proximity to existing electric transr mission facilities. The design of the project began in late 1977 with completion estimated by mid 1980. When t he evaluation is finished, the technical, geological, economic and environmental information will help MSS, ILPRI, and the DOE determine whether the project should be built. For the ycars 1978,1979 and 1980, the Middle South System has contributed or has a commitment to contribute approximately 57.1, 58.0 and 59.1 million respectively, for the various research programs in which the Middle South System is involved. 24
l REGULATION AND LITIGATION HoldingCompany Act
- The Company is a registered public utility holding company, subject to the broad regulatory provisions of the Holding Company Act. Section ll(b)(1) of the Holding Company Act limits the operations of a registered holding company system to a single integrated public utility system, plus additional systems and businesses a restricted by that Section. On March 20,1953, the SEC issued an order and an accompanying opinion which, among other things, (i) found that the electric properties of the Middle South System constitute an integrated electric utility system; (ii) ordered AP&L, LP&L and MP&L to dispose of their non-electric utility properties; (iii) stated that, in yhw of the uniAed operations under which electric, gas and transit properties are operated in New Orleans, and in view of the expressed strong desire of the City of New ! Orleans for continued uni 6ed operation, the SEC did not then propose to take any action regarding gas and transit properties of NOPSI; and (iv) released the jurisdiction which had been reserved over problems under Section ll(b)(1) of the Act. The disposition of non-electric utility propertiet required by such order was l completed in October 1960.
On May 5,1971, the SEC issued its 6ndings and opinion, and an xcompanying order under the Holding
; Company Act which, among other things, (i) approved the proposal of the Company to acquire the common stock of Ark-Mo from the holders thereof by ofering in exchange therefor Common Stock of the Company and (ii) ordered the Company to dispose of any direct or indirect interests in the gas properties of Ark-Mo and its subsidiary, Associated.
On April 25, 1973, the SEC issued its Memorandum Opinion and Order approving Ark-Mo's application for exemption from Rule 50 in connection with divestiture of its gas properties and denying a request for a hearing. After unsuccessful efforts to sell its entire natural gas business, in September 1976, Ark-Mo and Associated Sled an application with the SEC under the Holding Company Act requesting authority , 1 < for a program to reorganize the natural gas business of the two companies whereby Ark Mo would transfer '
- all ofits gas properties to Associated. Such a transfer would consolidate in one corporate entity gas properties which, with the exception of isolated operations of Associated, are already operated as an integrated system and would enable Associated, as an expanded gas corporation, to establish an operating record which could provide a basis for developing a plan for the eventual disposition of seutrities of Associated held by Ark-Mo.
Ark-Mo received an order from the SEC on May 2,1978 permitting the reorganization ofits gas properties and Ark-Mo subsequently transferred its gas properties to Associated on May 12,1978. j On March 2,1979, it was announced that,in the interest ofincreased economic efilciency, Ark Mo and i AP&L wi,l jointly begin developing a plan to consolidate their electric operations. Under the proposed arrangement, subject to the receipt of necessary regulatory approvals, Ark-Mo would become a division of AP&L, while Ark Mo's subsidiary, Associated, would become a subsidiary of AP&L. Applications for approval of this transaction have been Sled with the APSC, the Tennessee Public Service Ct==i=mion, the PSCM and the SEC under the Holding Company Act. Due to the continued Anancial burder. placed on NOPSI and its electric and gas customers by its transit operations, on July 15,1976, NOPSI Aled with the SEC an application for approval of a plan for divestiture of its transit properties to enable it to comfy with the standards prescribed by the Holding Company Act. The City of New Orleans Aled with the SEC a memorandum of law in opposition to NOPSI's application, and three citizens' groups requested that the Si'.C hold a hearing and that they be allowed to participate. The matter is pending before the SEC. By letter dated July 15,1976, NOPSI not:6ed the Couned that (i) it was surrendering its Indeterminate Transit Permits and Temporary Transit Franchise; (ii) it would discontinue transit operation at the earliest pre-hl- time but in no event later than nudmght, December 31,1976; (iii) it was tendering its transit properties to the City of New Orleans pursuant to the option to purchase contamed in the Indeterminate 25
Transat Permits and Te=porary Transat Franchise and (iv) in the esent the Oty c(New Orleans d:4 not, pr or to midnight. December 31.1976. exerc:se :ts opt:en and purchase NOPSPs tansat prcpernes or male other acceptable arrangements with NOPSI for the sa'e therec(to otten. NOPSI mould d:spose of the trans:t prtpernes. NOPSI contmued and centmues to opente the tnnsat system on an mter:m bans beyond Detember 31,1976 under subsady agreements with the Ot> of New Orleans for 1977,1978,1979 and 1950. Pursuant to the subsidy agreements. the Oty of New Orleans has apeed, sub)ect to cenam 1 = tanons, to make monthly payme .ts to NOPSI in such amounts as 3 hen added to cperaung resenues from the transat operation and any subsady from the combmed electne and ps cperances. 3111 preside NOPSI with an annnahrM 1.33ere rate of return on its trannt rate base. To the extent combmed electne and ps res e=ues for any month exceed the amount requ: red for NOPSI to cam an annnihrH 8.33'~< rate c(return en the rate base apphcabie to electne and gas openncos, such ea:ess ts requ: red to be apphed by NOPSI to subsa&ze the transit operanon in reducuon of the Gry's subs 2dy oenpten. The subsidy agre==e:tts for 1978,1979 and 1980 also provide for a shanng as betseen NOPSI (70"<) and the Gry (30"<) of the i.u::cial burden c( any money demges, anorneyrees court costs and/or reduction in transit fares that may u!* -atdy be suewd m er== tson with the class a.nco suit invching transat revenues collected pursuant to the trans:t fare mere 2se, efective November 14 1975. See "Regulanen and Latipuen-Other Regmbrv n and Lat:pnon' and 'NOPSI Industry Segments". State Regalation AP&L is 54ect to reguhrvo by the APSC and by the municipahnes in whrh it cperates. AP5C regulanen includes the authenty to fia rates, deter =mc reasonable and adequate semce, fx the value of property used and usefal. require preper account =g. centrei leasing, acqu2sanon er sale c(any pubhc utity plant er property consutunng an operanng unit or system. ix rates c( deprec:anen. :ssue cer bes c( ccavenience and necesszty and certi5 cates of enntenmental ecm;atabihty and pubhc need. and centrol the am=ve and sale of secunnes. AP&L is also sub)ect to regulance by the Tennessee Pubb: Semce C-k% as to standards c(servre and rates for semce to custc=ers m Ten:u:ssee. accounnng en
- of secundes and CerNScates of Cen%efdence arid necess:ty.
Ark-Mo is subject to resulanen by the APSC and the PSCM as to rates sad charges. senices, accounting, depmstsen. creperty valcanons, sale er acquis:non of unEty picpuiy iss:.ance and sale c( secunties, reormiWs and in other respecta. Assocuted is subject to regulanco as a pubbe unhty by the APSC and PScht LPAL is sub)ces to the fansdict2cn c( the LPSC as to rates and charges, standards c( senice, deprar 3r = er-ting and other matten, except in the Gry c( New Orleans shere it is reg,h*M by the Council, which has power o(local regulation. The LPSC does not exere:se junsdienen over the mmve c( secunnes by LPAL because these matters are subject to the jurdi~m of the SEC under the Ho&dsg Company Act. MPit is subject to regulanon as to senice, senice areas. f=-ihe< and rusil rates by the Mm*ppi Pubbe Semce Commi== NOPSI is subject to regulation by the Ccuncil. The ords- under wi6ch NOPSI cperates preside, among other thmgs, for the estabinht and connnuing determie of NOPSPs rate base, the rate c( return on the rate base and the rates and fares to produce such return: for the keeping c(bocks c(accccat; for an opuen to the Oty of New Orie=ns to purchase the gapmii and assets of NOPSPs electne J/cr gas and/or transit operanens at respeenve rate base values; fer the regulanco c(senices rendered end for the regulauen of the iun=ve of secunties basing aturities icoger than tsche months. 76
. . -- _ _ - . - - . ~ -_. - , ,\ REGULATION AND LITIGATION (J
Holding Company Act ; The Company is a registered public utility holding company, subject to the broad regulatory prosisions of the Holding Company Act. Section ll(b)(l) of the Holding Company Act limits the operations of a registered holding company system to a single integrated public utility system, plus additional systems and busmesses as restricted by that Section. On March 20,1953, the SEC issued an order and an accompanying opinion which, among other things, (i) found that the electric properties of the Middle South System constitute an integrated electric utility system; (ii) ordered AP&L, LP&L and MP&L to dispose of their non-electric utility properties; (iii) stated that, in view of the unified operations under which electric, gas and transit preperties are operated in New Orleans, and in view of the expressed strong desire of the City of New Orleans for continued unified operrtion, the SEC did not then propose to take any action regarding gas and transit properties of NOPSI; and (iv) released the jurisdiction which had been reserved over problems under Section ll(b)(1) of the Act. The disposition of non-electric utility properties required by such order was completed in October 1960. On May 5,1971, the SEC issued its findings and opinion, and an accompanying order under the Holding Company Act which, among other things, (i) approved the proposal of the Company to acquire the common stock of Ark Mo from the holders thereof by offering in exchange therefor Common Stock of the Compy and (ii) ordered the Company to dispose of any direct or indirect interests in the gas properties of Ark-Mo and its subsidiary, A<WatM On April 25, 1973, the SEC issued its Memorandum Opinion and Order approving Ark Mo's , application for exemption from Rule 50 in connection with divestiture of its gas properties and denying a request for a hearing. After unsuccessful efforts to sell its entire natural gas business, in September 1976, Ark-f
' Mo a6ad Associated filed an application with the SEC under the Holding Company Act requesting authority
( ( for a program to reorgaruze the natural gas business of the two companies whereby Ark Mo would transfer all ofits gas properties to AsM='M Such a transfer would consolidate in one corporatt entity gas properties which, with the exception ofisolated ope ations of Associated, are already operated as an integrated system and would enable Associated, as an expanded gas corporation, to establish an operating record which could provide a basis for developing a plan for the eventual disposition of securities of Associated held by Ark-Mo. Ark Mo received an order from the SEC on May 2,1978 permitting the reorgamzation ofits gas properties and Ark Mo subsequently transferred its gas properties to Associated on May 12, 1978. On March 2,1979, it was announced that, in the interest ofincreased economic ef5ciency, Ark-Mo at d AP&L will jointly begin developing a plan to consolidate their electric operations. Under the propond arrangement, subject to the receipt of neaury regulatory approvals, Ark-Mo would become a division of AP&L, while Ark Mo's subsidsary, Associated, would become a subsidiary of AP&L Applications for approval of this transaction have been filed with the APSC, the Tennessee Public Service Commission, the PSCM sad the W under the Holding Company Act. I Due to the continued financial burden placed on NOPSI and its electric and gas customers by its transit operations, on July 15,1976, NOPSI filed with the SEC an application for approval of a plan for divestiture of its transit properties to enable it to comply with the standards prescribed by the Holding Company Act. i The City of New Orleans filed with the SEC a memorandum oflaw in opposition to NOPSI's application, and three citizens' groups requested that the SEC hold a hearing and that they be allowed to participate. The matter is pend:ng before the SEC. By letter dated July 15,1976. NOPSI nortfied the Council that (i) it was surrendering its Indeternunate Transit Permits and Temporary Transit Fru hise; (ii) it would discontinue transit operation at the earliest pranW time but in no event later than midnight, December 31,1976; (iii) it was tendering its transit properties to the City of New Orleans pursuant to the option to purchase contained in the Indetermmate N)
Transit Permits and Tempora;y Transit Fram hise and (iv) in the event the City of New Orleans did not, prior to midnight, December 31,1976, exercise its option and purchase NOPSI's transit properties or make other acceptable arrangements with NOPSI for the sale thereof to others, NOPSI would dispose of the transit propenies. NOPSI continued and contmues to operate the transit system on an interim basis beyond December 31,1976 under subsidy agreements with the City of New Orleans for 1977,1978,1979 and 1980. Pursuant to the subsidy agreements, the City of New Orleans has agreed, subject to censin limitations, to make monthly payments to NOPSI in such amounts as, when added to operating revenues from the transit operation and any subsidy from the combined electric and gas operations, will provide NOPSI with an annualized 8.33% rate of return on its transit rate base. To the extent combined electric and gas revenues for any month exceed the amount required for NOPSI to earn an annualized 8.339e rate of return on the rate base applicable to electric and gas operations, such excess is required to be applied by NOPSI to subsidize the transit operation in reduction of the City's subsidy obligation. The subsidy agreements for 1978,1979 and 1980 also provide for a sharing as between NOPSI (70%) and the City (30fe) of the financial burden of any money damages, attorney fees, court costs and/or reduction in transit fares that may ultimately be assessed in connection with the class acnon suit involving transit revenues collected pursuant to the transit fare increase, effective November 14, 1975. See " Regulation and Litigation-Other Regulation and Litigation" and "NOPSI Industry Segments". State Regulation AP&L is subject to regulation by the APSC and by the municipalities in which it operates. APSC regulation includes the authority to fix rates, determine reasonable and adequate service, fix the value of property used and useful, require proper accounting, control leasing, acquisition or sale of any public utility plant or property constituting an operating unit or system, fix rates of depreciation, issue certi5eates of convenience und necessity and certificates of environmental compatability and public need, and co trol the issuance and sale of securities. AP&L is also subject to regulation by the Tennessee Public Senice Commission as to standards of service and rates for service to customers in Tennessee, accounting. issuance of secunties and cenificates of convenience and necessity. Ark-Mo is subject to regulation by the APSC and the PSCM as to rates and charges, services, accounting, depreciation, property valuations, sale or acquisition of utility property, issuance and sale of securities, reorganizations and in other respects. Associated is subject to regulation as a public utility by the APSC and PSCM. LP&L is subject to the jurisdiction of the LPSC as to rates and charges, standards of service, depreciation, accounting and other matters, except in the City of New Orleans where it is regulated by the Council, which has power of local regulation. The LPSC does not exercise jurisdiction over the issuance of securities by LPAL because these matters are subject to the jurisdiction of the SEC under the Holding Company Act. MP&L is subject to regulation as to service, service areas, facilities and retail rates by the Mississippi Public Service Commission. NOPSI is subject to regulation by the Council. The ordinances under which NOPSI operates provide, among other things, for the establishment and continuing determination of NOPSI's rate base, the rate of return on the rate base and the rates and fares to produce such return; for the keeping of books of account; for an option to the City of New Orleans to purchase the property and assets of NOPSI's electric and/or gas and/or transit operations at respective rate base values; for the regulation of senices rendered and for the regulation of the issuance of securities having maturities longer thar twelve moi chs. 26 i i
Franchines AP&L, LP&L and Ark Mo hold franchises to provide electric senice in a total of 258,114 and 65 incorporated cities and towns, respectively. Associated holds franchises to provide gas senice in 72 incorporated cities and towns. NOPSI holds indet:rminate permits a .d a temporary franchise to provide electric, gas c. ' i.ansit service in the incorporated City of New Orleans. In addition AP&L provides electric service in 7 communities in which franchises are not required. LP&L supplies electric service in 403 unincorporated communities, all of which are located in p eishes (counties) from which LP&L holds franchises to serve the areas in which the respective umacsjorated communities are located. MP&L has received from the Mississippi Public Senice Commission certificates of public convenience and necessity to provide electric service to the areas of Mississippi which MP&L serves. Ark Mo provides electric service in 18 communities and Associated provides gas senice in 19 communities in which franchises are not required. Federal Power Act The System operating companies are subject to regulatory jurisdiction under the Federal Power Act, administered by the FERC and the DOE, over, among other things, the licensing of certam hydroelectric projects, the business of and facilities for the transmission and sale at wholesale of electric energy in interstate commerce and wtain other activities of the System operating companies as interstate electric utilities, including accounting policies and practices. AP&L held a license for two hydroelectric projects (69 MW) which expired February 6,1973. On February 4,1970, AP&L filed with the FPC an application, which is still pending before the FERC, for a new long-term license for the projects. Under FERC regulations, annual licenses are issued pending the ultima's disposition of the application for the new long-term license. p1 > Nataral Gas Act Associated is subject to provisions of the Natural Gas Act, as administered by the FERC and the DOE, since certain of its 'ransmission lines, serving various parts of its distribution system. cross the Arkansas. Missouri state line Pegulatory jurisdiction under the Natural Gas Act relates to the construction and operation of facilities used in the transportation of natural gas in interstate commerce, the sale of natural g .s in interstate commerce for resale for ultimate public consumption, and the abandonment of either transportation facilities or the sale of natural gas for resale. Environmental Regulation The System operating companies are subject to air and water regulation by various Federal and state authorities. In meeting environmental protection standards the Middle South System is incurring increased costs of construction and operation. Regulations on environmental matters are continuously subjet to change and it is impossible to know what their ultimate cost to the Middle South System will be ta the future. MSU, however, estimated as of March 1,1980, that the Middle South System will make apital expenditures for environmental control purposes during 1980,1981 and 1982 in the approximate amounts of 561.6 million, 544.1 million and 547.1 million, respectively. Air Quality Under the Clean Air Act as amended through 1970, the EPA was required to estat,'ish Ambient Air Standards for certain air pollutants and to establish New Source Standards for all new facilities emitting such air pollutants. It also provided a framework for the states to establish air emission standards for existing sources in order to achieve the Ambient Air Standards. The States of Arkansas Louisiana, Mississippi and Missouri adopted State Plans, including regulations to meet Ambient Air Standards, as applicable, which were approved, subject to certam exceptions, by the EPA pursuant to the Clean Air Act, as amended through 1970. The States have' submitted, in part, resisions f ( \ C/ 27 i
to their State Plans as required by the 1977 Gean Air Act Amendments. It is not possible at this time to determine what ef!'ect, if any, these revisions may hase on the Middle South System over and abose the basic e!Tects of the Cean Air Act Amendments of 1977 and the EPA rulemaking activity theteunder. The Cean Air Act Amendments of 1977 iequire that the states review and revise, as appropriate, certain elements of their State Plans; that the Administrator of the EPA promulgate revised New Source Standards; and that State Plans contain emission limitations and such other measures as may be necessary to prevent signi5 cant deterioration of air quality in accordance with maximum allowable increases of sulfur oxides and , particulates. Oc June 19, 1978, the EPA promulgated its regulations for the presention of significant deterioration of tir quality. A group of utilities, including the System operating companies, petitioned for judicial review oicertain portions of the regulations to the United States Court of Appeals for the District of Columbia Circuit. On December 14, 1979, the Court issued its dee;sion requiring the EPA to propose and promulgate reved regulations. The EPA has also promulgated final regulations on New Source Str sdards. The System operating companies, as members of the same group of utilities referred to above, have petitioned for judicial review of these regulations to the United States Court of Appeals for the District of Columbia Circuit and have also petitioned the EPA to reconsider them. On January 30,19S0, the petition for reconsideration was denied by the EPA. At present a petition to review the EPA's denial has been consolidated with the petition for judicial review pending before tiu Court. Given the complexities and the uncertainties of the litigation and rulemaking stemming from the EPA's implementation of the 1977 Gean Air Act Amendments, the System operating companies cannot at this time predict the final outcome thereof, although adverse decisions and/or regulations could necessitate the expenditure of substantial additional funds for pollution control equipment. Each of the System operating companies believes that the operation of its existing plants is generally meeting applicable emission regulations and ambir.a air quality standards and that such plants will continue to do so. NCPSI has experienud some problems with the opacity of its emissions, and these have been reported to the appropriate state agency which has taken no formal action against NOPSI. To assist in the conval of the problem of opacity, NOPSI is in the process of installing new opacity monitors on those gtnerating units using signi5 cant quantities of oil as a boiler fuel. These monitors should provide the operational control necessary to keep the opacity lesels in compliance. On March- 21,19 79, the EPA published its proposal for " Assessment and Collection of Penalties for Noncompliance" pursuant to the requirement of Section 120 of the 1977 Clear Air Act Amendments. The System operating companies are unable to assess, at this time, the full implications of this proposal without speciSc knowledge concerning the EPA's method of determining unit or facilities noncompliance. However, the " Update of Power Plants Potentially Subject to Section 120 Noncompliance Penalties; Availability" issued by the EPA under the date of July 27,1979 does not name any of the System operating companies. Water Qualityr The FWPCA discontinued the discharge permit system of the Army Corps of Engineers under the Refuse Act of March 3,1899 and established the NPDES. Pursuant to the FWPCA, in October 1974, the EPA promulgated effluent limitations and guidelines for certain existing and future steam pos,er generating plants. A group of utilities, including the System operating companies, appealed certam portions of the regulations to appropriate United States Courts of Appeal. The appcals were consolidated in the United States Court of Appeals for the Fourth Circuit, which rendered an opinion July 16,1976 remanding a significant portion of the regulations to the EPA for futther consideration. If, as a result of the EPA limitations and guidelines, the System operating companies should be required to install closed cycle cooling systems at certain existing steam electric generating stations, substantial additional expenditures would be involved. The System operating companies currently have requisite NPDES permits for all major existing generating stations. Permits for these generating stations have also been issued by the applicable state authorities. The System operating companies' NPDES permits are subject to renegotiation in accordance with Federal regulations. The System operating companies' NPDES permits will be subject to revision in late 1980 in accordance with the Cean Water Act Amendments of 1977. These Amendments, in concert with 28
l ongoing programs instituted under the FWPCA, have raised a variety of issues concerning toxic and hazardous substances. At the time of permit renewal, substantial new requirements concerning these matters could be incorporated into the NPDES permits under new NPDES regulations. Compliance with these requirements could entail increases in expenditures for pollution control equipment and sampling or monitoring procedures in amounts not presently determinable. A group of utilities, including the System operating companies, have appealed certain portions of the new NPDES regulations to the United States l District Court for the Western District of Virginia and to appropriate United States Court of Appeals where j the matter is pending. LP&L, in common, it understands, with many other electric utilities, was not able to meet the July 1, 1977 deadline for applying the "best practicable control technology currently available" to effluent discharges from existing plants, but pollution control facilities necessary to meet these standards have now been constructed at all major generating stations and (although not yet accepted from the contracter as completed) are operational and are substantially meeting these standards. These pollution control projects have also required LP&L to obtain, and LP&L has obtained, amendments to its above-mentioned NPDES permits. LP&L's inability to meet the above-mentioned July 1,1977 deadline could subject it to claims for l'- Snes which, if imposed, might in the aggregate be substantial. On November 17, 1978, LP&L filed applications with the EPA for variances from, or alternatively for extensions of the deadline for, the July 1, 1977 standards with respect to its four major generating stations. On June 7,1979, the EPA advised LP&L, with respect to the applications relating to two of these stations, that it would be more appropriate for LP&L to apply for an extension than for a variance. These two extensions were applied for by LP&L and granted by the EPA for the period to April 1,1979, and LP&L believes that it effected timely compliance with such extension orders. LP&L has heard nothing from the EPA with regard to its applications relating to the other two stations. LP&L has made and filed with the EPA a study with respect to compliance under state and Federallaws and regulations dealing with environmental matters of the generating facilities of four of the five l municipalities which LP&L is now operating, and has commenced such a study with regard to the fifth, i I which LP&L has begun to operate more recently. (/ Facilities have been constructed at the System operating companies' steam electric stations which permit treating water and bringing discharges from these stations into compliance with the NPDES regulations. In accordance with permit conditions, the System operating companies have reported instances of non-compliance to the EPA. In March 1979, the National Wildlife Federation filed suit in the U.S. District Court for the District of Columbia against the EPA to force the agency to require NPDES permits for spillway discharge from dams and turbine discharges in the case of hydroelectric dams. The System operating companies, as members of a utilities group, have intervened in the suit. The suit is presently at the discovery stage, and responses to the l plaintiffs Srst set ofinterrogatories have been Sled by the System operating companies. AP&L is the only System operating company that would be affected by a ruling finding for the National Wildlife Federation. It is not known, at this time, what economic effects, if any, would occur as the result of an NPDES permit requirement being applied to AP&L's two hydroelectric facilities. NOPSI has been experiencmg certam water pollution control problems at its transit motor coach garage I and maintenance facilities relating to the discharge of oil and certain other wastes which could subject it to clauns for Enes and penalties in amounts not presently determinable. Studies are being made to determine what steps, including the effecting of revised operating procedures and capital expenditures, must be taken to i control the subject discharges beyond those measures which NOPSI has already implemented. The Sewerage and Water Board of New Orleans is aware of certain oil discharges at one facility and has directed that the situation be corrected. To correct this situation, revised operating procedures have been instituted at this location. Hazardous Materials; The EPA's poly,hlorinated biphenyl regulations recently promulgated under the authority of the Toxic Substances Control Act will require additional expenditure of funds for the marking, . I 29 y f
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handling, storage, transportation and disposal of this substance, which is characteristically found in some previously installed capacitors and transformers. However, the resultant costs are expected to be distnbuted over a substantial period of time in the course of phasing out the use of polychlorinated biphenyls. In addition, the System operating companies were required to implement procedures for the handhng, transportation and disposal of polychlorinated biphenyls pursuant to these regulations. Conformance to these procedures will effectively minimize the possibility of the inadvertent release of polychlorinated biphenyls to the environment, which could result in substantial Snes. A group of utilities, including the System operating companies, have intervened on behalf of the EPA in a suit filed by the Environmental Defense Fund seeking review of the final polychlo:inated b phenyl regulati ns. Pursuant to the Resource Conservation and Recovery Act, the EPA has proposed regulations for the ! management of certain hazardous wastes. Estimates of costs associated with compliance must, however, l await promulgation of final regulations as the status of utility wastes as a special waste is still uncertain. The S:ste of Louisiana has implemented a hazardous waste program that is generally consistent with that proposed by the EPA. Plans for compliance with state regulations have been formulated by LP&L and NOPSI, but costs can not now be predicted. The States of Arkansas and Mississippi are formulating hazardous waste programs that will be generally consistent with that propose ' by the EPA. Plans for compliance will be made once state regulation < are finalized. Therefore, costs can not new be predicted. Atomic Energy Act of 1954 and Energy Reorganization Act of 1974 The Atomic Energy Act of 1954, as amended, vested broad jurisdiction in the A EC over the construction and operation of nuclear reactors, particularly with regard to public health and safety and antitrust matters. Under the terms of the Energy Reorgamzation Act of 1974, effective January 19,1975, the AEC was abolished, its general licensing and regulatory jurisdiction was assumed by the NRC, and its general research functions were assumed by the ERDA. As the owner and operator of ANO, AP&L is subject to such jurisdiction. ANO No. I began commercial operation December 19,1974. Its nuclear reactor was supplied by Babcock & Wilcox Company and is similar to the Unit 2 reactor at the Three Mile Island nuclear power station. Pursuant to an agreement with the NRC, AP&L has made certam modificatiorn to the Unit and has agreed to make further modifications, certain of which were made in January 1980. Additioaal modifications are expected to be made during the refueling outage in early 1981. While the modifications were being made in January 1980 AP&L inspected one of two low pressure turbine rotors of ANO No.1. It discovered cracks in two of the disks which hold the blades on the rotor. These cracked disks were removed and ANO No.1 is being operated with a 13% reduction in capacity. The turbine rotor will be replaced during the early 1981 refueling outage. The construction permit for ANO No. 2 was issued on December 6,1972. The engineering and construction for ANO No. 2 is being performed by Bechtel Power Corporation. The turbine-generator was supplied by General Ele:tric Company and the nuclear reactor was supplied by Combustion Engineering, Inc. An gerating license for ANO No. 2 authorizing fuel loading, testing and full operation was issued by the NRC in the summer of 1978. Fuel loading was completed in July of 1978 and testing was started shortly thereafter. Testing revealed various repairs, replacements arx! adjustments which would be necessary prior to the Unit's acceptance for commercial operation. The time required for these repairs, replacements and adjustre nts has been substantial In February 1980, a shaft in one of the auxiliary power diesel generators broke. A new shaft has been installed. Pursuant to an agreement with the NRC, AP&L has made certain modifications to the Unit, and has agreed to make further modifications, some of which are expected to be made at the end of 1980. The full extent of additioral modifi~c- ions, if any, which may be required at ANO 30
and the cost thereof are not known at this time. Commercial operation of ANO No. 2 is expected to occur in the Srst quarter of 1980. LP&L, as owner and prospective operator of Waterford No. 3, is subject to the jurisdiction of the NRC. LP&L's application for the necessary permit and license to construct the Umt was filed with the AEC on December 31,1970. After hearings with respect to certain interventions, and after LP&L, in connection with the question whether its construction and operation of the Ursit would create or maintain a situation inconsistent with the antitrust laws, and for the purpose of maintaining competitive conditions, had accepted licensing conditions relating principally to reserve-sharing coordination, bulk power supply, access to nuclear generation and transmission service, the AEC issued a construction permit for the Unit on November 14, 1974. Construction of the Unit is proceedmg under the permit. On September 29,1978, LP&L Sled with the NRC an application for the necessary operating license for the Unit which will permit the loaoing of fuel scheduled to begin in September of 1981. Recent statements by NRC officials indicate that there may be delays in licensing all nuclear reactors. Petitions for leave to intervene in the operating license proceeding have been Sled by Oystershell Alliance. Inc., Save Our Wetlands, Inc. and by Louisiana Consumer's League, Inc. In general, these petitions ask that LP&L's application be disapproved or, if approved, that it be approved subject to additional safeguards. LP&L has answered and intends to oppose these petitions. The application is pending. MSE, as owner, and MP&L, as prospective operator, of the two units at the Grand Gulf Plant are subject to the jurisdiction of the NRC. The application with the AEC for the requisite construction permits was Sled on November 17, 1972. The Department of Justice accepted MP&L's and MSE's commitments, including those relating to interconnection, reserve-sharing and coordinated development with other systems; transmission for other systems; and wholesale power sales or the sale cf an undivided interest in the Grand Gulf Plant to other systems, and recommended that no antitrust hearing would be necessary on MP&L's and MSE's application if such commitments were imposed by the AEC as orvating license conditions for the Grand Gulf Plant. On September 4,1974, the AEC issued construction ermits t'or the two units containing O' such conditions. MP&L and MSE's joint application for operating licenses for Unit Nos. I and 2 was docketed for review by the NRC on June 30,1978. The first unit was scheduled for commercial operation in 1981 and the second unit in 1984. Cusunmi.I operation of the two unics is dependent, among other things, upon the receipt of operating hcenses from the NRC, Recent statements by NRC officials indicate there may be delays in licensing all nuclear reactors. In view of this, MSE has reviewed its schedule for testing and completion of the units and, as a result of the anticipated delays in licensmg and by delaying expenditures on the second unit, has changed the scheduled commercial operation dates to 1982 and 1985 for the nrst unit and the second unit, respectively. Under antitrust conditions in the construction permits issued by the AEC for the Grand Gulf Plant, MSE was obligated to offer an opportunity to participate in the Grand Gulf Plant to entities in a de6ned area of Western Miniuippi through ownership of a portion of the Plant or a contractual right to purchase a portion of the output of the Plant. Several entities expressed an interest in participating in the ownership of the Grand Gulf Plant, and MSE is currently conducting negotiations with SMEPA for the acquisition of a 10% undivided ownership im vt in the Grand Gulf Plant by SMEPA. SMEPA would become responsible for 10% of the cost of construction o'the Grand Gulf Plant and upon completion of the Grand Gulf Plant. SMEPA would be entitled to 10% of the energy from, and liable for 10% of the operating costs of, the Plant. Another entity, MEAM, has asked, among other things, to be offered an ownership interest of at lost 2.48% in the Grand Gulf Plant. The request for participation was rejected on the grounds of not being timely
-der the antitrust conditions referred to above. MEAM has asked the NRC to commence proceedmgs to l
require MSE and MP&L to offer MEAM a participation in the Granul Gulf Plant and to require MP&L to comply with the antitrust conditions relating to interconnection and coordination of reserves and wheeling of bulk power. The United States Department of Justice has advised the NRC that it supports MEAM's request that a hearms be heki to determine whether such antitrust conditions have been violated. The matter is ! presently pendmg befon the NRC.
' 31
The Price-Anderson Act limits the public liability of a licensee of a nuclear power plant to 5560,000,000 for a single nuclear incident, which amount is to be covered by private insurance and indemnity agreements with the NRC. Insurance for this exposure for the Middle South System companies which are licensees has been or will be provided by purchasing private insurance in the maximum available amount of $160,000,000 and the remainder is, or will be provided by a combination of retrospective assessments and, if necessary, such indemnity agreements with the NRC. Effective August 1,1977, as part of a program to phase out the government indemnity, every licensee of a nuclear power plant became obligated in the event of a nuclear incident involving any commercial nuclear facility in the United States that results in damages in excess of the private insurance, to pay retrospective assessments of up to $5,000,000 for each licensed reactor operated by it and, in the event of more than one such incident, up to M,0vu,vuu in av calendar year for such reactor. The government indemnity will be reduced by 6 aggregate amount of all such assessments payable. Other Regulation and Litigation To supply Reynolds' Patterson Reduction Plant with power and energy, Reynolds, the United States of America, acting through the Secretary of the Interior, ud AP&L entered into an agreement dated January 29, 1952. This agreement, as amended, extends to December 31, 1983, with Reynolds having the right to cancel after 15 years from the date of commencement of service on one year's prior written notice, and provides that the Department of the Interior will caus: SPA to deliver to AP&L 150,000 KW and not less than 360,000,000 KWH per year and AP&L will in turn deliver to Reynolds 110,000 KW and the equivalent of the aforesaid 360,000,000 KWH annually. In April 1979, SPA notified AP&L of an increase in rates higher than that provided for in this agreement. On May 8,1979, AP&L and Reynolds filed an action in the United States District Court in the District of Columbia for a declaratory judgment that the proposed rate increase is unlawful. DOE and SPA filed an answer claiming the right to increase the rates and charges. In addition, on May 16,1979, AP&L and Reynolds petitioned to intervene in the proceeding pending before the FERC for final confirmation and approval by the FERC of the increased SPA rates. On August 28,1979, a suit was filed against LP&L in the United States District Court for the Eastern District of Louisiana by The Waldinger Corporation alleging that it had contracted to do the heating, ventilating and air conditioning work on Waterford No. 3 and that during the course of the work LP&L had j breached the contract by terminating Waldinger's right to perform further work thereunder, and making claim for $20,092,050.51, costs, interest, and such other relief as the Court might consider proper. The
$20,092,050.51 consists of a claim for punitive damages of not less than $10,000,000, damage to reputation and loss of prospective business in the amount of $7,000,000, withheld amounts allegedly due under the contract totalling 572C,;35.51, reimbursement allegedly due under the contract for certain home office overhead costs in the amount of 51,670,000, tools and equipment allegedly misappropriated allegedly having a reasonable value of $351,815, and the cost of developing proprietary informa'mn .nd trade secrets furrisacd to LP&L in the amount of not less than $350,000. LP&L intends to deny
- oility and defend the suit vigorously. In the opinion of General Counsel for LP&L, (a) the claims for punitive damages of not less I
than $10,000,000 and dan Sge to reputation and loss of prospective business in the amount of $7,000,30 ue i without merit and will be msuccessful if and when proceeded with to final judgment, and (b) the other claims are of such nature the it will be necessary for the litigation to progress further before such General Counse; will be in a position to reach an opinion with respect thereto. On the same date, A ugust 28,1979, LP&L filed suit against Waldinger in the same Court claiming $21,250,000 in liquidated damages plus an unestimated additional amount of unliquidated claims, interest, costs and attorneys' fees resulting fror's Waldinger's failure to perform its commitments under the contract. The matters are pending. On September 5,1974, LP&L filed suit in Civil District Court for the Parish of Orleans, State of Louisiana, against United and Pennzoil Company, alleging breach of gas supply contracts, tortious conduct, and violations of Louisiana antitrust laws, and seeking compensatory damages in the amount of 5182,904,607 l ! (of which 555,639,457 is for the increased cost for rcplacement fuel through June 1974), trebled to
$548,713,821. On the same date LP&L filed with the LPSC a petition for a declaratory order providing a method whereby that part of the damages recovered from United in such suit attributable to increased cost of fuel passed through to LP&L's customers under fuel adjustment clauses would be made available to 32
I f us,tomers who receive service under the jurisdictional authority of the LPSC, less an appropriate portion of the costs of recovery. Discovery procedures are under way and the suit is pending in the state court. l LP&L has been named as one of the defendants in a class action which was filed in the United States District Court for the Southern District of Texas on or about August iI,1975 against Petrofunds, Inc. and l numerous other defendants arising out of investments by plaintifs in certain oil and gas drilling funds. The alleged mvolvement of LP&L is based upon a long. term ga, purchase contract or contracts entered into by LP&L with one of the other defendants, Louisiana Gas Purchasing Corporation. The suit is based upon alleged frauduleat violations of the securities laws, common law actions of fraud, breach of contract and of 6duciary duties, tortious conspiracy, conversion and other matters; alleges, in connection with the contract or contracts, that LP&L knowingly conspired with certain defendants to implement a fraudulent scheme to deprive the plaintifs of pro 6ts to which they were allegedly entitled; and, insofar as LP&L is concerned, seeks judgment for damages against LP&L and certain other defendants, jointly and severally, in the sum of
$200,000,000 or such lesser or greater sum as may be found upon trial, or alternatively, the setting aside of the contract or contracts, together with actual damages for the "true excess" market value of gas so far purchased by LP&L ("true excess" apparently muning the diference between mariu value and either what the plaintifs received or what LP&L paid), and " exemplary damages in the sum af Ten Million Dollars (510,000,000) against all defendants involved or participating in the fraudulent or tortious conduct" (which would, under the allegations of the suit, include LP&L). LP&L moved to dismiss the suit as to it for lack of
- jurisdiction. Following discovery on the question of the entitlement of the plaintifs to have the suit certined by the Court as a class action, the Court, on June 12, 1978, rendered an order certifying the suit, at least provisionally, as a class action and ordering that discovery on the merits be proceeded with. On June 25, +
1979, the Court orally denied LP&L's motion to dismiss. In the opinion of General Counsel for LP&L, the l suit is without merit as against LP&L and will be unsuccessful as against LP&L if and when proceeded with to Analjudgment. On October 31,1978, a suit was Aled agamst LP&L in the Civil District Court for the Parish of Orleans, l State of Louisiana, by Save Our Wetlands, Inc., seeking a declaratory judgment decreeing LP&L's Waterford ( No. 3 to be a nuisance, apparently on the basis that it will (allegedly) endanger the safety of the public, and an injunction to prevent LP&L from proceeding with the construction of such Unit. On November 17,1978, LP&L Aled a declinatory exception directed at the insufficiency of service of process upon it. In addition, on April 2,1979, a mandamus suit (to which LP&L is not a party) was Sled in the same Court by Save Our Wetlands, Inc. agamst the Governor and the Attorney General of the State of Louisiana and the State itself, asking that the Governor and the Attorney General be ordered to devise an adequate evacuation plan for i~ metropolitan New Orleans in case of a " plant accident" at Waterford No. 3, and if such an evacuation plan is impossible (which plaintiff alleges it is), W these defendants be ordered to immediately enjoin the construction of Waterford No. 3. Both matters are pending. i MP&L Aled suit on August 30,1974 agamst United and Pennzeil Company in the United States District Court for the Southern District of Mississippi, for d=N= for breach cf contract and for misrepresentations made to MP&L. The suit seeks the recovery of damages from United end Pennzoil in the amount of 5160,200,000 incurred as a result of breach of a Gas Sales Agreement between United and MP&L for the l supply of up to 190,000 Mcf of gas per day for use as fuel in MP&L's Rex Brown and Baxter Wilson Steam l Electric Stations. The damages sought include: 550,000,000 ofincreased fuel and power costs which MP&L mcurred and passed on as fuel adjustment to its customers since United began curtaihng gas deliveries and through July 31,1974, winch amount MP&L seeks to refund to its customers; $67,750,000 incurred or to be mcurred by MP&L in converting its power plant facilities to use fuel oil as a primary boiler fuel and
$42,450,000 for the cost of replacing capacity lost as a result of modifying its power plant facilities to use fuel oil as a substitute fuel. A declaration of rights is also being sought covering damages accruing with respect to increased fuel and pcwer costs after July 31, 1954 and through the remaining tegn of the contract. On !
motion of the defendants, the Court on April 4,1975 stayed these prrMrigs pending certain FPC actions; and on April 21, 1977, the Court referred the matter to the FPC. The FERC (successor to the FPC) accepted some of the referred issues, which are now pending before it. 33 P
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On August 9,1974, the United States filed suit against MP&L in the United States District Court for the Southern District of Mississippi seeking (1) a determination that MP&L is a government contractor as defined by Executive Order 11246 and subject to the equal employment opportunity clause and other obligations imposed upon contractors with the Federal government pursuant to the Executive Order and (2) an order enjoining MP&L from refusing to comply with the terms and conditions imposed by Executive ! Order 11246 and implementing regulations issued thereunder. MP&L filed a motion for judgment on the pleadings and the United States responded with a motion for partial summary judgment. On April 23,1975, the District Court granted the government's motion and enjoined MP&L from refusing to comply with Executive Order 11246. On June 6,1977, the Court of Appeals for the Fifth Circuit af'irmed the opinion but vacated the injunction and remanded the case to the General Services Administration for administrative proceedings. On June 5,1978, the United States Supreme Court granted MP&L's petition for writ of certiorari, vacated the Fifth Circuit's decision, and remanded the case for further consideration. The Fifth Circuit in turn remanded the case to the District Court. MP&L has renewed its motion for summary judgment, and the United States has renewed its motion for partial summary judgment. On May 30,1979, the Distdct Court ruled against MP&L. From this order MP&L filed an appeal to the Court of Appeals for the Fifth Circuit. On July 16, 1979, the District Court stayed its judgment of May 30,1979 pending this appeal On January 30, 1979, MSE fded suit in the United States District Court, Southern District of Mississippi, against Zurn Industries, Inc. alleging breach of the contract between MSE and Zurn Industries, Inc. for the design and constructica of two natural draft cooling towers at the Grand Gulf Plant and seeking judgment for damages of $6,000,000. On March 12,1979, Zurn Industries, Inc. filed a counterclaim against MSE, Bechtel Power Corporation and, individually, forty-three insurance companies in the American Nuclear Insurers property insurance pool, which insures the cooling towers at the Grand Gulf Plant, and a third-party complaint against the insurance companies. The counterclaim and third-party complaint allege that MSE, Bechtel Power Corporation, and the insurance companies breached or caused to be breached the l contract between MSE and Zurn Industries, Inc. and committed other wrongful acts and seeks damages against the counter-defendants in the amount of $37,130,000, including damages for breach of contract and other wrongful acts. On March 14,1980, the District Court granted Zurn Industries, Inc.'s motion to amend its counterclaim against MSE and Bechtel Power Corporatio, to seek judgment for additional damages of
$5,000,000 punitive and $1,000,000 actual. The District Court further, on March 18, 1980, approved a settlement reached between the insurance companies and Zurn Industries, Inc. and dismissed with prejudice the counterclaim and third-party complaint against the insurance companies. The matter is pending.
On August 4,1977, the Metropolitan New Orleans Chapter of the Louisiana Consumers' League, Inc. and others Sled a class action suit in the Civil District Court for the Parish of Orleans against NOPSI and the Council The plaintiffs are seeking to compel the defendants to refund the increase in transit fares collected l under authority of a resolution of the Council, which resolution became effective on November 14,1975; or, l in the alternative, plaintiffs seek to compel a reduction of present transit fares for a sufficient period of time to allow transit riders to recoup the increase in fares collected under the resolution. The !aw suit results from the fact that the transit fare increase. which became effectm on November 14,1975 and, despite a judgment by the trial court that the increase was invalid, was permitted by the courts to continue in effect during the l pendency of appeals through November 7,19P, was 8~. fly held to be invalid on November 4,1977, when l the Louisiana Sepreme Court refused to review rdings oflower courts which had held that the Council had failed to follow the prescribed statutory procedures in adopting the transit fare increase and hence the increase was null and void. (On December 1,1977, the Council adopted a resolution, effective December 4, 1977, increasing the transit fare by the amount it was reduced.) NOPS: has filed responsive pleadings in the proceeding and has taken the position that the increased transit fares so collected during the period November 14,1975 through November 7,1977 were lawfully collected. On May 15,1979, the Dir-ic Cwrt granted plaintiffs
- request for a Summary Judgment against defendants and awarded the plaintiffs 55,518,990 (plus judic;al interest), which sum has been ordered to be paid through a reduction of NOPSI's transit fares by five cents for a period of two years. The Court further ordered defendants to pay plaintiffs
- attorney's fees in the amount of $100,000. Or June 20, 1979, NOPSI and the Council filed a suspensive appeal from this 34
7 l y ' i e ' l I l l l
' - Summary Judgment of the District Qurt to the Louisiana Fourth Circuit Court of Appeals. NOPSI and the Council therein allege that the Summary Judgment was improperly granted by the District Court and request
)
that the matter be returned to the District Court for a trial. Under the subsidy agreements for 1978,1979 and i 1980 with the City of New Orleans, the City would assume 30% of any ultimate liability resulting from this litigatio: See " Regulation and Litigation-Holding Company Act." On February 4,1975, the Metropolitan New Orleans Chapter of the Louisiana Consumers' League, Inc. and others 61ed a class action suit in the Civil District Court for the Parish of Orleans against NOPSI and the Council alleging, among other things, that NOPSI's fuel adjustment dause in its electric rate schedules allows it to pass irwreased costs of fuel on to its customers without required regulatory hearing. A preliminary injunction and damages in the amount of $26.2 million are being sought. On January 19,1979, the District Court refused to grant plaintift's motion for summary judgment. On December 19,1979, after trial of the case, the District Court entered a judgment in favor of both NOPSI and the Council and against l the plaintiffs. On December 27,1979, the plaintiffs filed an appeal of the District Court judgment to the l l Louisiana Fourth Circuit Court of Appeals. It is the opinion of NOPSI that Snal disposition of this matter will not have a material adverse effect upon NOPSI's Anancial position or results of operations. On January 30,1979, a class action suit was filed in Civil District Court for the Parish of Orleans against NOPSI, the City of New Orleans and the Council by two individuals on behalf of all of NOPSI's electric and gas customers alleging that the Council has allowed NOPSI to subsidize its transit operation with funds which NOPSI has received and is continuing to receive from its electric and gas customers. Plaintiffs further allege that they have never consented to nor did they have knowledge of this arrangement. A refund of all sums paid by plaintiffs to NOPSI for the subsidization of the transit operation and damages in the amount of
$1.0 billion are being sought. NO?SI Sled exceptions on April 12,1979 and the matter is pending. NOPSI
' has been advised by counsel that tased on its understanding of the facts and law, it is counsel's belief that NOPSI has substantial and merito ious defenses which will ultimately prevail. NOPSI, the Citv of New Orlears and others filed suit on July 1,1974 (amended June 8,1978) against Unikd in the CiG District Court for the Parish of Orleans, State of Louisiana, for damages for breach of contract. Petitioners also include representatives of a class consisting of all persons and organizations
' purchasing electricity from NOPSI within the City of New Orleans. The suit, as amended, seeks the recovery of damages from United in the amount of $105,187,681 incurred as a result of breach of a Gas Sales Contract between United and NOPSI for the supply of all NOPSI's natural gas requirements for the generation of electricity. Of the total amount of damages sought,543.2 million represents the increased amount of fuel costs which NOPSI incurred and passed on to its consumers of electncity through June 1,1975, since United began curtailing gas deliveries for power plant generation in April 1971. Of the remainder of the damages.
sought,562.0 million,51.2 million represents increases in gross receipt and franchise taxes paid by NOPSI due to increases in gross revenues which resulted from the above mentioned $43.2 million increa -d cost of (
- fuel being passed on to NOPSI's electric customers through the operation of the fuel adjustment clause in its electric rate schedules; $8.0 million represents expenditures up to June 1,1975 for conversion of power plants j
( to burn oil for prolonged periods and 552.8 million represents the pro 6ts NOPSI would have realized from , the generation and sale of additional quantities of electricity had United not breached its contract with l NOPSI and delivered to it the volumes of gas which United had contracted with NOPSI to deliver, but did , j j- not deliver. The defendant effected the removal of the suit from the state court to the United States District j Court for the Eastern District of LW-- Plaintiffs moved for the remand of the suit to the state court
- which was granted by the United States District Court on November 20,1974. United then filed a motion to j j
d==== on the grounds that the FPC had primary junsdiction. On February 7,1975, the state court denied the motion. On June 26,1979, the District Court demed defendants' motions for Referral of Issues to the j FERC and for stay of trial pending the outcome of such referral. The matter is pending. In May 1973, the United States of Amenca filed suit agamst NOPSI in the United States District Court ! for the Eastern District of Louisiana seeking a determmation that NOPSI is a " government contractor" as dea =d by Executive Order 11246 and is subject to the equal employment opportunity clause and other obhgatsons imposed upon contractors with the Federal government pursuant to the Executive Order. The l ' 35 j i
l l United States also sought an order requiring NOPSI to submit to a review of its records and employment practices to determine whether NOPSI meets the non. discrimination requirements prescribed by the Executive Order and requiring NOPSI to comply with its provisions. The District Court rendered a decision on November 16,1979 holding NOPSI to be a government contractor and entered an order on December 17, 1979 permitting the United States to proceed by administrati.e action to enforce NOPSI's compliance with the Executive Ordet and the rules and regulatic 'is thereunder. On December 21,1979, NOPSI filed notice of appeal with the United States Fifth Circuit Courc of Appeals where the matter is pending. NOPSI INDUSTRY SEGMEN'IS 1 Selected Financial Information Relating to Industry Segments (1) Year Ended December 31. 1979 197s 1977 1976 197s (la Boassads) Revenue from sales to unaffiliated customers (2)(3): Electric. ........ ... ..... ... . 5204,486 S181,418 5168,198 S153,169 5125,933 Natural gas . . . . . . . . . . . . . . . . . . . . 85,624 70,013 61,218 44,169 33,784 Transit . . . .................... .. 36,996 36,399 31,828 18,873 13.176 Total . . . . . . . . . . . . . . . . 5327,106 5287,830 5261,244 $172,893 5216,2 { Operating income (loss)(3): Elect rie . . . . . . . . . . . . . . . . . . . . . . . . . . . S 16,238 5 15,521 S 14,142 i 19,402 5 14,907 Natural gas . . . . . . . . . . . . . . . . . . . . . . 1,046 2,269 2,951 4,142 1,495 Transi t . . . . . . . . . . . . . . . . . . . . . . ..... 759 530 519 (6,136) (4,949) Total . . . . . . . . . . . . . . . . . . . S 18,043 5 18.320 $ 17,612 5 17,408 5 11,453 Total utility plant: Electric . . . . . . . . . . . . . ........ ... 5318,377 5308,935 $300,403 5293,646 5286,859 Natural gas . . . . . . . . . . . . . . . . . . . . . . . . 69,771 61,239 58,615 56,392 54,57"i Transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,049 21,081 19,623 19,781 19,341 ! Construction work in progress: Electric . . . . . . . . . . . . . . . . . . . . . . . . 4,638 1,251 1,534 1,063 1,431 l Natural gas . . . . . . . . . . . . . . . . . . . . 147 1,989 107 14 26 Transit . . . . ................... I 3 2 - - Total . . . . . . . . . . . . . . . . . . . . . . 5411,983 S394,498 5380,284 S370,896 5362,734 (1) Because it is impracticable to allocate interest charges and other income and deductions, the contribution to net income by type of business is not shown. l l (2) NOPSI's intersegment sales are not material (less than 1% of sales to unaffiliated customers). See Note (b) to Summaries of Operations for sales to affiliates. (3) Includes adjustment for transit subsidy. See " Regulation and Litigation-Holding Company Act" regarding the subsidy of NOPSI's transit operations by the City of Ne'w Orleans and Note (a) to Summaries of Operations concerning the reclassification of certa % revenues in 1079,1978 and 1977. Narrative Description ofIndustry Segments
- Electric Service. Electric service was supplied to 193,769 customers at December 31, 1979. During l 1979, and before giving effect to the transit subsidy,30% of electric operatmg revenues was derived from ,
l 36
residential sales, 31"- from commercial sales,13% from industrial sales,10% from sales to governmental and municipal customas,16% from sales to public utilities and from other sources. Natural Gas Service. Natural gas service was supplied to 177,136 customers at December 31, 1979. During 1979,43% of gas operating revenues was derived from residential sales,16% from commercial sales, 26% from industrial sales and 15% from sales to governmental and municipal customers. (See " Fuel Supply-Natural Gas Purchased for Resale".) Transit Service. The transit service of NOPSI consists of motor coach and electric railway services. Dunng the year ended December 31,1979, the company's transit vehicles traveled approximately 14 million miles while carrying approximately 89.2 million passengers. During 1979, the company consumed approximately 4 million gallons of diesel fuel in its transit operations and was able to obtain a sufficient supply thereof. NCDI anticipates receiving an adequate supply of diesel fuel during 1980. The company's average cost per galloa of diesel fuel increased from 29.70c in January 1974 to 75.70s in December 1979, an heresse of 155%. For further information with respect to NOPSI's industry segments, see ""asiness of System Operating Companies", " Property", " Regulation and Litigation-Holding Company Act" and Note 15 to Financial Statements. Employees by Segment NOPSI's employees by industry segments are as follows: December 31.1979 Fall Part Time Time Total 622 1 623 Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 - 221 Natural Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,253 - 1,253 Transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849 3 4_3 892 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.945 4_4 2.989 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . h 37
l ITEM 2. SUMMARIES OF OPERATIONS CONSOLIDATED 1979 1978 1977 1976 1975 (In m usands) Operating Revenues: Electric . . . . . . . . .. 51,669,451 $ 1,489,915 51,327,319 S1,063,036 5 868,100 G as . . . . . . . . . . . . . . 116,612 95,863 83,910 62,502 49,513 Transit (a) . . . . . . . . . 36,996 36.399 31,828 78.873 13,176 Total . . . . . . . . .. 1,823,059 1.622,177 1.443,057 1,144,411 930,789 Operating Expenses: Fuel for Electric Genera-tion and Purchased Power . . . . . . . . . . . . . 955,983 75"',331 655,077 483,643 329,557 Gas Purchased for Re-sale .. ......... . 88,801 68,657 58,577 37,852 30,994 Other Operation Ex-penses and Mainte-nance.. .. ........ 31I,658 ?.99,347 253,595 204,183 190,437 Depreciation . . . . . . . . . 119,304 112,805 106,7.i 101,045 92,770 Income Taxes Charged
- to Operating Expen-ses(d ) . . . . . . . . .. 51,266 86,004 98,091 68,795 55,560 Taxes Other Than In-come Taxes . . . . . . . . . 77,849 69.771 67,306 61.561 56,481 Total Operating Ex-penses ..... .. 1,604,861 1,393.915 ' ."9,3 94 957,079 755,799 Operating Income ........ 218,198 228,262 203,663 187,332 174,990 l Allowance For Funds Used During Construction-To-tal(e).. ......... ..... 213,333 148,290 99,377 62,169 46,064 l Income Taxes Credited to l Other Income-cr.(d) . . . . 76,232 50,105 29,393 18,287 14,175 Interest Charges . . . . . . . . . . (297,381' (221,981) (171,265) (148,290) (132,663)
Preferred Di-idend Require-i ments of Subsidiaries . . . . . (36,264) (25,477) (23,109) (21,780) (16,660) Miscellaneous- Net . . . . . . . . 7,940 6.239 6.910 8.329 4,397 Net Income (f) . . . . . . . . . . . . S 182,058(c) $ 185,438 5 144,969 5 106,047(c) S 90,303 Weighted Average Number of Shares of Common Stock Outstanding . . . . . . . 85,444,691 75,522,179 66,598,876 58,395,628 50,733,782 Earniags Per Common Share on Weighted Average Number of Shares Out-standing . . . . . . . . . . . . . . . 52.13 $2.46 $2.18 $1.82 S1.78 Dividends Declared Per Ccmmon Share. . . . . . . . . . $1.535 $1.46 St.395 51.335 S t.275 l l 38
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9 l l
\ l l
. AP&L 1979 1975 1977 1976 1975 k (In Thousands)
Operating Revenues (b) . . . . . . . . . . . . . . . . . . 5583,826 5556,488 5537.408 S396,597 $316,831 Operating Expenses Fuel for Electric Generation and Purchased 346,092 288,485 284,115 215,196 132,344 Power ( b) . . . . . . . . . . . . . . . . . . . . . . . . . Other Operation Expenses and Mainte. 92,032 90,992 81,917 57,850 54,923 nance . .......... ................ 39,708 38,365 36,768 35,025 33,790 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . income Taxes Charged to Operating Ex. penses (d) . . . . . . . . . . . . . . . . . . . . . . . . . . '1,213
. 33,813 43,937 17,164 20,353 25,032 23,436 20.154 18,858 17,989 l Taxes Othe- Than Income Taxes . . . . . . . . .
l Total Operating Expenses. . . . . . . . . . 514,077 475,091 466,891_ 344,093 259,40_0 69,749 81,397 70,517 52,504 87,422 Operating Income . . . . . . . . . . . . . . . . . . . . . Allowance for Funds Used During Construc-65,903 50,262 36,666 26,445 18,978 tion-Total (e) . . . . . . . . . . . . . . . . . . . . . . . . Income Taxes Credited to Other Income-16,753 12,403 6,660 7,014 5,111 cr. ( d ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest Charges . . . . . . . . . . . . . . . . . . . . . . . . . . (75,536) (61,025) (48,964) (45,855) (43,818) Miscellaneous--Net . . . . . . . . . . . . . . . . . . . . . . . 6,873 4,583 5,806 3.314 3.020 Income Before Cumulative Effect of Accounting 8J,742 87,620 70,685 43,422 40,713 Chan ge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative Effect to January 1,1976 of Change in Accounting for Fuel Costs (c) . . . . . . . . . . . - - - 3,541 - 83,742 87,620 70,685 46,963(c) 40,713 Net Income (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preferred Dividend Requirements . . . . . . . . . . . . (17,474) (14,020) (14.020) (13,155) (8,035) Balance for Common Stock . . . . . . . . . . . . . . . . . S 66,268 5 73,600 5 56,665 5 33.808 5 32,678 s f'
- w LP&L 1979 1975 1977 1976 1975 l (la Thousnada)
Or crating Revenues (b) . . . . . . . ........... 5557,4,76 6 S456,375 $378.951 5331.277 5264,844 Operating Espenses: Fuel for Electric Generation s 'd Purchased 330,337 237,907 185,283 153,471 99,229 Pow r (1 ) . . . . . . . . . . . . . . . . . . . . . . . . . Other Operatior T2penses and Mainte. nance ... ........................ 73,688 76,744 59,713 52,483 47,868 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 40,863 38,389 35,999 33,866 27,837 Income Taxes Charged to Operating Ex. 22,750 19,919 21,482 19,990 18,535 penses (d) . . . . . . . . . . . . . . . . . . . . . . . . . . 15,977 14,106 13,918 12,414 11,746 Taxes Other 'Ih2n Income Taxes . . . . . . . . . 483,615 387,065 316,395 272.224 205,215 Total Operating Expenses. . . . . . . . . . . 73,861 69,310 62,556 59,053 59,629 Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . Allowanc: for Funds Used During Const.uc. 45,853 31,079 19,473 12,823 14,029 tion-Total (e) . . . . . . . . . . . . . . . . . . . . . . . . . Income Taxes Credited to Other Income-11,751 9,058 5,456 2,802 3,776 cr.(d)................................. Interest Charges . . . . . . . . . . . . . . . . . . . . . . . . . . (71,256) (58,125) (45,017) (38,991) (36,462) 4,920 2,422 1,938 3,590 2,723 MMU ==us-Net . . . . . . . . . . . . . . . . . . . . . . . 65,129(c) 53,744 44,406 29,277 43,695 Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preferred Dividend Requirements . . . . . . . . . . . . (15,441) (8,108) (5,740) (5,276) (5,276) Balance for Common Stock . . . . . . . . . . . . . . . . . S 49,688 _S 45,636 5 38,666 $ 34,001 $ 38,419
/m t
r
} 39 LJ
, , , e. - , , - , , , -
t MP&L 1979 1978 1977 1976 1975 (In nousands) Operating Revenues (b) ... .... . . $436,524 5400,276 5365.346 5308,776 5240.057 Operating Expenses: Fuel for Electric Generation and Purchased Power (b) . . .......... . ..... . 286,255 248,210 223,639 177,292 128,720 Other Operation Expenses and Mainte-nance . ....... ..... . .......... 62,137 49,099 43,708 38,316 33,064 1 Depreciation .... ........... . .... 21,974 20,528 19,728 18,151 17,532 Income Taxes Charged to Operating Ex-l 9,095 20,492 20,964 16,759 11,560 i penses (d ) . . . . . . . . . . . . . . . . .... Taxes Other Than Income Taxes . . . . . . . . 16.177 14.950 14.299 12,962 11,626 Total Operating Expenses. . . . . . . . . . . 396.538 353,279 322.338 263,480 202.502 Operating income . . . . . . . . . . . . . . . . . . . . . . . . 39,986 46,997 43,008 45,296 37,555 Allowance for Funds Used During Construc-tion-Total (e) . . . . . . . . . . . . . . . . . . . . . . . 1,077 1,172 1,601 - 1,853 Income Taxes Charged to Other Income-c r. ( d ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,145) (916) (113) (913) (919) Interest Charges . . . . . . . .... .... .... . (20,237) (20,694) (20,496) (20,342) ( '9,452) Miscellaneous-Net . . . . . . . . . . . . . . . . . ..... 2,900 2.286 1,027 1,M 1,766 Net Income . . . . . . . . . . . . . . . . . . . . . ....... 22,581 28,845 25,027 25.745 20,803 Preferred Di ridend Requirements . . . . . . . . . . . (2,384) (2,384) (2,384) ,, (2J84) (2,384) Balance for Common S(ock . . . . . . .... .... 5 20,197 5 26,461 S 22.643 5 23,3 $ 18.419 NOPSI 1979 1978 1977 1976 !975 (la nousands) Operating Revenues (a)(b): Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . 5240,032 S191,845 5178,040 $157,135 S129,305 Gas............................... 85,624 70,013 61,218 44,169 33,784 Transit . . . . . . ........ .............. 36,996 36.399 "s t,828 18,873 13,176 Total . . . . . . . . . . . . . . . . . . . . . ... 362,652 298,257 271,086 220,177 176,265 Operating Expenses: Fuel for Electiic Generation and Purcha ,ed 161,349 117,089 111,380 84,207 66,870 Power ( b) . . . . . . . . . . . . . . . . . . . . . . . . . . Gas Purchased for Resale . . . . . . . . . . . . . . 68,291 52,439
- 43,801 26,730 21,547 c
Other Operati on Expenses and Mainte-nance ................... ......... 84,433 77,497 64,185 58,552 50,970 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . 13,379 12,290 11,271 11,133 10,985 Income Taxes Charged to Operating Ex-penses (d ) . . . . . . . . . . . . . . . . . . . . . . . . . . 1.379 7,817 7,694 8,270 2,052 Taxes Other Than Income Taxes . . . . . . . . . 15,778 12,805 15,143 13,877 12,388 Total Operating Expenses. . . . . . . . . . . 344,6_09 279,937 253.474 202,769 164,812 17,612 17,408 Operatmg Income . . . . . . . . . . . . . . . . . . . . . . . . . 18,W 18,320 11.453 Allowance for Funds Used During Construc-238 136 52 156 228 tion-Total (e) . . . . . . . . . . . . . . . . . . . . . . . . . Income Taxes Charged to Other Income-cr. ( d ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (702) (706) (637) (747) (470) Interest Charges . . . . . . . . . . . . . . . . . . . . . . . . . (9,447) (8,640) (7,907) (R,094) (8,204) 1,878 1.533 1.392 1,680 971 Miscellaneous-Net . . . . . . . . . . . . . ......... 10,010 10,643 10,512 10,403 3,978 Net I ncome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preferred Dividend Requirements . . . . . . . . . . . (965) (965) (965) (965) (965) Balance for Common Stock . . . . . . . . . . . . . . . . . S 9,045 S 9,678 S 9,547 S 9,438 S 3,013 0 4e
NOTES TO SUMMARIES OF OPERATIONS y (a) Under transit subsidy agreements between NOPSI and the City of New Orleans for 1979,1978 and 1977, transit operations recorded a subsidy amount sufficient to earn on the transit rate base a year-to.date rate of return of 8.33% on a monthly basis. Such subsidy came first from electric and gas earnings in excess of an annualized 8.33% rate of return on those combined operations, on a monthly basis. and the balance came from the City. During the years 1979,1978 and 1977, the transit operations recorded subsidy amounts of approximately 519.1 million (52.1 million from combined electric and gas operations and $17.0 million from the City), $19.1 million (57.1 million from combined electric and gas operations and 512.0 million from the > City), and $14.8 million (513.0 million from combined electric and gas operations and $1.8 million from the City), respectively. See Item 1 " Business-Regulation and Litigation-Holding Company Act" for information concerning the proposed divestiture of transit operations. (b) Electric operating revenues include sales to affiliates as follows: 1979 1978 1977 1976 197s da Thousands) 548,320 535,680 548,934 514,948 519,617 AP&L..... .... 29,366 41,655 48,412 95,129 53,823 LP&L . . . . . . . . . 90,959 82,899 74,186 56,117 39,268 M P& L . . . . . . . . . . 35,546 10,427 9,842 3,966 3,372 NOPSI . . . . . . . . Operating expenses include power purchad from affiliates as follows: 1979 19*8 1977 1976 197s Ga Thoussads) 588,483 579,903 584,295 588,432 546,792 AP&L.... ..... 54,012 27,205 22,009 3,047 6,767 LP&L . . . . . . . . . 26,750 19,084 30,600 33,135 30,744
.s MP&L . . . . . . . . .
28,694 33,342 32,000 35.090 25,385
\ NOPSI . . . . . . . .
[V L Fuel for electric generation includes purchases from SFI as follows; l 1976 197s 19'8 1978 1977 r i da Thousands) 5106,296 5141,486 5146,561 585,675 544,630 AP&L . . . . . . . . . . 104,776 92,203 79,917 62.817 18,960 LP&L . . . . . . . . . . 133,233 143,842 125,247 92,992 60,186 MP&L . . . . . . . . . . 34,020 46,615 43,238 32,075 27,815 NOPSI . . . . . . . . . l (c) Effective January 1,1976, AP&L adopted the accounting policy of deferring fuel costs in excess of base lesels allowed in rate schedules until these costs are reflected in billings to customers pursuant to the fuel adjustment clause. Deferral of the excess fuel costs for accounting purposes was adopted due to (1) the i ' continuing increase in the unit cost of fuel and (2) the significant increase in unrecovered fuel costs during those periods when AP&L's nuclear plant is not operating. This accounting change, net of deferred income taxes of 54,175,000, resulted in an increase in net income for 1976 of 53,992,000 (50.07 per share) of which, 53,541,000 (50.06 per share) represents the cumulative
- effect of the change (net of taxes) as of January 1,1976 and is not shown separately in the Consolidated Summaries of Operations.
In January 1979, LP&L received authorization from the LPSC allowing and reqairing LP&L to credit or charge customers through the fuel adjustment clause in future billings for net over or undercollections of fuel costs in excess of those included in base rates. Ccncurrently with this change in billing for fuel costs, LP&L commenced deferring on its books fuel costs to be reflected in billings to customers pursuant to the 41 m
fuel adjustment 21ause until such amounts are billed. The effect of this deferral, net of deferred income taxes, was to increase net income for the year 1979 by $7,765,000. (d) Refe evce is made to Notes 1(F) and 6 to Financial Statements for information relating to income taxes and investrient tax credits. l Beginning January 1,1975, AP&L, LP&L and MSE have included in Other Income an amount I representing the income tax effect of the debt portion of AFDC. During 1977, MP&L and NOPSI began following this swne practice in their presentation of AFDC. Net income is not afected since the income tax effect was presiously credited to operating expenses. l The amount ofinvestment tax credit edjustments-net for each of the five years is as follows: 191. 1978 1977 1976 1975 a+-+ Consolidated. . . . . . . . . s(2,566) 5(4,166) 59.534 531,087 520,040 AP&L . . . . . . . . . . . . . . (753) (1,435) 1,33' 8,127 5,839 LP&L . . . . . . . . . . . . . . (1,019) (1,205) 2% 6,411 7,822 MP&L . . . . . . . . . . . . . . 1,286 (907) 3,814 1,960 NOPSI . . . . . . . . . . . . . 1,651 (312) 58 719 910 (e) Reference is made to Note 1(G) of the Financial Statements for information relating to AFDC. The composite rates for AFDC for each of the five years is as follows: 1979 1978 1977 1976 1975 AP& L . . . . . . . . . . . . . . . . . . . . . . . . . 7.7 % 7.6% 7.4% 7.5 % 7.5% LP& L . . . . . . . . . . . . . . . . . . . . . . 6.9 6.8 6.8 7.5 7.5 MP& L . . . . . . . . . . . . . . . . . . . . . . . 7.8 7.4 6.9 - 7.5 NOPSI . . . . . . . . . . . . . . . . . . . . . . . 6.5 5.8 6.6 7.5 7.5 Efective January 1.1977, in accordance with FPC Order No. 561, the System operating companies adopted the formula, which permits compounding, for determming the rate to be used in computing AFDC, and adopted accounting and reporting requirements for AFDC. MSE determines its accrual rate for AFDC based on an 11.6% return on average common equicy plus actual interest costs, net of related income taxes. (f) Reference is made to Note 10 to Financial Statements relating to AP&L's fuel adjustment clause. 42 9
CONSOLIDATED MANAGEMENTS DISCUSSION AND ANALYSIS OF THE SUMMARIES OF OPERATIONS The following factors, which may not be indicative of future operations or earnings, have had a signi6 cant effect upon the results of operations of the Middle South System during the years 1979 and 1978. Operating Revenues The principal components of the increases in electric operating revenues are shown in the fo!!owing tabulation: 1979 197s Annouet 85 of Aamours "e of (la nousands) Total (Is nousands) Total
$(12,615) (7)% $ 63,553 39 %
Sales of energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,084 1 28,034 17 Rate increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,505 102 60,494 37 Recovery of fuel cost * . . . . . . . . . . . . . . ....... 6.562 4 10.515 7 Miscellaneous" . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$179.536 1 $162.596 1 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _3% _3%
- Includes the effect ofincreased fuel cost recov-red through fuel adjustment clauses and increased fuel cost included in the new '.evels of base rates. See No:e (c) to Summaries of Operations.
" Includes the effe:t of adjustments for transit subsidy. See Note (a) to Summaries of Operations and Item 1 " Business-Regulation and Litigation-Holding Company Act" regarding the subsidy agreements for 1979 and 1978 with the City of New Orleans with respect to NOPSI's transit operations and the reclassification of certain revenues it: these years.
(, Electric operating revenues increased by $180 million or 12% in !"79 principally due to increased fuel cost recoveries through fuel adjustment clauses and increased fuel cost included in the new levels of base rates. In 1978, electric operating revenues increased by $163 million or 12% principally due to increased sales of energy to other utilities as a result of a national coal miner's strike in the early part of 1978 and increased fuel cost recoveries through fuel adjustment clauses and increased fuel cost included in the new levels of base rates. The increases in gas revenue, :.sr the years 1979 and 1978 (521 million,22% and 512 million,14%, respeedvely) are piincipally due to the recovery ofincreased costs through purchased gas adjustment clauses. Transit revenues increased in 1978 by 55 million (14%) primanly due to the operation of the transit subsidy agreements, see Note (3) to Summaries of Operations. Feel for Electric Generation and Purchased Power The incresse in fuel expense for 1979,574 millico, is pnmarily due to higher average unit costs for gas and oil-fired generation. The increase in fuel expense for 1978, 554 million, reflects additional generation to meet ir d energy requirements. The increase in purchased power expense in 1979,5124 million, is primarily attributable to reducel volumes of oil-6 red generation ad the outages of ANO No. I during the second quarter, half of the Md quarter and approximately one month in the fourth quarter of 1979. See Item 1 " Business-Regulation and Litigation-Atomic Energy Act of 1954 and Energy Reorgamzation of 1974". The increase in the cost of purchased power in 1978,54C milhon, is attributable to the escalating unit cost per KW of purchased power in order to meet customer demands and to additional shut-downs of major generating units in the second quarter of 1978. , , ( / V 43
It is the policy of the Midd.le South System to buy available power from neighboring utilities when the l cost thereofis less than theincremental cost of generating with the Middle South System's generating units. Gas Purchased for Resale The increases in gas purchased for resale in 1979 and 1978 ($20 million and $10 million, respectively) are attributable to the rising cost of purchased gas. Other Operation Expenses and Maintenance Other operation expenses increased 50.9 million in 1979 and $19 million in 1978. Excluding the effects of the nuclear fuel reserve and deferred fuel cost ccounting policies, as described below, expenses increased $31 million or 15% for the year 1979 and $29 million or 17% for the year 1978. These increases are primarily attributable to the Middle South System's growth and to inflationary pressures on wages, employee benefits, l services, and materials and supplies. Other operation expenses reflect AP&L's nuclear fuel reserve fund estimated to offset the effect of higher i I cost of generation when the nuclear plant is out of service for refueling. AP&L and LP&L defer fuel costs in excess of base levels allowed in rate schedules until these costs are reflected in billings to customers (generally two months later) pursuant to the fuel adjustment clause. The deferral results in a better matching of energy costs with related revenues. Thus, the deferred fuel cost amount represents a net adjustment of energy costs. When there are wide fluctuations in the cost of energy between periods, the adjustments necessary can be quite large. See Note (c) to Summaries of Operations. The increase in maintenance expense for the year 1979 ($11 million) is due primarily to a major overhaul completed at a generating unit, the continuous usage of oil as a boiler-fuel and inflationary pressures. The increase in maintenance expense for the year 1978 ($27 million) is due to more scheduled maintenance on generating units required by a continuous and greater usage of oil as a generator fuel, unscheduled maintenance and inflationary pressures. AFDC The increases in AFDC r :. primarily to increased levels of CWIP. Income Taxes Reference is made to Note 6 to Financial Statements for details of income taxes, including deferred taxes, and a reconciliation of the statutory to the effective book income tax rates. The fluctuatiors in total income tax expense included in operating expenses and in other income in the years 1979 and 1978 are attributable primtrily to changes in income before income taxes and to differences in timing between deductions for tax and book purposes for which deferred taxes were not provided. In addition, the 1979 change is partially attributable to a change in the Federal income tax rate. i 1 Taxes Other than Income Taxes The increase in taxes other than income taxes for the year 1979 ($8 million or 12%) is due primarily to increased ad valorem taxes, local franchise taxes and Federal Insurance Contribution Act taxes. Interest and Preferred Dividezds Interest expense and preferred dividend requirements increased during each year primarily as a result of l additional issuances of debt and preferred stock in conjunction with the construction program of the Middle South System and rising interest and dividend rates.
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6:
A 2 Net Income and Earnings Per Share Net income decreased 53 million or 2% for the year 1979 and increased 539 million or 24% for the year
\ 1978. In each year the percentage change in earnings per share did not change proportionately to the change
' in net income s'ac primarily to common stock sales in January and November of 1979 (8.5 and 5 million shares, respec'.svely) and January 1978 (8.5 million shares). AP&L MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE SUNL41 ARIES OF OPERATIONS 1 The following factors, which may not be indicative of future operations or earnings, have had a signincant efect upon the results of operations of AP&L during the years 1979 and 1978. Operating Revenues The principal components of the increases in electric operating revenues are shown in the following tabulation: 1979 1978 Amoest % of Asmount % of (In Thousanda) Total (Is Tho====d=) Total 5 1,911 7% $ 3,709 19 % Sales of energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- - 15,113 79 Rate increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470 3 Recovery of fuel cost * . . . . . . . . . . . . . . . . . ..... 26,652 97 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,225) ,,14) (212) _(1) 527,338 100 % $19.080 100 % To tal . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- Includes increased fuel cost recovered through fuel adjustment clauses and increased fuel cost included in the new levels of base rates. See Note (c) to Summaries of Operations.
p Purchased Power The increase in purchased power expense for the year 1979 of $51 million or 42% is due primarily to (
' additional amounts of purchased power being required to replace oil.Ared generation and the outage of ANO No. I during the second quarter, he.lf of the third quarter and approximately one month of the fourth quarter of 1979. In addition. higher unit costs for purchased power were incurred during the year 1979 as compared to the previous year.
Other Operation Eapenses and Maintenance Other operation expenses decreased 50.3 million in 1979 and $2 million in 197F. Excluding the efects of the nuclear fuel reserve and deferred fuel cost accounting policies, as described below, expenses increased $14 million or 23% for the year 1979 and 511 million or 20% for the year 1978. Tne increase in each period is primarily attributable to innationary pressures on wages, property insurance, employee benefits, services and rnaterials and supplies. Other operation expenses reAcct AP&L's nuclear fuel reserve fund estimated to ofset the efect of higher - cost of generation when the nuclear plant is out of service for refueling. AP&L adopted an accounting policy of deferring fuel costs in excess of base levels allo *wed in rate schedules until these costs are reRected in billings to customers (generally two months later) pursuant to the fuel adjustment clause. The policy results in a better matching of energy costs with related revenues. Thus, the deferred fue! cost amount represents a net adjustment of energy costs. When there are wide Auctuations in the cost of energy between periods, the adjustments necessary can be quite large. See Note (c) to Summaries of Operations. Maintenance expense increase i by $10 million or 60% in 1978 due to more scheduled maintenance on generating units which was required by the continuous and greater usage of oil as a generator fuel during 1978 and innationary pressures. n I 45 U)
Income Taxes Reference is made to Note 6 to Financial Statements for details of income taxes, including deferred taxes, and a reconciliation of the statutory to the effective book income tax rates. The changes in total income tax expense included in operating expenses and in other income in 109 and 1978 are attributable to changes in income before income taxes and to differences in timing between deductions for tax and book purposes for which deferred taxes were not provided. The 1979 change is also partially attributable to a change in the Federal income tax rate. In addition, the fluctuation in income tax expense included in other income for 1978 is also attributable to recording of taxes associated with the gain on the sale of the White Bluff Plant in 1977. Taxes Other than Income Taxes The increase in 1978 is due to additional investment in facilities and to increases in the base tax rates. AFDC The increases in AFDC during each year are due primarily to continued capitalization of AFDC on ANO No. 2. the White Bluff and Independence Plants. Interest and Preferred Dividends Interest expense in 1979 and 1978 and preferred dividend requirements in 1979 increased primarily as a result of additional issuances of debt and preferred stock in conjunction with the construction program and rising interest and dividend rates. Miscellaneous-Net The herease for the year 1979 is primarily due to a $1.3 million gain on the sale of an interest in the Independence Plant during the third quarter of 1979. The 1978 decrease in miscellaneous-net is due to the absence of the net effect of the gain on the sale of the White Bluff Plant partially offset by an increase in interest and dividend income. LP&L MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE SUMMARIES OF OPERATIONS The following factors, which may not be indicative of future operations or earnings. hsve had a significant effect upon the results of operations of LP&L during the years 1979 and 1978. Operating Revenues The principal components of the increases in electric operating revenues are shown in the following tabulation: 1979 1978 I Amoest ?. of A mount fe of (In Thousands) Total (In no====d=1 Total Sales of energy . . . . . . . . . . . .'. . . . . . . . . . . . . . . ! (3.002) (3)% $33.339 43 % Rate increases . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 11,419 15 Recovery of fuel cost * . . . . ...... ......... 103,882 103 33,850 44 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 _ (1.184) _(2) Total . . . . . . . . . . . . . . ........... $101,101 100 % $77,424 100 %
- Includes increased fuel cost recovered through fuel adjustment clauses and increased fuel cost included in the new levels of base rates.
G
.d
I l Electric operating revenues increased $101 million or 22% for the year 1979 pnmartly due to the recovery ofincreased fuel costs and the fuel component of purchased power costs. Electric operating revenues for the year 1>78 increased 577 million or 20% primarily due to increased energy sales to ultimate customers and the recovery of increased fuel and the fuel component of purchased power costs. Also, during the first quarter of 1978 LP&L was called upon to supply large quar.tities of energy to other utilities as a result of a national coal miners' strike and extremely cold weather. Feel for Electric Generation and Parchmaal Power The increase in fuel costs in *.he year 1979,522 million or 13%, is primarily due to higher average unit prices for natural gas and oil partially offset by a decline in oil-fired generation. Fuel costs increased by approximately 527 million or 19% in 1978. The increase resulted from a higher demand for electric service, higher unit prices for natural gas and oil and increased oil-fired generation. Purchased power expense increased 570 mdhon or 101% in 1979 due primarily to additional amounts of purchased power needed to replace reductions in gas and oil-fired generation. Purchawd power expense in 1978 increased $26 million or $8%. The change resulted from increased demand for electric service and higher unit prices. Other Operation Eapenses and Malm**===ce For the year 1979 other operation expenses decreased 55 million or 11%. Excluding the effects of deferred fuel cost accounting policies, as described below, expenses increased $10 million or 21%. The increase is primarily attributable to in8ationary pressures on wages, employee benefits, services and materials and supplies. Other operation expenses such as costs of labor, materials and supplies and services increased oy 59 million in 1978 primarily due to the el mts of inflation. ? \
\M LP&L commenced deferring fuel costs in .:xcess of base levels allowed in rate schedules until these costs l
are reflected in billings to customers (generally two months later) pursuant to the fuel adjustment clause. ! The deferral results in a better matching of energy costs with related revenues. Thus, the deferred fuel cost amount represents a net adjustment of energy costs. When there are wide fluctuations in the cost of energy f i between periods, the adjustments necessary can be quite large. See Note (c) to Summaries of Operations. Maintenance expense increased in 1978 by 58 million or 40%. This increase was due to increased scheduled maintenance on generating units, which is required by continuous usage of oil as a boiler fuel, 7 l unschiuled maintenance and inflationary pressures. Iar.eme Taaes Reference is made to Note 6 to Finannal Statements for detads ofincome taxes, including deferred taxes and a r==eh iont of the statutory to the effective book income tax rates. The fluctuations in total income tax expense included in operating expenses and in other income in 1979 and 1978 are primarily attributable to changes in income before income taxes, and to differences in timing between deductions for tax and book purposes for which deferred taxes were not provided. In addition, the 1979 change is parnally attributable to a change in the Federal income tax rate. AFDC The increases in AFDC are due primarily to increased levels of CWIP. 1 t/' \
\ 47 v
Taxes Other than come Taxes The increase m this itera for the year 1979 is due primarily to increased Federal Insurance Contribution Act taxes and local franchise taxes. Interest and Preferred Dividencs Interest expense and prefer 1:d dividend requirements increased during each year primarily as a result of additional issuances of debt and > referred stock in conjunction with financing the construction program and rising interest and dividend rates. Miscellaneous-Net Additional investments in SFI, an affiliated company, and higher rates of interest on such investments are primarily responsible for a 52 million increase in miscellaneous-net in 1979. MP&L MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE SISfMARIES OF OPERATIONS The following factors, which may not be indicative of future cperations or earmngs, have had a significant effect upon the results of operations of MP&L during the years 1979 and 1978. Operating Revenues l The principal components of the increases in electric operating revenues are shown in the following tabulation: 1 1978 Amount % of Amount % of (im Tho===ad=) Total (In Thousands) Total Sales of energy . . . . . . . . . . . . . . . . . . . . . . . . . . S(11,559) (32%) S22,239 64 % Recovery of fuel cost * .................... 45,803 126 8,397 24 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,003 6 4.294 12 Total ...... .................. S 36.247 100 % S34,930 100 %
- Includes increated fuel costs recovered through fuel adjustment clauses.
Fuel for Electric Generation and Purchased Power Fuel costs increased by approximately $27 million or 15% in 1978. The increase resulted from a higher demand for electric service and increased oil-fired generation which increased by 14% in 1978. Purchased power expense increased $29 million or 73% in 1979 due primarily to larger volumes of KWH's purchased to displace higher cost oil-fired generation. Other Operation Expenses and Maintenance The increase in other operation expenses in 1979, S7 million or 20%, is due primarily to increased expenses for fire and property insurance and inAationary pressures on the costs of labor, materials and mpplies, services and wages. Other operation expenses such as costs of labor, materials and supplies and services increased by $4 million in 1978 primarily due to the effects of inflation. 48
i l Maintenance expenses increased by approximately $6 million in 1979 due to increased scheduled maintenance on generating units which is required by the continuous usage of oil as a boiler fuci and O(/ inflationary pressures. Also, : atajor overhaul shut down MP&L's Gerald Andrus Steam Electric Generating Station in the fourth quarter of 1979 :csulting in additional maintenance expenses. Maintenance expenses increased by approximately 52 million in 1978 due to increased scheduled maintenance on generating units which is required by the greater usage of oil as boiler fuel and inflationary pressures. In addition, MP&L's Baxter Wilson Steam Electric Generating Station Unit No. 2 was shut down for scheduled maintenance for approximately five months in 1978. Income Taxes Reference is made to Note 6 to Financial Statements for details of income taxes, including deferred taxes, and a reconciliation of the statutory to the effective book income tax rates.
'Ilie fluctuation in total income tax expense included in operating expenses in 1979 is primarily attributable to changes in income before income taxes, a change in the Federal income tax rate and to differences in timing between deductions for tax and book purposes for which deferred taxes were not provided.
Miscellamoue-Net Additional investments in SFI, an affiliated compan r, and higher rates of interest on such investments are primarily responsible for the 50.6 million increase in miscellaneous-net in 1979. The 51.3 mi!Iion increase in 1978 resulted primarily from increased in.erest earned on a higher level of temporary cash investment balances during the year. O NOPSI
)
(d MANAGEMEN'I'S DISCUSSION AND ANALYSIS OF THE SUMMARIES OF OPERATIOliS The following factors, which may not be indicative of future operations or earnings, have had a significant effect upon the rexhs of operations of NOPSI during the years 1979 and 1978. Operating Revenues The principal components of the increases in electric operating revenues are shown in the following tabulation: 1979 1978 Assount % of Annoust % of Ga Thomenads) Total Ga Thousands) Total
$12,471 26 % $ 5,156 37 %
Sales of energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,816 62 3,112 23 Recovery of fuel cost * . . . . . . . . . . . . . . . . . . . . . . . Miscellaneous * * . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,900 J 5,537 J 548,187 100 % $13,805 100 % Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
- Includes increased fuel costs recovered through fuel adjustment clauses.
** Includes the effect of adjustments for transit subsidy. See Note (a) to Summaries of Operations and Item 1 " Business-Regulation and Litigation-Holding Company Act" regarding the subsidy agreements for 1979 and 1978 with the City of New Orleans with respect to NOPSI's transit operations and the rect ==Acation of certam revenues in these years.
I f% 49
)
(C/ ) i i I l
Electric operating revenues increased by $48 million or 25% in 1979 principally due to the recovery of increased fuel costs and to increased energy sales to affiliates under the System Agreement. The increase in energy sales to affiliates is attributable to an arrangement whereby SFI was able to purchase natural gas from intrastate sources at prices lower than the cost of available fuel oil and to sell that gas to NOPSI for use as fuel for generation. Approximately 90% of the power generated by NOPSI from this SFI gas was sold to other System operating companies. Addiuonally, increased fuel cost recoveries through fuel adjustment clauses and fuel cost recoveries through sales for resale contributed to the increase. Gas revenues increased by $16 million (22%) and 59 million (14%) in the years 1979 and 1978, respectively, principally due to the recovery ofincreased costs through purchased gas adjustment clauses. Transit revenues increased in 1978 by 55 million (14%) primarily due to the operation of the transit subsidy agreement, see Note (a) to Summaries of Operations. Feel for Electric Generation ana Purchased Power The increase in fuel expense for 1979,538 million or 53%, reflects pnmarily higher average unit costs for oil and gas and the sut,stantial increase in energy generated (gas-fired) and sold to affiliates. See Item I-
" Business-Fuel Supply."
The increases in purchased power expenses in 1979 and 1978, approximately $6 million each year, are due primarily to increased purchases and higt.er unit prices. The increase in purchases in 1979 resulted primarily from a higher demand for electric service, higher unit prices for natural gas and oil and decreased oil.ftred generation. The increase in purchases in 1978 was a result of meeting customer demands during an unscheduled outage at a generating station and increased scheduled maintenance on generating units. Gas Purchased for Resale The increased costs in 1979 and 1978 of $16 million and 59 million, respectively, are primarily due to the rising cost of purchased gas. Other Operation Expenses and Maintenance Other operation expenses such as costs of labor, materials and supplies and services increased by 57 million in 1978, primarily due to the effects ofinflation. Increased maintenance expenses on generating units in 1978 was due to the greater usage of oil as a boiler fuel. In addition, generator failure at one of NOPSI's generating stations was responsible, in part, for the increase in 1978. Income Taxes Reference is made to Note 6 to Financial Statements for details of income taxes, including deferred taxes, and a reconciliation of the statutory to the effective book income tax rates. The fluctuation in total income tax expense included in operating expenses in 1979 is primarily attributable to changes in income before income taxes, a change in the Federal income tax rate and to differences in timing between deductions for tax and book purposes for which deferred taxes were not provided. Taxes Other than Income Taxes The 53 million increase in taxes other than income taxes in 1979 is due primarily to increased ad valorem taxes. A 52 million decrease in taxes other than income taxes in 1978 was due to decreases in ad valorem taxes resulting from changes in the method of assessment. MisceV x__ Net The increase of 50.3 million or 23% in this item for the year 1979 is due primarily to higher interest rates on short-term investments. 50
ITE'.1 J. PROPERTIES
%/ Reference is made to Item 1 " Business-Property" for information regarding the properties of the registrants.
ITEM 4. PARENTS AND SUBSIDIARIES The five registrants, MSU, AP&L, LP&L, MP&L and NOPSI, and their active subsidiaries, are listed below. Ai! of the companies, with the exception of The Arklahoma Corporatian, are included in the consolidated financial statements included herein. In addition, separate financial statements are included for each of the registrants. Percentage of Comunos Stock State of Owned by Incorporation I--adiate Pareat[s](al Middle South Utilities, Inc. . . . . . . . . . . . . . . . . Florida - Arkansas Power & Light Company . . . . . . Arkansas 100 % The Arklahoma Corporation . . . . . . Arkansas 34 Louisiana Power & Light Company . . . . . Louisiana 100 Mississippi Power & Light Company . . . . Mississippi 100 New Orleans Public Service Inc. . . . . . . . . Louisiana 100 System Fuels, Inc. . . . . . . . . . . . Louisiana 100 Arkansas-Missouri Power Company . . . . . Arkamas 100 Associated Natural Gas Company. . . Delaware 100 Middle South Energy, Inc. . . . . . . . . . . . . Arkansas 100 Middle South Services, Inc. . . . . . . . . . . . Delaware 100 (a) MSU owns e!! of the Common Stock of AP&L, LP&L, MP&L, NOPSI, Ark.Mo, MSE and [.g\ MSS. AP&L owns 34% of the Common Stock of The Arklahoma Corporation. The capital stock ( ,/ of SFI is owned in proportions of 35%, 33%,19% and 13% by AP&L, LP&L, MP&L and NOPSI, respectively. Ark-Mo owns all of the Common Stock of Associated. ITEM 5. LEGAL PROCEEDINGS Reference is made to Item 1 " Business-Rate Matters" for details of registrants' pending rate proceedings and to Item 1 " Business-Industry and Company Problems-Federal Legislation", Item I-
" Business-Regulation and Litigation", and Item 1 " Business-Fuel Supply-Fuel Oil" and " Fuel Supply-Coal" for information relating to the registrants' pending regulatory proceedmgs (other than rate proceedmgs) and litigation.
\' 51
~ v.--.. , , y -
ITEM 6. INCREASES AND DECREASES IN OUTSTANDING SECURITIES AND INDEBTEDNESS (a) Increases and decreases in outstanding cquity securities during 1979 were as follows: (la nousands) MSU Common stock. 55 par value: Balance, January 1,1979 . . . . . . . . . . . . . . . . . . . . . . . . ... .. . 5380,491 Sale of 8,500,000 shares on January 17,1979 through competitive bid. ding.................................................. . 42,500* Sale of 5,000,000 shares on November 20, 1979 through competitive bidding.................................................. 25,000* Sale of 12,452 shares under the Employee Stock Ownership Plan: January " 1979 . . . . . . . . . . . . . . . . . .. ................ 5 30 April ',1979 ....... .. ................ .. ... ....... 32 62 " Sale of o08,875 shares under the Dividend Reinvestment and Stock Purchase Plan: Jan uary 3, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464 February 2, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 March 2,1979 . . . . . . . . . . . . . . ........ .. .......... 60 April 2,1979 ....... ... .............. .... ... ...... 500 M ay 1, 19 7 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 June 1,1979 . . . . ............. ......... ... .... .... 79 July 1,1979 . . . . . . . . . . . . . . ..... ... ............ ...... 596 August 1,1979. . . . . . . . . . . . . . . . . . . . . . ............ ... 117 September 4, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 October 1, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668 November 1, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 December 3,1979 . . . . . . . . .. ............ ........ ..... 75 3,045 " Sale of 214,433 shares under the System Savings Plan: January 8, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 January 29,1979............. ...................... .... 70 j February 28,1979............ .... ................. .... 67
- March 20, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 l April 24,1979 . . ........................ .............. 97 i
May 23, 19 79 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 J une 21, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ~ 77 J uly 24, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 J uly 26, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 August 23,1979.......................................... 72 September 26,1979.. .................................... 99 October 1, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 October 19,1979......................................... 84 November 16,1979....................................... 85 December 18,1979 ....................................... 93 1,072 " Retirement of 994 shares of MSU stock on April 20,1979 . . . . . . . . . . . (5)"* Balance, December 31,1979.................................... 5452,165
- Proceeds from the January 17,1979 and November 20,1979 sales were 514.94 and 512.6199 per share or 5126,990,000 and 563,099,500, respectively. Excess over par value, 584,490,000 and $38,099,500.
I respectively, was credited to paid.in surplus.
" Total proceeds from sales under the Employee Stock Ownership Plan, Dividend Reinvestment and Stock Purchase Plan, and System Savings Plan were $187,801, 58,909,427 and 53,092,807, respectively; excess over par value, 5125,541,55,865,052 and $2,020,642, respectively, credited to paid-in surplua.
'" Total proceeds from the retirement of 994 unclaimed shares at $10.95 per share pertaining to the purchase of Ark.Mo in 1972 was $10,884; excess over par value 55,914, charged to paid.in surplus.
t O 52 \ i
o
- n. no ma.i
\- AP&L Common stock,512.50 par value:
Balance, January 1,1979 . . . . ....... . ..... .. .. 5397,960 j Sale of 2,4t,000 shares to MSU: 510.000 September 26,1979 ................... . .. ........... 10,000 l October 26,1979 ............ ............ .... ..... .. . i December 26,1979............................. ....... . 10.000 30.000 ; I Balance, December 31,1979 . . . . . . ...... ..................... 5427.960 Preferred stock and premium; cumulative, 525 par value, without sinking fund: Balance, January 1,1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 10,051 Sale of 600,000 shares on February 1,1979,10.40% series, through com-petitive biddin g . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,182 blance . December 31,1979. .................................. 5 25.233 Preferred stock and premium; cumulative,525 par value, with sinking fund: Balance, January 1, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - Sale of 1,600,000 shares on June 28,1979,9.92% series, through compet. iti ve bidding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 40.454 hiance, December 31,1979...... ........................ ..... 5 40,454 LP&L Common stock, no par value: Balance, January 1,1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5353,900 I,p) V Sale of 11,364,000 shares to MSU: April 10, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 10,1979 .................. ................ ...... 550,000 25,000 75,000 blance, December 31,1979.... ................................ 5428,900 Preferred stock and premium; cumulative, 5100 par value, without siaking fund: bla nee, Jan uary 1, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5110,809 Sale of 350,000 shares on March 1,1979,11.48% series, through compet. itive bidding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,073 blance. December 31,1979..................................... $145,882 Preferred stock, premium and issuance expense; cumulative, 525 par value, with smkmg fund: bla av e January 1, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sale of 2,400,000 shares on July 19, 1979, 10.72 % senes, through com. petitive Inddmg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 .57,070 Sale of 1,600,000 shares on October 17, 1979, 13.12 % series, through 35,920 competitive bidding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . blance December 31,1979..................................... 5 92.990
! )
V $3
(b) Increases and decreases in outstanding debt securities previously reported in reports on Form 10-Q were as follows: (tn Thousands: AP&L First Mortgage Bonds: Balance, January 1,1979 . . . . . . . . . . . . . . ...... . . . .. . ... $715,200 Sale of 10%% Sries due 2009 . . .... . . . ..... . .. ....... 60,000* Retirements . . . . . . . . . . . . ... ... . . .... . .. (8.700) Balance, December 31,1979 . . . . . . ..... . . ... . ... . 5766.500 LP&L First Mortgage Bonds: Balance, January 1,1979 . . . . . . ....... ...... .. ... ..... ... .... $681,900 Sale of l0%% f.eries due 1989 . .... .......... .. ......... .... ... 45,000 " Balance, Septembe 30,1979. . ...... ........ . .......... .... ... $726.900
- Net proceeds from the sale of $60,000,000 of First Mortgage Bonds were used for the reduction of short-term indebtedness incurred for the AP&L construction program and the balance was used for AP&L's construction program. A further description may be found in Form 10-Q dated March 31,1979.
" Net proceeds from sale of 545,000,000 of First Mortgage Bonds were used to reduce short-term debt, to finance part of LP&L's construction program and for other corporate purposes. A further description may be found in Form 10-Q dated June 30,1979.
(c) Details of the increase in debt securities during the fourth quarter of 197J "or LP&L were as follows: (1) First Mortgage Bonds: (la n ousands) Balance, September 30,1979.......................... ... ............ 5726,900 Sale of 13 %% Series due 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.000 Balance, December 31,1979.................. ......... ... ..... ..... 5781.900 (2) On November 15,1979, LP&L issued and sold to the purchasers whose bid, in respe ise to the company's Public Invitation for Bids, provided LP&L with tfie lowest " cost of money" for said bonds, 555,000,000 in principal amount of First Mortgage Bonds,13%% Series due November 1,2009, at a price of 98.729% of the principal amount thereof plus accrued interest from November 1,1979 to November 15,1979. (3) (i) The net proceeds to LP&L were $54,300,950 (before deducting expenses estimated at
$195,000 2nd exclusive of accrued interest).
(ii) The representatives of the principal purchasers of said First Mortgage Bonds were: Salomon Brothers; ht4h Eastman Dillon & Co. Incorporated; The First Boston Corporation; Merrill Lynch, Pierce, Fenner & Smith Incorporated; Smith Barney, Harns Upham & Co.; Dillon, Read & Co. Inc. and Donaldson, Lufkin & Jenrette Securiti.es Corporation. (iii) The net proceeds from the issuance and sale of the 555,000,000 First Mortgage Bonds, were used for the payment in part of outstanding short. term borrowings, for the fmancing in part of LP&L's construction program and for other corporate purposes. (iv) The First Mortgage Bonds were registered under the Securities Act of 1933 (File No. 2-65673). O
$1 .
l ITEM 7. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED M SECURITIES At a special meeting of stockholders of NOPSI held on February 12,1980 and an adjournment thereof held on February 27,1980, the requisite majority of the stockholders of NOPSI voted to amend NOPSI's Restated Articles of Incorporation to permit NOPSI to establish sinking fund requirements for the purchase or redemption of new shares of NOPSI's $100 par value serial preferred stock. This amendment will permit NOPSI to include a sinking fund provision for the purchase or redemption of shares of any new series ofits
$100 par value scral preferred stock to be issued at any time in the future. Prior to such amendment, NOPSI was prohibited by its Restated Articles ofIncorporation from issuing a series ' preferred ste:k containing a sinking fund. This amendment is applicable only to series of preferred stock issued after its adoption and does not affect the terms of previously existing series of NOPSI's preferred stock. At the same special meeting and adjournment, the stockholders of NOPSI voted to raise the ceiling on the amount of capital stock of NOPSI from 5100,000,000 to 5200,000,000. See Item 10.
ITEM 8. DEFAULTS UPON SENIOR SECURITIES None. ITEM 9. APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS (I) Amnimse Nember of Record Heiders Nesse of at December 3t. Registrast Title of Class 1979r2) MSU Common Stock, 55 Par Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144.068 s A}}