ML19312A396
| ML19312A396 | |
| Person / Time | |
|---|---|
| Site: | Palo Verde  |
| Issue date: | 05/13/1980 |
| From: | PUBLIC SERVICE CO. OF NEW MEXICO |
| To: | |
| Shared Package | |
| ML17296A708 | List: |
| References | |
| NUDOCS 8005200594 | |
| Download: ML19312A396 (39) | |
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. a t $/Mk#-1979 i Page No.
FINANCIAL HIGHLIGHTS , , . I PRESIDENT'S LETTER 2 f ECONON!!C PICTURE 4 New Nfexico Economy s. 4 Construction and Financing 4 Revenues and Expenses 4 Earnings . 5 Rates and Regulation . 5 ELECTRIC OPERATIONS 6 l WATER OPERATIONS . 6 l { THE FUTURE . 7 l Construction and Financing 7 Sales and Rate Actisities 7 THE CONIPANY AND ITS PEOPLE . 8 Employee Deselopment 8 Employee Benefits. 8 Promotions and Nianagement Changes . , 8 SUBSIDIARIES 8 RESEARCH. DEVELOPNIENT AND DENIONSTRATION 8 INDEX TO FINANCIAL DATA . . 10 DIRECTORS AND OFFICERS . 32 SYSTEN! NfAP Inside Back Cover The annual meeting of stockholde-s is scheduled to be held The Common Stock of this Company is traded on the New April 22,1980. A proxy form and notice of the annual York Stock Exchange under the symbol PNNI. , meeting will be mailed to all stockholders on Niarch 3, 1 1980. This Annual Report and the financial statements contained herein are submitted for the general information of the
; For funher information and details pertaining to the infor. stockholders of the Company and are not intended for use in mation provided in this report contact D. E. Peckham, connection with any sale or purchase of, or any offer or ; Secretary, Public Sersice Company of New .\fexico, Post solicitation of offers to buy or sell, any securities of the '
Office Box 2267, Albuquerque, New Nietico 87103. Company. l
l l . . i i a 4 1979 1973 Change Operating tevenues 5 244,370,000 $187,205,000 30.5 Operating expenses 5 184,554,000 $143,258,000 28.8 Operating iacome 5 59,816,000 5 43,947,000 36.1 Net earnings . $ 54,803,000 $ 37,464,000 46.3 Net earnings applicable to common stock . $ 42,607,000 $ 29,081,000 46.5 Return on average common equity 13.6 9 13.0 9 4.6 Aserage number of common shares outstanding . 14,363.000 10,289,000 39.6 Net earnings per common share $ 2.97 5 2.83 5.0 Dividends paid per common share 5 1.88 5 1,72 9.3 Construction expenditures . 5 323,361,000 $ 198,976,000 62.5 Gross investment in utility property 51,197,514,000 $879,893,000 36.1 l Kilowatt hour sales (thousand kwhr) 4,960,451 4,527,826 9.6 ] Number of electric customers served at year end 206,000 196,000 5.1 i Average kwhr usage per resider.tial customer 5,929 5,880 .8 Number of employees 2,311 2,054 12.5 Number of common stockholders 34,236 27,026 26.7 l F. ,_ l c \
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i The end of a decade has come. Fer our industry, as for the country in general, it was ten years of unrelenting change. The rules and the perceptions of society, the attitude of the government and the attitude toward the p government seemed to shift daily. It was a strange ten years no matter who you were or how you looked at it. W It was a decade which saw the United States disengage itself from a war which it neither bothered to declare nor set realistic military goals. It was a decade in .h] which, for the first time, an American president resigned n in disgrace. It was a decade that saw " liberals" begin to -- militantly support the status quo under the no-crowth ~
.-2 [
theme and " conservatives" argue heatedly for growth ,@ / and change. It was a decade that saw the nation seemingly go into shock and refuse to make decisions or take action on matters of paramount importance - energy, deferse, economic policy . the list is endless. l Yet, through it all, our institutions did manage to survise and to keep prosiding the public with far more than human history could define as " basic necessitics."
~
Life went on, although polls revealed that for the first /,f(hff/h//[ time in American history many people no longer felt confident in the future. As it became apparent that new ideas were going to be range and diversity of the problems encountered in the essential, it was decided that a touchstone was needed to 1970's, the last ten years may well go down as a decade help us all make sure we were looking in the right of solutions for PNN1. direction. A statement o' principle was adopted. The full statement is on page 31. As simplistic as these thoughts PNNI initiated a shift to coal without gosernmental may seem, it is only necessary to reflect for a moment suggestion or advice more than two decades ago. The on the complexities of life and the confusion third unit at the San Juan Generating Station came surrounding us to see why a straightforward standard on-line in 1979. During the past year, your Company was developed. If PNN1 can adhere to these simple acquired full ownership of the fourth unit now under thoughts. our customers will have the service they expect construction at San Juan. By this action, we can assure at a pnce they can afford and in a manner they can our customers that tiny will have electricity in the understand. Our employees will hase worthwhile jobs 1990's. Such assurance is becoming difficult for all and our owners will be repaid for making it all possible. utilities to make in these uncertain times. An astounding expansion came about during this However, using coal as an energy resource is not decade, in part, as people in other states began to without its problems. Stringent constraints have been deselop an appreciation for the way of life offered by established on the burning of coal. PNN1 is committed to New Niexico. It also resulted from the commitment the building and operating facilities to meet those people of New N!exico hase made to their environment. requirements. When new regulations were being The insestment in pollution control equipment at the San developed, and when regulatory actions were required, Juan Generating Station now exceeds the total investment we often found that the desires of environmentalists of the Company just ten years ago. compounded our already complex business environment. However, PNNI has worked hard to establish a gooo Steanwhile, as the nation and the world grappled with relationship with local organized environmental groups. problems, companies, including PNN!, had to come up As a result, we have often been able to achieve with solutions to their own problems. In light of the agreements with those groups that contribute to the l Tag &2 l i __
preservation of New hiexico's environment and maintain any unexpected circumstances, tnere will be little change a balanced consideration of the customers' needs. in the real price of electricity in the foreseeable future. It is clear that in order to continue the financing required, In addition, we continue to search for new and better our emphasis must be on performance for shareholders. ways to meet future needs without relying on natural gas During 1979, our common shareholders provided us with and oil. As part of this search, work continued on the more than $57.2 million of additional equity capital, Palo Verde Nuclear Generating Station. As you know, 2,959.506 additional shares, to help finance needed your Company committed itself to a 10.2 percent share facilities. In return, our common shareholders earned in that project in 1973. In the aftermath of Three hiile $2.97 per share, up from $2.83 in 1978. Island, extensive reviews of the engineering and construction at Palo Verde have been conducted and You, our shareholders, have taken long-term risks in some are still underway. We are confident that Palo order to ensure an adequate power supply. The rate Verde will serve our customers safely and reliably. We structure simply must be such that the bottom line is are also confident that society will conclude that the enticing to shareholders. Stock must be selling above benefits of having domestic energy resources beyond the book value, and we will do eserything reasonable to control of international politics will outweigh the limited make that happer risks of nuclear energy. To our employees we say thanks for a dedicated PNNI studies continue to demonstrate that nuclear decade; your innovation and individual energy have power has economic, environmental, and safety made our Company part of the solution to our country's advantages over other available generating alternatives. problems. To our directors we again express appreciation Even though this is the case, the nuclear option is for the widsom, stability and leadership you provide. currently plagued with political and regulatory
- uncertainties. Therefore, PNN1 has not made a PN51 enters the 1980's confident of its ability to
! commitment to the construction of a nuclear plant within provide reliable service and maintain the high level of New Alexico, but the Company does continue to include accountability to its customers a.M to you, our the nuclear option as a consideration in its generation shareholders. planning activities. Such planning includes the examination of design options, economics, and feasible Sincerely, sites for any future projects. Work will soon commence on PNht's and the country's first hot water geothermal generating facility. - Though geothermal energy now provides a significant ( part of northern California's electricity, the hot dry steam J. D. Geist used there is a geological rarity. Geothermal hot water is President not as rare and, if the PN51 project now under development with the Department of Energy and Union Od Company is successful, the technology could lend itself to application in many areas of the country. - hb G. A. Schreiber bO The decade of the 1970's was remarkable for both the Chairman of the Board nation and PNNI. But changing the calendar has not changed all our problems: energy remains a critical issue: economics of uncertainty are still part of our i everyday life; and the quest for understanding and solutions to these pressing issues will be the hallmark of the 1980's. 1 Your Company's requirements for new construction in the 1980-84 five year period is predicted to be $1,084
- million. This is less than in the 1979-83 period. Barring l
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JfAfh5lfDYMOfHlf hHJhuYlCH'AN$ $lNaNClNf PNat is situated in one of the growth areas of the Nineteen seventy-nine was a significant year for PNNI. Rocky Stountain West, as the Company's construction The year represented the peak of our construction budget over the past decade indicates. Projections show program in terms of annual dollars spent. In 1979, net that during 1979-1984 population in PNht's service area utility plant additions totaled about 5317 million, will grow by 16 percent, or an average of 2.9 percent compared to about $199 million in 1978. Our current per year. The national annual growth rate is expected to construction budget indicates a downward trend in be about I percent. In contrast, the growth rate over annual construction dollars for the next several years 1974-1979 was 14.5 percent, an annual rate of 2.5 until we begin our next major generating project. Also, percent. The population in PN51's service area is the Company acquired full ownership of San Juan Unit 4 cunently estimated to be 532,000. Total state population by purchas;ng Tucson Electric Power Company's 50 is about 1,241,000. percent share of the unit. Construction of this 472-megawatt unit is scheduled for completion in 1982. Employment for the growing population in New The third unit at the San Juan Generating Station went Ntexico is centered on government agencies plus trade into commercial service in December, bringing 240 net and service businesses. Stanufacturing represents a small megawatts into the grid for PNN1's customers. portion of the economy with about 7 percent employment. This low percentage of manufacturing New external funding for 1979 included a 540 million workers serves as insulation, tending to protect New 8.75 percent preferred stock issue, an issue of common Niexico from the effects of any national recession The stock for $48 million, and $130 million in 6.5 percent combined industrial segment of the economy (mining, pollution control revenue bonds. Common stock totaling manufacturing, and construction) provides about 20 $9.3 million was also raised through the Dividend percent of total employment. Reinvestment Plan. the Employee Stock Purchase Plan, and the Tax Reduction Act Stock Ownership Plan But this industrial figure is climbing due to signif; cant (TRASOP). The Company also obtained commitments to growth in coal and uranium mining. Besides the place directly with institutional investors $45 million of increasing deselopment of huge coal reserves, the state 10% percent first mortgage bonds. of which 517 million currently supplies approximately 50 percent of the was received in 1979, with the remaining $28 million country's production of yellowcake. PNA1 supplies received in January 1980. electricity to about 70 percent of the state's uranium mining activity. In addition to the traditional segments of New AlnWnutJAntiYXffMJ(J Ntexwo's economy, there is also a large and active high Resenues rose from $187 million in 1978 to 52.* technology research sector, including Los Alamos million in 1979, or 31 percent. This follows a 35 pere Scientific Laboratories and Sandia Laboratories. PNNI is increase from 1977 to 1978. Of the 557 million increase also recognized as a leader in energy research and in revenues, it is estimated that 26 percent resulted from development because of its work in projects such as increased kilowatt-hour sales,26 percent f om fuel solar and geothermal energy applications. clause adjustments and 48 percent from increases in base electric rates. Electric sales grew from about 4.5 billion While the per capita income in New Alexico ranks in to almost 5 billion kilowatt-hours, a 9.6 percent increase, the bottom one-fifth of all states, the rate of increase is greater than most other states. Since 1974, personal In 1o79, fuel and purchased power expense was up by income in New Niexico has been growing at one of the about 36 percent due to increased energy requirements fastest rates in the Rocky Stountain region. Per capita and costs of fuel. Other operating and maintenance income in the Albuquerque metro area, in which 80 expenses climbed by 22 percent. compared to 26 percent percent of PNNt's customers lise, is currently about in 1977-1978. Cost control programs were continued equal to the national average. The continuation of these during the year and a trend toward improved trends is expected to lift New hiexico's per capita cost-effectiveness is evident. income above its current national ranking. I ra p
As a result of the financing for our construction designed to attain earnings of 13.5 percent on year-end program, interest expenses on short-term debt rose due common equity. The first annual indes factor was to a higher level of borrowing and increases in the calculated on 1978 revenues and expenses, with certain interest lesels. Long-term debt also grew in 1979 and adjustments. Investment in the construction work in total interest charges were up by about S3.7 million. progress relating to San Juan Unit 3, placed in service Preferred dividends increased by about S3.8 million. in late 1979, and all pollution control equipment at the
, San Juan Generating Station was included in the revised g calculations. The allowance for funds used during
(/dN/N construction rate on other construction work in progress was changed from 6.5 percent to 7.5 percent. A During 1979. PNal's net earnings available to composite return on accumulated deferred investment tax common shares grew from about S29 million to S43 credits was allowed. With the switch from quarterly to million, or about 47 percent. However, reflecting the annual adjustment of the factor and with the additional Company's increased iasestment in plant, shares procedural and reporting requirements, indexing has outstanding climbed from approximately 12.6 million become less automatic; however. it retains many shares to 15.6 million, or 23 percent. Earnings per share advantages over a traditional rate filing, including for 1979 were 52.97, compared to 52.83 for 1978, on significant reductions in traditional regulatory lag. The average shares outstanding. New 51exico Attorney General appealed the Stay 1979 Order to the Santa Fe District Court and is contending The increase in average shares outstanding was due to that the formula used by the NN1PSC in arriving at the the sale of common stock in 1978 and 1979 to fintnce annual index factor produces excessive revenues. The our construction program. Return on average common N51PSC and the Company are opposing the Attorney equity for 1979 was 13.6 percent, compared to 13 General's position. percent for 1978. On the basis of most measures of financial integrity, the Cost of Sersice Index has been successful to date. PNN1's total capitalization more than tripled between N d k / ///N N [/[// /d M// 1974 and 1978, compared to an industry average As an electric and water utility operating in the State increase of about 40 percent. Yet, during this period, of New Niexico PNN1 is subject to the jurisdiction of PN51 improved its position relative to the industry the New Alexico Public Service Commission (N51PSC). aserage. Return on aserage capital, return on equity, Actisities of the Company regulated by the NN1PSC before and after tax interest coverages, and market include rates, quality of service, issuance of securities, price-to-book value ratio improsed markedly. In and generation and transmission construction. The particular. return on average common equity rose Federal Energy Regulatory Commission (FERC) has approximately 39 percent fram 9.7 percent in 1974 to jurisdiction over rates charged by PNA1 for electricity 13.6 percent in 1979. sold to other electric utilities. As part of a review of the indexing procedures, PNN1 Since mid-1975 PN51 has used a method of rate filed a rate redesign package with the NSIPSC on adjustment called Cost of Service Indexing. which December 31,1979, to assist the NN1PSC in complying allows recosery of present-day costs of generating and with the Public Utilities Regulatory Policies Act l distributing electricity. As originally designed, the Index (PURPA). The federal law requires utility regulators was applied to rates underjurisdiction of the Nh1PSC, nationally to review cost and price standards, to promote and allowed a quarterly adjustment when retum on conservation by utility customers and to increase the aserage common equity fell below or exceeded a band of efficiency of electric energy use. 13.5 to 14.5 percent. If approved by the Nh1PSC, the Company's proposed - In 51ay of 1979, howeser, the NN1PSC ruled that the rate redesign would promote energy conservation as well rate adjustment method could serse its intent by allowing as provide rate incentives to high-use customers who annual adjustments. At that time, the NN1PSC allowed shift electric consumption off-peak when generatmg costs the " rolling-in" of the factor into the base rate charge are lowest. The proposal would offer high-use electric and during the remainder of 1979 the Indexing factor customers the possibility of being billed for electricity l was remosed as a separate item. The NN1PSC determined based on the times of the day and seasons the power is that PNN1 would be allowed to adjust rates in a manner used. The concept, called Time-of-Day or Time-of-Use MqCS \
rates, currently is not available from any utility in New PNN1 through its operating divisions provides electric Niexico. service to about half the people living in New Niexico. The Albuquerque Division service area includes roughly The Company has a fuel adjustment clause which a third of the population of the entire state. The Belen allows the direct pass-through of increased fuel costs. and Bernalillo Divisions serve the rapidly growing areas The adjustment is applicable to all sales. An additional south and north of Albuquerque, respectively. The Santa part of the proposed rate redesign filed with the NNIPSC Fe Division serves the State Capital and surrounding would allow the Company to "zero out" the fuel communities. The Las Vegas Division serves Las Vegas adjustment factor by rolling the factor into the base rate on the eastern slopes of the Sangre de Cristo 51ountains for electrical service. in nonh-central New Niexico. The Deming Division service area lies in the extreme southern ponion of the state, just nonh of the Niexican border. The Western Division serves a portion of the i anium and coal mining I areas west of Albuquerque. The power produced by PNN1 comes from generating in addition to the operating divisions, PNN1-generated facilities as shown in the following table: electricity is purchased by several other utilities, both publicly and privately owned, for distribution to their PNN1's Share customers within the state. of Capacity Location and Generating Station (51W) As a regulated business, PNN1 operates under franchise agreements. 51unicipal electric franchise Coal Fired stations expiration dates are as follows: Albuquerque - 1992, Near Farmington Belen - 1990, Bernalillo - 1998, Deming - 1993. Four Corners Units 4 & 5 208 Las Vegas - 1996, and Santa Fe - 1999. San Juan Units I,2, & 3 550 Gas- and Oil-Fired Stations - Albuquerque N NN Person Station 96 Reeves Station 175 Water service in Santa Fe and Las Vegas is also Prager Station 22 provided by PNNI. The water facilities were acquired Santa Fe along with the Santa Fe and Las Vegas electric systems Santa Fe Station iI many years ago. Las Vegas Las Vegas Turbine 20 During the year, PNNI reached agreement with the TOTAL 1.082 City of Santa Fe resulting in a new water franchise. Resolution of conflicting points of view expressed by the The Company holds a 13 percent ownership in Units 4 City PNN1, and Santa Fe County was gained by funher and 5 of the Four Corners Generating Station, a 50 expansion of the duties of the 51etropolitan Water Board. percent ownership in San Juan Station Units I,2, and 3, In an area where water is a critical resource and a key to and 100 percent ownership of the gas- and oil-fired deselopment, the Board will serve as a way for the three stations. The Prager, Santa Fe, and Las Vegas Stations panies to combine their expertise and meet the long-term are used primarily to meet peak loads, needs for all concerned. In 1979 PNN1's generating fuel v,as mostly coal, in large part, the credit for the success of the accounting for about 67 percent of total kilowatt-hours negotiations which resulted in the franchise agreement produced. Natural gas provided 31.5 percent and oil 1.5 belongs to the PNN1 employees in Santa Fe. Their percent. With the addition of 240 megawatts of abilities and persistence turned a difficult situation into coal-fired capacity from San Juan Unit 3 in December of one of cooperation for the long-term future of water 1979 PNN1's forecasted generation requirements from supply in Santa Fe. The new water franchise for Santa coal will rise to 83 percent, with natural gas and oil Fe will be in effect until the year 2004. The water providing 15.8 percent and 1.2 percent, respectively, in franchise for Las Vegas expires in 1993. 1980.
h /h. b C[[8/F 4 / N $ N8 MC// y Percent. The forecared peak demand for the summer of 1980 is 987 megawatts. To supply this peak demand and Capital expenditures in 1980 are expected to drop to maintain an adequate reserve margin for contingencies, about $299 million, the major portion of which is for the PNN! has a total installed capacity of 1,082 megawatts construction of the fourth generating unit at San Juan (11 megawatts of which is scheduled for retirement in and the three units at the Palo Verde Nuclear Generating early 1980, subject to a current review) and has Station in Arizona. To provide funds for the 1980 contractually arranged to purchase an additional 160 construction program, your company anticipates that it megawatts of capacity from other utilities plus a will offer up to $50 million of preferred stock in April projected eight megawatts from load management for and approximately $60 million of common stock during resource capacity of 1.239 megawatts, the second half of the year. PNN1 also expects to raise approximately $14 million through its internal stock During the fourth quarter of 1979. PNN1 and the Los programs. Angeles Department of Water and Power completed negotiations for the sale of firm surplus energy from San in addition to the January receipt of the 528 million Juan Station to Los Angeles. Final contracts, signed in from the private placement first mortgage bond January 1980, provide for the sale of 700,000 transaction, the Company's current financing plan also megawr t-hours until April 1982. includes a first mortgage issue of approximately $60 million during the second half of the year. Use of in January 1980, your Company completed contract approximately $77 million of low-cost pollution control nerotiations with San Diego Gr.s and Electric Company resenue bonds currently held in trust is planned. Funding fer the sale of contingent capacity from San Juan requirements will also be provided for by contmued use f tation. This delisery of energy is contingent on the of short term debt. Additionally, your Company plans to ivailability of the four units at San Juan and Palo Verde participate with the City of Farmington in the issue of Unit 1. The contract specifies the sale of 236 megawatts
$26 million in pollution control revenue bonds for each year over a six-year period (a total of about 8.6 environmental control structures at the Four Corners million megawatt-hours of energy) commencing with the Generating Station. in-service date of San Juan Unit 4 anticipated to be 51ay 1982.
PN51's planned construction program over the next five years is estimated to be 51,084 million. Of this As a result or tie purchase of Tucson Electric Power amount, approximately 5593.nillion is for Company's share cf San Juan Unit 4, and the contingent generation-related construction, including nuclear fuel, sale of power from his unit to San Diego Gas and land and water acquisitions, with an additional $187 Electric during 19821987. PNN1 has not only assured million for environmental control systems. The majonty availability of electridty to its customers into the 1990's, of this money is for continuing construction at the San but additionally has been able to accomplish this at Juan Generating Station, the Palo Verde Nuclear capacity costs of the tr70's rather than the late 1980's. Generating Station in Arizona, a large pumped storage The savings to PNN1's sustomers will be substantial. project. and PNNt's interest in additional pollution control equipment for the Four Corners Generating According to the schedule set by the NNIPSC, PN51 Station. The balance of the 51,084 million will be spent has filed a new Cost of Service Indexing factor which over the next five years on transmission and distribution will be collected subject to refund beginning on Starch systems plus additional operating facilities for both 21, 1980, while the NhlPSC decides the case. The factor electric and water customers. Additionady PNNt's reflects increased costs PNhl experienced during 1979. wholly owned subsidiary Paragon Resources, Inc., has a fise-year capital expenditure program of $48 million, in the near future PNhl will submit revised rates to , with about $15 million in 1980 prima,rily for the Federal Energy Regulatory Commission for developments related to futue generatien projects. wholesale customers cased on test year 1980 budgeted operating data. Final decisions in pending cases have not yet been issued. however, the rates hase been put into I![JdNN dMjg[Nkgj effect subject to refund. Total system requirements in 1980, including sales to wholesale customers are projected to increase by 15.8 percent. Total peak demand is projected to grow by 15.4
%&mpmpadasPeph Employees are PNN1's most impcrtant asset. The %g///ph//f g///Mgf/g/ (//////[ h/g/ (f employees work together to provide customers not only with the reliable service they expect today, but An expressed principle of the Company is to promote employees also test and implement new ideas and plans from within its own ranks whenever practical. As a for dependable service in the years ahead, company operating in a growth mode, many jobs become available. During 1979,877 employees were During 1979 PNNI added 257 additional employees. promoted to positions of higher responsibility.
Although the Company's continued growth accounted for some of the increase. it was growing regulatory and The Company's Board of Directors elected two environmental requirements which accounted for much employees to vice president positions and promoted a of the increase. Effective environmental performance third employee to Treasurer in April of 1979. requires that the Company constantly monitor power plant emissions and maintain the necessary pollution P. J. Archibeck was promoted to Treasurer from his control equipment. Detailed environmental studies are previous position as Assistant Treasurer. now required to support the construction of new generation and transmission facilities. To encourage T. P. Warnke was elected District Vice President of energy conservation and to meet the requirements of the PNN1's San Juan area. Str. Warnke, a former manager of Public Utilities Regulatory Policies Act, personnel were PNN1's Demir.g Division, previously served as manager added to provide additional assistance to customers and of the San Juan area. prepare studies for submission to appropriate agencies. The continued effect of these various activities on the J. L. Wilkins was elected Vice President of total number of employees was significant. Engineering and Construction. A past chairman of the National Electric Reliability Council. Nir. Wilkins PNN1 continues its tradition of attracting very talented previously was group manager of engineering and and highly skilled new employees necessary to keep pace construction. with customer needs. Of the 2,311 employees, almost 850 craft personnel are represented by Local Union 611 of the International Brotherhood of Electrical Workers. The PNN1-IBEW contract expires April 30,1981. hhdhf PNN1 has an interest in two subsidiaries, Paragon Resources, Inc. (formerly Public Service Land
/////[8/ / ([h(/Y ///l4//[ Company) and Western Coal Co. Paragon P; sources, Inc. is a wholly owned subsidiary, organized to secure A total of 1,730 employees participated in water rights and croperty for the Company's various Company-sponsored training programs during the projects and busii ess-related needs. Chief amor.g these 12-month period. Additional programs assisting needs are plant si.es and water for Company water employees wishing to further their education and jol- systems and for cooling purposes at generating plants.
skills at local schools and unisersities are also offered. Western Coal Co. is jointly owned by PNN1 and Tucson Electric Power Company. The purpose of [/////d(6h///[/[J f Western Coal Co. is to secure coal leases and provide fuel for San Juan Generating Station. The San Juan As part of a continuing effort to retain skilled and Generating Station has contracted with Western Coal Co. trained emploges as well as to attract new personnel, to supply all coal required for the life of the plant. benefits, including life, health, and dental insurance as well as retirement plans. have been upgraded. Emplosee wages during 1979 stayed within the President's salah jd@ h[/,, ' guidelines with isolated exceptions receiving prior . approval by the federal government. g pj l PNNI is inmived in a number of research, develop;aent, and demonstration projects designed to l increase Company operating efficiency, expand I l'
knowledge in energy use and alternatises, and protect Union Oil Co . is constructing the nation's first hot the environment. water geothermal generating facility. When completed, this demonstration plant will produce 50
- Because water resources are scarce in New N!exico, megawatts. Ultimately, the geothermal field could PNNI is evaluating treatment procedures necessary for produce about 400 megawatts. The Company is also water to be recosered from uranium mining activities in the beginning phase of work on a pumped storage for use in generating station applications. facility which, when completed in 1989, will produce about 600 megawatts.
- PNNI is investigating the economic recosery of deep seam Fruitland Formation coal at depths below 6 In 1980. Company load management engineers will strippable lesels. using underground coal gasitication joia with private individuals in the Deming area to technology. construct a sertical wind axis generator for use in irrigation and rural homes.
- Numerous solar research projects are underway including the performance of both passise and active
- Subsynchronous resonance, hardly a household word, solar residential and commercial systems plus water is very important to utilities. The problem lies in heating applications. PNN1 is also participating with sibrations created by transmission lines which can Western Energy Supply and Transmission Associates damage the power plant turbine-generator. PNN1 and (WEST) in the nation's largest solar monitoring ten other western utilities contracted with General project which will prodde an excellent data base for Electric and Westinghouse in 1978 to deselop a relay future solar projects. that could sense the sibrations and disconnect the generator before any damage could be done. As a
- PNN1 is also studying the effect of transmission iines result of this study, two relays were installed at the on birds of prey and their habitats. This nationally San Juan Generating Station in 1979 - the first of recognized study will be completed in early 1980. their kind in the country. Additional equipment is scheduled to be installed in 1980.
- At San Juan. PNNI is deseloping techniques for remote measurement of sisible and invisible power
- Another major project during 1978 and 1979 was the plant plumes. This project is also funded by WEST. High Silica Control Project. This involved PNN1 is also testing the use of ceramic-lined pipe experimentation with a new chemical to disperse silica sections in an effort to find ways to increase abrasion in the water that normally collects a3 scale on heat resistance in coal-handling systems at San Juan. transfer surfaces of power plant equipment, thereby reducing plant efficiency and causing the plant to use
- An improsed computer-assisted planning tool is being more water. The experiment carried out at deseloped to enhance PNN1 engineers' ability to Albuquerque's Person Generating Statio.1 resulted in esaluate system distribution plans and alternatives. saving one million gallons of water per day on just one unit.
- In the area of nonconventional electric generation, PNNI. along with the Department of Energy and
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l Page Growth Graphs !1 l Comparatise Operating Statistics 12 l Summary of Operations . 14 Management's Discussion and Analysis of the Summary of Operations 14 Consolidated Balance Sheet 16 Consolidated Statement of Earnings , 18 l Consolidated Statement of Capitalization . 19 Consolidated Statement of Changes in Financial Position 20 i Notes to Consolidated Financial Statements . 21 Accountants' Report 28 l ' Stock!Dividene Data . 29 Supplementary Information on Changing Prices . 29
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blY!!/ flll pmmnt.hu.atnant ]<att'putiw;hanau c9 7c n n 'TJ 74 '7s '7c 77'71'79 'c9 7c 71 72 'r3 '74 '7s 76 '77 71 '79 M m I W G 182 193 213 257 285 328 402 532 682 880 1,198 37 40 43 50 58 67 85 100 139 187 244 MILLIONS OF DOLLARS MILLIONS OF DOLLARS (thNif$l15lf, ItllNl hOffNI $IEEll h lff NNIllN} fllNi lh} co 7e 'n 72 'TJ '74 '7s '76 77 '7f 79 c9 7c 71 72 'rs 74 7s 7c 'r7 7f'19 M uunuuumum . M 9 9 9 10 11 11 14 14 19 26 33 437 541 541 542 617 727 727 858 858 842 1,082 MILLIONS OF DOLLAR $ THOUSANDS OF KILOWATT 5 O
.I I979 1978 1977 1976 ELECTRIC SERVICE ENERGY SALES-kwhr (in thousands:
Residential . 1.067.755 1.000.564 957.390 916.748 Commercial 1.403.282 1.353.805 1.320.651 1.277.025 Industrial 858.533 797.314 686,845 605.559 Other ultimate customers 159.396 164.901 160.922 157.694 Total sales to ultimate customers . . 3.488.966 3.316.584 3.125.808 2.957.026 Sales for resale 1.471.485 1.211.242 1.241.195 638.207 Total energy sales 4.960.45I 4.527.826 4.367.003 3.595.233 ELECTRIC REVENUES lin thousands) Residential S 66.262 5 51.414 5 39.547 5 32.423 Commercial 77.806 60,125 45.520 36.198 Industrial 40.467 28,860 18.918 13.070 Other ultimate customers 8.704 7.052 5.215 4.168 Total revenue from ultimate customers . 193.239 147.451 109.200 85.859 Sales for resale 44.000 32.568 23.219 9.340 Total resenue from energy sales 237.239 180.019 132.419 95.199 Niiscellaneous electric revenues 2.532 2.581 2.6_05 1.935 Total electric revenue 5 239.771 S 182.600 S 135.024 5 97.134 CUSTON1ERS AT YEAR END Residential 184.979 175.439 164.803 156.116 Commercial 20.334 19.496 18,374 17.483 Industrial 485 482 493 489 Other . 264 263 265 250 Total ultimate customers . 206.062 195.680 183.935 174.338 Sales for resale . . 5 5 5 5 Total customers 206.067 195.685 183.940 174.343 Reliable net capability - kW l.082.000 842.000 858.000 858.000 Coincidental peak demand - kW 855.000 809.000 715.000 633.000 Aserage fuel cost per million BTU 120.72C 105.52c 92.7 !c 61.83c BTU per \Whr of net generation 10.476 10.993 11.004 11.084 WATER SERVICE S ALES - Gallons tin thousands) Customer sales . 2.509.868 2.747.924 2.726.059 2.959.209 Interdepartmental sales 5.947 5.198 5.742 4.014 Total water sales 2.515.815 2.753.122 2.731.801 2.963.223 REVENUES (in thousands) Customer sales . S 4.595 5 4.599 5 3.606 S 2.386 Interdepartmental sales 4 6 6 3 Total water sales S 4.599 5 4.605 5 3.612 5 2.389 Customers at year end. 18.755 18.079 17.427 16.838 (I) Reclassified against expense (2) Certain customers were reclassitW from commercial to industrial during 1975. The reclassification accounted for a change of 220 customers in both categories. NA
I9 75 1974 1973 1972 1971 1970 875.361 828,243 786,108 706.973 648,626 5F3.136 1,177,953 1,128,576 1,110,147 985.431 885,782 702.376 530.I88 549 622 616.405 653,76I 618,695 552.I18 136.I36 137,843 128,17I I23.568 116.202 M8 2,719.638 2,644.284 2,640,831 2,469,733 2,269,305 2,035,228 578.037 250.901 122,656 I I4.333 106.000 98.026 3.297.675 2.895.185 2.763.487 2.584.066 2.375.305 2.133.254 5 28,912 $ 23,314 5 20.552 5 17,760 S 15.295 5 13,910 30,851 25.403 22,283 19,421 16,309 14,784 9.993 8,349 7,210 7,229 6.549 5,963 3.361 3.004 2.613 2,204 I.994 2.056 73,1I7 60,070 52.658 46.614 40.147 36,713 8.241 2.782 1.074 937 857 778 81,358 62,852 53,732 47.551 41.004 37,491 1.412 2.406 2.803 795 670 621 5 82.770 $ 65.258 5 56.535 5 48.346 S 41.674 5 38.112 151.11I 147,516 143.201 136,515 127,911 120,865 16.7382) 16,469 16.241 15,754 14,775 13,908 5192) 298 295 303 308 300 246 231 229 221 205 201 168,610 164.514 159,966 152,793 143.199 135,274 4 4 3 3 3 _3 I63.614 164.518 159.969 1$2.796 143.202 13ST 727.000 727,000 617,000 542.000 540,700 540,700 586,000 583,400 533.000 491,700 458.700 400,600 47.23c 39.49c 26.16c 24.47c 23.55c 23.04c 10.848 11.054 11.017 10.841 10.870 11.058 2.859,783 3.013,508 2,855,673 2.781,854 2,563.745 2,564,580 9.195 12.568 10.710 3.638 1.707 1.782 2.868.978 3.026.076 2.866.383 2.785.492 2.565.452 2.566.362 S 2,205 $ 2,103 $ 1.567 5 1.530 $ 1,434 5 1,418 3 6 3 (1) I 1 5 2.208 5 2.109 5 l.570 5 1.530 $ 1.435 S 1.419 16.437 16.158 -15,848 15.454 15.024 14.495 5 \ l 1
llhl$ f NJ 1979 1978 1977 1976 1975 (In thousands except per share amounts) Total operating revenues . 5244,370 5187,205 $138.636 599.523 $84,978 Operating expenses: Operation and maintenance . 134,539 103.864 76,524 51,535 39,785 Provision for depreciation and amortization 17,603 14,451 11,464 9.548 8,650 Taxes, other than income taxes . 10,531 8,221 7.257 5,875 5,114 Income taxes 21.881 16,722 10.986 8.028 8.626 Total operating expenses . 184.554 143.258 106.231 74.986 62.175 Operating income 59,816 43,947 32.405 24.537 22.803 Allowance for equity funds used during construction . 15.594 10.541 6,218 4.109 1.583 Other income and deductions, net . 2,401 2.257 1,435 689 530 Income before interest charges 77,811 56,745 40.058 29.335 24,916 Net interest charges . 23.008 19.281 15.137 11.978 10.700 Net earnings 54,803 37,464 24,921 17,357 14,216 Preferred stock disidend requirements 12.196 8.384 6,285 4,194 2.952 Net earnings applicable to common stock 5 42.607 5 29.080 5 18.636 513,163 511,264 Aserage number of shares cutstanding . 14.363 10,289 7,569 6.106 4.609 Per share amounts: Net earnings $ 2.97 5 2.83 $ 2.46 5 2.16 $ 2.44 Dividends $ 1.88 5 1.72 5 1.61 5 1.42 $ 1.26 JanapmaitDJ@)awkwandAnanpil
$1hmfurlwnaly$6pantbni The following factors, w hich may not be indicative of future operations or earnings, have had a significant effect upon the Company's results of operations during the years 1978 and 1979.
Electric revenues increased 547.6 million in 1978 and $57.2 million in 1979. The principal factors causing these increases are as follow s: 1979 1978 Increase in electric revenues due to: (In thousands) Increased kwhr sales (a) 514,660 5 4,584 Increased base rates (b) 27.597 29,912 Increased fuel cost adjustment factor (c) 14.963 13,104 557.220 547.600 (a) kwhr sales-the number of customers increased in each period and the average use per customer de-creased in 1978 but increased in 1979. Increases in kwhr sales were 3.7% in 1978 and 9.6% in 1979. (b) Rate increases-the Company bills most customers under a Cost of Service Index order based upon the jurisdictional return on common equity. The Index order, formerly a quarterly adjustment, was revised to provide for annual adjustments to base rates effective May 15.1979. The Company has periodically negotiated higher rates with certain customers whose rates are subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC). New rates for such customers were filed with the FERC and accounted for revenues, net of recorded provisions for possible refund, of $6.7 million in 1978 and $9.9 million in 1979 which are subject to refund pending a determination by the FERC. Accumulated revenues subject to refund, net of provisions for refund, at December : 1979 are 518.3 million.
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i (c) Fuel cost adjustment-natural gas fuel costs, cost of coal per ton and purchased power have accelerated rapidly. Such costs are passed on to customers. Water revenues increased $1.0 million in 1978 as a result of rate increases allowed by the New Mexico Public l Service Commission (Commission). , Operation and maintenance expenses increased $27.3 million in 1978 and $30.7 million in 1979. Principal causes ! are: (a) Production of energy from the Company's o vn generating units decreased by 14.3% in 1978 but increased by 16.3% in 1979. A boiler explosion, causing the shutdown of the first unit at the San Juan Generating Plant in July 1977 and the return to service of the unit in May 1978, coupled with the purchase oflower cost energy on the interchange market rather than generating from the Company's gas and oil fired units, resulted in the Company being a net purchaser of 957 million kwhr in 1978. Although generation increased in 1979, the growth in kwhr sales resulted in the Company being a net purchaser of 752 million kwhr. Increased fuel and purchased power
! expenses result ng from the boiler explosion wcre $6.9 million for the entire period of the outage. Of such expenses 1
$6.6 million w ere passed on to customers through the fuel adjustment clause by approval of the Commission and
- are subject to refund if it is determined that the Company was responsible for the explosion.
(b) Rapidly accelerating fuel costs.
; (c) Higher cost of labor and related benefits due to higher wage rates and an increase in the number of employees necessary to operate the expanded electric generating and water facilities.
(d) Generalinflationary factors. (e) Maintenance and repair expenses increased by $3.0 million in 1978 and $1.9 million in 1979. Oserhauls l and inspections at Person Station, the Four Corners plant and the San Juan plant accounted for increased costs of
$2.4 million in 1978 and $1.3 million in 1979.
The Company's gross utility plant increased by approximately 29% in 1978 and 36% in 1979 as a result of expanded operations. the need to maintain reliable service and increasing environmental protection requirements. In addition, the Company purchased the fifty-percent undivided interest of Tucson Electric Power Company in San Juan
, IJnit 4. This increase in utility plant and the Company's construction program have been the primary causes ofincreases j experienced in the following areas of operations: , (a) Depreciation and amortization.
(b) Taxes, other than income taxes-increases in ad valorem taxes resulted from increased plant. (c) Allowance for funds used during construction-increased construction at the San Juan plant and the Palo Verde Nuclear Generating Station. , (d) Interest charges and preferred stock dividend requirements-from 1977 through 1979 the Company issued l
$112 million principal amount of first mortgage bonds, utilized $147 million of proceeds of pollution control l
revenue bonds and issued $86 million of preferred stock, generally at higher rates than previous issues, and had up i to $96 million principal amount of short-term debt outstanding. j Other income and deductions, net, increased 5.8 million in 1978 primarily because the Company's share of earnings of its fifty-percent-owned subsidiary increased due to increased coal deliveries to the San Juan plant and an increase in
; the price per ton delisered.
l As a result of items detailed above, earnings before income taxes income taxes. net earnings and earnings per share of common stock all increased in 1978 and 1979. l
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-~ -- , - , - ,.-,.-,-r,,
December 31, I979 and I978 AJK(J l979 l978 (In thousands) Utility plant, at original cost (notes 4 and 8): Electric plant in service $ 712.096 $462,621 Water plan:in service 31,639 30,284 Common plant in service 17,340 14.148 761,075 507,053 Less accumulated depte;iation and amortization 127.939 102.033 633,136 405,020 Construction work in progress 435,353 371.754 Electric plant held for future use 1,086 1.086 Net utility plant 1.069,575 777.860 Other property and insestments: Non-utility property, at cost, net of accumulated depreciation of $757,000 in 1979 and $456,000 in 1978 17,362 9,516 Investment in fifty-percent-ow ned company 6,111 3,895 Other, at cost 1.875 1.747 Total other property and insestments 25,348 15,158 Current assets: Cash (note 5) 3,810 1,929 Receivables: Customers 23,818 18,835 Other 13,809 18.231 Allowance for doubtful receivables (224) (106) ! Fuel, materials and supplies, at average cost 22,073 16.015 Prepaid expenses 2,040 1,116 Deferred fuel costs 11.322 11.875 Total current assets 76,648 67,895 Deferred charges: Construction advance - 17.037 Unamortized debt expense 6,918 5,364 Other deferred charges 7. 957 5.433 Total deferred charges 14,875 27,834 j $1,186.446 $888,747 See accompanysng notes to consolidated)inancial statements. I i -
Ylipt/nhjathw ana'ZhiRh&s 1979 1978 fin thousands} Capitalization: Common stock equity (note 2): Common stock of $$ par value. Authorized 20.000,000 shares: outsranding 15.601.739 shares in 1979 and 12,642.233 shares in 1978 5 78.009 5 63.211 Additional paid-in capital 185,600 145.433 Retained earnings 83.719 67.645 Total common stock equity 347,328 276.289 Cumulative preferred stock. Authorized 5.000.000 shares (note 3): Without mandatory redemption requirements. Outstanding 860.000 shares of $100 stated value and 800.000 shares of $25 stated value 106.000 106.000 With mandatory redemption requirements. Outstanding 400.000 shares of $100 stated value in 1979. 40.000 - Long-term debt less current maturities (notes 4 and 1I) 431.655 356.347 Total capitalization 924.983 738.636 P Current liabilities: Short-term debt (note 5) 95,960 23.805 Accounts payable 51.695 43.072 Preferred dividends declared 2,869 1,994 Current maturities oflong. term debt (note 4) 5.224 1.189 Accrued interest 5.577 4.424 Accrued taxes 9,418 7.191 Other current liabilities. 4.220 4.226 Total current liabilities 174.963 85.901 Deferred credits: Customer advances for construc: ion 7.180 5.603 I Accumulated deferred insestment tax credits (note 6) 47.896 36.224 Accumulated deferred income taxes (note 6) 22.529 17,980 i Other deferred credits 8.895 4.403 Total deferred credits 86.500 64.210 Commitments and contingencies (notes 8. 9 and 10) 51.186.446 $888.747 1 1 t
Years ended December 31,1979 and 1978 1979 1978 (In thousands except Operating revenues: Electrte (note 10) $239.771 $182.600 Water 4.599 4.605 Total operatir:g tevenues 244,370 187,205 Operating expenses: Fuel and purchased power 85,143 62.694 Other operation expenses 34,351 28.002 Maintenance and repairs 15,045 13,168 Provision for depreciation and amortization 17,603 14,451 Taxes, other than income taxes 10.531 8.221 Income taxes (note 6) 21.881 16,722 Total operating expenses 184.554 143,258 Operating income 59,816 43.947 Other income and deductiuns: Allowance for equity funds used during construction 15,594 10,541 Equity in earnings of fifty-percent-owned company, net of taxes (note 6) 2.151 1,498 Other, net of taxes (note 6) 250 759 Net other income and deductions 17.995 12.798 Income before interest charges 77.811 56.745 Interest charges: Interest on long-term debt 24.236 21.349 Amortization of debt discount, expense and premium 394 347 Other interest charges 4.302 1.668 Allowance for borrowed funds used during construction (5.924) (4,083) Net interest charges 19.281 _2'.008 Net earnings 54,803 37.464 Preferred stock dividend requirements 12.196 8.383 Net earnings applicable to common stock $ 42.607 $ 29.081 Average number of shares outstanding 14.363 10.289 Per share amounts: Net earnings $ 2.97 $ 2.83 Dividends $ 1.88 $ 1.72 See accompanying notes to consolidatedjinancial statements. Arg&M
ll Years ended December 31.1979 and 1978 1979 1978 Percentages (In thousands) 1979 1978 Common stock equity: Common stock: Balance at beginning of year 5 63,211 5 44.287 issuance of common stock 14.798 18.924 Balance at end of year 78.009 63.211 Additional paid-in capital: Balance at beginning of year 145,433 90.947 Premium on common stock issued 42,466 57,241 Expenses of stock issuance (2.299) (2.755) Balance at end of year 185.600 145.433 Retained earnings: Balance at beginning of year 67.645 56.213 Net earnings 54.803 37.464 122.448 93.677 Cash dividends: Cumulatise preferred stock 12.196 8.383 Common stock 26.533 17.649 38.729 26.032 Balance at end of year 83.719 67.645 Total common stock equity 347.328 276.289 37.5 9 37.4 4 Cumulatise preferred stock: Without mandatory redemption requirements: Balance at beginning of year 106.000 80.000 Issuance of preferred stock - 26.000 Balance at end of year 106.000 106.000 11.5 14.4 With mandatory redemption requirements: Balance at beginning of year - - Issuance of preferred stock 40.000 - Balance at end of year 40.000 - 4.3 - Long-term debt,less current maturities: Balance at beginning of year 356.347 244.721 Addition to long-term debt 82.763 114.561 l Reduction of long-term debt (2.305) (6.544) Net change in unamortized discount and premium (911) (630) Balance at end of year 431.655 356.347 46.7 48.2 Total capitalization at end of year $924.983, 5738.636 100.0 % 100.0 9 j
~
l Number of shares issued: 5100 stated value cumulatise preferred stock 400 260 Commen stock 2,960 3.785 See accon*panying notes to consolidatedfinancial statements. l.9
4 Years ended December 31, '979 and 1978 1979 1978 (in thousands) Funds provided: Net earnings 5 54,803 $ 37,464 Charges (credits) to earnings not requiring funds: Depreciation and amortization 19,128 15.510 Provision for noncurrent deferred income taxes, net 4,549 1,149 Investment tax credit, net i1,672 10,378 Allowance for equity funds used during construct ion (15.594) (10.541) Undistributed earnings of fifty-percent-owned company (2.216) (l.621) Funds derived from operations 72,342 52.339 Sale of first mortgage bonds 17,000 65.000 Sale of cumulative preferred stock 40,000 26,000 Proceeds from pollution control revenue bonds 62,166 48,818 Sale of common stock 57,264 76,165 Proceeds from other long-term debt 3.597 743 Proceeds from short-term debt 290,315 142,280 Decrease in deferred charges 12,405 - Utility plant retirements, net of removal costs 14,137 809 Decrease in working capital other than short-term debt 8,154 - Other 6.113 4.086
$_583,493 $416.240 Funds used:
Cash dividends S 38,729 $ 26,032 Utility plant additions 308,526 189,307 Payment of short-term debt 218,160 168,475 Reduction of long-term debt 6,544 2,305 Additions to non-utility property 8,157 - Incn:ase in deferred charges - 22,316 Increase in working capital other than short-term debt - 4.400 Other 3.377 3.405
$583.493 5416.240 Changes in working capital other than short-term debt:
Cash $ 1,881 $ (3,708) Receivables 443 15.140 Fuel, materials and supplies 6.058 1,801 Prepaid expenses 924 (!!5) Deferred fuel costs (553) 4,747 Accounts payable (8.623) (9.877) Preferred dividends declared (875) (572) Current maturities of long-term debt (4,035) 176 Accrued interest (1,153) (832) Accrued taxes ' (2,227) (3,035) Other current liabilities 6 675 Increase (decrease) in working capital other than short-term deot $ (8.154) $ 4.400 See accompanying notes to consolidatedfinancial statements. 20
4 Y Y December 31,1979 <md 1978 (I) Summmy ofSignificant Accowtting Policies System of Accounts - The Company maintains its accounting records in accordance with the uniform system of accounts prescribed by the Federal Energy Regulatory Commission (FERC) and adopted by the New Alexico Public Service Commission (CommissionL As a result of the rate-making process, the application of generally accepted accounting principles by the Company differs in certain respects from the application by nonregulated businesses. Such differences generally regard the time at which certain items enter into the determination of net earnings in order to follow the principle of matching costs and revenues. Prmeiples of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly-ow ned subsidiary, Paragon Resources, Inc. (formerly Public Sersice Land CompanyL All significant intercompany transactions have been eliminated. Utility Plant -
! Utility plant is stated at original cost, which includes payroll-related costs such as taxes, pensions and other ! fringe benefits. administratise costs and an allowance for funds used during construction. Contributions re-ceised from customers to meet the customers'special construction requirements are credited to utility plant.
I: is Company policy to charge repairs and minor replacements of property to maintenance expense and to charge major replacements to utility plant. Gains or losses resulting from retirements or other dispositions of operating property in the normal course of business are credited or charged to the accumulated provision for depreciation. Allowance for Funds Used During Construction (AFUDC)- In accordance with the uniform system of accounts, AFUDC, a noncash income item, is charged to utility plant. The Commission ordered that AFUDC be limited to generating plant construction, effectise April 22, 1975. The Commission further ordered, effective alay 15, 1979, that the rate be increased from the previously apprmed 6.59 to 7.59 and allowed the Company to eliminate the recording of AFUDC on Unit 3 at the San Juan Generating Station and on pollution control plant associated with all San Juan units. The allowance for equity funds used during construction is credited to other income and deductions and the allowance for borrowed funds used during construction is credited to interest charges. The allocation of AFUDC between borrowed funds, after taxes, and equity funds is based on the method required by FERC. Depreciation - Prmision for depreciation of utility plant is made at annual straight-line rates approsed by the Commission. The aserage depreciation rates used w ere as follow s: i try act Electric plant 3.629 3.39 9 Water plant 1.889 1.89 9 Common plant 7.13 9 5.899 The provision for depreciation and amortization of certain equipment, including amortization applicable to capital leases, is charged to clearing accounts along with other costs of operation and subsequently apportioned to i operating expenses and property accounts based on the use of the equipment. Depreciation of non-utility i property is computed on the straight-line method. Insestment in Fifty-Percent-Owned Company - The Company's insestment in a fifty-percent-owned company is stated at equity. The co-owner Tucson Electric Power Company, is participating with the Company in the construction and operation of a steam turbo-electric , generating plant described in note (SL The generating plant utilizes coal from properties of the fifty-percent-ow ned company as a source of fuel. Deferred Fuel Costs - The Company uses the deferred method of accounting for the portion of fuel costs which is recoverable in sub-sequent periods under fuel adjustment clauses.
' Amortization of Debt Discount Expense and Premium -
Discount, expense and premium incurred in the issuance of the presently outstanding debt are being amortized by charges to income over the lives of the respective issues on the debt outstanding method.
?Aff/2)
4 , i . a I investment Tax Credits - I The Company follows the practice of deferring investment tax credits and amortizes them over the estimated useful lives of the related properties. Insestment tax credit carryforwards are recorded to the extent of the sum of the investment tax credits which would have been realized if taxes payable had been based on pretax accounting income adjusted for permanent differences and the existing net deferred tax credits which would reverse during the investment tax credit carryforward period. Income Taxes - Certain revenue and expense items in the Consclidated Statement of Earnings are recorded in a year different from the year in which they are recorded for income tax purposes. Deferred income taxes are provided on these
; timing differences to the extent allowed for rate. making purposes. This normalization method is used primarily for differences attributable to deferred fuel costs, the use of liberalized depreciation methods and different lives
- under the asset depreciation range ( ADR) than under the guideline depreciation provisions. Cenain other differ-ences result in a reduction in income tax expense in the current year. This flow-through method is used primarily for differences between tax depreciation computed under the guideline life provisions ud book depreciation and certain capitalized construction costs, principally AFUDC, deducted currently for income tax purposes.
At present, rates applicable to certain customers subject to FERC control allow recovery of amounts necessary to provide additional tax normalization of the items described above which are accounted for under the flow-through method for other customers. Provision has been made for additional deferred income taxes attributable I to amounts collected under these rates. Revenues - Revenues are recognized based on cycle billings rendered to customers monthly. The Company does not accrue J revenues for services provided but not billed at the end of a fiscal period. j Pension Plan - ) The Company's policy is to fund pension costs which are composed of normal costs and amortization of prior service costs over thirty years. (2) Common Stock Equity The Board of Directors reserved 2,000,000 shares of unissued common stock for the dividend reinvestment program,
- the Employee Stock Purchase Plan and the Tax Reduction Act Stock Ownership Plan, of which 1,229,413 shares j remained unissued at December 31,1979.
l Charter provisions relating to the cumulative preferred stock and the indenture securing the first mortgage bonds t impose certain restrictions upon the payment of cash dividends on common stock of the Company. At December 31,1979, there were no retained earnings restricted under such provision. (3) Cumulative PreferredStock The cumulative preferred stock may be redeemed by the Company, upon thirty days notice thereof, at stated redemption prices (plus accrued and unpaid dividends). Information concerning the cumulative preferred stock is as follows: Aggregate Stated Stated Shares Stated Value Redemptwn Senes Vauue outstandene tin thousandst Prtce tat $ Without mandatory redemp-l tion requirements: 1 1965 Series,4.584 5100 130,000 $ 13,000 $102.516 1974 Series,9.2% 100 170,000 17,000 107.00 1975 Series,10.129 (b) 100 100,000 10,000 110.12 ,
- 9. I6% Series (b) 25 800,000 20,000 27.29 8.484 Series (b) 100 200,000 20,000 - 108.48
, 8.80% Series (b) - 100 260,000 26,000 108.80 - 1,660.000 $106.000 l With mandatory redemption i requirements: I
' 8.75% Series (b)(c) 100 400,000 $ 40,000 108.75 i
l I i
(a) Redemption prices are at reduced premiums in future years. (b) Redemption may not be made through certain refunding operations prior to Starch 15, 1980 for the 1975 Series, or prior to June 1,1981 for the 9.16"c Series, or prior to April 1,1982 for the 8.48% Series, or prior to April 1,1983 for the 8.80% Series, or prior to February 1,1984 for the 8.75% Series. (c) On February 1,1984 and on each February I thereafter, the Company shall redeem 13,000 shares of the 8.75?c Series, pursuant to a mandatory sinking fund at a redemption price of $100 per share plus accrued and unpaid dividends. H) Long-Term Debt The details of the Company's outstanding long-term debt including unamortized discount and premium, less current maturities, are as follows: Issur anJ %rursts Interest Rates 1979 1971 tin thousandst First Stortgage Bonds: 1980 through 1984 3 % to 3% cc $ 5,241 $ 9,012 1985 through 1989 4%4 8,580 8,690 1990 through I994 4'6% 9,880 10,002 lY95 through 1999 5%% to 7%4 32,197 32,602 2000 through 2004 7%4 to 10%% 55,031 38.532 2003 through 2009 8%% to 9%% 119,073 119,290 2004 ttmugh 2009 - f polluticq control series, secu.ing 1.ollution control revenue bonds 6 % to 6%% 274,061 145,000 Funds held by trustee (153,660) (85,825) Total first mortgage bonds 350,403 277,303 Pollution control re$enue bonds, due 1984 5 "c to 7.6?c 77,000 77,000 Other 4,252 2,044 Total long-term debt $431,655 $356,347 Substantially all utility plant is pledged to secure the first mortgage bonds. Approximately 25 percent of the original principal amount of each series of first mortgage bonds will be redeemed through sinking fund requirements prior to the aforementioned due dates. The aggregate amounts (in thousands) a of maturities on long-term debt outstanding at December 31,1979 are as follows: 1980 $5 224 1981 2,314 1 1982 5,508 1983 2,816 1984 4.914 In August 1977 the City of Farmington, New Niexico issued and sold $77,045,000 principal amount of its 5.9% Pollution Control Revenue Refunding Bonds, Series 1977, the proceeds of which are expected to be used to re-tire 7.6% Pollution Control Revenue Bonds and 5% Pollution Control Revenue Bonds at their maturity in 1984. From and after such retirement, but not before, the Refunding Bonds will be payable out of revenues received by the City from the Company. Upon such retirement the Company will also guarantee the payment of the Series 1977 Bonds and secure its guaranty with an equal principal amount ofits first mortgage bonds. i 15I Short-Term Debr and Compensating Balance Arrangements The Company's interim financing requirements are met through issuance of unsecured notes payable to banks 4 and commercial paper. The Company has agreed to maintain compensating balances with certain lending banks or to pay fees in lieu of such balances. Compensating balances are generally equal to 20% of the outstanding in-debtedness or 10% of the lines of credit at such banks, whichever is greater Details of the Company's short-term debt at December 31,1979 and December 31,1978 and for the years then ended were as follows:
.?Agr&23 1
s 1979 1978 tiot them wn,ls t Aggregate short-term debt outstanding: Notes payable to banks $37,250 $ 4.950 Commercial paper $58,710 $19,755 Aserage interest rate on outstanding debt: Notes payable to banks 14 % 9 11 % 9 Commercial paper 13 % 4 10'h4 Maximum short-term debt outstanding during > car $95,960 $68.600 Aserage short-term debt outstanding during year $38,460 523.028 Weighted aserage interest rate on short-term debt outstanding dunng year. computed using daily outstanding balances: Stated interest ra'es i1 TkG 74% Effectne rate considering the effect of compensating balances and fees in lieu thereof 125k9 8%4 Unused lines of credit (subject to cancellation at the banks' option) 560,140 $53.120 Compensating balances at end of year $ 1.956 $ 91( Compensating balances have been reduced by the average difference between collected bank balances and book balances. (6) Incu>me Ta.tes Income taxes consist of the following components: 1979 197M tin themsandsl I Current Federalincome tax $ 3,864 $ 1,609 ! Current state income tax 1,467 1,048 i Deferred Federalincome tax 3,583 2,130 Deferred state income tax 677 657 Amount equis alent to current investment tax credit 13,611 12,413 Amortization of accumulated investment tax credit (742) (527) Totalincome taxes $22,460 $17.330 Charged to operating expenses 521,88i $16.722 Charged to other income and deductions 579 608 Total income taxes $22,460 $17,330 The Company has insestment tax credit carryforwards, for tax purposes, of approximately 556.000,000 as of Decem-ber 31.1979 which will expire in 1985 and 1986. Of this amount. approximately $17,075,000 has been recorded. for financial statement purposes, as a reduction of deferred Federal income tax credits. Deferred income taxes result from timing differences in the recognition of income and expenses for tax and account-ing purposes The major sources of these differences and the tax effects of each were as follows: 1979 1973 tln thousandsb Deferred fuel costs 5 (495) $ 2.396 Liberalized depreciation methods and asset class lives shorter than guideline lises 8.049 4.376 Other miscellaneous items 662 47 investment tax credit carryforward (3.956) (4.032) 5 4.260 $ 2.787 - i
The current portion of deferred income taxes (included in accrued taxes) results from timing differences on deferred fuel costs. Such balances amounted to $1,688,000 as of December 31,1979 and $1,977,000 as of December 31, 1978 atter reduction for investment tax credit carryforw ards. The Company's effective income tax rate was less than the Federal income tax statutory rate for each of the years shown. The dif ferences are attnbutable to the following factors: 1979 19N Federalincome tax statutory rate 46.0 9 48.09 Tax depreciation in excess of book depreciation caused by use of guideline depreciation provisions (2.79) (l.29) Allowance for funds used dunng construction, net of depreciation adjustments (12.1 9) (12.3 9) Certain employee benefits and taxes capitalized for financial statements, net of depreciation adjustments t.59) (.79) Amortization of investment tax credits ( l .04) ( l .09) Other miscellaneous items (.69) (-l . 29 ) Company's effective income tax rate 29.1% 31.6 9 1h Pension Plan The Company has a pension plan covering substantially all of its employees, including officers. The plan provides for monthly pension payments to participating employees upon their attaining the age of 65 or the age of 62 with 30 years senice, the amount of such payments being dependent upon length of service and the average wage of the fise most highly compensated consecutive years of employment. Early retirement is optional after age 55 or 30 years of senice. Normal retirement benefits are the lesser of 659 of the participant's average annual base earnings rate minus $1,320 or 29 of the participant's average annual base earnings rate times his years of credited service. The Company made contributions to the employees' pension plan of $3,058,000 in 1979 and $2,807.000 in 1978 including normal costs and amortization of prior 3enice costs. Prior to May 1,1978, the employees contributed $3 for the first $400 of monthly base salary, plus 3 percent of that part of base salary in excess of $400 during each month. The Company's funding of this portion of pension costs after such date did not have a significant effect on net earnings. As of January 1,1978, the most recent valuation date, the actuanally computed present value of vested benefits did not exceed the total market value of the pension fund assets and the estimated amount of the unfunded pnor senice liability was approximately $3,400,000. (8) Construction Program andJointly-On ned Plants The Company is participating with Tucson Electric Power Company in the con:,truction of the steam turbo-electric San Juan Generating Station. The Company owns an undivided fifty-percent interest in the first three units of the station. The Company purchased Tucson's fifty-percent undivided interest in the fourth and final unit of the San
an Station in 1979 and now ou ns all of such unit.
Tae (.ompany is also participating with several other utilities in the construction of the Palo Verde Nuclear Gen-erating Station with the first umt scheduled for completion in 1983. It is estimated that the Company's construction expenditures for 1980 will approximate $299,000,000 including expenditures on the jointly-owned projects. In connection, therewith, substantial commitments have been made. In addition to such amount, the Company's wholly-owned subsidiary forecasts construction expenditures of ap-prosimately $15.000,000. Details of the Company's interest in jointly-ow ned plants at December 31,1979 are as follows: P' ant in Seru< e kcumularcJ Deprn ratwn Construn twn n ork nu Protren Share at Total Plant tin thou san.ho San Juan Generaung Station $388,893 $26,788 $208,063 65 9 Palo Verde Nuclear Generating Station - - $170,159 10.2 9 Four Corners Generating Station l' nits 4 and 5 $ 26.019 $ o,440 13 9
$_6.087 625
These amounts represent the Company's share of capital costs and the Company has provided its own financing. The Company's share of direct expenses is included in the corresponding operating expenses in the Consolidated Statement of Earnings. The Company also has undivided interests in transmission facilities which are not sig-nificant. (9) Lease Commitments , The Company leases data processing, communication, office and other equipment, office space, utility poles (joint use) and real estate. Certain leases, primarily for data processing equipment, are capital leases. All other leases are operating leases. Certain leases provide purchase options in the approximate amount of $2,146.000 for data processing equipment and 4 5423.000 for construction equipment. Renewal options and contingent rental provisions were not significant. ] Leased property under capital leases at Deceruber 31,1979 and 1978 is as follow 5: j M M Iln themsandst i Data processing equipment $3,871 S2,310 i Other 232 181 {
! 4,103 2,491 l Less accumulated amortization _1,550 970 ,
j $2.553 $1.521 Future minimum lease payments (in thousands) under capital leases at December 31,1979 are: 1980 $ 922 1981 927 1982 312
! 1983 320 1984 230 Later years 457 Total minimum lease payments 3.668 Less amount representing executory w,ts 142 1
Net minimum Icase payments 3,526 Less amount representing interest 770
; Present value of net minimum lease payments $2.756 Future minimum rental payments (in thousands) required under operating Icases that have initial or remaining noncancellable lease terms in excess of one year as of December 31,1979 are:
1980 $ 670 1981 351 1982 192 1983 147 1984 146 Later years 356 Total minimum payments required $1.862 Rents charged to operating expenses were $1,277.000 in 1979 and $1,091,000 in 1978. Such amounts exclude pay-ments made on capital leases. Rents charged to utility plant were $236,dOO in 1979 and $577,000 in 1978. , The Company has entered into an agreement, not included above, for the lease of an office building currently under construction. Lease payments will commence after constructico is completed in late 1980 at a rate of 4.42% of construction cost per year for the first three years and at 9.62'E per year for the remaining thirty- , two years of the initial lease term. Construction costs covered by the lease are projected to be approximately
$ 18,700,000. Such lease is an operating lease.
(10) Res enues Subject to Refund , j A boiler explosion, caused the shutdown of Unit 2 at the San Juan Generating Station dunng the period July 1977 to Stay 1978. The major part of increased costs for replacement energy required during the shutdown was, with the approval of the Commission, initially passed on to customers through the fuel adjustment clause; howeser, the Commission subsequently ruled that charges for such increased costs are subject to refund if it is determined that the Company was responsible for the explosion. Amounts collected subject to refund, based upon a formula proposed to the Commission, were approximately $2.1 million in 1978 and $4.5 million in 1977. Based on the Company's investigation the Company is of the opinion that no refunds will be +c ihe Company's insurance covered a major portion of the cost of replacement. In addition, the Company has collected certain revenues and has established a provision for possible refund of a portion of those revenues that have been collected subject to refund under wholesale rate cases filed with the FERC. Information concerning such revenues and provision is as follows: Resenurs Prm,ston for Collected PosnNe Refund Net tin thousanJU 1977 $ 1,705 5- $ 1,705 1978 6,678 - 6,678 1979 13,177 3.292 9.885 Total $21,560 $3,292 $18.268 (lI) Subsequent Event On October I,1979 the Company entered into en agreement with a group of private investors to sell $45 million principal amount of 10%cb first mortgage bonds due 2004. On October 24, 1979 the Company received $17 million principal amount of such issue with the balance of $28 million received on January 28,1980. (12) Quarterly Results of 0perations (Unaudited) The results of operations (in thousands except per share amounts) by quarters for 1979 and 1978 are as follows: Total Net Operatant Operannq Net Earrungs Quarter Ended Revenues income Earnants per Share Neember 31,1979 $64,335 $16.378 $16,623 5.87 September 30,1979 $66,725 $18,998 $16,661 $.88 June 30,1979 $56,475 $13,192 $ 11,504 5.61 Starch 31,1979 $$6,835 $11,248 $10,015 S.57(a) December 31,1978 $49,473 $ 9,548 $ 7,781 5.45 j September 30,1978 $50,643 $13.039 $11,725 S.90 a June 30,1978 $44,079 $11,148 $10,005 S.84 Starch 31,1978 $43,010 $10,212 5 7,953 $.71 4 (al in June 1979, the Company established a provision for possible refund on certain revenues collected subject to refund since October 1977. The effect of such provision was to reduce operating revenues, net earnings and net earnings per share by approximately $1.9 million, $1.3 million and 5.10, respectively, for the first quarter of 1979. The quarterly results of operations have been restated accordingly. In the opinion of management of the Company, all adjustments (consisting of normal recurring accruals) necessary for a fair statement of the results of operations for such periods have been included. PA9627 1 l
decanhntj')kpat Certified Pubhc Accountants Suite 500 First Plaza Post Otlice Box 1027 Albuquerque, New N1exico 87103 Itat,Marwick.Mitchell&Ca The Board of Direewrs and Stockho.Jers Public Service Company of New .\1esieo: We hase examined the consolidated balance sheet of Public Service Company of New Slexico and subsidiary as of December 31.1979 and 1978 and the related consoli-dated statements of earnings, capitalization and changes in financial position 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 .nd such other auditing procedures as we considered necessary in the circumstances. In our opinion, the aforementioned consoliaated financial statements present fairly the financial position of Public Service Company of New N1esico and subsidiary at December 31.1979 and 1978 and the results of their operations and changes in their financial position for the years then ended. in conformity with generally accepted account-ing principles applied on a consistent basis. Y, $cLMk, $ $ $ 0, February 19.1980 92p21 1 I
dieck/WhnhndMara/ Common Stock: Range of sales prices of the Company's common stock, on the New York Stock Exchange (Symbol: PNM), and dividends paid on common stock for fiscal 1979 and 1978, by quarters, are as follow s: Ranee ofSales Prices Dividends 0 High Low Per Share Fourth Quarter,1979 20 % 17 % S0.48 Third Quarter,1979 21% 17 % 0.48 Second Quarter,1979 21 % 19 0.48 First Quarter,1979 20 % 19 % 0.44 Fiscal Year 21 % 17 % St.88 Fourth Quarter,1978 20 % 18 % S0.44 Third Quarter,1978 21 % 19 % 0.44 Second Quarter,1978 21 % 19 4 0.42 First Quarter,1978 21 % 19 % 0.42 Fiscal Year 21 % 18 % $1.72 Cumulatise Preferred Stock: While isolated sales of the Company's preferred stock have occurred in the past, the Company is not aware of any actise trading market for its preferred stock. Quarterly cash dividends were paid on each series of the Company's preferred stock at their stated rates during 1978 and 1979. ff lY h l lll$ lWh$ l l h The following supplementary information is supplied in accordance with the requirements of Financial Accounting Standards Board IFASB) Statement No. 33. Financial Reporting and Changing Prices, for the purpose of providing certain information about the effects of changing prices. It should be viewed as an estimate of the approximate etfeet of inflation, rather than as a precise measure. , Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured l by tne aserage Consumer Price index for All Urban Consumers (CPI-U). Current cost amounts reflect the changes in ' specific prices of plant from the date the plant was acquired to the present, and differ from constant dollar amounts to the extent that specific prices hase increased more or less rapidly than prices in general. The current cost of property. plant and equipment, which includes land, land rights, intangible plant, property held for future use and construction work in progress, represents the estimated cost of replacing existing piant assets and was determined by indices provided by an independent appraisal firm. These indices consist of a combination of the Handy Whitman Index of Public Utility Construction Costs and special indices derived from actual appraisals of certain property. plant and equipment. The accumulated provision for depreciation and amortization on the constant dollar and current cost amounts of property, plant and equipment was determined by calculating the ratio of the actual reserve to historical cost for each plant account and applying this ratio to the indexed amounts. The current year's provision for depreciation and amortization on the constant dollar and current cost amounts was determined by applying the Company's average annual depreciation and amortization rates for each plant account to the indexed amounts. Fuel insentories, the cost of fuel used in generation, and power purchased for resale have not been restated from their historical cost. Regulation limits the recosery of fuel and purchased power through the operation of adjustment clauses or adjustments in basic rate schedules to actual costs. For this reason fuel inventories are effectively monetary assets, b
As prescribed in Statement No. 33, income taxes were not adjusted. Accumulated Deferred Investment Tax Credits j is treated as a monetary item, since it is returned to customers through adjustments in rates. Under the rate making prescribed by the regulatory commissions to which the Company is subject, only the historical cost of plant is recoverable in revsnues as depreciation. Therefore, the excess of the cost of plant stated in terms of constant dollars or current cost over the historical cost of plant is not presently recoverable in rates as depreciation, and is reflected as a reduction to net recoverable cost. While the rate-making process gives no recognition to the current cost of replacing property, plant and equipent, based on past practices, the Company believes it will be allowed to earn on the increased cost of its net investment w hen replacement of facilities actually occurs. To properly reflect the economics of rate regulation in the Statement of Earnings from Continuing Operations, the reduction of net property, plant and equipment should be offset by the gain from the decline in purchasing power of r:et amounts owed. During a period ofintlation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of net amot;nts owed is primarily attributable to the substantial amount of debt which has been used to finance property, plant and equipment. Since the depreciation on this plant is limited to the recovery of histoncal costs, the Company does not have the opportunity to realize a holding gain on debt and is limited to recosery only of the embedded cost of debt capital. Statement of Earnings from Continuing Operations Adjusted for Changing Prices Year Ended December 31,1979 Adjustedfor Adjustedfor As Reported General Changes in in the Primary inflation Specific Prices Statement (Constant Dollars) (Current CostI (in thousands) Operating resenues $244.370 $ 244.370 $ 244.370 l Fuel and purchased power 85.143 85,143 85,143 Other operation expenses 34,351 34,351 34,351 Maintenance and repairs 15,045 15.045 15,045 Depreciation and amortization 17,603 27,364 28,666 Taxes, other than income taxes 10,531 10,531 10,531 Income taxes 22,460 22,460 22,460 Interest charges 23,008 23.008 23,008 Other income and deductions - net (18,574) (l8.574) (18.574) 189.567 199.328 200.630 Earnings from continuing operatwns (excluding reduction to net recoverable cost) S 54.803 S 45.042* $ 43.740 Increase in spectfic prices (current cost) of property. plant and equipment held during the year S 67,686 Reduction to net recoverable cost $(103,692) (18,568) Effect ofincrease in general price level (151.580) Excess ofincrease in general price level over increase in specific prices after reduction to net recoverable cost (102,462) Gain from decline in purchasing power of net amounts owed 62.665 62.665 Net 5 (41.027) 5 (39,797)
- Including the reduction to net recoverable cost, the earnings (loss) from continuing operations on a constant dollar basis would have been $(58,650) for 1979.
Taptx
Five Year Comparison of Selected Suoplementary Financial Data Adjusted For Effects of Changing Prices Years Ended December 31. 1975 1976 1977 1978 1979 (In thousands of average 1979 Jollars except per share amounts) Operating revenues $114,657 5126.957 $166.134 5208,378 5244,370 Historical cost information adjusted for general inflation: Earnings from continuing operations S 45,042 Earnings from continuing operations per common share $ 2.29 Net assets at year-end at net recoserable cost $428.877 Current cost information: Earnings from continuing operations S 43,740 Earnings from continuing operations per common share 5 2.20 Excess of increase in general price lesel over increase ia specific price after reduction to net recoserable cost $102.462 Net assets at year-end at net recoverable cost $428,877 General information: Gain from decline in purchasing power of net amounts owed S 62,665 Cash dividends declared per common share 5 1.70 $ l.81 5 1.93 5 1.91 S 1.88 Market price per common share at year-end 5 24.36 5 29.95 5 25.13 $ 21.31 5 17.27 Average consumer price index 161.2 170.5 181.5 195.4 217.5 20f Jfakwntcfhim)tk Public Service ompany of New Mexico believes that each successive generation's quality oflife will be progressively n se dependent upon the availability and reliability of electric and water service. C,msistent noth this behef. ne recogno:e our obligations to: Our Customers An adequate and reliable source of electric and water service at the lowest reasonable cost; Our Shareholders A reasonable return on. with optimum security of, their investment; Our Employees An objectise opportumty to progress and grow through prcJuctne and meaningfid participation; and Our Future Generations A leeacy of adequate electric and water service provided through free enterprise with environmental and economic compartholoty. To meet these ohhgarwns. we afirm a policy of: Operating our Comp,my in a respamsible manner which reflects the hithest corporate integritv; Providing open communications in order to achieve a high les el of understanding and acceptance of our p: rpose and endeavors: Shanne our technical and administrative skills with alllevels of government to assist in assuring the best decisions are made: and Promoting. supporting and partictpating us worthnhale communits acturities and Jevelopment. J. D. Geist. President YfN
$ Y $$$ $ A. B. COLLIN5. IR. - President. ReJJs Communerarr ms. lac. - Greenssu h. Connecticut H L. GALLES. IR.* - Chairman of the Board. Galles Chevroler comp <my - Albuquerque. N-w Alexico J. D. CEIST* -President. Pubhc Sersur Company of New Alesoco C. E. LEYENDECKERt - President. Alambres Valley Bank - Deming. New Afenco D W. REEVES * - Chaurru.n of the Esecurise Commarrer ef the Board of Directors. Public Serru& Company of New Alesico R. R. REHDER* - Professor of Afanagement. Robert O. Anderson Graduate School af Afanaerment. Untsersurv ofNew Alexico -
; Albuquerque. New Afesico G. A. SCHREIBE R* - Chairman of the Board of Drrectors. ParJrc Service Company of New .tfexico R. H. STEPHENSt - President. Stephens-Irrsk Agency - Las Vegas. New Aletico E. R. WOOD - Preudent. Santa Fe Aforor Comp,my - Santa fe. New Afesico i
- Alembers of the Eucurise Commarrer
? Alembers of the Audar Commuree
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J. D GEIST - Pressdent
- k. B ROUNTREE -Sentor Vice Pres'Jent i C. D. BEDEDRO - Vice President. Admmistratum J. P. BUY > RANT -l'oce President. Dwisum Operations B. D. LACKEY - Controller R. F. %1ERSHON - Vice President. Industrial Relartons i B N1CLCOCK - Vine President. Public Afates R. %1CLLIN5 - Vice President. Operations D. E. PECKHA%1 -Sesverars and Assustant Treasurer A.1 ROBISON - Vice President. Fmance
- P.1 ARCHIBECK - Treasurer and Assistant Secretary
- 1. L. WILKlNS - Vice President. Engmerring and Operarums B P. LOPEZ - Assistant Secrcrorv H. L. HITCHINS.1R. - Assistant Secretary and Assistant Treasurer
- 1. T. ACKERSIAN -District Vi<e President. Albuquerque and Western Area P. R. GA%1ERTSFELDER -Dostrict Vice PrestJent. S<mra Fe and las Vegas F. E. GRAY - Vece Pres Jent. Urban Desclopment R. A. LAKE -District Vin e President. Belen. Bernahllo and Deming Divisums T. P. WARSKE - Distruct Vice Preudent. San Juan W. A. BADSGARD - Western Divosion Afanager L. C. EDWARDS - Bernahllo Diviston 31anager i
E. L. FOGLEN1AN -Las Vegas Drsusion Afanager R. H. HALLFORD -D(mme Divisum Afanager W. %1 HICKS. IR. - Afanager. Water Operarrons. Santa Fe i L S%11TH -Belen Disusum Afanaeer huuhrifkn 414 Siher Asenue SW. Albuquerque. New Steiico ll$ l! l Albuquerque National Bank. Albuquerque. New %Ieuco Chemical Bank. New York. New York Irung Trust Company. New York. New York Anjohau i First National Bank m Albuquerque. Albuquerque. New Sletico l Chemical Bard.. New York. New York j trung Trust Company. New York. New York i YQN
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