ML20043H637
| ML20043H637 | |
| Person / Time | |
|---|---|
| Site: | South Texas  |
| Issue date: | 12/31/1989 |
| From: | Carey R, Shockley T CENTRAL POWER & LIGHT CO. |
| To: | |
| Shared Package | |
| ML20043H620 | List: |
| References | |
| NUDOCS 9006260217 | |
| Download: ML20043H637 (47) | |
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.entral Power and 1.ight Q)mpany supplies ekuric senice to a 44,000xluare-mile area tiut reaches into 44 - 4m '
D , counties of South Texas. The Q)mpany is a :;ubsidiary of Central and South West Q)rporation, a registered holding company m (*
' At the end of 1989, Central Power and I.ight company sened ,
549.301 eustomers in 226 communities and the surrounding area. ,y The Company also supplies, at wholesale, a part or all of the electric ; ' f . o
. requirements of fnr rural eleciric cooperatists and two municipalj elearic sptems. The territory sened by the Com uny has a population of approximately 1.9 million. Principa executive offices f- 3 are located at 539 N. Carancahua Street, Corpus Christi, Texaf
' lilephoneq512)8815300. s;, ~ :
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7inancia Summary CENTRAL. POWER AND IJGilT COMPANY
SUMMARY
OF FINANCIAL AND OPERATING STATISTICS iw9 t9si S citruct FINANCIAL STATISTICS (Thousands) Operating Revenues 8 836,585 $ 7h),432 6 Fu:1 and Purchased Power 336,3H0 343,629 (2) Other Operating Expenses 233,12M 250,016 (7)
'lhxes, Other Than Federal income 43,196 45,430 (5)
Federal income lhxes 62,275 28,979 115 Openiting incorne 161,606 122,378 32 Net incorne 147,781 156,819 (6) OPERATING STATISTICS Kilowatt-hour Sales (' thousands) 15,306,774 14,617,583 5 . System Maximum Demand (Kilowatts) 3,145,000 3,013,000 4 Electric Customera (Year-end) M9,301 539,896 2 Average Kilowatt. hour Sales Per Residential Customer 11,46; 10,925 5 Average Residential Rate Per Kilowatt-hour 5.93e 5.97c (1) Amut tae Cover Contents The 1989 Central Ibwer and ught ; .. -
-u y- ~
cpl. 5ptem Map . . . . . . . .. .1 Company Annual Report cover features % 1 Financial Summary . . , .2 the South Texas Project Electric - _ .1 Presidents'lettu .
. . .. . 3 Generating Station Texas' first fully
~
-.. .L Operating Re- ,. .. . ....5 operating nuclear power plant will give
~ Customer Sunw Progrants , . . . . . 7 the Company a diverse and stable fuel -
llullding liasic Economic Strength. . . . 9 supply wdl into the next mil' ..ium. '7- ' Itue Ctse Settlement
... . 11 Settlement of CPI's rate case will allow it to concentrate on what it does best -
t Powering South Texas' Future ... 13 J Marketing to Meet Needs ... .... 15 mrovide reliable electric service at the - '
. . : .. EtTicient, Effecthe Results , . .. 15 owest reasonable rate. As the Company i
..J,7 ;;, . #t,r \ eq~, Environmental Awareness . .. .... 17 faws the "New llorizons" of the 1990s, 4@ .. , V -
a' - Forecasting Fuel Needs . . . . .... 18 it realizes that many new issues lie ahead. Fortunately, it can draw on 2g% $n 1 .
],~ A Found.uk>n for Excellenw . . . . . 18 nearly three quarters of a antury of ;g # (l.; / '
.. 4 O i Directors and Officers . . . . . .. 19
. ; . .. - 4 Financial Review. . . . . . . 21 experience to face with confidence the dawning of a new era. -* "
financial Statements . . . . . . . . . . . 23 u Notes to Financial Statements . . . . 27
~
Sekct d Financial Data . . . . , .. 38 g.' . Management's Discession and
'~
Analpis . . ... . . ... . . 39
. Comparative Statistical Record . .. 43
. Charts .
.. . . . . ....... 45 9 , e Shareholder and Investor C... . . . . . . . .
Information . ..... ....... . 46 6 2 i
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( f . l'f f'%il jtofil gifl() I P illtf k N(*( ()IlV(* ( Mll( [tf h j()(34tf } C fgipy ary() Puh ,, (v)(qt (ag()f l t g pf f qgs, y (jf g(x h jpy ll5 lgggg ,(,( l g ( (gq),{ yl gg g ggy, gj gg,p houlh IP s W. Pf f ye( 1(in(jfg (jef:(u af pig (it,gton g ( .<P'.*y laut ('Hded hPit K 4 H y aHr, 1 1)>> Presit.ents' Irtter ,I I. n ox oca,i .niew anaac. u.nn nower and ugn, o,mnn 4 .j meet the gronog energ\ denunds of wuth leus wM in N*)Ihr vaind una o! the wuth 'lcus hoica Lleant hencraung stanon went into uimmert ui operahon The suucssful op ranon of b.th um!.s unes the l.ompam a dncrst and suble fuel supph y lionne Nw tuel expenso were ab >ut 129 milhon less than thn would har ban wubiut sTP k' l'9' t! est fuel smings are expeacd to range f rom 1% is mdhon Sc ,lrt it,illnitst) tIu! the PJhlh l~ltht\ (.4imnussliin < tl lcus wlll y) pro \c a r,He t Aw Tltlelllell! slp' led in lehroai\ lWI h\ the (aintpam a Kj mt hl o! tt!c In!Crient >rs WI the Mtr cdy' Er two step ) % inuihon rair un reast would in tulk unplemertal m IWI and u? subin/c r.ne' i'irough 1*. i sta kholder carnmgs were down m NW Jac to the lat L o! raic rhd amuted u nh NTP llownct N* canungs were improu d in 121 nuihon dut u rn ording delened auounung on I tHi 2 h,lx J 'in <,imf1huthin !ni n Ihe I'l ( aJmuustIatne Liw i.adge S'hch \ou look j! pll the &c* aspeds oj the (.ompam x 1 puns & \uu w dl sf y thji wt
'llherwlM' Ilad an ilutstalkhni' \ cal Sc u nfinpuc l. > mak. .'r( a! st:M L rw.E d est c!!c!v ( ll1 t u3l'ir!K'i MTih e 3
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Good ferxrs nuy nitke gad trighlxn, but we are tearing dcmu !arriers heturn ounehes and dune wr sent to buiki a stronger relatiintship We implemental serral customer semce programs in hmtsi at helping dialvantwed N>uth leuns Our imuhuirnt in the aduk literaq eampaign aho ex;urxkt! during the past year lhe vital resoune in sening custoners is the 01 empknre it n essential that orn' empknre nrnry our mmmitment to superior customer senict. We are continuing to emplasir training as a means of instilhng this phiknophy and will mnunue emplusinng superior semtr in our daily aethitio Our succeo rests with ow ahikty to ykw ourselves as the customers so us A posithr inuge will help retain natonen in an increasingly competitise nurket while hminng innitable criticism sien rate rise in hkAllen de city government has expressed an interest in buying mr facihties to create a munkipal system h is our strong behel that this eHon would not best sent de custoiners its da .trea, arxl we will resist any kas of our custottier lxne Cit Itn senrd South Texas for alaxs 9 years W Imt de expenise and roourm itut muld not te purclused in a sptem takanrr We can assure all our notonrrs of just and trasoruble rates, ahich we will keep comp 1itist our rates antsniently tuve been anong the kmw of all untstor smned ektuk companies in Texas Our proim! rate will be comgtinve with ether utilitio in the state As we huk toward the new horizons of the next &ule, we fully reahze the ddTwulties that he ahead 11r obsueles lefore us call to mind de adage %u not mly h.nr to do things right, pu Imr to do dr right thing" We spend a great deal of clion to nuke sure dut our emphnro are given the opponunity to get the job done nght Rmrganization in 1988 sucamlired our Q)mpany Otn empknir-antomer ratio of U to 1,0m a curllent Te almill have to ensure the imrstments we nuke are sound and will earn a return hel is a my cusi in doing husurw and de compkuon of S11' means we will lt usmg the least expemive fuel source avadable Another ewmelv nnponant area in nunaging expense n the mst of debt, which tkiermines a ponon of kikm'an hour cost lias past year. we went through snrral retinancmgs that nll help 4 reduw the mst of ekerity for the next quaner (entun-Our new nurketing strategt has been shaped not just to sell kikmatt houn, but to oller inniness slutons it is tailored to customers so dut we do ornthing we can to help fit their blairrAs nenis Thile We slew the E/Ab Wil i optlmbni, it n tempered With de reahz.iuon dut there are still nuny hurdles ahead ihmnw we have uken stens to weader these di!heult times We tenuin confident that the .uions our L apan) lus ukea this past year will ensure its growth and prosperity in the future. Ilobert t Carey T V Shockley,Ill f n%de,w u nanww on n. s,.. w e nmky.. (118tJl hatfl Wul Uplju UWtigefift Q1tre and haAh hel Orp Prenkin wel(.harf 1:answe OHka. (srural ami kaah Dms %rewes lem i 4 _, , m ,m -
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p s u ( t InNIlel( ld opvato in of the we south ktas Piotet t 1:lectra (,eneraung stanon durnig 1989 and prohahic settlefnent of the (ninpan) s f et.nl raic case j ar h ni Iwi mean rui ne than lust p gi ti ad flews It if (.cntral Pilwer af Kl 11,',111 ( A Hnllan) MicW
.a omphshments allow (.Pl to ,
re ocus anenniin on w hai n has di die Ilesl It if 3 \ cat s l$n t\ klt' n hahic rcavinabh prncd cleara senne ll\ttorcIHitsenlllMIIH customet \ou d bener he sen mg '"
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someone w ho is '" "'"" ""' ' ""r na sen a e donng the par due to lowrt lud Es ath a c for the P"ns apphes M""I' '" " I "' '""' ' '"'" ' " * ^"* dEC """"dI "*" """I ti n c\cn HRiusin lb iwt%cr a'niing electra unknes the unludes lnohks ul v%nal ( PI Wowan houn to U N>l, an mes%.ge has hkied sigmta.un e t u+ noen south hos w ho increav of W h nundx4 of ( nmpaines igniinng this (ounsel '"""'"""""""'"" awaknnal custonien at n ar end in.h lif ul dK'ntsch t% a lot iil ' husmess in the next t enton . In die conunenial canyon. whde unhoes wh< ise emplovces [3(h1 kgg [g winch na ks wononut gniwth, odal n'r""e "r"' op u N gr f ant t usimmel sen a e , the kni e ordef o! husmess (an lo. ik l *4 ' """"C ' d I '""'"C ' loruatd to grow 1h and piospenn v uineased hv M. Innn 1988 ( .Pl empl ivres. hum honi hoc lodosinal nienun innel k olin es .n rou s iuth 'lexas tii the , he past war saw du- Do and kdowan hour sdn Ih iflic tillk e let tigfil/c dia " ' provakng cu ellerne m t usiome, consinanon and ( M kni .unt Annun an uironx-sCn h e nlust Ix' nb lie th.In .I ' 4i m nutlear power stanon s construc energ) sales losses due to th H) O)st$ In rate haw All ( t tgeflet alit ;f t mdicanons are that IWn will show Net nuome detreased from {(i Mlbstantialh mlpnited ()p' rating ll5h 8 flHlllin) In l988 it n $ll" h resuits now th.u these maior tasks nuinon m i9s9 The deacase is s { CPI s 1989 n<ai usenues unrecovend o, sis or sun w hde ( rnake cM ellerk e the standant by increawd h) 64, llaw nienues the (nmpain's rate case was in whn h (.Pl people perform their increased h\ I!K prunanh due to progrns Johs non d.n a i'4 increase in kilowatt hour Rehnanung of Onnpam bonds
' pnivKle reliable electt'lt. sen K e %Iles alkt IIK' intplemefilath )f) t il during l989 will %Be cpl arid its at the lowest reasonable o>st mtenm rates in september !uel customers nulhons Nenes 7 was
- enMire a lair returfl hi levt'inin der! cased h\ lesN dlall 13. IsslK'd ill 1)ct erIIIK'r nl Ilflance sun kholden on their due to reduced fuel cost tender offers for serns V First in\ cstment Average nwenue pei Ldowan Mortgage lionds and $cnes 1985 5
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l l l l Debentures Adthhonally, the vulnerable semor att/ ens, mostly paid, or noubes CPI il a pnhlem interest rate on the Nenc31984 A people with no relJtives or close exots p>lluuon mntrol innds was fncials to look aher them lhe Our Cornement herment />lan i_,m ,esuk o, d- p, _ teaa_,,i ho _ nm,s who h m _ h,ni , measures it n esunuted the lunt contact with the pubhc to irnume lhe program acktret.scs l Onnpany will athieve an after .is remgni/c when people nuy need their wintrn that pension or savings of approumately $2 milkon assnunst After n< ding a irouble Naial Secunty checks might not per year for the nexi quaner sign, an emplo>re infornn a artice in urne to allow them to pay (entun- regional oordinator who mniacts by the cledric bill duc date the appnipriate area onnmunity Customers who sign up for senar agency 1 hat agency then Qinvenient Payment can choose uills the customer to see if it can the duc date of their bills to more Customer Senice hap a o ,.iy m u es p ,nd h ,he a,,,va, Another new senice helpful to of then dnsks elderly and disabled is our &nt in 1988 cpl. bname a corp >raic huny Nottikyttion program spunot of an Adult I.iteracy Iksidential customers who sign up program in Corpus Christi for the pmgram designate a third During 1989 the Onnpany made party who can ir noufksi if contributions to hteracy pnigrams Pt emploires pnnr y.n.lce h Muut to be ihniughout our x nice n truory dady they can le dNonnnud for non paynwnt and pnnided public awareness rela 11 upon to help a lhe durd lurty - a relauve, advenisements wektng tutors and neighlur in need The unnluny neighbor or fnend - is under no studenh for the hieracy agencies ennanced us reputanon as a GrundA obhgauon to pay du bdl Onnpany employees alm respmsible corporate cinien in 1he third pany simply reminds the volunteenst to sent as tutors in 1989 by intuaung or expandmg cusmnu r dut dw bul exeds m le On progrann customer semce pnigrann that nuke hic a hitic casier for th w ouisvete rmyam snowin noinon to tno sono c<wnmarney Nmth lexas neighlxus . jp . 'g'p"vgpg , f ygg In the summer of 19H9, # ' n 4 c yj'.1gp
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I'.xciting oil dim 1hrrk% t(m sk iniUioll(13%) Increaw to go into prohjal for three OnNeutive place in knir South 1t xas ciunlics clicct in March 1990, and a $120 years. llearings in the pnnierur during 19H9. New dirn% nal, or million (13%)iricrease to go into d<xket, the first of several phases
%rinnual," drilling technigtns elkt1 in jatniary 1991.1he of the rate case,Iqan May 22. >
lave ktl to inspening of the increase represents a 29% system- llearings in tlut pluse, which Austin clulk formation. Oil wide increase in rates. liase rates annrntrated on the pnnknce of itulustry analysts ate calling the w(nikile Irki stable thnnigh 1994 unistnK1lon expemhtures ami l'earsall Deki in l's to,7.avala, extrpt for specifini unusual nunagement (k cisions associatal Dimmit arnilaSalle niuntks circunntarnes. Clunges in the hrt with bulkhng Kil' lasted more
*another Sphulletop" Some of inirtion of the bill wtniki anitinue than six nunnhs.1hc pnnience t the writs are capable of pnxlucing to be adjustal to track fuel onts, d<xLet itselllegan four years ago, up to 5,000 luncts Ier day after revkw and appnwal by the with extensive testimony and .
Agtkulture remains a mainstay PilC. disawery nuterials tring pnukksi of the Sotuh 1t xas mnkuny, Settk1nent allows CI't. to reawer to intervenors. (k spite a suminer dniught arn! nnts of nuntnKtion arn! On April 19,19H9, CPI was Iktemler freeze that destroyn! operation of Sil' as well as other granted (k ferral acaiuntirm on i much of the 19H9 citrus cnip in onts while acrelerating nintinual S11'linit 1.1he I' llc onter the l(io Grarxic Wiky hul rate hearings A(kiltional allownl the Omyuny to pnicessing has alnunt unlimiini settlement herrfns indude: capitalite, or defer, o[erating and > puential in Smah li xas Approxl. carlier nimpk'tlon of lengthy, maintenance onts, taxes, nutely 91% of the varini experwive rate hearings and legal depreciation and carrying msts agricuhural pnxhx1s grown here pninedings; the end of addnional from the time linit I went into are punrssed elsewin re, but th.u defened charges on S115 and annmercial operation until new < jercentage will (kTline with new gre.ner oxiperation in eflorts to nues are put in ellect or until lich. textile and other pnxessing plants strengthen the South 1t xas 15,1990.1he Onnpany has plannni for annpktion in the inw nunomy acquestal an extension of this decade, in general, the settlement date. CI't also inquested defenni ; moves major customer groups anuunting for Linit 2, and a , ckner to equalient rates of favorable ruling w;n receivnl from return, while limiting the impact the administrative law judge in on customero who uw small 1:chruary 11e seulement provkks
. late Case Sett;ement """""""'"*"r""
seniemeni contains an nunomy
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ihe Arsi pluse of the nne increase l(esklential Service rate for is effective, and deferral of Unit 2 reshlential nntomers who use less carrying ants until step two of the than 500 klkiwatt hours of nue increase is in ellut. h[i settlenwnt of electricity irr month 1his addresws mncerns that low use In midJune the Gimmission allowed CE a $39 million interim a regulatory issues customers will be able to rative rate increa e When put into etInt vd aunrrning STI' was essential service at an affordable on Aug. 28 the increase signed by cpl., most of the price. represented the hrst rise in intervening partk s in the An abbreviated pnxvnling Onnjuny rates in six yeari l' rom Company's rate case and the related to the $120 million snund 1983 H9 residential customers' Public Utility Qimmission of 1t xas step of the settlement will have to clearicity bills decreasal 26%, General Giunsel in l'chruary be Gled in 1990 llowever,less primarily because of reducal fuel 1990.1hc settlement lenehts all opposnion, delay and regulatory nnts.1he interim increase was partk 3 - the Qnnpany, nntorners expense is anticipated to be acaimpanktl by a $32 million and South lt xas associatal with these hearings. (kcrease in the fuel lador portion 1he agtn ment inchnics a $2M 1he settlement followed months of customers' bills, resulting in a million base revenue trx reaw. It of in gotiatiorn diat pn(reded net average nite increaw of less annists of: an interim increaw of during the rate case hearings cpl. than 1%. Ilowever, the increase
$39 rnillion, with a $32 million fikt! its rate case l'eb 15,1989, did allow cpl. to improve its cash decreaw in fuel, for a net interim asking for a Orst' step increase in flow and earnings while waiting increar of $7 million that becune retail base rates of $155 million far a decision on the permanent ellecti"e in August 1989, a $105 annually, with additional inacases rate reluest.
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;,it've lived in Yorktown au my Ide except for.a Sve. year stint in theff
,, Navy during the war. As far as I'm conoemed the United States -Q
- le the nat6on in the world, huas is the best state in fly iunion, County le the test county in the state, and Udtpd;;9;
- Yorktown is the test,ony in Dewitt m .-e .%em ~,9W**
mm na,.9,y,pp u;Our communty:s population. ls only about 2.800 talks l end mostK A of them raies cattle and hogs and farm aman grains <There's net-
;;;much.here . tor our younger folke so we lose'most of them aCC7 o they grow up and go off to further their educahon, But it's a nice,4
' trierw9y and congenial communMy ~;fl2;L,;Z""yt7'",; p.'
_1 was in the lumter and construction business for 36 years!!?T:"' I built about 200 to 300 homes in and around Yorktown.4~ < of the homos't built were ell electric, People just seem 10ll;.;,
.% prefer the convenence,. selety
. ,. - and rehabluty of all elec, trio , #s,
. , _.7.,.,,-,-
'I'm 72 years old and may not build another.new home in mVJ: . ,'
.16tetime. But M+;;= either my heating or coohng unit fails I'm-
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I
, putting in a new heat pump, CPL's'marketin0 programs about ?
- Good Cents hones and electric test pumps have made a -
believer out of me! ' l 1.!
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nunager declared the unit in of the units and may possibly I)OWering80DO. mmnwrcian,peranon.iune iv. on exiend the entire plancs operating 1 scimdule with the constructor's life. N N NUO ume hne set in 1982 linii i began One of the key determinations commercial operation in August made during 1989 was the 198h decision to extend the unit's 1)pcal of new p>wer stations, refueling cycles to 18 nonths lxgh of the STP umts egerienced rather than 12. A longer fuel gcle onstrwtion of cpl;s a few " bugs in the systeni during means a higher capacity factor for most signincant the Drst year of operation Most or the plant, and more benefits to imrstment esvr, the the problems have been worked customers from lower cost nuclear South kxas Project Electric out, and S1Fs excellent operating energy Making the transition to Generating Station, mncluded results in 1989 helped prove the the longer gcle will take two to with mmmercial operation of llnti prudence of investing in the threeyears. 2 during 1989. Texas' first nuclear 2,500 megawatt p>wer station incorp> rating STP mnstruction power station oIIers great promise The state of the art plant s costs into cpl?s rate base will raise and p>ssibilities for cpl s service operational costs have run rates flowever, even after area The Company owns 25.2% of measurably less than those for the R.Ading F.' in rate base, South the twin-unit plant STP will help average nuclear plant m the Texr, will pay electric rates near stabilize fuel prkrs and countiy the average for service in the availability, and add to the in August during timt l's first state. STP will pnwide the power ecmumic strength of the servkr refochng. mspect on of the plant for long-term economic growth. area demonstrated that the water Nuclear pmvr gives the Company The Nuclear Regulatory chemistry used has been greater Ocxibilky in responding to Commission pavej the way lnr successful m nunimizing the Ductuations in fuel prkrs.1he commercial operation of linii 2 by buildup of various materials m the total benents from the facility granting its full power operating steam gc erators This will lead to outweigh any temporary negative lkrnse March 28,1989 The longer hfe for maior components impact from higher rates. The lighting of One Shorehne Plaza lowort, in 1989 drwnatcuny tanghtened Corpus Chnsii n night skyline 4 . . . . . . . .. . . . . .. .. .
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'MiUh # i'W [1!.(N @ [f't M ( N NM.$ .W h / M M N d . M Energy etScient Good Cents apanments and homes are being constructed h throughout South Texas or ;
i
? j undreds of CPL 1 Wul marktting programs benetii Marxeting to Meet cu,mmem ana the Company, J, ,ol employee 3 never werk with the A primary example of a public. Yet these employees.
hJeecs m. ke,mg ,,,a,egv ,ha, mee,,the,c who,e .eu,,ome,, a,e co.wo,ke,, goals r the cpl. Gml Cents in the field. also have adopted a program Good Cents targets the commament to prc viding excellent i i residenual construccon market. and efficient service. encouragmg builders and home For example, severe weather in Pl s Markeang buyers to cor. sider the advantages February and December of 1989 Department oI energs ethaent housing While tested commurucation.s and Y underwent exten3ne promoung energy consenanon cooperanon between power reorgamzauon dunng 1989 The and saving customers money on stations. the Company's Energy Company re-evaluated all of its their unlity bills. the program ar.o Control Center and service ex sung nurkenng programs to supports the Company goal of employees in the regions. On meet heightened compet.aon and imptoved system load factors a6 Dec. 22, CPL recorded a peak load reHect a market led operating lower overall costs per kilowatt demand of 3.145 megawatts. > aew philosophy l'nder the proierted hour record The total energy demand dynanucs of the utihtv industn in south Texa3 buiklers for the day also reached a record l the % - more compennon from construct J almosi IDoo CPL. high of 6'.235 megawatt hours ' other energy supphers, nerhaps tertified Good Cent.s homes During the cold snap some l accompanied by diluted regulanon during 1989 Other program Texas utiliues could not meet their
- markenng efforts will be 'ughlights were demand, which led to power required to be more pro actne Construction of Good (ent3 shortages on Dec 23 across the 'hvo b.tsic criteru will direct apartment uuildings throughout mterconnected electnc utihty nurkenng durum the new decade the sernce area, including a network However, aware of the Do CPL prograios proude 2munit complex in Corpus forecast for severe cold weather.
soluuons to cuwomers' needs) Chnsu CPL had all of ie Companyi 15 n-
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- The 1989 Corpus Cwisu Parade of Ilomes. a tour of 15 hotDes that attraded more than 6,00(>
visitors, exclusivelV featured (hKKl(ents h<intes The 19tX) tolti also h.Ls conimitted io display only Goxi(ents-certified homes Through the Commercial Fhxnthght Program, the Company J mstalled more than 3,'00 kghts during 1989 These hghts represent 2 megawatts of olT peak load 4 g t W i @' hs _l)> j: * \ m-
, . ,,s .
2nsunng o ccat, r ec tive 3esuts Energy othcient Good Conts apartments and homes are being construeled throughout South Texas E l
} undreds of CPL Will r arketing pn> grams benefit l employees never Maxeting to Meet cu,tomc<s ano tne Cenoang s -t we,k with the A pnmary example ut a public. Yet these employees, hteeCS markenng strategy that meets these whose customers' are co-workers goals is dw cpl. Good Cents in the field, also have adopted a program Good Cots targets the commitment to providing excellent resdenual construtnon market, and efficient service encouragmg budders and home For example, severe weather in Pl:s Marketing buyers to wnsider the advantages Fehruary and December of 1989 Department of energs efficient housmg While tested communications and underwent extensive piomotins energy conservanon cooperation between power reorganizanon donng 1989 The and sasing customers money on stations, the Company's Energy Company re-evaluated all of it.s their utihty bills, the pmgram also Control Center and service exisung marketing program 3 to supports the Company goal of employees in the regions. On meet heightened compeution and unproved systen- (oad factors and Dec. 22, CPL recorded a peak load reflect a marketled operaung lower overall costs per kilowan- denumd of 3,10 megawatts, a new philosophy linder the proiected hour record. The total energy demand dynamic.s of the utiktv indusar m South Texas builders for the day also reached a record the '" % - more compennon trom constructed almost IJ100 CPL high of 67,235 megawatt hours other eneigs supphers perhaps cernfied Good Cents homes Dunng the cold snap some accomparued by dduted regulanon dunng 1989 other program Texas utilities could not meet their
- marketing efforts will be highhghts were demand, which led to power reymred to be more pro-actie Construction of Gml Cents shortages on Dec. 23 across the Two haac cntena will direct apartment buildmys throughout interconnected electric utility marketing dunng the new decade the sernce aiea, meluduig a network. Ilowever. aware of the Do cpl. programs provide M)-umt complex m tmpus forecast for severe cold weather, !
l , olutions to customer < needs Chnso CFL had all of the Company's 1 15 [ _ ll((QQ.?l_jj NfQ } (Qlgt: }} } W
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available genatmg umts and umts to meet the comples semce employees .vad) 10 meet operaung requirements of the ; the anticipated de! Hand C(llupati) s elettrical system. CPI Winle the Company has no near continues to install boiler and term need for added capacin, turbine digual controls The there are long-range plans to re- mmhncanons enhance operating
}k)%er sorne olJer generatirig ethciencs li) alhiwing the units t<>
urnts This will involve the run on automanc controls at installation of new vas turbmes hghter loads as well as normal and heat re- .n loads and to respond more quickly generators to , ay steam to the exisang sieam turnines These to emergenes generation needs Addinonalk these comrols hhggg i st.ne.of the art modincanons will improve the units heat rates, a hygggg dramatically improve the units' pnman measure of how efficiently ; ethciencs a3 well as supph needed we operate our power stations { capacity for growth the rest of this cpl. stands m the foietront of our i centurv mdustn in this apphcanon of f lo adapt the okler generaung digital control system 3 ecting our
'+x -
.,7 ef.vironment has long
% w been a pnority with the Company 41' y
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- 1 fl As a good corporate cuizen.
y . :[. .' cpl. seeks the latest methods to r,. . 3 _ m aed re ,cie the - 1
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'; dispose of spent solvents in l f
- W mcmerators Now these spent 4 >- -
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*- j solvents will be regcled by x .
e
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manufacturing facihties, such as p k _
. cement kilns. Contaminated oil is
.. 3 .. seing detoxibed. and the vaiue of i
; . e[
L' the oil is being recovered by using l j . . ,v s ,
.-, a as a fuel stock Thi3 has reduced {
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- . conserwd resources l i
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Our Environmental Senites ( d; - ' '
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". , <a, l)epartment conducts continuing J studies tkH Wdl kt't'p Coyny
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,- . ' - : 3,, ,,f standards ahead of increasingh .
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stringent environmental
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cpl, enhances the area's natural
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,, resources through its support of l '. - ,
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3 the Gulf Coast Conservanon Assocanon cpl. uarine O '
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,7 '. .
l)evelopment Center To date 50
-4 milhon redfish fingerlings have a neen released into Texas havs and estuaries The center recenth
?
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- L
. . . :.. received an award from the Gulf 113MiWMAniWh22d3uMihMATMtU LixMdAM w%$ of Mexico hunative recognizing its n,gorous maintenance and improved technology ensures ett cient operation of CPL p >sitive impact on area sport generating unas 6 dme l'
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Woommunny"em envom evnemet to ZtW~ 11higschpWNspeopisC.; "aseT MW WJ
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.aa wn.niares of w xtonupw.otens.w metday wheneva you ram we h%' . . . Y pgoinQdofftMet.Mifty.,7N7, e DoYllidependM a prowemhi omosavio Anasgivesvovee
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16
available generating units and units to meet the complex service emphnres ready to meet operating requirements of the the anticipated demand. Company's ekctrical system, Cit While the Company has no near- continues to install triler and term need for added capacity, turbine digital controls. We there are long range plans to re- nulifications enhance operating power some older generating efIiciency by allowing the units to units. %is will invohr the run on automatic controls at installation of new gas turbines lighter loads as well as normal and heat recovery steam kuds and to respond more quickly generators to supply steam to the existing steam turbines. These to emergency generanon needs. Additionally, these controls h h g k' l t state of the-art nulifications will dramatica'ly improve the units improve the units' heat rates, a pnrnary measure of how efficiently kgg efficiency as well as supply needed we operate our pmer stations. capacity for gnath the rest of this CPL stands in the forefront of our century industry in this application of
'Ib adas the older generating digital control systents.
f rotecting our
. . . . . .. . . . ~ . . -
environment has long
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been a priority with
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the Company e e
.1,' As a good corp > rate citizen, Cit seeks the latest methods to
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minimize and n cycle the wastes it generates. Clt once paid to s .
., ' 4. ; f ' , ' i dispose of spent solvents in a
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. . .1 . :=
, . . ,- . ]J. solvents will be reofeled by ,
e . . . . -- _- n 1. v .1 blending them into fuel stock for J g l. , , a manufacturing facilities, such as ; 1% . ' cement kilns. Contaminated oil is ' c.'.. being detoxified, and the value of s i 7~ g . c *'
; the oil is being recovered by using
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t as a fuel stock. This has reduced l j b .{ waste disposal costs as well as consenrd resources. 8' '
'~
;' Our Environmental Services
~
Department conducts continuing .
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. ;,Q.;
studies that will keep Company standards ahead of increasingly 4
. + stringent environmental i .
, ,. .gL. ? ! regulations.
/{ Cit enhances the area's natural 3,
p resources through its support of 9
. . . - '! the Gulf Coast Conservation Association / CPL Marine Development Center. To date 50 1
,-) million redfish fingerlings have
#p
(
#. (
been released into Texas bays cod i i.p.g) $ MI . ' 9 estuaries. The center recentiv
.- Q '"i-* b- ,.,'.x 3 received an award from the ' Gulf 7..nf w e.m ) WQ % ge 8,. r n . .
li of Mex co Initiative recognizing its Rigorous maintenance and irnproves . og, ensures ethcient operahon of CPL i generating units positive impact on area sport ! fishing and tourism. l 17
\
1 l l i 1 2 l r I l F,orecasting Fue. Neccs e l l decade ago rutural g d gas supphed 99 % of w!! w1 the Company's fuel needs hlay coal and utanium atcount for approunutelv 'm of , CPlis fuel sounes Whde g.ts pnces u unnue to luse a great unpact on the (ost of semcc to customers the addinon of $TP to the gelielatiflg systent greath reduces sulnetabihn to volanle smyn e,non i.no nnenen now recmye cmne, canon in um wmis l Irk e .uld supph t t HKhtkifb lil the futural tus nurket servncmen and hnemen know 1;ue m 1989. LPI nutured Founcation how to doincir s salch and developmeni or a raci , ethuenth Trauung and iesis Pn n urement Plan designed to {,0F ILXCe.ence: mciude hants on work wnh duca (oci purchases dirmuxn , supervnors .n ihe Coionam s 1999 'Ihe pl.ul utirlines how the CI); imp OyeeS - trannnsuohn and dasm>m Compam wdi pun hase luci sinav at work hxanons supphes m the future. gauguig comem ana percened nmike, y M llunun relanons trauung for all s custome, serm e rep,esenui,ves l suuations Although the volanhn . s o ensure cusninier CPI:s most vnible, personal l of the g.o nurket nukes plamung conuct wuh customers aho wa3 f sanslacnon the most these purauses an mem we rund.unenui requue o,nauued dunng ihe 3 ear uns x icace. the Company beheses ; < ment n qtuhhed. u >uncous trauung wdl oinunue for new nurket will oghten, and g.b emplovces Lustomer sen he crapimees. .md rehe,her courses supphers will tu ome mcreasingh suris won po iple w ho know how w dl nuinuin emplosecs cusomer relucunt to dedicate resenes ni to do their lobs. uke sanstai non service skdh thcu customers lirm g.n m their work and h.nc pode m A .\luugement l >cselopment purch.bes with llexible terms will the Lompam 'Irauung for Program unplemented ni 1989 he more dithcuh to negonate The empimees durung 1989 li s'ncti on seeks to budd a foundanon toi the Ct 411 parts s slMTl[lc pl.in t llilllfles ;I slip llt)rllfig alkl deselt ) ping (,Il ( Almpant s luiure \luugmg ul l prudent u surse of action for the people the cln tra utihn ind,nin n not new decaJe tlut wdl meer la an 1.menun and senicenun npet ted to get iun casier m the l regulatory and relubihn u rnh. *!on donng 1989 set the 9ns but will be more I reyllirPfliellt s 11 alst i pB Aldes s!.Indahl ill die Ilkhnin h)r thn o inlldk aled .h t ( Hop?tilli)n opportunines for economa al sp a npc of trauung f ollowing ins ic.ncs and regulanon hcu nnes puR h.bes let HgalH/alliin ill the t A KnjMfit flHire tilinl des Atti;it. ling and Illel savings dorthg 1989 alKl Ifnplclllefluib di til ul c;ith kUPpmg Olmpetent, skdlcd resulted m two returuh to icurement program n.198~ xx workers and slip nnors wdl clnhimerN ('Pl refundell $ 9)h t ertilhJth if t til NCfs k clocf1 and reqtitre clih.Ilb etl tr.iulilig ;ind nulhon to cudomers in Apnl and linemen in ame a tiip pr e inn un entnes. and LPI n addres3mg
$20 ; nulhon ni ( A toher 'i hr , ^ >gr.un emtu es that these nsues 18
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Robert R. Carey .-- , ,. eCl0rS e,es. lent a,.i Ch f E,_uve . s r
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Of6cer. Central Power and laght .
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C<wnpany. Corpus Chnsu B. W. Teague - Vice huent ; %. l M. L Borchelt . Chairnun and Chael Executive Richard P. Verret Of6cer, Central and South West Vre President i Corporation Dallas Clayton R. Kirk W. R. Farquhar, Jr. Vre President Reured General Manager, Lavaca. . Navulad Rivts Authordy, Edna De j t and Chief Ward Ruben M. Garcia Engineenna Offrer ( Presulent or pnncipal of several Ronald L Kellett .- -
> +
Grms engaged si constructum and IU land development, laredo ' ~ ' Mary E, Sullivan . Clayton R. Kirk D**'"'" l Yre President, Central Power and l ught Cornpany. Corpus Chnsu C, Wayne Stice l Rotiert A. McAllen N'*W . gfD($$.
- Robert A. McAllen investments. Mary E. Hunt <
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%csixo Assistant Secretary , 4^'.'.
Marilyn J. Beehe - .
- O . I Jim L Peterson Presmient arul CEO, Whataburget. Assastant Secretary
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Presalent and CEO and Director
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- H. Lee Richards effective January 1,1990, to assurne
' # N .x ,-\,b President. Hygeia Dairy, Harlingen 'i - -
- 15 ' * ' ' l duues as Presnient and Chief Execuuve otTrer of Central and flunt B. W. Teague
%)uth West Servres. Inc., and Vre President Central Power and bght Company, Corpus Chnsu 5enux Vice President of Central and '. . . . . , , _ . . . . . .
i South West Corp Richard P. Verret Yre Presujent, Central Power and Robert L Range reured as .
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l Light L npany. Corpus Chnsu Execunve Vre Presalent and Director _ - ,.
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Dale E. Ward
- Vre Presalent and Chief John W. Crutchfiew reured as ,e ~ V y l Engineenng of6cer, Central Power IArector Apnl L3, IMJ
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and Lght Company, Corpus Chnsti Gerald W. Tucker resigned as Contrclier January 12. lWA
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j Ronald L Kellett resigned as '
; J Director Apnl 13, lW). to assurir ;l_. -
i dunes as Assistant to the Vre l Pressfent of Operatons of the . t -} O i I Company On January 12. !W). he v
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, 'i' REPOR'l OF MANAGEMFNr 's =
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, . Management is responsible for the- .'hasis. No internal control system can provide: i
. preparation, integrity and objectivity of the absolute assurance that errors and irregularities financial statements of Central Power and 1.lght '
will not occur due to the inherent limitations 'of - u, . Company as well as all other information / , the effectiveness' of internal controls; however,: 1 < ,
'~ management strives to maintain a balance, ... ; i W ,q 9
( contained in t'his Annual ReponMhc Anancial
- statements have been prepared in' conformity. ; recognizing that the cost of such a system should . '
',d=
,y ' with generally accepted accounting principles - not exceed the benefits derived. No material. , , ,
. applied on a consistent basis and, in some ' internal control weaknesses have been reponed o.
1 cases, reflect amounts based on the best ' , _ td management. <
, M i
, ; estimates and judgments of management, giving. MArthu'r Andersen'&'Cofwas engaged to audit' .
< due conskleration to materiality. Financial _ ,
- Information contained elsewhere in this Annual-the f nancial statements of the Company and . > '
'l Issue a repon thereon. Their audit wass
- i Report is consistent _with that in'the financial- . conducted in accordance with generally accepted J v '.
statements.- , auditing standards. Such standards recluire a E J
. The Company _ maintains an adequate system of = review of internal controls, examination of = l a ,
internal controls to provide reasonable assurance / J ' i , selected transactions and other procedurest that transactions are executed in accordance with sufficient to proylde reasonable assurance that" , 1managemenCs authorization, that financial' the financial statements neither are misleading"
, statements are prepared in accordance with nor contain material errors:The Report of o
. generally accepted accounting principles and that -, Independent Public Accountants does not limit M
. the assets of the Company are properly . the responsibility of management for information - safeguarded. The system of internal controls is contained in the financial statements and i : (kicumented, evaluated and tested by the - reisewhere in the Annual Report. Company's internal auditors on a continuing 1 [
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, . Presklent arul Chiel' Execudvc Omcef . , 1 s hp -
. . i R Rkhard Shambiln.. a
. Yke Presklent,l'inance 4
Ll i j lhinald 1. Kellett i ', t!- Controller s y. s 4 s t e eI ,,
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- REPORT OF AUDIT COMMITiliB j
=;
, lhe Audit Committee of the ikurd d Directors is and the independent public accoununts the overall=
ciansmi of six outskie directors. The members of scope and specific plaru for their respective atxhts. the Audit Comminee are: 11 C lYtry;Jr., lhe Gunmittee aho discusses the Company's financial Chairman, Jim L l'eterson, Ruben M. Garcia, W R.' . sutements and the adequacy of internal controb. The i e Farquhar,Jr., Robert A McAllen and ll. ire Ownmittee meets regularly with the Oxnpany's j lucharth The Committee held three meetings internal audnors and h%endent public acmuntants ' during 19H9. to discuss the results of their audits, their evahlations ,
' 1he Audit Oxnmittee oversees the Company's of intemal controh, and the overall quahty of the il lituncial reponing process on behalf d the ikurd of Q)mpany's financial rep qing 1hc meetings are Directors. In fulfilhng as respmsibility, the . designed to facihtate any private communicatkx) with ,
. Committee recommends to the ik>ard of Directors, - the Committee desired by th; internal audnors or - I I
subject to shareholder apprmal, the selection of the itxlependent public accountants. ' Cornpany's hxteperxlent public accountana. The ' j-Audit Oxumittee discusses with the internal auditors ,, c":>' ' i K C Petty Jr . Outrman, Andh Gxnmittee REPORT OF INDEPENDENT PUBl.lC ACCOUNTAN'IS 1b the Stockhoklers and ~ to oixain reasonable assurance about whether the ikurd of Directors of financial statements are free of material misstatement. j Central ibwer and ught Q>mpany: An audit includes examining, on a test bash, ; We have aedited the acctmipanying balance sheets *" *"EP'"*8 """* ' "' " and statemenu of capitaluation of Centralibwer and the financial statements. An audit al.so includes '.'8
' Ught Company (a Texas coqoration and wholly owned amsing acumndng primpics nd and subsidiary of Central arxl South mt Corporation) as "I8 " #** **"" *"" " 'Y "'*
- 8* "#"** " " "*
of December 31,1989 arxl 1988, and the related ##'*""8 """"0* #' **#** E**"""'*' statements of income, retained camings and cash ichew that our au(hts prmW a teamMc h i
"' ' )
llows for each of the three years in the perk)d ended i]m, the financial statements referred to December 31,19H9 These linancial statements are i u the responsibility of the Company's management. Our alove present fairly, in all material respetts, the i respxulbility is to express an opinion on these nel 1000 d Cemmi Power aM UgM Q)mpany J as of December 31,1989 and 1988, and the results of financial statements txtsed on our audits. Its operations and its cash flows for each of the three We cotxlucted our audits in accordance with generally acceped audidng starxiank Those years in the perkxl ended Ikcend>cr 31,1989, in ' standards require that we plan arut perform the at.dit conformity with generally acceped accounting principles. 44 4 . litilas, Texas Arthur Arxlersen & Gs. Februaq 21,1990 g
. 22
- j m
m , ;, ...,...; u Statements 01neome CEffrRAL l'OWER AND I,1GitT COMPANY he the Years Eruicd liecerutner 31 19H9 19H8 1987 (thousarvis) Elecinc Operating Revenues Rewdential $312,M50 , $295,167 $273,22'l C<wrercial 2S4,3Gi 244,082 231,(XM - Industnal 184,871 180,345 19tl,481 Sales for resale 47,356 35,458 g!,034 Other 37,241 35,3N0 4 522 M36,585 79(1,432 768,2 tit Operating Expexes xul Taxes Fuel 319,821 324,698 303,E67 l'uretused power 16,559 18,931
' ' 13.440 Jiw operating _ ,.
182,528 136,181 124,276 Maintenance 61,435 42,3P 40,891 Deprecutan arvi arnortuatum 113,73h , 71,497 55,115 Deferred STP costs (124,573) - - Taxes, oder thn Federalinconw 43,196 4 5, 4'10 38,177 FederalinconIe taxes 62,275 .I.tt,979 50,0fa 674,5)79 6fA054 625,829 Operatmg income 161,606 122,378
. . .- . .M2,435 .
Other income and Deductxms Alk>wance for equity funds used umg construction 24_,923 103,340 _ 98,424 , Deferred STI' carrying costs M4'i90 2,581 - Other 3,451 331 825 112,968 101,3'Wi 104,165 Income liefore Interest Charges 274,570 241,714 256,600
~ ^
Interest Charges Intenst on kang-term debt 129,535
~ 122,356 ~ 108,038 Interest on short tenu debt and other '12,422 7,087 12,172 Alk)wance k r tx>rrowed furwis used dunng constructum (15,168) (62. M8) (65,5l' i')
126,789 66,M.IS 54,673 Net inconw 147,'781 150,819 191,927 heterred Stock Divulcruls 24,558 21,525 15,820
' ~
Net income for ('urtrum Stock 5123,223 $135,294 $1'76,107
- , . . . . . , . , - = -.
~w Statements 03etainec. hmirg CENTML IUWER AND LIGitT COMPANY
' ~ '
hv the Years Eruled December 31 IDHD thli _ . . L9H7 ., (thousads) Retained Eastungs at Beguining of Year $720I956 $5ei5,f12 $459,555 Net income for Comnwn N1 , 123,223 , 135,294 176,107 Deduct: Comrrum Stock Divvferh% 50,000 - 50,00() Retamed Earnnign at E.ul of Year $794,179 $720,956 $5E662 M The amunpanymg inweiin bwrui statenwnts are an recuras part et these u4 avne+
....mn w c -. -
ww tua UJ M_ 3aance Sleets a _ m ._ . _ CENTRAL. l'OWEA ANI) 1,1GH1 t,OMl'ANY As of Daemter 31 IDM9 19M (thousaixh) ASSE . _TS .. . . .. . Eheter UttW Pl.ini Pnxtuctni $3,000,358 $$92,798 Waasnussa.n 309,125 3N,133 Disttibutkin 611,152 579,562 C.cneral 241,4WI 191.327 Civstrui:txx) work vi progress 52,052
.682.716 Nuclear fuel 121,709 117,101 4,298,859 4,I69,637 Less
-. Accuns..t.e.d Depr.eciatavi 769,M80 6fe.015
. . . . 3..,528,979 3,5.H.,622 Current Assets Cash and temporary cash investrnents 1,839 1.750 Advances to affihatts - 52,205 Account: receivable 32,398 14,282 Materials and suppim, at ascrage cut 36,203 Mn12 Fue) inventory, at awr.ge cost 31,801 25.N6 P. repayments and oth.e.r. 7,M59
.. - . -- 12.1 FG..
110,l00 128,677 Deferred Charges and Other Assets Deferred STP costs 209,161 2,581
- Othet 47,913 %7.702 257/t76 30,283 mm 3,896,155 3 670.432
.- s-. . . =========
CAPITAtl2ATION AND LIMillINES Lapttahzataji. Comnviu stock, $25 par value. authoived 12,0WNN) sbams, issued and outstas daig 6,755.515 shirt s 1EM,N M A ,888 Pawl in capital 40!L000 4%lM) Retained etu%ys 79-1,179 721),350 Total Granmt n Stock Equitv 1,368,067 12341.M Preferred stock Not subject to twnhtory redemptwin 250,351 .'S'),3t 8 fuhect to nLuWory redetytion 47,272 46. % 6 1.on,s term debt 1,001,M 4 1,1G 97,' Tot.d Capitahmku: 2,997.231 ?.918.155 Current Lbbihtaes long tten debt due wit'xn welve muahs 158 11,149 Advances kom affikates 46f>06 - Accounts psyable ! M,358 40W9 Fud refunt dut customers -- 19.9N Custonier Gax> sits 3,895 8.W2 Accrued taxeo SfM 3.880 Actrued intere 4t '. 1,676 YS 012
- O'her th 492 15,0)1 1C,&M 133 5,17 Defetred Credit 3 Unbiled customer accoiuits sold 40,253 A,175 Income taxes 507,905 3F6 057 hwunent tav credt2 197,M99 i93.618 736,056 618,750 11.896,155 53,670.432
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. CENTRAL POWER AND LIGifT CGMPANY-tj For t!w Yea,rn Erwied themte 31 19W - twoi 127 (thousands)
OPERATING ACTIVITIES Net income, ,
$147,781 5156,819 $191927 1
,4-Non-cash. items included in Net incone Depreciation and amortization 130,396 82,569 61,752
. = Deferred income taxes 128,740 39.826 28,923 ' 7 s Deferred inwstruent tax credits 1 (5,619) (1,576)- 14.301-
~
\ juowance fo'r equity funds used dunng (onstruction' '
(21,923) (98,424) (103,340) Deferred phmt costs. -(209.163) (2.581) - Changes in Aswts and Liabibties (18.116) 584- " Accounts recervable . 1,800 .
-(21.063) :(2241 0 7,161)1 Fuel refund due custom.. era - i Fualinventory , + (6,755) .1,993- (7,4 68)
'i t,nunts pa'yable 11.429- - (3.380) - -5,289= )
.[ ;
Accned taxes 1,799 - * (19,970) - = (1,359) . 4 Other (41.t29) (36,239)- 47,295-99,3 /7. . - 119,397 221,963 t
- INVESTING ACTIVITIES,
]C[truction expenhtutes ;
(101,631) ~ 0 68,250)- (275,846) s
, A!iowance kxr bottowed funds tned during construction ' -
(15,168) -(62,548)- (65,537) (116,799)' (230,798) - (341,383)
. w FINANCING ACTIVITIES .
Proceeds Fnn issuance of j l Long-term debt , 150,000- ,150,ono , 100,000 Preferred stock '- 85,000 ' - Ketirement oflong-term debt . .. (11,149) 0 2.140) + 030-Reacquisition of kmg term debt (150,361) e - = O7,915) ! ! Pro'meds from pollution control bonds held in trust - 1,746 5,176 *
'_ 58.462 -ic ;i ;
_ Change in short term debt 46,606 '(42,430) : 42,430 . , p ; L Paynvmt of dividends t (74,576) ' . (20,946) 1 (65,820) L--
' (34,7.'14) u ,, l164,659 117.026 t NET CHANGE IN CASH AND CASH EQUIVAY.ENTS - t . -(52,156) . . .-53,258 . "- * (2,394) f 53,995 . 7,131: =t CASil AND CASil EQUIVALENTS AT HEGINNING OF WAH 737 1 t ,
CASH AND CASH EQUIVALENTS AT END OF W.AR S ' 1,839 - -E:53,995 n , '4-J,U/ *
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Statements of Capitaization CENTRAL. POWl?H AND l.lGilT COMPANY As of ilecemtu r 31 19M9 19M8 (llu>ustnds) COMMON STOCK EQUITY $1,368,067 $1,294.M4 l'REl' ERRED STOCK Cumulative $19) par value, audorned 3,035,(xX) shares Number of Sharen Current Series Oututanding Redemption Price Not subject to mandatory redemption 4 uis lu) uo $105.75 10,(MX) 10,000
~
_,4.209 75.u)0 103 75 7,500 7,500_ 7.129 2fM),00(i 101.u) 26,000 2ti.ux) 8 724 5(x1,000 102 91 50,(XX) fd).utX) Auct on 750,0tU lu) 00 75,000 75,u X) Auctuin 425,uX) lu)lx) 42,500 42 fdl0 Aucton 425,uso 10010 42,500 42,fdK) Esuance expense - (3,1491 (3,132) 250,351 250.368
$ubject to nLuxiatory redempton 10.059 5(x).ux) 101 76 50,(XX) Ed),0tx)
Issuance expense (702) (792) Urumortm! ndempth,n costs (1,936) (2,242) 47,272 46.MWi 1,0NG TERM DEllT 14rst mortgage bonds Senes J. 6w9, due January 1,1998 ~28,0(X) 28,000
~Senes K, 8h9. due Jminary 1, 2ux) 25,000 25,0(o 5cnes l. 79, due February 1, 2001 36,000 :Di.ux)
Senes M, 89, due November 1, 2tX)3 16,(XX) 46,000 ~ ! Senes N. 96%, due June 1, 20nl 40,(MK) 40.000 Senes O. Mi4, due October 1. 2007 M,000 75.u10 Senes P. FA't, due September 1, 2tu)8 75,000 75,0x) Senes T. 7 h. due December 15, 2014 111,70,4 *
~Ill.700 Senes U. 9h9. duc July 1. 2015 M1,700
' ~ bl,700 ^
Senes V,11%9, due August 1, 2015 17,'5 6, 85,000 _Senes %. 8h9 due May l,1996 ,, _ _ _ 200,000 __ 2tx)JMO _ - Senes X, 9h9, due November 1. l994 100,(XX) 100.tXN Senes Y, 9h9, due June 1,1998 150,000 Ifd),0ui 5enes Z, 9h9, due December 1, 2019 150,000 - lietentures " Senes 1985,12'f, dia Septelder 1. 2015 16,309 85M O Installment sales agreements - Pollutu,n contrr4 tui', 7 A dueJuic 1,2 WI 9,h25 9,825 ti9, due Novembe r 1. 2io? 34,235 34.2 G T49s (Air 5eptitnbei 15, 3)14 -_) 6,330 630 10% duc Octokr 15, 20l1 199,200 In7io 7 0,9. due ihvernber 1, .hilh < net of $1,745,000 he'd by tnntee m 198Ai t 0,fMpo 5!s 25.i
. [bEh pa[a}Migiue Decem,her [ l90f,__ , _,_ _ _ _ , _ ,hlt) 1,, ,, _ _ , _131{ f Uimn.rturd dscount TAM,31M) (lu,9Hei >
lI [ U1amiatbed c4*4 t f reupterd delt 153,570) Q),fi37) 1 1,331,544 4 1 325,977 j TOTAL. C Al'lTAl.r/ATION $2,W 1J34 d =====_ . 1e; war seannia.- enar __ r 52318,if6 n emes ==sen. =,d e m a,4,. ,x-o.,rm.imn.m - ,. ,m e a...no,-s j a o i . 2 , y i
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Notes to ?inancia Statements
- 1.
SUMMARY
OF SIGNIFICANT ACCOUN'11NG POLICIES Central Power and I.ight Qtupiny (Qcipany or the life of STP in its retail rate filing. %e funds cpl.) follows the Uniform Sistem of Accounts received from customers applicable to prescribed by the Federal Energy Regulatory decommissioning will ir paid to an irrevocabk Gaumission (FERC) The Company, as a member of extemal trust. The Company will begin recogniaing tbc Gmtral and South West Sprem (CST System), ths axst upon the receipt of an order by the Public enpiges in transrKiions arid a) ordinates its activities t tility Q3mmission of Texas (1txas Commissic a) and cperatiors with otner membery of the CST authoriang the recovery from its cusuxners. System. The significant accounang policies are Electric Revenues and Fuel. Revenues are summarized bekm: generally recorded at the tirne billings are made to Electric Utility Pfarr. lilearic u$ tty plant is stated customers on a cycle-bilhng basis, and the aist of at the original cost oh mstructkm which includes the fuel is charged to expense as consur ut he cost of contracted services, dirm labor, matenals, Company recosers fuel custs applicable to sales to its murhead items and albvanws for borrowed and wholesale mstomers, regulated by the FliRC, equity hind used dinng, construction. through an atramiatic fuel adju mient clause. Alhwance for Fuxii Used During 03nstructiort Under rates established by the lhas Commission, lhe tilowance for fands used dunng constructiori the Cornrany reawers fuel costs as a Rxed ( AFlHX:) is the resuh of an amunting paredure component of luse rates. The difference between whereby amounts. based up n the level of fuel revence billed and fuel expense inct.rred is construction work in progrtss (CWlP) rep t serting retorckti a, ar, addition to or a reduction of the in erest on baramul funds and a retum ou reventes, with a correspond ng entry to accounts equity <apita' esed to hnance ainstruaion. are receivable or fuel refund due cuemers, as relhxted as anhts on the statements of iaawne and approprise. CNer rexwrries cf ftml are to be charges to G1P AFUDC daes not repreent a refundeJ to customers; urxkr recoveries may te current source c(unsh funds. Under cobfelwd billed t. ) custonw es atter Tex t. Commissk n approval. regulary nate practices, a rerum on and reaway of De cmt of nuclear fuel is atnonized to fuel sech uts b permhed m determining the rates expenie based on a ratio of the estimated Blu's used char;pi for utiht) eice.. The gran rempxsite and arailable to generme aoric energy, and rates avmrsd 11M%,1184 and 11 M, for the years includes a part< ion for the disposal of spect nucitar 1989 19bk and lW The tu, efeo aghctble co the fud
&bt compuaent is recor&d as a ciarge to de' erred Unbilled Cmtorxr Accounts Sok', Tiv Company immie ta opense %e Compaw excludm taim sells accouras receivable, w..hout rmourse, to CSW tic calculxior. of AFl.DC that pirtico of CFIP Creja, hc. a wholly mmed subsidntry of Central ircluded in iu cae twe for rate raiking purp1ses. an wth West (orpornion (CbYt the Company's Depreciation I or financial reporting purpases, paron in February 1987, the Comptny began pnnmrr3 for deottviation of electrie uibry plant ne se'Jiq receiv>bles for electric service pnwidrxl but
, conpsteJ ustru 6e crraight hoe mehd gercrally a tu yI billed to ctwomers indnidual rates mphed to the saious claves el' Statemmes of Cr,h Flows. The Company adopted depreviable property The armal annyiite rain '
. citemer t of Finmcial mourding '3tandards (SFAB wrzyd $12%,311% md 3 % for th: years '!M No % Sts.ertem of Cd Fkms, for the year en&d M ad WU7 Decemlnr D,19tH, al.d luts tystated the' year ended INuciena Occwarhnng Tre Gwnany's Dewmtrr M (987, for consistency For purpwes por6)n of de estmetof mst of de ouunish ming the of the statenen of ca h flows. the (nmpang
, Smth lirca, Prcrt O IT) nudear pwer pl: int is 038 ' omiders higuly liqu.d debt inscuments pitchded q milhoa ir W89 dolb. The, mt edatue wdl b: sich a ruamri:y of threr montit< ar less to be cash jL I i
trvrsed M ipiten p rudic@ me Gmirany ts equivakuts !ccorungly, the w,; wry c.as's D tecpstins, reweg of Jeuxnia,ionine, cq)ern o er a ewn' rn ad om to fliato are uns* red ceA -xprrh_% d 1 \, o' ( p
; 27
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CFXTRAllOWER ANDI.lGifT COMPANY .
,. 1he folkning arnounts of interest (net of amounts < ' and reponing for income taxes fnwn a deferral capitalized) and income taxes were paid (recehrd) for . nwt!xxl to a liability approach, and will be ackzxed each of the three years ended December 31. by the CSW System no later than 1992. The change .i
. 3. , g7 on the txilance sheet will result in increases to tiw accumulated deferred income tax liability, to a ,
, Internt incme Taxes s t27,9si (56,3em sTN s 44.Itx; regulatory obligatk>n and to a regubtory asset. 'ihe 14 ms 4,1r,8 ack3xion of this standard will not have a material New Accotadog Standard. In Decemler 1987, erect on de resuhs of operatkm ,;
the Iinancial Mounting Starxbrds Ikrard (IAsu) Reclassificatkn Certain financial statement items i issued SIAS h % Accountiny for inmue Taxes. for prior years lune been reclassified in order to lhe simim! require a citv.ge in the accounting conform to the 19H9 presentatkm
- 2. FEDERAL, INCOME 'lAXIS -
The Company, togeher with other memlers of the < CSW System, files a consolklated Federal income tax return. Details of Federal income taxes are as follows:
~
19H9 19M 1987 (thousands)
' .q Induded m Operataqg Expenses and Taxer, CtaTent $50,000)- $((728) $ 6,873
' i Deferred suune taxes IWed STP costs 70,462 633 -
Deprecnition ddferences y _.~ 42,334 27,653 8,606 Defened fuel 6,892 1,556 (6,588) AFUDC Lev-rd 5,157 21,146- 25,409 Reacqured debt costs 4,722
, (960) (258)
UdM revenues (4,270) (5,512) - - (8,799) Other 2,597 (5,213) 10,519 127,894 39,283 28,889 Deferred swestment tax crests ' Provision 372 20,349 (701) Amortizaton (5,091) (875) (6,048) (5,619) (1,576) - 14,301
~ *
, 62,275 28,979 50,063 Included rlher in e and deductm Curren- 1,536 (1,822)
~ 6l4 -
Deferr L (792) 543 34
-/
_ 744 1,157 - (1,788)
$63,019 $30,136 148,275
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Nota m aancia Statements . ; i [
' Taxes deferred in prior years are crulited to . . Total income taxes differ from the amouius com-income when txmk deductions exceed the related puted by applying the statutory Federal income tax !
tax deductions.1he deferred investment tax credits : rates to income before taxes. The reasons for the - 1 (lTC) are included in income over the lives of the differtmces are as follows:.- !' related properties,-
'l (dokrs si thousand9 t989 % 19tlH %- t9tl7 % ;j lax at statutory rates $71,672 34.0 $63,565 34.0 - $96,081, 4a0 _ '!
.Ddfereres AFUDC-equity . (8,474) (4.0) = (33,464) 2(17.9) (41,336): '(17.2) . a Amortization cf ITC ' (5.991) (2.8)- (875)' (0,5)' (6.048) 1 - (2.5) ' !
- Other 5,812 2.7 910 0.5 (422) (R2) -
S63,019 29.9 $30,136 '16.1 - $48,275 20.1 At December 31,1989, the cumulative net related tax effect anmunted to approxintuely I amount of income tax timing differences for which $34,160,000 and $11,614,000. deferred taxes had not been provided and the - , 1
- 3. LONG TERM DEBr !
1he mortgage indenture, as amended and sup" limitations on Dividends.1hc mortgage inden- 4 plemented, securing first mortgage bonds issued ture of the Company, as amended and , , by the Company constitutes a direct first mortgage supplemented, contains certain restrictions on the : l lien on substantially all electric utility plant. . payment of common stock dividends in accord-
' Annual Requirements. The annual sinking fund . ance with provisions of certain of the Company's ;
requirements are generally 1%'of first mongage supplanemal indenmres, tidcuritks ani bonds outstanding 'these requirements may be Exchange Qxnmission (SEC) has entered an order satisfied by the application of net expenditures for permitting the payment of dividends not otherwise bondable property in an amount equal to 166%% of = ' permitted under the Companys most restricthe the annual requirements. supplemenal indentures.1he SECS order requires a At December 31,1989, the annual sinking fund any dividends paid out of amounts that wuuld : requirements exclusive of maturities, and the therwise be restricted are limited to net income , earned in the twelve months immediately i annual aggregate maturities including sinking fund ptreeding payment of the dividends At Decemter requirements, of long term debt for each of the next five years are as follows: 31,1989, $720,956,000 of retained earnings were not available for payment of cash dividends Reacquired long Term Debt. In December li Fund Re ire nta Matu les 1989, the Company issued $150 million of 9%%, (w) Series Z, First Mortgage Bonds, due December 1, 1990 $9,423 $ 9.777 20191he proceeds from this issue were used to 1991 9,250 9,629 reacquire $68 million of 11%%, Series V First 1992 9,250 = 9,655 Mortgage Bonds and $68 million of 12%, Series 1985 ! 1993 9.250 10 401 mma h Compy ab hed k imerest n rate on its adjustable rate pollution control innds, 9.250 110h29 collateralized by Series T First Mortgage Bonds, at ' 7%% for the remaining 25 3rar term of the bonds. The premium and related reacquisition costs of
)
long-term debt are classified as a reduction to long-term debt on the balance sheet and are betag amortized over 10 to 30 years. 4
>29;
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y , i CENTRAL l'OWER AND IIGifT COMPANY .
- 4. PREFERRED S'IOCK The dividends on the Company's $160 million Each series of the preferred stock, with the auction preferred stocks are adjusted every 49 - exception of the 10.05% Series, is redeemable at days, based on current market rates. The dividend the option of the Company upon 30 days notice at rates averaged 7.77% and 6.43% during 1989 and the current redemption price per share, .
1988. kedemption prices of the 8.72% and 10.05% Series The Company's 10.05% Series, $100 par value . decline at specified intervals in future years.1he preferred stock requires a mandatory sinking fund 10.05% Series is not redeemable until 1994.1hc - Company's three issues of acetion preferrert stock
~
sufficient to retire 35,250 shares in each twehr. month perkx.! beginning February 1,1990 and totaling $160 million may also be redeemed on any endingJanuary 1,2001, and a specined number of dividend payment date at par. shares in each twelve-month perial thereafter, lhe sinking fund redemption price is $100 per share. 5.SilORTTERM FINANCING The Company, together with other members of aggregating $241,000,000, including the the CSW System, has established a System money Company's lines of credit. These lines of credit- , pool to coordinate short term borrowings and to generally require an annual fee. Short term cash - make borrowings outside the money pool through . surpluses transferred to the money [xx>l receive the issuance of commercial paper and from banks. . interest income in accordance with the money pool lhe CST System maintains bank lines of credit arrangement. 6,llENEFIT PIANS The Company, together with other members of' As of Deccmber 31,1989 and 1988, the plan's _ . 1 the CSW System, participates in a non. contributory- net assets exceeded the total actuarial present value defined tenefit pension plan ~ covering substantially of accumulated benefit obligations. all its empl<>yees. Ilenefits are based on in aildition to t'he pension plan, the Company employees' ) tars of service, age at retirement and - ~a lso panicipates, with other members of the CSW.
- compensation The CSW System's funding policy is System, in medical and death benefit plans for based on actuarially determined contributions, substantially all active employees and employees taking into account amounts deductible for income who retire from the CSW System. The Company's tax purposes and minimum contributions required cost of providing those benents was $9,515,000 in by the Employee Retirement income Security Act of 1989, covering 2,288 active employees and 1,233 197l, as amended.
- retirees; in 1988 the cost was $6,886,000, covering ,
lhe components of net pension cost'are as 2,290 active employees and 1,338 retirees; and in follows; 1987 the cost was $6,646,000, covering 2,602 active employees and 1,019 retirees. 1989 1988 1987 (thousands)
, Service cost $3,973 $1,518 $1.802 '
Interest cost on projected bene 6t obligation 12,527 11,031 9,791 Actual return on plan assets (19,993) (14,431) (7,235) Net amortization and 6 - deferral 10,380 5,498 (2.500)
$6,887 $6,616 $1.771 Assumptions:
thscount rate 8.3% 8.3% 7.5% Long term compensation
' increase . 6.2 6.2 6.2 Return on plan asets - 8.5 8.5 8.5 d
30 I h-
Notes to Financia Statements I
- 7. JOINTLY OWNED ELECTRIC UI'lLITY PLANT
~
l The Company has entered into a panicipation - Each participant bears its snare of proico costs.- \ agreement with three non affiliated entities ne statements of income reflect the Company's
. covering the joint ownership and operation of STP portion of the operating costs of the plants. At i consisting of two nuclear generating units. December 31,1989, the Company's participation (Reference is made to Note 8.) ne Company also in the jointly owned plants is shown below. ;
has a joint ownership agreement with other, i members of the CST System and non. affiliated entities to provide for the pint ownership and ) operation of the 666 megawatt, coal. tired ( Oklaunion Power Station Unit No.1 (Oklaunion)
. and its related facilities.
South Texas Project Oklaunion - t (douars m thousands) I tht in service 52,281,902 $36,137 ' Accumulated depreciation $ 68,481 $ 3,537-
]
lht capet.ity - mw 2,500 666 Participation
.l 25.2 %
7.8% _ . :' Share of capacity ..mw
. . ~ ~ ~ _ . . ~ . . . . .
630 52 .
.. - . . . - .. . ~ . - . - ~.~ -~
4
- 8. LITIGATION AND REGUI.AIORY PROCEEDINGS .
SOUTil TEXAS PROJECT, Introduction. CPL owns 25.2% of STP, which extension of deferred accounting treatment on STP is kicated near llay City, Texas. In addition to CPCs Unit 1 (See Deferred Accounting). He Settlement share, llouston Lighting & Power Company (IILP), has been entered into by Cit the Texas ' the proiect manager, owns 30.8%; the City of San Commission StalT(Staff) and nine of the other Antonio (San Antonio) owns 28.0%; and the City of fourteen intervenors in the STP dockets Austin (Austin) owns 16.0% representing a significant majority of CPCs . Project Cost and Schedule. %e Texas customers, which include the major cities in CPCs Commission has issued final orders confirming service territory, industrial customers and others.- August 25,1988, andJune 19,1989, respectively, Certain intervenors including one industrial \ as the dates that Unit I and Unit 2 were in customer, a coalition of low. income ratepayers, , =$ commercial operation in accordance with its rules. South Texas Cotton Ginners, the Office of itblic. CPCs cost of STP at December 31. ' 7 was $2,282 Utility Counsel (OPUC) and Texas State Agencies million including AFUIX: of $881. aliion. have declined to enter into the Settlement, and - Rate Case Settlement. On February 8,1990, . oppose it. CPL requested the Texas Commission to approve a The Settlement would allow CPL to increase inse Stipulated Agreement (Settlement) to settle all issues' rates in March 1990 by $105 million on a total i in dockets currently before the Texas Commission company basis, in addition to the $39 million of involving CPI's investment in STP. These dodets interim rates placed into effect in September 1989. include:(1) CPCs request for a retail rate in, rease . Fuel revenues were decreased $32 million annuaHy to reflect its investment in STP in rate base (See when the interim rates were placed into effect. CPL . Retail Rate Filing),(2) the prudence and efficiency would file for an additional base rate increase of ~ of the construction of STP and CPCs prudence in $120 million on a total company basis to becume participating in the projet (See Prudence Resiew), effective on January 1,1991, ' .aff and the signing: (3) CPCs request for deferred accounting treatment intervenors agree to support this filing as part of , on its investment 'in STP Unit 2, and (4) the' the Settlement. CPCs base rates would then be s 31 =
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CENTRAL M)WER AND LIGitT COMPANY t r frozen through 1994, subjea to cenain force Tlie Settlement calb for the use of a ratemaking. J majwre events including double-digit inflation, technique called Mirror CWIP Mirror CWIP -i'
; major tax increases, extraordinary increases in ' assumes that CTIP included in rate inse was a operating expenses or serk)us declines in operating temporary loan from customers which would bc ,
revenues. Gencrally, force majeure pnwislom repaki after the plant was placed in service. The - wuuld not apply unless annual revenues or temporary k3an is repaid through lowei rates over expemes have changed by more than $25 million. a time perkxl which approximates the period - ; After 19W, cpl. may file for increases in base rates during which it was collected through higher rates. as needed. Ik) wever, any increases in base rates in Consequently, CPL would capitalize $360 mdllon of j
- excess of 5% annually would be reduced by the - carrying costs as original construoion cts and - i excess, subject to maximum deduakim of $25 establish a liability to customers for a like annmt j million for 1995-1996 and $10 million for 19971999, to be amortized to income from 1991 through ~
-l 1he fuel portion of customers' bilk will continue _
I 1995. to be adjusted after review and apptoval by the Since all parties have not agreed to the i Texas Commission Settlement, hearings in Cit's retail rate filing will ! The Settlement would fully resolve all hsues continue. The Administrative law judge (Alj) then i pertaining to the reasonable original mst of STP may ask for hearings on the Settlement before i ! Units I and 2 and to the appropriate amounts for. sending a rea>mmendation to the Texas - , inclusion in rate tuse. The original cost of STP Commission. The Texas Commission must issue an would be included in rate base if the settlement is order approving the Seulement before it becomes o appnwed by the Texas Commission. ^ effective.1he lexas Commission will have until the > Ihe Settlement also pnwides for operating fourth quarter of 1990 to issue an order on the expenses and carrying aists on STP Unit I to be Settlement under current statutory time limits. . deferred until the first rate increase is placed into llowever, the Comnry : ,Cp: receiving a final - ; i effect. Cit would defer costs on STP Unit 2 from order before ;he end of the statutory perkxl. If the June 19,1989, the commercial operation date, Settlemens does not proceed, continuation of until the elTectNe date of the second rate increase he trings in the rate filing would culminate in a. when it would be refleaed in rates. Deferred _ final order in the same time frame. i' accounting, from the commercial operation d.ue lhe Staff and intervenors entering into the until the first rate increase becomes effeahr, Settlement have petitioned the Texas Commission would include lx>th operating expenses and - to allow CPL to place Settlement rates in effea in cartying costs on CPI's investment in Unit 2. After March 1990, on an interim basis subject to refund, . ' the first rate increase becomes effeaive, CPL would until the regulatory process is completed llearinp only defer carrying costs on its investment in STP _ on the need to place Settlement rates in effea on Unit 2. . an interim insis will be conduced in early March.' Additionally, the Settlement provides for the The Alts will make a recommendation on the , Texas Commission to allow an accounting interim tute request in mid-March, to allow the ' procedure which defers interest charges for STP to Texas Commission to issue an order on the request the extent of aaual interest costs incurred during before the end of March 1990/ the deferral pedods. This accounting procedure The apptwal of interim rates on a timely txuls is . would allow Cit to recognize approximately $95 a vital eterrient of the Settlement; as well as final million in 1990 as income attributable to 1988 and appnwal by the Texas Commisskm. Intetvenors not 1989. Accounting rules do not alk)w the deferral of entering into the Settlement are expected to use all equity costs to be reported as income until such legal meam at their daysal to disrupuhe costs are colleaed from customers. Cit would Settlement process in order to galo additional , forego recovery of equity carrying costs not concessions from CPIJhough management recognized for financial reporting. Such accounting cannot predict whether the Settlement w;ll procedure cannot be adopted for financial ultimately be appnwed by the Texas Commission, reporting purposes until an order is received every effort will be used to obtain such appnwal. appnwing the Settlement. Management believes that the Seulement is in the txst interests of both CPI:s ratepayen and investors. y t , 32 fl k
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Notes to 7inancia Statements Retall Rate Filing Cit filed in February 1989 of the liniwn & Root settlemem pniceeds will also with all incorporated cities it serves that have be determined in this docket. retained origmal jurisdiction and with the Texas in June 1989, Ernst & ibung (E&Y), previously Commission for an increase in its reuil rate Ernst & Whinney, whk-b was appointed by the (Docket No 86%) lhe request redens the Texas Gunmission to review HIFs prudence commercial operation of STP Unit 1 The fihng related to STit issued its rep >rt relating to the includes a four-step phase m plan mer nine years prudence of management and the reas<nubleness Cits total STP mvestment would be included in of costs associated with STP 1he rep >rt concluded rates after the implementation of the fourth step dut there were 37 nyinths of unreasonable delays in the first vcx rates would increase by 16% or associated with Unit I and 22 nunths of
$125 nulh n net of $29 milhon in reduced fuel unreasonable delays associated with costs ( M then would seek permission to increase Unit 2.
rates m each of the bliowing three years by 10% 10% ami 5% respectively, based on current .ie E&Y report found total project costs of estimaws t imler present sales forecasts, rates $1M5 biHion to be unreasonable. These costs included the effects of delays and A10DC of $1218 wouki be um hanged for the renuining five years billion, computed on tilFs AlUDC rate. The total Costs determd under the plan would be recovered over the last six years unreasonable c asts are net of the $502 milhon dut EMY determined to be the proceeds received from Brown & Root Settlement. As the resuh of the the Ilrown & Root settlement of litigation with settlement of htigation filed in December 1981, STP owners. each of the MP owners received a pro rata share of
$'50 milhon trom Ilrown & Root, Inc (Brown & p.4Y reported that unreasonable activities, Rour), the former architect-engmeer and consist ng mainly of mismanagement during the constructor of the project, payable m quarterly Nown & Root era of construction and the payments over seven years, without interest Cit unnecessary expenditures during the transition to a elected to receive $148 milhon, the present value new architect-engineer and constructor. cost the of its share of the settlement, in December 1985. project $%0 milhon, including associated AltlX' This amount was recorded as a reduction in the and net of an allocation of $206 milhon of die "I "I SU Brown & Root settlement The report further stated the unreasonable delays cost the project $1.105 Prudence Review billion in fixed costs and escalation, including Rxas Commmion Proctnhngs in 1985, the Texas Commission hired l.ubow, McKay, Nevens & associated AFUDC and net of an .dhication of $296 invis (l.ubow) to resiew the prudence and million of the Brown & R(xx settlement elucieng of the construction of STP in June 1986' The rep >rt's fmal phase was a revenue Iuluw submitted a report to the Texas requirements analysis which quantified the rate
(..ommission, covering the perni from IM3 effects resuhing from unreasonable activities and through January 1983 1.ubow claints in.its report unreasonable schedule delavs. The revenue requirements analysis of unreasonable schedule that $1.1 bilhon to $13 bdhon of direct costs were debys indicated diat the delavs did not ultimatelv spent imprudendy on STP by all owners. According ~ to 1.ubow s report, these amounts do not include increase o>sts to illys ratepayers. Rtther, the ' AIODC or rate effects that, I.ubow concluded, results showed that the benefits of delay exceeded sabstantially offset each other Flw amounts al30 do the costs of delay and consequendy therc is no not take into account the pniceeds from the lirown ddowance ( - dely costs. Ahhough die report
& Ro(x settlement The report recom.nends that further stated that the benefits of the delay more the Texas Commission dec ir,e to review the ments than offset the unreas mable activity related costs, of the llrown & Root settlement and concluded E&Y did not reconmand offsetting the benefits of g, g,g g g, gg,.,yg;g g yi c, g "that it was rut unreasmuble for the SW owners tc settle the htigation on the terms they did. mmaking purposes.
In 1986. the Texas Commission op ned Docket In August 1989, cpl. requested that E&Y calculate No M>8 ror the purpose of detennining the k & of b nenhnm a 6a prudence and efficiency of planniry, nunageraem resuh. E&Y hhl a resp)nse no ilut request in and consuuction of STP The accounting itc~trrent %9 which stated that $113 n.illion of CPils investment in STP Units 1 and 2 should be 33 lR,jl: Fff.Q jf kb6 %l
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CENTRAL POWER AND LIGitT COMPANY i excluded from rate base. CPL has filed testimony, cause of schedule delays and lecreased costs as discussed below; indicating that its ratepayers , related to any unreasonable performance.1he .. were not harmed by the delay.; report quant 10es for all of STP a total of $1.043 ~ l In January 1989, the Texas Conimission billion of unreasonable costs, includirig AFUDC at1 appointed Resource Management Internatkinal, Cits rates, before giving effect to the inrown & - Inc. (RMI), to review Cits management decisions . Root settlement. . 4 regarding STP in June 1989, RMI issued its review 1he report unds that of die 94 4 months of delayL of events during the 1973-1982 perkxl in which it . from the initial date of schedukd commercial ( found, with one exception, no reasonable basis ' operation,64.9 months was unavoidable and . for disputing the prudence of CPI's management L uncontrollable delay due to regulatory matters, .
' conduct. This exception concerned Cits prudence industry environment and other circunistances?
;in its evaluation of the continued viability of its lhe remaining 29.5 mondts delay results in total ,
panicipation in STP due to a lxk of timely analysis foreseeable costs due to unreasonable decision , of announced budget increases and schedule . making or performance of $767 million. The report - extensions. RMI did not associate any increasat . also finds $276 million of non delay costs; ,, 1 S1P cost to such conduct. attributable to unreasonable performance. l '
;1ntentnor Testimony in August 1988, OPUC . The report finds that CPL was prudent in its fi ed testimony in Docket No. 6668 calling for a < activities as a member of the STP Management disallowance of certain msts of STP after taking into ' Committee, The report also concludes that Brown account the settlement with tirown & Root. In . & Root, as archt:ea engineer and constructor,'wusi October 1988, OPUC supplemented its prior - c responsible for $814 million of the unreasonable! ,
testimony asserting that $1.050 billkm or 42% of its costs and that iltli as project manager, was 4
- estimated cust of C!ts shaie of STp shouki be responsible for the remaining $229 million of - ,
deemed umeasonable and excluded from any rates unreasonable costs. The report concludes that the E charged by CPt. OPUC indicated diat it did not 1985 llrown & Ikxx settlement of the STP litigation L consider the reasonableness of the cmts incurred reasonablyiumpensated the STP owners for lirown . subsequer.r to the replacement of the former & Roofs performance failures. I architect-engineer and diat the recommendations CPL filed bdditional teilmony in Dockets No.- contained in the testimony are preliminary and ~ 6668 and No. 8646 of Morris 11.Jacobs, a J subject to change based upon final costs and . principal of E&Y, previously Anhur%ung & . commercial operation dates for STP Units 1 and 2. Company.Jacobs used the NielsenWrster Ondings'- In September 1988, a group of cities se:Ted by- ' to determine if any adjustments to STP costs were CPL Aled a consultant's repon in Docket No. 6668 necessary Jacobs concluded that, based on an - with the Texas Commission. The report, after economic analysis of the net present value of ' taking into account the setdement with Ilrown & . revenue req'uirements, the pre-1983 project l delays . Root, recommends a disallowance of $1.105 did not harm Cits ratepayers. Further!as to L . billionior 53% of its estimated cost of Cits share . post.1983 delay costs and the unreasonable non-of STE delay costs found by the Nielsen Wurster report, ! CH. Estimony CPL Gkd in February 1989 in . - Jacobs concluded that the proceeds teceived from f Docket No. 6668 and in its retail rate filing with . the llrown & Root settlement exceeded the .-
.the Texas Commission an extensive report prepan.xl unreasonable expenditures and that no ad iustmetu l =
by the Nielsen Wurster Group, Inc. (Nielsen- to STP costs is necessary. Wurster). The report, done at the request of CPCF : cpl. previously filed a report'in Febmary 1988 in . , I counsel, reviews all aspects of the reasonableness Docket No. 6668 prepared by Drs. Dyer and ." 1 of proc (t planning, design, construction, stan up Ashley of the University of Texas 1his report was-and liceming of 51E Unit I was examined frorn' supplemented in February 1989 a'nd additionally . I pre construction through the commercial operation - -was Alal in Docket No. 8646.1he rqort reviewts! ' dite; Unh 2 was examined from pre construction aspects of CPCs management derision and:
.through September 198h The report reviews all monitating acthiries regardiny S11? Dyer an<l I y phases of the development of STP to determine the Ashley reviewulCPCs activities based on the use of!
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appropriate corporate objecthrs and information Defernxi STP Unit I costs of $28 million
- available at the time decisions were made. The = attributaMe to the perkxl from August 25,1988, y rcphrt concludst that CPI's management decision when S1p Unit I went into commercial operation, j making and processes related to STP were - through December 31,1988 were included in 1989 l reasonable and prudent. net income for common stock. .
Deferred Accounting. In April 1989, Cit was _ CPL recorded equity cartying costs for. regulatory. granted deferred accounting on STP Unit I by the : purposes of $120 million, net of tax, for STP Unit I ^ Texas Commission. The Texas Commission's order and $24 mi!! ion, net of tax, for STP Unit 2 which allows Cit to defer operating and njistcnance r - are not reponed in the statement of income.
- costs, taxes, depreciation and carryi6g costs, . InJuly 1989, OPUC and the Texas State Agencies -
including an equity return, for Unit 1. The equity- filed appeals in the district court of the Texas , return cannot be reponed as income during the Cornmission's final order approving deferred - deferral period under generally accepted accounting for STP Unit 1. These appeals are still' accounting principles. Cit can defer Unit I costs - pending before the district court. OPUC, Texas . from the time it went into commercial operation ~ State Agencies and Coastal Refining and Marketing, _ until February 15,1990. Cit has requested Texas Inc. have filed appeals to the Texas Commission of 2-Commission approval to continue to defer STP Unit the A!J interim order allowing deferred accounting I costs after February 15,1990, until rates for STP Unit 2.-
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reflecting STP Unit I become efTective~ If orders granting deferred accounting on STP Deferred accounting has an immediate positive Units 1 and 2 are ultimately reversed upon appealc effect on net income, but cash earnings will not 'the Company would experience a significant increase until new rates go into effect reflecting adverse effect on the resuhs of operations.
- STP in senice The Texas Commission will hlanagement believes that the deferred accounting . ;
' determine duringCit's rate case the extent that orders _will be upheldf such costkare prident, reasonable and necessary Viability Review. In March 1985, Docket No. >
and can to charged to customers The Texas 6184 was initiated for the purpose of gathering
- Commission will aho determine the period over evidence concerning the economic viabil.ity of STP . i.
which costs can be recovered. Unit 2. Initial hearings were held inJanuary 1987, CPL requested in its retail rate filing that the and final phase hearings were held in October "
- Texas Commission grant deferred accounting on 1987. uis docket was dismissed in June 1989.'
STP Unit 2 in the same manner alkmed for STP IILP Suit. Cit and CSW were r,esed irijanuary . Unit 1. In August 1989, the A!J in CPI's retall rate 1988 a petition (Petition), which ISP filed in Dallas filing granted a nuion by CPL to seWr deferred County in the 101st judicial District, asking the accounting on SW Unit 2 from the retail rate cue Court for authority to add CPL, CSW and San - inte a separate phase of the proceeding. llearings ' Antonio as panies to a suit (Austin Suit) between were held in December 1989. On l'ebruary 8, lilf and Austin:The Court granted liffs motion. 1990, the Alj issued an interim order allowing CPL ne Austin Suit was filed in January 1983 and the to defer carrying costs and operating expenses for status is discussed below. He Court, in a r STP Unit 2 from the date the unit was pbced in subsequent hearing, severed for a separr.re trial service entil the date rates whidi tellect STP Unit 2. IILP's lawsuit against CPL, CSW and San Antonio, are in effect. luf also has filed another original petuion in
%e following amounts were deferred r>ursuant hiatagorda County against Cl% CSW and San to theh orders in'1989 and are reflected in the Antonio requesting the same relief as requested in statemen. of inenme: the Austin Suir, which remains pendiog subject to g
. plea in abatement. No other action has occurred in T
, STP limit 1 STP Unit 2 the Matagorda County lawsuit.
. (thousands) tilf has assened in the Petition that if it is liable -
! Ogxa.m4 expenses $100,394 $ 11,179 to Austin for any damages in the Austin Suit,!!LP is
; Carry ng, costs J1,788 12,802 entitled to contribution or inJemnity from Cit '
i 172,183 % 981 CSW and San Antonio because all the activities - ; Federalincome taxes l 58,543 12,511 Net incomte $113#.0 $ 24,407-35 c , - c , U,, 'l l> ,
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CENTRAL POWER AND UGilT COMPANY c complained of were decisions or activities of the breach of duties and obligatiam pursuant to the - STP Management Committee, which had members STP Participition Agreement,- requested that all from all STP particliunts, rather than llLl4 sole relief sought against Cit and CST in the Petition decisions as project nunager, or that ilLP was be denied, requested that the Coun enter a acting as an agent for the other participants and, declaratory judgment construing the STP therefore, all participants are liable for the actkms Patticipation Agreement and declare llu' liable to-complained of by Austin. lil.P has allged tlut CST Cit for bicaches thereunder and stated that CST b is a proper party to this suit because it participated not a proper party to the action. through control of and directkin of Cit in all major L in April 1988, Ill.P filed a brief contending tlut STP decisions. Management believec that llLP does CSWh and Cit's request for arbitratkm is improper not have a sustainable claim for contribution or because the issues raised and the relief sought by indemnity against CST or CPL CST and Cit are not subject to arbitration under 11U' ako is seeking a declaratory judgment the STP Panicipation Agreement. < comtruing the STP Panicipaik>n Agreement to the in December 1989, because of the result ; elled that 11U1 as project manager, has no liability reached in the district coun in the Austin Suit, llLP y to Austin, San Antonio, Cit or CST for its actions filed a motion for sumnury judgement alleging tlut - relating to any nutter cumplained of in the Austin the doctrine of collateral estoppel and related Sult. IILP aho has requested the Court to direct (kictrines precluded any recovery by Cit against implementatk>n of alternative methods of dispute llut The Coun has not ruled on this motion; resolution as authorized by Texas law; such as non-Amtin Suit. Originally in January 1983, Au'.m binding arbitration, in order to settle the disputes Iled suit against ilLP and its parent compny, , related to STl! Ilouston Industries Incorporated (Illi), al':ging tlut in March 1988, pursuant to the S'IY l'articipation llLP had misrepresented the capabilities ( f the Agreement, Clt and San Antonio called for binding original architect engineer and constructet of the ; arbitratlon of the disputes with Ilu! The arbitration projea and h1d failed to proiwrly perfor.n its > call stated that 11U' as project nunager las l duties as project maruger. ! breached its duties and obhgations to the other STP " in July 1989, a state district court juri found for participmts and is liable to Cit and San Antonio for danuges and that Cit and San Antonk) have no llLP and 1111 in the Austin Suit. Austin Jppealed the decision of the state district court juty and other liability to llu' for any ponion of the damages pre trial decislam of the trial ludge to the Dallas alleged against !!LP by Austin. Aho on that date, Court of Appeals inJanuary 1990, Management Cit filed with the district court its response to the , cannot predict what effect these decisions and Petition, in that response, which was filed subject appeal will have on the vark us actions between l to arbitration, Cit requested the Coun to alute Cit and IIU? both of IILP's petitions until the conclusion of arbitration, limit all action to the arbitration Summary. Ahhough nunagement cannot predict procedure and compel arbitration in accordance the outcome of the various STP proceedings, with the STP Panicipation Agreement in the event nunagement believes that CPI's panicipation in STo lil.P refuses to arbitrate. Subject to its request for and its performance have been prudent and its abatement, Clt has countercialmed against ilLP for imestment in STP is recovemble through rates or ! danuges in an unspecified amount related to llLP s from llu! Ilowever, if any signillamt costs of STP ! are not recovered, there would be a material adverse etTect on CPL's resuhs of operations. . 9,COMMITMENIS AND CONTINGENT LIAlllLITIES l It is estimated that the company will spend have purchased the maximum limits chuclear approximately $110,000,000 for construction j liability insumnce, as required by law, and have purposes in 1990 (including AM)C of $2,300,000). executed indemnificadon agreements with the . Nuclear Insurance. In connection with the Nuclear Regulatory Commission (NRC), in d licensiug and operation of the STl; the owners accordance with the financial protection i 36 l 1 3 _ _ _ _ _ _ _
Notes to 7inancia Statements rnluirements of the Price-Anderson Act rn{uirement that post accident insurance proemis lhe Price-Anderson Act, a comprehensive tw paid to a special trustee.
- statutory arrangement pnniding limitations on The owners of STP currently maintain on site nuclear liability and governmental indemt.lties is in property damage insurance in the amount of $1.585 effect until August 1,2002. The limit of liability. billion prosided by American Nuclear Insurers and under the Prkr Anderson Act for licensws of Nuclear Ekrtric insuranw ljmited (NEIL). Policies nuclear power plants is $7.511 billion per incklent. of insurance issual by NEIL stipulate that policy ,
lhe owners of STP are insured for their share of procmts must be used first to pay dauntamination ! this liabihty through a combin.uion of prhate and clean up costs, before being used to cover insurance and a mandatory industry wide program direct losses to proyrty The Company and !!LP for self insurance. The maximum amount that each are members of NEIL and are subject to annual licensee may be assessed under the industry wide assessments, which could amount to approximately pngram of self imurance following a nuclear $9 million for the current policy year, November 15, incident at an insunti facility is $66.15 million 1989, to.Nowmber 15,1990, in the emnt that (which amount may be adjusted for inflation) for property losses as a resuh of a awcred accident at each Iktnel reactor, but not more than $10 a nuclear facility of any NEll insured exceeds the million per reactor for each nuclear incident in any accumulated funds available to NEIL The Company I one year. The Company and each of the other STP and the other owners of S1T have entered into an - i owners are subject to such assessments, which the agreeinent that panides for the t(xal cost of Company and the other owners have agreed will be decontamination liability and property insurance borne on the basis of their respective ownership for STP (including premiums and assessments) to be interests in STP For purposes of these sharnt pro rata based upon each owner's assessments, STP has two licensed reactors. respective ownership interests in STl! NRC nuclear property insurance regubions in 1989 the Company purchased, for its own i require lice sees of nuclear parr plan's to obtain anuunt, extra expense insurance under :he NEIL I l on-site property damage imurance in a minimum Extra Expeme Program. This insurance wodd I amount of $1.06 billion. NRC regulations also - reimburse the Company for extra expenses raguire that the pmweds from this insurance be incurred to generate or purchase power lost as the .: usal first to ensure that the licensed reactor is in a result of a nwered accident that shuts down ! safe and stable condition and can Iw maintained in production at STP for more than 21 weeks. The that condition so as to prevent any significant risk weekly indemnity for each of the two operating to the public health or safety Funber, NRC units at STP is $637,000.1he maximum amount regulations require that any remaining insurance recoverable for each of the units is $663 million. proceeds be used first to complete any 1he Company is subject to assessments, which decontamination operations that may be ordenxi by could amount to approximately $2 million for the the NRC. On November 6,1989, the NRC current policy year, November 15,1989,to l published a notice of proposed rulemaking which November 15,' 1990, in the event that losses as a ! would, among other changes, eliminate from result of a covered accident at a nuclear facility of . nuclear propeny insurance regulations the any NEIL I insured exceeds the accumulated funds amilable under the NEIL 1 Extra Expense Program.
)
I 37-
CENTRAL IOWER AND LIGitT COMPANY ,
- 10. QUARTERLY INFORMATION (UNAUDITED)
The folkswing unaudited quanerly information Company's deferred accounting order on STP Unit includes, in the Company's opinion, all adjust- . I recorded in the quaner ended March 31,1989,' ments (consisting only of normal recurring ' as discussed in Note 8) necessary for a fair adjustments except for the 1988 effect of the presentation of such amounts:' a Electric ' Operating - Operating Net Quarter Ended Revenues - Income income (thousands) 1 1989 March 31 $188,126 $35,495 $51,553
- J June 30 193,740 41,014 39,442
]'
September 30 242,001 51,593 42,473 December 31 212,718 33,504 14.313 l 1988 March 31 $175,526 $25,621 $41,416 - June 30 191,291 31,926 49,497 September 30 234,109 46,536 63,253 December 31 189,506 18,295 2,653 Operating income and net income were restated. discussed in Note 8. Operating income and net for the quaner ended September 30,1989, to reflect income for the quaner ended September 30,1989,' the AI,l's interim order appnwing the Compcny's were increased $5,612,000 from $45,981,000 and deferred accounting request on STP Unit 2 as $12,301,000 from $30,172,000, respectiveh : Information for quarterly periods is affected by seasonal variations in sales, rate changes and other factors. Seectec 7inanciaJata , The following selected financial data for each of hinblight significant trends in the financial condition i the five years ended December 31 are provided to - and results of operations for the Company; , 19M9 19MM 19M7 19M6 1985 l (thiusands, except ratus) L Electric Operating Revenues $ 836,585 $ 790,432 $ 768,2tM $ 859,975 $ 924,908 Net income 147,781 156,819 191,927 174,lt 5 152,164 Preferred Stock Dmdends 24,558 21,525 15,820 16,010 15,991 N(t income for Common Stock 123,223 135,294 176,107 158,155 136,173 Tota! Assets 3,896,155 3,670,432 3,381,989 2,950,129 2,723,361 , Preferred Stock Not Subject to Mandatory Redemption 250,:151 250,368 166,782 - 166,705 93,115 + Subject to Mandatory Redemption 47,27 46,966 46,660 46,355 88,861 Long.Tenn Debt 1,331,M4 1,325,977 1,179,456 1,018,987 981,481- , Ratm of Earmngs to Futed Charges (SEC Method) 2,49 2.44 3.00 3.16 2.86 ; Capitaldation Ratios j Common Stock Equity 45.7% 44.4 % 45.4 % 45.0% 45.5% 1 Preferred Stock 9.9 10.2 8.4 9.3 8.5 .j Long-Term Debt 44.4 45.4 46.2 45.7 46.0 38
u Nanagement's Inssionanc Anaysis07mancia Concitionanclesutsa 0 nations . Units I and 2 are ultimately reversed upon appeal, REFERENCE Cit wuuld experience a significant adverse effect he following discussion and analysis of the on the results of operations. Management believes Company's financial condition and results of that the deferred accounting orders will bc upheld. operations relate to the Financial Statements, Notes Rate Case Settlement. cpl. requested the Texas to Financial Statements and the Selected Financial Commission to approve the Settlement to settle all Data The information contained therein should be issues in dockets currently before the Texas read in conjunction with and is essential in Commission imulving Cits imrstment in STP understanding the following discussion and These (kickets incorporate all issues before the analysis. Texas Commission involving STP prudence, deferred accounting and Cits request to increase OVERVIEW retail rates. The Settlement was entered into by Cit, the Staff and nine of the other founeen Net income for common stock for the 3rar 1989 intervenors in the STP dockets representing the declined 9% to $123 million from $135 million in ma}ority of Cit's customers. 1988. The decline in earnings during the year is The Settlement would alknv CPL to increase base the result of accounting rules that prohibit the rates in March 1990 by $105 million, in addition to Company from reporting the equity carrying the $39 million of interim rates placed into effect in rg on STP Units 1 and 2 as income during the September 1989. Clt would file in 1990 for an l* ' additional base rate increase of $120 million to become effective on January 1,1991. CPI's base RATES AND REGUI.A1 DRY MATTERS rates will then be frozen through 1991, subject to Deferred Accounting. In April 1989, Cit was certain force majuere events. The fuel ponion of granted deferred accounting on STP Unit I by the customers' bills will continue to be adjusted after Texas Commission. The lexas Commission's order review and approval by the Texas Commission. - allows Cit to defer operating and maintenance Assuming a March effective date for the first rate expenses, taxes, depreciation and cartying costs, increase, deferred operating expenses and carrying . , including an equity return, for Unit 1. Re equiry costs in 1990 on STP Unit I would be - return cannot be reported as income during the approximately $15 million.~ Deferred operating. deferral period under accounting rules. CPt. can expenses and carrying costs on STP Unit 2 in 1990 defer Unit I costs from the time it went into would he approximately $70 million. commercial operation until February 15,1990. Cit Additionally, the Settlement provides for the has requested Texas Commission approval to Texas Commission to alk)w an accounting continue to defer STP Unit I costs after February procedure which defers interest charges for STP to 15,1990, until rates reflecting STP Unit 1 become the extent of actual interest costs locurred during . effective, the deferral periods. This accounting procedure Cil requested in its retail rate filing that the would allow the Company to recognize Texas Commission grant deferred accounting on approximately $95 million in 1990 as income in lieu STP Unit 2 in the same manner allowed for STP of equity carrying costs attributable to 1988 and Unit 1. On February 8,1990, the Alj issued an 1989-interim order which allows Cit to defer carrying De Settlement would utilize a ratenuking costs and operating expenses for STP Unit 2 from technique called Mirror CWlR Mirror CWIP June 19,1989, the commercial operation date, until assumes that CWIP included in rate base was a - rates which reflect STP Unit 2 are in effect. Wrious temporary kxm from customers which would be , appeals luve been filed concerning the deferred repaid after the plant was placed in senice. The accounting on S1? Units 1 and 2. temporary loan is repaid through lower rates over l If orders granting deferred accounting on STP a time perkxl which approximates the perhxl 39
CENTRAL POWER AND LIGitT COMPANY during which it was collected through higher rates. AFUDC of $8.6 million). Construalon expenditutes . Consequently, CPL would capitalize $360 million of during the next three years will primarily be for ! , carrying costs as original construction costs and improving and expanding transmission and l establish a liability to customers for a like amount distribution facilities. These impantments will be to be amortized to income from 1991 through required to meet the needs of new customers and - 1995. to satisfy changing requirements of existing Since all panies have not agreed to the customers. No base-k>ad power plants are currently
- l. Settlement, hearings in CP1's retail rate filing will planned until after the year 2000.
l continue. The A!) may ask for hearings on the Settlement before sendmg a recommendation to FINANCING AND CAPITAL RESOURCES I the 1bxas Commission. The Texas Commission ! must issue an order appnwing the Scttlement Internal Generation. He financial strength of before it becomes effecthe, A final order is the Company is dependent on numerous factors, expected late in the third or founh quaner the most significant of which is the receipt of rate of 1990. relief. Rate relief must be sufficient to provide l The Staff and intentnora entering into the adequate coverage ratios necessary for additional , Settlement have petitioned the Texas Commiss. ton ~ i external financing and for a fair return on imrsted [ to allow CPL to place settlement rates in effect in capital. In 1989, the Company obtained 21% of its l March 1990, on an interim basis subWt to refund, capital requirements from internal sources and until the regulatory process is completed. llearings anticipa:es the majority of capital requirements on the need to place Settlement rates in effect on during the 1990 through 1992 time period will be an interim basis will be conducted in early March. provided from internal sources.
%e AI) will make a recommendation on the inng Term Financing. During 1989, the interim rate request in mid March to allow the Texas Commission to issue an order on the request Company issued $150 million of First Mortgage Ik>nds, as discussed in Note 3 of the Notes to i before the end of March 1990.
! Financial Statements. ne pnmis were used to The Settlement would allow CPL the opponunity to earn on its total STP investment during the reacquire $136 million of high coupon debt, along ! with a premium and related reacquisition costs of period settlement rates are in effect. Further, management believes that the Settlement is in the $17 million. The Company also .f ixed the interest rate on its adjustable rate pollution control bonds, best interest of both CPL's 'ratepayers and imrstors. collateralized by Series T First Mortgage llonds, at Reference is made to Note 8 of the Notes to 7%% i r the remaining 25 year term of the bonds. Financial Statements for additional information concerning CPL regulatory matters. long term financing by the Company involves the sale of first mongage bonds, preferred stock and the receipt of capital contributions CONSTRUCTION PROGRAM from its parent company or other financing alternathrs. The goal of the Company is to provide The Comp;my's need for capital results primarily a strong capital structure. At December 31,1989, from its construction program which is designed to the capinlization ratios were 46% common stock provide reliable electrie senice to its customers. equity,10% preferred stock and 44% long term debt. : During 1989, construction expenditures including During the first quarter of 1990, the Company AFUIX' decreased 57% to $142 million from $329 intends to issue $50 million of collateralized million in 1988. The decline in construction is due pollution control bonds. The bonds will be used to to the completion of STP IJnit 1 in August 1988 and ilnance cenain pollution control facilities for STP Unit 2 in June 1989. It is estimated that Additional long term financing may be regulred construction expenditures during the 1990 through 1992 perial will aggrerate $297 million (including 40
e . S BIK 0MId.Mid2Eh$SOIMMS during 1990 depending on the amount and timing on a cash basis. The IASli is considering clunging of rate relief. the am>unting requirements to an acciual basis. Unhilled Customer Accounts Sold.1he : 1his would result in a significant increase in the Compmy sells its accounts recchable to CSW amount of benefit expense on the income Credit, Inc., a wholly <>wned subsidiary of CST erment and the recognition of a signincant in April 1987, the Compmy began selling ilability on the tulance sheet These effeas could nwhables for elearic senice pn>vided, but not be mitigated to the extent that such cost increases yet billed to customers.1he sales pnnide the could be recovered through rates. Company with cash immediately and reduce working capital and rewnue mjulrements. The monthly average and year end amounts of accounts RESU113 OF OPERATIONS nwivable factored were $82,623,000 and
$74,855,000 in' 1989, as compared to $79,814,000 Net income for Common Stock. The Company's and $72,727,000 in 1988. net' income fot comnon stock declined 9% in 1989 -
to $123 million from $135 million in 1988. The Short Term Financing 1he Company, together ' decline resulted from accounting rules that prohibit - with other members of the CSW System, ha^ the Company from reporting the equity carrying . j established a System money pool to coordinate clurges on STP Units I and 2. See Note 8 of the : shon-term borrowings lhese kuns are unsecured Notes to Financial Statements for more demand obligations at rates approximating the informatk>n. i System's commercial paper borrowing costs. Periodically, all the Company s short. term kuns are tilectric Operating Revenues. lbtal electric ! repaid with the proceeds from permanent operating revenues increased $46 million, or 6% ! financing, and therefore these kuns are not from 1988 due to a 5% increase in kilowatt hour: 0 sales, a retail customer interim rate increase which l considered a part of the Companys permanent capital structure. The Comp.my 8 short. term resulted in $15 million of additional revenue, and : { borrowing limit from the money pool is $200 the recognition of revenue for the deferred costs of 1 million and borrowings will be made during 1990 STP Unit 1 from its wholesale customers. Customer as required. During 1989, the average amount of 'd E dW 1989, with year end - short-term borrowings outstanding at monthend customers approximating 549,000. k 3 was $14,022,000 at a weighted average annual Residential kilowtt hour sales increased by 7% *j interest rate of 8.99% The maximum amount of owr 1988 reflealng a slight increase in customer short term borrowings oustanding at any month-end growth and kilowatt hour usage. Rewnue per i during 1989 was $78,396,000 and at December 31,' customer was $679 in 1989, an increase of $27 over 1989, $46,606,000 was outstanding 1988.1his was the result of the retail customer . interim rate increase and increased usage.' ;
.NEW ACCOUNTING STANDARDS . Industrial sales increased in 1989 primarily as a . !
result of increased usage by a major petrochemical Please refer to Note 1 of the Notes to Financial plant.1he Company has responded to the e' ffeas Statements - New Accounting Standard for a of competition from cogeneration by offering. disettssion of Statement of Financial Accounting incentive rates for large industrial customers. The j' Standards No. %, Accounting for income Taxes, Company is committed to continue its efforts to which has not been adopted by the CSW System. dewkip new business and retain existing custome.s lhe FASil L presently reviewing the accounting . In the face of more c' ompetition-for Other Post Employment Benents (OPElls). Sales for resale increased 34% from the same ; OPElts primarily relate to medical and dea:h period in 1988 as a result of the recognitioti of - ! benefits paid to employees after they retire, revenue for the ren>very of costs on STP Unit 1 3 Currently, the Company accounts for these benefits from its wholesale customers. The wholesale ..j d 41
i i CENTRAL POWER AND LIGIIT COMl%NY ' l customers are contractually obligated to pay such principal was credited to taxes other than Federal costs. ina>me taxes and the related tax impact was changes in kilowatt 4x>ur sales by natomer claw recorded in Federal income taxes. The decrease in ! for each of the years 1987 through 1989 are shown. taxes other than Federal income taxes is panially on the following chan: offwt by increased ad valorem taxes on STP Units
" 1 and 2 which were previously capitalized, but -
now are expensed. The increase in Federal income N%k nu.d ".7% 6 6t% 1 n. tax expense in 1989 is due to a much smaller anw of pre 4ax hme W mmW d i so .j (E7, l odwr ( u.n 14 3 u641 nontaxahle equity AFUDC. Other operating, wt s.de, 4.7 o 0033 maintenance, depreciation and tax expenses are offset by the deferral of $125 million re resenting # dr in al f ex s tri ut i e to the "jg"r an
"' '\ F increased usage of lower cost nuclear fuel. The average cost of fuel for the year was $1.99 per laterest Expense and Preferred Stock million 11tu as compared to $2.11 in 1988. The I)lvidends. Interest on long term debt increased l average cost of natural gas, which was used to primarily due to the issuance of first mongage ,
generate 59% of the Company's kilowatt. hour hab in de semnd quaner of 1988. Interest on ! requirements, was $2.29 per million litu, an $0.08 short4erm detx and other increased due to a increase from the prior year.1he average cost of reclawmcadon of lmemst expmse related to j cual was $2.22 per million litu, up $008 from last Federal inmme tax habihty for tax years 19781981 year. The cost persmillion litu of nuclear fuel for II" * ""CI#df I"CI I"VC"I"'Y 'O I"I#fCSI C*PC"50-STP was $0.53, down $0.01 from 1988. Reference . Ns mclawincui n wm awmiated wth du-is made to Note 1 of the Notes to Financial Wesunghouse seulement of Ws nuclear fuel Statements,
- Electric Revenues and Fuel" for mntraa. Preferred stock dividends increased due additional information on nudeai fuel expense. I the issuance of $85 million auction preferred Expenses and Taxes. Other operatir g. stock in February 1988 and a higher dividend rate on the existing auction preferred stock.
maintenance and depreciation expenses m.ereased , due to STP Units 1 and 2 being placed in service AH wance for Funds Used During Construction. In0ation rates, as measured by the Consumer The decline la the amount of AFUDC was due to Price index, have averaged about 4 4% for the 'M Un 1 g y imo se ce in August 19%, m three year period ending December 31,1989.1he """ E@* *
- I"3""C I9"9 ""d N*
Company believes that innation, at these levels, ne n dw Compan/s amrucnon pryant does not materially affect its results of operations Other income and Deductions. Deferred STP or financial condition. Ilowever, under existing c rrying costs of $85 million represents the carrying regulatory practice, only the historical cost of plant charges on STP Units 1 and 2. The increase in is recoverable from customers. As a resuh, cash Other is primarily due to the deferral of interest nows designed to provide rec (wery of historical expense related to the Federal income tax liability plant costs nuy not be adequate to replace plant in weiated with the Westinghouse settlement of fumre years. STP s nuclear fuel contract. This is offset by the Taxes other than Federal income decreased due
# I"* *"'#*C*P *
- to a Texas franchise tax refund received by the Company in the second quaner of 1989 totaling
$9.4 million including interest, net of taxes. The i refund was based on recent coun decisions which changed the calculation of the taxable base. The 42
t . Comnrative Statisticalecom CENTRAL, POWER AND UGIIT COMI'ANY =; 1989 1988 1987 AVERAGE NUMBER OF CUSTOMERS . L Residential 460,522 452,707 446,548~
- Commercial 71,209 70,285 - --70,008 Industrial - 6,488 6,570, 6,54_8, j- ,
All other - 3,401- 3.320 3.27F Tbtal 541,620 532,882 - 526,381l NUMBER OF CUSTOMERS - END OF PERIOD 549,301 539,896 532,546 SALES - KILOWATT. HOURS (Thousands) Residential 5,277,961 4,945,741 '4,630,356 Commercial 4,086,174 3,898,835 3,736,151i Industrial 4,587,663 4,244,925- 4,325,326 All other 1,354,976 1,528,082' 1,336,32FI
'Ibtal 15,306,774 > 14,617,583 14,028,160 i
REVENUES (Thousands) . d Residential $312,850 $295,167 - $273,225 Commercial 254,304. 244,082- - 231,00j4 ladustrial 184,871 180,345 198,48T All other 84,560 70,838 65,556l
'Ibtal - $836,585 $790,432 $768,264l RESIDENTIAL AVERAGES -
Kilowatt hours per customer 11,461 10,925 , 10,369l Revenues per customer $679,34 $652.00 $611,86j Revenues per kilowatt-hour 5.93c - 5.97f , 5.90 SYSTEM CAPABILITY AT PEAK (Kilowatts) i CPL stations 3,947,000 3,801,000- 3,6hi,000 Purchase contracts - - - l
'Ibtal system 3,947,000 3,801.000 3,698,000:
SYSTEM MAXIMUM DEMAND (Kilowatts) 3,145,000: 3,013,000 2,881,00d FUEL EFFICIENCY DATA l Average BTU per net KWil 10,402. 10,085 10,164' Cost per million BTU $1.99 $2.11 - $2,08: Cost per KWil generated (mills) :20.70 21,26 21.lf HALANCE SHEET DATA (Thousands) . Electric utility plant $4,298,859 $4,-169,637 , $3,853,568 Annual constructed additions 141,722 329.222 - 444,723 Accmnulated depreciation 769,880- ' 658,015 589,909 Percentage of accumulated depreciation to origmal cost 17,91 %' 15.78%D ~ 15.3E CAPITALIZATION (Thousands) l Common stock equity $1,368,067 - $1,294.844 $1,159.550 Preferred stock 297,623- 297,334 213,44$ Long term debt 1,331,544 1,325.977- 1,179,456 i. 1 4 . 43= 1
l CENTRAL l'0WER AND !.lGitT COMPANY l ! 1986 1985 1984 1983 1982 1981 1980 1979 i 441,849 432,906 420,487 407,006 394,437 376,444 361,181 347,746 i 69,719 68,720 67,217 65,359 63,581 00,386 57,901 56,023 6,713 6,827 6,717 6,652 6,560 6,322 6,014 5,771 3,254 3,268 3.206- 3.185 - 3.174 3,108 3,051 2,981 ! 521,535 511.721 497.627 - 482,202 467.752 446,260 428,147 412,521 527,392 521,281 507,402 492,712 477,892 459,003 437,438 422,298 4,567,961 4,469,884 4,209,063 3,863,798 3,988,111 3,736,235 3,574,451 3.202,513 3,734,321 3,664,447 3,452,989 3,268,206 3,278,005 't085,744 2,884,986 2,723,446 , 5,521,265 5,985,326 6,280,810 5,910,999 5.532,386 5,867,785 5,675,723 5,663,115 1,816,470 1,501,630 1,lfe,087 1.116,201 1,111,941 1,531,250 1,251,973- 1,131.052 - 15,640,017 15,621,287 15,108,949 14,159,204 13,910.443 14,221,014 13,387.133 12,720,126 _$284,345 $295,038 $298,186 $286,182 $282,616 $233,593 $203,214 $159,701
-241,773 252,334 255,879 249,255 242,215 202,819 171,047 127,743 254,626 300,915 342,900 336,604 - 303.933 277,829 234,906 189,017 79,231 76,621 75.219 74,240 70,422 79,701 60,429 42,125
$859,975 $924,908 $972,184 $946,281 $899,186 $793,942 $669,596 $518,586 10,338 10,325 10.010 9,493 10,111 9,925 9,897 9,209
$643.53 $681,53 $709,14 $70'1,14 $716,50 $620,53 $562.61 $459.24 6.22e 6.60e 7,08e 7,41v 7,09c 6.25e 4,99c 5.69e 3,703,(XX) 3,688,(XX) 3,04 7,000 3,625,000 3,523,000 3,523,000 2,954,000 2,976,000
- - - - - - - 10,0X) 3,703,(XX) 3,688,(XX) 3,667,000 3,625,000 3,523,000 3,523,000 2,954,000 2,986,(XO 2,974,(XX) 3,022,(XX) 2,832,(XX) 2,869,(XX) 2,825,000 2,734,000 2,505,(XX) 2,390,(XX) 10,174 10,Gl0 10,298 10,231 10,236 10,171 10,374 10,262
$2.33 $2.89 $3.27 $3,47 $3,51 '$3.Gl $2.55 $2.20 23.70 29,01 33.65 35,47 35.97- 30.93 26.43 22,58
$3,426,969 $3,056,619 $2,758,977 $2.385,489 $2,110,440 $1.880,395 $1.687,124 $1,461,916 433,061 456,151 386,952 286,524 237,251 199,519 231,858 228,631-546,285 503,405 458,834 418,037 377,738 339,497 301,299 269,212 15.94 % 16.47% 16.63 % 17.52 % 17,90% 18.05 % 17,86 % 18.42 %
i
$1,033gl43 $971,443 $851,805 $723,254 $635,Gl9 $555,245 $478,191 $426,184 213.060 181,979 181,989 182,024 132,770 132,770 132,796 93,136 1,048,Rp7 981,481 866,551 728,149 G17,404 573,427 509.024 434,590 M
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Sunnocer anc .nvestorinbrmation- 1 3 f. g PRiilliRRl!D S'IDCKT, , a i TIMNSIER AGENT /REGisTiuk Ol' STOCK- 1 Central and South West Setvicci, Inc,' N
- it O. Ikix 660lM a
. Dallas,'li xas 75266014 1 SilARE!ioll)ER SEINICES; 1he sharehokler 9:nico staff is available from 8 a.nt to 5 pnt. .
Central Time, M<nnby thnxigh.l rid ty to answer any t[uestions )txi nuy luve.
- If you luw a quotion, write:
Central and South West Senices, he H Sharehokler Services Department 2 4 P O. Ik3x 660lM Dallas, Texas 75266 OlM
. or call.
18n527 5797 (Outside of Texasyl#04421718 (in Texas) W recommend tlut you send stock certificates by either registered or certified nuit. F1RST MORTGAGliilONDS TKt!STEE l 1he First National ILink of Chicago ' l7 One l'irst National Plua Mall Suite 0126 Chicago,11. 660 T Richard D. Almella - (312 H07 l&il
> ', m j
ADDITIONAL. INFORMATION , u 1his report is prepared prinurity for the infornution of snurity holders, O! empknees and customers of the Compmy and is not transmiued in connection J: with the sale of any security or olier to sell or offer to buy any secunty Copies of this repon and the financial statements included therein and the Securities and Exclunge Conunission Annual Report on Form 10.K are available o
" ]
.3 generally to all security hoklers of the Company A mpy will he mailed to any security hokler or other interested piny upm wrinen request to C. Wayne Stice, Sceretar); P O. Ikix 2121, Corpus Chrbtl, Texas 781032121.
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. IlUlK RATE 110. Ik)x 2121. Corpus Christi, has 78403-2121 U.S. KCTAGE PAID '
-1 Address Correction Requested . I'EltMIT NO.'182 ,
A Member of the Central and Snth %bst System. Cold'UScilRISil, TEXAS 78403 l 1 l 5
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