ML19323H983
| ML19323H983 | |
| Person / Time | |
|---|---|
| Site: | Fermi  |
| Issue date: | 02/25/1980 |
| From: | DETROIT EDISON CO. |
| To: | |
| Shared Package | |
| ML19323H980 | List: |
| References | |
| NUDOCS 8006170408 | |
| Download: ML19323H983 (40) | |
Text
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ENERGY PLUS+ N l ' sJ . b
+ SIGNIFICANT 5
l i c A< . .... 5 g HEVENUE GHORTII Hevenues at Record Levels
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k7 f Revenues for 1979 mached almost t
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6.8% over 1978. This incmase was t Ihl' , , .' ' k N .' g , ,
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msult of higher rates authorized by
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gg 's y' . Commission and the effect of mcot w g, , ing inemased energy costs thmugh '
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f 3 n r ~- 17 - ; Company's rate schedules.The cor W
- tinuing impact of extmmely high ini tion rates, especially as reflected in p l higher fuel prices, has mquimd mces MTA$,, e 4, y
of these higher costs thmugh incrw ing prices charged to our customet. y (;j
' "PM and Other Power Supply Espen-e-
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Top:'Ihe Monroe Power Plant stacker-reclaimer N. E *ff? ' . '. moses coal from rail cam to the coal pile for / f,".-
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, storage or imm the pile to the conwyor belt for ,-
I mowment into the plant. flight: Senice Installem Daniel P.Christensen IleftI and [ ;f l
~ "i Joseph A. Beauregard irightt proside undergmund j ,
electrical senice to a new residential customer,
. . . - - ~ - - . . - _ _ _ _ _ ,__ .
7_ Skl
~ r*ptryep ury and themby reduce this country's depenaence on foreign sources t IP'lr,& ], for these fuels.
I hi. , i Although our electric generation is now pmvided primarily by C N ( f klf)h ,. jf r e g coal, we are still committed to a balanced generation mix which h
' f will include nuclear power in the future. In spite of the accident at
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p Three Atile Island, the resulting negative publicity and the many A' / ) i [ goumment and industry studies relating to it, nuclear power must MO % .' [ [ still be considered one of America's important energy alternatives. T/ ' .v i' \ Q We announced last June a delay in the scheduled completion dates of our Fermi and Greenwood nuclear units, including suspension of 1 l- Yy
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all work on the Greenwood units, pc7 ding complete evaluation of
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%y; the Three hiite Island accident and its impact on nucleac power in the world. A thomugh reexamination of all safety and cooling Yi " ' ' -
systems on the Company's nuclear units is coatinuing. We also
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await results of various studies by the government and other [ N . PCQ $ agencies in order to reflect these studies in our overall evaluation. W8' We are deeply concerned about the continuing delays in licensing nuclear plants by the U.S. Nuclear llegulatory Commissic veiaeni uccartl ' 1m Chat un llamann Edison and its customers, we have embarked on a program to attract new business and industry to the area and to retain existing businesses to help diversify the economy of our senice ama. This pmgram was begun in the fall of 1979 with the theme " Energy Plus+" which is featured in the accompanying mport. Through a series of advertisements in national, regional and local magazines and newspapers, we will point out the many " pluses" there am in the Detroit Edison senice area,in addition to an adequate energy supply. The fimt series of ads stmssed " leadership" at both the state and local level and at Detroit Edison. As a result, we have received several hundred inquiries from companies interested in this pmgram. We will continue our efforts, with the support of a highly skilled and dedicated work fome, to provide reliable electric service and reasonable carnings on your investment in Detroit Edison, one 41
^
of the largest electric utility companies in the United States. Sincerely, f u . [) wachett I Milliam _.. Meese
. Ae Walter J. McCarthy. Jr.
I Pirsident and Chief operating officer Chainnan of the Board and Chief Executise officer f[" -m ! - i.W i M d John R. Itamann Vice Chairman of the Board r ~M
.m 4 lhe ACCOmpanyins !? port Was ptTpar?d and submitted Order Of the Board of Directors.
ENERGY PLUS+ was financed during the year, with 1980 Financing of $600 Million
+ HECORD interest rates much lower than we A total of $600 million of outside p.ggggg g g would have paid usmg comentional financing will be required m 1980. T New Financing at Hecord Level financing methods. With total funds of record amount will be raised to hell
$90 million available through this finance the planned $700 million ca A high level of capital expenditures, financing,1980 nuclear fuel tal expenditure pmgram, meet matt; plus funds needed for refunding of and sinking fund payments on out-maturing debt, required a mcord $457.5 expenditures will also be met in the million of new financing during 1979, same manner. standing debt and preference stock in addition to the unique $90 million Another attractive featum of this and to repay the shon term borTow nuclear fuel financing completed early financing was the ability of the outstanding at the end of 1979.
Company to temporarily use any funds Early in 1980, financings thmugh In 1979. Impmvement in the Com-not immediately required for nuclear million of two year unsecured pmm pany's financial condition pmvided an fuel financing for other corporate pur- sory notes and $50 million of mong opponunity for private placements of bonds with a seven year maturity w some issues of secudties with insti- poses.This option was used through-out the year to help meet short-term completed. Another $100 million tutional irwestors for the first time in mortgage bond issue, with a twent many years.The private placement of a bonuwing needs.
$150 million mangage bond issue with year maturity, was arranged with a Tax Exempt Financing gmup of 15 institutional investors, y 16 purrhasers was completed early in Over $300 Million to Date viding for a :akedown of the pmcee the year, $9 million of tax exempt Since 1973, seven municipalities have pollution contml bonds wem sold in April and July, cooperated with the Company in issu. ~
The timing and amounts of the privately in September and a $65 ing either tax exempt pollution contml mmaining issues of securities will b million preferTed stock issue was or industrial revenue bonds to finance placed with a gmup of eight purchas- determined later. Company pmjects which qualify for ers late in the year. Other issues, all special tax treatment, with the interest Diddend Heinvestment sold publicly, included $100 million of received by the purchaser exempt imm plan Popular mongage bonds, $19.9 million of tax income taxes. This has invohed 24 is- The Company's Dividend Reinvestn exempt pollution contrul bonds and sues of securities aggregating $303.5 and Common Share Purchase Plan 6.000,000 shares of common stock. In million. The lower interest rate of these continues to be very popular with addition, 1,750,353 shares of common bonds, as compared to conventional shamholders. B ' ear-end, a total o stock sold thmugh the increasingly b nd finan ing in whicti th m~ tqmst 35,800 shamholders wem panicipat popular dividend trimestment plan r ceived by the purchaser is subi ect to in the plan, an incmase of 5,200 ow provided another $243 million of new tax, has resulted in lower interest pay- last year.The amount of money capig. ments by the Company of at least $6 imested during the year increased Nuclear Fuel Financing million per year. Detroit Edison is the $243 million, up $6.6 million or 371 Successful first electric utility company in the over 1978. Of this amount $15.0 mit A special mulear fuel financing ar- United States to have raised over $300 represented reinvested dividends, rangement, completed in early 1979, million thmugh the sale of tax exempt which qualified for a 5% discount fi has pmved to be very successful. A bonds. We expect to continue to take market price.The remaining $93 total of $603 million in nuclear fuel advantage of this lower-cost form of million were cash payments made - financing for any pmjects which can putthase shares at the market pric. qualify under existing regulations. No service or other charge is addec 1979 Financing
- the price paid by the shareholder.
Any shareholder who wishes to cIm$a$y enr 11 in the plan may obtain an Type of Secunty cmss Amount tAfter enrullment card by writing to Detri and Month Sold (Millions) Expenses) Edison, Box 380-A, Detmit, Michiga Mortgage sonds 48232. Mardh $150 10.47% September 100 11.09% shareholders Continue Polturion contml sond* to Increase June 19.9 723% September s 7.35% Byyear-end the Company had a to Preferred Stock of 231,506 shamholders, an incmasi 5 11,403 shareholders, or 5.2% over comr rock July (6.000.000 shares) 893 year-end 1978. The sale of 6,000,000 DMdend Rein estment new shares during the year contril' (1,750.353 shareal 243 Total s457.5 i
- Excluding nuclear fuel financing.
E n ;
ales Levels Decline less common shams outstanding. larly at the Monroc Power Plant which tntinued conservation efforts by The average number of common set a mcort! for monthly output in Oc-ustomem, much cooler than normal shams outstanding in 1979 was tober, helped moderate the increases ummer weather and the decline in 69,&l8,484, an increase of 12.a% over the in energy costs. As a result of the idu: trial activity combined to hold 61,898,763 outstanding for 1978. The inen:ased availability of our more ales to 36.9 billion kilowatthours, as increased number of shams resulted efficient units, which use coal as fuci, ompamd to 37.1 billion kilowatthoum fmm the sale of 5,000,000 shares of 85.5% of our customers' electric needs
' 11978.This decrease of 0.7% follows a stock in August,1978 and another wem met by coal-fired generation. Not 1me-year period, fmm 1976 to 1978, 6,000,000 shams in July of 1979, plus only is this imponant to our customers then ecles incmased each year. shams issued under the Disidend in tenns of lower electric bills, since Re:Idential sales were 10.3 billion Reinvestment and Common Sham the cost of generating electricity with ilowitthouw for theyear,1.1% below Purchase Plan and shares from the coal is less than half the cost of oil, but 978. With a net increase of 21,730 conversion of the 5H% Convertible it is also imponant in our national ef-u2tomers, the lower sales caused a Preferred Stock into common shares. fons to conserve oil.
.9% decrease in average kilowatthour Maintenance expenses were $128.6 Dividends Increased se per customer. The 1979 average Dividends paid in 1979 were $1.58 per million for the year, an inemase of only se wis 6,402 kilowatthours, or 127 less share, an incmase of 6c over the $1.52 $3.8 million or 3.0% over 1978. Pmduc-san th31978 average use of 6,529 rate paid in 1978. Effective with the tion plant maintenance had been ilowitthours. This lower use was April dividend, the annual dividend incmased significantly over the past tused by a combination of continued rate was increased fmm $1.52 to $1.60 several years. This effort now shows nergy conservation and mduced per share. This is the second consecu. positive results thmugh the incmased ooling loads because of significantly tive year in wt.ich the dividend has availability of generating equipment, ool:r summer weather. The number been increased. which helps moderate inemases in the f cooling degme days, which is a mea- Despite the increased dividend, cost of ene gy. Power plant availability use of the amount of air conditioning severely depressed general stock mar. averaged 85.9% for the year, the highest equired, was down about one-third ket prices, influenced by high interest level since 1972.
mm 1978, causing 1979 to be the rates and the unsettled national and Taxes are Significant ooleit summer in ten years. international economic and political As in the past, taxes charged to oper-Commercial sales, although also af- situation, caused the year-end market ations continue to oe a significant item ect;d by cooler weather, showed price of our stock to decline to $12%, of expense, maching $154.3 million in trung gmwth in the fimt eight months as compared to $13% at the end of 10 9, up $6.1 million or 4.1% over 1978. if the year but declined in the last four 1978.The price of our stock traded as This is equivalent to $2.21 per average nonths As a result, total sales for the high as $15% during 1979. share of common stock, substantially e .r wem 6.3 billion kilowatthoum, or Expenses Continue to Increase mom than the $1.58 per sham in
;.9% sbove 1978. Severe inflationary trends at double. dividends paid to shareholdem in 1979.
Industrial sales were also stmng du" digit levels seriously affected Company in view of the high levels of spending j ng the early months of the year, but operations. Total operation and by all units of govemment, we do not he economic slowdown, especially in maintenance expenses increased by expect to see any lessening of this he cutomobile industry, msulted in $39.6 million during 1979 to a total of trend in the futum. Detmit Edison con-arge decreases in the last few months. more than $1.1 billion, up only 3.6% tinues to be one of the largest tax-his ciused total industrial sales of over 1978. This increase was caused by payem in the State of Michigan and 8.0 billion kilowatthours to be down the quantity of electricity generated or the largest in the City of Detmit.
- .1% fmm 1978.The slowdown was purchased during the year to meet the Interest Hates Set Hecords noit evident in sales of electricity t needs of our customers being 0.8% With intemst rates reaching mcord
. sur tutomobile industry customem, below 1978 which helped offset the levels, total intemst charges, including town 6.9% for the year. The relatively higher fuel prices and inflationary in- that portion capitalized as part of the soor cutomobile sales volume and re- cmases in the cost oflabor and other cost of conatructing new facilities, were
.ulting reduced automobile pmduction materials and services.The much $183.1 million in 1979, an increase of tused the dechne in sales to this higher than normal costs of fuel and $36.1 million or 24.5% over 1978. . mport:nt segment of our business. purchased power in 1978 caused by This large incmase was caused by 3arnings Increase the long nationwide coal miners' strike higher intemst rates, the payment of a lamings for common stock reached a also contributed to the favorable year- full year's interest on bonds which were ecortl $132.6 million for 1979, an in- to-year comparison for 1979. sold during 1978 and the partial year's
- rease of 21.8% over 1978. On a per Cost of fuel and purchased power interest on new bonds sold in 1979. Inter-
. hare b& sis, eamings were $1.90, up continues to represent the largest est on short term bonuwings, because i.0% fmm the $1.76 eamed in 1978 on single item of expense, reaching $744.1 of higher rates and larger bonuwings, million in 1979, an increase of only $5.2 was the highest in many years.
million or 0.7% over 1978's abnonnally high costs caused by the coal miners' strike. Excellent performance of the Company's generating plants, particu-5
demand of 2.8%, as compared to a rate various pmjects in 1979. This brings continuing, the findings of President of 3.0% predicted a year ago. A greater the total to date for all pmjects to $1.2 Carter's Special Commission, the U.S. Nuclear Regulatory Commission and impact from consenation, coupled billion, or 22% of the Company's total with reduced economic activity, are th-plant investment. Major projects which other agencies investigating the Three major reasons for this mduction. were under construction during the Mile Island accident am being evaluated and fully reflected in both Severe Storms Hit Area year included the Monroe Powar In April the Company's senice ama Plant's fuels and emissions pmject, a the engincedng and design of the unit. The Company was notified shortly was hit by a wind storm followed in a coal handling and blending facility re- few days by an ice stonn, msulting in quired to bring this plant into com- after the Thme Mile Island accident outages to a total of 340.000 customers pliance with future emission standards; that NRC personnel who had been with a maximum of 230,000 out of the conversion of Unit Nos.6 and 7 at the reviewing licensing activity for the senice at any one time. St. Clair Power Plant from high-sulfur Greenwood units were temporarily The ice stonn caused by far the mo: to low-sulfur coal; and various projects assigned to special task forces inves- damage, occuning just befom comple-invohing flue-gas conditioning and tigating the accident. Since the NRC licensing resiew was the major under- tion of repairs requimd by the wind ston wastewater treatment systems. This placed a new burden on crews taking on the Greenwood pmject,it Greenwood No.1 la Service was the Company's belief that no who had already been forced to work Greenwood No.1, placed into com- long hours to restore senice to those mercial operation on July 5,1979, is the significant progress could be made customers affected by the wind storm Company's first new generating unit while this licensing review was sus-pended. It was, themfore, decided to A total of 1,300 Dettuit Edison lines since Monme No. 4 went into senice field personnel worked 16-hour shifts in 1974. It is also the Company's first delay all work on these units until inland generating unit, located some 15 changes in design and licensing to repair the damage. In addition, about 500 other Company employes miles fmm Lake lluron.The u:'it bums requirements could be determined. A small Greenwood staff is following were assigned to " wire d'own" teams t msidual oil, imported from CanaaA which is a by-product of the mfining industry and national studies so that pmtect the public. Senice restoration was not completed until one week pmcess remaining after other pruducts, licensing can be resumed when and if later, with a total Detruit Edison work such as gasoline, heating oil and it becomes appmp.iate to do so. petrochemicals, have been mmoved. These delays will undoubtedly result in force of about 3,000 people imulved. I Residual oil has limited use for industrial increased costs,but until specific chang- addition, other utilities provided es are known,it is not possible to esti- assistance, with 21 crews from Con-application, but is a good boiler fuel. sumers Power Company,25 fmm 1980 Capital Expenditures mate how much the increases will be. Commonwealth Edison Company an< of $700 Million Planned Peak Demand Down 18 from Toledo Edison Company. A capital expenditure prugram of $700 Peak demand for 1979, at 6,829,000 kilowatts, was 6.6% less than the 1978 The ice storm was among the wors million, the highest level in the Com- in the Company's history. About 1,70( pany's history, has been approved for peak. While this lower demand was distribution circuits,65% of the Com- ' 1980. Major expenditures are planned caused mainly by the reduction in in-dustrial activity and the extremely cool pany's system, were affected by the is , on the Fermi No. 2 and Belle River Nos. A total of 458 poles wem damaged frt 1 and 2 units and on the Monrue fuels summer weather, it also indicates a ' and emission project, which will be further slowing in peak demand wind and ice and almost two million 51uwth rates because of energy con- feet of wire came down. completed in 1980. Almost two-thirds Total damage repairs chargeable tc I of the 1980 capital budget is expected servation caused in part by the increased price of electricity. operations from the two storms cost to be spent on these three pmjects. about $12.8 million. An application is Nuclear Units Delayed An assessment of future demand potential has msulted in a slight re- now pending before the MPSC reque The Thme Mile Island accident in ing approval of amortization of these Pennsylvania created much uncertainty duction in future load estimates. The costs over a five-year period for about the licensing and operation of present estimate is for a long-term accounting and ratemaking purposed compound annual gmwth rate in peak nuclear units under constmetion or in the planning and engineering stage. New Generating Units In view of these uncertainties, the Expenditures in-senice date for the Fermi No. 2 unit Actual to Date Estimated Estima was delayed fmm December,1980 to (12/31/7si Total cost complet1 March,1982 and the Greenwood Nos. 2 Fuel (Millions) (Millions) Date Plant Size and 3 units were delayed from 1989 1,100 MW Nuclear $893 $1.300 1982 and 1991, respectively, to 1990 and Enrico Fermi Unit No. 2 113 1.371 19s4,19-675 MW ea Coal I Belle Rher Unit Nos.1 a,2 * * "'** 1992.These delavs will allow time for a *"" "" * ' * * ' * * # ** " I'*' thoruugh reexarnination of all safety
- 1he pmious estimated total expenditure of $3.8t0 million is being mised in light of delay and cooling systems and to incorporate other dewtopments and could incivase by se niuch as $500 million if and when the project, suspended in mid-197s. should be resumed.
any changes required, to be certain that the plants are as risk-free as possible. Although both engineering and construction of the Fermi unit are
ENERGY PLUS+ l l i consumption block has been increased increased from 15.5% to 13.75% for t
+ AGGHESSIVE by the A1PSC each year in an effort to above-mentioned twehe-month per IMTE ACTION encourage conservation. The higher availability results in lov Major Mate Case Delayed 4. The interruptible central air con- fuel and purrhased power costs A final order in the Company's major ditioning rate, presiously limited to 500 charged to our customers and the electric rate case, filed with the residential customers on an experi- Company is rewarded for the favore Afichigan Public Senice Commission mental basis, was pmposed to be made performance by an allowed .25%
on December 14,1978, has been de- available to any customer who requests increase since availability was betwi
' fed. A final order is now expected in it. In exchange for this special rate, the 80.1% and 85%. An additionalincrea early Marth,1980. Company has the right to intenupt the of .25% is allowed if availability is at An interim incmase of $56.9 million, customer's air conditioning by a remote- 85%. An average availability below 71 granted on May 22,1979, became controlled radio signal, llowever, would result in a .25% reduction in effective when the Company's the intenuption for selected days allowed return on common equity.
Greenwood No.1 oil-fimd unit was cannot be for an interval longer than Steam Hates Under Heview placed in commerrial operation on twenty minutes in any one hour and Pmceedings are continuing on the July 5.The rate increase was for the for no more than five consecutive Company's request filed in April,19 purpose of meeting the fixed charges, hours in any one day. for an incmase in rates to its steam such as taxes, interest and depmcia- 5. Continuation of the operation and heating customers. The Company tion, which became pan of the cost of maintenance indexing and system requested a two-step rate increase operations when the power plant went generating availability incentive consisting of $2.9 million for the into service. A rate increase tied to the pmvision, both adopted by the MPSC 3979 80 heating season and an addi recovery of fixed charges, commencing in prior rate cases, was proposed with tional $3.9 million for the 1980-81 so wnen a unit goes into service,is a some minor modifications. son. On January 31,1980 a negotiati significant advance in utility mgulation. O & M Index Increase settlement of the intervening customers, the MPSC Staff and the A pmposal for decision, recom- The Operation and Maintenance mending an increase of $137.6 Expense Index, which was first Company was filed with the MPSC ' million, was issued by an MPSC ad- established by the MPSC in its rate appmval. This settlement provides 1 ministratne law judge on October 4, order issued in September,1978, re- $2.6 million rate increase, an impro 1979.This amount included the mterim sulted in an increase in rates of $19.8 fuel adjustment clause and an oper increase referred to above.The million effective Febmary 1,1979. This tion and maintenance index similar pmposal for decision included the was determined by applying the 7.86% that previously appmved for electria following features: increase in the Consumer Price Index customers.The Company prmides
~
- 1. An authorized rate of return on frum August,1977 to August,1978 to an steam heating service to various bu common equity of 1325% was pmposed, operation and maintenance expense nesses, hospitals, schools and offic the same level as that granted by the base of $252.1 million, excluding fuel, buildings in the downtown Detroit MPSC in the last two rate cases. purrhased power and production wholesale Hates Increased
- 2. The Company s mquest for maintenance expenses. The increase nates to the Company's seven monthly trading of all customer meters was collected as a surcharge on each wholesale for resale customen wen was supponed, with rdes adjusted to ustomer sbill over a twe1ve-montii increased in 1979 and a second in-cover the increased costs. The pmsent peri d. crease is scheduled for 1980. In the practice of estimating consumption on sn x sys em msu ed in a sec- lier case, filed in November, 1973,11 alternate months for msidential and n nemase, oM327 mhon, effective Federn. 2nergy Regulatory Commis-some commercial customers causes ebmary 1,1980. Ms incmase was approved an incmase in rates of $3 billing pmblems which mquire adjust- ** " "" ^"E" IO78
- A"E"**' million. The new rates were effecth ment when meters are mad the next 1979 change of 12.04% in the Consumer on August 11,1979. In the recent ca Price Index which was applied to the a negotiated settlement was agmed
- 3. An increase in the diffemntial for new 0 & M expense base of $271.9 by the Company and the wholesale each consumption step of the regular milli n- customem.The agreement mached residential rate was proposed, thereby between the panies, prmiding for a imposing a gmater inemase on those Systern Generating Availability Incentive Provision increase in rates of $42 million who use larger amounts of electricity. effective April 1,1980, was accepted Since irwened rates were first adopted Under the System Generating Avail-ability Incentive Pruvision established FERC on January 17,1980.
in 1976, the differential for each by the MPSC in its 1977 rate order, the Company was granted an additional
$6 million in revenue, effecthe for a twehe-month period beginning June 6, 1979. By attaining an average system l
power plant generating availability of ' 832% for 1978, the Company's au-thorized retum on common equity was
aO m'
* 'Oe M'90*+a9e4 ENERGY PLUS+
use energy wisely and the assistance , calculations indicate that solar energy in establishing van pools among
+ EXTENSIVE c ntributed approximately 35% of the employes.
home's hot water and space heating The following programs are examples HESEARCH AND needs. of additional activities in 1979: CONSERVATION Passive Solar System -In contrast to Michigan Energy Exposition -The EWORTS the c nventional solar heating system Company was one of the major Hesearch Projects Continue mentioned above, the Company is cur- pa ticipants in the Michigan Energy As in past yeam, rescamh and de- rently studying the potential of a pas- Exposition held in November at Cobo velopment projects received high pdor- sive s lar system.This system has no flall. Nearly 135,000 persons attended ity in 1979. In addition to the support moving pans, such as a pumping the four-day show, one of several held of industry macarch pmgrams, a system. Designs for such a home are around the state as part of Michigan Company department is desuted being studied and, if appruved, the Energy Awareness Week. exclusively to this function. In 1979 a home will be built for testing purposes. Co. Generation Study-Phase I of the totti of $6.4 million was expended on Add.On Heat Pumps - A program to Department of Energy sponsoied co-these vanous research efforts by Detroit evaluate the perfonnance of electric generation study was completed dur-Edison. heat pumps as an add-on system to ing the year. The study invohed the The following projects are examples conventional gas and oil fumaces has potential use of steam, after it has been of the kind of work being done within begun. If successful, this system could used for elev.dc generation, for heating the Company: greatly improve the efliciency of resi- and cooling of buildings in the vicinity Monroe Greenhouse - This 5,000 dential space heating. In addition, in of the power plant. Phase I of this squire foot gmenhouse was completed the case of Detroit Edison, any energy study was to evaluate the ama around in 1979. It will be used to test the pmvided by electricity is pmduced the Conners Creek plant for its heating fe sibility of using heat extracted from mainly by coal, thereby consening the and cooling potential, plus consider-power plant discharge water, thmugh less abundant gas or oil which would ation of the technical, economic and the use of water source heat pumps, to thenvise have been used. emironmental factom imuvied. provide heat in winter and cooling in Electric Vehicles -Two electric vehi- Compact Cars -Over the past seven summer. Various vegetables, such as cles are now being tested on a daily years the Company's automobile fleet tomatoes, lettuce and cucumbers, are basis. One is a commercial van, which has been downsized from full size to being gruwn. In addition, three 500 has been in use as a mail delhery compact cars in a fuel conservation gallon fish tanks are being used to test vehicle, while the newest vehicle is a effort. Studies are now being made on the use of wann water to accelerate compact station wagon which will have the possible shift to subcompact cars fish growth. vadous uses. Information is being , wherever possible. Solar Hnme - Over 35,000 people, in gathered on thee effect on electncal use and the operating and main- Customer Service Improving tddition to vadous technical and Through various methods, including pmfessional groups, visited the solar tenance aspects imuhed. Some Testing of foles -In the mid- radio, television, newspapers, mail cni home during its yeanlong demon-stration phase.The home is now of. sixties, the Company developed and personal contacts, the Company pm-fered for sale, with the stipulation that patented a sonic system of testing vides an extensive customer senice the new cwners allow the Company to wood poles for decay.The system was program.These pmgrams hase been designed to provide information relate cany on its second phase of research. based on the amount of time it takes to energy conservation and assistance This will be a two-year data collection for sound waves to travel thmugh the to customars in understanding End analysis pmgram. Preliminary pole. This system has now been Company policies and services improved through the use of the latest available. Some of the major programt available electronic technology, msult-during 1979 included the following: ing in much faster testing. With over one million poles in senice on the Help Us, Help You -The " Help Us, Company's system,50,000 poles must IIelp You" program involves bill pay-ment counseling, bill payrnent plans, be tested each year. senior citizens rate and a double not Wise Use of Energy has High Priority The Company continues to carryvation, out its commitment to energy conser including both new and on-going pm-grams. These include the home insulation financing program, intenup-tible air conditioning, time-of-day rates, booklets and Company programs which pruside infonnation on how to t /
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-_.__m i i .1 i , "omparison of Annual Hesidential 3111 to Median Family Income Average Annual Average Annual Michigan Median Residential Bill kwh Use i' ear Family Income
- Amount 5 ofIncome Per Customer 1959 $ 6256 $ 90,49 1.45% 3,366 11,032 130.02 1.18 5,563 IS89 175.76 1.26 6,560 1973 13.922 14.537 19621 1.35 6,330 1974 15,385 238.90 135 6,514 8975 16,954 263.71 1.56 6,518 L976 18,395 29620 1.61 6,616 1977 19.776 313.08 138 6,529 4978 326.92 134 6,402 I93 21.190 Sourre:1959,1969and1975--U.S DepartmentofCommerte Estimateforotheryearsbasedonpen entage change in Michigan average weekly camings in private employment.
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T # y - g p$g.g( . )3 .:p ga"M[j@ Capital expenditures continued at a very high level in 1979, maching a tt r D[ - hcNT' MM
' of $591.4 million, excluding nuclear I9 h.,g 'gy A -
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' ' through the special arrang financed h#Nh@ ment discussed earlier. A large port h hlgg 2[
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\ h [AgM of these expenditums N1W Fermi No. 2 nuclear unit, whici was for the 11 M*, Wyhg ,,7'
~ 9" -.8bN 4%. was about 80% complete by year-en m
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A .. N . Significant amounts were also requi
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-"9 coal-fired Belle River units for engin N
g' d9--O ,#p *' - ing, licensing, site preparation, pilin b and concmte work.
+
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various projects irwohing transmiss x / distribution and other facilities. k .r
- Environmental Projects Costh The Company continues its comm'i' Mg.1:7 aWP iW; 1 ment to impmving the erwimnmen1 spending a total of $190 million for f v,lhW
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Bottom Ceriter: Msitors to the Fermi 2 g b(tf-f %- Q.N W g Top: Ead F.Wooley defu and Dennis t Lane a tright), construction company emplops, work Information Center are greeted by Eileen M. A --' on Fermi 2 turbine installation. Gibbone, Senior Stenograp+ar. gepf Bottom left: Mehin L Askew, Jr. Engineering Bottom flight: Roger E. Brelinski Geft) and ,.
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Technician in our Engineering Researth Paul S. Makar (right). Engineering Research i Y,6p'
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employes, take water samples near the Department, testa power plant discharge g water for its trace metal content. txioling spray modules at Greenwood. _..D _ _%1u % m-S
demand of 2.8%, as compamd to a rate continuing, the findings of President of 3.0% predicted a year ago. A greater various projects in 1979.This brings the total to date for all projects to $1.2 Carter's Special Commission, the U.S. Nuclear Regulatory Commission and impact from consenation, coupled billion, or 22% of the Company's total with reduced economic activity, are th other agencies investigating the Three major reasons for this reduction. plant investment. Alajor pmjects which hille Island accident are being were under construction during the Severe Storms Hit Area evaluated and fully reflected in both year included the hion:ve Power the engineering and design of the unit. In April the Company's senice area Plant's fuels and emissions pmject, a was hit by a wind storm followed in a coal handling and blending facility re- The Company was notified shortly few days by an ice storm, resulting in quired to bring th4 plant into com- after the Thme hiile Island accident outages to a total of 340,000 customen pliance with futum emission standards; that NRC personnel who had been with a maximum of 230,000 out of the convenion of Unit Nos.6 and 7 at the reviewing licensing activity for the senice at any one time. St. Clair Power Plant from high-sulfur Gmenwood units were temporarily The ice storm caused by far the mo to low-sulfur coal: and various projects assigned to special task forces inves- damage, occuning just before comple invoMng flue-gas conditioning and tigating the accident. Since the NRC licensing review was the major under- tion of repairs requimd by the wind sto wastewater treatment systems. This placed a new burden on crews taking on the Greenwood project,it Greenwood No.1 in Service was the Company's belief that no who had already been forced to work Greenwood No.1, placed into com- long hours to restore service to those meretal operation on July 5,1979, is the significant progress could be made customers affected by the wind stonn while this licensing myiew was sus-Company's first new generating unit A total of 1,300 Detmit Edison lines since hionroe No. 4 went into senice pendad. It was, therefore, decided to delay all work on these units until field personnel worked 16-hour shifts in 1974. It is also the Company's first to repair the damage. In addition, inland generating unit, located some II changes in design and licensin8 about 500 other Company emploves miles from Lake !!umn.The unit burns requirements could be determined. A were assigned to " wire d'own" teams residual oil, imponed from Canada, small Greenwood staff is following industry and national studies so that pmtect the public. Senice restoration which is a by-pmduct of the refining was not completed until one week pmcess remaining after other pmducts, licensing can be res.amed when and later,if with a total Detroit Edison worl such as gasoline, heating oil and it becomes appmpriate to do so. These delays will undoubtedly result in force of about 3,000 people involved. petrochemicals, have been removed. increr. sed costs,but until specific chang- addition, other utilities provide 6 Residual oil has limited use for industrial es are known,it is not possible to esti- assistance, with 21 crews from Con-application, but is a good boiler fuel. sumers Power Company,25 from 1980 Capital Expenditures mate how much the incmases will be. Commonwealth Edison Company an of $700 Milliott Platined Peak Demand Down 18 fmm Toledo Edison Company. A capital expenditure program of $700 Peak demand for 1979, at 6.829,000 kilowatts, was 6.6% less than the 1978 The ice storm was among the won million, the highest level in the Com- in the Company's history. About 1,70 pany's history, has been approved for peak. While this lower demand was distribution cimuits,65% of the Com-1980. hiajor expenditums are planned caused mainly by the reduction in in-pany's system, were affected by the i on the Fermi No. 2 and Belle River Nos. dustrial aethity and the extmmely cool A total of 458 poles were damaged fr. summer weather,it also indicates a 1 and 2 units and on the hionrue fuels wind and ice and almost two millior and emission pmject, which will be further slowing in peak demand gmwth rates because of energy con- feet of wire came down. completed in 1980. Almost two-thirds Total damage repairs chargeable ti of the 1980 capital budget it expected servation caused in part by the increased price of electricity. operations from the two storTns cost to be spent on these thme projects. about $12.8 million. An application i: Nuclear Units Delayed An assessment of future demand now pending befom the htPSC reque potential has resultec in a slight re-
'The Three hiile Island accident in ing approval of amortization of these Pennsyhania created much uncertainty duction in future loact estimates. The costs over a five-year period for about the licensing and operation of present estimate is fr r a long-term accounting and rater.taking purpose compound annual giowth rate in peak nuclear units under constniction or in the planning and engineering stage. New Generating Uahs In view of these uncertainties, the Expei.ditures in-senice date for the Fermi No. 2 unit Actual to Date Latimated Estimati was delayed fmra December,1980 to (12nt/79 Total cost complet-(Millions) IMillional Dats hlareh,1982 and the Greenwood Nos. 2 Plant Size Fuel and 3 units were delayed from 1989 1.100 M W Nuclear $s93 $1.300 1981 Enrico Fermi Unit No. 2 1.371 1984, if and 1991, respectively, to 1990 and BeDe Rher Unit Nos.1 &,2 675 MW ea Coal 113 1992.These delays will allow tirre for a C'"'*""" d " ' " *
- 8
*'* *'I* *'
thoruugh reexamination of all safe 7 * *Ihe pmious estimated total expenditure of $3.s 0 million is being redsed in light o other developments and could irr,rease by as much as $s00 million if and when the project, and cooling systems and to incorporate suspended in mid.1979, should t e resumed. any changes required, to be certain that the plants are as risk free as possible. Although both engineering and construction of the Fermi unit are
4 -w ee m w-ee.e.- ENERGY PLUS+
.{. FJTENSWE calculations indicate that solar energy use energy wisely and the assistance HESEARCH AND c ntributed appmximately 35% of the in establishing van pools among g ,gggg7 , home's hot water and space heating employes.
needs. The following pmgrams are example EFFORTS Passive Solar System -In contras; to of additional activities in 1979: Heseerch Projects Continue the conventional solar heating system Afichigan Energy Exposition -The As in past years, research and de- mentioned above, the Company is cur- Company was one of the major
. velopment projects received high prior- rently studying the potential of a pas- participants in the Michigan Energy ity in 1979. In addition to the support sive s I r system. This system has no Exposition held in No$ ember at Cobo of industry msearch prugrams, a moving parts, such as a pumpind liall. Nearly 135,000 pemons attended .
Company department is devoted system. Designs for such a home are the four-day show, one of several held cxclusively to this function. In 1979 a being studied and,if approved, the around the state as part of Michigan t::tal of $6.4 million was expanded on home will be built for testing pu: poses. Energy Awareness Week. these various research efforts by Detmit Add On fleat Pumps - A pmgram to Co-Generation Study- Phase I of the Edison. evaluate the perfonnance of electric Department of Energy sponsored co-The following pmjects are examples heat pumps as an add-on system to generation study was completed dur-of the kind of work being done within conventional gas and oil fumaces has ing the year. The study involved the the Company: begun. If successful, this system could potential use of steam, after it has bee Afonroe Greenhouse - This 5,000 greatly impruve the efficiency of resi- used for electric generation, for heatin; ' square foot gmenhouse was completed dential space heating. In addition, in and cooling of buildings in the vicinity j in 1979. It will be used to test the the case of Detmit Edison, any energy of the power plant. Phase I of this ' f=sibility of using heat extracted from pruvided by eiectricity is pmduced study was to evaluate the area around power plant discharge water, thmugh mainly by coal, themby consening the the Conners Cmek plant for its heating th3 use of water source heat pumps, to less abundant gas or oil which would and coohng potential, plus consider-pruvide heat in winter and cooling in therwise have been used. ation of the technical, economic and summer. Various vegetables, such as Electric Vehicles -Twn electric vehi- environmental factom invovled. tomatoes, lettuce and cucumbers, are cles are now being tested on a daily Compact Cars -Over the past seven being gmwn. In addition, three 500 basis. One is a commercial van, which years the Company's automobile fleet gallon fish tanks are being used to test has been in use as a mail delivery has been downsized frum full size to the use of warm water to accelerate vehicle, while the newest vehicle is a corppact cars in a fuel conservation fish gruwth. compact station wagon which will have effort. Studies are now being made on , Solar ffome - Over 35,000 people, in various uses. Information is being the possible shift to subcompact cars addition to various technical and g thered on their effect on electn, cal wherever possible. professional gmups, visited the solar use and the operating and main- Customer Service Improving tenance aspects invohed. ) home during its year-long demon- Thmugh various methods, including i stration phase. The home is now of. Sonic Testing ofPoles -In the mid- radio, television, newspapers, mail and fired for sale, with the stipulation that sixties, the Company developed and personal contacts, the Company pro-the new ownem allow the Company to Patented a sonic system of testing v des an extensive customer senice cany on its second phase of research. wood poles for decay.The system was
, prugram.These prugrams have been This will be a two-year data collection based on the amount of time it takes designed to provide information relate (
cnd analysis prugram. Pmliminary for sound waves to travel thmugh the to energy conservation and assistance pole. This system has now been to customem in undentanding improved through the use of the latest Company policies and senices available electiunic technology, result- available. Some of the major programs i ing in much faster testing. With over during 1979 included the following: ; one million poles in senice on the fielp Us, Help You -The " Help Us, Company s system,50,000 poles must Help You" program invohes bill pay-be tested each year. ment counseling, bill payment plans, Wise Use of Energy senior citizens rate and a double not;ci has High Priority The Company continues to cany out its commitment to energ conservation, including both new and on-going pm-grams. These include the home insulation financing pmgram, internip-tible air conditioning, time-of-day rates, booklets and Company prugrams which pmvide information on how to 11
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pmtection plan to help avoid electricity l l shut-offs. The use of infonnation bmchums helps customers get the i. most from their energy dollar. Advenis- N ing mlating to the plan has appeared in mom than 100 area newspapers, E- ;. L gi k almost 100 television spots and more d .p9/ '. e than 2,600 radio messages. Senior Citizens flate - h1om than
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for manyincluding - hir . ' ,' fkfWAs
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lo e and the confidential natum of ,hf - Top left: Michael F. Bica lleftl, Customer Top flight: Engineering Hesearth Department l Office Representathe, explains the Help Us. Help employe Gary D. tongton picks the first emp You pmgram to a customer. of tomatoes gmwn at the Monme Power Top Center: Mail Drher Guy S. Barter and the Plant's expenmental greenhouse. i experimental Electric Van used to delher 8 Bottom: George G. Murray tieftl, Researth Company mail in the Downtown Detroit area. Pmgram Administrator, and William H. Hollar trighth Director of Industry 1rade Gmup Services, rniew specifications relating to the Company's experimental sola- Dome.
_ = ENERGY PLUS+ Company. Mr. Gerstenberg, who served and Constmetion, was elected Vice on the Board for fouryeam and Mr. President-Nuclear Operations.
.f .1)EI)ICATEE)
- Mr. Claybourne Mitchell, Jr., was Iludson, who had been a board member for 17 years, chose for per- named Vice President-Planning and ws and Ners sonal masons not to stand for reelec- Reseamh, fmm his former position as At the Annual Meeting of the Share- tion as (iirectors. The Company is Assistant Vice President-Pianning and holders held April 23,1979, thirteen of grateful to both gentlemen for their Research.
the incumbent directom were reelected many years of outstanding service. Employes and Familles for a pedod of one year. Two new di- The following senior officer changes Kept Informed rectors were also elected at that were made at the Boarti of Directors In addition to using various means of meeting following the Annual Meeting, keeping our dedicated work force well Boa a an n Cl le Executive all el ective immediately: informed about the operations of the Officer of the Bundy Corporation of De-
- Mr. J hn R. Hamann, former Company, the Company also attaches tmit and Father Malcolm Carrun, SJ., President and Chief Operating Officer, 8 mat importance to keeping the Chancellor of the University of Detroit. was named to the newly-created post employe's family knowledgeable about Mr. Anderson and Father Canun fill f Vice Chairman of the Board. these matters.To accomplish this, the director positions vacated by
- Mr. Walter J. McCarthy, Jr. was many programs am underway Richarti C. Gerstent crg, Director and elected President and Chief Operatin8 throughout the Company, including fomier Board Chairman of General Officer. He was elevated fmm his the examples listed below:
Motors Corporation and Joseph L. pd r position as Executive Vice
- Members of the Company's Power Hudson, Jr., Chairman and Chief Club, their spouses, other employes Pmsident-Divisions.
Executive Officer of The J1. Hudson
- Mr. leon S. Cohan was elected and guests, totalling about 1,500 N Senior Vice President and General pemons, gathered early in the year to Counsel. He had been Vice President hear John R. Hamann, then the and General Counsel. Company's President, give his annual
- Mr. Frank M. Kehoe, Secmtary of " State of the Company" address.
the Company, was elected a Vice Presi-
- Open House for employe's families M. dent in addition to retaining his posi- was held at various locations dudng l i -
tion as Secmtary. the year, including power plants,
"
- Mr. Burkhard H. Schneider was wamhouses, the new engineedng
; / ,( . named Vice President-Divisions, center and the central office complex. ,
replacing Mr. McCarthy in that
- Semi-annual all-day seminars for l 4 position. Mr. Schneider had been Assis- spouses of Management Council mem-3 tant Vice President-Planning and Re- bers are dimeted by Mrs. William G.
' ' search. Meese. Since the meetings began in
;
- Mr. Hany Tauber, formerly Vice 1976, they have featured presentations j President-Fuels and Purchases, was named Vice President-Engineedng and by members of management on Com-pany operations and by nationally me-e,; '
Constmetion. ognized speakers on government and The following changes were made at the economy. the November 26,1979 Board of Direc-
- Paymll checks for employes paid tors meeting, effecthe January 1,1980: on a weekly and bi-weekly schedule
- Dr. Wayne H. Jens, formerly are mailed directly to the employe's Assistant Vice President-Engineedng home. A vadety of payroll inserts have Top: Chairman Meese receives the Honorary
$- N State Farmer Dogme fmm members of the - f 1
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f3J Tr n v ' use Michigan Association of Futum Farmers of America, their highest aws:ti. ,k d' .~~ J Nght: Mrs. %ullam G. Meese intmduces l [ j , ,
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r f)Q te N Claybeume Mitchen,Jr.,Mee President. I. f y. ) Mannin6 and Researth, as the next speaker at the semi-annual seminar held for spouses of gg :.'p { l g Mana6ement Councu members. y , ( g s
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been used to keep both the employe ? nd the employe's family well-infonned on many items relating to either the [t{ j n job or the Company. , . ;,, ; 6
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Smnli Increase in Employment . At year-end the number of employes Systems and many others. During 1979, : - was 10.908, an increase of only 179 over the following changes were made: the number at the end of 1978. Every
- A separate unit was established in ML.it% f dgy- NgM$. s [ f." '
effon hr.3 been made to hold employ- the Employe Relations Department to - [ ^ ment at the lowest possible level in this centralize the administration of equal f N , difficult period of rising costs and un-cenain economic conditions. Employ-employment opponunities, affirmative action and all related matters. C '
-- , c f ment was held to these levels despite
- A new hianagement and Profes- y- - 2 the need to provide service to a s%
h sional Development Program was - > .- y- . gmwing number of customers. The implemented. This program will assure ,
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additional plant and equipment placed availability of competent management ... Z i 3 ', j. y-into senice, such as the new Green- mplacements by forecasting future wood Power Plant, must be operated needs, identifying high potential ' ' - ^ .^ a"b ," g ..- and maintained. htany demands are employes and planning for their . made on employe time to install, development. M > operate, monitor and maintain the
- Company programs to train super-
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auw g. En '- extenshe installations of pollution con- visors and work leadens and to provide trul equipment being added to the sys- technical training for employes were 7)_ .?! tem each year and to cope with the revised and updated. rapidly growing administrathe burden of ever incmasing govemmental
- Vadous functions were combined to create three organizations in the ~
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regulations. Company's Operations group, i.e., Pro-Although the rate of new employes duction Organization is in charge of . himd was slowed in 1979, continuing generation of electdcity; Electdcal Sys-
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prugmss was made in increasing the tem and Interconnection Operations number of minority employes. am responsible for getting electricity
, w-l 7 hiinodties now constitute 15M of the produced or purrhased through work foree. intereonnections to the Division Or-Efforts were also continued in plac-ing women into both non-traditional ganization for distribution to the cus-tomers; and Administration Operations
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. s technical jobs and in administrative takes care of all invohed administrative and pmfessional positions. By year end functions.
k N\ a total of 407 women had been placed in these positions, which in the past
- A computer-assisted Automated hfapping System, which utilizes an T.
ja had been predominately held by men. electronic plotting board to pmduce Org nizing for Better Efficiency maps that in the past had to be drawn Mangk a are req d on the daily Throughout the years, improvements in by hand, has been completed for one repmenting some of these skms, from top to organization and better methods have of six didsfons and will be completed bottom, are Automotive Mechanic Hany C. h h ect R1cha C recehed a high priority in a cominuing f r three mom didsfons during 1980. QW8 , effon to be efficient and still prodde These maps identify by location the Mle Cleri Nancy M. Dichazi, and Computor as.tisfactory working conditions for Company's poles, lines, meters, trans- Operator Anthony G. Tancredi. employes and reliable customer ser- formers and other electric distribution vice. In the past, this has included the system facilities. In the future this new est blishment of a Division Organiz- system will also be used to suppon trion for all customer-related senices, accounting, engineering and regulatory the Pmject Management Organization rePoning functions. to coordinate all major construction pmjects, computedzed Customer In-form: tion and Shareholder 'nformation ts l
- '_ r _ . _ - _ _ .__
ENERGY PLUS+ Company is leading an alliance of + VIGOHOUS utilities and other intemsted groups g g,gg,g seeking to enact legislation in Congress legal acthities resulted in significant to limit state severance taxes imposed tchievements for the Company, in- on coal destined for use in any power cluding the following: plant or major fuel burning installation.
- The United States Supreme Court
- The Company successfully chal-ruled in favor of the Company in a lenged the legality of a City of Detroit major labor relations case, upholding ordinance imposing a moratorium on our right to refuse to turn over to a the shutoff of electric senice for the union copies of aptitude tests given to nonpayment of bills.The Wayne job applicants. Tl'e Company claimed County Circuit Court agmed with the that to do so would have destroyed the Company's position that the ordinance validity of the tests for positions involv- is invalid because it has been ing vital technical responsibilities af- preempted by state law. The Company fecting public safety and welfare. also contended that the ordinance is
- The Company won dismissal, in unnecessary since there are many pro-the United States District Court in New grams in effect to protect those in real York, of a major $77.5 million class financial need.
act!an lawsuit.The suit had alleged
- The Michigan Court of Appeals, that the Company's prospectus issued rejecting a challenge by the state At-in connection with its 1972 common Mmey General, mled that a $25 million stock offering did not properly dis- interim rate incmase granted Detruit close the effect on camings of cenain Edison in 1972 was proper and could accounting items. The Court rejected be retained by the Company.
the claim and supponed the Com-
- The Interstate Commerce Com-pany's disclosure and its lyal position. mission, acting after an intensive legal The plaintiffs are appealing the decision. battle waged by the Company, rolled
- A $5 million class action lawsuit back fmight rates that Detroit Edison against the Company relating to alleged must pay to ship coal by rail from overeharges to msidential customers Montana to the Company's because of the bi-monthly reading of transshipment facility in Wisconsin for meters was dismissed by the Michigan use in the Company's power plants.
Court of Appeals based on legal argu- Unless the decision is overtumed on ments put furth by the Company. appeal, it will result in a refund to the
- A settlement was reached and Company of several million dollars, pruvisional Court appruval granted in which will be passed on to customers.
the extended seven year discrimination In addition, there were intensive case against the Company. If finally legal proceedings involving the success-approved by the Court, the settlement ful resolution of a series oflawsuits in-will eliminate a 1973 District Court vohing the acquisition of rights-of-order which had imposed sevem way for new high voltage transmission restrictions on the Company's lines essential to serve our customers, employment practices and it will dis- the favorable settlement of lawsuits pose of hundreds of backpay claims for imuhing defective equipment supplied a lump sum cash settlement. to the Company and the vigorous de-
- The Company won a reclassifica- fense of a large number of public liabil-tion of the status of Greenwood No.1 ity claims.
unit which had been prohibited from During the year the Company also burning oil, the only fuel for which it continued to implement and expand was designed.The buming of residual its preventive law program aimed at oil has now been permitted and the avoiding litigation whenever possible or unit has been allowed to become placing the Company in the best legal operational without the necessity for position if a lawsuit is unavoidable. expenshe conversion to bum an These selected highlights of legal alternative fuel. achievements can only suggest the
- The legt* batt 9 to challenge the volume, variety and complexity of the Montana state coal severance tax con- legal activities conducted on behalf of tinued. In addition to the litigation, the the Company.
16
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a x - - The consolidated financial statements of The Detmit Edison Company and st Hegponsibilj(y sidiary coinpanies have bwn pmpamd by nianagernent in confonnity widt genna IOr Financial accepted accounting principles, based upon currently available facts and < cumsiances and management s best estimates and judgments of known conditio Statements It is the responsibility of management to assum the integrity and objectivity of su financial statements and to assum that these statements fairly report the finant position of the Company and the msults of operations. To meet this responsibility, management maintains a high standard of mcc keeping and an effective system of intemal controls, including an extensive pmgr. of intemal audits, written administrative policies, and pmcedums to assum t selection and training of qualified personnel. These financial statements have been examined by the Company's independ accountants. Price Waterhouse &. Co., whose mport appean, on page 23. Tl examination was conducted in accordance with generally acc.rpiai aediting st dants which include a mview of internal contmis, as well as the performance of si other pmcedums they deem necessary to pmvide reasonable assurance as to faimess of the Company's financial statements and to enable them to express opinion thereon. The Boani of Dimetors, thmugh its Audit Committee, meets with the independ accountants, mpresentatives of management and the internal auditors to raiew activities of each and to discuss accounting, auditing and financial matters and canying out of msponsibilities and duties of each gmup. Price Waterhouse &. C full and free access to mee' with the Audit Committee to discuss thei msults and opinions, withot t management mpmsentatives pmsent, to allow complete independence.
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Wilham G. Meet,e Emest L Grtwv Jr. Chainnan of the lioarti and Cl ief Executne Ot Senior Executwe Vice President-Finance
___. -L _ _ _ _ _ . . _ . _ .. year ended perember :
@ ted 1979 197, Statement of Operating Revenues rrhousandsi
$1,561
$ 1,667,679 Electric 30,832 28 The Detroit Edison Company Steam
$14,98,511 $1.589 and subsidiary companies Total Operating Revenues Operating Expenses Operation expense
$ eM7,620 $ 580 Fuel
, 96,502 158 Other power supply Other operation expense 266410 235 128,600 124 Maintenance expense 129,644 115 Prosision for depreciation (Note 11 s
Pmvision for taxes (Notes 1 and 7) 5,063 4 Federal income 54,732 38 Defemd federal income (10,154) is Defemd federal income Icmdit) 9,284 24 Investment tax credit-net 13,840 9 Other federal and state 81,493 77 Pmperty and excise $1,362 Total Operating Expenses $1423.034
$ 275477 5 226 ,
Operating Income Other Income and Deductions l Allowance for other funds used during construction
$ 38,323 $ 32 (Note 1) 3,664 I Other income and deductions (1,554) (1 Income taxes (Note 7)
S 40433 S 3: Total Other Income and Deductions Income Before Interest Charges S 315,910 S 26( Interest Charges
$. 167,585 S 14f long-tenn debt Amortization of debt discount, premium 1,644 and expense 13,823 .
Other Allowance for bormwed funds used during (43,171) 13: constniction (credit) (Note 1) Net Intemst Charges $ 139.881 S 11.
$ 176,029 $ 141 Net Income Pmfermd and Pmference Stock Dividend 3 43457 Requirements
$ 132,572 S to Earnings for Common Stock 694M8484 61.89 Common Shares Outstanding-Average
$ 1.90 $
Earnings Per Share
$347,506 $33
' Balance at Beginning of Year 176,029 2 HSOUted Net Income
$523,535 $_48 Statement of "*d"*'-Cash Dividends Declared Retnined Earnings Common stock ($1.60 and $1.52 per sham, i
$112,628 59 Used.m the respectiveiy)
Cumulative convertible prefemd stock 2,967 Business Cumulative nonconvertible pmfermd stock 25,507* 1 The Detn,.t Edison Company Cumulative prefemuce stock 15,559 _1 and subsidiary companies * $156,661 S1? Total Deductions Balance at End of Year ($14,000,000 mstricted as to
$366,874 $34 payment of common dividends)
'The initial dhidend in 1979 on the 972% series prefened stock and the 9 60% seiies prefened and in 1978 on the $228 series preference stock was for a pmiod c,ther than a quarter.
(See accompanying Notes to Consolidated Financial 5tatements on pages 24-29.1 m
year Ended Decemtwr 3: Consolida(d 1979 1978 Statement of rinanciai He.ource. prouded: tThousands) Chan g .in Net Income
$176,029 $146,861 Financial Position Items not affecting working capital:
129,644 115,32! The Detruit Edison Company Depreciation 28,911 cnd subsidiary rompamca 41,777 Defened income taxes-net 9,284 24,03: Investment tax cmdit-net Allowance for other funds used during (38,323) (32,27; construction (Note il ta) 3,129 (78! Other $282,08 Financial msources pmsided by operations $321,540 Funds received from Trustees: 41,86' 37,947 Collateralized pollution contrul bonds 1,500 2,11e Installment sales contracts 137,44. 247,131 Sale of general and refunding mortgage bonds 35,024 59,15-Sale of prefermd stock 110,554 97,47, Sale of common stock Issuance of common stock on conversions of Sh% 16r142 13.22 series prefermd stock 9,526 - Sale of capitalized costs mlating to nuclear fuel 10,349 3,41 Other $636,77
$790,013 Total Financial Hesources Used: $639,49
$588,473 Plant and equipment expenditums 2,916 3,18 investment in fuel supply through subsidiaries
$531,389 $642,67 Total capital expenditures Allowance for other funds used during construction (38,323) (32.27 (Note il (a) $ 610,40
$553,066 Dividends on common, prefermd and 156,661 133,44 pmference stock 13,22 Conversions of 5h% series prefermd stock 16,469 Iledemption or reclassification of long-term debt 65.695 78,7C and prefemnce stock 12,783 -
Storm damage costs 10,533 6,34 Other (Decrease) in working capital * (25,194) (205.30
$790,013 $636,7; Total
- Analysis of changes in working capital increase idecrease) in current assets:
$ 11,885) 5 (1.7 Cash - i85.1 Temporary cash irwer tments 111.3321 24.2 Accounts receivable 31.3 89,191 Irnentories - t1.1 Recostrable fuel costs 2,08: F Prepayments S 5M.235 $ (3t f tincreasel decrease in cunent liabilities:
$ 19.338) 5 (20.P Commerrial paper (53.50er a22.0 Bank loans (4388 42 tat Excludes allowance for bortuwed funds used Trust demand notes (28432) during construction of $43.171.000 and $33.590,000 Prornissory notes 15,505 (77.2 long term debt due within one year for the years ended December 31,1979 and 1978, (24801 Preference stock sinking fund erquirement due within one year respecthely, in accordance with accoimting re- 22.185 130.1 Accounts payable quirements of the Federal Energy Regulatory III A93) 45.2 Property, general and income taxes Commission. The totat allowance for funds used (15482) 127,1 during constructicm amounts to $8tAS4.000 and Other $t 173.1 8 tM34296
$65.863.000 for the years ended December 31,1979 S (25.194) Si205.
(Decreasel in Working Capital and 1978, respecthely (See accompanying Notes to Consolidated Financial Statements on pages 24-29.1
gggg 1979 Dectmber 31 1978 g _ (Wousands) The Detroit Edison Company Assets and subsidiary companies Utility Properties (Notes 1,8 and 14) Plant in senice and held for futum use Electric $4,397,250 $3,823,1 Steam 41,964 40.1
$4439,214 $3,864,(
Less: Accumulated depmciation (1,069,194) (962,2
$3,370,020 $2,901,1 Construction work in progmss 1,220,809 1,229,:
9,' Nuclear fuel ,_
$4,590,829 $4,140,f Other Property and Investments investments in coal supply $ 4,550 $ 11/
Non-utility propeny and other 12,682 11A
$ 17,234 $ 22.]
Current Assets Cash (Note 2) $ 2434 $ 4,1 Customer accounts mceivable (less allowance for uncollectible accounts of $7,500,000 and
$6,600,000, respectively) 152,248 151,(
Other accounts mceivable 8,569 21,1 Inventories (Note 1) Fuel 224A72 171,2 Materials and supplies 74,212 57,( Recoverable fuel costs (Note 101 1415 1,* Pmpayments 5,387 3,:
$ 468,737 $ 410,!
Deferred Debits Unamortized debt expense $ 19,072 $ 17,- Accumulated defened income taxes (Note 1) 9458 10,! Extraordinary pmperty losses (Notes 1 and 11) 22,945 13.1 Other 17,750 16.-
$ 69,225 $ 57,:
Total $5,146,023 $4,G31,. (See accompanying Notes to Consolidated Financial Statements on pages 24-29) 20
December 31 1979 1978 (Thousands) Liabilities Capitalization Common stock-$10 par value, 85,000,000 shams authorized; 74,459,897 and 65,941,890 shares out-standing, respectimly (2,142,764 and 2,816,999 sharts, respectively, reserved for conversion of
$ 744,599 $ 659,419 preferred stock) (Note 3) 316,314 271,092 Premium on common stock Common stock expense (27,346) (23,943) 386,874 347,506 Retained eamings used in the business Total common shareholders' equity $1,400,441 $1,254,074 Cumulative prefe:Ted stock-$100 par value, 6,000,000 shams authorized; 3,767,560 and 3,480,933 shares outstanding, respectively; 1,734,827 and 2,189,827 shares unissued, respectively (Notes 3 and 4)
Non-redeemable preferred stock 276,038 292,507 Redeemable preferred stock 94,182 59,158 Cumulative preference stock-$1 rar value, 10,000,000 shares authorized; 5,998,400 and 6,000,000 shares outstarding, respectively (Notes 3 and 4# Non-redeemable preferunce stock 47,906 47,906 Redeemable preference stock 92,622 95,120 long-tenn debt (Note 5) 2,069,518 1,843,036 Total Capitalization $3,980,707 $3,591,801 Current Liabilities Commercial paper (Note 2) $ 20,284 $ 10,946 Bank loans (Note 2) 75,500 22,000 Trust demand notes (Note 2) 20,000 19,564 Promissory notes (Note 2) 28,432 - Long-term debt due within one year (Note 5) 63,195 78,700 Preference stock sinking fund requirement due within one year (Note 4) 2,460 - Accounts payable 144,513 166,698 Pmperty and general taxes 151,932 144,301 Income taxes 16,927 13,067 Ir 'erest 46,729 36,606 Dividends payable 41,156 34,437 Payrolls 29,830 25,386 Other 31,341 , 37,165
$ 672.299 h 588,870 Deferred Credits Accumulated defr.ted income taxes (Note 1) $ 340,513 $ 303,088 Accumulated Merred investment tax credits (Note 1) 132,692 123,408 Other 19,812 24,320
$ 493,017 $ 450,816 Commitments and Contingencies
' Notes 8,9,10,11,12 and 13)
Total $5,146,023 $4,631,487 (See accompanying Notes to Consolidated Rnancial Statements on pages 24-29.) 21
s hhJRbRhD 1979 December 3 g Long-Term Debt (Note 5) (Thousan5 The Detroit Edison Company General and Refunding Afortgage Bonds (substantially and subsidiary companies all propedy is subject to lien of AfoMgage) 12M%, due 1979 3%% to 7%, due 1980 61,095 Sh% to 11%%, due 1981 4,600 2M% to 12M%, due 1982 116,860 1 4.6% to 11%%, due 1983 7,325 2%% to 11%%, due 1984 48,345 2M% to 11%%, due 1985 through 1989 235,310 1 53% to 11%%, due 1990 through 1999 562,430 4 6%% to 10%%, due 2000 through 2009 874,725 7 Less: Unamortized net discount (2,789) Funds on deposit with Trustee (1,238) t Amount due within one year (61,095) (. e Installment Sales Contracts
$1,M5,568 SE 43% to 7M%, due 1979 thmugh 2004 $ 71,050 $ r Less: Funds on deposit with Trustee -
Amount due within one year (2,100) Unsecured Promissory Notes $ 68,950 $7 3%, due 1979
$ 1 Less: Amount due within one year -
11 Variable intemst rates, due 1981,1983 and 1984 155,000 15
$ 155,000 $ 15 Total Long-Term Debt $2,069,518 $1,84 Cumulative Preferred and Preference Stock
- Non-Redeemable Preferred Stock (Note 3)
Sh% convertible series, 463,480 and 631,853 shams, respectively 8 46,348 $6 932% series,499,080 shares 49,908 41 7.68% series, 500,000 shams 50,000 5t 7.45% series, 600,000 shams 60,000 61 736% series, 750,000 shares 75,000 7! Non-redeemable preferred stock expense (5,218) (5 Total Non-Redeemable Pmferred Stock $ 276,038 $ 292 Redeemable Prefermd Stock (Note 4) 9.72% series, 600,000 shares and 500,000 shares, respectively 8 60,000 $ 50 9.72% series subscribed - 10 9.60% series,355,000 shares 35,500 Redeemable prefened stock expense (1,318) i Total Redeemable Prefened Stock $ 94,182 $ 59 Non-Redeemable Preference Stock (Note 31
$2.28 series, 2,000,000 shares
$ 2,000 $ 2, Premium on non-redeemable preference stock 48,000 48,
' Non-redeemable preference stock expense (2,094) (2,>
Total Non-Redeemable Preference Stock $ 47,906 $ 47/ Redeemable Prefemnce Stock (Note 4)
$2.75 series, 1,998,400 and 2,000,000 shams, respectively 8 1,998 $ 2,1
$2.75 series B, 2,000,000 shares 2,000 2,t Premium on redeemable preference stock 95,962
)
96,( Redeemable pmfemnce stock sinking fund requimment (2,460) i l Redeemable pmfemnce stock expense (4,878) (4.3 Total Redeemable Preference Stock $ 92,622 $ 95,1 22 (See accompanying Notes to Consolidated Financial Statements on pages 24-293
'emmon Stock and 'remium on 'ernmon Stock Premium on chedule Common Stock isio Pari Shams outstanding Par Value Common Stock se Detr# Edison Company gg73 jg73 gg7g gg73 d oubsidiary companies gg7g gg73 (Thousands) (Thousandst 65,941,890 59,204,021 $659,419 $592,040 $271,092 $225,379 alance at Reginning of Year $d 5,000,000 60,000 50.000 29.250 31,875 6,000,000 Sale of common stock-thmugh underwriters
- Sale of comrron stock-Dividend Reinvestment 1,146,980 17,504 11,470 6,836 6.232 1,750,353 cnd Common Sham Purthase Plan 767,654 590.889 7,676 5.909 9,136 7.606 Conversion of pmfermd stock,5%% convertible series 74,459,897 65,941.890 $744A99 56 g 19 $316,314 $2[1p92 alance at End of Year uly 1979 and August 1978, respecthely.
ee tccompan%ng Notes to Consolidated Financial Statements on pages 24-29) leport of ndependent 200 uts w uxct ctxTrn WounhtS DETRolr. MIClllGAN 48243 cItxxise &Cn February 15.19MO To The Board of Directors and Shareholders of The Detroit Edison Company in our opinion, the accompanying consolidated balance sheets and the mlated consolidated statements of income, retained earnings used in the business and changes in financial position pmsent fairly the financial position of The Detmit Edison Company and its subsidiary companies at December 3'1,1979 and 1978, and the msults of their operations and the changes in their financial position for the years then ended, in conformity with generally accepted accounting principles consis- ' tently appliad.Our examinations of these statements were made in accordance with generally accepted auditing standards and accontingly included such tests of the accounting mcords and such other auditing procedums as we considerrd necessary in the cirrumstances. 4 1 l i 1 4 i
. 2.
Notes to i ConsoHdated Financial Statements The Detroit Edison Company and subsidiary companies shorter depreciation periods used under the class life ass Note 1--Significant Accounting Policies: depmciation range system, recoverable fuel costs and extrac IndustrySegment 'Ihe company is a public utility engaged in the generation, purchase, transmission, distribution and sale of dinary property losses, an to income over the estimated composite service life of tl silectric energy. Property invorved. See Note 7. flegulation-The Company is subject to regulation by the The Company does not provide for defened income tax Michigan Public Service Commission ("MPSC"l and the Federal ansing from current deduction of items such as interest at Energy Regulatory Commission ("FERC"), which superseded taxes which are capitdized in the books or from additior. the Federal Power Commission ("FPC"), with respect to ac- straight-line income tax depreciation resulting from the diffr counting mattem and maintains its accounts in accordance ence between income tax guideline rates and book rates, with the Uniform Systems of Accounts pmscribed by these Michigan Single Business Tag-Pursuant to orders of the MP5 agencies. no prmision is made for defened Michigan single business t Principles Applied in Consolidation-The consolidated ac. arising from the curmnt deduction of capital acquisition r counts include those of all subsidiary companies, all of which Penditures which are capitalized and depreciated in are wholly owned. Allowancefor funds Used During Construction-The allowar Hevenues-Revenues am recorded as billed to customers. for funds used during constmetion ("AFDC"), a non-operati As authorized by the MPSC, the Company makes monthly item,is defined in the FERC Uniform System of Account purchased and net interchange power billing adjustments to net cost for the period of constmetion of bonuwed funds us recover costs which are approved by the MPSC following for construction purposes and a reasonable rate on other monthly headngs. Recovery of costs is limited to 90% of changes when so used.The AFDC rates for borrowed and other(pr in both Company system fuel costs and net purchased power red, preference and common shareholders' equ costs. Semi-annual hearings am conducted by the MPSC to established by the Company consistent with the metho detennine whether adjustments will be made to customer bills set forth in the FERC Uniform System of Accounts.The C to offset the over-recovery, if any, of energy costs arising from pany capitalized AFDC at a rate of 8%% and fluctuations in billing lag factors. The Company's policy is to 1978, respectively. reserve the temporaiy net over recovery of energy costs arising AFDC amounted to 61% of eamings for Common Stock fmm fluctuations in billing lag factors which will be adjusted in both 1979 and 1978. See Note 12. cubsequent months. The temporary net under-mcovery of these energy costs is not accrued because subsequent re- Imentory Valuation-Imentories am stated at average cost covedes are dependent upon MPSC authorization. Extr rdinary Pmperty Imses-Costs of the March 1976 sa Employes* lietirement Plan-See Note 6. sce and wind storm and project costs of the cancelled Eru Property, Depreciation, Plant itetirement and Maintenance- Fenni Unit No.3 have been deferred and are being amo Utility and non-utility properties are recortled at odginal cost operating expense as a cost of service over a five-year pe and cost, respectively, and the annual prmision for deprecia- ending in 1982 and a ten-year period ending in 1986, resp tion is calculated on the straight line remaining life method for thely, as authorized by the MPSC.In addition, costs of the A financial statement purposes. The composite perrentage of 1979 severe wind and ice storm have been deferred (see N annual provision for depreciation to average depreciable prop- gu. erty was 3.20% and 3.15%, for 1979 and 1978, respectively. In general, the cost of pmperties retired in the normal course of Note 2-Compensating Balances and Short-Term business is charged to accumulated depmciation. Expendi- Borrowings: ' tures for maintenance and repairs are charged to expense, and At December 31,1979, the Company had bank lines of en the cost of betterments and new pruperty installed which re- aggregating $200.1 million pursuant to which interint finant ! places pmperty retimd is charged to property accounts. was ava lable. In support of these lines of credit, the Comp ' focome Taxea 'Ihe Company prmides for defened income maintained compensating balances with the banks which r taxes when authodzed by ordem of the MPSC. ing 1979 averaged appruximately $4.6 million of cash, 50.4 : , l
'Ihe Company follows the normalization method of account- tion of funds on deposit with Trustees under Ins Contracts in the fonn of non-interest bearing certificate l ing which because provides for of accelerated income taxes amortization, deferred liberalized to future yeam deposit, and 31.8 million of cash in the ban depreciation, J .J3 U
s uction contractors. At Dec:mber 31,1979, $19.6 million of Company at the following per shire redemption pric sse lines of cmdit required compensating balances, $117.5 accrued dhidends. Ilion had commitment fees in lieu of compensating balances, DecmaMng Pnor On and d $63.0 millim; had both commitment fees and compensat. "" '"" ' T """ t balances. None of these balances are subject to usage or Non umaNe PmfenwiStock thdrawal restrictions. At December 31,1979, unused lines of los 4 is-si 101 4 ts-as tdit wem $129.5 million. At December 31,1979, the Company 7.sss st ts.ss tos 11.is-si toi o had outstanding 545 million of other short-term bor- 7.4ss nos 12- t-s2 tot 12- 2 s7
- 7. ass vings for which no compensating balances or fees were Non-Redeemable Preference stock plicable. zu tas-sa 2s25 1 4 s-93 s22.s 3ank loans are available at the banks' prime lending rate.
mporary arrangements have been made for up to $116.0 None of the shares of the 9.32% Series Preferred Stock or the Ilion of borrowings through the above bank lines of credit at $2.28 Series Pmference Stock may be redeemed thruugh certain es below the banks prime rates. Commercial paperis issued refunding operations prior to October 15,1980 and January 15, a discount basis at prevailing naarket rates.Tmst demand SPect tzs have vadable interest rates based on the highest rate n> mon Stock expenses were attributable to apted by General Motors Acceptance Corporation on its the issuance of additional shares. 480 day commercial paper bonuwings.
'n 1979, the Company also entered into a nuclear fuel financ- Note 4-Hedeemable Cumulative Preferred ; and credit arrangement (see Note 8). Pending use of the and Preference Stock:
tdit arrangement for nuclear fuel financing, the Company is The Prefemd and Preference Stock which is redeemable pur-rmitted to issue promissory notes for general corporate pur- suant to sinking fund requirements, may also be redeemed at ses. At December 31,1979, $29.7 million of the nuclear fuel the option of the Company at the following per sham redemp-edit arrangement was available for borTowing for general ti n prices, plus accmed dividends. rporate purposes, under which $28.4 million of promissory t s were outstanding. The average interest rates at December 31,1979 and De- 3. **"*[""
, 7, nber 31,1978 for aggregate short-term bonuwings were Redeemable emfened stock 2-1s-94 972s stos72 1as-s4 slot 0% and 11.1%, respectively. During 1979 and 1978, aggregate stooo 10-1s-84 tot to-ts->s ort-term borrowings mached a month-end maximum of esos Redeemable Preference stock 44.1 million and $56.0 million, respectively. For 1979 and 27 2s 7ase zs2s 7ase szas 78, aggregate short-term horruwings averaged $84.8 million *"' " ***' *
**#8 "
d $28.8 million, espectively.with an average interest rate of
.0% and 8.4%, respectively. Amrage short-term bonuwings are None of the shawts of the 9.72% Series Prefemd Stock,9.60%
s sum of dollar-days of bonuwings divided by actual days in Series Preferted Stock, $2.75 Series Preference Stock and 32.75 3 year. Average intere-A rates are detennined by dividing Series B Pmfemnce Stock may be redeemed thmugh certai tunt interest accrued by average short-term bonuwings. refunding operations prior to January 15,1984, October 15, 1989, July 15,1980 and January 15,1981, respectively. in December 1978, the Company sold 600,000 shares of 9.72%
>te 3-Common Stock and Non Redeemable Series Pmferred Stock, of which 100,000 shares wem sold pur-amulative Preferred and Preference Stock:
suant to a delayed delivery contract. Cash pmceeds of $10 ie Company has a Dividend Reinvestment and Common million were received by the Company on January 18,1979, are Purchase Plan under which holders of its Common, cfened and Preference shares and its regular employes may, when those shares were issued. In October 1979, the Company arTanged for the sale of 650,000 ruugh the automatic reinvestment of cash dividends and shares of 9.60% Series Pmfened Rock, of which 355,00 itional cash payments within specific limits, purchase un- were issued in October 1979 and 295,000 shares were issued in sued Common Stock. Shares purchased with reinvested div- January 1980 in accordance with provisions ends and optional cash payments are priced at 95% and 100%, Agreements. On October 15,1985 and specthely, of the average of the high and low prices on the Company shall redeem 32,500 shares at $100 tw York Stock Exchange on certain pricing dates. The Pmfemd Stock,5H% Convertible Series,is convertible accmed dhidends and calculated to retim 100% o later than October 15, 2004. The Company has the non-13 Common Stock at a conversion price of 521.63 per share at cumulati e option to annually redeem an additiona tcember 31,1979.The number of common shares reserved for shares not to exceed 220,000 shares. auance on conversion and the conversion price are subject to The 9.72% Series Preferred Stock, the $2.75 Series Prefemnce rther adjustment in certain events.The Pmferrad Stock, SM% Stock and the $2.75 Series B Preference Stock a mvertible Series, may be redeemed at any time in whole orin sinking funds providing for the annuai redem
.rt at the option of the Company at $100 per share, plus and s25 per share plus accmed dividends, of 30,000 crued dividends.
The Preferted and Preference Stock which is not redeemable 100,000 shares, respectively, commen 15,1980 an1 January 15,1981 and calculated to retire 100% of cept at the option of the Company, may be mdeemed by the 25
- - .m.._-
the issues not later than January 15, 2004, July 15,1999 and plan covering all regular employes who have compla January 15, 2000, respectively. The Company has the non- months of senice. The Company's policy is to fund p cumulati v option to double the number of shams of each cost annually as it accmes. Accmals are based on the ac series to be redeemed in any year. In December 1979, the cost of the plan. Unfunded prior senice cost is amortize Company purchased 1,600 shares of $2.75 Series Preference fortyyears and thirtyyears (for costs relating to amendm Stock on the open marict: these shares wem cancelled and will the plan after April 1,1977), as appmpriate, and net expt he applied Imvard the sinking fund requirement due on July 15, losses are amonized over fifteen years.The plan was am 1980. on April 24,1978, by shamholders' approval, to pmvic The combined aggrrgate annual amount of redemption re- benefits to be paid to panicipants who retire after Septer quirrments for all series of redeemable Pmfermd and Prefer- 1978 he inemased by changing the percentage of avera; ence Stock for the next five years are $25 million in 1980 and compensation allowed for each year of senice fmm 1 $5 0 million in 1981 thmugh 1984. 1.3%, which resulted in an annual cost increase of at Incmases in Preferred Stock expenses wem attributable to mately $2.5 million effective January 1,1979. Based on a the issuance of additional shams. tive actuarial valuation as of December 31,1979, the actt The 1978 balance sheet has been reclassified to separately computed value ofves:ed benefits exceeded the market v state redeemahle and non-mdcemable Pmferred and Pmfer- the pension fund assets by appmximately $114.1 millio ence Stock. the present value of unfunded prior senice cost was ar mately $203.1 million. Cost to the Company to fund the p Note 5-I ong-Terrn Deht: 1979 and 1978 was $28.8 million and $23.0 million, mspect Agrvements have been signed with certain municipalities, under which the municipalities have issued tax-exempt bonds Note 7-Incorne Taxes: to finance certain facilities of the Companyand the Company is Components of income taxes wem as follows: obligated to make payments sufficient to meet the principal is7s 1978 and intervst due on the bonds.To secure the Company's obli-gations under such agreements signed since November 1975, Federal hfichigan Federal y concurrentiv with the issuance of each of these bond issues the iThousandsi C" "' Company issued General and Refunding Mortgage Bonds s sos 3 e , ting expenses s - s 5.246 which contspond to the tax-exempt bonds m respect to prin- other income and cipal amounts, interest rates and maturity dates; accordingly, deductions las - 298 the Company's liabilities in respect of such collateralized s s. ass s - s 5344 bonds, aggivgating $221.9 million and $193.0 million at De* Deferred-Net cember 31,1979 and 1978, respectively, are included in General operating expenses: and itefunding Morigage Ilonds in Ihe Capitalization Schedule. Recoverable fuel cost; s - s - s 14891 Interest on the $155 million Unsecumd Promissory Notes Afarch 1976 storm
~
~
due 1981,1983 and 1984 is adjusted quarterly; the rates are 3pni "*$ '#' , variable based on the participating banks' prime rate for com- damage costs s nao - - mercial customers. The weighted average interest rates on Depreciation 33,4s3 i4.3aal 26.693 these notes for 1979 and 1978 were 13 6% and 9.9%, respectively. Amonization of pollution
~
The weighted average interest rates at December 31,1979 and e nt H sass - 4.455 3 faf es ,, 1978 for these notes wem 15.0% and 11.2%, respectively. Enrico Fennt Unit No. 2 1,0t>8 - 1.618 On the basis of property additions and gising effect to the other (2.s t3 D es 504 issuances in January 1980 of $50 mi' lion of Unsecured Promis. Other income and sory Notes and $50 million of1980 Series A Mortgage Bonds, an deductions n,4:n - 930 estimated $800 million principal amount of bonds could have s4s.sse
- s 44 mis)* s32 s40
- been issued under the Mortgage and terms of the Unsecured Inmunent Tan credia-Net s s.2*: s - s24 035 Pmmissory Notes at December 31,1979. Under the more restric. Total income Tam sea 47s s testsi 562.219 tise camings test pmvisions of the supplemental indentum creating the Series i General and Refunding Mortgage Bonds
- Includes cunTnt items aggregating s3.009.000 in 1979 and st375.0001 i and giving effect to the issuance in January 1980 of $50 million of1980 Series A Mongage Bonds and assuming an interest rate In 1975 the State of Michigan enacted a " single businet on any additional indebtedness of 13%, appmximately $381 effective January 1,1976 and repealed the corporate incor million principal amount of the Company's General and He. The MPSC has ordered that the accumulated balances of funding Mongage Bonds could have been issued at December red Michigan income taxes at December 31,1975 be writ-31,1979, as credits to income o er a five-year period for accountir 12mg-tenn debt maturing in the period 1980 thmugh 1984 ratemaking purposes. The Michigan income tax credi consists of $63.2 million in 1980, $66.7 million in 1981, $119 included in "other federal and state" taxes on the Consob million in 1982, $84.4 million in 1983 and $72.4 million in 1984. Statement of Income.
Total income tax expense as a percent ofincome befc Note 6-Employes' Hetirement Plan: was less than the statutory federal income tax rate fi The Company has a trusteed and noncontributory retirement following reasons: 26
e i
) Perrent of income Before Tax leases of $10.9 million and $10.0 million, respectively. TI-charges to expense for amonization and interest related 1 1979 1978 "ederalincome tan statutory rose 4e 0%
such capital leases would have exceeded the rental expens 48.0% Allowance for funds used during construction tie.1) (15.41 actually recorded for 1979 and 1978 by $1.8 million. The effet Construction oserhead costs (4.7) (4.7) on net income for 1979 and 1978 is indeterminable sinc Depreciation 4.4 43 neither the leased property and capital lease obligations nc Michigan income tax ti.8) 12.1) the incmased expenses have been included in the ratemakin Other-.-net (3.8) (2m
'otalincoine tax expense process which determines the Company's operating revenue 24.2% _ 28 3 % and rate of return.
Investment tax credit carryforwards aggregate approxi- Note 9--Commitments: nitely $75.4 million at December 31,1979. In connection with its continuing capital expenditure program the Company has entered into purchase commitments whic! g, amounted to approximately $2.6 billion at December 31,1979 lental expense for 1979 and 1978 was $23.0 million and $25.8 E#" # #* "" " "" " " ' ' "E~ "E# " nlllion, respectively. Future minimum lease payments under supply commitments. ong-term noncancellable leases, consisting principally oflake essels ($151.6 million), locomotives and coal cars is104.6 mil. Note 10-Hecoverable Fuel Costs: lon), office space ($402 million) and vehicles ($8.1 million) af Effective Jariuary 1,1974, as authorized by the MPSC, the Com-3ecember 31,1979 are: Pany changed its method of accounting for changes in fuel costs recoverable from customem by defening recognition to IMmionsj the period in which such costs were recoverable under the fue! 1980 . . s 303 1981 2s3 cost adjustment clauses. On February 3,1975, the MPSC au-
*8 thorized and directed the Company to raise the method of iss4
]
zu computing its fuel cost adjustment clauses for most of its electric rate schedules by effectively eliminating any fuel cost 1985-1989 . 79.4 1990-1994 o billing lag caused by changes in fuel costs occuning on and 54 0 3885-1888 " 44 8 after February 4,1975. On February 6,1975, the Company
""*'"'" U "* *73 applied to the MPSC for an accounting and ratemaking order T ' '"'# allowing recovery of $26 million of accumulated fuel costs defened as of February 3,1975 through additions to fuel ad-justment clause billings otherwise detennined. On December in addition to the leases described above, on January 23, 22,1975, the MPSC issued an order denying the recovery of such 1979, the Company entered into a nuclear fuel financing accumulated deferred fuel costs and on January 19,1976, the and heat purchase contract with Renaissance Energy Com-Company instituted legal action to seek recovery. On Sep-pany (" Renaissance"), an unaffiliated company, which provides tember 27,1976, the Ingham County Circuit Court ordemd the
'or the financing of up to $90 million of nuclear fuel. Simultane. MPSC to permit the Company to recover such accumulate ausly, the Company sold to Renaissance its capitalized costs of deferred fuel costs from its electric custorr/ ts, by use 59.5 million mlating to nuclear fuel that were proiously in- porary surcharges, over a twehe-month pt dod beginning Oc-
- luded on the Consolidated Balance Sheet. Under the heat tober 1,1976.The Company applied the surcharges as purchase contract, Renaissance will purchase nuclear fuel and and recovemd, subject to refund, $23.5 million of such costs as
- nake all other related payments. Title to the nuclear fuel will be neld by Renaissance. During the period that the nuclear fuel is were applicable to the Company's retall customers. O by the MPSC and the Michi6an Attorney General, the Michigan
. pnerating heat, the Company will make quanerly payments to Coun ofAppeals mversed the September 27,1976 Circuit Court Renaissance for the cost of fuel consumed during the quaner ortler and affinned the original December 22,1975 order of the plus all other costs of Renaissance. henaissance's imestment in MPSC denying recovery. The Company appealed t nucl:ar 11,1979. fuel totaled approximately $60.3 million at December of the Michigan Coun of Appeals to the Michigan Su Court which, on February 1,1980 remanded the case to the The Company does not capitalize those leases which are MPSC for specific findings with respect to fuel cost adjust defined as capitalleases by Financial Accounting Standard No. clause billings for the months of February, March, April and 13 because the MPSC treats all leases as operating leases for May of 1975. If the Michigan Supreme Court st; making purposes. However, had such leases been ac-determine that such costs should not have been recovered
- ounted for as capitalleases, balance sheet assets at Decernber through customer billings and must be refunded, the total a 51,1979 and 1978 would have included leased propeny under per share amounts of earnings for Common Stock for the, year
- rpit lleases,less accumulated amonization.of S200.6 million 1975 would be reduced by approximately $12.7 million and and S132.6 million, respectively. Also, balance sheet liabilities at
$027, respectively, and mstated to $59.3 million and $123, December 31,1979 and 1978 would have included long-tenn respectively, with corresponding reductions in retained earn-abligations under capital leases of $199.5 million and $130.4 ings used in the business at December 31,1975 and subsequent nillion, respecthely, and cunent obligations under capital years.
Note 11-Rate Matters: and applicants for employment who were discrimina! i On April 28,1976, the Company appealed to the Ingham County against after July 2,1965 could obtain full relief, inc!ud CircW. Court the AfPSC's h! arch 30,1976 rate order, which retmactive seniority and back pay. On remand from the Co granted an increase in electric rates of $62.4 million annually, of Appeals,the District Court resised,in some respects,its 11 on the gmunds that the relief granted was unreasonable and order and appointed a special master who commenced p , unlawful. On Afay 19,1976, the Court issued an order authoriz- ceedings to determine questions relating to back pay a ing the Company to collect not more than an additional $133 seniority relief. The Company has appealed the revised ore million thmugh December 31,1976.This order was temporarily and the order appointing a special master to the U.S. Couri stayed by the hilchigan Court of Appeals on June 2,1976. On Appeals for the Sixth Circuit. The Company and the Eqi September 30,1976, the Court of Appeals vacated the stay. Employment Opportunity Commission ("EEOC") have reach Effective November 1,1976, a temporary surcharge was applied agreement regarding a settlement with the EEOC of the porti to electric customer billings which resulted in the collection of of the case dealing with the claims of rejected applicants revenuer of $13.7 million, subject to refund, through December employment and the District Court has granted prmisioi 31,1976, pursuant to the Court's order. A
- rial was held in July approval of the proposed settlement, as embodied in a p 1977 and the Company is awaiting a decision on the merits. posed Consent Order. Following notice to the rejected applica On December 28,1979, the hiichigan Attomey General filed class, a hearing will be held before the District Court at whi complaints with the Ingham County Circuit Court and the time objections to the proposed settlement may be expressi h1PSC, requesting orders prohibiting the Company fmm charg- If the Consent Orderis given final approval, a fund of $850,(
ing, over the period 1980 through the first quarter of 1985, will be distributed to members of the rejected applicant ch rpproximately $30 million under the fuel cost adjustment identified in accordance with the terms of the proposed Cc clause.These charges relate to certain costs resulting from the sent Order.The Company, the EEOC, and private plaintiffs hr renegotiation of the Company's contract with Decker Coal also agreed upon a pmposed settlement relating to the clair Company, which reduced the tonnage of coal to be delivered af the employe class and the District Court has granted pm between Januuy 1,1979 and December 31,1984 and incmased sional appmval of the pmposed settlement, as embodied is the cost per ton over the same perioi On January 2,1980. the second pmposed Consent Order.lf this Consent Orderis gis Ingham County Circuit Court denied the requested miief and final apprwal, $4.25 million will be distributed to members remanded the case to the AlPSC. The Company denied the the employe class and $250,000 in attomeys' fees will diegations and has petitioned the AlPSC to dismiss the com- awarded. The pmposed Consent Order relating to the claims plaint or, in the attemative, to consolidate it with the semi- the employe class is contingent upon entry of the Const cnnual hearings on reconciliation of the fuel and purchased Order relating to the rejected applicant class.These pmpos power adjustment clauses. No action has as yet been taken by settlement amounts have been accrued by the Company al the AIPSC. am included in other operatica expense. The Company experienced a severe wind and ice storm in On February 10,1975, an alleged class action was filed in t April 1979. Costs of restoration of approximately $12.8 million U.S. District Court for the Southem District of New York again as a result of this storm activity have been deferTed and are not the Company,its independent accountants and one ofits ma reflected in cunent operating expenses pending appmval of an aging underwriters, adleging violations of federal and state e rpplication filed with the h1PSC foran accounting and ratemak- curities laws in connection with the Company's 4 million she ing order wh!ch,if granted, would permit recovery of such costs Common Stock offering in September 1972.The complaint, fil thmugh customer billings over a 60 anth period. by a purchaser of 200 of the shams but seeking relief on behalf all purchasers, alleges basically that the financial statemer contained in the Company's prospectus failed adequately Note 12-Litigation: disclose allegedly material facts invuhing AFDC, an item The Company and two uniors which represent various ofits non-operating otherincome reflected in the Company's fina cmployes were named as defe .dants in two actions (United cial statements in accordance with the FPC Uniform System States ofAmerica v. The Detroit Edison Company, et al., filed Accounts and the mquirements of the h!PSC.The plaintiff 4 June 22,1972 and Willie Stamps, et al. v. The Detroit Edison leges, among other things, that AFDC "gmssly exaggerates a Company, et al., filed Atarrh 17,1971) which wem consolidated tual eamings, and the trend of operating earnings," for 11 cnd tried in the District Court for the Eastem District of hiichi- periods covered in the Consolidated Statement ofIncome at gan. The complaints alleged violations of various federal sta- that the pmspectus should have stated that AFDC is not in fa tutes on the basis of alleged pattems and practices of discrimi- income as generally understood, but rather a pmjection nation by the Company against blacks. On October 2,1973, the future eamings not mflecting any actualyield on assets or ai District Court found that the Company and the two unions had mvenue during any fiscal period and not in fact eamed up< engaged in illegal racial discrimination and awarded various completion of construction. The complaint seeks damages types ofinjunctive and monetary mlief. Afterappellate proceed- $77.5 million against mturn of the shares sold (less any amoun i ings in the U.S. Court of Appeals for the Sixth Circuit and the U.S. mceived by the alleged class on prior sale of their share Supreme Court, the District Court's findings of discrimination together with intemst, attorneys' fees and other costs. On Ap were affuTned, except that the Company's seniority system was 26,1978, plaintiff voluntarily agreed to dismiss the action . upheld as bona fide. On remand f;um the Supreme Court, the against the Company's independent accountants and the u Court of Appeals on August 12,1977 held that black employes derwriter, subject to reinWtement in the event of a trial i 28
are co-owners of the Ludington Pumped Storage Plant whici other pmceeding on the merits. On April 2,1979, the District was placed into senice in 1973.The Company has a 49% undi Court granted the Company's motion for summary judgment sided ownership intemst and Consumers the other 51%. Th md denied plaintitTs cmss-motion for summary judgment and Company's investment at DeceMer 31,1979 and 1978 in utilit, motion for class action certification. Plaintiffs appeal of these plant in senice was $167.9 million, and the accumulated de ulings was heard by the U.S. Court of Appeals for the Second preciation at December 31,1979 and 1978 was $21.2 million an Circuit on October 12,1979. Such financial statements were $17.9 million, respectively. Operation, maintenance and othe pmpared and were fairly presented in accortlance with gener- expenses of the plant are shared by the Company and Cor dly accepted accounting principles. The Company is of the sumers,49% and 51%, respectively. The Company's sham a 3 pinion that its prospc.ctu and financial statements complied these expenses is included in other operation and mainte with all applicable regulatory requirements and, accordingly, nance expense in the Consolidated Statement of Income.
)elieves that the ultimate outcome of this action should not The Company and two cooperatives art co-owners of it materially and adversely affect its financial condition. The Enrico Fermi Unit No. 2, a nuclear unit under construction. St Company will continue to sigomusly defend this action. Note 13 'Ibe Company has an 80% undivided ownership inte See Note 10 for legal pmceedings relating to mcoverable fuel est and the two cooperatives the terr aining 20%. The con
- osts. pany's investment at December 31,197u and 1978 in constru-tion work in pmgress was $721.6 million and $577.4 millio Note 13--Sale to Cooperatives: mspectively.~
On Febmary 8,1977, the Company sold a 20% undivided owner-ship interest in its Enrico Fermi Unit No.2 to Nodhem Michi-gan Electric Cooperative, Inc. and Wolverine Electric Coopera- Note 15-Quaricrly Finc.acial Information tive, Incorporated.The cooperatives made an initial payment to (Unauditedh the Company at that time equal 1o 20% of constmetion expendi- 1979 quaner Ended tures, inclusive of AFDC, and are obligated to make monthly June 30 sert 30 Dec. pmgress payments of 20% of subsequent construction expendi- Man h 31 tures, exclusive of AFDC. As of December 31,1979, total pay- (ThousandM ments of $1713 million were mceived fmm the cooperatives. 5422.332 s43s,949 $40sJ operating twenues 5432.514 71.910 71 See Note 14. ss s;; es s44 The agmements irlating to that sale pmvide, among other oiwrating income 43.sm 44 raa 42 Net income 45.387 things, that the Company will exercise contml over construe. 31; tion and operation of the facility, the panies will share electric- E**j"8'jstork 34.s23 32.72s 33.ss7 0.49 0.47 0 052 ity generated and the costs of plant operations, maintenance Eamings Per Share and capital impmvements in pmportion to their ownership interests and the Company will have certain obligations to 1978 uuaner Ended pmside replacement power to the cooperatives when the Unit June 30 Sep-t.30 Dec is out of service. March 31
,,ae Company is obligated pmmptly to complete constme-
. rnmusando tion of Enrico Fermi Unit No. 2, but if the Company delays s410.518 $393.247 $398
$387.997 construction of Enrico Fermi Unit No.2 because more econom- operating Revenues 34.251 72.532 57.sas e2 operating income 41 ical sourres of power am available or because the Company tam 9 52.922 38s11 Ne' l'<ome decides that it does not then mquire the additional capacity,it wuuld be obligated to supply each cooperative with its entitle- *j"8"[3,,cg c 4,,33 4 3,,,, 3,, , ,3 33 i
0 07 0.73 0.47 ment of electricity otherwise expected to have been generated Eamings Per Shan-after the anticipated completion date and would have to in-demnify the cooperatives for additional constructio costs re- Note 16-Supplementary Information Concernin; sulting fmm the delay. If such delay extends to five jaars, the cooperatives may demand that the Company repurthese their the Effects of Inflation (Unauditedh interrsts at the cost of their irwestment.The Company would The impact of the rate ofinflation expcrienced in mcent ye not be liable for any delays in completion resulting fmm a as well as required compliance with federal and state emir I default in payments by a cooperative and may buy out a mental mquimments has msulted in replacement costs of cooperathe's investment if such a default continues for 150 ductive capacity that are significantly gmater than the hist cal costs of such assets reponed in the Company's finan days. Fmm the anticipated completion date thruugh 1990, the statements. In compliance with mponing mquirements, a Companywill be obligated to purrhase pan of the cooperatives' mated mplacement cost information is disclosed in t entitlement to the output of the Unit and has a right of first pany's 1979 annual report to the Securities and Excha refusal to purchase the balance. Commission on Form 10-K. Supplementary information < ceming the effects of inflation is presented on pages 30-3 compliance with the requimments of Financial Accoun Note 14-Jointly Owned Utility Plant: Standard No. 33," Financial Reponing and Changing Price The Company and Consumers Power Company I" Consumers")
iuinions of Awrage 1979 Doriars, Supplementary consolidafi.a statemeni
'"* "* " Year Ended December 31.1979 InformatIOn for General Infladon COncerning As Reponed in the
"'"a n' 5''**"
Adiusted fo the Effeets Of si s98 Inflation Operating newnues S t .s98 1.293 1.293 Operating Expenses (Excludmg depreciationi 256 he Detmit Edison Company 130 Prmision for Depreciation (Note De and subsidiary companie= 1A23 1.549 Total Operating Expenses 275 149 opnating Inc me 41 he following supplementary information is Other income and Deductions di supphed in accordance with the requirements 316 190 Income Before Interest Charges 140 of Statement of Financial Accounting Stan. 140 Interest Charges dards (FASI No. 33, " Financial Reporting and Net Income IExcluding reduction of pmpeny, plant and 50 Changing Prices " lasued in September 1979 by 176 the nnancial Accounting Standartin Board.FAS equipment to net reemerable amountt 43 43 No. 33 deals with two different aspects of an Preferred arxl Preference Stock DMdend Requirements inflationary emimnment:111 the effects of gen- Eamings for Common Stock (Excluding reduction of eral inflation, i e., the dechne in the purrhasing pmpeny, plant and equipment to net recmcrable $ 7
$ 133 -
power of the dollar 1the " constant dollar'* amounti methodi and 621 the effects of changes in the Reduction of Pmpeny, Plant and Equipment to Net $ (443 specific prices of cenain assets used by the Recowrable Amount (Note G) Company (the "cunent cost
- methodL The Ft. Gain imm Decline in Purrhasing Power of Net Amounts nancial Accounting Standart!s Boarti has taken 352 Owed (Note C; this dual appmach because there is presently no consensus on which method of reporting Reduction of Pmpeny, Plant and Equ;pment to Net Recmerable Amount in Excess of Purchasing Power better ponrays the effecta of changing prices on Gain on Net Amounts Owed (Note Gl Sg1 the operations of business enterprises. He Company has elected the option prmided by FAS Na 33 to delay reporting of information
- If the reduction of property, plant and equipment to net recmerable amount of $443 million w.
reflected, and no recognition was giwn to the $352 million purrhasing power gain, net income under the curwnt cost method until its annual adjusted for general inflation would haw been a loss of $393 million. report for the calendaryear ended December 31. 1980. he Company bellems it is important for fi-nancial statement users to dewtop an under-standing of the more significant impacts ofinfla. Five-Year Comparison tion. Ilowewr, the Company adsines readers of Selected Supplementary that the following inflation adjusted data haw Financial Data Adjusted " "" "*'#""'* been determined in accortlance with experi- for Effects of mental techniques prescribed by FAS No.33.It is General Inflation Year Ended December 31 an attempt to display the approximate 1978_ 1977 1976 economic effects of inflation and should be con- 1979_ sidered an estimate of those Hfects rather than $1.771 $1.741 $1,616
$1,898 operating Rewnues as a precise measure. Management has not yet Net income (Excluding reduction of concluded that use of the prescribed experi-mental techniques results in data that fairly re- pmpeny, plant and equipment to NA
$ so NA NA net reemerable amount) f!cet the full impact of inflation on a company Eamings for Common Stock subject to rate regulation. %e supplementary IExcluding reduction of pmpeny, infonnation should therefore be viewed with caution as should any other hypothetical data. plant and equipment to net NA NA
$ 7 NA reemerable amounti Eamings Per Common Share (Excluding reduction of pmperty, plant and equipment to net NA NA 8 0.10 NA recoverable amounti Reductia:1 of Pmperty, Plant and Equipnwnt to Net Recmerable Amour.1 in Excess of Purchasing Power Gain on Net Amounts NA NA Owed $ (91) NA Net Assets at Year End at NA NA
$1,823 NA Recmerable Amount Cash DMdends Declared Per $ 135
$ 1.58 $ 1.68 $ 1.75 Common Share Mariet Price Per Common Share at $ 19% $ 18%
8 11% $ 14% Year-End Awrage Consumer Price Index 1703 217.8 195.4 1813 (1967= 100) NA-Not /.<allable.These data are not required to be presented by FAS No. 33 and would have costly and difacult to prepare. In the future, one year's comparative data will be adde 30 .~
i
~ '
1978 1977 307s Comparative Results of Operatioris
$ 1.561.236 $ 1.423.9f Operaung amnues $ 1A87A79 Comparadve Electric 30 A32 28.54s 27.0; 5 14509; Sicam and water e d M Of Total Operating Rewr. M 6 1434211 $_1,589 842 Qyg=gdggg ggd Operating Expenses
$ 580 369 $ $383 Operanon expense $ 647 420 Managementp S Fuel 98402 158.098 1086 203.3 Other power supply 235.720 g Other operation expense 2644to II 115.325 1022 g '"I'"'"#' " E'"** 129M4 and subsidiary companies Prmision for depreciation 4.757 2J Pnnision for taxes 5As3 33/
Federal income 54,733 38.915 t6.716) 114 / Defened federal income 110,154) 24.035 501 Defened federal income (credits 9,2M 9.469 131 Investment tax credit-net 15A40 77,- 77,714 Other federal and state at493 Pmperty and excise $_1,362390 $ 1.226/ Total Operating Expenses $_1423 A34 $ 224,
$ 275A77 $ 226 852 Operating Income Other Income and Deductions $ -
Allowance for funds used during construction Allowance for other funds used during 32.273 23 36323 4 construction 3AM 2.371 it Other income and deductions 11454) t1.228) 33.416 3 26 Income taxes 8 40433 $ Total Other Income and Deductions $ 260.268 $ 251 Income Befom Interest Charges
$ 3I5A10 Interest Charges 167,5M5 $ 140.288 $ 12!
long-tenn debt 1 Amortization of debt discount, premium 1,s44 1,403 7 and expense 13A23 5.298 Other (2! Allowance for bonuwed funds used 143,171) (33.5901 during construction tcrediti $ 113.399 $ 10
$_ 139A81 Net Interest Charges Net income Before Cumulative Effect of a $ 146.869 $ 14
$ 178A29 Change in Billing Practice Cumulative effect to October 1,1973 of a change in billing practice, net of -
income taxes of $6.063.000 $ 146.869 $ 14 8 178A29 Net Income Prefened and Preference Stock 43457 38.056 Dhidend Requirements
$ 132,572 3 2ns.813 $ 1]
Eamings for Common Stock 61 A98,76; 55 28 99M84M 1,76 $ Common Shares Outstanding-Awrage $ 1.90 $ 122 $ Eamings Per Share $ 1.58 $ Dividends paid per share of Common Stock la) 1975 total and per share camings for common stock will be restated respecthely,if certain defened foi cost revenues am ultimately requ i Years Management's Discussion and Analysis of Comparative customerResults conservation. Inof 1976Operatio and 1977, re experienced a 3.0% reduction in kilowatthour sales included two court-ortiered temporary sure in Genecel dihmughout the five-year period, the from the prior year, reflecting declines in sales to amounting to $18.7 million and $18 Company experienced significantly increasin6 the steel and automotive industries, high un- specthely, collected subject to refund.ofwhi operating expetoes (in particular fuel and pur- employment levels and energy conservation. In million represents recovery of accumulated chased power costal and high costs of capital as- 1976,1977 and 1978 kilowatthour sales increased red fuel costs. See Notes to and 11 to Conso! sociated with construction commitments. Reduced SSE 3S% and L5%, respectively, reflecting an up- Statements. Financial availability of capital had caused a cash problem tum in the economy of the Company's service area,Operating Expenses - Operating expen which eventually required the Company to halt str* partially offset in 1978 by customer conservation creased substantially during the fin years tually all field constmetion acthity at pmpcmd efforts and cooler than normal summer weather. December 31,1979, as did the total cost p generating plants by the end of 1974 and the Com- Operating revenues in 1979 were favorably afected watthour sold. The largest increases re pany did not resume construction aethity until by an interim annual rate increase which became and other power supply 1977,when eamings imprmed. effective on July 5,1979 when Greenwood Unit No. I Increased during this period due prim. Although rate increases were recched during this was placed into commetrial serMce, andhigher MPSC au-of fuel consumed resulting fro costs five-year period, they were neither timely nor thorized billing surcharges effective February 1, ter use of higher cost washed low-sulfur adequate to permit the Company to eam its au- 1979 pursuant to the operation and maintenance comply with emimnmental requirements. thorized rate of retum on common equity. expense indexing plan and effective June 6,1979 use of higher fuel cost generating equ Operating Havenues - Operating rmenues in- pursuant to the system generating availabili;y in- United Mine Workers contract wage in, creased in each period since 1975 due to annual centhe prmision. A decrease in kilowatthour sales mine reclamation costs. co rate increases, operation of the Company's fuel ad-in 1979 of 0.7% was due to reduced industrial activ- si6nificant oil price increases resulting fi justment clauses which were in efect throughout Ity reflecting slowdowns in automotive and current world oil situation. The Compai the period. operation of a purthased and net inter
- automotive-related manufacturing activities, cooler imm a net selling position for change power adjustment clause authorized by the than nonnal weather during the air conditioning interthange power in MPSC in 1978, and increar,ed kilowatthour sales in acason, mild weather affecting heating sales and 1978,1977 and 1978. During 19f 5, the Company t _
Notes to Supplementary . Information Note A-GeneralInflation: deemable prefernd and preference stock, were ary financial statements. nus, taxes are levied or the data adjusted for general inGation represent treated as monetary items and thus included in the the Company at rates which.in real tenns f adiustes historical costs stated in tenns of douars of the purrhasing power gain computation. Although cer- for the effects ofinflationi,enceed established statu same general purrhasing power iconstant douarsi, tain assets and liabilit!cs might be considered tory rates. During periods of persistent inflation as measured by the average level of the Consumer nonmunctary imm a stdct theoretical point of view, such a tax policy effectiwly results in a tax or Price Index for All Urban Consumers (CPI-U) for such amounts do not materially affect tha purrhas- shareholders' investment in the Company. 1979. 'Ihese announts do not purport to present ing power gain repor1cd 'IUs gain is strictly an Note G-Effect of Hate Itegulation: appraised values or any other measure of curwnt economic concept and will never be realized in Under cunent ratemaking policies prescribed le value, cash. As such, the amount does not represent funds the regulatory commissions to which the Compan) available for distributton to shareholden. Note B-Monetary and Nonmonetary is subject, only the historica' cost of pmpeny, plan Items: Note D-Net Income Adjusted for and equipment is recoverable thmugh depreciatior 4 licy coacept in underttanding the data adjusted General Inflation: charges as part of the cost of senice billed to cus for general inGation is the distinction between Net income adjusted for general inGation was de- tomers. Therefore, the exces. of the cost of pmp monetary and nonmonetary assets and liabilities. riwd by restating the historical amount of deprecia- erty, plant and equipment stated in terms of con Monetary items are those assets and liabilities tion expense to mflect the change in the level of the stant douars over historical cost is not presently ahich am or will be comerted into a f!xed number CPI-U that has occurred since the related pmpers reemerable in rates as depmciation, and is, accord af dollars regardless of changes in pdces. Examples ties were acquired The historical amount of prop- ingly, reGected as a reduction to net reemerable of monetary items include cash, accounts receiva- erty, plant and equipment, comprised of plant in amount. While the ratemaking pmcess giws nr ble and debt. During periods of inGation, the hold- senice, constmetion wt.A in progress, and plant recognition to the cost, stated in constant dollars, o ing of monetary assets results in a losa of general held for futum use, was restated to average 1973 replacing property *%nt and equipment, based or purrhasing power. Similarly, monetary liabilities dollars by applying the CPI-U to the historical cost past practices the m. snpany believes it will be al are associated with a gain of general purchasing of these assets byyearofenpenditure. Depreciation lowed to eam a retum on the increased cost ofit: power because the amount of money required to expense was then determined for the adjusted net investment when replacement of facilities actu settle the liabilities represents dollars of diminished higher amount of pmperty, plant and equipment by any occurs. purrhasing power. applying the same depreciation rates and methods To properly redect the economics of rate regula AD assets and liabillt'es that are not monetary am used by the Company to compute the historical tion. the Company belieses that the reduction o nonmonetary. Nonmonetary items, such as pmp- amount of depreciation expense shown in the pmperty, plant and equipment to net reemerable erty, plant and equipment, do not gain or lose gen- Company's pdmary financial statements. amount, to reflect the adjusted cost in terms o eral purrhasing power solely as a result of general in accordance with procedures specified in FAS constant dollars not seemerable imm customers pdce level changes, but rather are affected by tre No. 33, revenues and all expenses other than depre- should be offset by the gain fmm the decline ir relationships between specific pdces for the item ciation am considered to reGect the awrage price purchasing power of net amounts owed.This pur-and changes in the general level of pdces. lewl for the year and accordingly remain un- chasing power gain is primarily attributable to the changed from those amounts shown in the Com- substantial amount of debt which has been used tt Note C-Purchasing Power Gaint firnnce the Company's innstment in property Pany'8 Primary financial statements.
%1nce the Company owed net monetary liabilities Pl ant and equipment. Since depreciation on this during a period in which the purchasing power of Note E-Inventories: imestment is lunited to the reemery of histoncal the douar declined ita, during a period ofinflation), Fuel inventories and the cost of fuel used in the c sts. the Company does not hase the opportunity the Company experienced a gain in purthasing generation of electricity hase not been restated to realize a holding gain on debt and is, therefore power.This net gain in purchasing power, shown imm their his.odcal costs. Regulation limits the limited to recowry of only the actual embeddet separately in the accompanying supplementary recmery of fuel expense thmugh adjustments in intetest c 5t Ic8P ital pmsided thmugh debt.
achedule, was calculated based on the Company's basic rate schedules or thmugh the operation of awrage net monetary liabuities for the year muhi- fuel adjustment billing clauses, which include 90% phed by the change in the CPI-U for the year. All of the changes in fuel imentory costs. For this rea-assets and liabilities other than pmperty, plant and son, fuel inventories are effecthely monetary assets j equipment, as weU as amounts applicable to re- and are thus included in the purthulng power gain computation. Materials and ss.pplies inventories were not restated since they are not a cost of generating ! electricity and the amounts imched are insignifi-cant.As with fuel inventodes, materials and supplies inwntories are included in the purchasing power gain computation. Note F-Inconne Taxes: Since present tax laws do not allow deduction for higher depreciation adjustments for the effects of inGation, income taxes included in the data ad-justed for general inflation were not adjusted imm those amounts presented in the Company's prim-31 m m.# r % ,
- s 1976 1975 1974 1973 1972 1971 1970 1969 (Thousands) 1.241A83 $ 1,052,061 $ 881,301 $ 738.236 $ 639.148 $ 585,?t4 $ 518.632 $ 473.745 24.284 18,719 17,158 14 919 14A43 13 A72 10.626 8.242 1 266,167 $ th70.780 $ 8 % 459 $ 753.135 $ 673391 5 599.196 $ 529.258 $ 481.987 077,231 3 445,437 $ 342.398 8 218,150 $ 197,016 $ 187,323 $ 145,725 $ 114.214 88,350 (9A64) (2,118) 20A30 9,985 15.1777 5.M6 4A34 179A67 160,224 142,789 134,266 129,296 123.691 114,559 1M,322 100.577 91,253 61A16 56,556 52.065 49A77 48687 38.718 93A75 89,240 84A85 72,967 63A32 56A98 50,076 46.188 3.733 16391 4,123 5.113 3.191 2,349 14,374 28.214 36,402 31,534 28.319 24,674 22.546 13383 11,428 10.699 14A28) 14.347) (4,1951 (4y,52; (1,7211 (I A67) 11 A19) 41,408) 4,0M 7,987 (2A28) 7,$83 7,298 6,793 583 4.388 15,396 16,769 14.567 15,645 13A66 10,424 9.369 9,024 74,577 63.222 61.747 54.00 . 47,163 45,676 39,505 36.986 1.070 074 $ _ _ 891,216 . $ 731.903 $ 605.218 $ 543A37 $ 490,270 $ 437,533 $ 395.779 196 093 $ 179.564 $ 166.556 { 147,901 $ 129.754 $ 108.926 $ 91,725 $ 86.208 49A33 $ 43A63 $ 37,561 $ 36,520 $ 39.395 $ 26A23 $ 16,760 $ 7,037 1,728 2A12 5A29 2.413 97 (523) 12MI 167 451 (1,3531 (3,280) (1,162) (22) 331 179 1861 52.012 $ 44,522 $ 40.110 $ 37,771 $ 39.470 $ 26621 $ 16.735 $ 7,118 248,105 $ 224 086 $ 206.666 $ 185.672 $ 169.224 $ 135,557 $ 108.460 $ 93,326 124.992 $ 116,267 $ 102,672 $ 84,627 $ 70,244 $ 58.964 5 40,913 $ 30521 1.084 945 618 455 3M 351 229 174 2A04 8,42n 14.124 6.043 3,434 1,700 4,667 903 128.480 $ 125.632 5 117A14 $ 91,125 $ 74,072 $ 61,015 $ 45A09 5 31,898 119.625 $ 98A54 $ 89252 $ 94,547 $ 95,152 $ 74,542 $ 62.651 $ 61A28
- - - 5,585 _ _ - -
. 119,625 $ 98,454 8 89.252 8 100,132 $ 95,152 74.542 62,651
$ $ $ 61A28 34,589 26.463 23,759 23.762 18A88 1't 385 6,105 5.284 85 036 $ 71,991 (a) $ 65,493 $ 76.370 $ 76.664 $ 61,157 $ 56,546 56,144 5
51.277,789 48.120A98 44,922,938 40,028,797 36,701,834 33,767,445 30,138.387 28A51 AM
+ 136 $ 1.50 ta) $ 146 $ 1.91(b) $ 2.09 $ 1A1 $ 138 $ 1.95 1A5 $ 1.45 $ 1.45 $ 1.45 $ 1.40 $ 1.40 .$ 1.40 $ 1.40 Note 10 of Notes to Consolidated Financial Statements.
W Includes camings per sham of $0.14 for cumulative effert to October 1,1973 of a change in billing practice, net of income taxes. y position beginning in 1976 due to higher kilo- ing equipment. Depreciation expense increased as primadly to increased operating revenues, ofset in Otthour nales, increased outager of major general- a result of higher composite depreciation rates and part by incmases in the cost of fuel and other ig equipment and, to a lesser estent, scheduled an increase in depreciable property, including operating expenses and higher interest expense wintenance. Further increases in other power major generating units placed . serMee in 1973, due to higher interest rates and incmased short-upply empense occuned in 1978 as a result of se- 1974 and 1979 which had highe installed costs per term bonuwing le els. ere winter weather, a nationwide coal miners kilowatt than earlier units. A significant pmportion of eamings for common enke and higher costs of purehased power. Other Cases of Capkal- As a result of the Company's stock has been pmvided by a non-operating item, ower supply expense decreased in 1979 redecting extensive extemal financing from 1975 thmugh AFDC (60% in 1975,59% in 1976,45% in 1977,61% in reduction in purchased power due to increased 1979 and the increased costs of such financing, 1978 and 61% in 1979).The total amount of AFDC
- ompany generation and a decline in kilowatthour interest charges increased 46%, preferTed and pref- (both borrowed and other funds) and hence cam-sles. Ir. creases in other operation expense reflect erence stock dividend requirements increased ings for common stock has increased due to in-igher labor and employe benefit costs, general in- 64%, and the average number of common shares emased constmetion wori in progress expendi-ationary increases in other costs and accruals for a outstanding increased 45% mer this period. Di- tures and an increase in the rate fmm 8% to 8H%
toposed settlement of two cases which involve Mdends paid on common stock during 1978 and effecthe January 1,1979. See Notes 1 and 12 to laims of employment discrimination ($850,000 in 1979, amounted to appmmimately 86% and 83%, re- Consolidated Mnancial Statements. l 978 and $43 million in 1979, see Note 12 to Con- specthely, of eamings for common stock. Total and per share camings for common stock i alidated Mnancial Statementst The increase in Baenings foe Comances 8tock -In light of the for 1975 will be restated and reduced to $593 mil-saintenance etpense was due primarily to higher foregoing, eamings for common stock increased for lion and $123, respectively,if certain defened fuel aber and material costs and to the extenshe 1975,1976 and 1977. Eaminga declined for 1978 as cost revenues are ultimately required to be re-iaintenance pmgram begun in 1975, including the Company experienced lower than anticipated funded. See Note to to Consolidated Financial gnincant maintenance at the Monme generating growth in kilowatthour sales, inadequate and de- Statements. Iant, seeking to assure dependable supplies of layed rate increases and steadily increasing operat- Retum on awrage common equity was 9.16% for nergy dusing periods when no new generating ing expenses (particularly fuel and purchased 1978 and 9.91% for 1979 as compared with the quipment was being placed in senice and con- powert. The improvement in eamingt for 1979, de- 1330% retum authorized by the MPSC. nuing eforts to improve availability of all generat- . spite slightly lower kilowatthour sales, was due
i
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1978 1977 1179 op ,,ating Hevenue.irhou.and., $ 497,9M $ 464.f Statistical Residential-Electric
$ 534,833 345J74 313.673 291.1 gg, Commerrial-Electric I us 611. 6 166.777 5394 155
- 3 ROAM 4 lhe Detmit Edison Company Other $ 1,450, arul subsidlary companies - $1 ASM,511 $1.589A42 Total to Salce (Millions of kMh) 10.274 10.386 6.073 6.
Residential 8,253 Commerrial 18.351 17. 17,980 Industrial 2,335 2 2A06 Other 37.148 36 38A91 Total 1,579 Elcetric Cuntomers (Year End) 1,822,788 1.600.988 Besidential 127.634 118 135,7MA 2201 2 Commercial 2,264 Industrial 1,713 1,675 1 Other 1,732,498 1,702 I,782A33 Total Average Annual Une 6A29 t eA02 Per Hesider;tial Customer (kMh) Average Annual Dill $324.92 $31308 $21 Per Residential Customer ._ Average Herenue Per KMh 5.11e 4.79C Residential 5.53 5.16 Commercial 3.80 3 33 Industrial Capitalization (Thousands) $1 A43.036
$1,73
$2A69.518 44 long-Term Debt 530,748 494.691 Prefened/ Preference Stock Common Shareholders' Equity 3,800,441 1254 D74_ y
$3,591 A01 $331
$3.9MO,707 Total Capitalization (Pertent) 52.0 513 long Term Debt 12.8 13 8 Prefened/ Preference Stock 35.2 34.9 _
Common Shareholders' Equity 200.0 100 4 Total Common Stock Data $1.90 $1.76 Eamings Per Share $152
$1.58 DMdends Paid Per Share 83% 86%
Payout s9,849,484 61 A98.763 552 Shares outstanding-Aserage 9.91% 9.16%
% Eamed on Avera6e Common Equity $18.81
$18.83 Book Value Per Share
. Market Price 15% 16 %
liigh 12 % 13 % tow MinceRaneous s.3% 7.7% Aserage Interest Rate on long-Tenn Debt Average DMdend Rate on Preferred / 82% 9.0% Preference Stock sAs4 8,591 System Capability at Year End-MW sA77 8.984 System Capability at Time of Peak-huv SAs 7.312 System Peak Demand-MW 30.0% 22.9% Besene Margin at Time of Peak 623% es.2% System toad Factor 10,280 10330 licat Rate-Btu Per kuh 183.4f 149.0f Fuel Cost-f Per Million Btu 10,808 10.729 Number of Employen $5.102A43 $4 Gmas Utility Plant (Thousandal $5Ae0A23 $3 84,5e0,A29 $4,140.521 4 Net Utility Plant (Thousands) $ 642.676 $ 8 593,3n9 Capital Expenditures (Thousandal I T"i )
. s 1973 1972 1971 1970 1969 1976 1975 1974
$ 366,381 $ 297,072 5 261,166 $ 236.957 3 213.724 $ 193.540 $ 178J84
$ 408A28 124.863 116.387 183J32 160.686 145.751 132.664 254.363 218.474 307,353 247A91 215368 184.830 156.357 142.166 463.174 363.732 44.650 122,193 83.392 74315 67398 54A98 139A02 110302
$ 599.196 $ 529.258 $ 481,987
$1.266.167 $1,070.780 $ 898A59 8 753,135 $ 673391 9,748 9309 8A02 8.314 7.649 10.105 9389 9384 4,809 5,907 5313 5.169 5.030 5A02 5.610 5390 13,752 16A19 17.687 16224 14.654 13J69 17.253 15.036 1 A52 1A09 1350 2.065 1.995 2,168 1.784 1Als 35.194 32A55 30.575 29.178 28.205 35.328 32.419 33A12 1A70458 1437.720 1 A10.104 1,390751 1,560.669 1,541.981 1,526.562 1 A99.524 116.098 115.677 115,502 118.107 117,373 117.688 117.060 116S57 1J81 1E86 1E12 1.522 1 A33 2,018 1.931 1A49 1 A35 1323 1.283 1.229 1.214 1.589 1,546 1.524 1419.800 1,590A24 1.556J13 1.528.532 1.508.900 1,682.383 1462A31 1.647583 6,560 6400 6.183 5.931 5.563 6,518 6,514 6.330
$175.76 $162S1 $15013 $138 06 $130.02
$263 71 $23890 $19621 2.43f 233f 234C 4 05f 3 67f 3.10f 2 63C 235f 270 2 64 237 2.48 2.42 438 3A9 329 1.40 133 126 1.14 1 03 2 68 2.42 137
$1,681,998 $1.542.542 $1.331.700 $1.193.522 $1.09t 965 $ 935A58 5 761.293
$1.573.077 418,312 324.534 324A09 324A95 249J78 142A72 93.967 412499 854,982 789526 690.028 601300 541 353 1616,797 939.593 903.980
$2.930,982 $2,771,056 52,511,491 $2.308.M3 $2.034771 $1480.030 $1.396.613
$3.111494 53.0 $1.7 53A 557 54 3 54.1 53 7 55J 11.7 13.0 14.1 123 8.5 67 132 14 2 34.0 34 2 33S 35E 38 8 32.7 32.1 32.6 100.0 100.0 100 0 100.0 100.0 100.0 100 0 100.0
$131 $2.09 $131 $1A8 $1S5
$1S6 $130 $1.46
$1A5 $1 A0 $1.40 $1A0 $1 A0
$1A5 $1.45 $1.45 76% 67% 77% 75% 72-87% 97% 99%
48,120A98 44,922.938 40,028,797 36,701 A34 33J67,445 30.138.387 28A51 AM 51.277,789 732% 9 40% 1037% 936% 9.90% 1030 8M% 7A8%
$19.62 $1986 $1972 $19.16 $18 85 $18.69
$18.64 $18 92 22 % 23 % 23 % 29' 15 % 14h 18 21 %
19 % 17 % 20t 13 8% 7h 15% 19 % 6S% 63% 62% 5.9% 5.0 i 7A% 73% 7A% 73% 73% 73% 7.0% 5.6 8.4% 83% 73% 7,721 6338 6.539 6.132 5.733 8365 8380 8.701 l 8,536 7.110 6,970 6317 6.007 i 8.999 8.556 - 8489 6A14 6,935 6.049 5,986 . 5A65 5.201 l 6A13 6A67 ' 31A% 23.1% 173 % 16.4% 15.6% 153 36.1% 323 % 62.1% 623% 67.4% 63.7% 66.6% 677 65 3 % 61 A% 10,140 10,150 10.310 10.500 10.510 10.360 10250 10.190 893f $33C 492f 45.0f 38.1C 313 1 120Af 1101f 11,176 ' 10.304 10.902 11309 10.916 9379 9.567 . 10.035
$3,439.667 $3.093,551 $2.717,596 $2312.353 $1.974.199
$4.209E99 $3.934J52 $3.765369 '
$3,120.348 $2,840.954 $2.536709 $2.195.019 $1,828,696 $1.523.029
$3A14.558 $3.221,932
$ 297,240 $ 241,186 $ 399S18 $ 390.915 $ 405S28 $ 423220 $ 352Al2 $ 221.274 35
ENERGY PLUS* 4 gggggg our senice ama strengths, including 7 ., HEHVICE AHFA I"*d*'*h'P' PI ""'Y "*'" ***"'*" extensive ratl, air, water and highway An adequate and reliable supply of transportation system, a skilled work - electric energy is n, vital pan of an forte and a large market with very high arra's economy and its standard of a* income levels. These advantages have f living. Not only must homes, offices already led to many accomplishments k and factories be assumd of its availabil- for the area, including the Renaissance 1 ity today, but for the future as well. Detmit Edison has always met that Center, Prudential Town Center, 'g 1 Fairlane Complex, recmational y obligation. In 1979 our customer's complexes and industrial expansion. .3 needs wem more than adequately met, These messages arr being canied in with a reserve margin of 30%. A very j M NeMee regional editions of various business ^'** high 85.55. of that energy was supplied magazines such as Business Week, by coal-1 s :1 generation, pmviding our Ferbes and Fortune; Alichigan metro customers with significantly lower-cost editions of Time and Newsneek; daily ' l D""" electricity than if generated by cmde c s**#, newspapers in Alichigan; and various oil or natural gas. Use of coal, our area radio stations. We are pan of a nation's most abundant fuel, also he!ps gmwing etTort to prumote Southeastern @= 'Y to consen'e gas and oil supplies. Alichigan as a good place to live, work llowever, there is mom to Detmit and do business-
;.p.e,.gg Edison's Southeastern Alichigan senice The area development program is a {
ama than an adequate and reliable long-term one, aimed at strengthemng . '^r _-- supply of electric energy. In order to the economy of Southeastern Michigan. ; f d%'"iEQ, . ; Jjd. tell this story, both locally and This will help realize a stable arid : y ' g' g g ,, nationally, the Company began its new gmwing revenue base for the Company : - yR Energy Plus+ con..,unications thmugh the full and eflicient utilization pmgram last Septembe.- This prr;,.am of existing and new electric generating g 4 M[, is just one of several activities the capability. 3 4 r Company is undertaking to aid in the The Company's Senice ama itop ' expansion and diversification of right) covers a 7,600 square mile urban
." M" business in our service ama. Every and rural area in Southeastern
{ , d.h "0 7 ' M cfrort will be made to retain our Alichigan. The ama has a population of present commerrial and industrial job about five million people, of which 1.3 y j, i and tax base and to attract new million reside in the City of Detmit.
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business to the area. This will be done Although the senice area is only 13% of #f-.'.p, d 7
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directly and in full cooperation with the state's land area, it represents over T5 . .s -. > governmental and private economic half of the state's population, electric , _ J H '1 .. E. I development organizations. The Energy Plus+ messages feature energy consumption and industrial capacity. dgg/.w(f;g?.dLg AS ,,,,n
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_y _ [*' q p . % the 1980 Repubhcan National Comentio
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Corporate Address Registrars of Stock Bradford Trust Company Detruit Ldison General Offices
'livo Broadway New York, New York 10004 2000 Second Avenue iPmferred, Pmfemnce and Common)
Detroit, Michigan 48226 Telephone: i313) 237-8000 National Bank of Detmit 611 Woodward Avenue Independent Accountants Detruit, Michigan 48232 Price Waterhouse &. Co. iPreferted and Pmfemnce) e 200 Renaissance Center The Detroit Bank and Trust Company Detruit, Michigan 48243 211 West Fon Stmet Detroit, Michigan 48231 Form 10-K (Common) Copies of Form 10K, Securities and Exchange Commission Annual Common Stock Repon, am available. Requests Listed on the New York Stock should be dimeted to: Exchange. Frank M. Kehoe Vice Pmsident and Secmtary Unlisted trading on the Boston, The Detroit Edison Company Cincinnati, Midwest and Philadelphia Stock Exchanges. 2000 Second Avenue Detruit, Michigan 48226 New York Stock Exchange Symbol Transfer Agents Bradford Trust Company Two Broadway New York, New York 10004 Charles A. Babcock Ronald J. Gdowski Imne C. Kata Frank M. Kehoe 2000 Second Avenue Detruit, Michigan 48226 Common Stock Market Price and Dividends Paid Quanerly Price Range Dividend High Low cer Share 16 % 16 038 1978 First Quarter 16 % 15 % 038 Second Quarter 16M 15 % 038 Third Quaner 16 % 13 % 038 Fourth Quaner 15 % 13 % 038 19t i Fint Quaner 0.40 Eecond Quader 15 % 13M 15 % 13 % 0.40 Third Quarter 15 % 12 % 0.40 Fotrth Quarter
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G. g.. g w,L./ a.h. -A % % Y,2 o this incrrase, as well as nonnal Distribution of Ownership of ,.rx ;:; M4, , 4mwth thmugh market purchases. Detroit Edison Common Stock, December 31,1979 Y-hp&$.h JN U) 1 Thmughout our history, Detmit Edison shamholders have alwa0s T%h[ ! neluded a large number of mlatively imall holders. Over 80% of all share-By Type of owner Ownem Shams 4hy yf .j[ ' 1oldens own 300 shams or less, which $"jnNunts Tmst Accounts
$M 7.472
!NS 2 342.142 %.
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it today's market price is an average Nommers 740 16.927.052 ..- r- r
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nvestment of less than $4,000 for each Institutions and jG w. ihamholder. Tin.s solid base of roundations 417 192.610 . .4w' *M ihamholders is very important to an Bmken and slectric utility, which must enter the gyunty Dealen 2.9 'l 65 W- j narket trgularly to sell new shares to roi,i 233,3os 74.433397 ~ $j{
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- any on its capital expenditure ny state and country D ' " - -
's YP~ -\ 'x Jmgram* ownen shams
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7MT ~' Owr the past several years itv.fre is 34.201.020 Michigan 119.348 dso evidence of gmater interest in our da 18 4 5$$ Top f# william w. white. supenntendent of ou, 3 Fenni 2. points out the various pans of the shams by large institutional investors. New York 12.456 14.565.799 mactor com model to dsning mpmsentatrms Ne also meognize the important sup* Hhnois 10.432 2.705.921 " 3 o ' ' " " " " Oh 639 ,,f,e th Co
) ort this gmup adds to the Com. , ,
pan s u ea fue ur Jany s SeCur1tles* Fomign Countries e46 230 575 Top flight: Senior Attomev Thomas P. 74.459.897 Bingman, Jr. (standing, to'p lefD and Irene C. About 52% of our shareholders reside Total 231.506 Kata. Assistant secretary icenteri are pan of a n Michigan and hold 46% of the total P "" *" mpt shares outstanding at year-end. f,"nciks c h n c6"heS i lower thght: Paul w. Thompson. Finance Director for the City of Detroit uses a signing i machine for pollution contml bonds sold to I l finance wastewater tmatment facilities. 7
Deholt Directors > MiSOn and officers l' Chairman of the Board and Chief Executhe Omcer, Bundy Corporation Wendell W. Anderson, Jr. Board of Chancellor, Unhersity of Detroit Directors Malcolm Carron, S.J. Pmsident, National Bank of Detmit Charles T.11aher 111 Chairman and Chief Executive Omcer, Ex-Cell-O Corporation Edward J. Giblin Ernest L. Grove, Jr. Senior Executive Vice President-Finance, The Detmit Edison Company Vice Chinnan of the Board,The Detroit Edison Company Johrr R. Hamann Dasid B. Harper President, Gateway National Bank George M. Holley, Jr. Retired Industrialist I*stricia Shontz longe Pmfessor of Business Administration, University of Michigan Walter J. McCarthy, Jr. President and Chief Operating Omcer, The Detmit Edison Company Chairman of the Board and Chief Executise Omcer, The Detmit Edison Company H1111am G. Meese Frank Merriman Dairy Farmer Kenneth D. Mchola Consulting Engineer Chairman of the Board and Chief Executive Omcer, Manufacturers National Bank of De Dean E. Itichardmn Senior Partner,lionigman Miller Schwartz and Cohn Alan E. Schwartz Audit Compensation Committees Executive Finance William G. Meese, Chairman Dean E. Richardson, Chairman Charles T. Fisher Ill, Chairman Edward J. Giblin, Chairme ofthe Edward J. Giblin Alan E. Schwartz f J hn R. Itamann Dasid B. liarper Wendell W. Anderson, Jr D ors Malcolm Canun, SJ. Malcolm Carron, SJ. Charles T. Fisher til Frank Meniman Charles T. Fisher III George M. Holley, Jr. Edward J. Giblin Dean E. Richardson Emest L Grove, Jr. Patricia Shontz longe Emest L. Grove, Jr. George M. Ilolley. Jr. John R. Itamann Patricia Shontz longe Patricia Shontz longe Walter J. McCarthy, Jr. William G. Meese Alan E. Schwartz Alan E. Schwartz Nominadng and Energy Redeement Fund Organization Resources Reskw Alan E. Schwartz, Chairman Kenneth D. Nichols, Chairman Patricia Shontz longe, Chairman George M. Ilolley, Jr. Wendell W. Anderson, Jr. Edward J. Giblin Frank Mer;iman Wendell W. Anderson, Jr. Edward J. Giblin Walter J. McCarthy, Jr. Ernest L Gruve, Jr. Dean E. Richardson Frank Meniman David B. Harper i Oficers M1111am G. Meese Chairman of the Board and Chief Executise Omcer John R. Hamann* Vice Chainnan of the Board A Walter J. McCarthy, Jr. President and Chief Operating Omcer Ernent L. Grove, Jr.' Senior Executive Vice President-Finance Charles M. Heidel Executive Vice Pre:Ident-Operations u 3 j Robert W. Lundgren . AeCuthe Vice President-Administration
^ Leon G. Cohan Senior Vice President and General Counsel Wa? ne H. Jens Vice President-Nuclear Operations Jo'an W. Johnson, Jr. Vice President-Finance qi
, i M. Jane Kay Vice President-Employe Relations Frank M. Kehoe Vice President and Secretary 4 Jc, Vice President-Planning and Researeh g- Cla> bourne MitcheR, Jr. Burkhard H. Schneider Vice President-Divisions /$f . t Vice President-Engineering and Construction Harry Tauber O. Desid Whidden Vice President-Operations
$/ 1 John C. Kennedy Treasurer jby Contmller , ,
t M1111am A. Basse 6 Arnold J. Benes General Auditor i
' Retired effective February 1,1980 "Dected Mce Chairman of the Board, effective Fetxuary 1,1980.
y nn*..e-L- r To Our Fellow Shareholders February 25,11 The year 1979 was a period of continued pmgress for Detroit Edison. Earnings for common stock reached a record $132.6 million, 21.8% higher than a year ago, despite a downturn in the econom,' double-digit inflation, record high interest rates and the coolest summer in ten years which reduced electricity used for air conditioning well below levels of a year ago. Earnings per share were $1.90, an increase of 8.0% over the
$1.76 earned in 1978.These higher carnings supponed an incma-in dividends, fmm an annual rate of $1.52 to the new rate of $1.6-per sham, effective with the April dividend.This is the second increase in the dividend rate in two years, an imponant factor to our many shareholders who need these dividends as an essentia:
part of their income. With total kilowatthour sales down 0.7% from last year, the major factors contributing to impmved financial performance wen price adjustments authorized by the hiichigan Public Senice Commission, continuing tight control of expenses and excellent performance by our generating plants. As discussed in more detaii in the accompanying report, some innovative and timely msponse; by the Commission helped counteract a portion of the inflationar) cost increases experienced by the Company and the fixed costs associated with the operation of the 800 h1W Greenwood No.1 generating unit which went into senice on July 5,1979. However, final decision by the Commission in the Company's main electric l rate case has been delayed and is now expected in early Afarch, 1980.This inemase and the $32.7 million adjustment authorized ,[j under the Commission's operation and maintenance expense j g,N indexing procedum, effective Febmary 1,1980, am both necessary [d M p(t gj* order to help offset increases in costs, Extremely high inflation rates affect our operations much as they do each of you. For example, the cost of fuel mquimd to hg[h generate electricity, our largest single item of expense, continued escalate in 1979.The average price per ton of coal mached $33.35l 4y an increase of 16.9% over 1978.This incmase is the result not onig [! of increased mining and transponation costs, but also the I
' mquirement that higher priced low-sulfur coal be used to meet -
erwironmental mquirements. In addition to large quantities of low-sulfur westem coal, which we have been burning for several l-f - years, new sources of high quality low-sulfur southern coal have also been obtained. Fortunately, coal is still much less costly th either gas or oil. In 1979, over 85% of our electric generation ne
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Js, y = Percent 6 :'O Increase 5 if ~ il-D . 1979 1978 (Dectease) % %M - ,
'perating Hevenues $1,698,511,000 $1,589,842,000 08 [ \
arnings for Common Stock $132,572,000 $108,813,000 21b m" A aniings per Common Sham $1.90 ' $1.76 8.0 , ommon Shams Outstanding (Average) 69,848,484 61,898,763 12E a-
'ividends Paid per Sham $1.58 $1.52 3.9 \ h, mss Utility Plant $5,660,023,000 $5,102,843,000 10.9 apitalization $3,980,707,000 $3,591,801,000 10.8 4
Ales of Electricity (kWh-Thousands) 36,891,000 37,148,000 (0.7) estem Capability at Time of Peak ikW) 8,877,000 8,984,000 (12) estem Peak Demand (kW) 6,829,000 7,312,000 (6.6) lectric Customers at Year End 1,763,000 1,732,000 1.7 e NERGY PLUS+ . cover contents Q ihe Company's new Energy Plus+ Charles E. IIanson, ~7 2 Message to Shareholders i sommunications pmgram will be Supervising Operator 4 Revenues. Earnings and Expenses imed at business and decision- at the Monme Power 6 Financing and Shareholder Data nakers. it will point out, in addition to Plant whose hands 8 Rate Acthities U appear on the cover 10 Capital Expenditure Pmgram n adequate energy supply, the many t whantages of locating in Southeastern photo,is one of those j h **, ,n a d o a A
? . 61ichigan. responsible for '
16 Major Legal Developments
%j Th:re am also many pluses at operating the contmls , -.
f 17 Financial Statements 2setmit Edison,in addition to pmviding which tegulate the 30 Effects ofInnation Ni adequate energy supply. Some of flow of electricity from our largest 32 Comparathe Results liese am highlighted in this Annual coal-fimd generating facility. 34 Statistical Review epott. 36 Sesvice Area and Map}}