ML20082U075
| ML20082U075 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley, Davis Besse, 05000000 |
| Issue date: | 12/09/1983 |
| From: | Woolever E DUQUESNE LIGHT CO. |
| To: | Harold Denton Office of Nuclear Reactor Regulation |
| Shared Package | |
| ML20082U079 | List: |
| References | |
| 2NRC-3-099, 2NRC-3-99, NUDOCS 8312160230 | |
| Download: ML20082U075 (2) | |
Text
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(412)787 - 5141 Telecopy -6 Nuclear Construction Division
- l Robinson Plaza, Building 2, Suite 210 Pittsburgh, PA 15205 I
United States Nuclear Regulatory Commission f Washington, DC 20555 l
ATTENTION: Mr. Harold R. Denton )
Office of Nuclear Reactor Regulation
SUBJECT:
Beaver Valley Power Station - Unit No. 2 Docket No. 50-412 Forwarding of Annual Financial Report s Gentlesen:
Enclosed are seven (7) copies each of Ohio Edison Company's , The Cleveland Electric Illuminating Company's , The Toledo Edison Company's , and Duquesne Light Com pa ny's 1982 Annual Financial Report in ac corda nce with 10C FR50. 71(b ) .
DUQUESNE LIGHT COMPANY By E .VJ .'Wo61 eve r Vice President ETE/wjs Enclosures cc: Ms. L. Lazo, NRC Project Manager (w/o enclosures)
Mr. G . Walton, NRC Res ident Ins pect o r B312160230 831209 PDR ADOCK 05000334 PDR I SUBSCRIBED AND S40RN TO BfFORE ME THIS ,
//] DAY OF LbcpA, _ , 1983. I L2) LO Not ary Public ANiTA EUdi!E R :Tr' ,,;if / FU ::C ROBINSON TC"J^ .SP, ALLEGH2NY COUNTY MY COMt.i:SS!ON EXPIRE 3 OCTOBEit 20,1986
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United Stctos Nucleer Regulatory Commission Mr. Harold R. Denton Page 2-COMMONWEALTH OF Ft.NNSYLVANIA )
) SS-COUNTY OF ALLEGHENY )
On this #42 day of d fu,_/f4 , //f3 ,_ be fo re me ,
a Notary Public in ami for said Commonwe alt h and County, pe rsonally a p pe ared E . J . Woolever, who be ing duly sworn, deposed and said that (1) he is Vice President of Duquesne Light, (2) he is duly authorized to exe-cute and file the fo regoing Submi t t al on behalf of said Company, and (3) the statement s set forth in the Submittal' are true and correct to the best of his knowledge.
sN Not ary Public ANITA EL/dNE RC'TCR, NOTARY FUBLIC ROBINSON TO'l/NSHIP, ALLEGHENY COUNTY MY COMMISSION EXPlRES OCTOBER 20,1986 i
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- Financial Contents 20 s -4 ,
- _, A, < Directors and Officers 42 Committees of the Board of Directors _43 I General Information 44
- ^. Service Area Slap 45 4
. .y n s 'i Our line mechanics are responsible for the mamtenance i--ma:**r -" - and upgrading of thousands of miles of transmission and distnbution lines. Their work ensures that out customers have reliable and safe electric sernce. Cover: Line mechanics place conductors in final position on -~3,#,# 2 p~ +. -, ,.v,._ pg, , s -.,:s 4 , - - ,- . . . u. a transmission tower. part of a new 43-mile. 345KV trans-mission hne which runs from the Perry Nuclear Power Plant to our Juniper Substation. The line will make Perry's low-cost electricity available to our entire service area. 1982 Highlights Financial Summary and o Earnings per share reached a Quarterly Stock Prices calendar year record of $3.01, up Percent 19% from 1981. 1982 1981 Change o Common Stock quarterly dividend Eamings PerShare per share was increased twice in 1982 of Common Stock $ 3.01 $ 2.52 19.4 Dividends Paid PerShare -28 effective in February and 3( o mm n St ck $ 2R $ 2.08 53 effective in November. Total payment IkmkValue PerShare of $2.19 represents a 5.3% growth of Common Stock $ 19.86 $ 19.63 1.2 over 1981. Common Stock Share Owners 111.688 103.242 8.2 o A $107.8 million (10%) rate increase Operating Revenues (000) $ 1,108.571 $ 1,012,930 9.4 became effective for retail customers Operating Expense;(000) _ $ 879.614 $ 820.226 7.2 in March 1982; another increase of Net income (000) $ 208.961 $ 155,734 34.2 $89.4 million (7.4%) became effective Eamings Available for in January 1983. Common Stock (000) $ 170.669 $ 120.817 413 o The Dividend Reinvestment Plan KilowatthourSales r:.; sed $23.4 million, an increase of (Millions of Kilowatthours) 67% from 1981. Over 30% of our Residential 4.336 4.376 (0.9) share owners are taking advantage 4 4' of the special tax treatment of dusdal 7 8 '(1 ) Other 414 399 3.8 dividends available through the Plan Sub-total 16.026 17.233 (7.0) e On November 2, Ohio voters over- Sales to Utilities 139 275 (49.5) whelmingly defeated the proposed Total 16.165 17.508 (7.7) amendment to the Ohio Constitution to elect the members of The Public Utilities Commission of Ohio. Quarterly liigh and low Prices o in 1982, nine million shares of mmm n st ck(dollars) common stock were sold through two public offerings. We do not expect to lta, nigh make a public common stock offering 4th its 20 in 1983. 3,a 33 ; gi3g o in July, the Advisory Committee on 2nd 16 % t7% Reactor Safeguards recommended a "%I '7 100% powerlicense for Perry Unit #1. 4th l16% 13%l 3rd 13%l l16% 2nd 14 l16% lst 14 . l16% lost I l 513 14 1s 16 17 18 19 20 m ,s .I Letter to Share Owners
as a time of change and challenge. For resulted in lower kilowatthour sales, is an organization with high standards a tribute to all the men and women of It is human nature to look back with pride on past accomplishments and to this is natural. The Company has always the Company. We are particularly draw confidence from them in facing recognized that the achievements and proud of our management team and the challenges which lie ahead. lessons of the past are only prologues are fortunate in having a Board of for the future. Directors ur. commonly strongin In almost every one of the 20 years leadership and breadth of experience. The year 1982 was no exception. that the three of us have been officers Our Board was strengthened early of The Illuminating Company,our The Company achieved higher reve-in 1983 by the addition of William J. predecessors have reported to you in nues and higher earnings per share. Williams, President and Chief this space on the outstanding results of The dividend was increased twice, mak-the prior year, but looked to the future ing the annual rate $2.28 per share. Opera ng 0 er P" g 9 ,d on o sI er- l This progress, achieved in the face of ship of one of the nation's largest i adverse economic conditions which industrial corporations, Mr. Williams brings to the Board utility experience
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The accomplishments of the past >ur
/3 V are described in detail in this Annual qk j4 % Nh fg Report. The significance of the past is the foundation it lays for the future.
Wg >ff aM I t$ We are a strong company in a strong geographical area.This does not mean, however,that we are overconfident. i M.g(ii 'd' LtWfV .~ ' [ r (' j : : ': , , 'f h / There is particular cause for concern in i M@# h.ty ,,;(, ( *
A three major areas-acid rain legislation,
,. [ g g. Y,d Q @ / fw 4A' the regulatory environment in Ohio 4 and nuclear energy.
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Rotiert M.Cinn (top) Richard A. Miller (left) liarold L Williams (right) I l 2 i
Midwestem utilities, including the While inclusion of CWIP slightly Efforts to provide reassurance to the Company, have been singled out as the increases rates prior to the in-service public through regulation have proved cause of this phenomenon. Congress is date of the plant, it provides rates costly in both time and money. now being urged to mandate solutions lower than they would otherwise be. The industry must find a way to provide , by passing legislation which would cost over the life of the plant.This practice i accurate information about nuclear our industry and ultimately our cus- also helps case the " rate shock" which energy. It is safe and efficient and that tomers billions of dollars. Yet there is occurs whenever a new plant goes must be understood. Nuclear energy no scientific ev,idence that the proposed ,in service. must be a part of our industry's future reduction of sulfur emissions from utili- Another provision of the proposed if we are to meet our customers' electric ties m the Midwest would significantly legislation would require retroactive energy needs. reduce acid ram m the northeastem adjustments of rates if the Ohio . We are in . deed facing challengesm. the states and Canada. Supreme Court reversed a PUC0
.. . years ahead. But we have confidence i,n The Company believes the environment decision. Under this proposal, a the Company and in the economic should be protected.The first step, company's camings would not be vitality of our senice area. When however,is to diagnose the problem- precisely known until the Court had recovery comes,our factories and to determme the causes and effects of ruled on the decision as much as a year businesses will participate. New indus-acid rain-before prescribing a cure. later.This would add alayer of tries in the senice segment-uncertainty to utility investment which particu'arly in the medical field-and Responsible research already begun increases the nsk to ,nvestors.
i That must be completed.This region has in higli technology are growing here. ns a raise mdinandng costs already suffered too many economic setbacks to burden utility ratepayers w u m W nms%an@ hMW Kn,mW, m and,ni ur customers. our state are . . acated to making th,s i with billions of dollars of additional
"*"" "# usiness.
spending which may prove unnecessary It is evident that this proposed . Through si u organizations as the or ineffectual. legislation is a reaction to the rate Great 14.:s Economic Pohc,es i Council, increases which all utilities have been business and govemment are working The second major area of concem .is forced to seek in recent years. Ohio's regulatory climate. Regulatory to bring economic progress to the law underwent legislative changes dur- This is unfortunate because higher entire Great I.akes region. ing 1982 and more have been proposed rates could result in the long run. Such
, The history of this Company has been for 1983. short-term expediency is not the one of change and challenge. It has answer if utilities are to have the also been one of considerable accom-As this is written, the Ohio Legislature fin ncial stability required to serve our plishment. As we resolve the challenges is considering a bill which would impose economy in the future.
several changes in rate regulations. In of1983 and beyond,we are confident the short run, those changes might Our third area of concem is nuclear that we will again provide history with a hold down utility rates but would sub- energy. new record of achievements. st mtially increase rates in the long run. Nuclear generating plants have a safety Sincerely, The proposed changes would tend t record unparalleled in industry. No lower the quality and amount of cam- member of the public has ever been - ings which utilities are allowed. In tum, this would increase the nsk of t.tility injured by a nuclear plant Yet they are k perceived as an uncommon danger. Robert M.Cinn. President mvestment and increase financing costs.
- The public's view of nuclear energy contrasts shamly with the view One change would stringently limit the amount of Construction Work in ofscientists. Richard A. Miller. Executive Vice President Progress (CWIP) allowed in rate base.
In a recent survey, sc.ientists most The CWIP inclusion-allowed presently ci sely associaW wu udear energy ' in many regulatory jurisdictions includ-were the raost confident ofits safety. Harold L Williams. Executive Vice President ing Ohio-permits construction costs Unfortmateh, agulaton mom oRen for projects nearing completion to be February 23,1983 respond to pubhc perceptions than included in rate base. This does not scientific realities. mean consumers are paying for the plant before it renders service-it only means they are paying " interest" costs on part of the money borrowed to build the plant. 3
Perspective
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.regroundi. some 2il miles apart. are brriught together in a summer sunset bs a 1.t m mm telephoto lens.
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agencies and those from whom We also improved the availability and Our contnbutions to the communities we borrow. efficiency of our generating plants we serve include efforts to improve the through an extensive Plant Availability social a well as the economic sitality of In 1982, we substantially improved and Efficiency improvement Program. our senice area.We are concemed our financial position. Our record A skilled team of engineers and opera- with the effect our operations have on earnings for the year supported tw tions specialists was formed to study the quality of air and water, and we have increases in our quarterly dividend our power supply system. Recommen- worked hard to comply with environ-nr e 1 f hort-te ns hm ee kam M We h mend @ahns; We are & W Y "N # " ""# "# "" " borrowing was significantly reduced-and capitalimprovement projects munities we sene. We are financial External financing reached a peak in resulted in reduced fuel costs. These supporters of health and social agen-1982 when we raised $434 million. cost savings ultimately are passed along cies, education, the arts and sciences in This amount included the sales of nine to our customers. Northeastern Ohio. million common shares. We expect There are over 5,000 men and women We provide electricity to an area of about ha'f of our future cash needs t in The Cleveland Electric Illuminating 1,700 square miles.This senice area be generated internally, thus contains approximately 1.9 million Company family- people who work significantly reducing our reh.ance on people,about 650,000 households and and live here in Northeastern Ohio. extemal financing. thousands of industrial and commercial They are a strong resource to their As in the past, we will continue to businesses. The electric energy needs communities.They, too, want a better request rate increases as needed to of the people and industries in North- quality of life for themselves and their provide quality electric service to eastem Ohio are growing and, in fact, families, their friends and neighbors Northeastern Ohio and to assure our are expected to increase by nearly and their fellow citizens. share owners a fair return. With 45 percent by the end of the century. Corporately and individually, the inflation abating and cost pressures We are committed to meeting our
, Company and its people are helping moderating, we are hopeful that future customers' needs by insunng that we make their communities better places rate requests will be smaller and less have the capacity required to provide to work...better places to live and raise frequent than m the recent past. electricity at the lowest possible cost.
families...better places for personal development and enjoyment. Product Reliability and Service Community Involvement The economic and social vitality of our We believe that again in 1982 we have Our record of product reliability and senice area affects the success of our passed the three tests of our steward-service is the standa-d by which we are business and the well-being of our ship: good financ,al i performance, judged by our customers. They depend employees and their families. Thus, the excellent product reliability and senice on us to provide a constant, instant third measure of our stewardship is our and dedicated community mvolvement. supply of electric power for their homes, offices and factories. contribution to the communities to The rest of this Annual Report supports which we provide electric energy. that belief. In 1982, senice reliability was nearly perfect. Interruptions were held to a One of the ways we meet this responsi-low level and restoration of service was bility is through our area development achieved more quickly than during the eff rts. Our pmgrams are designed to previous year. retain and expand existing businesses and to attract new ones by promoting the advantages of Northeastern Ohio. Through participation in the Great Lakes Economic Policies Council, our devel-opment efforts have now been expanded to include the Great Lakes region. 5
Financial Performance in 1982 "1:" ""Ot' ;"u'",""' J ll"" good stewards of their mvestment. Our first priority to our investors is to pr& vide them with a fair return on their investment. .\laintaining investor con-fidence in the Company is a critical
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M concern as we look to present and future mvestors to provide us with needed capital in the years ahead. Financial Objectives M.- To guide us in meeting our obligation to investors, we have established speci6c long-range financial objectives: (1) to
. d_ provide a fair return to our share owners: (2) to maintain earnings growth which will support dividends large enough to attract investors to our common stock: (3) to improve our credit ratings so that our securities can be sold in the future at reasonable costs; and (4) to maintain a balanced capital structure of 40 to 42 percent common equity, a maximum of 48 percent debt and 10 to 12 percent preferred and preference stock.
In 1982, we made progress in meeting
- FE- these objectives. We achieved record earnings for a calendar year of $3.01 per share, up 19 percent from 1981. We increased our dividend rate twice dur-ing the year: dividends per share increased 5.3 percent over 1981. In January the quarterly rate was raised to 54 cents from 52 cents, and then in
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September it was raised to 57 cents. This action provided dividend growth more consistent with that of the elec-tric utility industo'. measuusammamsamum_ -- ~ During the year, we significantly WiRarWEMMNRR reduced the level of our short-term debt from a daily average of $139 million in 1981 to a $61 million daily assureexamuse average in 1982. We took a consenative approach in our financing by lengthening the aver-age maturity of our long-term debt by three years. Average maturity was 19% years at year end 1982 compared to 16% years at year end 1981. We also A new on-line computerized share owner record system was implemented in 1982 to provide better and faster senice to our investors. Debbie Sasala. Stock Transfer Clerk. is g; reflected in the screen.
Quarterly Earnings and Dhds Per Share The Act provides a means for share j. N'""" M Wk81 owners to shelter all or a significant !
.subiAa portion of dhidends reinvested in our 4th ' Common stock.
' I The balance of funds obtained in 1982, ,
'"' approximately $5.3 million, was raised through employee stock plans.
im , 1 External financing activity will be lower i 32 inn &"' in 1983 than in prior years. Our financ- t 4th E i iMd & & d$1006
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E lion of first mortgage bonds in the first 2a half of the year and additional sales of l l ,[, E notes to the bond funds during the year. f Capital will also be raised through our , so .20 .40 m x iw i.20 employee stock purchase plans and the Dividend Reinvestment Plan. Finally, ! we are considering an additional pre- ! improved our ratio of earnings to fixed 30-year first mortgage bonds as col- ferred stock sale and we may borrow J charges to 3.0 times in 1982 from 2.4 lateral security for these notes. Under funds to finance construction of times in 1981. At year end, our capital the agreement, we can sell $60 million additional pollution control facilities. '5 structure cons,sted i of approximately 47 of the notes b ' November 1984. . I percent debt,13 percent preferred and . For the first time since 1974, the This new agr ement replaces a s. imi.lar Company does not expect to make a preference stock and 40 percent ne which expired in April 1982. The public common stock offering, largely i common equity. advantage of this financing program is because of the high level of share owner its flexibility. We can average our mter- participation in our Dividend Reinvest- - p -- '-- in 1982
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estcosts over a pep of tum or dechn ment Plan. f h Equity and debt financing activity to seH notes wkn interest rates are i totaled $434 million in 1982. Through extremely high. Last year, we raised Rates two public offerings of common stock,
$6.1 milhon m this manner.
totaling nine million shares, we raised The rates our customers pay for the ;
$150.4 million. We also raised $171.9 Through our Dividend Reinvestment services we provide are an ongoing and
,~ million through the public sale of - Plan,in 1982 we raised $17 million critical concern of the Company. Our < 30-year first mortgage bonds in March from reinvested dividends, up 79 per . rates must cover our costs and provide and November. In addition, through cent from 1981, and an additional $6.4 a fair return on our share owners' - the Ohio Air Quality Development million in optional cash contributions, investment. Yet, we are mindful of the Authority, we raised $76.7 million of up 42 percent from 1981. Participation . impact of our rates on household I 30-year tax-exempt bonds to refinance in the Plan increased 60 percentin budgets and the operations of area ! tax-exempt pollution control revenue 1982 from the previous year, mainly businesses
, bonds which mature in April 1983. We due to incentives provided by The The Company operates, as do all issued 30-year first mortgage bonds as Economic Recovery Tax Act of1981. - investor-owned electric utilities, under j.
- . - collateral security for the Authority's government regulation. When increased bonds. costs force us to rr.h a higher price for . >
in November 1982, we agreed to sell our prodA, we must request rate , notes, periodically and in varying increwes. In 1982, we received rate' S l
'. amounts, to a major financial institu. increases in three segments of our.
i 3 . tion for inclusion in its publicly-offered
' business-retail electric, steam and ' ,
bond funds. We issued $60 million of . wholesale electric. ; I a ]
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q Effective March 19.1982. The l'ubhc milhon of the increase allows for cam- million, or 12 percent. increase in : litihties Commission of ( >hio (PLIC( 0 mgs on pad of the construction costs steam rates. _ granted the Company a 10 percent, of l' nit #1 of the Perry Nuclear Power Early in 1983, the Company signaled its
$107.8 million retail electric rate Plant. For the first time since con-
. , continuing commitment to this segment mcrease. I his order. and the one stmction began in 1974. customer.'
of its business by announcing a $1.5 discussed below. dealt with the recovery will be contributing toward the costs of million capital improvement program through rates as an operating expense the l' nit. which will reduce operating costs. To of the costs of four nuclear unit proj~ The Company also sells steam for heat- meet competition from alternate fuels. ects terminated in 1980. This matter is ing and cooling to more than 300 the Company also offered a rate explained in detail in Note E of " Notes
. commercial customers in downtown reduction to those customers who to t.onsolidated Fm.ancial Statements.. make a long-term commitment to Cleveland. While our steam business is An additional electnc rate increase of relatively small. steam sales totaled receive steam service.
$89.4 million, or 7.4 percent, went into more than $17 million in 1982. In Wholesale rates for electricity we sell to effect on January 7.1981. Some $58 October, the Pl:CO granted us a $2.4 other utili'ies are set by the Federal
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,,,'Ve .A a The coohng tower of Perry units. of which the Company l' nit al stands completed in the owns 31 percent. will help the background as the Perry l' nit Company keep pace with future
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two 1.2n5-megawatt nuclear S
1 1 1 Energy Regulatory Commission (FERC). Corerage Ratios etnother type of coverage ratio achich ' In July 1981, we filed a request for a gg,, is important to the Company butis not l rau m art >nna m'al
$2.3 milhon rate sncrease covenng measurements of a company's ability " 'd b9 0' *N' "0"0 "9'"'I" 5 "
sales to the City of Cleveland's 0"' *""0"9'. bond interest coverage
, to pay intat charges. The higher the t municspal electnc system. Although the "0"' E' "I'"' ""'*I'"'"$"I ratio ofincome to interest charges, the i request is still pending with the FERC' achich must be met before the Company better the company's margin of safety we began collecting under the new may i sue adddumaMut mangage in paying interest. This measurement
! rates nn September 1981, subject to bonb unda HsMongage. M test is similar to the comparison ofincome refund depending on the innal FERC require that the Company's carnings, l to payments schich is used by banks i order. In November 1982, we filed for as definedin the Nortgage, must be at an additional wholesale rate increase of '.chen appnning mangage h>ans for least tacice the amount offirst mort-ne m wage mtio is one
$716,000, which is also pending. We gage bond interest charges. This cal-will be allowed to begin collecting mWriduals; ofMe m &gaton u edby Moody s culation is less restrictive than the one Im'ator anx, tandardMoors a under these new rates in June 1983, used by credit rating agencies prin-an oMa mdd m#ng agencia.
; again subject to refund depending cipally because only first mortgage upon the final decision. Comparing coverage ratios for bond interest is considered and, there-different time periods helps indicate fore, results in a higherratio. The uhe&w a wmpany's financialsitua- chart belote shoics that the Company's i Regulatory Climate
@m is impm ng, tua mng rstag- m'nage rados for the last fire years Regulation of Ohio's public utilities mg the same. hi addition, mccrage have been substantially above the tiro undeswent considerable legislative m#o mmpaqsons o mmpanic u #ms mquimment ne high mtuis -
change, although Ohio voters rejected m a specific mdustry are one measure mean that the Company has the a proposal for direct election of PUC0 of relativefinancialstrength. capability to issue a large amount of b members by a margin of two to one. There are a number ofitays to first mortgage bonds-our lou'est cost Under the new regulatory law. which wentinto cffect in January 1983, the calculate coverage ratios. One of the security This flexibility achich not all more commonly usedcalculationsis utilities have, as vitalto continue
, membership of the PUC0 was in.
Eamings Before Interest Charges plus financing expansion at the lottest cost. creased to five members from three and terms were reduced to five years Federalhicome Taxes plus the
- from six. The Govemor is now required ellhnrance for BorrotcedFunds Used First Mortgage Ikmd intast During Construction divided by coverage. Ratio ;
to fill PUC0 vacancies from a list of candidates submitted by a 12-member hiterest on Short and Long. Term Debt. . The Company's coverage ratios for 82 panel which makes selections based on . specific education and experience qual- the last fire years based on this calcu- 81 lation are shoten in the chart belom wi ifications. In addition, the newlaw - 7' disallows use of the " matching test i year", which based rates on current Interest Charges Coverage Ratio costs rather than historical costs and o i 2 3 4 s thereby recognized the effects of infla- uinm e-o ,,,,,, I 32
- tion on our financial results. A further .,,
=Imu=== t provision of the new legislation w, ",*$^7",,fC .
prohibits a utility from seeking a rate 3 increase ifit already has a rate case y, , pending before the PUCO. , , , 3 l There are indications that Ohio's "'" " "=* i regulatory climate may become even more difficult for utilities. Any unfavor- ; able shift would affect the financial health of the utilities on which business is depending to meet its future energy 4 needs. Ohio's economy depends on the vitality of its businesses. But, economic growth will not be possible without an l adequate supply of energy. 9
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Product Reliability anc Service ',;"?;",;t0?"icl1 '""< continuous service at the lowest possible cost. Ilow well we are meeting this objective is measured largely by our records of service rehability and equipment availability and efficiency. Service Reliability To our customers. our reliabihty record-that is, how well we supply adequate energy on demand-is of primary importance. In 1982, as in prior years, we had a nearly perfect reliability record. 99.98 percent. This is typical of investor-owned utilities in the g I . United States where we have the best reliabihty in the world. 7 J
. Our favorable record is partly the result M
of programs to maintain and improve system reliability. 31ost potential l .. problems at our transmission and dis-tribution facilities are discovered and
. remedied without senice interruptions I '
because of our preventive maintenance j l program. This program includes many
- manhours spent in visual inspection and electrical testing.
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P- severe weather conditions. enabled us to hold the number of customer outages to a low level. The average restoration times for those customers who experi-enced service interruptions was reduced to about 57 minutes per outage, well below the 67-minute average of 1981. .: Plant Availability and Efficiency Overall. both availability and effiuency of our fossil fuel units improved during i 1982. Availability, the percentage of time units are available to provide elec-g tricity. increased to 77 percent, up from i . 75 percent in 1981 Efficiency. measured by our abi!:ty to generate i more electricity with less fuel, also j improved, resulting in savings of $3 1 , million in fuel expenses in 1982 from I the previous year. brkers at one of our bution system are year-round substations repair a 345KV tasks and kes factors in our power circuit breaker. Repair. record of providing rehable maintenance and upgrading of and safe electne semcc our transrnssion and Jistri-10
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Our maintenance planning and nuclear power plants-Perry, of which Peak Demandand Capacity scheduling program is one of the we own approximately 31 percent, and factors responsible for our improved Beaver Valley Unit #2, of which we 5 tem peak donandoccz;rs in our g,rrice area mod c/ren during the , availability and efficiency record. By own approximately 25 percent. Beaver programming pertinent data into our Valley is being built by Duquesne summermonths reho. clectricity computers, we are better able to Light Company. donand is pushed higlict bit heary air conditioner usage. The pea'k represents schedule and manage equipment main-Some $48 million was spent on the maximum requirement /or c/cctricity tenance at regular mtervals. The improvements at the Davis-Besse and by ourcustomers for ant Company's ongoing program to mod-Bruce Mansfield Plants and for addi- periodin agircnyear 't one-hour crnize existing plants through capital tional facilities at the Beaver Valley site. improvements is another factor In 1966, our peak tras 1,947 affecting our record of availability An investment of some $61 million was mcparatts. Orcr the follorcing15 and efficiency made to upgrade our transmission and years, it grew 73 percent to the record distribution facilities. 3,363 megawatts setin1981. The prolonged oatage of the Davis-We spent $9 million to upgrade our flowever, the 1982 peak of3,078 Besse Nuclear Power Station during 1982 for refueling and maintenance c al-fired generating units, several of W 'd M g which are more than 30 years old. gg jgg7 j . . meant that our coal-fired generating Additional environmental equipment because of the sharp decline in indus-units were in greater use. Our mainte. required to meet State and Federal trialactivity during theyear-nance and modernization programs assured that our most efficient water and air standards was installed at Obviously, capacity planning cannot fossil-fueled units would be available a cost of $21 million. be basedon peak demandfor any when needed. An expenditure of $7 million was made singleyear. As the economy recorcrs for trucks and work equipment, data from the current recession, peak Although Davis-Besse experienced a lengthy shutdown last summer, its processing equipment and other items dananduillresume its growth. The operating statistics since returning to for day-to-day operations, all necessary Company must have adequate service in September show the to maintain the reliable, economical capacity to mcct the future demands Station's potential as one of the best in senice our customers expect and ofits service area. Our construction our system. During the last quarter of deserve from us. program is designedto phasein nerv the year Davis-Besse averaged 97 gerwratiny facilitres atplarmed In 1983, our capital expenditures are intervals to mccithat demand. percent availability, with an average expected to total some $500 million. capacity factor of 91 percent. The The largest allocations in the budget Peak Demand capacity factor measures actual output are for Perry and Beaver Valley (millions ofkikmutts) against maximum possible output. construction. Other items are for additional improvement of our existing Davis-Besse's electricity is the lowest i j cost energy available to our system. Its coal-fired units and for transmission .,~, fuel cost is about 0.5 cents per and distribution facilities. kilowatthour compared with 1.8 cents u for ourlowest cost coal units. Growth Forecasts The need for current construction and to . Expenditures for Plant and planning for new generation is pred-Equipment icated on our growth forecasts for t3 During 1982, capital expenditures Northeastern Ohio over the next 10 to for our power plants and equipment 20 years. By the year 2000, our resi- 3.o totaled $422 million. dential, commercial and industrial cuse tomers will require nearly 45 percent o.3 The largest outlay in . 1982 was $276 more electric energy than they are million for new construction at two presently using, a compound growth - o rate of a manageable two percent a year. * * * *
- Clearly, that increased need, coupled with the need to replace aging units, will require additional generating capacity i
12
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Jack Schultz, owner of electnc geothermal heat pump. Springbrook Gardens Nursery Mr Schultz says that the heat s in tentor. inspects his plants pump has increased productivity which are thrning in the ideal at a very reasonable cost greenhouse environment of operation. provided by his newiv installed 13
Present Construction toward en.sunng that all uinstrucunn i.' step toward full hcensmg L beheve The two 1.205-megawatt nuclear unit- bemg done properly. the Committee's action is mdicative of under construction at l'ern will help us the overall quantv of the l'eny I'lant i,erryl. nit "I paned a hcensing to keep pace with those prolected ndstom m 198'l In July the Admiry masmuch as the C.ommittee's first rec-needs 'I he l'erry l'l ant the largest ommendation often is for imly a tive L ommittee on l{cactor Safeguards. . construction tob currt ntic m ()hio with percent, low-power startup. I.he next over 4.(H NI workers on site, is progress-dd rovd s in& R rdent (valua-tiom M nuclear plant safety to the NitC. gp in tk liwnsng prom B a vne mg satisf actonly. The efforts of our own of public hearings before the Atomic
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recommended a 100 percent power l'enT statT and the N.uclear l<egulatorv hcense for i,erry i. nit al. This recom- Safety and 1.icensing Board, which are Commission iNitCl have been directed scheduled to begin m May 19KL mendation is an important intermediate
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hk The containment dome atop Perry l'mt 82 was pmitioned in August 1982. The dome, weichmg 58n tons. is 3n feet high ind 12n feet in diameter. 14
l Future Construction eventual savings in the tens or EPRIidentifies specific industry R&D l Because of the 10 to 15-year lead times hundreds of millions of dollars. projects and then assigns many of the required to build a new unit, planning pmjuts, ahmg u #h funding, to unka-l The Company continuously investigates for the additional generating capacity s#ia andindq)cndent research lab-the potential application of new tech-which will be needed in the 1990s must oratories or corporations. EPRI's tech-nology to all aspects of its operations. be done now. The Company is mvesti- nicalstaff,4thich has 144 PhDs One way in which we carry on our
. gating various new technologies to find research is through active participation among its more than 200 members, the most efficient, cost-effective m'asca, mon # nata and mports by a number of Company specialists in approach to supplying the power needs the industry advisory structure of the atmsnvly and ugularly on theprog-of the future consistent with the needs mss ofeach pmject.
Electric Power Research Institute. You of the environment. may read more about this activity in the Since1972, more than 1,700 research We are studying three methods which story below projects have been initiatedichich would reduce sulfur emissions from resultedin a comparab/c number of co% burning plants: fluidized bed CEl, EPRIand R&D published reports. There are currently combustion which introduces limestone about 1,400 active pmjects under into the coal-burning process; a The Elxtnr Pouw Racawh Inst #ute EPRImanagement. The EPRIfunding (EPRD n'as organizedin 19mo commitment for these pmjects fmm gasilier system which convents coal to ownunate andintensify the meamh gas for use as a fuel: and flue-gas 1982 thmugh 1986 totals $2.6 billion, scrubbers which remove substantially }',',' f,I*ff,'g"g(,f,
, h ,g, hicluding co-funding and cost sharing all of the sulfur dioxide from stack by over 490 contractors andother '
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emissions. Successful application of organi:ations. In 1983. EPRI's total these methods would allow the The industry has many R&Dgoals in budget trillreach $326million, up Company to burn more of the lower- common involving conventi< mal fossil about eight percent from 1983. cost, high-sulfur coal mined and nuclearpau erplants, alternate Benefits ofEPRIresearch are seen m Ohio. and advancedenergy sources such as throughout the industni in the form of olar and fusum. pou'a tmnsnussum, A fourth technology under investigation comniercialdevices, d'esign specifica-is a compressed air storage system in ""00 """"" "" U*'"'"* " # lions, contmis, testing devices, data whic1 air would be pumped and com-
"N*"**^ N"#' # ""#" and operating procedures. Forty-one e organi:ation has pmredto be eco-pressed in underground caverns. Such commercialproducts andservices nmnicalandproductive.
a system would allow us to build a less resulting fmm EPRIresearch are now costly unit to be used hn peaking To assure that EPRIinvestments are available to the utility industry Many . capacity. keyed to industry needs, the EPRI more u'ill be available in the next two These alternatives will be given equal pmgrami guidedbyindustiy years. In addition, such specialized L advisory committees andtask forces services as the CoalCleaning Test consideration until one emerges as a minpo edofseniorrepresentatives Facility and the Electric Porcer Data clear choice. We believe it is vital to from member utilities. Our Company Base have resulted from the organiza-explore all of the options oifered by currently has 10 senior technical tion's research. new technologies to provide the most
> cost-effective means of generating "P'# 5"9 5" "0'E "'U '"I' '
electricity While this approach EPRTs funding comes from nearly increases planning costs, it will provide 600 utilities across the country, rep-resenting about 70 percent of the , nation's electric energy service. Our Company's contribution to EPRTs total 1982 budget of$302 million was about $3.3 million, which makes pos-sible the Company's participation in research imvicing nuclear reactor com-ponents, reactor water chemistry and fluidized bed combustion, among others. 15
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f Judy Gaumer. word processor an adult Sunday School class. 7 at the Perry Nuclear Power Ms. Gaumer works closely Plant, has been a volunteer with retarded children at the . J worker with retarded children Happy Hearts School and with . i and adults for more than 12 retarded adults at the Asht ', years. She is shown teaching Craft industries Workshop. 5 i
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The Company's success and the well- The benefits continue. Seventeen of l'oices o/ Reason: Our Speakers being of its employees and their families the nation's largest 500 finns are head- Bureau, Films, Ads and Executires is dependent on the economic and quartered in the Greater Cleveland Arc Communicating social vitality of Northeastem Ohio. area. These companies require the ser-Tnus, our commitment to the area goes vices of a wide range of other businesses hr 1983, the Company's employce. staf/cd Speakers Bureau sci /l cc/cbrate beyond providing dependable electnc and professions, and they, in tum, its 30th anniversary !!'hile it is impos. semcc and touches the lives of the gmw, prosper and create still others. 1.9 million people of the area in myriad Today, the technology and service g, toreached km h>byww'reau co@n> in all been the Bu other ways. mdustries are becommg an important part of the area's economy. those m n'c do knote that in 1982 For the more than 100 years ofits #s 52 mcmbers pare almost 400 pre-existence, the Company has invested Signs of vitality are clear in downtown sentations to ymups ranging in size time, talent and money in environ- Cleveland, which is alive with new from 35to 300, a totalaudience of mental pmjects, area economic devel- office building construction for such about 12,000 people. opment, health and social senices, firms as Standard Oil Company of higher education, the arts and culture hr additirm, the Company reccired Ohio, Eaton Corporation, bledical and other activities which have helped blutual and Ohio Bell. TRW, Inc. is l' 00 "V"####I # * *I###* * ""' impmve the quality oflife in film librant ichich recre ricreed by an building a new headquarters in a Cleveland suburb. The Clr eiand Clinic, " 0# "# #'000 P"#""#' Northeastem Ohio. Our sizeable investment in land, plants P'"I" 5edical facility a .d largest /n May, tre held a series of meetings and equipment has made us the largest I "P "Y.er m the City of Cleveland, is crith share orrners in our scrrice area. property taxpayer in most of the com- nmng a N miWon egansion. A an adjund to & mgular annual By the mid-1980s, the Clinic s present meeting, Company executives took the munities we serve. employment of 7,000 is expected to annualmeeting message to six Community / Area Development increase to some 10,000. additionallocations, increasing the During the period following World War
- 11. the Company mitiated an extensive Community and area development [y$b ut14 '
work was, and is, an important effort of area development program.The cam- the Company. To help sell all prospec. It' hen the total communications effort paign soon was adopted as a pattem tive employers on the advantages of by the Company is taken into account, for other major industrial areas. Our our area, the Company's activities are the audience includesjust about crery industrial development campaign closely coordinated with those of the man, rcoman and child in Northeastern slogan "Best location in the Nation" Greater Cleveland Growth Association, Ohio. Our mass communications became known worldwide. the Cleveland Tomorrow committee program-netcspapers, television and While the Company fostered growth and other development groups. These radio-reachedinto ercry home many from expansion within, the need also efforts have now been expanded to times during the year. Our executives was seen to expand the base by attract. encompass the Great Lakes region. appeared on television and radio pro-ing new companies to the area. The We joined with other members of grams throughout 1982. It'e also result has been new business. new jobs Cleveland's private sector to lead the anstccred more than 800,000 cus-and a larger, stronger and more diversi. formation of the Great Lakes tomer mquirres thmugh telephone fied ecoaomic base to benefit the Economic Policies Council. This calls and office risits. A computerized Company and those who work and # FN"# permit m."# clu i n ##. stem mstalledlast y of bricfmessages, reside here' enabling us to reach aHofour 642,000 residentialcustomers each month. The men andicomen of The Cleveland Electricilluminating Company are taking the Company's message directly to thepeople they serve. \\'e are a dedicatedteam ichose only business purpose is to provide electric service to the homes, factories and businesses ofNortheastern Ohio-at theloicest possible cost. 17
organization of representatives from support to health and social services. the major industrial cities on the Great education. the ans and cultural lakes is working with public sector activities. Each dollar contributed is leaders to promote economic progress mten<Jed m some way to improve the throughout the region. quality of life in Northeastern Ohio. These activities have become even One of the area's greatest advantages is more important considering the reduc-abundant fresh water, a precious hons m de in Federal spending for resource that is becoming scarce in social nd civic pn iects. Fhus, we other parts of the countn Nonheastern continue to make donations even Ohio, with its 100-mile Lake Erie though the Lompany has been denied shoreline, has access to 20 percent of recovery through rates of its charitable the world's supply. In fact. the Great contnbutions. Lakes region has the largest supply of fresh water in the world. The Company's donations are made largelv through The Cleveland Electric In this time of economic uncedainty. ' Illuminating Foundation.The Founda-we recognize that many of our cus-tion was established over 20 years ago tomer prospects are engaged in coping
" when management recognized the with the immediate problems of the need. during more profitable years, to yii recession. However we are sowing invest contributions for future use.
j 'j' seeds for the future. The promotion of in this way, the Foundation enables the h= our area's advantages-its central _6= j ..
' Lompany to m intain a consistent level f
location to key markets, dependable energy supplies. abundant supplies of of giving in both good and lean years. its contributions place us among the 1 fresh water and a skilled labor force, leaders of Ohio electric utilities in among others-will yield results as it has in the past. I"I I Ni"I"N' l Our efforts to foster economic growth Employee Involvement in our service area extend to our own We are particularly proud of the degree purchasing. To the extent possible, we to which our employees contribute to e v buy equipment and other supplies from the well-being of their communities. our customers. For example, in 1982. For example, our employees' United we ordered almost 150 replacement Way giving in 1982 amounted to over passenger cars and light trucks- $1 million which was augmented by an ( vehicles made by American workers- additional $300.000 from the Company
.A including Clevelanders. Our purchasing Foundation.
,- policy affects a wide variety oflocal Financial contnbutions are only one g% businesses including mach'ine shops.
pad of the community mvolvement of
. t# combustion control manufacturers, ur employees. The Company cor. sis-1^ safety glasses suppliers, construction tently seeks to hire people who display and maintenance contractors and leadership ability. That we have been countless others.
< successful in this effod is evidenced by Financial Support the number of our employees who truly Beyond the economic contribution give of themselves as they provide made by our business activities, the volunteer leadership to community Company has long recognized a nrojects and governmental bodies.
responsibility to provide direct f'mancial For example:
- a service engineer holds free tax seminars for senior citizens and church groups C. ail Twvmon. Engineenng Aide. is one of the 11 member New fleavenly Wondert This highly regarded gospel music group performs m churches of all denommations.
homes for the elderly and pnsons m the Cleveland area. Each year the group tours the South and has standing invitations for annual appearances in New York City. 18 Atlanta and Chicago.
b. a I ii e a hilkng clerk works with yourig _ black women. involving them in commt.nity social service projects _ y
- a Tele-Communications Unit y supervisor and a Company telephone
[ operator are hospital volunteers -
- an electnc senice installer was -
I selected "Stan of the Year" hv the
~
- ()ptimists Club for his work in [ scouting
- a Personnel clerk volunteers for the
- American lleart Association -
,
- a word processor at the Perry Plant r teaches mentally retarded children g4 a more than 30 employees serve as _.y >I ,
[ volunteer tiremen i,p 4
- the number of scout leaders.1.ittle $j[ .
I eague coaches, service club of6cers 5 [ and church and social agency workers
$3 g runs well into the hundreds
- m the area of community '
[ development. Company employees e E are serving with organizations such .i - as the Ashtabula County Citizens -m l- Committee and the City of Rocky -
- - River 1)esign and Construction Board - -;- .
E
- professional group members total I
more than 5(W) in organizations as
'/ .,
h diverse as the American Institute of Architects and the Purchasing - (( B Slanagement Association ,
. ?
This sampling indicates the diversity of interest and depth of commitment of W our employee volunteers. We are proud that they give to these activities the - same dedication they give to their jobs. _ ()ur responsibility to the communities we serve goes beyond meeting the energy needs of the area. The Company and its employees are invest-ing their time, talent and money to contribute to the social and economic needs of Northeastem Ohio and its people. t L E Chff Bissell. Senior Community president of the Consortium, a e Development Representative group of six major educational - (left). reviews a report by the institutions formed to train Westem Reserve Consortium people to meet the needs of with Paul A. Reichert. Dean existing and new industries l;- of Kent State l'niversity's in the eastern part of our Ashtabula campus. Mr. Bissell service area. [ was an organizer and first 19 F
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l 1 Managemen s Discussion and Analysis of Financia. Concition and Results of Operations Capital Resources and Liquidity increase effective January 7,1983. We also secured various increases in steam, wholesale power and street Our capital requirements stem from our ongoing lighting rates in the three-year period. These rate program of constructing facilities needed to meet increases, coupled with effective cost control and hi'ier anticipated demand for electnc senice, to replace
~
AFUDC, offset effects ofinflation on operating expenses, worn-out facilities and to comply with pollution control higher interest expense, stock sales and the delay regulations. Over the years 1980-1982, we spent between the time our costs go up and the time we approximately $1.2 billion on the construction program. receive a rate increase to cover those increased costs. This amount included an allowance for funds used Consequentl/, earnings per share rose in 1981 and during construction ( AFUDC) which is explamed in Note 1982, reaching a calendar year record level of $3.01 in A of" Notes to Consolidated Financial Statements" At 1982. Also, the ratio of carnings to fixed charges rose December 31,1982, our purchase commitrnents totaled in 1981 and 1982 (2.3,2.4 and 3.0 in 1980,1981 and
$447,000,000, of which $236,000,000 pn,ncipally related 1982, respectively).
to the construction program with the balance applicable to the cost of acquiring nuclear material and processing Rate of Return on Common Equity it into fuel
- Authorized vs. Achieved After paying our expenses, taxes, interest and dividends, (nyceno er bainess currently does not generate all of the funds needed for our construction program. Therefore, we ~
q w2 buo must supplement our internally generated funds with
- W "i 1 hs~22 additional money raised from investors. In the past three *1 p 2m f M T M , i'5r "
years, about 70% of the money used for construction was raised from sales of securities, such as notes, first
., p' T
{% i ' " lj mortgage bonds and preferred and common stocks, 79 1 h37~ M hul and from bank borrowings. The cost of these funds has been high and the common stock was sold at various prices below book value. We also raised funds from two 3
^
Njy J]hy 2.9 sales of the Federal income tax benefits related to equipment placed in service in 1981. These sales were l turhorizes6yirco made possible by changes in the tax treatment of equip- g' .w a ment leasing rules contained in The Economic Recovery Tax Act of 1981. Construction program expenditures over the next several years are expected to be funded In 1981, ratings on our first mortgage bonds were about equally from internal and external sources. I wered to "A by both Moody's Investors Service and Standard & Poor's Corporation. Prev,ously, i the bends in order to be able to attract money from investors on were rated "Aa" by Moody's and "AA " by Standard & the best terms, we must receive sufficient and timely Poor's. Our preferred stock rating was maintained at rate increases to enable us to pay investors the return "a" by Moody's, but was dropped to "BBB" from "A " on investment they demand in the form of interest, by Standard & Poor's, dividends and increased net worth. We have vigorously sought rate increases over the last three years. As a result, The Public Utilities Commission of Ohio (PUCO) granted us the following rate increases in the last three years-9.0% (1980),17% (1981) and 10% (1982). In addition, the PUCO granted us a 7.4% electric rate 21
We will continue to seek fair rate levels in order to revolving loan commitments. In accordance with maintain as strong a financial position as possible. customary industry practice, part of these lines is held Without adequate rates it would be impossible to earn in reserve to ensure that we will be able to pay off a fair return for our common stock share owners in an commercial paper when it is due. Our commercial paper inflationary economy. Inadequate returns could also has the highest rating given by Moody's. Standard & result in further lowering of our securities ratings, Poor's rates our commercial paper in its second highest thereby increasing the cost of raising money from category. Note K of" Notes to Consolidated Financial outside sources. Our rate increase requests and future Statements" gives the details of our credit arrangements. financing plans are designed to prevent further lowering of our ratings. We aim to maintain a balanced capital Results of Operations structure of 40-42% common equity,10-12% preferred The chart below shows the factors which have affected and preference stock and a maximum of 48% debt. At our electric revenues in each of the last five years. year end 1982, our capitalization structure was 40% common equity,13% preferred and preference stock Sources of Electric Revenue Increases and 47% debt. Specific financing plans are discussed (millions ordollars) elsewhere in this Annual Report. I l I I Over the 1983-1987 period, we must refinance -so 52 ~' ni E
$339,320,000 of maturing debt and preferred stock . I I I which was outsunding at December 31,1982. In addition, wi -2i na 8 we are required to offer to purchase $19,400,000 of is8 wo -20 u preferred and preference stock in both 1984 and 1985 1_
and $36,067,000 in both 1986 and 1987. A portion of w p 27 y the debt which matures in the five-year period has very low interest rates. Refinancing of this debt will probably be done at much higher rates, thereby increasing our w
-sso o
[6c"gg j so ino no average cost of capital. The amount of first mortgage bonds the Company can #"* """# issue is limited by our Mortgage and Deed of Trust. The Ra* larrea'e' amount fluctuates depending upon the remaining amount i_ i sales twume change of bondable property and upon earnings and interest rates. At December 31,1982, we would have been in the last two years, the most significant factor permitted to issue approximately $694,000,000 of affecting kilowatthour sales was the recession which additional first mmtgage bonds. There are no restrictions began in 1980. In 1982, industrial sales declined 14.5%, on issuing additional authonzed preferred stock and primarily among our machinery and steel manufacturers. preference stock. In 1981, industrial sales increased 2.7%. The weak We use short-term financing, such as bank lines of economy as well as milder weather were the major credit and the sale of commercial paper, to give us factors affecting sales to commercial customers in 1982 flexibility in timing our long-term financings. Money and 1981. As a result, commercial sales increased only raised through these short. term arrangements is 0.4% in 1982 and 0.7% in 1981. Residential sales were primarily used to finance temporarily our construction down 0.9% in 1982 compared with a 2.0% decline in program. We have a total short-term borrowing capability 1981. The decreases were primarily attributable to of $200,000,000 in the form of bank lines of credit and milder weather. There also was a slight decline in the number of residential customers in 1982 as new housing starts were depressed. Overall, sales declined 7.7% in 1982 and 3.6% in 1981. i l l 22
Fuel and purchased power expense is the largest part Other significant items affecting earnings per share in of our operating expenses. The amount of purchased 1982 and 1981 were increased preferred stock dividends power varies from year to year depending upon the and a greater number of outstanding common shares availability of our power plants, the energy demands of resulting from additional external financing and higher our customers and the price of electricity available from preferred dividend rates. In 1981, interest payments other utilities. In 1982, purchased power expense was also increased significantly. The impact of the increases eliminated because of lower kilowatthour sales, improved in these items was partially offset by related increases availability of our plants and power sales to other in the amount of AFUDC. utilities. In 1981, purchased power expense was sharply For a discussion of how we are affected by inflation, reduced from 1980 primarily because of the greater see " Supplementary Information Concerning the Effects availability of the Davis-Ilesse Nuclear Power Station. of Inflation." I'ud Costs (e per million llTC) 2mc h
/
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iw out W im f
.\ur ieur wasammys.,%m ,,a#
, 1 I I 7x 'N w *1 w2 Total fuel and purchased power expense declined in 1982 because of the decrease in kilowatthour sales and a slight decline in the unit cost of fuel. This expense also declined in 1981 from 1980 despite sharply higher prices of coal and oil because of lower kilowatthour sales and greater use of low-cost nuclear generation.
Nuclear generation accounted for 7%,13% and 10% of our total electric generation in 1980,1981 and 1982, respectively. 23
Management's Statement of Responsibility for Financial Statements The management of The Cleveland Electric illuminating Company is responsible far the consc!idated financial statements which appear in this Annual Report. The statements were prepared in accordance with generally accepted accounting principles which are appropriate in the circumstances. These principles require that certain amounts must be recorded based on estimates. Such estimates are based on an analysis of the best inforn ation available regarding the amounts to be estimated. We maintain a system ofinternal accounting controls. The control procedures aie designed to assure that the financial records are reasonably complete and accurate. They also are designed to help pro $ect the assets and their related records. i We make an effort to ensure that the costs of our control procedures do not exceed the benefits. We have an internal audit program which monitors the intemal accounting controls. This program is designed to examine whether the controls are adequate and effective. Also, an examination of the financial statements is conducted by Price Waterhouse, independent accountants, whose opinion appears below. The Board of Directors of the Company is responsible for determining whether management and the independent accountants are carrying out their responsibilities. The Board has appointed an Audit Committee, comprised entirely of outside directors. The responsibilities of the Audit Committee are described elsewhere in this Annual Report. Report ofIndepencent Accountants
- 13. 1900 CENTRAL NATIONAL BANK BUILDING CLEVELAND, OH 44114
/ ate 1110USC 2 78i.37
- To the Board of Directors and the Share Owners of The Cleveland Electric Illuminating Company:
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, capitalization, retained earnings, and changes in financial position present fairly the financial position of The Cleveland Electric Illuminating Company and its subsidiaries at December 31,1982 and 1981, and the results of their operations and the changes in their financial position for each of the three years in the period ended December 31,1982,in conformity with generally accepted accounting principles consistently applied. Our examinations of these statements were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. l February 4,1983 Price Waterhouse l 24
Income Statement The Cleveland Electric illuminating Company and Subsidiaries For the Year Ended December 31, 1982 1981 1980 l OPERATING REVENUES l Electric $1,091,054 $1,000,734 $878,501 17,517 Steam 12.196 15,065 Total Operating Revenues 1,108.571 1,012,930 893,566 , OPERATING EXPENSES l Operation l Fuel 330,674 322,154 268,096 l Purchased power (1.395) 29.256 91,292 Other 168.802 149.374 128,782 498.081 500,7M 488,170
>1aintenance 81 '39 74,925 67,058 Depreciation and amortization 86.588 85,294 M,619 Taxes,other than Federalincome tax 106.804 91,f48 81,630 Federalincome tax 106.332 67,575 41,574 Total Operating Expenses 879.f41 820,226 743,051 NET OPERATING INCO)1E 228.927 192.704 150,515 NONOPERATINGINCO31E Allowance for equity funds used during construction 76.896 48,970 40,873 Other income and deductions, net (2.481) 10,617 7,605 Federalincome tax-credit 22.254 16.125 13,962 Total Nonoperating Income 96.669 75.712 62.440 INCO31E BEFORE INTEREST CllARGES 325,596 268,416 212,955 INTEREST CilARGES lamg-term debt 134,250 121,040 95,085 Shod-term bank loans, commercial paper and other 9,822 25,672 17,538 Allowance for borrowed funds used during construction (27.440) G4,030) (25,051)
TotalInterest Charges 116.632 112.682 87,572 NET INCO>tE 208.964 155,734 125,383 Dividend requirements on preferred and preference stock 38,295 34.917 27.711 EARNINGS AVAILABLE FOR CO31310N STOCK $ 170.669 $ 120.817 $ 97,672 EARNINGS PER CO)1310N SilARE $ 3.01 $ 2.52 $ 25 DIVIDENDS DECLARED PER CO)1310N SilARE $ 2.19 $ 2.08 $ 2.00 Retained Eamings Statement For the Year Ended December 31, 1982 1981 1980 (Thousands of Dollars) BALANCE AT BEGINNING OF YEAR $ 280,285 $ 258,432 $245,716 ADDITIONS Net income 208.9f4 155,734 125,383 DEDUCTIONS Dividends declared Preferred stock 33,900 29,762 22,949 Preference stock 4,418 4,417 4,417 Common stock 124,841 99,134 85,296 Costs ofissuing equity securities 627 568 5 Total Deductions 163.786 133.881 112,667 BALANCE AT END OF YEAR $ 325.463 $ 280.285 $258,432 The amnnpanymg notes are an integralpart of these financial statwrents. 25
Ba ance Sheet at December 31 The Cleveland Electric Illuminating Company and subsidiaries eb 19S2 1981 (Thousands of Dollars) PROPERTY AND PLANT Utility plant Electric in senice $2.6M,629 $2,585,892 Steam in senice 40,172 38.546 2.724,801 2,624,438 Less accumulated depreciation and amortization 679.890 621353 2.044,911 2,003,085 Construction work in progress 1.285.731 986,457 3,330,612 2,989,542 l Nuclear fuelin trust 52.751 - Other property,less accumulated depreciation i1,465 23.870 3,394,858 3,013.412 POLLUTION CONTROL CONSTRUCTION FUNDS-unexpended 17,778 36.337 CURRENT ASSETS Cash 5.216 6,946 Temporary investments,at cost 54,101 17,750 Amounts due from customers and others, net 101,858 N,407 Materials and supplies, at average cost 28,123 25,640 Fossil fuel inventory, at as crage cost 75,403 68,773 Taxes applicable to succeeding years 87,130 63,610 Other 1,837 1,786 353,668 278,912 DEFERRED CilARCES Unamortized costs of terminated projects 52,385 49,598 Deferred fuel 5,761 11,M2 Other 18.844 16.174 76.990 77,414
$3,843.294 $3.406.075 Capitalization anc. Liabilities CAPITALIZATION (See statement of Capitalization)
Long-term debt $1,441,822 $1328,4M Serial preferred stock With mandatory redemption provisions 265,000 268,000 Without mandatory redemption provisions 95,071 95,071 Serial preference stock with mandatory redemption provisions 57,000 57,000 Common stock equity 1.227,095 1,002,206 3,085.988 2,750,681 CURRENT LIABILITIES Current portion oflong-term debt and preferred stock /1,145 23,145 Notes payable to banks and others 19,100 94,963 Accounts payable 91.128 105302 Accrued payroll and vacations 15,407 13,353 1 Federat income taxes 10,149 8,300 Other taxes 110.011 103,631 Interest 31,268 27,491 Other 7328 5,286 355,536 381,471 DEFERRED CREDITS Unamortized investment tax credits _ 153,582 102,438 Accumulated deferred Federal income taxes 155,832 134,M3 i Unamortized tax benefits sold to others 24.226 25,101 l Nuclear fueltrust obligations 52,751 - ! Other 15379 12341 l 401.770 273,923 COMMITMENTS AND CONTINGENCIES-See Note L l The accwnpanying rwees are an integralpart dthese rmancialstatements. y843_.294 $3,406,075 26
Capitalization at December 31 TheClevelandElectricilluminatingCompanyandSubsidiaries 1982 1981 1982 1981 (Thousands of Dollars) (Percent of LONG TERbt DEBT (a) First mortgage bonds-maturing through 2013 at rates of 2 %% to 16%% (Less $50,000,000 in 1982 and $20,000,000 in 1981 classified as current) $1,245,191 $1,092,291 Collateral pledge notes (b)- maturing in 2012 at semiannual , equivalent rates of 12.79% to 13.07% 6.100 23.900 l Term bank loans (c)- maturing 1984-1988 at variatie rates 134.000 134,000 Promissory notes- maturing in 1983 at a rate of 14% (classified as current in 1982) - 20,000 Pcitution control notes- maturing through 2012 at rates of 5.6% to 6.7% (Less $105,000 in 1982 and 1981 classified as current) 57,840 57,945 Other-net (1,309) 268 Total Long-term Debt 1,441,822 1,328,404 47 48 SERIAL PREFERRED AND PREFERENCE STOCK-cumulative, without par value,4,000,000 and 3,000,000 authorized shares, respectively Preferred stock without mandatory redemption provisions Annual Dividend 1982 Series Rate Shares A $7.40 500,000 50,000 50,000 B $7.56 450,000 45.071 45,071 Preferred stock with mandatory redemption provisions less current portion 95.071 95,071 Annual blandatory Dividend 1982 Redemption Series Rate Shares Price C $ 7.35 250,000 $ 100 25,000 25,000 E $ 88.00 51,000 $1,000 51,000 54,000 F $ 75.00 50,000 $1,000 50,000 50,000 C $ 80.00 40,000 $1,000 40,000 40,000 11 $145.00 28,500 $1,000 28,500 28,500 I $145.00 31,500 $1,000 31,500 31,500 J $113.50 29,000 $1,000 29,000 29,000 K $113.50 10,000 $1,000 10,000 10,000 265,000 268,000 Preference stock with mandatory redemption provisions Annual blandatory Dividend 1982 Redemption Series Rate Shares Price 1 $77.50 57,000 $1,000 57,000 57,000 Total Preferred and Preference Stock 417,071 420.071 13 15 l CO31510N STOCK EQUITY Common shares, without par value-85,000,000 authorized; 61,774,582 and 51,054,503 outstanding in 1982 and 1981, respectively 901,632 721,921 Retained earnings (d) 325,463 280.285 Total Common Stock Equity 1,227.095 1,002,206 40 37 TOTAL CAPITALIZATION $3,085.988 $2.750,681 100 100 (a) long-term debt matures during the next five years as follows: $68,105,000 in 1983 (classified as a current liabihty on the consolidated Balance Sheet);
$82,210.000 in 19c4 $70,501,000 in 1985; $57,210,000 in 1986; and $27,210,000 in 1987.
(b) The collateral pledge notes shown as outstanding in 1981 were exchanged for first mortgage bonds in September 1982. (c) The term loan agreements were amended m 1982 to provide that, at the Company's option, interest payments will be based on either prime, bank eertificate of deposit or Eurodollar rates. (d) As of December 31,1982 there was no restriction on the right of the Company to pay dividends in any amount up to all the earnings retamed in the business. The acconuvnying notes are an integralpart of these Im' ancialstatements. 27.
Cjanges in Financial Position TheClevelandElectricIlluminatingCompanyandSubsidiaries For the Year Ended December 31, 1982 1981 1980 FINANCIAL RESOURCES PROVIDED Net income $208,9M $155,734 $125,383 Items not affecting working capital ; Depreciation and amortization 86,622 85,325 64 M 0 Deferred Federalincome tax 72,103 43,931 30330 Allowance for equity funds used during constmetion (76,896) (48,970) (40,873) Other 918 1,910 1,636 Total financial resources provided from operations 291.711 237,930 181,116 Sales of securities First mortgage bonds 277,600 82,200 171,591 Preferred stock - 70,500 28,500 Common stock 179,711 67,622 79,604 Total sales of securities 457,311 220,322 279,695 Term bankloans - 50,000 - Promissory notes - - 30,000 Collateral pledge notes 6,100 4,800 19,100 Nuclear fuelin trust 52,751 - - Sale of tax benefits to others - 25,199 - Pollution control funds expended 18,559 57,805 95,255 Deferred fuel costs 5.881 - - Increase in short-term debt and other borrowings - - 80,431 Working capital decrease (a) - 14,591 - l Other 126 1,451 - Total Financial Resources Provided $832,439 $612.098 $685,597 FINANCIAL RESOURCES USED Additions to utility plant ' $422,170 $409,277 $398,088 Allowance for equity funds used during construction (76,896) (48,970) (40,873) 345,274 360,307 357,215 Retirement of first mortgage bonds 94,700 - 31,831 Retirement of preferred stock 3,000 3,000 - Retirement of promissory notes - 10,000 - Retirement of collateral pledge notes 23,900 - - Dividends 163,786 133,312 112,662 Pollution control construction funds deposited - 22,200 123,300 Deferred fuelcosts - 11,642 - Nucicar fuel trust obligations 52,751 - Decrease in short-term debt and other borrowings 76,200- - 71,637 -- Working capitalincrease(a) 72,828 - 51,715 Other - - 8,874 Total Financial Resources Used $832,439 $612,098 $685,597
SUMMARY
OF CIIANGES IN WORKING CAPITAL (a) ( Temporary investments $ 36,351 $ 17,750 $ (4,300) .
- Amounts due from customers and others, net 7,451 (10,477) 26,572 l Fossil fuelinventory 6,630 1,306 11,912 Taxes applicable to succeeding years 23,520 5,499 4,351 Accounts payable and accmed payroll and vacations 12.120 (16,108) 9,634 Fedent income and other taxes payable (8,229) (5,446) 120 Otha,m (5,015) (7,115) 3,426 Cha.@ in Working Capital (a) - $ 72,828 $ (14,591) $ 51,715 (a) Other than short term borrowings and current portion oflong-term debt.
The accompanying notes are an integralpart of these fmancialstatenwnts, 28
Notes to Consolidated Financia. Statements Note A-Summary of Significant Accounting the unrecovered portion of these costs and amortize them Policies rather than write them off as a loss. Our share of the un-recovered costs is included in Deferred Charges on the %.c are required to follow the accounting principles or rules balance sheet as Unamortized Costs of Terminated Projects. set by The Public Utilities Commission of Ohio (PUCO) and the Federal Energy Regulatory Commission (FERC).The Allowance for Funds Used During Construction principles we follow are also substantially consistent with the We ay interest and dividends to our investors for the use requirements of the Financial Accounting Standards Board, of tneir money. This is called the cost of money. The PUCO as expressed in their Standard No. 71," Accounting For the and the FERC allow us to include as part of the total cost of Effects of Certain Types of Regulation." A description of our constructing new assets a portion of the cost of money paid significant accounting principles follows. on funds which are tied up in construction projects. Such Consolidation cost of money is called Allowance for Funds Used During Our financial statements include the accounts of two minor Construction (AFUDC). subsidiaries. We own all of the stock in both. One subsidiary When a construction project is completed or, if the PUCO is The CEICO Company which owns nonutility land and allows, at least 75% completed, the funds invested in it are performs certain nonutility services. The other is the CCO no longer considered tied up in construction and we stop Company which coordinates the operation of a five-company recording AFUDC.The cost of the project at that time, power pool (which includes the Company) called the Central including its AFUDC, is treated as a new asset and is used to Area Power Coordination Group (CAPCO). The costs of determine the rates we charge our customers for service. CCO are shared by all the CAPCO companies. Because the resulting rates include a factor for all these Property and Plant costs, we are being allowed to recover in cash all costs of the The property we own is stated in the financial statements at property, including AFUDC, over the useful life of the property. its cost when it was first devoted to public utility sersice. The The a nount of AFUDC for an accounting period is determined cost of making repairs is deducted from revenues in the by applying a rate of AFUDC to the funds tied up in con-income statement as maintenance expense. The cost of struction.The annual AFUDC percentage rate is determined replacing or improving property is added to Property and by a formula set by the FERC. The rate represents an average Plant after deducting (retiring) the cost of the replaced of the cost of money paid on funds tied up in construction. property. When we retire property, there is also a reduction The rate is compounded semiannually.The part of the rate in the depreciation reserve on the balance sheet (which is which represents interest is reduced to recognize that interest labeled Accumulated Depreciation and Amortization). is tax deductible. Depreciation The amount of AFUDC appears on our income statement We report depreciation expense on our income statement as in two parts: under Nonoperating Income as the Allowance a current cost of doing business to account for the normal for Equity Funds Used During Construction and under using-up of our property. Depreciation is deducted in end Interest Charges as Allowance for Borrowed Funds Used amounts over the estimated usefullife of the prorv e 4r During Construction. On the balance sheet, the AFUDC example,if we estimate that an item will be u@ k > becomes part of Construction Work in Progress. years, we charge one-tenth of its value to O .tw The amount of AFUDC recorded in each accounting period expense each year. varies. The variation occurs because of(1) the number of flowever,in the case of the Davis-Besse L. dear Powei dollars spent on construction, (2) the length of the construction Station (Davis-Besse), we utilize the units of production period and (3) the rate used in computing AFUDC. In 1980, depreciation method described in Note C. the rate was 8.75%; in 1981, it was 10.17%; and in 1982, Terminated Projects it was 10.00%. In January 1980, CAPCO terminated plans to build four FederalIncome Tax nuclear generating units. Before that decision was made, The depreciation expense we report on our income statement considerable planning, engineering and designing had been is different (mm 'he depreciation expense we use to calculate done for these units. As described in Note E, the Company Federal income ux. There are several reasons for this is rontinuing legal action to recover from customers in rates difference. First, AFUDC and certain overheads are excluded 29
Notes to Consolicatec Financial Statements , from the cost of assets which we depreciate for tax purposes. rate continues to be based on what we paid for fuel in the flowever, these costs are included in the basis for the preceding month. depreciation shown on our income statement. Second, the Fuel period of time over which the Internal Revenue Service When we make a payment for coal or oil, it is recorded on (IRS) allows the cost of assets to be depreciated is shorter the balance sheet as Fossil Fuel inventory. When we make than the period of time (useful life) we use. Finally, the IRS a lease payment for nuclear fuel, we record it on the balance allows some of the depreciation we are entitled to m future sheet under Deferred Charges-Other. As the fossil and years to be used early. (This practice is called liberalized nuclear fuel is used, we transfer the cost to the income depreciation.) Beginning with October 1976 property additions, statement as fuel expense. Nuclear fuel amortization also the tax reductions resulting from the use ofliberalized includes a recovery through rates for the ultimate disposal depreciation and accelerated amortization are not recognized of spent nuclear fuel. m the income statement as reductions of tax expense m the periods we obtain them. They are deferred to the periods in Accounts Receivable which we normally would have obtained them. The deterred Amounts due from customers and others was reduced by amounts are allocated to income over the useful life of the allowance for uncollectable accounts c,f $1,741,000 and property through a procedure called normalization. $1,126,000 in 1982 and 1981, respectively. When we filed our Federal income tax return for 1980, the costs of our terminated nuclear projects were deducted as an expense. Ilowever, for income statement purposes in order Note B-Deferred Fuel to match the costs with their related Federal income tax As described in Note A-Revenues, since September 1,1981, effects, the tax savings were deferred. our rates are adjusted every six months to reflect changes in fuc! costs. The differences between the cost of fuel actually When we place new property in service during the lear, the used and the costs included in the bills to customers are IRS allows us a credit against the tax due for up to 10% of the deferred. The deferred amount is taken into account to fix investment we have made in the new asset.This is called an the fuel factor for a subsequent six-month period. We were investment tax credit. We record Federal income tax on our not allowed to defer such costs (except for the cost of coal income statement as though it were not reduced by this credit purchased under one coal contract) under the previous We recognize the tax savings from this credit over the life of monthly fuel acUustment method. the property involved through the procedure of normalization. On August 25,1982, the PUCO issued an order providing The Economic Recovery Tax Act of 1981 allowed us to sell that starting August 1,1982 both actual and deferred costs to others the tax benefits related to property placed in senice of coal used at the Mansfield Plant can be recovered from on and after January 1,1981. The monies received from two customers through the Company's electric fuel component such sales relating to 1981 property are being recognized rate under a formula which is expected to permit gradual in the income statement as a reduction of taxes over the recovery of such accumulated deferred fuel costs. estimated useful lives of the property involved.The Tax Equity and Fiscal Responsibility Act of 1982 prohibits tax benefit transfers of public utility property p,iaced in senice Ncte C-Depreciation after 1982. We calculate depreciation for most of our electric property by multiplying our depreciable property by a composite depre-Our Federal income taxes are lowered because we can ciation rate. The composite rate is one based on the average deduct our interest charges from income. This reduction of life of all our assets. The rate also includes a factor for the taxes is split between Operating Income and Nonoperating money expected to be received when we dispose of the income. The tax reductions resultmg from mterest actually property (salvage) and the cost of dismantling and removing paid on funds mvested m property currently being con-t (removal cost). Prior to March 1982, the composite rate structed are charged to Nonoperating Income.The tax used was 3.4%. Since March 1982, the rate, as set by the reductions ofinterest paid on all other funds are charged PUCO, has been 3.5% to Operating income. Davis-Besse depreciation is based on the ratio of the amount Revenues of electric energy it produces in the accounting period to its Customer meters are read or estimated and billed on a monthly total estimated energy production over its useful life. When cycle basis. Operating revenues are recorded when billed. a nuclear unit is retired from service, we will have additional Prior to September 1,1981, the rates we charged customers costs to shut it down. These costs are called decommissioning for electricity were made up of two parts. These parts were a costs. From 1980 through 1982, the depreciation recorded base rate and a fuel rate. Each month's c!ectric fuel rate for Davis-Besse included a factor for decommissioning costs. was based on what we paid for fuel one month earlier. Since The factor was determined in 1980 estimating that the September 1,1981 under a new Ohio law, a fuel factor is decommissioning costs would be $20,000,000 in current included in base rates. The fuel factor is changed every six dollars. The factor used in 1981 and 1982 was based on an months after a hearing before the PUCO. The steam fuel estimate of $27,000,000 in current dollars. 30
ilydroelectric plant and property held for future use have We calculate depreciation for our steam pmperty by multiplying their own depreciation rates. Rates ranging from 1.8% to our depreciable steam property by a depreciation rate for 8.33% are used for hydroelectric plant. A rate of 3.66% is each individual steam account. The depreciation rates used used for property held for future use. range from 2.22% to 3.42%. Note D-Federal Income 'Ihx Federal income tax, computed by multiplying the income before taxes by the statutory rate of 46%, is reconciled to the amount recorded on our books as follows:
% of % of % of Pre-Thx Pre-Thx Pre- h -
1982 Income 1981 Income 1980 Income (Thousands (Thousands (T)msands d Ddars) d DoBarp d Dollaro Book income before Federal income tax $293.093 $207,184 $152.995 Tax on book income at statutory rate $134,803 46.0 $ 95,285 46.0 $ 70.358 46.0 Decreasca in tax due to: Excess of tax depreciation over book depreciation (3,608) (1.2) (2,508) (1.1) 4,201 2.8 Allowance for funds used during construction 47,994 16.4 38,180 18.4 30,325 19.8 Certain overheads capitalized on the books 2,491 0.8 2.526 1.2 2.267 1.5 Other items 3,798 13 5.637 2.7 5,953 3.9 50,675 173 43.835 21.2 42.746 28.0 Total Federalincome tax expense $ 84,128 28.7 $ 51.450 24.8 $ 27,612 18.0 Federal income tax expense is shown in the income statement as follows: 1982 1981 1980 (Thousands (Thousands (Thousands d Dollars) d Daars) d Ddars) Operating Expenses Current tax provision $ 34,279 $ 23,668 $ 11.244 Changesin accumulated deferred Federalincome tax: Liberalized depreciation and accelerated amortization 19,498 19,747 16,106 Terminated projects 1,700 (1.841) 21,944 Other items (239) 8,361 (254) Investment tax credit deferred,less amounts amortized 51,144 17,640 (7,466) ' Total charged to operating expenses 106382 67,575 41,574 Nonoperating income Current tax provision (22.254) (16,125) (13.962) Total Federalincome tax expense $ 84,128 $ 51,450 $ 27,612 In 1980, we had a loss for Federal income tax purposes. This The income tax we paid in 1981 and 1982 was reduced by happened principally because we deducted from taxable investment tax credits of $22,094,000 and $56,582,000, income the costs of four nuclear projects which were respectively. Since we had a loss for tax purposes in 1980, terminated in January 1980. See Note E. The resulting loss we could not use any investment tax credit in that year. we had that year was applied against taxable income in Investment tax credits which are available to the Company prior years. and have not been used amount to $41,971,000.These un-used credits may be used to reduce tax liability through 1997. 4
- 31-
Notes to Consolic atec Financial Statements Note E-Terminated Projects should be made. As a result, under generally accepted in January 1980, the CAPCO companies terminated their accounting princip!cs, as of February 1,1983 we stopped plans to construct four nuclear generating units which were amortizing the terminated unit costs. As of December 31, in various stages of construction startup. The amount spent 1982, the unamortized terminated unit costs were $52385,000, by the Company on these projects through December 31, or $31,506.000 (51 cents per share), after adjustment for the 1982 was $62.413,000 (terminated unit costs). For a period tax reduction resulting from the deduction of the terminated of time, the PUCO allowed us to recover these costs through unit costs on the Company's Federal income tax returns. rates to be charged to customers over a 10-year period The Company believes, based on the opinion ofits counsel, beginning late in July 1980, it also directed us to amortize that it should not be required to write off the unamortized these costs in the income statement as a cost of senice over terminated unit costs as a loss. Ilowever, if it becomes the same 10-year period. unlikely that any regulatory relief ultimately will be allowed In July 1981, the Ohio Supreme Court ruled that the PUCO to the Company, then all of the unamortized terminated did not have authority under Ohio law to authorize the unit costs after adjustment for the tax reduction would have Company to recover these costs through rates as a cost of to be written off as a loss at that time. senice. As a result,in October 1981, the PUCO ordered us to discontinue amonization of the terminated unit costs and Note F-First Mortgage Bonds to reduce our rates accordingly, but not to write off the The Company has first mortgage bonds outstanding, as follows: unamortized amount without further order. Therefore, for service provided on and after October 27,1981, the Company At December 31, Series Interest reduced its rates about 0.7% resulting in an estimated Due issued Rate 1982 1981
$6,700,000 reduction in annual revenues. We also stopped m-tw Mam amodizing the terminated unit costs. This did not result in 1982 1947 3% $ -
$ 20,000 any change in net income or earnings per share. 1983 1975 8.85 % 50,000 50,000 1983-A 1980 9%% - 74,700 The C,ompany appealed the rate reduction to the Oh'.
1984 1977 7.55 % 25,000 25.000 Supreme Court. The appeal was dismissed by the Court. We 19g A 1980 12%% 30.000 30,000 appealed both the Ohio Supreme Court's original ruling and 1985 1950 2%% 25,000 25.000 its dismissal of the rate reduction appeal to the United States 1985-A 1980 11%% 18.291 18,291 Supreme Court. That Court has refused to hear both appeals 1986 1951 3%% 25,000 25,000 on procedural grounds. 1986-A and B 1976 5%% 5,000 5,000 1989 1954 3% 20,000 20.000 In the proceeding for the electn.c rate increase granted t 1989-A 1981 15%% 40.000 40,000 the Company by the PUCO effective March 19,1982, the 1990 1969 7%% 60,000 60,000 Company tried again to obtain recovery of the terminated 1991 1969 35,000 8%% 35.000 unit costs in rates as a cost of senice, but the PUCO refused 1992 1981 15%% 20,000 20,000 because of the Ohio Supreme Court's ruling. Ilowever, the 1993 1958 3%% 30,000 30,000 PUCO increased the rate of return on common stock equity 1994 1959 4%% 25.000 25.000 in recognition of the added risk incurced by common stock 2005 1970 8%% 75,000 75,000 owners as the result of the disallowance of the terminated 2006-A 1976 7% 14,000 14,000 unit costs as a cost of service. The PUCO also authorized 2009 1974 9%% 50,000 50.000 the Company to amortize the unamortized terminated unit 2 A to C 5 000 52,000 costs over a period not to exceed 15 years. In April 1982, 2010 B to N 1982 12.10 4 15.75 % 23.900 - the Company began 15 year amortization. In July 1982, an 2011 125,000 1976 8%% 125,000 opp (ment appealed the PUCO's decision on rate of return to 20ll-A 1980 (a) 48.600 48.600 the Ohio Supreme Court and the Company appealed the 2011-B 1981 (b) 22.200 22,200 PUCO's refusal to allow recovery of the tern inated unit 2012 1977 8%% 75,000 75,000 costs in rates as a cost of senice. These appeals are pending. 2012-A 1982 16%% 75,000 - l The Company plans to appeal this case to the United States 2012-B 1982 13%% 78,700 - ! Supreme Court, if necessary, in its continuing effort to recover 2012-D 1982 12%% 100,000 - 2013 1978 6.20 % 47.500 47,500 the terminated unit costs in rates as a cost of senice. 1,095,191 1.112,291 In its January a.1983 rate order, the PUCO again dem.ed Less amounts classified as current 50.000 20.000 recovery of the terminated unit costs in rates as a cost of ! senice. The PUCO also stated that the rate of return on m3.191 R092.291 common stock equity granted in this case recognized the . (a) The interest paid on these bonds is at a variable rate. That rate can be 1 added risk resulting from the disallowance of such recovery no lower than 6% and no higher than 12%, The average rates in 1981 and and, therefore, no additional increase in that rate of return 1982 were 9 99% and 9.37% respectively. Ib) The interest paid on these bonds is at a variable rate. That rate can be no k wer than 6% and no higher than 14%. The average rates in 1981 and 1982 were 10.40% and 10.26%, respectively. 1
)
32
l The first mortgage bonds are issued under our Mortgage. All the rental payments we make for nuclear fuel and unit i , The Mortgage puts a first lien on almost all the property trains are recorded in balance sheet fuel accounts.The costs l we own and franchises we hold. in these accounts are transferred to fuel expense on the i The issuance of additional first mortgage bonds is limited income statement as the fuel is used. See Note A-Fuel. We l by two provisions of our Mortgage. Under the more restrictive paid rent of $8,180,000 in 1982, $7,925,000 in 1981 and l
$7.240,000 in 1980 for nuclear fuel and unit train Icases.
of these provisions, we would have been permitted at December 31,1982 to issue approximately $694,000,000 Lease payments under all other leases were not material. of additional 6rst mortgage bonds. This amount fluctuates Some of our leases have noncancelable terms of more than depending upon the remaining amount of bondable property one year. We have to make the following payments for thesc
- and upon earnings and interest rates. leases after December 31,1982
The collateral pledge notes included in the statement Year Amount of Capitalization were issued under an agreement signed in mmusanas s tuarsi 1982. This agreement permits us to borrow additional 1983 $ 3.942 amounts from time to time up to $60,000,000 over a two- 1984 3,706 year period. The interest rate on each borrowing will be fixed 1985 3,350 when it is made, but cannot be higher than 16%% We have 1986 2.775 delivered $60,000.000 of our first mortgage bonds as 1987 2,259 security for our obligation to pay the collateral pledge notes later Years 2.260 issued under this agreement. Although these bonds are not Total $18.292 shown as outstanding in the statement of Capitalization, they are outstanding under our Mortgage. We did not include in the above table the payments we must make on our Davis Ilesse nuclear fuel reload leases. Since the payments are made when fuel is used, we do not know Note G-Leases the timing or total amount of the rental payments. Ilowever. As part of our operations, we have entered into the following we do know that the lessor has invested $17.322,000 in leases: those leases. 4 Type Remaining Terms Note H-Serial Preferred and Preference Stock Nuclear fuelin the reactor (a) with Mandatory Redemption Provisions - Unit trains 4-8 years (b) Some of the Serial Preferred Stock we have issued is subject - Office space 5 years (c) to mandatory redemption. These provisions require us to Data processing and Mostly short-term buy back and retire outstanding shares on certain dates. The office equipment leases having a fixed table below lists those redemption obligations: i Construction and noncancelable term of maintenance equipment less than one year S Red ption - (a) We had a lease for the first core of fuel at Davis-Hesse through the Series Annually On Per Share ia) middle of 1981. The leases for the reload fuel cunently in the reador will last as long as it takes to bum the fucL For the reload leases, we pay full C 10,000 8-1 84 $ 100 rent as the fuel is burned and we pay a reduced rent equivalent to an interest E 3.000 6-1 81 $1,000 - charge when the fuel is not being burned. l{ ].782 6-1-85 $1,000 (b) I!mt train leases include renewal options thngth 2011. I 1,969 6-1-86 ' $1,000 (c) The lease for office space can he renewed for two five-year penods. (a) plus dividends accrued to the redemption date. When the PUCO determines what rates are to be charged to The total amount to be paid for these redeemed shares in 1 our customers, it includes the rents on all the above leases each of the next five years is: as an operating expense. Accordingly, we record those rents as an operating expense on the income statement. Financial 1983 $3,000,000 1986 $ 7,751.000 1984 $4,000,000 1987 $13.551,000 Accounting Standards (FAS) No.13 and No. 71 require that 1985 $5,782.000
. not later than 1986 we treat our leased nuclear fuel and unit train coal delivery equipment as though we owned it. This If for some reason we cannot buy back the shares, the .
will require us to record these leased properties on the ' unredeemed shares would be added to the next year's balance sheet as assets which will be depreciated. Also, we - redemption obligation.This would continue to be done until . will have to record a long-term debt for the promises to the total obligation to redeem is met. - make lease payments. Some Serial Preferred and Preference Stock we have issued includes a provision which requires us to ask the share owners of that stock whether they want us to buy back their 33
Notes to ConsoLidatec Financial Statements shares at $1,000 per share, as follows: We can buy back Series E Preferred Stock before June Shares 1,1986 only under certain conditions. Any borrowed money Subject to we use to buy back the shares cannot be borrowed at an Purchase Offer effective interest cost ofless than 8.8%. Also, we may not Annually Beginning on use money from the sale of other preferred stock or stock ranking higher than Serial Preferred Stock ifits effective Preferred Series F 16 667 11-1-85 Preferred Series G 8,000 8-1-84 dividend cost is less than 8.8%. Finally, we may not use Preference Series 1 11,400 4 1-M money raised through the sale of stock which ,s i Jumor to the Series E. A total of 3,000 shares of Series E Preferred if the share owners decide to sell, we must buy the shares Stock was bought back and retired in 1981 and in 1982 four months after the date we offered to buy, If they decide pursuant to its mandatory redemption provision. to sell all the shares which we must offer to buy over the next five years, we would have to pay $19,400,000 in both 1984 Sales of Serial Preferred Stock with mandatory redemption and 1985 and $36,067,000 in both 1986 and 1987. provisions during the three years ended December 31,1982 We have assured the owners of our Series F Preferred Stock a minimum return on their investment of 6.96% after Shares Sold deducting Federal income tax on the dividends received on Price Per the stock. If certain income tax laws are changed such that Year Series Share Shares their after-tax return is lower, we would have the option t $1,000 28,500 1980 Preferred 11 do one of two thingr we could buy back the Series F at
$1,000 per share plus accrued dividends or we could exchange 1981 Preferred I $1,000 31,500 Series F for a new preferred stock. The new stock would Preferred J $1,000 29,000 Preferred K $1,000 10.000 have a dividend rate high enough to provide a 6.96% after-tax return. There are no restrictions on our right to issue and sell We have the right to buy back and retire shares of Serial authorized shares of Serial Preferred or Preference Stock.
Preferred and Preference Stock which have mandatory redemption provisions. The times when this may be done Note I-Serial Preferred Stock Without and the prices we would have to pay (plus dividends accrued Mandatory Redemption Provisions to the redemption dates) are as follows: During the last three years, we did not sell or buy back any Redemption shnes of our Serial Preferred Stock which did not have Series Date Price Per Share mandatory redemption provisions. All this Serial Preferred Preferred C Prior to August 1,1983
# 88 ect to optional redemption. These provisions
$110.00 August 1,1983 and give us the n.g ht to buy back and retire the stock. The times thereafter $103.00-$101.00 when this may be done and the redemption prices (plus dividends accrued to the redemption dates) are as follows:
Preferred E Prior to June 1,1986 $1,088.00 June 1,1986 and Redemption thereafter $1 M9.74-$1,000.00 Prices Series Date Per Share Preferred F Prior to March 1,19M $1,035.00 March 1,1984 and Preferred A Prior to December 1,1986__ $102.50 thereafter $1,015.00-$1,000.00 December 1,1986 and thereafter $101.00 Preferred G December 1,1983 through November 30,1984 $1,035.56 Preferred B August 1,1982 through December 1,1984 and July 31,1987 $103.78 thereafter $1,026.67-$1,000.00 August 1,1987 and - thereafter $102.26 Preferred 11 June 1,1990 through May31,1991 $1,068.68 June 1,1991 and thereafter $1,%I.05-$1,000.00 Preferred i June 1,1991 through May 31,1992 $1,068.68 June 1,1992 and thereafter $1,%1.05-61,000.00 Preferred J June 1,1986 through May 31,1987 $1,050.44 June 1,1987 and - thereafter $1,037.83-$1,000.00 Preference 1 - Priorto August 1,1983 $1,032.29 August 1,1983 and :
'thereafter $1,025.83-$1,000.00 34
l 1 Note J-Common Shares Issued and The number of outstanding shares of Common Stock of the Reserved for Issue C meany changes during the year. We calculate earnings per share based on the average number of shares outstanding Shares of Common Stock sold during the three years ended throughout the year. The wighted average shares outstanding December 31,1982 were as follows: in each of the last three years were: l 1982 1981 1980 1980 43,3(X),451 Pubhc Sale 9,000,000 3.500 000 4,000,000 1981 48.0tti.081 Share Owser Dividend 1982 56,739,806 i Iteinvestment and Stock Purchase 1%n 1,362.141 926,542 733,188 Employee Savings Plan 282,162 261,605 Note K-Short 'Ibrm Borrowing Arrangements 218.902 Employee Thrift Plan _ 75,775 74,727 Gl.4% Notes payable to banks and others were as follows: Key Employee Incentive At December 31, Simk Plan - -
-469 Total Shares 10.720.078 4,765,874 5.017.055 ~
l At December 31,1982, we had five stock purchase plans llank loans $19,100 $19,400 available for our employees and share owners. The common commercial paper. net - 75.563 i shares which are set aside to be used far these plans $19.100 - $94.963 (including unexercised stock options) are as follows: p, Available bank credit arrangements are as follows: At December 31, Share Owner Dividend Itcinvestment and Stock Purchase plan 2.279,381 *0ype 1982 1981 Employee Savings Plan 2,833,819 m==xisof th Employee Thrift 1%n 528,327 Ilank lines of credit thorrowings Key Employee incentive Stock Ibn 550,250 (a) at or near prime interest rate) $170,300 . $209.600 1978 Key Employee Stock Option Plan 600.0(N) Eurodollar revolving credit agreement .,_, 530,000 $30,000 6.791,777 Variable interest note agreements $20,000 $20,000
- All bonuwings under the Eurodollar agreement are made and paid back in U.S. dollars. There are no requirements l Stock options held by employees to purchase um.ssued
. that minimum cash balances (compensating balances) be shares of Common Stock under the Key F,mployee incentive maintained at the banks involved. Ilowever, a fee of % to l Stock Plan and the 1978 Key F.mployee Stock Opt,on i Plan
%% per year is paid on any unused part of this borrowing are granted at 100% of the fair market value on the date of l agreement. The interest rate on borrowings is %% to %%,
- the grant. The shares which were actually bought dunng the depending on usage, above the rate which specified banks 1 three years ended December 31,1982 were sold at an option pay for Eurodollar deposits in the lamdon interbank market.
4 price of $ 17El. Shares under outstanding options held by emph,yces were as follows: Borrowings under the variable interest rate agreement must be paid back whenever the bank requests such repayment. Key Employee Interest is based on the rate for high quality commercial Incentive Stmk Ibn (a) paper in the 30-180 day maturity range.
! 1989 ~ 1981 1980 Commercial paper and variable interest notes outstanding Options Outstanding are backed by at least an equal amount of unused bank lines ar 150,095 15%,148 of credit to ensure the Company's ability to repay them.
148.612 Option Price $17Al to $17.63 to $17.63 to The unused portion of the above credit arrangements,after
$22.43 $22.43 $22.43 deducting bank lines held to cover outstanding commercial paper and variable interest notes, amounted to $181,200,000 1978 Key Employee
~at December 31,1982.
Stock Option Plan i- 1982 1981 1980 The average daily cash balance in bank accounts was
$6,500,000 in 1982 and $5,700,000 in 1981.This balance options Outstanding satisfied informal compensating balance arrangements under ~
re 374.705 244,425 which we maintain balances at banks of $3,000,000 to - 251.375 Option Price $15.69 to $16S% to $16.94 to $6,000,000, depending on the amount we borrow. -
$20.25 $20.25 $20.25 (a) l'nkr the terms of the Key Employee incenuve Stock I%n, no further , options may be granted. Accordmgly, only those shares relatmg to options .
I outstandmg at th cemtvr 31,19M2 may be issued. 35
Notes to ConsoLic atec Financial Statements Note L-Commitments and Contingencies in January 1982, the PUCO allowed us to increase steam Material and services needed to build new plant and rates by 47% which amounts to approximately $7,000,000 equipment must be ordered in advance so that it will be annually. In October 1982, the PUCO approved another 12% available when needed. At December 31,1982, such commit. increase which will result in an annual increase in steam rates of about $2,400,000. ments amounted to: Construction pmgram $236.000.000 in September 1981, the FERC granted a rate increase of Nuclear materialacquisition and $2,300,000 covenng sales for resale to the Cleveland Mumcipal pnwessing into fuel $211,000,000 Electric Light Plant. In November 1982, we filed an application with the FERC for an additional $716,000. Any increase Usually we can cancel advance orders but often we must pay the manufacturers for what they have already spent for labor Wn go inM ch m MM and materials and sometimes a penalty Note N-Property Owned with Other Utilities The Company has lease and other arrangements to finance up to $220,000,000 of the cost of acquiring nuclear material, S me of the generating units which we own or are building proces:,ing it into fuel and leasing it while it is being burned are owned with other utilities. Each company owns an in a reactor. At December 31,1982, under these arrangements, undivided share in the entire unit. All the owners are tenants a trust established in 1982 invested $52,751,000 shown on in c mmon. Each company has the nght to a percentage of the balance sheet, and lessors invested $84,000,000, in the generating capability of each unit equal to its ownership nuclear material and costs of processing it into fuel. Also share. We are obligated to pay for our share of the construc-under those arrangements, nuc! car fuel costing the lessor tion and operating costs of each umt. We are not responsible
$17,322,000 is in the Davis-Besse reactor under operating for the other owners' shares.
Icases. FAS No. 71 will require balance sheet treatment as Utility Plant at December 31,1982 includes the following described in Note G of all our existing nuclear fuel Icase and facilities owned as tenants in common with other utilities: other arrangements not later than 1986. Company Ownership Under two long-term coal purchase arrangements, we have Construction agreed to guarantee the mining companies' loan and lease Work Electric obligations. At December 31,1982, the principal amount Facility Percent in Service in Progress of the mining companies' loan and lease obligations was %na,%
$86,333,000. Under one of these arrangements, we are Davis-Besse 51.38 5421,912 $ 30,599 required to pay the mmmg company any actual out-of-11ruce Mansfield 1 6.50 25,039 614 pocket idle-mine expenses, as advance payments for coal, 112,920 2,823 Bruce Mans 6cid 2 28.60 when the mines are idle for reasons beyond the control of Bruce Mansfield 3 24.47 154,743 1,151 the mining company. Beaver Valley 2 24.47 - 373,831 Several lawsuits and government actions are pending. Perry I and C"" n ties 31 included is the appeal by the City of Cleveland to the United p 2 States Court of Appeals for the Sixth Circuit of the City's Eastlake 5 68.80 111,562 448 j antitrust suit against the Company. In the trial, the City had Seneca Pumped Storage claimed treble damages of $160,000,000.Thejury had Ilydroelectric Plant 80.00 54,735 88 returned a unanimous verdict in favor of the Company. We $1,164.394
$880.911 believe, based on the opinion of our counsel, that the ultimate disposition of these matters, including the antitrust suit, Separate depreciation records are kept for Davis Besse should not have a material adverse effect on our financial property and Seneca property. The accumulated depreciation condition, although an adverse final decision in certain for Davis-Besse at December 31,1982 was $38,026,000.
instances could have a material adverse effect on income for The accumulated depreciation for Seneca at December 31, the period in which the decision becomes final. 1982 was $11,363,000. Depreciation on all other property owned with other utilitics has been accumulated on a Note M-Rate Matters composite basis along with all other depreciable property The PUCO allowed us to raise electric rates by 9% on July rather than by specific units of depreciable property. Our 14,1980, by 17% on May 6,1981 and by 10% on March 19, share of the operating expense of properties owned with 1982. Because of these increases, we charged customers an others is included in our income statement. additional $47,000,000 in 1980, $133,300,000 in 1981 and l
$131,400,000 in 1982.
! In 1982, we asked the PUCO for another $221,000,000 l increase and, on January 5,1983, the PUCO granted us an l increase of $89,400,000 which was placed into effect on January 7,1983. The PUCO included in our rate base
$278,065.000 related to construction work in progress for Perry Unit #1, 36-
1 l l l Note 0-Pensions Statement of Financial Accounting Standards No.36 We pay the full cost of a pension plan for our employees. (FAS-36) requires us to disclose accumulated pension plan Under the plan, an employee who has worked at the Company liability without consideration of future increr~s in employees at least 5,10 or 20 years (depending on his age when he earnings. Therefore, the disclosures below, required by leaves the Company) can begin receiving a pension benefit FAS-36, compare liability of the plan determined on one between ages 55 and 70.The amount of his benefit depends basis with assets accumulated on a different basis.We and t on his length of service and his carnings.The benefit is our pension consultants believe that FAS-36 disclosures are l reduced by a portion of social security benefits. The benefit very misleading because they understate the amount which of an employee who retires after age 65 is determined as if the entry age normal method tells us should be in the fund he were age 65. If he retires before age 62, his benefit is now to provide pension benefits as they become payable reduced. The plan also pays benefits when an employee dies under a plan intended to continue indefinitely. We are making or is disaNed. the fiillowing disclosures only because we are required to do so. We annually deposit money into the plan to fund the cost of At l^""*'Y I-benefits arising from employee service and earnings in the 1982 1981 current year. We also deposit money to fund each year a mens omw , portion of the cost of benefits arising from past service and Actuarial present value of earnings because of amendments to the plan. In 1980, our accumulated plan benefits: j total payment to the fund was $9,300,000. We deposited flenefits which are vested $132 $122 another $10,200,000 in 1981 and $12,100,000 in 1982. Ilenefits which are not vested 13 12 Of these amounts, we recorded on the income statement $145 $134
$6,132,000 in 1980, $6,659.000 in 1981 and $8,014,000 in Value of assets held in the plan $194 $193 1982. The remainder was recorded in the balance sheet, l mostly as construction costs. Under both methods of determining the plan's liability, the i
The amount we deposit into the pension plan is determined one which we use and the FAS-36 method, we estimated in by a method known as the entry age normal method. It is 1980,1981 and 1982 that the carnings of the plan would
; used by many private pension plans. This method takes into average about 6%% per year over the life of the plan.
account estimated increases in employees' future earnings in 4 an effort to levelire the funding of pension benefits over their working lives. The liability of the plan as of January 1,1982 determined under this method was slightly more than the value of the assets in the plan on that date. Note P-Quarterly Results of Operations (Unaudited) The following is a tabulation of the unaudited quarterly results of operations for the two years ended December 31,1982, Quarters Ended March 31 June 30 Sepl30 Dec.31 IThousar.ds. except per share amounts 1981 Total operating revenues $229,625 $237,320 $297,783 $248,203 Net operating income $ 38,930 $ 41,822 $ 67,759 $ 44,189 Net income $ 27,801 $ 32.117 5 56,872 $ 38,944 Eamings available for common stock $ 20,371 $ 23,682 $ 47.432 5 29,332 Average common shares 46,445 - 46,777 47,959 50,914
, Eamings per common share $ .44 $ .51 $ .99 $ .58 1982 Total operating revenues $273,038 $268,985 . $299,224 $267,325 Net operating income $ 52.774 $ 56,953 $ 70,253 $ 48,948 Net income $ 48,019 $ 50,641 $ 66.849 $ 43,456 Eamings available for common stock $ 38,407 $ 41,051 $ 57,302 $ 33,909 Average common shares M,257 55,679 56,088 60,304 Famings per common share $ .71 $ .74 $ 1.02 $ .56 1
i e 1 37
Financial anc Statistical Review 1972-1982 1982 1981 1980 TOTALOPERATING REVENUES 1.1M 'J l 1 012.930 8935f6 Residential 34xf57 310.409 268.788 Commercial w4 +1 263. tut 220.67F Inuustrial Bi394 386.805 323.7 3 Other Electnc (includes Sales for Resale) 43302 39.912 65.273 Steam lleatmg 17517 121 % 15 c%$ TOTAL OPERATING EXPENSES 6945 M20.226 74 1 051 Fueland Purchased Power r92N 351.4 to 36a.3 0/ Other Operating Expenses 250.391 224299 194.881: Depreciaton and Amortization %% 85294 64.61% Taxes other Than Federal Income Taxes im so4 91.648 81.6r!) Federalincome Taxes lon 3s2 67.575 41.576 NET OPERATING INCOME 22Cc7 1923 m 150.514 NONOPERATING INCOME w*e 75 712 62. 4d Allowance for Equity Funds Used Dunng Constructon 7e 48.970 40.8n Income Statement Other income and Deductions _ 19 7q 26342 21.56? (Thousands of Ibilars) INCOME BEFOREINTERESTCilARGES r5sw 2M.416 212.957 INTEREST l ib ru2 112 682 87.57% leng and Short-term interest 144.072 14rs.712 112.623 Allowance for Borrowed Funds Used Dunng Constructum _ v27D's 04Ato) (25.051 INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING ClIANGE 20 m l 155334 125.383 Cumulative Effect of Change in Depreciation Methm! on Periods Pnor to January 1,1979 - - - NET INCOME (a) 2M *4 155 134 _ 1253R PREFERRED AND PREFERENCE DIVIDEND REQUIREMENTS w 2% 34.917 27,711 EARNINGS AVAILABLE FOR COMMON STOCK Iw*n 120.817 97.674 EARNINGS PER SilARE BEFORE CUMULATIVE EFFECT OF ACCOUNTING CllANGE 5 3 of $ 2.52 s 2R CUMULATIVE EFFECT PRIOR TO JANUARY 1,1979 - - - TOTAL EARNINGS PER SilARE (a)(b) 5 3 01 5 2.52 5 2.22 DIVIDENDS PER SilARE (b) 5 2 19 5 2 08 5 2.0( TOTAL ASSETS 3xttzut . 3.406 075 3994.462 Ptihty Plant-Total 4010512 3.610.895 3.215.339 Accumulated Utihty Plant Depreciaton and Amortization oiN wn (621 353) (557.8591 Other Property 64216 23.870 21.137 Current and Other Assets 4lx r:6 392m 415,845 TOTAL CAPITAllZATION AND LIABILITIES 3 x4 t 29s 3.406.075 3 094.462 BalanCC Sheel bng-term Debt L 4 t t r.? 1.328.404 1.211 528 Year end Preferred and Preference Stock: With Mandatory Redempton Provisions 322 000 3259 m 260.500 (Thousands ofIbtlars) Without Mandatory Redemption Provisions 91071 s .071 95.071 Comm<m Stock Equity 1.227.0 % l.0tr2206 912.731 Deferred Federal income Taxes 309.414 236.481 192.452 Current Liabilities and Other Credits 4 7 m2 418.913 422.18r UTILITY PLANT ADDITIONS (c1 422.170 4W.277 398.088 UTILITY PLANT RETIREMENTS 22.533 13J21 25.002 NUMBER OF COMMON SilARES(b) 61378 582 51.054.503 46.288.629 KWilR SALES (Thousands) 16.1 % 1s7 17.507.864 18.159354 Residential 4331N 6 4375J32 4.463.147 Commercial 4.194.177 4.178.459 4.148.5.7 0 Industrial 7.ox2261 8.279J00 8.062.18 Other(Indudes Sales for Resale) m 114 673.973 1. t85.445 ELECTRIC CUSTOMERS-YEAR END 711.222 711 325 710.557 Residential M l.795 M2V25 642.845 Commercial bl.861 60J14 60.071 Industrial 7.233 7.261 7.211 Other 421 425 432 RESIDENTIALSALES DATA Average Kwhr per Customer 6 4tm 6.548 6.686
. Average Revenue per Customer 5 524 rd $ 466.55 5 405E Operating Statistics Average Revenue per Kwbr M.ox( 7.124 6.05 d ELECTRIC PRODUCTION Net Available for Service Area (Thousands) I 7 A77xti I A936,567 18J22.6H Net Generation 17 032.759 17.297.523 15.325.948 Net Received from Othus ra; 072 1 A39.044 3346,668 BTU per Kwhr of Net Output 10.175 10.582 10.635 FuelCost per Million BTU 171 728 175.144 156.924 Coal Cost per Ton 5 4El $ 46 70 $ 3931 Annual Net f4-Min. Max. imad- KW-Excl. Interruptibles loNm 3.362.000 3 304.000 Net System Capability-KW-Year End 4 6Wm 4.624.000 4.598.000 STEAM llEATING Sales-Pounds (Thousands) 1501077 1.612.151 1.979.397 Customers-Year End 312 337 348 EMPLOYEES-YFAR END MII 5.189 4.991 (a) The 1978 net income and earninats per share calculated on a pro forma basis to reflect the units-of productum mettmd of depreciaton are $102.942.503 and 5231. resmtmly The pro funna effect of the adopton of this depreciatum metint on 1977 was not matenal.
38 f
The Cleveland Electric illuminating Company and Subsidiaries ! 1979 197M 1977 1976 1975 1974 1973 1972 M24 2',17 717JW2 659.240 54114M 523 165 4M3G7 32MJfe 241341 237.612 213.520 2mJh3 114 015 154.020 140.0JO IMJ79 9& 891 194D N 172.251 161 049 121286 121.tG3 109.185 80J56 74.992 321.W4 27A 405 251,181 19i.189 180.890 177.246 119.9M 99.926 51N9 42.k11 31.611 45J30 55.679 29.946 17.M32 13.466 13 048 10 OM3 10.te4 10.928 10923 7.530 5A17 5 56M
'M 7M 5992M9 542.M71 441 401 433 614 375 159 251 276 226473 349.027 307.429 2td771 234.107 246.9 4 199362 100.450 75 199 162.Eth 140.99h 127330 102344 94.539 K5.122 72.79a 41122 59.443 56374 43307 31874 33.046 31.622 30.965 27336 79.455 683 % 58.HH7 51.925 4MJ35 43.h53 40.9s vi 36.203 3M 227 25114 47 6M 16101 10 310 l'i340 10.ledi 14 011 135 479 11730 116.419 Inl347 M9351 M 778 73.4u2 tw M70 47.621 42.22h 49 4M 2h346 17 hgl M472 7M2 5 567 33.432 29MH 31265 24Jtwi 16.983 7.854 63h3 1938 14 IW 12/U6 14 219 I h40 h98 618 1 279 0911 IK31 si Itdi n29 8A %h 165.9i0 12M rFG 107 232 _ 97.250 81.134 74 437 1 1
61 016 54 17; 4& 413 42 464 3&SW 31120 21365 l M3?N 72.071 67.MN+ 56350 50.511 44317 35161 27.407 415 7131 d ilJish 113 714) 110 337: iM 0471 f M.3 W G 441 (23426 111 534 49 013 11112% 81.tso MJh8 60341 49.414 49.072 4.125 - - _ - - _ 117 h39 44Oli i11J2% 81 hMO Mj68 60 741 49.414 49 072 2'i SM7 2137; ?? 4n7 IWi liten 10067 7.65M 511M 42 o'2 Ti 4 M MM21 M 673 50 072 50.674 41356 43 9M 2 31 5 2.20 $ 2.91 5 2 38 5 2.11 5 2.45 5 2.03 5 2 15 11 - - - - - - - 2 42 5 2 20 5 2.91 5 2 38 5 2 11 5 2 45 5 2.03 5 2.15 1 92 5 1.R4 5 IJ6 5 1 71 5 I h5 5 1 60 $ 1 55 5 1 52 2 67M 7%h Col .341 2 117.133 1M42949 I 513 247 1 3543165 1.152335 1.037.091 2.M42.211 2.521996 2.232.111 1.951 701 1.h93 614 1.52h639 13 4.122 1 228.840 0 21.1751 f l76.9Kb (42913tn 1346338' (373.X31 G5iM11 (334.0711 0 13.109) 19.5s0 15.034 11753 12.849 93tl2 7.433 5331 5340 33M 20'i 2h9 444 300.421 270187 183 542 171814 116 951 136 020 2 67M 7M6 2331311 2.117.13; l x42 999 1 513 267 1354065 1.152 333 Ip57Sul 971941 920.973 MMlM99 747J92 673J uG 551144 502.8s ni 491304 232.in ni 2329 0 185D ni 131tNwi 75D ni 63 t n o 21000 - 41071 93Fil 91071 91071 95F71 91071 95.071 91071 M20.411 70&xK1 M3344 511 313 419.940 346136 326.947 314342 lh2.122 140.h77 Il9?N 7231% 63.267 43348 34312 34.444 _ 3 % 191 231 917 194 122 2MI .M5 1%& 416 252.766 16M 205 121 730 3 M Mh9 3t wilh5 286J39 271324 181 h73 173.N99 141470 134.893 II.fil2 M MMn 10329 11437 14J18 11362 10.188 12.850 41.271.574 33 9%3h5 323M 035 28347344 24351.449 20J4R.110 20.611.034 20.499.420 14 010.433 183M. 437 IM oh6 42M 18 070 241 IM 113 82ti 17.ed i t .686 17347. tie 15.171048 4332.9K3 4.2MM Mh5 4.2m.116 4.041158 3.9M4 I104 3830305 3.910.018 3.730 365 4,041.138 3.931.5M6 4 9 87.123 3.80M.897 3.h85878 3.527382 3.56RtW9 333h419 9.2689 n M.992.919 M.M74346 8.475.983 7 822.419 8.819.205 9.103.173 7.298 100 13n7.716 1.149 067 9443'O I 740.253 2 641.525 1.424 794 1 164 781 787 564 70My 19 70251M hun 547 691 423 **9 133 hK4 72M 67M 426 672 165 MIA% h37DFJ h32340 630.581 b27J19 623.9M8 618.2b6 612.M5 5M h40 57310 56 241 51178 53365 53.070 52 241 S t.M5 7232 7.167 7.112 7.2(wi 7.190 7.212 7.415 7.222 4 LI 4'i2 434 4fdl 439 45M 454 453 6357 ti517 6 412 6.187 6.116 5 914 6.098 5.84 337 M6 5 J24 91 5 307.11 5 245 16 5 237.02 5 2itif9 5 162.69 5 155 45 5 4Mt 5 tult 4 804 3 974 3 884 3 674 2 674 2 654 19.6433nt 19 256 M57 19 098 231 18.3313 44 17.271.169 17.8173M IM 257.155 1fi.101 fey 17.06% 914 thKM2 669 IM.123 528 16J47.626 16.213.012 18Dio.100 17.326.M0 15.404.233 2.575 nM7 2372 IMR 974 703 13&l 75M 1.05& l57 (222 3371 930 515 697.456 10.h34 10.536 10.401 10322 10.454 10.569 10.3M2 10.172 142 514 131 80s 117 50< 105 554 111.144 102 264 48 404 42.864 33 20 $ 30 73 $ 2172 5 23 98 5 24.93 5 21 53 5 11.05 5 9 94 3.097.c 3.249 000 3 330.000 3.065Dio 2.937De 2.934Dio 3.119.000 2.822.0 e 4 562 mo 436tiDio 4386.q MO 3.9tri 000 3.615 9 10 3J M D'10 31699 0 3375D10 2n) .ead 2.210.886 2 374.510 2.359 677 2.263 645 2.274.925 2.154.390 2.450.656 365 369 372 383 399 4t ni 416 427 491] 4 All 4340 4.840 4.947 4.982 4.853 4.898
<b) AJ;ustnj for the 34r.2 stak split effective December 16,1977.
kl Euludes $56.022. tai of termmatal projects reclasssed to Defermi charges in 1979. 3')
The Cleveland Electric Illuminating Company and Subsidiaries Statement ofIncome from Continuing Operations Adjusted for Changing Prices for the Year Enc ec December 31,1982 ~. L Conventional Constant Dollar Current Cost l llistorical Average Average j Cost 1982 Dollars 1982 Dollars , (Thousands of Dollars) Revenue $1,108,571 $1,108,571 $1,108,571 l Operation exp nse 498,081 498,081 498,081 Maintenance expense 81,789 81,789 81,789 Depreciation and amortization 86,588 184,923 214,338
' Paxes other than Federalincome tax 106,804 106,804 106,804 Federalincome tax 106,382 106,382 106,382 Nonoperating income (96,669) (96,669) (96,669)
Interest expense 116,632 116,632 116,632 899,607 997,942 1,027.357 Net income-continuing operations $ 208.964 $ 110,629 (a) $ 81,214 (a) Increase in specific prices of property and plant (b) $ 172,658 Reduction to net recoverable cost $ (17,199) (92.282) Increase in general prices (68,160) Increase in general prices in excess ofincrease in specific prices after the reduction to net recoverable cost 12,216 Gain from decline in purchasing power of net amounts owed 77.395 77,395 Net price level adjustment $ 60,196 $ 89.611 (a) includtng the reducten to net recoverable cost, net income doss) for 1982 would have been $93.430.000 in constant dollars and $(11.068,000) in urrent cost dollars. (b) At December 31,1982, the current cost of property, plant and equipment net of accumulated depreciation was $5.551.8M,000 while original (net recoverable) cost was $3.330,M2.000. Supplementary Information Conceming the Effects ofInf.ation As prescribed by Statement of Financial Ac-ounting Standards Current cost data differ from constant dollar data mainly No. 33, we have prepared information on the effects of because the prices of assets have increased at rates different inflation on operations.The methods used to compute this from the rate of generalinflation. data are expenmental and subject to change by the Financial Revenues and Expenses Accounting Standards lloard. These data do not reflect the Revenues and expenses (except for depreciation) were
" current value" of our assets. They do not measure all the assumed to accumulate evenly throughout the year. No adjust-effects of inflation on our operations or predict our future ments were made to the figures reported in the primary cash requirements. The effects described herein are not financial statements. No adjustments were made to Federal recognized for income tax or ratemaking purposes.
income tax expense. l General Depreciation l llistorical costs adiusted for general inflation are referred The constant dollar and current cost estimates of property l to as " constant dollars" The onginal cost of utility plant and and plant were determined by applying the indices noted to l certam other items was converted to constant dollars by original cost. Restated depreciation reserves were used to applying the Consumer Price Index for All Urban Consumers compute property and plant net of depreciation. They were to the cost of these assets. l obtained by applying current depreciation rates by account i Current cost data reflects the cost of current replacement of to restated property and plant figures by vintage year. The l existing assets.The current cost of assets was estimated by depreciation provisions were obtained by applying current applying the llandy-Whitman Index of Public Utility Con- depreciatio < tes to the average of beginning and end-of-stmction Costs to the orkmal cost of structures and equipment. year estimr 2 'epreciable property. Original cost of Ir I was trended using the Consumer Price Materials. Supplies index for A" - A Consumers. Certam other property was Balance shet items such at fuel in stock, materials and trended to + at cost usmg other mdustry mdices. supplies were treated as cash type items. Fuel inventory is - subject to rapid turnover. As such, we believe the original
'40 cost of this item fairly represents its current cost.
The Cleveland Electric Illuminating Company and Subsidiaries Five-Year Comparison of Selectec Supplementary Financia Data Acjusted for Effects of C aanging Prices ~~, t Awrue N Mani Year Ended December 31, 1982 1981 1980 1979 1978 (Thousands, except per share amounts) Revenue as reported $ 1,108.571 $ 1,012,930 $ 893,566 $ 824.267 $ 717,092 in 1982 constant dollars $ 1,108,571 $ 1,075,030 $ 1,046,718 $ 1,096,116 $ 1,060,958 Net Income as reported-continuing operations $ 208,964 $ 135,734 $ 125,383 $ 113,534 in 1982 constant dollars $ 110,629 $- 73,579 $ 60,868 $ 76,608 in 1982 current cost dollars $ 81,214 $ 45,661 $ 28,452 $ 40,493 Income (Loss) per Common Share as reported-continuing operations $ 3.01 $ 2.52 $ 2.26 $ 231 in 1982 constant dollars $ 1.27 $ 0.76 $ 0.66 $ 1.12 in 1982 current cost dollars 5 0.76 $ 0.18 $ (0.09) $ 0.17 Net Assets at Year End as reported $ 1,227,095 $ 1,002,206 $ 912,731 $ 820,411 at net recoverable cost $ 1,213,246 $ 1,029,264 $ 1,021,171 $ 1,031,670 Increase in general prices in excess of increase in specific prices after reduction to net recoverable cost $ (12,216) $ 130,524 $ 221,186 $ 252,262 Cain from decline in purchasing power of net amounts owed $ 77,395 $ 168,509 $ 220,971 $ 235,670 Cash Dividends Declared per Common Share as reported $ 2.19 $ 2.08 $ 2.00 $ 1.92 $ 1.84 in 1982 constant dollars $ 2.19 $ 2.21 $ 234 $ 2.55 $ 2.72 M:rket Price per Common Share at Year End as reported $ 19.75 $ 16.00 $ 14.63 $ 16.25 $ 16.88 in 1982 constant dollars $ 19.53 $ 16.43 $ 1636 $ 20.43 $ 24.04 Average Consumer Price Index 289.1 272.4 246.8 217.4 195.4 Reduction to Net Recoverable Cost about the same as in prior years. This shows that inflation Under Ohio law, we can recover only what we paid for plant reflected in rates by the increasing cost of service was mainly and equipment, so the values of these items under both responsible for revenue growth. constant dollar and current cost methods were reduced t Net income from operations increased in 1982 on both the lower onginal cost amounc constant dollar and current cost bases. The differences Increase in General Prices in Excess ofIncrease in between these measures and income as reported occurs Specific Prices After Reduction to Net Recoverable Cost because we are not permitted to recover current cost measures - The overall increase in prices of our property and plant of depreciation through rates. Ohio law restricts recovery of exceeded the increase in general prices as measured by the investment through depreciation charges to the original cost Consumer Price Index for All Urban Consumers during 1982. of plant.The part of current cost we couldn't recover was flowever, when the current cost of plant was reduced to the only partly offset by the gain from holding cash type liabilities. lower original cost amount, this " gain" from specifi price We have to raise new capital to meet growth needs at inflated increases was significantly reduced. costs of construction and to replace worn-out items at higher Cain from Decline in Purchasing Power of Net replacement costs. If rate adjustments fail to compensate for Amounts Owed the cost of new capital, especially during times of high With inflation, holding cash type assets such as money and inflation, a regular erosion of the return on equity will occur. receivables results in a loss in purchasing power. liolding As a result, there will be a regular need for rate relief. cash type liabilities such as long-term debt results in a gain in We continue to seek proper and timely rate increases and purchasing power. Preferred stock and deferred tax balances a regulatory environment which is responsive to the effects were treated as cash type liabilities for this computation. ofinflation on our investors. Effects ofinflation on the Company Our 1982 revenues increased despite the decline in unit sales of electricity, but revenues in constant dollars remained 41.
Boarc of Directors Principal Officers teigh Carter Chairman and Chief Executive Officer of'llemco. Inc., and Executives manufacturer of specialty chemical products and a wholly- Robert M.Ginn President owned subsidiary of The BFGoodrich Company. Also, President-Engineered Products Group and Executive Vice Richard A. Miller Executive Vice Pres. ident President of The BFCoodrich Company Harold L. Williams Executive Vice President Robert M.Ginn Dalwyn R.Davidson Senior Vice President President of the Company Murray R.Edelman Vice President-Nuclear Roy H.Holdt Robert J.Farling Vice President-Administrative Services Chairman and Chief Executive Officer of White Consolidated Industries. Inc., manufacturer of products for the home, J hn W.Fenker Vice President-Power Supply principally major appliances, and machinery and equipment Frank A.Kender Vice President. Marketing for industry Edgar H.Maugans Vice President-Finance John Lansdale,Jr. John J.Misic Vice President-Distribution & Services Partner m the law firm of Sqm.re, Sanders & Dempsey Richard A. Miller
^'*" * I # ### " " #^
Executive Vice President of the Company Newton D. Flack Division Manager-Steam Power Division Karl H.Rudolph Charles C.Chopp Controller Chairman of the Executive Committee and retired Chairman Andrew R.Felmer Treasurer and Chief Executive Officer of the Company g.y, p g, g , Craig R. Smith Chairman of the Industrial Group of Bendix Corporation, a wholly-owned subsidiary of Allied Corporation. The Industrial Group is a producer of machines and accessories for the metalworking industry Charles E.Spahr Director of several companies and retired Chairman and Chief Executive Officer of The Standard Oil Company (Ohio), manufacturer of petroleum products, chemicals and plastics and supplier of coal flerbert E.Strawbridge Chairman and Chief Executive Officer of The liigbee Company, a department store Richard B.Tullis Chairman of the Executive Conimittee and retircd Chairman and Chief Executive Officer of Harris Corporation, man-ufacturer of communication and information processing equipment Harold L. Williams Executive Vice President of the Company l William J. Williams' President and Chief Operating Officer of Republic Steel Corporation, manufacturer of steel and steel products j
- Elected effective February 1,1983.
l Italph M.Besse Chairman Emeritus of the Board of Directors l Elmer L Lindseth l Chairman Emeritus of the Board of Directors 42
l l Committees of tae Board of Directors Audit Committee The Audit Committee recommends to the Board the firm ofindependent accountants to be retained for the ensuing year and reviews the results of their examination of the Company's financial statements and the audit practices employed by them and the Company.The Committee oversees the establishment and administration by management of effective internal accounting controls and an accounting system designed to produce financial statements which present fairly the financial position of the Company. L. Carter (Chairman), R. H. Holdt, C. R. Smith. C. E Spahr C:mpensation Committee The Compensation Committee reviews and approves the Company's overall Compensation Plan, including the pension and employee stock plans and, in particult.r, recommends the remuneration of the Chairman (if any), President and all Vice Presidents. R. H. Holdt (Chairman), C. R. Smith, C. E Spahr,' H.E Strawbridge Executive Committee The Executive Committee acts on behalf of the Board at times other than regular Board meetings when it is impracticable to call together the entire Board. The Committee has the same authority as the Board, except that it may not elect officers (other than assistant secretaries and assistant treasurers), fill vacancies on the Board or on the Executive Committee or authorize the issuance of first mortgage bonds. K. H. Rudolph (Chairman), L. Carter, R. bl. Ginn, H.E Strawbridge Finance Committee The Finance Committee reviews and recommends long-range financial policies and objectives and specific actions to achieve these objectives. The Committee, acting for the Company as administrator of the Company's Pension Plan and Investment Program of the Employee Savings Plan, also reviews the investment performance of the pension fund trustee, other pension fund investment managers and the Employee Savings Plan trustee and establishes objectives for the investment of Pension Plan and Employee Savings Plan assets. R. A. Miller (Chairman), R. bl. Ginn, R. H. Holdt, K. H. Rudolph, C. R. Smith, R. B.1hilis Nominating Committee The Nominating Committee recommends to the Board candidates to be nominated for election as directors at the annual meeting and to fill any vacancies on the Board. When reviewing potential candidates, the Committee considers suggestions made by share owners.
. C. E Spahr (Chairman), L. Carter: R. H. Holdt, J. Lansdale, Jr., E H. Rudolph, C. R. Smith, H. E Strawbridge, R.B. Jhllis Planning Committee The Planning Committee advises and consults with management and the Board on long-range strategic planning. Responsibilities of the Committee include
. recommending long-range objectives and the strategies, manpower and overall corporate organization appropriate to meet those objectives.
. R. M. Ginn (Chainnan) L. Carter, R. A. Miller, R. B. 7hllis, H.L. Itilliams -
43. t.
GeneralInformation Share owner dividend reinvestment and stock purchase Common Stock plan The Company has a Share Owner Dividend Reinvest- Listed on the New York, Midwest and Pacific Stock Exhanges; ment and Stock Purchase Plan which provides common stock unlisted trading on the Boston Philadelphia-Baltimore-share owners of record a convenient means of purchasing Washington and Cincinnati Stock Exchanges. New York additional shares of Company common stock automatically Stock Exchange symbol-CVX. at no additional cost by investing a part or all of their quarterly Preferred Stock dividends and additional cash payments. Dividends reinvested L sted on the New York Stock Exchange. m Company common stock under the Plan qualify for the tax deferral provisions of The Economic Recovery
- Pax Act Registrars of 1981. In addition, dividends reinvested will not be subject for Common Stock andPrc/crredStock to the withholding tax on dividends which is expected to go AmeriTrust Company into effect July 1,1983. Information and a prospectus relating 900 Euclid Avenue to the Plan may be obtained from Sharc Owner Senices at Clevcland, Ohio 44114 the Company. Transfer Agents Form 10-K The Company will furnish to share owners, for Common Stock andPrc/crredStock without charge, a copy ofits most recent annual report to The Cleveland Electric illuminating Company the Securities and Exchange Commission (Form 10-K) and, Share Owner Services upon payment of a reasonable fee, a copy of each exhibit to P.O. Box 5000 Cleve%nd Ohio 44101-Form 10-K. Requests should be directed to the Secretary of Stock transfers may be presented at Wells Fargo Securities the Company. Clearance Corporation,45 Broad Street, New York, N.Y.10004.
Independent Accountants Share Owner Inquiries Price Waterhouse,1900 Central National Bank Building. Communications regarding stock transfer requirements, Cleveland, Ohio 44114 lost certificates, dividends and changes of address should be Bond'lYustee and Registrar directed to Share Owner Services at the Company. To reach Morgan Guaranty Trust Company of New York for all series. Sharc Owner Services by phone, call the following numbers: Local callsin Communications regarding bond registration requirements Cleveland area 622-9800, ext.2325 and lost certificates should be directed to Morgan Guaranty
'IYust Company of New York. 30 West Broadway, New York, Elsewhere
.inOh,io 1-800-362-1237 N.Y.10015.
Outside Ohio 1-800-321-3206 Bond Paying Agent Manufacturers llanover Trust Company,40 Wall Street. Please have your account number ready when calling. New York, N.Y.10015 and Ameriht Company,900 Euclid Executive Offices Mail Address Avenue. Cleveland, Ohio 44114-Co-paying agents for the Illuminating Building Post Office Box 5000 2%% Series, Due 1985 3%% Series Due 1993 55 Public Square Cleveland, Ohio 44101 3%% Series, Due 1986 4%% Series, Due 1994 Cleveland, Ohio 3% Series, Due 1989 Telephone Number (216) 622-9800 Morgan Guaranty 'lYust Company of New York,30 West The annual meeting of the share owners of the Company Broadway, New York, N.Y.10015-for the will be held on April 26,1983. Owners of common stock as 8.85% Series, Due 1983 8%% Series, Due 2005 of February 25,1983, the record date for the meeting, will 7.55% Series, Due 1984 9%% Series, Duc 2009 be entitled to vote on the issues. The official notice, proxy 12%% Series, Due 1984-A 9.85% Series, Due 2010 statement and proxy will be mailed to share owners on or 11%% Series, Due 1985-A 8%% Series, Due 2011 about March 14,1983. 15%% Series, Due 1989-A 8%% Series, Due 2012 Notice: The annual report and the financial statements 1 7%% Series, Due 1990 16%% Series, Due 2012-A herein are for the general information of the share owners of - 8%% Series, Due 1991 12%% Series, Due 2012-D the Company and are not intended to be used in connection - 15%% Series, Due 1992 with any sale or pur hase of securities. Inquiries regarding interest payments should be directed to either Manufacturers llanover ht Company or Morgan Guaranty ht Company of New York for the series of bonds for which each acts as paying agent as noted above. 44
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