ML20073J899

Forwards Annual Financial Rept,1982.Certified Financial Statements for 1982 Also Encl

ML20073J899
Person / Time
Site:	Point Beach
Issue date:	04/13/1983
From:	Goetsch J WISCONSIN ELECTRIC POWER CO.
To:	NRC
Shared Package
ML20073J903	List: ML20073J899 ML20073J917
References
NUDOCS 8304190448
Download: ML20073J899 (16)

Text

O lMsconsin Electnc men come 231 W. MICHIGAN, P.O. BOX 2046, MILWAUKEE, WI 53201 April 13, 1983 Nuclear Regulatory Commission Washington, D.C. 20555 Gentlemen:

In accordance with the regulations of your Com.nission, there is enclosed a copy of each of the following:

1. Annual Report of Wisconsin Electric Power Company which includes certified financial statements of the Company and its subsidiaries (consolidated);

2. Certified financial statements of Wisconsin Electric Power Company (corporate).

The abovementioned reports are being filed with your Commission pursuant to 10CFR, Section 50.71 of the Nuclear Regulatory Commission Regulations as Wisconsin Electric Power Company is the holder of Facility Operating License Nos. DPR-24 and DPR-27 issued by your Commission under Dockets 50-266 and 50-301, respectively.

t Very truly yours, 0(

J. H. Goetsch Secretary l

Enclosures L

00 (t 8304190448 830413 PDR ADOCK 05000266 I PDR

l WISCONSIN ELECTRIC POWER COMPANY Financial Statements for the Year 1982

REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and the Stockholders of WISCONSIN ELECTRIC-POWER COMPANY In our opinion, the accompanying-balance sheet and statement of capitalization and the related statements of income, retained earnings, undistributed subsidiary earnings, and changes in-financial position present fairly the financial position of Wisconsin Electric Power Company (parent

. company only) at December 31, 1982 and 1981, and the results of its operations and the changes in its 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.

}

^^

PRICE WATERHOUSE Milwaukee, Wisconsin t

January 27, 1983'

_ . _ _ ..- _ .. ._. _ _ . . _ . __ __. - _ _ ~ _ , . . _ . . . _ _ _ - . _ , _ _ , _ . . _ . _ . _ . _ . . . . . . _ _ . . . , .

WISCONSIN ELECTRIC POWER COMPANY INCOME STATEMENT Year Ended December 31 1982 1981 1980 (Thousands of Dollars)

Operating Revenues Electric $974,896 $870,106 $761,232 Steam 10,897 9,341 8,162 Total Operating Revenues 985,793 879,447 769,394 Operating Expenses Fuel (Notes A and G) 263,126 257,163 216,615 Purchased power 37,310 30,509 63,203 Other operation expenses (Note B) 175,767 152,103 140,054 Maintenance 99,951 82,366 73,851 Taxes other than income taxes 44,657 40,602 31,807 Depreciation (Note C)

Straight line . 76,803 70,799 61,538 Deferred income taxes (Note D) 15,625 28,061 21,044 Federal income tax (Note D) 66,668 31,558 (243)

Investment tax credit adjustments -net (Note D) 9,102 14,453 30,728 State income tax (Note D) 13.944 8,991 2,115 Total Operating Expenses 802,953 716,605 640,712 Operating Income 182,840 162,842 128,682 Other Income and Deductions Equity in earnings of subsidiaries 10,241 3,858 5,328 Interest income 8,889 9,998 4,852 Allowance for other funds used during construction (Note F) 4,588 3,155 5,330 Miscellaneous - net (Note M) (6,935) (125) (195)

Federal income tax (Note D) (706) (4,064) (1,901)

State income tax (Note D) (184) (729) (314)

Total Other Income and Deductions 15,893 12,093 13,100 Income Before Interest Charges 198,733 174,935 141,782 Interest Charges Long term debt _ 61,399 62,388 49,289 Allowance for borrowed funds used during construction (Note F) (2,812) (3,557) (8,338)

Other 8,501 10,60_2_ 18,343 Total Interest Charges 67,088 69,433 59,294 Net Income $131,645 $105,502 $ 82,488 The notes on pages 9 through 14 are an integral part of the financial statements.

WISCONSIN ELECTRIC POWER COMPANY RETAINED EARNINGS STATEMENT Year Ended December 31 1982 1981 1980 (Thousands of Dollars)

Balance, January 1 $283,598 $248,649 $228,247 Additions Net income 131,645 105,502 82,488 Equity in earnings of subsidiaries (10,241) (3,858) (5,328)

Dividends received from subsidiaries 5,520 2,588 5,175 410,522 352,881 310,582 Deductions Dividends - cash Preferred stock 15,087 15,087 13,294 Common stock - $1.902, $1.76 and

$1.657 per share

• 61,434 54,175_ 48,469 76,521 69,262 61,763 Cost of issuing capital stock 289 21 170 76,810 69,283 61,933 Balance, December 31 $333,712 $283,598 $248,649

• The amounts for 1981 and 1980 have been restated to reflect the July 1982 3-for-2 common stock split.

STATEMENT OF UNDISTRIBUTED SUBSIDIARY EARNINGS Year Ended December 31 1982 1981 1980 (Thousands of Dollars)

Balance, January 1 $ 24,664 $ 23,394 $ 23,241 Equity in earnings of subsif ar s 10,241 3,858 5,328 Dividends received from b > di :es (5,520) (2,588) (5,175)

Balance, December 31 $ 29,385 $ 24,664 $ 23,394 The notes on pages 9 through 14 are an integral part of the financial statements.

WISCONSIN ELECTRIC POWER COMPANY STATEMENT OF CHANGES IN FINANCIAL POSITION Year Ended December 31 1982 1981 1980 (Thousands of Dollars)

Financial Resources Provided Operations Net income- $131,645 $105,502 $ 82,488 Depreciation . straight line 76,803 70,799 61,538

- deferred income taxes-15,625_ 28,061 21,044 Accumulated deferred investment tax credits 7,215 12,008 26,232 l Nuclear fuel expense 11,165' 7,573 8,431 Amortization of precertification expenditures 9,137 8,358 5,906 Write-off of additional construction costs 5,000 - -

Undistributed subsidiary earnings (4,721) (1,270) (153)

Allowance for funds used during construction (7,400) (6,712) (13,668)

Total from operations 244,469 224,319 191,818 l -

Common stock ~ 30,152 25,260 21,767 f Preferred stock - - 24,906 Long term' debt 6,904 - 148,970 Sale of nuclear fuel 27,112 23,042 66,501 Release of construction funds held by trustees 1,641 2,578 20,633 Normalization of income taxes - precertification expenditures (3,363) (4,141) 9,939 Contributions and advances in aid of construction 3,543 2,494 2,623 Deferred charges / credits and other 3,131 (6,472) 6,263

$313,589 $267,080 $493,420 Financial Resources.Used Coastruction expenditures

~

$122,906 $141,558 $277,861 Nuclear fuel 22,617 32,813 31,260 Dividends 76,521 69,262 61,763

' Additional investment in subsidiaries - 15,000 -

Retirement of long term debt 60,374 3,556 13,112 Reduction of short term borrowings 14,983 55,061 59,260 Construction funds held by trustees 6,923 - -

Increase (decrease) in working capital (other than short term borrowings and long term debt due currently) 9,265 (50,170) 50,164

$313,589 $267,080 $493,420 Increase (Decrease) in Components of Working Capital Cash and temporary cash investments $(29,621) $ 41,772 $(10,970)

Accounts receivable and accrued utility nwemes 2,482 9,289 8,931 Fossil fuel . 21,365 (16,400) 40,603 Notes receivable from subsidiaries 11,210 (25,893) 9,400 Accounts payable and accrued liabilities 2,506 (55,100) (6,815)

Other 1,323 (3,838) 9,015

$ 9,265 $(50,170) $ 50,164 The-notes on pages 9 through 14 are an integral part of the financial statements.

~

WISCONSIN ELECTRIC POWER COMPANY BALANCE SHEET DECEMBER 31 ASSETS 1982 1981 (Thousands of Dollars)

Utility Plant Electric $2,155,979 $2,114,435 Steam 19,259 18,483 2,175,238 2,132,918 Accumulated provision for depreciation (931,717) (849,422) 1,243,521 1,283,496 Construction work in progress 328,959 264,489 Nuclear fuel (Note A) 46,300 46,976 Net Utility Plant 1,618,780 1,594,961 Other Property and Investments Nonutility property 4,921 3,823 Accumulated provision for depreciation (2,037) (1,006)

Net nonutility property 2,884 2,817 Investment in subsidiary companies (Note G) 70,892 66,172 Total Other Property and Investments 73,776 68,989 Construction Funds Held by Trustees 6,976 1,694 Current Assets-Cash 6,995 5,086 Temporary cash investments 6,920 38,450 Accounts receivable (Note E) 44,674 43,324-Accrued utility revenues 68,930 67,800 Accounts receivable from subsidiary companies (Note G) 2 -

Notes receivable from subsidiary companies (Note G) 14,421 3,211 Fossil fuel (at average cost) 104,694 83,329 Materials and supplies (at average cost) 39,544 38,312 Prepayments and other assets 5,511 5,420 Total Current Assets 291,691 284,932 Deferred Charges and Other Assets 16,547 33,955

$2,007,770 $1,984,531 The notes on pages 9 through 14 are an integral part of the financial statements.

WISCONSIN ELECTRIC POWER COMPANY BALANCE SHEET DECEMBER 31 LIABILITIES 1982 1981 (Thousands of Dollars)

Capitalization (See Capitalization Statement)

Common Stock Equity (Note H) $ 775,173 $ 690,186 Preferred Stock - Redemption Not Required.(Note I)

~

160,451 160,451 Preferred Stock - Redemption Required (Note J) 25,000 25,000 i

Long Term Debt (Note K) 694,498 689,320 Total Capitalization 1,655,122 1,564,957 Current Liabilities Long term debt due currently (Note K) -

59,119 Notes payable to banks (Note L) - 14,983 Accounts payable 58,013 62,202 Accounts payable to subsidiary companies (Note G) 213 580 Payroll and vacation accrued 14,435 12,096 Taxes accrued - income and other 63,249 66,082 Interest accrued 23,292 18,082 Other 4,784 7,450 Total Current Liabilities 163,986 240,594 4 Deferred Credits and Other Liabilities Accumulated deferred investment tax credits 114,909 107,694 Nuclear fuel costs accrued 30,891 .30,578 Unamortized accrued utility revenues 10,930 13,662 Other 6,439 5,230 Total Deferred Credits and Other Liabilities 163,169 157,164 Contributions in Aid of Construction 25,493 21,816 Commitments and Contingencies (Note M)

, $2,007,770 $1,984,531 4

The notes on pages 9 through 14 are an integral part of the financial statements.

I

. ,. . - - ,_. _ . , _ _ _ , _ _ _ _ , _ , _ . , _ _ - ~ ... -

. WISCONSIN ELECTRIC POWER COMPANY CAPITALIZATION STATEMENT DECEMBER 31 1982 1981 COMMON STOCK EQUITY * (Note H) usan s Do11ars)

Common Stock ($10 par value; authorized 41,000,000 shares; issued 33,216,164 and 31,732,460 shares) $ 332,162 $ 317,325 Premium on Capital Stock 79,914 64,599 Retained Earnings 333,712 283,598 Undistributed Subsidiary Earnings 29,385 24,664 Total Comnon Stock Equity 775,173 690,186 PREFERRED STOCK - Cumulative Six Per Cent. Preferred Stock - $100 par value; authorized 45,000 shares; 44,508 shares issued 4,451 4,451 Serial Preferred Stock - $25 par values authorized 5,000,000 shares unissued - -

Serial Preferred Stock - $100 par value; authorized 2.360,000 shares 3.60% Series - 260,000 shares issued 26.000 26,000 8.90% Series - 400,000 shares issued 40,000 40,000 7.75% Series - 300,000 shares issued 30,000 30,000 8.80% Series - 600,000 shares issued 60,000 60,000 Total Pref erred Stock - Redemption Not Required (Note 1) 160,451 160,451 10.875% Series - 250,000 shares issued, redeemable at par 25,000 25,000 Total Preferred Stock - Redemption Required (Note J) 25,000 25,000 LONG TERM DEBT (Note K)

First Mortgage Bonds E.ff1'.s Due, 3-1/4% 1982 - 9,119 10.20% 1982 - 50,000 3-1/8% 1984 16,848 17,177 3-7/8% 1986 21,207 21,420 13-3/4% 1986 80,000 80,000 11.40% 1987 70,000 70,000 4-1/8% 1988 22,191 22,426 5  % 1990 26,701 26,701 4-3/4% 1991 3,620 3,620 4-1/2% 1993 5,016 5,049 5-7/8% 1996 37,188 37,255 6-1/2% 1997 11,507 11,512 6-7/8% 1997 37,790 37,907 6-5/8% 1998 9,822 9,832 6-7/8% 1998 33,621 33,698 6.10% 1999-2008 25,000 25,000 6.25% 1999-2008 1,000 1,000 7-1/4% 1999 38,973 38,986 8-3/8% 1999 39,537 39,550 8-1/2% 1999 11.729 11,756 6.45% 2004 12,000 12,000 8-3/4% 2006 59.990 60,000 6.45% 2006 4,000 4,000 6.50% 2007-2009 10,000 10,000 8-7/8% 2008 80,000 80,000 657,740 718,008 Debentures (Unsecured) 7% Series due 1993 '31,165 31,942 Note (Unsecured) 7-1/4% due 1985 7,000 -

Unamortised Discount - net (1,407) (1,511)

Long Term Debt Due Currently - (59,119)

Total Long Term Debt 694,498 689,320 Total Capitalization $1,655,122 $1,564,957

• The amounts for '91 have been restated to reflect the July 1982 3-for-2 common stock split.

The notes on pages 9 through 14 are an integral part of the financial statements.

WISCONSIN ELECTRIC POWER COMPANY NOTES TO FINANCIAL STATEMENTS Summary of Significant Accounting Policies General

-The accounting records of the company and-its utility subsidiary are kept as prescribed by the Federal Energy Regulatory Commission, modified for require-mentsHof the Public Service Commission of Wisconsin (PSCW). The company owns all of the common stock of Wisconsin Natural Gas Company (Wisconsin Natural) and Badger Service Company. The company carries its investments in subsidiaries in accordance with the equity method of accounting.

Revenues Meters are read and accounts are billed monthly. Since January 1, 1977 utility revenues have been recognized on the accrual basis and include estimated amounts for service rendered but not billed. Accrued utility revenue of $32 million at December 31, 1976 is being recorded as revenue in equal amounts over a ten year period as prescribed by the PSCW.

Fuel The cost of fossil and nuclear fuel is expensed in the period consumed.

' Nuclear fuel expense includes an estimate for offsite storage of spent nuclear fuel after removal from the reactor. No salvage value is recognized for spent nuclear fuel.

Property Electric utility property is recorded at original cost, and steam utility and nonutility property is recorded-at' cost. Additions to utility property and significant replacements are charged to utility plant at cost. Cost includes material, labor and allowa ,ce for funds used during_ construction (see Note F).

Replacements of minor ite6.s of property are charged to maintenance expense.

The cost of depreciable property, together with removal cost less salvage, is charged to accumulated provision for depreciation when property is retired.

Income Taxes Deferred income tax accounting is practiced in respect to significant timing differences. The federal investment tax credit is accounted for on the deferred basis and is reflected in income ratably over the life of the related

. property.

Debt Premium, Discount and Expense Long term debt premium or discount and expense of issuance are amortized by the straight line method over the lives of the debt issues. Unamortized amounts pertaining to debt reacquired for sinking fund purposes are written off currently.

_ - _ - _ - _ _ _ _ - _ _ _ _ l

A - Rental Expense Total rental expense was $39,918,000 in 1982, $33,116,000 in 1981 and

$27,828,000 in 1980. This includes charges of $36,948,000 in 1982, $30,442,000 in 1981 and $25,551,000 in 1980 relating to the company's nuclear fuel leasing arrangement with Wisconsin Electric Fuel Trust (Trust). The nuclear fuel is leased for a period of 60 months or until the removal of the fuel from the reactor, if earlier. Lease payments include charges for the cost of fuel burned, financing costs and a management fee. In the event the company or the Trust terminates the lease, the Trust would recover its unamortized cost of nuclear fuel from the company. Under the lease terms, the company is in effect the ultimate guarantor of the Trust's commercial paper and line of credit borrowings financing the investment in nuclear fuel.

The nuclear fuel lease has been treated as an operating lease in the financial statements and by the PSCW in determining revenue requirements. The value of the leased fuel is not included in the company's rate base. Had the lease been accounted for as a capital lease, an asset and corresponding liability equal to the unamortized cost of the leased nuclear fuel would have been recorded at December 31 in the amounts of $53,036,000 in 1982 and $53,241,000 in 1981.

B - Pension Plans Several noncontributory pension plans cover all eligible employes. Normal employe pension cost is accrued and funded currently. Unfunded prior service liability is amortized over periods from ten to thirty years. Pension expense was $13,622,000 in 1982, $10,383,000 in 1981 and $8,120,000 in 1980.

A comparison of accumulated plan benefits and plan net assets available for benefits is shown below.

December 31 1982 1981 1980 (Thousands of Dollars)

Actuarial present value of accumulated plan benefits:

Vested benefits $137,345 $124,568 $110,324 Nonvested benefits 9,386 7,059 5,201

$146,731 $131,627 $115,525 Net plan assets $166,155 $125,295 $120,020 The weighted average rate of return used in determining the actuarial present value of accumulated plan benefits was 7.0%.

1

C - Depreciation Depreciation expense is accrued at straight line rates certified by the PSCW. Depreciation rates include estimates of salvage and plant removal costs.

Nuclear plant depreciation rates provide for an amount to cover estimated plant decommissioning costs.

Additional depreciation is accrued in accordance with the PSCW requirements, which is equal to the tax effects of timing differences related to property and nuclear fuel including principally the use for tax purposes of accelerated depreciation methods (see Note D).

Straight line depreciation as a percent of average depreciable utility plant was 3.8% in 1982, 3.6% in 1981 and 3.5% in 1980.

D - Income Tax Expense Below is a summary of income tax expense and a reconciliation of total income tax expense with the tax expected at the federal statutory rate.

1982 1981 1980 (Thousands of Dollars)

Current tax expense $ 81,502 $ 45,342 $ 4,087 Investment tax credit adjustments -

net 9,102 14,453 30,728 Deferred taxes charged to depreciation expense 15,625 28,061 21,044 Total tax expense $106,229 $ 87,856 $ 55,859 Income before income taxes $237,874 $193,358 $138,347 Expected tax at feieral statutory rate $109,422 $ 88,945 $ 63,640 Allowance for funds used during construction (3,403) (3,088) (6,287)

Equity in earnings of subsidiaries (4,711) (1,775) (2,451)

State income tax net of federal tax reduction 9,842 7,476 4,508 Investment tax credit restored (5,276) (4,698) (3,733)

Other (no item over 5% of expected tax) 355 996 182 Total tax expense $106,229 $ 87,856 $ 55,859 The aggregate amount of deferred income taxes included in the accumulated provision for depreciation at December 31 was $211,427,000 in 1982 and

$188,879',000 in 1981.

E - Accounts Receivable Accounts receivable are shown on the balance sheet after deducting an accumulated provision for doubtful accounts in the amount of $2,151,000 for 1982 and $1,428,000 for 1981. Unco 11ectible account write-offs net of recoveries were

$4,236,000 in 1982, $2,865,000 in 1981 and $2,244,000 in 1980.

F - Allowance for Funds Used During Construction (AFDC)

AFDC is included in utility plant accounts and represents the cost of bor-rowed funds used during plant construction and a rate of return on stockholders' capital used for construction purposes. On the income statement the cost of bor-rowed funds (before income taxes) is a reduction of interest expense and the.

return on stockholders' capital is an item of noncash other income.

The company has been limited by the PSCW to capitalizing AFDC only on con-struction work in progress exceeding 12.5% of its net investment rate base in 1982 and 10% of its net investment rate base in 1981 and 1980. Revenues granted

~

by the PSCW in rate orders include the equivalent of a return on investment in construction work in progress below this limit. AFDC was capitalized in 1982, 1981 and 1980 at a rate of 7% approved by the PSCW.

G - Transactions with Subsidiary Companies In December 1981 the company contributed capital of $15,000,000 to Wisconsin Natural; this amount is classified as an investment in subsidiary companies.

j The company renders managerial, financial, accounting, legal, data processing and other services to Wisconsin Natural, which in turn renders to the. company certain accounting and other services. These services are billed at cost by the respective companies. The company also purchased gas in the amount of $10,451,000 in 1982, $11,854,000 in 1981 and $21,558,000 in 1980 from Wisconsin Natural for electric generation at rates approved by the PSCW. To take advantage of the company's access to short term funds at a lower cost than that available to

, Wisconsin Natural, the company makes loans to the subsidiary at an interest rate approximating the cost to the company.

H - Common Stock and Premium on Capital Stock In July 1982 the company executed a 3-for-2 stock split and issued 10,808,826 additional common shares pursuant thereto. The par value of the common stock was not changed as a result of the stock split, and accordingly common stock was increased and premium on common stock wan decreased $108,088,000. In addition, i

$131,000 was paid to stockholders in lieu of fractional shares equivalent to 6,192 full shares.

Sales of common stock under the company's Automatic Dividend Reinvestment and Stock Purchase Plan (ADRSPP) and Tax Reduction Act Stock Ownership Plan (TRASOP) are summarized below.

1982 1981 1980 Shares issued (restated for 3-for-2 stock split)

ADRSPP 1,291,058 1,257,908 1,090,614 TRASOP 198,838 372,883 382,475 Proceeds from sales ADRSPP $25,819,000 $19,199,000 $15,551,000 TRASOP $ 4,333,000 $ 6,061,000 $ 6,216,000 Proceeds f rom sales over the $10 par value of comraon stock sold are reflected as premium on capital stock.

I.

I - Preferred Stock - Redemption Not Required The Serial Preferred Stock is redeemable in whole or in part at the option of the company at the following redemption prices plus any accrued dividends.

Series Redemption Price Per Share 3.60% $101 3.90% $104 to December 1, 1985 and $101 thereafter 7.75% $104 to November 1, 1986_and $101 thereafter 8.80% $108.80 to January 1, 1984; $105.87 to January, 1989;

$102.94 to January 1, 1994 and $101 thereafter J - Preferred Stock - Redemption Required In 1980 the company issued 250,000 shares of Serial Preferred Stock, 10.875% Series. The redemption at $100 par value of 6,250 shares is required annually on each September 1, from 1990 through 2009, with redemption of the remaining shares required on September 1, 2010. In addition to the mandatory redemption, the company may at its option redeem the stock at $110.13 to September 1, 1983 and at declining amounts thereafter to $100 after September 1, 2009. In the event of default in the payment of dividends or in the mandatory redemption requirements, no dividends or other distribution shall be declared on junior str:s In addition, no dividend shall be declared on any preferred stock class c.., series except ratably on all preferred shares according to their respective dividend rates.

K - Long Term Debt The maturities and sinking fund requirements through 1987 for the aggregate amount of long term debt outstanding at December 31, 1982 are shown below. Of the annual sinking fund requirements, $3,690,000 may be satisfied by certifying additional mortgaged property.

1983 $ 5,720,000 1984 49,101,000 1985 55,490,000 1986 75,825,000 1987 28,524,000 Future sinking fund requirements have been anticipated by advance purchases of bonds to the extent of $2,229,000 and certification of property in the amount of $3,690,000. Sinking fund requirements for 1983 have been satisfied.

Substantially all utility plant and nonutility property is subject to the lien of the applicable mortgage.

1 l

L - Notes Payable and Commercial Paper Unuse'd lines of credit for short term borrowing amounted to $90,350,000 at December 31, 1982. -In support of various informal lines of credit from banks, the company has agreed to maintain unrestricted compensating balances. With the exception of funds required for daily operations, the cash-balance shown on the balance sheet at December 31, 1982 as well as-$300,000 of non-interest bearing certificates of deposit included in temporary cash investments represent compensating balances.

M - Commitments and Contingencies Construction expenditures for 1983 through 1986 are estimated to be $692 million.

Estimated construction expenditures for this four year period include $81 million for completion of the 580-megawatt Unit 2 coal-fired generating station at the Pleasant Prairie Power Plant and $36 million for the 25% share in the 380-megawatt Edgewater Unit 5 coal-fired generating station which is being constructed by Wisconsin Power and Light Company. 'The other estimated construction expenditures are primarily for improvements to existing power plants, for additions to and replacements of portions of the distribution and transmission system, for new service centers and for other buildings and equipment. At December 31, 1982 construction work in progress includes $41,136,000 of company-financed expenditures relating to Edgewater Unit 5.

In April 1982'American Can Company (American Can) commenced an action against the company in U.S. District Court seeking unspecified damages for alleged breaches by the company of an Agreement dated January 16, 1975, providing for the purchase and use by the company of a fuel derived from refuse. The' complaint was amended on May 5, 1982 to specify damages of $41,500,000. On May 18, 1982 the company filed a counterclaim against American Can for damages in excess of $20,000,000. 'Although the result of litigation cannot be predicted with certainty, the company does not believe the~ ultimate outcome of this litigation will have a material adverse impact on the company's financial statements.

In January 1982 the PSCW issued an order directing the company to write off

$5,000,000 of its investment in Pleasant Prairie Power Plant Unit 1, representing certain additional construction costs incurred to place Unit 1 in operation by June 30,-1980. The PSCW deemed this expenditure imprudently incurred and directed

-a refund to customers of approximately $900,000'of related revenues previously held subject to refund. The PSCW denied the company's request for a rehearing on this matter and in March 1982 the company wrotefoff the $5,000,000 of construction costs and made provision for the ordered refund of revenues. Subsequently, the Milwaukee County Circuit Court dismissed the company's petition for review and reversal of the PSCW order'in this matter. An appeal of the Circuit Court's order has been filed and in July the Circuit Court granted the company's motion to relieve it from the refund obligation pending outcome of the appeal. Management believes the additional construction costs-incurred were prudent and should be recognized for rate-making purposes.

In 1979 the company wrote off its share ($2J million af ter income tax effect) of certain capitalized expenditures related to the discontinued Koshkonong nuclear plant project. In late 1979 the Brown County Circuit Court found that such expenditures were prudently made and were not to be charged to the stockholders and, therefore, reversed and remanded the order to the PSCW for modification. The Circuit Court order, which had been reversed by a 1981 Wisconsin Court of Appeals decision, has been upheld by a November 1982 decision of the Wisconsir Supreme Court.

. The company has not restored the write-off to income pending an order f rom the PSCW.

WISCONSIN ELECTRIC POWER COMPANY DIRECTORS Frederick M. Belmore

• Charles S. McNeer Russell W. Britt

• Donald K. Hundt Sol Burstein

• John P. Reeve Richard L. Johnson

• Morris W. Reid

• Jon G. Udell

(*) Member of Executive Committee; all other directors are alternate members OFFICERS Charles S. McNeer .... Chairman of the Board and Chief Executive Officer Russell W. Britt ................. President and Chief Operating Officer Sol Burstein .................................. Executive Vice President John W. Boston ................................... Senior Vice President Themas J. Cassidy ................................ Senior Vice President Nicholas A. Ricci ................................ Senior Vice President Robert H. Gorske .................... Vice President and General Counsel Richard A. Abdoo ................... Vice President - Corporate Planning Carlyle W. Fay ..................... Vice President - Nuclear Operations John H. McLean ..................... Vice President - Customer Relations Russell A. Niles .................. Vice President - Division Operations Huberto R. Platz ......... Vice President - Engineering and Construction Richard E. Skogg ................... Vice President - Operating Services John E. Speaker ........................ Vice President - Communications Kenneth E. Wolters .................. Vice President -S John H. Goetsch ........................................ystem Operations

...... Secretary Jerry G. Remme1...............................................

Treasurer Richard R. Piltz ............................................ Controller John W. Fleissner .................................. Assistant Secretary (crdon A. Willis ................................... Assistant Treasurer GENERAL OFFICES 231 West Michigan Street, P.O. Box 2046, Milwaukee, Wisconsin 53201