ML20096A759
| ML20096A759 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley |
| Issue date: | 12/31/1991 |
| From: | TOLEDO EDISON CO. |
| To: | |
| Shared Package | |
| ML20096A734 | List: |
| References | |
| NUDOCS 9205110204 | |
| Download: ML20096A759 (27) | |
Text
- go w
m,,
'[ [/
s
..e~.m._._ .
.....,,,:,, I - - - ~ - ~ __- . . . . _ .
.m s
1 4 - , .
.' I
. ;g 4
.:' A; *k g_ t
.w ;
Ep -
9
,; x 3991 Annua 1 Report- T
....a.,...,,.........,....~ .' ' ,,,,,,,,,,,,,,,,... ......... 4
- t C'+ 3 suuisiary qcenicior Enasy correation; 4
1
); r
~f
." c:-W g- # ;}
' i
$ }
s
. : f. +
.9 t
I :
t -
- % - i a ,+.t
s.,i-~. ,
.ii ff ;. ._
f . i ,.
1 -.
i .: " 'I
';l:
. 4 f-r L '
aaww 'T.
i i
i _ h '. ll' }.
- n
? tff
-1
- v. >
1 Contents 1 but Toledo Edison 1- Directors 1 Officers -
2 Report of Independent Public Accountants 3 Summary of Signinent AccountingIblicies 5 Management's Financial Analysis.
Finanaal Statements and Notes -
22 Financial and Statistical Review 24 investor Information c-e t
__:2_____---___ _ _ _ _ - _ _ -
y Aboht Toledo Edison Directors The Company, a wholly owned subsidiary of Robert J. farling,' President and Chief Operating Centerior Energy Corporation, pnwides elatric Officer of Centerior Energy Corooration and service to dmut 760,000 people in a 2,500. square mile C(uterior Service Company.
area of nort4vetern Ohio, including the City of .
Edgarll Afangans." \.. ice President and Chief Toledo. The Company also provides electric energy F nancial Officer of the Company and The Cleveland at wholesale to 13 municipally owned distribution
. Electn.c Illum.inating C.ompany and Executive Vice systems and one rural eketric cooperat.ive distribution .-
President of Centerior Energy torporation and system in its service area. The Company's 2.600 Centerior Service Company.
. employees serve about 285,000 customers. -
Richard A. Afillerf" Chairman and Ch.ef Executive Officer of Centerior Energy Corporation and Centerior Service Company.
Executive Off. ices ..... ..
Lyman C. PhiE s, Chairman and Chief Executive TheToledo Edison Company Officer of the Company,I resident and Chief 300 Madison Avenue Executive Officer of The Cleveland Electric -
Toledo, Oh 4365241001 !!!unanating Company and Executive Vice President (419)249 5000 of Centerior Energy Corporation and Centerior Ser. ice Company.
Donald 11. saunders, President of the Company and Vice President of Centerior Service Company.
- Dected Chairman, President and Chief Ewcutive Othcer of Centerior I nergy Corporation and Centerior Service Company effective March 1,1 A "Dected Director of the Company and The Ch veland Cectric illuminating Company etfective March 1.132.
"* Retired from these capacities ef fective March 1,132.
Officers Chairman and Chief Executive Officer . . .Lyman C. Phillips Presicient . . Darald IL Saunders Vice President & Chief Financial Officer .. .Edgarlt Afangans Vice President . . . . fred J. Lange. fr.
Controller . . . Paul G. Busby Treasurer . . . .Cary A1. Hawkinson Secretary . E. Lyle Pepin 1
.,,5
Report of. independent Public Accountants To the Share Owners of ANDERSEN The Toledo Edison Company:
Q)
We have audited the accompanying balant sheet and in our opinion, the financial statements referred to statement of cumulative prefened stock of The above present fairly, it: all material respects, the Toledo Edison Company (a w'aol.v owned subsidiary financial position of The Toledo Edison Company as of Centerior Energy Corport. con) as of December 31, of December 31,1991 and 1940, and the resuhs of its 1991 and 1990, and the related statements of imome, operations and its cash flows for each of the three retained earnings and cash Dows for each of the three years in the period ended December 31,1991, in years in th period ended December 31,1991. These conformity with generally accepted accounting financial statements are the responsibility of the principles.
Company's management. Our responsibility is to As discussed further in the Summary of Significant express an opinion on these financial statements Accounting Policies and Note 12, a change was made based on our audits. in the method of accounting for nuclear plant We conducted our audits in accordance with depreciation in 1991, retroactive to January 1,1991.
- generally accepted auditing standards. Those as discussed further in Note 3(c), the future of -
standards require that we plan and perform the audit Perry Unit 2 is undecided. Construction has been to obtain reasonable assurance about whether the suipended since July 1985. Various options are being financial statements are free of material misstatement. considered, including resuming construction, An audit includes examining on a test basis, converting the unit to a nonnuclear design, sale of all evidence supporting the amounts and disclosures in or part of the Company's ownership share, or the financial statements. An audit also includes canceling the unit. Management can give no assurance assessing the accounting principles used and when, il ever, Perry Unit 2 will go in service or signihcant estimates made by management, as well as whether the Company's investment in that unit and a evaluating the overall financial statement return thereon will ultimately be recovered.
presentation. We believe that our audits provide a reasonable basis for our opinion.
Ib ,
Cleveland, Ohio February 14,1992 L
'a 2
r
~ lS!ntintary of..Signif.icant Accounting Policies .
.. . . ...-... .- . ..... ... . ....... ~ . .. . . . . .... .... ...
! GENERAL- purchased power transactions arid reported as part The Toledo Edison Company-(Company) is an f fuel and purchased power eyese, The amounts I r prior years have also been reciassified to conform electric utility and a wholly owned subsidiary of .
Centerior Energy Corporation (Centerior Energy). with current reporting requirements. See Note 13.
The Compsny follows the Uniform System of Accounts prescribed by the Federal Energy Regulatory FUEL EXPENSE Commission (FERC) and adopted by The Public The cost of fossil fuel is charged to fuel expense based Utilities Commission of Ohio (PUCO). As a rate.
regulated utility, the Company is subject to Statement on inventory usage. The cost of nuclear fuel, of Financial Accounting Standards 71 which govems including an interest component, is charged to fuel
^
accounting for the effects of certain types of rate expense based on the rate of consumption. Estimated future nuclear fuel disposal costs are being recovered regulation.
The Company is a member of the Central Area through the base rates.
Power Coordination Group (CAPCO). Other The Company defers the differences between members include The Cleveland Ekctric illuminating actual fuel cests and estimated fuel costs currently Company '(Cleveland Electric), Duquesne Light. ~ being recovered from customers through the fuel Company (Duquesne), Ohio Edison Company (Ohio factor. This matches fuel expenses with fuel-related Edison) and Ohio Edison's whol;y owned revenues.
. subsidiary,1 Pennsylvania Power Company (Pennsylvania Power). The members have PRE PIIASE-IN AND P11ASE-IN DEFERRALS constrtmted and operate generation and transmission OF OPERATING EXPENSES AND facilities for the use of the CAPCO companies' CARRYING CllARGES Cleveland Electric is also a wholly owned subsidiary of Centerior Energy. The PUCO authorized the Company to record, as deferred charges, certain operating expenses and RELATED PARTY TRANSACTIONS carrying charges related to Perry Nuclear Power Plant Operating revenues, operating expenses and interest Unit 1 (Perry Unit 1) and Beaver Valley Power
- charges include those amounts for transactions with Station Unit 2 (Beaver Valley Unit 2) from their affiliated companies in the ordinary course of resoective in-service dates in 1987 through December business operations. L Amortization and recovery of these deferrab The Company} transactions with w led pre-phase-in deferrale) began in January 1989 Electn,c are pnmanly for firm power, ; Cleveland mterchange in accordance with the January 1989 PUCO rate order
_ power, transmiss on ime rentals and jomtly owned discussed in Note 6. The amortizations will continue po ver plant operations and construction. See Notes 1 over de lives of the related property.
As discussed in Note 6, the January 1989 PUCO Centerior Service Comp ny (Service Company), rate order for the Company mcluded an approved rate the third wholly owned subsidiary of Centerior phase-m plan for the Company,s investments m Energy, provides - management, financial, Perry Unit 1 and Beaver Valley Unit L On January 1,
. administrative, engineering, legal and other services at cost to the Company and other affiliated companies. 1989, the Company began recording the deferrals of The Service Company billed the Company operating expenses and interest and equity carrying
. $61,000,000, $49,000,000 and $40,000,000 in 1991,1990 charges on deferred rate-based ' investment pursuant and 1989, respectively, for such services. to the phase-in plan. These deferrals (called phase-in -
deferrals) will be recovered by December 31,1998.
REVENUES Customers are billed on a monthly cycle basis for their DEPRECIATION AND AMORTIZATION energy consumption based on rate schedules or contracts authorized by the PUCO or on ordinances The cost of property, plant and equipment is depreciated over their estimated useful lives on a with individual municipalities. An accrual is made at the end of each month to record the estimated straight-line basis. Prior to 1991, only nonnuclear amount of unbilled revenues for kilowatt-hour sales property, plant and equipment was depreciated on a rendered in the current month but not billed by the straight-line basis, as depreciation expense for the end of that month. . .
nuclear generating units was based on the units-of-A fuel factor is added to the base rates for electric production method.
service. This factor is designed to recover from The annual straight-line depreciation provision for T customers the costs of fuel and most purchased nonnuclear property expressed as a percent of -
power. It is reviewed and adjusted semiannually in a average depreciable utility plant in service was 3.4%
PUCO proceeding. in 1991,3.3% in 1990 md 3.6% in 1989. The rate Operating revenues include certain wholesale declined in 1990 because of a PCCO approved caange power sales revenues in accordance with a FERC in depreciation vates effective January 1,1990, clarification of reporting requirements. Prior to 1991, attributable to longer es*imated lives for nonnuclear these bulk power sales transactions were netted with property. See Note 13.
3
In 19@, the Nuclear Regulatory Commission DEFERRED GAIN AND LOSS FROM (NRC) approved a six year extension of the operating SALES OF UTILITY PLANT license for the Davis-Besse Nuclear Power Station (Davis-Besse). The PUCO approved a change in the The Company entered into sale and leaseback units-of-production depreciation rate for Davis- transactions in 1987 for the coal-fired Bruce Ma asb6d Besse, effective January 1,1990, which recognized the Generating Plant (Mansfield Plant) and Beave.
life extension. See Note 13. Valley Unit 2 as discussed in Note 2. TS.ese Effective January 1,1991, the Compary changed transactions resulted in a net gain for the aale of its method of accouming for nuclear plant Mansf eld Plant and a net loss for the sab of Beaver depreciation from the units-of production method to Valley Unit 2, both of which were deferred. The the straight-line method at about a 3% rate. The Company is amortizing the applicable deferred gain PUCO approved this change in accounting method and loss over the terms of leases under sale and for the Company and subsequently approved a leaseback agreements. The amortizations along with cl.ange to lower the 3% rate to 2.5% for the three the lease expense amounts are recorded as other operating nudear units retroactive to January 1,1991. operation and maintenate expense.
See Notes 12 and 13.
The Company uses external funding of future INTEREST C11ARGES decommissioning costs for its operating nuclear units pursuant to a PUCO order. Cash contributions are Debt interest reported in the income Statement does made to the funds on a straight-line basis over the not include interest on nuclear fuel obligations.
remaininglicensing period for each unit. Amounts interest on nuclear fuel obligations for fuel under -
currently in rates are based on past estimates of construction is capitalized. See Note 5.
decommissioning costs for the Company of Losses and gains realized upon the reacquisition or
$59,0M000 in 1986 dollars for Davis-Besse and redemption of long-term debt are deferred, consistent
$28,000,000 in 1987 dollars each for Perry Unit 1 and with the regulatory rate treatment. Suct losses and Beaver Valley Unit 2. Actual decommissioning costs gains are either amortized over the remainder of the are expected to significantly exceed these estimates. originallife of the debt issue retired or amortized over it is expected that increases in the cost estimates will the life of the new debt issue when the proceeds of a be recoverable in rates resulting from future rate new issue are used for the debt redemption. The proceedings. The current level of expense being amortizations are included in debt interest expense.
funded and recovered from customers over the remaining licensing periods of the units is PROPERTY, PLANT AND EQUIPMENT approximately $4,000,000 annually. The present funding requirements for Beaver Valley Unit 2 also Property, plant and equipment are stated at original satisfy a similar commitment made as 'part of the sale e st less any amounts ordered by the PUCO to be and leaseback transactm JNussed in Note 2. written off. Included in the cost of construction are items such as related payroll taxes, pensions, fringe benefits, management and general overheads and FEDERAL INCOME TAXES allowance for funds used during construction J The financial statements reflect the liability method of ( AFUDC). AFUDC represents the estimated accounting for income taxes. The liability method composite debt and equity cost of funds used to requires that the Company's deferred tax liabilities be finance construction. This noncash allowance is adjusted for subsequent tax rate changes and that the credited to income, except for certain AFUDC for Company record deferred taxes for all temporary Perry Nuclear Power Plant Unit 2 (Perry Unit 2). See differences between the book and tax bases of assets Note 3(c). The gross AFUDC rate was 10.96% in and liabilities. A portion of these temporary 1991,11.17% in 1990 antl 11.45% in 1989.
differences are attnoutable to property-related timinS Maintenance and repairs are charged to expense as differences that the PUCO used to reduce prior years' incurred. The cost of replacing plant and equipment tax expense for catemaking purposes whereby no is charged to the utility plant accounts. The cost of deferred taxes were collected or recorded. Since the property retired plus removal costs, after deducting r'UCO practice permits recovery of such taxes from any salvage value, is char [;ed to the accumulated customers when they become payable, the net provision for depreciation.
amount due from customers has been recorded as a regulatory asset in deferred charges. A substantial RECLASSIFICATIONS portion of this amount relates to differences between the book and tax bases of utility plant. Hence, the Certain reclassifications have been made to prior recovery of these amounts will take place over the years' financial statements to make them comparable lives of the related assets. with the 1991 fmancial statements and consistent Investment tax credits are deferred and amortized with current reporting requirements. These include over the estimated lives of the applicable property, reclassifications rele.ted a certain wholesale power The amortization is reported as a reduction of sales revenues as discussed previously unde.
depreciation expense under the liability method " Revenues" and accumulated deferred rents as See Note 7. discussed in Note 2.
4
Management's Financial Analysis RESULTS OF OPERATIONS related costs in rates, we have requested PUCO Om'icm approval to accrue post-in-service carrying costs and The January 1989 PUCO rate order for the Company, defer depreciation for facilities that are in service but as discussed in Note 6, was designed to enable us to not yet recognized ..i rates. PUCO action on this begin recovering in rates the cost of, and earn a fair request has been pnstponed under the joint return on, our allowed investment in Perry Unit I recommendation approved by the PUCO discussed and Beaver Valley Umt 2. The rate order, which below.
providec. for three rate increases, improved revenues in December 1991, the PUCO approved a joint and cash flows in 1989,1990 and 1991 from the 1988 recommendation of the Company, Cleveland Electric levels. However, as discussed in the first four and customer representative groups involved in the paragraphs of Note 6, the phase-in plan was not 1989 rate case settlement. The joint recommendation designed to improve earnings t=cause gains in sought to secure an interim resolution of then-revenues from the higher rates and assumed sales pending accounting applications in 1991 and to growth are initially offset by a corresponding establish a framework for resc,1ving accounting issues reduction in the deferral 1 nuclear plant operating and related matters on a icager-term basis (i.e.,1992-expenses and carrying charges and are subsequently 1995). As part of this joint recommendation, the offset by the amortization of such deferrals. Company and Cleveland Electric agreed to limit their _
Although the phase-in plan had a positive effect combined 1992 other operation and maintenance ori revenues and cash flows, there are a number of expenses and capital expenditures to $1,050,000,000, factors that eserted a negative influence on earnings in exclusive of compliance costs related to the Clean Air 1991 end will continue to present significant eamings Act Amendments of 1990 (Clean Air Act). Other challenges in 1992 and beyond. One such factor is operation and maintenance expenses and capital related to facilities placed in service after February expenditures on a consolidated basis for Centerior 1988 and not included in rate base. The Company is Energy totaled $1,005,000,000 in 1991. The Company, requ; red to record interest charges and depreciation Cleveland Electric and the customer representative on these facilities as current expenses even though groups also agreed to an ongoing review of our such items are not yet recovered in rates. We also are business operations, financial condition and facing the challenge of competitive forces, including accounting practices. This effort, with the participation new initiatives to create municipal electric systems. of the PUCO staff, is directed at the maintenance and The need to meet competitive threats, coupled w th a i ultimate improvement of our fmancial condition, the desire to encouragc economic growth in the service improvement of the efficiency of our operations, and area, is prompting the Company to enter into an the delay and minimization of future rate increases.
increasing number of contracts having reduced rates The Company and C'eveland Electric also agreed not with certa n large cus 'mers. Co..ipetitive forces also to seek any base rate increase that would become prompted us to implement rate reductions in 1991 for effective before 1993.
residential and small commercial customers. Factors The Company continually faces competitive beyond our control also having a negative influence _ threats from municipal electric systems within its on earnings are the economic recession, the effect of service territory, a challenge intensified by municipal inflauon and increases in taxes, other than federal access to low-cost power currently available on the income taxes. wholesale market. As part of our competitive The Company has taken several steps to counter strategy, we are strengthening programs that
't e adverse effects of the factors discussed above. We demonstrate the added value inherent in our service, have implemented most of the recommendations of beyond what one might receive from a municipal the management audit discussed in Note 6 and have electric system. Such programs include providing taken other actions which reduced other operation se vices to communities to help them retain and and maintenance expense by approximately attract businessn providing consulting services to
$17,600,000 in 1991. As discussed in the Summary of customers to improve their energy efficiency a,nd Significant Accounting Policies and Note 12, we developing demand-side management programs. To sought and received PUCO approval to lower our counter new municipalization initiatives, we are also nuclear plant depreciation expense in 1991 to a level stressing the fmancial risks and uncertainties of more closely aligned with the amount being creating a municipal system and our superior recovered in rates. In addition, we have increased our reliability and service, efforts to sell power to other utilities which, in 1991, . Annual sales growth is expected to average resulted in approximately $3,100,000 of revenues in about 2*o for the next several years, contingent on excess of the cost of providing the power. future economic events. Recognizing the limitations Despite the positive aspects of the measures impcsed by these sales projections and current discussed above, more must be done to maintain competiFve pressures, we will utilize our best eamings. Continuing cost-reduction efforts will be efforts to minimize future rate increases through necessary to lessen the negative pressures on cost-reduction and quality-of-service efforts and earnings. The Company is aggressively seeking long- exploring other innovative options. Eventually, term power contracts with whalesale customers to rate increases will be necessary to recognize the cost further enhance revenues. To counter the effects of of our new capital investment and the eheet of delays in recovering new investment since 1988 and inflation.
5
1991 t s.1990 The major factor accounting for the increase in Factors contributing to the 2.8% increase in 1991 base rates and miscellaneous operating revenues was operating revenues are as follows: related to the Januarv 1989 rate order. The PUCO innease approved rate incrcases for the Coinpany of 9%
Change in Oycrating Revenues (Dearase) effective in February 1989 and 7% effective in Base Rates and Miscellaneous . $20.000 000 February 1990. The associated revenue increase in Sales Volurv and Mh , 7,000.000 1990 was partially offset by reduced revenues Wholesale Sales. - (3,000,000) resulting from a 9.1% decrease in total kilowatt-hour
$R0m000 sales. Industrial sales decreased 3.3% because of the recession beginning in 1990. Residential and A significant factor accounting for the increase in commercial sales decreased 3.3% and 0.4%,
operating revenues resulted from the January 1989 respectively, as seasonal temperatures were more PUCO rate order for the Company. The PUCO moderate in comparison to the prior year's approved rate increases of 7% effective in February temperatures, resulting in reduced customer heating 1990 and 2.74% effective in February 1991. Hov.ever, and cooling-related demand. Other sales activity as part of the Company's efforts to improve its decreased 22.1% as a result of lower wholesale sales.
competitive position in its service area, the Company Operating expenses decreased 1.7% in 1990.
waived its 2.74% rate increase for residential and Depreciation and amortization expense decreased small commercial customers and reduced its primarily because of lower depreciation rates used in residential rates by 3% effective in March 1991 and by 1990 for nonnuclear and Davis-Besse property an additional 1% effective in September 1991. See attributable to longer estimated lives and because of Note 6. Total kilowatt-hour sales increased 3.3% in longer nuclear generating unit refueling and 1991. Residential and commercial sales increased 4.6% maintenance outages in 1990 than in 1989. Federal and 4.3%, respectively, as a result of higher usage of income taxes decreased primarily because of a cooling equipment in response to the unusually decrease in pretax operating income. These warm late spring and summer 1991 temperatures. The decreases in operating expenses were partially offset commercial sales increase was also influenced by by an increase in taxes, other than federal income some improvement in the economy for the taxes, resulting from higher property and gross commercial sector. Industrial sales declined 2% largely receipts taxes, and by lower operating expense because of the recession-driven slump in the auto, deferrals for Perry Unit 1 and Beaver Valley Unit 2.
glass and metalindustries. Other sales increased 8.5% Credits for carrying charges recorded in because of increased sales to wholesale customers. nonoperating income decreased in 1990 because a Operating expenses increased 2.3% in 1991. The greater share of our investments and leasehold increase was mitigated by a reduction of $17,600,000 interests in Perry Unit I and Beaver Valley Unit 2 in other operation and maintenance expense, resulting were recovered in rates. Other income and primarily from cost cutting measures. Offsetting this deductions, net, decreased primarily because of less decrease were an increase in federal income taxes interest income in 1990. These decreases were because of higher pretax operating income; an partially offset by an increase in federal income tax increase in taxes, other than federal income taxes, credits related to nonoperating income resulting from resulting from higher property and gross receipt taxes a decrease in pretax nonoperating income atid federal and accruals for Pennsylvania tax increases enacted income tax adjustments of $18,810,000 associated in August 1991; an increase in fuel and purchased with previously deferred investment tax credits power expense resulting primarily from mereased relating to the 1988 write-off of nuclear plant. Interest amortization of previously deferred fuel costs over the expense decreased in 1990 because of refinancings by amount amortized in 1990; and lower operating the Company and a lower level of debt outstanding.
expense deferrals for Perry Unit 1 and Beaver Villey Unit 2 pursuant to the January 1989 PUCO .e EFFECT OF INFLATION order. Although the rate of inflation has eased in recent Credits for carrying charges recorded in years, we are still affected by even modest inflation nonoperating income decreased in 1991 because a since the regulatory process introduces a time-lag greater share of our investments and leasehold during which increiased costs of our labor, matenals interests in Perry Unit 1 and Beaver Valley Unit 2 and services are not reflected in rates and recuvered.
were recovered in rates. The federal income ta' Moreover, regulation allows only the recovery of provision related to nonoperating income increased historical costs of plant assets through depreciation mainly because the 1990 provision was reduced by even though the costs to replace these assets would 518,810,000 for federal income tax adjustments substantially exceed their historical costs in an associated with previously deferred investment tax inflationary economy.
credits relating to the 1988 write-off of nuclear plant. Changes in fuel costs do not affect our results of 1990 es.1989 operations since those costs are deferred until reflected in the fuel cost recovery factor included in Factors contributing to the 0.3% decrease .in 1990 customers' bills, operatmg revenues are as follows:
Increase Change in Operating Revenues (Decreasej Base Rates and Macellanenus . $ 37 000lxU Sales Volurne and Mix. (29 000 000)
Wholesale Sales. f 10S00 000) 5 (2,0m w a) 6
% l Income $lalCmCH f J . . . . . . . . . . . . . . . . . . . . . .. ... .. '..THE p .... ........ 4....... . . .TOUDO
. . . .EDfSON
. . . . .COMMN For the years ended December 31, _
1991 1990 1989 _
(thousands of dollars)
Operating Revenues (1)'. . . . . . . . . . .. ... .. .. - $887,258 $863,173 $865,623 --
L- ,
l ' Operating Expenses
- Fuel and purchased power . . . . . . . . . . . . . .. .. .... 177,642 174,309 172,220
- Other operation and maintenance . . . . . . ..... . . . 355,728 -373,374 372,530 g 1 Depreciation and amortization . . . . . . . . . ........ . 72,137 72,627 85,057 6, Taxes, other than federal income taxes , . . ... . . 88,656 79,320 72,123 K - Phase-in deferred operating expenses . . . . . . . . . . . . . . . . . . (5,796) (16,980) (22,535) h Amortization of pre-phase-in deferred costs .... .. 6,943 7,196 6,782 H L Federal income taxes . . . .. . .. .. . . . . . 31,767 - 21.041 '37,285 727,077 710.887 723,462
' Operating income . . . . .. . . . .. .... .. . ... 160,181 152,286 142,161
-Nonoperating income
- Allowance for equity funds used during construction . . . 1,499 3,352 8,568
- Other income and deductie.as, net :. . . . .. .. . .. 3,628 6,305 20,517 -
{:
t LPhaselin carrying charges. . . . ....... .. . ... ... 21,986 '43,487 82,308 -
Federal incon.e taxes - credit (expense) . . . . .. (6,228) 8,664 (21,563) -
'20,885 61,808 89,830 income Before interest Charges. . . . . . . . . . , . . ... . 181,066 214,094 231.991 Interest Charges Debt interest .., ..... .. ... ...... ......... ....
132,3d9 135,344 --144,792 Allowance for borrowed funds used during construction .. - (946) (2,674) (5,479) 131,453 132,670 - 139,313-Net In com e . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . .. 49,613 81,424 92,678
-Preferred Dividend Requirements , , .... ...... . 24,792- 25,159 - 25,390 L
- Earnings Available for Common Stock . . . . . .. $ 24,821 -
$ SL E $ 67,288 (1) Includes revenues from bulk power sales to Cleveland Electric of $127,691,000. $111,761,000 and $114,123,000 in 1991,1990 and 1989, respectively.
c
. Retained Earnings For the years ended December 31, 1991 1990 1989 (thousands of donars)
- Balance at Beginning of Year. ... .. . ... , S 82,956 $ 99.965 $ 89,614
- Additions Net income . .. . ... ...... . . . . 49,613 81,424 92,678
' Deductions .
- Dividends declared:
Common stock . . . . .. . ... .. . . (17,831) -(73,283) (63,285)
Preferred stock . . . . .. . . (24,809) (25,145) (19,036)
Other'.... , . . . ... . .. ,
(5) (5) -(6)
' Net increase (Decrease) . ... . 6,968 (17.009) 10,351
' Balance at End of Year . ... . . . . $ 89,924 $ 82,956 $ 99,965 The accompanying notes and summary of significant accounting policies are an integral part of these statements.
L 7
. Management's Financial Analysis . . .. ... .. . . .. . . . . . .
are expected to be financed externally. If economical, CAPITAL RESOURCES AND L1QUIDITY additional securities may be redeemed under in addition to our need for cash for normal corporate ptional redemption provisions. See Notes 10(c) and operations, we continue to need cash for an ongoing (d) for information conceming limitations on t.ie program of constructing new facilities and modifying issuance of preferred and preference stock and debt.
existmg facilities to meet anticipated demand for electric service, comply with governmental gur capital requirements after 1994 will depend on the implementation strategy we choose to achieve regulations and protect the environment. Cash is also c mpliance with the Clean Air Act. Expenditures for needed for the mandatory retirement of securities. our plan are estimated to be approximately Over the three-year period of 19891991, these $35,000,000 over the 1992 2001 period. See Note 3(b).
construction and mandatory retirement needs totaled We expect to be able to raise cash as nerded. The approximately $450,000,000. In addition, we availability and cost of capital to meet our external exercised various options to redeem and purchase financing needs, however, depends upon such factors approximately $165,000,000 of our securities, as financial market conditions and our credit ratings.
As a result of the January 1989 PUCO rate order, Current securities ratings for the Company are as intemally generated cash increased in 1989,1990 and IU"*S 1991 from the 1953 level. In addition, we raised standard Moody's
$M1,000,000 through security issues and term bank loans during the 1989-1991 period as shown in the co,y,,[,n My Cash Flows statement. During the three-year period, BBB- Bd*3 D"' ""N b "d*-
the Company also utilized its short-term borrowing U " """d " t'S- 3B+ B*l arrangements (explained in Note 11) to help meet Prefmed st (k . BB+ ba2 its cash needs. Proceeds from these financings were used to help pay for our construction program, to repay portions of short-term debt incurred to finance A write-off of the Company's investment in Perry the construction program, to retire, redeem and Unit 2, as discussed in Note 3(c), depending upon purchase outsta. ling securities, and for geneml the magnitude and timing of auch a write oif, could corporate purposes.
reduce retained eamings sufficiently to impair its Estimated cash requirements for 1992-1994 for the ability to declare dividends, but would not affect cash Company are $248,000,000 for its construction flow.
program and $241,000,000 for the mandatory The Tax Reform Act of 1986 (1986 Tax Act) redemption of debt and preferred stock. We expcct to provided for a 34% , income tax rate in 1988 and finance extemally about 50% of our total 1992 thereafter, a new attemative minimum tax ( AMT) and construction and mandatory redemption other changes that resulted in increased tax payments requirements of approximately $180,000,000. About and a reduction in cash flow during 1989,1990 and 10-20% of the Company's 1993 and 1994 requiremeats 1991 because we were subject to the AMT.
8
Cash Flows rm rom ansou comur For the years ended December 31, 1991 1990 1989 (thousands of dollars)
Cash Flows from Operating Activities (1)
Net income .... . .. S 49,613 $ 81,424 5 92,678 Adjustments to Reconcile Net income to Cash from Operating Activities:
Depreciation and amortization 72,137 72,627 85,057 Deferred federal income taxes . .
31,522 30,642 79,199 investment tax credits, net . .. . . 30,206 (17,063) 1,237 Deferred and unbilled revenues . (25,566) (22.658) (42,624)
Deferred fuel . . .... 4,198 (433) 16,259 Carrying charges capitalized .. (21,986) (43,487) (82,308)
Leased nuclear fuel amortization . 53,904 37,122 46,408 Deferred operating expenses, net .. 1,147 (9,784) (15,733)
Allowance for equity funds used during construction (1,499) (3,352) (8,"tS)
Amortization of reserve for Davis-Besse refund obligations to customers .. . . .
(12,655) pension settlement gain . .
(6,449) -
Changes in amounts due from customers and others, net 2,780 (9,433) (4,406)
Changes in inventories . .. (7,135) (6,521) 1,890 Changes in accounts payable . (12,685) 6,658 (2,048)
Changes in working capital affecting operations. (25.975) 1,528 (30,713)
Other noncash items . .. 14.73o 16.309 16,840 Total Adjustments . . . . . 115,778 45,706 47,815 Net Cash from Operating Activities. . . 165,391 127,130 140,493 Cash Flowa from Financing Activities (2)
Dank loans, commercial paper and other short-term debt. (25,200) 23,200 -
Notes payable to affdiates . .
14,200 16,000 -
Debt issues:
First mortgage bonds. - 67,300 56,100 Secured medium-term notes . 134,500 - -
Term bank loans and other longterm debt . 108,365 15,000 -
Maturities, redemptions and sinking funds. . (178,993) (183,477) (65,006)
Nuclear fuel lease and trust obligations (51,728) (42,947) (39,015)
Dividends paid . . . . . (42,639) (98,427) (88,743)
Premiums, discounts and expenses . . (1,001) (1,845) (925)
Net Cash from Financing Activities . (40,496) (205.196) (137,589)
Cash Flows from Investing Activities (2)
Cash applied to construction . . . (51,393) (80,667) (61,360)
Interest capitalized as allowance for borrowed funds used during construction .
(946) (2,674) (5,479)
Loans to affiliates . . . (12,000) 114.000 (114,000)
Other cash applied. . . . . (3,3 74) (4.178) (3.261)
Net Cash from investing Activities .. . (67,713) 26.481 (184,100)
Net Change in Cash and Temporary Cash investments. '57,182 (51.585) (181,196)
Cash and Temporary Cash investments at Beginning of Year . 22,107 73.692 254,888 Cash and Temporary Cash investments at End of Year. $ 79,289 $ 22,107 5 73,692 (1) Interest paid (net of amounts capitalized) was $120,000,000, $114,000.000 and $104,000,000 in 1991,1990 and 1989, respectively. Income taxes paid were $9,465,000 and $2.272,000 in 1991 and 1990, respectively. No income taxes were paid in 1989.
(2) Increases in nuclear fuel and nuclear fuellease and trust obligations in the Balance Sheet resulting from the noncash capitalizations under nuclear fuel agreements are excluded from this statement.
The accompanying notes and summary of significant accounting policies are an integral part of this statement.
9
7 r
Balance Sheet ,
December 31, 1991 ,
1990 (thousmis of dollm).
1 ASSETS
' PROPERTY, PLANT AND EQUIPMENT Utility plant in service . . . . . . . . . , . . . . . . . .. .. .. .. $2,692,274 $2,603,883 3- Less: accumulated depreciation and amortization . . . . . . 709,505 640,252 1,982,769 1,963,631 1 Construction ' work in progress .. . . .. .. . . ...... . 53,965 - 93,154 Perry Unit 2. . . . . .... .. . .. .. ....... . 342,767 343,685 2,379,501 2,400,470 Nuclear fuel, net of amortization . . . . . . . 195,285 221,848.
Other property, less accumulated depreciation . . , . . . . . . . . 2,679 2,024-2,577,465 2.624,342 CURRENT ASSETS . . ;
Cash and temparary cash investments . . .... .. .. 79,289 22,107 Amounts'due from customers and others, net . . . .. . . 60,453 63,233 -
- Accounts receivable from affiliates . .. . . 21,917-. 29,99(-
- Notes receivable from affiliates . . . . . . . . .. ..... . .. .. 12,000 -
Unbilled revenues . . . . . . . . ... ,, . , .. . . . 21,844 20,16t Materials and supplies, at average cost . . . ... . ... 36,575- 32,666 Fossil fuel inventory, at average cost . . .... . . .. . . 18,804 15,578 Taxes applicable to succeeding years. . .. .. . . . . 66,343 63,375 O t h er . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2,760 2,473 p 319,985 249,597
- DEFERRED CHARGES Amounts due from customers for future federal income taxes. . . 472,199 494,454 Unamortized loss from Beaver Vauey Unit 2 sale. .. . 114,174 119,623 -
E Unamortized loss on reacquired debt . ........ . ... 25,672 27,404 Carrying charges and operating expenses, pre-phase.in . 244,404 252,2 %
-. Carrying charges and operating expenses, phase-in . . . 193,099 165,310 Other. , , . . ... .. . ... . . . .., .. . . .. .. 67,514 68,582 1,177,062- 1,127,579 Total Assets . . .. .. . ... . $4,014,512 $4,001,518 .
The accompanying notes and summary of significant accounting policies are an integral part of this statement.
..s. . .
10 .
.(
o Tile TOI.E*.)O EDISON COMPANY
- i _ . ................. ........ .., .. .. ... . , ......... ,,, . . ...... . . .., .. .. .. ..
December 31, 1991 1990 (thousands of dullm)
- CAPITALIZATION AND LIABILITIES
- CAPITAU2ATION J Common shares, $5 par value: o0,000,000 authorized:
39,134,000 outstanding in 1991 and 1990. , . . . . . . . , $ 195,687 $ 195,687 Premium on capital stock . . . . . ... . . .. 481,082 481,082 Other paid-in capital . . . . . . . . . . . . . . , ,. 121,059 121,059 Retained earnings , . . . . . . . . . . . . . . . ....., ...... ... 89,924 82,956
. Common stock equity . . . . . . . . . . . . . . . . . . ... .. . 887,752 880,;84 Preferred stock With mandatory redemption provisions . . .. .. 63453 66,328 Without mandatory redemption provisions . 210,0 9 210,000 Long-term debt . , . . . . . ,, . . .. ... ..... . ...... 1,158,510 1,097,326 2,319,9C ? 254.438 OTHER NONCURRENT UABlUTIES Nuclea.r fuel lease obligations . ,, . . .. . . . 143,145 180,835 Other... .... .. . ....... ... . . .. .
49,756' 48,009 192,901 228.844 CURRENT UABlUTIES Current portion of long4erm debt and preferred stock . . . . . .. 123,476 116,150 'e Current portion of lease obligations. . . . ... .. 63,692 50,389 -!
Notes payabie to banks and others . .... .. 3,200 Accounts payable . . . . . . . . . . . . . . . . . ... . .. . . . 55,274 67,959 Accounts and notes payable to affiliates . . . . ., . . . . 39,538 31,626 Accrued taxes .. ...., .. .... .. ...., . ... . 67,770 96,973
- Accrued interest . . . . . . . . .. ... .. ., ,,, 31,399 31.665 Other..... . . ..... . .. .. . . .., ., .. 16,180 35,113 397,329 453,075 DEFERRED CREDITS '
Unamartized investment tax credits. . . ... . 107,729 83,377 Accumulated deferred federal income taxes . . . . . . . . . . ,. '577,479 571,233 Reserve for Perry Unit 2 allowance for funds used during construction , , . . . . . ... . ... . ... .. 88,295 88,295 Unamortized gain from Bruce Mansfield Plant sale . . . . . . . 227,380 236,835-Accumulated deferred rents for Bruce Mansfield Plant and Beaver Valby Unit 2 . . . . . .. .. . . . .. ...... .. 66,888 57,843 Other.. ..... .... . . . .. . . 36,546 27,578 1.104,317 1,065,161 Total Capitalization and Liabilities. . .. . . $4,014,512 54,001,518 11 l l
Stalettsellt of Citratislative Preferred Stock ,, . , ,,,, ,,,, ,,,
rm rouvo coiscu cowq.w ,
1991 Shares Current Decernber 31.
Outstanding Call Price 1991 1990 (thousands of dollars)
$100 par value,3,000,000 preferred shares authorized and $25 par value, 12,000,000 preferred shares authorized Subject to mandatory redemption:
$100 par $11.00 . . . . . .. 24,825 $101.00 $ 2,483 $ 3,483 9.375 .. . ,
133,450 103.46 13,345 15,010 25 par 2 81 . ..... ... 2,000,000 26.56 50,000 50,000 65,828 68,493 Less: Curretit maturities 2,165 2,165 Total Preferred Stock, with Mandatory Redemption Provisions S 63,663 $ 66,328 Not subject to mandatory redemption:
$100 par $ 4.25 . . 160,000 104.625 $ 16,000 $ 16,000 4.56 .. 50,000 101.00 5,000 5.000 4.25 . . .. 100,000 102.00 10,000 10,000 8.32 .. 100,000 102.46 10,000 10,000 7.76 . .. 150,000 102.437 15,000 15,000 7.80 .
150,000 101.65 15,000 15,000 10.00 . . .. .
190,000 101.00 19,000 19,000 25 par 2.21 . .
1,000,000 25.25 25,000 25,000 2.365 . . . . . . . 1,400,000 28.45 35,000 35,000 Series A Adjustable . 1,200,000 25.75 30,000 30,000 Series B Adjustable .
1,200,000 25.75 30,000 30,tX)0 Total Preferred Stock, without Mandatory Redemption Provisions $ 210,000 $210,000 The accompanying notes and summary of significant accounting policies are an integral part of this statement.
1 12
Notes to the Financial Statements .,
(1) PROPERTY OWNED WITH OTiiER UTILITIES AND INVESTORS The Company owns, as a tenant in common with other utilities and those investors who are owner-participants in
'various sale and leaseback transactions (Lessors), certain generating units as listed below Each owner owns an
- undivided share in the entire unit. Each owner has the right to a percentage of the generating capability of each unit equal to its ownership share. Each utility owner is obligated to pay for only its rerective share of the construction and operating costs. Each Lessor has leased its capacity rights to a utility which is obligated to pa: 'r such lessor's share of the cont.truction and operating costs. The Company's share of the operating costs of these generating units is included in the income Statement. Property, plant and equipment at December 31, '991 includes the following facilities owned by the Company as a tenant in common with other utilities and Lessors:
. Owner. Construction In- Owner- ship Plant Work in Service ship Mega- Power in Progress and Accumulated
. _ Generating Unit Date Share watts Scurce Sernce Suspended - Deprecution in Service; (thousands of dollars)
Davis-Besse . . - . .. ... 1977 48.62 % 429 . Nuclear $ 661,573 $ 13.436 $139.504 Perry Unit 1 and Common Facihtws . 1987 19 91 238 Nuclear 923,503 1,486 119,374 Beaver Valley Unit 2 and Common Facilitu (Note 2) . 1987 1.65 13 Nuclear 188.560 1.698 23.333 Construction Suspended; Perry Unit 2 (Note 3(c)) . Uncertain 19.91 240 Nuclear -
342.767 -
$1.773.636 $359.387 $281.211 (2) UTILITY PLANT SALE AND LEASEBACK TRANSACTIONS As a result of sale and leaseback transactions Valley Unit 2 lease were 544,556,000 and completed in 1987, the Company and Cleveland $72,276,000, respectively. Amounts charged to Electric are co-lessees of 18.26% (150 megawatts) of expense in excess of the lease payments are now '
' Beaver Valley Unit 2 and 6.5% {51 megawatts),45.9% classified as accumulated deferred rents on the (358 megawatts) and 44.38% (355 megawatts) of Balance Sheet. Previously, the excess was included in
' Units 1,2 and 3 ot the Mansfield Plant, respectively, accounts payable, all for terms of about 29% years. The Company and- Cleveland Eler*ric are l As co-lessee with Cleveland Electric, the Company responsible under these leases for paying all taxes, is also obligated for Cleveland Electric's lease insurance premiums, operation and maintenance costs pay'ments. If Cleveland Electric is unable to make its and all other similar costs for their interests in the
. payments under the Mansfield Plant leases, the units sold and leased back. The Company and Company would be obligated to make such payments. Cleveland Electric may incur additional costs in No payments have been made on behalf of _ connection with capital improvements to the units.
- Cleveland Electric to date. The Company and Cleveland Electric have options to Future minimum lease payments under these buy the interests back at the end of the leases for the
. operating leases at December 31,1991 are summarized fair mar ~ket value at that time or to renew the leases, as follows: Additional lease provisions provide other purchase For options along with conditions for mandatory l For du Cleveland termination of the leases (and possible repurchase of ;
~
Company ; Electric Y?ar the leasehold interests) for events of default. These (thousands of dollars) events of default include noncompliance with several 1992. . $ 110.000 -$ 63.000 ' financial covenants affecting the Compt.ny, Q,
1995.
Q W ,000 63,000 Cleveland Electric and Centerior Energy contained in an agrcement relating to a letter of credit issued in 1996.. . 111.000 n000 connection with the sale and leaseback of Beaver
!.ater Years 2.480.000 1.516.000 Valley Unit 2, as amended in 1989. See Note 10(d).
Total Futuna Mmimum The Company is selling 150 megawatts of its
- t. ease Payments .
$3.03mo $1.831.000 Beaver Valley Unit 2 leased capacity entitlement to-Cleveland Electric. This sale commenced in 1988 and
[ Sc.niannual lease payments conform with the we anticipate that it will continue at least until 1998.
l' payraent schedule for each lease. Revenues recorded for this transaction were
! Rental expense is accrued on a straight-line basis $106,589,000, $102,773,000 and $104,127.000 in 1991, over the terrrr; of the leases. The amounts recorded by 1990 and 1989, respectively. The future minimum the Company in 1991,1990 and 1989 as annual rental lease payments associated with Beaver Valley Ur '- 2 expense for the Mansheld Plant leases and the Beaver aggregate $1.869,000,000.
+
t l
13
(3) CONSTRUCTION AND CONTINGENCIES for $3,324,000. Y a purchase does not signal any plans to resume construction of Perry Unit 2, but rather an (a) CONSTRUCTION PROGRAM intent to keep the various options onen. Duquesne The estimated cost of the Company's construction had stated that it would no* agree to resumption of program for the 1992-1994 period is $260,000,000, construction of the unit.
including AFUDC of $12,000,000 and excluding if Perry Unit 2 were to be canceled, then the nuclear fuel. Company's net investment in the unit (less any tax in an agreement approved by the PUCO, the saving) would have to be written ,ff. We estimate Company and Clevelaad Electric have agreed to limit that such a write-off, based on our investment in this their combined 1992 other operation and unit as of December 31,1991, would have been about maintenance expenses and capital expenditures to $171,000,000, after taxes. See Notes 10(b) and (d)
$1.050,000,000, exclusive of compliance costs related for a discussion of potential consequences of such a to the Clean Air Act. Within this limitation, capital write-off.
expenditures are budgeted at $59,000,000 for the if a decision is made to canvert Perry Unit 2 to a Company, exclusive of the Clean Air Act compliance nonnuclear design in the future, we would expect to costs. write-off at that time a portion of our investment for nuclear plant construction costs not transferable to the (b) CLEAN AIR LEGISLATION nonnuclear construc+ ion project.
The Clean Air Act will require, among other things, Beginning in July 1985, Perry Uni' 2 AFUDC was significant reductions in the emission of sulfur dioxide credited to a deferred income account until January 1, and nitrogen oxide. by fossil-fueled electric 1988, when the accrual of AFUDC was discontinued. -
generating units. The Clean Air Act yvill require that sulfur dioude emissions be reduced m two phases (d) SUPERTUND SITES over a ten-year period. The Comprehensive Environmental Response, Centerior Energy has developed a compliance Compensation and Liability Act of 1980 as amended st,tegy for the Company and Cleveland Electric (Superfund) established programs addressing the which will be submitted to the PUCO for review in cleanup of hazardous waste disposal sites, emergency April 1992. Centerior Energy will also seek United preparedness and other issues. The Company is States Environmental Protection Agency approval of aware of its potential involvement in the cleanup of Phase i plans in 1993. Our compliance plan would two hazardous waste sites. The Company has require capital expenditures for the Company over the recorded reserves based on estimates of its 1992-2001 period of r> proximately $35,000,000 for proportionate responsibility for these sites. We believe nitrogen oxide comrol equipment, emission that the ultimate outcome of these matters will not monitoring equipment and plant modifications. In have a material adverse effect on our financial addition, higher fuel and other operation and condition or results of operations.
maintenance expenses would be incurred. The rate increase associated with the Company's capital (4) NUCLEAR OPERATIONS AND expenditures and higher expenses would be less than CONTINGENCIES 2% over the ten year period.
Our fmal com'pliance plan will depend upon future (a) OPERATING NUCLEAR UNITS environmental regulations and input from the PUCO, The Company's interests in nuclear units ma) '
other regulatory bodies and other concerned entities. impacted by activities or events beyond its control.
We believe that Ohio law permits the recovery of Operating nuclear generating units have experienced compliance costs from customers in rates. unplanned outages or extensions of schedubd
"" E '*"*'4" '"' P~ " " " ' " ' "
(c) PERW UNIT 2 regulatory requirements. A major accident at a nuclear Perry Unit 2, including its share of the common facility anywhere in the world could cause the NRC facilities,is approximately 50% complete. Construction to limit or prohibit the operation, construction or of perry Unit 2 was suspended in 1985 pending future licensing of any nuclear unit. If one of our nuclear consideration of various options, including units is taken out of service for an extended period of resumption of full construction with a revised time for any reason, including an accident at such estimated cost, conversion to a nonnuclear design. anit or any other nuclear facility, the Company sale of all or part of our ownership share or cannot predict whether regulatory authorities would i cancellation. No option may be implemented without impose unfavorable rate treatment such as taking our the unanimous approval of the owners. In October affected unit out of : ate base or disallowing certain 1991, Cleveland Electric, the company responsible for construction or maintenance costs. An extended the const-uction of Perry Unit 2, applied for a ten- outage of one of our nuclear units coupled with year extension of the cons:ruction permit which was unfavorable rate treatment could have a mater;al to expire in November 199L Under NRC regulations, adverse effect on our financial position and results of the construction permit will remain in effect while operations.
the application is pending. We expect the NRC to grant the extension. (b) NUCLEAR INSURANCE in February 1992, Cleveland Electric purchased The Price- Anderson Act hmits the liabihty of the Duquesne's 13.74% ownership sFare of Perry Umt 2 owners of a nuclear power plant to the amount 14
h ,,rovided ' by private insurance and - an industry $71,000,000, $33,000,000 and $15,000,000, respectively,
' assessment plan. In the event of a nuclear incident at as of December 31,1991. The nuclear fuel amounts any un_it in the United States resulting in losses in fmanced-and capitalized also included interest
( excess of the level of private isu usance (currently charges incurred by the lessors amounting to
$200,000,000), the' Company's masimum potential-- $9,000,000 in 1991, $14,000,000 in 1990 and $19,000,000
~
assessment under that plan (assuming the other in 1989. The estimated future lease amortization CAPCO companies were to contribute their payments based on projected consumption are
. proportionate share of any assessment) would be $45,000,000 in 1992, $45,000,000 in 1993, $40,000,000 in
$58,503,000 (plus any inflation adjustment) per 1994, $34,000,000 in 1995 and $35,000,000 in 1996.
. inciden', but is limited to $8,844,000 per year for each
- nuclear incident. (6) REGULATOltY MATTERS
- The CAPCO companies have insurance coverage ifor damage to property at the Davis 4 esse, Perry and On January 31,1989, the PUCO issued a rate order
- Beaver Wiley sites (including leased fuel and clean. which provided for three annual rate increases for the up costs). Coverage amounted to $2,515,000,000 for Company of approximately 9%,7% and 6% effective
- each site as of January 1,1992. Damage to property with bills rendered on and after February 1,1989, could exceed th0 insurance coverage by a substantial 1990 and 1991, respectively. As discussed below, the amount; If it does, the Company's share of such 6% increase effective February 1,1991 was reduced to 2.74% for the Company, which later waived its 2.74%
excess amount coulo have a material adverse effect on its financial conditica and results of operations. increase and reduced its rates on two occasions in 1991 for certain customers. The resulting annualized The Company also has extra expense insurance revenue increases in 1989,1990 and 1991 associated coverage which includes the incremental cost of any with the rate order were $50,700,000, $44,300,000 and replacement powcr purchased @ver the costs which
$1,600,000, respectively. The 51,600,000 increase in
-would have been incurred had 'he units been 1991 reflects the net of $18,600,000 of annualized operating) and other incidental expenses after the J occurrence of certain types of accidents at our nuclear revenues authorized for the 2.74% increase less
$17,000,000 for the waiver and rate reductions.
units. The amounts of the coverage are RO% of the estimated extra expense per week during tht: 52-week Under the January 1989 rate order, a phase-in plan was designed so that the three rate increases, coupled period starting 21 weeks after an accident,67% of such estimate per week for the next 52 weeks ano 33% with then-projected sales growth, would provide of such estimate per week for the next 52 weeks. The revenues sufficient to recover all operating expenses
= amount and- duration of extra expense could and provide a fair rate of return on the Company's substantially exceed the insurance coverage. allowed investment in Perry Unit I and Beaver Valley Unit 2 for ten years beginning January 1,1989. In the (5) NUCLEAR FUEL first five years of the plan, the revenues were expected to be less than that required to recover The Company has inventories for nuclear fuel which should provide an adequate supply inta the mid-perating expenses and provide a fair return on mvestment. Therefore, the amounts of operating
- 1990s. 5ubstanti rdditional nuclear fuel must be expenses and return on investment not currently _
,bta!ned to suppiy fel for the remaining useful lives rec vered are deferred and capitah, zed as deferred nf Davis-Besse, Pert "T*~ and Beaver Valley Unit
. More nuclear fuel would be required if Perry Unit charges. Since the unrecovered mvestment will decline over the period of the phase-m plan because
? were completed as a nuclear generating unit.
- In_1989, existing nuclear- fuel financing I depreciation and deferred federal income taxes c arrangements for the Company and Cleveland Electric that result from the use of accelerated tax
- were refinanced through leases from a special- depreciation, the amount of revenues required to pr vide a fair return also declines. Pursuant to such purpose corporation. The total amount of fmancing phase-m plan, the Company deferred the following:
currently available under these lease arrangements is
$509,000,000 ($309,000,000 from intermediate-ter- 1991 N 1989 notes and: $200,000,000 from bank cr -dit - (thousands of doll.m)-
arrangements), although financing in an amount up Dit+n A Operating Expenses. $ 5.796 $16.980 $22.535 to $900,000,000 is permitted. The intermediate-term carrying charges:
notes mature in the period 1993-1997. The bank credit Det t. $ ti.986 $21.361 $30.617
' arrangements are cancelable on two ars notice by Equity .- 15.000 22.126 51.691 the lenders. As of December 31,1991, $209,000,000 of $21.9% $43 487 $82.308 nuclear fuel was financed for the Company. The Company and Cleveland Electric severally lease their The amount of deferred operating expenses and respective portions of the nuclear fuel ' ad are carrying cha.ges scheduled to be recorded in 1992 and obligated to pay for the fuel as it is consumed in a 1993 total $33,000,000 and $15,000,000, respectively.
reactor. The lease rates are based on various Beginning in the sixth year (1994) and continuing intermediate-term note rates, bank rates and through the tenth year, the revenue levels authorized commercial paper rates. pursuant to the phase-in plan were designed to be The amounts financed include nuclear fuel in the sufficient to recover that period's operating expenses,
' Davis-Besse, Perry Unit 1 and Beaver Valley Unit 2 a fair retum on the unrecovered investment, and the reactors with remais;; lease payments of amortision of the deferred operating expenses and
-1 15 o_1__ __ __ _ __ _ ___ _ _ _ __ __
carrying charges recorded during the earlier years of elimination of the 2J4% rate increase effective the plan. All phase-in deferrals relating to these two February 1,1991 for all residential and small units will be amortized and recovewd by December commercial customers, a reduction in resider.tial rates 31,1998, of 3% on March 1,1991 and a further residential rate The phase-in plan was also designed so that reduction of 1% on September 1,1991. Communities fluctuations in sales should not affect the level of accepting the package agreed to keep the Company as earnings. The phase-in plan permits the Company to their sole supplier of electricity for a period of f ve request PUCO approval of increases or decreases in years. The package also permits the Company to the phase-in plan deferrals to compensate for the adjust rates in those e, .nunities on February 1,1994 effects of fluctuations in sales levels, as compared to and February 1,199' mfStion exceeds specified the levels projected in the rate order, and for 50% of levels or under emw.ency conditions. All eligible the net af ter-tax savings in 1989 and 1990 identified by communities in the Company's service area, except the management audit as discussed below. Pursuant the City of Toledo, accepted the rate reduction to these provisions of the order, the Company package. In March 1991 the Company obtained recorded no adjustment to the cost deferrals in 1989 PUCO approval to reduce rates to the same levels for and recorded adjustments to reduce its cost deferrals the same customer categories in the City of Toledo g by approximately $14,000,000 in 1990 and to increase its cost deferrals by approximately $3,200,000 net in and the rest of its service area. Annualized revenues were reduced by about $17,000,000 as a result of 1991. The $3,200,000 net increase in 1991 included a these rate reduction packages. The revenue reductions
$4,000,000 increase for an adjustment of 1990 cost do not adversely affect the phase-in plan as the deferrals and an $800,000 reduction for the decrease in revenues is mitigated by the cost -
adjustment of the 1991 cost deferrals. reductions resulting from the management audit.
In connection with the 1989 order and a similar The 1989 order also set nuclear performance order for Cleveland Electric, the Company, Cleveland standards through 1998 We could be required to Electric and the Service Company have undergone a refund incremental replacement power costs if the management audit, which was completed in April standards are not met. No refund was required in 1991 1990. The audit identified potential annual savings in nor is one expected for 1992. The Company banked operating expenses in the amount of $98,160,000 $1.300,000 in benehts in 1991 for abo re-average from Centerior Energy's 1989 budget level, 45% nuclear performance based on industry standards for
($44,172,000) for the Company. The Company operating availability established in the 1969 order.
realized a large part of the savings in 1991. These banked benehts are not recorded in the Fifty percent of the savings identified by the financial statements as they can only be used in future management audit were used to reduce the 6% rate years, if necessary, to offset disallowances of increase scheduled to be effective on February 1,1991 incremental replacement power costs, for the Company. As discussed previously, our rates Under the 1989 order, fossil-fueled power plant increased 254% under this provision with the performance may not be raised as an issue in any rate PUCO's approval. proceeding before February 1994 as long as the in late 1990 in a move to become more competitive Company and Cleveland Electric achieve a in Northwest Ohio, the Company proposed a rate systemwide availabi!ity factor of at least 64.9%
reduction package to all incorporated communities in annually. This standard was exceeded in 1989,1990 its service area which are served exclusively by the and 1991, with availability at approximately 80% for ~
Company on a retail basis. The package called for the each year.
16
(7) 1 EDERAL INCOME TAX Federal income tax, cornputed by multiplying income before taxes by the statutory rates, is reconciled io the amount of federal income tax recorded on the books as follows:
For the years ended D-cemter 31, 1991 1990 1989 (thousands of dollars)
Book income fMore Federal income Tax . $ 87,608 $ 93.801 $151,526 Tax on Book income at Statutorv Rate . $ 29,767 5 31.892 5 51.519 increase (Decreaw) in Tat Accelerated depreciation. . . ... 2,857 (853) 5.993 Investment tax credits on disallowed nudear plant . -
(18.810) -
Taxes other than federal income taxes . (e92) (2,647) (107)
Other items . 6.043 2,795 1,443 Total Federal income Tax Expense. $ 37.995 $ 12377 $ 58 848 Federal income tax expense is recorded in the income Statement as follows:
For the,vears ended Decernber 31, 1991 1940 1989 (thousands of dollars)
Operating Expenset .
Current Tax Provision. . .... ... ... .... $ 13. 4 5 17.045 $(11,458)
Changes in Accumulated Deferred Federal income Tat Accelerated depreciahon and amortization. 6,515 1.580 8,764 Alternative minimum tav credit , .. (43,633) (5.480) 21,291 Sale and leaseback tratsactions and amortization , 12,682 5.121 455 Property tax expense. -
(4.011 t -
Reacquired debt costs . . . . . 6,674 (532) (378)
Deferred construchon work in progress revenues. 8.480 9393 11,726 Deferred fuel costs. (3R 9) (4.021) (1,229)
Davis-Besse replacement power . - -
5.055 Other items . . . . 1338 784 1,337 investme-t Tax Credits. 27.454 1.162 1,722 notal Charged to Operating Espenses. 31.767 21.041 37,285 Nonoperatmg inenme:
- Current Tax Provision. . . ..... ........ .. . .
(37.677) (18.242) (10.129)
Changes M Accumulated Deferred FederalIncome Tat Wnte ett of nudear costs , (180) (10.157) -
AFUDC and carrying charges . , . 9,000 16.835 32.930 Net operating loss carryforward . . 35,014 - -
Other items . 71 2.900 jg)
Total Expense (Credit) to Nonoperating income . 6.22ta (8.664) 21.563 Totl Federal income Tax Expense. $ 37.995 $ 12377 $ 58.848 The Company joins in the filing cf a consolidated federal income tax return with its affiliated companies. The metbod of tax aRocation reflects the benefits and burdens realized by each company's participation in the consolidated tax return, approximating a separate return result for each company.
Federal income tax expense adjustments in 1990, associated with previously deferred investment tax credits relating to the 1988 write-off of nuclear plant investment, decreased the net tax provision related to nonoperating income by $18,810,000.
TI e favorable resolution of an issue concerning the appopriate year to recognize a property tax deduction resulted in an adjustment which reduced federal income tax expense in 1990 by $3,911,000 ($2,168,000 in the fourth quarter).
For tax purposes, net operating loss (NOL) carryforwards of approximately $164,049,000 are available to reduce future taxable income and will expire in 2003 through 2005. The 34*o tax effect of the NOLs generated is
$55,77L000 and is reflected as a reduction to deferred federal income tax relating to accelerated depreciation and amortization. Future utilization of these tax NOL carryforwards would result in recording the related deferred tu es.
The 1986' fax Act provides for an AMT credit to be used to reduce the regular tax to the AMT level should the
. .eegular tax exceed the AMT. AMT credits of $27,822,000 are available to offset future regular tat The credits may be carried forward indefinitely.
17
The settlement (discount) rate assumption was (B) RETIREMENT INCOME PLAN AND 8.5% for both December 31,1991 and December 31, OTHER POSTRETIREMENT BENEFITS 1990. The long-term rate of annual compensation (a) RE71REA1ENT INCOAiE PLAN increase assumption was 5% for l'oth December 31, 1991 and December 31,1990. The long-term rate of 4 The Company sponsors a noncontributing pension return on plan assets assumption was 8.5% in 1991 plan which covers all employee groups. The amount and 8% in 1990, of retirement benehts generally depends upon the Plan assets consist primarily of investments in length of service Under certain circumstances, common stock, bonds, guaranteed investment benefits can begin as early as age 55. The plan als contracts, cash equivalent securities and real estate.
provides certain death, medical and disability benefits.
The Company's funding policy is to comply with the (b) OTHER POSTRETIREMENT BENETITS Employee Retirement income Security Act of 1974 The Financial Accounting Standards Board has issued guidelines. a new accounting standard for postretirement in 1990, the Company offered a Voluntary Early benefits other than pensions. The new standard Retirement Opportunity Program (VEROP). w uld require the accrual of the expected cost of such Operating expenses for 1990 included $7,000,000 of beMits during the employees years of service. The pension plan accruals to cover enhanced VEROP benefits plus an additional $8,000,000 of pension costs assumptions and calculations mvc,1ved in I for VEROP benefits paid to retirees from corporate determining the accrual closely parallel pension funds. The $8,000,000 is not included in the pension acc unting requirements.
data reported below. Operating expenses for 1990 also The Company currently provides certain included a credit of $5,000,000 resulting from a p stretirement health care, death and other benefits and expenses such costs as these benefits are paid, settlement of pension obligations through lump sum which is consistent with current ratemaking practices.
payments to a substantial number of VEROP retirees. Such costs totaled $3,700,000 in 1991, $3,000,000 in Net pension and VEROP costs for 1989 through 1990 and $2,200,000 in 1989, which include medical l 1991 were comprised of the following components: benehts of $3,100,000 in 1991, $2A00,000 in 1990 and i W9 WI WO $2,100,000 in 1989, c (millions of dollars) The Company expects to adopt the new standard service cost for benehts camed prospectively effective January 1,1993 We plan a during the renod . . . . . . 5 ', 5 5 5 4 amortize the discounted present value of the accumulated postretirement beneht obligation to aN. 11 11 10 expense over a twenty-year period. The Company has Actual retum on plan anets . (30) 2 (17)
Net amortization and deferral . 15 (15) 4 engaged actuaries who have made a preliminary Net pension costs. 1 3 1 review usmg 1990 data. Based on this preliminary review, the accumulated postretirement benefit N '"' ' - 7 -
obligation as of December 31, 1991, measured in settlement gain -
(5) - accordance with the new standard, is estimated in the Net cmts . 5 1 5 5 5 t range of $65,000,000 to $100,000,000. Had the new standard been adopted in 1991, the preliminary study The following table presents a reconciliation of the indicated that the additional postretirement benent _
funded status of the plan at December 31,1991 and cost in 1991 would have been in the range of 1990.
$8,000,000 to $14,000,000 (pretax). We believe the necember 3L effect of actual adoption in 1993 may be similar, g93 mo although it could be signif cantly different because of change 3 in health care costs, the assumed health care (milhons of Actuarial present value of beneht rates, or plan provisions between now and 1993.
obuganons.
Vested benehts . 5 92 $101 The Company does not know what action the Nonwsted benehts . 10 6 PUCO may take with respect to these incremental Accumulated benefit obhgation 102 107 cos*s. However, we believe the PUCO will either s Effect of future compensation allow a means of current recovery of such incremental le"l^ 34 22 costs or provide for deferral of such costs until Total projected bene 6t obliganon. 136 129 recovered in rates. We do not expect adoption of the plan assets at fair market value . 172 151 new standard to have a material adverse effect on sure s of lan assets over projected our financial condition or results of operations.
Unrecognized net gam due to variance between assumptions and experience . (40) (24) (9) GUARANTEES Unrecognized prior service cmt . 5 5 Transition awet at January 1,1987 Under a long-term coal purchase arrangement, the hing arrettized over 19 years . (IM (19) Company has guaranteed certain loan and lease Net accrued pension liabihty obligations of a mining company. This arrangement
' d requires payments to the mining company for any j,"yngth{'gn*l"g'(d actual out-of-pocket idle mine expenses (as advance 18
payments for coal) when the inines are idle for Under its articles of incorporation, the Company reasons beyond the control of the mining company. cannot issue preferred stock unless certain earnings At December 31, 1991, after giving eficct to a coverage requirements are met. Based on earnings refmancing completed on January 2,1992 by the for the 12 months ended December 31,1991, the mining company, the principal amount of the mining Company could not issue additional creferred stock.
company's loan and lease obligations guaranteed by The issuance of additional preferred stock in the the Company was $24,000,000. future will depend on earnings for any 12 consecutive months of the 15 months preceding the date of issuance, the interest on all long-term debt (10) CAPITALIZATION outstanding and the dividends on all preferred stock (a) CAPITAL STOCK TRANSACTIONS issues outstanding.
. Preference stock authorized for the Company is Preferred stock shares retired during the three years 5,000,000 shares with a $25 par value. No preference ended December 31,1991 are listed m the following shares are currently outstanding. There are no table. restrictions on the Company's abil;ty to issue 399 999 939 preference stock.
(thousands of shares)
Curnulative Preferred Stock With respect to dividend and liquidation rights, the sutiect to Mandatory Company's preferred stock is prior to its prefeicnce Redencion. stock and common stock, and its preference stock is
$100 par $1100. (10) (10) (5) prior to its common stock. ~
9.375 . (17) (17) (17)
Total . (2n (27) (22) (d) LONG-TERM DEDT AND OTHER BORROWING ARRANGEMENTS (b) EQUITY DISTRIBUTION RESTRICTIONS Long-term debt, less current maturities, was as At December 31, 1991, retained eamings were follows:
$S9,924,000. Substantially all of the retained eamings
^
c, g3]g, Deternter 31.
were available for the declaration of dividends on the year of Maturity interest Rate 1991 1990 Company's preferred and coinmon shares. All of the (thousands of dollars)
Company's common shares are held by Centerior Fist mortgage bonds:
Energy. A write-off of the Company's investment in 1995. IL25 % $ - 5 60.000 Perry Unit 2, dept : ding upon the magnitude and 1996. 9."- 100,000 100.000 timing of such a write-off, could reduce retained 1997-2001 7.to 66,378 66,378 2002-2006 . 8.d2 111,725 111,725 eamings sufficiently to impair the Company's abilits '
2007-2011 9.62 51,900 51,900 to declare dividends. 67,300 2017-2021 8 00 67.300 Any financing by the Company of any of its 7.58 147,800 147,800 2022 2023 .
nonutility affiliates requires PUC authorization 545,103 605,103 unless the fmancing is made in connection with transactions in the ordinary course of the Company's Term bank loans due public utilities business operations in which one hle u t rm notes company acts on behalf of another. due 1993-2021 9 06 134.500 -
Notes due 1993-1997 11.01 102,142 219,430 (c) CUMUlAT"/E PREftRRED AND Debentures due 1997 11.25 125.000 125,000 FREFERENCE STOCK Pollution control notes
" 9*
Amounts to be paid for preferred stock which must be Oh>r-redeemed during the next five years are $2.000,000 in 1992 and $12.000 000 in each ye'ar 1993 through 1996. To ongJenn g $1, 58.550 $1.097.326 The annual mandatory redemption provisions are as follows:
Long-term debt raatures during the next five years
- s fonows: $121.000,000 in 1992, $47,000,000 in l'993, To [$ Beenning h"er*
Redeernt d 'ni Share $47,000,000 in 1994, $72,000,000 in 1995 and
$192,000,000 in 1996.
rnderred
$100 par $11.00. 5.000 1979 $100 in 1991, the Company issued $134,500,000 9373. 16.650 1985 100 aggregate principal amount of secured medium-term 25 par 2.81. 400.000 1993 25 notes. The notes are secured by first mortgage bonds.
At December 31,1991, the Company has $15,500,000 The annualized cumulafve preferred dividend aggregate principal amount of secured medium-term requirement as of December 31,1991 is $25,000,000. notes registered with the SEC and available for The preferred dividend rates on the Company's issuance.
Series A and B fluctuate based on prevailing interest The Company's c artgage constitutes a direct first rates and market conditions, with the dividend rates lien on substantially all property owned and for these issues averaging 8.82a o and 9.67%, franchises held by the Company. Excluded from the respectively, in 1991. lien, among otiier things, are cash, securities, 19
accounts receivable, fuel, supplies and automotive Most borrowing arrangements under the short-equipment. term bank lines of credit require a fee of 0.25% per Additional first mortgage bonds may be issued by year to be paid on any unused portion of the lines of the Company under its mortgage on the basis of credit. For those banks without fee requirements, the bondable property additions, cash or substitution for average daily cash balance in the Company's bank refundable first mortgage bonds. The issuance of accounts satisf ed informal compensating balance additional first mortgage bonds on the basis of arrangements.
property additions is limited by two provisions of our At December 31,1991, the Company had no mortgage. One relates to the amount of bondable commercial paper outs %nding. If commercial paper property available and the other to earnings coverage - were outstanding. it w uld be backed by at least an of interest on the bonds. Under the more restrictive equal amount of un&d bank lines of credit.
of these provisions (currently, the earnings coverage test), we would have been pennitted to issue (12) CilANGES IN ACCOUNTING FOR approximately $164,000,000 of bonds at an assumed NUCLEAR PLANT DEPRECIATION interest rate of 11% based upon available bondable property at December 31,1991. The Company also In June 1991, the Company changed the method used to accrue nuclear plant depreciation from the units-g would-have been pennitted to issue approximately
$186,000,000 of bonds based upon refundable bonds at of-production method to the straight line method December 31,1991. If Perry Unit 2 had been canceled retroactive to January 1,1991. The good performance and written off as of December 31,1991, the amount of the nuclear generating umts over the past several of bonds which could have been issued by the '
years had resulted in units-of-production -
Company would not have changed. depreciation expense being significantly higher than Cer'ain unsecured loan agreements of the the amount implicit in current electric rates. The Company contain covenants relating to capitalization straight-line method better matches revenue and ,.
ratios, earnings coverage ratios and limitations on expense, tends to levelize periodic depreciatton secared financing other than through first mortgage expense for nuclear plant and is more consistent with bonac or certain other transactions. An agreement industry practice, relating to a letter of credit issued in connection with The PUCO Qp,oved the change and authorized the sale and leaseback of Beaver Valley Unit 2 (as the Company to accrue depreciation for its three amended in 1989) contains several financial oPeratinl: Luclear gener#rm units at an accrual rate of covenants affecting the Company, Cleveland Electric about h c.f plaat investment based upon the units' and Centerior Energy. Among these are covenants fort; , ear cectating hr rnes from the NRC. This relating to earnings coverage ratios and capitalization charge in mthod decreased 1991 depreciation ratios. The Company, Cleveland Electric and uperne $13,949.000 and increased 1991 net income Centenor. Energy are in compliance with these $10,9E000 Pet of $2,954,000 of income taxes) from covenant provisions. We believe these covenants can what bey ot;nwise would have been.
still be met in the event of a write-off of the in Decembcr 1991, the PUCO approved a Company's and Cleveland Electric's investments in mduction in the straight-line depreciation accrual rate Perry Unit 2, barring unforeseen circumstances. fmm about 3% to 2.5% for each of the three operating no:ler units retroactive to January 1,1991. The Capany believes the lower depreciation accrual rate *
(11) SilORT-TERM BORROWING iS Potopriate and reduces combined annual
~
ARRANGEMENTS dep=eciation expense to a level more closely aligned The Company had $70,400,000 of bank lines of cralit with the total amount currently being recove.ed in arrangements at December 31,1991. There were no customers' rates for these units. This change in rate borrowings under these bank credit arran3ements at decreased 1991 depreciation expense 59,453,000 and December 31,1991. increased 1991 net income $7,413,000 (net of Short-term borrowing capacity authorized by the $2,040,000 of income taxes) from what they otherwise PUCO is $150,000.000 for , se Company. The would have been.
Company and Cleveland El.ctuc have been Depreciation expense recorded in prior years was authorized by the PUCO to borrow from each other not affected. Current electric rates were also on a short-term basis. unaffected by the PUCO orders.
20
(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of operations for the two years ended December 31,1991.
Quarters Ended March 31, June 30. Sept. 30, Dec. 31, (thousands of dollm) 1991 Operating Revenues. .. .... . .. $212,930 $227,576 $238,271 $208,481 Operating income. .. . .
36,807 42,428 42,307 38,639 Net income . . . 12,341 14,210 14,498 8,564 Earnings Available for Common Stock . . . . .. 6,096 8,009 8,318 2,398 1990 Operating Revenues. . . .
$210,622 $210,412 $237,872 $204,267
. Operating Income. . . . 38,732 28,259 39,433 45,862 Net income . . . 21,604 26,971 19,420 13,429
] . . . .
20,660 13,109 7,139 Earnings Available for Common Stock . 15.357 Operating revenues for the first three quarters of 1991 and tha four quarters of 1990 were restated to comply -
with current FERC revenue reporting requirements, as discusr ae Summary of Significant Accounting Policies. This restatement had no effect on earnings results for ttle applicable quarter. The unaudited quarterly results for the quarter ended March 31,1991 were also restated to reflect the change in accounting for nuclear plant depreciation to the straight-line method (at about a 3% accrual rate) as discussed in Note 12.
Earnings for the quarter ended December 31,1991 were increased as a result of year-end adjustments. A
$9,453,000 adjustment to reduce depreciation expense for the year for the change in the nuclear plant straight-line depreciation rate to 2.5% (see Summary of Significant Accounting Policies and Note 12) was partially offset by an
$804,000 reduction in phase-in carrying charges for the adjustment to 1991 cost deferrals (see Note 6). The total of these adjustments increased quarterly earnings by $6,882,000.
Earnings for the quarter ended June 30,1990 were increased as a remit of federal income tax expense adjustments associated with deferred investment tax credits relating to the 1988 write-off of nuclear plant investment. See Note 7. The adjustments increased quarterly earnings by $17,907,000.
Earnings for the quarter ended December 31,1990 were decreased as a result of year-end adjustments. A
$13,933,000 reduction in phase-in carrying charges for the adjustment to 1990 cost deferrals (see Note 6) was partially offset by adjustments of $7,760,000 to reduce depreciation expense for the year for the change in depreciation rates for nonnuclear and Davis-Besse property (see Summary of Significant Accourting Policies) and
$2,168,000 to reduce federal income tax expense (see Note 7). The total of these adjustments decreased quarterly earnings by $2,000,000.
21
Financial and Statistical Review Operating Revenues (thousands of dollars) i steam Itwal l Total Total Heahng Operattng Year Residenhal Commercial industrial Other Retad Whole<> ale (s ) Electnc & Gas itevenues 1991. 183 523 236 049 90 919 740 331 146 927 BS7 258 - $/.,87 258
$229 840 1990. , 223 920 174 540 235 578 79 535 713 573 149 600 863 173 -
863 173 1989, 215 932 163 991 226 680 99 451 706 054 159 569 865 623 - 8e5 623 1988. 200 916 142 bob 199 5?! 34 961 578 094 71 863 649 957 -
M9 957 1987 200 877 142 385 219 098 27 646 590 000 42 476 632 482 -
632 482 1961. 138 781 40 863 151 539 32 253 413 436 47 427 460 863 7 431 468 294 Operating Expenses (thousands of dollars)
Other f uel & Operanon Depreciatwn Ta m Phee-m & rederal Total Purt hased & & Othet Than Pre-phaw-in income Operaung icar Ptmer(e) Mamtenance Amortuatwn FIT Deferred. Net Taws E xpenws 1991. $17: M 355 728 72137(b) 88 656 1147 31 767 $727 077 1990.. 174 309 373 374 72 627 W 320 (9 7M) 21 041 710 887 1989. . 172 220 372 530 85 057 72 123 (15 '5 3) 37 285 723 462 1988. 138 121 358 R23 75 093 80 138 (83 813) 29 242 597 604 1987.. 167 621 223 307 65 503 59 658 139 797) 22 747 499 039 1981, 148 452 95 884 43 427 3o 699 - 40 842 3o5 304 Income (Loss) (thousands of doilars)
Federal Other income bcome income & Tases- Before Operatmg Al'UDC- Deductwns. Carrymg Credit Interest iear hicome Equity Net Charges (Espenw) Chantes 1991. $160181 1 499 3 628 21 966 (6 228) $181066 1990. 152 286 3 352 6 305 43 487 8 664 214 094 1989 . 142 161 8 568 20 517 82 308 (21 563) 231 991 1988. , 52 353 5 452 (246 722)(c) . 129 632 66 244 26 959 1987, 133 443 122 138 (16 904) 14 989 42 726 296 392 1981. . 102 990 32 498 8 852 - 9 616 153 95n Income (Loss) (thousands of dollars)
Income (las) Cumulanve Before Effect of an [amings Cumulative Accou..tmg (Loss)
Effect of an Change or Net 7refened Availaple Det't JA <- Accountmg Estraordmary income stock for Cornmsm Ye r Interest Debt Change Gam (Loss } Dmder.de sud 1991. . $132 399 (946) 49 613 -
49 613 24 792 5 24 821 1990. 135 344 (2 674) 81 42( -
81 424 25 159 56 265 1989. 144 792 (5 479) 92 678 - 92 678 25 390 67 288 1988. 150 523 (l 833) (171 731) 6 279(d) (115 452) 26 983 (142 415) 1987. 185 493 (54 272) 165 171 -
165 171 42 749 122 422 ,
1991. 86 310 (15 491)' 83 137 10 807(r) 93 944 23 542 70 402
. . . . . J. .
(a) Wholesale revenues, fuel and purchased power, wholesale electric sales and purchased power amounts are restated for 1990 and pnor years to reflect a change in reporting of bulk power sales transactions in accordance with FERC requirements.
(b) In 1991, a change in accounting for nuclear plant depreciatton was adopted, changing from the uruts of production method to the straight-line method at a 2.5% rate.
(c) includes write-off of nuclear costs in the amount of $276,955.000 in 1988.
(d) In 1988. a change in the method of accounting for unbilled revenues was adopted 22
THE TOLEDO CDISON CDeANY Electric Sales (millions of KWH) Electric Customers (year end) Residential Usage Average Average Average Pnce Revenue Industnal KWH Pet Per Pet Year Residential Commernal Industrial Whotewle(a) Other Toul Residenbal Commeraal & O*her T otal Custome* KWH Customer 19yl, 2 041 1 683 3 543 2 587 482 10 336 '254 500 26 044 4 444 284 988 7 990 11.26r $897.41
~
1990 . i 60 I 614 3 617 2 333 4% 10 OW 253 %5 25 822 ; $$5 284 342 7 692 11.48 882.99 1u89.. 2 017 1 622 3 740 3 138 495 11 012 ?S3 234 25 803 4 434 283 4n 7 989 10.71 855.29 1988. 2 Ot.8 1 579 3 780 2 044 474 9 945 251 590 25 526 4 102 281 218 *?M 9 72 802.87 1987. 1 977 1 532 3 589 1 660 464 9 222 249 344 25 170 4 085 278 599 7 wo9 10.16 809.66 1981. .1 919 1 244 3 080 1 585 409 8 287 241 663 23 573 3 844 2e9 080 7 %6 7.23 575.95 Load (MW & %) Energy (millions of KWH) Fuel Operable E ffiaenc y-Cabinty a me Peak Capanty load Company Cencrated Pur(hased Fuel Cost BTU Per har _
of Peak lead Margm Factor Fomil Nudear Total Power (s) Total Per KWH KWH 1991 - 1 759 2 510 14.1% 64.5 % 4 848 6 003 10 851 95 10 946 1.44 f 10 327 -
1900. I 752- 1516 13.5 610 5 535 4 219 9 754 402 10 656 1.50 10 220 1989. 1 844 1526 19.4 65.2 5 206 5 552 10 758 788 11 546 1.42 10 293 1988. 1 (67(f) 1 614 (52.7) 62.8 5 820 3 325 9 145 1 491 10 636 1.59 10 174 1987, 1 608 144 12.6 64.9 5 916 3 218 9 134 669 9 803 1.45 10 196 1981. I 773 1 315 25 8 65.9 5 348 2 142 7 490 1 293 8 783 1.68 10 274 4 . . . . , . . . . .
Investment (thousands of dollars)
Construtton Work in Total Unhty Accumulated Proy,ress Nuclear Property. Utihty Plant in Depreoatson & Net & Perry Fueland Plant and Plant Total Year Service Amortuanon hant Unit 1 Other Equipment Adamons Aucts 1991 . $2 692 274 709 505 1 982 769 396 732 197 964 $2 577 465 $ 53 838 $4 014 512
-1990. 2 603 883 MO 252 1 963 631 436 839 223 872 2 624 342 86 693 4 001 518 19S9. 2 528 355 564 615 1 963 740 430 340 237 318 2 631 398 73 421 4 138 846 1988. 2 438 927 487 546 1 951 381 459 104 262 514 2 672 999 132 083 4 134 672
-1987. 2 600 511 419 149 2 181 362 374 274 267 069 2 822 705 380 974 4 277 587 1981; I 250 190 252 310 997 880 658 641 21359(g) 1 677 880 201 000 1 869 % 7 Capitalization (thousands of dollars & %)
Preferred Stoik, with Preferred Stak. without Mandatory Redempnon Mandatory Redemphon Year Common Stock Equity Provisions Provinnns _ teng-Term Debt Total 1991 . S 887 752 38% 63 663 3% 210 000 9% 1 158 550 50% $2 319 965 1990. 880 784 39 66 328 3 210 000 9 1 097 326 49 2 254 438 1989. 897 793 38 68 990 3 210 000 9 1 197 277 50 2 374 060 1988. 887 442 36 71 155 3 210 0(V) 9 1 291 444 52 2 460 041 1987. 1 0 % 737 39 73 340 3 240 000 8 14.'X) 292 50 2 810 369 1981. 550 176 35 95 500 6 150 OtM 10 762 584 49 1 558 260 ,
(t) In 1981, an extraordinary gain was reahzed frorn the exchange of common stock for bonds.
(f) Capacity data reflects extended generating unit outage for renovation and irnprovements.
(g) Restated for effects of capitahzation of nuclear fuel lease and financing arrangements pursuant to Statement of Finanaal Accounting Standards 71 23 m ~ a r- 8 x m c n & Md h S 2 @ % b M % no. >
e , . - , - . . . - - -. - -
/) ^
i ,
.l c , .
7 - +. .
lInvestcilG. .onnation!
r.y . . . . . '. ....................-.... 4 . . . . . . . . . . ............. . .........................
' iSSARE OWNERINFORMATION c
. INQULNES , .. _ . . DIVIDEND REINVESTMENT AND STOCK f Questions regarding the Company or stock --- -PURCHASEPLAN ANDINDIVIDUAL'
, Jaccounts thould be directed to Share Owner : i RETIREMENT ACCOUNT (IRA) -
Services at Centerior Energy Corporation at the Centerior Energy Corporation has a Dividend i Laddress and Llephone numbers indicated below ~ Reinvestment and Stock Purchase Plan which
, for the Stock Transfer Agent.- - provides Toledo Edison share owners of record Please have your accost number readv- and other investors a com enlent means of - ,
4 when calling. ' purchasing shares of Centerior common stock .
A ; STOCKTRANSFER AGENT - byinvesting all or a part of their quarterly -
dividends as well as making cash irwestments.
y ,
- Centerior Energy Corporation In addition, individuals may establish an Share Owner Services Individual Retirement Account (IRA) which?
- P.O. Box 94661 . irwests in Centerior common stock through the --
- Cleveland, OH 4410144661 . Plan. Information relating to the Plan'and the ,
' In Clevelarid area 642-6900 or 447-2400 - IRA may be obtained from Centerior Share
_ _ _ Outside Cleveland area 1-800-433-7/94 - Owner Services.
- Stock transfers may be presented at . INDEPENDENT ACCOUNTANTS -
x J PNCTrust Company of NeWYork Arthur Andersen & Co. -
40 Broad Street, Fifth cloor > 1717 East Ninth Street
= New York;NY 10004 Cleveland, OH 44114 2 STOCK REGISTRAR ' FORM 10-K
~
,- Ameritrust Compan National Association The Company will furnish to share owners,
- Corporate Trust Division . without charge, s. copy of its most recent annual J P.O. Box 6477 : report to the Securities and Exchange '
- Cleveland, OH 44101 . Commission. Requests should be directed to the -l "
" EXCHA'NGE LISTINGS Secretary of Centerior Energy Corporation at the ? .
E Preferred-525 par value-834%, $2365 and address of the StockTransfer Agent.-
i$2.81 series, Adjustable Series A and Adjustable j
' Series B-New York Stock Exchange : ,
' Preferred-S100 par value-4 %%; 832%; 7.76%
s !and 10% serier -Ameri'can Stock Exchange m
l BOND AND DEBENTUREINFORMATION
> BOND TRUSTEE AND PAYING AGENT - . DEBENTURE TRUSTEE AND PAYING. AGENT The Chase Manhattan Bank, N. A.~ ' National City Bank
- CorporateTrust AdministrationDivision 1900 East Ninth Street 1 New York Plaza,14th Floor - Cleveland, OH 44114
_" New York,' NY 10018.' (216) 575-2528
- (212) 676-5850 -
4 t
t e
J ..ie'** .
+
$*. "1kl .
Y y e-- *- yrw-r1 y g y - y--,--- a- <"re -pa-C
The Toledo Edison Company 300 Madison Avenue su m
< U.S. IOST AGE Toledo, OH 43652-0001 '
PAID CLEVELAND,01110 PERMTINO.4N E
, [
}
t b
- _ _- - - - - _ _-__-- - - .-.-_ _ _ - - .-- - ---- - _ _ - - - -- _ - - - - - - - -_. - ._.