ML20096A737

Dqe 1991 Annual Rept to Shareholders

ML20096A737
Person / Time
Site:	Beaver Valley
Issue date:	12/31/1991
From:	Von Schack W DQE
To:
Shared Package
ML20096A734	List: ML20096A728 ML20096A737 ML20096A740 ML20096A747 ML20096A749 ML20096A759
References
NUDOCS 9205110196
Download: ML20096A737 (52)

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b- ' 1991' ANNUA!. REPORT TO Sif ARLilot C ERS t

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l: - DQE is an energy services bolding company head. Pittsburgh, and has a population of about 1.5 million.. .,

quartered in Pittsburgh, Pennsyh ania. Our minion is- In addition to serving more than $76.000 customers 1 to supply low cost, ufe, and reliabic electricity and to L in Allegheny and Beaver counties, the company aho

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l pursue opportunities related to our core business that selk eleenicity to other utihiies. .

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b benefit our customers, shareholders, and communi- DQLi non-utility subsidiaries include Duquesne 'l ties. In conducting our business, we will be recognimi Enterprises and Montaul Duquesne Enterpric own , ,

for excellence, quabryJintegrity, and value. Allegheny Development Corporation and Property .,

Duquesne Light Comp,u y is the principal sub- Ventures, Ltd. These companies are invohrd in imtia-

- sidiary of DQE. It is engaged in the pnxhiction. trans- tises relating to the core business, including providing j mission, distribution, and sale of electric energv. Its all the energy senices for the new Greater Piusburgh wrvice territory n appnuimately 800 square miles in Intenutional Airport and investing in real estate.

Southwestern I ennsylvania, including the city of Momauk is DQE's fmance and invtstment subddiary- 1 1

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. The sun is rising on an age ofincreased electrification in the United states, driven by the inherent efliciency of this key energy source and the cleanlinen ofin many end-uses. DQE has the energy, vision, and s alue to meet l- growing demand for electncity in both Southwestern Pennsylvania and in new markets.

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CH AIRM Ws M r sutt i Wedey W. von SJuck discusses DQE's 1991 milestones and takes a look at the future of the electric utility mJustry.

L 2 S', RAl tc1c Pr RsncTis E i, Our perspective on key issues driving dunge in the industry.

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- EM P.6V Energy is the bednxk of our company and the focus of our business objectives.

6 VISION Our ample supply of electricity is fueling our vision of the future. We have abundant power ,o fuel local growth. -

With additional transmission acceu, we aho can help power growth in_ IVnnsyhasa and bevond.

10 V4trE By delivering quality energy and maintaining a strong environmental and cc,mmunity focus, we are adding value fi>r our customen and our sharehoklers. <

14 HN ANciti. con f f N f 5 17 BoAltu of DikicToRS AND OnlicLR$

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'.. Site ANCIAL AND hPER Af tsto 04406tMOHis 4

lbrrnt Gunge 1991 l'r10 1989 91 vs. 90 90 vs. 89

, Operating Revenues (in millions) 51.tW3 51,130.9 $1,118 6 kl% t.1%

interest on long-Term Debt (in rnilliorn) 5131.5 5139.9 $ 144.6 40% 0.3%

Preferred Dividends (In millions) 110m $110 516 8 22.9 % - 16.'%

Net tneorne (In millions) st33A 5121.7 $113.0 92% 77%

Earnings Per Share $2.50 52.24 52.03 11us 10.3 %

Return on Average Common Equity 12.2 % 11.3 % 104 % saw 66%

Shares Outstanding at Year-End ;ln thousands) 52,90s 53'59 55,340 14% -2 <r%

Annualized Dividends $1.52 $1A4 $1.36 5.6% 5.9%

lbok %lue ltr Share 521.00 520.07 $ 19.27 46% 4.2% y Capital Expenditures (In millions) 5125.4 $108.2 $85 4 159 % 267 %

Sn.ck Price at Year-End $30.625 524.87s $23r5 P 4.2%

Net Operating Cash Flow (in millions) 5380.6 $2992 52351 1 28 6 %

Retail Salc5 (ur10 11,861 11,696 11,% 9 1&. 1.1%

Peak load (Mw) 2Ao2 2379 2,381 1.0% -01%

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> -; < rimic wril positioned to accommshtnhanges resulting

i. _ mi.4 mdu rn (b!<ruand:ng dr.ap, an.iaang from potential N ES legislation and to make these

, i L tu ini?nence n,Gnui/t npi e muw!nnasc changes part of our strategy liir futme growth.

' ;Lue:in ;pp ofwnwrewurim and Civinnan O. What role does con >truction af new trans-1 E/n W: nm &/ud men gu bir to rn,mr :/ut mission capacity pby in achieving NES goals? j

! DQE h ur// /witsmn/:e beng/li/Wn dung A. Adequate electrichy transmission cajucity is j_ 1:e!hm ing h tie gun.p; jergeaise en mues reinni a vital element in achieving other N ES goah, to die Nnien.dEnegy hqr (NIN Without additional transmissica lines to move L Q. Congress has b;en urged to give high priority pmver from its source ofgeneration to where it to passage of is needed. neither the NES goal ofincreasing

~ " *~ _ NES legislation. competition nor its gor.1 of fidi and efikient use l1 y How important of domestic energy resources can be met.

_ is this legishtion The situation in Wntern Pennsylvania illus- l to the nation? trates this point we!L The region has abi.ndant ,

/usn w pen w nm. m A. A coherent caal reservn. as well as other potential electric fuel NES is critical to the nation. Otherwise. the sources. However, the lack of adequ.ne cleo city  ;

U.S. is severely restricred in its ability to meet transmission to the Northeast prevenu the full increasing demand for energy, to reduce :ts use of these energy fueh and stymies development dependence on foreign energy suppliers, and to of new power generation.

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implement additional energy efliciencies that  ;

. . "Or: most din tire [ East Cn.tnd and wdl help Amen.can industry to bmen more Midurst nylonalj transmhsiim intem h loaded competitive in the global maiketpbcc. L..ongress 3

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wdl debate NES lep.sbt.m .. m the current session.

m m.m ..,,.r& t  % na % -,. ,..ain, and passage in 1992 is pmsible. _ _

L Several key NES objectives rebte direcdy to the o. One important area tv uing to the proposed future of the electric utility industry and DQE: Gener:d Public Utilities-DQE Transmissior inceased aampethion and nurket based pricing in - Project is transmission siting. What is the key power generation, xpanded transmission capacity issue in siting new transmission lines?

! and iccess, reform of nudear plant licensing, and A. Timely review and approval of projects in demand side manager..ent initiatives. DQE is . a way that reflects today's busir ess realities-r 4

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i without sacrificing public participation and transmission xa- ' -

environmental pmtection. Balanced public p(dicy pacity. We believe ,

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decisions are the only way to rise above the all too .

common 'Not in Mr Back Yard reaction. mission capacity l

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will enceurage the "Gnnpetition in genemtion means changes development of in- ae%^! W in the u ay transminiw: uvrks. ' . .

I- new energv producing bus.inesses cteating ; ohs, ALmar tkr> Ownw. le.L+dI wy 16pdaravy Comuws Ap.,e 1 en L _ _ _ _ wages. tax revenues, and other economic benefits Following thorough review of environmental that can add vitality to the regional economy,

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matters, analysis of economic irnpacts, and

' .. . . , M long term, permanent and ajuitable solution prosision for full pubh.c partiapauon m tne  :

• T w transmmion pmblemsI must address the mrd process, regulatory response should reflect

... to evpandthe transmisdon pie:. ' I the u.me sensmviry of todav's competitive bus.i-i.n o u -~v m n ,y m <.,isi n rr am ness environment. ,

We believe the NES should concentrate on Q. How do demand side management (DSM) expalitious si ing of new transmission lines in programs relate to the NES?

l addition to reallocating use of existing transmis- A. DSM helps utilities make the most cost sion capacity, cfricient use of their generating capacity by f 3

Q. Will other energy providers have access to the reducing peak demand and redistributing load.

i GPU-DQE transmission line? Such program 3 support the NES goal of full and A. We are fding a plan with the Federal Energ efEcient me of energy resources and postpone

. Regulatory Commbsion to pn: vide non-diwrim. the need for comtructing costly new generating inatory access to the pmposed new power line to capacity. However, regulators must ensure that any energy provider that needs firm, long term utilities have sufEcient financial incentives to off-f ser revenues lost through conservation measures.

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the first utihty to file a DSM proposal with the

l. Pennsylvania Public Utility Commission.

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l Demand Ihr electricity continues to increase. set a new station continuous operatiom rcmnl i

i Individuah and businesses are finding increased of M days.

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j value in an energy form that can impnwe Ixnh Unit li 55.8% availability reflects a longer than L the quality of their lives and the efliciency of normal refueling outage and seseral smaller un-thdr enterprises. planned outages. As a whole, Deaver Valley Power Energy is the bedrock oi our company and Station received " superior' perfbrmance ratings l I

L I the focus of our business objecthes. We have in five of seven categories of the most recent l abundant ;wver, produced at eflicient, environ- Systematic Assessment of1.icensee Performance mentally sound facilities. Our electricity can report by the Nuclear ikgulatory Commission. I

! fuel expected future hical growth. With addi- Our coal fired Eirama and Che> wick power tional transmission facilities, we aho can help stations abo pedhrmed well in 1991. Elrama power growth throughout Pennsylvania and achieved an availability of 85.2%, compared to beyond. By restoring dem, cflicient, power plants the industry average of 84.4% and was a pri-to service, we create jobs, reduce customer wsts, mary sout Jpower for the Duquesne system and begin to carn a return on assets that cur- during scheduled outages at Beaver Valley Unir 1 ,

! rently are idle. and Cheswick i

l $0L10 0PIR ATION$ RECORD Through eflixtive planning. scheduling, and I

Duquesne 1.ight, our principal subsidiary, has use of resources, Cheswids outage was completal a strong history of operating efliciemly and pro- ahead of schedule, Impnwements compkted j viding envimnmental leadership. during the outage induded an overhaul of the e

Leading the way in 1991 was turbine generator and replacement the nuclear fueled Beaver Valley I [ .7 . ,. .

of the stationi boiler controk and Power Station Unit 2, with an -

- j data acquisition system with a

impressive 99.5% availability, .

staic of the art digital computer, compared to the nuclear industry Our people are a driving fbrce average of 72%. Now in its fifth . behind the success of our power ,

r year of operation. Unit 2 recently  ?

stations. On site training programs ,

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are helping them learn new skills and enhance increased use oflow sulfur coal and purchase of their professional development. En.ployee involve- emiwion credits ihtough the innovative market nr:nt teams arc creating new ideas that add to bascJ cmission allowance trading pnnisium of our solid operations performance. They have the Clean Air Act, addrmed a wide uriety of operational and main- oua towea is iN DIM AND tetunce issues, from more eflicirnt work pracict , lntreasing sales to othcr utilities and the proposed to improval safety conditiorn, to cost redus tium, sale of 500 megawatts of power to General HlOH ENVlaONMENT AL ST AND ARDS Publb Utihtics (GPU) are prime examples of We have a long history of environmental the emergence of new markets for our energv.

commitment. In the early 1970s we were the The GPU agreement. now under review by the first utility in the country to equip an operating Pennsylvania Public Utility Commis3 ion (PUC),

power station with a full scale scrubber system aho includes the purchase of a 50% interest for sulfur dioxide removal, Because of our ong+ in our coal fmxl Phillips Power Station.

ing commitment, all of the power plants in our Preparations were undertaken in 1991 to service territory already meet the 1995 sulfur reactivate the Phillips and Brunot bland i m tr dioxide control rapiirements of the new Clean stations, which were idled beginning in 1986.

Air Act Amendments. Eighty percent of our total Because ofout signifwant investment in environ-svstem is in comphance. We are working with mental control equipment thr Phillips in the m . - -"

the co-owners early 1970s, the station already meets Clean Air ofseveral plams Act sulfur dioxide emission standards for the year

.in which we have 2000. Brunot Idand is a peaking station employ-a minority ina r- ing combuaion turbines and heat recmery steam est to develop generators that burn very low sulfur oil. It does ways to bring not face the same air pollution contml cha!!enges ,

- those facihties that our coal burning power stations face.

- into ct.mpliance. However, to reduce emissions even further, we Options being plan to convert the plant's steam generators to dncussed indude natural gas and its three combustion turbines nu < . . ms . > . ,

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esws k ownwnm ww4 av sute We are invesring more than $70 million in

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facilities to suppon airpon rclated growth. We I,' j. ,~t- have construcial two new substations. upgraded

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'f five existing suh<tatiom, and are con'.tructing L 4 , more than 40 miles of new power lines to serve

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to a dual fired system that can burn natural pu Allegheny Development Corporation, another as well as low sulfur oil. DQE company, will pnnide all of the clearicity While both plants are scheduled to return and chilled and hot water for the new airport.

to service in 1994, major reactivation work Construction of AICs airport facility was com-depends on timely PUC approval of the trans- pleted ahead of schedule in December 1991. It mission line proposal. houses seven 1,200 ton chillers and four 40 million 5TE ADY GROWTH' 5EEN LOC ALLY Ifl'U leilers. Ily mid 1992, the ADC facihty in addition to growing national demand for will begin ftdl production. enabling Allegheny electricity, we project steady e/owth in our tradi- County to complete testing of the automatic i ,

l tional service territory ofabout 1%% annually temperature controls, underground people over the next dode. movers, automated baggage handling, and other Opening of the new Greater Pittsburgh systenu that will make the airpon one of the International Airpon in Oaober 1992 is expected worki's most passenger friendly and emeient.

to be a catalyst for continued commercial growth  :,7- ~ .i

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D in the region. A study by the Southwestern J . *i ((f"'  !

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Pennsylvania Regional Planning Commission ., .

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, projects that the new airport will create thousands m, ,-

of jobs and billions of do!!ats ofinvestment, it will make all of Southwestern Pennwivania even ,.'

y more competitive in the national and interna.

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vision .

Our ample supply of energy is fueling our vision mately 30% of the country's current supply.

. of the ftaure, The federal gmernment is considering a number The permanent loss of steel and heavy manu- ofinitiatives to expand competition in providing facturing hud in the mid-1980s reduced our this genera: ion. Non-traditional energy sources, system load factor from 70% to 59%. And while such as independent power pnxtucers and non-we project steady growth in the Pittsburgh utility electricity generators, are being encouraged region, retail sales for the year 2900 are expected to play an increasingly imponant role.

only lurely to surpass ou , J1 time sales high set Expanded trammission access is the key com-in 1981. ponent of efTorts to increase competition and to As a result, we will be able to meet kical balance energy supply and demand economically growth and also h>ok to new opponunities to sell across the country. The national electrical grid is bulk power to utilities in other pans of the country composed of more than a dozen interconnected with shortages of generating cajucity. Funber regional power pools. Each pool is composed sluving of peak retail customer demand through of electric utilities that coordinate planning and introduction ofdemand side management pn>- maintenance in order to meet their combined grams, now under review by the PUC, can free power hud requir anents reliably and economically.

up even more capacity and energy. While our country has the world's mmt CH ART 4No OUR COUR$E e6cient generation and distribution system, Use of electricity in America is growing dramati- impmvemcnts are needal in the national trammie _

cally While total energy consumption has sion grid. One of the biggest imitienecks is in grown only 10% since 1973, use of . Pennsylvania. West to cast trans-

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clectricity increased 58%, according mission lines already are loaded to the U.S. Department of Energy. , , to their reliable capacity.

An estimated 200,000 megawatts . sTR ATsoY f OR OROWTH ,

of new utpacity will be nded to , .

. . . We believe this expanding,.

serve nationwide demrid thmugh increasingly competitive energy the year 2010. This equah approxi- - -

marketplace offers us new

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opportunities to pursae bulk powet initiatives. society. It can im-Phillips Power Station illuurates that vision. pnwe the etlicieng -

This 300 megawatt power station has met the of a wide variety of g' sulfur dioxide standards of the new Clean Air functions, and do b~

Act since the mid-1970s. However, it currently so at a high level stands idle. Restart of the plant is a significant of environmental element of the GPU-DQE Transmission Pmject, cleanliness. >

which will create, according to a study by the We are lirking k --

Pennsylvania Economy League, mare than customers with electric end-uses that can improve 11,000 consuuction jobs ever a five year period both company operations and individual lifestyles and more than 1,500 permanent jobs in power There are many gutential customer solutions: heat production, coal mining and support activities. pumps, w hole house surge protectors, microwave Proceeds from the transaction will provide a waste disinfection, process control equipmer return to our shareholders, and a direct benefit and cool storage systems, to name a few. We are to Duquesne Light customers by reducing future narrowing our marketing focus to cost effectively electricity charges by more than 5300 million. target customers who can benefit most from these i GPU customers will save approximately 15% of types of electrotechnologies hiany of these target the cost of building a new coal fired plant to areas involve non-traDional electric markets.

provide the needed elecuicity. Sales in such markets pmvida more efficient use FINDINO CU$TOMER SOLUTIONS . of our generating rapadty.

While bulk power initiath es and improving We also will continue to consider investments access to the national transmission grid will be in energy related businesses that could bring a major fbcus, our people aho are working to added value to our cunomers and our sharehoklers.

provide solutions for Pittsburgh area customers Our malest investment in Intenutional Ibwer who are seeking ways to make their operations Niachine.s (IPhl), a manufacturer of products aad more etlicient through the uu afelectricity. systems designed to pnwide uninterruptible elec-The single most significant advantage driving trical power, is a good example of our strategv to future sales is that electricity is essential to our match our finanual strength with companies whose 12

f servics, technology, and pnxiucts can help incnme other utilities, unhersities customers, and customer satisfaction. supplien. Among these projects are:

While most of the nation's capital v,us plunged > competing for funding to develop a test sire into darkness early in the evening ofjanuary 6 for a high speed magnetic initation train 1

- when large power cables failed, the Washington > working with the state of Pennsylvania to Metro sulmay system continued to operate thanks, expand use of fly ash in road construction

in part, to custom designed IPM systems sening

• developing a model

• smart" office laboratory tunnel lighting, train controh, and m bugear. that will fickl test a variety oflighting hearing, j Another major ctotomer, ;he U.S. government, is cooling, and other electrotechnohyies in an i using fwe IPM units to support the nuin com- acaul working environment puter facility and numerous engineering work-

• developing c!can coal technoh>gies and -J er ,

stations througJmut the nnv Superconducting solations to new envitunmental challenget Super Collider Laboratory in Texas. turuae souaeis or oeowiH RE$5 ARCH $H APE $ 0UR Vl$1ON There is no sir, ele solution to meeting changing

We are invoh:ed i, a wide varicry of remarch and customer energy needs in the twos. Independent doelopment projects to build on the inhetent pover producers, companies like IPM, conserva.

- competitive advantages of electricity, develop tion and demand side management programs all future markets for our pnxiuct, and improve our are part of the mix. 'lhat is why we wil! continue operations etliciency We are maximizing our to analyze our nurlets, our customers, our com-i R&D investments through }oint efforts with petitors, end om suppliers to pinpoint areas where

[- prudent, strategic investments will provide a store of value for our shareholders by adding to our revenues or enhancing our l

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in talay's competitive environment, energv and clearly established, and our peor4e u ork closely vision are key components ofour business strategm together to implement change pmmoting perfor-However, there is a third component-value. mance improvement. Every facet of our company Tb remain a quality energv provider, we must is wen as part of a value chain that is dedicated continue to fmd ways to add value to the services to customer $;risfaction. The essence of this cus-we pnwide. We are taking steps in many arcac romer focused dedication is cimiained within our to continue to differentiate ourselves from other slogan, found on schicles, ,tationery, and ofE e energy companies. signs-Delivering Quality Energy.

DELIVIRINO QLtALITY ENEROY Eighty-nine percent of tustomen surveyed in A key component m value is the qtulity buik into 1991 rated their overall quality of experience in the process of delivering services to the customer. dealing with your company " excellent" or gml.'

We are maintaining excellence and quality through Customers who have had .ccent service related i

a pmcess ofcimtinuous perfornunce improve- contacts with our [wple are surveyed each month ment, guidal tw the use of performance measures, to determine their level of satisfaction ngarding competitise benchmatking, and dalication to cus- overall quality of servic , reliability, accessibility, tomer satisfaction. and responsivenen. Results of these measures and Our corpmate objeuives were the starting lessons learned are integrated inm c..r ongoing point for development of our performance untomer satisfaction plan.

measures. For each of these measures, we set rig- NV1RONMEN1 AL LE ADER orous performance standards based on competi. Your company's environmental focus provides tive benchmarking. All corporate ..

g additional value to our customers.

groups use these measures to eval- 2 Our impressive record ofenviron-s v. 73 uate progress toward achieving y Q mental achievements, ou. sig-

, the objectives, to acknowledge [ nificant imesonent in pollution achievement, and to discuss areas  :

. control equipment and technolo-w here improvement is needed. gy, and our long history ofgoing Accountability for results is <

k - h#beyond mere compliance with a ~n. ,,

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/,J.L is conscientious and environmentally aware. *"' f J .,

l Our emple are important contributors ;'.. [ .

,5 to our environmental record. A company-  ;~ '

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wide recycling pmgren tan year cellected ,, . f' +>;f,.; y. 4g -.7-p j '( l .

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thousands of tons of aluminum cans and ,. ,

W.v waste paper. In addition, ccmpany sulun- W 3 3 >~ .

teers helped local Iby Scouts plant trees < :> Msdfd d 4 and erect bird nesting boxes as part of our wildlife since 1987. We have been an active panicipant in

!. habitat enhancement project on Brunot hiand. the formation of a new local economy based on l C0MMUNITY P ARTHE R, BUILDIR services, medicine, education and technology, l We believe our community involvement is with a quality of hfe that rank 3 among the best in another added value for customers and the com- the country. The November 4,1991,1:ORTUNh l munities in which we operate. We place a very magazine cited the regioen new diversity, its o.n-high prioriry on partnerships with local schools, tral kication, clean air, and skilled work for.e in Current activities include a high tedi magnet naming Pittsburgh the third best city fo bwiness f

school program, mentoring, tutoring, and sum- in the United States.

mer internshins. Our people alm are active incR AstNO 5H AREHOLDER 'tALUt vohmteers for a variety of civic, cultural, and in recent years, our industry and your company non-pmfu community groups. have experienced much dr.nge. lb an ever Duquesne Light was a major contributor to greater extent, custome s expect more from us as i public-prirue efforts to help rebuild the k> cal their needs change. Our people have confronted l

c economy during the these rising exp.ctations with enthusiasm and g

1980s. Our econom- the b;ghest ,tandards of pmfessionalbm and ,

K .. ;$. ,. 48.. ic development pn>.

perforraance. By Delivering Quality Energy,

. ~ fessionals have played providing added value to customeis and the a role in the addition community, and pieserving the environment,

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or retention of mr,re they are adding value to your investment. Across ,

4 than 14JK)0 jobs DQE, energy and vision are creating value us,,w.s p p.m. m a su ,

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Rrron ts or MAN AGt MtNT AND INDIPENDENT ACCOUNTANIS 24

. ST ATT.ML NT OF CONsOLID AT E D INCOM F h+ 25

- Countituito 144t ANot SHiti 26 ,

$1 ATf MINT OF CONsOilD*3tD CAstt Flus s ,

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ST AY t MtN T OF_ CON 50 Lib 41 FD COMMON $10dHOtTO RC LQUtTY 29 Notu To ConotinATtD f tN ANcin STArtMtNis 29

$1LtCTED IIN ANCI AL DATA 44

$stLCTrn OrtartrNc DA1 A 45 P

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Grath

.1991 1990 1989- 1988 1987 1986 Lw

$ Farnings Per Share . 5 2.50 5 2.24 $ 2.03 5IE $ l.85 $ t.51 1013%

Year-End Dividend Rate $ 1.52 5 1.44 5 1.36 5 1.28 5 1.20 $ 1.20 4.8% -

Ikk %)uc at hr-End 521A> '520,07- $19.27 sirs.51 517.37 516A7 5E

• Market Price Per Share

- H;gh 31 25'l= 2rl. W/4 14 % 19 % 9.9% .

[ low 23 % 20 /. 17 % 11 % 10 % 12 % .14.0%

- br-end 30 % '.4 % 23 % 18 % 11 '/. 12 % 20.1% -

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MAN A06 ME NT*5 DISCUS 5 TON AND AN ALY545 OF FIN ANCI AL CONDif TON AND R E SU L15 O F O P t R Alloil.$

coaroud DQE was formed as a holding company in 1989 Electric utility activities will continue in cum-M""" Duquesne 1 ight Company (Duquesne) is a prise r .ost of DQEi business. The Company has, whotly owned subsidiary. DQE and Duquesne however, taken imponant steps to develop its two are referred to collectively as the Company. As non-utility subsidiaries: Duquesne Enterprises the principal operating subsidiary of DQE, (DE) and Aiontauk. DE is providing the tmt.d Duquesnei operatiom account for most of DQE's energy services tior the new Greater Pittsburgb awers, revenues and income. Therethre, DQEi intemational Aiiport. It is also investing in ical financial condition, changes in its lignidity and estaic. Montaut is pntsuing a variety ofimest-its future fmancial outlook depend primarily on ment management activitics.

~

Duquesne's operations, investments and finan-cial activities.

in u n s or on umso lu u s' i s _ .hase-in plan prwided that rates increase by Retail mrating revenues are based on rates autho- nimately $85 million in April of each yea riied by the Pennsyhania Public Utilir> Commiv trom 1988 through 1991 remain constant in sion (PUC). These rates are designed to retover 1992 and 1993, and decrease by approximately operating expenses, the Companyi investment $85 malion in April 199a. It also provided for in utility plant, plus a return on the invesunent recoverv of all deferred revenun plus the carrying in utility rate base. Sales to other utilities are ai costs on such deferred revenues. Th Company market rates, has recognized the entire general rate increase in The general raie increase resenues and the sevenues since it was giamed. The part of the

' ferred customer revenues resuhed from a increase yet to be collected from customers 5232 million rate increase granted in ca ' ins 8. appears as a deferred asset on the balance sheet.

The PUC required >he Company to phast is The Company expects this deferred asset to be increase in over a six-year period. The design of fully retovered by the end of the phase-in perial.

Comp (ments of the changes in revenues from the prior year:

(Mdliom ofDdim) Iml smo 1%9 Rate increase eihtise March 1%s 5 t H.6 ssi.0 sn?

Recovery ofdeferred customer revern. and rdated carrying oms 69/i no -

ikferred customer revenues (89.1 ) (85 s) (21.M Retail KWH & ales 2 2.' (0.to (l 6)

Energy cost rate revenues 15.1 s9 H.2)

State tax adjustment surcharge 11.1 - -

Other  ?.0 s.2 12.8 Revenues from other utilities 13.8 (2 3 (11JD 7istal %8.6 $123 557 '

.. % . _ _ . . - . _ __ ~ - . . _ _ . -

hDOE l

4

~

anasi opsn AUNS alVINUll fM)//wn,sf(L/4mf M state ta% adjlistment reve!)uci represent

- e .

-: recoveryofincreased Pennsylvania state taxes.

• g [ On August 4,1991, the state legislature enacted D?

ddM/ hh.

% sh;nificant t.u increases, virtually all of which N.n , ~ '

were retroacuee to January 1,1991. .I.he i,UL

. m, um g- -

; allowed Duquesne to recovet these increaws in ,

m-

. sm 7

m g yy L ; tas expense through an adjustment applied im d E i. M+ ~ :. mm _ -

to customeri bills beginning August 24,1991.

:= i _ _ _ Other revenues include rental income and billings to the other Central Area Power Coordi.

'.mr~.im-

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im < im. mi -

.resuss w J gaw,,,,,,,,,,,, _ nation Group (CAPCO) companies, c.~,ui -s,a s,rm,u lm Sales to other utilities reached record levcis during 1991 because of available capacity, The levei of retail kilowatt-hour sales in 1991 increawd demand by other utilities for nergy.

increased 1 A percent compared to 1990. This and Duquesne's marketing efkrts. Decreaws in was due io increased kilowatt-hour sales to resi- revenues from other utilities in 1990 and 1989 dential and commercial customers, partially offset here primarily due to decreases in demand from by lower sales to industrial customers. Summer other utilities. All such sales were made on a tempeiatures reached record levels in 1991 result- shon-term basis and the pndits from such shon-ing in increased use of electricity by these cus- term wholesale sales were pared through the tomers. Sales to industrial customers declined ECR m benefit Duquesne's tcail cwaomers.

- however, dt.e to decreased demand for electricity oi., m o.s n o si e n u n imse by the Company's largest industrial custorner Huctuation. .n fuel expense e2ch year result pri-which had large first quaner production cuthacks.

mardy from changes m. the cost per ton of coal.

The level ofindmirial sales had returned to the nu.s between coal and nuclear generation 1990 leveh by December of 1991. Retail sales and the total kilowatt-hours generated.1.uci are expected to grow over the next decade at an .

expense mcreasedm. 1991 primarily because of averag' e annual rate of 1.75 percent. .

an increase in foss.d generation and increased Retail kilowtut-hour sales in 1990 increased sales to other un.h. .oes.

L, 1,1 percent compared to 1989, Alodest growth l .I.he increase in other operation expenses in l- it. commercial and industrial ules during that 1991 was attributable primarily to an increase year were partially otTset by the effect of mild . .

m the allowance f.or uncollectible accounts weather conditions on residential sales. . .

. caused by the detenoranon of the L,ompanv,s '

Ructuations in energy cost rate revenues in all past due customer accounts and m. -creased col-years were primarily due to changes in the fuel lection costs. Also, other increases were due to -

-costs and profits from short-term wholesale .

increased generation.

sales that are passed through the energy cost rate Alaintenance expense was kmer m. !991 ano, recovery mechanism (ECR) to customers 1989 as compared to 1990 hecause e f the timing 19

. .~ - -- -. -- -. - - - - ..-. - ~. . . . . -

1 I

l I

l J

ofschedulal outages at the Company's coal-fired income increased in 1990 compared to 1989 units and a decrease in the amortization of nucle- largely due to higher canying charges on deferred ar maintenance costs. tevenues and a 1989 charge for rate refunds.

Taxis INitio si no Otme Cnuu s l Income taxes and taxes other than income taxes interest and other charges decreased in 1991 and increased 21,4 percent in 1991 as the result of 1990 due to the retirement or refinancing of  ;

kgislation v,hich increased Pennsylvania taxes and higher cost first mortgage bonds, pollution control

' higher income levels. The increase in income obligations and preferred and preference stock.

takes in 1990 was primarily due to increased tax- These activities allowtd the Company to reduce ,

~a ble income. The effective income tax rates for interest expense and dividends on preferred and i

1991,1990 and 1989 were 41 percent,38 percent, preference stock to $145 million in 1991 from and 37 percent, respecthrly. $160 million in 1990 and $168 million in 1989.

ornu Iscom no ornecuou tume.s via snoi Other income dedined in 1991 due to a regulato- Increases in ner income and a reduct .>n in shares ry imposed accounting redassification, the result outuanding resuhed in earnings per share increas-of which was to reduce 1991 depreciation expene ing from $2.03 in 1989 to $2.24 in 1990 and and decrease other ic ume by $5 million. Other $2.50 in 1991, CANAL Rii$orRef s ~ con $ t RUG joN ann liQUmiT1. f~$ Nfk eNSU kohI9hd hPiR Akibbkhbes)f)kb

~,

During 1991, Duquesne .mcurred constmcuan expenditures of 5125 million, exclusive of ~ d .

.- ~ g s )%

~

allowance for limds used during construction (AFC) and nudear fuel. The Company mcurred

[l f, ( W

[

these expenditures to improve and expand pm-p,x

• ** WM

,, M . , ,

i Omme w w wW h(9 y duction, t'ransmission and distribution systems.

. DhN

% + 4 The Company estimates that its 1992 con. L y ,;l's*mol' a struction expenditures willictal about $130 g %wL w a ,,

L ,;

F million. The 1993 through 1996 construction

~ .,m 7"? ".- 7 4

~

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7 nm am.

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. These amounts exdude AFC, nudear fuel, the c

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Utilities (GPU) (see Iung-Term Power Sales on page 22), and expenditures for possible early

' The Comp.my plans to meet its current obliga.

tiplacement ofsteam generators at the Be.urr tions and debt maturities through 1996 with Valley h>wer Station (see discussion in No:e I).

funds generated from operations and, to a lesser The Company currendy has no plans for con-degree, new financings.

struction of new ha,eload generating plants.

20

- _ DDOE e

.m ,

)INANCING

SITURN hN IbUd1 N1bW$rk ~

' y s m w st-: i Q:y-y {'< *

. lhe Gimpany is continuing to reduce its capital b '

i 1

4 -

costs by refmancing its securities to the extent '

e y.

pDe n 7

&w s mm fmancially beneficial results can be ach.ieved. g g g g p )P g g g {.:= uQf .

m During 1991,466A00 shares ofeommon stock

~

' w 4', 4 ~

were repurchased for 512.2 million. An addition- w_a _

N al 405,000 shares were repurchased for $11,5 in - 4_ _ i _

million in connection with the establishment of '% - -

ine Company's icveraged employee stock myner- " " - - - - -

ship plan (ESOP)(see discussion in Notes G and " . wf im a im 7,m Dm, K). In addition. $38.5 million of preferred and y '

,,,,, g g u g preference smck was repurchased, including the 529A million balance of the 52.315 preference of nuclear fuel As of December 31,1991, the stock issue. In Jammy !992, the $16.1 million net amount of Duquesne's nudear fuel fmanced -

balance of the $9.125 preference stock was under this arrangement totaled $98 million, redeemed. In April 1992, the Ompany will Dividends may be paid on the common stock redeem the balance ofits 58.375 preferred stock, to the extent permitted by law and as dedared by In 1991, the Company issued $50 million of first the Ik>ard of Directors. However, provisions in mortgage bonds with interest rates averaging Duquese's Restated Articles relating to payments 8.25 percent to finance the redemption of of pref 'd preference dividends may affect the 10.75 percent first mortgage bonds. The the payn- ommon dividends. No dividends Company reured an additional 59.8 million of or distributa .nav be made on Duquesne's long-term debt including amounts necded to common stock if the Company has not paia divi- ,

meet sinking fund requirements. The Company dends or sinking fund obligations on its preferred is authorized to inue up to an addition.d $400 or preference stock. Further, the aggregate amount

- million of first mortgage bonds. The proceca of Duquesne's common stock dividend payments

of such issuances will be used primarily to retire or distributions may not exceed certain percent-higher cost debt and meet current maturities. ages of net income if the ratio of common stc;k-In 1990, the Company retired or refnunced hoklers' equity to total capitalization is less than Y $241 million oflong. term debt. specified percentages. No part of retained earn-In 1989, Duquesne entered into an agreement ings at December 31,1991 wu restneted.

with an unaffiliated corporation that entitled As discussed in Notes r and K, Duquesne Duquesne to sell and the corporation to purchase, established an ESOP to fund a 401(k) match, on an ongoing basis, up to $100 million of effective January 1,1992. Duquesne expects

- accounts receivable. At December 31,1991 to purchase shares of DQE common stock from Duquesne had sold $25 million of receivables. DQE or on the open market to satisfy the p Duquesne currently finances its acquisirim exchange feature of the Preference Stock, Plan of nuclear fuel through a leasing arrangement Series A. The Company expects the ESOP to have ider which it may finance up to $120 million minimal dilutive impact on camings per share.

21 l

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4 a

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uw +

ft Losc.Trdron a snis share of the transmission line, On September 11,

. In September 1990, the Company agtced to cater 1991. the Company and GPU filed an appljeation i

mto a ;omt venture with GPU. Under the terms - with the PUC for siting of the transmhsion line.

7 forthe agreement, GPU will purchase from the - Constimmation of the transactions described Company 500 MW of capacity and associated alwe is subject to certain conditions, including -;

- energy for 20 years begir.ning in 1994. The sale receipt of federal, state and local regulatory and

- will mjuire reactivation of the cold reserwd environmental appnnah,  ;

Phillips plantThe Brunot Island 011.) combined E=owtmt W " n

. cple facilities will aho be returned to commercial The Comprehensive Envimnmental Response.

operation and will be available to support this Compensation and Liability Act of 1980  ;

sale. This p'artnership arrangement provides char (Superfund) and the Superfund Amendments -I GPU will contribute 5150 million for a 50 per- and Reauthorintion Act of1986 established a O cent interest in the Phillips plant. Duquesne will variety ofinformational and environmental

n,.arn the plant to commercial operation by 1994. action programs. The Environmental Protection j;

- Duquesne submitted a petition to the PUC for Agency has mformed Duquesne ofits imolve- i approval of the prudence of the tr.nsaction and ment or potential involvement in three hantdons

- for accoun' ting treatment of the associated cmts. waste sites. If Duquesne is ultimately determined

^1n December 1991, the PUC Administrative to be a responsible party with respect to thesc f LawJudge recommended approhl of the Com- sites, it could be liable for clean-up costs In pany's petition.The ALJ's decision is subject each case, other solvent potentially respc mible - l

} to review by the PUC. parties are involved, which may bear all or part

Pursuant to this partnership arrangement, the of any liability. In addition, Duquesne believes

- Company and GPU also will construct and oper- that available defenses, along with other factors ,

- are a 268 mile, 500 IN transmission line from including its overall limited involvement and Pittsburgh to Harrisburg, Pennsylvania, sched- relatively low estimated remediation costs

, uled to be in service in 1996. Duquesne will own - for one of the sites, will substantially limit any p4 J a one-third interest in the new line. GPU will potemial liability which it may have for dean-

. own the remaining interest in the line. Duquesne up costs. Accordingly,it is Duquesne's opinion also will have an option, exercisab!c prior to that these matters will not have a material September 1995, to use up to another one-sixth adverse elket on it, fmancial position or results of ths line. The 500 MW sale will be delivered ofoperations. l 1 over GPU's share of the new line, leavis : In 1990, Congress approved certain amend- ,

Duquesne with 500 MW of new transmissic sents to the Clean Air Act. The new legislation Ecapacity available for other transactions, regard- ~ will require Duquesne to reduce sulfur dioxide of whether Duquesne exercises its option. (SO2) and nitrogen mide (NOJ emhsiom at its Duquesne expects to file a plan with the Federal wholly owned Cheswick plant and its jointly 3

- Energy Regulatory Commission (FERC) for mar- owned Eastlake, Samniis and Fort Martin plants

> - ket based pricing and open access for Duquesne's by 1995. The Company believes the Phase I ,

j

- -- ='*

t MDOE l i

I 1[

nxiuirements beginning in 1995 can be met by of pnt vtironent nJdical unnage Ibr in retiren  ;

ming hmtr sulfur coal and adding knv NOi timmgh age 65 will be between $27 n illion anl a burnen at these fimr plann and Phillips. Capit.d 570 milliot. The Company expects to amottlic  !

cmts anociated with this Phase i stratery are esti- this ont over iwenty yeart The annuahuu under [

mated at 550 millionJIb meet Phase 11 require- Statement 106. including this amortiutio.;,is  !

menn beginning in 2000, Duqunne is exploring opcoed to add betwwn 53.5 million and O 1.5  !

a combitution ofconipliantr methmh. Duqunne million to <,urrent expeme. .i will(untinue to work with the owner / operators Assuming the PUC will pnnide for future ofin jointly owned stations to arthr at a ant recuvery of thne arnounts there would be no j cffeaive compliance strategy. diiri on Duqunne's cantings. 'the PUC b npret.

Act mwrec Msinn ,

al to pnnide guidame on this hsue prior to 1993.

The l'inancial Acwunting Standaw Board has Note 1I dewribn the statm of tenain invntJ .

issued staternents regardirg the accounting liar ments not included in rate base and other ,

income taxn and pniemph>yrnent benefin that defend una that the Company expecn to reuw. j the Company expecn to adopt by 1993 er. If at any tim he Company determines that j Statement ofihneial Accounting Standanh 'ecovery ofihne items is not probable, such l No.109. ArrnmiingforImvmr km, tequires the unwmveuhle amounts wonk! be nrogniscd as liability method of atcounting fbr income tasn. a charge to carninp.  ;

Adoption of the Statement is expected to have a Duquane's utility operatiom are subjeu to -

f one-time avorable income sta'ementt impact of nyulation by the PUC and the fl!!(C. This wg-  :

about 510 millionflhe Company estimatn that ulation h dnigned to pnwide Gn the twovery of the deferred tax adimtments will be oft,et pri. operating cmu and the opportunity to earn a fair j mrily by regulatory aucts of about 5650 million k 'n on funds invested in the utSty budnns.

l and nyulatory liabilities of about $60 million. The regulatory proten impwn a time lag during -

Statement;of Financial Acaiunting Standards shich increases in operating expemn, capital

{

No.106, Empk9rr1 Aranmtingpr iNmetimnent, '** * "" NG I"" '** ""Y ""' bc *"'"E Benefn Odrer Than Pemion<, requires acaual ef O'""*' = -

i pntretirement lenefits (sua neakh caw benetits)  !

ThiCompmy expeas that Amds generated from during the years an employee providn service, operatiom v # wntinue to be sulkient to meet l

S Duquesne currently wntributes " ward the cost sinking fund and long-term debt maturities, pay ,

of pwtretirement medical coverage for its rniren &idcnds and fmanc: a large pan ofla capoal ' l through age 65. These costs are refleced in :he .ncedw The Company's need for funds and the I Cv yifinancial m statemenn, and rtumered availability of those generated from operations t' ugh rates, on a pay-as->vu go (cash muhod) - will be alTeard by the lorl of economic activity acwunting bawis. This expense h approximately in the Company's service area. Irgidation, rate ,

51.3 million annually. related proceedings envimamental manen and Based or,atimatn, the unftmded transition other matters experiem ed by it and the elcarie ubli Fanon related to contributing mward the cost utility industry generally, A

i

. .. .. _4 m _ _, _ . , , _ . ~ . _ _ _ , w ,, _u, _.. _ ;__ , , g _ , -

- ~ -- - .- _ ~ . -_ >. _

f R t r oll f % O F (4 A N A o t Ml fit A N D I INDEPIMDifdf ACCOUN1 ANil  !

CourAx1 Rt roki The Con tun) is inpinnible for the 6n,uicial infinin4- and dat iransactiorn are nauicd and ruorded in os Ilsascl68 tion and c4resentations mntained in the hnantial atwrdante with establehrd proculma 1 hrte are hm. ,

5io i ut M s statements and othet antion, af thh Annual Rtpon, its inhen nt in any system of mtrinal mnirol ba cd on 1 he Company bchna that the mnwhdated finmdal the enognition dut the mst of suth a system shouki r.tatementri hne been prepaini in c informity with not cured the bcoclits to bc detimi. 'lhe syuem of generdy acaptal auounting prindples appmpriate intunal aucunting (ontml is sup;mried by w riurn ,

in the d:cunwtances m edlen, in all maiorial inpcca. pohdes and guidelines and inupplcmtnted by a suff ihr sulntance ofcvents and tranuttiom that should be ofimernal auditors. The Company lehem that the

- indaded m the statements and that the othcr infonna- internal auouming mntrol system prmida reawruble i tion in the Annual Repori h mnsisimt wnh those awuramc dut its awen are ufepurded and the hnan-statemenn. In perparing the finandal statemenn. the dal infornudon h sdubic.

Company males informni judgmcnn and ntirnates y /

based on curremly available mformation about the k NA dTn ts of cenain events and tranuctiom. Wnley W. mn N hat L Gary L Nhwau

""#**"*' "'**~d The Company maintains a mtem ofimernal nlii<.ef} m nerod.c  % 4sr ,

acmuDNnK t.ontrol dcNQ fled to prmide leasolvide anurance that the Company's aucts are ufcpwded Ri cor,t on To the Dirmers and Stodbolden of DQfa staicmento An audit also mdudn aunsing the Iwturiso. o We have audnid the aanmpanying comolidased auounting prindpin uwd and Ugn.i.on niimatn Ctuouoreaut balanoe shnts of DQL and in subidiarin a of made by marugemcm, n wvil as o ahuting the oveull Arcornast$ December 31,1991 and 1990, and ihr related conwb Snandal staicmeni prnentanon. We bdicvr that our f,,.;,,,,,. e fa idated statements ofincome, mmmon umkholderi udits provide a teamnable basis far our opmion.

rw mu,mi.i* equity, and cash flows for c.u h of the ibrcc yean in in out opinion. suth mnmbdaird finandal itatc- -

M Uiw Ibsa the period ended Oncmber 31,1991. Tbne finandJ1 ments prncht faidy,in all matcrial ropeus, the hudwrA lbwd wC50.M

• statemenn are the inpimdbility of the Company's fmandal podtion of DQF and in subddiuies as of management. Our rnponsibility k to upnv an opin, Ihember 31,1991 and 1990, and the resuhs of their inn on these fmandal statemenn basni on our audin. o;wrations and ihcir ush flows for cach of the three We mnducted our audus in anordante with gencr- yean in the pedod endal . xmdict 31,1991 in wn-ally accepted auditing standards. Those uandards lbrmity with genaally ancpted auounting peindples.

require that we plan and perform the audit to obtain .

reasonable awurance about whethcr the finandal ' T*"M statemenn are free of nuierial miutatement. An audit De'aine & 'Ibuche indudes cumining. on a int bads, n<idence suppon- h*"* # ^'

ing the amounn and diutosurn irt the financial Arun Comot r The Audit Commince, composed entirely of mm- independent puhhc aucuntanti nunagement lena 1 r, T il R employee directorb meets regularly with the indcpen* retommendationA and reviewed and appmvnt thi. -

dent public accountants and the internal auditon to independent pul& aaountanti general audn fen discua rnuhs of their audit work,ihdr evaluation of and non-audit 3crvicn, the adequacy of the imernal aaounting mniroh and The commince meetings are deugned to faciutatt ,

the quahey of finandal reporting. opcn mmmunicaiiom with the internal audimo and In fulfilling ie nponsibihtin in 1991, the Audit the independent pubbe aaountana. ~1b cmure audimr Comminee recommended to the ikurd of Dircunn, independence, both ihe independent public auonn-subject to durcholder appmval the sdection of tht tams and i, :crnal audimn huc full and free aans to Companyiindependent public aaountann, The the Audit Conunince.

Audit Commmee reviewed the overall smpe and Jetaih of the independent public acmuntanti and internal audimri re pe 6ve audit plans. diwmsed the The Audit Commince of the Ikurd of Dirnton 24 .e

$1ditMINT of e ON$OLID ATED INCOME 'DDOE

)her DulalDerronic .51,

(%aans offMlan, Lu ryt iH Sloarr.4*nounn) 1991 1990 1989 0rtaat su Customers:

- Rt vtwa s Current 51,218,909 51,074.956 $ 974.40 Deferred (Note 11) CAJi4) 10.784 96,287-Other utditica 58,903 45,1$3 47,837 TotalO/ vratinglirarnun 1,199,468 1,130,893 1,118,568 O ri a 4: tt.c . 1;ucl 237.855 213,324 210.299 13 Pl N nl y Pufduwd pfWet- 12S00 6,187 4,744 Other operation 287.767 267,169 272279

' Maintenance 83,773 9?J56 . 63305 Depreciation and amortization i19,266 122.2%I 119J76

. Taxes other than income tairs 95,o67 81/1 0 92,898 Income taxes (Note F) 95,941 76,247 65.678 TotalOperating thy >rnses 99,%62 863.977 849,075 Ors k AtiNc INtoMt 266,846- 266,916 - 269,4N9 .

. O rui K INviua ' - Allowance for rquity funds uwd during corwtruction .A 1375 69 4N ti (DI (WC i lONO i tharge6 00 dderfCd reVenuel Cartf ng 2l:5l4 22050- 18,13$

Rare refunds (irujading inscresi expenw) - U3) (432) (8.581)

' income taxes (Note r) (s, salt (2,548) - (9J41) -

Other- net (8/>o8) (2A33) 8407

• /btal Otlorr inconw and(ik ioru)'- 8.357 12,412 K 5W) 1N00ML P*IOR1. lNTIRI$T AND OrHi A CH AkGf & . 275.763 ' 279,K28 277,998-Iwiiassr iNo _ interest on long-term debt

~

13 AA99 139,889 -144,633

. oon a cuancisJ zat6 Other inscrest - - 5,781 - - 6J73 - -

Alknvance for borrowed funds used during cc,nstruaion - - (2,418) (1,$59) L . (2.803)

Preferred and pteference mick dividends of Duquesne light Company 10,801. 14.045- 16,743 Totalinternt aoulativr Clwges 142,19s -158,156 164 3)6

'Nt1INcout- 5 133,565 5 1214 .72- $ 113.002 s .

AvtaAct Nc6 sik of COMMON

. SHants Ot'istAwotNu (000); 53J91 - 54,432 $s,7 1 F,ARNINGS PE R $H4kt Of COMMON Stocx $2.50 $2.24 $2.03 C-- ' DiviorNos Drct Aaro Pta Stirar os COMMON STOCK ' $1 A6 5138 $130 Set Mtrs to Conw!idated l'irwrcialSure nents.

.. D 2$

4 1

1. - . _ ._.m . - , _ . _ _.__m_- _ . _ _ - - _ ._- _ _ _ , _ _

e a

n. ,

' C'O N50LIDQ180 S AL ANil $Hilf  ;

b-- ,

l o- t l- 7 i L

?..

• t L - _

1 I As vfikrmler31, (T!vauarub ifikfl.sn). -199l 1490 f ,

' . ~A u n > -

.- Property. Plant and fquljuncut: .!

- Electric plant in serske 53,740.809 luw.822 [

' 91,1 to f4.172

' Constrtoion work in pmgrro :l 235,791.  !

lJ t mierty held under capital leaws (Note E) 220.106 n

W Propeny held ihr future uw (Noic 1I) 216.341 216.2ui d 7 bid 1 4,268,398 4.176.h31 I

' I less accumulated depreciation and amortization (1,2 U,281) (1,135A . J-3.0.15,115 5.060,562  ;

' kperty,I'l,rntandEjuipmerst-Net i

f -t.

Other Property and Imtstments (at cost) 44.297 24.129 l

. Current Aswis:

- Cash and terr.porary cash investments (at cost v.hich approximates ma:Let)' 25,245 ' 38,576 1 i16,176 62,147 ReceivablS (Note C) =

" Materiah and supplies (getierally at average cost); ,

. Coal '. ' .M,470 37,938' l

. Operating and construction - 64.692 60.102 ,

M ' Other current assets . 19,852 10 H47 ,

. Jhtd Cumwt Aucts 262,435 209,810 ,

z i' t 1 . Deferred Debite ,

r g <

- theraordmary pmpeny kiss (Note B) - 67.514 - - 84A07 1 Unamanhed ktss un reacquired debt (Nmc K) $5,270 55,42W j .-Income taxes on ute of Ecser %1ky Unit 2 (Note E) 73.107 '76,101 51,149

]

(g .,  ! Dcferred costs of units not in rate base (Note iI) 51.149 267,883 r

' Phase-in plan deferrak (Note H) . 211.053

' ' . 109,H39 .-

Other deferral dehlu. 134 769 ,

s  ;

9 2 7htdIk[erredIk/rirr 5N.862 i,44.805 ,.

w udAares - - sn3u09 ns!9.n

= - .

I $f $0s'n to Corisolidated1;ruirnidStatements. i 1

i

~~

s I

l * ~

W2 ., _ ,. -- , ~ - , - - - . . . . - , . . . . . ~ - . . _ . -. _., .-. w ,. _._ ..______.;.._

i t

.i -

hDOE ,

i-i L

i i

3 Aw]l.Mmlvr31. j (11suwub rflh!Ltn) i991 14%)

f CAN A tirtsos Opitalization (Note K):

m > I1natunts Common sta L (authorim! - 124mwoo sharn, iwan! - 73.1194 % shares) 5 73,119 5 73.! !9 Capital turplos 928,% 2 92 Mall ,

Retained carninp 4 % 484 381,159 l

[ ess trecury stock (at omt) (20,2 t 4.57 and 19360301 sharn, ropatively) 0 27,044) 003,54U

{

Total common stod. holders' equiry - 1.1I1.121 1,079,141 Non-redermal le preferred asnl preferente $nk - 128,906 151,346 l'

Redeemable preferred and preferen(c unck 15A37 37,747 Redamabic preference Stock, Plan Series A '30,000 -

[

I Dektred employee stock ownenhip plan benefit 00,0mn -

Total preferred and preference stak 137J43 189,tn3

- l'irst mortpge lxmds : 1,02%,299 1,103,6 %

Othrt long-term debt 399,275 401,912 i Unamartir.ed debt discount and premium - twt 0,848) (4,253) 4

~!btallong-term ikht - 1,420,726 1,s01:'95 7btalCapitallution 2.669,190 2.769.529 Obliptions Under Capital leues (Note E) 87.861 10N3H8

' Current IJabilities: I long-term debt and lease obligations due within one year (Notes E and la 119a2a 4a303 128,646 l

Accounts payable 129,473 i Accrued income taxes  !

34J66 16,413 OcNted inmme tuo and other accrued tum - 34,187- 25,689-- -.

t ihrued interest ' 32,339 .34,598  ;

j Diddendideclared 25,545 25.984 Sinkhg fimd and purchase requirements (Note K) 28.665 16A89

~

l TotalCarnnt liabilitin - 403.1s6 2 % ,949 -

.. - bther Nuncurrent 1.iabiliiin: ,

- Im'estment t2s crnlits unamortized 141,549 147,527 Axumtdated deferred incorne rates $30,580 512,056

' 3 Other defersed credits 102J73- M,857-p

7brid Ot/vrNoneurnut liabsl.1its 774,501 744A40

. Commitmems and Contingencies (Notn B through 13

= 7btalCapitaliution andliabilitin $3,934,709 $3,919.306 o J

.a 27

- wns: . . - - .s... .;-_- ~. ...u. __._ _ .: , _ u.

t y +d jq g

~,i

)

( jWRe  ;

' f s q W h -[. "1 - - -

• .,f; ( v,: bk, ; * . 41 O F C O N S O L I D A T E D C A S H F L O W S

u. , , ,

+

~

y 3

1 1 . c

.p-V, J v v i  ; ri d ,

ll-

^

% ., 4

((ph I I (7/wwmhaflhd4ml 1991 1990 1989 f 1

con hows Net inmme 5 133565 5 121.672 5 113.tw2 i

' f uuht Ort a rtisu Principal riotaash c harpn (anlity to nct intonm j'

.Activitet s - ikprec-iation and amortitation 119,264 122.251 119J76 Capital leaw and other amortizatioli _ 56A37 49.26ft 31.013 Deferred income tan atalinvntment in tredits-nct (IR3N) 203M 59A67

- Alknvan(c for rquity funds uml during mmirtriion (1,855) (1375) (69) ,

g Ph. win plan deferred revenues and relatal cartf i ng(harpo 56.830 ( O.73ei) (l14.442)  ?

Changes in working rapital other than cah (Noic,1) (41,050) 281 96N78 C thet - net 35Jil 21.153 24,746 i

Net Guh hovidedfem Openning Actirltin - 337+%s 300 251 329371

?CAsHItossthip Comtruction expersluures (127.U6) (109.718) (88.169) i

' BilNu nINr. Other - net - (24J46) (3,404) - ( A,519) >

N' IY'M b I gg g $ j ,;  ;,,,,; y 93 y 1

Cnn flowMbtn '- - Sale oflonds - 50.000 199A50 13300 lh l'4N ANONtf ' Dividends on common stsck (78,040) (74372) (72J47)

Atitvli ti s Reductiom oflong-term obligatiom: [

Preferred and preference stock ORA 05) 01371) {24,H26)  ;

Inng trim debt - (48.782) (241.7N8) 09328) i

'n ' Other obligadons (42,9r) ( 0.517) (29.358) i

' ilate n fund payments ; .

' O J83) 07J21) 0 0.873)

Repurchase ofcommon stod - (23,70 %) (34.170) (45.707)

Pr-mium on readquired debt (2317) 0 349) (173)

Other a" et (2,410) n '-. '2.129 2A81

, l INeo Guh UsedbiRnancini Activitin . 3198,767) (2M312r 0 86.681)- ,

• ~

f

. Net indeaw 6kueaw) in cah and temp >rary cah invntments .-(13J31)f '08583) .51 M 2 Coh and temporary cash imatments at beginning of year 38376 97,159 . e 557 i Cmh and temporary cah invntmems at end ofpar ' 5 25,245 5 38376- $ 97,159  ;

4 1

, $UP PL.l MI N T AL C A 5 H F L OW IN T'O R M ATIO N k CAsit 0463 Dt' RING ^ Intrie5T (Det of 3mOUH$ Capital} Zed) ;. $ 136.147 $ 133,754 $ 166,702 -

5 41393-- S 28,157-vT;:e YeAn Fou _ -Income taes .

$ 86.201

. N6w. cod twvr o me. - Capital lease obliptions recorded ' $ 22,028 's 31321 5 31,542 t 130P preference stock issual . 5 30,000 - -

EANt>I)NAsctwo r

AcuvmW kr Nota to Conwlidatedfinanci<dStatnnents.

~

-i g g i i

,' 'f' , a w , _,..-..%_, _ __ __; _ _ , _ _ , - _. . _ .,,_ _. _ _ _ . _ _, _ . _ _ . _ , _ _ .

- - ~ .- +-~.-~.~.-n . -~ - --

s ,

-c!+ }

O }

19 Af tMINY OF CONtotIDQTtD h r.nJE l COMMOM Sf 0CMHOLDIR5' toulf Y I

, 'i i.

7 I

-- I (1kumd v[lk/!.m)_ 1991 IWn 1989 1988 f CouuoN$1ock- C4stnruon stml pat ulue ($1 pr shm) 5 71119 5 71119 5 71119 5 73,119 l car 41 A kaes es Cepiad stak expenw and other khange) 09) y,8 yr Ial5  :

' flalanw at end of par - 928, % 2 WH 411 92tt#13 927A46 -

{

Rn Am 4 o I:AstimA - Net inmme 131565 121.672 113.002 118366 t Dividends dniated C'8,060) U4,972) U2J97) (77371) h llalance Li end of yrar 4 %,684 381,159 illa 59 293.N54 [

Tatucav$1o n' Stal repucham!(net) - (23A96) (34,117) (4$387) (INYJF#i)  !

Ihlame at end ofyear (327,044) (30334N (269,431) (223.844). l 7htalCommon SiwWldm'/'quiry $1.111.121 - $ 1.u79.141 51avi6.190 11.0?0375 = -i

__a.-- _ _,,,; -,

Sk Notn is Conw!icittsiHmrmialStartmentx ,

~

Nd til TC CONEOLID Af tD FIN ANCI At lf ATFMENTS [

t A. C@$ol f o Af loN <

~ ~

seuuAny m - +

Acco0Nmc Tite omsolidated fmancial statemen% indude the accounti of DQE and its subsidiatin. All mate.

i,m wu, ' rial intercompany balances and transactiom have been eh,nu,natni m, the prepatation of the umxw,  ;

idytal fmandal statements.

- rion an, ius1 w n i.eurum  !

Pibpertin are ststed at the original cost ofwnstruction. This indudo the related pa) toll taxes, pene 1 s ic ns and other fringe benefut,'and administrative and general ums. It aho indudes an allowance for . j

- funds uwd dudng conuruction (AFC), representing the niimaint cost ofdebt and equity fmids med I ttpn.mcc construction.The AFC capitalized varies acconlint to change $ m the level of conuruction wrk in pnyns (CWlPfand in the cost of capital. AFC h cralited to income. The Company dom not .

"r g realia cash currently from this allowanc6 h realins cash over the life of the plant through increased rev-enues resuhing fnim higher rate hae and higher depreciation npeme. Tlw AFC ratn applied to CWlP - ,

were 9fi percent,9.9 perwnt and '10.1 percent in 1991,1990 and 1989, rnpectively.

Additiom and replacements of pmpeny units are dargal to plant accounts: Maintenance, rcpairs 4 t nd replacement of minor items of propeny are charged to expeme as incurred. The cost of property j retired plus removal entsiins any sah; age value, is charged to the accumulated pmvision for deprecia.

tion. Substaiitially all ofDuquesne's propenies are subject to a first mongage lien,  ?

ortnanum - ,

Depreciation ofelectric plant is panided on a straight line basis over the estimated meful lives of

z propeny. Depreciation and amortinuion ofother propeny are calculatni on varium bases, such as'the amount of DuClear [tle! burnal, As permitted by the PUC, Duquesne recovers through rates in share of the estimaint future decom.  ;

mhsioning costs for its operating internt in ihree nudear units. Duquesne's share of such cosa are nti; mated at 580 million for licaver %lley Unit 1 $23 million for lleaver Valley Unit 2 and $38 million >

for Perry Unit 1. These amounts indude cost of removal as well as decontamination cmts. Amounts

- collectal from cmiomers through rates are degnital in segregated accotum that can be med only for 9

29

m 4" J

j futtire dccommissioning cmts. Colkrtions and rdated internt of 511.3 million are in Other lhferp awlbunimeras in the Comolidatal llalance Sheet, with the relatni liability in Ot/w Dr/mn/ Onlin Mmumu Maintenance cmts related to schahilat outages at the Company's nudear unin are defenni as incurnd and amortind over the 18 month perhid between scheduled usags, All other maintenante cmts, induding the cmts of fotted outagn at the nudear units, are shargni io npense as incuned.

Rotweis Customer meten are read and billat monthly. Revenues are remrded in the acmunting periods in which they are bilkd. Deferred revenues are anociatal with the Company's Pm7 rate caw. See Note 11.

Iscous Tm s

. Deferred income taxes result from ti g differences in the remgnition of revenue and expeme for financial and tax reporting purposes. Defeirni income tues are provided at the statutory rate in effect

~at the time the diiTerence originates. The defernd tax cEcts of certain timing thfferentrs, however, are

not provided in order to be comiuent with raremaking policin. These differenen are recogniicd Ibr -

i=mk purpows, and in rates, in the yean thy aflict taxes payable. As of December 31,1991, the cumu-lative net amount of timing differences for which deferred income taxes have not been provided was about . 5450 million.he items are principally lumL venm tu basis difTcn nco, investment tax' credits related to utility property generally were deferred when applini to trduce the Companyi income tu liability. They are subsequently refhcted as nductions to in npense over the lives of the rdarni auctt; in Febndry 1992, the FAS11 intends to luue Statement of Financial Accounting Standaids No.109, Arountingfgr /ncome hrs, which requires the liability method of accounting for income tun. The l adoption of this statement will no.e afTeet the Company's policy stanti above for investment ta cndits.

, 4 The Company musi .dopt the statement by 1993 Adoption of the statemeni h expected to have a -

one-time favoraNe income statement impact of atout 510 million. Duquesne expect, that the defernd tu adjustments will be ofTset primarily by regulatory assets of about $650 milhon and iegulatory  !

liabilities of about $60 million..  ;

tim ene n i eu cosu .

--. ,y Duquesne recovers fmm customers fuel and other energy costs not othenvisc recovered thmugh b.we ,;

rates, thmugh an annual ECR. The ECR i basal on projected cmts and is recalculated each year. h 4 inclucles an adjmtment fbr any prnious over or undercollections from customers. Duquesne defers

'the ditTerence between actual energy costs and the amounts currently recovered fmm customers .

through the ECR. The diErence is recorded as a payable to, or recci ab!c from, customen.

Necu n Fun?Cosu

Duquesne finances its acquisition of nuclear fuel through a capital lease arrangetnent. The cmt of nudear fuel is charged to fud expeme based on the quantity of dectric energy generated by the reacton.

The U.S. Department of Energ (DOE) is inp<msible for the uhimate storage and di< position of spent nudear fuel Duquesne pays DOE a fee for future disposal senice, This fee is recovered through rates.

0 02

hDOE i

e y

1 i

Cmt Iion t For the purpose of the statement of cah ihnvs. the Gunjuny coraiders all highly liquid invntments ,

that mature in three montin or less to be cash equivalents.

na t usn u:uion  !

The 1990 and 1989 financial statements h.ive lxrn reclaulfied to conform with acmunting ptnente f tions adopted during 1991, I,

it in 1984, the CAPCO companies agreed to minimite comtruction work and cash expenditutes on l IT t nonotu av g , Unit 2 pendinpmidnation ofsnrral ahernathrs. includmg resumptmn of comituction or Paorta n tu u [

cancellation of the unit. In 1986lDuqunne abandoned its internt in the unit, ln 1987, Daqunnc. [

rectival appnwal from the PUC to amonire and recover its original $155 million imestment in the f unit owir a ten-year petiod whkh began July l',1987. Duquone is not earning a return on the unre-covered cost of the unit, whkh was $79 million at December 31.1991. The Gunpany accounts t r  ;

this abandonment in accordance with Statement of financial Accounting Standards No. 90. ,

C. In 198". Duquone entetrd into an arrangement with an unalliliated wrporation by whkh Duquesne is -!

-Ratto ute$;

entitled to sell and the corpmation must purchase, on an ongoing basis, up to $100 million ofits 4

f accounts erwivable. At December 31,1991,1990 and 1989, Duquone had sokl $20.5 million,550 million and $77 million, respectively ofcustomer rewivablo and 34,5 million,51N 1 milhon and $13 l;

millkin, inpenively, ofother rewivables. The sales agreement includes a limited recourse obligation under which Duquesne cotdd be " quired Io repurchase certain of the receivab!n. The maximurn &

atuount for which Dirjuonc is' gently liable was $ h2 million at December 31,1991, Amounts in huwub offkflan sn ikvember 31, 1%I two l9N9 Customet annunts sneivable $137,706 $117,234 $111,083 l

- Udier accounts receivable : 3 068 30.0$7 - 27.140-- ,,

(25,nm - "

Icas: Retrivables sold (68,139) (90.0n01 Alknvance for uncollectible anounn ' 00,890 (16.805) U1,244)

Tora /Rerrivaldes l 5116,176 5 62,317 $ 36,979 D; Dugt .e has an extendable revolving credit agreement with a group of banks totaling 5225 million The ,

j M. jar Tr m initial expiration'date of this arrangement is Nmrmber 30,1992. Dgending on the option wleaal by Ilonnorm, nn

= Rnonn,c Caioir Duquene at the time leac h borrowing, internt rato can be bawd on prime, federal fun &. NoJollar or -

g S Aannt su W1SL ' CD rates. Duquesne pays a commitment fee based on t)" vbormwed amount of the conunitment.

Anwunts in Wuwab ofIkilanpr hrf>dedlhveminrJ1; 1991 1940 1989 }

Maximum short-term bank and commercial paic lorowings outstanding 566 000 553.000 $ 104.9nn -

- Average daily shor: term imrrowinp ountanding 10399 i U98 15.591

• Weightal average daily internt rate 6.36 % 8.36 10% .

l r

=

3I

-1

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

. - .~ . --- - - . -.. - -

b 1

i Ik The Company leases nudear fuel, a portion of a nude..t generating plant, ollice buildings, computer 1 l '# * '

e <

equipment and othet ptoperty and njuipment. The capitalimi lean are summarimi twlow:  !

~ Amounti 1.v 11emand eflMlan at thrrmie 31, t991 19 % 1usy l

Nuclear fuel 5170,~04 5192.657 $186.2a4 i 1.lectric plant 44A02 43.131 3L020  !

~

I 7hral 220,106 23c91 222.124 Im accumulated amoniution (84.003)' an.no0) (54,705) I hvperty lleld iInder Grj>ltad lmer - Net 51$6,103 (l) $l5%74l $167Al9

. e t!k tstav sfa.ptw e,+ am wd.up ,e wd In' 1987. Duques ie sold as 13.74 percent interest in Beaver Wiley Unit 2, esdusne of trammission

'tg and common facilitin. The total s.dn price was 5537.9 million, which was the appraisal value of

Dugenne's interest in the property. Duquesne subsequently leasal back its internt in the umt ihr a tetm of 29% years. Thc leam provide Ibr semi annual payments and are aauunted for as operating ,

< leases. Duquene is rnpom;hle under the terms of the lease for all cmts ofits internt in the unit.

Irasni nudear fuel i< amortized as thi fuel h burned. The amoniution of all other leaml properry is h; uni on the rental payments made. Such payments for capital and operating leam are dergni to oper- I ating openses on flye Statement of Comolidated Income. The following Summariers those rental pay. .

ments reponni iti the State *nent tif Comolidatal income for the thwe years ended December 31,1991,  ;

[ Amountsin 7inwana ofIkdlmpr dar DulediMrnder31 1991' I990 1989 L Operating l cases ; 5 65AI4 5 f6,989 -5 65.292 Anwdtintion Afcapitallea',cs 39J23 43,%fi . .'9.2N7 ,

imcrest sn capitalleaks - -10,057 '10334 -8.555

7hta/ Rent,dl}<ynsru e $114.794 5119.691 5103,th

- Futme minimum lease payments for capitallean are related principally u> building leases and the .;

stimated usa;;c of nuclear fud financ:d through leasing arrangements. Minimum payments fbr oper-atingleases are sted principal'y to licaser %lley Unit 2 and the corporate headquaners; Future I

+ minimum lease pa, mentiat Detember 31,- 1991 were as follmn:

e -

Amount in 71 ~ usands ofIAd!arsfur liar bading thtrmber 31. Operatins inses CapitalIn 1992 $ 663n7 5 52,W8 - ,

1 913; 65.1 N7 35.134 iw4. 62A68 3uno .

_1995' 61,2 % 14.589 18.'96 61.221 kJ95 +

' 1997 and thereafter - 1 302.161 36/t00 j 7btalMinimmn ime lityments 178.1I6 51f18.780 E 4 Im amounk reg +neming interest (45.387)

Prescat value of minimum leasc phments far iiut tal leaws 5132,729 1323

~# _ f._-..-..._..__..._.____.__ _ _ , _ _ _ _.. . _ _ _ . . . . _ . _ _ . . . .

D DOf' I 1

i r

I i

E The G3rupeny's federal incorne tax retur:is are closed through 1980 The returns fo.1986 and l I " " '" ' 1987 are currently beitig reviewrd, and the 1988,1989 and 1990 returns are subject to review. The  !

Tut 5  !

Gun}uny believes that the final settlement of fnletal and state taxes will not have a nuterial adverse i eficci o.l its fmancial position 01 rtaults of operatiom. Since DQi"5 fornution in 1989, the Company

_j has filed a wnsolidatni federal tn return, b flMeuh rffk!!ard 1991 lH) 19F9 ,

fr-dadalin opersting expen et  ;

Currently payahle: Irderal 5 44.862 5 44.711 $ 6.$i3 State 31,980 10.864 (919;

..,. [

Infrial

~

lkferred - tiet: (4,823) 31,430 62,269 -  ;

State 110J50) (4.920) ' 2.$35 [

Innstment tax credits deferred -- f.et ($,328) (5.838) ( 4."60)  ;

i 7inal/ncludedin Ojaning 13penses 95,941 76.241 6s.678 7

W :. Indoded in other income and deductions: ^[

3..

Cur *rs.dy paphle: Faletal 2380 6,720 8.084 '!

State 1.174 1365 2,234

.O lhfetmi: anlcral 1.943 33) (5) i Statr 443 (9). (113) [

Investment tax credits (459) (459) (459)' i

_.__ lot.dIrvludedin Oderlucomeandikductiora 5,asi n,s48 9:'41

- Total /ncome 714x fiperur $101,822 584395 5 75A19  ;

't j

'Ibral income taes differ from dit amount computed by applying the $ratutory federal income tax f

rate to income before income ines and Duquesne 1.ight Company precetred and preference dividendt {

The reasor.s for this diffsrence in each year wcre as follows: >

Computed federal income tu at statutory rate $ 83306 5 74,974 I 5 69J73 herease (decreaw) in tae> resuhing from:

Excess oflxd over tax depreciation 5.333 8.547 7.329 +

State income rues. net of federal income ta benefit 15,0') 5.214 2A66 ,

Amnisation ofdeferred investment ta (redin ($J87) (6A35) ($382)

'a Other- net 3A93 : 2A95 -L833 Tohd/ncam 71vlipeme $101,822 . $ 84395 $ 75A19 A-- - .

Sources ofincome taes deferred and the rdated ta effats wcre- }

Exceu of accderated over straight-line dern ciation 5 20,957 $ 24.230 5 28340  ;

Ikferml revermes rewrdal(recuverni) for txiok but not for ,

ta purjxnes (21,24m 12J74 43l298 ,

[

Allowance for unwllectible aucunts ($,930) (2,722) (4,290)

' Other - net (6,974) (7,450) (3fi62) A 9 . .

p. ThtalDefe'rrrdIncome 7Ar liperue (Brsafit) $ (13,187) 5 26,832 - $ 64.686

i

+ 33 l-

-s

,-l J. - , , ,. , M ,. $ n,.- +.,..a + - . , _ _ , , , - . , . , '.A,, , . , . . , , . - . ~ , . . . _.,....,i,i.-~ - .,

t

% [

G, - Itt intt ut st Pt m -

' f htfloill llf Nt rFr%

, , - 1 Duquesne has trustens fetirement plam to provide pensions for all full time employou. Upon

~'

~

l retirement, employen rneive a monthly p;nsion luwd on length of service and compenution. The l Companyi policy is to opeme and fund the pemion cost detennined through the use of the unii l

c'redit actuarial cost method, if this amount is at least niual to the minimum funding requirem.nis j roptired by the Employcr Retirement income Security Act (1.RISA) and does not excent the maxi-

[

mum tas dnluctible amount for the year. "ension costs chargal to opense or constmetion for 1991, i 1990 and 1989 were $11.2 million. $12.6 million and SI 1.7 milhon,inpectr+cly, j The folkming sets forth the funded status of the retirement plam and amounn accognimiin the r Comolidatal Italance Sheet at December 3',1991,1990 2 d 1989. i 199l yym 1989 (7keunsh t{lMl.m)

Actuarial present vahr of benefits tenderni to date: [

Ves;ed benefits 5279.917 $ 241.193 5226,532 Nomoted hencfm 14.296 19,91s 19.009 Accumulatcd benefit obligations bawd on f compenution to date 294.211 261,108 24s,54i Additional benefits based on (stimaral future ulary levels 64,919 56,414 sHJm. i 30),849

- Proiccred benefit obligati(m 359.130 317342 (

Tair market vahie ofplan aswts 392,027 319,s94 322,065 3 Projceted bencftt oldigation under plan awen $ 32,H97 $ 2.052 $ 18.216 +

Unreewgni$rd nei pain $ 86,695 5 $6.s73 $ 66,1% I

. Unicuignimi ptior wrvicuost (22.317) (23,959) 18.868)

Unrecognimi not transition liability (22,913) (24,'25) (26,53M Net pendon liability per balance sheet is36m (s 837) _ (2,s 14) >

7bral $ 32,897 $ 2,052 l

$ IN.21(

Awumed rate of retum on plan awers 7,50 % a on% 7.7s%  ;

Oitcoutit late UWd to deterniine projectNI- l benefn obligation 7.50 % avo% 175 %  ;

Average assumed change in comremtion leveh 5.75 % 5?$% s.7s% t !

Plan asscts consht primarily of common stoch, United States obligation and corporate debt snurities. ,

Net pension cost for 1"91i1990 and 1989 was computal as follows: l fika, nub effMlard 199l mo 1689 .)

Servke cost benefits carned during the year 5 9,91I s 9J10 $ 8,458 .;

Interest on projected benefit obligation 24,70s 1.;,101 21.700 i Return on plan awets (80lr16) ( 4.x97) (ss,653)

Net amortization of deferrah - 57.319 (16,289) 40,168 Ncr /kmiors Cost 5 11.219 $ 12.625 $ 11,673 l

.. 1

34 -

I 4i ,; = -- u _.: ._ _ ._. ..._._ _. ._ . _ _ , _ . , - _ ,_u,.,.,.,

E e

I: I hDOE i

[ Rt lirt in u r Su ssu PL AN A%o 01ni k UlNillr Or tloM i

t Duquesne maintains separate 401(k) retirement plans fbr its union represented employen md its -

{

management employees. As of January 1,1992, Duqunne implemented a maithing feature with j rnpect to its 401(k) Retirement Savinp Plan Ihr Management Employees, w hich provides that the i Company will match $.25 for nrry $1.00 that employees munibute to their 401(k) aaounts up to a _

maximum of 6% of their eligible salary. The Cornpany will match up to an additional 5.25 on every

{

51.00 if certain incentive targeis establishn! by ihe Company's board of directors are rnet. The  :

Company is funding its matching contributions with mntributions to an Employee Smck Ownership l Plan (LSOP) estabthhed in December 1991 hee Note M.

in 1987, the Company's shareholders approved a long-term imentive plan iluongh which the -j Company may grant management emph> yen optiom to purchase up to a intal of thwe million shares  !

of DQlfs mmmon stock dming the period 1987-1997 ai prices ainal to the fair marhet value of  ;

such stock on the darn the options were granwd.  !

4 As of Daember 31,1991, acthe pants totaksi 1,277,927 durn, at exenhe prien ranging from 512.31 l to $28.75 per share, which expire at various dates fmm 1997 to 2001. Simk appreciation rights (SAR4 have been granted in connection with 822A27 of the opdons outstanding. During 1991,229,207 SARs  !

were exerchal,10,846 options at $12.3125 were cxertised for shares and 47,900 options lapsed. Of the {

1,277,927 grants active at December 31,1991,540,54 I were not exercisable at December 31,1991, Ortie n Pm1p:1:eaktssi Itsstatis -;

The FASB has issued Statement of Financial Accounting Standanh No.106, F-phyri Accountingf>r

& retirement hefhs Osber 7kn femiem, which requirn, among other thinp accrual of postretire- -

ment health care benef ts during the years an employee pmvides service. The Company is required to  ;

adopt this statement by 1993  !

Duquesne curremly pays a portion ofits cady retirees posuctirement medical emtrage fmm the

' date of cady retirement through age 65 These costs are refketed in the Company's financial statements

{

and recovered through rates, on a pay-as you-go (cash method) acmunting basis. This expense is ,

- approximately $1.3 million annually.

Based on estimates, the unfunded tramition obligation related to mnuibuting invard the cmt j of postrctirement medical mverage for the Company's retirces through age 65 will be between 527 j rnillion and $70 r illion. The Company expects that it will amonise this cmt over 'wenty years, l The annual cost, including this amortintion, is expecH to add between 53.5 million and 511.5 ,

million to current expense.

- Assuming the PUC will provide for future remvery ofihne amounts, similar to the recovery alkmrd '  ;

for pension expeme, there would be no effect on Duquesne's caminp. If future recovery is assurni, the 1

~

- difTerence between what is currently being remvered ihtough rates (current cash ou.ilays for such-

[

benefits) and the amount required to be wflected ihr financial reponing purpmn would be set up as a regulatory asset for future recovery. The Pl'C is expected to provide guidance on this iwue prior to the -

required adoption of the statement in 1993.

t

'Y h

k - ~ - , + , -,_ .-~--.-.---~++,-nr.-aw, w-. mmnn,,~ - u m r.- , , -- wmv , n- -n n m + mv_ w ,.m---

m_ .. , -- _ -. ____ m ___ _ _ . _ _ _ _ _ ___ __

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i II.

y

- 1987 R4tf CAsr Ratt-M otras- I In htarch 1988, the PUC adopted an order that increased annual rnenues by appnnimately $232 million. The order reflected the PUC's allowance of a 12.87 percent retuin on equity and an metall  ;

. rate of return of 10.94 percent. Although the neve rates became efTective at that time, the PUC ordertd )

the increase to be phasal in in er a pcriod of six years. 'the deficiencin in revenuci roulting fmm thme i

- abcduled rate inacasa as defened and will be recovered by the end of the sisth year. The phae.in l plan wa designed to include a return njual to the after. tax AFC rate on any revenues defored for later 'i recswayl Previously deferred revenun of 587A million have been rauveral as of Daember 31,1991. l.

. Dcferred revenues and related carrying charges of 5211.1 million remain to be recovered as of December 31,1991, Duqunne ex1wis this deferred asset to be fully rnovend by the end of the phac-in period. Duquene currently he no pending bue rate case and currently has na plans to

.l file a hae rate case. 1 Dm aht o Cmn 06 UmtiNm W R4H Hui _

in July 1987, the PUC approved Duquesne's priition to defer for pimible recovery in a future rate - ,

_ proceeding, initial operating and other cmts of Perry Unit I and licaver Valley Unit 2.1hc cosu deferred were incurred fmm November 1987, when the units were placed in commercial operation -i

.until the March 1988 decision of the PUC in the rate cae. In that case, the PUC deferrni ruling on the recoverabilkf of th:se cmr These costs, net of defened fuel savings related to the two units.

totaled $51.1 million at Dne.aber 31,1991 The Company b not earning a cunent return on the  ;

diferrcd costs. The Company believes that these defctred ones ultirnately will be recovered. _

l Deneata Coat Cmn -!

Ik;, inning in 1981, the PUC directed Duquesne to begin deferring recovery, through the ECit, of the delivered cost oicoal ir excns of general!y prevaihng rnuket : Ices for similar coal Hmvever, the PUC '

allowed amounts deferred to be recovered from customers during periods when the delivered onts ,

--ofcoal are less than generally prevailing market prices. The PUC ntahbhed two cual cost standarlh, one applicable only to the Mandield plant (Mansfield coal cost standud) and the other applicable to the remainda of Duquene's system (system-wide coal cost standardh both of which are updated monthly to reflect prevailing market prices of similar coal du, ring the month. The unrecovend

. (deferred) cost of Matsfiehl coal ps! by Daquesne was $6.2 million at December 31,1991. There were no deferral coal cmts related to the sy sum-wide coal (mt standard at December 31,1991. The ,

Conipany believes that the deferred coal costs will be recovered.

~

- A Joint Petition for Settlement was approved by the PUC in June 1990 that clarified cenain aspats of the exhting system-wide coal est standard and extenckd it threugh March 1992, with an option for'the Company to'funher extend it through March 2000. This joint petition ncognims costs at the

. Company's Warwick mine and allows for recovery of such cmts, including the costs of ultimately o '

L . closing the -ine. In December 1991, Duqunne exerched the first of two options which extended the standard through March 1996. i i .

- 3 6 --

9 iEe w v h mE--[ <--e w w m m e+ -vr. -,-wva--s-- %www-,---e'E-m-,--n--, -w----.-wem  ::ww=e m-.- e ------e- v e w- ,--rww-,-.v--even+r-, vnm

y ,

O me wm n,. him cos ts )

_.o -

1 The Warwick mine had been on standby since 1988. In September 1990, the Company entered into - i agt-ementy with an unanitiated firm to operate the mine until March 2000 and to sell to the Company coal from the mine during thh period. Pniduction began in late 1990, and full pnxiuaion  ;

was teached in March 1991. Duquonis net investment in the mine, which we $35 million at f December 31,1991, is expected to k tecovered through the cost of wal during the perhid of the l

system-wide coal cost standard, induding extensiom, Duquesne is also recovering through the system- [

. wide coal cost standard a provision for khe chtsing of the mine ($3.8 million at Decembcr 31,1991).

f Paort nv lhite som f enu U$r in 1986, the PUC appnwed Duquesnis request to remove nom service and place in " cold roerve" the j '

Phillips and most of the Brunot Idand power statiom. Duquesnes net invniment in the coki-reserved units wn $1066 million at December 31,1991. These statiom are expected to tw returned to service i in connection with the long-term sale of guver to GpU. I

1. Contacc1mw connmxts aso . The Comp y estimates that it will spend appnnanately $ 130 million on construction during 1992.

cosusw.tns '

Construction expenditures for 1993 through 1996 are expected to total 5530 million. These amounts exclude Al'C, nodear fuel, the pmpoxxl tramaction with GPU 3nd expenditures for possible early ,

replacement of steam generators at the Ikaver Valley Station. j N(2et t As inenN s F #8h'eH l

The CAPCO companies maintain a nuclear imurance program to the ma imum extent available.'ih ,

program cunrntly provides $1.265 billion of primary and excca pmperty imurance and $1.25 billion l ofdecontamination liability, decommhstoning liability and excess property inmrance for the 55.8 bil- l lion total imestments iri Beaver Valley Units I and 2. The CAPCO ccmpanies har similar property insurance for the $5.4 billion total imestment in Perry Unit 1. If the property damage resenn of one -

of the imurers are inadequate to cover daims arhing from an incident at any nudcar site in the United States covered by that insurer. Duquesne is obligated to pay retrospective premiums of up to $3.1 mil-  ;

lion per yeare The Price-Andsmn Amendments to the Atomic Energy Act pnwide nuclear liabilityindemnification

.that limin public liability from a single incident at a nudear plant to $7.4 billion. The primary fman-

' cial protection is provided by purchasing the maximurn amount of available insurance of $200 mib 3 lion. Additional protection of $7.2 billion would be provided by an assessment of up to 563 million per incident levied on each of the nudear units in ihe United States, subject to a maximum assosment of $10 million per incident per nudcar unit in any year. Duquemis current interest in three operating  ;

p reactors would subject Duquene to a $47 million maimum awessment which it would be liable to i l' pay with respect to an incident at a nuclear plant. Duquesnis payment of this assessmem woukt be L limited to a maximum of 57.5 rnillion per incident per year. An additional surcharge of 5 percent ,

could be levied if the total amount of public daims exceeded the funds provided under the retnapec- ,

thr program. Duquesnebhare of the surcharge woukt be approximately 52.3 million, subject to any  ;

s

'h FW"T

• f8 WWN $' W '"rraW fE-

• b> 4eaF'-rT'P-Ap+-=i-r+ h- r q'-re-Nqu- t 4 1rv'%- er 4 we Aw+-#-d-vvmmemaw?s.&Ee's"-Ep 4'in""'s

- gtiT-M---'N'-df't'ly-r-r="W' yW we=g ?9rggy-t#$ 1 Ty' ' wt9'T 2~ q d I1.-'4'

1 1

increases for inflation. Congress could impose fmther revenue raising measures on the nudear industry ,

if ftmds proveinsuflick to pay daims. (

wis m unoisii m tu ,

On April 30,1991, the CAPCO companin. owners in varying percentagn ofinterest in Ikaver Wiley Units 1 and 2, filal suit agaimt Tutinghouse 11ccuic Corporation in the Uniini States Dhtrict Court ibt the Western Distrkt of Penmylvania %e suit alleges that Westinghouse supplini Six steam genera.

tors for the units which contain seriom defects, particularly defects causing tube corrosion and cracking. ,

and wrks monetary and corrathe relief. Steam generator maimenance costs have increased due to these

- defects and will continue to inucase in the future. He condition of the steam generators is being dosely monitorni and,if the cortmion and cracking continue. this will resuh in their replacement dmrt of their  !

40 iyear design life. % site specific estimates of the cost of replacement of the steam generators are yet l available; howner, the wsts of replacing stram generators at nudear units of other utilities have  ;

excmicd $100 million per unit. While the Company cannot predict the outcome of this litigation, . .

1 the Company does not bdieve that such resolution will have a material adverse effect on its financial  !

pmition or resuks ofoperations. Duqunne's penentage internts in lkaver Wiley Unit I and in Ikaver i Wiley Unie 2.tre 47.5 percent and 13.74 percent, res;wetivdy. Duquesne is the o;wrator of both units.

ctu e n

• Duquesne and the athet CAPCO companies have guaranteed certain debt and le.tw obligations in ,

connection with a cud supply contract for the liruce Mamf.cid plant. At December 31,1991, Duquesne's share of these guaranim was $45.5 million. In January 1992. 572.8 million oflends were refundnl at  ;

lower interest rates. uis guarantee was reduced to S40.6 million in January 1992. In general, the - [

prices paid for the coal by the CAPCO companies under this contract will be suflicient to satisfy the 3 debt and lease obligations. He minimum future payments in millions of dollars to be made by Duqunne that relate solely to these obligations are $5.8 in 1992, $7.2 in 1993, $6.9 in 1994, $6.6 in 1995, $6.2 in 1996 and $21 thereafter. Duquesne's total payments for coal purchased under the con c j trac kere $32.6 million, $25.7 million and $30 millio'n in 1991,1990 and 1989, respectivdy, ormn e

ne Company is involved in v.uious other legal procmlings. He Company bdbrs such pnwenimgt in the aggregate sill not have a material adverse effect on its financial position or resuhs of operatium. -

i

( 7/ mand o[Do/lan) 1991 199u 1989 coa % dis tA5 t Wotmc CArnat l Receivables (Nmc C) 5 5A829; $(2s.%8) - 5118.154 s Diuta'To Ak Cou;- Materials and supplie. O,12h 0 7.n30) (RJI O V Other current assets (9,n05) (2.741 0.15N Accounts payable (827) 24,W (7 $ 6)

Other current liabihties 217M 20N4 OAIN

- Toral' $?41050) - 5 281 5 96.878 m

.38i i

-[,- y y y .- ...,-,' + - . , . - ,-y,, m.yy,-., .,.,m-, -,ey.,,....,.,.m, -..,,,w,,,..%,-,.',,-,,7- , . , - - --.,w,,, , , - .-,,..,w vw,m,.w.-- -v ,, - , . , , , -

MDOE L

K. CouMoi N1o( k - __

Carni.t m nos

- The Company has paid a regular quartoly unumon stak dividend each year since 1953 Dividends were 32 cents per share for each quarter in 1989. The quanetly dividend was inurased to 34 cents pet share effective with the dividend paid January 1,1990; to 36 cents per share eflective with the divi-dend paid January 1,1991t and to 38 cents per share effective with the dividend paid January 1,1992.

The following summary indicates the changes in the number of sharn of wmmon stak outuand-ing during 1991,1990 and 1989:

%arub of%:rnpr uar DulafIkemirr31. nwg eno vnn i

l COMMON 5'soik+ Outstanding ~ legianing of year 53,759  % 340  %?AH

. $I fra v4n i Reissuance from treasury srmk t' 4 m  ;

Repurdiaw of tommon Stock 0FH U .$W QA00 Oursrsntling- butofIrar %L40%  % 389  %,ys0 -

gmenw an ramenste smc6 1 The preferred stock is entided to quanetly cumulative dividends. If four qu.inctly dividends on any g series ofprefened siock are in arrears, holders of the stock are emitted to clat a majority of Duquesne's  !

board ordirectors umil all dividendi have been paid. J The preference uock is emitled to quanerly cumulative dividends, pmvided that no dividends on f any series of preferred suwk are unpaid. If six quanedy dividends on any serin of preference stock are in arrears, the holders of the preference stock are entitled to cleet two of Duquesne's directors until all ,

dividends have been paid.

The outstanding preferred and preference saxk generally are callable on not ks, than 30 days' notice

~

-- ai the prices stated in the table on page 40, plus accrued dividends. Cenain call prica dedine in 1992 l and beyond, The preferred and preference stock are subject to various purchase and sinking fund re-quiremems. As of Decemhei 31,1991, the maximum combined aggregate sinking ftmd and mandatory  ;

~ purchase rajuirement for prefenni and preference smck is $2.5 million in 1992 and $1.3 million for

. each o'the following four pars, in December 1991, the Company established an ESOP to pnwide matching contributions under 2'

its 401(L) lletirement Savings Plan for Management Employees (see Noie G). Duquesne issued ;

and sold 845,070 shares of Preference Saxk, Plan Series A, to the trustee of the ESOi! Duqunne i'

recch;ed a note from the trustee valuni at 530 million as consideration for the stock, The preference 'l stock has an annual dividend rate of $2.80 per share and each share of the preference stock .is

- Lexchangeable int'o one share of DQE common stock. At December 31,1991, $30 million of prefer-ence stock issued in connection with the establishment of the ESOP has been olTset for financial *

[' statement purposes by the recognidon of a deferred compensation benefn. Dividends on the prefer-ence stock'and cash contributions from Duquesne will be used to repay the ESOP note. In future o

m ,

l:

lx r

-1 39 1

i f p V a. ,- , - - , em g y + - ,  %- , 9 +q ,u-- ,. --+-'e nem + r =- v e n er-.s- V--=,~* +=-*+-m e- - =~- - ----=ew m "%-**

t

i i

years, as shares of preference stock are allocated to the accounts of participants in the ESOP, the j

Company will recognire compensation expense, and the amount of the deferred cornpensation j benefit will be amortiied.-

-l' Y""*'""" (in huund, Evee,t h r kr Anumnty Outnawhng on 1krender31, -

PktlERE NCE 510ck {

- or Degersst 1991 1990 - 1989 -!

lacnt Courwy . Call Price l IVr Share h rs Amount Sharn Arnount Sharn Amount  !

t Preferral Snick Series:(1) ,

p 3.75% DX7) .- 5 51,00 148 $ 7,407 148 $ 7A07 148 $ 7A07 4W4 0)(7) S i.50 550 27,4 % 550 27A86 550 17A36 4.10% 0)(7) - 51.75 120 6,012 120_ 6,012 120 6,019 i O 4.15% 0)(7) 51.73 132 6.643 132 6.M3 132 6443- l 4Jo% OK7) ' 51.71 100 5.021 100 5.021 100 5.021 .

' $2.10 0)(7)? 51.84 159 -8.039 .159 8.039 159 - 8,039 I

$7.20 (4)(7) . t 01.Do 319 31,91$ 319 31,91$ 334 33A15 l

. 585$ (4)(6)(81 104.02 80 7.944 104 10 3i5 146 14409- [

5844(4)(6) - - - .~ -

!?6 - S 520 j i

TotalhvfrrrrdStock 14,08 100A68 1.632 -102.868' 1R,5 126.159

[

Preference Stock Series:(2) ,

$4315($X7) - - - 1.177 29A40 1.200 30.000

$2.100 (5)(7) 25.70 1.175 29J83 1,175 29,383 1,200 30.000

$7.500 (4)(6) -

101.00 87 8,692 92 9,172 ' 96 9.542 f

$9.125 (4)(6)(9)J 103.36 .161 - 16,lM - 223 '22,284 ~ 294 29A20 Preference Smck, Plan $ erin A (6M10) 38.30 845 30,000 -

7htalhrferrnce Stock 2,268 84.175 '2467 90.279 17% 98,962 i (4,054) (5,130)  !

. Punhme and enking fund requiremena (17J00)

- Defened F. SOP bencfu 0 0,000) - --

7htalorfitrrdand/hfirence Stork 3,876 $137,343 . 4,299 $189,093 445f 52Li391 utl&da.k awwahmalm;2w wo se,a.a, sm w umai.k fal%1ok MknUwashmdrhert 51pv nelw,,mm],,uw th N<se-mkrmble .

!J!$10rre kw swdnewy l&nea mie - ik%simies g(asse u k whemal Aps!L IM2 tD $10"pr oweit eluseren i&am euin tv%mbe ofwwn ud,cond hm.,,rer 1. IW2 ,

ysi5:sp h,,i sw,hp.:a ,s,w .u0 s sunp k a modawy hq ,4.,n ,a.e '

- Finri Moa nact 11oNos no Onn a Low.Tt nu Dritt ~ (,

~

.  ; l'irst mortgage bonds totaling $50 million and $73.5 million were iaued in 1991 and 1990. rnp tivdy, through the Company's mcdium-term note program These bonds have interr" rates averaging j

~ 8.25 percent and 8.47 percent, respectively. '

Since 1985, the Company has reacquired $575.5 million ofits high cost debt, The difference j 1

benveen the purdme prien and the net carrying amounts of these Ixmds has been induded in the Consolidated Balance Sheet as Unantortizedloss on tracquireddebt. Duquesne amoniics and recovers i l thesi kkses throug'i rates. The current balance of Uwnortizedhs on rearyuistdd4t is SM.3 million. -

\ n; .___:, . . . _ . . .. .- . .. - . :_ _ , _ . . _ . ... _ . . . , _ . ,..,..w_.,.._... . , _ _,,_.....,;

l J

. -l s

lJ i } &LM h[ .

~

Itkir M ost a ct htstajud Aruount Outwairng i U *

• I' ' "I ~ ati h mic.ti,  !

{1 M w da rfl M i m )

IstQra sNi Lu.H r - _-  ;

Coypgg Interest Mtc MMurity l99) jeyyg  !

K24% 12 1-92 5 73,w0 1 7 M 00 8A7% 6- 1 *M %0.(H10 -

10% % 6195 419fde [

5%% - 2. W 22,800 12 MH1 -!

5%% 21# 24,600 24MO 6%%. 2198 44,700 34.MI -j 7%- 1 1-W 30AK10 30#80

- 7%% . 7199 28.947 28,917. ,

8%% 3- 14xl - 30,000 30#m  ?

' ? */. 9 3-1-01 35h00 35 9 Ki ,

"%% 12 1-01 26 461 26A61 7%% 6-1-t:2 28,470 #A70 7%% e103 32,670 32.670 ' 1 7%% '1-03 35,000 35J00 f

8% % 4 1-04 44,100 44JO0 '

' 9% % 3-l-05 49,500 50 # 0 9% 6 1416 80.000 SOMN .

' A R%% 4107 97,400 - 97A00

' ' ' 10 % % - 214W 93,040 V4.040

,M%% A 1 12 - 371 i W.276 -

p' 11% % - 12 1-15 91.161 9%% 12116- W.000 100W) 9 %~ 2 1-17 100,000 100,000  :

1 less current maturities and sinking fund requiremems . (84.0%) (11.MH T j

' TotalFint Mortgage Bonds - $1.02 s,299 $1,103h36 i At Ibember 31.1991 and 1990, die Company was in comphance with'all ofits debt nwenants. .3 Sinking fimd requirements and nuturities oflong-term debt outstanding for the' near tive years are  !

as lhlh>ws (in inillione as ofIkcember 31,1991; S I 1.9 and $74.6. respectinly, in 1992i $12.1 and A ~ 51,1 in 1993t $12.7 and $.8 in 1994; $12.4 and $50.8 in 1995: and 513.2 and $.1 in 1996c The sinking fund requirements relate primarily to the first mortgage bonds and may be satisfied by

, cash or the certification of pmperty additions eqtial to 166;is pertent of the Imnds required to be

.~

redeemed. During 1991, $4.1 million of the annual sinking ftmd requirement wanatisfied by cash  :

O

%d $7.2 million by certification of pmperty additions.

[ lbtal interest costs iricurmd during .1991,1990 and 1989 were $143.1 million, $)58.5 million and l

- $172 milhon, respatively, of which $9.3 million; $13.9 millioriand $18 million, including AFC, were v

L, capitali7ed or deferred.' Debt discount or premium and related issuance expa,ses are amortimt over ' ,

- the lives of the applicable hsues, L Duquesne was imulved in the issuance of $421.6 million of collateralired lease bonds, of which

.5417.5 million remaim outstanding, Ir; an unafEliated corporation for the purposcof fawning the I j 1

? -# )-

-w

'A ir 1- r +-* < - 'r+-r -*-&n'r

• - - ' '+- -- s--** w 'w' ya tr er 3 -

e v *v- ar'-

,7 7 .. e_ _ _ _ _ _ _ - - - . _ _. _ _ _ . _ .

~,i, ' l'

.,l.

t 39 .

sn ,

i lessor ( purchases ofIleaver %11ey Unit 2. Duquesne is also associated with a letter iAnxht sesuring

. 3

- tklessori $183 mill on eghy Anterest in the unit and certain tax benefits. Ifcertain speti(icd events i ,

, eccur, tit- hses could terminate and the lettet of(rtdit and/or the bonds would bestme disert obliga- ,

- tion.cf Duqac5nt, l Ot ur n low..Te nu - g Oist m DrotisNs x: ~ .

tu.ntCodrk %Lt t!TECM CON t hol Utul%M!*Mt 1%1/ulAmunt outstandg at ih r=rther J f. j isusd . herage internt Rate Se:ies Maturity 1991 t <rso l,

m . _ - -

1972- 1 579 % Myheny County Seric" A 2002 $19.000 $19# 0 l 1990 (2) Allegheny County Serio A 2013 50.000  !

$0.000

.13,050 I 1973- i?c h A!Lgheny County Serio li 2003 13J9) 1973 7.50 % Allegheny County Series C 2005  !?,0Ms 17AX6 I

1973 5.718 % ikart uiunty Seria A 2tKB 10,100 10.400

' 1990 _ (2) lleaver County Series A 2020 13,700 13;tK)  : t 17)0 (2) beaver County Series 14 2009 18,000 18JK10 i

$1,000 I 1984' I1.625 % Ikaver County Series B 2014 $14Kio '

.1976 6.90 % lic.sver County Series C 2011 15.000 15.000

, 1990 (2) . Beave r County Seties C 2025 44,250 44,250

~

1983 10.50 % Ohio Dorlopment Authorby 20 0 20300 20300 -i

~

1985 11.125 % 0 ) Ohio Dntlopmem Authority 2015 3 nato - 38/it0 1988 42) Ohio Dnchipment Authority 2018 71J)oo 71JKio ,

.1989- 645 % (3)- Ohio Dntlopment Authority 2023 13300 0 300 ,

la current matrritics and sifAing fund requirements (1,815) dJi3D .,

y

'lhtal pollution control ollganons 392,895. 394J20

[

c ' $% sinking ftmd obligationa sie h' arch 1,2010 6,0n2 7.592 Misellancom 338 -

5399,275 5401,912

-~TotalCr/er long-tmn lklir  ;

' (Iilad a che f we r% %espgr bed

'm .,,fA w .,c-a w .,sa o- , u .,.,,, ,,s.,,,,,s.m ,4,,w e o,w,,..,-ym. .a.,&  ;

, - Cmpam an akar h a4xpawwe resceu mer teams ek kb o e /p<ma m,o ra ,uupnd wepgtwo av J.n w sklhsdnwaarvfk k,d Tk ,mor &

..,wn m.as ap,.v,p-.aw ,an.a q m luod u,e s%g+)apapm. thn.dre knemmg wvNr ,aw e mputan,2 _ 'i ne pollution contml obligations arise from the sale ofImnos by public authorities' to fmance the  :

construction of pollution control facilities at Duquesne's plants or to refund such imnds. Daquesne is ,

obligated to pay the principal of and interest on the bonds. For certain of thymilation .untrol obliga-l tions, there is an annual commitment fee for an irrnucable letter of credit. The letter ofcrnlit is acailable, under certain circumstances, for the payment ofinterest on or redemption of a portion of the tends.

1.( .

In addition to its wholly owned generating units, Duquesne, together with other electric utilities,

.cuniumcUwr5 . has an ownership or leasehold interest in certain joindy owned units. Duquesne is required to pay its share of the constructiau and operating costs of the units. The operating expenses of the units are included in the Statement of Consolidatal Income.

, . _t.

. n. ---a.-. _ . , . . _ _ ,_ , ._< ..---..:.,-,_ _ ., , ,-_ . a. , , . . , .- _ , - - - - - .,_

7 ,

5 8

I if- DDOE l

_b e' l t

b ,

Amounts included in the Conslidated Ittlance Shert at Deccinber 31,1991 as property, plant mid l

~+'

u]uipment include the following (thouunds ofdollarsh j i

Ga st striiNG Ustist Omst uction Drurt swe * , Iktecntage Utibty Plani Accumulated Gh in 1 uel -

!Nilkitt bnit !atefcSt MegaW M in k niCf 00prWialNH Ufogtrha boufCC "  ;

Cheswick 100.0 's70 '5 I"7,752 508M2 5 5,766 G ul

• 13rama (Il 10tLO 4M7 193313 102.020 1.485 - Coal l~t. Martin i Sa0 2?6 (A49A 26.757 1,723 - Gul - l t

Ferlake 5 31.2 186 65.s00 23.723 1,885 Gaal i

. Sammis 7 - 31.2 187 84,941 26362 394 Gul 5

' IWce M.adirld i t1) 293  ??S 115.877 50,125 7N Coal .

Bruce Mannield 2 io s.o 62 31.9:1 13.99: 322 G ul- l Bnxe Mandield 3 0i '3.N 110 s? nM 31.715 89 Coal .

Beaver % ) ley 1' 47.5 385 399.634 131.565 3,623 ' Nudear Beaver Wiley 2 (2) 13.74 114 15M3 1.620 175 Nu lear Beaver %lley Common Iacilities 208.643 34,387 1.73H :j

- lbtry 1 13.74 164 758.797 99,728 3347 Nuclear 7bral 2.769 2.207.965 609.775 21357 i Odd-reserved unitr '. j .

[

Brunot Idand 100.0 306 8615A 34.099 t, t 12 FuelOil  ;

Phillips (t) 100 0 300 14Lb5 67,114 28 Gul  ;

TotalCentratirig linity 3375. 52,438.478 $710,988 522.497-to re,, w,s , s ft.,g 4+ma ,,,y .,  :

(Mh,0wher: twt'l%paruw mid pv 11 N% sw.wrw w Me sk%p Uma 2 ewfume of tenmeen a,.ismonen fe.ei<rs Amme how ymewksk

. ma siladokrurm tra cl.4trepm.wawa

'~

=

M. The foLwing h a sumnuty of selected quarterly fmancial data (thousands of dollars, except per > hate : l

' QUART LRti ' amounts). The quarterly datt. reflens seasonal variations common in the utility indstry.

I IN 4 N Cl4 L

ILtouurnow .1998 lirst Quarter Seamd Quarter - 'Ihird Quarter Fourth Quarterz 3

?

(gu409: r E oi - - Operating Revenues  : 5 289.096 $ 2sa,886. 5 332,039 5 289.447

- Operating Income O) 65,8*7 ~ 65.675 75A47 -- 59.907 -- .

. Net Inu mc . 37,862 '29,431 42,916 -28362 j t

^#

- Carnings Per Share .61 .55 .A0 .54 Stock price; thgh 2$% 26 % 28 % - 31_

.- Inw 23 % -- 25 26 28 % 3 9

- 1990 ,

. Operating Revenuci O) '5 283,534 5271307 ' 5 304.6H5 $ 271367 Operating lncome (l) 69341 59.862 77,136 60.577 L1 N ' Net income - 33337 2i.715 38,195 28,425 ,

- Earnings Per Share .60 A0 71 53 .

Stock price: .High : 23 % 23 % 22 % 25 %

low 20 % 20 % 20 % 22 % l t}I kJ.adw.nfurm wh wwumgpmm.nwn adapudduring i+)/

O r. 43

$n

p. _ -

+d#-, . . . . , + . . . . . _ , - . . . . _ _ - , . , , _ _ , _ . _ .,,,_.,_;...w... _. ,. . . - . - r. . .m

w w w^

V

$ltiCTE D flNONCI AL D AY A F

" 1(Aescuntsin 77euurnds efikll.rrd - -1991 19 4 1989 1988 1987 1986 ,

- Stiictt o luout $1 Att us NT, lit us j ' Operating Revenues: ,

k Curknt rcrenues from ctmomers $1JtR,909 - $1,074,956 ' $ -974A44 $ 683l725 $ 83s.986 $ 850.744 Deferm!(ustomer revenues - (78.344) 10.784 96,287 117 344 -

. Revenues from other utilities 58,903 45,153 47,837 59348 Sa214 44,177 7htal Operuting Rrernurs - 1,199, % 8 1,130.89, 1.118368 l,( m al? 886.200 894.921_

Opeittir g12pemes:

Fuel and purchased power 250,755 ?219311 215.043 228.172 241.829 236 296

~ Other operation & maintenance expemes - 371335. 364.924 3%084 341,942 2 % 163 : 344,274 -

M, L Depreciation rad amortization '419,264 - 122,251 119376 111,023 R2,172 74J25 Income and other tast6 _ '191,008 157,290 158,576 135338 129.301 150,711 Operariag/ruwnc - _ '2 %906. 2 E916 269A89 244342 185,735 189315 '!-

. Other income, exduding AFC - 7,002-- 11337 8,440 - 47,723 33,791 (12,94H) '

Toial AFC (debt and' equity) 4,273 2.934 2.872 3,027 1033 77 110384 k_ l less Interest and Orher Charges - 144,616 159,715 167,799 1 6.526 188.131 176.822

+

Netfewne $ 133365 - - $ 121,672 ' $ 113.002 $ 118366. $ 134,972 S 110 329 L Earning Per Share $2.50 - $2.24 $2A3 $1.86 $1.85 $131

.s g -- .

J$tt0CT4d BALANCE Slf tt.f lirNs.

' [Pmpry, plint & equipment -- ttct $3.035,1151 - $3.440362 $ 3,055.039 . $ W5.922 53S98,897 $3A90,599

Total assets $3,9.V,709 $3,919306. $3,920 590 $3.881 A24 $4151.615 $3,997,076 Capikalitathrn ,

Comrnon stockholders' cquity > $ 1,111,121 - $1,079.141 '- ' $1,0%I90 $1,070373 $1,217J61 $1,204 A33

' Preferred ind preference stock ( 137,343 169.093 219.991 244.816 260.905 266.790 llong-term debt .. I A20.726 - 1301,295 1340,32?. 13 50,231 1,690,600 1,613,787-l EralCapitalizarian ' $2,669,190  : $2.769329 ' $2.826310 f $2,865,622 $ 3,168,866 $3h85,010

' CAmatar ATsoN Rytto/,J Com: hon stockholders' egptiry - 41.6% 39h% 37.7 % 37.4 % 38A% 39.0 %

Prefermi and preference stuck 5.2% ' 6.8% 7.8% - 8.5% 8.2% 8.7%

-long-term debt - .

53.2% - 54.2% . 54.5% - 54.1 % $34% 52J% .

i TotalCapitalkation.. t 00.0% 100 0 % wo.0% 100.0% 1(.ww 10u 0% 1.:

, llines interrst Lanied(pre IA)l 2.64 2,51 231 2.25- 1.84 1,75

-^

_ 15 tietto Coupon Stock INinkurtioN 3:

Shard Outstanding (In t/mandd:

2 Year-end - ' 52,5,J5  : 53,759 55340- 57,531 70h% 73,119 L Antage i , . .

53391- 54A32 55,790 - 63,748 72.845 72,930 l Dividends declared (In t/vmandd - 57s,040-- $74.972 . $72397 577,571 $87.296 $lo3h98 (Dhidend payout rate ^  : 57.6 % 60.7 % 63.1% 64.5 % 64.9 % 107.9 %

~

Price camings ratio at year-end (1) - 123 ' i 1.1 11.8 10.1 6A 8.1

Dhidend yield at year-crid (!) L = $.0% - 5.8% 5.7% 6.8% 10.2 % 9.8%

iReturn on average comm6n equity  : 12,2w 11 3 % 10.6 % 10A% 11.1 % 9.3%

~~

t w M wr d w,k pkje k,e L 40 f t

.? .  !. - _ _ _ _ _ _ _ - - _ __ l'W .-_

i

1 k

. 5 5tLIC;ID OPIR AllNG D AT A '

hDOE '

t

[

i 1991 ly90 1989 1968 1987 1986 - i

'Satn ol' Etiotatrit t:

. Avetage anmtM residential

6,16tt 6,019 kilowattt-hout use 6331- $M53 6.060 5.821 ,

- 11ctric enerl;y tales billed (millions of Kwh): i Residential - 3,285- 3.078 3,119 3.156 3 Mis 2357

[

Commeasal- 5.450 5.2% 5,145 5.055 4.sv9 4,724 Indiatrid 3.042 3.296 3.221 3J02 2.918 2,734

-: Miscellancota 84 84 84 91 98 99 s __-

7b/dSa/n so Cunomm 11,861 - 11,694 -11369 18464 10.980 lb,514 Saln to other utilitin - 2,979 1.N30 2.100 2.716 - 2,426 2S91 Todd&da 14.8 '.0 ' 13,524 13h69 14.320 13A06 12/.05 . I L'va ncy $rt tti Aho Puourcitos D ATA: -h Energ supply (millions of Kwh):

[

Net generation - system plants ' i (net ofCompany me and hmes) , 14.220 13,266 13.455 14,144 13,208 + 12A56 [

thrchard and oct inadvenem power - 620 258 214 176 198 149 ..

_ t NetDarrySuff dy 14,540 - t 3,524 l3.669 14J20 1SAUG. -12 M

. Generating capability

, (thousand4 of kikiwattd ' 2,835 2A35 2,0$ 2.M% 2,H52 230M. >

ikak load (thousands'OfkD9 watts)' 2,402 2379 2J81 2372 2.280- 2.132 [

Cost of fuel wr million flTU

~

I 53.70< . 149.62e 14 m e 145.7R 1 sos 9e 16534e-  :

I a - IflU pet kilowatt-hout pr. crated 10J14 ' 10A44' 10All ' 10304 10A49 = 10,624 Average production cost

. per kilowatt-hour' 2,804 - 2.61t . 2.73t 2384 13)( 2.$5( -  ;

-: Nt:ust a of Cohout an - E xp of Y Ani i Residentid - 520.016 - -

< 51HJ22 516.801' 513,760 - $10.H23 - 509,0.54 --i

- CorimerclM 52,417- 52330 -- 51.950 - 51 A56 50,W4 $0J46  ;

Industrial 12,004- 2,026 2,023 2,017 1,978 -1370

, Othe~rl- 1.891 1.847 1 N1% - 11.828 1,831 ;1.826' J. : 1htdCsuromm ~ 576,528 574325 5723 92 $69Amt - %53% '563,196' i j., t _

E 1 f.-

1

'[,'

d I

Y" p .

45

,- 6 ww J9+- @ q n.!,'

-a g- p,eM g y ,, mis-rv.- g,-g--, y p g yp g y y,rw-..rtMTP= 9 w->**rtW-# 7 lips- m M1M-W ;T-

d i BO ARD Of DIR ECTOR$ AND Of flCIR 6 i.

h 4

4 4

' " 7 g%

• e (s'38h [ g "'{ ' % ~ f j j'[ Yk

)

[ f (y,

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Ls incidental to the ownership of pmperty, and thus 109, whi< h rnjuins the habibiy methmi of aaounting h acwunted for a the acquisition of an auct and the for income taws incunence of an obbg.uion by the Insee. Iuiuu i snu Cl Nik 4 Akl A Pow f n Rtut t Aiout Couvinios tii RC) Coonms uios Okot r IC APCO) -- An.mtirpendent five"membet tomminion witly the Duquesne Light, Ohio libson Company. Pennsylvama ikpartment of Enngy wWh hn enponsihihtpior sci-lbwer Company, The Cleveland I lectric ll!uminating ting rates and charpn for the wholoale tran ponation t Company and The Toledo Edhon Company. He and ute of natuul gas and elecintity, and il e itrntng companies bined together in 1%7 to jointly devclop of hydroclenrit pmn pmietu, among oth. , ihnp. guwer generation and transmiwion facilitics. , Coulettlios Woat is Peonat ss (CWIP) g g , g. g gg g This amount reprocnts utility plant in pnuns of wn- changn to natomers due io increases or dc'ocacs in stmction but not yet placed in sense and is shown a fuel msts incurred by the utility. Du.juesne 1 ight a mmponent of propeny, plant and njuipment. rn. men the awl of fuel wnsumed at in generating Dio nio Ioo plaan, a wcil a the cmt of partbased powcr. and pam the profus of shon-term omri sales to other income taxes resulting from the recognit;on of cauin . utihu.es through the IL.R to in customen, items of revenue and expense .m the tax return m a dif-ferent period that, they are rnurded on the looks of oct artiso ti ut the company. I kne lear do not transfer she benclits or rhks of I Asn 5 m no s t No. 90 ownenhip. An accounting s.tandard, iwuni in 1980, w hit h specife P munsin Puu u U t n u s couunuos t PUC) the accounting for plant abandonments and disallow- The Penmylvania government.d lwly w hich regulaics ances of certain uwt recovery of rnendy wmp!cted all utihtin (ck oric, gn, idephone, w.uct, acJ is made plants. This Statement requirnt that a low be recorded up of fue memben (one a chairman) appointed by for the disdhmance of a return on Duquesne Liglu's the govanor. invntment in abandoned plant, reg.udleu of the fact 4s E f 7 TTftf:ff'ff T TITf'fT ff f T ffT M Co8roR4ti Olll( t h Sli ARi not pt R $t kt iel s/ Antit r A Nt i DQE Shart holder iinluitio rel.iting to disidendw nihdng One Oxford Centre smtk t enifiarn, dividend reinmtment, dirut 301 Grant Sutet Pittsburgh, PA 15279 depit, thange of address novitiotion, and othn x ount information shoulJ indude your auount couwos$totg nundier and be diretted to: Tradmg Symbol DQE Sharehokler Relatium Deputment Stock Lu hanges 1Ated and Traded: DQE New Lk, Philadelphia, Midwnt lion 68 15ttdiurgh, PA 152304KM,8 Naber ofCommon Shareholders of Raord at br End: 87.093 Shateholders aho un call between 7:30 .m. and ANst u Mit usc 4:30 p.m., Istern time. Monday thmugh i sil.iy. Shareholders we cordially invited to attend our P1 W your mum mdin bdp Annual Meeting of Shareholders at 10 a.m. (local Pidi h m 39M16'? San rive gynnglcanix 3.gog.367-6400 time). April 28,1992, at the Carnegie Made Hall lhll free ounide Prnnsylvania (within the in the Oakland scaion of Pitnhusgh. ;c e '. ser.t;.! '.*nital Stainh 1800 247-0EK) FAX: 412-39M087 UnIDINth lhe Doard of Directors hismricaHy has dedated Qantium relating to reWphteling stm k, inJudmg quanctly dividends payable on ot about the first shun hdd in the Dhidend Reinvntment and Sim k day ofJanuary, April, July and Oaoher. The retord P" haw Plan, un be amm red by our shareholJn datn for 1092 are expeaed to be March 11. June 10, Rdations Depannient. li> actuaHy tramfn notk Sepresher 9 and Detrmher 9. undiutn, wntact our uander agent: Mellon Secmities 'liansfer % tries Ditiri Dt coni on Dnim sos Attemion: Ila downthal YourMQE quarterly dividend paymenn can be 85 ChaHenper Road deposited automatically into a permnal chec kinc or W npnk Cenne 1 Ridgefield Park, NJ 07660 savin s account. Through thh free service, your dm.- 201 296 4052 dend inwme is available for use on the payment date. Standing in hank lines is eliminated, as wdl as the fear Deruem M4uis(a of mhplacing or losing your (heck Call us toH free for if>uu hohl muhiplc accounn, yuu may be recticing rnore informadon. dupbcate maihnp of annual and quanctly n pons Hdp us rhminate this unnecessary opeme by t alling one of Tu 514:os of COMMON $1ock Un iDI NDi The company estimarn that all of the common g g  ; {  ; stock dividendi paid in 1991 are taxahle as dividend miling will not plett separate delhery ofdividend thetts and pmxy mateiiah to each aaount income. This ntimate is subject to audit by the Internal Revenue Service. I m sein couucuiiisotsweis I """ ' U # Analysts. inintment managets, and brokers should if you hold or are a benefaial owner ofour sn(k a' direct their inquiries to 412 393-4133. Written inquisicohoukt be sent io: ofI chruary 21,1991 the record date for the 1992 Invesmr Rdations Department Annual Meeting, we will wnd yuu, free upon request, ogg a copy of DQF?s Annual Repon on Iorm 10-K, as One Oxford Centre (20 l) L fded with the Securities and & change Commiuion 301 Grant Street - for 1991. All rnjuesa must be made in wri:ing to: l'ittsburgh, PA 15279 Secretary I AX: 412-39M448 U9E One Oxford Centre (17-6) DQE and its anihated companies are lyual 301 Grant Sueer Opportunity Employers. Pittsburgh, PA 15279 @ m mi Ni %n a.p.m u, ram w a ~ % w m, ei 0 E .$ .

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