ML20112D620
| ML20112D620 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley |
| Issue date: | 12/31/1995 |
| From: | Andersen A PENNSYLVANIA POWER CO. |
| To: | |
| Shared Package | |
| ML20112D597 | List: |
| References | |
| NUDOCS 9606040430 | |
| Download: ML20112D620 (20) | |
Text
ANNUAL REPORT 1995 l PENN POWER
{ The Energy Makers l
i i
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l 9606040430 960524 PDR I
ADOCK 05000334 PDR
CONTENTS COMPANY PROFILE i Selected Financial Data . . . . . . . . . . . . . . 1 Pennsylvania Power Company provides electric Management's Discussion service to more than 143,000 customers in western and Analysis . . . . . . . . . . . . . . . . . . . . 2 Pennsylvania. The Company furnishes electric Statements of Income . . . . . . . . . . . . . . . . 4 service in 139 communities, as well as rural areas, Balance Sheets . . . . . . . . . . . . . . . . . . . . 5 and also sells electric energy at wholesale to four Statements of Capitalization . . . . . . . . . . . . 6 municipalities. Its service area has an estimated Statements of Retained Earnings . . . . , , . . . 7 population of 342,000. The Company, with Statements of Capital Stock and headquarters in New Castle, Pennsylvania, is a Other Paid-In Capital . . . . . . . . . . . . . . . 7 wholly owned subsidiary of Ohio Edison Statements of Cash Flows . . . . . . . . . . . . . 8 Company.
Statements of Taxes . . . . . . . . . . . . . . . . . 9 Notes to Financial Statements . . . . . . . . . 10 Report of Independent Public Accountants ...................16 Directors and Officers . . . . . . . . . . . . . . 17
l SELECTED FINANCIAL DATA Pennwivania Power Comoan, I995 I994 1993_ i992 1991 (Dollars in thousands)
Operating Revenues . . . . . . $ 314.642 $ 301.%5 $ 292.084 $ 315.458
........... $ 321.845 i Operating lacome . . . . . . ............ $ 67.317 5 63.668 $ 62.777 $ 66.525 $ 81.102 Net income . . .................... $ 38.930 $ 31.260 $ 21.317 $ 30.956 $ 40.197 Earnings on Common Stock . . . 8 34.155 25.8 % $ 15.454 $ 24.457
..... , , $ $ 32.475 i
Return on Average Common Equity . . ,.... g% g% Q% M% g%
Cash Dividends on Common Stock ... . . $ 21.386 $ 21.386 $ 21.386 $ 27.676 $ 27.676 Total Assets ........ ... ... . EL4ML4 $ 1.193.198 $1.180.983 $ 986.158 $ 1.022.099 CAPITALIZATION:
Common Stockholder's Equity .., ... $ 271.920 $ 258,973 $ 254.782 $ 261418 $ 266,058 Preferred Stock-Not Subject to Mandatory Redemption . . . . 50.905 50,905 50,905 41.905 41.905 Subject to Mandatory Redemption .. ... 15.000 15,000 20.500 30.362 34,282 Long-Term Debt . ... ,. ...... . 338.670 424.457 440.555 398.630 408.443 Total Capitalization . . . .... . $ 676.495 $ 749.335 5 766.742 $ 732.415 $ 750.688 CAPITALIZATION RATIOS:
Common Stockholder's Equity . . . .. .. 40.2% 34.6% 33.2 % 35.7 % 35.4 %
Preferred Stock-Not Subject to Mandatory Redemption . . . . . 7.5 6.8 6.6 5.7 5.6 Subject to Mandatory Redemption ..... 2.2 2.0 2.7 4.2 4.6 1Ang Term Debt . . . . . . E
. . ...... 56.6 E 54.4 54.4
. Total Capitalization ........... . g% y 10% g% g%
KILOWATT HOUR SALES (Millions):
Residential . . . . . . . .............. I.195 1.178 1.105 1,050 1,061 Commercial . . . . . . . ........ .... 938 891 831 782 772 Industrial . . . . . . . . . . . . . . . .... ... 1.558 1.293 1,212 1,674 1.823 Other....... ............. .... lj,1 E 139 ,_L1! 136 Subtotal . . . . . . . . . . .. .... ... 3.842 3.510 3.287 3.644 3.794 Parent Company . . . . . . . . . . . . . . . . . .. 250 468 469 786 556 Other Utilities ....... .... .... ,_jff 466 748 906 790 Total . . . . . . . . . . . . . . .. 4.777 g ,4J04,, 1),J,g g CUSTOMERS SERVED:
Residential ..... ., ... ... ... 126.480 124.951 123 316 128,879 120,537 -
Commercial . . . . . ............ .. 16.317 15.966 15,593 15.348 15,127 Industrial . . . . . . . ....... ... .. . 223 219 221 235 243 Other ......................... . 97 98 97 100 100 Tots). .... ... .. . ... I43.117 141.234 I39.227 137.562 136.007 Average Annual Residential Kilowatt-Hours Used 9.505 9,501 9,017 8,672 8,839 Cost of Fuel per Million Bau .. . ,. . .. $ 1.12 $ 1.20 $ 1.28 $ 1.26 $ 1.32 Peak Load (Megawatts) ... ... .. 836 710 690 734 739 Oenerating Capability:
Coal............... ...... . 72.1% 72.1% 74.6 % 74.6 % 74.6 %
Oil . . . . . . . . . . . . . . .. .... 3.0 3.0 2.8 2.8 2.8 Nuclear . . . . . . . ...
Total . . ... .....
.2M g%
.319 100.0 %
22 Q 100.0 %
.22 _6 100 0 %
m 10g,,0%
SOURCES OF ELECTRIC GENERATION:
Coal . . . . . . . , . . . . . . . 65.6 % 69.6 %
... .. . .. 76.8 % 68.3 % 72.9 %
Nuclear . . . . . . . . . . . . . ...,.. .
.2M 203 ,2)_2 31.7 E Total . . . . . . . . .. .. ... . g% 100.0 % 100 0% 100.0 % 100 0 %
NUMBER OF EMPLOYEES . ......... .Mlf ,MM 12,5,5 14,,3,] ),,d3]
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION factors, total kilowatt-hour sales were up 7.5%
RESULTS OF OPERATIONS compared with 1994 sales, which were 1.3%
lower than the prior year.
We continued making significant progress in 1995 as our Company prepares for the rapidly Because of higher kilowatt-hour sales, we changing environment within the electric utility spent 5.9% more on fuel and purchased power in industry. 1995. The 1993 amount included a $4,950,000 charge related to a fuel cost recovery issue.
For the second consecutive year, our net During the same period, our nuclear expenses fell income increased substantially compared to the 2.2% compared to the previous year-nuclear prior year. The 1993 results were adversely expenses were higher in 1994 mainly due to affected by a $17,029,000 aRer-tax write-off for corrective maintenance work at the Perry Plant.
the termination of Perry Unit 2 and a charge ne comparative decrease in other operating costs related to a fuel cost recovery issue. The effect of reflects a charge in 1994 of approximately the 1993 write-off was partially offset by a $8,400,000 for a voluntary retirement program
$5,653,000 after-tax credit from the cumulative offered to qualifying employees in 1994, effect of a change in accounting to accrue metered but unbilled revenue (see Note 2). Higher depreciation charges in 1995 resulted piimarily from a higher level of depreciable utility We are achieving good results from our plant and an increase in the accrual for nuclear ongoing cost-control efforts. Total operation and decommissioning costs. The change in net maintenance expenses in 1995 were lower than any amortization of regulatory assets was because we year since 1988. stopped deferring postretirement benefit costs and provided a reserve in 1994 against the amounts Higher operating revenues in 1995 are due to which had been deferred in 1993. The reserve was increased retail sales. The following table provided due to contradictory court decisions in summarizes the sources of changes in operating Pennsylvania which make future recovery of these revenues for 1995 and 1994 as compared to the costs uncertain. General taxes in 1995 included an previous year: adjustmen' for property taxes.
9i,m3 " Interest on long-term debt fell in 1995 -
compared to 1994 due to the redemption of more
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than $43,000,000 of first mortgage bonds with a weighted average interest rate of 8.09% and the 0*" a5 refinancing of certain pollution control notes in Net inu+am sl u su 1995 and late 1994. Preferred stock dividend De 1995 start-up of Caparo Steel Company, requirements were down in 1995 due to the which purchased the assets of Sharon Steel miemption of preferred stock m the second half of Corporation, and an improving local economy 1994. The 1994 amount also included a $325,000 helped us achieve a 9.8% increase in retail sales, charge for premiums paid on preferred stock follow 8ng a 6.8% gain in 1994. Our customer base redeemed in that year.
continues to grow with nearly 1,900 new retail customers added in 1995, after gaining over 2,000 CAPITAL RESOURCES AND LIQUIDITY customers the previous year. Increased weather-related demand during the second half of 1995 We have significantly improved our t,manc.ia l contributed to a 1.5% increase in residential sales, position over the past five years. Cash generated which rose 6.6% the previous year. Commercial fr m perations was 34% higher in 1995 than it sales followed the same trend, increasing 5.3% was in l990 due to higher retail sales and and 7.2% in 1995 and 1994, respectively, aggressive cost controls. Also, we have enhanced Industrial sales increased 20.5% during the year, ur fixed charge coverage ratios and the Excluding Caparo, industrial sales rose 6.3% in pmentage f common equity to total 1995 after increasing 6.7% the previous year. capitalization. Our SEC rat,oi of earnings to fixed Sales to other utilities were relatively flat in 1995 charges improved to 3.15 at the end of 1995 from after falling 23.2% in 1994. As a result of these 1.88 at the end of 1990. The Company's indenture 2
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ratio, which is used to determine the ability to . One of our former municipal customers issue first mortgage bonds, increased from 2.71 at signed a contract with another energy supplier in
. the end of 1990 to 3.91 at the end of 1995. Over November 1995. The Company and the former the same period, the charter ratio, a measure of customer are in dispute over our proposed our ability to issue preferred stock, improved from transmission rate. Both parties have filed proposals 1,32 to 1.97, and our common equity percentage with the Federal Energy Regulatory Commission of capitalization rose from approximately 34% at requesting it to establish final terms. No ruling has the end of 1990 to slightly over 40% at the end of yet been issued. Sales to this municipality were 1995, approximately $1,500,000 in 1995.
For the third straight year, we improved our OUTLOOK cash position compared to the end of the prior year. All cash requirements for the year were met Many competitive challenges lie ahead as the with internally generated funds and all of our electric utility industry becomes less regulated and financing activities during the year were for more energy suppliers enter the marketplace.
redemption and refinancing purposes. Retail wheeling, which would allow retail l customers to purchase electricity from other We had about $43,000,000 of cash and energy producers, would be one of those temporary investments and no short-term challenges, if legislators choose to move in that indebtedness on December 31,1995. We also had direction. It is imperative that we continue to find
$2,000,000 of unused short-term bank lines of ways to increase revenues and reduce costs.
credit, and $12,000,000 of bank facilities that Effective operation of the nuclear facilities we provide for borrowings on a short-term basis at the jointly own will also help us meet these banks' discretion. competitive challenges.
At the end of 1995, we had the capability to In 1995, we increased our accrual of the issue $157,000,000 principal amount of first nuclear decommission!ng obligation. As discussed mortgage bonds and $134,000,000 of preferred in Note 1, the Financial Accounting Standards stock (assuming no additional debt was issued). Board (FASB) is reviewing the accounting for However, our cash requirements in 1996 for decommissioning costs regarding the recognition, operations and scheduled debt maturities are measurement and classification of expected to be met without issuing additional decommissioning costs in the financial statements securities. During 1995, we reduced our total debt of electric utilities. The FASB issued its proposed by approximately $50,000,000. We expect to pay accounting standard in February 1996.
off in excess of $80,000,000 of debt over the next five years with internal cash, including more than The Clean Air Act Amendments of 1990,
$53,000,000 in 1996. discussed in Note 7, require additional emission reductions by 2000. We are pursuing cost-effective
, During 1995, our capital spending (excluding compliance strategies for meeting the reduction 4
nuclear fuel) totaled approximately $30,000,000, requirements that begin in 2000.
Our capital spending for the period 1996-2000 is expected to be about $105,000,000 (excluding Through our Performance Initiatives i nuclear fuel), of which approximately $24,000,000 program - an ongoing effort to control costs and i applies to 1996. 'Ihis five year spending level is encourage continuous improvement throughout our more than $35,000,000 lower than actual capital Company - we have identified substantial savings outlays over the past five years, that will better position us to successfully compete in the future. In addition, we are moving forward Investments for additional nuclear fuel during on a Corporate Strategy program which focuses on the 1996-2000 period are estimated to be our core business by outlining specific strategies in approximately $31,000,000, of which about key areas of our business. Through these programs
$5,000,000 applies to 1996. During the same we continue to identify opportunities for revenue periods, our nuclear fuel investments are expected enhancement and cost reduction. Our focus is to to be reduced by approximately $34,000,000 and exceed customers' service expectations by
$7,000,000, respectively, as the nuclear fuel is providing superior value and high-quality products consumed, and services at competitive prices in order to
~ maximize the value of shareholder investment in the Company.
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STATEMENTS OF INCOME Pennsvivania 1%w C--v For the Years Ended December 31, 1995 1994 1993 (In thousands)
OPERATING REVENUES . ........................ ... 1314.642 $301.965 $292.064 OPERATING EXPENSES AND TAXES:
Fuel and purchased power . . . . . . . . . . ......... ......... 63,959 59,529 67.312 Nuclear operating costs . ................ ... ......... 32,759 33.480 30.162 Other operating costs ..., ............................ .. 58.959 . 65.424 61.125 Total operation and maintenance expenses . . . .............. 154.777 158,433 158.599 Provision for depreciation ............... .. .......... 33,152 29.108 29.260 Amortization (deferral) of net regulatory assets . .... ......... - 4,339 (4,339)
Oeneral taxes . . . . . . .................. ... ...... 28.278 23.137 22.591 locome taxes ........ ......... .. ............. . 31.118 . 23.250 . 23.196 Total operating expenses and taxes . . . . . ................. 247.325 238.297 . 229.307 OPERATING INCOME , . . . . . ...... .................. . 67317 63,MS 62.777 OTIIER INCOME AND EXPENSE:
Perry Unit 2 termination (Note 3) .. ............. ... .. . - -
(24.458)
Income tax benefit from Perry Unit 2 termination . . .... . ... . - -
10.293 Other . . . . . . . . . .. ....... . .................... 2.213 1.811 1.542 Total other income (expense) . . . . . . . . . ......... . . .. . 2.213 1.811 fl2.623)
TOTAL INCOME ..... ................. .. . .. . 69,534 65.479 .50.154 NET INTEREST:
Interest on long-term debt ........ ..... . .... .. .... 28.937 32.130 33.208 Interest on nuclear fuel obi.gations . . . . . . . . . . . ......,,.. 447 519 401 ,
Allowance for borrowed funds used during construction . . . . . ...... (754) (728) (772) !
Other interest expense . . . . . .. ... .. ... . ......... . . 2.006 . 1.653 i 2.293 Net interest . . .... ........ .......... . .. . 30.600 34.219 34.490 I l
INCOME BEFORE CUMULATIVE EFFECT OF A CIIANGE IN ACCOUNTING . . . . . . ........ ... ....... ..... 38,934 31.260 15,664 Cumulative effect to January 1,1993, of a change in accounting for unbilled revenues (net of income tapes of j
$4,108,000)(Note 2) .... .. ... .... .,... ....... - -
5 653 NET INCOME . . .... ..... . ......... ... . .. . 38,930 31,260 21,317 l
PREFERRED STOCK DIVIDFND REQUIREMENI'S . .... . 4,775 5 364 5.863 EARNINGS ON COMMJN STOCK . . . . .. .... ...,.. .
),,,j;42l L2180s $ 15.454 The accompanying Notes to Financial Statements are an integral part of these statements.
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BALANCE SHFifIS 7 p= = p_,
' At Decemaker31, '
199g 19,4 (In thousandit ASSE'IS UTIIJTY Pl. ANT:
In service, et original cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1J15J74 31.215.831 14ee-Accueiulaud provision for depreeistion .... ...................-,........ 426.974 410 3 08 788.300 805.323 Construction work la prosmaa-Electric plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.997 11.226
< N uclea r Aael . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.858 12.389 4
... 18.855 23.615 l 801.155 828.938 OTilER PROPERTY AND INVESTMENTS . . . . . . . . . . . . . . . . . . . . , , . . . . . . . . . . . 14.550 8.777 CURRENT ASSETS: 1 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ 20.984 17.200 l
Notes receivable from penne compeny (Note 6) ................................ 22.800 23.000 Accounts receivable-Customere (las occumulated provisions of $563.000 and $515.000, respectively. for uncollectible accounts) . . . .. . . . . . . . . . . . . . . . . . . . ........... 35.987 32.745 1 Pe n nt c ompany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 14.965 20.777 Other........................................ ...... ......... 15.329 12.823 Materials end supplin. at everage cost . . . . . . ................ ........... . 15.588 17.039 Propeyments . . . . . . . . ... ............. .. ............... ....... 2.113 2.048 126.966 127.632 DEFTRRED C11ARGES:
Regulatory eenets . . . . . . . . . . .................... ...... .. ...... . 189.900 215.002 Othr.......................... .. . .......... .. ........ .... 7.833 12.849 197.733. 227.851 h 4M $1.193.198 CAPITALIZA'IlON AND LIABILITIES l CAPITALIZATION (See Statements of Capitalization):
l Common asockholder's equity ....................... ................ .. $ 271,920 $ 258.973 j Proformd stock-l Not subject to mandatory redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.905 50,905 Subject to mandatory redemption . . . . . . . . . . . . . . ........ .. ........... 15.000 15,000 Long4erm debt-Associated compania . . . . . . . . . . . . . . , . . . . . . . . .. ...... ............. 11.648 . 15,155 Other........................... ............... .. ........... 327.022 409.302 676.495 749.335 CURRENT LIABILITIES:
I Curnatly payable long-term debt-i Associated companies . . . . ........... . . ........................ . 6.180 9.318
, Other ......... ........ ..... . .. . ...... . . ......... ........ 53.817 15.126 Accounts payable-Associated companies . . . . . . . . . . . . . . . . . . . . . . . . . . ....... ... . ..... 10.593 9.440 Othe r . . . . . . . . . . . . . . . . . . . . . ........ ....... .,.............. 26.013 25.276 Accrued tenu . . . . . . . . . . . . . . . ............... . .................. 16J21 15.421 Acc rued interut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......... . ..... 8.487 10.106
, Oiher........................... . ... ........... ... ......... 28345 21.473
! 149.656 - 106.162 DEFERRED CREDITS:
Accumulated defernd income taxes . . . . . . . . . . . . . . ..............,.. . . . , 260.458 277.542 Accunndated defernd investnwns tax credits ....... . ............. .... . 30.521 32.209 l Other . . .............. ........................... ....... ... . ._ 39.274 27.950 320.253 337.701 COMMIDIENTS, GUARANTEES AND CONTINGENCIES (Notes 4 A 7) ....... ...
Lt.4M JLIEl.lf i The accompanying Notes to Financial Statements era en integral part of these balance sheets.
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ST'ATEMENTS OF CAPITALIZATION Femanhamia Power Commen (Dellars la thoussads. encept per share amounts)
At Decemaker 31, UM 1H$
COMMON STOCKilOLDER'S F4UITY:
Comunon seos k. $30 per valw.6,500,000 sham authorued 6,290,000 shares cutstanding . . . . . . . . . . . $188.700 $188.700 Othe r paid-la capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (423) (600)
Retained earniags (Nees Se) .............. ,...............,,,................ _3,1&Q 10J2}
Total conunon stockholder's equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271.920 .258.973 Number of Shares Optiemal pg _v-- 33 ' .A Mg PREFERRED STOCK (Note 5b):
Cumulative. $100 par valm-Authorised 1.200,000 shares Not subject to mundstory reden9 tion:
4.24 % .... ,,................. 40,000 40,000 $ 103.13 4,000 4,000
$ 4.125 4.25 % ... .................... 41.049 41.049 105.00 4.310 4,105 4.105 4.645 ........................ 60.000 60,000 102.98 6.179 6,000 6,000 7.64% ........................ 60,000 60,000 101.42 6.085 6,000 6,000 7.75 5 ........................ 250,000 250,000 - -
25.000 25.000 8.00 5 ......,,,.. ........ ,,. .13 Ogg 54.000 102.07 5.920 . 5.800 5.800 Total not subject to mandatory redemption . 509.049 509.049 M9 50.905 3 90,2 Subject to mandatory redemption (Note Sc):
7.625 % . . . ................ ... jjo m 000 150.000 . 15.000 15.000 LONG. TERM DEBT (Note 54):
First mongere bonda-.
9.000% due 1996 . . . . . . . ..................................... ........ 50.000 50,000 9.740 % due 1999,2019 . . . . . . . . . . . . . . . . . . . . . . . . . . ....... .. ... ......... 20.000 20.000 7.500 % dw 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............... 40,000 40,000 6.375 % d ae 2004 . . . . . . . . . . . . . . . ................................ . ... 50.000 50.000 6.6 25 % dw 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.000 20,000 8.500 % due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............. 27.250 50,000 7.625 % due 2023 . . . . . . . . . . . . . . ....................................... _11J00 40.000 Total first mangage bonds ,,.............................. .............. 226.750 270.000 !
A Secured notes- 3 4.750 % due 1998 . . . . . . . . . . . . . . . . . . . . ................... ............ 850 850 6.080 % due 2000 . . . . . . . . . . . . . . . . . . . ................................. 23.000 23,000 j 5.4005 dw 2013 . . . . . . . . . ......... ................. ........ ....... 1.000 1.000 8.125 % dw 2015 . . . . . . . . . . . . . . . . . . . . ,,,,....... .... ..... ........ - 14.250 5.400% due 2017 . . . . . . . .................................. ...... ... 10,600 10,600 7.150 % due 2017 . . . . . . . . . . . . . . .......... . .. . ...................... . 17,925 17.925 3 5.900 % dw 2018 . . . . . . . . . . . . . . . . . ..... . .. . .. ........................ 16,800 16.800 j 8.100 % due 2018 . . . . . . . . . . . . . . . . . . . .... . . .. ......................... 10,300 10,300 8 .100 % due 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 5.200 5.200 7.150% due 2021 . . . . . .......... ................ ........... . . . 14,482 14.482 6.15 0 % due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . 12.700 12,700 6.450% dw 2027 . . . . . ............................................... 14.500 14.500 5.450 % due 2028 . . . . . . . . . . . . . . . . . . .......... . ... .................. 6,950 6,950 j
6.000 % due 202 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............. ..........
5.950% due 2029 . . . . . . . . . . . .
14.250 -
)'
.................. ... .... ............ . 238 _2)3 Total escured notes . . . . . . . . . . . . . . . . .. . . . . .... ,,....... .. ...... 148.795 148.795 Other obligations-Nuclear fuel . . . . . . .... ....... ............... .. ..... ............. 17.828 24.120 Capital leases (Note 4) . . . . . . . . . . . . . . . . . . . . .. . . . ....... .. . .... . .... 6.309 7.456
. Total other obligations . . . . . . . . . . . . . . . . . . . . . . . . . ........... .. .. ....... 24.137 . 31.576 Net unamortized discount on debt . . . . . . . . . . . . . . . . ... ... ............. ....... . (1.015) U .470) !
Long4erm debi due within one year . . . . . . . . . . . . . . . . . . . . . . . ........... . . .. . (59.997) 124.444)
Totel long4erm debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338.670 424.457 TOTAL CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .......... ........... jjligl $749.3M 1 1
1he acconganying Notes to Financial Statenwnia are an integral part of these statements, j 1
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l STATEMENIS OF RETAINED EARNINGS Pennsvivania P_...; C--- )
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For the Years 5'adad Deceanber31, 1995 1994 1993 (la theimands) l Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... $ 70,873 $ 66.392 $ 72,777
. Net ince nes . . . . . . . . . . . . . . . . . . . . . . . .. ... ................. 38.9h) 31.260 21.317 109.803 m 94.094 Cash dividends on common stock . . . . . . . . .............. ........... 21.386 21.386 21,386 Cash dividends on prefered stock . . . . . . . . . . . .. ... ... .... ...... 4,775 5,035 5,639 Premium on redemption of preferred stock . . . . ................ . ..... - 358 67' 26.161 26.779 27.702 Balance st end of year (Notc 5e) . . . . . . . .................. ........ j g,gg $ 70.n73 g STA'IEMENIS OF CAPITAL S'IY)CK AND OTHER PAID-IN CAPITAL Preferred Stock Not Subject to Subject to Caineen Stock Mandatory Redenstas Mandatory Redeemstace Other Nummber Par Paid-la Neuber Par Nussber Par of Shares Yalue Canstal of Shares Y.sha of Shares lelus (Dollars in thousame)
Ratance. Jammary 1,1993 . . . . . . . . 6,290.000 $188.700 $ 41 419,049 $41,905 336,616 $33,662 Sale of 7.75% Pnferred Stock . . . . (345) 250.000 25,000 Redemptions-8.24 5 Series . ......... (45.000) (4.500) 8.48 % Series . . . . . . . . . . . (6) (80.000) (8,000) 9.16 % Series . . . .... .. (80,000) (8,000)
I1.00 % Series . . . . . . . . . . . (8,000) (800) 11.50 5 series . . . . . , .... (60,000) (6,000) 13.00 5 Series . . ....... (10.000) . (1.000)
Rataare Deconsber31,1993 . . . 6,290.000 188,700 (3 0) 509.049 50.905 213,616 21.362 Mininum liability for unfunded retirement benefits .. ..... .. (290)
Redemptaons-11.00 % Series . . . . . . . . .. (3.616) (362) 13.00 's series . . . . . . . . . . . (60.0001 _ 1 000)
Rainnee, Deceanber 31,1994 . . . . . . . 6,290,000 188,700 (600) 509,049 50.905 150,000 15.000 Minimum liability for unfunded retirement benefits ......... .. 178 Ratance, Dersanber 31,1995 .. .. M $188.700 g) 509.049 550.905 150.000 515.000
%e accompanying Notes to Financial Statements are an integral part of these statements.
7
STATEMEbrIS OF CASH FLOWS r :. :s.r_ _-C -
For the Years Ended Decensber 31, 1995 12tL ,,,,12tL Go thousands)
CAMI FIDWS FROM OPERATING ACTIVITIES: 1 Not income . . . . . . ...... ............ ...... . . . . . . . . . . . . $ 38.930 $ 31.260 $ 21.317 Adjustmente to reconcile not lacome to not cash from operating activities:
Provision for depreciation .. .. ........... . . . . . . . . . . . . . . 33,152 29,108 29.260 Nuclor ibel and lease amortization . . . . ......... . . . . . . . . . . . . . . . I1,337 10,656 8.812 Deferred income taxes. not . . . . . . . . . ... ........ . . . . . . . . . . . . . 8,144 7,578 10,261 Investment tax credita, not ..............,.... . . . . . . . . . . . . . . (1,688) (1,351) (1,341)
Allowance for equity funds used during construction . . . . . . . . . . . . . . . -
(408) (237)
Deferred fuel costs, not . . . . . !$$
...... ...... . . . . . . . . . . . . . . . . . (4.091) 199 I Cumulative effect of an accounting change for umbilled revenun . . . . . . . . ...... ................. . . . . . - -
(5.653)
Perry Uni 2 termination . . . . . .............. . . . . . . . . . . . . . . - -
24.458 (
Receivablu . . . . . . . . . . . . . . . ......... . . . . . . . . . . . . . . . . 64 (1,059) (5.974)
Materials and supplies . . . . ...... .......... . . . . . . . . . . . . . 1.451 (601) 4,666 Accounte payable . . . . . . . . . . . . . ... ........................ 1,848 4.196 (1.686) 1 Other ..... .............................. . . . . . . . . . . . 11.003 35390 (6.178)
Net cash provided from operating activities ....... . . . . . . . . . . . . 104396 104.7 % ,,,,8),J66 1
l CASH PLOWS FROM F1NANCING ACTIVITIES: '
New Financing-l Preferred stock . . . . . .. ........ . . . . . . . . . . . . . . . - -
24.654 l leng-term debt ....... ...... ...... . . . . . . . . 13.528 11,868 149,867 Redemptions and Repayments-Preferred stock . . . . . . . . .. . .... ... . . . . . . . . . . . . . . . . . -
6.687 28,970 leng-term debt . . . ..... ..... ....... . . . . . . . . . . . . . . . . . . 67.337 23,655 145.809 i Notes peyeble. net . . . . .. . ....... .. - 15,000 j
Dividend Paymente- '
Common stock . . . . . . . . . . . . . . ..... ..... . . . . . . . . . . . . . 21,386 21.386 21.386 Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.775 ,,,,J,3 5.639 Net cash used for financing activities 79.970
. . . . . . . . . . . . . . . . . . . . . . . . . 44J95 42.283 )
i CASil FLOWS FROM INVESTING ACTIVITIES: I Property ndditions . . . . . .. ....... . .. . . . . . . . . . . . . . . . . . . 29,705 30,072 31.328 loan to parent .. ......... ,, , ............. . . . . . . . . , . . - 25,000 - I lean payment from parent .. ....... .... . 4 . . . . . . . . . . . . 0.000) - -
Sale of utility property lo perent . . . . . . . . ............ . . . . . . . . (4.249) - -
Other ........... .... ......... .... . . . . . . . . . . . . . . . (1.814) 448 999 Net cet used for investing activities .. ..... . . . . . . . . . . 20.642 _3.Lf.20 32.327 Net increase in cash and cash equivalents .. . ....... . . . . . . . . . . . . 3.784 4,381 9,156 Cash and cash equivalents at beginning of year . . . ... , . . . . . . . . . . . . . _),L23 1LR19 3.663 Cash and cash equivalems at end of year . . ....... . . . . . . . . $ 20.984 517.200 $ 12,819 SUPPLEMENTAL CASil FLOWS INFORMATION:
Cash paid during the yar-Interest (net of ernounts capitalized) . .... .... . . . . . . . . . . . . . $ 30J15 5 31.738 5 32.391 Income tases ........... ..... . ... . . . . . . . . . . . . . . 26.605 19,873 10,403 1
The accompanying Notes to Financial Statements are an integral part of these stateirients.
i b
d l i i 1 8
l i
STATEMENTS OF TAXES r .tw.ais r= C-For the Years Ended December 31, 1995 l!!d 1993 Ga thousands)
GENERAL TAXES:
Stats gross aceipts . ................ ................ . ......... $ 11,680 $ 11,024 $ 10,754 Real and personalpropony . . .................... ...... ........... 11.222 6,699 6.712 State capital stock . . . . . . . . . . . . . . . . . . . ...... . ....... ......... 2.499 2.440 2.000 Social security end unemployment . . . . . . . . . . . ............
Other . . . . . . . . . . . . . . . . . . .
........... 2.440 2,590 2.643 j
.............. .... ................ . 437 ,,,,_J.33 442 Total general texes ................. ................. ....... g g7 j 2M91 %i PROVISION FOR INCOME TAXES:
Curantly payable-Federal . . . . . . . . . . . . . . . . . . . . . ................ .. ...... $ 20.352 $ 11,040 $ 3,292 State......................... .... ..... ................. 5.783 _ L966 716 26.135 18.106 4.008 Defernd, not-Federal . . . . . . . . . . . . . . ..................... .... ......... 6J22 8,088 10,035 Siete .............................. ............. ... .... 1.922 dion 4.291
_ 8.144 7378 14.326 Investment tax credit amortization . . .... .... . .. ... .. ............. .. (1.688) (1.351) (1 361)
Total provision for income taxes . .... . ........................
M 123.J.J.3 M INCOME STATEMENT CLASSIP1 CATION OF PROVISION FOR INCOME TAXES:
Operating expensee . . . . . ...... . ............ ... ........ $ 31.118 $ 23.280 $ 23,1%
Other iscome . . . . . . .......... .. . . .......... ..... ... .. I,473 1.053 (10,331)
Cumulative effect of e change ln accounting . . ........... ...... ........ - -
4.108 Total provision for income taxes . . . . . .... . ......... . .. ... 1J2E91 1.2.U.J] M RECONCILIATION OF FEDERAL INCOME TAX EXPENSE AT STATUTORY RATE TO TOTAL PROVISION FOR INCOME TAXES:
Book income before provision for income lancs ..........
Federal income tax expense at statutory rate . . . ........ ... .. .... .......
... ....... . . 7 5
h5
$ 19,458 93 Q38 90
$ 13,402 lacreases (reductions)in taxes resuhing from:
State income taxes net of federalincome tax benefit ............. ........ 5.008 4.261 3.255 Amortization ofinvestment tax credita . . . . . . . . . . . . . . . . . . .............. (1.688) (1,351) (1.361)
Amonnation of tax regulatory assets . . . ........... . ....... ...... 4.398 2,231 2.376 ,
Other. net . . . . . . . . . . . . . . . . . . . . . .............. .............. ,,,,_lij!) (266) (699)
Total provision for income taxes . . . . . .......... .... .. .......... LJ22.1 g 5 16.973 ACCUMULATED DEFERRED INCOME TAXES AT DECEMBER 31:
Property basis differences . . . . . . . . . . . . . . . . . . . . . . . . ... ..... .. .... $178.589 $178.345 $171,581 Allowance for equity funds used during construction . . . . . . . ..... . . ...... 38.894 39.921 41.091 Deferred raclear expense . . . . . . . . . . . . . . . . . . ............ ... 8.681 8.914 8,914 Customer receivables for future income taxes . . . . . . . . . .... . ..... .... 43,001 55.498 56,736 Unemonized investment tax credits ... ... .. ...... .. ..... . (12.510) (13,557) (14,124)
Other . , ....... .... ................. ..... . .... ..... 3.003 8.421 . . . _9.121 Net deferred income tax liability ... .... ... .. .. . ...... .
M 127Li42 M9 The accompanying Notes to Financial Statements are an integral part of these statements.
9
NOTES TO FINANCIAL STATEMENTS Annual depreciation expense includes
- 1.
SUMMARY
OF SIGNIFICANT approximately $1,100,000 for future ACCOUNTING POLICIES: decommissioning costs applicable to the Company's ownership interest in two nuclear De Company, a wholly owned subsidiary of generating units. The Company's share of the Ohio Edison Company (Edison), follows the future obligation to decommission these units is accounting policies and practices prescribed by 6e approximately $72,000,000 in current dollars and Pennsylvania Public Utility Commission (PNC) (using a 2.8% escalation rate) approximately and the Federal Energy Regulatory Commiaion $142,000,000 in future dollars. He estimated (FERC). He preparation of financial statements in obligation (based on site-specific studies) and the conformity with generally accepted accounting escalation rate were developed using information principles requires management to make estimates obtained from consultants. Payments for and assumptions that affect the reported amounts decommissioning are expected to begin in 2016, of assets, liabilities, revenues and expenses during when actual decommissioning work begins. The the reporting period. Company has recovered approximately $3,000,000 for decommissioning through its electric rates from REVENUES-The Company's principal customers through December 31,1995; such business is providing electric service to customers amounts are reflected in the reserve for in western Pennsylvania. He Company's retail depreciation on the Balance Sheet. If the actual customers are metered on a cycle basis. Revenue costs of decommissioning the units exceed the is recognized for unbilled electric service through funds accumulated from investing amounts the end of the year (see Note 2). recovered from customers, the Company expects Receivables from customers include sales to that additional amount will be recoverable from its residential, commercial and industrial customers customers. He Company has approximately located in the Company's service area and sales to $4,400,000 invested in external decommissioning wholesale customers. Here was no material trust funds as of December 31,1995. Earnings on concentration of receivables at December 31,1995 these funds are reinvested with a corresponding or 1994, with respect to any particular segment of increase to the depreciation reserve. The the Company's customers. Company has also recognized an estimated liability of approximately $3,900,000 related to FUEL COSTS-The Company recovers fuel decontamination and decommissioning of nuclear and net purchased power costs not otherwise enrichment facilities operated by the United States recovered through base rates from its customers Department of Energy (DOE), as required by the through an annual "levelized" energy cost rate Energy Policy Act of 1992. The Company (ECR). The ECR, which includes adjustment for recovers these costs through its ECR.
any over or under collection from customers, is The Financial Accounting Standards Board recalculated each year. Accordingly, the Company (FASB) is reviewing the accounting for nuclear defers the difference between actual energy costs decommissioning costs. If current electric utility and the amounts currently recovered from its industry accounting practices for decommissioning customers. are changed: (1) annual provisions for decommissioning could increase; (2) the full UTILITY PLANT AND DEPRECIATION- estimated cost for decommissioning could be Utility plant reflects the original cost of recorded as a liability rather than as accumulated construction, including payroll and related costs depreciation; and (3) income from the external such as taxes, employee benefits, administrative decommissioning trusts could be reported as and general costs and financing costs (allowance investment income. The FASB issued its proposed for funds used during construction). accounting standard in February 1996.
De Company provides for depreciation on a straight-line basis at various rates over the COMMON OWNERSIIIP OF estimated lives of property included in plant in GENERATING FACILITIES-The service. The anm'al composite rate for electric Company and other Central Area Power plant was approximately 2.7% in 1995,1994 and Coordination Group (CAPCO) companies own, as 1993. tenants in common, various power generating 10
l L
1 facilities. Each of the companies is obligated to consolidated tax liability is allocated on a pay a share of the costs associated with any jointly " stand-alone" company basis, with the Company' owned facility in the same proportion as its recognizing any tax losses or credits it contributed interest. De Company's portion of operating to the consolidated return. l expense 8 associated with jointly owned facilities is l included in the corresponding operating expenses RETIREMENT BENEFITS--The j l ' on the Statements of Income. The amounts ,
Company's trusteed, noncontributory defm' ed
- reflected on the Balance Sheet under utility plant at benefit pension plan covers almost all full-time December 31,1995, inclade the following: employees Upon retirement, employees receive a monthly pension based on length of service and unaley A-m-a-as come - can, ,'. compensation. De Company uses the projected i
u.a.
'77,1,7 unit credit method for funding purposes and was
- s.eyw n-- . . _ _ i- .m not required to make pension contributions during om sh====do the three years ended December 31; 1995.
- w. H. saannis #7 $ 56.900 $ 18,500 $ 300 20.80 5 De following sets forth the funded status of aruce ns n.id the plan and amounts recognized on the Balance
. s!, a2 and a3 .93,200 40,900 400 5.76 s Sheets as of December 31:
asever Valley #1 225,000 95,000 1,100 17.50 5 -
Perry #1 338.800 66.300 1.100 5.24 5 Total s713.900 s220.700 s2.900 i99s i9M Ga thousands)
Actuarial present value of bensrat NUCLEAR FUEL-OES Fuel, incorporated ""$,,,;,, - $ 98.529 $ 83.789 ,
(OES Fuel), a wholly owned subsidiary of Edison, Nonvested benent. 8.479 5.862 l is the sole lessor for the Company's nuclear fuel ^~ ' ' h*=nt obli==tian sio7.008 s 89.65i requirements. pi n. s r.ir v.lue $1u,336 $ii4,881 Minimum lease payments during the siext five Aci ri.i pru.m v.ius orproj.ci.4 i years are estimated to be as follows: ba= n""--"- 131.375 iOS.a8 .
- plan assets in excus orprojected 1996 $6,180,000 benefit obligation 4,961 6,383 1997' 5,443,000 Unrecognized est gain , 0,447) (1,281) 1998 3,827.000 Unrecogniud prior service cost . 5.057 2.347 1999 1,076,000 Un- >=' net tr-% asset (7.372) (8.426) 2000 647.000 Net nension liability s 301 s 977 Tne Company amortizes the cost of nuclear De assets of the plan consi:t primarily of
, fuel based on the rate of consumption. The common stocks, United States government bonds Company's electric rates include amounts for the and corporate bonds. Net pension costs for the
~
future disposal of spent nuclear fuel based upon three years ended December 31,1995, were <
the formula used to compute payments to the computed as foHows:
DOE. i,9s 19u 1993 Ga thousands)
INCOME TAXES-Details of the total service co.i-be=ni. rned provision for income taxes are shown on the du'ia8 'h* period 3 2,856 $ 3.2H $ 2,802 Statements of Taxes, Deferred income taxes result '"*",",$projecud bem6 8,823 8,158 7,281 3
from timing differences in the recognition of asiurn on pi.. .nei. o 0,963) 1,346 (15,653)
- revenues and expenses for tax and accounting Na delstral (arnonization) 19,108 (14.093 2.%6 purposes. Investment tax credits, which were V*'""*',7 "gi'*""" _ g deferred when utilized, are bem, g amortized over Na nen. ion com s ri?6) s 7.840 s 726 the recovery period of the related property. The liability method is used to account for deferred The assumed discount rates used in income taxes. Deferred income tax liabilities determining the actuarial present value of the related to tax and accounting basis differences are projected benefit obligation were 7.5% in 1995 recognized at the statutory income tax rates in and 1993, and 8.5% in 1994. He assumed rate of effect v/ hen the liabilities are expected to be paid, increase in future compensation levels used to The Company is included in Edison's measure this obligation was 4.5% in each year.
consolidated federal income tax return. He Expected long-term rates of return on plan assets 11
were assumed to be 10% in 1995 and 1994 and and the aggregate annual service and interest costs .
11% in 1993.~ by approximately $800,000.
The Company provides a minimum amount of De PPUC authorized the Company to defer ,
noncontributory life insurance to retired employees the incremental costs, resulting from a new
'. in addition to optional contributory insurance. accounting standard for postretirement benefits, for Health care benefits, which include certain future recovery from its retail customers. Similar employee deductibles and copayments, are also authorizations relating to some other utilities available to retired employees, their dependents regulated by the PPUC were appealed by the ,
and, under certain circumstances, their survivors. Office of Consumer Advocate to the
' De Company pays insurance premiums to cover a Commonwealth Court of Pennsylvania. The portion of these benefits in excess of set limits; all Commonwealth Court has issued conflicting amounts up to the limits are paid by the Company, opinions and both cases have been appealed to the ne Company recognizes the. expected cost of Pennsylvania Supreme Court. Due to the providing other postretirement benefits to uncertainty resulting from these conflicting employees and their beneficiaries and covered opinions, the Company provided a reserve in the dependents from the time employees are hired fourth quarter of 1994 of $8,728,000 ($5,066,000 until they become eligible to receive those after-tax) against the full amount deferred, benefits. He following sets forth the funded status of the plan and amounts recognized on the Balance TRANSACTIONS WITH AFFILIATED Sheets as of December 31: COMPANIES-Transactions with affiliated 1* 1* companies are included on the Statements of 8" *""*)
3,,,,,,,,,,,,,,,,,,,,,,,,,,,, Income as follows:
obligation ellocation:
astirees $23,371 $28.056 IN IN IN Fuuy eligible activ i plan participants 1.378 1.817 0" **""*'*I O&ar active elas aarticinants 18.988 18.263 opennng mvenues:
Accuanslated postretimment beneGt Electric sales to Edison - $ 4,374 $ 8.884 $ 8,781 abligenion 43,737 - 48,136 Bmco MansGeld Plant Plan aanste at fair value 160 -
edndnistredve and general Accumulated postratisment benefit charges to Edison 6,118 6,038 5.652 obligation la excess of plan essets 43,577 48,136 oen tunnections wie
." $10 810 $15.2 114.788 Net _
^'
._ rd'____ . 114.535 $10.637 Fuel and purchased powen Power puschemed froen Edison $15.129 $12,673 $ 8,667 Net periodic postretirement benefit costs for Tp',",*,' '""' "" im ii.529 ' 10.356 the three years ended December 31,1995 were s27.135 s24.202 si9.023 computed as follows: o** epa =uas **:
1995 1994 1993 Rentalof transmission g, g,,,,,g,y lines from Edison & l 057 $ 1.102 $ 1,042 service cost-benents auributed Data processm* g urvicu to the period - $1,090 $l.109 $ 866 rrom Edison 2,572 2,706 3.307 Intmst cost on occumulated Other tronanctions with beneGt obligation 3,988 3,4% 3,129 Edison 3.987 3.908 4.345 Asnostmastion of transition obligation 1,699 1,699 1.699 $ 7.616 1 7.716 $ 8.694 Amortiention ofloss lit 1% -
voiumary ariy retiremsat SUPPLEMENTAL CASil FLOWS Um dNmunmus benent co. s67888 $7.f69 Sh.y INFORMATION-All temporary cash investments purchased with an initial maturity of
. He health care trend rate assumption is 6.0% three months or less are reported as cash in the first year gradually decreasing to 4.0% for equivalents on the Balance Sheets. The Company the year 2008 and later. The discount rates used to reflects temporary cash investments at cost, which compute the accumulated postretirement benefit approximates their market value. Noncash -
obligation were 7.5% in 1995 and 1993 and 8.5% financing and investing activities included capital in 1994. An increase in the health care trend rate lease transactions amounting to $3,744,000, assumption by one percentage point in all years $7,566,000 and $2,357,000 for the years 1995, would increase the accumulated postretirement 1994 and 1993, respectively.
- benefit obligation by approximately $6,300,000
-12
. All borrowings with initial maturities ofless - deferred costs. in accordance with expected rate than one year are defined as financial instruments treatment based on PPUC precedent, it is under generally accepted accounting principles and improbable that the Company will be required to are reported on the Balance Sheets at cost, which terminate application of Statement of Financial approximates their fair market value. The Accounting Standards No. 71, " Accounting for the -
following sets forth the approximate fair value and Effects of Certain Types of Regulation," in the related carrying amounts of all other long-term foreseeable future.
debt, preferred stock subject to mandatory redemption and investments other than cash and ' Regulatory assets on the Balance Sheets are cash equivalents as of December 31: comprised of the following:
r 1998 1994 IN IW Carrying Fair ' Carrying Fair (Is M) g g g g Curready being recovered through roses:
(la amigions) Cussoeur receivables for Assure incomw cases $106,862 $l32,012
.narum daht $376 1385 1419 $384 Loss on reecquised debt preferred mock 11.009 l1.967 1 15 $ 13 s 15 s 12 doe decomunisseossag and
--- other than deconsaamaassoa costs 4,170 4.582 '
cash and cash Deferred ruel costs 7.040 7.195 eauiv 1--a $ 6 16 1 5 $ 5 129.001 155.756 The fair values of long-term debt and Noi cu,,sedy ,ecovered through reaes:
preferred stock reflect the present value of the cash Nuclear unit expenses 21,180 21,I80 >
outflows relating to those securities based on the Pern Unit 2 tenniandon current call price, the yield to maturity or the yield roian sis 9.900 s2:5.oo2 to call, as deemed appropriate at the end of each respective year. He yields assumed were based on 2. CHANGE IN ACCOUNTING FOR securities with similar characteristics offered by a UNCILLED REVENUES: f
- corporation with credit ratings similar to the Company's ratings. _
On January 1,1993, the Company changed its -
De fair value of investments other than cash accounting policy to recognize revenue relating to and cash equivalents represent cost (which ' metered sales which remain unbilled at the end of approximates fair value) or the present value of the. the accounting period. His change was made to cash inflows based on the yield to maturity. The more closely match the Company's revenues with yields assumed were based on financial the costs of services provided. De cumulative instruments with similar characteristics and terms.- effect to January 1,' 1993, was $5,653,000 (net of.
investments other than cash and cash equivalents $4,108,000 of income taxes).
consist primarily of decommissioning trust
, investments of approximately $4,400,000. 3. PERRY UNIT 2 TERMINATION:
l Unrealized gains and losses applicable to the
- decommissioning trust have been recognized in the in December 1993, the Company announced I
trust investment with a corresponding offset to the ]
that it would not participate in further construction reserve for depreciation. The Company has no of Perry Unit 2 and abandoned Perry Unit 2 as a sscurities held for trading purposes, :
i L
possible electric generating plant. The Company '
expects its Perry Unit 2 investment to be REGULATORY ASSETS-Re Company recoverable from its PPUC jurisdictional
- recognizes, as regulatory assets, costs which the customers based on Section 520 of the FERC and PPUC have authorized for recovery Pennsylvania Public Utility Code. Due to the from customers in future periods. Without such anticipated delay in commencement of recovery authorization, the costs would have been charged and taking into account the expected PPUC rate to income as incurred. De Company's rates treatment, the Company recognized an impairment currently exclude approximately $61,000,000 of to its Perry Unit 2 investment of $24,458,000 in 1993, reducing net income by $14,165,000.-
l i
U l
- 4. LEASES:
(c) PREFERRED STOCK SUBJECT TO The Company leases certain transmission MANDATORY REDEMI'rION-The I facilities, office space and other property and Company's 7.625% series has an annual sinking i equipment under cancelable and noncancelable fund requirement for 7,500 shares beginning on l leases. Consistent with the regulatory treatment, October 1,2002. !
the rental payments for capital and operating leases l
are charged to operating expenses on the (d) LONG-TERM DEBT-The first mortgage I Statements of Income. Such costs for the three indenture and its supplements, which secure all of l years ended December 31,1995, are summarized the Company's first mortgage bonds, serve as i as follows: direct first mortgage liens on substantially all l N5 54 N3 property and franchises, other than specifically (I" """"#
g ,,,,; excepted property, owned by the Company. I immmeiemem s 2s9 s 20s s 171 Maturing long-term debt (excluding capital leases) oiher i006 s93 912 during the next five years are $53,000,000 in C*P i '""'
" 1996, $850,000 in 1998, $487,000 in 1999 and
$r*
- Total rental paymess i.$ :.3f4 73 $23,974,000 in 2000. Amounts for 1996 include 53.363 s3.360 53.426 $3,000,000 of first mortgage bonds optionally l
redeemed in January 1996. i
'Ihe future minimum lease payments as of December 31,1995, are: The Company's obligations to repay certain pollution control revenue bonds are secured by series of first mortgage bonds and, in some cases, D Tj by subordinate liens on the related pollution tin omsands) control facilities.
1996 sI,s50 s 247
[
1999 1.179 2
209
- 6. SIIORT-TERM FINANCING ARRANGEMENTS:
2000 1,079 199 Years thermaner 12.594 3.5s The Company has lines of credit with banks U,',"j" "*o,'", '**" """*'
Net minimum lease paymess
'N "
that provide for borrowings of up to $2,000,000 15.592 under Various interest rate options. Short-term 1*=d "aion 9.2s3 borrowings may be made under these lines of
$7p*'"*, j "*' *"*
, 6.309 Credit on the Company's unsecured notes. To 12es currem portion sl7 assure the availability of these lines, the Company Noncums ponion $ 5.492 is required to pay annual commitment fees of 0.50%. These lines expire at various times during
- 5. CAPITALIZATION: 1996.
The Company also has a credit agreement (a) RETAINED EARNINGS-Under the with Edison whereby either company can borrow Company's Charter, the Company's retained funds from the other by issuing unsecured notes at earnings unrestricted for payment of cash the prevailing prime or similar interest rate. Under dividends on the Company's common stock were the terms of this agreement the maximum
$72,076,000 at December 31,1995, borrowing is limited only by the availability of funds; however, the Company's borrowing under (b) PREFERRED STOCK-The Company's this agreement is currently limited by the PPUC to 7.625% and 7.75% series of preferred stock have a total of $50,000,000. Either company can restrictions which prevent early redemption prior terminate the agreement with six months' notice.
to October 1997 and July 2003, respectively. All other preferred stock may be redeemed by the 7. COMMITMENTS, GUARANTEES AND Company in whole, or in part, with 30-60 days' CONTINGENCIES:
notice.
CONSTRUCTION PROGRAM-The Company's current forecast reflects expenditures of approximately $105,000,000 for property 14 l
additions and improvements from 1996 through GUARANTEES-De Company, together 2000, of which approximately $24,000,000 is with the other CAPCO companies, has severally applicable to 1996. Investments for additional guaranteed certain debt and lease obligations in nuclear fuel during the 1996-2000 period are connection with a coal supply contract for the estimated to be approximately $31,000,000, of Bruce Mansfield Plant. As of December 31,1995, which approximately $5,000,000 applies to 1996, the Company's share of the guarantee (which During the same periods, the Company's nuclear approximates fair market value) was $9,160,000.
fuel investments are expected to be reduced by The price under the coal supply contract which approximately $34,000,000 and $7,000,000, includes certain minimum payments, has been respectively, as the nuclear fuel is consumed. determined to be sufficient to satisfy the debt and lease obligations. The Company's total payments -
NUCLEAR INSURANCE-De Price- . .. vnder the coal supply contract amounted to Anderson Act limits the public liability relative to $9,793,000, $10,071,000 and $13,230,000 during a single incident at a nuclear pcwer plant to 1995,1994, and 1993, respectively. Under the ,
$8,920,000,000. The amount is covered by a coal supply contract, the Company's minimum I combination of private insurance and an industry payments in each year during the period 1996 retrospective rating plan. Based on its present through 1999 are approximately $4,000,000, ownership interests in Beaver Valley Unit I and the Perry Plant, the Company's maximum ENVIRONMENTAL MATTERS-Various potential assessment under the industry federal, state and local authorities regulate the retrospective rating plan (assuming the other Company with regard to air and water quality and CAPCO companies were to contribute their other environmental matters. De Company has proportionate share of any assessments under the estimated additional capital expenditures for retrospective rating plan) would be $18,000,000 environmental compliance of approximately
-per incident but not more than $2,300,000 in any $2,000,000, which is included in the construction one year for each incident. forecast under " Construction Program" for 1996 He Company is also insured as to its interest through 2000, j in Beaver Valley Unit I and the Perry Plant under The Company is in compliance with the sulfur policies issued to the operating company for each dioxide (SO2) and nitrogen oxides (NO,)
plant. Under these policies, up to $2,750,000,000 reductions required for 1995 under the Clean Air is provided for property damage and Act Amendments of 1990. SO, reductions for the decontamination and decommissioning costs. De years 1995 through 1999 are being achieved by
' Company has also obtained approximately burning lower-sulfur fuel, generating more
- $61,100,000 of insurance coverage for electricity from lower-emitting plants, and/or
- replacement power costs for its interests in Perry purchasing emission allowances. Plans for and Beaver Valley Unit 1. Under these policies, complying with the reductions required for the the Company can be assessed a maximum of year 2000 and thereafter have not been finalized, approximately $2,900,000 for incidents at any The Environmental Protection Agency is covered nuclear facility occurring during a policy conducting additional studies which could indicato year which are in excess of accumulated funds the need for additional NO, reductions from the available to the insurer for paying losses. Company's Pennsylvania facilities by the year The Company intends to maintain insurance 2003. The cost of such reductions, if required, against nuclear risks as described above so long as may be substantial. He Company continues to it is available. To the extent that replacement evaluate its compliance plan and other compliance power, property damage, decontamination, options.
decommissioning, repair and replacement costs and Legislative, administrative and judicial actions other such costs arising from a nuclear incident at will continue to change the way that the Company any of the Company's plants exceed the policy must operate in order to comply with limits of the insurance in effect with respect to that environmental laws and regulations. With respect plant, to the extent a nuclear incident is to any such changes and to the environmental determined not to be covered by the Company's matters described above, the Company expects that insurance policies, or to the extent such insurance any resulting additional capital costs which may be becomes unavailable in the future, the Company required, as well as any required increase in would remain at risk for such costs.
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operating costs, would ultimately be recovered REPORT OF INDEPENDENT PUBLIC l from its customers. ACCOUNTANTS
- 8.
SUMMARY
OF QUARTERLY To the Stockholders and Board of Directors of FINANCIAL DATA (UNAUDITED): Pennsylvania Power Company:
The following summarizes certain operating We have audited the accompanying balance results by quaner for 1995 and 1994. sheets and statements of capitalization of Pennsylvania Power Company (a Pennsylvania
% % pm ""MI'#",,30,s.Q,Dec; 5 corporation and wholly owned subsidiary of Ohio
- a. m d.j Edison Company) as of December 31,1995 and opmting Revenues s73.916 s77.622 $81.31s $81,786
- " 1994, and the related statements of income, II$Ye n o75 mm es.7s3 cs.633 retained earnings, capital stock and other paid-in opmuns incon= i6.s4: 16,78s 15.535 is. 53 capital, cash flows and taxes for each of the three
$* s.N 7. 4s 7.4N 7. years in the period ended December 31,1995.
Ne ineone s 9.406 s94:9 s s.c6 si i .469 These financial statements are the responsibility of
"""E sio ' " "~ s s.246 s s.3ts s 7.279 sio.312 de Qmpan/s managemem. N wow % b to express an opinion on these financial statements based on our audits.
Mmh 31, Ju 30, sept. 30, o.e. 31, We conducted our audits in accordance with nr.,M ou rased 1994 1994 1994 1994 generally accepted auditing standards. Those un mm. ads) standards require that we plan and perform the gt evenue $7s.35s $74.700 s77.055 571.s52 g g gg gg ggg and T m 60.172 60.997 57.437 59.691 the financial statements are free of material
$,M '"' $ 8.443$ "'8.802 $ 12. $ misstatement. An audit includes examining, on a Ne intnem 8.443 8.526 Ne neo $ 10.157 test basis, evidence supporting the amounts and s 5.777 s l i .224 s 4.iO2 disclosures in the finanClal statements. An audit siock s s.soi s4.0% sio.057 s 2.942 also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pennsylvania Power Company as of December 31,1995 and '
1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31,1995, in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, effective January 1,1993, the Company changed its method of accounting for unbilled revenues.
(Lf Arthur Andersen LLP Cleveland, Ohio February 8,1996 16
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BOARD OF DIRECTORS OFFICERS H. Peter Burg Willard R. Holland Senior Vice President and Chief Financial Officer Chairman of the Board and Chief Executive of the Company's parent, Ohio Edison Company, Officer Akron, Ohio.
Charles E. Jones Robert H. Carlson President Retired, formerly President and Chief Executive Officer of Universal-Rundle Corporation, a Jack E. Reed plumbing fixture manufacturer, New Castle, Vice President Pennsylvania.
Robert P. Wushinske Willard R. Holland Vice President, Secretary, Treasurer, and General Chairman of the Board and Chief Executive Counsel Officer of the Company, and President and Chief Executive Officer of the Company's parent, Ohio David W. McKean Edison Company, Akron, Ohio. Comptroller Charles E. Jones Randy Scilla President of the Company, New Castle, Assistant Secretary and Assistant Treasurer Pennsylvania.
Mr. Holland is president and chief executive l Joseph J. Now sk officer of the Company's parent. The principal Retired, formerly Vice President of Armco Inc., a employment of all other officers is with the l manufacturer of steel products, Pittsburgh, Company.
TRANSFER AGENT and REGISTRAR for Jack E. Reed Preferred Stock:
Vice President of the Company, New Castle, Office of the Company's parent l
Pennsylvania. Ohio Edison Company Investor Services Richard L. Werner 76 South Main Street l Chairman of the Board and President of Werner Akron, Ohio 44308-1890 l
Co., a manufacturer of aluminum extrusions, ladders and scaffolding, Greenville, Pennsylvania. PRINCIPAL OFFICES:
, 1 E. Washington Street l DIRECTOR EMERITUS P. O. Box 891 l New Castle, Pennsylvania 16103-0891 G.14e Winger (412) 652-5531 Pennsylvania Power Company is an equal l
l BOARD / MANAGEMENT CHANGES opportunity employer.
Robert H. Carlson, a director of the Company since 1983, will retire from the Board in March 1996. We greatly benefited from his guidance and expertise during his years of service.
Charles E. Jones, former Lake Erie Division manager of the Company's parent, was named president. Mr. Jones replaced H. Peter Burg, who l had been serving as interim president.
We are saddened to report the passing of l Douglas W. Tschappat, a former board member, in January 1996.
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l Pennsylvania Power Company
, 1 E. Washington Street P.O. Box 891 i New Castle, PA 16103-0891 (412) 652-5531 1995 Annual Report l
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