ML20148B649
| ML20148B649 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley, Davis Besse, Perry, 05000000 |
| Issue date: | 03/16/1988 |
| From: | Shriver J TOLEDO EDISON CO. |
| To: | Dinitz I NRC |
| References | |
| NUDOCS 8803220074 | |
| Download: ML20148B649 (23) | |
Text
- TCLEDO
%mm EDISON A Catartr f rery, CcrTay Docket Nos. 50-440 JENNIFER M. SHRVER 50-346 n._ .e %
50-412 (4'S12dS m March d. 1988 Mr. Ira Dinitz Nuclear Regulatory Commission State and Licensee Affairs Office of State Programs Washington, D.C. 205.*5 RE: Retrospective Premium Guarantee for Perry Unit No. 1, Davis-Besse Unit No. 1, and Beaver Valley Unit No. 2
Dear Mr. Dinitz:
The Tc,ledo Edison Company hereby provides the documents described below and enclosed herewith as evidence of its guarantee of ite share of the retrospective premiums which may be levied against the Perry Unit No. 1, Davis-Besse Unit No. 1, and Beaver Valley Unit No. 2 reactor licensees, in the amounts of $1,991,000, $4,862,000, and $1,991,000, respectively.
- 1) A copy of The Toledo Edison Company's certified financial statements for the calendar year 1987.
- 2) A Certificate of the Company, signed by Jennifer M. Shriver, Treasurer, stating that the Company will guarantee payment of deferred premiums by maintaining a cash reserve as permitted by 10 CFR Section 140.21(e).
At December 31, 1987, the Company had a cash reserve in the amount of
$599.1 million, in cash and short-term instruments. Total cash and short-term investments at year-end 1987 are shown on page 8 of the Company's ce;tified financial statements.
Sincerely, L -
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Enclosures uh "o
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THE TOLEDO ED: SON COMPANY EDISON PLAZA 300 MAD! SON AVENUE TOLEDO OH!O43652 8803220074 880316 PDR ADOCK 05000346
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1 CERTIFICATE OF'IHE COMPANY THE TOLED0 EDISON COMPANY Guarantee _of Payment of Deferred Premiums The Toledo Edison Company hereby certifies that it elects to
. guarantee its share of payment of deferred premiums which may be levied -
against the Perry Unit No. 1, the Davis-Besse Unit No. 1, and' Beaver Valley Unit La. 2 by maintaining a cash reserve as permitted by 10 CFR Section 140.21(e).
The Company had cash, invested in shnrt-term instruments, at December 31, 1987, in excess of $8,844,000, its share of the deferred premiums for Perry Unit No. 1, Davis-Besse Unit No. 1, and Beaver Valley Unit No. 2. The deferred premiums for each unit are $1,991,000,
$4,862,000, and $_,991,000, respectively, based on the Company's ownership shares of 19.91% of Perry Unit No. 1, 48.62% of Davis-Besse, and 19.91% of Beaver Valley Unit No. 2. The Company agrees to maintain cash reserves totaling $8,844,000 in cash and short-term instruments, for the year covered by this filing.
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_I i L Summary of Signi6 cant Acccunting Policies .
General are read. A fuel factor is added to the base rates for The Toledo Edison Company (the Company) is a cint le service. This factor is designed to recover fuel c sts from customers. It is changed semiannually wholly owned subsidiary of Centerior Energy Corpo-ration (Centerior Energy), The Company's common after a hearing before the PUCO.
stock was acquired by Centerior Energy on April 29, 19A6, as a result of a June 25,1985 affiliation agree. Fuel ment with The Cleveland Electric illuminating Com-The Company defers the differences between actual pany (Cleveland Electric) approved by the share fuel costs and estimated fuel costs currently being owners of both companies on November 26,1985.
recovered from customers. This inatches fuel ex-The Company follows the f *niform System of Ac- penses with fuel related revenues.
counts prescribed by the Federal Energy Regulatory Commission and adopted by The Public Utilities d W M b %d m M vm based on inventory usage. The cost of nuclear fuel, Commission of Ohio (PUCO).
including capitalized interest, is charged to fuel ex-Pense based on the rate of consumption. Estimated Reclaseincations future nuclear fuel disposal costs are being recovered Certain reclass 6 cations have been made to the prior through the base rates.
years' Enancial statements to conform to current year presentations. Cariying Charga and Retared Party Transactions The PUCO has authorized the Company to defer Operating expenses include those amounts for trans- g actions with affiliated companies in the ordinary (including rental pannenu) and depreciation for course of bus' ness operations.
Beaver Valley Unit 2 from its commercial in service The Company's trans2ctions with Cleveland Electric date through December 31,19AA or until that Unit's are pr unartly for interchange power, transmission line costs are included in rarer, whichever occurs Erst.
rentals and jointly. owned power plant operations and The PUCO also has authorized the Company to defer consuuction. See Note 1. current operating expenses and depreciation for Centerior service Company (Service Company), a Perry Unit I from June 1,1987 through December 22, wholly owned subsidiary of Centerior Energy, was 19R7, the date when these costs began to be recov.
formed in May 1986. The service Company provides cred in rates, and has authorized the deferral of management, Enancial, administrative, engineerine, interest and equity carrying costs, exclus!ve of those
! legal and other services to the Company and other associated with operating expenses and depreciation,
! af511sted companies at cost. The Service Company for this Unit from June 1,1987 through December I
billed the Company $21,000,000 and $6,000,000 in 31,1987 and deferral of interest cartying costs from 1987 and 1986, respectively, for such services. January 1,198A through December 31,1988 or until such interest carrying costs are included in rates, The Company is a member of the Central Area Power whichever occurs first. The PUCO determined that Coordination Group (CAPCO). Other members in.
l Perry Unit I was ccnsidered "used and useful" on clude Cleveland Electric, Duquesne Light Company May 31,1987 for regulatory purposes. For financial (Duquesne), Ohio Edison Company (Ohio Edison) reporting purposes, the amounts deferred far Perry and Pennsyhania Power Company (Pennsylvania Unit I pursuant to the PUCO accounting orders have Power).The members have constructed and operate been included in property, plant and equipment
,l generation and transmission facilities for the use of through the November 18,1987 commercial in ser-the CAPCO companies.
vice date. Subsequent to that date, amounts deferred have been recorded as deferred charges. The PUCO did not authorize deferral of any equiry carrying Customers are billed on a me ithly egle basis for cuts after November 17,1987 for Beavet Valley Unit 2 l their energy consumption, based on rate schedules or after December 31,1987 for Perry Lb 1. See Note authorized by the PUCO. These revenues are re- 7 for a discussion of regulatory matters relating to corded in the accounting period during which meters the Compariv's investments in these Units.
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'ammuse waysus resetwo 3,ses. wwvus an i scut m a>44 nu na0rrr in-la-.no essi strer siseuast57WUS57Vuees tsT.4 Far tsassceafoects&co sr$AfeG*f00009% Fat e 100 0000 57VG j ses t Fee het II40Detenta. heet had 80. vb.: sras .M: LOGO P9N: M .M.M.00 SIN: 21 touco crwr stevice a0==e or cuwwm uw smasse i l' Depreciation and Amortization - oeferred income taxes have not been provided amounted to 8151.000,000. Based on PUCO and Ohio The cost of property, plant and equipment, except for Supreme Court decisions, such taxes can be recov, the nuclear generating units,is depreciated crer cred in future revenues.
their estimated u.=eful lives on a straight line basis.
Annual straight-line depr aciation provisions ex- For certain property, the Company rerelved invest-pressed as a percent of average depreciable utility . ment tu credits which have been acco anted for as plant in service were 3.6% in 1987 and 3.5% in 1986 deferred credits. Tax credits utilized are reflected as -
and 1985. Depreciation expense for the nuclear units reductions to tax expertse over the life c.f the related is inmed on the units of production method. This property. See Note 8 for federal income tu details includes provisions for future decommissioning costs. and a discussion of a new accoundng standard for These provisions are estimated at $59,000,000 in income taxes.
1986 do!!ars for the Davis Desse Nuclear Power Sta-tion (Davis Desse) and $28,000,000 each for Peny Intum Charges Unit I and Deaver Valley Unk 2 in 1987 dollars. There are no restrictions on the use of the amounts cut. Interest on long-term debt reported on the statement rently being recovered from customers through rates 4 Results of Operations includes interest on nuclear for decommissioning of Davis Desse and Perry Unit fuel obligations for fuel in the reactor. Interest on
- 1. The sale and leaseback agreement for Deaver Valley nuclear fuel obligations for fuel under construction b Unit 2 requires the external funding of the leasehold capitalized. See Note 5.
interests' share of the Unit's decommissioning costs ~
starting by September 1992. See Note 2. Property, Plant and Equiprnent Costs associated with four CAPCO nuclear generating Property, plant and equipment are stated at original units cancelled in 1980 are being amortized and cost. Included in the cost of construction are items recovered in rates through 1991 in accordance with such as related pa) Toll taxes, pensions, fringe bene.
PUCO rate orders. The * 'O does not allow the fits, management and general overheads and an al.
Company to earn a e- a the unamortized bal. Iowance for funds . used during construction ance. A new accourw andard will require the (AFUDC). AFUDC represents th* estimated compos.
discounting of this balans in 198& This discounting ite debt and equity cost of funds used to finance will not materially i npact the Company's financial construction. This aoncash allowance is credited :o statements. income, except for AFUDC for Perry Unit ? SinceJuiv 1985 Perry Unit 2 AFUDC had been credited to a Fedual Income Taxes deferred income account. Efective January 1,1988, the practice of accruing AFUDC on Perry Unit 2 was The Company has deferred the federal income taxes discontinued. See Note 3. The AFUD(., rates, net of for the d:Kerences between straight-line depreciation the income tax effect, were 10.97% in 1987,10.71%
and tax depreciation for property additions since in 1986 and 10.50% in 1985 1973. In addition, the tax effects of certain other timing diferences have been deferred.,This treatment Maintenance and repairs are cfwged to expense as is consistent with the methods used for rate-making incurred. Certain maintenance and repair expenses purposes. The Company has also deferred the tax for Peny Unit 1 and Beaver Valley Unit 2 have been efect of the net gain and loss rela:ing to the sale and deferred pursuant to the PUCO accounting orders leaseback transactions. See Ncte 2. The remaining discussed above. The cost of replacing plant and timing diferences are not deferred. They are recog- equipment is charged to the utility plant accounts.
nized for book purposes, and in rates, in the year they The cost of property retired plus removal costs, aftet afect taxes payable. At December 31,1987, the deducting any salvage value, is charged to the accu-cumulative income tax timing diference for which mutated provision for depreciation.
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.h. nent's Financial Analysis Results of Operstions ATUDC and deferred carrving charges have repre.
sented an increasing proportion of earnings - 145%
Operating revenues incteved by 5.2% in 1987, in 1987,150% in 1986 and 105% in 1985. At the same following a decrease of 0/as in 1986 and an increase time, cash Bows have been impacted by the cost of of 7.9% in 1985. The f31,000,000 increase in electric additional debt and equity 6nancing for the comple.
revenses in 1987 from 1986 resulted from a tion of the two nuclear units. AFUDC for the Beaver
$ 29,000,000 increase in base rates and other revenues Valley Unit 2 investment was discontinued on the and a $15,000,000 increase from kilowatt-hout sales portion sold in the sale and leaseback transaction on growth offset by a $13,000,000 decrease in fuel cost Septetc.ber 30,1987 and on the remaining portion recovery revenues. ' when this Unit became operational in November 1987. AFUDC for the Perry Unit 1 investment was Kilowatt hout sales increased by 3.9% la 1987 follow' discontinued on January 1,1988 pursuant to a PUCO ing modest gains in 1986 and 1985. sales to ladus.
accounting order. Subsequent to the November 1987 trial customers increased by 3.1% in 1987 from the and January 1988 dates, interest carr%ng charget on level in 1986. Industrial sales growth was broad- out investments in these two Units are being credited based, particularly in the metal fabricating sector. to incoc:e at a rate lower than the full AFUDC rate.
Residential and comniercial sales increased 1.9% and Consequently, carnings are expected to be lower in 2.5%, respectively, in 1987 from 1986 levels,73rgely 1988, although the quality of earnings and cash Bow because of a substantially utmer-than normal sum. are expected to improve. Deferral of interest cartying mer in 1987. Lower fuel revenues in 1987 resulted charges will be discontinued as the investments are from increased use of our nuclear units. recognaed in rate base.
Operating expenses increased by 2.8% in 1987, 2.7%
EKect dInh in 1986 and 6.3% in 1985. The inc* eases m operating expenses in 1985 and 1986 were derived partly from inflation continues to affect our business. Over the the effects of an 18 month outage at Davis.Besse.This three year period 19851987, our average electric outage r' esulted in the use of more coal and pur. rates have increased more than the Consumer Price chased power at unit prices which exceeded the urJt Indet in this period, increases N the cost of labor, price of nuclear fuel generation. Other operation and materials and services used in operations were moder.
maintenance expenses in 1985 and 1986 increased sted by a downward trend in the cost of coal.
principally for the refurbishment of Davis.Besse. In The effe:t ofinflation on the cost of much of our new 1987, fuel and purchased powe. e pense dropped as facilities has yet to be recognized in the rate making Davis-Desse came back on line and Ferry Unit 1 and process. Cenerally, we have to raise new capital to Beaver Valley Unit 2 went into service. The reduc.
meet growth needs at Irdated costs of consuuction tior in fuel and purchased powet expense, lower and to replace worn.out iterns at higher replacement federal income taxes and sanngs from cost reduction costs. If rate adjustments fall to compensate for the programs were about offset by sale and leaseback cost of new capital, an erosion of our return on equiry rental expense and higher units-of production depre' will occur. As a result, there will be a conunuing need cistion at DaeDesse. for rate increases.
Earnings available for common stxk decreased by We continue to seek adequate and timely rate in.
7.0% in 1987 following a decrease of 0.4% in 1986 creases and a regulatory environment whMh is respon-and an increase of 11.5% in 1985 sive to the effect of in8ation on our investment.
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.J 6 1 Results of Operadons The Toledo Edison Ccenpany For the vests ended December 31.
1987 1986 1985 (thousands et dnnAm Operating Revenues Electric.,............................................... $625,222 $594.421 $ 589.172 Steam heatin g and gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
5.761 625,222 594,421 594.933 Operating Expensen ,
. ruel and purchased power .. .... .. ........ . . .. 140,176 '158.763 158,990 Other operation and maintenance . . . . . . . . . . . . . . . . . . . . 223.307 167.319 141.608 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 65.503 37.832 44.338 Taxes, other than federal income taxes . ...... . .... ... . 60,617 . 52,440 48.698 Perry Unit I and Deaver Valley Unit 2 deferred operating expenses .. .. . .. .. ....... . ... ..... . . (39,797) - -
Federal income taxes . . .... ........... . . ..... ..... 30.428 50.763 61,412 480,234 467,117 455.046
-Operating /ncome . . . . . . . . . . . . . . .. .. ... .... .... . . 141.988 127.304 139.887 Nonoperating Income Allewance for equity funds used during construction . .. . 112.529 119.954 97.725 Other income and deductions, ret.. . ... .. ... .... . (16.904) (1.627) 10.669 Perry Unit I and Deaver Valley Unit 2 carrying charges .. . ... . 14,693 - -
Federal income taxes - credit . . . . . . . . .... . . .. . j2.726 52.029 38.167 I13.044 170.356 146.561 income Before Interest Chstges. . . . ....... ..... . ...... . 296%2 297,660 2R6,44R Interest Charges Long term debt. . .. ... .. ... . .. . . . . 179.565 168.275 150.021 Short term debt . .. . .. ...... .. .. . . . .. .. 3,297 3.675 4.518 Allowance for borrowed funds used during construction.... (50,001) 61,207) (41.604) 132.861 120,743 112.935 Net Income . . . .. .......... . . 165.171 176.917 173.513 Preferred dividend requirements. . . . . .... .. . 42.749 45.243 41.362 Earnings Aratlablefor Common Stocir . . ... , ,, . $ 122,422 $131.674 $132.151 The accompanying notes and summary of signi6 cant accounting policies are an integral part of this statement.
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.. anagement's Financial Analysis Capital Resources and ljq uidity In addition to the construction program funding re-quirements (as discussed in Note 3), we will require We carry on a continuous program of constructing $415,000,000 for the retirement of debt and pre-new facilities and modifying existing facilities to meet ferred stock during the 1988 1992 penod. See Note anticipated demand for electric service and to com- 11 fx further information concerning the nest mort-ply with governmental regulations. The capital re. gage bonds and the preferred and preference stock of quirements for this construction program over the the Company. Our available short terrs bortcuing d.ree year period 1985 1987 totaled approximately arrangemms are explaW in Note 12.
$1,200,000,000, excluding nuclear fuel. This amount includes AFUDC.The capital required to 6 nance our - Our ability to meet out 6nancing needs depends upon
. construction prognm is obtained from funds ;ener. obtaining sufficient and timely rate increases and sted internally as well as from external sourcer, upon availability of capital. See Note 7 for discussion j rate increase r; quests. The availability of capital to About 70% of the construction prognm capital re- mut our extual Snancing needs depends upon quirements for 1985 and 1986 was nised through such factors as Snancial market conditions, earnings, bank borrowings, sales of secunties and equity contri, out ability to pay dividends, the size of our construc-butions from the parent company. In 1987,we issued ti n pr gram and our credit ratings. In 1985, rating
' $250,000,000 of unsecured notes and debentures, agencies I wered their ratings on certain securities
$ 50,000,000 of preferred stock and $41,000,000 of o the Company. This made our cost of capital more Erst mortgage bonds. In September 1987, we sold and CIPensive. In April 1986, standard and Poor's Corpo-leased back certain interests in three generating units nd nta ur Erst m ngage nds ad prded as discussed in Note 2. A substantial portion of the st ek ntings to DDD- and DD+, respectively.Those
. net proceeds from these transactions has been used to niings have rnt changed through 1987. Standard and pay portions of short-term debt incurred to 6 nance Poor's rates our unsecured notes DD+. Moody's In-the construction program, to redeem outstanding ce nto our bonds Baa3, unsecured voton securities, to pay oiar construction program costs and notes Dal and preferred stock Da2.
for general corporate purposes. The remainder of the funds from the sale and leaseback transactions sill be for discussion of the cash Row impact of the Tax used for our construction program, mandatory and Reform Act of 1986, see Note 8.
optional redemption requirements and general cor-potate purposes.
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...I & L Retained Earnings The Toledo Edison Company For the vears ended December 31.
'1987 1986 19R5 towanandi et Mtan)
/falance at fieginning of rear. . . . . . . . . . . . . ................ ....... $ 305.130 $ 276.588. $ 221.486 Additions Net income . . . . . . . . .................................... .. .. 165.171 176,917 173,513 Deductions Dividends declared:
Common stock ... .......... ... ... ........... ... . .. ... (111.500) (102.918) (76.566)
Preferred stxk . . . . . . . . . . . . . . ... . ...... . ....... .. ... (40,212) (45,457) (41.845)
- Preferred stock redemption expenses . . . . . . . . . . . . . ... . . .. (21,368) - -
Earnings Rett veste d During the Year . . . . . . . . . . . . . . . . . . . . . . . . (7.909) 28,542 55,102
- fialance at End of Tear. . ..... ... ..... ................ ... . $ 297.221 $ 305.130 $ 276.5AA l Source of Funds Invesced in Plant. Facilities and Special Deposit For the years ended December 31.
_,1,987 1986 19R5
. tthouunds or annani Provided frorn Internal Sources Net income . . . . . . . . . . . . . . . . ... . .. . .. . . . $ 165,171 $ 176,917 $ 173.513 Principal Non. Cash items:
Depreciation and amortization, net . .. . . . . ... .... 57.628 37.832 44.338 Deferred federal income taxes. .... ... . .. . .. (143,036) 32.037 12.801 Investment tax credits, net . . . . . . . . . . ...... .. ,. .. 79.332 (21.558) 6.512 Allowance for equity funds used during construction . .. .. .. . (l12.529) (119,954) (97.725)
Funds Provided from Operations . ... . .... .... .. 46,566 105.274 139,439 Dividends paid . . . . . . . . . . . . . . . . . . . . . .. ... ........ . .. . (155.515) - (148.382) (139,072)
Net proceeds from sale and leaseback transactions . . . . . . . . . . . . . . . .. 1,075.988 - -
Increase in reserve for Perry Unit 2 allowance for funds used during construction . . . . . . . .............. .. . .... .. ... . ..... 32.158 27,079 12.460 Net change in working capital and other accounts .. .. . . ... .. 4.195 22.608 3.905 Allowance for equity funds used during construction . . .. . ..... I12.529 119,954 97.?25 '
Funds Provided from Internal Sources... . .. .... . , l.115.921 126,533 114,457 Provided frorn External Sources Sale of Securities:
Common stock . . . . .... . ... . . .. .. . - 1.333 80.8A5 Preferred stock . . . . . . . .. .. .... ...... . 50.000 30.000 30.000 First mortgage bonds . . . . . . . . ...... . .. . .. 41.000 100.000 96.800 Equiry contnbutions from parent . . .. .. .. . . . 30,000 91.059 -
Net change in other debt . . . . . . . . . . . ... ........ ... 179,745 93.535 147.346 Net change in pollution control construction funds .. . . . . .. 5.448 25.403 (10.512)
Net increase (decrease) in short-term debt . . . . . . . . . . . . .. 46,700 (7,700) 1,000 Net (increase) decrease in temporary cash investments. .. ... (520.901) 41,492 (31.599)
Redemption of bonds and preferred stock . . . . . . . . . . . . . .... . (459.708) (53.031) (52.823)
(14.215) 42,047 33,4 A6 Net (decrease) increase in other noncurrent liabilities . . . . . ..
Funds Provided from External Sources .. ,, . . . . . (64193J) 364.138 294.583 Tota / Sources o/Fu nds. . . . .. .. . ... . . , . . .. . $ 473,990 $ 490.671 $ 409,040 invested in Construction Expe nditures . . . . . . . . . . . ..... $ 366,797 $ 449,432 $ 378,045 Deposits in Trust, sale and leasebxk proceeds . . . .. 109,976 - -
(Decrease) Increase in Nuclear Fuel Inventory . .
(2,783) 41,239 30.995 TotalInvested in Pltrnt, Facilines and Special Deposits. . .. $ 473,990 $ 490.671 $ 409.040 The accompanying notes and summary of signi6 cant accounting policies are an integral part of these statements.
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,) i L Balar.ce $heet The Tokdo Edison Company December 31, 1987 19n6 Assees (rhousands of dollan) .
Prpperry, Plant and Equfpment Utility plant in service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . .... 82,562,093 $1,442.812 -
Less: accumulated depreciation and amortization . . . . 419,149 415,745 2,142,944 1,027.067 Construction work M progress .. . ... . . . . .. . . . 67.704 1.870,649 Perry Unit 2. ... ... . . .... .. ... . .. . 306,570 275,055 2.517.218 3.172.771 Nuclear fuel, net of amortiration . . . . . . . . . . . . . . . . . .. ... 265.046 267,M29 Other property, less accumulated depreciation .. .. . .... .. 2,023 1,193 2,784,287 3,441,793 Special Deposta Pollution control construction funds, unexpended . . . .. . 883 6,331 Deposits in trust, sale and leaseback proceeds . . ,, 109,976 -
g,,, !!0,859 6.331 i
Cash and temporary cash investments ..... ... . . . ... 399,117 7M.974
( Arnounts due from customers and others, net . .. . 62.866 50,72 M Amounts due from afliliates . .. .. .. .. .. .. . . 15.840 11.539 Materials and supplies, at average crut . .. .. . 21.272 I I.479 Fossil fuel inventory, at average cost . .. . .. ... .. 23.245 21.1M2 Taxes applicable to succeeding years.... . . .. . . . 61,614 4 4.M99 Other . . . .. . . . .. ........ . . . . 14,699 2,536 p,f,y,j g 798,65) 221,337 Unamortired costs of terminated projects... .. ,, . 17.223 22,408 Accumulated deferred federal income taxes.. . . . 218,030 11.223 Unamortired bs. Beaver Valley Unit 2 sale . .. .. . 134.475 -
Unamorti7ed W9 on reacquired debt . . . . . . . . . . . . . . . 19,784 -
Carrying charges and nuclear operaung expenses . . 40.072 -
Other . .. . . . . . . 87,027 66,436 516,611 100,067 Total Assets . .. .. .. , ,, $4.210,410 83.76912M Capitalization and Ilabilities l Cmtralization Common shares. 85 par value 60.000.000authorired; 39.134.000 outstanding in 1987 and 1986. . . . $ 195487 5 195.6M7 ls Premium on capital stock . . . . . . 482,770 4 M2.7M7 Other paid-in capital. . . .. . . 121.059 91.059 itetained earnings . . . . . 297.221 305,1.m Common stock equity.. .
I 096.737 1,074.663 Preferred stock Tith mandsory redemption provisions. . . . 73,340 14 M.'97 l Tithout mandatory redemption provisions. .. . . 240,000 260.000 Long term debt. . .. . . . 1,400,292 1,4 Mo.947 l 2.810,369 2.964,407 Orbec Noncurrent 2dahttities, primarily nuclear fuel lease and trust obligations . 260,429 274,644 Current liabritties Current portion of long term debt and preferred stock. . 36.932 2M.39M Current portion af lease obliganons. 30,791 17.?10 Notes pmble to banks and others . -
15.000 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 79.970 62.4 M0
! Accounts and notes psisbie to aff.liates . . 84.269 7.767 l
Accrued taxes . . . . . . . 9L.264 46.6M6 Accrued interest . . . . 43,675 42,955 Dividends declared . . . . . . . . . . . 7,497 11.300 Accrued payroll and vacations . .. 8.116 M.929 Other . . 17,000 11.51 M l Deferred Crediu #'# I 0 l
Unamortired investment tax credits . . . . . . . . 101,566 3 3.M90 l
Accumulated deferred federal income taxes. . . . . . . . . . . . . - . . . .
237.103 IM9.4 54 l Iteserve for Perry Unit 2 alltmunce for funds used during construction . 71.697 39,539 Unamortired gain. Bruce Mansf eld Plant sale. 275,618 -
l Other . .
52y4 14.M 51 738.098 27?.734 Total Capitalization and Liabilities . 84.210,410 8 5.769.5 2 M l
The accompanying notes and summary of sign 16 cant accounting policies are an integral part of this statement.
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Statement of Cumulative PreferredThe Toledo Edison Company and Preference Stock 1987 Shares Current December 31, Outstanding Call Price 1987 1986 (thaumanch af dn4Lans
$100 ur nlue preferred. 3.000,t'00 shares authorized: $25 par value preferred, 12,(,w.000 shares authorized; and $25 par value preference 5.000.000 shares authe *ied - none outstanding Subkes 'o mandatory redemption (less current maturttles):
$100 pat # 11.00 . . .. ....... . . 50,000 $103.50 $ 5.000 $ 5,499
- v. 5 7 5 . . . . . . . . . . . . . . ... 183,400 105.43 18,340 20.005 13.2 5 . . . . . . . . . . . . . . . . - - -
11.268 12.6 5 . . . . . . . ... . - - -
18.225 14.86 . . . . . ... .. . - - -
28.800 25 par 3.7 5 . . . . . . . . . . . . . . - - -
30.000 3.72 .... ..... .... - - - 35,000 2.81 ..... . . ...... 2,000,000 27.81 50.000 -
$ 73.340 $ 14 A,797 Not subject to mandatory redemption:
100 par 4.2 5 . . . . . . . . . .. 160.000 104.625 16.000 16,000 4 .56 . . . . . . . . . . . . . 50,000 101.00 5.000 5,000 4.25............... ., 100,000 102.00 10,000 10,000 8.32 .... . .. . . 100.000 103.54 10,000 10,000 7.76 . . . . . . . . . . 150.000 103.377 15.000 15.000 7.80................ 150,000 102.60 15,000 15,000 10.00 ........... .. .. 190,000 101.00 19,000 19,000 25 par 2.21 .. .. .. ... . .. 1,000,000 25.90 25,000 25.000 2.3 65 . . . . . . . . . . .. 1,400,000 28.45 35.000 35,000 4.28 .. .. . .. . ... - -. - 20,000
- 3. 4 7 . . . . . . . . . . . . . ... 1,200.000 30.97 30,000 30.000 Series A Adjustable . ... . 1.200,000 - 30,000 30.000 Series B Adjustable . ... 1,200.000 -
30.000 30.000
$ 260,nno a$ 240.000, The accompanying notes and summary of significant accounting policies are an integral part of this statement.
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.. ons so the Financial Staternents (1) Property Owned with Other IJet11 tin and Intmore The Company ons, as a tenant in coremon with other utilities and those investors who are owner. participsnu irt vstfous sale and toueback trenssetions (lessore),certain generating unlu u listed below. Each owner owns an undivided share in the entire unit. Each owner has the right to a percentage of the generating espsbility of each unit equal to lu ownenhlp share. Each utility owner is obilgsted to pay for only its respective share of the construction and opersting costs. Each lessee la obilgated to pay for the related lessor's share of those cosu. The Company's share of the operating expenses is included in the Resulu of Operations. Propeny, plant and equipment at December 31.1987 includes the following facilities owned by the Company u a tenant in cornmon with other utilities and lessors,
- In. Plant Construction serWee Osmership ownership Power in work Qecerstinst Unit Oste share Me rnwstts source Service in Prosress Ohoweds7 ocus. )
In Servicei D a vis B e s s e . . . . . . . . . . . . . . . . . . . . 1977 48.62 % 421 Nuclest i 505.657 8 45.563 Perry Unit 1 A Cornmon Pacilltles..................... 1987 19.91 240 Nucles 1,097.02) -
Beaver Valley Unit 2 A Common Fac!!:tles (Note 2)... 1987 1.65 14 Nucles: 155.204 154 Constniction Suspended (Note 3):
F erry Unit 2 . . . . . . . . . . . . . . . . . . . . Uncertain 19,91 240 Nucleu _ - 506,570 I t_ 75 5,884 R$19.6J (2) 11ttllry plan Sale and Leuebsek Trsanctions The Cornpany is amorti Ing the applicable deferred stln and less usectated with these sales of utility On September 30,1987. Cleveland Electric sold es. plant over the period of the leue terms.
sentially sll of its 470.megantt undinded tenant In.
common Interests in Units 1,2 and 3 of the cost. As co.insee with Cleveland Electric the Company is slso obilgated for Cleveland Electric's leue psy.
Bred Bruce Mansneld Flsnt (Mansteld Fitnt). Clevt.
Isad Electric had owned 6.5%,08.6% and 24.47%. ments. If Cleveland Electric is unable to make lu respectively,of those three unlu.The sale price wu payments under the Mans 5 eld Fisnt lesses, the Com.
1625.500,000. On the nme day. the purchuers (eued psny would be obligated to make such payments.
those interesu back to Cleveland Electric (with the The future minimurn lesse paymenu required under Company u co lesso) for a term of about 29% these operering lenses s. December St.1987 are yetts. summarleed u followsi Also on September 50,1987, the Corepany sold essen* For the Cle eland tistly all of its 294.merratt undivided tenant.in. Yest Company Electric
~~
common Interesu in Units 2 and 3 of the Mans 8 eld Ohomne el miani Plant.The Company had owned 17.3% and 19.91%, 19 8 8 . . . . . . . . . . . . . . . . I 88.000 0 34.000 respectinly, of there two units. The sale price wu 198p................ 111.000 71.000 1598.100.000. On the same day, the Company also 1990 ' ' " ' " ' ' ' " 111,000 71.000 sold about 18.26% of Besver Va!!ey Unit 2.The Com. h [ ","',"," ff pany had owned a 19.91% (165 messwatts) undi. Later Years . . . . . . . . . . 5,052.000 1.968.000 dded tenant in. common interest in Besver Valley Total Future Minimum Unit 2 and has retained about 1,65% interest la the Leue Faymenu .... g)~89.000 82.286.000 Unit. The sale price was 1715,000,000. On the same day, the purchsters lesaid these intereau in th'e two No payments were made on beh If of Cleveland Elec.
p'. ants back to the Company (with Cleveland Electric tric in 1987. As discussed in Note 7. the Compsny is u co lente) for terms of about 29% yests. constdering proposing the transfer cf lu Desver Vol.
10
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use su6ee mittssinstelsat.4 re stalsta at N.ctas ts t.:n at e.en ean s to c. ice uc6 sW ses e a e ree aca9 s m e tas 390. tu A.: Jodl LO4680 PCH 010 00.o0.o0 SlHi M totteo cte semes swho er ctestiate mu6 1.sisa
,,,,1 s ley Unit 2 lessed capacity entitlement to Cleveland implemented without the spreoval of each of the Electric. The related future minimum lease psy. CAPCO comparlen.
nems asso ed with Desver Valley Unit 2 aggregate if Perry Unit 219 cancelled. the Company will seek suthorir.stion from the PUCO en recover itt Invest.
The amount recorded by the Company si rental ex. ment in the Unit in rates. We have no 2<5urance that pense for the &lsnslield Plant testes was $12,600,000 recovery would be allowed. In the ewnt of such n in 19R7. Rental costs for the Desver Valley Unit 2 cancellation. lf and when it were to appear probsble leases of $18.500,000 in 19R7 were recorded by the that recovery would not be allowed. the Company's Company in a deferred charge account. Investment in Perry Unit 2 (including ATUDCh plut sny cancellation costs,lest any equipment usable The Company and Cleveland Electric are responsible elsewhere and lets any resulting tax saving, would under the lestes for paying all taxes. Insurance pre. have to be written off. Te est!mste that such a write.
mlums, operating and maintenance cetts and all off, based on the Company's investment in thIt Unit other slmlist costs for all interests in the Units sold as of December $1,1987, would have been shout snd leased back. The Company and Cleveland Elec. $172,000,000, tric may Incur addulonal costs in connection with In April 19R6. Duquesne announced that it no longer capital improvements to the Untre. The owners fles.
needs the capacity of Perry Unit 2. Duysenne is sors) may elect to make additional equity investments continuing to pay for its 1)J4% ownership share of with respect to the cost of any captist improvements maintaining Perry Unit 2 while construction is sus.
on terms to be agreed upon. The Company and pended. Duquesne hst advt (ed the Pennsy(vsnis Pub.
Cleveland Electric h.ne options to buy the Interests lic Utilities Commistion f P2PUC) that it wid not back at the end of the leases for the fair market value agree to resareption of construction of Perry Unit 2.
at that time or to renew the lesset for a rninimum of we do not know what strangementt might be made two years. Additionsileste provisions provide other between Duquesne and the other CAFCO comps-purchase options slons with conditions for mandstory termination of the lesses (and possible repurchase of nies if they want to complete Perry Unit 2 and Duquesne does not change its position.
the lessehold Interests) for obsolescence and events of default.
(4) Nuclest Operations and Contingencies O) Construction sad Contingencles Dar(Mme Nuclear Porter Xrniton Construction Program in 19R7. the PUCO ordered a refund of certain te.
placement fuel and purchased power costs incurred The estlmsted cost of the Company's construction and collected fro n customers daring an outJge al program for the 19RR 1992 period ls $575.000.000 Davis.Deste in 19A5 sad 1986, plot interent. The including AP"D0 and excluding nuclear fuel. Should refund requirement wat based on the PtlCO's conclu.
more stringent environmental reguistions be slon that the outage was a result of imprudence in the adopted.psnicularly in the sres of sctd rain pollution management and maintenance of DavirDesse by the control conttruction program costs for this period Company. The amount of the refund it approximately are not expected to increase substantially. However, #3).595.000. The refund is to be made to customers such costs could increue substantially thereafter. No over a period of IR months beginning in February amount is included for Perry Urdt 2 because its 19AA through cperarlon of the fuel cost rate adjust.
construction has been suspended. ment. The company has sppealed the order to the
. Ohio supreme Court. The refund will reduce esth Perry Unir J llow in 1988 and 1999 up to the time of any reversal Per'I Unit 2. exclusive of the facilities to be used in to that which othrerwise would be required The common with Perry Unit 1. is about 44% complete.
refund will not adversely affect future results of opers.
Including its share of the common faci!!tles,it is tions 23 sdequate reservet have been provided.
sbout $A% complete. Construction of Perry Unit 2 was suspended in 1985 by the CAPCO companies pend. In January 1986, the Nuclest Regulsenry Commission ing future consideration of several siternativet which (NRC) undenook a review of the design and opers include resumption of full construction with a re. tion of nuclear reactori designed by Dsbcock a vised estimated cost and completion date. mothball- Wilecx (Daws at neveral plante. Including Davio ing or cancellation.None of thete alternatives may be Deste. The NRC staff has concluded that the DAT.
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designed reactors can continue to operate safely The maximum amount that the Company can Enance while its review is being done. The outcome of the under one set of nuclear fuel leasing arrangements is NRC's review and its impact on the Company cannot $ 215,000,000. It consists of a long term lease that be predicted. allows the lenders to cancel their Enancing commit-ments after three years' nodce. The Company's share in December 1986, the State of Ohio and an organiza-of the maximum amount available under another tion each separately requested the United states arrangement, which includes leases and a trust com.
Court of Appeals for the sixth Circuit to prevent the bined, is $83.000,000. This arrangement is subject to operation of Davis Desse until the NRC has reviewed cancellation by the lender after one year's notice.
the offsite emergency plan for Davis Besse. That Court has not yet ruled on these requests but has ruled in The leue and borrowing rates are based on bank the Company's favor in a similar proceeding involv. prime and commercial paper rates. The amounts capi-
, ing Perry Unit 1. talized included interest charges incurred by the yng g lessors amounung to $17,000,000 in 1987 and 1986 and $16,000,000 in 1985. Under the leases, rental Perry Unit 1 was pbced in commercial operation on payments are made as the fuel is burned in a reactor.
November 18,1987. Although the Unit is in commer- The estimated future lease amortization payments cial operation, petitions are pending before various based on projected burn are $32,000,000 in 1988, ludelal and regulatory bodies to halt the operation of $ 36,000,000 in 1989, $35,000,000 in 1990, Perry Unit 1 or modify or terminate the operating $41,000,000 in 1991 and $48,000,000 in 1992. As license.We believe these petitions are unlikely to - these payments are made, the amount of credit availa-succeed. See Note 7 for a discussion of regulatory ble to the lessors is renewed and becomes available matters relating to the Company's invesment in the to Enance additional nuclear fuel.
j Unit.
I At December 31,1987, a total of $273,000,000 is Bearer Va#ey Unit 2 committed under the leases and the trust for nuclear material and costs of processing it into fuel for the Beaver Valley Unit 2 was placed in commercial opera.
tion on November 17,1987. See Note 7 for a discus- Company. This includes nuclear fuel in the Davis-sion of regulatory matters reladng to the Company's Besse, Perry Unit 1 and Beaver Valley Unit 2 reactors with remaining payments of $25,000,000, investment in the Unit.
$34.000,000 and $26,000,000, respectively, as of 1
Otber Nuclear Risks December 31,1987.
The Company's interests in four nuclear units (Davis-Desse, Perry Units 1 and 2 and Beaver Valley Unit 2) (6) Nuclear Insurance
(
l are also impacted by activities or events beyond the The Price. Anderson Act (Act) limits the liability of
' Company's control. Operating nuclear generating the oimers of a nuclear power plant. This limit is uruts have experienced unplanned outages or exten.
sions of scheduled outages because of equipment covered by private insurance amounting to
$160,000,000 and an amount provided by an industry problems or new regulatory requirements. A maior accident at a nuclear facility anywhere in the world assessment plan. Under the plan, if any unit in the l
United states has an incident with losses in excess of I
could cause the NRC to limit or prohibit the opera.
tion, construction os licensing of a nuclear unit. pnnte insurance, up to $5,000M @ut not more than $10,000,000 per unit per year in the event of more than one incident) must be contribuwd for each (5) Nuclear Fuel licensed nuclear unit in the country by the licensees l
The Company has lease and trust arrangements to of each unit to cover liabilities arising out of the 6 nance nuclear material and fuel. This nuclear fuel incident. Based on the Company's present ownership inventory should provide an adequate supply lasting and leasehold interests in its three operat%g nuclear into the mid 1990s. Substantial additional nuclear units, the Company's rnaximum potendal assess-material must be obtained in the future to supply fuel ment under these provisions (assuming the other for the remaining useful lives of Davis-Desse, Perry CAPCO companies were to contribute their propor-Urut 1 and Beaver Valley Unit 2. More nuclear mate- tionate share of any assessment) would be $4,422,000 rial and fuel would be required if Perry Unit 2 is per incident but not more than $8A44,000 per calen-completed. dar year.
12
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h Certain provisions of the Act expired on August 1 In December 1987, the PUCO granted the Company 1987. However, until new legislation is adopted. the an increase in electric rates of $4,000.000 annually. In provisions of the Act relating to the industry assess- addition, the order made permanent the FebruaryL ment plan and the limitation of liability will con. 1985 and May 1987 emergency rate increases. The ~
tinue to apply. We cannot predict what action rate increase includes a sign 16 cant portion of the Congress or the President might ultimately take re - requested annualized operating costs for Perry Unit 1.
,g garding pending legislation oc the Act. If the Act is The rate increue also re6ects inclusion of a portion , ,
modi 6ed to increase or eliminate the liability limit, of Perry Unit I cost as construction work in progress the Company's potential assessment in the event of a in rate base. The new rates went into efect in late -
nuclear incident could be signi6cantly increased. . December 1987.
The Company has insurance coverage for dar.uge to in connection with the February 19A5 rate order, the -
its property at Davis Desse, Perry and Beaver Valley Company was ordered to record a portion of its (including leased fuel and clean-up costs) in the . ' AFUDC accruals to a reserve account (rather than to i amount of $1,525.000.000 for each site. Damage to income) in an amoure sudicient to ofset the in. ,
the Company's properry could exceed the insurance . crease in after-tax earnings resulting from the cate coverage by a substantial amount and thereby have a increase. At December 31,1987, this AFUDC deferral -
material adverse efect on the Company's Snancial amounted to $38.000,000. It is expected that when condition and results of operations in the periods Perry Unit 1 is considered for full inclusion in the
- following the loss. If the property damage reserves of U,ompany's rate base, the PUCO will either reduce one of the insurers are inadequate to cover claims rate base by the amount of the reserve or include such arising out of an accident at any nuclear site in the amount in rate base. If the latter option were chosen, Unhef States covered by that insurer, the Company is future revenues would be reduced by the interim obligated to pay retrospective premiums up to revenues collected, including carrying charges, over a '
$6,530,000 for the current policy year. Period equal to the period the interim rates were in efect.
Insurance coverage is also held for the cost of any rep!acement power purchased after the occurrence of The OSice of Consumers' Counsel (OCC) requested certain types of accidents at the Company's nuclear a rehearing objecting to inclusion of Perry Unit 1 units. The amount of the coverage is limited to 90% operating costs in the rate decision. The OCC also 6ted a second request for rehearing in the rate case on of the estimated diference in replacement power other matters. The Company and other iruerested
- costs per week during the 52-week period starting 26 i parties also bave requested rehearings. The PUCO weeks after an accident and 45% of such estimate per -
week for the next 52 weeks. The cost and duration denied the request for rehearing with rget to the '
inclusion of Perry Unit 1 operating costs. The PUCO of replacement power could substantially exceed the insurance coverage. Also,if the insurer's reserves are also acted on the other requests by agreeing to rehest inadequate to cover claims arising out of accidents speci6c issues raised in some of the requests. The OCC appealed the issue raised in its Erst request for
( at any nuclear units in the United states covered by rehearing to the Ohio Supreme Court and has re.
such insurance, the Company is obligated to pay quested a stay relating to inclusion of such costs. The l retrospective premiums up to $1,462.000 for the cut.
rent PoHey year. Company and the other parties niing requests for rehearing may also appeal to the same court if the r PUCO denies their respective requests. We believe
! (7) Regulatory Matte' OCC's request relating to inclusion of Perry Unit 1 g,y, operating costs is unlikely to succeed.
During the three years ended December 31,1987, the #'" #* N # ""#""
PUCO granted increases in electric rates to the Com- In February 1988, the Company Sled a notice ofintent pany as follow to request a rate increase with the PUCO. Generally, Date when a new electric generating unit is, or is about to g be, placed in commercial service, the Company re-m quests a rate increase to recover all allowable costs.
February 1985 $22,700 including current operating expenses, depreciation.
May 1987 43,000 interest and a fair return on its investment in the unit.
l December 1987 4,000 Because of the size of its ownership investrnents in l 15 I
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_l i L Perry Unit I and Deaver Valley Unit 2, the Company does not approve the phase.in plan or if a phase-in has proposed to the PUCO a gradual increase in rates. plan is approved that does not meet the accounting These increases would "phase in" full recovery of all standard, the Company's results of operations and such costs over a 10 year period. This plan would 6nancial condidon would be adversely affected to the defer costs in its initial years, but would ultimately extent that allowable costs, including all costs being provide for full recovery of all allonble costs, includ. deferred pursuant to PUCO accounting orders, are ing all costs deferred pursuant to PUCO accounting not being currently recovered.
orders.
The plan includes a request for an initial increase in Potential D(sallowance ofNucitar /nrestments the Company's base rates which, when coupled with Depending on the ultimate outcome of prudency a reduction in revenues from a decrease in the fuel investigations and the related appeals, the Company
- cost recovery factor and the impact of the February may have to write off the disallowed costs or discon.
1985 emergency rate increue, would result in reve unue accruing post in service carrying costs on a nues being 7.2% higher than 1987 revenues, or portion of its investments in Perry Unit 1 and Beaver
$45,000,000 annually, followed by nine annual in-Valley Unit 2. See Note 3 for a discussion of Perry creases. The amounts of the annual increases follow- Unit 2.
ing the Erst year have yet to be Enalized. They will be designed to provide for the full recovery of allows- In January 1988, the PUCO issued an order stating ble costs relating to the Company's investments in that approximately $627,800,000 of Perry Unit 1 con.
Perry Unit 1 and Beaver Valley Unit 2. Also, as an struction costs were imprudently incurred er were alternative to the phase in plan, the Company in- unreasonable and that the Company's share of these duded in tu notice of intent a request for an approxi- costs of about $125.000,000 must be written off and mate 30% rate increase which reflects the increase not included in its rate base. The PUCO's investiga.
necessary for full recovery of its investments in Perry tion covered the period of time starting with the Unit 1 and Beaver Valley Unit 2 on a nondeferred decision to build the Unit through the date of bas's- fuel load.on March 21, 1986. Approximately
$4,153.000,000 in construction costs of Perry Unit I A rate applicadon reflecting the phase-in plan and the were incurred during this period. He order also nondeferred alternative is expected to be filed with stated that further adjustments will be required to the PUCO in March 1988. As a part of this application, correct the addidonal AFUDC component to reflect the Company is considering proposing the transfer of subsequent delays in the in-service date and to reflect a portion or all of lu leased Beaver Valley Unit 2 addidonal AFUDC associated with certain issues.The capacity entitlement and associated rental obligadons to Cleveland Electric for an undetermined period.
preliminary estimate of this additional amount, based on the methodology used in the PUCO's order, The application also will seek to recover the Com-is $174,100,000. The Company's share of this amount pany's investments in facilities other than Perry Unit 1 is about $35,000,000.
and Beaver Valley Unit 2 and higher operating and capital costs. Irrespective of any action the PUCO specifically, the PUCO concluded that Cleveland may take with respect to this application, additional Electric performed its project and management re-rate increases may be requested in future years to sponnbilides M an aggreuive and effective manner, recover the Company's other investments in facilities excep for about $298.900,000 of costs which could and higher operating and capital costs. have been avoided through improved management The Chairman of the PUCO has stated that the PUCO and decision making, $263,600,000 of costs result.
will sponsor a settlement conference with the Com. ing from delays caused by General Electric Company pany and intervenors in early March 19A8 to begin in connection with the design and construction of discussions on the phase in proposal. It is our intent the nuclear steam supply system and $65,300,000 of to work with the PUCO and other inte*ested parties costs resulting from delays caused by another con-to reach an agreement sooner than December 19RA, tractor. Although the PUCO concluded that Cleveland the earliest time when under normal procedures, any Electric did not act imprudently with respect to the rate increase from the expected March 19AA applica. latter two costs, the PUCO concluded that these costs tion would go into effect. should be disallowed.
The proposed phase in plan is expected to satisfy the The PUCO will also consider the prudency and rea-accounting standard for phase in plans. If the PUCO sonableness of Perry Unit I construction costs in.
14
/
GRAPHIC !$ CONS!$ TENT WITH TEXT EPC ARE COMPAT18tt w1TH NEXT PCN : 014.00M 00
) i i.
. _ , - _L*._.-. _
- unn a e mureue rm.n=e sneen vauvws a,e i ocum tweese, ecteorrr w.se et .e sw lisoussisrvttssrvtases est.a r= ouasscaaroect-woonstsaroervosoorts a=e c iso uno sTvts se, 6 roe sea ree9 ms, == mm reso, vmu As JOS: LO4610 PCN: 014.00.00.00 SIN: 30 totroo crut servica eDWhf W CLIWtato (119 W1.ege.
I i i curred after the fuel load date which are esumated to Company and Duquesne do not agree with the admin.
be about $1,200,000,000, istrative law bdge's recommendadons regarding dis-allowances er with Canatom's condusions with we believe all of the Companys expenditures for respect to amidable costs. Duquesne will challenge Perry Unit I were prudently incurred and that the these recommendations in appropriate PsFUC pro-PUCO's 6ndings were in error. The Company has ceedings. Neither the administrative law judge's rec.
requested a rehearing with the PUCO and, if the ommendations not the Canstom report are binding on -
request is denied, will appeal the order to the Ohio the P2PUC. the PUCO or the Company, and any Supreme Court. We cannot reasonably estimate the decisjor. cf the P2PUC will not be binding on the amount of loss, if any, that may result from the Company or the PUCO. However, the PUCO also will resolution of this matter. Accordingly, the Company investigate the prudency of the costs of the Unit and
, has not written off any of its investment in Perry Unit I will review the Canatom report in determining at this time. If the PUCO's decision is not reversed on whether to disallow the recovery by the Company of appeal, the Company would be required to write off any of its costs of the Unit. If it were to appear the disallowed amounts. probable, as a result of any proceedings instituted by the PUCO, that recovery in rates of any portion of the In January 1988, in a Duquesne rate case, a Penn- construction costs, including a full return thereon, sylvania administrative law ludge recommended t of Deaver Valley Unit 2 wul not be allowed, then the the P2PUC that there be no disallowance of Perry Unit Companys share of such costs would have to be 1 construction costs incurred from the time fuel was written off. To the extent a disa!!owance is attributed loaded until the Unit began commercial operation.
to the Company's leasehold interests in the Unit, the The recommendation is not binding on the PaPUC, Company would have to record a loss provision for the PUCO or the Company, the deferred sad future lease rental payments.
In his January 1988 recommendation, the administra-PUCO Reserre Capactry Standards tive law judge also recommended that the PaPUC disallow $372,000,000 of Beaver Valley Unit 2 con- In November 1987, the PUCO issued an order adopt.
structbn costs which were incurred during the period ing a reserve capacity policy. The policy states that an undl fuel was loaded and were determined to be the appropriate generic benchmark for an electric util.
result of imprudent management by Duquesne. The trys reserve margin is 20%. A reserve margin exceed-total estimated cost of the Unit is $4.700,000,000. In ing 20% gives rise to a presumption of excess his recommendation, the administrative law ludge capacity, but may be appropriate if it bene 6ts the considered the report submitted by Canatom. Inc., customers or relates to unique sy* tem characteristics.
the engineering Erm selected by the PaPUC to evalu- Appropriate remedies for excess capacity (possibly ate Duquesne's management of the construction of including disallowance of costs in rates) will be Beaver Valley Unit 2 and to conduct an audit of determined by the PUCO on a case.by case basis. We related ptoject costs. Canatom concluded that Du- believe that the Companys reserve margin, both quesne performed most of its duties in a ressor.able before and after Perry Unit I and Deaver Valley Unit 2 manner, with the exception of certain engineering- went into service, is reasonable and prudent under related and other matters which increased the cost of the circumstances and is not excessive, although it is Deaver Valley Unit 2 by an amount ranging from expected to exceed the 20% benchmark for the fore-
$219,000,000 to $UI,000,000. Canatom coactuded sceable future. However, the Company is consider-that those costs could have been avolied. %e admin. ing proposing the transfer of its Beaver Valley Unit 2 istrative law judge recommended a disallowance of leased capacity entitlement to Cleveland Electric.
about $89,000,000 of the costs which Canatom had Moreover, since the Company is proposing to phase concluded were avoidable and recommended a disal- in its investments in these Units, we believe capacity lowance of $283,000,000 of costs which were not not in rate base should not be included in the 20%
considered avoidable by Canatom. Canatom also con- test. Te believe that, after giving effect to these ciuded that the CAPCO companies delayed the con- proposals, the Company's reserve margin will not struction of Deaver Valley Unit 2 due to capacity, load. exceed the 20% benchmark.We cannot predict what, financial, regulatory and technical considerations re. if any, determinations will be made with respect to sulting in sdditional cosu of $312.000.000 to generating capacity in the Company's rate application
$488,000,000 but did not charactertze these delays to be 6 led in March 1988. However, if the PUCO and costs as avoidable. The administrathe law judge disallows a portion of the Companys investment be-recommended that these costs be allowed. The cause of an excess capacity nnding or does not permit 15 l
l GRAPHIC !$ CCNS!$ TENT wtTM TUT EPC ME CCMP Af!8LE WITH NEXT PCN : 015.01 00.00 1 i l
. .- e . . :_.
M beene Intserne.4 Treenttmo srenes va*vus Job I GCLJivee nseasA& gcLoenf lartier as et te siru sisoumsmsssmaeoisstA ne saassca&rcueccescascearcorrasserre re a see moo sma sw a rise mee neo o u, e.i em rios, vna a J05: LO4510 PCN: 015.00.00.00 $1N: 37 voans cre savice esser or usveuso um m.sme
- I i l the Company to earn a full retum on its investment.' (8) FederalIncorge Tax the disallowed amount may have to be written oK.
Federal income tax, computed by multiplying the income before t1xes by the statutory rates, is recon.
Dividends and Financial Ur crtainties
' ciled to the amount of federalincome tax recorded on Permanent rate increases granted to the Company and the books as follows:
Cleveland Electric in 1987 and recent ) tars by the For the years ended PUCO have been significantly less than the amounts December 31, requested. Centerior Energys Board of Directors 1987 - 1986 19ns declared a quarterly dividend of 64 cents per share of (nousane of oMiars) common stock on January 5,19Aa, the same amount d l$ncom Tax . . . 8152.n73 8175.651 s196.758 as the previous quarter. This action was taken prior to the PUCO order disallowing a portion of Perry Unit Tax on ano I ome t, , ,. s 61,073 s no,non s 90,508 I constnaction costs. Future common stock dividend increase (Decrease) in action by Centerior Energy's Board of Directors will Tax Due cor be decided on a quarter to-quarter basis after evalua. AFUDC and Carrying Charges .. . ,, (70.M00) . (7s,734) (64,091) tion of Snancial results, potential earning capacity Accelerated and cash flow in light of the anticipated outcome of Depreciation. , 1,666 (2,728) (367) the plans of the Company and Cleveland Electric to Other items , . . (4.237) (604) (2.n05) phase in Perry Unit 1 and Deaver Valley Unit 2 Tmi Federal income Tax construction costs, the potential for any material Expense (Crect) . sn2m s a266) $ 2L2e write of of their investments in nuclear facilities and other factors. Federal income tax expertse is recorded in the Results of Operations as follows:
The likelihood of the occurrence of any of the matters described in Note 3 "Construction and Contingen- I*'[/,T,'3 fed cies - Perry Unit 2", Note 4 "Nuclear Operations 19n7 19n6 1985 and Contingencies - Other Nuclear Risks", Note 6 %,e m and this Note 7 which could have a 6nancial impact operating Expenses I
on Centerior Energy or the Company cannot be deter. Current Tax Provision 8 71,050 $33.288 839.778 mined at this time. Based on Centerior Energys and n c u C\ang ed ge d-l the Companys current 6nancial conditions and eral income Tax:
l levels of annual income, a write oK of the Companys Acceler2ted Depre-l or Cleveland Electric's investment in Perry Unit 2 or *j" nool 27.9H W 30 the investment in Perry Unit 1 ordered to be disal- Nuclear Fuel Inter, lowed pursuant to the PUCO's January 1988 order . est Charges . . . .. 5.574 7,606 7.054 sale and back would have a material adverse eKect on Centerior Energy's and the Companys results of operations in Property Tax the period in which it were to occur and on retained Expense . . , 5,454 1,245 752 earnings. Any wntasos resulting from the occur. Unbilled Revenues ( t,184 ) - -
rence of any other of these matters could have such E Pl 10.356 - -
an effect depending upon the magnitude of such other items . . . . . (6.432) 2,2 84 (3.101) write-os. However, such a write of relating to Perry Investment Tax credits Unit 2 or Perry Unit 1 individually would not reduce
- Net . m3 J 64 (2L6H) W retained earnings sumetently to impair Centerior Tota 1 ' P' E 30.4 2H 50,763 61,412 Energy's or the Company's ability to declare divi- Nonoperating income dends but together could have such an efect. A write' Cur ent Tax Provmon 0 1.209) (42.915) (37,7) of due to the occurrence of any one or more of these Changes in Accumu.
other matters could, depending upon the magnitude la ed De ed Fed-and timing of such a wite-os, reduce retained earn- oss sess, p, puce.
ings su5ciently to impair Centerior Energys of the ment Poser . 0 0.114) (6.026) -
Companys ability to declare dividends. Other trems . O .40 D 0 0n8) 0 90)
Total Federal locome Tax Expense (Credit) . 8 0 2.29n) 8(1.266) 82L245 16 i
_ GRAPH:C !$ CONS! STENT WITH TEX 7 EPC ARE CoupATIBLE MTH NEXT PCN : 014 o0. 00.0o .
I I I
O umme now hty..efm.n. sraea w a vus me i scume n4assas ecuom wares un
. sere saloutisTYL19sf%fte3 8st.s far tGassCaafoecWe0ttsr9afD$f10000nt Feie esse C let MOD sfMI seg 3 rese hoe Descagnes, met has cedo vna et JOS: LO4510 PCN: 016.00.00.00 SIN: 32
- foano cui semet mmne or o.rvewe uw an.eina 1 i -l The Company joins in the 611ng of a consolidated death, medical and disability benents. The Company's federal income tax return with the affiliated cornpa- funding policy is to be in compliance with the Em-nies for 1986 and 1987. The method of tax allocation ployee Retirement income Security Act Guidelines.
approximates a sepante return result for each In 1987, the Company adopted the new standard for company.
accounting for pensions. Also, during 1987 the Com.
Approximately $27,000,000 of unused investment tax pany offered a Voluntary Early Retirement Opportu.
credits are available and may be used to reduce nity Program (VEROP) which was accepted by 131 of future tax obligations. The unused credits expire in the 139 eligible employees at an estimated cost of varying amounts in 2001 and 2002. Utilization of $6,300,000. Pension and early retirement program these unused credits is limited by p ovisions of the costs for the years 1985 through 1987 were Tax Reform Act of 1986 and tne level of future taxable $4,000.000, $3,400,000 and $5,700.000, respectively.
tacome to which such credits may be applied. Net pension and early retirement costs for 1987 were The Tax Eleform Act of 1986 provided for a 40% Comprised of the following components:
average income tax rate in 1987 and a 34% income tax of D*m rate in 1988 and thereafter, the repeal of the invest. Pension Costs:
ment tax credit, scheduled reductions in investment Service cost for benents earned dur.
tax credit carryforwards, less favorable depreciation p'thete l'INe~f[t5 Int res co o rates. a new alternative minimum tax and other items. ligation . . . . . . . . . . . . . 8 These changes haw resulted in an increase in tax Actual return on plan asseu .. .. . . (8) payments and a reduction in cash flow during 1987. Net amortization and deferral . ..
J)
Most of the increase in tax payments is because the Net pension cost. .. ... . .. I alternative minimum tax reduces the amount of in- VEROP cost . .. ... . . 4 vestment tax credit allowed as an offset to federal income tax payable.
Net pension and VEROP costs . ... U 1ne following table presents a reconciliation of the In December 1987, a new accounting standard for funded status of the plan at December 31,1987.
income taxes was issued. The standard requires a w%
change in the accounting and reporting for income or twm taxes from a deferral method to a liabihty approach. Actuarial present value of bene 6t obli.
The Company does not anticipate adopting this stan. g2tions:
dard before the effective date of January 1989. The Vested bene 6ts . . .. . . . ... $ 86 liability approach establishes accumulated deferred Nonvested benents.. ... . . .. _12 income tax liabilities for amounts recorded either net Accumulated bene 6 obligation .. 98 of tax or after tax and flow through accounting items Efect of future compensation levels. J and recognizes the effect of any changes to the Total projected bene 6L obligation . 128 income tax rates. The change will result in a signifi. Plan assets at fair market value..... .
R cant increase to the accumulated deferred income tax Unfunded (surplus) projected benent liability reported on the balance sheet. However, the obilgation . , . . .. .. (13) increase in this liability will be primarily offset by an Unrecognized variance between as.
Increase to a regulatory asset account also on the sumptions and experience. . . (2) balance sheet. We do not expect the adoption of this Unrecognized VEROP cost . . (2) standard to have any signi6 cant effect on the Com. Transition asset at January 1.1987, pany's net income. being amortized over 19 years . . _2J
, Net accrued pension cost included in other deferred credits on the Dalance
! (9) Retirement Income Plans and Other
Post Retirement Benents 1=$
Te sponsor a noncontributing pension plan which Assumptions used for the actuarial calculations sum.
l t covers all employee groups. The amount of retirement marized above are as follows: settlement (discount) j bene 6cs generally depends upon the length of ser. rate - 7%. long term rate of annual compensation vice. Under certain circumstances, bene 6ts can begin increase - 5% and long term rate of retum on plan as early as age $5. The plan also provides certain assets - 7%.
l l
17 1 e l _ GRAPHIC 15 CONS STENT WITH TEXT EPC ARE CCMPATIBLE wtTH NEXT PCN : 017M 00.00 .
I 1 l l l
- -- . . , . - ....... ... . ...,.._,o. . , , _ , , .
6 i,d , 7 ,,/. h T ul M edU M ICO. N as - m.a.aa * - ' ' * ,.., P.3 g
is m,n,ewsm.m.smewer.e.,rw e. =1. emenssit=ecLinse m.: a JOS: LHIf 0nciaremmes g y A 32 y y PCN: Oth. J.D 5 6,, , , . < ..
min cent stivice acwie or cetums inw um (,
4 .
"' .' .L- .!!d.
AtJanuary 1,1946, the fatt market wlue of net astett svallable for pts.. benefits was $120,000,000 and the Common Stocki - - 8/ m vested and nonvested actuarial present value of ae. Public Met . . . . . . . . . . . . . -
cumulated plan benefits was 374.000.000 and %"(",'d"ll,p7l,'",'** , _ y im H,000,000, respectively, assuming a 7% discount rate Tor 1 common stock and long term rate of return on plan sesets.
Safet .. . .. .. 4 J4g Plan assets consist primarily of Investments in com. 0"gh,'f['n$'i,$'th,I' dempoon; mon stock, bonds, guaranteed investment contracts Sale' , ,
and real ettste. , ,
in 1987, the Company began to fund the post retire. Rettrernents sino par 11 .. . .
ment medical benefits and premiums. In prior yests 19) -
13 2$ . . . (121) such costs were recorded when paid. The tots! '10' -
amount funded in 19A7 was 1700.000.
'~y 25 par 3 75 Q
(floot - -
3.72. fl<nn) -
(10) Gustentees 14er change . .
gi (41:
""~ ""
till Under a long term cost purchase arrangement, the CMm F**ed W W subleet to Mandatory Ke.
Company has guaranteed the loan and lease obilgs- demptione tions of a mining company. This arrangement also requires payments to the mining company for any 581m - - I.Jnn actual out of pocket idle r. tine expenses (se advance Adiuttable series A . . - l2nn -
Ad)ustable Nrte4 R .
payments for coal) when the mines are idle for restons beyond the control of the mining company. At R",'y'"t' g , , , m _ _
December 31,1987, the principal amount of the chanae. . .. . YN5Il I.2nn iJon mining company's loan and lease obilgations guarsn.
teed by the Company was $29,000.000. Changes in premium on espital stock are sumenarized '
as foHows:
The Company hit also gustanteed the debt obilgstion ""
of a supplier. At December 31,19R7, the principal ,
amount of the debt obilgstion gustanteed by the 84!ance at Refnning n(
Ye ar . . . . . . . . . . . . .., le n t.? M' 84 *8.939 14 21.1in Company w2s $2,000.000. Premium. Het of Expen't $ 2.? id l - S.n4 i
- Comrnon Hock. .
l (11) Capitaliittion --. Preferred stak r l') M4) fM9')
l (a) Capitalstock Tramactiorss nstance at End at teu .. se t.~n M M n
shares sold and retired during the three years ended (b) squtry Drsterburron #enrictioris l December 31,1987 are liued below. No new sharet At December 31, 1981 retained estnings were i
of common stock have been issued by the Company $297.000,000. !tubitsnually all of the retained estn-since April 19A6. Ings were sysllable for the declaratinn of dwidends on I
the Company's preferred sn) common thstet. All of l
the Company's common sharet are held by Center.
lor Energy.
A loan or advance by the Company to Centerior En-ergy requires PUCO suthortestion unlett it is made in the ordinary courte of businest opershont in which the Company acts for Centerior Energy.
(c) Cumulatite Preferred and Preference stock l
Amounts to be paid for preferred stock which must be redeemed during the next fue } ears are f 2.000.000 in each yest 19AA through 1992 19
- *
- Ne x t PCN + 0:11oo 00as f 0&PWir f t enettf Dif wfTW TFtf
t p eene imrms rys use eri== rwnes .mo n acuimusemeesctsar, wen,,;; et e ser sisovansmassmsessest.e rer suasscaarosecwecucaarc orresseris -rea e ass- uno sma sw no r mee assoasses ami mee pee, vs,. na JOS: LO4510 PCN: 018.00.00.00 SIN: 30 .
Toi.ros crut sawics somme or camuso me ami.ame I i l_
The annual mandatory redemption provisions are as (d) long Term Debt and Utber Horrowing follows: Arrangements
'"#" Long-term debt, less current maturities is as follows:
( [
to be ning Per-stedeerned - in share First mortgage bonds:
Actual Preferred: . or Average December 31,
$100 par $1100,. . ., 5,000 1979 $100 Year of Maturity interest Rate 1987 1986 9.3 7 5 . . . . . . . . 16,650 1985 100 (chrmands et douarn 25 par - 2.81. . .o . 400,000 1993 25 1988.......... 4.00 % $ - $ 15,000 1990.......... 14.00 - 65,000 The annualized cumulative preferred dividend re. ,
15.625 --- 35,m quirement as of December 31,1987 is $30.000,000.
III I ". . * . * .". .".
1991. . . 15.00 70,000 70,000 The preferred dividend rates on the Company's Series 199 2 . . . . . . . . . . 16.125 - 60,000-A and B fluctuate based on prevailing interest rates.- 1993 1997... . 9.78 M5,500 335.500-The dividend rates for these issues averaged 8.55% 1998 2002..... 8.37 60.978 60.978 and 9.43%, respectively, in 1987. 2003-2007. . 8.96 85,725 85.725' Under its articles of incorporation, the Company can. 2008-2012. ... 10.44 126,900 186,900 not issue preferred stock unless certain earnings cov.
2 ~ 12 60,W erage requirements are met. Based on earnings for 710,103 974,103 the 12 months ended December 31,1987, the Com.
pany could issue at December 31,1987 approxi. Term bank loans,11.19%
mately $336,000,000 of additional preferred stock at average rate, due 1989 1990 . . .. ..... . 41,166 62,833.
an assumed annual dividend rate of 11%. Any re.
quired write of of the Company's plant investment Notes,10.83% average could adversely afect its ability to issue additional rate, due 1989 1997,. 357,000 277,000.
preferred stock. See Notes 3 and 7. The issuance of Debentures,11.25%. due additional preferred stock in the future wili depend 1997. ..... . ...... 125,00t' -
on earnings for any 12 consecutive months of the 15 Pollution control notes, months preceding the date of issuance, the interest 10.82% average rate, on all long-term debt issued and the dividends on all due 1989 2015 . . . 16*/,500 167,600 preferred issues. Other - net . . ... , ,(477) (589)
There are no restrictions on the Company's ability to Total Long Term issue preference stock. Debt . , $ 1.400.292 31.480.947 With respect to dividend and liquidation rights, the Long-term debt matures during the next five yean as Company's preferred .vock is prior to its preference follows: $35,000.000 in 1988 $25,000,000 in 1989, stock and common stock, and its preference stock is $113,000,000 in both 1990 and 1991 and prior to its common stock. $110.000,000 in 1992.
The mortgage of the Company constitutes a first mort.
gage tien on substantially all its property and franchises owned. Excluded from the lien are cash, securities, accounts receivable, fuel, supplies and au-tomotive equipment.
The issuance of additional first mortgage bonds by the Company is limited by provisions in its mortgage.
The mortgage also permits the issuance of refunding bonds in an amount equal to retired bonds which have not served as the basis for the issue of other bonds. Under these provisions at December 31,1987, the Company would have been permitted to issue approximately $241,000,000 of nontefunding bonds and $24,000,000 of refunding bonds.
19 1
G8tAPHIC !$ CONSISTENT WTTH TEXT EPC ARE COMPATIBLE WITH NEXT PCN : 0n.00.00.00 I I I.
8 M esame inesgrated Typesettug sysessa VAA/Vess Joe i ecLJ113 )234ee4Au tet001ee thear.se et 2 sire sisountsmassivtem est.4 ran otsassceAroecemecascrvoertessous re e see une sma se, i r m e reasom,.=s n mee so. vs.: srts JOS: LO4510 PCN: 019.00.00.00 SIN: 34
.Totsoo cruf sewics somme or ctavstamo uses ers ene.
I i i Certain unsecured loan agreements of the Company (12) Short. Term Borrowing Arrangements contain covenants limiting to 65% of total capitaliza-The Company's bank credit arrangements at Decem-tion (as de6ned) the total of its short term debt in g3 39g7 , fogg excess of $150,000.000 and funded debt. timiting 3,,,,,
secured Enancing other than through Erst mortgage g,so,,,no, ,g bonds and certain other transactions and requiring Mm >
Toledo Edison to maintain earnings (as denned) of at . Bank Lines of Credit.... . .... . $ 69.350 least 1.5 times interest on its Erst mortgage bonds. Revolving Underwriting racility... 25.000 The earnings coverage ratio applies to 8349,500.000 There were no borrowings under these bank credit of unsecured loans and was 2.71 at December 31. arrangements at December 31.1987.
1987.
short term borrowing capacity authorized by the Any required write-offs of the Company's plant invest-PUCO is $150,000,000.
ment could signi6cantly affect its ability to issue additional debt. See Notes 3 and 7. Annual commitment fees range from 0.25% to 0.5% .
on most of the bank lines of credit. The rest of the lines of credit have informal compensating balance arrangemenu. Danks expect the Company to main-tain average deposits equal to 5% of the ime of credit, depending upon the amounts borrowed. The deposits provide operating balances for the Company and are not restricted legally.
The Company also has a commeretal paper program.
There were no such borrowings at December 31, 1987.
(13) Quarterly Results of Operations (Unaudited)
The following is a tabulation of the unaudited quarterly results of operations for the two years ended December 31,1987. Quaners ended March 31 June 30 Sept.30 Dec.31 1987 Operating Revenues .. . . .. . ... .... $150.155 8153.155 8172.414 $ 149,49 A Operating income .. . . . . . . . ... ...... . 37.957 33.362 39.026 34.643 Net income . . . . . . . . . . . . . ........ . .. . . 47.950 35.372 47.565 34.2 A4 Earnings Available for Common Stock. .... . .. 36.637 24,364 36.210 25.211 1986 Operating Revenues . . . . . .. . 152,730 138.032 154.8A6 148.773 Operating Inco ne . .. . ... .. . 36.358 33.6T4 34.735 22.537 Net income . . . . . . . . . . . . ........ .. . . 45,066 40,077 46.304 45.470 Earnings Available for Common stock. ... .. 33.973 28.545 34.975 34.181 l
l 20 i
e l
~ NEXT PCN : 020.00 00.00 I
GRAPHIC 15 CONSISTENT WITH TEXT 4 l 3.
L
p asm aseemse 7,s u o s,som vauvus me i scumw asaeseaw ecuorer ra ts sere sisommatsresmamest.* rur omasscaaroactamen sce mrresosi , is.any.se e ,., e see neo sms ses 80 Fsse use eeennam-a, met hae es. vnsa of JOS: LO4410 PCN: 830.00.06.00 OlN: 33
. rotaes cast soevice neuer or cuvetano tam m. eses
_1 i 1 itors' Report To the Share Owners of The Toledo Edison Company:
Te have examined the balance sheet and statement of costs relating to Perry Unit 1 and Beaver Valley ~
cumulative preferred and preference stock of The Unit 2.
Toledo Edison Company (a whollyowned subsidiary of Centerioe Energy Corporation) as of December 4. The resolution of potential excess capacity issues.
31,1987 and 1986 and the related statements of
- 5. Whether Perry Unit 2 will be completed and results of operations, retained earnings and source of , ggg ,gg
, 3
. , 9 ,,
funds invested in plant, facilities and special deposits able in rates charged to customers.
for each of the three years in the period ended
. December 31,1987. Our examinations were made in As a result of the unceruinties referred to above, accordance with generally accepted auditing stan. nunagement can give no assurance that the full in-dards and, accordingly, included such tests of the vestment in these units and a return thereon, applica-accounting records and such other auditing proce. ble lease rental obilgations and deferred c sts will dures as we considered necessary in the ultimately be recovered in rates charged to circumstances. customers.
As discussed further in Notes 3 and 7, signi6 cant g , gg g gg uncertainties exist with respect to the recovery of statements of such adjustments, if any, as might have investmenu, lease obugations and deferred costs re.
been required hai the outcome of the uncertainties lating to Perry Units 1 and 2 and Deaver Valley Unit 2, including:
h 6MI me referred to above present fairly the 6nancial position
- 1. The outcome of a request for rehearing pending of The Toledo Edison Company as of December 31, before The Public Utilities Commission of Ohio 1987 and 1986, and the results of its operations and (PUCO) and,if necessary, an appeal to the Ohio source of funds invested in plant, facilities and special Supreme Court regarding Perry Unit I cost disal - deposits for each of the three years in the period towances ordered by the PUCO. ended December 31,19R7, all in conformity with generally accepted accounting principles applied on
- 2. The outcome of further PUCO investigations re-a consistent basis.
garding the prudency of construction costs at Perry Unit I and Deaver Valley Urdt 2.
^ ' "# '
- 3. The outcome of future PUCO regulatory proceed- ,
, ings to esublish a rate phase-in plan to recover Toledo, Ohio f the investments, lease obligations and deferred February 17,1988 t
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