ML20126H209

Annual Financial Rept 1980

ML20126H209
Person / Time
Site:	Zimmer
Issue date:	01/23/1981
From:	Dickhoner W, Yeager B CINCINNATI GAS & ELECTRIC CO.
To:
Shared Package
ML20126H208	List: ML20126H203 ML20126H209 ML20126H214 ML20126H218
References
NUDOCS 8104070347
Download: ML20126H209 (38)

Text

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Annual Report 1980

-_ _ _820407 _ _ _ - - _ _ _o39 7 - - _ _ _ - __ _ _ _ _

T

i. t l The Company  : .

J' (CG&E and its subsidiaries)  :

i l

The Company primarilyis en- .

g -

3 gaged in providing electric and _, .

l gas service in the southwestern ** '

! portion of Ohio and adjacent .

areas in Kentucky and Indiana, The area served with electricity h.

V.

or gas, or both, covers approxi-a mately 3,000 square miles with i an estimated population of1.7 million. Among the major com- .

! munities served are the cities of -

i i Cincinnati and Middletown in .

Ohio,Covington and Newport ,,

i in Kentucky,and Lawrenceburg in Indiana. .

\ ,

CG&E and its subsidiary com- .- . :

i panies, The Union Light,Ileat and j l Power Company (Union Ligh0, ,

l Miami Power Corporation,The )

I West liarrison Gas and Electric Williarn H.Dickhoner B.JohnYeager 1 President and Chairman of the Board l Company,l.awrenceburg Gas *****""'ON",'

! Company,and Lawrenceburg

Gas Transmission Corporation,

, operate in contiguous territories.

i Tri State Improvement Company

. is a wholly-owned real estate developm-nt company and YGK j Inc. is a wholly-owned rail and  !

harge terminal company organ-ized to service Zimmer Nuclear Station. All of the companies l are managed by substantially the same officers.

I

] Annual Report 1980 i This annual report and the fi-ll nancial statements contained I herein are submitted to the l

! shareholders of the Company for their generalinformation a and not in connection with any

sale,or offer to sell, or solici-l tation of an offer to buy any

! securities.

! The annual meeting of share-i holders of the Company will j be held at the office of the j Company in Cinciar'ati, Ohio l on April 22,1981, at 11 A.M.  ;

i i PROXIES for the annual meet-  !

l ing will be requested from  ;

shareholders when notice of l meeting, proxy statement and The Cincinnati Gas & Electric Cornpany j form of proxy are mailed on or 139 East Fourth Street, Cincinnati, Ohio 45202 about March 20,1981. Telephone 513-381-2000 1 i 8

l I

To Our Shareholders: authorized. In an order issued by the PUCO inJanuary 1980, CG&E was allowed a rate of return on common Earnings on common shares totaled $69.2 million equity of 14.39% however, the actual return earned on compared to 1979 earnings of $69.8 million. As a result of average common equity was 11.68% in 1980.

this decrease in earnings and a greater number of com- CG&E is committed to an aggressive pursuit of realistic

. mon shares in 1980, earnings per share of common stock - rates which will provide a satisfactory return to our share-were $2.25, compared with $2.59 in 1979.The quarterly - holders.The PUCO has been informed of our intention to cash dividend per common share was increased from request annual rate increases.

4 49c to 51< during 1980. Innation CG&E's efforts for short-term improvement of our in- Persistent inflation is a serious threat to our economic vestment climate include delaying electric generation con- system and our free society. It is a particularly heavy bur-struction, aggressively pursuing more timely rate relief, den on such capital intensive enterprises as regulated working to repeal or reduce non-productive governmen- utilities. In addition to driving up the costs oflabor, mate-tal regulations, using nuclear technology to generate elec- ~r ials and services used in building new facilities and con-tricity, and increasing public understanding of the energy ducting our daily operations, inflation increases the cost of situation. We believe we have made progress in 1980 to- money in capital markets.

ward achieving these ends. The following pages contain an analysis of the impact of inflation on our financial condition and costs of operation.

Construction Plans Revised We have adjusted our electric construction schedule The inflation-adjusted figures form a clear demonstration to reflect a lower rate of growth in sales, and thereby re- . of the spiraling costs of maintaining productive capacity.

duced our projeced cash requirements for the next four We are convinced that there are vast areas of non-essential year perk >d (1981-1984). We do not expect any threat to government spending which can and must be reduced. '

our level of service because of these changes. Stemming the tide of the federal deficit is a first step in Today's combination of rising construaion costs, high ridding ourselves of the crippling effects ofinflation.

cost of capital and lagging rate adjustments tend to make Regulations saving a unit of energy a more attractive investment than Over-regulation by government agencies is a major generating a unit of energy.Through load management factor in inflation. Difficult to quantify, but tremendously programs and appeals to our customers to conserve expensive, are the growing requests for information and energy, we hope to influence a slower rate of growth in directives to take action from state and federal levels of energy demand, especially during peak demand periods. government. The increased workload inflates our oper-This will enable us to accommodate our customers' needs ating expenses and uhimately drives up our customers' while adding necessary new capacity at a slower and more utility bills. Of more serious consequence is the faa that manageable rate. many of the regulations are arbitrary in nature, question-Rates able in intent, and produce results in no way commen-Earnings, and dividends, have not kept pace with infla- surate with the costs, tion. The entire utility industry suffers from regulatory lag Electric Reliability and the resulting failure to receive and earn a rate of re- The unrelenting effects ofinflation and regulation have turn adequate to cover the rising costs of doing business, forced electric utilities, with great reluctance, to accept the Not only do rates of return allowed by regulatory author- possibility that the traditional high level of our electric ities fail to keep up with inflation, rates actually earned are service reliability will have to be downgraded. Although even lower than those allowed. In the current inflationary CG&E can foresee no deterioration in service in the im-climate we never" catch up". mediate future,we cannot be optimistic about the long- )

In 1980, the Public Utilities Commission of Ohio term future. Customers' growing unhappiness with higher and higher utility bills may increase their willingness to (PUCO) authorized a smaller rate increase than we had I requested, and also reduced the return on equity we had accept the inconveniences and disruptions of a less rell-sought. The problem was compounded when actual re- able delivery system. A recent survey showed that 75% of CG&E's customers believe that we will be able to supply turns experienced during the year were lower than those all the electric energy they want in the next ten years. It is not clear to them - and CG&E's public education efforts will try to make it clear - that if we fail to get the timely rate increases we need, there could be a serious degrada-tion of service by the late 1980's.

We are sure that most customers, when actually faced with electric shortages, will support constructive courses of action. Unfortunately, our national history implies that we will have to experience the crisis of a shortage before we fully understand its implications to the economy, to our jobs, and to our way oflife.

A 1 l J

Nuclear N:tional Encrgy Policy CG&E's Zimmer nuclear power station is scheduled to since the oil embargo of the early 70's, our government go into commercial operation in 1982. Recent delays in has tried and faikd to formulate a coherent national en-our construction schedule have come about primarily be- ergy policy to protect our position in world markets and cause of the effects of the accident at Three Mile Island, to shore up our defenses against the economic disaster of and the resulting requirements for additional construction a major energy shortage. Attempts to increase domestic work, for a more complex emergency plan, and for production of oil and gas, and to encourage the substitu-changes in engineering design. tion of coal and uranium, in order to reduce the nation's Nuclear power plants have proven that they are capable dependence on imported oil, have been only partially of producing large quantities of electric energy at a lower successful.

cost and with a minimum impact on the environment and We will continue to encourage our government to set public heahh. The economic and environmental benefits rational energy goals, to develop practical energy guide-of nuclear power are well established, lines, and to display the political backbone necessary to The point seems clear to leaders of our scientific and implement them. TM nation desperately needs a balanced technical communities, but has not been grasped by the energy program to encourage conservation, to research general public and government policy makers. The unbe- and develop promising alternate energy sources, and to lievable complexities of governmental regulations, many utilize plentiful domestic resources such as coal and of them contradictory, have balk >oned the costs and con- uranium. >

struction times of nuclear power plants. You are encouraged to join us in our efferts to com-The major unresolved problems relating to nuclear municate our concerns about the future of free enterprise power are the reprocessing and storage of nuclear wastes. to government leaders. Support political candidates, at all These problems are political, not technical. Governmental levels of government, who have demonstrated their indecision alone has delayed the adoption of safe and eco- understanding of, and confidence in, the American system.

nomically feasible methods of dealing with the waste dis- Management posal problem. On behalf of the more than 5,000 employees of CG&E, liard scientific evidence supports our contention that we express our sincere appreciation to you, our share-nuclear power is safe, clean, reliable and economical. It is holders, for your confidence and support 3 bur replies to a proven technology. In combination with coal, and con- our recent shareholders' survey contained helpful advice servation, it can provide the electric energy needed to sus- and welcome support. We plan to share the results of the tain our standard ofliving well into the 21st Century, sus rey with you in a future mailing.

Communications The management of your Company is prepared to meet Effective communications with our customers has a the challenges of the future. We fu!!y accept the need to high priority on our agenda. We will try to improve our maintain a greater control over our destiny, to influence customers' understanding that they will have to pay a fair events rather than react to them, to nurture the balanced price for the energy services they use. Customers should judgment necessary to keep problems in perspective, and be informed why utility rates must be adjusted in a more to take advantage of every opportunity to improve our timely manner. Rates, based on operating expenses in- financial position.

l curred in the past, simply are not realistic. In the following pages, our vice presidents review their Many special interest groups in our society, without any operations during 1980. We hope you will read of their ac-legal responsibility to furnish energy, presume to speak on complishments in operating under a tight budget, and the consumers' behalf. None of them is as close to the share our pride in a competent and productive managerial needs and desires of customers as the local utility. Our staff. Their past performance gives us confidence that they public messages point out that we are acting in the con- will adapt well to new circumstances and successfully sumers' interest when we plan for the future energy needs meet the challenges of the years ahead, of their community.

Sincerely, William H. Dickhoner RJohn Yeager President and Chaimjthe Board ChicfEvecutice Officer l January 23,1981. j 2

Summary

% Increase -

1980- 1979 (Decrease)

Earnings on Common Shares (000 omitted) . . . . . . . . . . . . . . $ 69,183 $ - 69,824 (.9) i Average Number of Common Shares Outstanding (000 omitted) . . . . . . . 30,765 26,964 14.1 Earnings per Common Slure . . . . . . . . . . . . . . . . . . . . . . . . . . . $- 2.25 $ 2.59 (13.1)

Year End Annual Dividend Rate . . . . . . .. .............. . . . . . . .. $ 2.04 $ 1.96 4.1 Number of Holders of Common Shares . . . .. .... .. .. . . . . . . . 75,000. 69,000 8.7 Electric Sales (million Kwh) r Residential . . . . . . . . . . . . . .. . ..... ..... . . . . . . . . . . . . . . 5,277 .- 4,822 9.4 Q)mmercial . . . ... .... . .. .. .. .. ,,.. .. . . . . 3,333 3,182 ' 4.8 Industrial . . . ..... ... .. . . .. ... . . .. . . . . . . . 4,493 4,757 (5.6)

Other Retail . . . . . . . . , ... . ......... . . . . . . . , . . . . . 1,242 1,155 7.5 Total Retail . . . . . .. ...... .. ..... . . . . . . . . . 14,345 13,916 3.1 Other Utilities , . . . . . . . . . ... .. . . . . . . .. . . . . . . . . 174 172 .9 Tbtal . . . . . . . , . . ... . ..... . . . . . . . . . . . 14,519 14,088 3.1 t

Gas Sales (million cu. ft.) . .

Residential . ..... . .. . .... ... ... . .. . . . . . . 45,746 48,213- (5.1)

Commercial . . ... . .... . .... . .... . . . . . . . . . . . 21,071 21,837 (3.5)

Industrial . . . . . . . . ... . . . .. . ... . . . . . . . . . . 32,390 35,929 (9.9)

Other . .. . ..... .. . .... . .... . . . . . 4,403 4,104 7.3 lbtal . . . .. . . ..... . . .... . . . . . . . . . . 103,610 _110,0R _

(5.9)

I Electric Net System Peak load (thousand Kw) ... .. . . . . . . . . . 3,154 2,978 5.9 '

Construction Expenditures (000 omitted) . . . .. . . . . . . . . . $ 296,957 $ 269,298 10.3 Gross Plant-Year End (000 omitted) . ...... . . . . . . . . $2,499,083. 52,213,749 12.9 Source of Revenue 1980 F.arnings and Dividends other ]

Per Common Share industrial d Earnings Per Sharc Commercial ,

Residential Dwidends Declared Per Share ]

$100 600 $'s (millions) l .

l'10%

M '

$150 ,

27%}-

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5%

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$1.50 ' 28% y d 3

$1110 200

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$.50 Gas Electric 3

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

l 1

Electric Production Because of reduced cus- Unit 1, located in A1oscow, on the Zimmer Project,in-and t merdemands, prim?rily Ohio,25 miles east of the cluding a substantial addi-due to energy conservation city of Cincinnati. The esti-Engineering eUormve have made sig-tion to the service building mated cost of this facility is to accommodate facilities Services nificant changes in our elec- $1 billion. CG&E owns a for the Nuclear Regulatory ,

tric generation construction 40% share of this unit. Con- Commission and a Techni-  !

schedule. struction is approximately cal Support Center. Major A planned second unit at 95% complete.Various additions to the plant's in-  ;

the new Killen Generating stages of thelicensing hear- strumentation and com-Station in Ohio has been ings are expected to be munication systems have l .

cancelled;and the comple- held during the course of been manda:ed bylessons l ~

tion of the second unit of 1981. We anticipate loading learned at TMI, and a com.

(h the East Bend Station in Kentucky has been delayed fuelin late 1981,and to plete revamping of begin commercial opera- emergency planning was for three years, until 1988. tion of the plant in 1982. required. Increased staffing CG&E's interest in the de- Zimmer will supply about and training requirements layed unit will be increased 10% of our generating re- )

were also a resuh ofTMI. i

~

from 69% to 75%. Both quirements,when placed An augmented in-depth i I

these projects are a part of into commercial service. training program for plant CG&E's joint construction The principal engineer- operators and technical program with the Dayton ing emphasis during the staff has been formulated Power and Light Company past eighteen months has and is being implemented g~ The margin of reserve been on the numerous in conjunction with the generating capacity over modifications and University of Cincinnati, the next four years will be reanalyses prompted by a General Electric Company,

\

, slightly above the 20% of difficult regulatory climate. and other industry j - ')- system demand target The Three Mile Island consultants. l

! Earl A. Borgmann which is considered pru-senior uce+ resident (TMI) accident and its af- We have been negotiating I

, dent.The projected margin termath added greatly to with local and state gov- l during the last five years of '

, the scope of work required ernment ollicials on the in-the 80's will dip slightly stallation and financing of below 20%. This is not an community emergency insurmountable problem notification systems, com-because,if necessary we munication networks, and can delay the scheduled re-tirements of some ofour Construction Expenditures

! older genemting units, pur-chase power from other

• U utilities, or accelerate con- muunon contna strucdon schedules for new generating units, whichever yo n tnuniono is the most economical

, course to pursue at the t

ame. , -

The change in generation construction schedule will '

- 4 reduce our planned con- 1 struction budget for the *  :

next four years by $252 mil- ~

lion and delay the need for "

borrowing funds. Total con. m struction expenditures for

1981 are estimated to be -

j $239 million. For the five # '

years 1981 1985, construc- -

tion expenditures will be gng ** gg I g g - -

2 $1,053 million.

50 Construction work con-tinues on the Wm. IL Zim-

mer Nuclear Power Station g Prtycted  ?

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radiological monitoring- developed newash storage along the Ohio River,in equipment. lt is much more basins,and accelerated the close proximity to Appalach- ,

likely that warning sirens L search for additionalloca- ian coalfields. Barge and radio alert systems ' ions which are environ-

. . transport keeps our hauling -

would be utilized more for mentally acceptable for the ' costs at a minimum. Despite natural disasters,such as disposal of this material. this naturalgeographic ad-tornadoes, than for a nu- Mie first unit of East Bend vantage,our coal costs will clear emergency.There- Station, located in Kentucky, continue to rise.

fore,it would appear to be is scheduled forcommer- In anticipation of a possi-more equitable to have the cial operation in March, ble strike by United Mine costs shared by the com- 1981. CG&E owns 69%of Workers (UMW)at the end munities imulved,rather this 600 megawatt coal-fired of theircurrent contract in "

than have them borne steam generating unit,and March,1981, CG&E has completely byour therefore will have 414 built up its coal piles to a shareholders and electric megawatts of new capacity 90-day supply from the customers. We are confi- added to our system. normal 60-day inventory.

dect that a satisfactory East Bend is the first The last strike by the UMW agreement with govern- generator in our system in 1978 lasted a record 111 ment officials will be constructed with a " scrub- days. ,

reached soon. ber" to remove sulfur in order to help reduce Because ofsharply rising dioxide from the exit flue our nation's reliance on

costs land increasingly gases.The " scrubber"and foreign oil,we have con-more complex regulatory other pollution control de- tinued to cut down the requirements, our existing vices cost $121 million,or proportion of oil used in generating plants are in- 32% of the totalconstruc- electric generation. In 1980, creasing in their relative tion cost of the unit. oilaccounted forless than i

mlue to our system. There- Coalis used for 99% of 1% ofgenerating fuel,down fore,we are accelerating our electric production, from 4% in 1977.

our efforts to prolong the and will continue to be our efficient operating lives of major fuel even after the our older installations Zimmer Nuclear Station through upgrading tx>th begins operating in 1982.

equipment and personnel. . Cost of fuel continues to Well trained, dedicated escalate. Over the past five people are essential to the years, fuel cost per kilowatt efficient and reliable opera- hour has increased 55%,

tion of our generating and we expect the cost of plants. This valuable ro fuel to continue to increase i source is being increasingly in the future. Our average C ' C *l *' T "

l recognized;and to that end, cost of coal has risen from '

a significant effort is being $30.06 a ton to $34.72 a ton 3s n expended in retraining and during 1980. g developing technical, Price increases are due to E operating,and maintenance increased mining and 30 personnel.Both classroom transportation costs,and a and hands-on training pro- government mandate to 25 grams have been instituted meet applicable emission and have been paying divi- standards which has forced dends. CG&E to use higher priced 20 New environmental pro- low sulfur content coalin '

tection facilities for existing severalof our units. CG&E .

units include opacity is fonunate to be located g monitors for several of the stacks and due gas condi-tioning agents, where re- in quired toimprove the per-formance of electrostatic precipitators in the collec- 5 ,

tion of particles from the tuiler flue gas.We have also 5

Electric Operations Tbtal electric kilowatt- was trees. Tree lhnbs in some of which began in hour (Kwh) sales were up close proximity to our dis- 1973,were completed this in 1980,3.1% over 1979. In- tribution circuits were year,after the resolution of dustrial sales were down blown into contact with many complex environ-5.6%, due to the economic wires, and widespread serv- mental and regulatory is-recession; commercial sales ice outages occurred. sues,and problems of

, were up 4.8%; and residen- In order to minimize fu- right-ofmy acquisition.

tial sales were up 9.4%. ture outages caused by tree in our continuing evalua.

A new record system contacts, CG&E has ex- tion of alternate forms of e

electric peak k>ad of 3,154 panded an already ambi- energy production,we are

, megawatts was established tious tree trimming pro- assisting several customers onJuly 16,1980.This peak gram. We spent $3.5 million with the installation of was 2.8% higher than the in 1980,and plan to spend wind powered generators.

previous peak of 3,068 more than $4 million in Funded by the Department i megawa:ts, established on 1981 on trimming back of Energy /the National

.% July 15,1980, and 5.9% trees. This expenditure is teronautic Space Adminis-higher than the 2,978 mega- necessary to insure the re- tration, the installations are

'A watt peak of August 8,1979. liability ofour distribution

. designed to test the practi-Our revised forecast in- system. cability of wind-powered dicates a 3.4% average an- 1980 marked the comple- electric generators within 4 nualincrease in electric tion of severallongterm our service areas.

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Kwh sales and a 2.8% aver- projects to improve our The rising costs of all age annual increase in elec- 345,000 volt electric trans- forms of energy has prompt-tric peak demand during mission system. Construc- ed severalinquiries from the 1981-1985 period. Load tion projects on approxi- our customers about i

growth is expected to aver- mately 130 circuit miles, wind-generation.Through

. . age about 3% per year in our cooperative efforts, the Robert R Wiwi the decade of the 80's. Company will obtain much Vice-Preskient The summer of 1980 will usefulinformation on the go into Cincinnati's record books as one of the storm-iest of this century. During a typical summer, CG&E expects to deal with four severe thunderstorms. This vear, we had to deal with syMMn C8Pabmty anmaWad the effects of twelve such storms. Sv' tem capabinty ai rtme or reak l The most violent of the storms struck our area dur-summer reak U

ingJuly 8 throughJuly 10. , , ,,3 Service to 150,000 custom-ers was interruoted. Cus- -

tomer inquiries about elec. -

tric outages were up ap-proximately 250% over the 3,y comparable period in 197 Our field crews worked 16-hour shifts per day for .

three consecutive days dur-ing this period. Their dedi- ,

cation to a difficult and dangerous task exemplifies a tradition of outstanding public service.

High winds and lightning ,

were the major causea of ,

the number and length of 5y service interruptions. ..

Another contributing factor ~Bb$k 6 -

_ _ . . _.__ ~__ . .. . . . _ _ _ _ . . _ . _ _ . _ . . _ . . _

h impact of such devices on - Better forecasting of de-

- our distribution system, and mand and energy has been .

enable us to give better ad- assured by the completion .

vice to our customers on in early 1980 of a new com-such installations. puter system. Programs Major components of a - have been designed to for-

, new Power Management mat and print all the tables (

System (PMS) were com- required for the annual pleted on schedule.The " Electric Sales and Load PMS is comprised of six ' Forecast." The automation computers and 73 remote of this primary informa-substation controllers,and tional booklet will help to should be in full operation insure the accuracy,consis-early in 1981.The nn sys- tency and timeliness of this tem will reduce our fuel ir. portant planning tool.

costs to the practical L- minimum and improve the l reliability of our electric power system.

Numerous power system studies,using improved computer techniques,were made in 1980. Allcomputer tasks are now assigned System Capability and Peak Load Forecast through remote control terminal equipment, reduc. System Capability ing the time required to as-E

.; 7 semble detailed input in- System Peak formation. Output can also be returned to the terminal for quick review of the pr& 5000 Megawatts l

gram results.The use of the terminal,and the new pro-1 grams implemented in 1980, will improve effi- -'

E ciencyin planning for the _

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l Finance in order to provide 12% were sold through inJanuary,1981, CG&E adequate energy to our cus- underwriters. sold through underwriters tomers in the future, CG&E Tb assist in financing cer- 300,000 shares of 12.52%

must continually build tain air pollution control fa- series $100 par value additional facilities and re- cilities at the Walter C. Cumulative Preferred Stock.

place old plant and equip- Beckjord Generating Sta- As of the date of this Report, ment. During 1980, CG&E tion,CG&E obtained a loan CG&E plans to offer and its subsidiaries invested in May of $5 million from through underwriters l

$297 million for both new the Ohio Air Quality De- 2,500,000 shares ofnew facilities and the replace- velopment Authority.The common stock in late ment and upgrading of loan was obtained in con- January,1981, subject to existing facilities. Of this nection with the Authority's market conditior.s.

amount, $275 million was issuance of $5 million of Plans are to obtain the i for electric facilities, $19 8.50% State of Ohio Air balance of the 1981 external million for gas facilities,and Quality Development Rev- capital requirements from

- the remaining $3 million enue Bonds Series 1980 t'le sale of debt securities

- t for common facilities used due May 1,2000. and the issuance of com-in both electric and gas Additional equity capital mon shares through the

.  ;. operations. of $13.9 million was pro- Plans mentioned above. Any

.. Construction expendi- vided by the issuance of additional requirements

, , tures for 1981 are expected 841,124 shares of CG&E will be obtained through

? to be $239 million. Over the common stock through the the issuance of short-term 3 next five years (1981-1985), Dividend Reinvestment and indebtedness.

I construction expenditures Stock Purchase Plan, the Rate increases and

. are expected to total $1,053 Employee Incentive Thrift additional financing will be million, primarily for elec- Plan, and the Employee required every yearin the

~ $' tric generating, transmis- Stock Ownership Plan. foreseeable future. Ilow.

William H. Zimmer,Jr. sion, and distribution fa- ever,in order to minimize senior vice+ resident cilities($885 million). An these requirements, man-estimated $132 million will agement is exercising tight be spent for gas facilities. controls on expenditures The finar.cing of this con- and continually seeks new struction program will con- and better ways to operate.

tinue to be one of the major The importance of problems management CG&E's internal audit func-must face in the future. In- tion has increased as CG&E ilation has resulted in higher construction costs and an increased need for external funding. Average AnnualInterest lute on long Tenn Debt Despite high interest w perceni costs, CG&E was required to sell securities to the pub- 9 lic several times during g 1980 to obtain the construc- g ,

tion funds necessay to as-sure our customers con- ., . . --- EC1 , , x, fJ 7

~

tinued reliability of service.  !.3 4 InJanuary,1980, CG&E of- 6 , T5 - b# ~

fered to the public through , &r E y 3 y ,  ;

underwriters 500,000 3

A q'7 shares of 10.20% series  ; l ql.

, . t

$100 par value Cumulative 7-f  ; -

N yfs Preferred Stock and an i i < ? M ; a -

additional 3.4 million shares of common stock at a 3

. I

Q' "

i7?/?

price of $16.125 per share. 2 .; j h / i s.

y .}

In May, $100 million of 30- s. . S O d.. i N /' i  :

year First Mortgage Bonds 3

'i M " E '- # 1 - '?

bearing interest at a rate of .

8

grows, operations become to operate more efficiently which coordinates the ef-more complex, regulatory and reduced the rate at forts of all departments in demands become more which the costs of doing the use of electronic data stringent,and consumers business increase.The use processing equipment.

become more active. CG&E of computers willacceler- Larger computers,more has embarked upon a pro- ate in the future. peripheral equipment, new gram to update and docu- This growth requires systems, revisions of exist-ment all procedures per- careful planning by the per- ingsystems,and more taining to internal account- sonnel in our Information space are required.To ing controls. In 1980,the Services Department, a utilize this valuable tool ef-Internal Audit staff worked service-related group ficiently and effectively and and consulted with all to service future require-CG&E departments toward ments, computer capacity the completion of this studies are being per-long-term program. formed on a continuous Comprehensive internal basis.

audits are performed on operations and on expendi-tures incurred by CG&E for commonly-owned facilities with neighboring utilities. Firs Second Third rounh Additional reviews included - Quaner Quaner Quaner Quaner audits of price adjustment clauses contained in long- Sale Prices of cGaes common term coal supply and barg. Stock (Stock Symbol-CIN) 1979-lii8h 2t% 20% 20h 19 ing contracts, and reviews -tow. 19h 18 18 16h of contracts and expendi- 1980-lii8h 17h 19 % 19 % 18%

tures incurred by the prime - tow . . 14 % 15 % 15 % 14 contractor at the Zimmer Dividends Paid Nuclear Station. per Common Share in 1979 8'49 8A9 849 8 49 The Committee on Audit 1980 SA9 $ 51 5.51 $.51 of the Board of Directors, consisting entirely of out-side Directors, met three times in 1980 with repre-sentatives of Management, Internal Audit and the In-dependent Accountants.

internal Audit continues to he Revenue Dottar 1980 There it comes From.. There It Goes..

coordinate its schedules

, with the Independent , x Accountants.

Electronic Data Process-Other 34

\ Reinvested in the Business 1<

neprecuuan 5<

ing auditing is growing in importance due to the in- o,s 39

, \ " ' * " ' "8*""'*

Dividends 9' creasing reliance on Hx raxes 9<

computer-based systems for -

the daily operations and fi- ,

other operation and Maintenance 184 nancial reporting of CG&E.

Growth in the use of com-i puters has enabled CG&E ,

j [--

Gas Purchased 28<

Electnc 614 Fuel thed in Electric Production 24<

9

Rates And InJanuary,1980, the Pub- rates of approximately $100 (Union Light) West Harri-Economic lic Utilities Commission of million, and an increase in son Gas and Electric Com-i

' Researcli Ohio (PUCO) issued an gas rates of approximately pany,and to five villages order authorizing CG&E to $20 million. The increases which are wholesale increase annual electric are necessary because of customers.

revenues by $35.1 million. the effect ofinflation on our in November,1980, ,

The City of Cincinnati and operations, and the antki- Union Light applied to the l the Ohio Office of Con- pated electric rate increase E 1ergy Regulatory Com-sumers' Counsel have filed is required because ofin- m?ssion of Kentucky

! , , an appeal before the Su- creases in operating ex- (EEGy) for a $13 million i

. preme Court of Ohio, con- penses and construaion increasein retail electric testing PUCO's inclusion in costs incurred by the addi- rates. The amount reflects CG&E's rate base of 50% of tion of the first unit at the the requested FERC in-L the amount allowable new East Bend Station. Any crease in wholesale rates of f

. under Ohio law of the in- increases granted are not $10.9 million, applicable to vestment in the Zimmer expected to go into effect Union Light, and an in- i

'f Nuclear Unit No.1. until early 1982. crease in Union Light's

~~

In May,1980, CG&E CG&E filed an applica- other operating costs. The applied to the PUCO for a tion with the Federal new rates are expected to

$55 million annual increase Energy Regulatory Com- become effective inJune, in electric rates. The PUCO mission (FERC)in 1981, subject to refund.

Staff has recommended that November,1980, requesting The Ohio Legislature has I CG&E receive between $33 an annualincrease in passed a law to eliminate l and $41 million of the $55 wholesale electric rates of the fuel adjustment clause million requested.The $11.5 million. The rates will now in effect for Ohio's

, major difference is in the apply to CG&E's sub- electric utility companies.

amount of working capital sidiaries, Union Light,IIcat The law permits e!ectric Jackson IL Randolph to be allowed in the rate and Power Company Vice. President base rates to be adjusted base. after semi-annual public The United States De- hearings are held to review l partment of Energy (DOE) fuel costs. )

has intervened in the case A new PUCO rule, effec-for the purpose ofinitiating, tive inJanuary,1980, or participating in the con- changed the manner in sideration of ratemaking which CG&E applies the standards required by the purchased gas adjustment Public Utility Regulatory clause. In conjunction with Policies Act of1978 this change, CG&E ex-(PURPA). The DOE will penses gas costs as they are not take a position on recovered in revenue.The l the amount of rate relief portion ofgas costs recov-I requested. erable, or refundable,in fu-Rate increases in Ohio ture periods,is deferred on can be placed in effect, sul> the books until recognized ject to refund, nine months in rates.

after the filing date, unless

, the PUCO issues an order l authorizing an earlier effec-l tive date. Public hearings on i the application for new .

I rates began in December, 1980. New rates are ex-pected to be placed in ef-fect about March 1,1981.

l InJanuary,1981, CG&E notified PUCO and various government officials of our intention to file an applica.

tion for an additional an-nual increase in electric 10

As a result of this rule, the standards to be consid- ment.The studyinvohed CG&E, early in 1980, re- ered are time-of-day the periodic cycling of quested the PUCO to au- (T-O-D) rates, seasonal some customers' air condi-thorize recovery of previ- rates, cost of service, load tioning compressors by ously unrecovered gas costs management techniques, remote radio control dur-amounting to approxi- elimination of declining ing times of high system mately $12.6 million. At De- bk)ck rates, and interrupti- peak loads. In return, the cember 31,1980, $6.6 mil-. ble rates. selected customers were lon of that amount had CG&E has compiled a given a discount on their tren billed to customers massive body ofinforma- bills.

and is included in Deferred tion for use in hearings on Early results indicate that, Credits in the accompany- the PURPA standards.We while the mechanics of the ing Dalance Sheet. On re- have completed a load interrupt system are effec-ceipt of the PUCO order study based on usage by tive, the total amount of de-covering this request, ap- reidential electric cutom- ferrable load would depend propriate portions of these ers, and are now conduct- on the number of panici-contingent gas revenues ing a study of usage by pants, and the actual will be reflected in income smaller commercial cus- amount of the customer or refunded to customers. tomers. Because large load which is deferrable.

A comprehensive load commercial and industrial The amount of the deferra-research program has been users have more sophisti. bleload will have a direct established to determine cated metering installations, bearing on the cost-benefit how and when customers they are included in our analysis of this project. Final use our electric service. on-going studies by exami- determination of the feasi-The information is required nation of usage information bilityof theT-O Dand by PURPA,in order to en- from customer billing re- interrupt studies will be courage (1)consenation of cords. made in 1981.

energy,(2) the highest pos- During 1980, CG&E The increasing degree of sible efficiencyin the use of completed a residential governmentalincursion in facilities and resources, and T O-D rate experiment in- the regulatory process U) equitable rates. To ac- volving 150 customers. under PURPA, and the grow-complish these purposes, Each customer was encour- ing number ofintervenors state regulatory Commis- aged, through lower rates, in our rate cases,will re-sions must consider and de- to use electricity during quire a continuing expan-termine the appropriate- off-peak hours. Preliminary sion of our rate and eco-ness of numerous rate- results show that the T-O-D nomic research efforts.

making standards. Among rate structure is not pre-l ferred by our customers. We are conducting a cost-benefit analysis to deter-i mine the effect of the rate on both the customer and l the Company. Our prelimi-nary conclusion is that, al-though customers did re-spond to the price differen-tial, the costs to both the customer and to CG&E are greater than the benefits.

We are making a cost-benefit analysis of the re-sults of a residential electric air conditioning interrupt study,which was completed prior to the T O-D experi-11

Gas Operations Total gas sales in 1980 represented only 1% of was at a very low level dur-were 103.6 million Mcf. the sales of CG&E's total ing 1980. Most of our new 5.9% less than sales in 1979. system in 1979 gas customers installed gas Residentialsales were System-wide gas Mcf service into existing build-down 5.1%; commercial sales are projected to grow ings previously heated by sales down 3.5%; and indus- at an average annual rate of oil. Based on the current trial sales were off 9.9% 2.1% over the next five cost differential, we esti-from 1979. The primary years. mate the average residential reason for the decrease in we installed 54 miles of cur,tomer who changes gas usage was the economic new gas distribution mains from oil to gas for space recession which affected and added 4,100 gas cus- heating will save more than industrial activity within tomers to our lines in 1980. $600 a year.

k our service area. Upon the improvement in Columbia Gas System, A contributing factor to gas supply in 1979, state Inc., which supplies CG&E the decreased gas sales was regulatory commissions with most ofits gas supply, conservation by our custom- of Ohio and Kentucky ap- will be able to furnish us ers. Since 1973, our res- proved the addition of new with all our gas require-identialand commercial customers, and increased ments during the next ten customers have reduced service to existing custom- years, including the neces-

'_ ~

their use ofgas for space ers, except new boiler loads sary amount for winters up heating by approximately in excess of 300,000 cubic to 10% colder than normal.

~ '

. s 17%. In the face of con- feet a day. InJuly,1980, our We expect a steadily in-4~

stantly rising prices, we ex- Indiana subsidiary was creasing supply of gas an-pect this trend to continue, granted authority to accept nually over the next ten but at a slower rate. new customers whose years. No gas will be avail-Ourlargest gas customer premises were adjacent to able for new boilerloads in in Kentucky, Interlake Steel, existing mains, and who excess of 300,000 cubic feet Paul W. lierking closed its Northern Ken- did not require more than a day.

vice-President tucky operations and re- 50,000 cubic feet a day. The price we must pay quested cancellation ofits New building construc- for gas will continue to in-Special Gas Service Con- tion in Greater Cincinnati crease. Onr suppliers fore-tract effective August 1, cast that our cost of natural 1980.There is no indication gas in 1990 will be 3%

at this time when orif the times the 1980 level.

plant will resume opera-tions. Although Interlake accounted for 10% of our gas sales in Kentucky,it Gas supply Projected Purchased Gas Costs Projected Per Mcf 12s Mcf (mdlione 10 00 $i B

9 00 B

100 8 00 l zm 7s j 6 00 i c 5.00 m :

s0 9 4 00 .

m .

3.00 l

l 2s 2.00 .

1 l ..

! tm 1

12

Administrative The performance of our pany activities by members charges, fines, and penahies 5,000 employees during of the management team. were either dropped or re-Services 1980 reflected CG&E's tra- National, regional, and duced to a minimum or dition of pride in public local safety organizations nonserious nature The service. Through a variety recognized the outstanding Company will continue, of programs,the Company records set in 1979 by by policy and practice,its has provided the working CG&E employees. Ihgh- commitment to safe and conditions, developed the hghting the awards was the healthful working condi.

l f .

skills, and encouraged the first-time receipt of the First tions for its employees re-y attitudes which are condu- Place Frequency Rate Safety gardless of OSHA activities.

cive to high productivity in Award from the Edison During 1980 the Ohio a safe work environment. Electric Institute. Civil Rights Commission A detailed employee The Company also re- (OCRC)and the Office of

.( ' '

opinion survey was con- ceived the Ohio Electric Federal Contract Com-u , .

ducted this year. Mcre than Utility Institute (OEUI) pliance Programs (OFCCP) 90% of CG&E employees Award for having the lowest conducted extensive re-

. communicated to manage- injury frequency rate,and views into the Company's

i $, ment their attitude toward the OEUI Award for the equal opportunity em-P Company policies, pro- longest period without a ployment and affirmative

g .. .

grams, working conditions lost-time injury. This was action compliance posture.

l and operations.The results the fifth consecutive year InJanuary the Company 4  % ' of the survey were carefully our employees have won was notified by the OCRC

~1 analyzed and reported in the lowest frequency award, that the Black Elected management information and the sixth consecutive Democrats of Ohio re-j meetings and, dirough year they have won the quested the Commission to l audio-visual presentations, award for the longest self-initiate charges of em-to all employees. period without a lost- ployment discrimination Arthur R Ehrnschwender The second phase of our time injury. against major public Ykewestdem management effectiveness Two major Occupational utilities in the State, training course was com- Safety and Health Act Cooperating fullyin the i

pleted this year. Approxi- (OSIlA) inspections of our subsequent investigation, l mately 800 supervisory and facilities were made this the Company supplied vol- ,

management employees year. They resulted in pre- uminous personnel records received sixteen hours of liminary charges of willful and responded to a broad instruction. Topics included violations, various other ci- array of discovery inquiries.

leadership, planning, or- !ations, and fines. Following A report on the findings is ganizing, controlling, time an intensive investigation expected from the OCRC management, setting objec. and the establishment of in 1981. Complying with  ;

tives and overcoming resist- facts of these cases, all OFCCP requirements,in ance to change. The third June the Company submit-phase of the program, re- ted to the Department of vised to address results of Labor a comprehensive the employee survey,is Affirmative Action Plan scheduled for the spring for the Miami Fort Electric of1981. Generating Station. This CG&E's Mutual Benefit plan is designed to facilitate Association, a volunteer the employment at Miami employee organization, to Fort of minorities, women, ,

which 90% of our em- Vietnam Veterans, and i playees belong, contributes handicapped persons.

to harmonious relation- ,

l ships among employees.

For many of our employees, j a close connection with the Company does not stop

' with retirement. Agreat number of retirees and 4 their spouses attend monthly luncheons,and are briefed on current Com-i 1

13 l . _ - _ . -

Customer Relations Continued growth in Customers, citizen from their gas and electric demand for eletric service groups and legislators have services. Federal regu-in 1980 was reflected by a requested us to allow more lations will require the 1.4% increase in the total time for the payment of Company's customers to number of customers over their utility bills. We have subsidize about 95% of the l

,' 1979. The number of gas extended the period be- total cost of the program, a customers increased by tween the mailing date of estimated to be 554 million 1.1%. the bill and the due date over thelife of the program.

On December 31,1980, from 14 days to 21 days. Customer information k 4 CG&E and its subsidiaries A teleprinter was in- messages in local media -

served 591,459 electric cus- stalled in May for customers newspapers, radio, televi-

, , tomers and 365,313 gas with voice or hearing im- sion, magazines, and transit customers, pairment. Similar equip- ads - were increased in

'1 -

Residential customers ac- ment in their homes 1980. The ads featured

' l- counted fbr 36.3% of total enables them to communi-Company employees ex-electric Kwh sales in 1980; care with us over telephone plaining,in their own I commercial customers lines about billing, credit words, the rates, services,  !

, j 23.0%; and industrial cus- and service matters,includ- and bill-paying a3sistance

" ' i

tomers 30.9%. Street light- ing reports of gas and elec- available to our customers.

J mg and other electric sales tric trouble. An estimated The messages were tailored accounted for the remain- 15,000 customers in our specifically to answer the x ing 9.8%. service area have hearing most frequently asked ques-Residential customers ac- or speaking problems, tions from our customers.

W counted for 44.2% of total s .

and we expect an ever- Another series of ads fea-  :

gas Mcf sales; commercial increasing number of them tured Company executives I

, $.. customers 20.3%; and in- to install telecommunica- in discussions of major util-l dustrial customers 31.3%. tions print equipment in ity issues, including need R Gregory Graham for construction, the rate-Vi -President Public authorities and other their homes. About 300 gas sales accounted for the customers are now using making process,and utility remaining 4.2%. this service. financing. .

InJanuary,1980, the As mandated by the Na- In order to help our cus-Company returned to tional Energy Conservation tomers understand the monthly meter reading for Policy Act of 1978, we in- changing energy situation all customers,after reading tend to implement a five- and howit affects their our customers' meters year energy audit program lives, members of the Com-every other month for for our residential custom- pany's top management more than twelve years. The ers. This willbe a major meet regularlywith com-change was made for sev- element in our continuing munity leaders, govern.

eral reasons: new state and effort to help customers get ment officials, media federallegislation requires the most efficient usage editors, consumer groups us to read more meters on and industrial customers.

a monthly schedule;many An active Speakers Bureau, of our customers told us and the Media Services they were confused by Group, effectively assist in 1

interim estimated bills;and maintaining open com-l an increasing number of munications with our cus-customers, trying to con- tomers. Our investment of serve energy, want to see monetary and human re-the results of their efforts sources in better com-on a monthly basis. Monthly munications has paid divi-readings also afford greater dends in increased cus-opportunities to monitor a tomer understanding of the growing problem - the Company's operations, and theft of energy. We believe in a more efficient delivery the results of the re- of customer services.

, institution of monthly meter reading are well worth the additional annual cost of $1 million.

14

Despite the general ' dollars expended.The $80 renovation of the City's

' downturn of the economy million First National Bank - historic Union Terminal in 1980, plans for industrial Center on Fountain Square created a mini-mali with a and commercial expansion will be completed in early variety of retail stores and a in our area remain vigor- 1981.The complex includes: - restaurant. Atrium I, a $30 ous. Nou-residential con- a 26-story office tower, million multi-tenant office struction contracts let in in which First National will . building,with Cincinnati Greater Cincinnati during be the major tenant, oc- Bell as the major tenant, 1980 totaled $340 million, cupying 38% of the office - will be ready for occupancy compared with $428 mil- space;a 450-room Western in the summer of1981.

lion hist year. . Internationalliotel;and Foreign industrialin.

Construction in the retail stores. A $20 million vestments in the area in -

downtown Cincinnati area 1980 included a $2 million accounted for most of the expansion of the Wmazaki i

Machine Works, Ltd. in Northern Kentucky.

Comparative City Itates-Gas (U.S. Department of Labor, Bureau of Labor Statistics-November 1980)

Figures reflect the average price paid by residential customers for 10,000 cubic feet of gas in November 1980.

60 $'s 1

40 f

3

'8 .

30 ,

N -

II ' .-

20

.g Comparative City Rates-Electric (U.S. Department of Labor, Bureau of Labor Statistics - November 1980) >

Figures reflect the average price paid by  ;

residential customers for 500 Kilowatt hours of '

electricity in November 1980.

50 $'s 40 ~I 30 k

J 15 1 llllll_lI. l '

Managernent s Discussion and Analysia of Finanelal Condition and Results of Operations 1 The decrease in earnings per common share for 1980 compared to 1979 was due to several factors including the fol-lowing: an increase in the number of common shares outstanding; decreases in both gas and electric industrial sales )

volumes (reflecting the effects of the recession); conservation by our customers; increased maintenance costs a dec- i tric generating units; an increase in purchased power; higher interest charges and preferred dividends due t i dr 4 1 suance of additional securities at higher rates; and general inflation which caused increases in labor and mat % costs. i For further discussion of the effects of inflation, see Note 11 to the Consolidated Financial Statements. j l

Operating Revenues l Increases in operating revenues in 1979 and 1980 primarily were due to the operation of fuel adjustment clauses re- (

flecting changes in the cost of fuel used for electric production, to the operation of escalation clauses reflecting changes J l-in the cost of gas purchased, to increases in 1979 and 1980 in total electric sales volumes, to an increase in total gas sales volumes in 1979, and to rate increases granted by regulatory bodies.

Operating Expenses increases in gas purchased expense resulted from increases in as erage cost per Mcf purchased in 1979 and 1980, and from an increase in quantities purchased in 1979. Increases in fuel used in electric production resulted from increased fuel prices in 1979 and 1980, and from increased electric generation in 1979 Other operation expense increased in 1980 due to a number of factors including significant purchases of electricity, wage increases, and the general effects ofinflation. The decrease in other operation expense in 1979 resulted primarily from a decrease in purchases of electricity.

The increases in maintenance costs largely were attributable to increased maintenance on electric generating units.

For a discussion of the fluctuations in income taxes, see Note 1 to the Consolidated Financial Statements.

Allowance for Funds Used During Construction The allowance for funds used during construction increased due to higher levels of construction work in progress and to an increase in the allowance for funds rate from an annual pre-tax rate of 7M% to 84% effectiveJanuary 1,1979 and to a net-of-tax rate at 8%% compounded semi-annually effectiveJanuary 1,1980.

Interest Charges Interest on long-term debt increased due to the issuance of additional securities to finance a portion of the construc-tion program. The increase in other interest in 1979 occurred due to greater amounts of short-term lx>rrowings at higher interest rates.

1981 Earnings CG&E expects to experience a deterioration in earnings per common share at least durir.g 1981 and until adequate rate reliefis obtained. Pending rate applications totaling $69 million are not expected to cure the anticipated deteriora-tion. CG&E has informed the PUCO that it will be seeking rate increases on an annual basis for the next several years. In January,1981, plans were announced to the PUCO to request additional rate increases. Reference is made to " Rates and Economic Research" herein with respect to additional rate information. Costs are escalating primarily as a resuh of con-tinuing inflation. In addition, increased depreciation and other costs associated with the first unit at the East Bend Generating Station will have an adverse effect on earnings during 1981 and until fully reflected in rates. CG&E also expects the allowance for funds used during construction component of earnings to increase as a percentage of total earnings until adequate rate relief is obtained and the amount of comtruction work in progress is reduced.

Liquidity and Capital Resources .

The construction expenditures for CG&E and its subsidiaries for 1981 are expected to be $239 million. Over the next live years (1981-1985) construction expenditures are expected to be $1,053 million. CG&E contemplates continuing debt and equity financings in the capital markets. The amount of these financings is subject to the amount and timing of nue increases, sales volumes, changes in construction plans, and market conditions. For further discussion of financ-ings, see " Finance" herein. Short-term indebtedness will be used to supplement internal sources of funds for the interim financing of the construction program. CG&E and its subsidiaries presently have authorized a maximum amount of shon-term indebtedness of $110 million and $69 million of short-term borrowings were outstanding at December 31,1980.

16

Consolidated Statement ofIncome TIx Cincinnat/ Gas & Electric Compain' for the years ended th.ccmber $l, Andsubsk!kwy Compnies (Thousands of Dollars) 1980 1979 1978 OPERATING REVENUES Electric . ... ...... . . . .. .. .. . . .. $599,142 $518,916 $493,323 Gas . . . ... .. .. . .. ... ., . . . . -355,893 306,910 279,353

'Iotal operating revenues . .. . .. . .. .. . . .. . 955,035 825,826 772,676 OPEPATING EXPENSES Gas purchased . ... . ... ...... .. . .. .. .. . . . 280,168 232,055 199,309 Fuel used in electric production .. .. .. . . .. 234,938 216,279 194,126 Other operation .... . .. . ...... . .. .... . . . 109,877 83,673 92,896 Maintenance . . . .. . . .... ... 65,131 50,337 43,822 Provislon for depreciation . .. . ...... . .. . . .. . 52,740' 49,711 47,693

'Etxes other than income taxes (Schedule on page 23) . . ... .. 65,542 59,941 55,139 income taxes (Schedule on page 23) . . ... . . ... . . 36,942 21,442 33.299 Total operating expenses . . . .. .. ... . . . ... 845,338 713,438 666,284 OPERMING INCOME , . . . .. . .... ... .. . . . 109,697 112,388 - 106,392 OTIIER INCOME AND DEDUCTIONS Allowance for other funds used during construction (Note 1) .. . 31,051 19,218 11,243 Income taxes-credit (Schedule on page 23 and Note 1) . . 10,264 (442) (38)

Other-net . ... .. . .... ... . . 2,187 1,056 253 Total other income and deductions . . . . . . 43,502 19,832 11,458 INCOME BEFORE INTEREST CilAr<GES . . . ... . 153,199 132,220 117,850 INTEREST CllARGES Interest on long-term debt .. .. .. .

73,484 61,052 50,133 3,529 2,977 1,290 Other interest . . . .... . . . . .

Amortization of debt discount, premium and expense . . .. 59 20 27 Allowance fbr borrowed funds used during construction - credit (Note 1) . (13,854) (17,577) (11,332)

Net interest charges .. . . .. .. . 63,218 46,472 40,118 89,981 85,748 77,732 NET INCOME . . . . .. . . .. .

20,798 15,924 15,924 Preferred dividends . .

$ 69,183 $ 69,824 5 61,808 EARNINGS ON COMMON SilARES ... .. . .. , ,

l 6 ss 30,765 26,964 24,253 AVERAGE NUMBER OF COMMON SilARES OUTSTANDING (000 omitted)

EARNINGS PER COMMON SHARE . ... .. . . . $ 2.25 $ 2.59 $ 2.54 DIVIDENDS DECLARED PER COMMON SHARE , ... . . $ 2.04 $ 1.96 _$ 1.90

+

17 ne accompanying notes are an integral part orthe financial statementa and schedules.

Consolidated Statenient cf Sources of Funds for Construction Expenditures for the years ended December 31, (Thousands of Dollars) -1980 1979 1978 SOURCES OF FUNDS Operationi, Net income . . . .... .... ...... . .. . .. . . . $ 89,981 $ 85,748 $ 77,732 Non cash provisions deducted in arriving at net income Deferred ga.s costs-net ..... .. . ... .. . . (2,820) - -

Depreciation . . . . ..... ... . .... . .. . .... 52,740- si9,711 47,693 Deferred income taxes-net. ... . . . .. . . . . 3,904 150 1,105 Investment tax credits-net .. .. . . 20,438 24,719 15,248 Total allowance for funds used during construction . . . . .. (44,905) (36,795) (22,575)

Funds provided by operations . .... ... .. . . 119,338 123,533 119,203 1.ess-Dividends declared on common shares . ... . . . .... 63,583 52,964 46,639 Dividends declared on preferred shares . . .. .. . 20,798 15,924 15,924 Net Funds provided by operations . . . . .. .... . 34,957 _ _ 54,645 56,640 Financing <

Common shares Public ofTering . . . ... . . .. . . . . 54,825 -

55,300 Dividend Reinvestment and Stock Purchase Plan . . . . . . 3,359 2,210 707 Employee Incentive Thrift Plan .. . . . . . ... . . . 4,667 3,885 2,163 Employee Stock Ownership Plan . . . . . . ... . ... . 5,895 2,859 2,582 Cumulative preferred shares . . ... . .. . . . . . . . 50,000 - -

First mortgage bonds . . . . . . .. . . ... 100,000 100,000 85,000 Other long-term debt . . .. ..... . . . . 5,149 48,109 8 Repayment of long term debt . .. . ... . . . .

(611) (5,545) (15,507)

Increase (decrease) in short-term debt-net . . . .. . ... (8,073) 53,705 17,073 Funds provided by financing .. . . . 215,211 205,223 147,326 Other Soarces of Funds-net Decrease (increase) in net current assets (excluding shon-term debt and temporary investments) . . . . .

(141) (43,389) (21,580)

Decrease (increase) in temporary investments . . . .... . . .. 300 2,666 (2,966)

Refunds from gas suppliers received (distributed)-net . . . (6,493) 12,100 4,470 Other-net . . . .. . .. ... . .. 8,218 1,258 411 Funds provided from other sources . . . . . 1,884 (27,365) (19,665)

'Ibtal Funds for Construction from above Sources . . . .. .. . .... 252,052. 232,503 184,301

'Ibtal Allowance for Funds used during Construction . .. ... .. 44,905 36,795 22,575 CONSTRUCTION EXPENDITURES ... . . . . . $2%,957 $269,298 $206,876

-18 The accomnanying notes are an Integral part of the financial statements and actwdules. )

Consolidated Balance Sheet Tlx Cincinna!! Gas & Electric Company

. Decemtwr 31,1980 and 1979 AndSubsidiary Cormantes (Thousands of Dollars) 1980 1979 ASSETS PROPERIT ltANT AND EQUIPMENT, at original cost (Notes 2,7 and 8)

In service- .

Electric .. .. . .. . . .- . ... . ...... ., . . .. $1,457,684 $1,370,612 Gas . .. . .... . . . . . . . .. . .. .. . 229,511 211,841 Common . . . . . .. .. . . . . . .. . 38,125 36,331-1,725,320 1,618,784 Less-Accumulated provisions for depreciation . ... . .... . . . 529 209 484,906 Net property, plant and equipment in service . . . . . .... .. . . . 1,1 % ,111 1,133,878 Construction work in progress . . . ... . .. .. . . .... ... 773,763 594,965 1,969,874 1,728,843 OTHER PROPERTY AND INVESTMENTS ... .. . . . .. ... ..... 9J02 8,827 CURRENT ASSETS Cash (Note 6) . .. . . . .. .. .... . .. . .. . . 5,698 .6,199

. Short term investments, at cost .. ... . . . . .. .. .... .

300 Construction funds (pollution control) held in escrow .. .. .. . .. .... 2,514 21,475 Accounts receivable, less accumulated provision of $2,810,000 in 1980 and $2,307,000 in 1979 for doubtful accounts . . . . . 99,502 81,256 Materials, supplies and fuel, at average cost-Fuel for use in electric production . . . .... .. . . . . 74,785 51,696 Other . ... . ... . . .. . .. . . . . . ... . -31,081 26,637 Tixes applicable to subsequent year . .. ,. . ... ..... .. . ... 33,479 28,739 26,595 '22,632 Prepayments . . . . . . .. . ... .. .

Other . .. ... . .. .. .... . . . .. 337 288 1

273,991 239,222 OTIIER ASSETS . . . . . .. ... . .... 8,901 3,943

$2,262,268 $1,980,83_';

LIABILITIES AND SHAREHOLDERS' EQUITY CAPITALIZATION (Schedules on pages 21 and 22)

Common shareholders' equity . .. .. . . . .... . .. . . . $ 628,138 $ 556,504 Cumulative preferred shares (Note 4)-

Not subject to mandatory redemption . .. . . . .. 200,000 200,000 Subject to mandatory redemption . . . . .. . .. . .. .. 50,000 -

long-term debt (Note 2) . . . . . . . . .. 948,864 846,652 1,827,002 1,603,156 CURRENT LIABILITIES Current ponion of bonds . . .. . . . . . ..... 1,450 58 Notes payable (Note 6)-bank . . . . . .. . ,. . . .. 22,800 25,290

-commercial paper . ... . ...... . 45,790 51,350

-other . . .. . . . .. . .. 518 554 85,565 75,446 Accounts payable .. . . . . . ,. . . .. . .

Dividends payable on common shares . . . . . . . . .. 16,055 13,347 Dividends payable on preferred shares . . . . . .... . . ... . . 5,256 3,981 Accrued taxes . .... . . . . . . . .. .. .. . 60,846 45,589 Accrued interest on debt . ... . . ... .. . . ... . . . .... .. .. 14,295 13,214 Other current and accrued liabihties . . . . ... . ... . . . .. 17,582 13,094 >

270,157 241,923 DEFERRED CREDITS AND OTHER Deferred income taxes . ......... .. . . . . . ... . .. 38,190 31,249 Investment tax credits . . , . . . . . . . 106,695 86,257 i Other liabilities and deferred credits ... ... . .. . . .. .

20,224 18,250 165,109 135,756

$2,262,268 $1,980,835 i

19 The accompanying notes are an integral part of the financial statements and schedules.

Consolidated Statement of Changes in Shareholders' Equity for the years ended December 31,

- (Thousands of Dollars) 1980 1979 1978 COMMON StIAIES Balance, beginning of year . . . . . . . .. ... $231,484 $227,392 $201,450

$8.50 par value of 4,241,124, 481,403 and 3,051,996 shares sold in 1980,1979 and 1978, respectively . . . . ... . 36,049 4,092 25,942 Balance, end of year . . . . . . . . . . .. . .. . .. ... .. . . $267,533 $231484 $227,392 PREMlUM ON COMMON SIIARES Balance, beginning of year . . . . .. .... . . ... .. . $144,930 $140,068 $105,258 Premium on sale of common shares . . ...... . . ., .. . ...... 32,697 4,862 34,810 llalance, end of year . .. ... .. . .. .. ... ... . . $177,627 $144,930 $140,068 RETAINED EARNINGS Balance, beginrung of year ...... . .. . . . .... .. .. $190,930 $174,070 $158,901 Net income . . . . . ....... . . .. ..... . . . .. 89,981 85,748 77,732 -

Cash dividends declared on capital shares-Cumulative preferred (See page 21 for rates) . ... ...., . . (20,798) (15,924) (15,924)

Common (See page 17 for rates) . . . . . ..... .. . . .... .. (63,583) (52,964). (46,639).

Balance, end of year . . . ... ..... . .. . ... .. . .. $196,530 $190,930 $174,070 CAPITAL STOCK EXPENSE Balance, beginning of year . . .... .. . .......... ..... . . $ 10,840 $ 10,715 .$ 8,760 Common stock expense . ... .. ... . . . ... . . 2,050 125 1,955 Preferred stock expense .... . . . . . . .. . 662 - -

Balance, end of year . . . . . . . . . . $ 13,552 $ 10,840 $ 10,715 CUMULATIVE PREFERIED SIIARES Balance, beginning of year . ... . . . . . . . . $200,000 $200,000 $200,000 Sale of 500,000 shares in 1980 . , .... . . . 50,000 - -

Balance, end of year . . . .. . .. . . . . $250,000 $200,000 $200,000 l

l I

l 20 The accompanying notes are an integral part of the financial staternents and schedules,

Schedule ofShoreholders' Equity The Cincirmati Gas G Electric Company AndSubsidk.vy Ccnnjumks thcemtter 31,19H0 and 1979 (Thousands of Dollars) 1930 1979 bMMON SilARElIOLDERS' EQUITY Common shares, par value $8.50 per share (Note 3) -

Authorized-40,000,000 shares outstanding-31,474,523 and 27,233,399 shares, respectively .. ... ..... .. $267,533 $231,484 Premium on common shares . . . .. . . . .. . . . . . . . .... ... 177,627 144,930 Retained earnings . . . . . ... ... ..... .. ..... . . . . . .. . .. .. 1 % ,530 190,930 Capital stock expense .. .. .. . ... . . . . . . . . . .. . .... . . (13,552) (10,840)

Total common shareholders' equity . .. .. . .. .. ... $628,138 $556,504 CUMULATIVE PREFERRED SHARES, par value $100 per share (Note 4)-

Authorized-3,000,000 shares Outstanding-not subject to mandatory redemption 4% series-270,000 shares (redeemable, upon call, at $108) . . ... .. . ...... .. $ 27,000 $ 27,000 4M% series-130,000 shares (redeemable, upon call, at $101) . . . . .. ..... .. 13,000 '13,000 9.30% series-350,000 shares (redeemable, upon call, prior to July 1,1985 at $105; reduced amounts thereafter) . . . . . . . . . . .... 35,000 35,000 7.44% series-400,000 shares (redeemable, upon call, prior to April 1,1982 at $105; reduced amounts thereafter) . . . .. .... .. .. 40,000 40,000 9.28% series-400,000 shares (redeemable, upon call, prior to July 1,1984 at $106; reduced amounts thereafter) . . . . . .. ... . .. .. 40,000 40,000 9.52% series-450,000 shares (redeemable, upon call, .

prior to January 1,1986 at $106; reduced amounts thereafter) . . . . . .. . 45,000 45,000 200,000 200,000' Outstanding-subject to mandatory redemption 10.20% series-500,000 shares (redeemable, upon call, prior toJanuary 1,1985 at $110.20; reduced amounts thereafter) . . . . . . 50,000 -

Total cumulative preferred shares .. . . . . . J250,000 _ $200,000 21 The accompanying notes are an integral pan of the financial statements and schedules.

Schedule cf Long-Term Debt Decemter 31,19NO ard 197 (Tnousands of Dollars) 1980 1979

'lhe Cincinnati Gas & Electric Company First mortgagc bonds-3% % series aue 19ei) .. . .. $ 20,000 $ 20,000 3M % series due 1983 . . . .. 20,000 20.000 4% % series due 1987 . .. . . .. . 25,000 25.000 5  % series due 1990 . . .. . . . 30,000 30,000 4% % series due 1992 . . . . 25,000 25,000 5% % series due 1997 . . . . 30,000 30,000 7% % series due 1999 . . .. . . .. 50,000 50,000 8% % series due 2000 . . . . .. . . . 60,000 60,000 7% % series due 2001 . . . . . .. 60,000 _60,000 8% % series due 2003 .. . . . . 60,000 60,000 9.15 % series due 2004 , . . . . ... . . . ... 60,000 60,000 9.85% series due 2005 . ... . . .. 60,000 60,000 8.55% series due 2006 . . . . . . 75,000 75,000 9% % series due 2008 . . .. .. 75,000 75,000 10 % series due 2009 . . .. 100,000 100.000 12 % series due 2010 . . . . . . . . 100,000 -

850,000 750,000 Notes payable-4% due through 1985, . . . . ... . 1,890 2,503 6% H% due through 1984 .. .. . . . . 76 126 Other long-term debt-6.70% due 1997 through 2006 . . . .. 10,000 10.000 7.10% due 2004 . . 10,500 '10.500 7.20% due 2005 through 2009 . . 37,500 37,500 8% % due 2000. . 5,000 -

914,966 810.429 The Union Light, Heat and Power Company First mortgage bonds-3% % series due 1981 . . . . .. 1,400 1,400 3H % series due 1984 . . . 1,500 1,500 5  % series due 1989 . . 6,100 6,100 4% % series due 1993 . 6,500 6,500-8  % series due 2003 . . 10,000 10,000 9H % series due 2008 . . 10,000 10.000 35,500 35,500 Less 3%% series due 1981 . 1,400 -

34,100 35,500 Other Subsidiary Companies' Debt . . . . .. 468 446 -

Unamortized premium and discount (net) . .

(670) 277 Total long-term debt .. .. $948,864 $846.652

• 22 The accorn;unying rxxes are an traegral part orthe ruurvut statemern are schedules.

Schedule of Tcxes ne CincinnatiGas& Electric Company for the years ended twenmer n. amtsubuday compues (Thotsands of Dollars) 1980 1979 1978 TAXES OTHER TIIAN INCO.\1E TAXES Property . . .. . . .. . ... . . $ 32,304 $ 28,396 $ '26,702 Public Utility Gross Receipts . .. .. . . . . . . 27,010 25,904 23,608 Payroll .. .. .. . . . . . . . . . 4,356 3,850 3,283 Other . . .... . . ., . ..... 1,872 1,791 1,546

$ 65,542 5 59,941 $ 55,139 INCO51E TAXES Included in operating expenses-Currently payable . . . . .. . . $ 9,231 $ (6,708) $ 14,693 Deferred- net

. Accelerated amortization .. . . . . . (462) (563) (716)

Liberalized depreciation . .. . . . . 4,109 1,061 988 Contingent gas revenues . . . . (3,036) - -

Other . .. . . . . 3,293 (348) 833 Investment tax credits-net .. . . . . . . 23,80_7 28,000 17,501 Total. . . ... . . . . .. . 36,942 21,442 33,299 Included in other income and deductions-Currently payable . ... . . (10 318) 489 79 Deferred-net . . . . .

(46) @) (41)

Total. .. . . . . (10,264) 442 38 Total provision .

$ 26,678 $ 21,884 _ $ 33.337 Analysis of provision Federal income taxes . . .. $ 26,023 $ 21.269 $ 32,804 State income taxes . . . 655 615 533

$ 26,678 $ 21,884 $ 33.337 CO.\1PLTATION OF FEDERAL INCO51E TAX PROVISION Pre-tax income . .

$116,004 $107,017 $110,536 Tu at statutory Federal income tax rate applied to pre-tax income $ 53,362 $ 49,228 $ 53,057 Reductions in Federal income taxes revulting from-Allowance for funds used during construction which does not constitute taxable income . . . (20,657) (16,926) (10,836)

Excess of tax depreciation over book depreciation (3,244) (5,885) (7,077)

Cost of remom] for property retired . (1,061) (1,190) (866)

Amortization of investment tax credits . (1,777) (1,503) (1,386)

Other-net . . . . .

(600) (2,455) (88)

Federal income tax provision .

$ 26,023 $ 21,269 5 32,804 E

M The accompanying notes are an integral part of the financial statements and schedules.

Notes to Consolidated Financial Statements 7& CincirmatiGas &Ekctric Com]xmy And kdmJtary Comfwmws (1) Summary of Significant Accounting Policies:

CG&E and its subsidiaries follow the Uniform Systems of Accounts prescribed by the Federal Energy Regulatory Com-mission ( FERC). The more significant accounting policies are summarized below:

Principhs ofCr>nsolidation. All subsidiaries of CG&E are included in the consolidated statements. Intercompany items and transactions have been eliminated.

Utility Plant. Property, plant and equipment is stated at the original cost of construction, which includes payroll and re-lated costs such as taxes, pensions and other fringe benefits, general and administrative costs, and an allowance for funds used during construction.

Ret ennes and Fuel. Revenues are included in income as billed to customers on a cycle basis. The companies charge to expense the cost of fueI used to generate electricity as it is consumed and prior to 1980 the cost of gas as it was pur-chased. Effective inJanuary 1980,The Public Utilities Commission of Ohio (PUCO) implemented a rule which changed the nunner in which CG&E applies the purchased gas adjustment clause. In conjunction with this change, CG&E began expeming gas costs as recovered through revenue and deferring the portion of gas costs recoverable or refundable in future periods.

IAynvciation and3faintenance. The companies determine their provision for depreciation using the straight-line method and by the application of rates to various classes of property, plant and equipment. The rates are based on periodic studies of the estimated service lives of the properties. The percentages of the annual provisions for de-pr eciation to the weighted average of depreciable property during the three years ended December 31,1980, were equkalent to:

1980 1979 1978 Electnc . 3.3 34 34 Gas . 2.9 2.9 2.9 Common 2.3 22 23 All expenditures for maintenance and repairs of units of property, including renewals of minor nems, are charged to the appropriate maintenance expense accounts. A betterment or replacement of a unit of property is accounted for as an addition and retirement of property, plant and equipment. At the time of such a retirement, the accumulated provi-sion for depreciation is charged with the original co3t of the property retired and also for the net cost of removal.

Income 7?ms For income tax purposes, CG&E and its subsidiaries use liberalized depreciation methods including ADR depreciation and cost of remom! deductions. In February 1980, pursuant to a PUCO electric rate order, CG&E began providing for income tax deferrals resulting from the difference between liberalized tax depreciation and straight line (guideline lives) tax depreciation for property additions from October 1978 forward. CG&E does not provide for in-come tax deferrals resulting from the use of liberalized depreciation methods for property additions prior to October 1978 in accordance with an order of the PUCO. Based on a decision of the Supreme Court of Ohio, CG&E will be allowed to collect through future rates the income taxes payable in the future as a result of currently using liberalized depreciation methods for pre-October 1978 property additions. CG&E and its subsidiaries provide for deferred taxes arising from the use ofliberalized depreciation for operations regulated by utility commissions other than the PUCo.

InJanuary 1980, pursuant to a PUCO electric rate order, CG&E began alk)cating the tax benefits associated with borrowed funds used during construction to other income and deductions rather than as a reduction in income taxes included in operating expenses.

Investment tax credits are deferred and amortized over the estimated useful lives of the applicable properties.

24

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

t Retiivment income Plan. CG&E and its subsidiaries have a trusteed non<ontributory retirement income plan covering substantially all reFalar employees.The total accrued pension expense, including administrative expense, for 1980,1979 and 1978 was $6300,000, $ 5310,000 and $4,600,000, respectively, which includes amortization of the unfunded aauarial -

liability over periods ranging from 15 to 40 years. The companies make annual contributions to the plan equal to the amounts accrued for pension expense (exclusive of administrative expenses which are paid direaly by the companies).

. Accumulated plan benefits and plan net assets are as follows:

I January 1,1981, (Thousands)

' Aauarial present value of accumulated plan benefits (based on salary rates and years of senice at present time and does not include the additional i actuarial liabihry for future senice and salary hcreases).

Wsted . . . . ,, . $ 88,000 Nonvested . . . . . . 5.000.

$ 93.000 Net assets at market value available for benefits , ,. $163.000 t

?

The assumed rate of return tzed in determining the actuarial present value of accumulated plan benefits as of  ;

January 1,1981 was 7.5%.

Allowancefor Funds Used Dunng Constnection. The applicable regulatory uniform systems of accounts define  !

" allowance for funds used during construction"(AFC) as including "the net cost for the period of construction of borrowed funds used for construction purposes and a reasonable rate on other funds when so used?Ihis amount of ,

AFC constitutes an acual cost of construction and, under established regulatory rate practices, a return on and recovery of such costs heretofore has been permitted in determining the rates charged for utility services. AFC was accrued at an i annual pre-tax rate of 7%% for 1978 and 8%% for 1979, and at a net-of-tax rate of 8%% compounded semi-annually for '

1980. .

(2)long Term Debt:

Under the terms of the respective mortgage indentures securing first murtgage bonds issued by CG&E and its sub-sidiaries, substantially all property is subject to a direct first mortgage lien, except that a portion of CG&E's headquarters property is pledged as collateral for a purchase-money 4% note payable in installments through 1985.

Improvement and sinking fund provisions contained in the indentures applicable to the First 51ortgage Bonds of CG&E and Union Light, except CG&E's 12% Series due 2010, require deposits with the Tru.stee, on or before April 30 of each year, of amounts in cash and/or principal amounts of bonds equal to 1% ($7,855,000) of the principal amount of bonds of the applicable series originally outstanding less certain designated retirements.

In lieu of such cash deposits or delivery of bonds and as pennitted under the terms of the indentures, the companies '

have been following and plan to continue the practice of pledging unfunded property additions to the extent of 166%%

of the annual sinking fund requirements.

The amount of maturities of Notes Payable during the next five years will be approximately $520,000 in 1981,

$480,000 in 1982, $470,000 in 1983, and $1,030,000 in 1984. First Mortgage Bonds of either CG&E or Union Light will mature as follows: $1.4 million in 1981; $20 million in 1982; $20 million in 1983; and $1.5 million in 1984. The annual sinking fund requirements with respect to the First Mortgage Bonds of Lawrenceburg Gas are approximatelv $50,000 -

in 1981 through 1985. The amounts due during the 12 months after the balance sheet date are reflected in Current Liabilities in the accompanying Balance Sheet. -

(3) Common Stock:

CG&E issued authorized but previously unissued shares of Common Stock pursuant to three plans as follows- .,

Shares Reserved Shares issued for Issuance at 1980 19'9 December 31,1980

. 208,510 1.535,785 i

[hvklend Reinvestment and Stock Purchase Plan 121.850 Employee incentive Thrift Plan . .. . .286,225 208.315 202.658 Emplovec Stock Ownership Plan . 346,389 151.238 687 034 ,

841,124 481.403 '2.425.4'7 ,

i Reference is made to " Finance' herein for information concerning the proposed sale of additional common stock on j or aboutJanuary 28,1981. j r

b I

25

(4) Cumulative Prcferred Stock - Subject to Mandatory Redemption (Redcemable Preferred Stock):

OnJanuary 15,1981, CG&E sold through Underwriters 300,000 shares of Cumulative Preferred Steck,12.52% Series

$100 Par Wlue. The proceeds from the sale were used to repay a portion of CG&E's short-term indebtedness incurred in connection with its construction program. Under a restriction imposed by CG&E's Articles of Incorporation wnich re-quires consolidated income (as defined) to be at least 1 % times the sum of annual interest charges on consolidated debt and annual dividend requirements on Preferred Stock, CG&E would have been able to issue approximately 140,000 additional shares of Preferred Stock on January 15,1981.

The Cumulative Preferred Stock,10.20% Series and 12.52% Series are subject to mandatory redemption in an amount sufficient to retire on each January 1, beginning in 1985 and 1987, respectively,15,000 shares and 9,000 shares, respec-tively at $100 per share plus accrued dividends, and CG&E will have the noncumulative option to redeem up to a like -

amount of additional shares in each year. CG&E will have the option to satisfy the mandatory redemption requirement in whole or in part by crediting shares of the applicable series acquired by CG&E. To the extent CG&E does not satisfy its mandatory sinking fund obligation in any year such obligation must be satisfied in the succeeding year or years. If CGME is in arrears in the redemption of either series pursuant to the mandatory sinking fund requirements, CG&E shall not purchase or otherwise acquire for value, or pay dividends on, Common Stock.

(5) Rates:

Reference is made to" Rates and Economic Research" herein with respect to electric and gas rate matters.

(6) Compensating Bank Balances and Notes Payable:

Substantially all of the cash balances of CG&E and its subsidiaries are maintained to compensate the respective banks for banking services and to obtain lines of credit; however, no specific amounts have been designated as compensating bal-ances and CG&E and its subsidiaries have the right of withdrawal of such funds. Unused lines of credit under agree-ments in effect at December 31,1980, totaled $20 million. The maximum amount of outstanding shon-term notes pay-able, including commercial paper, authorized by CG&E's Board of Directors and approved by the PUCO to be incurred at any time in 1981 is $100 million and, in addition, FERC authorized Union Light to issue a maximum of $10 million of short-term notes payable through December 31,1982.

(7) Common Ownership of Electric Utility Plant:

CG&E, Columbus and Southem Ohio Electric Company, and The Dayton Power and I.ight Company (DPL) have con-structed or have made commitments for the construction of electric generating units and related transmission facilities on varying common ownership bases as set forth below:

CG&E's share at December 31,1980

% Property, Plant Accumulated Construction owned by and Equipment, Provisions for Work in CG&E in service (a) Depreciation Progress (b)

(Thousands of Dollars)

Production Miamt Fort Generating Station (Units 7 and 8) 64 $165,272 $22377 $ 2350 WC. Beckjord Generating Station (Unit 6) 37H $ 28.897 $ 8396 5 23 JM Stuart Generating Station . 39 $184318 $34352 $ 6,831 Conesville Generating Station (Unit 4) 40 $ 53,222 $14,170 $ 723 Wm 11. Zimmer Nuclear Power Statiors (Unit 1) 40 $ - $ - $334,260 (c)

East Bend Generating Station (Units I and 2) 69 (d) $ 14,093 $ - $247,656 Killen Generating Station . 33 $ - $ - $107,782 (e)

Transmission various $ 55,514 $ 8374 $ 1,409 (a) The ronsolidated Statement of Income reflects CG&E's portion of all operating costs associated with the commonly owned facilities.

(b) Each participant must provide funds for iu share of the construction project.

(c) Excludes cost of nuclear fuel.

(d) in September 1980, CG& E announced plans to increase its interest in Unit 1 from 69% to 75%.

(e) includes $8 5 million related to the cancellad second Urut. Reference is made to " Electric Production and Engineering Services" herein.

CG&E and DPL are studying various options available with regard to existing contracts cowring certain components for the Unit. If the contracts are cancelled, additional costs wdl be incurred. CG&E believes these costs will not result in any material adverse effect on its financial condition or results of operations.

26

(8) Commitments:

The companies estimate that their construction programs will require expenditures of approximately $1.1 billion during the period 1981 through 1985 Reference is made to Note 7 above and " Electric Production and Engineering Services" '

herein for further information.

CG&E owns 9% of the common stock of Ohio Wiley Electric Corporation (OVEC) which has a long-term contract to supply power to the Department of Energy (DOE). The proceeds from the sales of power by OVEC are to be sufficient to meet all of its costs, including amortization of debt capital, As of December 31,1980, debt capital of approximatel i H million remains to be amortized over a period ending 1981. CG&E and other sponsoring utilities are entitled to receive, and are obligated to pay fo' the right to receive, anv available power from OVEC's facilities not required by DOE; CG&E's portion of available OVEC capacity is 995.

(9) Quarterly Financial Data (Thousands):

Average Number of Total Earnings on Common Earnings per Operating Operating Net Corranon Shares Common Quarter Ended Revenues income Income Shares Outstanding Share March 31,1979 . ,, $265396 $ 41,509 f,,35,218 $31,237 26,7 % $1.16 June 30,1979 . ,, 179,237 24,909 18345 14364 26,868 .53 September 30,1979 168,758 25,697 19,008 15,027 26,996 .55 December 31,1979 212,435 20.273 13,177 9,196 27,197 33

$825,826, $112388 $85,748 $69,824 (a)

March 31,1980 . $304210 $ 36,246 $33,221 $28,192 29,583 $.95 June 30,1980 205,610 22348 17,590 12334 30,839 .40 September 30,1980 208,948 30,091 24,071 18,815 31.219 .60 December 31,1980 236.267 21,012 15,099 9,842 31,418 31

$955,035 $109,697 $89,981 $69,183 (a)

(a) Total does not equal annual earnings per share due to change in shaies outstanding.

(10) Financial Information By Business Segments (Thousands of Dollars):

Operating Operating income Provision for Construction Revenues inceme 'Ihres Depreciation Expenditures (a)

War Ended December 31,1978 Electric . $493323 $ 87316 $21,659 $41,486 $199,065 Gas . 279353 19,0"6 11.640 6.207 7.278 Taal $772,676 $106392 $33,299 $47,693 $206343 War Ended December 31,1979 Electric . $518,916 $ 95,258 $14319 $43358 $256,771 Gas 306.910 17,130 7,123 6353 12,791 Txal $825,826 $112388 $21,442_ $49,711 $269,502 War Ended December 31,1980 Electric . $599,142 $ 95,735 $31,283 $46,019 $276,655 Gas . 355,893 13,962 5,659 6,721 19,834 i

l Total $955,035 $109,697 $36,942 $ 52,740 $296A89 (a) Excludes construction expenditures for non-utility plant of $533,000 in 19~8, $(204,000)in 1979,and $468,000 in 1980.

Years Ended December 31 1980 1979 1978 Property Plant and Equipment, net -

Electric $1,808,530 $1,580541 $1,368364 Gas . 161,344 148302 142,271 1,969,874 1,728,843 1.510,635 G her Corporate Assets 292,394 251,992 208,638 i

$2,262,268 $1,980.835 $1.719,273 l Total Assets (11) Supplemental Information Concerning the Effects ofInflation (Unaudited):

The estimates of the effects of inflation on the operations of O3&E and its subsidiaries, as set forth below, were pre-pared on the basis prescribed by the Financial Accounting Standards Board (FASB) Statement No. 33, " Financial Report-l ing and Changing Prices". This Statement requires adjustments to historical costs to estimate the effects that general infla-tion," Constant Dollar," and changes in specific prices," Current Cost," have had on the Company's results of operations, 27

This data is not latended as a substitute for earnings reported on a historical cost basis. It offers some perspective of the approximate effects ofinflation rather than a precise measurement of these effects.

Statement ofIncome Adjusted for Changing Prices For the Year Ended December 31,1980 Constant Dollar Current Cost Conventional Average . Average Historical Cost 1980 Dollars 1980 Dollars (husands of Dollars)

Ltal operating revenues . , $955,035 $ 955.035 $ 955,035 -

• Gas purctused . ._ 280,168 280,168 280,168 Fuel used in electric production 234,938 234,938 234,938 Provision for depreciation 52,740 109,115 118,139 other operating expenses . 240,550 240.550 240,550 Income taxes . . 36,942 36,942 36,942 Ltal other income and deductions . , (43,502) (43,502) (43,502)

Net interest charges . 63,218 63,218 63.218

-865,054 921,429 930,453_

Net incorne . 89,981 33,606 24,582 -

Preferred dividends . 20,798 20,798 20,798 Earnings on common shares $ 12.808(a) $ 3.784

$ 69d83 increase in specific prices (current cost) of property, plant and equipment held during the year (b) . $ 303.404 Reduction to net recoverable cost . . .. , $(162,187) . (37,941)

Effect of increase in general price level (418.626)

Excess of increase in general price level over increase in specific prices, after reductkm to net recoverable cost (153,163)

Gain from decline in purchasing power of net amounts owed . 148,759 148.759 Net , $ (13,428) $ (4.404)

(a) Including the reduction to net recoverable cost, the earnings on common shares on a constant dollar basis would have lwn $(149,379,000) for 1980.

(b) At December 31,1980, current cost of property, plant and equipment, net of accumulated depreciation, was $3,798,136,000 while historical cost was $1,969,874,000.

Five-Year Comparison of Selected Supplementary Financial Data Adjusted for Effects of Changing Prices Years Ended December 31 1980 1979 1978 1977 1976 (husands of Aerage 1980 Dollars, Except as Specified)

Total operating revenues Actual . . $955,035 $825,826 $772,676 $689,866 $547,133 Adjusted to average 1980 dollars $955,035 $937,886 $976,324 $938,446 $792300 Constant dottar information Earnings on common shares . $ 12,808 $ 29,078 Earnings per common share , , . $ .41 $ 1.08 Net assets at year end at net recoverable cost $599,487 $598,436 Current cost information Earnings on common shares . $ 3,784 $ 14361 Earnings per common share . .

$ .12 8 .53 Excess of increase in general price lewl over increase in i

specific prices, after reduction to net recoverable cost . $153,163 $163,014 i Net assets at year end at net recoverable cost $599,487 $598,436 General information Gain from decline in purchasing power of net amounts owed . . $148,759 $151,288 Cash dividends declared per common share Actual . .. .

$ 2.04 $ 1.96 $ 1.90 $ 1.79 $ 1.64 Adjusted to averzge 19H0 dollars $ 2.04 $ 2.23 $ 2.40 $ 2.43 $ 2.37 Market price per common share at year end Actual . . ,

$ 15.250 $ 16625 $ 20.000 $ 23.125 $ 22.8S ,

Adjusted to average 1980 dollars $ 14.554 $ 17.854 $ 24.337 $ 30.680 $ 32.403 Aserage consumer price index (1980 projected) 246.9 217.4 195.4 181.5 170.5 l

Pmpert); Plant andEqtupment(Plant) Estimated plant primarily consisting of plant in service and construction work in progress, was determined in constant dollars by applying the Consumer Price Index for All Urban Consumers to the his.

28

torical cost of plant. The current cost estimates were determined by applying the Handy-whitman Index of Public Utility Construction Costs to plant accounts. Current cost is an estimate of the cost of currently reple ing existing plant. The resulting adjusted data for plant under either of the above methods is not indicative of the Company's future capital re-quirements because the actual replacement of existing plant will take place over many years and is not likely to be a repnx!uction of presently existing plant.

The difference between current cost and the constant dollar data results from specific prices of plant increasing at a rate different from the rate of general inflation.

AcanimlatedIkpn clation. The accumulated provisions for depreciation under both of the methods described above were developed by applying the same percentage relationship that existed between gross plant and accumulated provi-sion for deprecianon on a historical cost basis to the respective adjusted plant data.

Ihyinriation thperse. Depreciation expense for fx)th methods was determined by applying the Company's deprecia-tion rates to the respective indexed plant amounts.

Mtedoten ofPrvperty Pkmt and&ptipnwt to Net Recott rable Cost. The ' egulatory process limits the Company to thu ecovery of the historical cost of plar.t in .its rates. Therefore, any excess oithe value of plant stated in constant dollars or current con must be reduced to the net recoverable cost, which is historical cost. The amount of this excess that oc-curred in the current year is reflected as a writedown of plant to net recoverable cost.

Gainfrvrn the Decline in Puttinsing Pou er ofNet Amounts Ou al. The Company; by holding assets such as cash, re-cchables, and inventory; loses purchasing power during periods ofinflation because the amount of cash received in the future for these items will purchase less. Conversel>; by holding monetary liabilities, primarily long-term debt, the Com-pany benefits because the payment in the future will be made with dollars having less purchasing power. The Company has significant amounts oflong-term debt outstanding which will be paid back in dollars having less purchasing power and therefore, for purposes of these calculations, has a net " gain" from holding monetary liabilities in excess of mone-tary assets.

Other /tems. As permitted by FASB Statement No. 33, items in the income statement, other than depreciation expense, were not adjusted. The cost of fuel used in electric production and gas purchased were not adjusted because the effect on earnings on common shares was not material due to the relatively short turnover period.

The regulatory process limits the amount of depreciation expense included in the Company's revenue allowance and the amount of plant in rate base to the original cost investment. Such amounts produce cash flows which are inadequate to replace such property in the future or preserve the purchasing power of common equity capital previously invested.

While this effect is panially mitigated by the benefit derived from holding long-term debt and preferred stock, the Com-pany has a net purchasing power kiss in 1980 which is experienced by the common shareholder and can only be over-come as a result of adequate rate relief. Ilowever, the Company expects that it will be able to establish rates which will cover the increased costs of new plant.

l Auditors' Report To the Shareholders of The Cincinnati Gas & Electric Company:

We have examined the consolidated balance sheet and schedules of shareholders' equity and long-term debt of THE CINCINNATI GAS & ELECFRIC COMPANY (an Ohio corporation) and its subsidiary companies as of December 31,1979, and December 31,1980, and the related consolidated statements of income, changes in shareholders' equity, and l sources of funds for construction expenditures and schedule of taxes for each of the three years in the period ended l December 31,1980. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the accompanying consolidated financial statements and schedules referred to above present fairly the financial position of The Cincinnati Gas & Electric Company and its subsidiary companies as of December 31,1979, and December 31,1980, and the results of their operations and their sources of funds for construction expenditures for each of the three years in the period ended December 31,1980, in conformity with generally accepted accounting principles applied on a consistent basis.

l Arthur Andersen & Co.

Cincinnati, Ohio, j January 23,1981.

29

4 t

Consolidated Stati:: tics 11970-1980

.1980 1979 GENERAL Earnings on common shares ($000 omitted) . . , . . . . . . 69,183 69,824 Average number of common shares outstanding (000 omitted) . 30,765 26,964 Earnings per common share ($) . . . . . . . . . . . . . . 2.25 2.59 t Cash dividends declared per common share ($) . . . . . 2.04 1.%

Pay out ratio (%) . . . . . . . . , . . . 90.7 75.7 Total assets ($000 omitted) . . . . . . . . . 2,262,268 1,980,835 Construction expenditures ($000 omitted) . . . . 2 % ,957 269,298 Plant retirements ($000 omitted) . . . . . . . . . . 10,943 13,802 tong-term debt and redeemable preferred stock ($000 omitted) . . . 998,864 846,652 Electric revenues ($000 cmitted)

ELECTRIC Residential . . . .. . . . . . . . . . 222,952 186.216 .

DEPARTMENI* Commercial . . . . . . . . . , . . . . . . 157,551 135,705 Industrial . .. . . . . . . . . . . . . . . . . . . 159,051 146,490 All other . .. .. . . . . . . . . . . . . . . . . 59,588 '50,505 Total revenue . . . . . . . . . . 599,142 518,916 Electric sales (million kwh)

Residential . . . . . . 5,277. .' 4,822 Commercial . . . . . . . . . . . . 3,333 3,182 Industrial . . . . . . . . . . . . . .  : 4,493 4,757 All other . , . . . . . . . . . . . . . 1,416 1,327 Total sales . . . . . . . . . . . . . . . . , , . 14,519 14.088 Number of customers December 31. . . . . . . . . . . . . . . . 591,459 583,195 -

Average annual sales per residential customer (kwh) . . . , 9,994 9,303 Electricity generated-net (million kwh) . . . . . . . 14,664 14,879 Electricity purchased and interchanged-net (million kwh) . . 942 240

'Ibtal available (million kwh) . . . . . 15,606 15.119 KW capability at 12/31-net (thousand kw) . . . . . . 3,867 3,880 System peak load-net (thousand kw) . . . 3,154 2,978 Fuel cost per kwh generated (cents) . . , , . . . 1.602 1.454 Bru per kwh sendout . . . . . 10,364 10,409 load factor-electric . . . . . . 56.2 57.8 Gas revenues ($000 omitted)

GAS Residential . , , . . . 166,271 143,657 DEPARTMENT Commercial . . . 72,462 61,166 Industrial . . . . . 100,383 89,250 All orher . . . . . . . . . . 16,777 12,837 Total revenue . . . 355,893 306.910 Gas sales (million cu. ft.)

Residential . . . 45,746 48,213 -

Commercial . . . . . . . . 21,071 21,837 Industrial . .. . . . 32,390 35,929 '

All other . . . . 4,403 4,104 16tal sales . . . . . 103,610 110,083 Annual degree days-billing . , . . . . . . . . 5,686 5,669 Number of customers December 31. . . . . . . 365,313 361,190 Average annual sales per residential customer (thousand cu. ft.) . . . . 140 149 Gas purchased (million cu. ft.) . . . . . . . . , . . 106,541 111,890 Gas produced (million cu. ft.) , . . . . . . . . 12 28 Total available (millica cu. ft.) . . . . . 106,553 111,918 System maximum day sendout (million cu. ft.) . . 736 747 Average cost per Mcf purchased (cents) . . . 263.0 207.4 Mean temperature on maximum day ('F) . . . 10 13 load factor-gas . . . . . . . . . . 39.5 41.0 l N (a) See Note 10 to the ConsolKl.ited Financial Statements for additional financial information by business segments. i

Tlx Cincinnati Gas & Electric Com;xeny AndSnbsiduny Comp 2Kn ,

1978 1977 1976 1975 1974 1973 1972 1971 1970 61,808 60,191 38,639 38,097 35,736 42,241 40,108 32,771 33,687 24,253 21,450 21,000 20,233 18,700 18,700 17,000 16,001 15,502 2.54 2.80 1.84 1.88 191 2.25 235 2.04 2.17 1.90 1.79 1.64 1.64 1.64 1.64 1.58 1.% 1.51 %

74.8 639 89.1 87.2 85.9 72 S 67.2 76.5 69.8 1,719,273 1,537,614 1,442 S18 13N,551 1,191,566 1,061,279 973,598 877,686 759,280 206,876 154231 133,828 142,294 136,578 126,0N 113,500 141,710 107,658 8371 20,N2 26,632 14,825 11,806 17,953 10,139 15,496 6,209 698,974 618,876 644 333 560,753 501,936 487,793 416,746 417,212 357382 180,476 161.531 132,093 125,887 100,899 89,097 81,155 74,976 67,501 129,402 120399 91,534 83,786 69,758 61,109 53,981 47,824 41,877 136903 123,721 94,748 83,188 73,151 59,870 53,788 47S88 41,822 16,542 44,531 34,044 31,649 29,707 21,439 19,174 17,208 15,041 493323 450,182 352,419 324,510 273,515 231,515 208,098 187996 166241 4,728 4,569 4,068 3969 3,574 3,510 3,228 3,042 2,808 3,069 3,057 2,873 2,755 2,644 2,632 2398 2,209 2,124 4,517 4,487 4,295 3,938 4334 4373 4,118 3 S26 3,722 1,254 1312 1,193 1,178 1319 1,059 961 910 858 13,568 13,425 _ 12,429 11,840 11,871 11,574 10,705 10,087 9,512 570,536 560,551 553,915 544,494 533,079 521,833 510324 499,797 491,676 9,328 9,149 8,251 8,183 7,551 7,574 7,117 6,836 6,406 14,196 13,848 13247 12352 11,886 11,830 10,936 9,899 8,814 332 586 189 476 899 _ 684 685 1,001 1,520 14,528 14,434 13,436 12,828 12,785 12,514 11,621 10,900 10334 3,800 3,480 3,492 3,739 3,482 3,254 2S34 2,461 2,146 2,835 2,841 2,598 2,511 2,402 2,439 2243 2,093 2,011 1383 1.172 1.034 .944 .761 .444 .411 382 319 10,555 10,500 10,252 10.183 10,262 10,024 10,178 10308 10,667 58.4 57.8 58.4 58.1 5C3 58.2 58.8 593 58.6 137,440  !?3,082 94,775 76,038 63567 54,745 57,736 51,528 47,435 58,010 50,105 40381 32322 27,478 23256 23,783 20,481 18,454 72,756 56.856 49321 37369 40,161 30,716 27,805 25,734 20,782 '

11,147 9,641 10.237 9,629 11365 8,989 8,613 8.633 8,717 279,353 239,684 194,714 155358 142571 117,706 117,937 106376 95388 50312 48,769 50,156 48,527 50,201 50:137 55,182 53,044 51,646

[

22,589 21,238 22902 22356 24,114 24,072 26,N7 24,463 23,269 i 32,0N 27,465 33,823 31,433 47,687 47,474 47,945 47,641 40,185 3,747 3,484 5,536 6,150 12,353 11,138 10,912 13,587 16,956 108.652 100,956 112,417 108,466 134355 132.821 140,086 138,735 132,056 6,145 5,749 5360 4,712 5,034 4,725 5362 4S28 5,094 360 988 363,275 366,288 367,427 369329 370,441 366,277 361,661 356,745 155 149 152 147 151 152 169 165 163 109,753 100352 115,723 110,216 134,485 134 350 142,026 137,907 132,705 36 1353 20 135 540 661 2,431 109,789 101,705 115,800 110.216 134,505 134,485 142,566 138,568 _ 135,136 803 832 70 720 767 781 900 884 886 181.6 167.8 121.5 106.1 71.1 56.2 53.2 499 43.6 1 - 17 6 16 20 14 -5 6 -2 37.4 33.5 41.1 419 48.0 47.2 433 43.0 41.8 i

l 1

I l 31 1

1 Executive Officers Board ofDirectors. I

- William 11. Dickhoner ' C. Robert Everman Neil A. Armstrong (2)(5) - ' Harry iIoliday,Jc (1)(5) ,

Preskient and ' Treasurer Chairman, Chief Executive Officer, .

1

- Chief Executive Officer Cardwell International Ltd., - Armco Incy Middletown, Ohio R Gregory Graham an n,Ohi B. John Yeager - Vice President - George C.Juilfs(2) .. -l Chairman of the Board Customer Relauons William Beckett (1)'(4) President and Chief Executive -

' Retired President, Officer, Senco Products,Inc.,-

Earl A. Borgmann PaulW. lierking The Beckett Paper Company, Cincinnati SeniorVice President Vice President llamilton, Oh!

Engineering Services and Gas Operations W liiam N.Liggett (3)(4)

Electric Production .

N Elmer R Best(2)(3) Chairman of the Board and Retired President, . . Chief Executive Officer, First William 11. Zimmer,JE eea hu National Cincinnati Corporation -

.. The Union CentralLife Jackson 11. Randolph Insurance Company, Cincinnati - l and The First National Bank of ,

Vice President anmnati  !

Donald R Blum Rates and Economic Research 01 ver W. Birckhead (3)(4) '

President and Chief -  : Donald I. Lowry (4)(5) ecretary ' Executive Officer, Senior Vice President, '

Milton L Van Schoik Arthur R Ehrnschwender ControHer The Central Bancorporation,Inc. l The Procter & Gamble Company,

• Vice.Presiderit and Chairman of the Board and - Cincinnati Robert R Wiwi Chief Executive Officer, Administrative Services Vice-President - Jane L Rees, Ph.D. (5)

The Centramust Qupany, N.A" Electric Operations Professor and Chair of the Cincinnati Department ofIlome Economics [

Sanford M. Brooks (1)(5) and Consumer Sciences, Miami Chairman of the Board and - University, Oxford, Ohio l Chief Executin: Officer, Xtek,Inc., Cincinnati William S. Howe (1)(3) <

Chairman of the Board. -

William II. Dickhoner (1)(3) l Fifth Third Bancorp and t (6) President and Chief Executive The Fifth Third Bank, Cincinnati

3 Officer, CG&E l Richard E.Mgner(4')(5)

James R lierring(4). . .

Former President, and netired Chairman of the Board, . Consuhant, Pepsi Cola Bottling -

The Kroger Co., Cincinnati Company of Cincinnatl B. John Yeager(1)

Chairman'of the Board,  ;

CG&E (1) Member of Executive '-

Q)mmittee (2) Member of Committee on -

Audit

. (3) Member of Finance -

' Committee (4) Member of Management Compensation Committee (5) Member of Nominating Organizational Changes - Q>mminee (6) Ex-officio menter of aH Mn George C.Juilfs was elected to our Board of Directors "* '"8 ' "*'"#"

in April,1980. Mr.Juilfs is President and Chief Executive '

Officer, Senco Products, Inc., Cincinnati manufacturer and distributor of fastening systems.

At the April.1980 organization meeting of the Board, following the Annual Meeting of Shareholders, William I1.

Zimmer,Jn was elected Senior Vice-President- Finance.

Mn Zimmer formerly served as Vice President- Finance.

The Ikiard also appointed Daniel R Ilerche and William L Sheafer as Assistant Controllers.

$2

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

, Outside Executive Committee U illia Beckett William S. Rowe t h('-

( Sanford M. Brooks liarry lioliday,Jr.(seated)

,(F l ,

p Finance Committee (L to R) i William S. Rowe Oliver W. Birckhead William N.Liggett (Chairman)

~

Elmer R Best (seated) i '

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. , .- 4 An .

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\i 3 M }, 7 l,

. Committee on Audit ,

n.

N (L to R)

~

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I Elmer R Best (Chairman)

'O W 4 3 Neil A. Armstrong ~

. George C.Juilfs (seated) s ' .g ff n l

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'$ Nominating Committee  !

(L to R) f .

Management Com nsation Richard E. Wagner Jane L Rees

! Sanford M. Brooks (Chairman) emminee

- , scii s. x,mst,ony (s,,,,o,

, . ..,, (L to R) *(Donald I. Lowry)

- Richard E. Wagner .(pg.11oli&yJr.) '

u Oliver W.Birckhead

- . William Beckett (Chairman)

William N. Liggett (seated) i

• (Donald I Lowry)  ;

• (James P. lierring)

• (Not available for photograph)  !

A r

The Cincinnati Gas & Electric Cornpany 139 East Fourth Street, Cincinnati, Ohio 45202 Bulk Ittte -

Telephone 513 381-2000 U.S. POSTAGE PAID Cincinnati, Ohio Permit No. 874 -

Public Accountants:

Arthur Andersen & Co.

425 Walnut street,

- Cincinnati, Ohio 45202 Rustee for Bonds and Interest Paying Agent:

Irving Aust Company one Wall street, Shareholders' New wrk, N.Y 100i5 InqulfieS Preferred Shares Listed on:

New Wrk and Communications regarding g WWF LP % g Cincinnati stock Exchanges stock transfer requirements or lost certificates may be 2 WQh h (UhMsg $d Common Shares Listed on:

New York, Cincinnati, Midwest directed to either Stock Transfer Agent, All com-h@P "M ph 4 '#[F y$gf) 1, and Pacific stock Exchanges Transfer Agents and Registrars for munications regarding a u ab '

d -

Common Shares: '

Shareholder's account, div- -n W Hm Nadonal Bank of m

m g Cincinnati, Po. Box 2058, idends and changes of ad- e O Cincinnati, ohio 45201 dress should be directed to [7 %p8E d Manufacturers sanover wusi Company The Cincinnati Gas & Elec- * '4 g

k Four New York Plaza, tric Company Attention: ((G# f New York, N.Y 10015 Corporate Department, PO. Box 960, Cincinnati' 6

{, CT Ransfer Agents for Preferred Shares:

h Hm N d nal Bank of O 14 -

Cincinnati Po. Box 2058, Ohio 45201. j ,

p'g Cincinnati, Ohio 45201 C .

[2 Manufacturers llanover Yust Company SEC Form 10-K V~

"'W Four New brk Plaza, New Wrk, N.Y 10015 to be Available Registrars for Preferred Shares:

A copy of CG&E's annual '

The Central Rust Compan); N.A.

Fifth and Main streets, report on SEC Form 10-K Cincinnati, ohio 45202 will be available,without +

" Morgan cuaranty Trust Company charge, on or about April 1, of New York,30 West Broadway; ,

1981 to each holder of New York, N.Y 10015 Common shares upon writ- Administrator of Dividend l ten request to C. Robert Reinvestraent and Stock Everman,"Reasurer; P we , , .

Pur hase P :

PO. Box 960, Cincinnati, o

':M*. avan Corporate nust. Po. Box 1198, Ohio 45201. " ( Cincinnati,ohto 45201

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