Text

1985 Annual Rept
	ML20155G482
Person / Time
Site:	Fermi
Issue date:	12/31/1985
From:	Grove E, Heidel C, Mccarthy W; DETROIT EDISON CO.
To:	;
Shared Package
ML20155G478	List: ML20155G473; ML20155G479; ML20155G482;
References
	NUDOCS 8605060150
	Download: ML20155G482 (50)
	v • d • e

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. - J Pagef 1. .Jinancial Higidigtets ; Page 18.% Detroit Balleen Is a Key PlayerM .

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The Compsny is playing a maior role in :

_ Q", - 2 Page g 2MLetter to Steareleoiders

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to Southeastern Mictugant future.

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1ingthe' Many ar.ea. resources contribute to revitaliz., ' Page 49. . . Directors asesi ONicers l ~

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[o our fellow shareholders:

lebruary 2 4.19%

Timyeac io85 was one of hoih iriai ana iriumph foryour Company as tuajor milestones, culminat-ing years of patience and hard u ork, were achiertsl.and asyour management prepared for some of the challenging uncertainties that lie g"U ahead in the next few vears.

Earnings for comnuin stock gained for the ninth lLnL"3 a .utellite Pf mtograph oriFineir nfuoin seni,e straight year totaling a record S331.3 million.and d"'d d"W'" "S Mh"I"" " hcl *I' d""d*"' d"'I dN "'"#

"Ivant and"U"* """ ' n"un"", k and' N"lter na J.

lwr-shar'e earnin5s of $2.33 also w cre the hi5best l

of the clurf financialo >

on record. Your inanagentent is proud of the long Md'arfht Jr. s hairarbst of the Imjnf atuf t hirf r3ct'utn r record of year-to-3 ear financial gains slum n in otJi<rr l Comparative llesults of Operations and the statisti-cal tables on pages 44 to 47 of this reimrt. Timy ment. We also must seriously consider ilm demonstrate that from 1975. the earliest y car on potential ath erse impact of a proixised new ,

j the table 3 common-stock earnings have increased accounting standardi mrtaining to our imlustry. '

i 464 percent - from $59.3 million in 1975 to the During our long y ears of building new ixm er S334.3 million in !!!M5. Per-share earnings are up plants and at her facilitic3. earnings has e been 89 percent, from $1.23 in 1975 to the 52.33 f or 1985. supimrted significantly by a smn cash accounting Your Company further strengthened its credit to Ilm income statement called Al I!DC, or I clectric generating system by placing the sec. Allowance for Fumis t' sed During Construction.

ond unit of its llelle Iliver Pow er Plant in Al l'DC, an acommting principle unhjue to tim -

commercial operation and by obtaining a full- utility industry,is discussed in Note lin the Notes ;

[xnver license for its Fermi 2 Pow er Plant. These to Consolidated Financial Statements on page 31 In !

milestones virtually closed an S 11-billion, post. recent years, AFL'I)C has ranged from a high of .

World War II construction and modernization 133.4 percent of common stock earnings in 19M2 to i program that u ill give our service area more than a sis year low of 73.7 percent in 1985.

10 million kilowatt 3 of pow er to generate furthe" I)etroit Edison is in a process of transi-revitalization of the area's economy. tion, from a company w ith a large construction Ilecord Company res enues of S2.8 billion and program to one w hich is almost totally an operat.

the highest kilowatthour sales since 1979 reflected ing company. Once i ermi 2, the last of our major continuing resurgem e of the service-area cron- postwar projects. is in commercial operation.

omy and suggested the theme for this report- AFL 'DC w ill virtually cease as a credit to income.

-Power for Progress in Southeastern Alichigan." Alaintenance of earnings thus will depend not only flut this is more Ihan a theme of a report;it is Ihe on maintaining and increasing sales, but also on embodiment of our commitment to Ihe circa and our ability to control espenses and to receis e rate j its people. We have played a significant role in the adjustments sullicient to reflect the cost of build-progress to date. and will continue to do es en ing and operating the new facilities. !

more to ensure Ihe area's growth. Detroit Edison The outlook for adequate rate increases is not l will do its part w ith restructured marketing and gmnl. We have had to initiate court action for w hat I customer relations programs designed to sell more we believe should be more equitable treatment of electricity and to improve customer services. our llelle Ilis er plant, and an administratis e law l

The achievements of the past year have judge for the Alichigan Public Senice Commission been satisfyingand reflect the will and spirit of alPSC) has reconunended that some of w hat u e l Detroit Edison men and women.That same requested for Fermi 2 he disallow ed. Additionally, resolve will be needed in the coming years. our request for rate increases for i ermi 2 does not l Our concern now is the extent to w hich recent include recovery of the plant costs in esress of '

earnings levels can he maintained in the years those included in the case filed with the N!PSC in )

immediatelv ahead because of the delay in getting July 1983. It appears that it uill be necessary to go ,

the Fermi 2 Power Plant into conherrial opera- to the Commission with a request for additional :

tion, the costs associated with that delay and the rate adjustments for i ermi 2. We also has e taken l need for increased rates to cover the pLm: invest. issue with a recommendation of the administralis e 2

i

l l

!aw judge that the revenue increase for Fermi 2 la- money. We st rongly disagree w ith the proposal phased in over a longer period than w e think is and are w orking n ith Ihe industry to document necessary. (See details on page 22.1 our obiertions. The new standard, w hich w onhi Until Cerini 2 is considered in runnner- apply to regulated enterprises inchaling electric tial operatinn by ahe All>SC, of course, u e can utilities, w ouhl iunt iake efiect until 1987, but we receive no rate adjustment for flu' plant. The mtist view it as a possible contingency in our transition from constructing a nuclear plant to plamiing.

operating one can be ditficult arul frustrating, as One result of the foregoing and other concerns many companies have found. The regulatory and is the strimgest marketing program 3 our Company public scrutiny can be intense as testing at various can mount to meet tlu' growing challenge of an power levels is performed. In estemled testing increasingly competitis e energy market.

preparatory to commercial ojw' ration, Fermi 2 Another result is ame of the umst estensive cost-encountered a series of equipment and procedural retlurtion programs in your Company h history. To problems w hich, u hile not unusualin the industry keep I)etroit Edison competitive, we imist make it and with such complex mechanisms, nevertheless more -lean and trim" than es er. 'Ib ihat end, w e frustrated hopes to Imgin commercial operation of have instit uted cuts of inm Limi or aimilmr in the plant first in late 1985 and then in early 1986. s irtually every phase of our operatiims. Ih cry We cannot determine with certainty a romn.ercial reasmiable economy is being elfected, short of operation date for Fermi 2 untilIhe Comp.mv aiul hamirring Ihe Companyh ability Io ogms ate its the Nuclear llegulatory Commission (N hcl reach facilities safely and cificiently and to prinide agreement on resuming operations at ihe plant. needed customer sen ires.

We have been working diligently on our ou n As one esample,I)ctroit lilison in late January and with the NHC to resoh e problems rt the plant, of fered a s oluntary separation program Io ceriain and on January 29 sent the Commission a detailed management employ es who w ill be 583 ears of age description of actions being taken to em ure the or older by Ihe end of 1986 and a cre uilling to planth safe and efficient operation, whic h is the leave ihe Company by Ihe end of Alarch 1986.The top priority of your management and Company. program, espected to im oh e several hundred As one step. we have formed an independent Iwmms, w as designed in part to redure Ihe num-O'.'erview Committee to res icw I ermi 2 opera. ber of supen isory les els and personnel without tions, critique plant management and ath ise us on icopardizing management etliciency.

a program to raise Fermi 2 to the les c: of power Virtual cannpletion of our surressful needed to achieve commercial opr . ation (the S t I-hillion facilities espansion and mod.

AIPSC may determine what that ievel must bei. The ernii.ation prograin marks the end of one era m erview committee is made up of sis recognized for I)ctroit Edison and the beginning of another.

outside consultants on nuclear energy, and already I)nring the long lwistwar renistruction pericxt, has made initial recommendations for improve. earnings u ere supported by 31 l'l)C and of her ments at the plant.The committee u ill continue to factors. With ihat protecti<ni about to be remos ed, con + ult with your management for an indefinite w e must have adequate rates to em er the large period. investments made to ensure a suf ficient supply of Another development which conecrns electricity for our customers and to firmly estab-your management, in addition to Fermi 2 and lish I)ctroit filison as a a ustomer-oriented, the(arnings outlook,is a recommendation by the market-driven company providing gomi prmincts Financial Accounting Standards floard (FASill for aml good sen ices at f air prices.

an ar, ended standard governing phased-in rate We has e s;n nt billions of dollars on brick and increases, abandonments of facilities and dis- mortar to ensure adequate supplies of pow er for a allowances of certain plant costs.The proposed grow ing and bras ily imlust rialized economy. Now standard is discussed in detailin Note 3 on pages our resources must be directed more than ever to 33 and 34. Adoption ofIhe new standard could satisfying our customers, selling our prinlucts and seriously impact your Companyh retained earn- earning a fair return for our im estors.

ings and ability to pay dividends and borrow We are determined Ihat they u ill be.

4I Zd (M !d rrnest !. Gr m e. Jr ( har les st Hentel uaber 1 %i at ths h s w e t hau man ol lhe burd atul rr esulent .nu t t tuu man ed tiu Hewia asul cluef lin.nu ul olla er ( hmf operatum ( Htu er ( hmt i m uin e oHu et J

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+ %m 0,; m L ~'

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q :Two;dekeiopmer is have*deni1-

' inated the past year for Detroit ^

f Edison and Southeastern Michlt:

- jgan:virtualEompletionof theJ-

' ?Companyk massive post-World{ . ,

[ War 11 program to modernize and , -

expand ,its generating system, arid - ^

s continued business resurgence -:

firsulting from an improved 2 - _

economy generally,but more

/specifically from aggressive eco ';. -

Jnomic development efforts by the ,

._ Company and many other organt-L zations, botti public_and private,(

~

~ lshroughout the ama.: 1); ff ,

hc It isihese'deselopmenis -anM _ '

~ ithe prospects foradditional. qual.':i .

N ity-of-life' gains - that'are re-i- ~ ~

flected iri the theme'Fmyer for -

Progressin Southeastern 545 chi" -

j gan." And, People, Power and L.;

f ; Progress are the _three basic ele.'.' i

. ments of that, theme which apply 3 , 9

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W']Mlg ho 1982,the Utiltei$! Wales andSM a

N l particslarly.Michigahhad been(Tsj 4 s

(buffeted foralmost' ' ye:arsi cpf .

[6 l lbyamajorr .. . . ..,n end.. --

ofW t W .

s s ;thatyearsaw t at G >

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< '7# P*'""' '" "'**'the south i _O4 inearly ispercentin %:

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$ Nb)fernpartofDetroit Edisonsl thestateserved($:

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b? Anes < lierrecessionlin;!m! M y 7-M197pf5,1 i from the,uut tesuhed laE .

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' of tfwag OPECi '[Vv#w p, );and price d "ing world ~ titionomtrols fed scarar' ' ' and

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( 3) isceseir 7jF w g %[dnotherh,,,f,a,,,;,,4which o 7

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eq sposaser asws gicgnw;;;gargg' , g ;

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y. g:BE.p@. 2 t*11 .. i struction was weH underMsp 1bringabout

. g,gy_'needed changesand? y ,,g; ,

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cyf } Cf F 4 y - economicandsocialfabricM gstructuralchanges'in NW' wee 4eing'of Detratt the' M ,stats

to.th m w T{.V .?. .- p .. i. , nosmic t 4mp a w sense,' ? M Edison anditiahorebolders, ~ g h;g..W 7..

.,...a%.N,.3 :.[./.NgC i Q j.;/ .

.' L.. . .Wi J Mwas"emIIestSee. '

}Thottwhy Groups the Company perth6. W .

... m -

,patedseentensh'ut@@amiY '

krs =uppors =crs ires for f W9 la.bor,governenen.t,arincasforf&,

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, j, ,USDd @ M @ ,M ~ M ye-8es h been .

s he robosion indu=sr3 include in.:rurason in kh., j reReduptheiraloewesandi""% M(. ._ , .7andallhaveennN d'i nome hartideriaannag & tributais toa analoresonomicL

6 roboeir shcor3 ae umcomh couae3 $f p 4[i fg@by@]pg; a , rebound.andianomybetsveg , ee n

communi 3 coniene p - jm gegrg- ( W neededleeig-earinaructuretandg a labos el and remearch, e m sm,ies'

-~- --

=-ensinly to ge' t, inwa.y

,m

- -frome.e r; t ~*. busineesh n -

mm xe A. W; -(oneepW'$ r +

des elopment and sensing ye- e . - - - .. + .

aa abe Indunsrial a$g; such' M y. on the auto ;

~

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pursue vigorous economic develM5and;in;facCachieved a healthyj k '

S .. s opment programs to achieve thew wourplus for thelfirst timethis since( ?,

[f9

'e..

. (diversification.Theyhad to; ' l, . $1973f nimportant simprove thebusiness climateaA - f recoverywas a program recom- @

A facterin -

k, i mended to the governor;electin @

[r. ' jbothLto

< and to retain attrastexisting ones new entag{Q glate 1982bythe Michigan F 6 f (threatening to flee to climatesi 1 VeialCrisis Council headedliy !

y .' , perceived to be more hospitaf A ? Walter J. McCarthy,Jr.fchairs 6 t b.a m, O ,J. cjbleMeathersise,economie ' . [ man saxichief executiveofficerP -

p J ~ j cally and politically The charges ;; > ; of Detroit Edison. ,

{? - / had to be far-reaching, and T f.C ' # f* The states rating.Eredik onces m s "N - #

j many doukihave to share theS N - Lthe worst among the 50 states,is/

4 M w wy ad,dresponsibility forcarrying them&M.nowa,motig the,be. stb. qwhLui g o - out. , .

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.m (Every major sector partici-? f s E ] pated.Close and effective? ?,,e E

>- 4 cooperation took place ,s at theh2

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g f ,

'A , o dg . :. . Asertteileg enemics repromoedativel oy 7 , ;jV Wuan== noeme,lempeces roses grewei maa g Men get the Blee erecer Grosehouselej C. 3 s Asemed C.Isensee urasin eine.eeeeedemes of 3 p- __ _ N ;~

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< 00 Michigan income taxes, raisedi S.the country as a whole. In dea f was a pattern lof the past and) .

nin 1983 to help ease the financial? j cember1985,Michiganh unen Ethat dramatic steps were needed % <

D (crunch,have been cut back once? 9.Yployment rate

,was if the state7.6 were persever (" to- regain L .

g gand are expected to be cut again. ; cent hitslowestlevel since#R -sits place as a leadesin commerce :

4The state also has reduced thei J f 71979Fcompared with a natioimii l Cand quality oflife.; , ,

$ jiingle.Businessflhx folr smalljfigureof

"# : 6.7 percent.;Howev@ , fAmongliterallyhuhdreddofT "' *

{ low and,noprofitbusinesses, (the iniprov.ement forMichigan? ^

~

piecepof evidende that industryl eM'

<: and has committed tolook forf " : since December 1982is 9.7 per@' 2 stillcan thrivein Michigan aref '

i Mays toprovide generalprop+ 7centage points, compared with; y the facts that the state in1984 lekli

~

D^

,y 4rty. tax reliefJ QL f . (only 3.8 percentage points forn / the nationin manufacturingi m4

, kjoSomeof themoneyearned3 % Vthe country as a whole.Thei f _ d lantconstruction/addedmorei e -

M?through,the temporaryincome' .; numbers of people workingini , {pnew manufacturingjobs than all)mE '

- itax boost his been used toprog $ December 1985 were at recordn lbut three btherstates?and; Mvide recordincreasesin supporti ) levels for both Michigan and thei 7 shared with California the UiS3G n f 4of highereducationpelearlya? l United States / - ,f* y- leadin newindustrialinvesti . 3N ' "

7 qcritical resource _for the ads. 1' ^ $ Th'e state hhs eliniida~ted 29 h Sment andindustrial researchW f #;fvancedFesearch;trainingand; . . 1pbrcentof Allregulationsi ' ~

Tand development expenditures; s f knowledge needed to propelthe

, - ; stUe and area to new technologi-) Departments of Commerces ~ ^jimposed jg.,,, !o on hne business g,partisularly gg,, ,,,,,, by,,,,,,,gs thd;x W ( r cyalmy econompheigMs yp12rgely through the efforts ofI ~

, fLaborandNaturalResources,1 ~ Gejuvenation had been thek W'

and adopted measures aimed at '8

% the Economic Alliance for Michi? ghalting, and even lowering, the 3M iGreatsrDetroitMioutheastM Pgan Business Atiraction and t

~

SganM coalition of business and M ; rapidly rising cost of health care ? h Expansion Council (BAECLwhEhi #J .

, ' laborleaders which Detroit Edi? 3 for businesses by stimulatingb 3 Detroit Edison helped found ini j$ son helped foundin1982,and i y j competition amonginsurance; ' , - l 3931and helps lead today, Ernestd

~

gprdnipt actkm bf the Michigan WWproviders;It also has deregu? WWGrove,Jr.;vice chairman and 4N+ N N , tagislature, projected costs for] o 4 ated 1 state security laws and Schief financialofficerof DetroitM w'

- &stateunemploymentcompen-; _ gupdated and streamlined fran- ~ Edison,is chairman of the5 ' ' '

Ssation have been_ reduced ,

chiselaws to make Michigan

4 Greater Detroit Chamber of J

[. significantly, Efforts aiso'arej , Z g, ;imore competitive.' .y g , -

~

lC6mmerce, another BAECeliary -

A contmumgtoimprovethestate?

~

'iT he dhidng forcein bringing ? iter member /and wasinstruJ

' 9_ workers'_compensatio,n systemZ ~. _, .. , _

> iabout t' hese much-needed N ~

J mentalin the Councilt develd. ;

p, W"

' Nainee the end of1982,unemN ~ ichan6es was the recognition byl ' iment of a'liroad strategy foss ~ .:

n ployment rates habe i business and labor ; and'setion 2> ,

$mordsharply for state the}dropl and ? ed i , 'N (by a receptive state' governa " implementation . now in proiJ eco ._

4 WSoutheastern,Mihhigas than forJ ? ment - thit

business asissual"J >

f gress;Bylate 1985,the Council; ' y0 t

g , .

w -

- - n ^ -

= w

^$

, 4, y- "4 "< '

, y y .

t s a r A ..' , gp .4L'g V O MM . No".4'. e $ + e, s -- * " w .y' % i " E 5.b ., g . J TJ.Shh q Eg Q ,., g j hh i

~ ~ '

__~~~~

L .___.. _.J llertricit3 help keep uirhigan ~

a uinter uonderlaand c esa at nighs.

p wg *

%C* ' th . .

], ey ,g g;

g[5, pq y n M^%S V ~

i;w 4 % .v sJ ~b

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5eM$k faresj% O i

Y3 9mistaMthm '

p pi + ;disceiosand

.=r.emfororandirium forconstructiondii g r x. .snerieme.senounceddeedbecauseafits e.ar 3 m? i _+

perceivedreala-ynlapsdalsd 9

both residendaland nonresides e

f ^ ftial- definitive signsofi 7#1 J

labor,isnow recogniaud as thel ' '

~

?* ed.,f.gh roboelen censer'orthe;world. port h

F "G

( % , , Age M"ggse'M Jtumaround

and , y example { -

F# J lungsweseed edi ; ;fibchnologyinedtute,foundedine

?? , 2 thra record 12,000 new t

1 set {wastsangef aninnovag, ideeestimatedtsheeN d ehr=Han,gowrnment and[y' INN I ,

C, udN "i

N- forniedinSou,theast,U, 9be.s y c n..gg- - - - - - ' - ' - - -

dadirmead '

Machiganen less fora three-yeary , -laisor"9"r""

'W eS

I"#I- '8 u - ;' M2tesal'of 34l000; As'a resi$lof aV Y"puier .manufacturins'q g -

c,w;,,,,andiaMi,ugny,.ancm l

The -n orn : mme f _ , " g[ chaseleWM snioisths'agiqand,{tr---7; ;;;the Ann -

uarhini Training {, ;g y,g gy g c (art into the n.ationh*Autoenam )p a prograin. uperii ca hinaiher ninianii.

p:

o~

g x g g -- .

y, p g g y tton Alley _ x u- ~ -

e' . > record 272.e-d=m=in, ass 52 7 otheribd,,-pdator6an"ip ' .

~

a nninghan..i, I heipiog pro ide N 4 , ?The f0ndamental structuialM f rationshin at as which Detroly q ai aa.aniagra E

changes needed'in the arenh ec@ (Edisonis activefinchade;they "

uichigan u orker. g$jl # g M M g'Wg'g, ~ (J.Highflhchnology,the jj uieh neu joh -kil1. d: , - 1 MAhhough Southeastern neichigan M W M iat_j Governork h'N[p; ,

g e gg g gg g . W=f-NonpandEcoE f '

& ing manufacturing centers; local { ' i nomic Development, the Detroit;

~'industrp is shifting away from } ' , _ .EconomicGrowthCorporation7 ,

+ ,;;gaking pnxiocts with roarinep 414 aired lbyLWaher1 McCa E '

(,6ndanEzed preces /es thaGrej , 5Jr.;the Michigan High *Ibehi ,

' (nologyTIhsk Force and theR ghipe for ridding b/siates and G ,WGovermeli Encutive CorpKA, j Mixamtriesoff6tingMAEwagesN

= - X iThe sophis.ticated products off ' dStillinher sthps have beenD-4. ,

, & 7today and tomorroQ are more N ;taken to stimulate research and

dependent,than'everon thej G M business psogressnnhw MichiO .

gareas highly skilledlabor forcei - ogan Research Exc'ellenceind? T ^

~t 1FMdcDevelopmentIbnd3

> dwith and.'the he helpiechnologies ofits many outi defeloped ' . # underwrites projects at Michil

~

m 9t'anding universitiest ' ~ 4gan universillesand theS : $ s

' eSodthhasiern Michigadis thd jMichiganTechnologyDeployN $

h"s %: acatalyst for the ecceleratingi

~

ment service lends technicalP Qg

.' Etransition from standsdi ~ 'Passistance nismallJand nuxliuin. M "

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. 4niaedmanufacturersseeking'to? , Land'the'statehQuickstart prop M SjhThestatahthirdiargestinduso f6 girmoderniee'their facatiesF C ' f gram helps make programs atgg i try H tourism falsol continues'to i ,

1 ' Mbepam@nchigan s svocati nalschoolsandcommu. ygrowsignificantly.In iss4Winie s .

Ma che Gesefreset of emerging ' j nity colleges more affordable to e 9 tors spent 28 pestent more ! _ 7

% echadogyisineWpartnershigg t Juniness; y g jj ' a (nmyinSouseastenMigan ! ,

fr Poflabw med managementin? .~ M1Thh stats also14nsaking more3 Jhanin1980. Attendanceat_mety .

t " <which todayWworkers not onlye ' ? seed money available to busii .

NPditan Detrm@nventbns s7s c

~ [ operate mechanacalsysthms,buh / ness.The Michigan StrategicifM -

Krw byme than 36 percenting ,

Jealso team up_with management 1 . i IMnd will provide nearly S80 milh , j the same perioide cw m l to introduce new techniques and W ilion'in venture capital to suppor17 f Effoits to strengthed$nrea

+ jaolveproblems Traditionalf, gentrepreneurstart-ups and toi, (business are animportant part? " '

N labor-management confrontan m' help small to medium-sized _busiY Jof the job assigned to Detroit i

" tions are being replaced J ca nesses expand and conduct i ' Jy e 7Edisonb' extensive economic w e sincreasingly by a system fos- ,

researchanddevelopment{ 7 ,

[ development program --theO 4 1'

- jeredbysharedresponsibility ( Additionally,Michiganisoneof f : ilargest such privateeffortinf , ' '

Jnd trustt T 4y n, > ' 4 ;the few states toinvest part ofits ? JMichigan;For examplej com--:pc

D: Michigan'slibor forceisi UN a Pension fund --nearly $150 mil- [ tpanies aidedbyDetroit Edisonini 1-d.,6g new skills, both? - Ison --in new busmesses

. _ ' (1985 included a computer manu D ~;

through state funding and i , f FAgriculture,thestatehsec@

K facturerin Oakland County,' auto a s Gnd largest isdustryathe first'isj ? parts suppliersin Detroit and , I ~ '

,, ithroughcooperativetraining?

programo involving business,, , ^ rautomobile manufacturing $

1Howell,inductionmetalinetting2 (

( 7 labor, agriculture and acade'miaM imaintains its strong position.In ) {facilitiesin TroyandTrenton,a' - 26 NThe federalJob Training Part( . Rtheeconomy.Foodprocessing? h plastics firm in Port Huron /aL '

i

, (nership Act provides funds forj 9 and forest products are among s " CspecialtyprinterinMillingtonk r i"

g private 4ector job training andR, % the

target

Industries identified 1 fand a producer of famous toyJ y piammmtpMichiganhBusiness ' 'for specialredevelopmental( _ Ltrainswhichreturnedtop ~ _ -

" d and Industrial Trainang Programy - ! efforas by ths Governork Comi, V1 Chesterfield'Ibwnship,near) ,

s [ offers free training assistanw tof } misason on Jobs' a nd Economic [ tMount Clemens;after a few ? - ,

newwexpendingImainesses(hy -\DevelopmentQ % < py years in Mexicod . [4 y ;; . ',, - m . y ,, ,

Primary goals of Detroit,Edi :

g' 7 .~ '~

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~

1 Sperceived bp futurist Johns , n-

^ ! Naisbht hasbeen dependent ? 0 llargely onisound infrastruc- l

- itureincluding a reliable and1 .

, / ; fairly priced supply of electricity $

~ WprovidedbyDetroitEdisosiQ \ '

fThisinfrastructure amainlyl .

4

' facdities forenergy, water,trans-~ 3;-

- ~ fportationicommunicationsihd _ .

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}i c@jtwomajor service arent developmentsinoucl

~'*, a rebound by basic g

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ficationwhichistpansforming_ a '

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most advanc'ed high technology

! g e a nters. ~li.g' O tahER 3lgg lg j #

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1 ,

l I,.helplag the area claim an Wei

~ f I S instensing' share of the service:S, I J ' ~ industry.a' growing mainstay ofi ~

i< 4the U S economy.The11/S4 ' ,'

(2' b . ' wBureG. u O,f Labor. Statistics.y, Saks( i O

+- . , +

j' A

') theDetroit metropolitan at;eaf ;

F W ' gained morethan 50,000 man? ?

=

5

., h lufacturith%3bsin.1984IandND Y -

2<~

.7 s

s

\\\\\\ \ d,$(""4'PUrdversityof shows there areAnchigan 54,000 :nore Vip study? >,s 9 '

p\ \ \ \ \ \ \ \ \ \ V q\[s j. l service andjradejobs'here.nowg I

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asad a record 15 snil- J.

, 3;g 7="+ g 9., 4 lions psa%=cengerai a t p]. .I[fiDM %: .

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t m.1 lsescone ueiropolitan ppc-

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wer IIInf $ -

e a'a,.chs mammaa _ -Q

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5 nouminig pernaism increa=ed u4 percent in lHN5 us er IllM4.

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' ' ? !. ' -$~ ' $ 'lM 'I Ul - the iContrdN upturnin tihgimportAn'tlyisM Southeastern 9k ,'7 y d;% C %$M < ~MF ' '

, Q^Michiganieconomy have M% beesy ~_ - ly ,,j O ** - -

E--

maiorgaindin construction, airy :s ~7 ~, .

~ -

" transportation arid retading. Ini -}* . . * ~ ' * -

G

- anhMunny nnehined car andi ^ '

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~d A s= e-m trucksales hit'a recordlevel? * * ~' * . 4

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W Eletremit Edsessin 7,808 " ' . icountry. By 1993, larger conven-l (thr,oughout its natiosNide system. , ..

, aquerukunBe sesvles ares \lsf" [llons and trade shows will) , : Hetalungis makStrongNU$ & YN_-

-U geen8tEngatlevels'not seen for) , [ attract an estimated 250,000W p[ gains,'too;The Michigan 11 #.

decades.With interest ratesi . ,

, f more delegates ayear, create L Employment SecurityCommisN J ' -i n lower, property values more :-

[; attractne and office space in y ' ;theLarea by an addidonal J

( j;h 9 obsln the I$hM last 'year ! in f greaterdemandinon-residentiala L8150 million annually inconverpf ' SDetroit metrog'mlitan area alone? J :

N- ,'

bulleng expertenced a 267-pers itn,on-related reverpuesi , :E# , , jand TheNMewssap[

, fcentincreasein'actavity from T , [ .jThe new hotels being built ink 2Deiroit his become very'sttEacy ' , , ,i

~t he fourth quarter of 1982 to ths ? - / Detroit and thpoughout theinetM < tive to developers allover thei ,

i

% accond querter of 1sa5Mn estI{ , tr! ropolitan area will benefit from) ' / country as other urban.niarketO ' w, - ' '"

ymated 11.5 million'squa:re feet of 2 itheinflux of people and dollars! Vhave become ovdratored andi space have recently been com ' - Malong withlocal restaurants /f < overdeveloped."In late Decem+ ' ci-

' ~ '

pleted or are being builtyg Tentertainment facilities and P ber,the Minnesota based Daytoni m~ _

." ~

Residentialconstrustiorihap ' yhersupport services!Onesuch! < ;HudsonCorporationannounced; . ~

~ recorded equally impresside, ~ fenterprise -a festival styleL ~ f plans to build 30 Mervynin . ?

. igains/According to the U.SZ , : entertainment, food and shopO ' iDepartment -

Department'of Cdsver.m 464( 7 ping complex called Trappers ,

} 6350 people, stores employing; in Michigan,withf - o

percent more housing permits c ' JAlley in' Detroit's Greektown 1 .

about half of them'in Detroi.tf _

. lwereissuedin this area in 1985 hp Earea --is already drawing vist ' ' "sulerbs.TheOhiobasedFeden * ,. _

N f than in 1984,iriple the amount in ! , slors and area residents alike in } , ; rated Department St. ores E s J "

U19821CondominiumSarerisingc ' funprecedented numbersi - organization has also disckMl[J~ , .

M fasterin the Detroit area than C N Air transportation.la' . ' iplans for eight.new MainStreet j Jutlets in metropolitarj Detroit]( y,

_danywhere

~a els.e_in_the count _ry.i_, s _j un_dergoing sign,ific_ ant _ a

'~ _" _

99fgaddjdMI Misds' y 7 growth. During the past year,j ' " r Millions of~sq , . .uare feet of:. _ .

~ Iactivities-theespansion'of on ' ' Detroit Metropolitan Airport : - ; added space are.home to newf ' ,

, ynewadaptationsforexisting[ f handled a record 15 million pas 3 ~ [ enterprises, including the a y buildings--the pictureis even1 lsengers- nearly four million; ;research and development? g?' -,,n-

- ;more impressive.For example)a ( - Lmore than tne previousyeas? ' 5 / efforts of high-tech companiesk ,- f]

NMs200millionexpansionof L C " WMuch of the substantialincrease s iThese also help make the re? . .

MDetroitWCobo Hallwillenablei 61n traffic thAt has made Detroit i 3giontliasic' Industries-such as 7 +

?

7 ths city to' offer the highly com. lCJMstro one of the fastest growing? ' automotive and steel--more sffi.- - "

4 petitive convention worldt ,; ' F [ airports lIn the countryis due tof icient and competitive; A recent t <

f 650,000 square feet of unbroken J ;Hepublic Airlines' decision to use New York Times study placed1 ,

4 dioor space-the most in thef ,

? Detroit as the hub for flightsW f Ann Arbor and Southeastern <

, c ,

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$4l.*G St h h $O NX% lO M r Y& bY d a ~ %n, k.k$ r r . i+si % - ., $, igw JL m;: mig: 'f& k is I

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- l (.oniputer rapalillisiem pros iste new les el= of flesi-t:

.jj tillit3 aust qualis3 runerol fser musonnostic produs sion.

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,LA . jmen ,t,rensarch and computer p ( .

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4%?W%qwuWW @controlsforGMkhighlyadmyg

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m - vanced Saturn'new earprolert,f M

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- ' ' f7 " ' Lhave the bestof two worlds f7p q , ,

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M.y hhrougha joint Foud Manda vent

,, s - , y turein Flat Rockisouthwest of M, ,

p g m *% -

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_ WADetroit Once a.formerFord] W plant isenlapand rey _

y,, ,

p . m , 7 J. l shaped for vehicle senasably,hj , '

y 1 Michigan at the"mnter of a Odid ;; ~ (wgliemploy;3,3copeople maidng' 1 if", '. western)manufacturingrevol < .t?240. coo"Japansee cars % year!;f g ,

ution that_could be as dramatici < . ifor sale through Ferdidonwetic 1 i n n.~ 3. n. ore n.a o 7 _

Eas the'one that began wkh HenrR ' ' i network. Among factorsdeatX

5Fordhenormgassemblilinef T persuadedMazda tolocatehde? .

i , ,

i4.000 neu resailjoin ,

, ;.g he Mhindustry is EdE9was Detroh FAlanr4assuram'OD u ere ereaaed in { g:g 4,.g gg, reEmble supply of electricity [ [

meiro,,osiaan neirois.

no- niou n nevroi -

O e - - .

hMW -

- .- 96 W M M 'E - -- - - -

~

neu 'I rappers llicy -

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Michigan (Andsupportingthat( . lother eligible businessesa

~

= a one of eserai . ,

M

~

nea resaii liopping industryaremanysmallbut? .m - 4Dieneelfleetleetlan 8eestinK i enaer openest in in%5. { + _ % [stronglocalresearchgrVupe ~ jp gagggym g is taking.j-c % '

w .

Sworking to make rohutics more ' ; many forms in the serviceindui-7- J"Wi Kh )flexiblein todayh and tomord . / try,includinggrowthof twol i * /

s y trowh workplaces.7.y .s (relativelyyoungcompaniesinto)

D iA hey to this flexibilitv is ! -

f . ,

^ advanad computerisation AO ," dwoof thelargest fastfood.3

~

Jan example,1,500 employes of):. , .g Plazailnctiwhich stal;ted in 19601

witha Mooinvhstmentandlast( ,

l- l GeneralMotors' Electronic Datas s TSvetems%most of thent transa s ? year reeksed 31 billions in sales; is .: '

'ifer ired from ED5"!bxas opt 7 ibuilding an ultra modern headi, ..

ierations--are.developincal L, jquartersin; Ann Arbor.'ibwnsgg 7hationwide telecommunicationem -

~~--"=c==

E9 I

- .h' - 7networkJwhich,among'otherJ 9 (things /wtMenableft.heLeompanyl ~

useontrol, from its suburban"

A 's Auburn tHEs computer baseiGM 4

=

manufact%o,e, ns: .

+ +

throughout the countryL p <

. . Another1,200 persons at CMjp ,

, j _

J locationsin Troy and Madison p l Heights willprovidemanagei

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- [covbr a walknn square feet of : 62 dimate provements hadIhit are requirediTo additionalid?j ; _

yipace.Uttle Caesars Enterprisese i expected

' hundreds of millions of kiknvatti _to increase demand by } _ L complete .

the recovery.

, j

" 'N mo

ihmJwhsch has almost m0oute 1 (hours. And not all' of the added : ' ! agree,the drive to enr.ure the k V M letsin Southeastern Michigani , idemandis for traditionalusesk , fareah leadershipin high techn61 .V

~

" kand nsarly 1.oo0 nationally,is - *

- iPorexampleithe4w OmniW .

f ogy must continue unabatedl@[ ~

1. i

% L international Hotel; in' the 7 314 The stateiteducational system is

, " planning a new b=dryierters;namnpisein DetEoitb Farmington , [

e i Centerin downtown Drdroit$s % couragement from both thel , $ s y' 'titBis suburb.

DiversiSemainehasbadnur? e sell as loof the15 hotels now? ' pubhc and private sectors.The( ,

- tured Isi part through' foreign '

A,jbeing buHt in Oakland Coahtg - galns madeinlabor _

manages ;

invasamensa-frees a Canadian dust north of Detroit,are aH. mment cooperation must continue 1 - "

Telectriciincladingheatingb, as3 y and. increase? , . t ~ @ .y

-la.neiclagasst'Thousb~

grain terminal'in areaBrown to a j Citying f are many of the spean syw office' 4 Zaut steps are under way toe ' q ,[

' b. growing nuenteroff , _ -e g buildings 2 , 1;, ; !liring about the neededimprover

' ~

(and Euroymon autosmotive parts * ; Aggge ugg,,,,,,g,3,,, g,y,,, ,

. f ' .larme%goperationsini ' '.,anas,vaislIn'sinin test alarse &jments.Once goals are raalisari,the these %me and s othery ' ,

g? 8''8"""dn MichiganJ ye.,,,'the h...dak"is far;g , q back'alreadyin progressini " ,M Otwiously, diversification ami $ O from complete. Many observersj Smitheastern Michigan wlR be a growth are heav9y an===*niant 2 ' ' istill beheve Michigan is deficient - e } reality and the arcab quality of 5 j life willbe even betterq .

I 9

@ en electricity.The new growthZ S~ w'z& .iln =ch terins%,as of perceived &udu,,, business;@hd26hb&&dK , w:

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5*'M roit Edisonis a key player i j # ~J "gsp# { : d*h .+ U' .(

' '* T* ', -hvirtuaHy aHpffa ts to Mal g -

h 9 :/iae Southanatern Michigan / ' ,

l [ y .pTiwCompanyhmostimpor , .1 r '

tant role,of coursei.is to provide y k enough electric power,at read W m

i p sonable prkes' to operate'and i I % ' - s attractLthe growing business ,

& -=^ g needed.foragrow W S' (ing economy,and to he5 sustaing

~

L ' /and knpeweinsiguantyof ufeini

= -

,,, p ; ; = non business areas- homemak - ,

k "tLif(, recreatiori and a broad j range of hw=ehuist,cuhural,iw' s_ [

~~

./g .- .,.

(p 4 .-.. U .

gs % [g % ~

spiritua(and human servicesi

^ ithe first[need Iri fuWilbng this [ '

P I;a.. 6G f ... Q S .,~ ,s p ,. ^ $ A k . 7y S ohhgationis adocquatefetectricg 7

r. igenerating fac'.hties;in 1985,;tiAr $ty y'jJ.f' 7.g M ; . - ?. W:g ; . #.7:l

. j s. .)g;; 4 g..ei Mjppggl3.M ;f A.f.;g; p,*_

-a

]Casapany virt.u auy completed aMd7

- :- :c p/T H.':egfp:;tg#

7 9.g;p. .,. . ' . . , ' ,; . 9. f : _ . ; . t -$ W. K. { ih(,

L 811-biElon postwar facGities con ' M

=; % ,G . e j . J ~ - Jp,;,i g.j J. ,c f., 9.. .4 7 #u. .. r * '

E'

~

.m% m 7.....t . .(~d. . : :t : ~ f

, 4.t . - .. ... struct. ion and snode.rnisation ' v

.',:I 1 ". 4.". C." ?. $ - s Program designed to satisfy the c '

..y[. - .),

2. [l 4,-

/ .. T ,' WS A:., 1i f p Y y4 ~' g6' j power needs of Southeastern ( ,

y?;=c; :.. 4 .y. ' cc; . ; b. . .

i ~. .,7 .. 7,.. .., aMichiganthrou6h theendon the e '

c :}.K f . J. . I; : . l , ~; i.7 ; . .

~

..,.. . l l 2: % " f -l20thcentury.; *

%:{ .. ; O , Tayyjeg MlestMlb-

T f SJ ,l.[i] ' .; i %.(Y '

-t.

@!:1;J ,;7[..b.7' 'l.~ , [*;J '

'."I.N. 7 [D -$.'.

.1

[ Mjtf , i1- i tinis progrman were the placing F-q) ,j.?pDf ph.i f: - .

j%ly.dl"%} J',A.< %ft'.:;@[

.6 .

-c 3' ~p Q .Mk.'i$ ^J r ' ?k ;in commercial operation of the r

.junitGf D.'theU17

-- t.$. ., z. '. - . d . 1 . ;

l'

, second Belle River ; s

,3Y 1

N _ N.f,[ .Y,.h./.5 fg ~.p,'hQlf[. ' 3 $g.',p Gj. { ;f V;J 9: y% f < V .jp.f )l . 9 <- ;pfw,,.PleMwar Port Huronb s ,

J' 4

%J.1 wn%. % .

e$k;'jihfM; .j;Q. .![.h.hd ,, d 2 theCo?and complNion and licen

% ". A;;M,?:';.:.c G.& En E.

..n

= ~ w...

di 3 % 4 hA.. u.9 ,O

..n -

y '.

4.ey y

' nelaar pow

~yh-Fermt er plant first commetrial 2 --

h: ~ 93~$.S '.N. p.f . ,d..,.,; a .g .. ; , .. q$ , y .[. . [p.l ,.i ';..h',',,tg.;Q(f n; e3 {a{; . ]3l?

m

, e. .y . ,ar 7 7. .

p ~

!near Monroe,

% .hY1 : h,N .4' [: [ g.((h h M.N [ Oj ~ . douslyimportant

~

j[ 3

~ t These were't'wo tren'nen .

$J'.; ..h b.h .{. stepsin this[ , ;3 s 4 R.D/(p4:e [ Md'.[.([m.,h p, 3 . ,

..-M ' .

6. Sf[:.41% jy .63 ;; agrengthening of I)etroit Edisonb .

generating system to meet prey

=i k.. Esses Bessede ameenendteseemse ' , :

.- f Immendedusessengof sherurmiF; sent and future needs. Belle 1

River,whichburnsenvironmen m y

1[ A, yes,eryammete geandsomes.L ii <

aseresesoperessesesenet , : tally cleanlow sulfur cost,wasi !

p meme neoer power yn==4heesend. ~ g (completed on_ time and Under; <

g ' [Weeb esserved as used-yemy ; budget,andis operating effi{ -

d ;

i gn lciently. Fermi 2 received its fullt - '

- - xNhe. . m

&& obbsC%Se.Y$f ^* u% b5d.4Y $$dAA $.E $1 Cn$ &$$ 0/hemN' *b ' 0,,mG

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

Er ,a

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ws. ,m,...- m

=

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yq <

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' qc W.em ,

asterimiennew i ," ^

a einsehasbeeneenshaesing alm-t ?- *-

g. ,ggig,,gg m.m7- 9.o ; . seems--e 9m mgoes lesseemes bessensene

< , SteMEW. . e .ylegebesfey,reEmbu Mg3 ,J m

.O assessetsegnamessteestes. seamager. >- ,-

', eIqyapulapasselemet ===#===. ,

e s mayne eemamme mesessen, andaenseo m. 2 esses, assessnes m< -

g - + -

s:v kemidassastatammitoshare - e "

m: @emessantenne ame nsmusem4mmetimmesy _

~

y -

., ~,c , . 39 _

[ mhghheMI) storm _7 h.This %h . '

espebleadprodmeing L3 mimon. c powerinner uptionsA 4 wtg? " i ~ ~ [not andy the brkiend enorter. .

- g T needsof thefuture,butalsothe;

tesenesseofstocadettyiandwishf _ - second a new-- ,

s pesimiKampectedasadd tamil-l E controlsynemen is bein' s ip.a.m.d r paraonnel,financialandother g " ~ _

? anstasmoses,therCompanywBb isde ANehhpanElecu'icPbwer m ,

nedadamakseen ' , ,.

a reassfeffleiencylmdadesgumee #-

e 6,Namemesentempebmapetuncre- C coordinationCenserneerh deemWe abamm= sets;Thiel ' ? " Arbor,withwork tobe' finished' - dristurns toour$esA00 share , , '

m peeleimasSouabesseuransichigenUCbysende==p=s;of as7.Thet? holders when y% A . >

==nencein the servka pre , ,

Swaneseensoeur Weemeerseemereurreva=me= mukeyt E_ _ Daron ; censer,operesedpoindybyp a -iand Consummers mded ;i ',mour c. tsmenon A 7: c:

ettensneaestylascosabut aboE < PowerCompanp,soonkers th4 % cuseoneers. ,-

fehet8statsaateneandindeed theE , generating sy amma of both com 7 q==miresnestieheereske. . , : p.nies todewrmine whicht ~

4,%3eusleensees.

,, g,% ge tAdleIn6@ y

$/

. gg,;,ggggg -

power.planas are most eastWM business operesions to protoce' n , e a M,,, seems? j u '*6"""Operam e any given 5 dh{kself from severe cyclical ' p-

+swasp =HooisDerek EdhonY,

^1 Aes,.s.ci,aasas moverands . L "": *"* "8' P""*' " - *"d 2 b

l uys frosa-otherutaties_when ',

' Inn'ad 4.Detrek Edson looks - %% dvereined activklesQ JS rr

,g ,g g,j -

such transactions serve the best ; N: iThe C9pispoing kinewW > : _

g" < interestsof.thecustonnersof the; 2 -: wholly' owned subsidiary,$YN-f

^,

. DEcofas a%bormory"m ,2 aunruisymeensM@

we companies. ,

'~

m are under wayy~ iw_ E .Puture needs fathk generaw' baty of' diversification.In

" fexplore ihn posential thei Q, and_

m

' gjg _

j-tion"and transe=3==an of power promes it is' offering for sale.-to i- #6 <

s "

Cem a GOC) ,, f are the subject of an active stra- .

Ti nM Derettilssched . 1881cl P am% prases nowy _ other utaties and other busi-

~

$g;gg.c4 .nse.7 ., resent.oc:wma n 4gg,gy Jurxler:way -

y at +all x levels of Detroitj -w Wiwsses mam as#11_

y~ .. , comessessammemmesamososshej .

gQ. ^~ggensduiselleyadd4sS7prin6 g,ne.gw v ' t A emmisenessyneessapeemstems T M80Cwg -

censereneswesessemassess

""8""8* ** **"""""*8"

i idvenendesseputersand? ,

h; g e ,,,,g,,,,,

,4 adsummedesempmemeansesser :- . y D **'*"'***d*8""'-

o.nessmengesmeenseeseeamme 4*b8Pr88* de. canrol om ' ; b

$vnssaanteestagof theCan ~

Jeershneveneenemmenessasses W

W

' , pesi@enetreelectricpower _ '

y mgesse ,gengie ,g o g seemamendamneswerkaboth{ B s % gene,essenamens,egen

. tharing normalthnes andinf ' ? and asweed m.seesh, meerJan ; y x q, u .

4 ,

",, 3: n Alb a $! L [ir No Y 4 , Eek- 4E h% $ 5:'t AD . 2 # $4 .1 s?.+4 Y &E?S a$.

m*- :m~

- - .,~

=g p

' T Q

~~

/

.s s ,

~

, akgmymng_wmygwggwy

,g d; egst N [< Mvidadfwith taalm to help i

%e

@s i7'Mx esa me arr i thnon.wie- bb managerial, consultive and 3 pecome W M- , -y( f are ai she runing e.i e os M(technological services in whiche- (for Detroit M=ans while4 , '

neo markceing h b ,9 Detrok Edison has a deep reser - ,

enhancing the Companyt oneg ' y

> lon one raladans wkh itsj s Ey opporinnisie .spia ma -

Tvoiref MM'and talent:In) .;

" -'m iorc h crea s e, a " '"'""'"

b Des, ks secrmd fun year of operg. f customers ,

iname ihr..ngh she x < .

g gg y:~ s

,g 7 g

.nierariion os ga c, . h E. called Utility'Ibchnical26,biA - Itant economic dewtopsment'and.:"

.I. I a Io2. [.'s$. IHX 1 yLievelto quadrupledIdannualsalest nearly $8 millioniAt; ~ l %g ' ( marketing tool for Detroit Edi((% ,

opera sion, o is a ma n, neu n e on ihe hori,on. p , z the tinne the subsidiaryn nsme ? ( ; son / Since Companyb special 1983, for enamplei th saetal cooking 1 x ;was changedin 1985;SYNDECO W e? / rate has been nand by three ares ; '

R ; created its own. subsidiary to : ' Esteel e ._ - i that might ath- e k , ? perfornicertain engineering! , 7 erwise have reduced operations '

' ifunctions and namedit; Utility ~i ' _, FirsSoutheastern Michigenprj - - _

C % I haked them shagether A specialT 4^Dchnical Services. l _

j ' economiciwh4. cit rate F h s Yet not au such'actMtids'arer N < isng-range isividw/As Detroit c , V . [ has been avaibble since 1984,10 i lEdisonh ability ~to mset de,mandh _ new businesses and e#sdag? g p(

(irs the m is satisfied with power E ~ ;CWnPar.nes expanding a b~ h ? plantscompletedin the'sosy(New ernizingiheirlocaloperathms. ,

meeting financialgoals'will( ~ ~-rates and customer equip. ; '

E frequireincreasingsales.Thun. _ ;menpfinancing imentives are '

. ' beugexplored s

3 E~ .{a maior strengthening amIL \ .]. .

iredirecting of the companyhf y Coaspied.wkh efforts sof '

' increase revessesesby selling, jstrategic marketing plans was f .

completedin 1985 with a goalofp Tmore electricity have been>

c Eselling an additional 7.7 billion b 2 numerous.streamising and costO O

. I ; kilowatthours of electricity fromj '

fcubing actions.ForinstanceltheE s

.: - ,< [ Company saved its customers . ' '

R3 $y986 Ihbough= 199(L . - n ' f niany millioni6f dollarslastyearf -

' -r - - - -

Whe new naarketIng pref _ Qvhenit prevailedin alegalprs *

[grasseiami a complementary?

L ceedingihat it instituted overi ,

ctistomer relations program /arej ; prices in a long term contract for : ?

1 designed to make Detroit Edison f purchase oflow+ulfut; coal ft om?

i erhniras uper i or f a more market <lriven, customer-

~

, 1 Montana.'It realized other multii nicki hernickie i x 7 oriented company. Specific goals L 7 million'<lollar savings by signing? '

haner3a-parioraac= -

2are toincrease salas by learning ; y five new 10yearcontracts at i ~ ,

prore.iu re .ic ch pc.i

more about -and satisfying -- " highly ~

attractive prices forlow; , "

a n. m r k eie. n' customer needsiBut'a corollary - isulfur cdal from Apgialachiai vooer%< n,. er.irenv -

benefit willbe to bring the entirs - fwith an option to extend for five ;

a Detrolt Edlum family" closer > pyearsiand by assembling the ?

' IaI.'

um s n i. '

+

+': ,,

a

. +e ,wSAm. .a t s h! # , Mr + 1%dg $ -;;; M 7 o

=

L O ne s_ei_..s. tar..=_i s .c. l_cr e ria s ._a n = i n u =c In s t_ir a u niln.e nt t in .a joiansli issnelcel progr.ases u isli Ilir I .%. Ipep.sre snent . _ ,

ed I'nerg3 ses es .slu.a se a fic ic.e iliilis 3 ni es=ing slic s .in=

" """ I"" " ' " " '

r-

< 1 J 'er {- s.s .,

> - p %%# ." }[ Q y

]i y% & @ ~ < ' y{Q j , -

y g k tusgset A Asil M playerfortheDetrekplserum@f [. ; mena=8M 'hns

M"res$lik teresesserM[#

kk ' ; [

ccurassais.em Tematimeenthsweaternateess .;

m enhad '

a[

s Y

healemaham.teena,In adh E . ?ory5plansadtsdeksitsbetr;sMQ "semitingthisyear hDeerett. f 7. M -

typuseefshamipumpaearsjemanada0

" hasslerstasicerswal~ represent M for Detroit y;4lmonasand udI=amThosans_~f gdippearances

. ' .Wheneasapleesdinearty i se D a cousinuing==naampfers urgseyoungpeopleandthstr$ g; kwabe.theIksgestof tskindinS di -

76 Deeren semeneusnommers. g -

perents to tnat whictrical.ettuipt ithecountryandwdR'ceswesK c '

Z pthii MX nient;wth_ proper caution'and W ? y,oessens off ehsee dady into[

stayaway.fromdownedpower, t electricity and steem which, ,

~ Leiseses@%asedshe'

' kyuhlis==emada beyond supply.S ylinesduringorafterstorms. pp 1Detrois FANson willbaqy fordeliv{ ; ?;l-

- ^ v ingesseerenity 'and retened serv- g wanes!hacenseof hia highy py mita cushmaers4The project ' - -

' ; sees as enhisady as pomade: ins s idsgree of credibiinty;anso. hasp ; would not have been possible , 'y - -

Uthelastyear k hasf=ad E ^ rgremented Detroh Edison inM ykhout the CompenA parp t w g,,,,,,ggg,,,g ,a,,,,,,, gidcaF TweNM,d series of TVand? ' tidpation. Again;the puhne , p '

es the pubbe welfare. electrical, , iradio mesa %ges urging youths ta p ybeneAlsareisignlAcant because f ,

' esEsty.suberanceabuseandtheP YSey NO'o t Drugs

A reissed & ; the refuse no, lunger will,have,to F *K~

biochure developied by the Com4 m. c hipiacedin acame and environ-Asuustremamenad 7[' cn

' n star'annusphe$ electrical'safeb JPany was slint to a5 custaneersC "'ensally ihable landnu j + y s.

' areas e _ g /

-@ y_

fis an ares in widets surveys shodr cand delivered free in built to; ,

hundreds of churches, clubs and" ^ [In, summary,Detrait Ediman ' j"7 '

. 7 ausemasershaveentreamseinfi. 1 _

2.---f

[asherorganisations for usein? _ hakeychligations:

~ desseehithiim.0 heaf '

, russen Iertidsis~an mannesianal ,

,(theirown Ee TtsconstanalyMMAbeoffl}l

+ "=

d m

~ peusress.amwinenthirdyeara a 4'yM -

"Fa%

1on.the eswiremament; stra substancey:o aL g jpseury;ot ciencyofa , it8 (aperednas.the

==== = eervene f a

=

c a' 7 Edison anadnues to niondeor? .a 9 and eothe sc@y==f its amarkas

,. C< 6 g, - - '

y?very carefuqy theipsehtya(diej ~K%,unashelptogspiermee ~ s- .g -

7g_ q jp 'ah*astalWdterWfromi ,

" ja Jas power planes.endasher e O M / /Mares,m%esI411pnet feelE>$ M tIbeh @ g $ $' inse

_^ '

b i ties; and to. ensure ===rma== " " fthe Despany and toshare- M M e twethaB reuphiresnants -instud%ghetfors.: ~^ l ^ ,_g1 <

9 $

R 4k'eneMannrequinstanswhish Jg/f,,,,sesje4. gest,g.,,g(f Q -

It gare_among the anst stringssa m7m ,p , ,g a.,,;,,,,g,,c v

~

e Ahichenshb tmreatus k

n O etp theeaunary0

. amuse ===msenes+% '

esemed boyesus eho feeEW J[seushenseern teleidense a better ,

Asapresrem. utmam '

J - '

%^ "0 R > however.Forexample,Detrois j;D

%* -- 4

. h a, y,

, Ay;;, business.

o

% pionsinwldshtotheanddsl M , ' -

'y ,z 6 *S g'-

~

y y

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y,fQ,

s. ~q .=.:.

-2 y *r, /

u

& f f rm g;

+

n

^

a r ,l ' g _ff, ,1 }# + f; ~ > ; ;; J a , m _ , . . + .

-- , J- - 6 Sedesy ahespNelsInees'el y .,h y 1 .l^,*,-

+7 . .

t t

ess$seensposesopseestsy.Gedney@lp"pg^.g;;

puesynessapop6msensesesi

~ -

e ,

=. paneseeseeksheseghees etwp 4, Q . ' ', 7 ,

y Q

-- : M. . aM eenpeer4tL %neewee w m dhsee..gg m L ( n. manuw;iuManiaimaak i -_

Q-:;' "

~

e i+ -

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

t i

1 l 1I11111011tl POVIew a

j Operating lieVenues fmilhonst i

~

s2mes s2.4m s2.au I!igher sales, reduced capital increases are a inajor increase in 33,g.,

" spetuling and tighter rost con- t he Cornpanyh snarketing pro.

! -- suan i trols hell ed I)etroit Edison grain and one of Ihe inost

record iinportant financial gains extensis e rost-reduction pro-l

j i in 19M5. grains in the Coinpanyh litruings on coinmon stock history -a f orther estension of l

, ; and operating res enues reacheti the es er-tightening runt rol of

.. ! peak levels, and kilon att hour inanpon er enul esin nses during h sales were the best since the pre. the past decade.

i l~

i recession year of 1979. With llcrortl !!!M5 res etnics of $2.M j

i 7s 79 so si az na u as inaior construction all but roni- billion surpassed the 198-4 total of pleted rapital spetuling $2.5 billion by ll.fi percent, runtinued to decline, although reflecting sales of 3ti.7 billion outside financing inneased. kdowatflunnw of electricity and i Earnings for Conunon Stock tmilhonsi Total earnings ot'S33-8.3 rate increases granted by Ihe saas anilliott alul per-share earnings AHE. Sales in 19M5 traded only ,

of $2.33 w cre all-tirne highs for the previous peaks of 37.I billion the Company. Total carnings kWh set in 197M aiul ali.9 billion

52. ." LWh recorde<l in 1979, and sales wcre up 12.2 percent from $29M million in 19&l, and earnings per in the fourth quarter of 1985 l l ,

! share exceeded hv 5.9 percent u ere Ihe highest f,or any f ourth l the 1981 figure of'$2.20. (luarter in three years. Saies in

l ,,77 smi !;

198 4 totaled 35.9 billion kWh. -

! Earnings continued to be sup. l 5'33 "^

' ! ported in large part by Af t'I)C Near rcrord electris ity !

sm (Allowance for l usuls t ?>cd I)nr. sah s w cre acemnpanied by a

! ing Constructiont a nonrash high in ak demaini as w ell.On I 8 I accounting credit made to the Derendn r IM.1985, a In ak uin.

tertime load of G.3 million kilo.

i ! i income statement primarih ,

! i reflecting the rost of financing u atts was recorded, erasing the !

f j l'ermi 2 construction until the old cold wcalher mark of li.2 : nil- I ra 79 no an a2 a3 u as lion kW set in January 1979. The i det i,;dared in s rvin . In 198 L AFUDC accounted for 73.7 per. sununertime peak remains at 7..I rent of reported earnings, tuillion kW set in July 1977.

Earnings Per Share compared with 98.G percent in The 1985 as erage ret urn on 198 4. Once l'erini 2 is placed in rofumon equity n as 13.3 per-j m2.a3 ronunercial operation, AITI)C rent. compared u ith 12.9

' 52. 1 52.2o w 11 he reduced;Ihus, inainte-san 2 pert ent the previous year, but SLED sL76 . sL 73 , sL75, nance of eartlings at Ft rellt still u as IH low lhe 1I.5 perrellt i

j i levels will depend on adequale authorized by the N1PSC The I Conunission cut the authorized l i rate increases granted by the l ,

Alichigan Public Service Commis- ina simusii fi oti: 15 percent w hen sion f.\1PSU to reflect the added the second unit of the lleile His er l investment in the new general- Poner Plant u ent into rotumer.

ing plant. Among steps being rial opes ation in July 1985, and l taken to help maintain earnings said it u ould make a f orther

nul redure Ihe need f or raie reduction wlu n it authorizes 7n 7s no ni n2 n3 m 3 l zo l

l l

l t

rate adjustments for fermi 2, total interest expense in 19M5 reflecting lower interest rates was $419.4 million, compared 8 ""3 3'I"""rl"M and the Company's reduced with $432.2 million the previous s i r. os sn unti cme rosi in J

( ^""" d i need for outside financing. year. Outside financing in 19M5 ',',"',,'.'." 7

,,,["," ? '"" " ,

( henefited from improt ed stortgage nonils 1 Capital spending runtin- securities l'alings by Ahuly's \t.n 5 .n a r95%.

ucd to drop, totaling $710.7 lin estors Service, Inc.

"" 5" I3 32 '

j i million in 19M5.That was down Ponunon cont rol r At the end of 19M5,32E74 neruniling non<is from $938 million in 1984 and I'chmary anil lone aa m tu

! more than $1 hillion a year in pharehoMers w cre participating in ge Dets oh on D end ronutunwonn oi n.nuh l 1982 and 1983. Facilities spend- o<tober 92 to 33 Hennestment Plan.That fi'ure h 4

ing should decline still more in rnscun nt in ni sous

. repre3ented 31.6 percent of the next f.ew vears with comple- . .

u9

"" 3" 2 '

i. -

those eligible to part. .icipate. New June : . so lion of the Company's postwar e

10 un estnu'nts under the plan n.i jui3 23o to o , l modernization and'espansion 1985 totaled $95.9 million, connnon snia program. llirluding $33.!Iinillion iti rein-Dn kle9ul neiniestnn sit l

' External financing increased veHed dividends and $12 million ""' M ' " PI "."'

in 1985, to $709.2 million from in rash im estments. t'nder $',',">',$,';"$ r. d na9

$505.4 million in 1984. Financing amendments to the plan effer- intal 3799 ,'

in 1985 included a $192-million lit e Not emhen 1,19M5, cash hond offering to cover pollution- investnu'nts no longer are I j control expenditures at Fermi 2 accepted and the plan has been The Company continuca.

! carlier than originally planned in corn erled from the use of newit to Int dia. appointed nW: i anticipation of unfavorable tax- issued shares of common stock -

WE m don on rates On July I law changes in 1986. Funds frorn 16, N,Ihe ConunWon

to the purchase of outstanding this offering enabled the Com- ag>gumed only $99.3 million lei j shares in the open market.The pany to prepay 1986 debt rate adjustments for the llelle

plan u as changed heranse um i maturities with a significant Itis er Pon er Plant and all other Company has no need for addi-interest savings.

isstics etrept i ernii 2, in addition j gjgnag pgnunon equit v rapital in Io an interim award of 51M2.9 i With interest rates down, the f oreseeable future.

i million in June 19M I for the first I -

llelle Iliver unit. lierause the ser-Capital Ihpenditures inulluine l , ,' ",",', g ond adjustment of $99.3 million f associated u ith the second llelle l

SLL" llis er unit is considerably less 33,4 SLou Ihan the $13 8 million recom- t 5" nieruled by the administralis e law judge u ho presided over the j

4 s7:n i ate prorcedirig,1)etroit l'.disori

"" " has filed a rir ruit court suit seek-l m ing judicial review of the Commission's action. Among I othel'IllillMs, the ($ollighilly (jl es-5253 5244 $2:2 $2 n tions the alp 5C's disallowance of e- - ' -

l i

j $96.9 million of Ihe llelle llit er b l iln estitient,inchiding $60.9 litil- !

.d J RJ O:.b2a lgg gjg ggg g.umminion 7A 79 AU Al A2 Al A4 MS Ate 87 A8 A'l 9n 2\

r r

L t

l l -

l Shareholders In I)is idend !

11 clin esamene o,,sa.,.,,,,,n ,, sn.,, .n, u,.m tthousnuts1 M s ime=4 ot sh.neh Men 33.s, ! a es aas

s. s us

^

,y,,, an additional toy ears-hegin- asked the Nil SC to apprm e un, three new im!ustrial incentiuo y, ning w ith Ilm ses enth y ear us "* e

"~

folkm ing commercial opera. rate proposah. Tu o u onld

=

tion-to renn er in rustomer estemt tim present elet tric rates res enues not reros erable filetal-melting and entnomic during the lh e y car phase.in redes clopment rates for .1 l'2 i s ao n u period. In its esreptions, the aiul 101. 2 yea rs, respertis ely. l l :n ai n4 as n)nmany imted that a shot ter Imy omi their scheduled espira- i I m erall phase in period u onld lion date of Niay 1,1:186. 'l he l attributed to an " imprudent" redure im estor risk and at Ihe ihird u onld establish a new cler-one year delay in the llelle Iliver sann,i me low er tim ultimate tric pnress-heat rate. Appros al proiert. I)ctroit I.dison notes cost to customers. The status ot of Ihe new rate applications that an .\lPSC staf f witness testi- rermi 1 as u cll as pro lHbed rouhl pnulure outre Ilhin ficd that there should be no changes in dm arrounting f or 200mo kilon att 3 of .ulditional disallowance herause the delay ph.nc-in plans. .dhuulonment load f or I)ctroit I;dison and

orrurred early in the construr- losses and disallow anres of plant about 1000 new jobs f or area i tion schedule before larg" rosts, s discussed in detailin u orkers.

l oudays of money were imohed. Notes 2 and 3 of the No'es to the In late loss, Ihe Company in this legal action, the Consolidated I inancial State- began ret'unding about Ingham County Circuit Court in n m nts. 828 million to custmners September !!)M5 granted the One positis e actIsm by u ho w ere hilled a surchat ge !

, Company's request for a tempo- Ihe %IPSC during 19M5 was in Nm emimr and I)cremher of ,

rary injunction against the restructuring of i esidential rates 1:176. 'l he NIPSC ordered Ihe !

NIPSC, thus allow ing l>ctroit I:di- ta chminate the so. called 1.if eline ret und f ollow ing a series of (

son to bill its customers an ss stem under u hi< h rates w ere court decisions in u hirh the sur-l additional S12.1 million m er 1 hat sharply im erted to penali/e rharge u as first apprm ed and [

l apprm ed by the 11PSC for licile higher-t han-average usage. I or later ihsapprm ed. Curs ent rus- ;

llis er. 'I he action u as attributa- I)etroit I:dison the new struc- tomers receis ed the : clunds as '

i ble to the arbitrary disallon attre lure u ent into ellert ruinrident r edits on their()rtoher bills.

, of $60.9 million of the llelle itis er w ith the rate increase f or lielle Former rustomers receis e rash

! imestment referred to earlier. Itis er l'oit 2 in July I!185. pa3 ments as they are identitied.

l At the tirne this report uas in an elfort to inrI~ ease cler, 1lH* rehuul,n et@ Mo W published, the Compatty still had tricitv sales attd stimulate re cutial rustonuTs using 20 not been granted rate relief for business gron Ih in Southeastern kII"" dill"""'* "I "I""I' i"I'F l" T i ihe rermi 2 Pow er Plant. In a shrhigan, the Company has month-l rase filed with the AIPSC in July l

1983,l)ct uit 1:dison i equested a ini%:ribution of On nership of fictroit I:di%on Common storis

$556 million rate inercase to m."n*nm j roincide u ith rominercial opera- .h pc M Un in n 5un anul Comur p 4

tion of l ermi 2. last July, the ga ny, , s i ,, g ., g g ng,s si,,n gs Comlhlily filed esreptions to an ineln nlu.nl* Ib M Tl M l521 M u lug.in i U 'IM .il MTEM admillistralis e law judge \ Pl o- h unt i s uunb llO'M9 M 729914 l le n ni.4 l'l oo l 7,Il l 4tt

'" "" '" ' ' "'"^ '

i Ilosal for I)erision u hirh sonnhecs 248 sh7otal Neu bu k 12 tn Su l5 mx l' included a recommendation f or i nson,non, ,n n i ninnns mam 7 nn rm, disallow ance of nearly $300 mil. i nniulanon s 277 ih t 90 t otun M oli 2 to; 'n,7 15o1)indI ant const!'llrtioll( osts

, sci non'"o"cain s i,, i ,i7s i.n I,n , ,gn af ul a suggestion lihit ilW es ell- IIlllef s 2 IM I IMIU11MI ( nunh n's Mft 2 n 122 t t hil I ale illrl case IW ld hisMI Ill I"IdI MMIM $ U' U"'

l e nt al 23M 120 l th 57h l'th i

m er a period of live s cars, w it h ,

l ;

1 1

d 22 '

l 1 !

l IIESI80NSIIIII.lTY l'Olt FIN ANCI AL STATEMENTS The consolittateil financial statements of Tim 1)etroit I:<lison Coinp.uiy anal subsicliary coinpanies base been preparett by nianagernent in con-forinity w ith generally arreptetl arrounting principles, baseil upon cur-rently available f acts anti circumstances ami management % best estimates anti ituigments of know n rotulitions. It is the re3ponsibility of management to assure the integrity arul objectisity of such tinancial statements atul to assure that these staternents faitly relmrt the Com-panyh financial position anti the results of its operations.

To meet this resimnsibility,inanagement maintains a high stanitarilof recortl keeping atul a n el fertis e syst em of internal cont rols, inclutling a n es tensive prograin of internal atulit s, w rit ten atlininist ratis c lH)licies atul proretlures, anal programs to assure the selection amt training of

<ptalit ietl personnel.

'I hese financial statements base been esamineal by the Companyh intlepciulent accountants. Price Waterhouse, u hose report aplmai s on this page. Their esamination w as rotulurteil in accortlance with gener-ally acceptetl amfiting stalularils w hich iru lutie a resiew of intei nal controls, as well as such other procedures they electu necessary to prosit!c reasonable assurance as to the fairness of the Companyh finan-rial statements anti to enable them to espress an opinion thereon.

The lloard of i)irectors, t hrough it s Atulit rommittee ronsisting solely of outsicle clarertors, inects uith Price Waterhouse, representalis es of In.tnagetnent atul the internal alulitors to IcVieu the artisities of each alul to (liscuss arrounting, authling .uul financial niallers aint the carry-ing out of responsibilities and sluties of carh gt oup Price Waterhouse has full aint tree arress to meet with the Audit Committee toiliscuss its esalnination restilts alulopinions,Mithotlt inallagenWnt rept t'Sentalises present , to allon f or a tunplete indeperufence.

A b 1 s.

I nest 1 (,s in e Jr u alter j sh t as iln Jr i n r ( han tuan ut the haar d and ( han inan of tf w Ikund aiut

( Inct i nuni ul t Hf u re ( hui i we utn eiItin en IIEI80llT OF INI)EI8ENI)ENT ACCOUNTANTS muu s uw nc i < t s n n l$'5Ct'lIIllt'l$1tillNL' 0 To the lioarel of I)irectors ain! Sharehohlers of

'"'" "",""'

Nruu tib uaisii .

The I)etroit I.dison Company in our opinion, the staternents appearing on pages 2 5 through 10 of this report present fairly the financial position of 'I he I)ctroit 1:alison Company arul its subsidiary rompanies at 1)erember :ll, I!m3 azul !!!&l.

! alul the results of their operations and the thanges in their financial position for carb of the three years in the period etnied I)eremher :ll, I!m3 in conformity with generally arrepted arrounting principles ron-sistently applied. ()or esaminations of these statements u ere made in arrordance n it h generally arrepletl atu hting standat ds aiul arrordingly inchuled such tests of the arrounting r ecords and such other amliting prm edures as n e considered necessary in the circumstances.

AE2. Y 4ultrtk1<

v

The Ikmit Edison Comtuny and subshliary mmparues CONSOLIDATED STATEMENT OF INCOM E Wr Ialegl Ihw venin r 3 i I198 5 19&l 1983 tuhouwula Operating Herennes Electric (Note 11 $2,738,33H $2,439.M35 $2,260.021 Stearn 4tl.Mo t 58.370 49.637 Total Operating lies enues $2,7MM, t 57 $2.49M.205 $2.3011.65M Operating Expenses Operation l Fuel 8 7M5, I I O $ 700.7M9 $ 676.809 I Other ixm er supply t !Hi,ti t M 181.750 128.921 Other o[rration 422,133 803,616 374,168 Maintenance 250,7tlM 203.945 1 M7,769 Deprecia' ion (Note Il 2 I M,502 190,420 171,980 mes other than inanne 173,55H 144,17I I 12.7 la income tases (Notes 1 and 51 124,113!I 131,459 115,559 Total Operating Expenses $2,173.flatl $ 1.959.4 80 $ 1.M27.505 Operating Inconne S ti14,20 t S 53M.765 , $_ 4M2.153_

Other Inconne and Deductions Allowance for other funds used during construction (Note 1) s 113,223 $ 130,350 $ 92,750 Other income and deductions (3,240) 1.M29 7,877 Income tases (Note 5) I,H42 (I12) (5,4M7)

Totai Jther inanne and Deductions s 109,H27 $ 132.067 $ 95.180 Incorne Hefore Interest Charges s 723,82M $ 670.832 $ 577.293 Interest Charges long-term debt S 401,272 $ 399,4 4M $ 351,M5 8 Amortization of debt discount, premium and etpense (Note 11 2,502 2,191 2,I31 Other 15,H42 30.592 53.03M Allowance for borrow ed funds used during construction Icredit)(Note Il _

(133,103) _t 163,3361 (198.4021 Net interest Charges $ 2MH.313 $ 26M.895 $ 212.671 Net Incoine s 437, sis S 40i.937 $ a6 8 622 18 referred azul I* reference Stock Ilividesul Hequirenierits 103,2n4 101,159 98.618 Earnings for Constrion Sinak s 334,25 t_ _ .5. '17,778_

2 $_ 2iitgni8 Costinnoin Shares Outstandirig- Average 143, l M3,3 33 135,230,827 120.278,269 Earnings l'er Share S 2.33 $ 2.20 $ ]2;2 !_

24 (See au ennp.sming %ntes to t nemlut.eleil liruru Lil Maternents i

ne Detmit Edison cornpany azulsuluuliary e om;unies CONSOLIDATED STATlalENT 013 Cll ANGES IN l'IN ANCI AI, l'OSITION

\ ear I ndeelIhw emler 31 I fl_M5 !!)M i !!M3 taluonsur<ht Financial itesources Provided Operallons Net inroine S 437,5I5 $ lo I .!!37 $ 368.622 Items not affecting u orking capital 1)epreciation 21 M,502 !!Hl.120 171.!Il0 I)cierred inrotne lates and ins estinent tai credit - net I l o,77M 127,436 135.603 A rnortization of estraordinary property lo3ses and unreros ered plant costs (Note 71 12.231 12.23I 10. I I!)

Allow ance for other funds used during construction (Note il (I13,225) (130.350) t!)2.750)

()ther __. _

2,385 15

_ . _ _. 2 8 61 788 l-inancial resources pros ided by operations S filiM,1 Mil $ 5!Hi,3MM

_ $_ 5'HJ 608 thtcrual l'inancin;.;

Sale of romanon stock S 113.6M3 $ 112,080 5 261,17!)

Issuance of coinmon stock on rom ersion of rom crtible etunulatis e preferred stork. 5M series 1,53 M 2.236 3 62i Sale of preference stock - -

113.537 llelle Ris er Proret l'inancing (Note 101 -

331.6M6 266.M!I!I Sale of general and refunthng mortgage bonds M4,728 - -

l'unds receis ed from Trustees: Installment sales e ontracts and loan agret*nents i M7,0!) I 10.I70 36.1 M I

[3suance of unscadred promissory notes 30!),M 70 a l I,75 8 15!).!) 8!!

Increase klerreaselin short-term lmrrow ings _ 2.000)

( 23HHl _

(233.fl331 S H!)4.!11If $_M32 !1311 _

5 607.;13si Ot her Sou rces Change in obligations under capital leases (Note 1 Il S 4 M,4!)0 $ 14.010 $ f t 2!I2 Sale to N!!'PA of an on nership interest in the Itelle Itis er Project (Note il - -

337.053 Increase tderreaselin arrumulated rate refunds, w ith interest (43,fl75) 32.215 (28,8531

()ther - net (4,224) (IM M32) (3,

__ _ _.73. _8 )

Total S I,3 n3,3M7

$ 1.456 J 17 $1,511M00 Financial itesources Used Plant and equipment expenditures S 7 l o,si!I!I $ fl3M 00 8 $ 1014.56M Purchase from Cooperatis e of on nership interest in l'ermi 2 (Note 41 40,47!I - -

Allow an( c for other- f unds used during t'orist r uctiori (Note 11 1113,225) (130.3501 I!!2.750)

S 4137,!I53 $ M07.65 8 $ fl21.M I M Change in net property under capitalleases (Note 111 4M,4!In i1,010 f t 2112 I)is idends on rolnmol), prelerf ed alld pl cf et ef)I t'st(M'k 344,6321 332,348 306,073 Cons ersion of corn ertihie runlulatis e pref erred stin-k. 5' 6 series I,540 2.2til 3.626 Ilepay inent of long-term debt 3783,1 M5 370 070 256.!)25 IleMlemptioll of redeefil.dlle preIci'lTd alld prelef enre %t<M k 10.015 6.22I 5.363 Incrcase (derrease)in u or king rapital' (55,417) 175 M73) l 2J03 Total S t ,303,3M7 $ 1,156117 $1.515M00 Changre in H orkinJ( Cagslial

( ash and tem lwn ar) e ash on esinmnts M ;I,030 sito till 5 4 2 ta l

.h a viunt i r ecen able 8 0,0H!$ lit llti 2h 2:t7 fin enf or ms (75,8 7'n 42 418 f.'l M1hl b ounts payable il7,5 7 2 ..li bM il 4 illn pI UjMar In. MPf W'l al arHI ir H I f nP ta %Ps ll14.22tN l s (BAl,] l 1.5 l .*, ll Inter est 5,1:14 1.1 t 712) .5641 Ottmr (1,42:0 ( 7 *. i 11 110 'IM il hw rease Ider a rawlist n os king i apital' M 33, 4171 M 7 ", M 711 %12701 5

'l.u ludmg shot t ler m f uer e ou mgs. < ur r eni matur irms of king tvr m det,t i ur i ent ohhoteon* under i apital leases and pi e Iri a vil and pr eirr riu e stra k smLmg tus wl e rejine enmnis isce .w ompaan mg Notes to t a nsolnfated i mans ial st.itement* I

l The Derricit Edi. wit C>mpany and sulmidi.nry exunpmies }

CONSOt 1i)ATEI) H ALANCl3 SilElst' ths ernlu r .it I!IM5 1118 talun u nish Assets Utility Properties (Notes I,2,4 aiul 11)

Plant in sen ice and held for future use Electric $7,107,56! $6.2tlit.2!)2 Steam 5M.5Htl 5M. I 12

$7,iHH,T3M~ $i;.~357 isi Less: Arcumulated depreciation i 1.M53. I 4!D) {l.676.178)

S5,'312,! M!l'

~

5'87tiMII22tf Construction work in progress 3,29tl,f Mi t 3.3!Il,til2 Net utility properties SM,H 12.M!H) $M 076.16M Property under rapital leases S 7!I,!l47 $ 26.517 less: Accumulated amortization (M,155) (3.21 *.)

Net property uruler capital leases S 71,7!D2

$ 23._302 Total owned and leased properties SM,HM4. tim 2

_ $M.utPI l70_ _

Ollier 18roperty a tul IIWestInceits Non-utility property and other S 37,944 $ 33.51M Ins estment in coal supply -

2.M00 S 37,944_ 5 36.31M Current Assets Cash (Note 6l S 1,741 5 3 71!I

'li*mgx>rary rash inn est ments (at cost , approsimating inarket s aluel 13,1 Min M (NMI Customer arrount s receis able fless allon ance ior uncollertible accounts of $16.tNxuMMH 227,753 201 MM2 0:her accounts receis able 34,134 1!1.t136 lin entories (al as erage rust) fuel 23tl,H243 313,MM i

.\laterials and supplies I 21,5MM I If t,50tl Prepayments H,HMO 2.427 S H41,M30 s 6ttil.357 Def'erreal DebitM i

!!namortized debt espenss= lNote il S 35,301 $ 2tl,32tl I Accumulated deferred income lases INote Il 15,4 MM 16.087 Extraordinary property losses and unreros es ed plant rosts (Note 71 5f t,3412 71,5tl3 l U0" -

II'?53 - -_I5:?"I. l S 127,no4

- - - - - . -s u-sa -G!)

'I'U t .~l ! S! ,4!I2,348tl $M !)70.01 I 26 t$ev .ar # rniqualy efig \r,tes to ( 'an e silHl. ele *el i tiuf u l.il %f. alt'tiu r el s I

The Dettvit Ediscus Commmy arul subsidiary sumpunes CONSOLIDATED HALANCE SIIEET

0. m ni .r u

!HM5 l948 relu,uwnM Liabilitics Capitalization Common stock-$ 10 par s alue,160.(HHMMNI shares authoriml; 146.576,496 atul 139,081,562 shares outstaruling. i espertis cly 1M05,756 azul M94,227 shares. res[xrtis ely, rescami for rosnersion of preferred stork)(Note 8) $ 1,4485,7fi5 $ 1.390.816 Premium on common stock 552,M4 7 512,-101 14 7,613 2) I17,370)

Conunon stock es[ense lietairuxl earnings used in t he busitu'ss til 7,045 528,151

[

Total conuuun sharehoklers'extuity $2,5 MM,025 $2.379,998 Non-retleemable preferreti stock INote M) 244,424 285,963 Ihxhtmable preferred stock (Note to I H7,MU5 20h0MM l

Non-rtMlcemable prefcretur stix'k (Note M) 2M7,4041 287,132 I

Hedeemable preferetur stock (Note 9) I 49, Mil 2 15 4,6M5 3.M I'i,272 long-term debt tNote 10) 3,774),Mel3_

Total Capitalization 87,23M,3M5 57,i19.13M Other Noncurrent I.iabilitles Obligations uruler rapital leases (Note 1 l) S ti 4,MM2 $ 20.025 Arctunulated rate refunds, w ith interest 14,433 58.InM N 7D,315 $ 7M.133 Current Liabilitics ILmk haans (Note 61 S - 5 21NN) long-term <!eht due w ithin one y ear (Note 10) 404,325 116,1M5 Preferre4! arul preference stock sinking lumi requirement 4 tlue w ithin oneyear (Note 9) n,oM7 5,750 Obligations uf uler rapital leases due u ithin one y car INote I li 61,9 i O 3.277 Accounts payable I M2,3M7 219.959 Property arul general tases 251,131 220.159 Income lases 13,H I i 10.363 Interest MM,ti44 9:1.77M M 7,2dl7 M 8,396 Dis idefuls payable Payrolk 54,948 53.678 Other 2!t,227 2ful96 S1_,127,5_3_7._

$_M36,537 __

I)ct' erred Crealits Arrutnulated deferred income lates (Note il N 774,715 $ 713.295 259,010 210,211 Arrumulated deferred ilnestment tas ri edits (Note Il Other -- - . - _ -

13.3flM -. .

12,100 N I ,H l_7,123._

$ 935.006_ _ _ _ _ .

Costattait tinctif s agnel Cotilltagetacics (Notes 2. 3, I, i 1,12 and 131 Tufal M9,4 92.3fl0 $M 970.0I i 27 Nr ou t sunpam ing %,t,

lo t .ntwilulaienli nwu sal Ntah nw nt, I

=;

The Detnut Eshsors Cortsparty aint subsulury marqunies 1 H

CONSOI.lDATED STATIGIENT OF CO.\lllON SII AllEIIGI.1) Ells

EQUITY neiani ,i I e vni.uin

( unimon stni k nn Conunun I at inng s

$ in var _ t munnn sta k t wil niitr shaies s alue sim L q.cn . nusine_ss ednlLws un thouunstsi llalaricc at llerettilier 3 i, tils2 111.391.399 51.113.918 $ 402.6M6 Si to. 42M1 5396.009 Issuave of Common Stock Public offerings 16 million shares in

.\ larch 1983 and 5.95 million shares in December 19831 11.950.0n0 $ 119.500 $ 53J34 $ (5Jaxt $

Onidend lleingestment and Common Share Purchase Plan 6.427.82: 68.278 24,292 1889)

Employ es' Sas ings I'lans 368.624 3.636 1,731 Cons ersion of rons ertible rumulat n e preferred stock. 5 %"o scries 201 097 2.011 I.694 IMI)

Gain on preference stock purchawd and retired 178 Espense of increase in authorimi number of common share 3 1175)

Net income 36-4 622 Cash dis idend3 declared Common stock-$ 16M per share 1206.M 17)

Cumulatis e preferred and pref erence stock * . ___ __

199 256) llalatice an ilecciiilier a i, i nnsa i30.33 4.9 i si.aoa.a io s:M 375 si i6.92 ii s35i55M lssuance of Conunon Stork Dit idend lleins estinent and Conunon Share Purt haw Plan 7.577.598 $ 75.776 5 22.612 $ (39MI $

Employ es' Sas ings Plans 1,037,720 10373 3.672 Cons ersion of cons erIihle cumulatis e preferred stax k. 5b% wries 131,304 1.313 1.024 151)

Gain on preferred and preference stock purrhased .tnd retir ed 71M Net inrone 101.937 Cash dit idends declared Conunon stock-516M per shar e 122M.2181 Cumulatis e preferred and pr eference stm k

1108 1261 llalaiice an ileceriilier a i, iiisa ian oxi.5t2 si.a9nMin 35iz. ion sii7.aToi 352 i.i5i Is5uanre of Common 5t(K k Disislend lleins estment and Common 5 hare Purchase Pl.m H.307,762 5 63 077 5 33,109 $ 1227) $

Linplo)es' Sat ings Plans 1,09MJ6 8 10 98X 6,.130 Cons ersion of runs ertihle rtsmulatis e l

preferred sten k,5b% series MM.108 MMI 639 13 5) i IDss (g pr t'ferred and pt efet enre st(H k purchawd and retired (MMI ,

l Net income 437.515 Cash dit idends declared Common stm k-51 UM per shan e 12 : L39n Cumulatise pi ef erred and pr efer ent e stin k * (103.22 il Italaitre at tleccililner a l, I!)M5 116.576.896 SI165165 $552.M l7 si l 7.6321 5617.015

+ u estahnsh.,i , air tur e., ti ,.e, ms 20 tsee .u i tunpang ing Notes in ( nnmlulateil i mane tal statement s i

nse Detroit Edison Compane arul subsidiary amnpanies CONSOLIDATED STATEMENT OF CUMULNilVE l'HEFEHHED AND PHEFEHENCE STOCK thle of U""nler .O Iwuance l!)M3 I t)M S

'" - to CtlIntilative i>reterred stock - snHii ar vaine Aua horised -it.tHH),sHH) mharew () aantanding-4,548,tH)4 and 4,6328,1633 nharem. rewgwells cly (3,539,M27 hharem usiimmureD Non-liedeemable l' referred stock note M 5 %% nun ertible writs, 143.3 4 4 anti 15!I 0M3 shares. resl=ttis ely th tolm'r 1967 5 14.334 $ 15!HiM 9 32% wries. -899 OM) shares th1oher 1970 4ts,tH)M 89.!HiM 7 68% wries. 5(M)JMM) shares \lart h 1971 So. HM) Soinxi 7.45% wries. 600 EMMI shares Nos emin r 1971 tio,tHH teo.s H Hi 7.36% senes. 7503MK) sharew thremin r I!!?2 75.sHM) 75.s H N)

Non redeemable preferrett sitx k cyn nw 14,M I M D I M531 5244,424 $241?H;3 Total Non-Hnteemable Preferred Stot k :-- -- : : : :.

1 iledecinable i* referred stock note ro fif2% wrms. 449,150 $ hares and 4753MMi shares. reslwitis ely threm!= r 197M s 44,915 $ 47.500 l M,nM3 912% wries. M9.M30 shares and 91tkHhhares. respertn ely January 1979 9.500 l

9Etr% wries. 337,250 $ hares and 351(MNi shares, reywTtn ely Octoln'r 1979 33,725 31500 9EO% series. 2Mo 250 shares and 291tNMI shares. reyn etis cly January 19Mo 2M,025 29.500

\ta) 19Mo 40,t H H 40.twur 12 Mo% wries. 400AMMIshares 13 5tr% series. 250,lMM) shares thremher 19M0 25,sHNI 25 iMM) 15 HM% series,2503MM) shares June 19MI 25,t H H 211MN)

Hedeemable pref errnt stax L smking fund requirement due u ithin anw 3 ear 15,2501 (1 250)

_ (2,593[ 12 t,62)

Hedeemable pref erred stin-k cyn nw _

s 197,MuS _ 52m; OMM total Hnleemable Preferrni sto. L Curntilative 18 reference stock si i>ar vaiu.-

AuIhorlied - 30,tHH),sHN) hha ren: Out% anding-IM,453,4MO and IM,5f t9,HMO nharen, remgwrtis el)

(11,5461,520 nhareg unl%%uctD Noti-IIedeceiiahic i>rerer clict, stock iNote Mi

$2.2M wries. 23MxlixMi shares I)es emin r 1977 8 2,tH NI $ 2JNNI

$3 42 wrtes 3 0(MijNM shares ()ctoln'r 19M2 3,sHHi 3 (MN)

$140 wries, 2.2501MN) shares lhtemlnar 19M2 2,25H 2.250

$3.12 wrH4, 750 (M Ni shares lebruJr3 19M3 750 750

$3.13 wries 2E(M)(MM) shares \la) 19M3 2.450 0 2 600

$3 24 serH4,1,4(Mi txWishares 5cpternher 19M3 1,400 1.4mi Premium on non-rethemable preferefH e situ k 2MM,sHM) 2MM o(H)

Non rmhrmable preference stix k eyrnw (12,5Hil i12.56M Total Non linleemable Preference 5tru L 82M7_,4sHi 52M7. 432 l{cdeceiiahie i>rercreiice stock noie m

$2J5 series.1.3M0.180 and 1.499.9M0 shares,Ieslxy tiwly July 1975 8 1,3 MH $ 1,500

$2J5 wries it l.473.3(Ni and 1,5003NMhhar es. rcynt tis ely thw emlu r 1975 1,473 1.500

$4.12 wries. 2 (MN) INN) shares January 19M2 2,s H N D 23NN)

$ 4 00 wries,1.600 EMN) shares Apr il 19M2 1,HtHB I tipo Premium on rnleemable pr cler ens e staw k 15 4.MM 4 15M 399 fledeemable prefereru e stix k sinking fund requirement due w ithm one y ear la,M37) 12.50 n Hnieemable pr clerence stru L cyn nw if,in3MI (7 MI u 8 8 4!p, Mil 2 515 8 CM5 Total Haleemable Preference 5tsw k 2?D het m a enupao)sog Note s to e no*wdalaltail } in.sor i.sl % late nwol* )

l The IWtnNI hhson Cornpany and sulunhary sumpanies CONSOI II)ATED STATEllEN"I' OI' IJ)NG-TElut I)EllT

[ng e, p3g On esulies .i t llat e ' l?tM5 l'IM 4 tokuwnhl Gellt'rillitsial IIt'I'tisialistg Murigangt? Illistals N' ries .l. dtte' 3 l M5 2 % "a M -

5 .15.t M N ?

N'ria% P due M 15 M7 4uf till,325 1,6 ;125 N'rtes Q due 6 I M!l 3% 37,titl5 :l7. bili Sertes ll. tfue 121 !Hi 6 IIHl.(HND llM I.t N N )

Set ia% 5. tlue' 101 !!M 68 150.d H M) I SO.I N N)

ScritS 1. thu' 12 I fl9 il 75.(H N D 75 (M N)

N' ries l', dste 7,8 Oil 9.15 75.t H H B 75.I N k)

Scrit% V dut* 1215 (Mt M 13 IIHl.(H H) 100 INN)

Series \. tjue 615 Ol M's I(H B,t H H D 100 INN) 5eries Y due 11'l5 01 7 's lio,lHNI 60 IN N)

N'ris% /.. due i 15 0,1 7'2 I(H),t H N) ItN)(MN)

Seiies \\.due5IOl t l 's i tHl.f M H) llNl(MN) 5 cries I L. duc 121500 I i 'n 3 7,5t H D to (N NI 5ef uw lill. due 7'15 06 i O 's 5tp.tHHB 504100 5eries l'P. tiue 615 04 !! \ 70.t H NI 70(MN)

Series Illt, due 1015 08 'l M 7tl.tHH3 70 (N NI 5eries 55 due ;l 15 9:9 I O 's 140.t H M) 150 (N M) 5criew I'l', due !) 15 0 I I O 's I(Hl.tHH) 100 IM M) 19MO 5etles \.due i ! M7 titeluvuled 6 :l M51 12 % *O (N MI 19MO 5 crit % ll tlue 4 I (N) 12 \ IIHl.t H H B IOO I N N) 1985 N r ies \.tlue 5 I l12 I I 'l 35,IMH) -

19M5 Sriles 11. due 6'l 92 11 25 50.t H N D I A%s: l'n.unorti/ed net tilu ount 42,0!Hil (2.2200 5tnount flue u itlun one y t'.ir i i fl. I SO) (IT SINH M 1,5fl5,2 74 $I579.HNI Tins thentigli lies esitec 110:l81(Illligatiost%

installinent Sales ( out rat ts (set ured in a ur i es[nindmg amount s of

(,eneral and liefundmg \forigace lionda

( ity of I)ctr uit. due ;l 1 M6 - 61 'll 6 M7"- M l!I,105 5 20 6li

('ils of liar lsor l'w.H li . ilue' 1 1 M6 -;l 1115 6 'll 3,4?HI .I $6; (11) of lin er flouge.tlue 71 M6 - 10 I til 6 M, .. O.19749 52.840

('ity til 5uper Hir. dLH' 21 M6 - 2 I O l M (16 42,54HI l.l l(Ni

('ity of I renton due l 1 M6 .I I O., , 00 ti,:450 6 IMi

( ounty of \lonnwn alue .I l M6 - 10 I I i 9 21 OI,5?HI 82M70

( ounts of 5t (' lair. due 615 M6 - 5122 10 15 21 si,3 MO 21M l'15 law I'n.unortised net shst ount 1571) 114 0 lunds on degunit uith I r usive IM l!)I 12 S l'O Amotuit due u illun one scar IM,235) 17. I M il M 3!Hl.7 40 $ .177 .lM 7 Installment 5 ales ( oritr.n 1s

( siunts of \lont aus due 5 l M6 - 12 i 16 10 62 5 320.050 5 I l'8 *i10 IJ w lunds en delnisit u ith f rustre 17,070)

Tmount alue u it hin one y car i t ,tl 410 11 idNH M 381,034 A IIM OTO lJhtfl Agi eenients Pollution llotuillelinnling l's ayet Is. alue 2 IS 9 4 - 615117 9 M7 M 1 M.M I S S Ill 1:l*,

M 720,5 mfl 3 1.11 't72 t! isectsrcti 18rusatiw%ury NOlc%

PWlle lin er Pr Ole e 1 I m. int liig, due 7 1 M6 - 101 M'l 'l S i 'i M 1,050,t H HI $ 1,2110 ( M N I (aliable intet est rate %. (fue $ 2 M6 - 1 15 90 9 ili 150.t H H B 210(MMI I t wd Intet est iate, slue' 10 l M6 1820 2tHl.IHH) 200 E M Ni

)iwd trifer est f.ite, Elin' 7 9 M7 10 fli 250.t H N)

Iiwd Illter est iates, slue 5 l M7 - 4 25 91 1.169 S MO,tHHI IMOIMMI IJSs' AltitHmt due u it hill olle y e.u 1375.0001 160 t M N H M I , 4 55,lH H) S t . 7.101 M id

~ lot.d lJHig let in I)cht l\ote 101 M3,7 70, Mil 3 il M li 272 10

M etghtesl ag et age inief est f .ste ,at l >et vinln s .ll l'l"i .or lag 9 temgit lbq coue l'a n pi t lhIi4sf u ens .ni,1 ( lhet tu nl l'iinnew n t Noism ewv ai e omp.na ng Notes to f tunnl <!.stnl l inans sal %Iatonn nt s I

1he lMnct 111aenn Gunpuny azuisubsaliary arrisponres NOTES TO CONSOt.II) ATEI) FINANCI AL STATEM ENTS Naste 1 -Signaliirani Arcouniing Polleles in accordance with FERC accounung reprements, the Consohda'ed Statement Industry s,ynrent-The Detroit Edtson Company (" Company") is a pubic of Changes in finanaal Posibon is not adjusted to remove the borrowtt funds ut!ity engaged in the generabon, purchase, transmisson, distnbution and sale of component of AFUDC of $1331 rn! hon $163 3 muon and $1M 4 mdhon for electnc energy 1985,1984 and 1983, respectree!y Total AFUDC for both borroned and other funds amounted to $2463 mdhon $293 7 mi! hon and $287 2 mdica for 1985,1984 and liesuLstion-The Comoany is subject to regulaton by the Michgan Pubhc Seruce Commission ("MPSC") and the Federal Energy Regulatory Commisson 1983, respectvely AfUDC amounted to 74%. 99% and 108% of Eamings for Common Stock for 1985,1984 and 1983. respectreery

("FERC") mth respect to a'countng ma*!ers and maintans its accounts in accordance with Uniform & stems of Accounts prescnbed by these agenoes.

1"n"ne 'IbvS-for federal Income tax purposes. the Comparty computes depecuton using accelerated methods and shorter deprecuble Irves Deferred Principles Applicci in Consolid.stion The Consokdated financel State ocome taes awW Wng Mencs hn M rd taxahon ments include the accoun's of all subsiduty companies, all of whch are who!!y as authonzed by the MPSC. kr<estment tax crects Ut!ved are deferred and g amortved over the eshmated composite serace hfe of the related property (See flesenues-Re.tnues are recorded when customers are bi: led on a monthly Note 5 )

cycle bas 6. Revenues include the recowy of fuel and purchased power costs. ,. gg,, _ ,g.nunt Perniiurn ,mel l3 pense-The discount. pe subject to annual reconcluton heanngs conducted by the MPSC Any oser or mium and expense rebted to the issuance of long term debt is amortzed over the under recovery of these ents is recorded in the Conschdated Ba:ance Sheet lives of the issues Capital stock expense retted to that portion of preferred and pendng the resu'ts of such Nanngs. reference stock redeemed is wTen oft against the accumulated net pn un ICmploy es' Hetirrment l*l.sn inial Other I*nstrctirrinent lient:t'ils- reacqu, red capta! Mock included in pr ynium on common stock.

SCO DIC 1A 13tr uonluvery Pnspert; I.sssse s inul I 'nretm erni I'l.utt i osts-See Projarty. IDepreri.stion, lletin'inent irrul Al ointen.snt e-ULhty Voper Note I tes are recorded al Orxynal cot The annual prousion for depreciabon 6 ca'cubted on the fraght kne remaining I,te method by apptpng annua! rates approved by the Msh 2 - h nasi2 MPSC to the amage of year Degnning and year ending batances of oeprecub!e Prni< rt C,c,ts-in 1985, the pqect estmue for fermi 2, a nuclear generabng property by onmary plant accounts For mapr generatng units. the first yeart unit haung a nominal capabbty rahng of 1.100 UN was acreased from $3 375 deprecabcn expense 6 calcuta^ed on a month y basis commenong mth the month buon (ncludirq $867 mil hon of AfUDC)to $3 765 bNon Oncluding $1.036 bbon in wta:h the unit 6 placed into commerce! operaton Annual deprecuton of AFUDC) azummg March 1986 commsrcul op'rabon at a 75% axer level, proasions expressed as a percent of average deprecuble property were 3 28%. v,tich is no longer a"ainable; see d6cussion trkw These estmites include the 3.31% ard 338% for 1985.1984 and 1983, respectr<e!y in general. the cost of undrMed canership interest of Wo!venne Power Supsy CooperaSve, incTCoop properbes retred in tre normal course of business is charged to accumulated erabye*t other than interest on con 9tuction loans capitateed by the Coopvatue decrecuton. Expenctures for maintenance and repairs ve charged to eroense. re'anng to its ownership interest from the date of sale in 1977. Th6 increase Mi be and the cost of new property instaCed which rep l aces property reDred is cha';1ed to funded sole'y by the Company because the Coop 5atues ot99 tons h,we been propWy accounts- hmited by aryeement The rev6ed project estmate does not incbde the quarter!y AII<mance for l' units I'sett floring construe tion l'.tI L 'IJC1- purchases of portons of the Cooperatve s interest in fermi 2, which are ecmited AfUDC, a non operat ng non catutem, is defined in the FERC Uniform System of to tota! $59 muon (excluding $2 mdlon of AfUDC recorded by re Company) for Accounts to include Te re! cost for t*e penc4 of construchon of borroved funds the perod Ju'y 1985 through March 1986 Se Note 4 ) Through December 31 used for constructon purposes and a reasonaue rate on other funds nhen so 1985. actual expenditures were $3 634 (Son OnclAng $979 mAon of Af UDC) used " AFUDC inv&ses an accounung procedure whereby the appronte intered The Companyt portion of the Ltest progt ecmate for fermi 2 6 $3 338 tAon erpense and the cost of other (common. preferred and preference stareho!ders' (!ncluding $1017 baan of AfUDC), and. through December 31,1985. the equity) funds applicable to te cost of constructon are transferred from the income Comtuny has expended $3 207 b lon Onclud.ng $9U) moon of Af UDC) on its statement to construchon wc/> in progress in the ba:ance sheet Th6 accountng unarmed owreshio intered in ths unit procecure 6 intended to remove the effect of the co9 of finanong constructon The Company 6 subject to the regula'ory lurndicton of the fbcWr Pqutory actroty from the income statement Under current ratemahng prachce. the cash Commn90n("f.RC') uth respect to constructon. hcenang and oss anon of f ermi recovery of AFUDC, as well as other costs of constructon, occurs oniy when 2 As uncussed herein, the NRC 6 continuing to review fermi ? nwugement, completed projects are placed in service and related depreaabon is authorved to be equipment and procedura! dithcufnes Also, the MPSC m4 determme that commer recovered through customer rates @e Notes 2 and 13 for pending rate ma~ers ) cut opercon of f ermi 2 requees a power levet in excess of 75% as v,til as Ita Comoany capitahzed AFUDC at 9 % from January 1,1983 through comphance Mh other cntena As a result. the Company 6 unable to determine uth March 31,1983.10 73% from Apol 1.1983 through Ju!y 16.1985 and 10 3% certaint/ when fer.ni 2 MI commence commeraa! opera $on The Company thereater. Ocept for AFUDC re!ated to the Be!lc Ruer Project finanang for Atnch preocusty announced a commeraa! opera' ion date for iermi 2 of March 198E Oe CItual 'nterest and commitment fees were capitali/ed (See Note 10) in azuming a 75% 0%er level. which 6 no lary r attainahic f or erh month of accordante gh MPSC requiremer,ts. these composite Af 0DC rates are equa! to dely beyond March 198E f ermi 2 progt rmts (r.hich MI be funded solety by the the wefa!! rite of retum au' hon /ed 6n electnc rate orders A!so. purs" ant to an Company) wnl inacase by appormite'y $30 40 mAon p r mont'i a substantal MPSC crdor, AFUDC 6 not recorced on corttruchon vark in progrrm rebtng to porbon of which uit he AfUDC Under current germity auephyl accounhng posut:Dn cGntrol faakbes for fossilf jeled poner plants, except fur such expendi ponop:es. the Company di conhnue to captah/e a'l co% including Af UDC, tures firur:ced under tJe 8e00 Ruef Project financing Agreement azocuted uth the unit unht commeraal op:rahon n

1

)

l

sting and Limnsing-in Jury 1985, the Company receved a full power amounts) for the first four years of the projectt commeroal operation, tused on the c,)erahng license for fermi 2 from the NRC which permined powel ascension at Stafft charactervabon of certain capaaty as "unrequired," we tre deferred lew!s above 5% power. Dunng tesbog of the plant, a number of management, amounts, including return thereon at the Companyt ovuall rate of return, being procedural and technical difficu!bes haw been expenenced. In hght of these recovered through restnues over the sutaquent taelve years (See No:e 3 )

d!!icu!bes the Company has agreed that it will not ascend to pove levels in excess On June 5.1985, an Administratwe Law Judge CALJ~) issued a Proposal Ior of 5% unti such tme as the NRC and the Company are sausfied tnat all approprote Deoson ("PF0") with respect to ferms 2 The ALJ. acknowledging that the hnal cost correctons and modificabons are in place or are progressing sabsfacton!y The of the prolect will exceed the $3075 th! hon eshmate presented in the record, Fermi 2 reactor is present!y in a cold shut down status incated by the Company for concluded that con 9deration of adctional costs must necessanty be addressed in a the completion of certain plant mod.ficabons. Subsequent proceeding. The Compny will seek recowry of all fermi 2 costs not yet Anhough the integnty of the plantt safety systems (both technical and secunty) presented to the MPSC for rewew (estmated at $751 mAon at March 31,1986)in has not been wgpoed. the NRC rs renewing the possbhty of takog future proceedngs.

enforcernent acton against the Company as a result of a number of technical and We the Staff had recommended fermi 2 csahances aggregating $365.5 procedural notabons at the plant. In addcon, the Company rs condnuing to work to mAon ($3013 mdhon of which is apphcable to the Companyt rate basel the ALJ correct beanng problems encountered on tack up desel generators Any enforce found $2M 3 mdhon ($242 6 mdlion of which is appbcable to the Companyt rate ment achon may result in fines leued against the Company At this time. the base) more approprote Recovery through deprecation of the csano.wd project Company is awadog further notficabon from the NRC as to these notatens. costs was recommended, a!! hough the retum on strh costs would be derued.

By leter dated December 24,1985, the NRC recueded the Company to prepare As escussed in Note 4. the Company is ochgated to purchase the capaaty and a program for Company achons that would imprese ferm 2 management and energy entmements of the Coopeatne for up to fifteen years The Cooperabves techtr' performance dunng teshng and subsecuent power ascenson. Key purton of the fermi 2 esa!iowance rs recected in the capaaty tx@rk costs and, management changes are being made and changes in reportng relabonships wdl therefore. the Company expects that the MPSC will osailow the recovery of a to effected. On January 29,1986 the Company submitted its program to the NRC corresponding portion of such capaaty tx yback costs in Power Supply Cost Tra C:mpany beheves rts program, which includes such management changes. Recovery proceedings proodes for enhanced personnel training, restructures the fermi 2 organcaton and The ALJ recommended that an annual revenue increase of $4M mdhon for proudes greater support for ferm: 2 personnel. is responsrve to the NRCt concems fermi 2 not be fulfy effectree commenong we commeraal opfaton, but be and thould make a&erse achon unnecessary wc respect to the plantt operabng implemented generany in accordance wm the Staff a phasein plan Under this bense. prusein proposal, $227, $272. $318. $363 and $409 mil hon of the revenues Ita Comoany has also estabiched an Independent Overvew Commit'ee, assocated with fermi 2 would oc recoverabfe in the first five years. respectively. we Composed of recogneed nuclear industry consu!! ants, to rewew the operabons at $4M mdhon recoverabie each year therefter in adchon, the revenues not fems 2 and to make recommendabons for imprwement The Compx1y proposes recoverabk dunng the free year phase in penod (aggreglbag $681 mAon) would be to utiize the expertse of the Commitee dunng poner ascengon The Commi?ee deferred on an after tax bass, together we a 103% return on the accumulated will review plant operabcns and aWoe as to power ascen900 at su increasng aher tax amounts, to be recovered in customer rates in the amount of $162 muon power leve!s up to and inc!uong full power of revenues annualty over a 10 year period, tx9nning we the sesenth year Unbl such tme as the Company and the NRC reach agreement on a pomr follemng commercial operation ar.enson program. the Company 6 unable to determine wc certanty the The ALJ addressed the 9grecant rnarer of determining when femu 2 6 to be commercaf operabon date for fermi 2. accorded rate rehet anocu*ed we commercul operat on by suggeshng a number of cntena. the most st:ir' gent of which is a Oh powtr 100 hour0.00116 days <br />0.0278 hours <br />1.653439e-4 weeks <br />3.805e-5 months <br /> run, which is not flare .\fatters-Pursuant to the Comrunyt request for rate rehef of $556 mAon expected unbl four to 9x months afMr achieving a 75% power level The Company coodent we the commercal operabon of ferm: 2 See Note 131 the MPSC Sta"s beheves that a 75% power level should be the threshold for pOong the unit in case, aled in 1984. proposes a osailonance of a retum on $365 5 mi lhon ($301.3 commeroat operaton. Homver. the MPSC mg determine that commercal i mAon of wtuch is apphcable to the Companyt rate base; c! project costs for ferrru operabon of fermi 2 requires a prws levelin excess of 75% as atfl as comphance 2 resurung from the Staffs prudency revew of constructon expenctures and a we other cntena. atach could result in a further detw in commercal operabon As based upon a previous cost eshmate of $3.075 bAon (inclucng $755 meon of dccussed above, de!ays in the commerca! operation of femu 2 beyond March AFUCCl compared to the Company 5 tatest protect eumte of $3 765 buon which 1986 wdl increase the project cous by aporoximatey $3040 mAon per month assumed March 1986 commeraal operabon, which 6 no longer arainable The The ALJ a!so recommended that at toe time fermi 2 is declared to be in Stan case would a!10w the recovery through deprecabon of the csa!!cwed project commeroal operabon. the 795 PM od fueled Greenwood Unit No I be temporanly costs, atthough return on such costs would be denied A Staff report on fermi 2 mothbased and removed from rate base (a rate base reduchon of $283 mAnn) No stated that the Company must be he!d accountable for costs related to fuel load adjustment was proposed to operation and maintenarx;e exp:nses or depreciabon delays afMr December 1983 and that a further csMohance may be con 9dered expense to reflect the removal of Greenwuod Und No 1 from rate tme as these sace fuel load cd nuf occur by June 1984 expenses w"e con 9dered appropnate The ALJ recommended that the urit he l The Staff s case also presented a proposed revenue deferral plan which would returned to rate base in 1990 when needed to rmet sysem reamrements However, phase in the cash recovery of a porton of the net income assooa!cd wd ferme 2. no current or deferred return would be aflowed on thc inve9 ment untd it is returned Under tbs aternatrve proposal, there would be an annual deferral (in decaning to rate base. thus reduong op5ating revenues by approxinutely $44 mAon per az L

I year forthis penod of bme. nuclear plant. Proceedg are continuing before the MPSC. The Company beheves This PFD is the ieumio sition of the AU and as such rs not birx;1g upon the that an intemal fund has a cost advantage over an extemal fund. However, the MPSC, which may adopt an order containing provsons which are substantiah MPSC Staff has taken the posibon that an extemal fund rs preferable because of the ddlerent from the icwimwGoiis included in the PFD. The Compary in its secuntyit mi provide to ratepayers.

excephans to the PFD filed July 8,1985, vigorously opposed the AUs recommen The Company is awaiting f nal MPSC achon before estabkshing a funding dabans regard og disaRowances from rate base, the duraban of the proposed phase- mechanism for demiuismurg costs. At this bme, the Company has not in plan, the cntena for deterraning the operabonal status of Fermi 2 and the requested recovery through rates of such undetermined costs.

temporary removal of Greenwood Unit No. I from rate base.

Because the rewinid&#6 of the AU dscussed above do not provide for Note 3 - Progumed Changen in Arrounting

- the ful recovery (from either current customer rates or phasein revenues) of the Standards projec2 costs and operahng expenses (operabon, maintenance, depreciation, prop- In December 1985, the Finanaal Accounhng Standards Board ( FASB") pubItshed erty and other taxes) for Fermi 2, these icwTuio Gws would, if adopted by the for comment an Exposure Draft which would, if adopted, amend Statement of MPSC in is order, adversely affect future eamings per share when this unit Finanaal Accounhng Standards ("SFAS~) No. 71, "Accounhng for the Effects of commences commercal operabort (See Note 3.) Certain Types of Regutabon" for three types of events-accounhng for phasein The Company bebeves that no portion of the new generabng capacdy is plans, abshielts and esallowances of plant costs. An Exposure Draft is a "unregured", and al project costs incurred were reasonable and prudert Accord proposed Statement of Finanaal Accounhng Standards which sets forth the FASBt ingy any poposed esalowances mR be wgorously opposed. Under current tentatrve conclusions on an issue, which are crculated for pubnc comment and generah accepted accounbng pnnoples, il d is utmately oetermined that a parbon subtect to pubic heanngs. The Company is unable to predct which provsons, d and/or the retum on a parbon of project costs is disallowed, total and per share any, in the Exposure Draft may be adopted.

Eamings for Common Stock el be reduced over the penod of bme the plant The Exposure Draft, which includes sgnificant changes in current generah remains 6 service. A wnteoff would be required under current generally accepted accepted accounbng pnnopies, d issued as a Standard, would have to be apphed rcounbng pnnopies only if, and to the extert that, anhopated future revenues by the Company for the frst bme in 1987. The Exposure Draft would permd assocated mth the plant, including retum, are insufficent to recover currett retroactNe appbcabor. of the amended Standard to years poor to 1987 through operahng expenses and deprecaban of al of the plant investment, including the restatement or, attemavey would ca8 for reflecbon of the cumulatne effect of a amount dsallowed, plus assacated ongoing interest costs. Since the Company change in accounhng pnnoples in 1987. Although the foRomng discussion be6 eves commercial operabon of Fermi 2 mR commence before the point in bme provides a descnphon of the accounhng that would be requred had the Exposure when the total plant costs and expenses would equal anhopated future revenues Draft been appkable as a Standard effectNe for the year ended December 31, ,

assocated mth the plant, it be6 eves that such a wnte off wiB not be required. 1985, the eshmated adverse effects set forth below would result in reducbons in Onit:2 basis of current generally accepted accounbng pnnaples and utnout Eamings for Common Stock in various years depending on the attemabve selected.

gNing effect to the macers discussed in Note 3, the Company beheves that, Ths analyss is based upon the Company's interpretation of the Exposure Draft '

although no absdute assurance can be gNen, the utmate resolubon of ttnse rate provsions and assumes that the MPSC had issued a rate order consistent uth the matters Oncluding those rnatters escussed under 'MPSC Dectnc Rate Case" in Fermi 2 PFD (See Nde 2 ) The amounts set forth beba for the estrnated adverse Note 131 after a# appropnate proceedings Onclueng court reviews 1 wig not hae a effects of applying these proposed changes in accounbog standards have been matenal adverse effect on its finanaal position and results of operabons. However, reduced by interpenod income tax calculabans, where apphcable.

see Note 3 for a discussion of proposed changes in accountng for phase h plans. 1%ein rians-The Exposure Draft would require that phasein ptans meet dang.Tos and dsallowances of plant costs. certain cntena before any amounts deferred for future recovery pursuant to such plans are capitalized for finanaal reportng purposes. Phase in plans must be format

. Iknunmissioning costs-The NRC has authonty to regulate the rnethod by arrangements, agreed to by the regulator, which speafy the bming of recovery of all which Fami 2 m8 be Gwigi wurci Deccg.i. wor.ng, which could cost in amounts deferred. In addition, all amounts deferred under phase in plans must be Qxcess of $100 million dependag upon the method adopted (mothba!!ing, dsman- rewvered ethin 10 years of the date when deferrals begart As escussed in Note 2, ting or entombment) would occur 35 to 40 years after the plant curinians the phase in plan recommended by the Au covers a penod of 16 years commenc+

commeraal operatiort The MPSC has junsdicbon over the manner in which the sng uth commeraal operation of Fermi 2. If this phase in plan is adopted by the Company wil fund and recover these costs from its customers. MPSC, the 10 year recoverability provaan of the fxposure Draft would prohibd the in 1979, the MPSC ordered that genenc heanngs be conducted to recerve Company from recordng deferred net income of approxrnately $368 mittion during caritments and proposals on the establishment and finanang of funos for the the hve year phase in penod together w th a 103% retum thereon and, accordingy purpose of decommissionirg nuclear power plants In 198 , a PF0 was csued eamings would be adversely affected in each of those years. However, dunna the which rgurs64:d that an extemal fund to cover future decommcsioning sutuguent recovery period, eamings would be enhanced as revenues are actually expenddures be established. in August 1985, the MPSC reopened the record in this recweredin customer rates proceedirtg to a!!aw for further testimony because of a provaon in the Tax Reform ,Wndonments-The Exposure Draft would require that when an operating Act of 19M which perrnets a tax deduchon for contnbubons made to an extemal asset or an asset under construction s abandoned, the present value of the

'f&ctur Decommrssioning Reserve Fund'. Such an extemal fund s an attematue probable future revenues expected to be provided to recover the annual amortita to an intemal fund Inat would be maintained by the Company as the owner of a hon of the cost of that asset,if any, shall be reported as a separate asset (a deferred

.l .1

l l

chargel Any excess of the carrying amount of the asset oser that present value sha3 of approumately $250 milhon. This amount which has been reduced by interperiod be recognead as a loss. At December 31.1985, the Company has $52.4 md! ion of income tates where applicab;e, is the sum of the amoun's set forth acose under Fermi 3 cid Greenwood Unit Nos. 2 and 3 unrecosered plant costs and $18.2 "Abanconments' and "Disanowances of Plant Costs", the calculaton of which are milhon ouetated accumulaMd deferred income taxes. (See Note 7 ) The cscount to approomaions based upon the Companyt interpretaton of the relevant Exposure present va!ce of abandoned plant costs approximates $10 milion at December 31. Draft provisons and certain assumptons regarong rate reket Accoreng!y the 1985. amount of the esentual losses. if any. could be greater or less than the amount set forth Such losses would be sgnif cant in relaton to both retained eamings ($617 Disalhm anres of Plant rosts-The Exposure Draft would requae that when milhon at December 31,1985) and total common shareholders' eaurty ($2.588 part of the cost of a new'y comp!eted plant is osa30',ed for ratemahng purposes or bi! hon at December 31,19855 when such a csabance becomes probable. that part of the cost sM! be in adction to the above, as escussed in Note 2. t*e PfD concluded that deducted from the reported cost of the ptant and charged to expense imm.1atey consderaton of adotonal fermi 2 costs in excess of the $3075 DMon presented in (recorded as a loss) !! part of the cost is csa!!cwed incirect'y (such as a the record must necessaNy be adcressed in a subsenaent proceecng The disahance of return on mestment on a portion of the p! anti an eqursalent Company has not included in its current main eEtoc rate case before the MPSC amount of cost sha!! be deducted from the reported cost of the plant and charged to approomately $751 muon of Ferm 2 progt costs (See fJotes 2 and 4 ) Unde the expense. In the PFD, the ALJ recommended that $242.6 m6cn of the Companyt prousions of the Exposure Draft any progt costs for whcn rate recomry is not porton of Fermi 2 costs be csabed from rate base (See Note 2) Acetona! consicered probacle sna!! be charged to eipense at the tme such determinaton is AFUDC cn these csahed costs which was not conscered in the PFD approu made A'though the Company bele es that att protect costs at fermi 2 have been mates $33 mvhon Recoery through deprecaton of the csalowed prciect costs pruderty incurred and intencs to seek reco<ery of att Fermi 2 costs not yet was recommended, atthough a retum on such costs would be cented Under the presented to tne MPSC for reuew, the prosons of the Exposure Draft m3/ require prowscas of the Exposure Draft. the escount to present value of such csabed recognoon of an or part of these add. tonal costs as a loss at the time it e deemed costs would be recorded as a loss and would reduce Eamings for Common Stock probau+ that tauable rate acton M1 not result when euch a esa10wance becomes probabie or when an order containing such a The Exposure Dra't, it csued as a Standard, would require adju*.tments to the csaflowance is received in a rate proceecng The d:scount to presenha!ue of plant Companys accounts in 1987 (to be ef'ected either through restatement of pre costs recommended for ccalcrwance by the ALJ approumates $115 mcci at nous'y issuea f nance: statements or through ref ecton of a cumulate et'ect)

December 31,1985. w%ch, depencng on the ratemahng treatment accaded Fermi 2 costs. could hase in the PFD. the ALJ also recommended that at the time Fermi 2 is decwed to be a matenal aterse et'ect or, t"e Companyt finanaa! postion and resutts of in commercal operaton, Greenwood Unit No I should be temporany remosed operatons from ra'e base and retumed in 1990 when needed to meet system regarernents A required ante ott of abandoned plant costs. proposed osahances and Operatrg expenses, inclucng deprecation. would be recovered through rates but pos90!e adotona! dca cAances n from rate base for ferrni 2 could signMcantby no retum on investment would be abed dunng the bme the plant is remo,ed from reduce or elrninate retained earn 4ngs. and accorcngk / would result in a substantal rate base. The decount to present va'ue of the cost of pl ant temporany removed reducton in the aggregate amount of retained eamings and captal surplus lega!1y from rate base for the four year penod appronmates $50 moon at Decemoer 31 avadable far tN payment of dnidends Because of the resuttant reducton in the 1985 equity component of the Companys captavaton. the Company ma/ be requWed As cscus2d in Note 13. on July 16,1985, the MPSC csued a parta! f.nal to fund certain escrow accounts in an amount that may approach $163 mi' hon. The opnion and orcer which prouded a total csabance from rate base of appron eamings test prowson of the Mortgage and Deed of Trust could preclude the imate!y $96 9 mvhen for Be!!e Rrver Of this amount $32 8 moon was ordered to be csuance of Mortgage Bonds on the bass of property a&nons for at least nine recovered through deprecabon with no return abed. $641 rnnon was accorded months. HoAever, Mortgage Bonds cou!d be issued on the bass of retirements !

neither return nor recovery if the Company's porton of csa30wod Be!:e ftser costs (See Note 10 ) Lndy the terms of the Company s nuclear fuel finanang arrange l of $902 muon were accounted for at December 31, 1985 pursuant to the ment. the reneaal in January 1987 of the Heat Purchase Contract would be procons of the Esposure Draft. Eamings for Common Stocl' for the year ended prevented and caresponcng'y require the repurchase of appronmatey $2G1 December 31,1985 wodd be reducca by apprc;amatey $75 m2cn The Company mdhun of nuclear fuel teng fnanced by Ren+ssance Energy Company (See Notes has accaa:ed the Bene Rner rate order to the Ingham County C4rcuit Court and is 6 and 11 )ln amition, due to the customary conctons assocated wdh exten90ns presentty co1ecting surcharge revenues of $12.1 mdion annuMy granted b/ the of new or rerm!s of enshng crect, certain crect fachtes such as commeraal Court, subject to refund The Exposure Dratt would rerpre the Company to mak e an patn revocab!c ines of crest and revoMng vedt arravments may be avadable immedate wnte off based on the adverse MPSC order in spie of the fJuab;e court to the Comorry if at an. on the ba9s of less fa orarde terms fired income qua'cy order; subsequerdy. af'er aN court proccecogs if the Comparr/ c c'Lmately rahngs of the Companyt secuntes might be adversch attected and hence, the successful in its appeal, it would record a gain Companyt atAty to obtain lung term furxh from the fmncal mark ets on !Jaable terms mJ/ be ad,0rsely a"ected Sununaryft the amendments proposed by the f uposure Draft had been risued as a final FASB Statement, ef'ecove for the year ended December 31.1985. and assumira that the MPSC had csued a rate order conastent uth the ferme 2 Pf D.

NotsN -Joinily Oss ne'elI'lilliy I'lanI the Company would hJ/e been prohibded from recording deferred net income Be Companyt portion of joint'y owned uhkt/ plant at December 31,1985 e as l

aZooated uth the phase in plan and wouk1 ha/e been required to recognize losses fobs u

.- - 3 -

i .ua ingt.,, inte<eMo 14 4124 The Compm/t remairang purchaa' oDhgabons wd! average _

run pat tr mi2 ikue na ei a 3: ora.w approunateh $7 m60n per mo@ and w111 cont nue unt; commercal oWraion. g The rivtes w111 share electroty generated ai plant opraton and maerunce ,

in*n av date -

in 1973 es,)enses in proportion to their adjusted partopabon interests in s'an! at the _2 t win ided ou nerstup interest iti ui 4" commeroa! operaton date The Company will have certain obhgatons to provide aiu im ratment inullauw 5.l203 9 51 052 1 SibM 3 Tn umulated deprn satman inullanul 5 - 5 53 8 54I.1 43C t powM to the C00perata e me unit n out of me- -

The mpany is obhgated to purchase the Cooperahth capaoty and erngy [

entteme<a for a to titeen years fonowing the commeroal opera'on of Fermi 2, _-

t n see duwani twi m -

i2iliwiudes tkile Rner l'aut No 1 ran'ines u=ed in summon nith ( int Na 2. ininMy at M Drough W seCJnd fuH c#endar year of Commercal operMion 3nd tanhten umt p unil 3in ttw Ikile Kn er arut St Clais- Pow er Planti arid ive tain deChning each yer trereAter The costs for the buyback of power will be i Med on 1

'he Cooperahth plant rGated inWS! ment m the project, interest Costs incurred by i31t i a i ranhtes umi in nunnum with tiut Ni 2 were plami in senav nn Augu,i t. issa Una si 2 wa piamt m sen av maui 1 ius the Coooeraht (pM55% 'uryie 100% tqtack years and plus 1% thereafter) 3 z

certain out handhng ianhir, umi enmt3 b3 tie skile nner and i < tair at! cedain omer cos.s sc as toel, depreoabo1 aN operabon and mantenance rim er riants w ere planst m ,en av in i 976 and 1977 i tw transnum m law' _-

expenses Buitack payments to the Coopers,'e are ete. ncy enmated at $1085 were plansl in wen ue in s arman scars letween 1%0 arut Ini _

un tw compano unanided owirrJtupintemus 82 :nin Eno %> t ni an moon, $1416 mAon. $118 4 mAon. $1122 maan and $99 7 maon for 1986. 7 in ranhties used kHntly by nelle nner alMt St. t IJ1r Po%er PlJntt 4 9 .*s % m 1987,1988,198} 33d jggQ, respectwg ,

avrtain transminnuiines aiut at ieast 70% in f ar:'ities uel in nunmon u ith gg7 3

=

l'iut %). 2.

llelle Hiier-la 1983, the Company sold to Michigan Pubhc Power Agmcy j

('MPPA*) an undmded ownership interst in Bene Ruer Unit No.1 and fachtes =

Fermi 2-in 1977, the Company sold an undmded ownership nie est in Ferms 2 to the Cooperatra. The Company is obhga'ed to complete constructon prompti used in common by Be!lc Ruer Unit No.1 and Bete Ruer Unit No. 2, and certam Other related fachbes. At December 31,1985. MPPAt nestment consrsted of 4

and retains control over constructon and operabon of the fachty Under cerun $3442 moon for Unit No. I and common fachtes, $27.9 m4on for certain coat hj orcumstances, should the ComDany delay constructon of the unit, it may De handkng and transmission f30'Ites and $168 mean for coal invertones and other i obhgated to supp'y the CooperaWe wc ts entrement of electrx4 othirAtse non capitaWad costs. ,

1 expected to have been generated af*er the antopated complator, date and mg MPPA r, entred to 18 61% of the capaaty and enevi Rhe entre p'C; sid is i have to indemnify the Coopera!Ne for adGbonal construcbon costs reid!tng from responsible fu the same percentage of the plants operado, and maintenance ;

the detay expenses The Company is obhgated T provide MPPA wim bickup power wtwo j

~

The Coopera%e made an naal payment to the Company at the 1.me of sah either unit is out of serace.

equal to 20% of construcbon expend @Jres, incluGng AfUDC, and becAme The Company began oDhgatory pure.ases of MPPAt capact/ and enrfgv g obhgated to make monthly progress payments for COnstrur/JCn expend?Jes. entrements at the Commeroal operab00 Cate of Unit No.1 rnd mil cunh>e to 00 %

excluding AFUDC. The Coopera5th irrsestment in Fermi 2 has been kmfed by a La for up to eleven years, nta!y at 100% through 1990, we dechng amounts 1983 amendment to the Partiopanon Agreement to $4269 muhon for p: ant. $24 3 thereafter The cost for the tryback of power is based on MPFAt p! ant related ]

mAon for nuclear fuel and $3.0 mdtion for matena!s and suophes, which limcatons investment in tm Bene Ruer protect, interest asts incurred tr/MPPA(plus 2 5%) g were reached in 1984. Expendeares to comp;ete p!rt constn;cton in progress at and certan othei costs such as fuel deprecaton and operation and mainterance J the bme the plant irnestment limitabon was reached in 1984 have been made soley expenses Buitar h pqments to MPPA were $321 dhoa and $76.6 m&on for 7 by the Company wc the Cooperatuet partopaton interest decreasing through 1084 and 1935 respecbvety and are currenth estimated at $74 7 menn. $732 4 December 31,19% An August 1985 amendment to the Partcicaton Agreement muon, $O 2 mAon. $68.3 mAon ano $67.4 mAon f R 1986,1987,1988.1989 =_

and 19M respecWeiy requres the Company to make qua'teP/ purchases of a porton of the Coopratvet

ownership and partopaton interests in Fermi 2 (in amounts equuaMt to the 1.udington mmped storage-Operation, maintenance and other enmses i Cooperawet quarter >y interest dunng constructon on its investment, stoos tne of the Luong'on Pumped Storage Plant are shared tr/ the Car'.cany and Consum decrease in the Cooperatues partopaton interest at December 31.19M except for ers Poaer Company in proporton to the r respectwe oterests in the plant g such Quarterty purchases, and modfies the capacty and energy bu)(iack schedule.

N" "", - I " "" "" D " j Expenditures a'ter December 31.1985 for plant construct on n progress and for any plant improvement proscts commenced wchin a penod ot ud to two years after Tod . me ta em as a Ant of m We ta( was less man N 's the plant commences commeraal operaton m!I be completed s09/ uth funds moy WalocomdanaW Womng mam g provided by the Company The Cooperatvet ownership interest wdl deuease Ne to em ent or nu one im e w g these expendit ires and the Quarterly purchases, as 'he proporten of its investment JumL M _ty -I to the totalinvestment dechnes. The partopahowiterest remains fixed at 15229% d i";"" "" 'd " ' d ' rd '" 4" " % ** 46 "'

"i

[.[m ,,mo ,,,,y , $$

at December 31,1985 subject only to decreases resutbry from the quarterly "j [, "[i]

purchases. Through December 31,1985, the Company has made such quarted/ intemi on nuacar iu.un,un mg o,n nn om 3 D"P" dam ' 3" ii 23

purchases amountng to $398 meon for plant (excluGng $0.7 mdlion for AFUDC

""""""' " '"E " "'-

recorded by the Company 1 $2.1 m60n for nuc! car fuel and $01 meon for matenals and supphes, which reduced the CooperaWes adusted cartopahon

" ^ f

.M k

L i

Components of income taxes were apphcable to the follomng- The Company had bank knes of credit of $300.1 maon, of which $51 muon required compensat ng balances, $293 5 mAon had wiTicheni tees in heu of cumpensahng balances and $1.5 moon dd not require compensating balances or 8""3 1'58 i - commtment fees. In support of knes of credt requinng compensahng balances, the

'"""** Company ma.ntained bank balances which dunng 1985 averaged $2.2 maon.

None of these balances is subject to usage or w thdrawal restnctions. Commitment Tr'eN s i3.s49 s a4o s i4 e.as.

fees paid in heu of compensabng bank balances for 1985 were $1.7 mAon.

g,.gny _o,,

surnmni rumt,n upi wn Substantial >y an borrowings are at rates below the banks' pome lendng rates. _

ofAtCDC H,399: 3ti 724 abana The Company has a nuclear fuel hnancing grangemerd under which Renais-I. sance Enegy Canpa (Renaissancel an unawed cepany, raises funds,

$$rNiUinwininnois s$i$ii u 2nn sub iect to the sabstachon of catain condbons, to purchase nuclear fuel and to lend Def ermi ruel terumi - -

sar in u rr^ "' *" to the Company, pursuant to a separate loan Agreement, for general corporate ,

Ni rI[i - -

isi.m purposes for penods not to exceed 270 days Renaissance may issue letter of creet backed commercial paper (currenth bmited to 180 days' matunty) or borrow from Anortuatinn or estraontuury proivr:3 inv,e"mi partcipahng banks on the basis of prom:ssary notes hmited to 270 days' matunty unrnm erni piani n.,,i, i4 2ai n To the extent the max: mum amount of funds available to Renaissance (current'y

$309 muon) is not needed by Renaissance from tme to time to purchase nuclear sa.s_no. m c_u _is_sn_.,

inemwn: tas ornhi-wi At Decemoer 31,1985 $44 6 maon was available to the Comoany under such rimmt ss.4on uec sa n2' Loan Agreement (See Note 11)

Annrtual (H.6o96 i3 29~,1 44 5441 g gg g,g The Company has a $250 mAon creet arrangement restrcted to bankers 2 4 fi39 i45 5Y, aCCeph M Iotal i3: 459 gg, gom, Note 7 -Ihtraor linary I*roperty I.nsses anal ami dnhx1 mins U n rs*coV e rt* 1 I'latit Costs Current (1,03ol 72% 75n Amatzabon of extraadnyy property losses aid unrecoM p!st costs cari o-rer mi i se 2i _i i _4.- mences wtien recoWry of such costs is authonzed by accounbng and ratemaking adas of the E A ut;m on irrastment is paded onh fa the unamatzed soial m n.metases s 23.297 sni 3 i sisi mc extraordnary property losses. (See Note 3 )lnformation relating to these items is as fo10ws The Company defers income taxes for the borrowd funds component of AFUDC and indrect constructon costs wtuch are deducted current'y for federal rmner iunt

""'d "' "

income taqurposes. In accordance wrth MPSC requirements defermd income tax ' , _ g, , 3, accounbng is not followed for such construchon costs relahng to Fenni 2, interest p,.,,,, n ,,,, p,y p,y on nuclear fuel 'inanc.ng (See Note 11) and certain other current income tax ,g,om.,m t,,

deduc h i attannhnars in July 1985, the MPSC ordered that, for accounbng and ratemahng purposes, ernieri3 ia 51 153 5

5 66"5 the accumulated deferred income tax crects related to indirect construcbon costs ^P"I"'79"""" l'52 l'"

and the borrowed funds component of AFUDC for Belle River Urut No. I and common plant be amortzed to income over a frse year penod rather than over the Ul,"" ,, "l'l[

life of the plant. Such credits to income amounted to $12 mi!! ion for 1985. ou u n Ienm rna sn a iurt.i9ss 6.n in uni uc2 The cumulatra net amount of income tax timing dfferences for whch deferred c"+na "" i

"' '", 2 ana a inu i992 ::.2n2 si m sa ann taxes have not been prooded at December 31,1985 and 1984 are $20 buon and sinn 2ni svi ac2 s i vu

$1.7 buon, respectrseh The tax effect of these amounts not provided for currentfy wil be recorded when such taxes become payable and are recovered from customers. Note M -Connmon Stock an I Non Ilesleemable investment tax credit carryforwards of approximately $291 mAon at December Cu niulatIve l'referreal azul I' reference Seock 31,1985 are available to offset future years' tadiabilites as permitted by law Such in the fourth quarter of 1985, the Company dscontinued the issuarce of new credts,if unused, expire over the period 1996 through 2000. shares of its Common Stock through the Drvidend Reinvestment Plan and the Employes' Savings Plans.

Note il- Compensating Italances anal Shurt-Term The Convertble Cumulatrse Preferred Stock,51/2% Senes, is convertible into llorrowings Common Stock. The conversion pnce was $17.79 per share at December 31,1985.

As des nbed below, at December 31,1985, the Company had total short term The numbers of shares converted dunng 1985,19M and 1983 were 15,739, credit arrangemeris of $369.7 mAon under whch no borrowings wue outstand- 23,417 and 37,072, rewectrvely The number of shares of Common Stock reserved ing. for issuance upon conversion and the conversion pnce are subject to further 36

i

)

I l adpstment in certain events. The Convertbie Cumulatre Preferred Stock,51!2% p,n p,a , pc Senes, may be redeemed at any time in whole or in part at the opbon of the p, g yy,g,g, ,, ,,,n,, ]g;,g 36, _

Company at $100 per share, plus accrued dmdends. en.seri nt sta L . 9 wrs, senes 22.sm - -

The fobing senes of Preferred and Preference Stock, which are not redeema riefern="im L. 52 73 vras i e' am 28.900 iia 200

"'""'"""'"#"*""'" 2" "" """ '""'"'

ble pursuant to snking fund requirements, are redeemable solely at the option of the Company at stated per share redempt on pnces, plus accrued dmdends:

In the event that a payment due under requirements of a sinhng fund for any nerreasuv rnor on a'al senes of redeemable Preferred or Preference Stock is not made, no dmdend shall wmni,vmanie scrus tnun io in uter a W # gW@ W m NW made upm any pa sm Common and Pr&ence Stock n the case of 32 sto4 inis as sion to-is as 7 sas sua 41336 ioi 4as au Preferred Stock, and Common Stock in the case of Preference Stock) until such 7.45 % ioI i i. is-a6 ini in is a6 payment is made, 7.3n in: so 2. i at io 12- i nr The combined aggregate annual amounts of redemption requirements at P'y"7'* ' ,gg , . , 3, 23 ,3 , . ,3 3, December 31,1985 for all senes of redeemable Preferred and Preference Stock are 53.42 2a 42 i n as 23 :s i n sa 59.1 milhon, $27.6 milhon, $27 8 milhon, $27 8 milhon and $278 mithon for 1986, sa 40 :s 40 1-1su 25 23 oi5aa 1987,1988,1989 and 1990, respecuvey

$$! !N3 N$$ !!23 [j] The following senes of Preferred and Preference Stock, which are redeemable sa 24 28 24 in is as 23 :s no is un pursuant to snhng fund requirements, may a'so be redeemed at the option of the Company at stated per share redempbon onces, plus accrued dmdends:

None of the shares of the $3.42 Senes, $340 Senes,53.12 Senes, $313 Senes nm ,,,,n ,,,,,, g ,g or $3.24 Senes Preference Stock may be redeemed through certain refunding amiecmani, serws i n,m in lo u s..r_

operabons poor to January 15,1988, January 15,1988, January 15,1988. Jufy 15, nn.,er,mi sn,, t 1988 and October 15,1988, respectreeY at an effectve cost less than that ind,cated 9 72 % 5ios no iase sioi i i5 9

" M r5' I"7 m 3"45 " lot to is-94 by the angnal dr/idend rge.

Apart from MPSC apprwal and the requirement that Common, Preferred and Preference Stock be scid for at least par value, there are no lega! restnctons on the ll[

is sas l"" $'l ior as

[$'7 7 is as 3 '[

ino yl ",3, ras n issuance of additional authonzed shares of such stock. eravrem esim L s2 n 2c to 7. i s 90 25 2., tas tni 52 75 5cr ws H 26 95 i is a6 25 23 i is 9i Note 9 - Hedeemalile Cumulative Preferred azul 58 82 29 15 8 & "7 25 2s 3 IW Pref rence Stock The following redeemable senes of Preferred and Preference Stock are enttled to the None of the shares of the Cumutawe Preferred Stock,960% Senes,1350%

benefit of sinung funds (provided that no dividend a rearages exist) prWiding for the annual redemption of shares at stated per share pnces, plus accrued dmoends, Seres or 15.68% Seres may be redeemed through certain refunding opera $ons commencing on datesindicted: poor to October 15,1989, January 15,1986 and Juty 15,1986, respectreeY at an effectrse cost less than that indicated by the orgnal dmdend rate. None of the son tumosain e shares of the Cumulative Preference Stock, $4.12 Seres or $4.00 Seres may be opium to redeemed through certain refunding operahons pnor to January 15,1987 and Apnl 15,1987, respecuvey at an effectrve cost less than that indicated by the orgnal snnual ena- iu$[ai romnwnong suna-r rer shared n dMdend rate.

Raicernable scrws On of Shares Sharc \ns near-Note 10 - Long-Tersii Heht

~

rrererral 5tock 9 12 % vism am ni sim am u n, General and Hefunding Mortgage Hands-The Comparris 1924 Mort 9 ars, inas as 323m im 32sm* gage and Deed of Trust, as amended, (" Mortgage 1 the lien of which covers i2 nos 7 s an 2oani im zm " ' substantaPy all of the Companyt propertes, hmits the amount of additional General

!x$

!b !ah [ and Refunding Mortgage Bonds (" Mortgage Bonds") which may be issued on the basis Of property addihons, an eamings test provison and Mortgage Bond rreferesu c 5tu k s2 n ruso imins 23 imini retirements. At December 31,1985, approximately $38 bil hon poncipal amount of 52 s serrs n ina im noo 25 1""""" additional Mortgage Bonds could have been issued on the basis of property rYi !N a

"j [ ]["l addcons, after taking into account the effect of the eamings test provision of the Mortgage and assuming an interest rate of 11.25% on any such add 60nal noi in ewen122m ni cumulain e aikhnonai shan.3, Mortgage Bonds. In addaon, at December 31,1985, approximately $298 mi! hon poncipal amount of Mortgage Bonds could have been issued on the basis of The following numbers of shares were purchased for apphcation to 9nhng fund Mortgage Bond ret rements See Note 3 for pos9ble changes which could hmit the requirements: Companyt abihty to issue Mortgage Bonds.

ar

n3 fSeinpr llevenue Hund obliptions Agreements have been signed and habktes at December 31,1985 and 1984 include certain property and related with certain municipalaes and munopal agences, under whch the municipakties ochgabons under capdalleases.

and agencies issued tax exempt bonds to finance certain Company projects and to B/ 987, 1 as permced by $fAS No 71, the Company wdl record caoitalleases refund matunng issues. The Company G obligated to make paymen's suthcient to for whch the incephon date is on or before December 31,1982. Had all such meet the pnnopal and interest due on the bonds To secure the Companyt ehg ble leases been accounted for as capital leases. assets at December 31,1985 otQat:ms under most of these agreements, the Company has issued Mortgage and 19M would have included acctonal property under capital leases (inciucng Boncs we pnntipal amounts, interest rates and matunty dates corresponcng to nuclear fuell less accumulated amortzaton of $3714 mAon and $3066 mdW.

those of the tax exempt bonds. Payments made on the tax exempt rewnue bond respectme'y Also, habhbes at December 31.1985 and 1984 would have includ.x1 obhgatms secured by Mortgage Bonds automatca!!y escharge corresponcng adcbonal noncurrent habihbes under captal leases of 598.1 m6on and $1054 Mortgage Bond obkgabons. mdon, respectweY and adacona! currert habhbes (inclucng nuclear fuel obhga-nelle fili er l'roject Financing The Comparty has an agreemer,t wc a group tions) under capital leases of $273 3 moon and $201.2 moon, respectue'y of commercial banks for a 512 bliion project financing re!atng to Be!!e Pwr Unit Under SFAS No 71, amortaabon of leased assets 6 modfed so that the total of f61 and facntes used in common we Be!!e Rwer Unit No. 2. In March 1984. the interest on the obhgaton and amortzaton of the leased asset 6 equa! to the rental maximum of $1.2 bdhon of borromngs under this agreement was reached in 1985. expense aneaed for ratemahng purposes Net income is not aNected by capitahza l the Ccmpany prepaid $150 muon representng cuarterty repayments due January ton of leases.

1 and Apnl 1,1986 Quarter'y repayments are due beginning Ju!y 1.1986 and for ratemahng purposes, the MPSC has treated a'l leases as operahng leases.

conbnuing thereafter through October 1,1989 with proason for prepayment at any ,

trr:2 wcout penafty The agreement contains a number of covenants,inclucng an Nietc 12 - CassiistilIstieriis avid Cassieisigesicies l agreemant by the Company not to plecge Or sell any of its assets except in tne commaments-The Company nas entered into purcnase commcments of ordinary course of business and except for the sale or conveyance to one or more approxima*e'y M91 muon at December 31.1985. The Company has a'so entered Ub!fJes of undiwded interests in generatng plants; and not !0 create certain hens on into substan*ial 10ng range fuel supply Commitments.

its assets. For 1985.19M and 1983. interest and commcment fees of $119 5 contingencies-The Company has experenced and in the future may expen-mit::n,5152.7 mAon and $120.3 mdlon, respechey are included in interest ence some of the problems confrontng the electre u%ty industry in general. such charges, offset by 51.3 melon. 5642 mSon and $110.3 moon. respectuey as d.'fcul:y in obtaining suf$ cent return on invested capta! through hmely and includEd in the borrowed funcs component of AFUDC. adequate rate increases resultng in part from phase in plans and esaBorances of Long-7erm Dehr Maturities-In 1986.1987,1988,1989 and 1990, long plant costs; low lewis of funds generated interna!Y for corctruction; the effects of tam dabt matuntes consist of 533 moon. 5721.4 mAon. $379 8 maon, signifcant cash commitments and extended constructon penods for generahng 54296 mAon and 592.1 muon. respeche!y unds; adctonal expenctures and delap due to ettoits to comp;y we changing erMronmental laws and regulatons; increased operabon and maintenance expenses. unantcipated reduchon in load groAth. inabikty or unadlingness of joint Nante 11 - Leases enners of gmatng units to honor commaments; ddubon of common share-Rental expenses were 539.1 mAon. 5380 mAon and 5361 muon for 1985,1984 holders' equity due to the issuance of substantal numbers of common shares at and 1983.respecWely prces below boch value, aad increased pohtical actmtes by consumer interest Future minimum lease payments under long term noncancenable leases, Cons'stng of nucdr fuel (5386.3 m60n computed on a projected units of 96 See Notes 2,3 and 13 for a dccusson of conbngences related to Fermi 2 and producton basis, plus current interestl lake vessels (51036 mGont locomotwes and ccal cars ($107.8 m6ont of' ice space (559 3 mdlon) and compu'ers. vehcies ommate mass 0^*Sh's of an operating nuclear generatng unit subjects a company to and othar equipment (566.7 mdiion) at December 31,1985 are as fotious additiona! rds The Company is insured as to its interests in fermi 2 under property inuui.mi omniono damage insurance proeded by Amencan Nuclear Insurers (~ANr) and Nuclear j Electrc insurance umited ('NEIL 1 Under the ANIinsurance pohces,5500 mAon i im 5n. 2 iwe 3 .,i o iw ur c suo no of composite pnmary coverage and $85 mAon of excess comage s prooded for l 19ax nn twmaunc ean am i decontaminahon costs, debns removal and repair ana'or replacement of property !

I"tal SME The Company pays annual premiums for this coverage and is not liable for '

retrospectue assessments. Under the NEIL insurance polcy $525 mAon of excess The Company has a heat purchase contract with Renacsance whch proudes property damage insurance s prouded. The combned kmits proode total property t for the purchase by Renaissance for the Company of up to $309 minon of nuclear damage insurance of 5111 bdion (5500 mAon of composite pnmary coverage, fuel. Title to the nuclear fuel rs held by Renaissance Subst to the contnued 585 mAon of excess coverage and $525 mMon of adctional excess coverage) In wailabhty of funds to Pena ssance to purchase such fuel, the Company s obligabon accton, the Company will obtain coverage for fuel costs associated wth plant to make quarter'y payments under the heat purchase contract wdl rot commence outages through NEIL Under the NEll coverages, the Company could be hable for utfJl the consumption of nuclear fuel for the generation of electrcity begins maximum retrospectue assessments of up to approximately $17 m6on per year if Renarssancet irretment in nuclear fuel was $264.4 mdlion and $1899 m60n at losses were to exceed accumulated funds avadable to NEIL December 31,1985 and 1984. respectuety (See Notes 3 and 6 ) As required under the Prce Anderson /tt(whch expires in 19871 the Company in accordance wth SFAS No 71, the Company records captal leases for which maintains pubbc habikty insurance for a nuclear incident The current limit of habdity tha inception date s after Decemoer 31,1982. AccordngY balance sheet assets is $160 mdion of pruate insurance plus deferred premium charges of 55 m@on 3M

which may be lesied against each nuclear unit licensed to operate (but not more other boder p; ant equipment, the MPSC determined that a return on and a recovery than $10 muon per year per nuclear unit) On December 31,1985, there were 98 of the expenditures through depreciabon are not approonate. Approximatdy $32.8 bcensed nuclear unds in the United States. Thus, deferred premium charges in the mdhon of the $339 minion dsallowance relahng to certain coal handhng facihbes aggregate amount of 990 mi!! ion could be leued against a!! owners of Icenced a1!! be recovered through depreciaton, but a return on this investment is not nuclear units in the event of a nuclear incident AccordngY pubhc habihty for a a!! owed, pursuant to the order, the Company is not entitled to a return on and a single nuclear incident is currently limited to 5650 minion (5160 mdhon of pruate recovery of the remaining $1.1 milhon through depreciaton. The Company insurance and $490 mdhon of deterred premium charges) appealed to the Ingham County Circuit Court the July 16,1985 order of the MPSC To tb extent that insurable claims for replacement power, property damage, wtch denied the Company rate base treatment of approximately $969 mdhon of decontamcaton, repair and replacement and other costs and expenses arising costs associated we Bete Rrver On September 17,1985 the Court issued an from a nuclear incident at Fermi 2 exceed the policy Imts of insurance, or to the injunction whch a30ws the Compry to conect, subject to refund, rates in an exient such insurance becomes unaelable in the future, re Company wi!I retain amount designed to produce an adetional $12.1 mdhon in annual revenues. This the nsk of loss as a se!! insurer Although the Company has no reason to anbcipate a adotional amount of authonzed resenues is to compensate for the $609 minion of serous nuclear incident at Fermi 2, if such an incident did happen it could have a the Eeue Ruer esatlowance.

matena! but presentty undeterminable adverse impact on the C0mpanyt financial The Companyt anaysis of the rate order in6 cates that the resenues a!! owed for position. the Beue Ruer Plant are sufficient to recoser current operating expenses and depreciason of a!i of tne p! ant investment. inciuang the amount oisanowed, plus Noto 13 - Hate Matters associated ongoing interest costs Therefore, the Company beheses that, under MISC Electric nate case-In 1983. the Company "ad an electre rate case current genera 3y accepted account:ng ponciples, a current penod wide off of the wc tra MPSC requestng an annual revenue increase of aporoumate'y $969 amounts osabed is not required. However, total and per shre Eamings for mdhon which included (1) $71 mdhon for general cost increases related to a 1984 Common Stock mil be adversely affected over the penod of time the p! ant is in test year,(2) $213 milhon coincident ac the commercial operaton of Be!!e Rrc semce. See Note 3 for a escussion of proposed amendments to SFAS No. 71 Unit 161,(3) 5129 mithon coincident we the commercial operanon of Bere Ruer conceming the dsanowances of plant costs.

Unit No. 2 and (4) S556 mi! hon coincident we the commerc:al operaton ot Fermi 2. Pnor to the issuance of the MPSCt Juty 16,1985 order, the Companyt On August 1,19M, Bere Ruer Unit No.1 commenced commercial operabon and approved rate of return on common equey was 15% and its authorized overall rate the Company began couectng rates designed to produce annua! revenues in the of return was 1073%. The Ju'y 16,1985 order expressed the MPSCh vea that the amcunt of $182.9 mdhon pursuant to an intenm order of the MPSC At the time the compiebon of the Bere Ruer Project has ehminated a contnuing nsk to insestors; Na Rrm intenm order was issued, the Company 5 request for $71 minion to cover and for this reason, the MPSCs order has reduced the Companyt retum on general cost increases was denied On July 9,1985, Belle Rr.er Unit No. 2 common equity to 14 5% and its overan rate of return to 1034 The MPSC also ccmnenced commercial operaton and the Company ceased to accrue AFUDC on assed that, when a decoon is rendered we respect to Fermi 2. it intenos to the unit and began to record expenctures associated we plant operations and reduce the Companyt retum on common equity to a manmum of 14 25% and the depreciatan es current opcrabng expenses On July 16.1985, the MPSC issued a overan rate of retum will be reduced at least to 10.23h However, such retums are parhal final opinion and order which represents d6posibon 01 a'l issues relevant to not assured and the Company has not been able to acheve prevmfy ahed rates this case (inclucng the $71 milhon requested for general cost increases) wc the of retum exception of those pertaining to the Fermi 2 p! ant which wdl be aodressed at a later nefermi ruct cost nejimd-in 1983, the M chegan Supreme Court dened date. The MPSC authonzed an addbonal eectnc rate increase in the annual amount the Companyt mobon for a re heanng of the deferred fuel cost matter, thereby of $99.3 mdhon effectue Ju'y 16,1985, bnnging the total rate increase for Bece requinng a refund of $23 5 mdhon of revenues corected to recoser 1975 deferred Ruer and all issues exclueng Fermi 2 to $282.2 mdhon in response to the M13 fuel costs and a restatement of eamings for 1975, we correspond ng reductions in mdlion requested by the Company for the revenue requirements associated we the retained earnings used in the business at December 31,1975 and subsequent comtrarcial operabon of BeRe Ruer Unit Nos. I and 2 and for general cost penods. Interest, prehminanly determined, of $232 mi! hon reduced total and per increases. The Company anats the fnal decoon and order of the MPSC deakng share Eamings for Common Stock for 1983 by $12.5 mdhon and $0.10, respec-with its Fermi 2 rate request (!556 mdhon coincident we the commercial operation twefy Subsequenty the MPSC issued an order crecting the Company to refund the of Fermi 2) and related issues. inclucng proposed dsanowances, a proposed rate $23 5 mdhon of revenues previousty conected, we interest prehminarily determined ritaderaDon plan and areged unrequired capacity (See Note 2 ) of $232 mdhon. AccorengY the Comparry refunded portions of the $235 milhon in its July 16,1985 order, the MPSC stated that whde rate base treatment of the we interest and deposited 'unds we a trustee sufficent to refund the remairrng

, Be!!e Ruer Project is jushfed, it must also determine the approonate level of costs balance. In 19M, the MPSC issued a final order directing the Company to refund incbded in rate base for the facikbes based on a "reasonaDie and prudent' $19.1 mdhon of interest Since the prehminary interest of s23 2 milhon refunded by standard. The MPSC concluded that there was an unreasonable delay in the the Company exceeded that required by the order, the Company beheves that it has ccnstruction of this project. The MPSC prended a total dsanowance of approx no further refund obhgabon. Because the preliminary interest was stipulated to by imatefy 596.9 mdhon ($90.2 mi: lion of which is appficable to the Companyt rate the Company, the excess amount refunded cannot be recovered from customers. In base) for Belle Ruer. This amount included the acailorance of $33.9 mdhon for January 1985, the Michigan Attomey General and Association of Businesses certain coal handling facilites and $2.1 mahon for certain other boder plant Advocating Tanff Equity fil ed an appeal with the Ingham County Circuit Court which equipment plus a dcanowance of 5609 milhon d;e to what the MPSC termed an chauenged the MPSC's me*nd of determining interest In September 1985, the imprudent delay of twelve rnonths. With remect to the $60.9 mdhon esa!!owance Court remanded the case to the MPSC for coroderation of addtional evidence related to the delay in construction and the 52.1 mdhon d sa!!awance for certam presented to the Court and a decoon with respect thereto m

~

-- w Hate nefund-in 1976, pursuant to a temporary order of the Ingham County December 31,1984 and 1983, the latest dates for whch actuanal informahon is Circuit Court, the Company couected revenues of $13.7 milhon, sutyct to refund, avadable,is as follows whch increased total and per share Earnings for Common Stock by approximately

$7.1 miihon and $0.14, respecbvey in 1981, the Ingham County Circuit Court D-end-r3

"* 8 ""3 issued a final opinion and order concluding that there was insufhcient evidence to

"'"'""'"h' support the collection of the adotonal $13.7 mdtion of rewnues. In 1984, after a senes of appeals, the final opinion and order of the Ingham County Circuit Court muan.i inmnn ain.-i a.nnnutana was affirmed, therecy requinng a refund, we interest, of $131 milhon of revenues ""s,7l.',""" 3 3,, n 5322 nn codeded in 1976. In February 1985, the Ingham County Carcuit Court ruled that the smn esini it: 2i m statutory interest rate should be used for the refund and remanded the case to the inui sasi oli s s u n_e.2 MPSC to determine the method of refund. In March 1985, the Michigan Rorney s,. 3 ,, g,,,,,, ,m, p,,n ,,,,,wt ia sm n n 5454 25n

=

General and other intervenors filed an appeal we the %chigan Court of Appeals wbch argues that lhe statutory interest rate is unreasonably low in August 1985, the MPSC ordered the Company to refund the $13.7 mi! hon of revenues we other Postretirement nenefits-in ad6 tion to piond ng pension benefits, interest prehminanty determined. Accordngy the Company refunded portons of the Company proudes certain postrettement hea!th care and hfe insurance benefits.

the $13.7 mithon we interest and deposited funds we a trustee sut'ioent to refund Substanna!!y all of the Companyt employes wdl become ehgible for such benefits if the remaining balance Finalinterest charges will be determined by the MPSC af*er they reach rettement age w%le stil working for the Company These benefits, as apprognate proceedings. The accrual of this refund with interest reduced total and well as simdar benefits for actre employes, are prwided pnnopa!!y through per share Eamings for Common Stock for 19&4 by $158 milhon and $0.12, insurance companies and other organizatons whose premiums are based on the respectvey benefits paid dunng the year The Company recognizes the cost of providng these fuel Cost Recoverv-in 1979, the Michigan Attorney General requested orders benefits as the premiums aruecorded.

from the ingham County Circuit Court and the MPSC prohibitng the Company from charging, over the penod 1980 through the first quarter of 1985, approximate!y $30 i9c as4 i9a3_

million under the fuel cost adjustment clause. These charges related to certain costs ( osi in it,( mnp.n.s or prownng tr iiti car e a*1 n'e insur rwe t,nwrin in a. us e resulung from the renegotaban of a contract we Deci.er Coal Company in 1980, the Crcuit Court denied the requested relief and remanded the case to the MPSC in ywerl*[',}'"$",e"r]o'j'j "("j",*]",',, aan 5jQ3j 5j", 7, 5j ,

1983, the MPSC issued a final order w5ch dsmissed the Mchigan Attomey ge nuini f rein ni einpan.se, a 2nx a 2s9 Generalt complaint. The Michigan Attomey General appealed the orcer to the Ingham County Circuit Court w+ isch denied the appeal in September 1985. In September 1985 the Michigan Attorney General appealed this case to the Michigan Court of M N"8" 15 -S"PP I"3nentary Quarterly Financial Steam Heating Rate case Appeal-in 19&t, the Michigan Supreme Court Infurinatinn (UnauditcaD deaded to hear an appeal cha!Ienging a 1970 MPSC order grantng an increase in steam heabng rates. If it is ulbmatety determined that the Company must refund al'

""4"""'"""'

" ' ' " ^ " " "

P' #" "" "

or a porton of the approximately $8.1 mi!! ion collected plus interest of an estmated

"#"'""*"'""4""#""""""'""#

$14.8 million at December 31, 1985, such amounts refunded would reduce Eamings for Common Stock in the penod of such determinaton (approximately ',',3",','""",","'"l""'

5["'"j ,

5M','s 5@2;295 inj ,

$12.4 milhon at December 31,19851 scum oom um42: 94 um i2nu2 n34u f arnings for ( ornnwin Stoi k A2.535 tim 149 91242 87 725 Note 14 -Einployes' Hetirement Plan anal Of her rarnne rer stwre o 59 o 4n o ss o so Postretirernent Henefits --

Employes' Retirement Plan-The Company has a trusteed and noncontnuu-tory defined benefit retrement plan covenng all ehgible employes who have '"*" b" " " t* "I completed six months of service. The Companyt policy is to fund pension cost

"3' '"""3" '"P' 3" "" 3 '

""""*^"^"P4""'"""""""'

annually as it accrues based on the actuanal cost of the Plan. Unfunded pnor service cost is amortzed over forty years and thirty years (for costs relatng to "P"'""A H"' e"""' 5620 023 5 6 568235" 56453M amendments to the Plan after Apnl 1,19761 as appropriate, and net expenence 's Yi,"""'*"""

, l*,[, $ "7,' s'"

l$ "}*3 gains and losses are amortized over fifteen years. Cost to the Company to fund the tarnne for nunmon stm k 74 n46 48.22s 97.07: $".'3$

77 s3s o su

'arnne en simm o 37 o as o 7:

plan ns $37.9 million, $35.7 milhon and $413 milhon for 1985,1984 and 1983, respectvey Effectve January 1,1984, the Company changed the actuanal fundng method used in determining pension cost from the entry age normal cost method to the projected unit credit method. In addton, the Company changed the interest rate Note Ifi-Supplementary Information Concern-used in determining pension cost from 6% in 1983 to 7% in 1984 and 1985. Ing ihe Effccts of Changing Prices (UnauditciD -

A comparison of the actuarial present value of accumulated Plan benefits, The following supplementary information is supplied in accordance with the determined using an interest rate of 10%, and net assets available for benefits at requirements of SFAS No. 33, Tinancial Reporting and Changing Pnces," as 40

amended. SFAS No. 33 addresses aspects of an inflationary enaronment i.e . the Since the higher depreciabon expense under the current cost method is not tax effects of changes in the soeofic onces of certain assets used by the Company (the deductible. income taxes were not adjusted from the amount shown in the

" current cost' methodl It is an attempt to display the approximate economic effects Companyt histancal cost statement of income.

of inflabon and should be consdered an estimate of those effects rather than a fuelinventores and the cost of fuel used in the generabon of electnoty were not preose measure. restated from their histoncal costs. Regulation provides for the current recovery of fuel cxpense Matenals and suppies inventores were not restated snce they are not n,nsolidatat siatemeni or in">"# a cost of generating electnoty and the amounts involved are insignificant.

Atlastal for Changes in Nwutir \ ear taled Ibemtwr 3I nw.

rna s trurrent Co>ti umatam ora, erne an.witar,,

Adjustment of Net l'tility riant to Net Ilenn crahle Anwant-Under current ratemaking polices prestnbed by the MPSC and the FERC, only the rarnings f or nunnun sto. L. a, reparted in ilw historical nist histancal cost of uthty plant is recowrable through deprecahon charges as part of statenwn or i,xunw s338 the cost of sernce bdied to customers. Therefore, the excess of the cost of utikty Adaituul depen-iaton una 9 0 aWs Farnings for Comnum 5 tot L adtustal for rtunges in speutic pnces 5 2M depreciabon. In aCC0rdance with the requirements of SFAS No 33, the amount of tirrea+ in speutic pnres of twt utdity plant

Jul this excess th3! accrued as a resort of changing onces dunna 1985 is ref'ected as an Efrect of increase in the generd prkv les el ta n adjustment to net recoWrable amount.

Adjustnwnt of net utdit3 plant to art recm erahte anwunt un3 Ileduction of Purchasing runer Loss through I)cht Financing-Hnfurtion or purchasing pow er low Since the Company 0'Aed net monetary habihtes during a penod in which the ihnugh debt financmg 2:7 general purchasing power of the dollar dechned, the Company expenenced an Net riunge in Comnmn Shareholdershuny 52a3 Oconomic gain in purChasna poWeI. M assets and liabiht es otner inan othty piant.

as well as amounts apphcable to preferred and preference stock were treated as le a n w I I e i kht I o ta iti rih e@ M WmMW saNaN E through depreciatum w as sa 6 bdimn long term debt. The gain in purchasng power which resu'ts from the Companyt use of debt finanong is stoct'y an econom!c concept. The Company caubons readers that such garns w11! never be realized and theretare will not contnbute to General-The current cost data ref;ect changes in the speofic paces of uth!y plant t'om the date such plant was acquired to the present, as measured by the Handy.

cas h 5"'"' nary-The regulatory process hmits the amount of depreaahon expense Whitman index of Pubhc Uthty Constructon Costs ( index')

recoverable through rewnues to the histoncat cost of the Companyt investment in Earnings for Common Stock Adjusted for Changes in Sperit'ic utility plant. Such amount produces cash flows which are inaaequate to replace Prices-Adjustment of the histoqcal cost statement of income to amve at Eamings such property in future years or to preserve the purchasng power of common for Common Stock adjusted ler changes in speofic pnces was kmited to depreca- equity capita! invested As a result, the Company must rely on the capital markets to tion expense, in accordance wth procedures speofied in SFAS No. 33 proode necessary finanaal resources thus furthc5 exposng the Company to the Est: mated uthty plant was determined under this method by applying the Inaex effects of inf:abon ia the form of increased fmnang costs The Company therefore to the histancal cost of utihty plant by vintage year. Deprecaban expense was then incurs a signit cant purchasing power loss which is expenenced by the common determined for the adjusted amounts of uthty plant by apphing the same composite shareholder and can be overcome only as a result of adequate rate r9het in the deprecahon rate used to compute the histoncal amount of deprecaton expense regulatory process.

Five4 car Comparison of Selected Supplementary I inancial Data' i9ns inns twi i332 pesi Imdimnd I:arnings for Common StorL As repnrted 8 334 5 29M $ 2(.6 $ IMi 5 177 Adpustnj for rhange% in speutir pn( em 2M 111 0 51 (1221 197)

Earnings 58er Common Share As regwstal 8 2.33 $ 2 20 S 2 21 $ 1 75 $ 2 H2 Ad#usted for c hanges in spenlK' pt Nrs IL2n (n Oil 10 291 (l iM) (). t ll Increase in Specific I*rires of Net l'allisy I'lant os erdumleri Ihe Increase in t he General Price Iri el sI 9 71 $ 12 82: S 67 s asil 5 l17m lledursion of l'urrha%ing Pow er la>%% through peht I inanring s 2s7 s 215 $ 20t $ 180 $ .tM i Net A%%et%tCommon Shareholders'laguitp at icar-I:nd As regnrtal s 2,3mm 5 2 un s2in 3 1.872 > 1671 AdjusteMI for i hanges in slwurir pnnm af ter adjust ment to renn et able annunt 2,547 2 431 2 UO 21 H i.) l 917

All data adlusled f or riunging prk es are staMI In JWI age IMI doII.n s 4I I

{

l The Detmit Edison Company and subsidiary armpanies SIANAGEAIENT'S DISCUSSION AND ANAL YSIS OF FINANCIAL, CONDITION AND llESULTS OF OPEHATIONS This anaysis should be read in can;uncton wth the Consolicated Financia! The increases in commeroa! and injustnal sad wwe due pr manly to Stt2ments and accompanying Notes thereto. contained herein. improved business and economic conditions with maior increases in sales to automobve and automotue related customers. Sales to steel customers were Consolidaaed Sta emeni oiIneome higher in 1983 and 19&t. but declined in 1985. The decreases in residental General-Improved business and economic condmons ensted throughout sales in 1984 and 1985 were due pnmanty to cooler summer weather the Companyt service area during the three year period resulting in higher operating IOpenses-Operabng expenses increased in each year. Fuel kbwathour ("kWh") sales, parbcularty in the commertal and industnal expense decreased in 1983 due pomanly to decreased generabon, coal sectors. The Company also expenenced increased operabng expenses and freight rate tan!! refunds and increased consumpbon of coal, the Companyt increased costs of caDital assocated with finanong capital expenditures. lowest cost fuel. Fuel expense increased in 1984 and 1985 due pnmanly to AL" lough ra'e increases were received dunng this penod, they were not increased generaton reflecting higher kWh sales to customers and. in 1985, adequate to permit the Company a reasonable opportunity to earn the rates of to higher costs of coal The increase in 1985 was parta!y ottset by a reduction retum on common equiti authcrized by the MPSC. in expense for a reclamaton semement with Dec6er Coal Company The amage cost per ton of coal consumed for 1983.1984 and 1985 was $4209, ofmting iterennes-Approximatey 97% of the Company 1 operatng $41% and $44 34, respectrse'y Coal as a percent of total fuel consumed in revenues are subject to the junscichon of the MPSC. with the remaining 3%

1983.1984 and 1985 ms 97.4%. 97 8% and 98 0%. respectreeiy Other in n due to the following factors-W# * *"" * #

energy at low unit pnces reflecting decreased generaton and higher sales to customers Other power suppy expense increased in 1984 and 1985 due pnmanly to the purchase of MPPAt capaaty and energy ent;tlements j o $ N uSI5eZ7krar isF ]ijsi7u beginning in August 1984 (See Note 4) and lower sa'es of energy to General l

<='tu mi Public Utdites Corporation The increase in 1985 was parta!!y ottset by lower j It$tNtNi Cl[

tuhm atttwur salm s229 14 3a tai su I44 purchases of energy from other electnc utdities Other operation expense increased due pomanly 10 higher l abor and genera! inflatonary increases.

despite managementh continuing sinngent control of expenses. The 1983 "f[ s2 i pi increase included the wnte off of fuel od conversion protects at two peaker s'tes and the amorteaton of unrecovered plant costs relatng to Greenwood Operatng revenues incluae the tonoung MPSC authonzed electrc rate Unit Nos 2 and 3. parta!!y ottset by a decrease in unconectcle e> pense The increases: 1984 and 1985 increases inc uced the cost to operate Be!'e River Unit Nos.1 and 2 wSch coritmenced commeraal operabon in August 1984 and Juy snnuai un enum um"* 1985. respectivey and a renewed part opahon in the Dectrc Poe Research smerun in. iuNiniron, Insttute The 1985 increase a'so included higher pub!c liatety insurance s 4s 2 ouh ie $2ai 4 mai A Pfem'ums and egal expenses Maintenance expense increased due pnmanty inn uune imu 2x22uun in to higher labor and matenal C0S!S. cont nuing effoits to maintain or improve the avadaD6ty and e!'ioency of a!I generatng equipment, and a severe ce The June 1984 and the Ju'y 1985 rate increases became e'fectree mth tne m in N aN mmean aM M mnws commercal operaton of Bete Rrver Unit Nos 1 and 2 in August 1984 and amaw e k camaal wau d Me b W Ws 1 aN 2.

Deprecaton expense increased due to increases in ceprecable property Juy1985 respectuey l induding the aducon of Bene River Unit Nos.1 and 2 in 19&1 and 1985, i For 1985, revenues include an elecinc rate surcharge ordered by the mzemy Se Note 1 ) Tapes other than income taxes increased due to Ingham County Circuit Court effectue in Seotember in the annual amount of 512.1 milhon. For 1984, revenues decreased by $13 7 miikon due to a court h@ m and W M and in N at E to an Meam in cNgan g BusindaWeemaxesin N and E W ordated refund of revenues corected in 1976. (See Note 13 )

N comoM waton d M h W Ws 1 and 2, emc%

Operatng revenues reahzed from rate increases are dependent upon me thes maw in E due peaW M W Wu incma actual levels of kWh sa!es and bang cemands (requirements for elecinca Income taes decreased in 1984 and 1985 due to lower deferred taxes on the power measured in latenats) boMundum@nenMhengWmmalwa@n of Changes in k%h sa'es were as follows:

Bc!!c Ruer Unit No 1, partially offset by an increase in pretax income. (See Notes 1 and 5 )

inti c.goco cam nin rP"'P"' (inu ((bpirW-Interest on long term debt and dividenas on common

~~

shares outstanding increased for all penods and preferred and preference newiental - r, .

rnnunerrui 4.i 3: ia stock duidend requirements increased in 1983 and 19&1 due pomanly to the

',";'"[" "' 8g Q, ".' j.,, issuance of secunbes to t nance the Companyt capital espenuiture program and, to a tesser extent. to refund matunng secunty issues. The increase in 42

j 1

)

l interest on long term debt was parta!?y offset by lower interest rates in 1983 customer rates or phasein re',enues) of the project co;ts and operabng and 1985. Other interest expense decreased in 1983 due to lower leve!s of expenses (operation, maintenance, depreciat3on, property and other taxes) for short term berrmings and lows interest rates, partia!y offset by interest on Fermi 2.

the deferred bel cost refund. (See Note 13.) 0ther interest expense decreased Cash requirements for captal expen6tures from 1986 to 1990 are in 1984 due to lent be!s of short term borrowings and the accrualin 1983 eshmated to be approximately $1.2 bdhon (excluding approximately $79 of interest on the Jef6 Fed fuel cost refund, parba!!y offset by higher interest mdhon of AFUDC) In 1986, cash requirements for capital expendtures are ra'es and intqt on the court ordered refund of revenues conected in 1976. eshmated at $273 milhon (excluding $61 milhon of AFUDC) These eshmates (See Note 13 Nther interest expense decreased in 1985 due priman!y to the assume the commercial operabon of Fermi 2 in March 1986, which is no accrusl in 1984 of interest on the court ordered refund of resenues conected in longer attainable. (See Note 2 for a discussion of addfaonal fermi 2 project 1976. The awrage interest rate for shortterm borromngs increased from costs) 10.4% in 1983 to 11.7% in 1984 and decreased to 8.8% in 1985. Cash requirements for the Companyt remaining purchase obhgabon Earningsfor comrnon Stock and Earnings &r Share-Eamings for porbons of the Cooperabyet ownership interest in Fermi 2 are approx for Common Stock increased in each year due to rate increases and to higher imately $7 mdkon per month and wiu conunue untd commercial operabon.

kWh sales, parba!!y oftset by increased operabng expenses in spite of (See Note 4) managementh conbnuing sinngent control of examses. Desste the increases Cash requirements for long term debt maturfacs and cumulahe preferred in Eamings for Common Stock, eamings per share dechned in 1984 and were and preference stock sinking fund requirements are $413.4 milhon (after reduced in 1983 and 1985 as a result of increases in the average number of prepayment in 1985 of $150 mdhon under the Bene River Project Financing 1 common shares outstanding. $749.1 milhon, $407.6 mdhon, $457.4 methon, and $119.8 mdlion for 1986 Eamings for Common Stock include AFUDC, a non operating non-cash 1987,1988,1989 and 1990, respectn,ety item, consisbng of the net cost of borrowed funds used for constructon Shortterm borrowings are incurred to finance the Company's captal purposes and a reasonable rate on other funds when so used AFUDC expencture program, to refund matunng long term debt and to meet other increased in 1983 and 1984 due to adaconal captal expendtures and an intenm cash requirements, pending the receipt of proceeds from unsecured increase in the AFUDC rate in Apn! 1983 (in recognition of increasing costs of longterm bank borrowings arid the sale of debt and equity secuntjes. The capd) in 1983, ad6tional captal expendtures on the BeDe Rwer project were Company had temporary cash inve;tments of $130 mdhon at December 31, substanba'ty offset by the sale to MPPA and lower interest rates. In 1964, the 1985. The Company had short term credt arrangements of approximatefy increase in AFUDC was substantaffy offset by the commercial operaton of $3697 milhon at December 31, 1985 unoer which no borrowings were Bere Ruer Unit No.1. AFUDC decreased in 1985 due to the commercial outstanding Any material dsrupbon in the secunte markets or any other operabon of the Bere Ruer Power Plant, parta!!y offset by adctional captal circumstance that might sigruficanity delay or restnct the Comanyt access to expenditures for Fermi 2. AFUDC amounted to 108%,9% and 74% of longterm debt or equity financing would increase rehance on shortterm Eam:ngs for Cammon Stock for the years 1983,19M and 1985, respectuely borrowings and, dependng on the circumstances, could adversety affect the Accordngh, eamings available for cvidends on Common Stock are depen- Companyt financial conction.

dent in part upon sources other than current operabng income (See Note 1 ) The Company's ablechve is to actneve a captal structure of approximately Retum on asage common equity was 13.0%,12.9% and 13 3% for 35% common sharebalders' equity.1415% preferred and preference stock 1983,19M and 1985, respecti@ as compared with the 14 0% return and 5055% long term debt. The rabo of common shareholoers' equity to total authonzed by the MPSC through March 1983.15.0% from Apol 1983 to Ju!y captanzabon (excludng amounts of long term debt due within one year) 1985 and 145% thereafter. increased from 33.4% at December 31,1984 to 358% at December 31, 1985 due primanty to the issuance of 7,4M,934 addtional common shares Consolidated Italance Sheea and the increase in net income in 1985. The rabo of preferred and preference Plant in service increased and construcbon work in progress decreased stock to total captahzation decreased from 12.6% at December 31,1984 to primarily as a result of the commencement of commercial operation of Bene 12.1% at December 31,1985 due pnmarily to redempbons of preferred and River Unit N12 in July 1985. The decrease in construction work in progress preference stock and the increase in common shareholders' equity The ratio has partialty offset by additional captal expenditures for Fermi 2. of long term debt to total capfa!izabon decreased from 540% at December 31,1984 to 52.1% at December 31,1985 due pnmarily to increases in Iziquidity and Capital Hesources amounts due within one year.

Extemal financing pro /ioed 88V 84% and 60% of capt.a! expendtures See Note 3 for a escussion of the possible adverse effects on the (excluding total AFUDC)in 1983,1984 and 1985, respectuely La le/els of Company if the FASB Exposure Draft is issued as a final Statement and the irremal cash generabon are expected to contnue untd Fermi 2 commences MPSC issues a rate order consistent with the Fermi 2 PFD.

ccmmercial operabon and rates are authorized by the MPSC a!!owing the See Notes 4,6,11,12 and 13 for other matters that may affect the Ccmpany captal recovery and return on the investment in this unit. See Note Companyt hauidity and captal resources.

2 far a description of a plan recommended by the ALJ which would phase in Inflation th3 cash recovery of a portion of the net income requirement associated with The Company has been and will continue to be impacted by an inflationary Fermi 2. This plan does not provide for the full recovery (from erther current economy (See Note 16) 41

E*-

E _

[ --__

r The Detrtit Edisent Company and suhsidiary annjunies COMPAR ATIVE IIESULTS OF OPEllATIONS I flM3 19M4 19M3 19M2 Ogwrating lies enuem tiertnc $2,73M,33ei 52.439 M35 52 260 illi 52 07M !H.5 Steam 4 f t.MO I SM 370 49 637 44 2M9 Total Operating Etes entes $2.7mm,137 52.498 205 $2.309 65M 52.123 254 Operating INpenses Operatkm Riel S 7MS llo 5 7007M9 5 E76 409 5 71 M. 431 Otter gu.mer supply !!Hi.!Il M IM4140 12M 921 74 654 Other operation 422.133 403 6 tH 374.164 372167 Alaintetutur 230.7tlM 203 945 1M7169 170 974 Deprerutum 2 8 M.302 190 420 171.940 161.430 Tases other than irminne 173.33ei 144478 142J43 I IM.537 Irumme tases 124.fl3!) l 31.4 N 14'i 559 96 9 t 2 Total Ogwrating Fa penses $2,8 73.!t346 519 M 41H 51 M27 505 51 713 705 Operating inconte $ til 4.20 5 5 53M 7F5 5 4M2.153 5 4tPt 549 Other inroene and Dedursions

\lkm anre f or turwis uwsi during unwtr urtkm S -

5 -

Alam aruv for otler f usals uwst dunng nostnulum i13.223 130 aio 92 750 47.995 Otter innume azul tiesitu tions (3.2401 I .M29 7M77 t4M201; innxTie tauw B .fi42 11121 15 4M71 1.155 i Total Otter inrtune anet Dnhu-thxu s__I_o_f_i_.ti2_7_

5

_ 1_32_06.7. . 5_ _ tv_i_l t_o _5__4_4._3 to_ !

lisconw liefore Interest Charges S_ __7 2 3.M_2 M . 5 671) M32 5 5_71 29I SJ3MM

. _ _ _ . - - _ . _ _ _ . _ _ _ . _ . _ - _ i Interest Charges tong 4rrm debt S 401,272 5 399 4 4M 5 351Mit 5 3.11 469 Amortii.athm of debt dNuunt, premium alwl rspense 2.302 2.19 l 2,131 2 no6 Otler i 3.464 2 3H 592 53 OMM 59179

\lkmanre for hornmed furuts uwd dunng nmtr urtum irrtMist i (133.8036 tl613 hit (194 4021 (194 076:

Net Interest Charges S 2Mel.3 3 3 5 2bM wt3 5 282bil 5 19917%

.%et incenne S 437,353 5 401 917 5 3h4 622 5 254 708 l* referred and I' reference been L Dit idesul itesguiresnrns* I tt3.26i4 104.151 9M 614 7.5245 IMrnings for CAnsnnson nt<M L $_ 334.238_ 5 297_ TM 5 206 linM $

I M {E_

rannenon 5 hares outstanding .ts crage 5 43. l M3.133 131230 M27 120 274 2b9 in3.5M1915 IMrnings B*er Share $ 2.33 5 2 20 5 2 28 5 115 Dit idends Derlared l'er Share sof Onninon St<n L $ 1.eiM 5 I LM S I HM S I 08 Itatio of EMrnings to l'ised Charges (5BE liasis) 2.2 M 2 19 2 22 1 M5 Itatio of I.arnings an l'ined Charges azul l' referred and l* reference Stork Dis idesul liesguirrenents(5tC liasist 1.75 3 67 I b7 8 19

______q l

44

1981 1980 1979 1978 1977 1976 1975 (thousainis)

$2.011.217 $ 1.776.364 $1.667.679 S t .561,296 51.423.909 $ 1.2 41.883 51.052.061 42.840 36.150 30.A32 28 546 27.012 24.2 A 4 IM 719

$2 054.057 51.M12.514 $1698511 51.589 842 $1.450.921 S t .266167 5 8,070J80

$ 689.165 5 670.116 5 647.620 5 5MO.M69 5 53M.325 5 477.231 5 471.873 139.981 107,767 96.502 15M 098 IOM 648 M 350 19.4641 333.440 290.566 266,410 235120 203.300 179 867 160.224 164.978 133.270 128 600 124J44 110 136 100 377 91.253 150.240 141,948 129 644 115.325 102.3tM 93 875 89 240 117.224 115.520 99.552 91,4M 96.59* 94.234 76.365 64.338 37.012 54.706 56 6M6 66 717 35.940 24 398

$1.659.416 51,496.199 51.423 034 51.362.9*) _51.226 627 51 070 074 5 903na9

$ 394 641 5 316 315 $ 275.4'? 5 226 M52 5 224.294 $ 196.tN 3 5 166.M91 5 - 5 -

$ 49.833 5 43.463 39.398 38.815 38.323 32.273 23.750 - -

19.5011 692 3 664 2.371 4 821 1.72M 2.4 I2 4 771 16691 II 5543 II,22MB li ft101 458 (1.353)

$ 34 66A $ 38 M33 5 40.433 $ 33 416 5 26.M71 5 52 012 $ 44,522 5 429 309 $ 355.153 5 313.910 5 260.263 $ 251.165 5 248 los 5 211.413

$ 2S0045 5 211.M37 $ 167.585 5 140 2M $ 129 078 5 124.992 5 116.267 1.853 IJ76 1.644 1.403 1,339 1.0M4 945 37,025 19.662 13 M23 5,29M l.959 2.404 M.420 1133 SSN 6661081 143.17 Il 133 5901 _ d251261 - -

5 194 956 5 166.587 5 139.M i 5 113 399 5 106 650 5 128 4MO $ 125 6.12

$ 234.333 $ 188,566 $ 176 029 5 146.M69 5 144.515 $ 139 621 5 85JMI 57.566 51.037 43 457 3A 056 34s.95 3 4.5M9 26 463

$ 176J87 5 137.529 5 132.572 5 108813 5 110,420 $ A5036 5 59 318 87,473.581 78180.863 69,848 484 6t A9M 763 55.202.974 31.277JM9 48.120 893

$ 2.02 5 IJ5 5 1 90 $ 1 76 5 2.00 5 1 66 5 1.23

$ l.64 $ I 60 5 11,0 $ 1.52 5 1 4675 $ 1.45 5 1.45 1.84 1.90 2.17 2.28 2.48 2.13 I M5 1.53 1.33 1 69 111 1 A5 I 61 I 45 15

J l

J

}

The Detrtdt nhspel Cornpany aunt subsi<h.ury nunputies l STATISTICAL HEVIEW IllM3 l'tM 4 19M3 19M2 Operatinag ilet enurM ulunNuuld Hesalamtial-l brtric 8 M2 7,2 t u S 75M 12 8 5 741.399 5 h7h 370 Conutu*rrul-f lert ric ti31.33!B 170.OM2 513.292 4 7.l.49M hulustrial-Ele't tric I,034.374 919. 4 t h i MlM 660 754 2.lM Otlu r 273.014 25 1509 23b.307 21914M lutal S 2.7MM.8 37 52.49M 205 $2.309 b5M 52,l23 254 Salem (milluun of Lu 10 Hesittential l O.8177 IO.I30 10.256 9 9in Comnwrrul 7.430 6 M*O 6,479 ti.252 huhntrul l ei.fil 3 lb,32 4 15.162 13.751 Otfrr 2.M73 2 563 2 402 2 052 Ional 3ti.fi!I3 35 MM7 34279 31.t#5 Clertric Cu%It,nters ty ear esull Hesulentul 1,ti4 2.HM I l629bbM i ti21. I 72 1 A19.369 C4xturrrrul 144.1942 142 195 140 4H3 139.376 Irutustrul 2.314 2.246 2 253 2.239 Oiler I.MM3 1 MM5 1 M7M i M27 Total I.7!#2.120 1.776.194 1.7b.i Tiih 1.762.M I I At rrage Tnnual C%e Per firsialevaltal CRI%tufnerILu hl #1.1 tis 6.253 t;.332 6,131 An erage Annual flill l'er lic%ialesillal Custorner A3tMl36ti ! 4b7 H3 Sl'7 7i $417.33 As crage liet enue Per Lil h Hesittemtui M.2 t c 7. 47C 7 23C ti MoC Ctunmerrul f t.14 4 32 7 !!2 7 57 halustrial H.23 5hI 5 40 5 49 Capitalisaslort Ithousasuhl I Amg-Term t hist 5 3.770.Mai3 S3 M4 272 5 3.5 4 2.41M 53.2 8M 649 Preferrn! Pref eretur 5 tin L M7tt.4!I7 M9 4. I bd t M l7.5H i MO2,423 Conmuni 51urt lusklers 14]mt v 2.5MM.023 2 37:1 99% 2 115 168 I M72.lMI Tisal 5 7.23M 3M3 57.119,43M Sb 645.304 $5 M13 253 Capiealliatisen t}rrtvnti lamg/ler m th43 32.8 54 0 53 3 54 6 Pref errni Pr eter ener 5toi k i 2. 8 12 6 13 7 13 6 Cannnum 5tur#4uilelers'14]uit s 33.M 314 310 31 M lotal I ( N B.O 100 0 100 O 100 0 Csuntnon Stem L Data larnings Per Slure $ 2.33 $2 2H S2 21 $1.75

$ 3. tim $ 16M $ 1 bM $ g g,M Dn uletul Panl Per 51urc Pavuut 72 % 7bN 7b% 96 %

Slures Out staruhng-Ts erage 143. l M3. 8 33 135 230 M27 120.274 2b4 IO.1,5M5 915 Return im Ascrage Conmum 14lmt3 13.38 % IIM~% 1.1 u3% ln 14%

Bixik Va'ue Per Slure S l 7.47 $ 1b 91 Sib b3 516 60

\larket Prue thgh Siih Sie % $16 Sl3%

lans $14 Silh $13 511 Mi%reliancou% I-'inancial Data Aserage lnterest Hatc on temg ler m lhint 9.9 % 99% 95% 95%

As erage Dis wh*nt! HJte (H1 PI eler's ett Prt'ter t'Eu e 5 tin k i I .43 % II b% 1 I 6% j l.3%

long/lerm De4,t Obligatu ms arul Hethenuble Pr cleri eit arul Preferciuv 5 tin L Outstasuhng filuna.uuld $ 4.332.733 $8.3 83 674 5 4 H27.029 $3.792.9M2 lutal Anets filunhasu!4 8 fir 4?l2.360 $M 970 HI 4 SM 2Hl.4 IM $ 7 6 4 ~, M*,6 Grms l'Illity Plant filupusaruls) $ 10.46ti.03!I $1752.3 46 SM M41779 SM.252.570 Net t'tility Plant filunnaruld 8 M.ul 2.MHD iM al7b ibm $7.120 570 Sh M2 4.05M Capital I A[rruhtures filunnapuld 5 7 B O.69?B S 93M 0n4 $ 1.O l 4.56M $ 1.135 0 85 Miserllaneou% Operating Data

$y stem Capability at ) ear Faul-\lW 9.2 964 M.M93 M 162 7.762 5y. tem Cagulnhty at 1inr of Peak-\1W !B,3H7 9 271 7.M in M569 System Peak th masul-\lW 7.172 7,350 7.t Ni3 6.396 Resene \largin at 't inr of Peak 3 0 .41 % 26 1 % 10 6 % 34 tr%

htem laual I arfor 63.3 % 602% 60 2 % til .7%

lleat Hate-Btu Per ku h 9.990 9 9'H1 10D40 10 I N.O luel Cost-C Per \hllum Blu 202.OC 1906C l'HI 2C 193 MC Numlrr of IJupknes at ) Par IJul 1 1,OMel 11,136 11.152 I I .20M 46

l 4 t' 29r6 Gi! 6 010'6 GZf05 ktWrol fiWful tIO'll 31 OfI 3W 071 32 00l 30 6t i 3t 098 30 Wil 3r 061 061 01 OtZ'01 09701 00001 OWT01 Oti 'O f 090'0I

%W19 %S i'M %iIN NO E9 %Z IM) %IT9 %FWC

%f TF *til 90 %9WI %6 EZ No DC %CiZ %6'il 29t '9 019 9 IWri Ilri UIW's 00f9 !!!'i 9tC W furW lEfW tNG W iiW'W L ECW Wi't'W INfW E96W ttfw 16FW 996 W tEZ W IETW tNI'I t Z $ OtriGZ $ WitTWr S 929 tt9 S UWC l6C S Otrtt9 S 197t96 S EfirIEZT$ WtY t It T$ 6415 Wiel CS lZrot l'tS 6EW (Ef ts Et T9IO'CS 464TZtW ES I!!tf6TS 669 60Z ts iWW'i k r t-$ tt WTul T$ 070'IMet !S Tbt'EI T99 061 60l'21 tOTTT90$ 696 WCW ri Elfi t t 'ts 709 E t9 t$ Wil'9tl ES S W lEEES OfMr219'91 01 tT04fl % OtET6f t s ut fWwW'I S Otr%0 ES tulIT0rIS 92fr60WTS ECO'ZWI TS NEW %tW %9W %WW %06 NE'il %W6

%Ui %92 %C2 %fi %EW %D6 %t6 QiW $ Clt STit %CIS %IIS Ol$ %0f f h t IS %tl$ Wit % 91 $ N!!$ % Cit %IIS 99 WIS Ot Wit 29 Wi$ Z9 Wls 9t WIS EW'il$ it'il $

%8T 9 %62 W NOU til %9Z 6 %IO 01 % 29'6 sit'l I WOW oil Wt bWriit 15 t4670T!! 091WWl9 twt'WtW 69 E?N OWfWi I WCTit'iti

%Wil NiW %Ci %9W astW %'6 %4N St IS Et- l $ St IS If It Wil$ Mlf 79 l$

CI lt 99 I S E K17$ 92 l$ (WilS !! l $ IO IS 0 00I O DOI O tuil 0 ODI O 001 0 001 0 001 W IC 9 II: W Cl: i tC 9 EC Z CE E FC E tI CiI 9ft W Cl frIl O Cl OTI 6 CS C t! 9 TV C IE LT! W ET ftS 600 WISTS ITW Who CS Tt I !O0 CS WilGirT$ tro WWTt$ E2irETS tS tITIED TS 076'976 til ton 4 !?M) WII I tilt ItTl W974WT I 691 ' t' I f I iWrT191 IRC Wit 6 M itt 76WWtr 16916t Wtf0l! 9trl6f 19ET09 1200278$ W66'I W91 $ TWIWrilf 900 Et-W IS Wir690TS 2!t'Of tTS W16 0!fZS 7t E W9 Z 10 t 00 0 09 E EI't 06' t 6W f Wr t iWt 91 E 0! ! O l '9 E6'S 329 0 300 t 3Wt' t 362 l' 3IlT 379 E 3tf9 4E Wr!$ li09;S OT96ES WOEIFW 76 970S 99 61TS 99 TECS tir3 Wir9 919 9 6IS 9 70t'9 WOf 9 ft T9 trW'Z99 i CWCTW9'l CICTori W6t TEfI E0rI91I WWl't'9f t ill'49f t 9tr i UWt l Wt9i ri9 I CIfI Orri I ZW' l i f6'l kl0T 971 Z 1072 t97Z 06TZ E0rZ Eirill 201 WII Et6 WIl tr9'4El WWf!Cl EW901 OfW WCl I WG' l t t" I UWOKI 209 61rI WWerta19 I W9f st9'l Z91 CI9 I 198 TIS I 6ItTE W70 EC ti9 90 W t l'it IW9C TCTtE ZIO FC tvil W98 Z 4WTZ tri I thit T tuli 20l'2 900 Tl ETril T 16'il trC WI 09(fil Zit'El liVSI 019 E It N'T 470 9 020'9 lET9 09Z'9 DIC'S 6W6 ti Tul 'OI EWt 08 !NE 01 tiTOI t6001 tEl'UI OWf020~l $ 49 t '997 8 $ litrutt'lt ItW'6WT lf IIE W691$ t irZlW'I $ 20 tiff 0TS 06L ZZI IIN 601 920!!! 21f 991 tWW LNI t tfWWI IEf il t ICIT90 tilt 9t 69t '60E t ot l l 9 wit'it9 IE0 WT9 29tT92 tit' WIZ 090trl 07T160 C49 ElC 92 rite Wl0TWE W9W'90t lwr!NC S WIW WOt S 90tr t-9t $ WWir46t S 019 tit S IU2 TWT S IOCIt9 S Tiht 946l 2 44,8 Wiht 6464 OW68 IWtil J

. _ _ _ _ _ _ . . _ _ . _ _ . _ _ _ _ _ . - _ _ - _ _ m _ _ _ _ _ _ . _m__. _ _ _ _ _ . . . _ -.M

The Detroit Edison Comfuny and subsidiary compmies AI AllKET FOlt Tile COAll8ANY'S COAIAION EQUITY AND llELATED STOCKilOLDEll AIATTEllS The Company % Common Stock is listed only on the New York At December 31,1985,146.576,496 shares of Ihe Company's Stock Fachange, w hich is the principal market for such stock. Ccmmon Stock w cre outstanding. 'l hese shares w ere held by a The following table indicates the reported high and low sales totalof 238.120 shareholders.

prices of the Companyh Common Stock on the Com;x> site Ta;w The amount of future disidends will depend upon the Com-and dividends paid per share for each quarterly peritxt during pany's earnings (which in turn are dependent, among other the past twoy ears: things, u;xm levels of kilowatthour sales and timely and ade-use quate rate reliefl. capital requirements, financial condition and enn stange pg other factors.

Cahlar Quarter thgh te,w h r share 19M5 First 516 % S U. 50 42 sennut 17 % th 0 42 l lunt 17 % 11 0 42 Fourth 16h 14 s 0 42 19M4 First I4% 12 % 0 42 senwul 13 % 11b o 42 1 hin! I4% 12 % 0 42 Fourth 16 % 13 % 0 42 AIISCELLANEOUS COlll'Oll ATE DATA Armual %Iecting Scheduled for April 2M Corporate Address llegistrars of Stock The 1986 Annual Alecting of Shareholders will be held at 'I he Detroit Edison Company Fidata Trust Company 10 a.m. EST Alondav, April 28. at the llenry and Edsel Ford General Dffices New York Auditorium in Detroit. Shareholders will be asked to ch ct mem- 20m Second Au nue 67 Hroad Strect hers of the Board of Directors and ratify reappointment of Price Detroit. Alichigan 48226 New York, New York itHM)4 Waterhouse as independent accountants for the Company. Telephone: (313) 237-8000 (Pref erred Pretcrence and At the 1985 meeting. on April 22,15 members a ere re-elected """"""I Independent Accouneants to the Board of Directors for one-year terms. They included Price Waterhouse Comerica Hank-Detroit David Bmg president of Hing SteelInc.,a new Director u ho first 200 Renaissance Center 211 West Fort Street poined the Hoard on February 25,1985. Detroit, Alichigan 48243 Detroit, Alichigan 48231 C""""""I Company %1ourns Alessrs. Ilarnann, higar, Kirkby I'orin to K Tw o retired officers of the Company and one corporate s ice Copies of I orm 10-K, Securities NationalILmk of Detroit president died in 1985. and Enhange Conunission 611 Woodward Asenue John R. llamann, former president and chief operating ^"""dI H"Imrt. arc atailable. Detroit, Niichigan 48232 officer, w ho was vice chairman of the Ik>ard at the time of his H"luests should be (Preferred and Preference) retirement, died September 4 a' the age of 70. lie had been directed to:

""""'8 8 retired since 1980, and sened 4~. vears with Detroit Edison. Katbryn i . Westman .

Secritaiy Donald E Kigar, former president, died July 17 at the age of E,u hange

80. lle sen ed the Company for 41 years before his retirement in 1 he Detroit Edison Company 2000 Second As enue Symbol-D I E 1967.

Robert C. Kirkby, vice president, Engineering and Construe. Detroit. Alichigan 48226 Unlisted trading on the tion, died December 27 at the age of 61. lie originally joined Ik at on, Cincinnati. Niidw est ,

Transfer Agents and Philadelphia Stock Detroit Edison in 1947. Fidata Trust Company ~

New York Fachanges 67 Itroad Street New York, New York 10004 Charles A. Babcock Honald J. Gdowski Elaine N1. Godfrey Sophia J. Koziatek Kathryn I.. West man 2000 Second Asenue Det roit , Ntichigan .48226 sn

L DillECTOllS AND OFFICEllS Hoard of Directors Wendell W. Anderson, Jn Chairnun of the ikurd and Chief Ewoutis e utlicer. Hundy Corporation

(\tanufacturer of steel tubing, flesible fume and engineered plastic primlurtsi Das id Iling President. Ring Steel Inc., IA steel sen ice renter)

%Ialcolin Carron, S.J. President,l'nisersity of Detroit liigh Solumil Charles T. Fisher III Chairman and President, National Rank of th troit David 11. Gat es Professor of Ikitany and Director of liiological 5tation. L'niwrsity of \hrhigan Edwartl J. Giblin Retired Chairman and Chief Ewrutis e Officer, Es Cello Corporation

(\tanufacturer of dnersified industrial prmlurts)

Ernest I. Grove, Jn Vice Chairman of the ikurd and Chie (1 inancial of firer, I he Det ruit latium Comiuny Charlen %I. IIeldel President and Chief Operating 01 firer. 'I he I)etroit laliuin Company l'atricia Shunti. Iannge tiunomist: Professor of Husiness Administration,l'niwr3ity of Alichigan Walter J. %IrCart hy, Jn Chairnun of the Ikurd and Chief twrutis e of firer, I he Detroit 14hson Company Frank %Ierrirnan Dairy Farmer Dean E. Itirhardson Chairman of the Ikurd and Chief twt utise ottirer. \tanuf acturers Nationalliank of Dets uit lanuis II. Itoddim. J n Consulting Engic~r Ala n I:. Schu a rtz senior Partner. itonignan \ tiller Schu artz and Cohn ITitorneys at law i Otis 11. Srnit h Hetired Vice President. General \totors Corporation Comtnittees of the Hoard of Directors Organisation and Audit therutis e Nanninating Cannpensation Fahvard J. Gihlin

Walter J. \frCarthy. Jr

Alan L Schu artz

Wendell W. Anderson. Jr

Patricia Shontz Innge** Atalcolm Carron, S J Clurles I. Iisher lil*

Fahsard J Gihlin" Dasid Hing Ernest L Grm e. Jr. Wendell W. Anderson. Jr. Cha r les I hsher ill Ntalcolm Carron. sl Charles \t. iteide! Dasid M. Gates l' rank \terrenan Dean E. Hichardson I rank \lerriman Charles it . lleidel Dean L Hiciurdson Otis Al. Smith Dean L Hichardum Patru ia Shontz longe Alan L Sc hw artz Alan L schu artz i rank \terriman Otis \l. 5mith I:ncrgy llemources 181anning Cinance Nuclear lies lew Itetirement Cund liesicw Frar.L Merriman* Dean L Hichardson* Inms II Hoddis.Jr

Patricia 5honti innge

Wendell W. Anderson. Jr.*

Malcolm Carron. S J Das id \t. Gates" Wendell W. A nderson. Jr.*

Das id fling Cha rles T. Fisher Ill Patricia 5hontz innge Dasid \l. Gates David M. Gates Edu a n! J. Giblin Frank iterriman I4hs ard J. Gibhn Charles M. Ileidel Ernest L Grm e.Jr. Ernest L Grme, Jr Inuis II. Hoddis, Jr. Patricia 5hontz Innge Otis M.Snuth Alan E. 5chwartz

Cluirnun

"\ im Cluirman Officers Walter J. Af rCarthy, Jn Chairman of the ikurd and Chief J. I'hilip I,enihan Vice President - Mar Leting and LAerutis e 01 firer Customer Helations Charles %I. IIcidel President and Chief Operating John I . Lubbla Viw President -1 inancial senices Offirer Cla%our ne Mitr hell, Jn he President - Pbnning Ernest 1. Grove, Jn Vice Chairman of the ikurd and and Researt h Chief Financialoffirer Jamen H. Otis er Vice Pr esident - 1.mploy e Relations Leon S. Cohan senior Vice President and General William E. Penre Vice President -OFutions Counsel Donald J. Pinimenti Vire President -Community and Itu rkhard II. Schneider Group Vice President Gme rnnu ntM AHairs liarry Tauber Group Vice Pr esident Saul J. Waldman \ ice President -Public Allairs Willard it. llolland Vice President Kat hryn I. M ess man Seeretary Wayne II. Jens Vice President - Nuclear Operations Ledle I., I,ooma ns Treasm er John W. Johnmun, Jn Vice President - Finano" Itonald W. Gresens Cont roller

51. Jane Kay Vice President - Administration A rnold .5. Elenc% General Auditor Hobert C. Kirkby Vice President - Engineering and a j (deceased i2/27,M5) Const rurtion

Detroit Edison 2000 Second Avenue Detet. Mchigan 48226 l

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