ML20204H184

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Forwards Serving Customers Through Competition Innovation Leadership & Performance,1986 Annual Rept & Discusses Wall Street Journal 870306 Article Re Regulatory Impact on Util Investment Outlook
ML20204H184
Person / Time
Site: Fermi DTE Energy icon.png
Issue date: 03/19/1987
From: Agosti F
DETROIT EDISON CO.
To:
NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
Shared Package
ML20204H190 List:
References
VP-NO-87-0050, VP-NO-87-50, NUDOCS 8703260573
Download: ML20204H184 (2)


Text

Front L Agosti j Nuclear Ope tions *

[/0 Detroit , . -

Edison g;gpeu g ,

March 19,1987 VP-NO-87-0058 U. S. Nuclear Regulatory Cmmission Attn Docunent Control Desk Washington, D. C. 20555

Reference:

Wall Street Journal Article Regardia 1 Detroit Edison on March 6, 1987

%e article appearing in the Wall Street Journal referenced above discussed Detroit Edison's investment outlook as it is intacted by the regulatory treatment and operation of Femi 2. Actually, the articlo contalnul no new information regarding the Canpany's investment outlook beyond what has already been available and widely reported by various financial analysts.

Investors recognize that when remi 2 is declared "camercial", there will no longer be substantial Allowance for Funda Used During Construction (AFUDC) which has supported current earnings. It is also recognized that the authorized rate increase did not cover the total cost of Femi 2. Consequently, the Canpany nuat file a new rate case to cover the additional Fermi 2 costa.

Detroit Edison's earnings will likely decline smewhat when Fermi 2 achieven camercial operation because the authorized rate increase does not cover the total coct of Femi 2. Ilowever, internal cash flow will increase as the Conpany experiences rato increases for Fenni 2.

the A rate increase Michigan Publichan aircady Service been approved Canmission totalingby$475.8 million (including interest) thased in over five yearn once the plant entern cannerclal operation. We first year's increano will be S77.9 nillion.

A substantial volume of Detroit Edison camon stock was traded on Nnday, March 9, following publication of the article on Friday, March G. IIcwever, thin was due to the fact that Nnday, March 9, was the last trading day the stock could be purchanal in order to roccive the quartorly dividend paynent. It in a nornal occurrenco i

for the cannon otcck of Detroit Edison arxl other ] (60k 0703260D73 070319 I;Dil ADocK0000g1

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March 19, 1987 VP-NO-87-0050 Page 2 electric utilities with high yields to exhibit heavy trading volume on or just before the dividend record date as financial institutions " buy" the quarterly dividend payment. Were has been no sericos sutsequent movement in the stock price.

New accounting stanchrds adopted by the Financial Accounting Standards Board will require the recognition of accounting losses related to the regulatory treatnent of Fermi 2. Maintaining earnings at current levels in the future poses a significant challenge to the Capany as was highlighted in the article, but the Cmpany believes that it is prop red to meet that challenge.

Furthermore, the Capany is committal to maintaining the carnon stock dividend at its current level.

ne Cmpany still faces significant regulatory and eterational hurdles. % is pr m pts various amounts of scrutiny by investors, but the fact reains that cash flow will continue to inprove follcultyj camercial operation of Fermi 2. A more emplete description of Detroit Edison's financial position is contained in the enclosed 1986 Annual Pcport, including the effect of the ncw accounting standard.

Sincerely,

.C E .

Enclosure cc: Mr. A. D. Davis Mr. W. G. Rogers it. J. J. Stefaro