ML20235Z409

Illinois Power Co 1986 Annual Rept

ML20235Z409
Person / Time
Site:	Clinton
Issue date:	12/31/1986
From:	Kelley W ILLINOIS POWER CO.
To:
Shared Package
ML20235Z413	List: ML20235Z409 ML20235Z428 ML20235Z446 U-600990, Forwards 1986 Annual Repts for Illinois Power Co & Western Illinois Power Cooperative,Inc & 1985 Annual Rept for Soyland Power Cooperative,Inc
References
NUDOCS 8707270291
Download: ML20235Z409 (44)

Text

'

j -

? *'

-N e,, .

j f'"T , o-

,...;'.. j - . .q . ' .. ..s , ," .'

a. j;  :'. - . . ' 't

. f 67.* ' w. g ; ,' ~ . , , . );.- g ,.g. ,... m.r. s. wa k

.-.- f .. i .p g. ,

4 -

• A -. ry,y f t ,. A,tw n ,. . . < . . p ,. .,

.,.~. 5P ql h' 3. g ;: -j; - ~ ;' ' 1 -e - -

9 . g g,.;.,..y:. 1

! '. , , g ,, 4. . ; .; ,.. -.4-', ' l, f; .

4-

.j} ' j .' .,3. ( . A(r g,l

<< 7.; ..

e .

• . .a .s ,. .

+. .

g:' y

.3 .-

.., .. g 3 y ,-f.

. - . ~ . . - , ,e ,,,4.,._ . .; .

..t . , .. . s, , 4 .. .. ,

.. s . .. / - .. : ,

. ; ~ yy h ,

'.k . ,.;. ,. ,'.. ,,,,

.' 1f+'j - - ' -  : < f. #

" ~

. .  ; , - ,. , *  %'. . ic *' ' . ,- '; , , 4 y ' '_ ' q. 'd * ". ).

'. ', Y's ? },;.

_c .  ; . . ,.. v,.,.y, ' { p' ..-.' Q j. i , _ .

f, ' ,' }' y,l 4 gg i t, [ ' y ._ ' [' ', *. ,.,_;, .,

s

.,t  ;'; ; .(}

..e .. - ':- -

-.'s ~. ,.' O'

_ ' \ :

A W, "I.$q m;\ a J a ;' bSNh \.()f: z . V.

• . y h' ,;, '

o . . . - .

, . , _ -6 L ,. ? r' t

' .'_ - N ? & 01' 'S'

, .gl'. $ '; . ] .k. ;' {_ ,. [ _; .,, -i+-

i ,,' '

' f: b pO.  ; qq. *'.y? f - ;

. a

_' 't.

43 - :- ' - . - 'e  ; I

..yp,.

%, ):. .. .:

}._ _._lq 4.p g . , '. '

+. ~ . - . -

, ,3,,V

. . .'f,'..,*

' , , }, . . - '* ' _. _

i

, l'),

4- U ,'

._.yt' - -

a',yg , u

,l'p ;'m .

)

t,0 f i,.

f \ { . _,

' ~

. l-

' ' ' Q

, .8 + o

~

. . _ _ _l , ' '

I

.. - .' ., .u' s G ', . a

.' - [. .

s,.,..s.

1,

>- ,c v .;

4

, s

=.,-

, . ') '

• w

. :l ' ,,

). g

...9

f

;_ .

. .\

f,i. v7./ .".

• \~  ; 4 A -

. ;; j _ .

}'.

'( i U4 I'

.k

'. .' .T. '.-

f. ; . ' . .. .,,; . . . -

.g

. s l ,W

,-.n,,4 y

?, , - 3

. . ' ' a,-

S .',

s .. .

.gs, - ' .,'i -- - I ,

s ,..!,

4, - } ., ; ; * ., ' . . + . ';- ,. * ,

.t, -

T i," -

• • • ~*

b "

[,'  ;' - * *

. } :. _ ' ' ,

',*h*

~

_.,.,3 - _ _ _

. - , . .g

).., }:

.y.,., , . .. . , .. ,

- . ' _ ' - ~ .. _

. ,. g< a or. ...#

y'd .*

4 y . ,

.3, t

3_ L ., - -. 4 ,

. . _ l _' - . _

_ N,. h 'k s . . . . .

, .- t_ _

h 'f A% ,

..r .t'

(

y 3 .yf_ o r . .' ' ? .

.y :. . ~t .:. y 3, . . s . ,.

.c_ _ .. - , ,

n .. .s.

,, . ; : ;.I , : / . : ' .s !, ~. ,: :(. :' ' .

q .;

(,

e -

L .;.  :

f . . , . .

~ "

A.^ . J N . .

a

_ [ .' * ., *. . _ - l ': 7 .' _. ' .

( .

] , '. j

(' Q ' , .- ~,(.. .

" . l, . , ,, f. ,, $ .) /

I

'a h J. -

.p . ., >

-l ,

. .,e,., ..,,;;'..

. . n..

t

.l;i M

-1

.a f .- . .g. . U s,,. , . . ,. I I ', ,

.s

[-<,.

I. i .f .

l - . ., ' } ,'. .,,- .j

',.,'g,

^:& ' . 1 y; . , ' . ,,

.[-l

- - . . . . _ l, 1 :t " ,

[ ' .s._

, ..o . , ; o . -

. , .  !.. . _. ;. ;. s .. . ,.

-: . .. ,. y m.

7 k, , * .' , . ,

, pp -a - wg .. , ' .' . 4

^* * ' -

, , c . . . , . . 4 ,, ,

3 ' , ,

l' e- .:.

o ( .. .

.a . . f e :.- y .- . *#.,-

.: o

(, , . ,

e

• i.s y-

..' .(

,.. ... + .t g

, f ,-

s

, . i,. ., A , ,,

5- - 4

.': e

- 9 - , / .

' .y&. .; . . ,;( . ... L ",;. ] .. , .- ' .

, ,e . '. s.  ; J., .

• c, .' .' ' - 3

'i4 4 .

-. + r. 1

- ' + * - _ .. *

) - ' - ' l , '. n 4

y.

,;,'j9,..' / s - >. -

.l g,'-

.e 1,.

. . .v-' .

'.'. -[', , ' .

/ '

9...- -

,s .; ...

a . A - .j -

, 7g , . ,.; y .

g. . .,.

, . .. . _ _. . ~ .. _

' .-,-'** e) . 1' -

. s

.,  ! 4 ( . .

., . . e , f '. ,'l t.

'g.+ * . ,* - *

1. - . Y

+, .

'f-

.e h

, g. '

g-.-

, , 4 '

. ff. . ,

, - .a,

- +

,. .. , f  ; -

]' ' '

~ .

,... + ; - . ,. .

.1.7.

- Q.y e.,

.y , - s,

'__-_. , T w y'- e. .

. . .I

'n2.* .

', a_ .

b< $; m -

._ ,e .

. : , ) :' 1 '

i.2 4 -.

g';)q. x,- . t r- +

g , . .

. N ,~'* .', ,' i

,.il[

[, v . -, . l.. [y'

, . [- . - .

.x. . .

.. . 4 '.

.(( "g ,. , .* ,, pg . d'*

g

- og.N' 5a' '. - , 9

,J ., , 9 .t f ,

e s ', " ' "

- u.o

. .w, + : ? . , . q. c -, .: .*

a...

6-

jk'i f.- .., .. 1. - ;+. ;

< ~ ' :L :I *

~.) ' ' ', . ' '

. . l t, ,, .

3 3, ..s, .

k.% .. . g.. . . , -. . a c. .

• J, . ., .,. 4 . - ,. - ,

t

.=,y-.. ..

.. . -y!'f%'  %, . ,

,j

'.'-, 9. ' 3 ' , , ; * , , [ j[ I,.'.a '.,'- -' t . - * '.

, . , , - .= . . .

.wl.f.~ f ,o 4i j+ 'Y.., ,'

• . D _ ' f ', ^ . .N ,' .l. .,

• )? . ' [

. Q 8; % f.:;. 'h l, ._. ~l h h j ] ) . ~ +

,m

\. ._+^..' .' - :; . ;

d, '

/ l ) ..;* -

q

::h.$,q"lgg,y p_ _, ; .. l. 3 ' - h' .. , ,

-(  ;. - . ,

.y [ f

. . . v

,_nn.nm,ay_m.a.m_.pm w w.) .

.. n;.w. .wn z.w m.gs_w 33.xygy

i

.. . , ' i - Jn .

. l '

~

s y y- 3;3gy.34pyyg. 43373 4 x

7 .

p,q7 7 ggggg7.gp= .ggy .

,,.,:.w .,- . -, .. .. . .. , .

[ a ,}

[- [ . ~ ' , .

' ' ~

\ .

L

~

ja a m w ; ' > e p git..mi ?L L .T ' - ~N E

7. 5 # -

n . 4,,,,n,g,,esena4 ansa d

,, gen,s ,, ,w, wAs,,owems

" 3 .  :  : otty ." : . ~ Me -

a... c. . . . . . . - . .7 .

was,k -

~~

H'2.."- V'-

andWwdharawenand -

M, Wo sessm.ed.a. me..- . - . o i - - E s. -

.6i, - .. .

mantiaeno,anaismess, , . . .

+

q.

s. -

- - .m .

. . e ## e

~

.. scosoush Pdsweet,Decmurianois. > . ': .-

1- i '. - f

.; .syss : -

2

..' ' ' '~

4 -

' Phone <mH2+ eses . -

.', ' - . f .

4 ,

' ~

.1 '

continenidmealswaiimutaank and - '

1-

e -i .

~r l'"

~

~

ni huuMW%r,

sowwtasamesir Chicago Snois ~ . x, . .g'.- g.

.) c -; "

. qqgn. -[ '

. _~;

p.

.s

, it -

' ^

.y' l . . _ - , E .

n

. . . ' .. 7mme.Aseet .; c: .-

. .: &,,,g

• • • • • L  % Q,_.

l f l _

N.

i ff: _

- c

' ^ '

. D eces w e n eist j';f;. .J [ . , .

/

tmumene . ysW ; La .- >.m l'

, f ._

f M - '

- ,  ; '2

- ' ;[ s ' 'M, ' , L-

. . [. ,.~ ; .. . . , !,.OrrY b , '

,. . '.ihekwdr - .. .. i -

~

' b. * - .

.. , -- .1 -

..; sy.- '

[ y,yy ;; y,3. .

, 3., .;:r / ; ..

. .. _O. ,7 . '.

e s

$,.+ ..

r. .

c

-g - -

hquAprag,e,4,g,4,,,,,,e,w,i ewecun -,, g ? ..

E "

.1 m,ner,a -

1.1 ' - .

e . -

'~

.amoe of A.M.Pr e s '

.at .~

c ' ..--

~

. for aliisipseeing. win frisquestedby.the '

~ '

- w- ei

,E < , .~ N

~

. . . Board cif Direchoes; A promtatenant -.

1

~

1 o . - . '

wiNberensantestadhd. 3ers about .

4. . , L -

. V ..'~

,1.,. .

March 12,1987. f E..v.- .

.,., - J .

a -

2...

, a ,

. 4 . n ,.

- . + . i. a

. +

^'

..,'. I' .' ,,

..-' e -'

, ) .

' . .' " - .., n a'x '

' ~<?

- . momenne&herein are ser '

em -: _1. '

L Jgerieraihidersnatiempidip' .  : oQ":N / E: 1. M O- M : 1- E=.i

~

L T

' [ c 4.. .' M4hjeL . ' . . '$$1N$$M.2f$,

! . i :I. [ $J[ . [ i ( '1- .',. .t " O..j

$ 1$D, 3 c [L .j >.[::i ;'

'; 1 y . . . 11- ilitandshep . ' dtledge' - L.? .-

3 O 'l c 1. ' f./

. Tawinenisonweih,any et6er  ; ' W En:PX t

,\.;;... U 1,  ; . , ' N(N ],

j j.;- 2 E : i ' N ' 7. [ . [:. ic f .;', i c. : .. . [ .?cz J.x,.j l.L.s.

.! . . W , ,. A.illC4W$$,$,3,s?.  ? i ._..,9 , , . M(.

...y. ..t.,, c n , . . .

, .] .).-1 _ \! ' . ' ' '+ . ' ' .

• k

', . : . .c ; . '-. e.

Y

. j .. ,' ; '[

,.i

,.,l '

,w', ,, ', ,,:,;..,y.,.

3 l ,.- {l $*. . , . , , . . _ ,.

.; . 7 ;c. ; , ..',';  ;;1  ::r n:i.m , ..b:.,:,,z,

- - b, M a i, . , o x.~. . .. ; a ay n: .y=, .8 Y..  :.

3. , /;

. y .j.u. _  %. a; y .,.  ;, n n,.; .;. . . A {,.;. ;ey t.; ,. , ;n . , , ',- a

. ..; ..t _~ ~ q a;k u.y' ?,.,.

.';;\. .f .Ky -. ; >.

, , ;;. fj . _ f gn,.. .j,j p .}._ lf.',y ~, Q t . , , , , *

,R%}s .:_ .g ;;y(

_ , .;) .; ,

. } ll j ,,P + -' . L, ,

; hs, .g.;[Q 'y.,.s

,,.,J'.<

q:A

b.  ?

y; ; [.^ $> W.;g. W Q-

.- .~ ,y -( ; y n.y ..s.,y _ y q+gcy_. ;: yg.

.yu

. :: J.: -. u:

y3 {. ' W ; ,. 9 , ; ., .

i,,.,._.. ._ w

[. , , . . ,_ , ,a . a,.a. - . .. m - . , c. . . . , S, , 99 3p. y.r; ..[y..mm%.#y . .c my .4 . . g; ... .

.m-g .. 44% .

s n f. ,.3,.;%: L4 3,3 7p 71'. j.j %;d%. g'*.& =3,yg$ ;.Jf g t.e T N

. ..,;._ (. . p# .,

(

, j , _= ,

s ..'

_',,*.;;'.'Je,

'.'.,s.

'h

. . , ;.. ( ..

d' - -L

~

- l ,' . -,,,,.9,..

,} ,;, . ; ; .., '

,?

.. ,,c.. t-  :

,.3..-,' N. . ..,t..

, ~ .- ,1 . / ". .:,..- ..

~- 'C ',: ;c, s 6 m.g > oa ' .57' y. .

a

' C,... m... ec., s -

' ,' .'. s ,

-( .......g.,_ 3;.3. _ _ .~. ; . g,, , , , .p n , _ . c.

, . , . . - . . . ., ., ._ . ; . 3 - ..,.

g

(^

) .

, ,; , . '^ . i; t ., ~ ;! .,

f.

k w' ;..

=.

. J.  ; .

.: s

.. . - t  ; . ..

~

y l

if.

Table af Contents. '

i J'

Q e , j .

,,,e e

tetter to. Stockholders . ., . . . . .'.'. . . 2 .

.' y w : .

. p' y Highlights. . J. i y-

/ . .

. .. . Earenngs anh. Revenues . . . .. ... ...i. ..... .. .. .. ....5. . . ;-. . . ;. 4

- Electric Business .:. . . . . . . . . . . . . . . . . 5  : c.-

. Gas- Business . '. . . . . . . . . . f. . . . . . . ; . . 6 . .

5

. . ~ - . Regulatory Affairs . ... . . . . ....'..J. .... 8,' , ...,3

. fihandng . . . . . . . . . . . . . . . . . . . . . . . . . ' 9 c 4

Clinton Power Sta) tion .-. . . . . . . . . . . . 10 .

4._

~

Marketing . . . . . . . . . . . . . . . . . . . . . . . 12 -

ces . . . . . . . . .. . . . . . .. .' .i 13 .

. , . '1 . . - .,m-

' g.

t.-

.t.s m. . .

. Customer Environmental Servi. Activities . . ~. . . . . . : pp. -

.'. 14 i . -: .; 4.= : -

~

d M ',' f

.- - ~

'Research andDevelopnient . J. . . . . . 15 P. -

. Empidfee Relations .' . . . . . . . . ., . . . .: 15  : '

., .: . E.  ;. ,

j am p - K ,, t . . . <

' CenpanyOf6cers . . . . . . ... . . . . . . . . ~. 15 ..

M.L' f @@ D 2 # * ' " " ~ ' '

' e ' ' @""

~

~-

Soard of Directors . .N. . .1. . . . . . . 16

'~ #

. ORespontjbility for.Information . . . . . . 16 17 : , -

c3

.g Directors and,, -

Officers . . . . . . r. . . . . .

. Discussion and -

' ' ' ~

J A N-

.' i- fhancial Conditiort ..

and Results'of. Operations . . . . . . . 18 -

~

. - i "

M ..."

k' .

. Financial Statements . . . . . . . . . . . . . . 21 . ...V. 6 . . .,

-i

. Twe Year:Oividends and QU~ !

~

~ '

~. . Stock Prices by Quarters . . . . . . . . '. . P 4 - .?,<r '

l

~"

.1 (' , -

Seleceedlinancial Data . . . . . . . . . . . . . P :. ' . =

% dn " - .* 4 Qpefacing $tatis$ics . ... . ~. . . . . . . . .,. 38. ~ - o . .. y , , .. ..

J -

,, .g ,

O .

j.,

I ,

,..m

~

. . . s m ,, , e,.,e.,sa_,_, .' .' .

- ? museens'aelenecemqpiser.CeoversionseshismesesmelentgIssilrenic ~

masser sand,iggasse was esausassediensay.. - : . z t t - 4 . :

aeaneserdag:mmumps.lor--

we,eeneda seerden enW3and yearmore Aunt Anse she sesseer Wie .. .

. './

. , sente . samtaspeedgsgest ' ' .

,,ars egainsawr, teseendusosaw

' M. - .-

shew derseenieppes u s; . < .. c ,

llL , . ' miste apY

• re %e  ; Q'K*Yi**  % ****nn.. : . S.lY. ,3. '

/.; '

's.,s a . m e 5 m n,annps,"*  ;,.9f p: R j ;

ed

,:=. an e~ ai

.+/ = .

. w ar  : o

. .m.gw ,u.g(w~.@g;.y. -,. (;,;.,3.p: ,. c _. _

i u

3: .; .z; 4 ;. n .y T .

~; .

-- ., ,;  ; . y _ . .

. ,7,y g. l3 g{ ;. y p, ,,; .;.<  ; y n;. .u;.y ;, . :. .

> s.. _y... ;. .. .. ..  ;

y '. 8 . .<;.a: o. . :..:n -w.. s . . &. . ;;;;;M. ;, y m. , 3;,7, . .qm . f j._  ;, v y ; e. : ;w,:2. .

p , ;;_ .

,.,i . , . .

,y> y ;.s 3., ; , q .::. c . ... ,q . . . , ; . -- .- F. * .s: ._-: ,

- } - y , . .

m ._ - .

._ s * ;. ..;; [. j. .

i l -

(

. A -

y

p 4,1 To Our Stockholders:

For several years we have looked forward to the transition of our work at

}/ I Clinton from construction to operation. No single event in our Company's jj. 4 history is as significant as our successfully bringing Clinton into commercial operation. I am pleased to report that during 1986 we began this process with 34 '.% '

,l the receipt of an operating license from the Nuclear Regulatory Commission

]';{ -

permitting us to begin loading fuel in late September.

Tied to this major milestone was the implementation of our first electric rate increase since January 1983. This increase of nine percent and another one, also of nine percent which will become effective when we receive our full-power license, provide the basis for improvement in our financial situation beginning in 1987 - and carrying on into the foreseeable future.

We are pleased that the many burdens of the prolonged construction process at Clinton are behind us. While we recognize this success is key to our

,M ability to achieve sustained improvement in our financial health, we are also fjf  ; keenly aware of the many additional challenges we face in order to realize the Q4 y long-term improvement we all desire.

, wG" Just ahead, we must successfully cornplete the testing program at Clinton

.- and achieve commercial operation. We are pleased to report that, although the testing process has been somewhat slower than we had hoped,it is about equivalent to the industry average, and so far no significant problems have been identified. This is reassurance that Clinton will proceed into full operation as a consistently safe and reliable generating station.

But as important as the reliable operation of Clinton is, our success in obtaining reasonable and constructive regulatory decisions regarding the ratemaking treatment of Clinton will be a major determinant of our Company's future financial prospects. Proceedings are continuing before the Illinois Commerce Commission. They will include reviews of the construction audits conducted by independent auditors engaged by the Commission and those engaged on behalf of the Company to assess the construction activity at Clinton.

Coupled with the eventual decision of the Commission determining the amount of construction costs to be included in the ratemaking process are the recent changes in accounting principles issued by the Financial Accounting Standards Board. These new standards will require that we write off any costs deemed unreasonable by the Illinois Commerce Commission. While this I change in reporting requirements does not in any way change the underlying liquidity of our Company,it does require that we record in our financial statements any disallowance with the potential of causing a significant, one-time reduction in our reported earnings.

Our transition from construction to operation at Clinton comes at a time when other aspects of the utility business are also being affected by change.

One of the ironies of these changing times is that the traditional constraints associated with regulation are now being aggravated by the uncertainties of deregulation. We know, for example, that even with Commission action affecting the rate treatment for Clinton, we must by necessity find ways to j

\

I 2

I

establish rate lesels that are competitively attractive Rate increases will be phased-in in a way that provides us with the continuing opportunity to be an effective force in the energy marketplace.

We are confident that we can cope with the regulatory and industry uncertainties in a manner consistent with the vision contemplated in our long-range strategic plans, announced in our 1983 Annual Report as a program to

" help determine the kind of company we will become during the rest of this

entury". Our long-range plans have evolved systernatically - identifying and anticipating changes and developing optional responses to convert the challenge of change into an opportunity for advantage. This report shows how we have changed to meet change.

I refer you specifically to innovations and improvements in services to all of our gas and electric customers and in our marketing and pricing of these services,in our financing activities, in upgrading employee profe:sionalism, and in our many marketing activities oriented to help strengthen the economy of the territory we serve.

The success of our economic development activities has helped justify renewed optimism in the economic vitality of our territory and this part of the Midwest. While transportation facilities, abundant water supplies, a productive labor force, central proximity to markets, and outstanding educational facilities are all factors, our ability to provide reliable, competitively priced energy services for years to come has been and will continue to be a major consideration for many industries in the decision to locate or expand in our territory.

The balance of this report delineates our financial performance for 1986. It also describes what we have done and are doing to respond to the various changes in the economit. political, and regulatory influences affecting our business. We are pleased to report that our earnings per common share increased in 1986 to $3.98 from $3.48 in 1985. However, our cash earnings as a percent of total reported earnings were again lower than in the preceding year.

Change is certain, but the nature, extent, and timing of change are not. We are committed to, and confident of, our ability and flexibility to respond effectively to change and to make the most of the benefits derived in the process. We believe our optimism for sustained improvement in our financial performance is soundly based.

Sincerely yours.

Wendell J. Kelley Chairman and President February 19,1987 l

4 _. . . . - .. - . . . . . 1 r <. .:3 ,. a m .- ...m o ausmuualLLINOIS POWER COMPANY 1986 ANNUAL REPORT 3

Highlights )

% increase 1986 1985 (Decrease)

(Thousands of Dollars except per share amounts)

Total operating revenues. . .. ..... .. .. .... . $ 1,183,865 $ 1,167,364 1.4 Electric. . . . .. .. . . . . . . . .. . $ 814,144 $ 766.467 6.2 Gas . .. .. ... . . . ... . . . . . $ 369,721 $ 400.897 (7.8)

Total operating expenses and taxes . . .. . . . .. . .. .. $ 976,407 $ 963,084 1.4 Net income . . . . .. .. .... ... .... . .. .. ...... $ 292,721 $ 239,999 2.2.0 Average number of common shares outstanding (thousands) . . . 64,503 59,619 8.2 Total earnings per common share . . . . . . . . .. . ... . .. . $ 3.98 $ 3.48 14.4 Earnings distributed as dividends declared per common share . . . . . $ 2.64 $ 2.64 -

Cash Earnings vs. Total Earnings Per Share 1977

$1.78 $2.68 1978

$1.55 $2.74

$1 2 $2.70 1980

$1.31 $2.87 1981

$1.22 $2.84 1982

$1 9 -

$3.04 1983

$2.02 $3.80 1984

$1.75 $4.02 1985

$0.76 $3.48 1986

$0.58 $3.98 Total Bar Represents Total Earnings:

Cash Component Non-Cash Component 4

l l l

l l

Jarnings and cause of lower gas costs and a nomi-nal 0.5 percent increase in gas sold 0.8 percent higher than the previous y peak of 3,371,100 kilowatts set in 1984, meVenueS and transported. and peak day energy use was 3.7 i Both earnings per common share percent higher than the previous hnd total operating revenues in- peak of 64,737,750 kilowatt-hours, 1 creased in 1986. Earnings per com- Electr.ic Bus.iness also set in 1984.

mon share were $3.98 in 1986, an Warmer summer weather and sta- As resuk of turbine generator 5ncrease of 14.4 percent from the 1985 ble economic conditions contributed Problems during July and low-cost earnings level. to an increase for the year in kilowatt- electricity available from other utili-Several factors affected our 1986 hour sales of 5.6 percent more than ties, we bought more electricity from earnings: the cost of financing the those in 1985. other utilities than we sold to them.

Clinton construction program, in- However, we had sales of $55 million Residential customers used 6.9 per-treased kilowatt-hour sales, lower cent more electricity in 1986 than in to two cooperatives under the terms sales of interchange power, increased the previous year, primarily due to f a power coordination agreement.

bosts of operating and maintaining warmer weather. Commercial custom- The result for the year was net sales hur business, and nominal growth in ers used 4.3 percent more electricity (more sales than purchases) of $38 mil-has therm consumption. However, the than in 1985, and industrial customers li n Compared to net sales of $49 mil-

)ncrease in our 1986 earnings per used 5.9 percent more, reflecting both li n in 1985. In the future with the

1. ommon share results from the non- warmer weather and a stable econ- Clinton power station,we expect more bash allowance for funds used during omy, compared to 1985. sales of electricity to other utilities.

Construction (AFUDC), which in- Hourly peak demand on our elec- in spite of some problems, our gen-treased from $2.72 to $3.40. tric system, including the require- er ting units systemwide produced

! Total operating revenues were $1.18 ments of a power coordination agree- 16,806,408,125 kilowatt-hours in 1986, billion, an increase of 1.4 percent ment with two cooperatives, reached the second-highest generation year from 1985. Electric revenues increased 3,396,400 kilowatts on July 18. Our in ur history. The highest year was

).2 percent reflecting a 5.6 percent peak day energy use, also on July 18, 1979 Individually, the Havana and increase in kilowatt-hour sales. Gas was 67,157,000 kilowatt-hours, a Verm.i lion power stations set all-time

[evenues decreased 7.8 percent be- historic high. Peak demand was pr duction records of 1,545.277,600 i

.t m ,

'Our 1986 Dollar >

SOURCE USE .

l Electric Reyenues. . .. . . ... . 69c Operating Costs . . . . . . . . . . . . . , , . .w . n77c) "

Residential .. . .. .25c Electric Energy Costs . , . . . . . . . . . 19<; j Commercial . . ,. . .. .16t ' P,archased Gas Costs . . . . . . . . . . . . . . . 20c '

/

J industrial . . ... . . . . .24c , Ot'ner' Operation &' Maintenance . . . .16< ,

Other . . . . . . .. ..... . .. 4e Depreciation . . . . . . . . . . . . . . . . . . . . 7e

' Gas Revenues . ..... . . .4.. . 31c cTaxes .. ............... . . . . . . 15<

Residential . . .. . .. .17t ' Ca pital Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23< .

, ; Commercial .... .. . 6c Cost of Money (Interest & . ,

I <

- Industrial & Other . . .. . ... . 8c - Dividends) . . .... .............. 16e i I

Retained Earnings . . . . . . . . . . . . . . 7c: 'i

. $1.00 4

/ - $1.00 -

Y mm., -

-w .,

e tLLINOl5 POWER COMPANY 1986 ANNUAL REPORT 5

l' and 1,248,587,500 kilowatt-hours, burned low-sulfur coal from Illinois, A number of our industrial custom respectively. Kentucky, and West Virginia. ers continued to purchase gas direct}

We negotiated a power coordina- In 1986 we re-negotiated several from producers and pay us to trans tion agreement with the Illinois Muni- long-term agreements that will main- port it.The transported gas amountec cipal Electric Agency that replaces tain stable coal price > for several years. to 253 million therms in 1986, appron wholesale contracts under which we Such contracts with expiration options imately 26 percent of the total amours provided electricity to 10 cities. The will provide about 97 million tons o.f of gas sold and delivered. During193 Federal Energy Regulatory Commis- coal, all of which will come from lili. competition in the gas productiel sion (FERC) approved the 10-year nois mines. Based on 1986 usage, this sector contributed to a continuirt contract during 1986. We also nego- is a 13-year supply for our power decrease in the cost of purchasing gI tiated a new five-year wholesale con- plants burning Illinois coal. from market suppliers. As a result c tract with the city of Highland and are Over the next five years we expect declining costs and of the pipelines awaiting FERC approval. Under a new to generate approximately 79 percent suspension of transportation pro contract with Mt. Carmel (Illinois) of our electricity from coal and 20 grams, more of our larger gas custom i Public Utility Co., we will continue to percent from nuclear fuel. ers purchased our gas and reduce l provide wholesale electric service. Mt. Uranium purchased from Quivira the quantities solely being transporte Carmel is a privately owned utility. Mining Company will fuel the Clinton through our distribution system.

We participated with Central lili- power station through 1991. We plan Although total volumes of tram nois Light Company, Central lilinois to purchase additional uranium in ported gas declined in 1986 compare l Public Service Company, and Com- 1987 to fuel Clinton beyond 1991. An to 1985, the volumes of natural ga l monwealth Edison Company in a joint enrichment contract with the U.S. transported for industrial customec study to investigate the possible eco- Department of Energy (DOE) covers in December 1986 were nearly triple th nomic benefits of increased coordina- 70 percent of our requirements volumes transported in January 1980 tion of generating operations. The through the year 2014. There are con- primarily because we used interie I study identified sufficient potential tracts to cover the remaining 30 per- transportation agreements with ANl I benefits to merit a two-year trial pro- cent of enrichment services with Pipeline Company, Natural Gas Pipe gram. The coordinating office will be Cogema,Inc., a French company, for line Company, Panhandle Eastern Pip in Peoria and is expected to be in full the first refueling and with DOE for Line Company, and Trunkline Ga operation by the summer of 1988, fuel through 1995. A fabrication con- Company on behalf of our customer operating under the terms of existing tract with the General Electric Com- Gas provided to customers unde interchange agreements. We already pany will satisfy our expected require- transportation agreements results 5 are interconnected with all of these ments through the year 2004. virtually the same profitability' as ga utilities. We also continue to partici- sold by the Company.

pate in the Mid-America Intercon- Residential therm sales decrease nected Network, a voluntary organi- 2.2 pecent. Comnaial sales wa zation of utilities that studies how to CaS BUSINESS down 2.8 percent. Industrial usagc improve the reliability and economy Our gas business, which is meas- including gas transported through ot of electric systems. ured by both therms sold directly to system for industrial customers, wa We used 7.7 million tons of coalin customers and therms transported for up 4.2 percent.

our power plants in 1986. Coal was customers, remained relatively stable The most gas sold and transports used to generate 99.6 percent of the this year. During 1986 therm sales in a single day in 1986 was 677,5435 electricity we produced. Illinois mines increased 7.3 percent, while therms cubic feet on January 27. This is 2 provided 89 percent of our coal. The transported declined 14.7 percent percent below our record peak day <

Havana and Wood River generating from 1985 levels. As a result, overall 857,324,000 cubic feet set in 1982.

I stations, which have units that are gas consumption increased by only We meet peak day gas requiremen subject to stricter emission standards, 0.5 percent in 1986. through the use of pipeline and loc 6

L

7 gas supplies, our eight underground increase competition in the natural bills for the 1986-1987 heating season, storage fields, five contract storage gas pipeline industry, four of our five These decreases are in addition to a 6 services, and propane peak-shaving interstate pipelme suppliers filed percent decrease in the 1985-1986 plants. We have adequate peak day transportation plans available to any heating season.

gas supplies to meet all current and customer. None of the plans has yet We reduced costs in other areas of projected needs uder the most se- been approved. We used the interim our gas business as well Primarily vere weather conditions expected in transportation opportunities to pur- because customers were conserving our territory. chase additional gas on the spot mar- gas and industrial customers were The regulation, pricing, and supply ket and reduce our gas acquisition switching from firm to interruptible of natural gas remain in a state of flux, costs by 5.9 percent. service, we have been reducing gas We expect this trend to continue as We also reached agreement with storage inventories since 1982, for a the Federal Energy Regulatory Com- our pipeline suppliers to reduce our savings of $5 million annually. We mission (FERC) maintains its course of cost of gas purchased under long- reduced pipeline demand costs by deregulating the natural gas industry. term contracts. Because we took ad- terminating one contract with a pipe-The continuing surplus of natural vantage of lower cost spot market and line supplier and installing additional ,

gas and the modest growth in the long-term contract purchases, we metering and control equipment at national demand for gas caused spot were able to reduce our customers' the 5hanghai gas storage field to allow market prices to continue to move rates. Typical customers who heat more use of storage gas and to replace downward steadily during the year. In their homes with natural gas are re- pipeline purchases, j response to efforts of the FERC to ceiving a 3 percent decrease in their

~

--', . f'4 T - .

2 ;y,, ',

~ - - +

, p.ex.

W d J f-+ , _ s r ty C ...

p . ,

=

. .. / . #

. .\

y ,  ?. ,_ l 7 i ' ' L.w F *&

O. $h W M DQ Ma.

ecww;@i " w e,

+ at x e .

p ,.;; }  ; ?-[

[. .y p&mp&  ;

% i D M . d i. m% ,c

• w_g . x .g .

,m . M,+ f"-

DR_ N;4 s y M 17.;-.p'-ranu ,- sf g_*g a t-3 y:

W "3

c ui 4 ".k W M Q R ;NL F '

g' , f. . ~

%f:lV[J c.=" . @fN?g,&,,y FO. a.

D bhD j '?

\ . <

~.

Officers (left to right) Executive Vice President Charles Wells, Vice President

. r .

/ &~' .

,3 Pauliang, Vice President Porter

y' V: WomcIdorff, and Vice President James f.

McHood watch Director of Electric l&1f~'

(; J

~.

Supply William Govro bring up a screen

': showing the bulk power supply system of

' +A

• ' ' ^ '

Ihe Company. The computer console and

. ~ the wall map of our electric facilities

%- 1 '; y s i s support monitoring and control of our V QQ;, , transmission and subuansmission system.

J:; ;3 >p , These officers are responsible for

.Q,( L # f P:.

economic development, gas and electric

. G'

();f. y J g . _ A }, -- l .y,:-

f4 W  ;

marketing. engineering, environmental affairs. planning, real estate, strategic

%j%

f \ 6f kn LV

$kkEf)%kl&};$ W'. c .. .. i. .

~ planning, power production, the power plants. and energy supply.

l I

ILLINOIS POWER COMPANY 1986 ANNUAL REPORT 7

d' y'

' Regulatory Affairs ICC filed a request sking the judge station. The ICC then initiated pro-to review his decision. In January 1987 ceedings regarding our proposal. We We were engaged this year in a sig- we and the ICC agreed to a stipula- expect a decision by mid-1987. An nificant number of major proceed- tion whereby the ICC will amend its ICC order in May stated that certain ings before the regulatory bodies that August 1985 order to include, among Clinton costs incurred between the H oversee our rate-related activities, pri- other things, the following language: in-service date and the first subse !

marily the Illinois Commerce Com- "In setting the cap, the Commission is quent rate order will be deferred for mission (ICC) and the Federal Energy not at this time making any determi- recovery through rates at a later time.

- Regulatory Commission (FERC). nations as to the reasonableness of The ICC initiated a study in Octo ,

in August 1985 the ICC approved a any of the costs incurred in the con- ber to collect views and information '

$139 million electric rate increase tied struction of Clinton. The purpose of on what constitutes excess electric '

to two milestones at the Clinton the cap is to set a limit on costs above generating capacity and the appro-power station. Fuel load at the Clin- which the Company will be required priate treatment of excess capacity. i ton power station began on Septem- to present affirmative evidence of The proceeding may or may not form !

her 29,1986, the day the Nuclear reasonableness as part of its burden the basis for the initiation of a rule-Regulatory Commission (NRC) grant- of proof." .

making or other proceeding at a later ed us a low-power operating license. Touche Ross & Co. and the Nicken- date. A decision is not expected be- i Electric rates reflecting a $66 million, Wurster Group, the firms the ICC fore late 1987. {

or 9 percent, increase were put into selected to perform an audit of the A federal district judge in Chicago J effect on October 4. Also at fuelload Clinton power station, filed the first on October 15 ruled in favor of Illi-an additional $352 million of construc- phase of their report in January 1986. nois utilities in their request to dis-tion work in progress (CWIP) was The report concluded that we are continue mailing the messages of the included in rate base. When we re- responsible for a minimum of 12 Citizens Utility Board (CUB) with util-ceive the full-power license for Clin- months of an 18-month delay result- ity bills. CUB was formed by the Illi-ton, a $72 million, or a second 9 per- ing from stop work orders in 1982. nois legislature in 1984 to represent its j cent, rate increase will become effec- The cost associated with that delay is members in utility matters. We were '

tive, and an additional $384 million of .in the range of $294 million to $463.6 one of eie,ht Illinois utilities that initi--

CWIP will be included in rate base, million, and our share of that cost is ated the suit in March. A state law resulting in a total of $1.54 billion of estimated to be between $250 million requiring utilities to include inserts ;

CWIP in rate base. Receipt of the full and $395 million. It is our position, prepared by CUB in their bills was '

power license from the NRC is ex- based on the findings of independent Feld unconstitutional because man i pected in March 1987. consultants hired on behalf of the datory inclusion violates the right of A second economic incentive elec- Company, that there was no evidence free speech. In November CUB ap-tric rate, based on a flexible combina- of decisions or actions on our part . pealed the ruling.

l tion of our present industrial rates for that should be categorized as unrea- in December the Financial Account-  :

interruptible and non-interruptible sonable. During 1986 and into 1987, ing Standards Board issued a state-power, became effective April 12. Our the ICC conducted hearings on the meet that would require that a disal I first economic incentive rate designed first phase of the audit and has not lowance of plant costs by a regulatory ;

to encourage industries to locate or reached a decision.The second phase commission be recorded as a loss. We' 1 expand in our service territory was of the Touche Ross audit, covering do not know what amount,if any, of approved in 1985. ,j April 1985 thrcugh the in-service date, Clinton's costs might be' disallowed.

In August a circuit co'urt judge in is due following the in-service date Many aspects of the Tax Reform i Mt. Vernon overturned part of the and may conclude that additional Act of 1986 will have specific implica-ICC order of 1985 that would have costs are unreasonable. tions for the Company. These include, placed a $2.7 billion cap on our share On October 7 we proposed the in- among other things, the corporate i of construction costs at Clinton. The service criteria for the Clinton power income tax rate reduction, repeal of l 1

1 8

'l the investment tax credit, a new our earnings of the provisions of the pjngdggor deprecation system for tax purposes, Tax Reform Act of 1986 when com-and a corporate alternative minimum bined with any related ICC action, We recognize the importance of tax. The ICC has initiated a proceed- We continued our litigation in 1986 our financial activities as we prepare ing to review the impact of the reduc- on the proposed merger with the Mt. for a future where gas and electric tion of the statutory federal income Carmel(lllinois) Public Utility Co Fol- rates will be influenced by competi-tax rate. Accordingly, the ICC has lowing oral arguments, the Illinois tive pressures. With this in mind, we ordered that amounts collected from Supreme Court issued its order on completed $755 million of financing customers at the higher tax rates will March 19,1986, upholding the 1982 used to refund higher cost securities be recorded as a liability subject to decision of the ICC that denied our and to meet requirements of our1986 refund. Ultimate disposition of such acquisition of the Mt. Carmel Public construction program.

amounts will not be determined until Utility Co Mt. Carmel serves about f avorable market conditions expe-the ICC completes a review of the 5.670 electric and 3,580 gas customers rienced this year permitted us to re-overallimpact of the new tax act and in southeast Illinois and continues to place outstanding, high-cost financ-the then-current financial condition be a wholesale electric customer of ing with lower cost forms of financing.

of the Company. At this time we are the Company. During the year $360 million of new unable to determine the impact on financing was completed to refund 3 'h QMY"" ' "

,k bQ* fnk l ' $ _ _( W y :?

, auditing. investor relations, rates,

.l; JG' . -l,Mv(-3 '

s :~ regulatory affairs, rid management, OdhlL U;SJ$ dLaiAIN

' D.sh and tax es.

IltlNOIS POWER COMPANY 1986 ANNUAL R[ PORT 9

I

more than $334 million of first mort- agreement with one Chicago and dangering the health and safety of gage bonds and Eurobonds and a $36 three New York banks. These borrow- the public.'

million issue of preferred stock, cor- ings w ere initially drawn down in 1985. Loading the 624 uranium fuel bun-responding to a first-year savings in We also hate agreements for a $50 dies into the reactor began imme-interest and disidend costs of approu million line of credit with a group of diately after receipt of the license and imately $12 million. We will continue European banks. In addition we bor- was completed on October 21. Initial to study opportunities available to re- rowed $52 million from banks within criticality, the first self-sustaining nu-finance existing issues to reduce our the territory that we serve. At year clear chain reaction, will occur within cost of doing business. end we had available unused lines of the next month. Following initial criti-The new issues that made up the credit totaling $235 million. cality, we will conduct tests at gradu-refinar.cing plan were as follows: $75 During 1986 more than 25,000 of ally increasing power levels. We million of 9ML first mortgage bonds approximately 84,000 stockholders expect to receive our full-power due 2016 issued July 2; $100 million of participated in the automatic reinvest- operating license in March 1987 so 8WL unsecured notes due 1994 issued ment and stock purchase plan. Pro- that we can perform tests above the f August 1; $125 million of 9WL first ceeds from the reinvestment plan, 5-percent power level and begin mortgage bonds due 2016 issued Sep- along with our various employee commercio! uperation.

tember 4; and $60 million of 8'E serial stock plans, amounted to approxi- Four of the fise NRC commission-preferred stock issaed December 29. mately $71 million. ers visited the Clinton station before Construction expenditures, includ- or during fuel load, beginning with ing AFUDC, during 1986 were $710 the site visit in May by NRC Chairman  ;

million, almost $161 million less than Lando Zech. In July and September l the 1985 amount. More than $628 mil- NRC management from both the  !

lion was related to the Clinton power ClintOn Power Washington and the Region ili offices  !

station project. We spent $57 million sted the site to review the status of on other electric facilities and $25 mil-Station the plant in preparation for issuance lion on gas projects. Our major goal has been to bring of the operating license.

To help finance our construction our C4nton power station on line as a in September members of 22 Illi-program in 1986, we issued $125 mil- safe and reliable source of electric nois rural electric power cooperatives lion of 30-year,10% first mortgage energy for the coming decades. In filed a lawsuit against the Company bonds on February 26. A public offer- this light the receipt of our facility regarding our construction manage-ing for the sale of $50 million of 8.52% operating license was the high point ment of the Clinton power station. I cumulative preferred stock followed of the year at the Clinton power sta- The suit purports to be on behalf of one day later. On December 31 we lion. On September 29 the Nuclear Soyland Power Cooperative, Inc. and j initiated $150 million of tadexempt Regulatory Commission (NRC) issued Western Illinois Power Cooperative, i debt financing. a facility operating license permitting Inc. (WIPCO) and alleges that we With the completion of the C!inton us to load fuel at Clinton and to con- induced the two cooperatives to par-project, capital expenditures for the duct low-power testing at lesels up to ticipate in ownership of Clinton by five years 1987 through 1991 are ev 5 percent power. falsely representing that Clinton pected to mos e to a significantly lower The license states that the NRC has would supply inexpensive electricity, lev el. In the first year,1987, we plan to found that " Illinois Power Company The plaintiffs seek various forms of spend $260 million for capita! im- is technically qualified" to operate relief. As permitted by a judge's rul-provements. The five-year total is ex- Clinton, that the plant has been de- ing, the plaintiffs filed their first pected to be $1 billion. signed and built "in conformity with amended complaint on January 26, Our bank loans amounted to $200 the regulations of the Commis- 1987. On February 17,1987 the Com-million under an agreement with four sion," and that operation and actisi- pany filed a motion to dis.niss this Chicago banks and under another ties "can be conducted without en- amended complaint. We believe that 10

e ammen, man this litigation will not have a material, see Performance (SALP) covering the quate and represented a licensee man-adverse effect on our earnmgs or period from 5eptember 1985 through agement that was sufficiently staffed financial position. August 1986. The SAI P report is an and appropriately involved and con-We announced on December 9 that evaluation of the technical and man- cerned with nuclear safety."

the estimated cost for our portion of agement performance in meeting The Clinton Visitors Center pro-the Clinton power station had in- NRC regulatory requirements during vided services for 18,107 people over creased to $3.8 billion. This estimated construction and operation. This re- the course ci the yen, Of that num-cost assumed a commercial operation port was the first to cover the opera- ber more than ' A00 guests toured the date in April or May 1987, based on tion, rather than primarily the con- station or the controt room simulator, meeting operating criteria consistent struction, aspects of the Clinton pre- In January 1987 we again success-with that used previously by the Illi- ject. The NRC concluded that overall fully passed prelim.inary evaluations nois Commerce Commission in estab- our performance was " acceptable" by the NRC and the Federal Emer-lishing commercial operation dates The report said that we had a "high gency Management Agency of the for nuclear generating units. Cooper- level of performar,ce" in the pre- Clinton station emergency response ative owners Soyland and WIPCO are operational testing area; that in- plan. At a public critique an NRC limited by agreement with us to $450 creased attention should be given to spokesman indicated that if the acci-million of investment in Clinton. the area of quality assurance and dent scenario had been real, he felt At a public meeting on December administrative controls and to main- confident that the actions taken would 17, the NRC presented results of the tenance; and that "all other assess- have been adequate to protect the sixth Systematic Assessment of Licen- ment areas were found to be ade- health and safety of the public.

i

[v &~ ; . .

s' "y -

W g N lQ

_ _ k..x~}_ Sat .n u'L W

.' "3

)) I

~ , .fj_ _

n.; . ..

-mmm. .

l  % . ,M -. ,,,

i ' f. "

e$ . s.d &&) <

~

i e ?u i 1 7

f((  ! ( ;hq --y :

v f yth6ML- .- . c; .

.s

%y 2 -

. ~ su ..  ;

memwr -

sgl. ,

I' Vice President Donald Hall, left, and

• i Executive Vice President William 54 .khf ( .j) $ ;";;~i tC Gerstner standin front of the reactor 3.. b a here fuelloading began on September i; & ~; $ ., - :  ?.,; J~. .

L

29. The fuelloading bridge, behind them,

• 8 htted fuel bundles kom storage,

'b l, . m transported them forward, and placed n.'

[}y ' , '

f

~

,l them down into the reactor. As required y 3; . .

for allplant employees entering a 1 k v'- '

A 'i '

• radiological control area. Mr. Gerstner lh;00$ 'l**~) *

and Mr. Hall are wearing their identification badges and two types of

, y ^

dosir.etry-one type that measures the l lhs .??

I

'I

'N . '

iminediate Icvel of exposure to radiation and another thai measurs the

' Q  ::T ;.

Q' ' Ql cumulative level.

l ? f q .g [

.> b. '

2 4, , , ,

These officers are responsible for the o: a wa .

Clinton power statiort 1'

1 l

,mE ILLINOIS POWER COMPANY 't986 ANNUAL REPORT l

! 11

(

l gggp o tion s< stem to our electric system. In northern part of our service territory the fall two additional auto supply in part through our intensified efforts Effective marketing and economic firms announced plans to locate in We have worked extensively organiz-development are critical to our future our ter ritory. ing and cooperating with many com-success as a company. Consistent with We expect electric sales to these five munity and regional economic devel-our recognition of the strategicimpor- new facilities and other customers to opment groups. We expect increased tance of these efforts,we reorganized approximate the loss of sales in 1987 industrial and commercial develop-to make economic development activ- and 1988 due to three major industrial ment, especially in LaSalle, Bureau.

ities the sole function of one depart- customers converting to cogeneration. Putnam, and Champaign counties in ment its primary role is to help stimu- Gas sales are expected to drop in 1987 the northern part of our territory and late economic growth in our service and 1988 because there is no similar in Madison and St. Clair counties territory by attracting new industry, offset anticipated for the loss of gas During the past two years approxi-helping to retain or expand existing sales to the same three customers and mately $680 million in private funds industry, and assisting in revitalizing to a fourth customer converting from and $1 billion in public func's have our communities. Simultaneously, we gas to coal. However, we are encour- been invested in southwestern Illi-elected a new vice president and re- aged by the early success of our stra- nois, in part because of the South-structured the electric and gas mar- tegic marketing program that sales at western Leadership Council's efforts, keting groups. Both the electric and levels greater than that discussed in which we participate. We also gas marketing groups are concentrat- above are achievable. continue to work closely with the ing on meeting the energy and busi- In late 1986 we received permission state's Department of Commerce and ness needs of industrial and large from the Illinois Commerce Commis- Community Affairs to attract new commercial customers. We expect to sion to become a one-third owner in industry to Illinois.

carry out an expanded marketing the Project Development Corpora- Because the needs of our agricul-effort in coming years. tion, a corporation organized specifi- tural customers remain of great im-Some of the highlights of the eco- cally to stimulate economic growth in portance to us, we made more than nomic development activi:ies in 1986 the Granite City area. The group has include projects that were commit- 500 visits to inform farm customers developed and constructed a single about new technology in farm elec-ted to earlier and began to take shape and a multi-tenant building in the during the year. Construction is now trical equipment, proper electrical Northgate Industrial Park, which we wiring of livestock confinement build-underway at the Diamond-5 tar Motors own. The other participants are Butler ings, and efficient electricity use for Corporation auto anembly plant, Manufacturing Company and Ralph grain drying, space heating, and farm committed to in 1985. Jointly owned Korte Construction Company. One automation.

by the Chrysler Corporation and Mit- tenant is currently leasing space in the The emphasis of our electric mar-subishi Motors Corporation, it will be multi-tenant building. keting goup is making our customers one of our 10 largest industrial elec- While unemployment in Illinois at tric customers.

more energy efficient and more pro-about 7 percent remained close to the fitable through the use of electrotech-Construction is also proceeding at .1ational average and unemployment nologies. We also initiated activities to another plant, the Nascote plant of in our service territory was closer to 9 help us design special electric services Magna International of America, Inc. percent, economic development ac- to meet customers' needs and to in-Announced in 1986, the Nashville, tivities in our territory and in other crease electric sales to wholesale cus-tilinois auto supply plant is expected parts of the sta e created more jobs to begin production in 1987 and even- tomers. We will ensure that our future and encouraged new industrial plant marketing plans will be consistent with tually employ 600 people. We built investment. In our territory 81 new or or are building new electric facilities our customers' needs by building an expanding customers created 5,950 information base to better understand to serve Diamond-Star and Nascote, new jobs. In addition approximately our own competition and our custom-as well as to serve a third customer 650 existing jobs that were in jeopardy ers' market. competitive environment, that is to convert from its cogenera- at three plants were retained in the and business.

sum 12

i . . i ii..ik'i. a eii *. im a i ii . d a p. ..'

The industrial gas sales group, orga-CUSlOmer Services " " * """" 8 v " " " " d " " e d '"""

nized in 1985 to concentrate solely on than 1,600 energy audits of homes, prosiding gas sales and senice to our An important part of our plans for apartments, and businesses in 1986.

major customers, emphasizes the the future is to continue to emphasize Low-income customers receised the value and abundant supply of natural our concern for our customers by audits at no charge. Since 1977 we gas. In a conference for 85 of our prosiding courteous, timely, and effi- hase audited approximately 19 per-largest customers in December, we cient senice, by offering weatheriza- cent of all of our residential custom-discussed deregulation of supply and tion adsice and assistance, and by ers, continuing to be one of the lead-price, accen to transportation, supply being actise in the communities we ing utilities nationwide in the number availability, and our natural gas ser- sen e. In 1986 we impros ed our cus- of residential audits performed.

vices and lans. We deseloped pro- tomer senice by en.phasizing train- We discussed conservation, energy grams to ensure industrial customers' ing for customer senice personnel supply, rates, safety, and non-energy access to competitive spot market and completiag in May the conser- related topics in 979 programs pre-natural gas using interim transporta- sion to an electronic meter reading sented to cisic, church, and school tion agreements with interstate pipe- system. Using hand-held microcom- groups. In addition 2.027 pupils and lines. In 1986 we also requested ud puters, electronic meter reading pro- adults toured our fossil-fuel generat-receis ed exemption for several of our sides more efficient and accurate ing stations to better understand gen-largest customers from costly incre- meter reading and billing. eration of electric energy.

mental pricing provisions of the fed- To assist our residential and com- The Energy Assistance Act, passed eral f uel Use Act. mercial customers in their efforts to by the Illinois legislature in Nosember

_. , .g 3 g y ,,

1Q W DY k: *

.. l h b #. ',f.i 7 j.' .h [l ' ,- (h f? N

=t- ,

ll . , '-

f.. $

~

p i S E i TJ i d i d 5 i f5 N = = = @ 9 $ s; d bl . Yh h wi4216 _ .

g - t c, - ~ Zr

{, Wme =

"r -

g .r-  ;

o L , - l ,4 . . -'

.3 e-), Senior Vic e President V.',,*,^ tam \Varren,

, 9 y-

,- , , .]w """ u? '

! lef t, and Vic e Prevdent I atry Idleman

[ s %%n{ f' .

reuen the p ansl for a new apprentic e Irneman trairung program. Mr. Idleman is responsible for purchasing and matenal

~~~~ .

C control and employee relationt Mr.

. , - fb \Vanen is addannnally responsible for

)

senice area operations and the serace u .

e area managert

....,,..m.1m, . ....- .,,.m....%.. <..m.

~- ,. ....<m .~ . .. , -. ILLINOIS POWER COMPANY 1386 ANNU AL REPORT -

13

1985, established the Illinois Residen- in 1982 to help customers, who may that such action will not exceed tial Affordable Payment Plan (IRAPP) not qualify for other forms of assis- environmental standards.

and required the Illinois Commerce tance, better manage their utility bills. Numerous organizations, including Commission (ICC) to propose and The f oundation grants money to local the Company, contracted with Mar-administer a weatherization and con- churches and service groups who, in tha C. Rose Chemicals PCB Division servation program. The IRAPP rules turn, purchase materials and provide (Rose) of Holden, Missouri for the became effective in May. The IR APP labor to weatherize the homes those disposal of polychlorinated biphenyls plan allows customers with incomes groups select. The foundation issued (PCBs). Early in 1986 Rose informed us of less than 125 percent of the poverty seven grants totaling $77,800 during and others that it did not have suffi-level to pay during the winter no the year to community organizations cient funds to satisfy its contractual more than 12 percent of their income throughout the territory we serve. and environmental obligations. In re-for utility service, regardless of the bill Our total contributions to the foun- sponse we and the other organiza-amount. Dunng May through Novem- dation were $536,724 through 1986. tions, classified as potentially respon-ber, customers must pay either their Grants gisen to date are expected to sible parties under federal statutes, actual bills or 12 percent of their provide long-term energy assistance developed an organization to admin-income, whichever is greater. The Illi- and save customers of Illinois Power ister and direct the remediation of fort nois Home Energy Assistance Pro- Company approximately $69,000 an- of the Rose site. Resolving the situa-gram must certify customers' eligibil- nually on their utility bills. tion will require 24 to 36 months.

ity for the plan. The plan is not easily The Illinois Home Energy Assis- We began studying 26 former gas understood by the parties involved tance Program provided about $6.4 manufacturing sites to determine if and hu been difficult and costly to million in federal funds during the there are any residues remaining from administer. We continue to oppose 1985-1986 heating season to help pay the past activities of predecessor com-this plan because of the potential our customers' bills. panies that may prove to be hazard-impact on the remaining customers, ous. Physicalinvestigations of the sites, its discouragement of conservation, which began during the third quar-and the administrative burden placed Environmental ter of this year, will be completed in on utilities.

An ICC interim order related to the ggg another two or three years. The results of initial investigations have not re-weatherization and conservation par- We closely monitored the 24 acid vealed any immediate threats to hu-tion of the Energy Assistance Act states rain bills that were introduced but man health and welfare.

that utilities could be required to pro- failed in the 99th Congress. Generally, Clinton Lake has continued to be vide " substantial and comprehensive" these bills called for reductions in sul- used by thousands of people for fish-weatherization to low-income cus- fur dioxide emissions at coal-fired ing, boating, swimming, and skiing.

tomers. In public hearings held in power plants in the Midwest. Similar However, a 1985 decision by the Illi-early 1987, we testified in support of bills are expected to be introduced in nois Department of Public Health pro-limiting the costs of such programs to the 100th Congress. We continue to poses to ban swimming and water ski-funds appropriated by the state or propose to Congress solutions to acid ing because of potential danger from federal government rather than hav- rain concerns. a disease-causing amoeba known as ing these costs passed on to other util- Since 1979 we have continued to Naegleria fowleri that flourishes in ity customers. The ICC is expected to pursue a rule change from the U.S. warm waters. The ban is scheduled to issue final rules in 1987. Environmental Protection Agency take effen when the power plant is in During 1986 our customers contrib- (U.S. EPA) that would allow our commercial operation, uted to the Energy Assistance f ounda- Baldwin power station to continue to We continued our environmental tion $67,186, an amount that we burn Illinois coal in all three units. We self-monitoring program in 1986, con-matched. We created the Foundation have demonstrated to the U.S. EPA ducting approximately 50 audits of 1 . . . .. . . . . .. . . , . -.: .< .. -

.....s 14

I 1

our facilities and of facilities owned mulion to the project in 1986, bring- our behalf were approximately $1 mil-and operated by organizations that ing our total contribution to the pro- lion for 1986.

provide environmental services to us. ject to $10 million.

Along with the federal government and t he state of Illinois, we are actively Employee Relat. ions Research and ,ese,,csing me,soa, ,o ge,e,op g,e,,.

Development er e,e of m>neis ceei. One ,esee,ch During ,986 we successfuiiy nege.

activity to burn coal cleanly is a dem- tiated new collective bargaining agree-In 1986 we reduced our expendi- onstration project at our Hennepin ments covering wages, working con-tures for research and development power station, supported by the U.S. ditions, and employee benefits for from 1985, but we continued to be Department of Energy, the Illinois De- 2,954 employees w ho are represented involved in several research projects, partment of Energy and Natural Re- by 11 local labcr unions. We believe The majority of the $3.6 million spent sources, and the Gas Research Insti- employee professionalism will be en-in this area in 1986 supported the tute. The technology is intended to hanced by agreements reached in Kilngas project and nuclear-related reduce both sulfur dioxide and nitro- these negotiations for a new Lineman research. gen oxide emissions that result from Apprenticeship and Training Program The Xilngas project at our Wood burning high-sulfur, Illinois coal. applicable to our Nne workers repre-River power station is designed to To encouray,e clean coal research sented by the International Brother-demonstrate the feasibility of generat- so that the vitality of the Illinois cual hood of Electrical Workers Local ing electricity using an Allis-Chalmers industry is enhanced while the eco- Union #51 and a Fitness for Duty pro-Corporation process in which low- nomic impacts of environmental con- gram applicable to personnel at the BTU gas is derived from high-sulfur straints being considered in Congress Clinton power station. The latter pro-coal such as lilinois coal. After the are minimized, we are also an active gram was introduced to assure that 1984 testing the Kilngas program en- participant in the Clean Coal Tech- personnel are not under the influ-tered into a new, multi-year effort to nology Coalition. This group pro- ence of alcohol or other drugs that improve demonstration plant per- motes in the U.S. Congress the devel- could affect their ability to operate formance to commercial levels while opment and implementation of clean the plant.

accumulating information on the coal technologies. We think (nat improvements we operations of the facility. The princi- Research and development projects made in our employee comrnunica-pal goals of the first phase were to associated with the Clinton power sta- tions and communications training gather more data, improve perform- tion include research to enhance the programs will enhance employee re-ance, and identify any problems that safety and reliability of nuclear power lations, will increase understanding may arise during winter operation. plant operations. We are an active and support of Company goals and The second phase, currently in pro- participant and supporter of many pof; des, and will encourage sugges-gress,is structured to proside operat- nuclear-related reseanh programs, tions for improved productivity. We ing experience and data needed to including the institute of Nuclear strengthened employee communica-begin commercial project activities. Power Operations, the BWR (Boiling tions by revamping publications to The total cost of the Kilngas program Water Reactor) Owners Group, the convey information on a regular and will be over $250 million. The pro- Seismicity Owners Group, and the timely basis. As part of explaining our gram has been supported by a con- Hy drogen Control Owners Group. strategic goals and programs to sortium of seven utilities including Our support of the Gas Research employees, officers conducted meet-the Company, the state of Illinois, the Institute (GRI) is included in the ings with employee groups. We U.S. Department of Energy, the Elec- price of natural gas bought from the began training in organizational and tric Power Research Institute, and pipeline companies. Contributions to managerial communications in 1986, Allis-Chalmers. We contributed $2.2 GRI made by natural gas pipelmes on and we will expand this program in ill!NOIS POWER COMPANY 1986 ANNUAL REPORT I

15

.____,__m.-----------------------------T" - ~ - - - - - " - - ' - - - ' - - - - ---- '

1987 for all managerial and supervi- elected executive vice president Larry appropriate to meet these objectives; sory employees. D. Haab to the board of directors to and advises management and the improvements in our overall em- fill this vacancy. board on such matters. The members ployee safety performance enabled Members of the board of directors are Keit h R. Potter, chairman,Wendell us to achieve our safest year ever with serve on committees established to J. Kelley, Robert M. Powers, Boyd F.

respect to doctor-treated injunes. address various issues of management. Schenk, and Gordon R. Worley.

Recommendations of the committees are presented to the full board for Company Officers discussio" and fina' de'ermi"a'i "~

Current committees and their mem- R e S p O n S'I M t y This year we were deeply saddened berships are as follows:

at the death on April 8 of vice presi- finance Committee - This com-fOr information dent Jerome P. O'Grady. The board of mittee reviews the Company's finan. The financial statements and a!! in-directors, at its meeting on April 17, cial forecast, financing plans, and formation in this annual report are said in a resolution that his death "was pension fund investments; and makes the responsibility of management. The a grievous loss to the planning and recommendations to the board con- financial statements have been pre-operations of the Company and a trag- cerning such maMers. Members of the pared in conformity with generally ic bereavement to his family" Mr. committee are Gordon R. Worley, accepted accounting principles con-O'Grady had served the Company al- chairman, William C. Gerstner, Larry sistently applied. In the opinion of most 20 years. D. Haab, Wendell J. Kelley, Donald E. management, the financial statements in Aprillarry L. idleman was elected Lasater, Keith R. Potter, Charles W. fairly reflect our financial position, vice president responsible for em- Wells, and Vernon K. Zimmerman. results of operations, and sources of playee relations and for purchasing Audit Committee - This commit- funds prov;ded for gross property and material control. He formerly was tee, which consists entirely of non- additions.

manager of industrial relations. management directors, recommends We maintain accounting and inter-Paull. Lang joined the Company in the appointment of the Company's nal control systems that we believe July as vice president responsible for independent accountants; confers are adequate to provide reasonable economic development and electric with the independent accountants; assurance that assets are safeguarded and gas marketing. He formerly was and reviews the scope of audits, the against loss from unauthorized use or general manager of energy at inland results of auditors' examinations, and disposition; and we believe that the Steel Company. the activities of the Company's in- financial records are reliable for pre-The board of directors in August ternal auditors. The members are paring financial statements.

elected senior vice president Larry D. Vernon K. Zimmerman, chairman, The financial statements have been Haab an executive vice president. Mr. Grover J. Hansen, Donald E. Lasater, audited by our independent accoun-Haab remains chief financial officer and Eva jane Milligan. tants, Price Waterhouse, in accord-and is responsible for accounting, Compensation and Organization ance with generally accepted auditing corporate secretary, corporate treas- Committee - This committee reviews standards. Such standards include the urer, data processing, finance, inter- and recommends compensation of evaluation of internal controls to nal auditing, rates, and taxes. elected Company officers; reviews establish a basis for developing the benefit plans; and recommends nom- scope of the examination of the finan-inees to fill vacancies on the board of cial statements. In addition to the use Board of Directors direct rs. The members are Boyd F.

Schenk, chairman, Grover J. Hansen, of independent accountants, we main-tain a professional staff of internal At the annual meeting on April 17, Wendell J. Kelley, Eva Jane Milligan, auditors who conduct financial, pro-stockholders re-elected the 11 direc- and Robert M. Powers. cedural, and special audits. To as-tors of the Company. In August the Corporate Activities Committee - sure their independence, both Price by-laws of the Company were amend- This commi tee reviews corporate ob- Waterhouse and the internal auditors ed to increase the number of direc- jectives and long-term Company have direct access to the audit com-tors from 11 to 12, and the directors plans; reviews the corporate structure mhtee of the board of directors.

16

Board of Directors Officers William C. Gerstner Wendell J. Kelley

[xecutise Vice President of the Company Chairman and President Det at ur, Illinois Larry D. Haab William C. Gerstner

• • C * '" #"'

[xecutive Vice President of the Company Decatur, Illinois Larry D. Haab Grover J. Hansen Executive Vic e President Consultant and Retired President and Chief Operating Officer of first Federal Savings & Loan Awociation of Chicago Charles W. Wells Ocean Springs. Mississippi E xecutive Vice President Wendell J. Kelley William E. Warren Chairman and President of the Company Senior Vice President Det atur, Illinois Donald E. Lasater Arthur E. Gray Chairman of the Board and Chief Executive Vice President and Secretary Officer of Mercantile Bancorporation inc.

(a hank holding company) Donald P. Hall St. Louis. Miwouri Vice Pres dent Eva jane Milligan Retired Senior Vice President, General Larry L. Idleman Personnel Manager of Marshall Field & Vic e President '

Company (a retailer); President of Pro lines.

inc. (a merchandise service organization) j Hilton Head Island South Carolina EdU!b*bdO8 Vice President Keith R. Potter Consultant and Retired Vice Chairman of James O. McHood international Harvester Company Vic e President (a manufacturer of trucks and diesel engines)

I aston, Maryland Porter J. Womeldorff Robert M. Powers Vice President President and Chief Operating Ofhcer of l A.E. Staley Manufacturing Company (d procewor of grain and oil seedsl Larry F. Altenbaumer Decatur, Illinois Treasurer Boyd F. Schenk Carl E. Mathias Vice Chairman of IC Industries, Inc. and Assistant Vice President Chairman of Pet incorporated (a diversified manufacturer and marketer of consumer and commercial prouucts) Ann H. McEvoy Chicago. Illinois Assistant Secretary Charles W. Welk Gary L. Secor Executive Vice President of the Company  ;

Dec atur, Illinois Gordon R. Worley Retired Enecutive Vice President-Chief Note: The principal occupation financialOfficer of Montgnmery Ward & of each director and officer of Co., Inc orporated (a retailer) tilinois Power Company is that Chicago, Ilknois listed.

Vernon K. Zimmerman Director of the Center for inter iational Education Researt h and Accountmg. and Professor of Act ountancy j at the Unisersity of lilinois Ur bana. Illinois ILLINOl5 POWER COMPANY 1986 ANNUAL REPORTausnummmum 17

Management's Discussion and Analysis of Financial Condition and Results of Operations Reference is made to the financial Statements and this three-year period totaled $1.6 billion. On October 4, Electric and Gas Operating Statistics for information con- 1986 in accordance with the August 1985 ICC order, we cerning financial condition and results of operations.The implemented a 9% annualized electric retail rate increase factors having significant impact upon financial condi- (about $66 million), following receipt of a low-power tion, changes in financial condition, and results of opera- operating license from the Nuclear Regulatory Commis-tions since January 1,1984 are as follows: sion (NRC), permitting us to load fuel. Commensurate with receiving a full-power operating license from the NRC, the Company is authorized to implement a 9%

l.iquidity and Cap.tal i Resources electric retail rate increase, representing additional an-nualized revenue of about $72 million. With these Gross property additions for the years 1984 through increases and the completion of Clinton construction, 198o were $2.1 billion includii g approximately $500 mil- we anticipate both an improvement in cash flow from lion of allowance for funds osed during construction operations and a related reduction in the need for exter-(AFUDC). Funds totaling $339 million were utilized for nal financing.

debt retirements during this three-year period. During the three-year period cash requirements The Company currently estimates that its portion of between long-term financings were provided via short-the cost of the Clinton power station (Clinton) will be term borrowings, such as commercial paper, and through

$3.8 billion. This estimated cost assumes a commercial lines of credit maintained with commercial banks. At operation datein Aprilor May1937 based upon meeting December 31,1986 the unused portion of our totalline operating criteria consistent with that used by the Illinois of credit was $235 million.

Commerce Commission (ICC) in establishing commer- In addition our foreign financing subsidiary, IPF (Illi-cial operation dates for other nuclear generating units. nois Power Finance) Company N.V., has been utilized This estimated construction cost further reflects an addi- during the period to provide about $100 million of capi-tional $384 million of construction work in progress tal through borrowings in the European financial market.

(CWIP) to be included in electric rate base at the time of To reduce financing costs, in 1986 we issued $300 mil-full-power licensing. Based upon this current estimated lion in long-term debt with a weighted average interest cost, it is expected that the ownership share of Soyland rate of 9.2% for refinancing purposes. These funds were Power Cooperative, Inc. and Western Illinois Power used for the retirement of $334 million of debt with a Cooperative, Inc. (Cooperatives), which is limited to $450 weighted average interest rate of 12.3%. In December million of direct construction costs, will be reduced to 1986 we sold $60 million principal amount of 8% cumula-about 13.5% at project completion. We estimate that $1.0 tive redeemable preferred stock, the proceeds from billion will be required for construction during the 1987- which will be applied in part to the redemption of $36 1991 period, including about 5.1 billion for nuclear fuel. million principal amount of 11.66% cumulative redeem-The retirement at maturity of currently outstanding long- able preferred stock, and in part for reimbursement of a term debt and redeemable preferred stock, and sinking portion of the funds previously required to retire certain fund payments on first mortgage bonds will require outstanding first mortgage bonds. First year annualinter-approximately $.3 billion during this five-year period. est and dividend savings from these refinancing will There has been no final determination in connection approximate $12 million.

with the ICC proceeding which will ultimately determine in order to obtain the capital necessary for our on-the amount of Clinton costs which will be allowable for going construction program, it is important that we recovery through rates. However, if the ICC ultimately maintain the financial strength necessary for flexible determines that a portion of Clinton costs is disa!Iowed, access to financial markets. It is also important that we the Company would not Se entitled to reflect the dis- maintain the interest coverage ratio required by the allowed portion in rates in any respect. After amend- Mortgage and Deed of Trust for the issuance of addi-ments to current generally accepted accounting princi- tional first mortgage bonds. Failure to meet the interest pies are adopted by the Company, a disallowance,if any, coverage ratio could result in alternative, and poten-would be recognized as a loss. tially higher-cost, financing methods to provide the Funds provided from operations amounting to $200 projected capital requirements associated with our ongo-million for the years 1984 through 1986 supplied working ing construction program and other working capital capital to meet operating requiremer.ts and a portion of needs. At December 31,1986, based upon the most res-the funds needed for the ongoing construction program. trictive earnings test contained in our Mortgage and in addition funds obtained from external sources during Deed of Trust, approximately $321 million of additional

_mm 18

first mortgage bonds could be issued at an assumed The cost of meeting our system requirements is re-interest rate of 9WX,. flected in the cost of fuel for electric plants, power pur-Many aspects of the Tax Reform Act of1986 willimpact chased for resale, and power interchanged-net. Changes

, our Company. These include, among other things, the in these costs are summarized below:

l Corporate income tax rate reduction, repeal of the 1986 1983 1984 l investment tax creft, a new depreciation system for tax (MHlioCihollars) purposes, and a corporate alternative minimum tax. The f uel for electric plants. ... $ (8.9) $ 20.1 $ ( 8.4)

ICC has initiated a proceeding to review the impact of the reduction of the statutory federal income tax rate.

[' %df ,

yo,,, ,nc,,,, e < decrease) d*-

Q Q ]

, 5 2.s 5 (4s.u 5 9.1 l Accordingly, the ICC has ordered that amounts collected I from customers at the higher tax rates will be recorded as Changes in the above costs are caused by system load

' a liability subject to refund. Ultimate disposition of such requirements, availability of generating units to meet amounts will not be determined until the ICC completes those requirements, fuel prices, purchased power prices a review of the overallimpact of the new tax act and the and volumes, power interchange market conditions, the l then-current financial condition of the Company, in power coordination agreement with the Cooperatives, l accordance with internal Revenue Service requirements, and recovery of fuel costs through the fuel adjustment depreciation-related deferred tax balances will continue clause.

to be normalized at the weighted average tax rates at Kilowatt-hour generation decreased 1.6% in 1984, and which they were provided. At this time the Company is increased 6.4'X, and 1.4'X, in 1985 and 1986, respectively.

unable to determine the impact on its earnings or cash During the three-year period coal-fired generation aver-flow resulting from the provisions of the Tax Reform Act aged over 99'X, of our total generation. The weighted of 1986 when combined with any related ICC action. average cost per million BIU's of coal burned increased See Notes 14 and 15 in " Notes to Financial Statements" 1.3% in 1984 and 3.2% in 1985, and decreased 8.6% in 1986.

for information regarding matters which could impact in 1964 there was an aggregate decrease of $27.7 mil- {

financial liquidity. lion for fuel for electric plants and power purchased for resale; however, power interchanged-net switched from Results of Operations a net sales credit of $25.0 million in 1983 to a net purchase f $11.8 mil lion. Interchange power purchases increased Electric Operations - For the three-year period 1984 ue t greu availability of interchange power at through 1986, electric revenues increased 3.0% the components of which are summarized as follows: fav rable prices.% hile customer requirements increased m 1984, a greater portion of the demand was provided

• *

• through interchange purchases. In addition power pur-Rate increases . 5 - 5 5 2 chased for resale and interchange sales were lower in Volume & orher . .... . 47 (4 h 20 1984 due to the expiration of a power interchange toss on sale of nuclear fuel agreement ;vith a neighboring utility.

Fue tr ries . } } During 1985 there was an aggregate increase of $18.3 million for fuel for electric plants and power purchased R evenuc increase (deocase). . 5 48 5 (44l 5 20 for resale, and power interchanged-net switched from a During the above periods kilowatt-hour sales have net purchase of $11.8 million in 1984 to a net sales credit been impacted by weather. economic conditions within of $51.5 million. These changes reflect reduced sales to our service territory, and by ongoing conservation efforts. our customers, increased interchange sales to other utili-in 1984 kilowatt-hour sa'es increased 4.4% principally ties, greater availability of lower cost generating units, due to the economic improvement in our area, as evi- and the power coordination agreement discussed above.

denced by a combined increase in sales to commercial During 1986 there was an aggregate decrease of $9.5 and industrial customers of 6.9%; in 1985 kilowatt-hour million for fuel for electric plants and power purchased sales declined 6.7% due principally to a power coordina- for resale, and the credit for power interchanged-net tion agteement with the Cooperatives under which sales decreased $12.0 million. Lower fuel prices in 1986 resulted to the Cooperatives were re-classified as power inter- from coal cont:act re-negotiations and a favorable spot changed-net (1,023,342,700 kilowatt-hours; $47.5 million market for coal purchases. Reduced availability of our in 1985) rather than as electric revenues (972,855,970 lower cost generating units in 1986 contributed to kilowatt-hours; $34.6 million in 1984). See Note 4 in decreased interchange sales. Increased customer require-

" Notes to Financial Statements". In 1986 we experienced ments and increased sales under the power coordination a 5.6% increase in kilowatt-hour sales, principally due to agreement, coupled with greater availability of low-cost warmer summer weather. Due to the seasonal rate generation from other utilities in the interchange market, design, the revenue effect of the October 1986 rate resulted in increased interchange purchases.

increase was minimal. Gas Operations - During the latter part of 1983, in muuuulLLINOIS POWER COMPANY 1986 ANNUAL REPORT 19

i response to changes in the gas industry, we began enter- The cost of gas purchased for resale, which reflects ing into agreements with some of our larger industrial volumes of gas delivered to customers, decreased M2.4 customers to transport gas through our pipeline distribu- million, $49.1 million, and $25.0 million in 1984,1985, and tion system. Under this type of arrangement, the cus- 1986, respectively. The average cost per therm delivered tomer purchases gas directly from a producer and con- to our customers decreased 2.1% in 1984,2.0% in 1985, tracts with us to transport the gas to the customer's and 12.6% in 1986, reflecting declining prices and advan-facility. for this transportation service our fees provide an tageous use of spot market purchases of gas.

operating margin comparable to that which would have Other Spenses and Taxes - A comparison of increases been earned from making direct gas sales. Gas operating in other expenses for the last three years is presented in statistics were affected in that revenues, therm sales, and the following table:

cost of sales to these customers showed declines in 1984 1986 1985 1984 and 1985.

(Thousands of poliars)

Effective October 31,1985, the Federal Energy Regula- oiber operanng expenses . 517.86s $15,159 5 3.231 tory Commission (FERC) issued an order which estab. staintenance . 7284 2.943 2.504 lished new rules for transportation of natural gas by $7jdll[,' l$s"o )$ $

interstate pipeline.s. One effect of the order was cancella-tion by pipeline companies of agreements with certain of The changes in other operating expenses reflect the our customers to transport gas owned by such custom. impact of mflation, increased employee wages and ers. As a result of this order, and because of decreased benefits, greater utilization in 1985 of professional gas costs for customers on our system, certain customers services relating to nuclear issues, and increased insur-resumed purchasing gas directly from us as reflected in ance costs in 1986. The increase in 1986 maintenance 1986 gas sales statistics. expenses primarily reflects power plant maintenance Gas revenues decreased 24.2% during the three-year requirements.

period 1984 through 1986, the components of which are for a detailed analysis of income tax components, see summarized as follows: Note 5 in " Notes to financial Statements" 19u, 19n 1984 Otherincome- Total AFUDC increased $32.6 million mtillions of pollars) in 1984, $43.0 million in 1985, and $57.2 million in 1986.

Rate increasc ider rease) . 5 - 5 0 46 5 - Increases in AruDC relate to changes in the amount of volume & other . 20 e 120) CWIP subject to AFUDC, which is not included in rate sYsIr c$r Is ' !4 i[ base. The ATUDC effective after-tax rate was 9.25%

throughout the three-year period.

R ewnue increase a decrease). . 5 on 5 469; 5 n,,

The amount of CWIP included in rate base related to in 1984 we filed with the ICC to reduce gas rates and Clinton, as approved by the ICC, was $625 million during thus promote both the retention of existing customers 1984,$733 million January through July 1985,$804 million and further industrial expansion within our sersice terri- August 1985 through September 1986, and $1.156 billion tory. In mid-December 1984 the ICC granted our request. October through December 1986.

which left residential rates essentially unchanged but interest Charges - Interest charges increased $30.6 resulted in lower rate < to industrial customers and million. $28.8 million, and $24.0 million in 1984,1985, and decreased annual gas revenues of approximately $14 mil- 1986, respectively. These increases primarily reflect the lion in 1985. $1.143 billion of long-term debt issued during the three-Therm sales (which exclude therms transported) de- year period at a weighted average interest rate of 9.1%.

creased 6.3% in 1984,17.9% in 1985, and increased 7.3% in During this period we retired $339 million of long-term 1986. The major factors affecting therm sales for the debt with a weighted as erage interest rate of 12.2%

three year period were changes in economic and weath- Earnings per Common Share - The changes in net er conditions, customer conservation, and gas transpor- income applicable to common stock in 1984 through tation arrangements as discussed above. Although therm 1986 resulted from the interaction of all the factors dis-sales decreased in 1984, the combination of therms sold cussed herein, including the issuance of additional pre-and transported represented an overall increase of 9.0% ferred stock in 1984, N85, and 1986. Changes in earnings in gas consumption by our customers, reflecting the per common share also reflect the increased number of effect of the severe winter of 1983-1984 and the eco- common shares outstanding in each year. See Notes 9, nomic recovery in our territory. In 1985 the combined 10, and 11 in " Notes to financial Statements" therms sold and transported decreased 3.6% reflecting inflation - Inflation, as measured by the Consumer the milder weather experienced during the heating sea- Price Index, incr eased 4.3%,3.6%, and 1.9% in 1984,1985, son. In 1986 the combination of therms sold and trans- and 1986. respectively. The primary effect of inflation on ported represented an increase in gas consumption of the Company is that historical plant costs are recovered 0.5% Therms of gas transported for customers were 188 in the Company's rates rather than current costs.

million in 1984, 297 million in 1985, and 253 million in 1986.

20

Balance Sheets December 31, 1986 1985 (Thousands of Dollars)

Utility Plant, at original cost Electric (includes construction work in progress of $3,679,959,000 and

$3,043,132,000, respectively) . $ 5,494,656 $ 4.819,361 Gas (includes (construction work in progress of $4,701,000 and $5,730,000, respectively) . 409,182 388.905 5,903,838 5,208.266 Less-Accumulated depreciation 944,853 883,933 4,958,985 4,324,333 Acquisition adjustment (less amortization of $3,154,000 and $2.908.000, respectively) 778 1,024 4,959,763 4,325,357 Investments and Other Assets. . 14,934 27,584 Current Assets Cash . 14,669 5,721 Temporary cash investments, at cost, which approximates market , , 115,193 43,201 Accounts receisable (less allowance for doubtful accounts of $6,000,000), 79,158 78,447 Materials and supplies, at average cost f uel , 32,276 37,193 Gas in underground storage . 21,253 30,916 Operating materials , 44,357 37,387 Prepayments, miscellaneous accounts receivable, and other . 14,847 22,759 Prepaid and refundable income taxes . . 60,471 60.634 387,224 316.258 Deferred Charges Unamort; zed deferred abandonment costs . 22,%0 29,345 Unamortized debt expense 43,354 16,483 Other . 3,531 3,608 69,845 49,436

$ 5,431,766 $ 4.718,635 CAPITAL AND LIABILITIES Capitalization Common stock-No par value,80,000,000 shares authorized:

65,608,876 and 62.800.583 shares outstanding, respectively, stated at $ 1,221,838 $ 1,150.622 Retained earnings 481,192 398,755 Less-Capital stock expense 11,152 10.091 Total common stock equity , 1,691,878 1,539,286 Preferred and preference stock 315,171 315,171 Redeemable preferred stock . 1 % ,000 86.000 Lo,g-term debt 2,080,326 1,836,919 Total capitalization. 4,283,375 3,777.376 Current liabilities Accounts payable. 122,829 146.060 Notes payable . 128,863 --

Long-term debt maturing within one year . 17,000 20,000 Disidends payable . 52,988 50,108 General taxes accrued. 35,676 35,226 Interest accrued . 64,270 61,950 Other . . 24,007 33,060 445,633 346,404 Other Accumulated deferred income taxes . 356,764 310,451 Accumulated deferred insestment tax credits , 345,994 284,404 702,758 594.855 Commitments and Contingencies (Notes 13,14, and 15)

$ 5,431,766 5 4.718,635 See note.s to financial statements which are an integralpart of these statements.

lLLINOIS POWER COMPANY 1986 ANNUAL REPORT 21

Statements of income For the Years Ended December 31, 1986 1985 1984 Operating Revenues. (Thousands of Dollars)

Electric . . . $ 814,144 $ 766,467 $ 810,312 Gas. . 369,721 400.897 470.225 Total .

1,183,865 1.167.364 1,280,537 Operating Expenses and Taxes Fuel for electric plants . 264,807 273.687 253,571 Power purchased for resale , 1.910 2,494 4,346 Power interchanged-net . (39,463) (51,469) 11,816 Gas purchased for resale. 239,214 264.221 313,365 Other operating expenses 133,275 115,410 100,251 Maintenance . 58,590 50,7 % 47,763 Depreciation . . , , 71,732 70.097 68,647 Amortization of abandoned plant costs. 6,380 2,556 -

General taxes. , 105,310 104.060 102,622 5 tate income tases-current 13,483 13,978 18,059 deferred (net) 4,879 3,822 3,730 Federal income taxes-current . . 24,728 25,% 1 82,1 %

deferred (net) . 29,972 22,617 20,120 Insestment tax credit-deferred (net) , 61,590 64.944 29.974 Total . .

976,407 963.084 1,056.460 Operating income . . 207,458 204,280 224.077 Other income Allowance for equity funds used during construction . 158,238 117,622 88,771 Miscellaneous-net . 64,679 48,367 38,289 Tc'al .. 222,917 165.989 127,060 income before interest charges. 430,375 370.269 351,137 Interest Charges interest on long-term debt . . 186,781 168,073 141,008 Other interest charges. . 11,786 6,540 4,854 Allowance for borrowed funds used during construction. (60,913) (44,343) (30,203)

Total . 137,654 130.270 115.659 Net income . 292,721 239,999 235,478 Preferred dividend requirements . 36,242 32,759 25,257 Net income applicable to common stock . . $ 256,479 $ 207,240 $ 210.221 Weighted average number of common shares outstanding during the period . , 64,502,690 59,618,728 52,314,853 Earnings per common share. $3.98 $3.48 $4.02 Cash dividends declared per common share . $2.64 $2.64 $2.64

• Includes revenue-related taxes added to customer billings in each of the years 1977 through 1986. In 1986,1985, and 1984 these revenue-related taxes were $58,997,000, $61,885,000, and $65,792.000, respectively.

Retained Earnings For the Years Ended December 31, 1986 1985 1984 (Thousands of D " <rs)

Balance at Beginning of Year . $ 398,755 $ 350,552 $ 280,814 Net income . 292.721 239,999 235.478 691,476 590,551 516.292 L ess-Cash dividends-Preferred stock . . 36,845 33,070 25,779 Common stock . 171,111 158,726 139,% 1 Reacquisition costs of preferred stock . 2.328 - -

210,284 191.7 % 165,740 Balance at End of Year. . $ 481,192 $ 398.755 $ 350.552 See notes to financial statements. which are an integralpart of these statements.

22

1983 1982 1981 1980 1979 1978 1977 (Thousands of Dollars)

$ 790,588 $ 685,544 5 620,968 $ 567,356 $ 479,052 $ 452207 $ 383,567 487,671 421.231 343 324 316.014 272,770 219.807 183.820 1,278,259 1,106.775 964,292 883 370 751,822 672,014 567,387 262,002 236,460 245,626 240,601 225,621 207,082 148,553 23,612 33,314 18,970 6,527 6,171 5,505 8,664 (24,946) (35,989) (55,684) (40,452) (58,498) (47,078) (30,855) 345,721 313,788 257,427 218,998 191 296 145,486 117,812 97,020 102,891 95,195 85.628 73.531 70,463 59,827 45,259 44,995 44.731 40,182 37,763 33,954 28,919 67,025 61,521 60,031 57,835 55,% 7 51,569 47,188 98.571 88,892 78,737 72389 55225 54,325 46,974 15.895 11,257 8,014 7,983 4,820 2,697 3,18E 6,728 2384 3239 3,169 2,090 1,846 980 76,012 50,909 32.215 27,210 14231 6,812 15,760 37,700 14,202 17,594 15,683 15,329 18,638 9,053 16.860 22.227 21.419 23.071 21,958 22.793 19.573 1,067,459 946.851 827,514 758.824 645.504 574,092 475.636 210,800 159,924 136,778 124,546 10631B 97,922 91.751 64217 57,841 45,101 36,567 27,520 21.321 15,137 25.812 21.498 16.651 14.798 10.043 9.402 5.709 90,029 79339 61,752 51365 37.563 30.723 20.846, 300,829 239,263 198,530 175.911 143.881 128.645 _ 112.597 1

110 260 93,599 82318 72,952 62,005 52,453 42,091

, 5,003 9.837 5,100 4.050 1,752 1,439 1,888 l (22.170) (20.568) (16310) (14.653) (11.211) (7.608) (5.046)

, 43.093 82.868 71.117 62349 52.546 46284 38.933 1

207,736 156,395 127,413 113,562 91,335 82.361 73.664 23,640 19.897 19.897 19,069 15.699 15.699 13.257

$ 184.096 5 136.498 $ 107,516 5 94,493 $ 75.636 $ 66.662 $ 60.407 48,473,770 44.839,807 37,843,513 32,906,017 27,979.606 24,302,139 22,521,013

$3.80 $3.04 $2.84 $2.87 $2.70 $2.74 $2.68

$2.52 $2.48 $2.405 $2.355 $2.28 $2.28 $2.22 Report of independent Accountants Price Waterhouse To the Board of Directors of Illinois Power Company suouis. Missouri g

We have examined the balance sheets of Illinois Power Company as of December 31,1986 and 1985, and the related statements of income, of retained earnings and of sources of funds provided for gross property additions for each of the three years in the period ended December 31,1986. Our examinations were made in accordance with generally accepted auditing standards and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

As more fully described in Note 14, the Financial Accounting Standards Board issued a statement which provides, among other things, that the costs of a plant disallowed by a regulator be recognized as a loss. The statement is ef fective for years beginning after December 15,1987.

In our opinion, the financial statements examined by us present fairly the financial position of Illinois Power Company at December 31,1986 and 1985, and the results of its operations and the sources of funds provided for gross property additions for each of the three years in the period ended December 31,1986,in conformity with generally accepted accounting principles consistently applied.

February 2,1987 ILLINOIS POWER COMPANY 1986 ANNUAL RFPORT 23

Statements of Sources of Funds Provided For Gross Property Additions For the Years Ended December 31, 1986 1985 1984 (Thousands of Dollars)

Funds Provided from Operations Net income $ 292,721 5 239,999 $ 235,478 Items not requiring working capital-Depreciation and amortization , 83,758 79.745 72,155 Deferred income taxes-net 46,313 25,932 33,313 Deferred insestment tax credit-net , 61,590 64,944 29,974 Allowance for funds used during construction , (219,151) (161,965) (118,974)

Total funds provided from operations , 265,231 248,655 251,946 Dividends on-Preferred stock . , (36,845) (33,070) (25,779)

Common stock . (171,111) (158,726) (139,961)

Net funds provided from operations . 57,275 56,859 86,206 Funds Obtained from External Sources Proceeds from sales of-Common stock , 71,216 155,753 130,870 Preferred stock . 110,000 50,000 50,000 Capital stock expense (1,061) (1,745) (1,203)

Proceeds from sales of long-term debt 575,000 358,930 209,000 Proceeds from sale of nuclear fuel , , ,

- 54,576 -

Pollution control construction funds held by trustee - 16,891 (16,891)

Proceeds from sale of ownership interests in the Clinton power station , - - -

Net increase (decrease) in notes payable , 128,863 (1,000) 1,000 Retirement of long-term debt . (333,870) (5,000) (100)

Total funds obtained from external sources . 550,148 628,405 372,676 Other Funds Provided (Used)

Net decrease (increase) in workir g capital * . (97,600) 13.832 3,828 Sale (purchase) of investment in long-term bank notes , 14,000 13,000 (21,560)

Miscellaneous-net , (32,901) (8,391) (6.769)

Total other funds provided (used) (116,501) 23,441 (24,501)

Total Funds from Above Sources. 490,922 708,705 434,381 Allowance for funds used during construction 219,151 161.965 118,974 Gross Property Additions , $ 710,073 $ 870,670 $ 553,355 Decrease (Increase) in Components of Working Capital

• Cash and temporary investments $ (80,940) $ (12,760) $ 20.283 Accounts receivable, (711) (6,536) 13,883 Materials and supplies . 2,610 21,193 (38,747)

Accounts payable , (23,231) 43,533 (24,387)

Disidendt payable 2,880 5,407 5,554 Accrued taxes , 450 (8.336) 12,406 Interest accrued , 2,320 8,883 13,131 O t her--net . (978) (37,552) 1,705

$ (97,600) $ 13,832 5 3,828

• Eniuding notes payable and long-term debt maturing within one year.

Grcss Property Additions and Retirements For the Years Ended December 31, 1986 1985 1984 (Thousands of Dollars)

Additions -flectric $ 685,343 $ 854,659 5 538,384 Cas , 24,730 16.011 14.971

$ 710,073 $ 870,670 $ 553,355 Retirements-Electric $ 10,048 $ 9,875 $ 6,358 Gas . 4,453 4,163 4,564 5 14,501 $ 14.038 $ 10,922 See notes to financial statements which are an integralpart of these statements.

24

1983 1982 1981 1980 1979 1978 1977 (Thousands of Dollars)

$ 207,736 $ 156,395 $ 127,413 $ 113.562 91,335 5 $ 82.361 $ 73.664 69,971 64,520 62.659 59,967 57.653 53,003 49,761 36,395 21,350 20.240 19.922 18,635 20,275 14.099 16.860 22,227 21,419 23,071 21,958 22,793 19,573 (86387) (78,409 n (61,411) (51,220) (38,731) (28,929) (20.183) 244.575 186.083 170,320 165,302 150,850 149,503 136,914 (23,990) (19,897) (19,897) (19.419) (15,699) (15,699) (13,590)

(123220) ,

(113.972) (92.814) (79.636) (64,615) (56252) 150.051) 97,365 52 214 57,609 66.247 70,536 77,552 73.273 65 293 132,785 93236 82,146 85,451 67,870 3,788 50,000 - -

36.000 - -

50,450 (1,611) (465) (427) (845) (368) (379) (275) 125,000 217,000 -

125.000 100.000 100,000 118.700 39,810 - - - -

2,999 (2.999) 33,926 42,855 (70,500) 70,500 (34,145) 24,145 10,000 -

(20.000) (20.000) -

110.000) (15.000) (15.000) -

218.682 258.820 203.119 198.156 194,228 199.416 212.519 (31.692) 43,325 23,565 414 (11,048) 7,345 (23,480)

(17,440) - - - - -

(11,061) (2,444) 3,811 (474) 1,371 (835) (814)

(42,753) 23,441 27,376 (60) (22,109) l (11.883) 6.531 273,294 334,475 288,104 264,343 252,881 283,499 263,683 86,387 78.409 61.411 51,220 38,731 28,929 20,183

$ 359 f>81 $ 412,884 $ 349.515 $ 315.563 291.612 283,866

$ $ 312.428 $

$ (39,462) $ (3.913) $ 3,371 $ (3,406) $ (5,146) $ 22.231 $ (534)

(10.986) (2,286) (8.656) 4,328 (11,673) (3,632)

(10.466) 13.026 4,707 2,200 1,707 (19,228) (24,868)

(14253) 21,419 19,389 21,092 (22,799) 27,781 10.884 9.832 4,985 4,215 4299 4,825 2,365 1,650 1,528 (17,d33) 12,257 1.612 12,148 (3,455) 178 (4.466) 444 10,745 31 7202 3286 3.711 692 (3,685) (1.789) (384) (3.591) (4.978) (6,590) (2.032)

$ (31,692) $ 43,325 $ 23.565 5 414 $ (11.048) $ 7.345 $ (23.480) 1983 1982 1981 1980 1979 1978 1977 (Thousands of Dollars)

$ 344,430 $ 3 % 233 $ 330,470 $ 297,157 270,806 272,462

$ $ 296.597 $

15,251 16,651 19.045 18.406 20.806 15.831 11.404 5 359.681 $ 412.884 $ 349,515 $ 315.563 $ 291.612 $ 312,428 $ 283,866

$ 8,765 $ 12.027 $ 7,420 $ 5,607 $ 5,748 6,247 5,040

$ 5 5.520 2.869 3,139 2.943 2.218 2280 1,746

$ 14.285 $ 14.8 % $ 10,559 $ 8.550 $ 7.%6 $ 8.527 5 6.786 lLLINOIS POWER COMPANY 1986 ANNUAL REPORT 25

ti n thereof. While cash is not realized currently from Notes To Financial Statements such allowance, n is reahzed under the ratemaking pro-Note 1-Summary of Si8.. nificant fess ver the service life of the related property through mcreased revenues resulting from a higher rate base and Account.ing Policies: higher depreciation expenses.

The Company is subject to regulations of the lilinois The rate used in computing AFUDC, which is an after-Commerce Commission (ICC) and the Federal Energy tax rate compounded semi-annually, was 9%% through-Regulatory Commission (FERC). Because of the ratemak- out 1986.1985, and 1984.

ing process, certain differences arise in the application cf in accordance with ICC rate orders, the Company generally accepted accounting principles between regm excluded $625 million of electric plant construction work lated and non-regulated businesses. Such differences in progress (CWIP) from the base on which AFUDC is concern mainly the time at which various items enter computed for the Clinton power station during 1984.

into the determination of net income in order to follow This level of CWIP was increased to $733 million effective the principle of matching costs and revenues. The Com- January 1,1985, and $804 million effective August 7,1985, pany's principal accounting policies are described below, pursuant to ICC orders, in accordance with the ICC Utifity Plant - The cost of additions to utility plant and order issued August 7,1985, the amount of CWIP in replacements for retired property units is capitalized. rate base was increased to $1.156 billion effective October Cost includes labor, material, and an allocation of general 4,1986 subsequent to receiving permission from the and administrative costs plus an allowance for funds used Nuclear Regulatory Commission (NRC) to commence during construction as described later in this note. Main- fuel loading. Since these orders authorized the inclusion tenance and repairs, including replacement of minor of such expenditures in the rate base upon which the items of property, are charged to ma,ntenance expense Company realized revenues, there was no material effect as incurred. When units of depreciable property are on net income.

retired, the original cost and dismantlirm charges, less Unamortized De/ erred Abandonment Cost - In salvage, are charged to accumulated depreciation. accordance with the ICC order on August 7,1985, the Depreciation - For financial statement purposes de- Company was authorized to amortize and recover preciation is provided over the estimated lives of the through rates $31.9 million of its investment in Clinton various classes of depreciable property by applying com- Unit 2 over a five-year period. No return was allowed on posite rates on a straight-line basis. Provisions for depre- the unamortized investment balance. Additional costs of ciation of electric utility plant in 1986,198.5, and 1984 $2.9 million were written off to Miscellaneous-net in the were equivalent to 3 4% of the average depreciable cost. third quarter of 1985.

Provisions for depreciation of gas utility plant, as a per- finamortized Debt Expense - Debt issuance costs are centage of the average depreciable cost, were equivalent amortized over the lives of the related issues. Costs to 4.0% in 1986,1985, and ' M4. related to refunded debt are amortized over the lives of Revenue and Energy Ca - The Company records the related new debt issues.

revenues as billed to its customers on a monthly cycle Income Taxes - The Company normalizes the income billing basis. At the end of each month there is an unde- tax effects of transactions giving rise to timing differences termined amount of unbilled electric and gas service between inclusion in financial statement and taxable which has been rendered from the latest date of each income. Provisions for deferred income taxes are com-cycle billing to the month end. puted based on the statutory income tax rates in effect The uniform electric fuel adjustment clause imple- during the period that the tirning differences originate, mented in 1982 and the uniform purchased gas adjust- Deferred income taxes are amortized to income as the ment clause implemented in 1983 provide that changes underlying timing differences reverse.

in allowable energy costs from the Company's filed tariffs Principal sources of timing differences giving rise to are passed on to customers. Accordingly, allowable deferred taxes are as follows:

energy costs that are to be passed on to customers in a e Use of the most liberahzed depreciable lives and subsequent billing period are deferred. methods allowed by the Internal Revenue Code, Allowance for funds Used During Construction - The e Capitalization of certain construction overheads, FERC Uniform System of Accounts defines allowance for dismantling, and other costs for book purposes that funds used during construction ( AFUDC) as the net costs are claimed as current deductions for income tax for the period of construction of borrowed funds used purposes, and for construction purposes and a reasonable rate on other e Revenues and energy costs recognized in different funds when so used. AFUDC is capitalized at a rate that is periods for financial statement purposes than for related to the approximate weighted average cost of cap- income tax purposes.

ital reduced by the income tax effect of the interest por- For income tax return purposes, net depreciable utility 26

]

l i

plant does not include the allowance for funds used dur- The Company has a $50 million revolving loan commit-ing construction that is capitalized, net of tax, for finan- ment through December 7,1987. No borrowings were cial statement purposes. .

made u'nder this agreement during 1986. The agreement in estment tax credits, which reduce federal income is on a fee basis of 3/16% for the unused line of credit taxes, base been deferred and are being amortized to and 5/16% on any portions of the line of credit that are income over the life of the property which gave rise to used, in addition the interest rate under this agreement ' ,

the investment tax credits. on funds borrowed is based upon the borrowing rate of I Federal and state income taxes are allocated between key banks in the London interbank market.

operating and non-operating income and expenses. The in November 1986 the Company obtained a $30 mil-tax effects relating to non-operating activities are in- lion, one-year revolving loan commitment through cluded in Other locome - Miscellaneous-net. November 17, 1987 No borrowings were made under this agreement during 1986. For the unused portion of the c mmitment, the Company pays a quarterly fee of Note 2-investments: 1/4% on the amount of available credit. The interest rate included in investments at December 31,1986 and on borrowings under this agreement is, at the Com-1985 are $7,000,000 and $21,000,000, respectively of float- pany's option, based upon the lending bank's reference

. ing Rate Bank Notes owned by IPF (Illinois Power rate, their Certificate of Deposit rate plus 1/2%, or the Finance) Company N.V. (IPf), the Company's wholly borrowing rate of key banks in the London interbank owned financing subsidiary. These floating rate notes market plus 1/2%.

earn interest at a rate which varies with the London in addition the Company has a credit agreement interbank, Euro-dollar, and Certificate of Deposit rates. entered into in 1985 which provides for a revolving loan IPF, organized under the laws of the Netherlands Antilles, agreement of $175 million with the provision for conver-was established for the purpose of borrowing funds out- sion to a three-year term loan. Fees for this agreement side of the United States (see " Note 6 - Long-Term are primarily based on 0.3% of the loan commitment.

Debt"). The accounts of IPF are consolidated in the !nterest rates on borrowings are, at the Company's financial statements, and all intercompany balances and option, based upon the banks' prime rate, their 90-day transactions have been eliminated. Certificate of Deposit rate, or the borrowing rare at key IP Gas Supply Company, a wholly owned subsidiary, banks in the London interbank market.There was a $100 was organized for the purpose of exploration to increase million revolving loan made under this agreement dur-available natural gas supplies through one of the Com- ing 1986 (see " Note 6 - Long-Term Debt").

pany's pipeline suppliers. In accordance with an order In 1984 the Company entered into a' $180 million, from the ICC, the accounts of the subsidiary are account- three-year revolving loan agreement that has a provision ed for as an investment under the equity accounting for conversion to a three-year term loan. There was a method. The Company's investment at December 31, $100 million revolving loan made under this agreement 1986 and 1985 was $1,871,000 and $1,620,000, respectively. during 1986 (see " Note 6 - Long-Term Debt"). For the The Company owns 20% of the capital stock of Electric unused portion of the commitment, the Company pays Energy, Inc., an Illinois corporation, which was organized an annual fee of1/4%, partially offset by a credit related to own and operate a steam electric generating station to average calances maintained at the banks.The interest and related transmission facilities r. car Joppa, Illinois. rate on borrowings under this agreement is, at the Com-  !

This generating station and facilities are used to supply pany's option, based upon the lending banks' prime rate, electric energy to the Department of Energy for its pro- their 90-day Certificate of Deposit rate, or the borrowing ject near Paducah., Kentucky. The Company's investment rate of key banks in the London interbank market.

is accounted for under the equity accounting method The Company also has lines of credit totaling approx-and was $1,764,000 and $1,750.000 at December 31,1986 imately $52 million with commercial banks for short-term and 1985, respectively. bank borrowings. Bank borrowings under such com-mitments have a maximum 360-day maturity from the Note 3-Short-Term Loans and time of issuance and carry an interest rate equivalent to the prime rate in effect at the time of issuance, adjusted Compensatm.g Bagances: to the prime rate in effect on the first day of each The Company had totallines of credit represented by cahndar quarter thereafter. Borrowings were made bank commitments amounting to $487 million of which under these agreements in February and March 1986 for

$235 million was unused at December 31,1986. These about $52 million. The borrowings had a weighted aver-bank commitments support the amount of commercial age interest rate of 8.5% during 1986 and were still out-paper outstanding at any time and are available to sup- standing at year end.

port other Company activities. Notes payable at December 31,1986 consisted of about

_ ,.. .. _ _ .._.._. - ......- -.. -.,m.m. --m. . .. n i u m a=" mWW 19% ANNUAL REPORT aummmmmma 27

1

$52 million of commercial bank borrowings as noted in January 1,1985, the Company will provide the Coopera-the above paragraph and about $77 million in commercial tives with 10.7 % (400 megawatts) of electrical capacity paper bearing interest at a weighted average rate of 6.0% from its fossil-fueled generating plants through 1992,8%

and maturing between January 15,1987 and January 29, in 1993 and 1994, and 4% in 1995 through 2004 and will i 1987. There were no outstanding notes payable at Decem- transmit energy for the Cooperatives through the Com-l ber 3 i,1985. At December 31,1984 notes payable con- pany's transmission and subtransmission system. This will sisted of $1 million in commercial paper, bearing interest be in addition to the capacity the Cooperatives will at a rate af 8.125% which matured January 7,1985. receive as part owners of the Clinton power station, The The maximum aggregate amount of short-term bor- Company will be compensated with capacity charges rowings at any month end during 1986,1985, and 1984 and for energy costs and variable operating expenses.

was $230.6 million, $60.0 million, and $45.0 million, respectively. The average daily short-term borrowings Note 5-income Taxes:

during these periods approximated $111.2 million, $14.3 million, and $13.1 million, respectively (calculated as an inc me taxes included m. the Statements of Income average of the daily borrowings outstanding), with a c nsist of the following components:

weighted average interest rate of 7.3% 8.4% and 11.1% gears inded respectively (calculated by dividing the interest expense December 31, during the period for such borrowings by the average 1986 1985 1984 short-term borrowings indicated above). (Thousands of Dollars) l Current taxes-l Induded in Operating l E spenses and Taxes . 5 38,211 $ 39.939 5 100.2ss l Note 4-Fac, lit.ies Agreements: Induded in Other income-l Misc ellaneous-net . (59,279) (46.147) (30.719) l Pursuant to agreements entered into in August 1976, Total current taxes . (21.068) (6.208) 69.536 Soyland Power Cooperative, Inc. and Western Illinois Deferred taes-Power Cooperative, Inc. were to have a 10.5% and a 9.5"6 Book-ias depreciaison interest, respectively,in the Clinton power station. Under d'H" enc e" net . 12,M 9,096 8.149 revised agreements entered into in October 1984, the ,,Ni$,fgS#fj

, other co.,v, Cooperatives' investment is limited to $450 million (the capitalaed-net . . . . 26.479 16.618 20.413 Cooperatives base paid their portion of construction Book 4d' revenue and expenditures as incurred and the limit was reached in ["C,[,'s' "'"*""'"" (835) 2,006 (6,596 carly 1985) of the direct costs of placing the plant in chnian onit 2 commercial operation. The agreement provides for the abandonment . (3,169) n.283, 1.884 recalculation of ownership shares based upon the rela- lo'dl defe"ed taxes. 34,851 26.439 23.as0 tise investments of the parties in the total of such direct Defe"ed inves' men' 'd5 c a-net . 61,m e4 2w4 costs. As a result of this agreement,it is expected that this 5 7sa73 5 esa7s 5 123a60 i

limit will reduce the ownership share of the Coopera-l tives to about 13.5% based upon the current estimated cost of the Clinton power station. See " Note 15 - Legal Income taxes are less than the amount which would Proceedings" for information relating to a lawsuit filed be computed by applying the statutory federal and state September 22,1986 against the Company. income tax rates to pre-tax income; the principal differ-Each party is responsible for its portion of financing ences are as follows:

and construction expenditures. The Company's invest-ment in the Clinton power station including AFUDC, o , ',"m\"c r"31, land, and nuclear fuel at December 31,1986,1985, and 1986 1985 1984 1984 was $3.7 billion, $3.1 billion, and $2.3 billion, respec' (Thousands of collars) tively. The agreements include the provisions that the computed tax expense at Company has control over construction and operation of statutory federal and state

'" 5 182 m 5 16 m o 5 m.223 the generating statiori, the parties will share electricity ge 7,$n','[n'c'[feq in generated in proportion to their interests, and the Com- mcome taxes resulting l pany will have certain obligations to provide replace- Iro""

l . Allowan< c for funds used l ment power to the Cooperatives when the unit .is out during construction. 108,383 80.101 s9,090 of Service. Other-net . (1,711) (4.4s8) (4.227)

In a related agreement the Cooperatives and the Totat income taxes. 5 7sJ73 5 8s.17s 5 123,360 Company signed a Power Coordination Agreement in combined federal ano state October 1984. Under the agreement which was effective effective intome tax rate . . , 20.5 % 262L 34 n l

l 28 l

Note 6-Long-Term Debt:

Long-term debt was represented by: December 31, 1986 1985 (Thousands of Dollars)

First mortgage bonds-3%% series due 1986. . . . . . . . . .. .. . .. .. .. . ... . . . $ -

$ 20,000 11%% series due 1987. ... .. .. . ... . . . ... ..... .. . -

75.000 4% series due 1988 . . . . .. .... . ... . .. ... .. ......... ... 25,000 25,000 14%% series due 1990. ... ..... .. .. . . ... . ...... ....... . 9,653 75,000 4%% series due 1993. . . . . . . . . . . . . . . . . .. ...... . . 35,000 35,000 5.85% series due 1996. . . ... ..... . .. .... . .. ... ... ..... 40,000 40,000 64% series due 1998, . .. . .. . . .. . . .. . . .... .. 25,000 2 %000 6%% series due 1998. . . ... . .. . . .. . . .. .. . . ... 45,000 45,000 8.35% series due 1999. . . . .. ... .. ... .. . .. .. 35,000 35.000 9% series due 2000 ..... . .. . . ... ........ ... ... 35,000 35,000 7.60% series due 2001. . . . . .. . .... .. . . . . . . . . .. 35,000 35,000 7%% series due 2003. . . . . . ... .... .. . .. . ... 60,000 60,000 6.60% series due 2004 (Pollution Control Series A) .. . .. . ........ 8,050 8.400 9%% series due 2004. , . . .. . . . . . .. .. . . 90,000 95,000 10H% series due 2004. . ..... .... .. . , .... . . , . 50,000 50.000 8%% series due 2006. . . , .. . .. ... .. .. 100,000 100.000 6% series due 2007 (Pollution Control Series B) . . ... . .. .. 18,700 18.700 8%% series due 2007. . . . . ... .. .. .. . . . . .. .. 100,000 100,000 8%% series due 2008. . . . . . . . . . . . . . . . .... . . .. 100,000 100,000 12%% series due 2010. . . .. . .. . .. .... . .. .. .

- 50,000 12% series due 2012 . , . . .... .. ...... . .. ... . .... . 6,827 75,000 10%% series due 2013 (Pollution Control Series C) . . . .... . 125,000 125,000 11%% series due 2014 (Pollution Control 5enes D) . . . . .. . .. .. 75,000 75.000 10%% series due 2015 (Pollution Control 5eries E). . ... ... ... 150,000 150,000 10%% series due 2016. . . . . ...... ... .. . .. . 125,000 -

.% series due 2016. . . . . . .... . .. .. .. .... ... .. 75,000 -

9WX, series due 2016. ... . . .... . . . . . . . .. . . 125,000 -

Total first mortgage bonds . .. . . .. . .... ... 1,493,230 1,452,100 14h% debentures due 1989* . . . . . ... . .. . . ...... -

50.000 12%% debentures due 1992* . . ... ... . ...... .. .. . 100,000 100,000 Long-term bank notes due 19873 .. .. . . . . .... .... .. .. .. 17,000 17,000 Long-term bank notes due 1992 * . . . . ... . . . .... . .. .. 34,000 34,000 Revolving Ican agreements + . . . ...... ... . . ... .... , ....... 200,000 200,000 10.75% loan agreement due 1992 . . .. ... . .. ... . 8,930 8,930 8%% debt securities due 1994 . . .. .. . .. .. . . . . 100,000 -

Variable rate long-term debt due 20164 ... . . . .... ... ... . 150,000 -

Total long-term debt . ..... . . . . ...... . 2,103,160 1,862,030 Unamortized premium and discount on debt .. ... .. ... . . .. . (10,097) (7,073)

Long-term debt maturing within one year . .. ... .. . .. .... . (17,000) (20.000) 2,076,063 1,834,957 Obligation under capital lease-noncurrent . .. . .. . . ... ... 4,263 1.962

$ 2,080.326 $ 1.836.919 m The dehentures. issued by IPF are guaranteed as to payment of pancipal and interest by the Company.

minterest rate is adjusted semiannually and was 6.4375", at December 31,1986.

minterest rates are adjusted semiannually and ra".ged from 6.375% to 6.875% at Det ember 31.1986. '

to Repayment of the first $100.000,000 loan is required to commente lanuary 31.1989 with ten subsequent quarterly payrnents. Repayment of the j second $100.000.000 luar, is required to commence December 10.1988 with eleven subsequent quarterly payments. Ilowever, both of the loans 1 are subject to extension options and may also be repaid in advance at the Company % option.1he interest rate is currently based on Reference i Bank Certthcare of Deposot Rate plus 0.5% and at December 31,1986 was 6.69't, and 6 62. , respectively. l mlnterest rate is adjustable daily This debt was issued on December 31. 1986 and had an intere,t rate of 4.5"L This debt will be replaced on February 10.1987 with 7W. first Mortgage Bonds (Pollution ControI5enes I, G. and in due 2016 totaling $150,000,000.

t ILLINOIS POWER COMPANY 1986 ANNUAL REPORTemme-a 29

)

Note 6-Long-Term Debt: (continued)

The long-term debt maturing during the next five Certain other supplemental indentures require that years aggregates $17,000,000 in 1987, $33,350,000 in 1988, the Company deposit annually in cash, as a sinking and

$69,700,000 in 1989, $79,350,000 in 1990, and $52,300,000 property fund, amounts not to exceed $4,850,000 in 1987, in 1991. $5,600,000 in 1988, $6,600,000 in' 1989 and 1990, and Certain supplemental indentures to the Mortgage $7,100,000 in 1991, which amounts are subject to reduc-and Deed of Trust require that the Company make tion in accordance with certain terms of the mortgage.

annual deposits in cash as a sinking fund. For the 9%% Historically, these requirements have been met by pledg-series due 2004, the Company will deposit $5,000,000 in ing property additions.

cash annually, beginning in 1985, as a sinking fund, For The above bonds are secured by a first mortgage lien the 6.60% series due 2004 (Pollution Control Series A), on substantially all of the fixed property, franchises, and beginning in 1986, the Companfwill deposit annually in rights of the Company with certain minot exceptions cash as a sinking fund, $100,000, increasing $25,000 in expressly provided in the mortgage securing the bonds.

1987 and every two years following; this requirement The remaining balance of net bondable additions at has been satisfied through 1988. These amounts are not December 31,1986 was approximately $2,085,000,000.

subject to reduction.

l Note 7-Segments of Business:

The Company is a public utility engaged in the generation, transmission, distribution, and sale of electric energy

and the distribution and sale of natural gas.

1986 1985 1984 l

Total Total Total Electric Gas Company flectric Gas Company flectric Gas Company (Thousands of Dollars) (Thousands of Dollars) (Thousands of Dollars)

Operation information-Operating revenues .. ,$ 814,144 $ 369,721 $ 1,183,865 $ 766.467 $ 400,897 5 1.167,364 $ 810312 $ 470,225 $ 1280.537 Operating expenses, excludmg provision for income taxes . ., 518,559 323,1 % 841,755 486,951 344.811 831 762 507.854 394.527 902381 Pre-tas operating income . 295,585 46,525 342,110 279,516 56,086 335.602 302,458 75,698 378,156 Allowance for funds used during construc-tion ( AIUDC) . 218,977 174 219,151 161,819 146 161 S65 118.897 77 118.974 Pre-tax operating income, including AFUDC . .5 514,562 $ 46,699 56I,261 $ 441335 $ 56232 497,567 5 421355 $ 75.775 497,130 Other (income) and deductions . (64,679) (48 367) (38289)

Interest charges . 198,567 174.613 145.862 Provision for income taxes. 134,652 131 322 154.079 Net income $ 292,721 $ 239.999 $ 235.478 Other information-Depreciation .$ 56.507 $ 15,225 $ 71,732 $ 55329 $ 14768 $ 70D97 $ 54.175 $ 14.472 $ 68,647 Capital expenditures .$ 685.343 $ 24,730 $ 710,073 $ 854.659 $ 16.011 $ 870f>70 $ 538384 5 14.971 $ 553 355 investment information-Identifiable assets' .$ 4J61,418 $ 300,144 $ 5,061,562 $ 4,136149 $ 313,847 $ 4 450,596 $ 3 A64.806 $ 296.893 $ 3761.699 Nonutility plant and l

other investments . 14,934 27,584 45.471 Assets utilized for overall Company operations. . 355,270 240.455 157345 Total assets . $ 5.431J66 $ 4718.635 $ 3364.515

• Utahty plant, nuclear fuel and acquhition adjustment (less accumulated depreciation and amortization), materiah and supploes. unamortized deferred abandonment con, prepaid gas, deferred energy costs, and depout with pollution control authorities 30

l l

1

)

Note 8-Pension and Other Post- )

Employment Benefit Costs:

The Company has pension plans covering all officers The assumed rate of return used in determining actu-and employees. Pension costs, which are funded as arial present value was 9% for 1986 and 1985.

accrued, include current service costs plus unfunded in addition the Company provides certain health care prior service costs that are being amortized over a period and life insurance benefits for substantially all active and of about 25 years. The cost of the pension plans was retired employees. These benefits are provided through

$3,136,000, $2,059,000, and $1,613,000 during 1986,1985, an insurance company and premiums are based on and 1984, respectively, actual claims experience. The Company recognizes the Following is a comparison of accumulated plan bene- cost of these benefits as premiums are paid. Costs for fits and plan net assets as of January 1, the most iecent 1986,1985, and 1984, net of contributions by both active date for which the data are available: and retired employees, were $8,341,000, $7,788,000, and

$6.821,000, respectively. The cost of providing those benefits for about 975 retirees is not separable from the (Thousands of p la s)

Actuarial present value of accumulated cost of providing benefits for about 4,490 act_ve i plan benefits ~ employees.

Vested . . . . . . $ 99,1 % $ 88,383 Non-vested . 10,946 9.498

$ 110,142 $ 97B81 Net assets asailable for benefits . . $ 213,Rs0 $ 176.255 Note 9-Common Stock and Retained Earnings:

The Company has an Automatic Reinvestment and federal and state governments. Under the provisions of Stock I'urchase Plan and an Employees 5tock Ownership the Plan, the Company provides a matching contribu-Plan (ESOP) for which at December 31,1986,2,543,884 tion to the Plan Trust in an amount equal to 25% (up to a and 29,149 shares, respectively, of common stock were maximum of $20 per month) of the participant's monthly designated for issuance. contribution to the Plan. Further,if the Company's rate The Company also has a Tax Reduction Act Stock of return on common equity for the calendar year is in Ownership Plan (TR ASC,?) pursuant to federal income the top 25% of a selected group of utilities, the Com-tax laws, under which Company contributions of com- pany will make an additional contribution equal to its mon stock are based on a percentage of payroll costs; initial contribution for such year. The Company's match-at December 31, 1986, 415,990 shares were designated ing contribution is used to purchase common stock.

for issuance. Under this Plan,17,101 shares of common stock were The Company adopted an incentive Savings Plan designated for issuance at December 31,1986.

[ Plan) effective June 1,1984 for salaried employees. The Changes in common stock during 1986,1985, and 1984 Plan allows eligible employees to contribute a portion of were as follows:

lheir salaries to the Plan before the money is taxed by 1986 1985 1984 shares Amour.t* Shares Amount

• Shares Amount

• Balance beginning of year . . ... 62.800,583 $ 1,150,622 56,381,448 $ 994 B69 49,922.166 $ 863,999 Public offerings . . - - 3,000,000 78.480 3,000.000 65,550 Automatic Reinvestment and Stock Purchase Plan. 2,573,622 64,854 3,160,678 71,136 3.176,044 59,756 L50P . . . . . . , , 28,675 759 32410 757 39361 761 TRA50P. . 194,218 5,279 210.243 5.012 237,960 4.686 Incentive Savings Plan. 11.778 324 15.404 368~ 5.717 117 alance end of year. . . . 65.608,876 $ 1.221,838 62.800 583 $ 1.150.622 56.381.448 $ 994.869 Thousands of dollars None of the Company's retained earnings at December 31,1986 was restricted with respect to the decoration or oayment of dividends.

ILLINOIS POWER COMPANY 1986 ANNUAL REPORT 31 L__ _

1 l

Note 10-Preferred and Preference Stock:

The following tabulation shows preferred and preference stock, issued and outstanding at December 31,1986,1985, and1984, and the redemption prices (exclusive of accrued dividends) applicable to each series.

Serial preferred stock, cumulative, $50 par value*-

Authorized and outstanding 5,000,000 shares (including 720,000 shares of redeemable preferred stock-see Note 11):

1986 1985 1984 l Series Shares Redemption Prices (Thousands of Dollars) 4.08 % 300.000 $51.50 . .. . .. . . . . . ... .. $ 15,000 $ 15,000 $ 15.000 4.26 % 150.000 51.50 . . . . .. .. . ... . .... . . 7,500 7,500 7,500 4.70 % 200,000 51.50 . . . ,,.. . . . . . . . . . 10,000 10,000 10.000 4.42% 150.000 51.50 . . .. .. .. .. , , .. . .. . . 7,500 7,500 7,500 1 4.20 % 180,000 52.00 . . . ... . . . .. . .. . . 9,000 9.000 9,000 8.24 % 600.000 51.90 . . . . 30,000 30.000 30,000 l . .. .. .. . .

7.56 % 700,000 j 52.63 prior to July 1,1987 I 51.685 thereafter I.

I

. 35,000 35,000 35.000 52.90 prior to March 1,1991 8.94 % 1,000,000 )t 51.60 thereafter I..

i

. 50,000 50.000 50,000 54.29 prior to August 1,1987 8.00 % 1.000.000 53.29 thereafter and prior to August 1,1992 ., 50,000 50.000 50.000 j 52.29 thereafter Premium on preferred stock . . . ,. .... . . .. .. 1,171 1,171 1,171 Serial preferred stock, cumulathe, without par value-Authorized 5.000.000 shares; 4.600.000 shares outstanding (including 2,600,000 shares of rtdeemable preferred stock-see Note 11)

Series Shares Redemption Prices

( $51.50 after february 1,1988 and 1 A" 1.000.000 ; prior to February 1,1993 h. . 50,000 50,000 50.000 1 50.00 thereafter h

51.50 after May 1,1990 and B"* 1,000.000 prior to May 1,1995 . 50,000 50.000 -

50.00 thereafter Total preferred stock . .. . .. .... .... .. 315,171 315,171 265,171 Preference stock, cumulative, without par value-Authorized 5,000,000 shares; none outstanding. . . .. .

Total preferred and preference stock . . .. .. ... $ 315,171 $ 315.171 $ 265,171

• Redeemable at the option of the Company in whole or it' part at any tirne upon not less than thirty days and not more than sixty days notice by pubhcation,

" Adjustable Rate Series A issued on March 3.1983. Quarterly diudend rates are determined based on market interest rates of certain U.S. Treasury securities. See "Two-Year Dividends and Stock Pnces by Quarters" on page 37 for the 'l986 quarterly dividend rates. The dividend rate for any dividend period will not be less than 6% per annum not greater than 12% per annum apphed to the bquidation preference value of $50 per share.

• " Adjustable Rate Series B issued on May 15,1985. Quarterly thvidend rates are determined based on market mterest rates of certain U.S. Treasury secunties. See "Two-Year Dividends and 5tock Prices by Quarters" on page 37 for the 1986 quarterly dividend rates. The dividend rate for any dividend period will not be less than 7"6 per annum nor greater than 14%% per annum applied to the liquidation preference value of $50 per share.

Note 11-Redeemable Preferred Stock:

On December 29,1986 notice was given to the Com- The Company's 11.75% serial preferred stock (cumul >

pany's 11.66% serial preferred stockholders calling all a-tive, without par value, liquidation preference $50;l outstanding shares (cumulative, par value $50; 720,000 1,000'000 shares issued and outstanding) issued in 1984, is shares issued and outstanding) for redemption on Feb- subject to mandatory redemption in an amount sufficient ruary 1,1987 at $52.50 per share. The call premium of to retire on each November 1, beginning in 1990,200,000i

$2.50 per share and expenses related to the redemption shares at $50 per share plus accrued dividends. Beginning j were charged to retained earnings during 1986. The November 1,1990 the Company may redeem up to regular quarterly dividend of $1.4575 per share will be 200,000 additional shares each year at 550 per share.

paid on february 1,1987 to stockholders of record on The Company's 8.52% serial preferred stock J anuary 9,1987. (cumulative, without par value, liquidation preference, i

1 s

32

$50; 1,000,000 shares issued and outstanding) issued ulative, without par value, liquidation preference $100; February 27,1986, is subject to mandatory redemption 600,000 shares i3 sued and outstanding) issued December in an amount sufficient to retire on each February 1, 29, 1986, is subject to mandatory redemption in an beginning in 1992, 200.000 shares at $50 per share plus amount sufficient to retire on each February 1, begin-accrued dividends. Beginning February 1,1992 the ning in 1993, 120,000 shares at $100 per share plus Company may redeem up to 200,000 additional shares accrued dividends. Beginning February 1,1993 the each year at $50 per share. Company may redeem up to 120,000 additional shares The Company's 8.00% serial preferred stock (cum- each year at $100 per share.

Note 12-Quarterly Financial Information (Unaudited):

first Quarter $ccond Quarter Third Quarter Fourth Quarter 1986 1985 1986 1985 1986 1985 1986 1985 (Thousands of Dollars hcept Earnings Per Common Share)

Operating revenues. $ 355,900 $ 370.372 5 245,259 $ 242,155 $ 303,818 $ 281258 $ 278,888 $ 273,579 Operating income 50,747 53.588 41,829 41.092 67,456 62.494 47,426 47,106 Net income 69,850 59.977 62,3 % 48,249 92,416 71.167 68,059 60.606 Net inc ome applicable to common stoc k 61,110 52.456 53,203 40.090 83,283 62.595 58,883 52.099 f arnings per common share. $ 96 $ .92 5 .83 $ .69 $1.28 $1.02 5 .90 $ .83 Quarterly earnings per common share are based on weighted average number of shares outstanding during the quarter and the sum of the quarters may not equal annual carnings per common share.

Note 13-Nuclear Fuel Lease:

Illinois Power f uel Company (Fuel Company), which is exceed the funds available to the Fuel Company. The 50% owned by the Company, was formed in January 1981 Company's investment of $50,000 is accounted for under for the purpose of financing a portion of the nuclear fuel the equity method, and the lease is accounted for as an requirements of the Clinton power station. The Com- operating lease in accordance with an ICC order. Had pany entered into a lease agreement with the f uel Com- the Company accounted for the nuclear fuel lease as a pany under which the Company will lease nuclear fuel. capital lease, both total assets and liabilities would have Lease payments, which will be equal to the fuel Com- been increased by approximately $191 million (of which pany's cost of fuel as consumed, will begin when the $30.3 million would be a current liability) and $176 mil-Clinton power station commences pre-commercial lion at December 31,1986 and 1985, respectively.

operation. The Company is obligated to make subordi- In accordance with Financial Accounting Standard nated loans to the f uel Company at any time the obliga. No. 71, such leases will be capitalized on a retroactive tions of the Fuel Company, which are due and payable, basis in 1987.

l Note 14-Commitments and Contingencies:

The 1987 construction budget is $260 million. This the cost of constructing a nuclear generating unit; and includes $155 million for the Clinton power station; $86 difficulty in obtaining rate increases to recover the total million for other electric facilities; and $19 million for gas cost of completed projects.

facilities. The five-year construction program for 1987 The Company expects to complete, obtain the required l through 1991 is estimated to be $1.0 billion, including operating license for, place in commercial operation,

' $0.1 billion for nuclear fuel. and be permitted to earn an adequate return on the Clinton power station; however, if any unforeseen or The construction of a nuclear generating unit (see unexpected developments should occur which would

" Note 4 - Facilities Agreements") exposes the Company prevent the Company from doing so, the Company to significant risks, including increased and changing could be materially adversely affeded.

regulatory, safety, and environmental requirements Costs - The Company currently estimates that its por-which affect engineering and design requirements; diffi- tion of the cost of the Clinton power station will be $3.8 cuhy in obtaining the necessary permits and licenses for billion including the capitalization of AFUDC in accor-commercial operation: increased costs of capital and dance with current generally accepted accounting prin-lengthy construction periods, all of which contribute to ciples. This estimate assumes a commercial operation lLLINOIS POWIR COMPANY 1986 ANNUAL REPORT 33

l date in April or May 1987 based upon meeting operat- ship share, the Company estimates that its portion of ing criteria consistent with that used previously by the- these costs is between $250 and $395 million.

ICC in establishing commercial operation dates for in early 1985 three nationally known firms, Theodore nuclear generating units. At December 31,1986 the Barry & Associates, Ebasco Services incorporated, and ,

Company's share of the cost of the Clinton power sta- Burns and Roe Company,were retained on behalf of the l tion was $3.64 billion. Company to evaluate management of the Clinton power 1 Decommissioning, Depreciation, and Nuclear fuel station project through independent audits. The inde-Disposal Costs - The Company will be responsible for pendent audits are separate from the one being con ,

the costs of decommissioning its ownership share of the ducted by the two firms hired by the ICC and show that i Clinton power station and for spent nuclear fuel disposal construction of the Clinton power station has beeni costs. While these costs will be material, the Company geneully reasonably managed by the Company. The:

expects to recover these amounts through its rates. The conclusions of these audit reports and the Touche Ross/ !

Company has filed a petition with the ICC to establish a Nielsen-Wurster interim audit report generally agree but :

rate of depreciation for the Clinton power station based differ on one point. Touche Ross/ Nielsen-Wurster con-upon a 40-year operating license, and to obtain approval tend that a portion of II e cost of the Clinton power ,

to recover future decommissioning costs (estimated to station associated with the stop work actions issued in be $105.3 million in 1986 dollars), early 1982 was unreasonable. During 1986 and into 1987,,

Regulatory Matters - The NRC on September 29,1986 the ICC conducted hearings on Phase i of the audit and ;

issued an operating license for the Clinton power station has not yet reached a decision.

to load fuel and conduct low-power testing at levels up A Phase ll audit report, which will cover the period to 5% power. Fuel loading was completed on October commencing Aprill,1985 through the date of commer-21, 1986, and surveillance testing is in progress. The cial operation, could allege additional unreasonable; Company, upon completion of the low-power testing, costs. As in Phase I, independent audits to evaluate man-l will request the NRC to remove the low-power restric- agement of the Clinton power station during this period!

tion and permit full-power operation. will be performed on behalf of the Company, in February 1984 the ICC initiated a proceeding to, The Company believes that it has satisfactorily man-among other things, review issues of economic reason- aged the Clinton power station project and that cost dis-ableness of the Clinton power station and proposals for allowances are not appropriate. It believes it has shown moderating the initial rate increase (phase-in) that would in hearings before the ICC that the events surrounding be associated with placing the station in service. As a part the stop work orders support Burns and Roe's finding-of this proceeding, and as required by law, an audit is that there was no evidence of decisions or actions on the being conducted by Touche Ross & Co. and the . Nielsen- part of the Company which should be characterized as Wurster Group under contract with the ICC. The scope unreasonable.

of the audit encompasses an evaluation of the reason- On August 7,1985 the ICC issued an interim order in ableness of the costs of the Clinton power station and a the February 1984 proceeding which directed the Com-l recommendation as to the proper rate treatment pany to proceed with its plan to complete the construc-l thereof. Under Illinois law, the cost of a new electric tion of the Clinton power station. It also ordered that generating plant is not includible in a utility's rate base there shall be a construction cost cap for rate-making unless it is reasonable. purposes of $2,698,361,000 on the Company's share of; A Phase I audit report filed on January 9,1986 covered the costs of the Clinton power station, with a strong preH a time frame from the beginning of the project through sumption that any amount expended above the cap has March 31,1985. In this audit report Touche Ross/ Nielsen- been imprudently incurred. The Company appealed the Wurster contend that a portion of the Clinton power portion of the lCC's interim order imposing the cost cap station cost associated with stop work orders issued in in the Circuit Court of Jefferson County on the grounds early 1982 is unreasonable. The report estimates that that it was not supported by the evidence in the proceedJ these costs are at least $294 million and no more than ing and was not in conformance with Illinois law. On

$463.6 million. The major component of these costs is January 20, 1987 the Circuit Court entered an Agreed attributed to a 12- to 18-month delay associated with the Order, pursuant to a stipulation between the Company; 1982 stop work orders. Based on its anticipated owner- and the ICC under which the Circuit Court's Order of 34 t ______

August 28,1986 is vacated and the case is remanded to recovery of its insestment in the Clinton power station.

the ICC for the purpose of amending its August 7,1985 Should it ultimately be determined that a portion of the order in accordance with the provisions of the stipula- Clinton power station construction cost is not allowed in tion which requires inclusion, among other things, of the the rate base, the Company would not be entitled to following language: "In setting the cap, the Commission reflect the disallowed portion in its electric rates. Under is not at this time making any determinations as to the current generally accepted accounting principles reasonableness of any of the costs incurred in the con- (GAAP), a disallowance would not in itself require an struction of Clinton. The purpose of the cap is to set a immediate charge to income but would be reflected as a limit on costs above which the Company will be required reduction in the Company's earnings over the life of the to present affirmative evidence of reasonableness as part plant. However, as discussed under " Accounting Devel-of its burden of proof. Such affirmative evidence of opments" below, current GAAP will be modified with reasonableness should consist of evidence of the reason- respect to this issue.

abieness of the utility's decisions, construction and super- Accounting Developments - In December 1986 the vision of construction underlying costs expended above FASB issued " Statement of Financial Accounting Stan-the cap, as provided in Section 30.1 of the Public Utilities dards No. 90, Regulated Enterprises - Accounting for Act Any of the costs expended above the cap for Abandonments and Disallowances of Plant Costs, an which the Company fails to present affdmative evidence amendment of FASB Statement No.71"(F AS 90) which is of reasonableness shall not be included in rate base, applicable to future and past partial disallowances of even if no other party has presented any evidence chal- plant costs and plant abandonments. The statement is lenging these costs as being unreasonable." effective for fiscal years beginning after December 15, in March 1986 the ICC issued an order authorizing the 1987 or, in certain circumstances for years beginning Company to record and defer certain " post-construc- af ter December 15,1988. Upon adoption of the standard, tion" operating costs associated with the Clinton power prior years financial statements may be restated or the j station, including certain financing costs. The order pro- cumulative effect of the change in accounting may be l vides that such costs be deferred from the Clinton in- recorded in the year of adoption.This statement requires service date to the date on which new electric rates that a partial disallowance of plant costs by a regulatory reflecting the inclusion of the Clinton power station commission be recorded as a loss when such a disallow-become effective. While this procedure would prevent a ance becomes probable and a reasonable estimate can j substantial reduction in reported earnings between the be made. The statement also requires the cost of an in-service date and the effective date of new rates, cash abandoned plant, which pursuant to a regulatory com- )

flow would be delayed until such post-construction costs mission order is being amortized over a period of years, are reflected in rates. to be recorded on a discounted basis if a return on the The Company plans to phase in elettric rates in order unamortized balance has not been allowed. In addition, i to moderate the impact of costs related to the Clinton once adopted, the statement requires that AFUDC be i power station on customers' bills. Certain costs will be capitalized only if its subsequent inclusion in allowable I deferred and cash flow reduced during the initial years costs for ratemaking purposes is probable.

of the plan and will be recovered through rates in subse. The Company has not adopted the provisions of F AS quent years. The specific plan is not known at this time; 90. If the new standard had been adopted the Company howeser, such deferrals could be substantial. The finan- believes that no provision for a disallowance would have cial Accounting Standards Board (F ASB)is currently con- been required in 1986 or prior financial statements. The sidering the accounting for phase-in plans. amount of loss due to the discounting of the Clinton Although the Company believes it has acted prudently Unit 2 abandonment costs would have been immaterial. ,

in the construction of the Clinton power station, the ICC Where a prudency investigation is in process and a disal-  ;

may ultimately disallow a return on/or recovery of a por- lowance of cost is reasonably possible, the adoption of tion of the cost of the unit. Other utilities in similar situa- F AS 90 would require that capitalization of AFUDC be j tions have negotiated settlements with respect to the discontinued on the maximum amount within the range extent and timing of the inclusion of the cost associated of possible disallowance of costs.

with new generating plants in their rate structure. The Company is considering all alternatives to obtain timely l

,,e 4m -o-.% + ILUNOIS POWtR COMPANY 1986 ANNU AL REPORT saa-m l

35

l On the basis of current generally accepted accounting Note 15-Legal Proceedings:

principles, the Company believes that it is probable, although no absolute assurance can be given, that the On September 22,1986 members of 22 lilinois rural ultimate resolution of the above matters will not have a electric power cooperatives filed a lawsuit against the material adverse effect on its financial position or earn. Company concerning the Company's construction man-ings. However, under the amendnunts to GAAP which agement of the Clinton power station. The action pur-will become effective in the futurd, the Company will ports to be brought derivatively on behalf of the member have a charge to earnings if there is a disallowance. cooperatives of WIPCO and Soyland, and as a class While such charge to earnings could be materialin rela. action on behalf of the individual members of the coop- 1 tion to earnings and/or financial position, management eratives. Plaintiffs allege that the Company induced believes that it, in and of itself, would not materially WIPCO and Soyland to enter into an ownership partici-adversely affect the Company's ability to meet its finan- Pation agreement with the Company by falsely repre-cial obligations. senting that the Clinton power station would supply 3 Insurance- The Company has insurance for physical inexpensive electrical power. The suit also alleges that damage, including contamination, to the Clinton power the Company subsequently mismanaged the construc-station. This insurance is structured through a level of tion project. Plaintiffs further allege that, because of the primary coverage provided by nuclear insurance pools present construction costs, WIPCO and Soyland have and excess coverage from a combir:ation of nuclear insur. become obligated for sums in excess of those. repre-ance pools and an ind6try-owned mutual insurance sented by the Company and will now be required to pay company.

and charge allegedly " exorbitant" rates for electricity.

The primary coverage provides limits of $500 million Plaintiffs seek to proceed on behalf of a class of all cus-and the excess coverage curently provides limits of $695 tomers of cooperatives that obtain electrical power from million, for a total available coverage of $1.195 billion. In the Clinton power station, alleging that such customers addition when the Clinton power station is placed in will be " injured due to drastically increased energy service, the Company plans to obtain accidental outage supply costs." The plaintiffs seek various forms of relief replacement power insurance coverage to the maximurr including unspecified compensatory, pun;tive and ex-extent available. Abajor loss involving the above insur. emplary damages, rescission of the ownership participa-ance coverages could result in additional annual prem. tion agreement, and an equitable accounting by the ium assessments to the Company of up to approximately court so that the cooperatives will not be held responsi-

$11.5 million. in addition while the Company has no rea. ble for certain sums expended in connection with the son to anticipate a serious nuclear incident at Clinton,if construction of the Clinton power station. On January such an incident should occur, the claims for property 14,1987 the Circuit Court for Sangamon County, Illinois damage, replacement power costs, and/or other costs ruled that in principle the members of the distribution and expenses could materially exceed the limits of insur. cooperatives can maintain a double derivative suit against ance coverage available. the Company, but required the plaintiffs to file an All nuclear power station operators are s ubject to the amended complaint, ruling that the original complaint Price-Anderson Act (Act). Under the Act public liability did not adequately allege that a demand had been made for a nuclear incident is currently limited to $695 million. on the cooperatives to sue the Company. The court also Coverage of the first $160 million is provided by private denied the Company's motion to dismiss the class action insurance, with the balance provided by retrospective count of the complaint for lack of standing.The court has

, premium assessments against each licensed nuclear unit not yet addressed other grounds asserted by the Com-in the United States. The Company's maximum assess. pany in support of its motion to dismiss the complaint. ,

ment would be $5 million per incident, but not more On January 26,1987 the plaintiffs filed their first amended l than $10 million per year.The Act is scheduled to expire complaint, and on February 17,1987 the Company will '

August 1,1987. Bills to amend the Act, including bills to file a motion to dismiss this amended complaint. Based increase or eliminate the public liability limit, are under upon its review of this proceeding and after consulta-consideration in Congress. tion with counsel, management of the Company helieves ' !

The Company cannot predict either the outcome of that this litigation will not have a material adverse effect legislative proposals or the financial impact resulting on the Company's earnings or financial position.

i from such future legislation.

si ,

36

Two-Year Dividends and Stock Prices by Quarters The common stock is listed on the New York Stock Exchange and the Midwest Stock Exchange.The prices below are the prices reported on the Composite Tape. The preferred stocks are listed on the New York Stock Exchange and the prices below are the prices on that Exchange.

1986 Stock Prices 1985 Stock Prices 1 2 3 4 1 2 3 4 Dividendsm Hjh Low High L,o,m Hjh Low gh Ly Hjh Low High Low Hgh Lo,m Hjh Ly Common 5 .66 29 23 % 29 % 23 4 32 25 % 31 % 28 % 25 % 21 % 27 % 23 % 27 % 22 % 25 % 21 %

4.08% Pfd. .51 23 18 % 23 % 20 23 % 20 % 25 22 18 15 % 19h 16 % 20 17 % 19 17 %

4.26% Pfd. .53 % 24 18% 24 % 20 % 25 21 % 26 % 24 19 17 20 17 20 % 18 208b 17 %

4.70% Pfd. .58 % 25 20 % 26 % 22b 28 % 23 28 % 25 % 19 % 18 21 % 18 % 21 3 19 4 22 20 4.42% Pld. .55 % 24 19 25 % 21 25 % 22 % 27 % '23 % 19 17 20 % 17 21 18 4 21 19 4.20% Pfd. ,52 % 23h 19 25 20 % 25 % 22 26 % 23 % 19 % 17 % 21 17h 21 % 18 % 21 17 %

8.24% Pfd. 1.03 46 % 38 47 41h 48 % 41 % 49 % 44 % 35 % 32 38 % 33M 38 % 25 % 39 34 7.56% Pfd. .94 % 42 % 33 43 37 44 % 37 % 45 % 40 % 32 % 29 35 30 36 % 32 36 32M 8.94% Pfd. 1.11 % 49 % 39 50 44 % 50b 44 % 51 % 47 37 33 % 40 % 35 40 37M 41 % 36 %

8.00% Pfd. 1.00 44 % 35 % 46 39 % 45 % 39 48 44 % 33M 30 % 37 % 31 % 37 % 34 37 % 33 %

11.66% Pfd. 1.45 4 56 52 % 57 52 % 58b 55 % 58 % 55 SOM 48 % 53 % 50 % $4M 51 % 55 52 %

Adj. Rate Pfd. A

• 46 % 37 45 % 41 44 % 40 44 % 37 43 37 45 41 % 45 % 41 % 46 % 41 Adj, Rate Pfd. B

• 52 49 % 52 % 49b 50 % 46 51 % 47 -

- 53 50 % 55 50 % 53 % 50 %

11.75% Pfd. 1.46 4 58 52 % SP 56 % 58 55 59 0 57 52 % 48 % 53h 50 % 55 52 55 % 55 8.52% Pfd. * -

- 50 % 50 51 % 50 % 52 52 - - - - - - - -

8.00% Pfd. * - - - - - - - - - - - - - - - -

mThe amount declared in each quarter during 1986 and 1985.

U' Dividend rate changet Rates for dividends declared in 1986 were $0.7875. $0.75, $0.75, and $0.75 in the first, second, third, and fourth quarters, ,

respectively. Rates for dwidends declared in 1985 were $1.0438,51.0625,$0.90, and $0 925 in the first, second, third. and fourth quarters. respectively.

thDividend rate changes quarterly. Rates for dividends declared in 1986 nere $10188, $0.875, $0.875, and $0.875 in the first, second, thi-d. and iourth i quarters. respectively. Rates for dividends decla red in 1985 were $1.0801, $1.1313, and $ L1563 in the second. third. and fourth quarters, respectively.  ;

I

• Rates for dividends declared in 1986 were $0.7539, $1.065, $1.065. and $1.065, in the first, secund, third, and fourth quarters, respectively. I

15) Rate for diwdend declared in the fourth quarter of1986 was $0.739L There were 79,860 registered holders of common stock at January 9,1987.  !

Selected Financial Data

• 1986 1985 1984 1983 1982 Total operating revenues. . . . $ 1,183,865 $ 1,167,364 $ 1280,537 $ 1,278259 $ 1,106,775 'l Net income . . .. . . $ 292,721 $ 239,999 $ 235,478 $ 207,736 $ 156,395  !

Net income applicable to common stock $ 256,479 $ 207 240 $ 210,221 $ 184,0 % $ 136,498 l Earnings per common share . . ... . $ 3.98 $ 3.48 $ 4.02 $ 3.80 $ 3.04 Cash dividends declared per common share. $ 2.64 $ 2.64 $ 2.64 $ 2.52 $ 2.48 Total assets . .. . . $ 5,431,766 $ 4,718,635 5 3,964,515 $ 3,436.937 $ 3,092,522  ;

Long-term debt . ., $ 2,080,326 $ 1.836,919 $ 1,502,046 $ 1291,555 $ 1,166.980 l l Redeemable preferred stock . $ 1 % ,000 $ 86,000 $ 86,000 $ 36,000 $ 36,000 l Ratio of earnings to fixed charges" .. 2.57 2.6o 3.15 3.56 3.04

• Thousands of dollars except earnings per cnmmon share, cash dividends declared per common share and ratio of earnings to fixed charges.  ;

"The ratio of carnings to fiwdcharges represents the number of times that earnings before mcome taxes and fixed charges cover the itned charges.

Eamings used in the calculation of the above ratoos include allowance for funds usd during construction and are before the deduction of income ta x es a nd fixed charges which include int erest on long-term debt. related amortizarian oidebt discount, premium and enpense, other interest, and that portion of rent expense which is estimated to be representanve of the interest component.

l lLLINOIS POWER COMPANY 186 ANNUAL REPOF.Tammmmmmmmmma I

37 1 ll

l Electric Operating Statistics 1986 1985 1984 1983 1982 Revenue (Thousands of Dollars)

Residential . . .. . . . .. 5 293,041 $ 276,210 $ 278,740 $ 289,224 $ 232,06:

Commercial . . . . . .. . ... . .. 187,592 179,665 178,701 173,925 151,13 Industrial . . .. . . ... . .. .. . 290,321 276,903 277,246 263,455 243,01C Other . . .. . . ... .. . . .. . . 16,601 16,057 15.856 15365 13.52 Revenues-ultimate consumers. . . . . . 787,555 748,835 750,543 741,969 639,83 Rural cooperatives and municipal utilities * . . . . . . . . . .. 15,159 15,073 48,916 43,926 40,60 Other electric utilities ... . . ... .. 6,452 5,963 5,833 3,563 3 Miscellaneous . . . .. .. . .. . 4,97b (3,404) 5,020 1,130 4.9D

$ 814,144 $ 766,467 $ 810312 $ 790,588 $ 685,56 Customers at End of Year Residential ... . .. .. . .... . 482,802 479/675 476,460 473,021 470,31!

Commercial . . . . . . . . . . . . . . ..... 56,734 56,315 55,857 55.476 54,87 Industrial. .. . .. . .. .. 339 340 310 312 30 Other . . ... ..... . .. . .. 720 717 725 716 79, 540,535 537.047 533 352 529,525 526,23 Sales in KWH (Thousands)

Residential . ... . . . .. . .... . 4,197,687 3,926,997 3,976.775 4,076,726 3,772,6%

Commercial . . . . . . . ... .... .. .. 2,821,336 2,706,217 2,698,493 2,575,710 2,479,20 lndustrial . . . . . . . . .... ....... . 7,341,567 6,932,903 6,968,072 6,466,919 6,218,00 Other . .. . . . . . . .. . . . 320,121 314.455 310.562 302.631 304.1@

Sales-ultimate consumers . . . . . . 14,680,711 13,880,572 13,953,902 13,421,986 12,774,19.

Rur.J cooperatives and municipal utilities * . . , ,....... 393,% 3 390.521 1,351,306 1,274,747 1,201,814 Other electric utilitles ......... .... 160,783 155.807 159.570 114.123 1.77

_ 15,235,457 14.426.900 15.464.770 14.810,856 13,977.6%

Generated and ?urchased in KWH (Thousands)

Generated-Stea m . . . . . . . . .. .... .... . . . 16,794,598 16,560,905 15,566,681 15,816,814 14,431,76 Hydro and internal combustion . .. 11,810 10.761 7370 12,497 10,12 Total generated . . . .. ... ... . 16,806,408 16,571,666 15,574,051 15,829,311 14,441,8@

Purchased and interchanged-net . (533,703) (962253) 888,451 146.608 452,73 Total output . . . ........... . .. 16,272,705 15,609,413 16,462,502 15,975,919 14,894,63 Less-used and unaccounted for. . . . . . 1,037,248 1,182,513 997,724 1,165,063 916.93 15,235,457 14,426,900 15,464.778 14,810,856 13.977,6T System Peak Demand in KW' (Thousands) . . ........ . .... . 3,176 2,929 3371 3,297 3,0J Lirm Peak Demand (native load) in KW' (Thousands) .......... .... .. .... . 2,949 2.771 3.217 3,215 2,93 Net Generating Capability in KW (Thousands) ....... .. .... .... ...... 3,740 3.740 3,742 '3.806 3,E

• The 1986 and 1985 bgures have decreased cornpared to prior years due to the Power Coordination Agreernent between Illinois Power Compara Soyland Po wer Cooperative. Inc.. and Western lilir,ois Power Cooperative. Inc. Sales to the Crmeratives are now clanihed as power intert hanged, nel rather than clectric revenues.

38

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

Gas Operating Statistics 1986 1985 1984 1983 1982 Reven re.v (Thjusa ids of Dallars)

Residential -without space heating. $ 2,522 $ 2.841 $ 3,035 $ 2.609 $ 2,347 with apact heating. 203,292 225,458 244,972 225,289 189,389 Commercial-without space heating. 3,567 4,755 5,571 2.876 4 30 with space heating. 74,265 83,928 93,112 85,092 73,055 Industrial -non-interruptible 41,109 43,530 64,990 137,961 147,446 interrupt:ble. 32,054 24,570 45,420 28,522 3,516 Revenues -ultimate consumers. 356,809 385,082 457,100 482,349 419,913 Interdepartmental revenues-interruptible . 355 316 380 479 281 Miscellaneous . 12,557 15,499 12.745 4,843 1,037

$ 369,721 $ 400,897 $ 470,225 $ 487.671 $ 421,231 Customers at End of Year Residential -v ,thout space heating. 9,882 10,358 11,141 11,829 12,480 with space headng. 339,809 338,636 337,102 337,270 337,011 Commercial-without space heating. 1,331 1,363 1,436 1,498 1,556 with space heating. 31,6 % 31,600 31,546 31,394 31,567 Industrial -non-interruptible 405 429 452 458 477 interruptible. _

78 56 33 27 6

_ 383,201 382,442 381.710 382,476 383.097 Sales in Therms (T housands)

Residential -without space heating. 3,195 3,423 3,690 2,808 3,848 with soace heating. 353,770 361,659 395,662 358,947 414,062 Commercial-without space heating. 7,359 9,439 10,261 5,082 8,742 with space heating. 153,652 156,250 172,572 155,837 176,976 Indutrial -non-interruptible 99,069 78,773 132,107 281,825 394,635 interruptible. 98,746 57,619 97.908 62.167 8.716 Sales -ultimate consumers' 715,791 667,163 612,300 866,666 1,006 979 Interdepartmental sales-interruptible . 1,232 827 866 1.060 801 717,023 667,990 813,166 867.726 1.007.780 Purchased and Produced-Therms (Thousando Purchased . . . 729,079 739,768 821,587 956,132 994,815 Storage-net of (injected) and withdrawn 562 7,687 (7,050) (12,628) 48,400 Purchased gas delivered. 729,641 747,455 814,537 943,504 1,043,215 Produced - 10 624 692 279 Total . .

729,641 747,465 815,161 944,196 1,043,494 Less-used and unaccounted for . 12,618 79,475 1.995 76,470 35,714 717,023 667,990 813,166 867,726 1,007,780

• lvludes therms transported for others amounting to 253.280.000 on 1986. 297.070.00v nn 1985, and 188.335.000 in 1984 l

l l

l

. . , .. . . . . . . . , , , e x.. . .- w- - -

~ . . . ..

- .- - - sammmar,esslLLINOIS POWER COMPANY 1986 ANNUAL PJPORT 39

! p ,, - ,- h 41(

i,'* .-

g 1 i i

,' ?I . - . ..

~:

-' ,' f. .

'g g . i- ,

' - 4.. ,a 7

l,  ; I. ,a'.' ' -

';,[+ ,

< , .y .. - . . . . .

. , . - ;, ' . .. . '; j  : .* : );. _' ' ' _ .

l. j. V

. g, c -. . . ...c,.

i . R$ f

@[

Y. k;; $ e,V.g.j.

'- **

L.

.' j'"9$ ,,th *, '.'; ';'

'; f.: ' sqll; . * \ ;',.

F

,<.(.' ' . l...q..

., J.,d):. - ,-' ,, , , ' .; . )

....s- e

. = 3 .- .

. s. .,' ,

m,  ;

i

< y ,_ 'j': _,

n. , . . .

.9l? ,' '-

w~ rg 7

. \ $ . t. . , ,

. , . . lM. . ..

~.

1. ~ .;. ' '. 4 .

.. . f. 2

. '~,j mm, .

.s . ' :* d% .

-, 4 _

. 9- .

' as q.

• s . k,

. .r .

9 .

~

~~ ' -.

~ * ^

s g .

j< v h y- .. .

3; . ) -

. . 2;.Aa.. l7

> l $^ ,

. j . .

~

1 a. ,

...u 1.'

. . - i' L' ,. * '

N .' ._( . 'I .

l _-

.. s .~

. .. a . .

# ~'

4 . e -

+ . . .

. ...' * . ., t - ..,  ;

~ ~ ' '

J- -

I

'I.. )' .

7

9 e e CHICAGO rme

.~

get%g W1LA SALLE Hennepin - m;3 e 1 St

. ;, ,ationIla 2 4' e .r : . .... w.w

~43,m7.??. ?7:93 - me T"'" p. .

Rw':&N: +. llqg? ~ o ;;

. G ua u , s

% .pp 3 2;;

kkGALE $8dRG w

_ %;11;;. -

f:a, ,;&

4 43 G ua ULOOMINGTON Vermilion Havan: -...s Stationil

$+ Statio ClintoE _[t}2gj g g,

= Stahon mem a+ggg g# q#-

E pekw- C. HAM l'AIGN DANVILLE g :s s+ [ge *"{ g eg O [ JACKSONVILLE (ge w -' E 2 , .<. J . H

" **49 W DECATURUJ" e ua O

Z 3 W}

7.; g@

e HILLS'50ROf v

.. 9u ff. ~,,O,~;hg .n.

.y~ q ;

ayw - . ,&

tryn g lu.w * ,aq-g,nba ap o .u T

?

g. '

4 g:d q q gj

- o

.jiam*;p$- g JCRANITE EITYt M e

% }.IS$11.EVJttf3memog;73 5

,g p ,*(~g e 'e e e #1 Idwig spa ggL y* ; %g

• erm.,>.

Mb VERNON Station ~g seawam LEGEND amp ,.g mg FOSSIL GENER ATING STATION a  %==

W NUCLE AR GENER ATING STATION 9 G A5 STOR AGE flELD G A5 Tf RRITORi SERVED 4 ELECTRIC TERRlIORi SER\ ED bb G A5 & ELECTRIC TERRITORi' E O

~. . . .. . . .

< ~ ~ ,

~

t .. .

a .

" rl ' ?: .'a 4 , %.j . \ . y

./ y I*y.n . ...,b,;. _.v.'

;, *.,.y. . !4' ~.,, in-1

,.pc .. . - .. b- i ., .- . yg - wN '._

3 9 ; . ;, c ' ,; .,z- , 3

-' l' ..N.; ,-# l..?\. .h., : . ' , . ,.m.

• m i

s e , l i- .', ik.:' . ; . -:' l* ' :.....h.'-r' ' d i,r i T ~ - 4 It l' " ' ' '

':.- 'J 71 i

b :N::. ', ']J 'W'f_ ?.bl< p^ '

h.S ' ' ' <l '-\ '?'O'& " &:- '..Q i .a.n

$ * ,yJ y . %. sf': ^dh' k. Y ,.'?s: (.*.' . .' :.)

, '* 'c ,d:  :.:. 'Y :' ,, >< f' . ~ 'e ..f' Fl.'>Y< ' E .-

m T.>-a - ,-  ?' n.  :

i , e; '. ','.: &"- -:

2 q &.~uj.,y'; .

j '_ . g ' y,:.';./ ' (F::., .L .:

p, f v;_g

..>^

• L' . .[ .. ' ._ J .  :,c.h>q.- - ) ' :W md

. . _. y' . 'Y'N" Q >j' f'N, , . >y') . f ',j, ~bf'h N:V) , 'l:r v

, , . ' ' , /. Q _ . ,

k. w.9 . [p Cy[ '.)a. ~mV f 'r,- .- b,' 'N, k'f T, n'._N '- %.,'t' +-[:a' ' :: "Y'$. a:).7.'hI '.'W k '

i pr.tvoW'h."*F h/A~ . . . -

a t .. * ' ,.,. '

i -

.' $ e . ' l \ . ;i - ..* -f , . - p*g-)b . n f

,'- \

W: ;? '.,W: Q m >l. 2, ' ',j ;. *\

'V a - :> ^ ; . ' ;^ - l '.; :s . ' - 'r 3 f(:J , ' ' ' 4 :,l; ' .  :' . .

( f.3 _ , a l' h; i j q. ; .+4%;. ' ' ~ _

.f,;.',, 'O

? -

-l~ ,,l l , Y *\;; 4 ', ;- '

' l L'. \,. 'l: i. N , S .' ' b . l V; ,

,k ',

' ' '3 I

'i ' ' [ -[

- ' : .'; O':

.,'...c.  ; , e ,. . . ~ [, 5,

'Y..'

. ', ,: .;_ .' )

q ic.a  : , > - 's. , i* m.- . . :g .

- ' .'

; . d ,. . '; i'[ ' _ l. a

[;;;lt t. , - y ,, s , '. .,Q, c. ' ', L 'a __ ', ..

s enf f; - ';. - ; .

~,_, ,

{ .

.< .' m,. ,.

.[ 4A, *

.'. -l'

.'- - .' \

f 7 [. ' ;l '.'.:..

- ,' ).

- _ . J ,,'

.[ . . ' '.' . :

, . ;y 9:- .

.. .. ; . ,s

- . ~

• p' . .

a, w .. ;  ; ; . _ . _s _ ._.

,' 64c z. ,

- . .r ... ' . '. .  : : -

- - ~

g y g j ..

p- a . p,. ,', wI {l: y c .g '. . - - ' .- .,. . , - * ' 4 -- g- p -

- - ,,p

! > i .

7 . .- .

. . N,., t. .

C, g -

Jc.). . -.::) l

. Y y .

y

).

g ,

d K;; ( ~ * : .

i

, , _ - - .. _.. ,' ..., V(

<q ,wf:. . , . . . . - - ,- .

• ' ,f e c.G. , M.h.!6li. :*.i....',' ., ,, ' .. .-,, . ,h

~ '

a- . s l .

a,. . . ,

' ' ' . ' - b.  : -

' V '.,1.

e y , -

p

,'s , ' . . . .. . . .. . - -

~ . . . ~,. '

.:' &;;;-j leh'*- ,n. L

.-D.

.' ,.,.'- I ' ' '

'.;l) . s.., t '. <

• l - -  %

{,' .

y".. '

j *, ,.

a

... .@F:: ..<-

. . ,- . 9

.n y.e g

., , . ,o -9 7

- , . , ,*A 4'

)k) * '

3,i, i ' t .'s . ,. : . , . - - -

'g *

- /'l '

, h'. *

.. m

{}lW:&::. ' *. . ,.* -

, , - sq f . .

b  ; .g' s, -7

' ~

. ..t o . . . . .. ,

[3,y , , f i-i

..'  :. ,a -

, y . . .. , y 5 6 -

g- . i.

f; Y>.

it ,

~

' ' 1.,y * . '. .

s' . ._ . .

n..  : . . .

.' . (

• f -[ ' ; . .

n .

• ' D

'"3 . , ' . ' :. '.

.- ...y'

- L' V, ' . ' F . . . .

. . . . . .. . . ~ ' '

. <. ..  ;- < .- - .p -

4,., . .

,3

- * ,, p::3 ;,-

, , g- .

z 1, '. 6 C _ y ; . .

' - - s. * :y . T' , .

. .W '

5 )[ l .\. :,;', ' - .

g. -

• ~- , . . _y_ ,.,,*- '

e .N

, * 'y ' - , 6 f ., ' . .

} ( [g ' . (m.'} . .,' I.

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

}ol . - ..

s ,

y,. _y .k

'c I ,j " '

.~

)i}nl f;.p.)

~

/ . . - .- s,; *i -

v. .

.j

.c<..-c. . . . . .

l . s e .. , ,

&')'$ l -l 6 . i s, 'l '_ , , , ' . ,_ _' ** , . ,

w* '

/>

.i ..:...- ~- p . .

^

4-n '.- -

, .e

• ?

,. ' ,r:

• Y'\ , . * . '

~

, *' Y - '

y;

..'-5 ^ [ ' _ ,. ,

W. js . .'.

; i d

. ,, -  : e

, - a t-m;3: : * '

4

.- .. y, ,,

, , j p .W,- . , - .

r . + - ' . , -

7. ,- . i .

3 m .t J * * .: j - .

2 3 '- #. - ,j g ' -: ."-

,- so.

. *^

~

'g y ;1, ;,' , ..,,.

. 5['[ ~ + '

) .- . ' aib- ' .- . ', ,

._p; y iT : ;,y. 2

_L'

't! '

~

jhWy ' :d. la , . ^ 3. .

L'

,.y h * -

.  ; l';^) y , eQ '. 3 .. > - j , p- . , , .- - s , ; (i (

-. ., s ,- .  ; , .

c . v. ; i * ,

b/ 8.Y.1 A 4>

• ', Y - -

n. . p 3 ,' J.

i

l. k;h1. 1.

. y , b .n O. . 'g

,. .h.* ,- .'. 4: : ' . ' . ' - [ - '. . . . ,

. . - . ; _ :[. ' . .q. .' - ,. .-

(. ,

n: '  ; -  : ,J. . . s . .

i . ..

a- .

T .y

- o +'

, Ugy;.Q(l Un'. 3: . . : : ; *

e. . *

• e .V- ' .' A .; '

7 ; - -. . :. ;~..- . .

g . . ;[ _ . . . _. . g .-, ,

. .~ ,.

-7 , _. .

mu. s o .-, , . .- n.. n .

[h ?] l[

7 g- ,

, ,^ .

v . , , ,.

., 0 ", - ' ' ' , " ' 8 Mod;,s ' - - ~

s.w .; - .' ' ' '

1-  : - -

S .. - . . .#  %

I': :.* - --

. [ - ,

~ '

'[ -  ; , . , - . -

,- - . 3 i.;.l2.}:h ;

,p: 1. ~s

• .' .- ,, , a

,~- , . .. .

._t .

- - 4 ,- . . .

. , . .. c .

_.n4 .

p .m 4 ,. , .

i - . . .t + - .i h, . , . .

5- + <t. .. .-. . ,_ . . .

1 - . .. - - .

3 ,

' M

_[  : *' '- .. ., , * , .'

' ~

• 0 <

~

% a- 4,... -

,1 .r g -

. . r - . .

-fG_'- :; . ' ' , .v- , , \ ,

v '_ f*.' _, '. , **-;

~

~#

- . j ,l, . .. , .. '*;  ?

• 6j. _ .i' J', . . , , ( .. ; .[ ~

l : , .

',:,e l ,g* ,, . __ y ,

a .: - -

v. -

e..  ;. .> . -

w:m;p, . , , . . . .-

c.. .g.*

. ,h

4 .m

' } L p. .; - - ,

g - r. .' '.

s

~,:, <

.. . . _ + ,

t. .

,, ., j . ,. ,: ,

32.6 .

i

.e

• ,*(; -eg~

[ g+ $ I1[]L - g.. s . ; ,,-. . .

. ' o' r ,- - A 4 g p p . s .1 .. t a, 4 a.

':'[.,..

' . ,q - , '.'+.. ' - ( {, - - + '

e *

'x . J/.'

'. - f, j'} . . ,.

s

'l , a j , , . ,3 , ,

4 ., ~ -

my .j., '

O . t: ' * . , , ' , , .g _ s , . ', g , e. >. .

- p . ,

,. =l . .s- , k' -

.e. .f. , -

'. 'f, ': d' .g T

. '... +'; _ _ ..;y . l ll; N , .1-

' . _#}. ,' r?. ,l . ;',{ . .*', '. ' ,3

.lU. ..lf.h. . n.a .;

r.. '

'

• w* . .f m ..

M.&v h,.. 4 ' ;G;

<<:' : , . ~ ". ,',,.  : . r:

. - . - .\ '.=' D : ' ;.N ' , *, , D ,1

, g qh,[{3_.

re . -

40

..',f,',

.: ., ' v_

1, -;g

[ ,

f

/ O '.- ' ' . , -

sc

'r * . ./. . , , ., <j? l. .

.' [ ' :

' , J , j '.. -.

v

, l. r ,

S bI '.

= .Ym, ; ;. i : *. - . . .

,\ +, j. . ;',g , . , ., _.,e " ,. ;. . ,. ._._. , ._ ...a.;} _, . - ..,l_ . . - . , . . _ _ -

y.O vr lfl, , , ', ',.'.al ...

s.,,. 'g *: +e ' -

.- _,4;.

... c , .'?,

l y s.

'9. .-.. ., .., . ,. -

yo,

.W ":.. .

j. . c a.I ,. ..':'.v, g . g J , , '

r _; ;

. . - > .J 2 . ,

'. .. b- - vl z .

. . . - ,, .- ..u , ' : ./ . s. n . ;,  : .- .,

w,;)4p{ .

%.y,y' u.

' i ., i.:;

. ; . .a . ':

'! A.,. '*

,).,C; .. : yl . *L'( -

v, . s j

,9 g

.O:. .

. .f. _:_ _;_:'- .. , , . _

.. .; , ' 4 , _ , . y ' .; g ,

._x.

l- '[ ' l . j

_' ',p'=-

• ;v . q . _ - s ' ..'.. l .

,-..-;;'_ . ._ , , l ,, ...,',,-' ..'

i .; J

, i - . . .

t- , , - .; . . .

. . .