ML20073L541

Toledo Edison Co 1990 Annual Rept. Sec Form 10-K Encl.W/

ML20073L541
Person / Time
Site:	Davis Besse
Issue date:	12/31/1990
From:	TOLEDO EDISON CO.
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
1935, NUDOCS 9105140010
Download: ML20073L541 (78)

Text

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CENTERIOR ENERGY Donald C. Shelton 300 Matson Avenue Vice Pre @nt Nuclear Toleda, OH 436520001 Davis Besse (419)249 2300 Docket Number 50-346 License Number NPF-3 Serial Number 1935 May 2, 1991 United States Nuclear Regulatory Commission Document Control Desk Vashington, D. C. 20555

Subject:

Annual Financial Report Gentlement In accordance with 10CFR50.71(b) Toledo Edison hereby submits its annual i financial report, including the certified financ2al statements. Attached are the Toledo Edison Company 1990 Annual Report and Form 10-K, the Annual Report

, to the Securities and Exchange Commission for the fiscal year ended l December 31, 1990.

i Very truly yours,

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attachments cc: P. M. Byron, DB-1 NRC Senior Resident Inspector A. B. Davis, Regional Administrator, NRC Region III J. R. Hall, NRC Senior Project Manager H. D. Lynch NRC Senior Project Manager Utility Radiological Safety Board 9105140010 901231 PDR ADOCK 05000346 I PDR i ; I'

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UNITED STATES SECURITIES AND EXCllANGE COMMISSION WASillNGTON, D.C. 20549

'l Form 10-K (Stark One)

[X) ANNUAL. REPORT PURSUANT TO SECTION 13 OR 15(d)

OF Tile SECURITIES ENCilANGE ACT OF 1934 (FEE REQUIRED)

I or the fiscal year ended December 31,1990 OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

Ol' Tile SECURITIES EXCilANGE ACT OF 1934 (NO I EE REQUIRED)

For the transition period from to Commiolon Registrant; State of lacorporation; l.R.S.1.mploser l'ile Number Addreas; and Telephone Number identification No, I-91 M CENTERIOR ENERGY CORPORATION 34-1479083

( An Ohio Corporation) 6200 Oak Tree Bonlevard independence, Ohio 44131 Telephone (216) 447-3100 1-2323 Tile CLEVELAND ELECTRIC ILLUN11NATING 34-0150020 CON 1PANY

( An Ohio Corporation) 55 Public Square Cleveland, Ohio 44113 Telephone (216) 622-9800 1-3583 Tile TOLEDO EDISON CONIPANY 34-4375005 (An Ohio Corporation) 300 Niadison Avenue Toledo, Ohio 43652 Telephone (419) 249-5000 Indicate by check mark whether each of the registrants (1) has fileu all reports required ta be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X. No The aggregate market value of Centerior Energy Corporation Common Stock, without par value, held by non-alliliates was $2,577.819,162.75 on February 28, 1991 based on the closing sale price as quoted for that date on a composite transactions basis in The li'allStreet Journal and on the 138,406,398 shares of Common Stock outstanding on that date.

Centerior Energy Corporation is the sole holder of the 79,590.689 shares and 39,133,887 shares of the outstanding common stock of The Cleveland Electrie illuminating Company and The Toledo Edison Company, respectively.

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Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange i Registrant Title of each class on which registered 4

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Centerior Energy Common Stock, Corporation without par value New York Stock Exchange Midwest Stock Exchange Pacific Stock Exchange The Cleveland Electric Cumulative Serial Preferred Illuminating Company Stock, without par value:

$7.40 Series A New Yotk Stock Exchange l

$7.56 Series B New York Stock Exchange l Adjustable Rate, Series 1. New York Stock Exchange i First Mortgage Bonds:

8-3/8% Series due 1991 New York Stock Exchange 3-7/8% Series due 1993 New York Stock Exchange 4-3/8% Series due 1994 New York Stock Exchange 8-3/4% Series due 2005 New York Stock Exchange 9-1/4% Series due 2009 New York Stock Exchange 9.85% Series due 2010 New York Stock Exchange l 8-3/8% Series due 2011 New York Stock Exchange 8-3/8% Series due 2012 New York Stock Exchange The Toledo Edison Cumulative Preferred Stock, Company par value $100 per share:

4-1/4% Series American Stock Exchange 8.32% Series American Stock Exchange 7.76% Series American Stock Exchange l 10% Series American Stock Exchange Cumulative Preferred Stock, par value $25 per share:

8.84% Series New York Stock T hange

$2.365 Series- New York Stock Exchange Adjustable Rate, Series A New York Stock Exchange Adjustable Rate, Series B New York Stock Exchange

$2.81 Series New York Stock Exchange First Mortgage Bonds:

9% Series due 2000 New York Stock Exchange 7-1/2% Series due 2002 New York Stock Exchange 8% Series due 2003 New York Stock Exchange 9.65% Series due 2006 New York Stock Exchange 9-5/8% Series due 2008 New York Stock Exchange

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TABLE OF CONTENTS Page Number Glossary of Terms y PART I Item 1. Business ... . . .. . .......... ,,,,, 1 Ilk The Centerior System . . . .. . ... ............. 1 Industry Problems and Financial Uncertainties ......... 2 CAPC0 Group . .. . . . . ... .,. ....,,,,,,,,, 3 Construction and Financing Programs .............. 3 Construction Program . . ... ... ............. 3 Financing Program . . . ... ................ 5 General Regulation . . . ..... ............... 6 Holding Company Regulation . . ................ 6 State Utility Commissions . . .......... ...... 7 Ohio Power Siting Board . .. ................ 8 Federal Energy Regulatory Commission . ............ 8 Nuclear Regulatory Commission ................ 8 Other Regulation . . . . . . . .............. .. 8 Environmental Regulation . ... ...... ,,.,..... 9 General . . . . . . .. .. . ... ............. 9 Air Quality Control . . .. .. ............... 9 Vater Quality Control . .. . ... ............. 11 Vaste Disposal . . . . . . . . . . . . . . . . . . . . . . . . 11 Electric Rates . . . .. . .. ... . .,,,.,, ,,,,, 12 General . . . . . . . . . .. ................ 12 1989 Rate Orders . . . . . ... ............... 13 l

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l 13 Operations . . . . . ......................

13 Sales of Electricity . ....................

14 Operating Statistics . ... ...... . . . . . . . . . . . . . . . 17 Operating Nuclear Units ............... 18 Nuclear Unit Concerns .... . . . . . . . . . . . . .. .. ... . 18 Competitive Conditions . ...............

18 General . . . .... .... . . . . . . . . . . . . . . .

18 Cleveland Electric . ... . . . . . . . . . . . . . . . . .

20 Toledo Edison .. ..... ... . . . . . . . . . . . . .

21 Fuel Supply . ............ . . . . . . . . . . . .

21 Coal . . . . .. . ... ...... . . . . . . . . . . . . 22 Nuclear . . .. .... .. ............ . . . .

23 011 .. . . . ........ . . . . . . . . . . . . . . .

Executive Officers of the Begistrants and the Service Company . 23

. . . . . . . . . 32 Item 2. Properties . ... .........

32 Ceneral .. . . . .......... . . . . . . . . . . . .

................. 32 The Centerior System . ...

..... .......... . . . . . . 33 Cleveland Electric . 33 Toledo Edison . ....... ....... . . . . . . . . .

34 Title to Property .... ......... . . . . . . . . . .

35 Item 3. Legal Proceedings . ... ... . . . . . . . . . . . . .

Submission of Matters to a Vote of Security Holders . . . 36 Item 4.

PART II Item 5. Market for Registrants' Common Equity and Related 36 Stockholder Matters . . ..... . . . . . . . . . . . .

. . . . . 36 Centerior Energy . ..................

36 Harket Information . ... .. . . . . . . . . . . . . . . . . 36 Share owners . ....... ...... . . . . . . . . . . . 36 Dividends . . .............. . . . . . . . . . .

. . . . . . . . . . . . . 37 Cleveland Electric and Toledo Edison .

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l Page Number Item 6. Selected Financial Data . . . . . . . . . .. . . . .. . 37 Centerior Energy . . . . . . . . . . .. . . . . . . . . . ... 37 Cleveland Electric . . . . . . . . . .. . . . . .. . . . ... 37 Toledo Edison . . . . . . .. . . ... . . . . . . . . . ... 37 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . .. . . . . . . 37 Centerior Energy . . . .. . . . . .. . . . . . . . .. . . . . 37 Cleveland Electric . . . .. . . . . . . . . . . . . .. . . . . 37 Toledo Edison . . . . . . .. . . . .. . . . . . . . . . . . . 37 Item 8. Financial Statements and Supplementary Data . . . . . . . 37 Centerior Energy . . . . . . . . . . . . . . . . . . . . . . .. 37 Cleveland Electric . . .. . . . . . . . . . . . . . . . . . . . 37 Toledo Edison . . . . . .. . . . .. . . . . . . . . . . . .. 38 Item 9. Changes in and Disagreements Vith Accountants on Accounting and Financial Disclosure . . . . . . . . . . . 38 PART III Item 10. Directors and Executive Officers of the Registrants . . 38 Centerior Energy . . . . . . . . . . . . . . . . .. . . . . . . 38 Cleveland Electric . . . . . . . . . .. . . . .. .. . . . . . 38 Toledo Edison .. . . . . . . . . . .. . . . . . . . . . . . . 39 Item 11. Executive Compensation . . .. . . . . . . . . . . . . 39 Centerior Energy Executive Compensatian . . . . . . . . . . . . 39 Salaries and Insurance . . . . . . .. . . . . . . . . . . . . . 40 Pension Plan Benefits ... . . . . . . . . . . . . . . . . . . 43 Employee Stock Plan Transactions . .. . . . . . . . . . . . . . 44 (a) Employee Purchase Plan . . . . .. . . . . . . . . . . . . 44 (b) Employee Savings Plan . . . ... . . . . .. . . . . . . 44 (c) 1978 Key Employee Stock Option Plan . . . . . . . . . .. 46 (d) Employee Stock Ovnership Plan . . . . . . . . . . . . . . 47 Item 12. Security Ovnership of Certain Beneficial Ovners and Management . . . . .. . . . . . . . . . . . . . . .. . 48 Centerior Energy . . . . .. . . . . . . . . . . . . . . . . . . 48 Cleveland Electric . . . . . . . . . . . . . . . . . . . . .. . 49 Toledo Edison . . . . . . . . . . . . . . . . . . . . . . .. . 49

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Certain Relationships and Related Transactions . . . . . 50 Item 13.

50 Centerior Energy and Toledo Edison . . . . . . . . . . . . . . .

50 Cleveland Electric . . . . . . . . . . . . . . . . . . . . . . .

PART IV Item 14 Exhibits, Financial Statement Schedules and Reports 50 on Form 8-K . . . . . . . . . . . . . . . . . . . . . .

52 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Index to Selected Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Opeiations; F-1 and Financial Statements . . . . . . . . . . . . . . . . . . . . .

S-1 Index to Schedules . . . . . . . . . . . . . . . . . . . . . . . . .

E-1 Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . .

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This combined Form 10-K is separately filed by Centerior Energy Corporation.

The Cleveland Electric Illuminating Company and The Toledo Edison Company.

Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to any other registrant, except that information relating to either or both of the Centerior Utilities is also attributed to Centerior Energy.

GLOSSARY OF TERMS The following terms and abbreviations used in the text of this report are defined as indicated:

Term Definition AFUDC Allowance for Funds Used During Construction.

AMP-Ohio American Municipal Power-Ohio, Inc., an Ohio  !

not-for-profit corporation, the members of which are certain Ohio municipal electric systems. i Beaver Valley Unit 2 Unit 2 of the Beavei Valley Fover Station, in which the Centerio Utilities have ownership and leasehold interests.

CAPCO Group Central Area Power Coordination Group.

Centerior Energy or Centerior Centerior Energy Corporation.

Centerior System Centerior Energy, the Centerior Utilities and the Service Company.

Centerior Utilities Cleveland Electric and Toledo Edison.

(individually, Centerior Utility)

Clean Air Act Federal Clean Air Act of 1970 as amended.

Clean Air Act Amendments November 1990 Amendments to the Clean Air Act.

Clean Vater Act Federal Vater Pollution Control Act as amended.

Cleveland Electric The Cleveland Electric Illuminating Company, an electric utility subsidiary of Centerior Energy and a member of the CAPC0 Group.

Consol Consolidation Coal rompany.

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Term Definition Consumers Power Company, an electric utility Consumers Power subsidiary of CMS Energy Corporation.

CPP Cleveland Public Power, a municipal electric system operated by the City of Cleveland.

CVIP Construction Vork in Progress.

Davis-Besse Davis-Besse Nuclear Power Station.

Detroit Edison Detroit Edison Company, an electric utility.

District of Columbia United States Couit of Appeals for the Dis-Circuit Appeals Court trict of Columbia Circuit.

DOE United States Department of Energy.

Duff 6 Phelps Duf f & Phelps, Incm porated.

Duouesne Duquesne Light Compa.y, an electric utility subsidiary of DQE, Inc and a member of the CAPCO Group.

ECAR East Central Area Reliab1?ity Coordination Group.

FERC Federal Energy Regulatory Commission.

FICA Federal Insurance Contributions Act.

Public Utilities Corporation, an CPU General electric utility holding company.

Ludington Plant Ludington Pumped Storage Power Plant, a pumped-storage, hydro-electric generating station jointly owned by Detroit Edison and Consumers Pover.

Mansfield Plant Bruce Mansfield Generating Plant, a coal-fired power plant, in which the Centerior Utilities have leasehold interests as joint and several lessees.

Moody's Moody's Investors Service.

Note or Notes Note or Notes to the Financial Statements in the Centerior EnerP,y, Cleveland Electric and Toledo Edison Annual Reports for 1990 (Note or Notes, where used, refers to all three companies unless otherwise specified).

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Term Definition NOV Notice of Violation issued by the U.S. EPA.

NPDES National Pollutant Discharge Elimination System.

NRC United States Nuclear Regulatory Commission.

Ohio EBR Ohio Environmental Board of Review.

Ohio Edison Ohio Edison Company, an electric utility and a member of the CAPC0 Group.

Ohio EPA Ohio Environmental Protection Agency.

Ohio Power Ohio Power Company, an electric utility sub-sidiary of American Electric Power Company, Inc.

Ohio Valley The Ohio Valley Coal Company, the successor corporation to The Nacco Mining Company and a subsidiary of Ohio Valley Resources, Inc.

Operating Companies The Centerior Utilities.

OPSB Ohio Pover Siting Board.

PaPUC Pennsylvania Public Utility Commission.

Penelec Pennsylvania Electric Company, an electric utility subsidiary of GPU.

Pennsylvania Power Pennsylvania Povet Company, an electric utility subsidiary of Ohio Edison and a member of the CAPC0 Group.

Perry Plant Perry Nuclear Power Plant.

Perry Unit 1 and Perry Unit 2 Unit 1 and Unit 2 of the Perry Plant, in .

which the Centerior Utilities have ovnership interests.

PUC0 The Public Utilities Commission of Ohio.

Purchase Plan Centerior Energy's I;mployee Purchase Plan.

Quarto Quarto Mining Company, a subsidiary of Consol.

Savings Plan Centerior Energy's l~mployee Savings Plan.

SEC Securities and Exchange Commission.

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Term Definition Seneca Plant Seneca Power Plant, a pumped-storage, hydro-electric generating station jointly owned by Cleveland Electric nnd Penelee.

Service Company Centerior Service Company, a service sub-sidiary of Centerlot Energy.

Sixth Circuit United States Court of Appeals for the Sixth Appeals Court Circuit.

S&P Standard & Poor's Corporation.

Superfund Comprehensive Envitonmental Response, Com-pensation and Liability Act of 1980 and the Super f ur.d Amendments and Reauthorization Act of 1986.

Toledo Edison The Toledo Edison Company, an electric utility subsidiary of Centerior Energy and a member of the CAPC0 Group.

U.S. EPA United States - 1:nvi ronmen t al Protection Agency.

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PART I Item 1. Business Ti1E CENTERIOR SYSTEM Centerior Energy is a public utility holding company and the parent company of the Centerior Utilities and the Service Company. Centerior was incorporated under the lavs of the State of Ohio in 1985 for the purpose of enabling Cleveland Electric and Toledo Edison to affiliate by becoming wholly ovned subsidiaries of Centerior. The affiliation of the Centerior Utilities became effective on April 29, 1986. The consolidated operating revenues of the Centerior System are derived primarily from the sale of electric energy by Cleveland Electric and Toledo Edison.

The Centerior Utilities' combined service areas encompass approximately 4,200 square miles in northeastern and northwestern Ohio with an estimated popula-tion of about 2,600,000. At December 31, 1990, the Centerior System had 8,517 employees. Centerior Energy has no employees.

Cleveland Electric, which was incorporated under the laws of the State of Ohio in 1892, is a public utility engaged in the generation, purchase, transmis-sion, distribution and sale of electric energy in an area of approximately 1,700 square miles in northeastern Ohio, including the City of Cleveland.

Cleveland Electric alse provides electric energy at wholesale to other elec-tric utility companies and to two municipal electric systems in its service area. Cleveland Electric serves approximately 742,000 customers and derives approximately 74% of its total electric revenue f r om customers outside the City of Cleveland. Principal industries served by Cleveland Electric include those producing steel and other primary metals; automotive and other trans-portation equipment; chemicals; electrical and nonelectrical machinery; fabricated metal products; and rubber and plastic products. Cleveland Electric's operating revenues are derived primarily ' rom the sale of electric energy. At December 31, 1990, Cleveland Electiic had 4,490 employees.

Cleveland Electric has a collective bargaining agreement with one union.

Toledo Edison, which was incorporated under the laws of the State of Ohio in 1901, is a public utility engaged in the generation, purchase, transmission, distribution and sale of electric energy in an area of approximately 2,500 square miles in northwestern Ohio, including the City of Toledo. Toledo Edison also provides electric energy at wholesale to other electric utility companies and to 13 municipally owned distribution systems (through AMP-Ohio) and one rural electric cooperative distribution system in its service area.

Toledo Edison serves approximately 284,000 customers and derives approximately 53% of its total electric revenue f rom customers outside the City of Toledo.

Among the principal industries served by Toledo 1:disor are metal casting, forming and fabricating; petroleum refining; automat ve equipment and assembly; food processing; and glass. Toledo Edison's operating revenues are derived primarily from the sale of electric energy. At December 31, 1990, Toledo Edison had 2,548 employees. Toledo Edison has collective bargaining agreements with three unions.

The Service Company, which was incorporated in 1986 under the laws of the State of Ohio, is also a wholly owned subsidiary of Centerior Energy. It pro-l vides management, financial, administrative, engineering, legal, governmental and public telations and other services to Centerlot Energy and the Centerior Utilities. At December 31, 1990, the Service Company had 1,479 employees.

INDUSTRY PROBLEMS AND FINANCI AL UNCERTAINTIES The Centerior System has experienced in recent yeais some of the significant problems cor.f ronting the electric utility industry in general, including: the effects of fluctuating economic conditions and customer conservation practices upon electricity usage; increased competition from municipal systems; diffi-culty in accurately forecasting demand for electric service; difficulty in obtaining adequate and timely rate relief, including disallowance or deferral of construction costs in rates and the consequent write-offs of investments in nuclear generating facilities; adverse changes in rate-making law; increasingincreasing operating costs; increasing costs of and delays in construction; in particular, costs of complying with evolving governmental regulations, environmental and nuclear plant regulations; uncertainty associated with the operation of nuclear units; and a reduction in common stock dividends.

Now and in the future, the Centerior System may have to contend with many of the problems listed above as well as the following: difficulty in financing construction due to high costs of capital, uncertain financial markets and financing limitations contained in articles of incorporation, indentures and certain financial agreements; increasing scrutiny of, and the involvement in management of, company operations by state utility commissions and state consumer advocates; increasing pressure from the threat of municipalization for utilities to reduce rates; and the emerging need for utilities to reduce electrical peak load growth through the integration of demand-side and supply-side energy management programs.

See Note 3(c) and Note 4 for discussions of uncertainties associated operating nuclear units. with The Perry Unit 2 and the Centerior Utilities' likelihood of the occurrence of any of the matters discussed under these Notes which would have a financial impact on the Centeifor Utilities cannot be determined at this time. Based on each Censarior Utility's and Centerior's current financial condition and level of annual income, a write-off of either Centerior Utility's investment in Perry Unit 2 would have a material adverse effect on such Centerior Utility's and Centerior's results of operations in the period in which it were to occur and on retained earnings, but vould not affect such company's cash flow. Such a write-off could reduce Toledo Edison's retained earnings sufficiently such that Toledo Edison's ability to declare dividends, under Ohio law, might be impaired. However, such a write-off would not reduce retained earnings sufficiently to impair, under Ohio law, Centerior's or Cleveland Electric's ability to declare dividends.

Whether dividends vould be declared in such event cannot be determined at this time.

For a discussion of the financial consequences associated with the January 1989 PUC0 rate orders which established a 10-yeai rate phase-in plan for recovering the Centerior Utilities' investments in Perry Unit 1 and Beaver Valley Unit 2 and of the impact of current economic c onditions and competitive ,

pressures, see Note 6 and also Management's Financial Analysis contained under [

Item 7 of this Report.

CAPCO GROUP Cleveland Electric and Toledo Edison are members of the CAPC0 Croup, a power pool created in 1967 vith Duquesne, Ohio Edison and Pennsylvania Power. This pool affords greater reliability and lover cost of providing electric service through coordinated generating unit operations and maintenance and generating reserve back-up among the five companies. In addition, the CAPC0 Group has completed programs to construct larger, more effielent electric generating units and to strengthen interconnections within the pool.

The CAPC0 Group companies have placed in service nine major generating units, of which the Centerior Utilities have ownership or leasehold interests in seven (three nuclear and four coal-fired). Construction of another nuclear generating unit (Perry Unit 2) has been suspended (see Note 3(c)). Each company owns, as a tenant-in-common, or leases a portion of certain of these generating units. Each company has the right to the net capability and associated energy of its respective ownership and leasehold portions of the units and is, severally and not jointly, obligated for the capital and oper-ating costs equivalent to its respective ownership and leasehold portions of the units and the required fuel, except that the obligations of Pennsylvania Power are the joint and several obligations of that company and Ohio Edison and except that the leasehold obligations of Cleveland Electric and Toledo Edison are joint and several. (See " Operations--Fuel Supply. ) The company in whose service area a generating unit is located is responsible for the operation of that unit for all the owners, except for the procurement of nuclear fuel for a nuclear generating unit. Each company owns the necessary interconnecting transmission facilities within its service area, and the other CAPCO Group companies contribute toward fixed charges and operating costs of those transmission facilities.

All of the CAPC0 Group companies are members of ECAR, which is comprised of 28 electric companies located in nine contiguous states. ECAR's purpose is to improve reliability of bulk power supply through coordination of planning and operation of member companies' generation and transmission facilities.

CONSTRUCTION AND FINANCING PROGRAMS Construction Program Although the Centerior System has completed its generating unit construction program, it is carrying on a continuous program of constructing transmission, distribution and general facilities and modifying existing generating facil-ities to meet anticipated demand for electric service, to comply with governmental regulations and to improve the environment. The Centerior System's integrated resource plan for the 1990s combines demand-side management programs with maximum utilization of existing generating capacity to postpone the need for new generating units until later in the decade.

Demand-side management programs, such as direct Joad control, residential appliance interlocks, curta11able load, thermal storage and energy management, are expected to reduce peak load growth and increase energy usage in off-peck periods. The next increment of generating capacity to be constructed by the Centerior Utilities is expected to be relatively small, 100,000-150,000-kilowatt units with short construction lead times. According to the current long-term integrated resource plan, and assuming construction on Perry Unit 2 is not resumed in the interim (see Note 3(c)), the Centerior System plans to put into ser" ice 110,000 kliovstts of such generating capacity in 1999 or 2000.

The following table shovs, categorized by major components, the construction expend $tures by Cleveland Electric and Toledo Edison and, by aggregating them, I for the Centerior System during 1988, 1989 and 1990 and the estimated cost of their construction programs for 1991, 1992 and 1993, in each case including AFUDC and excluding nuclear fuel:

Actual Estimated 1988 1989 1990 1991 1992 1993 Cleveland Electric (Millions of Dollars) 21 $ 5 $ 0 $ 0 $ 0 $ 0 Perry Unit 1 S 0 0 0 Beaver Valley Unit 2 0 4 0 0 0 0 0 0 0 Perry Unit 2*

Transmission, Distribution 65 87 82 94 107 130 and General Facilities Renovation and Modification of Generating Units 14 17 13 5 8 11 Perry Unit 1 4 4 Beaver Valley Unit 2 24 3 (3) 5 56 25 40 15 12 10 Davis-Besse 80 86 33 24 37 59 Non-Nuclear Units Total S._212 S 153 $__.1M S_lB4 S _212 $ __2 4_7 Actual Estimated 1988 1989 1990 1991 1992 1993 Toledo Edison (Millions of Dollars) 9 $ 1 S 0 $ 0 $ 0 S 0 Perry Unit 1 $

0 0 0 Beaver Valley Unit 2 0 3 0 O 2 0 0 0 0 Perry Unit 2*

Transmission, Distribution 50 26 28 29 32 41 and General Facilities Renovation and Modification of Generating Units 9 11 5 7 Perry Unit 1 22 3 4 4 Beaver Valley Unit 2 20 2 (2) 5 51 29 39 15 12 10 Davis-Besse 17 28 Non-Nuclear Units 2 10 16 7 Total $__12Q $ 78 $ 82 S 66 $ _ 8} SJ_Q Note: The footnote to the table is on the following page.

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Actual Estimated 1988 1989 199D 1991 1992 1993 Centettor System (Millions of Dollars)

Perry Unit 1 $ 30 $ 6 $ 0 $ 0 $ 0 $ 0 Beaver Valley Unit 2 0 7 0 0 0 0 Perry Unit 2* 0 2 0 0 0 0 Transmission, Distribution and General Facilities 91 115 111 126 148 180 Renovation and Modification of Generating Units Perry Unit 1 35 8 13 18 23 28 Beaver Valley Unit 2 44 5 (5) 10 8 8 Davis-Besse 107 54 79 30 24 20 Non-Nuclear Units 35 34 53 66 97 114 Total $_ 342 $__231 $_2M $._210 S 300 $._310

• Constraction of Perry Unit 2 has been suspended. The amount shown for Perry Unit 2 in 1989 for Tc'edo Edison and the Centerior System is the result of a reallocation of previous years' costs between Periy Unit 1 and Perry Unit 2 for Toledo Edison.

See " Environmental Regulation--General" for estimated pollution control expenditures.

Each company in the CAPC0 Group is responsible for financing the portion of the capital costs of nuclear fuel equivalent to its ownership and leased interest in the unit in vhich the fuel vill be utilized. See " Operations--

Fuel Supply--Nuclear" for information regarding nuclear fuel supplies and Note 5 regarding leasing arrangements to finance nuc)est fuel capital corts.

Nuclear fuel capital costs incurred by Cleveland Electric, Toledo Edison and the Centerior System during 1988, 1989 and 1990 and their estimated nuclear fuel capital costs for 1991, 1992 and 1993 are as follovs:

Actual Estimated 1988 1989 1990 1991 1992 1993 (Millions of Dollars)

Cleveland Electric $ 37 $ 29 $ 38 $ 43 $ 20 $ 29 Toledo Edison $ 34 $ 21 $ 24 $ 34 $ 15 $ 20 Centerior System $ 71 $ 50 $ 62 $ 77 $ 35 S 49 Financing Program Reference is made to Centerior Energy's, Cleveland Electric's and Toledo Edison's Management's Financial Analysis contained under Item 7 of this Report and to Notes 10 and 11 for discussions of the Centerior System's financing activity in 1990; debt and preferred stock redemption requirements during the 1991-1993 period; expected external financing needs during such period; restrictions on the issuance of additional debt sec urities and preferred and preference stock; and short-term and long-term financing capability.

Financing activity for Cleveland Electric in 1991 is expected to consist of the periodic issuance over approximately 12 months, starting in the second quarter, of $150,000,000 of notes secured by first mortgage bonds and the issuance of $100,000,000-S125,000,000 of preferred stock.

In January 1991, Toledo Edison issued $25,000,000 of unsecured notes pursuant to a bank tetm loan agreement. In March 1991, Toledo Edison sold $99,500,000 of notes secured by first mortgage bonds. Toledo Edison's financing plans for the remainder of 1991 include the periodic issuance over approximately 12 months of an additional S50,500,000 of notes secured by first mortgage bonds and the possible issuance of $80,000,000 of unsecured notes in the second quarter of the year pursuant to bank term loan agreements.

Centerior plans to return to the sale of authorized but unissued common stock under certain of its employee and share owner stock purchase plans in 1991 and expects to raise about $40,000,000-S45,000,000 during the year through such common stock sales.

Toledo Edison's first mortgage bonds and preferred stock are rated belov investment grade by Duff & Phelps and its preferred stock and unsecured notes are rated below investment grade by both Moody's and S&P. Cleveland Electric's preferred stock is currently rated below investment grade by both Duff & Phelps and S&P. The current securities satings for the Centerior Utilities are as follows:

S&P Moody's Duff & Phelps Cleveland Electric BBB-First Mortgage Bonds BBB- Baa2 BB+ baa2 BB Preferred Stock Toledo Edison First Mortgage Bonds BBB- Baa3 B3+

Preferred Stock BB+ ba2 I B-Unsecured Notes BB+ Bal --

GENERAL REGULATION Holding Company Pegulation Centerior Energy is currently exempt from regulLtion under the Public Utility Holding Company Act of 1935.

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State Utility Commisrions l

The Centerior Utilities are subject to the jurisdiction of the PUC0 vith re-

spect to rates, service, accounting, issuance of securities and other matters, i Under Ohio lav, municipalities may regulate rates, subject to appeal to the PUC0 if not acceptable to the utility. See "Electile Rates--General" for a

description of certain aspects of Ohio rate-making lav. The Centerior

! Utilities are also subject to the jurisdiction of the PaPUC in certain re-spects relating to their ovnership interests in generating facilities located in Pennsylvania.

The PUC0 is composed of five commissioners appointed by the Governor of Ohio from nominees recommended by a Public Utility Commission Nominating Council.

Nominees must have at least three years' experience in one of several disci-plines. Not more than three commissioners may belong to the same political party.

Under Ohio lav, a public utility must file annually with the PUC0 a long-term forecast of customer loads, facilities needed to serve those loads and prospective sites for those facilities. This forecast must include the following:

(1) Demand Forecast--the utility's 20-year forecast of sales and peak demand, including and excluding the effect of demand-side management programs.

(2) Integrated Resource Plan (requf red biennially)--the utility's projected mix of resource options to meet the projected demand.

(3) Short-Term Implementation Plan and Status Repott (required biennially)--

the utility's discussion of hov it plans to implement its integrated resource plan over the next four years. Estimates of annual expenditures and security issuances associated with the integrated resource plan over the four-year period must also be provided.

The PUC0 must hold a public hearing on the long-teim forecast at least once every five years to determine the reasonableness of such forecast. The PUC0 and the OPSB are required to consider the record of such hearings in proceedings for approving facility sites, changing rates, approving security issues and initiating energy conservation programs. Centerior expects the PUC0 to hold a public hearing on the Centerior Utilities' 1992 iong-term forecast.

The PUC0 has jurisdiction over certain transactions by companies in an elec-tric utility holding company system if it includes at least one Ohio electric utility and is exempt from regulation under Section 3(a)(1) or (2) of the Public Utility Holding Company Act of 1935. An Ohio electric utility in such a holding company system, such as Centerior, musi obtain PUC0 approval to invest in, lend funds to, guarantee the obligations of or otherwise finance or transfer assets to any nonutility company in that holding company system, unless the cransaction is in the ordinary course of business operations in which one company acts for or with respect to another company. Also, the holding company in such a holding company system must obtain PUC0 approval to

make any investment in any nonutility subsidiaries, affiliates or associates ,

of the holding company if such investment vould cause all such capital to exceed 15% of the consolidated capitalization of the holding investments company unless such funds vete provided by nonutility subsidiaries, affiliates or associates.

The PUC0 has a reserve capacity policy for electric utilities in Ohio stating that (i) 20% of service area peak load excluding interruptible load is an appropt' ate generic benchmark for an electric utility's reserve margin; (ii) a reserve matgin exceeding 20% gives rise to a presumption of excess capacity, but may be appropriate if it confers a positive net present benefit to customets or is justified by unique system characteristics; and (iii) appropriate remedies for excess capacity (possibly including disallowance of costs in rates) vill be Jetermined by the PUC0 on a case-by-case basis.

Excess capacity was not an issue fot the Centerior Utilities in their February 1991 rate increases. See " Electric Rates--1989 Rate Orders".

OhioPowerSitingBoatj The OPSB has state-wide jurisdiction, except to the extent pte-empted by Federal law, over the location, need for and certalu environmental aspects of electric generating units with a capacity of 50,000 kilowatts or more and transmission lines with a rating of at least 125 kV.

Federal Energy Regulatory Commission The Centerior Utilities are each subject to the jurisdiction of the FERC vith respect to the transmission and sale of power at wholesale in interstate com-merce, interconnections with other utilities, accounting and certain other matters. Cleveland Electric is also subject to FERC jurisdiction with respect to its ownership and operation of the Seneca Plant.

Nuclear Regulatory Commission The nucleat- generating units in which the Centerior Utilities have an interest are subject to regulation by the NRC. The NRC's jurisdiction encompasses broad supervisory and regulatory powers over the construction and operation of nuclear reactors, including matters of health and safety, antitrust considera-tions and environmental impacts.

Owners of nuclear units are required to purchase the full amount of nuclear liability insurance available. See Note 4(b) for a description of nuclear in-surance coverages.

Other Regulation The Centerior Utilities are subject to regulation by Federal, state and local authorities with regard to the location, construction and operation of certain facilities. The Centerior Utilities are also subject to regulation by local authorities with respect to certain zoning and planning matters.

ENVIROMMINTAL REGULATION General The Centerior Utilities are subject to regulation with respect to air quality, vater quality and vaste disposal matters. Federal environmental legislation affecting the operations and properties of the Centerior Utilities includes the Clean Air Act, the Clean Air Act Amendments, the Clean Vater Act, the Resource Conservation and Recovery Act of 1976 and Superfund. The require-ments of these statutes and related state and loc al laws are continually changing due to the promulgation of new or revised regulations, the results of judicial and agency proceedings and frequent amendment of these statutes.

Compliance with such laws and regulations may requit e the Centerior Utilities to modify, supplement, abandon or replace facilities and may delay or impede construction and operation of facilities, all at costs which could be substan-tial. The Centerior Utilities expect that the impact of such costs vould eventually be reflected in their respective rate schedules. Cleveland Electric and Toledo Edison plan to spend, during the period 1991-1993,

$30,000,000 and $4,000,000, respectively, for pollution control facilities.

The Centerior Utilities believe that they are currently in compliance in all material respects with all applicable environmental laws and regulations, or to the extent that one or both of the Centerior Utilities may dispute the applicability or interpretation of a particular environmental law and regula-tion, the affected company has filed an appeal or has applied for permits, revisions in requirements, variances or extensions of deadlines.

Concerns have been raised regarding the possible health effects associated with electromagnetic fields. Scientific research has yielded inconclusive results. Additional studies are being conducted. If electromagnetic fields are ultimately found to pose a health risk, the Centerior Utilities may be required to modify transmission and distribution lines or other facilities.

Air Quality Control Under the Clean Air Act, the Ohio EPA has adopted Ohio emission limitations for particulate matter and sulfur dioxide for each of the Centerior Utilities' plants. The Clean Air Act provides for civil penalties of up to $25,000 per day for each violation of an emission limitation. The U.S. EPA has apptcved the Ohio EPA's emission limitations and the related implementation plans except for fugitive dust emissions and certain sulfur dioxide emissions. The U.S. EPA has adopted separate sulfur dioxide emission limitations for each of the Centerior Utilities' plants. In November 1990, the Clean Air Act Amendments were signed into law imposing restrictions on nitrogen oxides and making sulfur dioxide limitations significantly more severe beginning in 1995.

A variety of options vill be available to meet the nev requirements, including switching to lover sulfur fuel, purchasing emission allowances from other companies, installing scrubbers or reducing generation. See Note 3(b). The Clean Air Act Amendments also require studies to be conducted on the emission of air toxies from utilities. The results of these studies may lead, if deemed necessary by the U.S. EPA, to the promulgation of regulations to control the emission of air toxics from utilities.

The Centerior Utilities' fossil fuel-fired generating units in Ohio comply ,

with the current U.S. EPA and Ohio EPA limitations on emissions of particulate matter and sulfur dioxide applicable to those plants. Currently, the U.S. EPA enforcement policy and Ohio regulations allow compliance with sulfur dioxide emission limitations to be based on a 30-day averaging period.

In 1985, the U.S. EPA issued revised regulations specifying the extent to which stack height may be incorporated into the establishment of an emission limitation. Pursuant to the revised regulations, the Centerior Utilities sub-mitted to the Ohio EPA information intended to support continuation of the stack height credit received under the previous segulations for stacks at Cleveland Electric's Avon Lake and Eastlake Plants and Toledo Edison's Bay Shore Station. The Ohio EPA has accepted the submissions and forwarded them to the U.S. EPA for approval.

In January 1988, the District of Columbia circuit Appeals Court remanded portions of the 1985 regulations to the U.S.

EPA for further consideration. The Centerior Utilities cannot predict what action the U.S. EPA may take or whether the ultimate outcome vill have a material adverse effect on either of the Centerior Utilities.

In 1986, the Sixth Circuit Appeals Court ruled on a challenge filed by an environmental group and several states east of Ohio seeking to overturn the Federal sulfur dioxide emission limitations for the Eastlake and Avon Lake Plants. The Court ruled that the validity of the air quality model used by the U.S. EPA to set the sulfur dioxide emission limitations for those plants had not been adequately established. The Court permitted the Ohio sulfur dioxide emission limitations to remain in effect while the U.S. EPA completed its review of the application of the air quality model. The U.S. EPA, along with Centerior, demonstrated the validity of the model used to establish the sulfur dioxide emis: 'on limitations for those plants. In January 1990, the U.S. EPA proposed to reinstate the overturned emission limitations; however, final action has not been taken by the U.S. EPA.

In July 1990, the U.S. EPA informed Centerior that it had changed the factor used to calculate sulfur dioxide emissions f rom coal- fired units. This change made it more difficult for fossil-fueled power plants to comply with emission limitations. In August 1990, the U.S. EPA issued an NOV against Toledo Edison stating that the Bay Shore Station had violated its sulfur dioxide limitation at various times in 1989 and 1990. Based upon discussions with the U.S. EPA, If Toledo Edison believes that no fine vill be levied as a result of the NOV.

the method of calculating sulfur dioxide emissions is changed as the U.S. EPA has indicated, Toledo Edison believes it will incur additional operating costs but does not believe that such additional costs vill result in a material adverse effect on its financial condition or results of operations.

Congress is considering legislation to reduce emis.sions of gases that are thought to cause global varming. The burning of coal is thought to be a cause of global varming. The cost of operating coal-fited plants could increase significantly and coal-fired generating capacity could decrease significantly if such legislation is adopted.

Bater Quality Control The Clean Vater Act requires that power plants obtain permits that contain certain effluent limitations (that is, limits on discharges of pollutants into bodies of vater). It also provides that permits foi new power plants include even more stringent effluent limitations, including zero discharges, where gracticable. The Clean Vater Act also requires that cooling vater intake structures for power plants incorporate the best available technology for minimizing adverse environmental impact. The Clean Vater Act requires the states to establish vater quality standards (which could result in more strin-gent effluent limitations for facilities than those described above) and a permit system to be approved by the U.S. EPA. Vioiators of effluent limita-tions and water quality standards are subject to a civil penalty not to exceed

$25,000 per day for each such violation.

The Clean Vater Act permits thermal effluent limitations to be established for a facility which are less stringent than those which otherwise vould apply if the ovner can demonstrate that such less stringent limitations are sufficient to assure the protection and propagation of aquatic and other vildlife in the affected body of water. By 1978, the Centerior Utilities had submitted to the Ohio EPA such demonstrations for reviev vith respect to their Ashtabula, Avon Lake, Lake Shore, Eastlake, Acme and Bay Shore plants. The Ohio EPA has taken no action on the submittals.

Cleveland Electric's Ashtabula, Avon Lake, Eastlake and Lake Shore Plants and Toledo Edison's Bay Shore Station and Davis-Besse have received NPDES permit renewals from the Ohio EPA vhich incorporate applicable effluent limitations.

Applications have been filed with the Ohio EPA for the reneval of NPDES permits for Cleveland Electric's Perry Plant and Toledo Edison's Acme Plant, but have not yet been approved. However, Acme and Perry may continue to operate under the expired permits while the applications for reneval are pending. Cleveland Electric has appealed the NPDES permit granted for the Ashtabula Plant to the Ohio EBR because the Ohio EPA imposed more stringent limitations. Violations of these NPDFS permits are considered to be violations of the Clean Vater Act subj ec t to the penalty discussed above.

In 1990, the Ohio EPA issued revised vater quality standards applicable to Lake Erie and v Ters of the State of Ohio. The most recent NPDES renewals did not contain any additional effluent limitations resulting from the revised standards. However, the revised standards may serve as the basis for more stringent effluent limitations in future NPDES permits. Such limitations could result in the installation of additional pollution control equipment and increased operating expenses.

Vaste Disposal Superfund established programs addressing the cl<an-up of hazardous vaste disposal sites, emergency preparedness and other issues. Cleveland Electric is aware of its potential involvement in the clean-up of seven hazardous vaste sites, and Toledo Edison is aware of its potential involvement in the clean-up of two hazardous vaste sites. The majority of these nine sites are subject to Superfund. Centerior and the Centerior Utilities believe that the ultimate outcome of these matters will not have a matarial adverse effect on their respective financial conditions or results of nreratn:ns.

The Federal Resource Conservation and Recovery Act exempts certain electric utility vaste products from hazardous vaste disposal requirements until the U.S. EPA has completed a study of these vastes and existing disposal methods.

The Centerior Utilities are unable to predict whethei the results of the study vould affect them or, if affected, the costs relating to any required changes in the operations of the Centerior Utilities.

ELECTRIC RATES Ceneral Under Ohio lav, rate base is the original cost less depreciation of a utility's total plant adjusted for certain items. The lav permits the PUCO, in its discretion, to include CVIP in rate base when a construction project is at least 75% complete, but limits the amount included to 10% of rate base ex-cluding CVIP or, in the case of a project to constiuct pollution control fa-cilities which would remove sulfur and nitrous oxide from flue gas emissions, 20% of rate base excluding CVIP. When a project is completed, the portion of its cost which had been included in rate base as CVIP is excluded from rate base until the revenue received due to the CVIP inclusion is offset by the revenue lost due to its exclusion. During this period of time, an AFUDC-type credit is allowed on the portion of the project cost excluded from rate base.

Also, the lav permits inclusion of CVIP for a particular project for a period not longer than 48 consecutive months, plus any time needed to comply with changed governmental regulation, standards or appiovals. The PUC0 is em-powered to permit inclusion for up to another 12 months for good cause shown.

If a project is canceled or not completed within the allovable period of time after inclusion of its CVIP has started, then CVIP is excluded from rate base and any revenues which resulted from such prior inclusion are offset against future revenues over the same period of time as the CVIP was included.

Current Ohio lav further provides that requested rates can he collected by a public utility, subject to refund, if the PUC0 does not make a decision within 275 days after the rate request application is filed. If the PUC0 does not make its final decision within 545 days, revenues collected thereafter are not subject to refund. A notice of intent to file an application for a rate in-crease cannot be filed before the issuance of a fina) order in any prior pend-ing application for a rate increase or until 275 days after the filing of the prior application, whichever is earlier. The minimum period by which the notice of intent to file must grecede the actual filing is 30 days. The test year for determining rates may not end more than nine months after the date the application for a rate increase is filed.

Under Ohio law, electric rates are adjusted every six months, after a PUC0 hearing, to reflect changes in fuel costs. Any diiterence between actual fuel costs during a six-month period and the fuel revenue: recovered in that period is deferred and is taken into account in setting the fuel recovery factor for a subsequent six-month period.

The PUC0 has authorized the Centerior Utilities to adjust their rates on a seasonal basis such that electric rates are higher in the summer.

l Also, under Ohio lov, municipalities may regulate rates, subject to appeal to the PUC0 i' not acceptable to the utility. If municipally fixed rates are ac-cepted by the utility, such rates are binding on both parties for the speci-fled term and cannot be changed by the PUCO. See " Operations--Competitive Conditions--Toledo Edison" for a discossion of Toledo Edison's rate contract vith AMP-Ohio.

1989 Rate Orders In March 1988, the Centerior Utilities separately filed with the PUC0 appli-cations requesting rate increases. Each Centerior Utility proposed a gradual increase in its rates so as to " phase in" full recovery of all its allovable costs of Perry Unit 1 and Beaver Valley Unit 2 over a 10-year period.

On January 11, 1989, the Centerior Utilities entered into a settlement agree-ment with the majority of those parties who had intervened in the Centerior Utilities' then-pending electric rate cases, and, on January 31, 1989, the PUC0 issued orders to the Centerior Utilities which adopted, in its entirety, the January 11 settlement. Subsequently, all pending prudence investigations and litigation involving the Centerior Utilities' nuclear investments were terminated. A complete discussion of the rate increases and other major provisions of the PUCO's January 31, 1989 orders is included in Note 6. As discussed in the ninth paragraph of Note 6 to Centenior's and Toledo Edison's Financial Statements Toledo Edison planned to reduce electric rates in the City of Toledo and the rest of Toledo Edison's seivice area which had not a,zreed to the rate reduction package described in the eighth paragraph of such Note 6. The request was made to the PUCO, and the PUC0 approved the rate reduction effective Match 1, 1991. Also, as discussed in the third paragraph o f' Centerior's, Cleveland Electric's and Toledo Edison's Management's Financial Analysis contained under Item 7 of this Report, the Centerior Utilities planned to request the PUC0 to authorire the accrual of nuclear plant depreciation on a straight-line basis and the accrual of post-in-service interest carrying charges and deferral of depreciation for facilities that are in service but not yet recognized in rates. The requests were filed with 'he PUC0 on March 22, 1991.

OPERATIONS Sales of Electricity Kilowatthour sales by the Centerior Utilities follow a seasonal pattern marked by increased customer usage in the summer for ali conditioning and in the vinter for heating. Historically, Cleveland Electric has experienced its heaviest demand for electric service during the summer months because of a significant air conditioning load on its system and a relatively lov amount of electric hea t ir.g load in the vinter. Toledo Edison, although having a significant electric heating load, has experleneed in recent years its heaviest demand for electric service during the summer months because of heavy air conditioning usage.

The Centerior System's largest customer is a majur steel mnnufacturer which has two major steel producing facilities served by Cleveland Electric. Sales to this customer in 1990 accounted for 3% and 4% of the 1990 total electric operating revenues of Centerior Energy and Cleveland Electric, respectively.

The loss of this customer (and the resultant loss of another large customer

whose primary product is purchased by the tuo stoel producing facilities) ,

vould reduce Centerior Energy's and Clevelar,d Elect 11c's net income by about

$39,000,000 based on 1990 rales levels.

The largest customer served by Toledo Edison is a major automobile manuf.4-turer. Sales to this customer in 1990 accounted for 1% and 3% of the 1s.,

total electric operating revenues of Centerior Energy and Toledo Edison, re-spectively. The loss of this customer vould redere Centerior Energy's and Toledo Edison's net inco.ae by about $11,000,000 basco on 1990 sales levels.

4 Operating Statistics Centerior System Years Ended December 31,

, TF90 1989 ~ 1988 Energy Generated (Millions of kVh):

Net Generation 30,595 32,296 29,381 Net Purchases (1,926) ,_j2,785) 920 Total Energy J M2 m 29.511 _JDJ21 Electris Sales (Hillions of kVh):

Resiccatial 6,666 6,806 6,920 Commercial 6,848 ,830 6,577 Industrial 12,168 12,520 -12,793 Wholesale 148 429- 863 Other 959 996 946 Total Electric Sales _26.78S [~~jJajg1 28.099 Customers (End of Period):

Residential 918,965 914,020 909,182 Commercial 94,522 93,833 92,132 Industrial & other 12,906 12,763 12,305 Total Electric Customers L.0 & JS3 E 022,11] 1.d111L2 Operating Revenues (In Thousands):

Residential $ 719,078 $ 685,735 $ 637,329 Commercial 668,910 616,902 53/,861

-Industrial 779,391 746,534 675,594

-Other 189,754 204,769 84.524 Total Retail 2,357,133 7",253,940 _1,935,298 Wholesale 10,542 48,496 102,262 Total Operating Revenues $Llja62) $L3DL!t3$ $1,M L310 i

1

Cleveland Electric I, Years Ended December 31 1990 1989 Thg8 Energy Generat(d (Millions of kVh):

fiet Generation 20,841 21,530 20.236 14et Purchases _ _ _ . (643) _ _ _ (777) _

1_ 091 Total Energy _1QQ _ 2 M (1 Q1.,_ _ ,

Electric Sales (Millions of kVh):

Residential 4.716 4,789 4,852 Commercial 5,234 5,208 4,998 Industrial 8,551 8,780 9,013 VI,olesale -

87 481 Other 463 501 472 Total Electric Sales 10dM JMM _l.ML Customers (End of Period):

Residentini 065,000 660,786 657,592 Commercial 68,700 68,030 66,606 Industrial 6 Other 8,351 81329 8,203 3Q1

~

Total Electric Customers _742._Q)] J MM Operating Revenues (In Thousands):

Pesidential $ 495,158 $ 469,803 $ 436,413 commercial 494,370 452,911 395,165 Indus* rial 543,813 519,854 476,063 Other 122,701 117,220 59,804 Total Retail 1,656,042 F359,788 1,367,445 Vholesale (198) 31,874 84,133 Total Operating Revenues Sldph8}3 $[.)JiaM2 S M L 518

i j Toledo Edison .

1990 Years Ended T989December 19 31,H8 Energy Generated (Millions of kVh):

Net Generation 9.754 10,7$8 9,145 Net Purchased (499) (1,115) 385 Total Energy _912M ypj JJQ Electric Sales (Millions of kVh): 2,068 Residential 1,950 2,017 Commercial 1,614 1,622 1,579 Industrial 3.617 3,740 3,780 Vholesale 932 1,175 938 Other 496 495 474 Total Electric Sales  ;.jldd _ 9.049 _LQg Customers (End of Period):

Residential 253,965 253,234 251,590 Commercial 25,822 25,803 25,526 Industrial & Other 4,555 4 434 4,102 Total Electric Customers 284.342 3e 1 281 21_8 Operating Revenues (In Thousands):

Residential $223,920 $215,932 $200,916 Commercial 174,540 163,991 142,696 Industrial 235,578 220,680 199,521 Other 79,535 99,451 342 961 Total Retail 713,573 706.054 M8,593 Vhtlesale 113,513 120,749 49 Total Operating Revenues $pj R jk Sg2fgjQQ) $ @ d,903 1

4

l l

Operating Nuclear Units The Cente':for Utilities' generating facilities include, among others, three '

nuclear units owned or leased by the CAPC0 broup--Perry Unit 1._ Beaver Valley Unit 2 and Davis-Besse. Thes. three units are in commercial operation.

Cleveland Electric has responsibility for operating Perry Unit 1. Duquesne has responsibility for operating Beaver Valley Unit 2 and Toledo Edison has re-

, sponsibility for operating Davis-Besse. Cleveland I:lectric and Toledo Edison ovn, respectively, 31.11% and 19.91% of Perry Unit 1. 24.47% and 1.65% of Beaver Valley Unit 2 and $1.38% and 48.62% of Davis-Desse. Cleveland Electric and Toledo Edison also lease, as joint lessees, another 18.26% of Beaver

, Valley Unit 2 as a result of a September 1987 sale and leaseback transaction (see Note 2).

Davis-Besse vas placed in commercial operation in 1977, and its operating license expires in 2017. . Perry Unit I and Beaver Valley Unit 2 vere placed in commercial operation in 1987, and their operating Ilcenses expire in 2026 and 2027, respectively.

The nuclear plant performance standards set for the Centerior Utilities for the 1991~1998 period as a result of the PUC0's January 1989 rate orders (see I

Electric Rates--1989 Rate Orders" and Note 6) vill he based on rolling three-year industry averages of operating availability for pressurized Vater reactors and for boiling water reactors. Operating availability is the ratio of the number of hours a unit is available to generate electricity (whether or not the unit is oper .ed) to the number of hours in the period, expressed as a percentage. At year-end 1990, the industry three-year average operating availability for pressurized vater reactors such as Davis-Besse and Beaver Valley Unit 2 vas 73% and f or boiling vater reactort: such as Perry Unit I was I 73%. Initially, the averages of the Centerior nuclear units over the 1988- l 1990 period vill be the basis for comparison against the appropriate industry '

average over the same period. As of January 1991, the three-year average operating availability of the Centerior Utilities' pressurized water reactors was 80% and boiling vater reactor was 65%. These averages vill produce a banked performance benefit of betveen $3,000,000 and $4,000,000 under the terms of the PUCO's January 1989 rate orders for the first three-year accounting period. This banked benefit can be used to offset future below-standard performance if that should occur.

In the spring of 1990, Davis-Lesse had a modification and refueling outage which lasted about five months. The long duration was required to fulfill the '

centerior Utilities' commitment to the NRC to complete its Performance Improvement Program in an expeditious manner. As a iesult, Davis-Besse had an operating availability of 55.2% for 1990. In September 1990, Perry Unit I and Beaver Valley Unit 2 commenced refueling and maintenance outages which lasted until-January 1991 and November 1990, respectively. These outages resulted in operating availabilities for 1990 of 65.3% for Perry Unit I and 76.9% for Beaver Valley Unit 2. Sin n -theit-seturn to service, all three units have experienced high availability factors. The situation where all three nuclear units are down for refueling in the same year vill repeat itself every three years due to Centerior's 18-month fuel cycle operating strategy and the i

spring / fall outage schedule, with Davis-Besse in the opposite season from Perry Unit I and Beavet Valley Unit 2. Only Davis-Besse The next refueling is scheduled for outages

' refueling in 1991, and that vill be a fall outage.

for Perry Unit I and Beaver Valley Unit 2 are scheduled for spring 1992.

Cleveland Electric has responsibility for maintaining Perry Unit 2, whose consttuttion was suspended by the CAPC0 Group companies in 1985 (see Note 3(c)). Cleveland Electric and Toledo Edison own 31.11% and 19.91%,

respectively, of Petty Unit 2.

Nuclear Unit Concerns See Note 4 for a discussion of potential problems facing ovners of nuclear genetaling units.

Competitive Conditions Genetal. The Centerlot Utilities compete in their respective service areas Wh suppliers of natural gas for space, vater and pro:ess heating and appli-ances. The Centerior Utilities also are engaged in competition to a lesser extent with suppliers of oil and liquified natural gas for heating purposes and with suppliers of cogeneration equipment.

The Centeriot Utilities also compete with municipally owned electric systems within theit respective service ateas. Certain municipal officials in several of the municipalities served by the Centerior Utilities have suggested that theit municipalities investigate the economic feasibility of establishing and operating municipally ovned electric systems. Vith the exception of Clyde, Ohio, as discussed belov undet " competitive conditions--Toledo Edison", none of those municipalities has obtained authorization to establish such a system.

The Centerfor Utilitles face continuing competition from locations outside their service areas which are promoted by governmental and private agencies in attempts to intluence potential and existing commeicial and industrial cus-tomets to locate in their respective areas.

Cleveland Electric and Toledo Edison also periodically compete with other pt oducers of electricity foi sales to electric utilities which are in the market for bulk pwer purchases. The Centerio Utilities have inter-connections with other electric utilities (see " Item 2 Properties--General")

and provide a transmission system for wheeling povei from the Hidwest to the East. Revenue ftom these types of sales are excluded from the operation of the rate phase-in plans discussed in Note 6 and in Management's Financial Analysis contained under Item 7 of this Report.

Cleveland Electric. The City of Cleveland operate: CPP in competition with Cleveland Electric. CPP is pr imarily an electric distribution system which supplies elect ic power in approximately 35% of the City's area and to approximately 23% (about 50,000) of the electric consumers in the City--equal to about 7% of all customers served by Cleveland Elettric. CPP's kilowatthour sales and revenues are equal to about 3% of Cleveland Electric's kilavatthour sales and revenues. Much of the area served by CPP overlaps that c f Cleveland Electric. Cleveland Electtic is obligated to nake available ur to 100,000

kilowatts of CPP's energy requirements over two 138 kV interconnections.

However, in recent years, CPP has not made significant power purchases from Cleveland Electric. In 1990, Cleveland Electric provided less than 1% of CPP's energy requirements. The balance of CPP's power is purch m ed from other sources and transmitted or "vheeled" over Cleveland Electric's transmission system. Por all classes of customers, Cleveland Electric's rates are higher than CPP's rates due largely to lover-cost power available to CPP and to the exemption from taxation enjoyed by CPP. In 1983, CPP announced its intention to convert some of Cleveland Electric's customers to its serrice. In 1987, the City of Cleveland sold $50,000,000 of special obligation bonds payable only from revenues of CPP. CPP stated that it plans to use the proceeds primarily to construct by 1992 new transmission and distribution facilities extending into easterly portions of Cleveland, comprising over 20% of the area )

i of the City, which nov are served exclusively by Cleveland Electric. The '

construction schedule of CPP is intended to enable it to start offering service in that area as early as 1991 to residential and commercial customers (including some classified as small industrial by Cleveland Electric) and various City facilities. The expansion, as now planned, could take away about 20,000 of Cleveland Electric's customers, primarily residential users, over the next several years. This could reduce Cleveland Electric's revenues by about $10,000,000 although there vould be partially offsetting reductions in  :

operating expenses and taxes. Cleveland Electile has retained large commercial and industrial customers in Cleveland despite CPP's expansion efforts, primarily because of Cleveland Electric's higher level of reliability. Over the past three years, Cleveland Electric has experienced the net loss of an insignificant number of customers (about 2,400), which vere primarily residential, to the CPP system.

In May 1988, the Ohio Supreme Court ruled that CPP must pay back the loan of approximately $29,400,000 it had received from tax revenues of the City of Cleveland, Which loan was subsequently forgiven by the City. Cleveland Electric had filed a suit in August 1984 on behalf of itself and all other taxpayers in the City of Cleveland claiming that the transfer of tax funds f rom the City to CPP was in violation of the City's c harter. The Ohio Supreme Court agreed with Cleveland Electric and remanded the case to the trial court for a determination of a repayment plan for the ielmbursement of tax funds with proper interest. In June 1990, a cuyahoga County Common Pleas Court '

ruled that CPP must repay at least $20,000,000 to the City plus interest to be ,

determined by that Court. In July 1990, the City announced that it vould appeal the Court's ruling, but authorized an increase in CPP's electric rates to cover the repayment if the appeal proves unsuccessful. In November 1990, the Common Pleas Court affirmed the repayment plan submitted by the City of Cleveland which requires CPP to repay the City about $46,900,000 over a period ending in 2000. The repayment plan has been appealed to the Cuyahoga County Court of Appeals by both the City and Cleveland Electric.

Also in November 1990, voters in the City of Cleveland approved am amendment to the City's Charter which would allow the City to transfer tax monies to support municipal utility departments, including, CPP, without requiring the repayment of such transfers.

The City of Painesville owns and operates an electric generation and distribu-tion system which supplies electric power exclusively to customers in the City of Painesville. It also serves small portions of Painesville and Perry Town- ,

ships which also are served by Cleveland Electric. The number of customers served by the Painesville system is approximately 1% of the number of cus-tomers served by Cleveland Electric. Cleveland Electric has a 138 kV inter-connection vith the City of Prinesville and provides power for emctgency  ;

purposes only.

currently, two commercial customers and one industilal customer of Cleveland Electric have cogeneration installations. A number of customers have inquired i i about cogeneration applications although there vere no new installations in 1990. Cogeneration vendors continue to be active in Cleveland Electric's service area.

Toledo Edison. Located wholly or partly within Toledo Edison's service area .

are six tural electric cooperatives, five of which are supplied with power, i transmitted in some cases over Toledo Edison's faellities, by Buckeye Power, i Inc. (an affiliate of a number of Ohio rural electile cooperatives) and the sixth is supplied by Toledo Edison. l Also -located within Toledo Edison's service area are 16 municipally owned electric distribution systems, three of which are supplied by other electric systems. Toledo Edison serves the other 13 municipalities at wholesale rates l through AMP-Ohio. In December 1989, Toledo Edison commenced billing AMP-Ohio under a new agreement vhich is in the process of being approved by the FERC. i Under this new 20-year agreement, Toledo Edison vill supply certain power l requirements of AMP-Ohio and transmission service for 13 of its municipal ,

members. Rates under the proposed contract are permitted to increase annually I to compensate for increased costs of operation. Less than 2% of Toledo j Edison's total electric operating revenues in 1990 vas derived from sales i under the AMP-Ohio contract. l The municipalities which have entered into an agreement with AMP-Ohio have been purchasing some of their por r needs from other sources at rates lover than Toledo Edison's and transmitting and delivering such power through Toledo Edison's transmission and distribution systems. J In November 1987, the City of Clyde, Ohio, initiated plans to -establish and operate a municipally owned electric distribution system. Toledo Edison's largest customer in Clyde, which accounted for about 75% of Toledo Edison's total sales to Clyde and represented over SS million in annual revenues, converted to the Clyde system in March 1989. As of March 1991, the distri-bution system was 90% complete, and about 1,900 Toledo Edison customers in Clyde (over 80% of the total) have converted or have requested conversion to Clyde Light & Pover. For most customer classes, Toledo Edison's rates are significantly higher than Clyde's rates.

In October 1989, the City of 'Ioledo adopted an nrdinance establishing an Electric Franchise Review Committee for the purpose of studying Toledo Edison's franchise agreement with the City to determine if alternate energy sources are available. The committee is investigating the feasibility of l establishing a municipal electric system within the City of Toledo and the l

1 1

feasibility of utilizing other alternative electric power sources.

Consultants have been hired to assist in these studies. Toledo Edison is continuing to make an effort to address the City's concerns. See " Electric Rates--1989 Rate Orders".

Two municipalities currently served by Toledo Edison have authorized or completed studies on the fearibility of establishing municipal electric systems within such municipalities. However, both of these municipalities have entered into five-year rate ordinances with Toledo Edison whereby they have sgreed that the lover rates shall remain in effect as long as 1oledo Edison is the sole supplier, as discussed generally in Centerior's and Toledo Edison's Note 6.

Currently, one commercial customer of Toledo Edison has a cogeneration opera-tion. Two commercial cogeneration installations have ceased operation in 1990 due to pVC0 approval of rate incentive agreements. However, cogeneration vendors continue to be active in Toledo Edison's service area.

Fuel Supply Generation by type of fuel for 1990 was 75% coal-11 red and 25% nuclear for Cleveland Electric vas 57% coal-fired and 43% nuclear for Toledo Edison; and was 69% coal-fired and 31% nuclear for the Centerior System.

Coal. In 1990, Cleveland Electric and Toledo Edison burned 6,426,000 tons and 2,142,000 tons of coal, respectively, for electric generation. Each utility normally naintains a reserve supply of coal sufficient for about 40 days of normal operations. On March 1, 1991, this reseive was about 44 days for plants operated by Cleveland Electric, 59 days for plants operated by Toledo Edison and 85 days for the Mansfield plant, which is operated by pennsylvania power.

In 1990, about 49% of Cleveland Electric's coal requirements was purchased under long-term contracts with the longest remaining term being almost 10 years. In most cases, these conttacts provide for adjusting the price of the coal on the basis of changes associated with coal quality and mining costs.

The sulfur content of the coal purchased under the long-term contracts ranges from about 2% to about 4%. The balance of Cleveland Electric's coal was purchased on the spot market with sulfur content ranging from less than 1% to 3.5%.

In 1990, about 98% of Toledo Edison's coal requirements was purchased under long-term contracts with the longest remaining term being almost 10 years. In most cases, these contracts provide for adjusting the price of the coal en the basis of changes associated with coal quality and mining costs. The sultur content of the coal purchased under the long-tetm 'ontracts tanges from less than 1% to 4%. The balance of Toledo Edison's coal was purchased on the spot market with sulfur centent of about 1%.

One of Cleveland Electric's long-term coal supply contracts is with Ohio Valley. Cleveland Electric has agreed to pay Ohio Valley cer'.ain amounts to cover Ohio Valley's costs regardless of whether coal is actually delivered.

Included in those costs are amounts sufficient to service certt.in long-term debt and lease obligations incurred by Ohio Valley. If the coal sales

any teason, including the inability to use the agreement is ter minated f oi coal, Cleveland Elect ic must assume certain of Ohio Valley's debt and lease that obligations and may incut othet expenses. Cleveland Electric believes the cost of assuming such obligations and incurring financialsuch expenses position. vould not The principal have a matetial adverse effect upon its amount of debt and termination values of leased property covered by Cleveland Centerior and Electtic's agteement was $42,288,000 at December 31, 1990. from sales of coal to Cleveland Electtic expect that Ohio Valley reventu s Cleveland Electric vill continue to be sufwith ficient fot Ohio Valley to meet its Ohio Valley expires in 1997.

debt and lease obligations. The conttact The CAPCO Gloup campanies, including the Centerior Villities, have a long-term with ;ou to and Consol f or the supply of about 75%-85% nf the annual contract The contract tune through at least the end coa l needs of the Hansfield Plant.

of 1999, and the price of coal is adjustaule to soflect changes in labor, The CAPC0 Group companies have materials, t r anspot tat ion and othet costs.

guatanteed, severally and not jointly, the debt two and lease of the minesobligations which sepply incurted the by Quatto to develop, equip and opetate the total dollar amount ef Quarto's Mansfield Plant. At December 31, 1990, debt and lease obligations guaranteed by Cleveland Electric vas S42,805,000 Centeriot, Cleveland Electric and and by Toledo Edison was $24,065,000. to the CAPC0 Tcledo Edison expect that Ouatto tevenues from sales of coal Group companies vill c:ntinue to be sufficient fot Quarto to meet its debt and lease obligations.

Compliance with the C1can Ait Act Amendments vill probably require the The Centerior Centerior Utilities to increase their usage of low-sulfur coal.

Utilities believe that adequate supplies of low-sullutthan coalthevillprices be available that the at prices which should not be substantially greater Centetfor Utilities vould otherwise expect to pay.

Nuclear. The acquisition and utilization of nuclear fuel involves six dis-convet sion to tinct steps: (i) supply ci uranium oxide raw material, (ii) uranium hexafluoride, (iii) enrichment, (iv) fabrication into fuel assemblies, (v) utilization as fuel in a auclear reactor and (vi) storing and rept otessing or disposing of spent fuel. The Centetior Utilities have inventories of rav material sufficient to provide nuclear fuel through 1994 for the operationfuel of their nuclear f,enerating units and have contracts for conversion of that The CAPCO Group companies and fabrication services for most of that fuel.

have a 30-year contract with th DOE vhich vill supply up to all of the needed entichment services for theit nuclear units' fuel supply for that period. The Substantial required fabtication services are available.

additional additional fuel vill have to be obtained Perry in the future over the remaining Unit 2 is completed. There is a useful lives of the units and if the industry's nuclear plentiful supply of uranium oxide t w matuial to meet fuel needs.

fuel reprocessing is not commercially available. Off-site disposal of Spent the CAPC0 Group companies have spent nuclear fuel is also unavailable, but contracts with the DOE vhich provide for the futute acceptance of spent fuel Putsuant to the Nuclear Vaste Policy for disposal by the Federal government. indicated it vill begin accepting Act of 1982, the Federal govetoment has On 41te storage capacity at spent fuel from utilities by the year 2010.

Davis-Besse and Beaver Valley Unit 2 should be sulficient through 1996 and

2009, respectively. On-site storage capacity at the Perry Plant should be sufficient through 2006 for Perry Unit 1. Any additional storage capatity needed for the period until the government accepts the fuel can be provided for either on-site or off-site by the time it is needed.

011. The Centerior Utilities each have adequate supplies of oil and fuel for their oil-fired electric generating units which are used primarily as reserve and peaking capacity.

EXECUTIVE OFFICERS OF Tile REGISTRANTS AND TilF. SERVICE COMPANY Set forth belov are the names, ages as of March 15, 1991, positions and brief accounts of the business experience during the past five years of the execu-tive officers of Centerior Energy, the Service Company, Cleveland Electric and Toledo Edison. Positions currently held are desigaaied with an asterisk (*).

Centerior Energy Executive Offiters Business Experience Effective Date Name Age (Positions as Indicated) of Position Richard A. Miller 64

• Chairman of the Board and October 1988 Chief Executive Officer of Centerior and the Service Company Vice Chairman of the Board July 198R and Chief Executive Officet of the Service Company and Cleveland Electric and Chairman of the Board and Chief Executive Officer of Toledo Edison President of the Service April 1986 Company President of Centerior February 1986 President of Cleveland September 1983 N Electric Robert J. Farling 54 Chairman of the Board and February 1989 Chief Executive Officer of Cleveland Electric

• President of Centerior October 1988 Chairman of the Board and October 1988 Chief Executive Officer of Toledo Edison

• President of the Service July 1988 Company President of Cleveland April 1986 Electric Executive Vice President of February 1986 Centerior Vice President-Administrative July 1980 Services of Cleveland Electric Business Experience Effective Date .

t Name Age (Positions as Indicated) of Position j Murray R. Edelman 51

• Executive Vice President- April 1990 e Power Generation of the l Service Company ,

• Executive Vice President of July 1988 '

Centerior President of Toledo 1:dison July 1988 Vice President-Nuclear April 1986  ;

of the Service Company and I Senior Vice President-Nuclear of Clevelond Electile l i

Vice President-Nuclear of December 1982 Cleveland Electric

,e Edgar 11. Haugans 56

• Executive Vice President of April 1990 Centerior and *Exerutive Vice President-Finance & I Administration of the Service Company

• Vice President and Chief April 1990 Financial-Officer of Cleveland Electric and Toledo Edison Senior Vice President-Finance April 1988 of Centerior Senior Vice President-Finance April 1986 of the Service Company i Vice President-Finance of February 1986 Centerior i Vice President-Finance of February 1979 Cleveland Electric l Lyman C. Phillips 51

• Executive Vice President- April 1990 l Customer Operations of the Service Company and

• Chairman of the Board and Chief Executive Officer of Toledo Edison and

• Chief I:xecutive i Officer of Cleveland Electric i

• Executive Vice Prerident of July 1988 i Centerior and

• President of Cleveland Electric Executive Vice President of June 1987 Toledo Edison and Senior Vice President of Centerior Senior Vice President- April 1986 Administration of the Service Company--

Senior Vice President, January 1984 Administration of Toledo Edison l

L I

. . _ . . _ - _ . - ~ _ _ . . . - _ _ _ _ . _ . _ _ . . - - _ _ _ _ _ _ . _ . . . _ _ _.-._._ _. _ ._ _ ,.__ _____ _ _

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

1 i

Business Experienre Effective Date <

Name Age (Positions as Indicated) '

of Position Fred J, Lange, Jr. 41 *Vice President-Legal & April 1990 l

Corporate Affairs of {

i Centerior and the Service i' Company and *Vice President of Cleveland Electait and Toledo Edison General Attorney and Senior July 1989 Director of Governmental Affairs of the Service Company Assistant General Counsel November 1986 and Principal Corporate Counsel of the Service l Company l Secretary of Toledo Edison June 1986 General Counsel of Toledo May 1986 Edison Partner of Fuller & llenty July 1980 Paul G. Busby 42

• Controller of Clevelnnd April 1990 l Electric and Toledo Edison

• Controller of Centerior April 1988

• Controller of the Se: Vice June 1986 Company Controller of Toledo Edison April 1979 Gary H. Hawkinson 42

• Treasurer of Cleveland April 1990 Electric and Toledo Edison Assistant Treasurer of August 1987 Cleveland Electric

-Assistant Treasurer of September 1986 Toledo Edison

• Treasurer of the Service April 1986 Company

• Treasurer of Centerior February 1986 Assistant Secretary of April 1984-Toledo Edison April 1986 Assistant Treasurer of March 1979-Toledo Edison April 1986 E. Lyle Pepin 49

• Secretary of Cleveland October 1988 Electric and Toledo Edison

• Secretary of the Service April 1986 Company

' Assi: tant Secretary of April 1986 Cleveland Electric and Toledo Edison

• Secretary of Centerior February 1986 Secretary of Cleveland October 1982 Electric

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

Service Company Executive Offiters Business Evperience (Positions Vith the Service Company Effective Date

!Jame Ag_e Unless Othervise Indicated) of Position Richard A. Miller 64 *Chaitman of the Board and October 1988 Chief Executive officer See listing under Centerior Energy Executive 01ficers for additional business experience.

Robert J. Earling 54

• President July 1988 See listing under Centerior Energy Executive Officers for additional business experience.

Murray R. Edelman 51

• Executive Vice President- April 1990 Power Generation See listing under Centerior Energy Executive 01ficers for additlonal business experience.

Edgar 11. Haugans 56

• Executive Vice President- April 1990 Finance & Administiation See listing under Centerior Energy Executive Officers for additional business experience.

Lyman C. Phillips 51

• Executive Vice President- April 1990 Custrmer Operations See listing under Centerior Energy Executive 01ficers for additional business experience.

Richard P. Crouse 51 *Vice President-Fossil April 1990 Operations Senior Vice President of April 1988 Toledo Edison Vice President-Fossil August 1987 Engineering & Operations Senior Vice President, June 1986 Engineering & Operations of Toledo Edison Senior Vice President, July 1985 Opetations of Toledo Edison

IT '

l Business E>perience (Positions Vith the Service Company Effective Date '

Name Age Unless Ott.ervise Indicated) of Position Gary J. Greben 53 *Vice Presider.t-Transmission April 1990 and Distribution Engineering & Services Vice President-Marketing July 1987 ,

of Cleveland Electile Manager-Business Ventures November 1984 of Cleveland Electile Jacquita K. Hauserman 48 *Vice President-Customer April 1990 Service & Community Affairs Vice President-Administration October 1988 of Cleveland Electile Director-Consumer Setvices April 1986 Dept. of Cleveland Electric Senior Corporate Planning August 1985 Advisor of Cleveland Electric Alvin Kaplan 52 *Vice President-System April 1990 Engineering & Contiol Vice President-Nuclear December 1987 of Cleveland Electile Vice President-Nuclear February 1984 operations Division of Cleveland Electile Fred J. Lange, Jr. 41 *Vice President-Legal & April 1990 Corporate Affairs See listing under Centerior Energy Executive Officers for additional business experience.

John S. Levicki 51 *Vice President-Human April 1990 Resources & Strategic Planning Vice President-Public October 1988 1 Affairs & Rates Vice President-Finance, January 1988 Administration & Legal of Cleveland Electric Vice President-Finante & April 1986 Administration of Cleveland Electric Manager-Consumer Services September 1981 Dept. of Cleveland Electric

i Business Experience (Positions

• Vith the Service Company Effective Date Name Age Unless Otherwise Indicated) of Position Michael D. Lyster 47 *Vice President-Nuclear- April 1990 4

Perty General Manager-Perry March 1988 Plant Operations Dept.

of Cleveland Electile Director-Perry Plant December 1987 Operations Dept. of Cleveland Electric Manager-Perry Plant October 1984 Operations Dept. of Cleveland Electric David L. Monscau 50 aVice President- April 1990 Transmission &

Distribution Operations Vice President-Cue'omer September 1987 operations of Toledo Edison Director-fluman Resouices April 1986 Dept. of the Service Company Manager-Personnel Dept. of June 1980 i Cleveland Electric i Thomas H. Quinn 51 *Vice President-Marketing April 1990 Vice President-Marketing September 1987 of Toledo Edison General Manager-Consumer August 1986 Services Dept. of Toledo Edison i

Hanager-Southern District -January 1979 of Toledo Edison Donald H. Saunders 55 *Vice President and *!' resident April 1990 r of Toledo Edison Vice President-Administra- January 1990 tion & Governmental Affairs of Toledo Edison Vice President-Finance & July 1986 Administration of Toledo Edison Treasurer.of Toledo 1:dison March 1979 l

I l 1 L _ ._-,_ _._. _ _._ _ _ _._._-_ _ _ _ _ __ _ ___ _ _. - _ _ _ _ _ _ _ . _ - . - - _,

Business Experience (Positions Vith the Service Company Effective Date l t ay e j Age Unless Othervise Indicated) _of Position I

Donald C. Shelton 57 *Vice President-Nuclear- April 1990 Davis-Besse Vice President-Nuclear August 1986 of Toledo Edison Project Manager-Stone and January 1983 Vebster Engineering Corp.

Paul G. Busby 42

• Controller June 1986 See listing under Centerior Energy Executive Officers for additional business experience.

Gary M. Itavkinson 42

• Treasurer April 1986 See listing under Centerior Energy Executive Officers for additional business experience.

E. Lyle Pepin 49

• Secretary April 1986 See listing under Centerior Energy Executive Officers for additional business experience.

Cleveland Electric Executive Officers Business Experience (Positions Vith Cleveland Electric Effective Date Name Age Unless Otherwise Indicated) of Position Lyman C. Phillips 51

• Chief Exccutive Officer April 1990

• President July 1988 See listing under Centerior Energy Executive Officers for additior.al business experience.

Fr ed J. Lange. Jr. 41 *Vice President April 1990 See listing under Centerior Energy Executive Officers for additional business experience.

- 29

p Business Experience (Positions -

1 Vith Cleveland Electric Effective Date Name Age Unless Otherwise Indicated) of Position Edgar H. Maugans 56 *Vice President 6 Chief April 1990 Financial Officer See listing under Centerior i  ;

Energy Executive Officers for additional business experience.

Paul G. Busby 42

• Controller April 1990 I See listing under Centerior Energy Executive Officers for additional business experience.

Gary H. llavkinson 42

• Treasurer April 1990 See listing under Centerior Energy Executive Officers for additional business experience.

E. Lyle Pepin 49 *$ecretary October 1988 See listing under Centerior Energy Executive Officers for additional business experience.

Toledo Edison Executive Officety Business Experience (Positions Effective Date Vith-Toledo Edison fame j Ae h Unless Otherwise Indicated) of Position Lyman C. Phillips 51

• Chairman of the Board-and April 1990 Chief Executive Officer See listing under Centerior i Energy Executive Officers for additional business experience.

Donald 11. Saunders 55

• President April 1990 See listing under Seivice I

Company Executive ufficers for additional business experience.

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. _ _ . . _ _ _ _ . - _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ . . _ . _ . _ _ _ _ . - . _ . -_ ._ m _ . . _ .

Business Experience (Positions Vith Toledo Edison Effective Date Name Age Unless Otherwise Indicated) of Position Fred J. Lange, Jr. 41 *Vice President April 1990 See listing under Centerior Energy Executive Officers for additional business experience.

Edgar H. Haugans 56 *Vice President and Chief April 1990 Financial Officer See listing under Centerior Energy Executive Officers for additional business experience.

Paul G. Busby 42

• Controller April 1990 See listing under Centerior Energy Executive Officers for additional business experience.

Gary H. Hawkinson 42

• Treasurer April 1990 See listing under Centerior Energy Executive Officers for additional business experience.

E. Lyle Pepin 49

• Secretary October 1988 l See listing under Centerior Energy Executive Officers for additional business i experience.

All of the executive officers of Centerior Eneigy, the Service Company, Cleveland Electric and Toledo Edison are elected annually for_a one-year term by the Board of Directors of Centerior, the Service Company, Cleveland

' Electric or Toledo Edison, as the case may be.

No family relationship exists among any of the executive officers and direc-tors of any of the Centerior System companies.

Item 2. Properties .

CENERAL The Centerior System The wholly ovned, jointly owned and leased electric generating facilities of the Centerior Utilities in commercial operation as of December 31, 1990 pro-vide the Centerior System with a net demonstrated capability of 6,694,000 kilowatts during the vinter. These facilities include 28 generating units (4,390,000 kilowatts) at seven fossil-fired steam electric generation sta-tions; three nuclear generating units (1,860,000 kilovatts); a 305,000 kilo-vatt share of the Seneca Plant: seven combustion turbine generating units (135,000 kilowatts) and one diesel generator (4,000 kilowatts). All of the ,

Centerior System's generating facilities are located in Ohio and Pennsylvania. '

The Centerior System's not 60-minute peak load of its service area for 1990

vas 5,261,000 kilowatts and occurred on August 28. At the time of the 1990 peak load, the operable capacity available to serve the load was 6,437,000 hilovatts. The Centerior System's 1991 service area peak load is forecasted to be 5,490,000 kilowatts. The operable capacity expected to be available to serve the Centerior System's 1991 peak is 6,461,000 kilowatts. Over the 1991 1993 period, Centerior Energy forecasts its operable capacity margins at ,

the time of the projected Centerior System peak loads to range from 10% to I 15%.

Each Centerior Utility owns the electric transmission and distribution facili-ties located in its respective service area. Cleveland Electric and Toledo Edison are interconnected by 345 kV transmission facilities, some portions of which are owned and used by Ohio Edison. The Centerior Utilities have a long-term contract with the CAPCO Group companies, including Ohio Edison, relating to the use of these facilities. These interconnection facilities provide for the interchange of power between the two Centerior Utilities. The Centerior System is interconnected with Ohio Edison, Ohio Power, Penelee and Detroit Edison Company.

, Cleveland Electric has entered into an agreement with GPU under which Cleveland Electric vill sell the power from its 305,000-kilowatt share of the Seneca Plant (about 3,000,000 kilovatthours annually) to two subsidiaries of GPU from the time FERC approval is received through 1993. For the same time period. Toledo Ediscn has entered into separate agreements with Consumers Power and Detroit Edison under which Toledo Edison vill purchase 312,000 kilovatts (about 2,500,000 kilowatthours annually) fiom their Ludington Plant.

Toledo Edison vill then sell to Cleveland Electrir power equivalent to the amount that Toledo Edison purchases f rom the Ludingt on Plant. The net result of the power purchase and sale agreements vill be economically beneficial for Cleveland Electric and economically neutral for Toledo Edison, Requests tor

, approval of these transactions are pending before the FERC. The FERC is expected to consider such requests in the second quarter of 1991.

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

Cleveland Electric The wholly ovned, jointly owned end leased electric generating facilities of  !

Cleveland Electric in commercial oieration as of December 31, 1990 provide a .

i net demonstrated capability of 4,592,000 kilowatts during the vinter. These '

facilities include 21 generating units (3,197,000 kilowatts) at five fossil- I fired steam electric generation stations: its share of three nuclear generat- )

ing units (1,028,000 kilovatts) a 305,000 kilovatt share of the Seneca Plant; I two combustion turbine generating units (58,000 kilowatts) and one diesel gen. i erator (4,000 kilowatts). All of Cleveland Electric's generating Scilities i are located in Ohio and Pennsylvania.

The net 60-minute peak load of Cleveland Electric's service area for 1990 vas i 3,778,000 kilowatts and occurred on August 28. The operable capacity at the time of the 1990 peak vas 4,685,000 kilowatts. Cleveland Electric's 1991 service area peak load is forecasted to be 4,000,000 kilovatts. The operable capacity, which includes _ firm purchases, expected to be available to serve Cleveland Electric's 1991 peak is 4,703,000 kilowatts. Over the 1991-1993 ,

period, Cleveland Electric forecasts its operable capacity margins at the time '

of its projected peak loads to range from 9% to 15%.

Cleveland Electric ovns the facilities located in the area it serves for transmitting and distributing power to all its customers. Cleveland Electric has interconnections with Ohio Edison, Ohio Power and Penelec. The intercon-nections with Ohio Edison provide for the interchange of electric power with the other CAPCO Group companies and for transmission of power from the tenant-in-common owned or leased CAPC0 Group generating units as well as for the interchange of power with Toledo-Edison. The interconnection with Penelee provides for transmission of power from Cleveland Electric's share of the Seneca Plant. In addition, these interconnections provide the means for the interchange of electric power with other utilities.

Cleveland Electric also has interconnections with the Painesville Municipal Light Plant and CPP.

Toledo Edison The wholly ovned, jointly ovned and leased electric generating facilities of Toledo Edison in commercial operation as of December 31, 1990 provide a net demonstrated capability of 2,102,000 kilovatts during the vinter. These facilities include nine generating units (1,193,000 kilovatts) at three fossil-fired steam electric generation stations; its share of three nuclear generating units (832,000 kilowatts) and five combustion turbine generating units (77,000 kilowatts). All of Toledo Edison't generating facilities are located in Ohio and Pennsylvania.

The net 60-minute peak load of Toledo Edison's tervice area for 1990 vas 1,516,000 kilovatts and occurred on-August 28. The operable capacity at the time of the 1990 peak was 1,752,000 kilowatts. To.ledo Edison's 1991 service l area peak load is forecasted to be 1,510,000 kilowatts. The operable capac-

.ity, which includes the effect of firm sales, expected to be available to serve Toledo Edison's 1991 peak is 1,758,000 kilowatts. Over the 1991-1993 period, Toledo Edison forecasts its operable capacity margins at the time of 1 its projected peak loads to range f rom 12% to 14%.

l

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Toledo Edison ovns the facilities located in the area it serves for trans- -

mitting and distributing power to all its cus t oniers. Toledo Edison has interconnections with Ohio Edison, Ohio-Power and Detroit Edison. The in-4 terconnection with Ohio Ed(son provides for the interchange of electric power-vith the other CAPC0 Group companies and for transmission of pover from the ,

tenant-in-common owned or leased CAPC0 Group generating units as well as for j the interchange of pever with Cleveland Electric. In addition, these inter-connections provide the means for the interchange of electric power with other utilities. ,

1 Toledo Edison has interconnections with each of the municipal systems operating within its service area. -

TITLE TO PROPERTY The generating plants and other principal facilities of the Centerior i Utilities are located on land owned in fee by them, except as follovs:

(1) Cleveland Electric and Tolede Edison lease fiom others for a term of about 29-1/2 years starting on October 1, 1987 undivided 6.5%, 45.9% and 44.38% tenant-in-common interests in Units 1, 2 and 3, respectively, of the Hansfield Plant located in Shippingport, Pennsylvania.- Cleveland Electric and Toledo Edison lease from others for a term of about 29-1/2 years starting on October 1, 1987 an 18.26% undivided tenant-in-common interest in Beaver Valley Unit 2 located in Shippingport, Pennsylvania.

Cleveland Electric and Toledo Edison own another 24.47% interest and ,

1.65% interest, respectively, in Beaver Valley Unit 2 as a tenant-in-common. _

Cleveland Electric and Toledo Edison continue to own as a tenant-in-common the land upon which the Mansfield Plant and Beaver Valley Unit 2 are located, but have leased to others certain portions of that land relating to the above-mentioned generating unit leases.

(2) Most of- the facilities of Cleveland Electric's Lake Shore Plant are situated on artificially filled land, extending beyond the natural shore-line of Lake Erie as it existed in 1910. As of December 31, 1990, the cost of Cleveland Electric's facilities, other than water intake- and discharge facilities,- located on such artificially filled land aggregated approximately $113,987,000. Title to land under the water of Lake Erie within the territorial limits of_ Ohio (including artificially filled land) is in the State of Ohio in trust for the Paople of the State-for the~ public uses to which it may be adapted, subject to the powers of the United States, the public rights of navigation, water commerce .and fishery and the rights of upland ovners to vhalf out or fill to make use of the water. The State is required by statute, after appropriate pro-ceedings, to grant a lease to an upland owner, such as Cleveland Elec-tric, which erected and maintained facilities on such filled land prior to October 13, 1955. Cleveland Electric does not have such a lease from

-the State with respect to-the artificially filled land on which its Lake Shore Plant facilities are located, but-Cleveland Electric's-position, on advice of counsel for Cleveland Electric, is that its facilities and occupancy may not be disturbed because they do not interfert with the free flow of commerce in navigable channels and constitute (at least in i part) and are on land filled pursuant to the exercise by it of its i-l 1

property rights os ouner of the land above the shoreline odjacent to the filled land. Cleveland Electric holds permits, under Federal statutes relating to navigation, to occupy such artificially filled land.

(3) The facilities of Cleveland Electric's Seneca Plant in Varren County, Pennsylvania, are located on land ovned by the United States and occupied by Cleveland Electric and Penelee pursuant to a license ssued by the FERC for a 50-year period starting December 1,1965 for the construction, operation and maintenance of a pumped-storage hydroelectric plant.

(4) The water intake and discharge facilities at the electric generating plants of Cleveland Electric and Toledo Edison located along Lake Erie, the Haumee River and the Ohio River are extended into the lake and rivers under their property rights as owners of the land above the water line and pursuant to permits under Federal statutes telating to navigation.

(5) The transmission systems of the Centerior Utilities are located on land, casements or rights-of-way ovned by them. Their distribution systems also are located, in part on interests in land ovned by them, but, for the most part, their distribution systems are located on lands owned by others and on streets and highways. In most cases, permission has been obtained frnm the apparent ovner of the property or, if the distribution system is located on streets and highways, from the apparent ovner of the abutting property. Their electric underground transmission and distri-bution systems are located, for the most part, in public streets. The Pennsylvania portions of the main transmission lines from the Seneca Plant, the Mansfield Plant and Beaver Valley Unit 2 are not ovned by Cleveland Electric or Toledo Edison.

All Cleveland Electric and Toledo Edison properties, with certain exceptions, are subject to the lien of their respective mortgages.

The fee titles which Cleveland Electric and Toledo Edison acquire as tenant-in-common ovners, and the leasehold interests they have as joint lessees, of certain generating units do not include the right to require a partition or sale for division of proceeds of the units without the concurrence of all the other owners and their respective mortgage trustees and the trustees under Cleveland Electric's and Toledo Edison's mortgages.

Item 3. Legal Proceedings Regulatory Proceedings and Suits Contesting Sulfur Dioxide Emission Limitations and Related Regulations Applicable to the Centerior Utilities--See

" Item 1. Business--Environmental Regulation--Air Quality Control".

Taxpayer Suit Filed by Cleveland Electric Challenging Transfer of Funds by City of Cleveland to CPP--See " Item 1. Business--Operations--Competitive Conditions--Cleveland Electric".

Item 4. Submission of Matters to a Vote of Security Holders -

1 CFRrERIOR ENERGY, CLEVELAND ELECTRIC AND TOLEDO EDISON None.

PART II Item 5. Market for Registrants' Common Equity and Related Stockholder Matters CENTERIOR ENERGY Market Information Centerior Energy's common stock is traded on the New York, Midwest and Pacific Stock Exchanges. The quarterly high and lov prices of Centerior common stock (as reported on the composite tape) in 1989 and 1990 vere as follovst 1989 1990 H16h Lov H16h Ly 1st Quarter 16-1/4 13-3/8 21-1/8 18 2nd Quarter 18-1/4 15-5/8 19-1/2 17-3/8 3rd Quarter 19-1/8 17-1/4 19-1/8 16-1/8 4th Quarter 20-7/8 17-7/8 18-1/2 16-1/2 Share Ovners As of March 12, 1991, Centerior Energy had 180,461 common stock share owners.

Dividends See Note 13 to Centerior's Financial Statements foi quarterly dividend pay-ments in the last two years.

See Centerior's "Hanagement's Financial Analysis--Ct.pital Resources and Liquidity" contained under item 7 of this Report for a discussion of the payment of future dividends by Centerior.

At December 31, 1990, Centerior had earnings retained in the business of about

$655,000,000 and capital surplus of about $1,966,000,000, both of which vere available to pay dividends. Cleveland Electric and Toledo Edison can make cash available for the funding of Centerior's common stock dividends by paying dividends on their own common stocks. At December 31, 1990, Cleveland Electric had about $564,000,000 of reta5ned earnings and about $1,321,000,000 of capital surplus and Toledo Edison had about $83,000,000 of retained earn-ings available under Ohio law for the declaration of dividends on their re-spective preferred-snd common stocks. However, the- payment of dividends out of capital surplus by Cleveland Electric may be restricted under the Federal Power Act.

l l

l

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

CLEVELAND ELECTRIC AND T0 LIDO EDISON The information required by this item is not applienble to Cleveland Electric or Toledo Edison because all of their common stock is held solely by Centerior Energy.

Item 6. Selected Financial Data CF.NTERIOR ENERGY The information required by this item is contained on Pages F-23 and F-24 attached hereto.

CLEVELAND ELE (*FRIC The information requi:1J by this Item is contained on Pages F-46 and F-47 attached hereto.

TOLEDO EDISON The information tequired by this Item is containtd on Pages F-68 and F-69 attached hereto.

Item 7. Management's Discussioi. and Analysis of Financial Condition and Results of Operations CENTER 10R ENERGY The information required by this Item is contained on Pages F-5, F-6 and F-8 attached hereto.

CLEVELAND ELECTRIC The information requited by this Item is contained on Pages F-28, F-29 and F-31 attached hereto.

TOLEDO EDISON The information required by this Item is contained on Pages F-51, F-52 and F-54 attached hereto.

Item 8. Financial Statements an'd Supplementary Day CENTERIOR ENERGY The information required by this Item is contained on Pages F-2 through F-4, F-6, F-7 and F-9 through F-22 attached hereto.

CLEVELAND ElICTRIC The information requited by this item is contained on Pages F 25 through F-27 F-29, F-30 and F-32 through F-45 attached hereto.

37 -

_ _ _ _ . _ . _ _ _ _ . . . _ _ _ _ _ . . . _ _ .__m.______.._

e TOLEDO EDISON l

The information required by this Item is contained on Pages F-48 through F-50, '

F-52, F-53 and F-55 through F-67 attached hereto. '

Item 9. Changes in and Disagreements Vith Accountants on Accounting and~~

Financial Disclosure CEfffERIOR ENERGY, CLEVELAND ELECTRIC AND TOLEDO EDISON None.

PART III Item 10. Directors and Executive Officers of the Registrants CENTERIOR ENERGY The information required by this Item for Centerior regarding directors is incorporated herein by reference to Pages 5 through 9 of Centerior's definitive proxy statement dated March 6, 1991. Reference is also made to

" Executive Officers of the Registrants and the Service Company" in Part I of this report for information regarding the executive officers of Centerior Energy.

CLEVELAND ELECFRIC i

Set forth belov is the name and other directorships of each director of Cleveland Electric. The year in which the director was first elected to Cleveland Electric's Board of Directors is set forth in parentheses. Refer-ence is made to " Executive Officers of the Registrants and the Service Company" in Part I of this report for information regarding the directors and executive officers of Cleveland Electric.

Robert J. Farling*

Hr. Farling is a director of National City Bank. (1986)

Richard A. Hiller

• Hr. Hiller is a director of The Lubrizol Corporation Bank One, Cleveland, N.A., and Bank One Ohio Trust Co., N.A. (1977)

Lyman C. Phillips Mr. Phillips is a director of Society National Bank.

(1988)

• Also a_ director of Centerior Energy and the service Company.

TOLEDO EDISDN Set forth belov is the name and other directorships held, if any, of each director of Toledo Edison. The year in which the director was first named to Toledo Edison's Board of Directors is set forth in parentheses. Reference is made to " Executive Officers of the Registrants and the Service Company" in Part I of this report for information regardilig the directors and the executive officers of Toledo Edison.

Robert J. Farling*

Mr. Farling is a director of National City Bank. (1988)

Richatd A. Miller

• Mr. Miller is a director of The Lubrizol Corporation, Bank One, Cleveland, N.A., and Bank One Ohio Trust Co., N.A. (1996)

Lyman C. Phillips Mr. Phillips is a director of Society National Bank. (1990)

Donald 11. Saunders II988)

• Also a director of Centerior Energy and the Service Company.

Item 11. Executive Compensation CENTERIOR ENERGY EXEClTTIVE COMPENSATION The information required by this Item for Centerior is incorporated herein by reference to the information concerning compensationi of directors on Page 10, and the information concerning employee stock plan transactions of executive officers on Pages 15 through 17, of Centerior's definitive proxy statement dated March 6, 1991.

i

sal. ARIES AND INSURANCE

• Centerior Energy The following information summatires (1) compensation paid by the Centerior System to the five highest paid executive officers of Centerior Energy or the setvice Company for setvices tendeted in all capacitles in 1990 while an executive officet of Centerior Energy or the Service Company and (2) the aggtegate compensation paid by the Centerior System to all executive officers of Centerior Energy or the setvice Company as a group for such services Cash Compensation To Vhom Paid and Principal Salaries and IncentTve Capacttles in Vhich setved (1) Compensation (1) Other (2)

Richard A. Miller S 46n,441 $ 5,772 Robett J. Failing 264,125 3,542 Lyman C. Phillips 227,847 3,195 Murray h. Edelman 225,819 3,121 Edga r 11. Maugans 192,614 2,787 All 23 executive officers (including the above officets) as a group 3,103,210 50,941 (1) Data =re included for the portion of 1990 during which the persons were executnve officets of Centeriot Energy or the Seivice Company and includes cash :ompensation paid or accrued in all capat ities with the Centerior Systun as listed in "Dusiness--Executive Officets of the Registrants" for that perlod. Includes Incentive Compensation awarded on March 26, 1991 for services tendered in 1990.

(2) Centerior pays long-term disability benefits and premiums for life, acci-dent and personal liability insurance benefits for executive officers to the extent those benefits exceed the benefits uniformly available to sal-aried employees under the Centerior System's benefit plans. No such long-term disability benefits vete paid in 1990. In addition, Centerior provides additional compensation to certain executive officers to purchase other employee benefits.

Centerior Energy has a deferred compensation plan under which employees desig-nated by the Compensation Committee of Centerior's Board of Directors may elect to defer the receipt of up to 25% of salary oi up to all incentive com-pensation until a year selected by the employee not later than the year in which the employee attains age 70 or, if it occurs earlier, at retirement, 12 months after death or at other termination of employment. Amounts deferred by Centerior's executive officers in 1990 have been included in the cash compen-sation table.

Cleveland Electric

! The following information summarizes (1) compensation nald by the Centerior

! System to the five highest paid executive officers of Cleveland Llactric for services rendered in all capacities in 1990 vhile an executive officer of Cleveland Electric or Centerior Energy and (2) the aggregate compensation paid to all Cleveland Electric executive officers as a group for such services:

Cash Compensation To Vhom Faid and Principal Salaries and Incentive Capacities in Vhich Served (1) (2) Compensation (2) Other (3)

Richard A. Miller S 460,441 $ 5,772 Robert J. Farling 264,725 3,542 Lyman C. Phillips 227,847 3,195 Murray R. Edelman 225,819 3,121 Edgar H. Maugans 192,614 2,787 All 17 executive officers (including the above officers) as a group 2,042,726 31,544 (1) Includes the executive officers of Centerior Energy regardless of whether they are officers of Cleveland Electric because they are key policymakers of Cleveland Electric.

(2) Data are included for the portion of 1990 during which the persons were executive officers of Cleveland Electric or Centerior Energy and includes cash compensation paid or accrued in all caparities with the Centerior System as listed in " Business--Executive Officeis of the Registrants" for that period. Includes Incentive Compensation avarded on March 26, 1991 for services rendered in 1990.

(3) Centerior pays long-term disability benefits and premiums for life, acci-dent and personal liability insurance benefits for executive officers to the extent those benefits exceed the benefits uniformly available to sal-aried employees under the Centerior System's benefit plans. No such long-term disability benefits vere paid in 1990.

Cleveland Electric has a deferred compensation plan under which employees designated by the Compensation Committee of Centeriot's Board of Directors may elect to defer the receipt of up to 25% of salaiy or up to all incentive compensation until a year selected by the employee not later than the year in which the employee attains age 70 or, if it occurs earlier, at retirement, 12 months after death or at other termination of employment. Any amounts deferred by executive officers in 1990 have been included in the cash com-pensation table.

The directors of Cleveland Electric received no remuneration in their capacity as directors.

41 -

Toledo Edison .

The following information summarizes (1) compensation paid by the Centerint System to the five highest paid executive officers of Toledo Edison for serviccs rendered in all capacities in 1990 while an executive officer of Toledo Edison or Centerior Energy and (2) the aggregate compensation paid to all Toledo Edison executive officers s.s a group for such services:

Cash Compensation To Vhom P< tid and Principal Salaries and Incentive C_apacities in Vhich Served (1) (2) Compensation (2) Other (3J Richat:d A. Miller $ 460,441 $ 5,772 Robert J. Farling 264,725 3,542

' yman C. Phillips 227,847 3,195 Murray R. Edelman 225,819 3,121 Edgar H. Maugans 192,614 2,787 All 16 executive officers (including the above officers) as a group 2,095,912 33,697 (1) Includes the executive officers of Centerior Energy regardless of whether they are officers of Toledo Edison because they are key policymakers of Toledo Edisrn.

(2) Data are included for the portion of 1990 during which the persons were executive efficers of Toledo Edison or Centerioi Energy and includes cash compensa~i'n -paid or accrued in all capacities with the Centerior System as listeu in " Business--Executive Officers of the Registrants" for that period. Includes Incentivc Compensation avaried on Hatch 26, 1991 for services rendered in 1990.

(3) Centerior pays long-term disability benefits and premiums for life, acci-dent and personal liability insurance benefics for executive officers to ine extent those benefits exceed the benefits uniformly available to sal-aried employees under the Centerior System's benefit plans. No such long-term disability benefits were paid in 1990.

Toledo Edison has a deferred compensatica plan under which employees desig-nated by the Compensation Committee of Centtrior's Board of Directors may elect to defer the receipt of up to 25% of salaiy or up to all incentive compensation until a yur selected by the employee not later than the year in which the employee attains age 70 or, if it occurs (arlier, at retirement, 12 months after death or at other termination of employment. Any amounts deferred by executive officers in 1990 have been included in the cash com-penu. tion table.

The directors of Tolede Edison received no remuneration in their capacity as directors.

1

PENSION PIAN BFREFITS Centerior System employees, including officers of Cleveland Electric and Toledo Edison, are covered by Centerior's pension program. The pension pro-gram is a noncontributory fixed-benefit program which provides benefits upon retirement at or after age 55. The annual amount of the pension is based pri-marily upon the monthly average straight-time salaiy and incentive compensa-

'lon in the 60 consecutive highest paid months (" covered compensation") and the number of years of service. The resulting benefit is reduced by a percentage (based on the number of years of service) of the average FICA vage base. The pension is reduced in the event of retinement prior to age 62 and in certain cases prior to age 65. Approprie'e reductions are made if the employee elects a joint and survivor, guarar. teed years certain, lump sum or other form of pension in place rf payments for life. To the extent limits imposed by Federal law apply to reduce a pension which otherwise vould be payable under the pension program, the amount of the reduction vill be paid, at permitted by Federal lav, directly by Centerior, except to the extent it is paid out of a trust established by Centerior. The following table shows the annual amount of payment-for-life pension payable to salaried employees who retire under the pensien program at or after age 62 at stated levels of covered compensation and years of service:

Covered Years of Service Compensation __

25 .' O 35

$100,000 ............. S 45,711 S 51,253 $ 53,524 150,000 ............. 69,711 78,253 81,774 200,000 ............. 93.711 105,253 110,024 250,000 ............. 117,711 132,253 138,274 300,000 ............. 141,711 159,253 166,524 350,000 ............. 165.711 186,253 194,774 400,000 ........ .... 189,711 213,253 223,024 Centerior Energy, Cleveland Electric and Toledo Edison The following table sets forth the years of service and the covered compensa-tion as of year-end 1990 of the five highest paid executive officers of Centerior Energy, Cleveland Electric and Toledo Edison:

Years of Covered Executive Officer Service Compensation Richard A. Miller 30 $350,069 Robert J. Farling 31 212,143 Lyman C. Phillips 29 178,759 Murray R. Edelman 29 175,567 Edgar H. Haugans 34 146,658

4 EMPLOYEE STOCK PLAN TRANSACTIONS ,

(a) Enployee Purchase Plan All -employees, including officers, of Centerior, the Service Company,  !

Cleveland Electric (and its participating subsidiaries) and Toledo Edison (except- certain of its union-rep: '.sen t ed employees) are eligible to participate in the Purchase Plan. A participant may contribute to pur-chase U.S. Savings Bonds t' p to 100% of his straight-time pay less (1) payroll withholding tax and other payroll deductions, (2) any other

, contribution he makes into the Purchase Plan avid (3) any contribution he makes into the Savings Plan. A participant also may contribute up to 8%

of his pay, less any Basic Contribution he makes into the Savings Plan, to purchase Centerior common stock at a price 15% belov the fair market value on the semiannual dates of purchase, March 15 and September 15.

The Bonds and common stock are distributed to the participant immediately after purchase. Centerior's contribution into the Purchase Plan is the 15% discount on the price of the common stock. The 15% discount is

, taxable ordinary income to the participant in the tax year the common stock is purchased and is deductible by Centerior.

Cleveland Electric None of the five named of ficers of Cleveland Electric acquired Centerior common stock through the Purchase Plan in 1990. All 17 executive officers of Cleveland Electric as a group, including the five named officers, purchased a total of 42 shares at an aggregate purchase price of $693.00. The aggregate market value of the stock on the purchase date was $805.88.

Toledo Edison i None of the 16 executive officers of Toledo Edison, including the five named officers, acquired Centerior common stock through the Purchase Plan in 1990.

(b) Employee Savings Plan All employees, including officers, of Centerior, the Service Company, Cleveland Electric (and its participating subsidiaries) and Toledo Edison (except certain of its union-represented employees) may participate in the Savings Plan by means of payroll deduction contributions. The Sav-ings Plan consists of two parts: the After Tax Part and the Before Tax Part. The-After Tax Part receives _a participant's contributions after '

they_ have been taxed as pay. The Before Tax Part receives a partici-pant's contributions before they have been tared as pay; however, they vill be taxed when withdrawn from the Savings Plan.

The combined maximum employee contribution into both Parts of the Savings Plan is 16% of pay. A participant may contribute up to 6% of his straight-time pay as a Basic Contribution anel up to another 10% as a

Supplemental Contribution into the After Tax and Before Tax Parts com-bined. The minimum contribution is 1% of pay. Centerior contributes out of current income or retained earnings an amount equal to 50% of the I

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

employee's Basic Contribution. _ Contributions of highly compensated employees and Centerior's matching contributions are reduced when neces-sary to keep the contributions within the limits of Federal tax lav.

Contributions are placed in a tax-exempt trust administered by a corpo-rate - trustee. The trust invests in (1) Centerior common stock, (2) a i diversified group of common stocks, excluding Centerior common stock and I (3) fixed income debt or stock investments, which currently are deposits under insurance company contracts at fixed rates of interest. A partici- l pant may allocate his contributions into the three funds in such portions 1 as he designates. Centerior Stock Fund contributions and earnings are invested in Centerior common stock purchased by the trustee from Centerior at its fair market value or in the open market. Centerior's contributions are invested in the same funds and in the same portions as a participant's contributions. Centerior contalbutions and the earnings thereon become 100% vested in the participant after the participant makes at least 36 months of contributions in the After Tax Part, but become I immediately vested in the Before Tax Part. ]

i Cleveland Electric The following table presents information relating to the acquisition of Centerior common stock by executive officers of Cleveland Electric under the-Savings Plan during 1990:

Centerior Executive Officer Contributions Richard A. Hiller $ 3,567 Robert J. Farling 7,289 Lyman C. Phillips 2,203 Murray R. Edelman 1,057 Edgar H. Haugans 5,438 All 17 executive officers (includ-ing the above officers) as a group 37,180

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

Toledo Edison The following table presents information relating to the acquisition of Centerior common stock by executive officers of Toledo Edison under the Savings Plan during 1990:

Centerior Executive Officer Contributions Richard A. Miller $ 3,567 Robert J. Farling 7,289 Lyman C. Phillips 2,203 Murray R. Edelman 1,057 Edgar H. Maugans 5,438 All 16 executive of ficers (ir.clud-ing the above officers) as a group 38,700 (c) 1978 Key Employee Stock Option Plan Prior to becoming a subsidiary of Centerior, options to buy Cleveland Electric common stock vere granted at various times by Cleveland Electric to certain at its key employees pursuant to its 1978 Key Employee Stock Option Plan. When Cleveland Electric became a subsidiary of Centerior, the Plan was changed to provide for the sale of Centerior common stock instead of Cleveland Electric common stock upon exercise of those op-tions, and Centerior assumed all the obligations of Cleveland Electric under those options and the plan. No additional options can be granted under the Plan.

Cleveland Electric The following table presents information relating to the exercise of options by the eligible executive officers of Cleveland Electric under the 1978 Key Employee Stock Option Plan during 1990:

Options Exercised ___

Excess of Market Value Number of Over 4 Executive Officer Shares Exercise Price Richard A. Miller 5,548 $17,330 Robert J. Farling 3,105 11,919 Murray R. Edelman 666 2,526 Edgar H. Maugans 5,550 22,464 All 10 eligible executive officers (including the above officers) as a group 18,853 70,071

m Toledo Edison The following table presents information relnting to the exercise of options by the eligible executive officers of Toledo Edison under the 1978 Key Employee Stock Option Plan during 1990:

Options Exercised Excess of Market Value Number of Over Executive Officer Shares Exercise Price Richard A. ailler 5,548 $17,330 Robert J. Parling 3,105 11,919 Murray R. Edelman 666 2,526 Edgar H. Maugans 5,550 22,464 All 6 eligible executive officers (including the above officers) as a group 15,701 57,290 (d) Employee Stock Ovnership Plan Under the Toledo Edison Employee Stock Ovnership Plan, common stock of Toledo Edison was, and since 1986 Centerior common stock is, allocable to the accounts of all eligible employees of Toledo Edison in proportion to their compensation from Toledo Edison. Toledo Edison made contributions in 1977, 1934, 1986 and 1988, in each case for the preceding tax year.

Participants are always fully vested in the common stock credited to their accounts. Upon the affiliation of Cleveland Electric and Toledo Edison, the Toledo Edison common stock in the Plan was converted into Centerior common stock.

Cleveland Electric At December 31, 1990, under the Employee Si,ck ovnership Plaa, 541 shares of Centerior common stock were held in tne account of Lyman C. Phillips and 1,227 shares vere held in the accounts of the three eligible Cleveland Electric executive officers (including Mr. Phillips) as a group.

Toledo Edison At December 31, 1990, under the Employee Stock Ownership Plan, 541 shares of Centerior common stock were held in the account of Lyman C. Phillips and 1,826 shares were held in the accounts of the four eligible Toledo Edison executive officers (including Mr. Phillips) as a group.

i

Item 12. Security ownership of Certain Beneficial Owners and Management -

CCNTERIOR ENERGY The following table seta forth_ the beneficial ownership of Centerior common stock by individual directors of Centerior and all directors and officers of Centerior Energy and the Service Company as a group as of February 28, 1991:

Name of Beneficial Number of Common Owner _,

Shares Owned (1)

Richard P. Anderson 1,112 Albert C. Dersticker 1,000 Leigh Carter 2.257 Thomas A. Commes 5,000 Vayne R. Embry 1,000 Robert-J. Parling 33.044 (2)

Robert M. Ginn 32,071 Roy H. Holdt 1,731 George H. Kaull 4,640 Richard A. Miller 45,563 (2)

Frank E. Mosier 1,225 Sister Mary Marthe Reinhard, SND 2,220 (3)

Robert C. Savage 1,000 Paul M. Smart 3,342 Villiam J. Villiams 1,270 All directors and officers as a group 243,772 (2)

(1) Beneficially owned shares _ include any shares viih respect to which voting or investment power is attributed to a director or officer because of joint or fiduciary ownership of the shares or relationship to the record owner, such as a spouse, even though the director or officer does not consider himself or herself the beneficial owner. On February 28, 1991, all directors and officers of Centerior Energy and the Service Company as a group were considered to own beneficially 0.2% of Centerior's common stock and none of the preferred stock of Cleveland Electric and Toledo Edison, except for one officer who owns- 50 shares of Toledo Edison preferred stock. Certain directors and officers disclaim beneficial ownerchip of some of those shares.

(2) Includrs the following numbers of shares which are not owned but could have been purchased-within 60 days after February 28, 1991 upon-exercise of' options to purchase shares of Centerior common stock: Mr. Farling'-

21,730; Mr. Miller - 32,743; and all other of fic ers as n group - 58,731.

None of those options have been exercised as of March'27, 1991.

(3) Owned by the Sisters of Notre Dame.

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4 . _ --

CLEVELAND ELECTRIC The following table sets forth the beneficial ovneiship of Centerior common stock by individual directors of Cleveland Electric and all directors and officers of Cleveland Electric as a group as of February 28, 1991:

Name of Beneficial Nember of Common Owner Shares Owned (1) l Robert J. Farling 33,044 (2)

Richard A. Miller 45,563 (2)

Lyman C. Phillips 2,696 All directors and officers as a group 108,524 (2)

(1) Beneficially owned shares include any shares with respect to which voting or investment power is attributed to a director or officer because of joint or fiduciary ownership of the shares or ielationship to the record owner. such as a spouse, even though the director or officer does not consider himself or herself the beneficial owner. On February 28, 1991, all directors and officers of Cleveland Electric as a group vere considered to own beneficially 0.1% of Centeriot's common stock and none of Clevelar.d Electric's serial preferred stock. Certain directors and officers disclaim beneficial ownership of some of those shares.

(2) Includes the following numbers of shares which are not owned but could have been purchased within 60 days after February 28, 1991 upon exercise of options to purchase shares of Centerior common stock: Mr. Farling -

21,730; Mr. Hiller - 32,743; and all other officers as a group - 9,807.

None of those options have been exercised as of March 27, 1991.

TOLEDO EDISON The following table sets forth the beneficial ovneiship of Centerior common stock by individual directors of Toledo Edison and all directors and officers of Toledo Edison as a group as of February 28, 1991:

Name of Beneficial Number of Common Owne: Shares Owned (1)

Robert J. Farling 33,044 (2)

Richard A. Miller 45,563 (2)

Lyman C. Phillips 2,696 Donald H. Saunders 1,194 All directors and officers as a group 109,694 (2)

4 (1) Beneficially owned shares include any shares with respect to which voting .

or investment power is attributed to a director or officer because of joint or fiduciary ownership of the shares or telationship to the record owner, such as- a- spouse, even though the director or officer does not consider himself or herself the beneficial ovnet. On February 28, 1991, all directors and officers of Toledo Edison as a group were considered to own beneficially 0.1% of Centerior's common stock and none of Toledo Edison's preferred stock. Certain directors and officers disclaim bene-ficial ovnership of some of these shares.

(2) Includes- the following numbers of shares which are not owned but could have been purchased within 60 days after February 28, 1991 upon exercise of options to purchase shares of Centerior common stock: Mr. Farling -

21,730 Mr. Hiller - 32,743; and all other officers as a group - 9,807.

None of those options have been exercised as of March 27, 1991.

Item 13.- Certain Relationships and Related Tranractions CENTERIOR ENERGY AND TOLEDO EDISON The information required by this Item is incorporated herein by reference to Page 10 of Centerior's definitive proxy statement dated March 6, 1991.

CLEVELAND ELECTRIC None.

PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

.(a) Documents Fi]ed as a Part of the Report

1. Financial Statements:

Financial Statements for Centerior Energy, Cleveland Elactric and Toledo- Edison are listed in the Index to Selected Financial Data; Management's Discussion and Analysis of Financial Condition and Re-sults of Operations; and Financial Statements. See Page F-1,

2. Financial Statement Schedules:

Financial Statement Schedules for Centerior Energy, Cleveland Electric and Toledo Edison are listed in the Index to Schedules. See Page S-1.

l

3. Exhibits:

l Exhibits for Centerior Energy, Cleveland Electric and Toledo Friison are listed in the Exhibit Index. See Page E-1.

l (b) , Reports on Form 8-K Centerior Energy, Cleveland Electric and Toledo Edison did not file a Current Report on Form 8-K during the fourth quarter of 1990.

SIGNATURES ,

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange '

Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ,

CENIERIOR ENERGY CORPORATION Registrant March 28, 1991 By

• RICHARD A. MILLER, Chairman of the Board and Chicf Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this re-port has been signed below by the following persons on behalf of the regi-strant and in 2.he capacitics and on the date indicated:

Signature Title Date Principal Executive Officer: )

• RICHARD A. MILLER Chairman of the Beard )

and Chief-Executive )

Officer )

Principal Financial Officer )

• EDGAR H. MAUGANS Executive Vice )

President )

Principal Accounting Officer:

• PAUL G. BUSBY Controller )

Directors: )

• RICHARD P. ANDERSON Director )

• ALBERT C. BERSTICKER Director )

• LEIGH CARTER Director )

• THOMAS A. COMMES Director ) March-28, 1991

• VAYNE R. EMBRY Di rec tor )

• ROBERT J. FARLING Director )

• R0bERT M. GINN Director )

• ROY H..HOLDT Director )

• GEORGE H. KAULL Director )

• RICHARD A. MILLER Director )

• FRANK E. MOSIER Director )

• SR. MARY MARTHE EEINHARD, SND Director )

• ROBERT C. SAVAGE Director )

• PAUL M. SMART Director )

• VILLIAM J. VILLIAMS Director )

• By-J. T. PERCIO J. T. Percio, Attorney-in-Fact i

I - - .

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY Registrant March 28, 1991 By *LYHAN C. PHILL]PS, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this re-port has been signed belov by the following persons on behalf of the regi-strant and in the capacities and on the date indicated:

Signature Title Date Principal Executive Officer: )

• LYHAN C. PHILLIPS President and Chief )

Executive Officer )

Principal Financial Officer: )

• EDGAR H. MAUGANS Vice President and )

Chief Financial ) March 28, 1991 Officer )

Principal Acccunting Officer: )

• PAUL G. BUSBY Controller )

Directors: )

• ROBERT J. FARLING Director )

• RICHARD A. MILLER Director )

• LYHAN C. PHILLIPS Director )

• By J. T. PERCIO J. T. Percio, Attorney-in-Fact 4

SIGNATURES Pursuant to the requirements of Seetion 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TiiE TOLEDO EDISON COMPANY Registrant March 28, 1991 By *LYMAN C. PilILLIPS, Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this re-port has been signed belov by the following persons on behalf of the regi-strant and in the capacities and on the date indicated:

Signature Title Date, Principal Executive Officer: )

• LYMAN C. PilILLIPS Chairman of the Board )

and Chief Executive )

Officer )

Principal Financial Officer: )

• EDGAR 11. MAUGANS Vice President and  ;

Chief Financial )

Officer )

Principal Accounting Officer: ) March 28, 1991

• PAUL G. BUSB~l Controller )

Directors: )

• ROBERT J. FARLING Director )

• RICilARD A. MILLER Director )

• LYMAN C. PilILLIPS Director )

• DONALD 11. SAUNDERS Director )

• By J. T. PERCIO J . T. Percio, Attorney-in-Fact

. . - . . -. _ _ _ - _ . . . - - - . . _ _ _ . _ - -_m.__._ _ ___m._. _ _ _ _

INDEX TO SELECTED FINANCIAL DATA; MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS; AND FINANCIAL STATEMENTS .

Centerior Energy Corporation and Subsidiaries:

Report of Independent Pubhc Accountants . . . . . . . . . . . . . . . F-2 Summary of Significant Accounting Pohcies . . . ... . ........ .. F3 Management's Financial Analysis . .. . ... .. .. . .. . . . F 5/F 8 Retained Earnings for the years ended December 31,1990,1989 and 1988. . , . . F6 incomo Statement for the years ended December 31,1990,1989 and 1988. . . F7 Cash Flows for the years ended December 31,1990.1989 and 1988. .. ,, F9

. Balance Sheet as of December 31,1990 and 1989. . .. . ., . . ,. F.10 Statement of Cumulative Preferred and Preference Stock at December 31, 1990 and 1989 . . . . . . . ......... . .. F-12 Notes to the Financial Statements . . . . . . . .., , .. F 13

- Financial and Statistical Review . .. . .. . .. . . F-23 The Cleveland Electric illuminating Company and Subsidiaries:

Report of Independent Pubhc Accountants . .. .. . . . .. F.25 Summary of Significant Accounting Pohcies . . . .. . F-26 Management's Financial Analysis .. .. .. ... . .. ., . . , . F-28/F 31 Retained Earnings for the years ended December 31,1990,1989 and 1988.. F 29 income Statement for the years ended December 31,1990,1989 and 1988. . . F 30 Cash Flows for the years ended December 31,1990,1989 and 1988. . . . . F 32

- Balance Sheet as of December 31.1990 and 1989. .. . . , . F-34 Statement of Cumulative Preferred and Preference Stock at December 3i, 1990 and 1989. . . . . . . .. . .. . F-36 Notes to the Financial Statements . . , , , F 37 Financial end Statistical Review . . . . . F 46 The Toledo Edison Company:

Report of Independent Pubhc Accountants. . .. . . .. . . F-48

- Summary of Significant Accounting Pokcies . .. . F-49 Management's Financial Analysis . . . .... .. . . . ....... . . F 51/F 54 .

Retained Eamings for the years ended December 31,1990,1989 and 1988. , F-52 income Statement for the years ended December 31.1990,1989 and 1988. .. F 53 =

Cash Flows for the years ended December 31.1990.1989 and 1988. . . F 55 Balance Sheet as of December 31.1990 and 1989 . . . . . . . .... F 56 Statement of Cumulative Preferred and Preference Stock at December 31, 1990 and 1989. . .. - F 58 Notes to the Financia! Statements . . . F 59 Financial and Statistical Review . . . . F 68 F-1

REPORT OF INDEPENDENT PUBuC ACCOUNTANTS 3ARTHUR To the Share Owners and Board of Directors of nNDERSEN -

Centenor Energy Corporabon RCO; We have audited the accompanying consohdated each of the three years in the penod ended December balar ce sheet and consohdated statement of 31, 1990, in conformity with generally accepted cumulative preferred and preference stock of Centenor accounting pnnciples Energy Corporation (an Ohio corporation) and As discussed further in the Summary of Significant subsidianes as of December 31.1990 and 1989, and Accounting Policies and Notes 7 and 12, a change the related conschdated statements of income, was made i" the methods of accounting for income retained earnings and cash flows for each of the three taxes and unbilled icvenues in 1988, retroachve to yers in the period ended December 31,1990 These January 1,1988.

financial statements and the schedules referred to As discussed further in Note 3(c), the future of below are the responsibihty of the Company's Perry Unit 2 is undecided Construction has been management Our respunsibility is to express an suspended since July 1985 Various options are being opinion on these financial statements and schedules corsidered, including resuming construction or based on our aud:ts canceling the unit. Management can give no We conducted our audits in accordance with assurance when, if ever, Perry Unit 2 will go in service generally accepted auditing standards. Those or whether the Company's investment in that unit and standards require that we plan and perform the audit to a return thereon will ultimately be recovered.

obtain reasonable assurance about whether the Our audits were made for the purpose of forming an financial statements are free of matenal misstatement opinion on the basic financial statements taken as a An audit includes examining, on a test basis, evidence whole The schedules of Centenor Energy Corporation supporting the amounts and disclosures in the financial and subsidianes hsted in the Index to Schedules are statements An audit also incluoes assessing the presented for purposes of complying with the accounting ponciples used and significant estimates Secunties and Exchange Commission's rules and are made by management, as well as evaluating the overal not part of the basic financiat statements. These hnancial statement presentation We bebeve that our schedules have been subjected to the auditing audits provide a reasonable basis for our opinion procedures appled in the audits of the bas'c financial ,

in our opinion, the financial statements referred to statements and, in our opinion, fairly state in all above present f airly, in all matenal respects, the matenal respects the finai.cial data required to be set financial position of Centenor Energy Corporation and forth therein in relation to the basic financial statements subsidiaries as of December 31,1990 and 1989, and taken as a whole.

the results of their operations and their cash flows for Cleveland, Ohio February 12,1991 Arthur Andersen & Co (Centenor Energy) F-2 (Centenor Energy)

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES GENERAL nuclear fuel disposal costs are being recovered through the base ratcs Centenor Energy Corporation (Centenor Energy) is a The Opc<atrg Companies defer the dfferences holding company with two electnc utiht es as between actual fuel costs and estimated fuel costs subsidianes, The Cleveland Electnc liluminating currently being recovered from customers through the Company (Cleveland Electoc) and The Toledo Edison fuel factor This matches fuel expenses with fuel-Company (Toledo Edison) The consolidated financial related revenues statements also include the accounts of Centenor Energy's other wholly owned subsidiary, Centerior PRE-PHASE-IN DEFERRALS OF OPERATING Service Company (Service Company), and Cleveland EXPENSES AND CARRYING CHARGES Electnc's wholly owned subsidianes The Service Company provides. at cost, management, financial. The PUCO authorized the Operating Compan es to administrative, engineering. legal and other services to record, as deferred charges operahng expenses Centenor Energy, Cleveland Electnc and Toledo (including lease payments, depreciation and taxes)

Edison. Cleveland Electric and Toledo Edison and interest carrying charges for Beaver Vaney Po^er (Operating Companies) operate as separate Station Unit 2 (Beaver Valley Unit 2) from its companies. each serving the Customers in its service Commercial-in-service date in November 1987 through area The first mortgage bonds, other deb; obhgations December 1988 Af ter the PUCO determined that Perry and preferred stock of the Operating Companies Nuclear Power Plant Und 1 (Perry Unit 1) was continue to be outstanding secunties of the issuing considered "used and useful" in May 1987 for utihty Ah significant intercompany items have been regulatory purposes, the PUCO authonzed the ehminated in consobdation Operating Companies to defer operating expenses Centenor Energy and the Operating Companies (including depreciation and taxes) for Perry Unit 1 follow the Uniform System of Accounts prescnbed ny from June 1987 through December 1987, when these i, the Federal Energy Regulatory Commission (FERC) costs began to be recovered in rates The PUCO also and adopted by The Pubhc Uhhhes Commission of Oh,o m.Monzed the deferral of interest and equ:ty carrying (PUCO). The Service Company follows the Unform charges exclusive of those associated w ' operating System of Accounts for Mutual Service Companies expenses, for Perry Unit 1 from June 1987 through prescnbed by the Secunties and Exchange December 1987 and the deferral of only interest Commission (SEC) under the Pubhc Utihty Holding carrying charges from January 1988 through December Company Act of 1935 1988 The amounts deferred for Perry Unit 1 pursuant The Operating Companies are members of the to these PUCO accounting orders were included in Central Area Power Coordination Group (CAPCO) property, plant. and equipment through the Other members include Duquesne Light Company commercialon-service date in November 1987.

(Duquesne) Oh;o Edison Company (Ohio Edison) Subsequent to that date. amounts deferred for Perry and Pennsylvania Power Company (Pennsy!vania Unit 1 were recorded as deferred charges Power) The members have constructed and operate Amortization of these Beaver Valley Unit 2 and Perry generation and transmission facikbes for the use of the Unit 1 deferrals (called pre-phaseon deferrals) began CAPCO companies in January 1989 in accordance with the January 1989 PUCO rate orders discussed in Note 6 The mr b ns wm mhnue over the kves of the related REVENUES property Customers are bined on a monthly cycle basis for their energy consumption based on rate schedules or PHASE-IN DEFERRALS OF OPERATING contracts authonzed by the PUCO or on ordinances EXPENSES AND CARRYING CHARGES with individual municipanties. Effechve January 1 1988. the Operating Companies changed their method As discusseu in Note 6. the January 1989 PUCO rate of accounting to accrue the estimated amount of orders for the Operahng Companies included approved rate phase-in plans for their investments in unbilled revenues (as defined in Note 12) at the end ,

of each month Perry Unit 1 and Beaver VaMey Unit 2 On January 1 A fuel factor is added to the base rates for electnc 1989 the Operating Companies began recording the service This factor is designed to recover from deferr !s f operating expenses and interest and customers the costs of fuel and most purchased equity carrying charges on deferred rate-based power it is reviewed semrannually in a heanng before inWs pwsuant to the phaseon plans These the PUCO deferrals (called phaseon deferrais) will be recovered by December 31.1998 FUEL EXPENSE DEPRECIATION AND AMORTIZATION The cost of fossil fuelis charged to fuel expense based The cost cf property, pl ant and equ>pment, except for on inventory usage The cost of nuclear fuel, including the nuclear generaung units is depreciated over their an interest component. is charged to fuel expense estimated useful hves on a straight kne basis The based on the rate of consumption Estimated future annual straight 1:ne depreciation provision expressed (Centenor Energy) F-3 (Centenor Energy)

accounted for as deferred credits. The amortization of these investment tax credits is reported as a reduction as a percent of average depreciable utihty plant in service was 3 3% in 1990 and 3 8% in 1989ofand depreciation 1988 expense under the hability method.

The 1990 rato dechned because of a change in See Note 7.

depreciation rates attnbutable to longer estimated hves for fossibfueled electnc generating units. The PUCO approved this change in depreciation rates DEFERRED GAIN AND LOSS FROM effective January 1,1990 which reduced depreciation SALES OF UTILITY PLANT and increased expense for 1990 by $16,000,000 The Operating Companies entered into sale and eamings per share $ 08 leaseback transactions in 1987 for the coabfded Bruce Depreciation expense for the nuclear units is based Mansfield Generahng Plant (Mansfield P' ant) and on the units-of-produchon method In 1990, the Beaver Vaney Unit 2 as discussed in Note 2 These Nuclear Regulatory Commission (NRC) approved 3 transachons resulted in a net gain for the sale of six-year extension of the operating kcense for the Mansfield Plant and a net loss for the sale of Beavor Davis Besse Nuclear Po6er Station (Davis-Besse) Valley Unit 2, both of which were deferred The The PUCO approved a change in the Units-of' Operating Companies are amortizing the applicable production depreciation rate for Davis Besse effectivedeferred gain and loss over the terms of leases under January 1.1990 which recognized the hfe extension sale and leaseback agreements The amortizations This change reduced depreciation expense for 1990 b/

along with the lease expense amounts are recorded as

$9.790,000 and increased earnings per share $ 04. other oporation and maintenance expense.

Effechve July 1988, the Operating Companies began the external funding of future decommissioning g costs for their operating nuclear units pursuant to a PUCO order. Cash contnbutions are made to the Debtfunds interest reported in the income Statement does on a straight hne basis over the remaining hcensing not include interest on nuclear f uel obhgations. Interest penod for each unit Amounts currently in rates are on nuclear fuel obhgabons for fuel under construction based on past eshmates of decommissioning costs for ts capitahzed See Note 5 the Operating Companies of $122,000,000 in 198 Losses and gains reahzed upon the reacquisition or dollars for Davis Besse and $72 000,000 and redemption of long-term debt are deferred, consistent

$63,000.000 in 1987 dollars for Perry Unit 1 and with the regu!atory rate treatment Such losses and Beaver Valley Unit 2, respectively. Actual decommissioning costs are expected to exceed these gains are either amortized over the remainder of the ong!nal hfe of the debt issue retired or amortized over estimates it is expected that increases in the cost the hfe of the new debt issue when the proceeds of a estimates will be recoverable in rates resu!bng from new issue are used for the debt redemption The future rate proceedings The current level of expense amortizations are included in debt interest expense.

being funded and recovered from customers over the remaining licensing penods of the units is approximately $8,000.000 annually. The present PROPERTY, PLANT AND EQUIPMENT funding requirements for Beaver VaHey Unit 2 also satisfy a similar comm3tment made as part of the sale Property, plant and equipment are stated at ongina!

cost less any amounts ordered by the PUCO to be and ieaseback transaction discussed in Note 2. wntten off. Included in the cost of construction are Kems such as related payroll taxes 1 pensions, fnnge FEDERAL INCOME TAXES benefits, management and general overheads and allowance for funds used during construction The financial statements reflect the habihty method of AFUDC represents the estimated

( AFUDC) .

accounting for income taxes as a result cf adopting a composite debt and equity cost of funds used to new standard for accounting for income taxes in 1988. finance construction This noncash allowance is The habihty method requires that our aeferred tax cred:ted to income, except for certain AFUDC for Perry habihties be adjusted for subsequent tax rate changes Nuclear Power Plant Und 2 (Perry Unit 2) See Note and that we record octerred taxes for all temporary 3(c). The gross AFUDC rates averaged 10.8% in differences between the book and tax bases of assets 1990.11.2% in 1989 and 11.4% in 1988-and habihties. A portion of these temporary ddferences Maintenance and repairs are charged to expense as relate to Ilming differences that the PUCO used to incurred Certain maintenance and repair expenses for reduce prior years' tax expense for ratemaking Perry Unit 1 and Beaver Valley Unit 2 are being purposes whereby no deferred taxes were recorded deferred pursuant to the PUCO accounung orders Since the PUCO practice permits recovery of such discussed above The cost of replacing plant and taxes from customers when they become payable, the equipment is charged to the uhhty plant accounts. The net amount due from customers has been recorded costas of property retired plus removal costs, after a regulatory asset in deferred charges deduchng any salvage value, is charged to the For certain property, the Operaung Compames accumulateo provision for depreciation, r9ceived investment tax credits which have been (Centenor Energy)

F4 (Centenor Energy)

MANAGEMENT's FINANCIAL ANALYSIS e mings by as much as $58.000 AGO. or 5 42 por RESULTS OF OPERATIONS sa in an m r ss in seseqent years.

Overview depending on the performance of the units inabikty to obtain approval of the second request would reduce The January 1989 PUCO rate orders which provided for eamings by as much as M6.000.000, or $ 26 per three rate increases for the Operating Companies, as share in 1991, and ev 3re in subsequent years discuued in Note 6, were designed to enable us to The Operating Comi - as have agreed to use their begin recovering in rates the cost of, and earn a fair best efforts, such as these two requests for return on, our allowed investment in Beaver Valley Unit accounting orders to avoid rate increases in the years 2 and Perry Unit 1. The rate orders improved revenues immediately following 1991 Eventually, rate increases and cash flow in 1989 and 1990 and are expected to will be necessary to recognize the cost of our new continue to improve them in 1991 However, as capital investment and the effect of inflation discussed more fully in the fourth and fif th paragraphs Annual sales growth is expected to average about of Note 6, the phase in plans were not designed to 2% for the next several years contingent on future irrprove earnings signibcantly because gains in economic events Recognizing the kmitations imposed revenues from the higher rates and assumed sales by these sales projections and competitive constraints.

growth are initially ottset by a correspond:ng reduction we will utilize our best efforis to minimize future rate in the deferral of nuclear plant operating expenses and increases through maiumizing our cost reduction and carrying charges and are subsequently offset by the quahty of service efforts and explonng other innovative amortization of such cost deferrals and carrying options We will concentrate our efforts on retaining charges customers and adding new ones through innovatae Despite the positive effect the new rates have on marketing and service initiatives revenues and cash flow and the relahvely neutral impact they have on earnings, we face a number of 1990 va.1989 other factors which will exert a negative influence on Factors contnbuting to the 2 d% increase in 1990 earnings an 1991 and beyond These include inflation, operating revenues are as fo!!ows.

the economic recession and competitive forces. The latter, coupled with a desire to encourage economic Cnange in operatna Re enues $c[ase)

Base Rates and bscehaneous $ 151.000 000 growth has prompted the Operating Companies in sees volume anu w 154,000.000) recent years to enter into contracts having reduced Sales to Oneo Edison and Pennsr Nania Power (32 000 000) rates with certain large customers Competitive forces have also prompted Toledo Edison to offer a rate -5 65 000 000 reduction package to residential and small commercial The major factor accounting for the increase in customers as discussed in the eighth and ninth operating revenues was related to the January 1989 paragraphs of Note 6. Two other factcrs are having a rate orders for the Operating Companies The PUCO negahve influence on earnings First, the Operating approved annual rate increases for the Operating Companies are currently recording depreciahon on Companies of 9% effective in February 1989 and 7%

nuclear units at a higher level than that which is effective in February 1990. The associated revenue reflected in rates because of the good performance of increase in 1990 was partially offset by reduced the units over the last several years Second, with revenues iesulting from a 2 9% decrease in total respect to facihbes placed in service af ter February kilowatt hour sales Industnal sales decreased 2 8%

1988 and not meluded in rate base, the Operating because of the recession beginning in 1990 Companies are currently required to record interest Residenbal sales decreased 21% as seasonal charges and depreciation as current expenses even temperatures were more moderate in companson to though such items are not yet reflected in rates the poor year's temperatures. resulting in reduced We are taking several steps to counter the adverse customer heating and cochng-related demand-effects of the factors discussed above. We are Commercia! sa!es increased 0 3% as increased implementing the management audit demand from new all-electne office and retail space recommendations discussed in the sixth paragraph of was offset by the effects of mild weather. Otner sales Note 6 which are expected to reduce operating activity decreased 22 3% pnmanly as a result of expenses by about $100.000.000 annually We have Toledo Edison's municipal utikty customers sabsfying already shared 50% of the expected savings with a greater portion of their power needs from other customers by reducing the 1991 rate increases sources The increase in revenues was also partially granted under the 1989 rate orders However. offset by the lost, of revenues related to the May 1989 continuing cost reduction efforts will be necessary to expiration of Cleveland Electnc's agreement to sell a help ottset the effect of inflahon Also, the Operating portion of its share of Perry Unit 1 capacity to Ohio Companies are seeking PUCO approval to accrue Edison and Pennsylvania Power nuclear plant deprec:ahon at a level which is more Operating expenses decreased 0 4% in 1990 closely ahgoed with the amount currently being Depreciation and amortization expense decreased recovered in rates by switching to the straight-hne pnmanly because of lower depreciation rates used in method We also will seek approva! to accrue post in. 1990 for nonnuclear property and Davis-Besse service interest carrying charges and defer attnbutable to !onger estimated hves and because of depreciation charges for facihties that are in service longer nuclear generating unit refueli ng and ,

but not yet recognized in rates inabihty to obtain maintenance outages in 1990 than in 1989 Federal approval of the first accounting request would reduce inccme taxes decreased pnmanly because of a (Centenor Energy) F5 (Centenor Energy)

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

I l

l

• i decrease in pretax operating income These decreases Commercial sales increased 3 9% as a result of in operating expenses were partially offset by an continuing growth from new office buildings and retail ,

increase in taxes, other than federal income taxes, outlets. Industrial sales decreased 2.1% principally resulting from higher property and gross receipts because of a 7% reduction in sales to large steel and taxes, and by lower nuclear operating expense automotive customers Sales to other industnal deferrals for Perry Unit 1 and Beaver Valley Unit 2 customers increated 0 5% The decrease in revenues pursuant to the January 1989 PUCO rate orders from sales to Ohio Edison and Pennsylvania Power was Credits for carrying charges recorded in the result of the May 1989 expiration of Cleveland nonoperating income decreased in 1990 because a Electnc's agreement to sell a portion of its share of greater share of our investments and leasehold Perry Unit 1_apacity.

interests in. Perry Unit 1 and Beaver Valley Unit 2 were Operating expenses increased 8 4% in 1989 Lower recovered in rates. The decrease in the federal income deferrals of nuclear operating expense for Perry Unit 1 tax provision related in nonoperating income was the and Beaver Valley Unit 2 resulted in a $122,000,000 result of a decrease in pretax nonoperating income and increase in expense Fuel and purchased power federal income tax adjustments of $37,522,000 expense increased largely because of the matching of associated with previously deferred investment tax expense with higher fuel cost recovery revenues credits relating to the 1988 write off of nuclear plant. discussed in the preceding paragraph. Improved Othcr income and deductions, net, decreased primarily nuclear unit availability enabled the Operating because of less interest income in 1990. Companies to sell power to other utilities The excess f r v nu s v r cost is treated as a reduction in

- 1989 vs.1988 purchased power expense which cushioned the Factors contnbuting to the 13% increase in 1989 increase in fuel and purchased power expense for the operating revenues are as follows year. Depreciation expense increased reflective of the Change in Operabng Revenues (Decrease) increased genera on from our nuclear units since Base Rates and Misceitaneous . $173 000,000 their depreciaticn is recorded based on units-of-Defenm1 CWIP nevenues . . . . .. 88.000.000 production.

Sales to Ohio Edison and Pennsyivania Power . (52.000,000) Nonoperating income credits for AFUDC and F uel Cost Recovery Revenues , 42.000.000 -

Sales Volume and Mix. 14 LOO.000 carrying charges decreased in 1989 as a result of

$Ns,000.000 placing investment in rate base pursuant to the rate orders Interest expense and pieferred and preference The January 1989 rate orders for the Operating dividend requirements decreased in 1989 because of Companies were pnmanly responsibic for two major retirements and refinancings by the Operating factors impacting the increase in revenues The PUCO Companies.

granted both companies 9% rate increases effective in February 1989. The increase in revenues attnbutable EFFECT OF INFLATION to deferred construction work in progress (CWIP) revenues in 1989 resulted from the reduction in the Although the rate of irfiation has eased in recent years, amount of deferred credits fcr the mirror CWIP refund we are still affected by even modest inflation since tne obligations to customers. Fuel cost recovery revenues regulatory process introduces a time lag dunng which increaseo in 1989 because of a mgnificant rise in the increased costs of our labor, materials and services are fuel cost recovery f actors compared to 1988. The not reflected in rates and fully recovered Moreover, lower 1988 factors recognized a greater amount of regulation al!ows only the recovery of histoncal costs refunds to our customers ordered by the PUCO for of plant assets through depreciation even though the ce'tain replacement fuel and purchased power costs costs to replace these assets would substantially collected from customers dunng a 19851986 Davis- exceed their historical costs in an inflationary economy.

Besse outage. ton kilowatt-hour sales decreased Changes in fuel costs do not affect our iesults of 1.8% in 1989. The comparatively moderate summer operations since those costs are deferred untd weather in 1989 lowered sales because of reduced air reliected in the fuel cost recoveiy factor included in conditioning usage Residential sales decreased 1.6%_ customers' bdis.

RETAINED EARNINGS CENTERiOR ENERGY CORPORATION AND SUBSIDIARIES For the years ended December 31, __

1990 1989 1988 (thcusands of dollars 1 Balance at Beginning of Year . S 613,774 $ 571.882 - $ 908,611 Additions Net income (loss) . 264,459 266.886 (73,960)

Deductions Common stock dividends. . .. ... (222,482) (224 947) (259,022)

Other, pnmarily preferred stock redemption expenses of suosidianes . (915) (47) (3,747)

Net increase (Decrease) 41,062 41.892 j336.729)

Balance at End of Year . S 654,836 $ 613.774 $ 571,882 The accompanying notes and summary of significant accounting pokcies are an integral part of this statement (Centerior Energy) F6 (Ce terior Energy) i

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

lNCOME STATEMENT CENTERiOR ENERGY CORDORATiON AND SUBSDARIES For the years ended December 31.

1990 1989 1988 -

(thousands of dollar $, except per share amounts)

Operating Revenues . .. .. . .. . $2.367,675 $2.302.436 $2.037,560 Operating Expenses Fuel and purchased po uer . . . . . 412,531 413.816 391,401 Other operation and rrstenance . . . 862,738 860.138 865.632 Depreciation and amortization . , .. . . . 251,640 280.918 264,824 Taxes, other than federal income taxes 283,425 259.871 268.550 Phase in deferred operating expenses . (50,940) (74.555) -

Pre-phase in deferred operating expenses. . .. . . 7,629 7,932 (188.209)  !

Federat income taxes . .. . .. . . . . 96,076 122.383 123.697 1 1,863,099 1.870.505 1.725.895 Operating Income . .. . .. ,. . . . 504,576 431.931 311.665 Nonoperating income Allowance for equity funds used dunng construction. 7,883 16,930 13,504 Other income and deductions, net .

(11) 14.212 45,308 i

Wnte off of nuclear costs. . . . . . .

(534.355) l Phase in carrying charges . , . ... . 205,085 299.159 -

Pre phase-in carrying charges . . . . . . - -

372,155 Federalincome taxes - credit (expense) .. . (12,948) (73.177) 131.254 200,009 257.124 27,866 income Before Interest Charges . 704,585 689.055 339.531 Interest Charges Debt interest .. .. . 384,278 369,481 378.202 Allowance for borrowed funds used dunng construction. . (5,993) (12.929) (6.137) 378,285 356.552 372.155 Income (Loss) After Interest Charges .. , 326,300 332.503 (32,624)

Preferred and preference dividend requirements of subsidiaries . . . . . . .. 61,841, 65.617 69.489 income (Loss) Before Cumulative Effect of an Accounting Change . . . . 264,459 266.886 (102.113)- .

Cumulative Effect r.,n Prior Years (to December 31,1987) of an Accounting Changc for Unbilled Revenues (Net of income Taxes of $18,729,000) . .

- - 28,153 Net income (Loss) . . $ 264,459 $ 266,886 $ (73.960)

Average Number of Common Shares Outstanding (thousands) . . . . 138,885 140.468 140.778 Earnings (Loss) Per Common Share Before cumulative effect of an accounting change. . $ 1.90 $ 1.90 $ ( .73 )

Cumulative effect of an ac ounting change. - -

20 Totai . . . $ 1.90 $ 1.90 $ ( 53)

Dividends Declared Per Common Share . . . $ 1.60 $ 1 60 $ 1.84 The accompanying notes and surnmary of significan accounting pohcies are an integral part of this statement.

. (Cesarior Energy) F-7 (Centenor Energy)

- . . - -.- -- . . . . . .- - . - ~ . - . . - - - ..,- - -

i

• MANAGEMENT'S FINANCIAL ANALYSIS .

CAPITAL RESOURCES AND LIQUIDITY additional secunbes under optional redemption We cont nue to need cash for an ongoing program of provisions See Notes 10(d) and (e) for information constructing new facihties and modif ying costing concerning hmitations on the issuance of preferred and facikhes to meet anbcipated demand for electric preference stock and debt.

Our capital requirements willincrease after 1994 as service. to comply with governmental regulations and msW of the Clean Air Act of 1990 (Clean Air Act),

to improve the environment Cash is also needed for mandatory retirement of secunties Over the three.

Our future capitat spending will depend on the year period of 1988 1990, these construction and implementation strategy we choose to achieve mandatory retirement needs totaled appronmately comphance with the new law Our prehminary

$1,210,000 estimates for capital expenditures to comply with the options toredeem

'000. In addihon, Clean Air Act are in the range of $400.000,000 to and purchasewe exercised vanous approomately

$720.000,000 of our secunties $ 700,000 000. See Note 3(b)

We expect to be able to raise cash as needeo The Dunngtne 1988 1990 penod, Cleveland Electnc V 'labahty of capital to meet our external financing and Toledo Edison issued $356.430.000 and needs, however, depends upon such factors as

$ 174,100,000. respect voly, of first mortgage bonds, and obtained $56.000,000 and $15.000,000 hnancial market cond:tions and our credit ratings.

Current secunbes ratings for the Operating Companies respectively, of term bank loans. In 1989 and 1990, Cleveland Electoc also issued $550,000,000 of

• SION *S secured medium term notes The Operating Companies utihted their short-term borrowing

{'Qd Corporabon iMS Serece 3

arrangements (explained in Note 11) which resulted in Neiand Eiectric l Cleveland Electnc and Toledo Edison having first rnortgage twnds BBB- Baa2

$87,110.000 and $23,200.000, respectively, of Preurred stack BB+ baa2

commercial paper outstanding at December 31,1990 Tosedo Ed son l

Proceeds from these financings were used to pay our rirst rnortaay bonds BBB- Baa3 i construction program costs, to repay portions of unsecured notes 88+ Ba1 short-term debt incurred to finance the construchon Pmferred stock BBt ba2 program, to retire, redeem and purchase outstanding secunties, and for general corporate purposes.

i The Operating Companies were granted rate We beheve that the rate orders, coupled with increases effective in 1989.1990 and 1991 pursuant to stnngent cost control have gwen us a reasonabi:

January 1989 PUCO rate orders. See Note 6 for a opportunity to achieve financial results which shoulo discussion of those rate orders which provide for permit Centenor Energy to continue the current specific levels of rate increases through 1991. quarterly common stock dividend of $ 40 per share Although the rate orders required us to wnte off certain Nevertheless, dividend achon by our Board of Directors assets in 1988 which lowered our earnings base, our will continue to be decided on a quarter-to quarter current cash flow was not impaired. Internally basis af ter the evalua' ion of financial results, potential generated cash increased in 1989 and 1990 from the ear;ung capacity and cash flow A wnte-off of our 1988 leve as a result cf the rate increases. investment in Perry Umt 2, as discussed in Note 3(c).

Estime'ed cash requirements for our construchon would not reduce our retained earnings sufficiently to program for 1991-1993 are $605,000,000 for impair our abihty to declare dividends and would not j

, Cleveland Electnc and $235,000.000 ter Toledo affect our cash flow.

Edison. In addition. Cleveland Electnc and Toledo The Tax Reform Act of 1986 (1986 Tax Act)

Edison will require $515,000,000 and $297,0u0 000, provided tar a 34% income tax rate in 1988 and respectively, for the mandatory redempoon of debt and thereaf ter, the repeal of the investment tax credit, preferred stock dunng this penod C'reland Electnc scheduled reductions in investment tax credit expects to finance externally about 33% of its 1991 carryforwards less favorable depreciation rates. a new construction and mandatory redemphon requirements alternat ve minimum tax ( AMT) and other items.

of approomately $267,000,000. About 75% of Toledo These changes had no sign!!icant cash flow impact in Edison's requirements of approximately $177,000.000 1988 because we had a net operating loss for tax in 1991 will be f nanced externally We expect to purposcs. However, the changes resulted in increased finance externally about 60% of our 1992 and 1993 tax payments and a reduchon in cash flow dunng requirements if economical, we may also redeem 1989 and 1990 because we were subject to the AMT.

(

l l

(Centerior Energy) F8 (f,cntenor Energy)

CASH Flows CENTERiOR ENER3Y CORPORATION AND SUBSOLARIES

_ _ For the y_ ears ended December 31, 1990 1989 1988  !

(mousanas oi mars) j Cash Flows from Operating Activities (1) 1 Net income (Loss) . .

S 264,459 $ 266.886 $ (73 960) l Adjustments to Reconcile Net income (Loss) to Cash from j Operating Activities:

Depreciation and amortization 251,640 250.918

)

264.B24 '

Deferred federalincome taxes 142,190 181.240 (37,422)

Investment tax credits, net j

. (34,287) 1.179 (3,687)

Wnte.off of nuclear costs. - -

534.355 1

Deferred and untR!ad revoues . (60,792) (74.792) 23.842 Deferred fuel (11,843) 25.086 (54,6011 Carryrng charges capital: zed. (205,085) (299.159) (372.155)

Leased nuclear fuel amortization - 84,150 102.120 77.196 Deferred operating expenses, net (43,311) (188,209)

(66.623)

Attowance lot equity funds used during construction. (7,883) (16.930) (13,504)

Amortization of reserve for Das e Besse refund obkgations to customers. -

(24,817) (41,118)

Pension settlement gain. ,

(40,966) - -

Cumulative effect of an accceng change. - -

(28,153)

.hanges in amounts due tror,; cumomers and others, not . (26,445) (13.486) 5.384 Changes in inventories. (29,015) (3,029) 10.283 Changes in accounts payable 63,610 (10,732) 73.765 Changes in working capital affecting operations. (24,913) 17.120 17,058 Other noncash items (10,772) (10.319) (8.510)

Total Adjustments , 46,278 87.776 259.348 Net Cash ' rom Operating Activities . 310,737 354,662 185.388 Cash Flows from Financing Activities (2)

Bank loans, commercial paper and other short-term debt 109,888 29 (36.555)

Debt issues:

First mortgage bonds. 167,300 123,800 239.430 Secured medium. term notes. 337,500 212,500 ferm bank loans . ,, 31,000 40,000 -

Common stock issues -

740 1,539 Reacquired common stock . . (25,601) (19,804) -

Maturities, redemptions and sinking funds. (395,287) (370,747) (384,178)

Nuclear fuellease and trust obligations (99,076) (86.589) (77.196)

Common stock dividends paid . . (222,482) (224.947) (259,022)

Premiums, discounts and expenses (7,360) (2.622) 1.176 Net Cash from Financing Activities _(104,118) (327,640) (514.806)

Cash Flows from investing Activities (2)

Cash apphed to construction (237,436) (223.881)

Interest capitahzed as allowance for borrowed funds used (313.157) during construction. (5,993) (12.929) (6.137)

Cash withdrawn from sale and leaseback and other trusts - -

374.085 Other cash apphed . (13,055) (17,866) (7.351)

Net Cash from Investing Activities . (256,484) (254.676) 47.440 Net Change in Cash and Temporary Cash investments. (49,865) (227,654) (281,978)

Cash and Temporary Cash Investments at Beginning of Year. 103,143 330.797 6:2.775 Cash and Temporary Casn investments at End of Year $ 53,278 $ 103.143 $ 330.797 (1) Interest paid was $375,000.000, $367,000.000 and $373.000.000 in 1990.1989 and 1988. respectevely income taxes paid were $21,185.000, $9,058.000 and $76.53A 000 in 1990,1989 and 1988, respechvely (2) Increasoa in nuclear fuel and nuclear fuellease and trust obhgations in the Balance Sheet resutting from the noncash capitabzations under nuclear fuet agreements are excluded from this statement.

The accompanying notes and summary of significant accounting pohcies are an integral part of this statement I

(Centenor Energy) F.9 (Centenor Energy) l

L BALANCE SHEET December 31. i 1990 1989 (thousands of dollars)

ASSETS PROPERTY, PLANT AND EQUIPMENT Utskty plant in service . S 8,648,888 $ 8.411,116 Less: accumulated depreciation and amortization 2,056,244 1,831,767 6,592,644 6.579,349 Construction work in progress 268,386 288.225 Perry Unit 2 865,149 869.048 7,726,179 7,736.622 Nuclear fuel, net of amortization. 522,672 544,375 Other property, less accum 'ited depreciation. 45,452 47.317 )

8,294,303 8,328,314 CURRENT ASSETS j Cash and temporary cash investments. 53,278 103,143  ;

Amounts due from customers and others net 242,761 216.316 i Untxted revenues . 80,866 '8.718 Matenals and supphes, at average cost , 108,758 83,322 1 Fossil fuel inventory. at r,verage cost 52,578 48.999 Taxes apphcable to succeeding years 218,444 207,635 Other . 9,922 14.819 766,607 _

752,952 DEFERRED CHARGES Amounts due from customers for future federal income tams . 1,165,904 1,201.278 Unamortized loss from Beaver Vakey Unit 2 sale . 119,623 122,911 Unamortized loss on reacquired debt . 80,564 75,988 Carrying charges and operating expenses. pre-phase-in 634,595 641,236 Carrying charges and operating expenses. phase-in . 629,744 373,714 Other . 202,895 170,154 2,833,325 2.585.281 Iotal Assets . $11,894,235

$t1- 666.547 The accompanying notes and summary of significant accounting pohcies are an integral part of this statement.

(Centerior Energy) F 10 (Centenor Energy)

CENTERiOR ENERGY CORPORATsON AND SUBSIDIARIES December 31, 1990 1989 ~~

(tnousands of dolla,5)

CAPITALIZATION AND LIABILITIES CAPITALIZATION Common sha'es. without par value (stated value of $189,460 000 and $191,710.000 for 1990 and 1989. respectively):

180,000.000 authonzed; 138.401.000 (excluding 2.511,000 shares in Treasury) and 139.792.000 (excluding 1,120.000 shares in Treasury) outstanding in 1990 and 1989, respectively $ 2,155,197 $ 2.180.798 Retained earnings . . 654,836 613,774 Common stock equity , 2,810,033 2,794,572 Preferred stock With mandatory redemption provisions . 237,490 281.352 Without mandatory redemption provisions . 427,334 427,334 Long term debt . 3,729,237 3.533.656 7,204,094 7.036.914 OTHER NONCURRENT LIABILITIES Refund obligations to customers -

23,779 Other, pnmanly nuclear fuel lease obhgations . 508,694 557,789 508,694 581,568 CURRENT LIABILITIES Current portion of long term debt and preferred stock , 214,138 217.706 Current portion of lease obkgations. 114,943 101.057 Notes payable to banks and others. 110,094 206 Accounts payable . 311,713 248.103 Accrued taxes . 323,716 329,440 Accrued interest 84,778 84.232 Dividends declared . 13,972 13493 Accrued payroll and vacations . 28,555 27.692 Current portion of refund obhgations to customers 23,888 58,752 Other . , 7,386 22,072 1,233,183 1 103.153 DEFERRED CREDITS Unamort: zed investment tax credits 336,136 381.925 Accumulated deferred federal income taxes 1,730,954 1.622,458 Reserve for Perry Unit 2 allowance for funds used donng construction . 212,693 212.693 Unamortized gain from Bruce Mansfield Plant sale. 626,493 655,573 Other . 41,988

'72.203 2,948,7 4 2 944.912 Total Capitahzation and Liabihties $1L894,235 $ 11,666.547 (Centenor Energy) F-11 (Centenor Energy)

STATEMENT OF CUMULATIVE PREFERRED CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES AND PREFERENCE STOCK 1990 Shares Current December 31.

Outstanding Call Pnce 1990 1989 CLEVELAND ELECTRIC

• "5" * '"*)

Without par value, 4.000,000 preferred shares authorized, and without par value, 3,000,000 preference shares authonzed, none outstar ang Preferred, subject to mandatory redemption

$ 7 35 Senes C 180,000 $ 101.00 $ 18,000 $ 19,000 88 00 Senes E 30.000 1,034.43 30,000 33,000 75 00 Senes F. 2,384 1,000 00 2,384 2,384 80 00 Series G - - -

800 145 00 Senes H - - - 14,244 145 00 Senes i 13.779 -

13,779 17,717 113 50 Senes K 10.000 -

10,000 10,000 Adjustable Senes M 500,000 103.00 49,000 49,000 9125 Senes N 750,000 106 08 73,968 73.968 197,131 220,113 Less Current matunties 25,969 7,751 171,162 212.362 Preferred, not subject to mandatory redemption:

$ 7 40 Series A 500,000 101 00 50,000 50.000 l 7.56 Senes B 450,000 102.26 45,071 45,071 Adjustable Senes L. 500,000 103 00 48,950 48,950

, Remarkeled Senes P 750 100,000 00 73,313 _73,313 l 217,334 217,334 TOLEDO EDISON

$100 par value, 3,000.000 preferred shares avhonzed, $25 par value, 12,000,000 preferred shares authonzed, and $25 par value, 5,000,000 preference shares authonzed, none outstanding Preferred, subject to mandatory redemption

$100 par $1100. 34.825 101 00 3,483 4,480 9.375 150,100 103 95 15,010 16,675 25 par 2 81. 2,000,000 26.87 50,000 50,000 68,493 71,155 Less: Current maturities 2,165 2,165 66,328 68.990 Preferred, not subject to mandatory redemption:

$100 par $ 4.25. 160,000 104.625 16,000 16,000 l 4.56. 50,000 101.00 5,000 5,000 4 25. 100,000 102.00 10,000 10,000 l 8.32. 100,000 102.46 10,000 10,000 7.76. 150,000 102.437 15,000 15,000 7.80. 150,000 101 65 15,000 15,000 l 10 00. 190,000 101.00 19,000 19.000

! 25 par ' 2.21. 1,000,000 25.90 25,000 25,000 2 365. 1.400,000 28 45 35.000 35,000 Series A Adjustable 1,200,000 25.75 30,000 30,000 Series B Adjustable 1.200,000 - 30,000 30.000

-210,000 210,000 CENTERICR ENERGY Without par value, 5,000,000 preferred shares authorized , - - - -

Total Preferred Stock, with Mandatory Redemption Provisions $237,490 $281,352 Total Preferred Stock, without Mandatory Redemption Provisions $427,334 $427,334 The accompanying notes and summary of significant accounting policies are an integral part of this statement (Centenor Energy) F-12 (Centerior Energy)

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NOTES TO THE FINANCIAL STATEMENTS (1) PROPERTY OWNED WITH OTHER UTILITIES AND INVESTORS i

The Operating Companies own. as tenants in common with other utihties and those investors who are owner.

participants in vanous sale and leaseback transactions (Lessors), certain generahng umts as hsted below Each owner owns an undivided share in the ent re und Each owner has the right to a percentage of the generat>ng capabihty of each unit equal to its ownership share Each utihty owner is obhgated to pay for only its respective sha'e of the construction and operating costs Each Lessor has leased its capacity nghts to a utility which is ObhgPfed to pay for such Lessor's shate of the Construction and operating costs The Operating Companies snare of the operatng expense of these generating units is included in the income Statement Property piant and equipr>ent at December 31.1990 includes the following f acihties owned by the Operating Compan,es as tenants in common w,th otb~ r utihties and Lessors owner ir C% ner sn4 Pe c 3str uaan Sernce sNo Vega Po e, n As %wre, Generahrgj>n't Date St.r e natts Sme se w e ir- nyyess gegec.au in servee (1%usaus of axes!

Senects Pumped Storage 1970 82 oh 305 w $ % 344 $ $54 $ 19 5;7 E astla*e Unit 5 1972 68 0 411 N 154 te9 1 t99 _

Perr, Un t 1 and Comor Famit es t937 51 02 609 Naaea< 2 524 24s 10 L 257 b2s Bea.er VaDev Un.t 2 and Comrnon Faah!.es (Note 2) 1987 26 12 214 Nsaear 13M 451 E ?97 139 075 Comtructen Suspen&d (Mie 3(o )

Perry Un,t 2 Unc ertain 51 02 Elf N.;uw

_- BB 149 -

Depreciation for Eastlake Unit 5 has been accumutated with c;epreciante property for au ganerating umts ratner than by specific generating unds Chio Ed. son and Pennsyhania P;wer purchased 80 megawatts of Cleveland Electoc's capacay entitlement in Perry Unit 1 from November 1987 through May 1989 Revenues from this transaction were $31831000 and

$84 068.000 in 1989 and 1988. respectmely (2) UTILITY PLANT SALE AND LEASEBACK TRANSACTIONS As a resu't of sate and teasecack transactions $70 300 000 in 1988 was recorded in a deferred completed in 1987, the Operating Companies are co- charge account pursuant to PUCO accounting orders lessees of 18 26% (150 megawatte) of Beaver Valley This deferred amount is being amortJed to egense Unit 2 and 6 5% (;1 mega w atts ) . 45 9% (358 over the ue of tne lease beg <nning in 1989 Add.tional rT%awatts) and 44 JB% (355 megawatts) of Units 1 rental cxpense amounts which were not deferred but 2 and 3 of the Mansfield Plant, respectively. al. for were charged to expense in 1988 were not significant j terms of about 29% years The Operahng Companies are respons.ble unaer Future minimum lease payments under these these leases for paying all taicts. insurance premiums, operating leases at December 31 1000 are operation and maintenance costs and all otner smiar summari7ed as foHows costs for their interests in the untts sold and leased back The Operating Compan,es may incur add tional

^~*""'

1** costs in connection with capital improvements to the

% sa ws a w es' units The Operat ng Companies have options to buy 1991 5 170 000 the interests back at the end of the leases for the fa3r 1992 173 000 market value at that time or to renew the leases

', h Add.tiona! lease prosisions provide other purchase 1995 174 000 ophons alnng with conditions for mandatory later Yers 4 171 000 termnation of the leases (and possible repurchase o' Tcts ru Nre u n e the leasehold interests) for events of default These Lease Pafments 15 03c 000 events of def ault include noncomphance w th severa financial covenants affecting Centenar Energy and tr:e Semiannuallease payments conform with the payment Operating Comoanies contained in an agreement schedule for each lease relating to a letter of credit issued in connection wit" Rental expense is accrued on a stra:ght hne basis the sale and leasebaci of Beaver Vauey Umt 2 as over the terms of the leases The amounts recorded as rnended in 1999 See Note 10(e) rental espense for the Mansfield Plant leases were io:edo Ed' son is seihng 150 meganatts of ds

$114,564 000 in both 1990 and 1989 and Beaser Valley Un:t 2 leased capacity ent:tiement to

$t 11.105 000 in 1988 Rental expense for the Beaser Cle.eland Electnc Thes sale commenced in Novemwr Vaney Unit 2 lease was $72 276,000 in botn 1990 and 1988 and we anhcipate tha* it ** continue at least 1989 Rental expense for Beaser VaHey Unit 2 of untJ 1998 (Centenor Energy) F 13 (Centerior Energ,)

(3) CONSTRUCTION AND CONTINGENCIES (d) SUPERFUND SITES 1he Comprehensne En.gonmental Response (a) CONSTRUCTION PROGRAM Compensation and tutnuy s,et of 1980 as amended The estimated cost of our construchon program for the (Superf und) estabhshed pmgrams addressing the 1991 1993 penod is $900.000.000 including AFUDC cleanup of hazardaus waste deposal stes emergency of 160.000 000 and excluding nuclear fuel preparedness and other issuer The operatog companies are aware et thea potenha! inwohement n (b) CLEAN AIR LEGISLATION the cleanup et nine hazardaus waste sites We behme lhe Clean Ag Act WW requae among other thinas. that the ulbmate outcome of inese matters AM not hawe d f"3IU"M dd

• me Mn t on our hnmy m& hon m signthcant reductions in the emission of su! fur dIoude and nitrogen oudes by f ossil f ueled e!ectric m

• 15 of W "?' d h CM generating unds The Clean Air Act wW requee that sulfur dicode emissions be reduced in t60 phases os er (4) NUCLEAR OPERATIONS AND a ten-year penod Our prehminary analysis inacates CONTINGENCIES that comphance mth the Clean An Act may reque additional aggregate capdal e= pend 4tures in the range (a) OPER ATING NUCLEAR UNITS of $400 000 000 to $700 000 000 by th^ C'peratma ou interests in nudea< un ts ma, tie impx tca b, Companies and is expected to resutt in h gher fue' actwhm or esents tmnd o e contml Oper ahn;;

and operahon and ma'ntenance expenses nudear oenerahna on ts haw em nenced unptanned The aggregate rate increases needed to fund outa ges'or e &nsions of ;hedded cn tages be :ause comphance with the f ast of the two phases could De in of equ pment problems or new regulatory the range of 2% to 4% by the year 1999 Total reawrements A ma;or ardent at a nucu at f aaltj Comphance costs of the Clean An Act for both phases angnere m tne nurid cou'd caum the NRC in I m t or could result in aggregate rate mcreases in the range prohut the operahon. construchon u kens:nq of an, of 7% to 8% by the year 2004 Cap.tal e= pend.tures si nudearund it one of our nudear u% is taLen out of be incuned af ter 1994 Tne financial impact is sen, ce for an e tended perm of hme fm am reason

. espected to be substanhany greater on Cle,e:and ,ncunq an accant at sxh on 1 or any other nreat Electnc than on To edo Ed son A more specMc tasto le cannot p<e x t whether 'reguiat or y comphance cost est mate wW Decome a.adable anen aathonte woud impt w unta.cratue rate treatment our comphance strategy is further developed such as tak m1 our a'fected u

• out of rate tuse An We beleve that Ohio law Aould perm.1 the reco,ery g,tendN catage of on d our noiar un=ts coupted of comptance costs from customers in rates un i nfaarab!" rate vatment taa1 hase a matenal adese eFect en our fmanaat p.-s han and results at (c) PERRY UNIT 2 opera..an-s m

Perry Unit 2' includtn"" its share of the common f acc. es, is over 50,4 comp ete construchon of Perry (b) NUCL EAR INSURANCE Unit was suspended in 1985 of the C APCO The Pnce Anders i Act Lm% the UMt. of tne cane s

= wan*es pend ng future consiaerahon of vanous of a nuclear pener p'an' to thi amo mt pros tded by cptions, inc!ud.ng resumption of fui! construction with a pnvate insvance and an in1s try as' msment plan in reased eshmated cost and compiehon date or the6 vent of a aucica+ inadent at any un:t in tne cancellabon No ophon may be implemented witnaut United States resu+t rg in losses in excess of the lese!

the appro.11 of each of the CAPCO compan.es of pn am msurare (conent!j 1200 000 000) our Duquesne a 13 74% o^ner of Perry Unit 2 has maomum potent,a' am ssment under that pbn advised the Pennsylvan:a Pubhc Uhhty Comm;ssion (assuming me other CAPCO compames were to that it wW not agree to resumobon of consbuct.on nt ccn!"Dute the r propcrt onate share of any Pony Unit 2 The NRC construct on perm;t for Peny assessment ) e oud he M 29 257 000 < p!as any .

Un:t 2 expnes in No. ember 1991 C!eveland Eiectnc nt.ahan adjustmc ot ) per Fe' but is tmaed to the company respons;ble for the construchon of Pe rry $19 540 000 per yW fm eacl nuuear inadent Unit 2, plans to appy for an e= tension of tne T% CAPCO ccmpames he msurance co erage .

Construction permit pnor to the expnahon da'e Under fur damage to prcperty at Daws Bme Perry and NRC regulations this action wm cause the Bea er Vane, t mdud ng leased fuel and clean up construchon permit to remam n e"^Ct whue tne costs ; Cvaraje amountnd to E E 3 000 000 for apphcahon is pending each ete as of Januari 1 1M Damm tu p operty If Perry Unit 2 were to ne canceled. then our net coud e ceed tne !nsurance cc era _w n, a sunstantal investment in Perry Unit 2 Dess any tan saang) woud amount d ir dom our snare of su h e. cess amount have to be wntten off We eshmate that such a Anto codd hase a man na: ad e > ettKt on our hnanaa!

off based on our irwestri ent in th's umt as et cond han and re its of cperahu December 31, 1990, would I ave been anout we ats has ms raw cc,uro for the 1441.000 000. af ter tanes See Natcu 10(d) M te) uementa: cost of arq repaa mm pe er purchawd for a d scus9an of oth, r potenbal consearnces of ( o,er thr. costs Av h 1

.id N oN r morred ha1 such a wnte off tN um' Dw opern q ) a'ter the uc_. ;ner ce of Begoning in JWj 1985 Perry Un,t 2 AFUDC was ci 'ta r' !;p , e are ' J' er ow une The cred led to a dcferred >ncome account unni Jouar / 1 am o ntn of t! o e ;< n ' 00 of tno , Amted 1988 when the practce cas esconhnued Nr "W 51 i+ . - d/qW T ^ w penod (Centenor Energy) F-14 kr S nor f-negy )

starting 21 weeks after an accident,67% of such Cleveland Electoc and $50.700 000 and $44.300 000, estimate per week for the next 52 weeks and 33% of respectively, foi Toledo Edison in 1991 the estimated such estimate per week for the next 52 weeks The annuah ed revenue increases resu!!ing from the cost and duration of replacement power could orders as adjusted are $71400 000 for Cleveland substantially exceed the insurance coverage Electnc and $18,600 000 for Toledo Ed son before gning effect to the rate reduction proposa!S discussed below (5) NUCLEAR FUEL The January 1989 rate orders provided for the The Operating Companies have inventories for nuclear permanent exclusion from rate base of a portion of the fuel which should provide an adequate suppiy into the Operating Companies combined investment in Perry mid-1990s Substantial additional nuclear fuel must Unit 1 and Beaver Valley Unit 2 which resulted in a be obtained to supply f uel for the remaining usefut hves wnte-off of $454 000 000 ($300.000,000 af ter tag in of Davis-Besse, Perry Unit 1 and Beaver VaHey Unit 2 1988 Since the orders etiectr,e!y chminated the More nuclear fuel would be required if Perry Unit 2 possibil.ty of the Operating Companies recovenng were completed their remaining investment in four nuclea' construction in 1989, existing nuclear fuel financing projects canceled in 1930 and recovenng certain arrangements for the Operating Companies were deferred expenses for Dans-Besse add:tional wnte-refinanced through leases from a special purpose otts totahng $80 000 000 ($49 001000 after tax) corporation The total amount of financing currently were recorded in 1983. bonging the total wnte off of avadable under these lease arrangements is nuclear costs as a consequence of the orders to

$609.000,000 ( $309,000.000 from intermed; ate term $534.000 000 ($349.000 000 after tax) notes and $300.000,000 from bank credit The phase in p'ans inder the January 1989 rate arrangements). although financing in an amount up to orders were designed so that the three rate increases.

$900.000,000 is permitted The intermediate term coup!ed witn then projected sales growth would notes mature in the penod 1993-1997 Beginning in provide revenues sufficient to recover all operating 1991, the bank credit arrangements are cancelable on expenses and provide a fa:r rate of return on the two years' notice by the lenders As of Decemoer 31

=

Operating Companies aHowed investments in Perry 1990. $547.000,000 of nuclear fuel was financed Unit 1 and Beaver Vaaey Unit ' for ten years beginning The Operating Companies severally tease their January 1 1989 in the early years of the plans, the respective portions of the nuclear fuel and are revenues were e=pected to be less than that required obligated to pay for the fuel as it is consumed in a to recover operat,ng expenses and provide a f air reactor The lease rates are based on vanous return on insestment Therefore, the amounts of intermediate-term note rates. bank rates and operating expenses and return on investment not commercial paper rates currently recosevd are deferred and capitah ed as The amounts financed inctode nuclear fuel in the defe' red charges Since the unreco,er~1 investment Davis-Besse, Perry Unit 1 and Beaver Va!!ey Un<t 2 wm dechne oser the penod of the phase in plans reactors with remaining lease payments of because 9 depreciation and federai i ncome tax

$127.000.000 $46.000.000 and $59 000.000. benefds that i wutt from the use of accelerated tai respectively, as of December 31.1990 The nuclear depreciation the VTiount of revenues required to fue! amounts financed and capitahzed also included provide a f air return a!so decones Beginning in the interest charges incurred by the lessors amounting to siitn year the revenue lesels autnorized pursuant to

$33,000.000 in 1990 $44.000 000 in 1989 and the phasean plans were designed to be su%cient to

$41,000.000 in 1988 The estimated future lease recove Inat pened s operating expenses a fa.r retum amortization payments based on projected on tne unrecosered investments. and amort.zation of co* sumption are $112 000.000 in both 1991 and deterred operating eipenses and carrying charges 1992. $116 000 000 in 1993 $110 000.000 in 1994 recorded dunn; the eather years of the plans All and $99 000 000 in 1995 As these payments are phascon deferrais af ter December 31,1988 relating to mace, tne amount of credet avadable to the lessor tnese two unns wm te reco,e'ed by December 31 becomes avalable to finance additional nuclear fuel 1998 Pursuant to sucn phaseon plans tne Operating assumog the lessor s intermediate term notes and Companies aeterrea the focomg bank cred:t arrangements continue to be outstand 1ng g w w w i am (6) REGULATORY MATTERS m+Ga w sr i sc wa i 74 555 On January 31.1989 the PUCO issued orders which c am.  %

provided for three annual rate increases for the gy 3r m m 445 Operating Compan,es of approomately 9% 7% and my gg g 6% effective with bms rendered on and af ter February == = - - = =

1. 1989 1990 and 1991 respectrvely The 6%

increase effectnce February 1.1991 has been reduced Una the January 1969 rate crae p% u m aeogned so tnat

$120 700 000 and $105 700 000 respectuey for flucts a sa ,

m et a"oct me leset of (Centenor Energy) E 15 tCemenor Energi)

_ _ _ _ _ . . _ _ _ _ _ - _ . . _ - _ _._____-_m._--,_-_m.._

earnings. The orders accomplish this by allowing the package to all incorporated communities in Toledo Operating Companies to seek PUCO approval to Edison's service area which are served exclusively by '

adjust cost deferrals if actual revenues are higher or Toledo Edison on a retail basis The package calls for

~ lower than amounts projected in the orders The orders the clamination of the 2.74% rate increase ettective

- also provide for the adjustment of deferrats to reflect February 1.1991 for all ' residential an't smail 50% of the not after tax savings in 1989 and 1990 commercial customers. a reduction in residential rates identified by the management audit and approved by of 3% on March 1.1991 and a further residential rate the PUCO as discussed in the following paragraphs. No reduction of 1% on September 1,1991. Communities change was made in the cost deferrals for 1989 The acceptirig the package must agree to keep Toledo Operating Companies deferred an additional Edison as their soie supplier of electricity for a penod of

$10sG9.000 of carrying charges in 1990 and will five years. The package also permits Toledo Edison to request PUCO approvat of the deferrat adjust rates in those communities on February 1.

In connection with the 1989 orders, the Operahng 1994 and February 1.1995 if inflation exceeds e Companics and the Service Company have specified levels or under emergency conditions. All undergone a management audit to assure that ekgible communites in Toledo Ed: son's service area, operation and maintenance expense savings are except the City ot Toledo. have accepted the rate maomized The audit was conducted under the reduction package.

direction of an Audit Advisory Panel ( Audit Panel) Toledo Edison plans to request PUCO approval to compnsed of representatives of Centenor Energy, the reduce rates to the same levels for the same customer Ohio Office of Consumers' Counsel and the Industnal categones n the City of Toledo and the rest of its Energy Consumers in A.pnl 1990, the Audit Panel service area if all areas now served by Toledo Edison announced that it had identified potential annual receive the benefits of the lower rates. annualized savings in operating expenses in the amount of revenues wt!! be reduced by about $17.000,000 The

$98.160.000 from 1989 budget levels The amount of revenue reductions will not adversely affect the phase-potential savings attnbutable to Cleveland Electnc is in plans as the decrease in revenues will be mitigated 55% ($53.988.000) and the amount atir butable to by the cost reduchons discussed above Toledo Edison is 45% ($44,172.000) The Operating Tne Operating Companies have entered into an Companies e>pect to begin reakring most of the acreement with other members of the Audit Panel in savings idenbfied by the audit by the end of 1991. which the Operating Companies have agreed to use Fifty percent of the savings idenhfied by the Audit their best ettorts to avoid rate increases in the years Panet were used to reouce the 6% rate increase immediately following 1991 schedu:ed to go into effect on February 1.1991 tor The 1989 orders also set nuclear performance each of the Operahng Compan;es As discussed standards through 1998 Beginning in 1991, the previously Cleveland Electne rates increased 4 35% Operating Companies could be required to refund and Toledo Edison rates increased 2.74% under this incrementa! replacement power costs if the standards provision as approved by the PUCO in January 1991 are not met The Operahng Companies do not beheve The rate impact is different for the two companies any refund wdl be required for 1991. Fossil-fueled because much of the savings wit! be achieved in areas power plant performance may not be 'aised as an tssue such as nuciear operations in which Toledo Edison in any rate proceed;ng before February 1994 as long stands to achieve greater savings relative to its size as the Operating Companies achieve a system-wide in a move to become more competitive in Northwest avadabihty factor of at least 65% annua 9y. This Ohio, Toledo Edison has proposed a rate reduction standard was exceeded in 1989 and 1990 (7) FEDERAL INCOME TAX Federal income tat computed by mulhplying the income before taxes and preferred and preference dividend requirements of subsidianes by the statutory rates,is reconcded to the amount of federalincome tat recorded on the books as follows.

For he years ended De mtwr 31.

1990 1989_ 1988 itnouunos or doitau)

Boon income Betone f ederal income Tax , 1415324 1528 065 1 6701 Tax on Bam income at Statutory Rate 1148 0ie $179542 $ -2 278 ircrease (Decease} in Tu ,

Acwsrated deprecahort C2M 10 415 6.829 irwestnant tae ved;ts on d:sanoned nudear plant . (37 522) -

Orgarmon costs -

5617 Ta<es omer tran federat income tves (12 116) (107) 2090 Omer items 43(S 5 712 (5 642)

Total Fedeex income Tan Emmse 1109 024 1195 562 $ 11,172 l

(Centenor Energy) F-16 (Centerior Energy)

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

Federal income tax expense is recorded in the income Statement as follows:

For the years ended Decemter 31 1990 1989 1988 (thousands of douars)

Operating Expenses Current Tat Provision. .. .., .. $ 42 685 $ 51809 $ 79.520 Changes in Accumulated Deterred Federalincome Tai-Accecrated deprecsation and amortization . 41.777 44 144 2ti168 A!tematnre minimum tan cred.t. .

(2L340) (12 874) -

Saie and leaseback transactions and amort.zation. t.617 4.348 13.588

- Property tan expense . (14 891} -

(12,127)

Deferred CWiP revenues ; 20 186 22,731 (B.453 )

Deterrsd fuel custs. . /42 (4 384) 16 227 Systern development costs. 651 555 9.157 Davis Besse septacement power -

9 191 15291 Federal income tai return adjustment $ - -

(19 621)

Reacquired deet cosa 1.355 (1 250) 3 774 Defo, red operating expenses . 2 454 1.021 14 913 Net operating loss carryforward . . - -

(2.54 5)

Other items . . . 11 889 5 254 (8 508) investment Tai Credits . 2 651 1.780 (3 687)

Total Charged to Operating E apenses 96 076 122 385 123 697 Nonoperating income Current Tas Provision. . .

(42.256) (39 3J11 (46.432)-

Changes in Accumulated Deferred Federal income Tau Daws Besse replacement power . - -

5724 wnte-off of nuclear costs . (22,143) -

(188.920)

AFUDC and carrying charges. 74 447 114.300 133.637 Taxes other than federalincome taxes . - -

5.520 Net operating loss carryformard . - -

(36.831)

Other items - - 2.900 _ 1782)

( (3 952)

Total Expense (Credd) to Non-operat.ng income 12.948 73 177 (131 254)

Federalincome Tax included in Cumulative Effect or an Accounting Change for Unbilied Revenues , - -

18 729 Total Federai income Tai Empense . $109 024 $195 562

$ 11.17]

.in 1988, a change was made in accounting for income taxes from the deferred to the habihty method This change did not impact net income as the additional deferred taxes recorded were offset by a regulatory asset on the Balance Sheet.

Federalincome tax expense adjustments in 1990, associated with previously deferred invastment tax credits relating to the 1988 wnte-off of nuclear plant investments, decreased the net tax provision related to nonoperating income by $37.522,000 and increased eamings per share by $ 27.

The favorable resolution of an issue conceming the appropriate year to recognize a property tax deduction resulted in an adjustment which reduced federal income tax expense in 1990 by $14,011,000 ($10.375,000 in the fourth quarter) and increased eamings per share by $.10 ($ 07 in the fourth quarter),

For tax purposes, net operating loss (NOL) carryforwards of approximately $74,627.000. $71.532,000 and

$327,852,000 were genereted in 1990.1989 and 1988, respectively. The NOL carryforwards are aviiilable to reduce future taxable income and will expire in 2003 through 2005 The 34% tax effect of the NOLs generated in 1990.

' ($25,373.000) and 1989 ($24,321,000) is included in the above table as a reduction to deferred federal income tax relating to accelerated depreciation and amortization. The 34% tax effect of the NOL generated in 1988

($111,470.000) m included in the above table as reductions to deferred federal income tax relating to accelerated depreciation and amortization ($72.094.000) and to deferred federalincome tax charged to operating experises

( $2.545.000) and to nonoperating income ($36,831.000). Future utikzation of these tax NOL carryforwards would result in recording the related deferred taxes.

Approximately $31.665.000 of unused general business tax credits are available to reduce future tax obhgations, The unused credits expire in varying amounts in 2001 through 2005 Utihzation of these unused credits is hmited by provisions of the 1986 Tax Act and the level of future taxable income to which such credits may be apphed The 1966 Tax Act provides for an AMT credit to be used to reduce the regular tax to the AMT level should the regular tax exceed the AMT AMT credits of $24.340,000 and $12.87.4.000 were generated in 1990 and 1989.

respectively (Centenor Energy) F 17 (Centenor Energy)

(8) RETIREMENT INCOME PLANS AND OTHER The settlement (discount) rate assumption was -

POSTRETIREMENT BENEFITS 8 5% for December 31.1990 and 8% for December 31, 1989 The long term rate of annual compensation We sponsor noncontnbuting pension plans which cover increase assumption was 5% for both December 31, all employee groups The amount of retirement 1990 and December 31,1989 The long-term rate of benefits generally depends upon the length of service return on plan assets assumption was 8% in 1990 and Under certain circumstances benefits can begin as 1989.

early as age 55 The plans also provide certain death, Plan assets consist pomanly of investments in medical and disabihty benefits. Our funding pohey is to common stock, bonds, guaranteed investment comply with the Employee Retirement income contracts, cash equivalent secunties and real estate Secunty Act of 1974 guidelines The cost of postretirement medical benefits Dunng 1990, we offered our second voluntary Early amounted to $6.500.000 in 1990, $5.000.000 in 1989 Retire.nent Opportunity Program (VEROP) Operating and $3,800.000 in 1988 Consistent with current expenses for 1990 included $15,000.000 of penson ratemaking practices, these costs are recorded when plan accrua!s to cover enhanced VEROP benefits paid plus an additiona: $28.000,000 of pension costs for in December 1990, a new accounting standard for VEROP benef ts being paid to retirees from corporate postretirement benehts other than pensions was funds. The $28,000,000 is not included in the pension issued This standard requires employers to accrue data reported below Operating expenses for 1990 also the expected cost of such benefits dunng the included a credit of $41.000.000 resulting from a employees' years of service The standard also settlement of pension obhgations through lump sum requ:res the recording of a cumulative transition payments to a substantial number of VEROP retirees obhgation adjustment which can be recognized Net pension and VEROP costs (credits) for 1988 immcdiately, subject to certain hmitations, or amortized through 1990 were compnsed of the following over the longer of 20 years or the average remaining components: service penod of actne employees expected to receive 3993 39g9 39gg benefits. We are required to adopt the new standard no later than 1993 Although we have not completed an tmnons of dsars)

Penson Costs (Credss) analysis to determine the effect of adopting the new Serece cost for beneta camed standard, we do not expect adoption to have a donng me pered 5 15 $ 14 5 12 matenal adverse effect on our financial condition or interest cost on pimected benett results of operations because of expected future ochgabon . 37 35 33 regulatory treatment Any trabihties recorded pursuant Actuai return on pian assets. (8) 173) (761 to the standard may be essentially off set by regulatory Net amorteaton and detenal . 15p 13 19 assets to reflect anticipated f uture revenues associated Net penson credes (8) t11) (12) with recovery through rates Vf ROP cost. 15 -

6 (9) GUARANTEES Semement gain. (41) - --

Ner cred ts . $t34) $ rCi Under two long term coa! purchase arrangements.

- --$(t1i' Cleveland Electoc has guaranteed certain loa,1 and lease obhgations of two mining companies Toledo The following table presents a reconcihation of the Ed: son is also a party to one of these guarantee funded status of the plans at December 31,1990 and arrangements This arrangement requires payments to 1989 the mining company for any actual out of pocket idle December 31 mine expenses (as adsance payments for coal) when 3999 3939 the mines are idie for reasons beyond the control of (mations of dalla,g the mining company At December 31.1990. the Actuanal preser,1 value of benett pnnCipa! amouril of the mining companies' loan and ontgabons leare obhgations guaranteed by the Operating vested benetts 5 330 5 32e Companies was $109 000.000 Nonwsted benetts 24 28 Accumuta'ed berett cohgahcm . 354 356 Effect of future compensabon leve!s _ 72 11:7 Tota! prqected benefit ochganon 426 473 Ptan assets at fair ma%t va:ue. 653 761 Surpius of pian assets over pmscted benet,t othgabon 227 288 Unrecogwed net gar, ow to vanance between assumpf-ons and egenence (8e> (163)

Unrecognaed phGr seroce cost 13 a Transibon asset a? Januvf 1.1987 berng amortved over 19 yea's (126i i141)

Net precard (accrued) penson cost irciuded in cther deferred (Nyges (cred.ts) on the Baance Snet. 1 26 $ (8)

(Centerior Energy) F- 18 (Centenor Energy) i

('10) CAPITALIZATION outstanding options held by employees were a-(a) CAPITAL STOCK TRANSACTIONS fou ws-g,g Key Lmp,oyee Shares sold, retired and purchased for treasury dunng St ck Opt.on Py the tnree years ended December 31,1990 are listed in m0 m sa the following table. Ops Outstaeg at l 1990 1999 1988 December 31 (thousands or shares} Shares 108 655 215 187 314 693 Common Stxk Opton Rees .

04 09 to 114 09 to $14 M to Empiovee Savngs P.an . - - 7 120 73 120 73 520 73 Employee Pur? .>e Pian , -

36 62 l

1978 Key Employee Stod Ophon rian . -

17 27 (c) EQUITY DISTRIBUTION RESTRICT 80NS Tota! Common Stock Saies. -

53 116 At December 31,1990, consohdated retained earnings -

Treasury Snares (1 391) (1 062) (2) were comprised almost entirely of the undistributed Net Cha,ge . g_029) M4 retained earnings of the Operating Companies i

[1 391)

Substantiolly all of their retained earnings wSe l Cumutahr Pretened and Pretererce Stock of Substd. anes avadable for the declaration of dividends on their {

Subiect to Mandatory respective preferred and common shares All of their  !'

RMempton common shares are held by Centence Energy.

Cleveland Eiectnc Rebrements Any financing by an Operating Company of any of  :

PreMued its nonutility arfiliates requires PUCO authonzation '

I unless the financinQ is made in ConneClion with g 7 j33,b",] f transactions in the ordinary course of the companies 75 00 Senes F -

(1) (14) pubhc utlhties business operations in which one 80 00 Senes G . (1) (2) (5) company acts on behalf of another 145 00 Senes H . (14) (4) (4) 145 00 Senes i (4) (4) (4)

P* '*"c' (d) CUMULATIVE PREFERRED AND

$ 77 50 Senes 1 -

(6 (7)

PREFERENCE STOCK i

loiedo Ed:sen Rebrements Amounts to bu pa'd for preferred stock which must be pretened redeemed duw the next five years are $28.000.000 s100 par sn 00 00) (5) (5) in 199t, $18,00b000 in 1992 and $43.000,000 in 9 375 (17) (17) _y 7) each year 1993 ihrough 1995 Tota! . (59) (52) (69) The annuamandatory redemption provisions are as Cumutabve Preferred Stock of Annual Mandatory Subsidianes Not Subject to Redemphon Provisons Mandatory Redemphors Snares Pnce Toiedo Edison Retirements To Be Beg ming Per

$25 par 3 4 7 , - -

(1200) N' *" #' 8"*'*

Clevelana E!ec:nc Tota! . _-- g00) p,,g,,cd

'9 Shares of con. mon stock required for the Empicyee Savings Plan and the Employee Purchase Plan are I$ g f ]$ 3[ Sj 75 Cn Senes F . 2384* 1985 1.000 being acquired in the open market 145 30 Senes i 1 969 1986 1 000 Centenor Energy began a program in 1999 to ti3 50 Senes x 30 000 1991 " 3000 purchase up to 3.000,000 shares of its common stock Adius'abte Senes V 100 000 1991 100 at prevamng pnces in the open market in the penod 9125 Senes N 150 000 1993 103 between March 28,1989 and March 31,1991. As of Toledo Edison December 31, 1990. 2.510,00-0 shares had been PT*"M purchased at a total cost of $46.198,000 Such shares is par su 00 5 000 1979 100 are being held as treasury shares 25 pa< 28 4 0 to 3 (b) COMMON SHARES RESERVED FOR ISSUE ' "*"'* " "* '***"""9 #^'" ' " " " * " " ' * ' " '

• AP outstanding shares to te redeemed June 1.1991 Common shares reserved for issue under the Employee Savings Plan and the Employee Purchase Plan were The annualized cumulative preferred dividend 3.176.727 and 21,448 shares. respectively, at requirement as of December 31.1990 is $60.000.000 December 31,1990 The preferred dividend rates on Cleveland Electnc s Sto% options to purchase unissued shares of Senes L and M and Toledo Ed: son's Senes A and B common stock under the 1978 Key Employee Stock fluctuate based on prevaihng interest rates, with the Option Plan were granted at an exercise pnce of 100% dividend rates for tnese issues averaging 8 38%

of the fair market value at the date of the grant No 7 71% 9 06% and 9 84% respectively, in 1990 The addmona! options may be granted The exercise prices d!vidend ratr on Cleveland Electnc's Remarketed of option shares purchased dunng the three years Senes P as raged 8 0 t% in 1990 ended December 31.1990 ranged from $14 09 to Under os articles of incorporation. Toledo Edrson

$17 41 per share Shares and pnce ranges of cannot istue preferrea sinck unless certain earnings (Centenor Energy) F 19 (Centenor Energy)

coverage requirements are met Based on earnings for 1992. $317,000.000 in 1993 $63.000.000 in 1994 the 12 months ended December 31.1990. Toledo and $292.000,000 in 1995 Edison could issue at December 31, 1990 in 1989 and 1990. Cleveland Electnc issued i

approumately $7.500.000 of additional preferred stock $550.000.000 aggregate poncipal amount of secured at an assumed d;vidend rate of 11% 11 Perry Unit 2 medium term notes with vanous matunties ranging had been canceled and wntien off as of December 31, from 1993 to 1999 and annual interest rates ranging 1990. Toledo Ed: son would not have been permitted to from 8 95% to 9 8% The notes are secured by first issue any adddional preferred stock See Note 3(c). mortgage bonds The issuance of additional preferred stoc k in the future Dunng 1993 Cleveland Electne arranged to refund wdl depend on camings for any 12 consecutwe in 1992 $78.700 000 pnncipal amount of its first months of the 15 months preceding the date of Mortgage Bonds 13'e% Senes due 2012 which are issuance the interest on alllong term debt outstand.ng cohateral secunty for pollution control refunding bonds and the dividends on all preferred stock issues issued Dy a pubhc authonty The authonty's bonds wdl outstanding. be refunded at the same time To ettect the ref und of There are no restnctions on Cleveland Electne's its bonds the author.1/ entered into a contract with two abihty to issue preferred or preferer.ce stock or Toledo inst +tutions to dehver in 1992 $78.700 000 aggregate Edison's abihty to issue preference stock pnncipat amount of its tare empt pocution control With respect to d:vidend and Iqu:dation nghrs bonds due December 1. 2013 with an interest rate of each Operating Companis preferred sinck is poor to 8% at a poce of 97 496% tor an effectne interest cost its preference stock and common stock and each of 8 25% The authohty s bonds will be secured by

~

Operating Company s preference stock is poor to its $78 700 000 poncipal amount of Cleveland Electnc's common stock First Mortgage Bonas 8% Senes due 2013 8 The pr ce ds wm n uwd t md*m p om nys (e) LONG-TFRM DEDT AND OTHER utstrding Donds and .etund the 13 W Senes First BORROWING ARRANGEMENTS Mortgage Bonds in July 199? 1he PUCO authonted Long term cebt, less current matunties. for the Cieseland Electnc to recoid interest expense equal to Operating Companies was as fouows a blend of the higher rate on the outstand ng bonds Ah with the lower rate on the new bonds for an interest cmnw 33 weara va w v NMb 1990 m expense reduction of $1.000.000 in 1990 and approomately $6 000 000 totM in 1991 and 1992 (moumds e asam First mortgage bonas The mortgages of Cieseland Electoc and loiedo 1991 8 375% $ --

i 35 000 Ed son constitute d rect f ast cens on substantiah all 1991 15 00 -

70 000 property ownea and franchises held by them Excluded C 13 75 -

4 334 from the hens, among other things are cash 1992 15 25 20 000 20 000 secunties accounts rece. sable fuel supphes and. in 4 4 the case of Toledo Ed; son. automotse equipment ff Acditional brst mortgage bonds rnay be issued by 1993 3 875 30 000 30 000 1993 8 55 50f00 50 000 Cie,etand Electnc under its mortgage on the basis of 1993 13 75 4 334 (334 bondable property add,tions. cash or substitution for 1994 4 375 25 000 25 000 refuncable hrst mortgage bonds The issuance of 1994 13 75 4 334 4 334 additional first mortgage bonds ny Cieseland Electoc 1995 1D125 -

36 800 on the basis of property addihons is hmited by two 1995 11 25 60 000 60 000 prowsions of its mortgage One relates to the amount N of bondabie properth avadable and the other to f[0 e mgs comage of interest on the bonds Unar the

,gg[ h gy 'IS I5 15 mye mstoctNe of these proustons (currently. the 1995 7 00 15 9 35 219 798 219 74B amount of bondabic property avalable), Cleseland 1996 2000 2001-2005 9 08 194.135 194,135 Electnc would have been perrru t ted to issue 2006-2010 9 08 323 650 323 650 approumately 1369 000 000 of bonds based upon 2011-2015 9 38 448 435 533 435 asadab>e bondable property at December 31.1990 2016 2020 8 92 760 180 592 880 Cleveland Electnc a'co would have been permitted to 2021 2023 8 09 322 100 322 100 issue approomately $159.000.000 of bonds basect 2 511.384 2 575 218 upon refundable bonds at December 31.1990 If Perry Term ba% loans oue Unit 2 had been canceted and wntten off as of 1992 1996 8 71 127.900 130 000 December 31,1990. Ciesciand Electnc would have Notes due 1992 1939 . 9 70 769 430 474 215 been permitted to issue approumateiy $20,000 000 of Denentures due 1997. 1125 125 000 125 000 bonds based uport avadable bondable property and pproom ely $159 000.000 of bonds based upon 92 0 9 09 190 860 221 250 refundable bonds at December 31,1990.

Other - ne -

4 663 7 973 The issuance of add.tional f ast mortgage bonds by Tetat Long. Term 13 729 23713 513 65g Toledo Ed son also is kmned by prows.ons in its Debt .

mortgage simdar to those in Cleveland Electnc s Long term debt matures danng tne nest fae years mortgage Under the more restnctue of these as fouows $186 000.000 in 1991. $220 000.000 in prowsions rcurrenuf. the eamings coverage test)

(Centenor Energy) F 20 (Centenor Energy)

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

Toledo Edison would have been permitted to issue Short term borrowing capacity authonzed by the approomately $177,000,000 of bonds based upon PUCO is $300,000.000 for Cleveland Electne and available bondable property at December 31,1990 $150,000.000 for Toledo Ed: son The Operating Toledo Edison also would have been permitted to issue Companies have been authonzed by the PUCO to approximately $56.000,000 of bonds based upon borrow from each other on a short term basis refundable bonds at December 31,1990 If Perry Unit Most borrowing arrangements under the Operahng 2 hao been canceled and wntlen off as of December Companies'short term bank knes of cred:t require a 31,1990, the amount of bonds which could have been fee of 0 25% per year to be para on any unused portion issued by Toledo Edison would not have changed of the knes of credit. For those banks without fee Certain unsecured loan agreements of Toledo requirements, the average daily cash balance in the Edison contain covenants relating to capitahzation bank act ounts satisfied informal compensating ratios, earnings coverage ratios and hmitations on balance arrangements _

secured financing other than through first mortgage At December 31,1990. Cleveland Electne and bonds or certain other transact,ons, An agreement Toledo Edison had $87,110.000 and $23 200.000, relating to a letter of credit issued in connection with respectively, of commercial paoer outstanding The the saie and leaseback of Beaver Valley Unit 2 (as commercial paper was backed by at least an equal amended in 1989) contains several financial covenants amount of unused bank lines of credit for botn affecting Centenor Energy and the Operating Operating Companies Companies Among these are covenants relating to The fee for the Service Company's hnes of credit is earn:ngs coverage ratios and capitahzation ratios 0 25% per year to be paid on any unused portion of its Centenor Energy and the Operating Companies are in knes of cred t comphance with these covenant provisions. We No formal short term borrowing arrangements have beheve Centenor Energy and the Operating been estabbshed for Centenor Energy Companies will continue to meet these covenants in the event of a write off of the Operating Companies' investments in Perry Unit 2, barnng unforeseen (12) CHANGE IN ACCOUNTING FOR UNBILLED circumstances. REVENUES (11) SHORT-TERM BORROWING Pnor to 1988. revenues were recorded in the ARRANGEMENTS accounting penod dunng which meters were read Our bank credit arrangements at December 31.1990 Utikty service rendered af ter monthly meter reading were as follows d tes through the end of a calendar month (unbilled cie eiano Tomo serxe revenues) became a pa t of operating revenues in the Electr,c E c, son CompaN Totav following month h January 1988, we adopted a  ;

(twsands of conars) change in account ng for revenues in order to accrue Bann unes of the estimated amo int of unbilled revenues at the end Credat $ 150.000 575 550 56.000 5235 550 of each month The adoption o this accounting method increased There were no borrowings under these bank credit 1988 net income 13 581.000 (net of $1.845.000 of arrangements at December 31.1990 An additional income taxes) anc earnings per share $ 03 before the

$5,000,000 kne of credit is available to the Service cumulative effect o i penods pnor to January 1,1988 Company under a $30,000,000 Cleveland Electnc kne The cumulative effe:t of the change on the periods of cred,t, if unused by Cleveland Electne The poor to January 1.1788 was $28.153 000 (net of

$5 000 000 kne of cred.t is included in the C'eveland $18.729 000 of incon e taxes). or $ 20 per share, and Electnc total was included in 1988 i et income (Centenor Energy) F 21 (Centenor Energs)

(13) CUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a tabulation of the unaudited quarterly results of operations for the two years ended December 31 1990 oumies t rwa

_,MQ'Q June 3D Sfyt 30_ Dt;c 31_

onauwm e nam eon u r use awants) 1990 Operating Revenues . 1560 594 1577 505 $673.015 $556 561 Operating income 1116.208 $ 86.782 1171.723 1129 B63 Net income . $ 50,509 i 64 921 1 99,749 $ 59 280 Average Common Shares (thousands) 139.486 138.980 138.610 139.441 Earnings Per Common Share 1 36 5 40 $ 72 $ 43 Dividends Pa:a Per Common Share 1 40 1 40 $ 40 1 40 7989 Operating Revenues . $555 230 1577 303 1637,619 1532,284 Operating locome $112 968 $ 129 708 1152 796 1 36 459 Net income . i 67.690 $ 77.807 1108 857 $ 12.532 Average Common Shares (thousands) 140 829 140 752 140 391 139 990 Earnings Per "ommon Share i 48 i 55 5 78 $ 09 Dwidends Paid Per Common Share. 1 40 $ 40 1 40 $ 40 Earnings for the quarter ended June 30 1990 weru increased as a result of federal income tax cupense adjustments associated with deferred insestment tax cred,ts relating to the 1988 wnte-ott of nuclear plant investments See Note 7 The adjustments increase; quarterly earnings by 136 298.000 or i 26 per share Eamings for the quarter ended December 31,1990 were increased as a result of year end ad ustments i of

$25,790,000 to reduce depreciation expense for the year (see Summary of Significant Accounting Pohcies).

$10.169.000 to increase phase in carrpng charges (see Note 6) and 110 375.000 to reduce federal income tax expense isee Note 7) The total of these adjustments increased quarterb, earnings by $35.000.000. or i 25 per share (Centenor Energy;. I 22 (Centenor Energy)

FINANCIAL AND STATISTICAL REVIEW Operating Revenues (thousands of dollars)

Steam T ota)

Tota! T olai Heeng Dwrong Year 4s<14ntia; CCFYtrherC43 Influsinal Olner Sta+1 Who6esate flecinc & Gas kevenvet 1990 $719 078 $668 910 8779 391 8189 754 52 357 133 8 10 542 82 367 675 8- $2 367 675 1989. 685 735 616 902 746 534 204 769 2 253 940 48 496 2 302 436 --

2 N)2 436 1988. 637 329 537 861 675 584 84 524 1 935 298 102 262 2 037 560 -

2 037 560 1987. 629 663 531 682 689 959 36 272 1 887 576 24 409 1 911 985 13 371 1 925 356 1986. 4 599 445 516 614 675 682 79 716 1 871 457 11 381 1 882 838 12 953 1 H5 791 1980, 394 872 301 513 461 624 53 633 1 211 642 36 966 1 248 608 22 047 1 270 655 Operating Expenses (thousands of dollars)

Otnce Fue4 & Cvetaten Depsaceton Taies Phase en & F ederai Ictat Purchased & & Otnet inan Ae phase m

'Y e as Power Mamlevre Amortdalen fd w.come Ope w g Defened Net Taaes ( eg enes 1990. $412 531 $862 738 $251640 8283 425 8 (43 311) 5 96 076 81 863 099 1989. 413 816 800 138 280 918 259 871 (66 623) 122 385 1 870 505 1988. 391 401 865 632 264 824 268 550 (188 209) 123 697 1 725 895 1987. 470 466 642 594 214 421 207 521 (57 623) 105 912 1 553 291 1986 522 281 550 874 141 009 194 925 138 181 1 547 270 1980 490 659 280 722 90 621 112 832 64 950 1 039 784 income (Loss) (thousands of dollars)

F ede< al inceme Other income income income A nossi Taaes- Bewe Aftes Operar.ng AF UDC- Deducions Carrv ng Cuot inte<est Derit AF UDC- interest Year income ( Saty Net Chages 1(spense) Imerest Charps Dept Charges 1990. 8504 576 8 7 883 8 (11) $205 085 $(12 948) $704 585 5384 278 3 ($ 993) 8326 300 1989. 431 931 lb 930 14 212 299 159 (73 177) 689 055 369 481 (12 929) 332 503 1988. 311 665 13 504 (489 047)(e) 372 155 131 254 339 531 378 292 (6 137) (32 624) 1987. 372 065 299 308 (57 821) 39 599 121 122 774 273 435 042 (137 257) 476 488 1986 348 521 308 405 (8 108) -

116 422 765 240 406 465 (118 145) 476 920 1980. 230 871 69 316 8 484 - 27 180 335 851 163 489 (40 199) 192 561 income (Loss) (thousands of dollars) Common Stock (dollars per share & %)

income (LoS$}

Before  % turn on Pretened & Cumuiatue ComuWe A inage A e age Preference Effect of an Effect of an Net Shares Comnon Stact Accouning Account,ng mcome Outstawng(c ) E arnmgs Stoc. D wtends Eku vear Dwdends Change Change (b) (Loss) f inousams n EqA (Loss >(c) Decwed(c) vane (c) 1990 361 841 8 264 459 8 -

$264 459 138 885 8 1.90 9.4% S t.60 $20.30 1989. 65 617 266 886 -

266 886 140 468 1 90 96 1 60 19 99 1988. 69 489 (102 113) 28 153 (73 960) 140 778 (0 53) (2 5) 1 84 19 68 1987 86 135 390 353 -

390 353 138 395 2 82 12 8 2 56 22 10 1986 85 027 391 893 -

391 893 128 927 3 04 13 7 2 49 22 13 1980= 45 732 t46 829 -

146 829 67 185 2 19 11 2 1 92 19 37 NOTE 1980 data e tne result of comtuning and restating Cleveland Electnc and To<edo Edison cata (a) incluces wnte ct's nuclear costs in the amount of $534 355 000 in 1988 (b) In 1988 the Operahng Companies adopted a change in the metnod of accounting for unnitteo enenoes (c) Outstanding shares for the penods prior to Apnl 29 1986 refect tne Clevetanc Dectnc 111 for ene enchange ratio and tne TNedo Ec son one for one enchange rabo for Centenor Energy shmes (Centenor Energy) F 23 (Centenor Energy)

Ct N1t R on i NERGY CORPOR ATON AND SUBSOAhES Electric Sales (millions of KWH) Electric Customers (year end) Residential Usage -

A* a je Avera.jer A s"a.se Ptg e Ri% tenue O kla@ d a WH f t.t Pe* Per

}

IMW Ih sents C ommer:.ai & Otter lad C ustan er kAH costrer Year Res* dent.a! Crmmet od hdustr W W%4tssW Other 1990. 6 666 6 848 12 168 148 959 26 789 918 965 94 522 12 906 1 026 393 7 079 10.824 $765.93 1989 6 806 6830 12 520 429 996 27 681 914 000 93 833 12 763 1 020 610 7 295 10 08 737 58 1988 6 920 6 577 12 793 B63 946 28 099 909 182 92 132 12 335 1 013 619 7 462 9 21 690 06 1987. 6 659 6 350 11 965 399 949 26 342 903 365 90 146 12 240 1OM 753 7 217 9 46 685 43 1986. 6 527 6 239 11 409 242 909 25 326 893 583 B7 947 12 012 9M 542 7 108 9 18 654 99 1980. 6 434 5 431 11 227 1 630 826 25548 882 987 83 602 11 460 978 049 7 111 6 16 437 99 Load (MW & %) Energy (millions of KWH) Fuel ope,ew capaatv _ *o t mooner a1 f.rne Pee Carsdy tcaJ l # * ~ "*" *

• I h.r. '--M f s Cop Blu Per of Pm i vad Map i F1

• F cssa h it'ar ior r  % 1oa! Perae,4 sWH Y ear 1990. 6 437 5 261 18.3% 63.6 % 21 114 9 481 30 595 (1 926) 28 669 1.524 10 354 1989 6 430 5 3B9 16 2 63 3 20 174 12 122 32 296 427eSi 29 511 1 47 10 435 1983. 5 525(d) 5673 (27) 60 8 21 576 7 805 29 381 9r 3D 301 1 59 to 410 1987 5955 5 173 13 1 63 6 /0 694 6 907 27 801 001 2R 422 t 53 10 466 1986. 5193(d) 5 021 34 63 0 22 739 24 22763 4 552 27315 1 79 10 292 1980. 6 113 4 635 24 2 04 3 20 015 2114 .2 129 ;246 27 375 1 66 10 519 invest %1ent (thousands of dollars) cwm

[y ofI D ')d'

$4 uciem v t 4 +* r t , L1bb t ,

Utsdy A. a.3muu'txt Pr ay t-s.s Punt h Depeoaton & W A Peq he a-u MW %t fate k tl AWnt AJt 14 r 4 Apet s V e&f St4 Wif e AIMtCa%M hant Urul 2 O" + r 1990 $8 648 888 $2 056 244 $6 592 644 $1133 535 $568124 $8 294 303 $ 251312 511 894 235 1989, 8 411 116 1 831 767 6 579 343 1 157 273 591 692 9 32B 314 230 797 11 666 547 1988 8 143 673 1 569 304 6 574 369 1 222 732 643 087 H 440164 343 1*3 11 573 098 1987, 8 388 114 i 324 446 7 063 668 1 007 707 656 350 e 727 725 947 921 11 349 836 1986. 4 639 542 1 367 662 3 271 860 5 237 762 652 504 9 it,2 N 6 1 133 74B 10 On t 932 1930 3 602 029 778 488 2 823 541 1 331 323 89 683(e) 4 244 547 633 9 % 4 827 944 Capitalization (thousands of dollars & %)

Vrdeoca & Pfer reers e eved $ra k su !%u sw. en vuxwa , vander, necam Commm Skxk EquN H + n. pen N a m i ro wr+s t .xy l e"- D. i Tatai Y ear 1990- $2 810 033 39% $237 490 3% $427 334 6% $3 729 237 52% $7 204 094 1989 2 794 572 40 281 352 4 427 334 6 3 533 656 50 7 036 914 1988. 2 771 744 39 301 781 4 427 334 6 3 551 614 51 7 054 473 1987, 3 109 060 41 343 995 4 457 3~i4 6 3 71e 249 49 7 628 628 1986. 2 991 341 39 487 814 7 404 021 5 37 s 402 49 7 675 578 1980. 1 365 229 36 327 000 8 245 071 6 1 925 934 50 3 883 234 (d) Cac,aaty data renects extende<1 genmahng uta cutsps br rewavaton and *mpocrenn (e) Restated for ettects of capitahration of radar f te Waw arnt f nanong anangemen putwant to S:airm ' d F manaar At counbrq Standards 71 (Centenor Energ/) F-24 (Centenor Energy) 1

REPORT OF INDEPENDENT PusuC ACCOUNTANTS ARTHUR To the Share Owners of ANDERSEN The Cleveland Electnc liluminating Company:

We have audited the accompanying consohdated and 1989, and the results of their operations and their balance sheet and consohdated statement of cash flows for each of the three years in the penod cumulative preferred and preference stock of The ended December 31,1990. in conformcty with generally Cleveland Electrc liluminating Company (a wholly accepted accounting ponciples owned subsidiary of Centenor Energy Corporation) As discussed further in the Summary of Significant and subsidianes as of December 31,1990 and 19894 Accounting Pohcies and Notes 7 and 12, a change and the related consohdated statements of income, was made in the methods of accounting for income retained earnings and cash flows for each of the three taxes and unbined revenues in 1988, retroactive to l years in the penod ended December 31,1990 These January 1,1988 financial statements and the schedules referred to As d:scussed further in Note 3(c), the future of below are the responsibikty of the Company's Perry Unit 2 is undecided Construction has been l management Our responsibihty is to empress an suspended since July 1985 '/anous options are being i opinion on these financial statements and schedules considered. including resuming construction or based on our aud-ts ,

cancehng the unit Management can give no We conducted our audits in accordance with assurance when, if ever, Perry Unit 2 wiu go in service generally accepted audibng standards Those or whether the Company ~s investment in that unit and standards require that we plan and perform the audit to a return thereon will ultimately be recovered obtain reasonable assurance about whether the Our audits were made for the purpose of forming an financial statements are free of matenal misstatement opinion on the basic financial statements taken as a An audit includes examining. on a test basis, evidence whole The schedules of The Cleveland Electnc supporting the amounts and disclosures in the financial liiuminating Company end subsidianes hsted in the statements An audit also includes assessing the Inden to SchedJles are presented for purposes of accounting pnnuples used and significant estimates complying with the Secunhes and Exchange made by management, as well as evaluating 'he overa!! Commission's rules and are not part of the basic financial statement presentation We beheve that our ,aancial statements These schedules have been audits provide a reasonable basis for our opinion. subjected to the audit:ng procedures apphed in the in our opinion, the financial statements referred to audits of the basic financial statements and. in our above present fairly, m all matenal respects, the opinion, f airly state in all material respects the financial financial position of The Cleveland Electnc lituminating data required to be set forth therein in relation to the ,

Company and subsidianes as of December 31.1990 basic financial statements taken as a whole )

Cleveland. Onio February 12.1991 Arthur Andersen & Co (Cieveland Electne) F-25 (Cieveia~d Eiectnc)

SUMMARY

OF SIGNIFICANT ACCOLINTING POLICIES GENERAL nuclear fuel disposal costs are being recovered through the base rates The Cleveland Electric illuminating Company The Company defers the differences between (Company) is an electric utikt; and a wholly owned actual fuel costs and estimated fuel costs currently subsidiary of Centenor Energy Corporation (Centenor being recovered from customers through the fuel Energy). The Company follows the Uniform System of f actor This matches fuel expenses with' fuel related Accounts prescobed by the Federal Energy Regulatory revenues Commission (FERC) and adopted oy The Pubhc Utihties Commissen of Ohio (PUCO), The financial PRE PHASE IN DEFERRALS OF OPERATING statements include the accounts of the Company's EXPENSES AND CARRYING CHARGES wholly owned subsidiaries. which in the aggregate are not material- The PUCO authonzed the Company to record, as

- The Company is a member of the Central Area deferred charges, operating empenses (including lease Power Coordination Group (CAPCO) . Other members payments, depreciation and tames) and interest include The Toledo Etson Company (101ed0 Edison). carrying charges for Beaver Vaney Power Station Unit Duquesne Light Company (Duquesne) Ohio Edison 2 (Beaver Valley Unit 2) frorn its commerciatan-Company (Ohio Edison) and Pennsylvania Power service date in November 1987 through December Company (Pennsylvania Power) The members base 1988 After the PUCO determined that Perry Nuclear constructed and operate generation and transmismon Power Plant Unit 1 (Perry Unit 1) was considered facihties for the use of the CAPCO companies Toledo used and useful in May 1987 for regulatory Edison is also a wholly owned subsidiary of Centenor purposes the PUCO authonzed the Company to defer Energy operating e>penses (including depreciat on and tases) for Perry Unit 1 from June 1987 through RELATED PARTY TRANSACTIONS December 1987, when these costs began to be recovered in rates The PUCO also authonzed the Operating revenues. operating expenses and interest deferral of interest and equity carrying charges.

Charges include those amounts for transactions with exclusive of those associated with operating expenses, affihated companies in the ordinary course of business for Perry Unit 1 from June 1987 through December operations 1987 and the deferral of only interest carrying charges The Company's transactions with To;edo Edison are from January 1988 through December 1988 The pnmanly for interchange power, transmission kne amounts deferred for Perry Unit 1 pursuant to these rentals and jointly owned power plant operations and PUCO accounting orders were included in property, censtruction See Notes 1 and 2. plant and equipment through the commercial in service Centenor Service Company (Serece Company), date in November 1987 Subseouent to that date, the third wholly owned subsidiary of Centenor Energi. amounts deferred for Perry Unit I were recorded as provides, at cost, management. financial. deferred charges Amortization of these Beaver Va! icy administrative, engineenng legal and other services to Unit 2 and Perry Unit 1 deferrals (caued pre phasean the Compny and other affihated companies The deferra!s) began in Januag 1989 in accordance with Service Company billed the Company $106 000,000, the January 1989 PUCO rate order discussed in Note

$92,000.000 and $79.000.000 in 1990.1989 and 6 The amorteat.ons wdt continue over the hves of the 1988, respectivel/ . for such seroces related property.

REVENUES PHASE-IN DEFERRALS OF OPERATING Customers are bdied on a monthly cycle basis for their UUUU # UNU NMU energy consumption based on rate schedules or As discussed in Note 6 Ine January 1989 PUCO rate contracts authonzed by the PUCO Effective January order for the Company included an approved rate 1 1988, the Company changed its method of phasean plan for the Company's investments in Perry accounting to accrue the est; mated amount of unbd:ed Unit 1 and Beaver Va iey Unit 2 On January 1,1989, revenues (as defined in Note 12) at the end of each the Company began recording the deferrals of month operat;ng expenses and interest and equity carrying A fuel factor is added to the base rates for eieCtric charges on deterred rate-based investment pursuant to service Th:s f actor is designed to recover from the phasean plan These deferrals (called phasean customers the costs of fuel and most purchased deferrals) wdi be recovered by December 31,1998 power 11 is reviewed sem1 annually in a heanng before the PUCO- DEPRECIATION AND AMORTIZATION l

Ine cost of property. plant and eampment, except for FUEL EXPENSE the nuclear generating units is depreciated over their The cost of fossd fuelis charged to fue! expense based ecmated useful hves on a straight 4ne basis The I on inventory usage Tl e cost of nuclear fuel including annual straight kne depreciation provision expressed l an interest component is charged to fue! expense as a percent of average depreciable uhhty plant in based on the rate of consumption Estimated future service was 3 3% in 1990 and 3 9% in 1989 and 1988 (Cleveland Electnc) F 26 (Cleveland Electoc)

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

The 1990 rate deckned because of a change in depreciation expense under the habikty method See depreciation rates attributaole to longer estimated Note 7.

lives for nonnuclear property. The PUCO approved this change in depreciation rates effective January 1,1990 which reduced depreciation expense for 1990 by DEFE.RRED GAIN FROM

$12.070,000 and increased eamings $9.000.000. SALE OF UTILITY PLANT Depreciation expense for the nuclear units is based on the units.of-production method in 1990, the The Company entered into a sale and leaseback Nuclear Regulatory Commission (NRC) approved a hansadon h,1987 for the coal fired Bruce Mansheld six year extension of the operating hcense for the ma% ram WansW M) as dscussed in Note 2. The transaction resulted in a net gain which Davis Besse Nuclear Power Station (Davis Besse)

The PUCO approved a change in the units of- was deferred The Company is amortizing the production depreciation rate for Davis-Besse effective apphcable deferred gain over the term of the leases January 1,1990 which recognized the hfe extension under the sale and leaseback agreement The This change reduced depreciation expense for 1990 by am rtization and the lease expense amount are

$5.960.000 and increased earnings $4.000,000 recorded as othm opmabon and maintenare expense Effechve July 1988, the Company began the extemal funding of future decommissioning costs for its INTEREST CHARGES ,

operating nuclear units pursuant to a PUCO order. l Cash contnbutions are made to the funds on a Debt interest reported in the income Statement does I strcqht.kne basis over the remaining hcensing penod not include interest on nuclear fuel obhgations interest for each unit Amounts currently in rates are based on on nuclear fuel obhgations for fuel under construction past estimates of decommissioning costs for the is capitahzed See Note 5.

Company of $63.000.000 in 1986 dollars for Davis. Losses and gains reahzed upon the reacquisition or Besse :.d $44,000.000 and $35.000 000 in 1987 redemption of long term debt are deferred, consistent dollars for Perry Ur.it 1 and Beaver Valley Unit 2, with the regulatory rate. treatment. Such losses and l respectively Actual decommissioning costs are gains are either amort::ed over the remainder of the l expected to exceed these estimates it is expected onginal hfe of the debt issue retired or amortized over l that increar.es in the cost estimates will be recoverable the hfe of the new debt issue when the proceeds of a j in rates retulting from future rate proceedings The new issue are used for the debt redemption. The 1 current levei of expense being funded and recovered amortizations are included in debt interest expense, '

from custome's over the remaining kcensing penods of the units is aporoximately $4.000.000 annually PROPERTY, PLANT AND EQUIPMENT FEDERAL INCOME TAXES Property, plant and equipment are stated at onginal cost less any amounts ordered by the PUCO to be The financial statemems refleci N habihty method of written off. Included in the cost of construction are accounting for income Mes as a result of adopting a items such as related payroll taxes, pensions, fnnge new standard for accounting for income taxes in 1988 benefits, management and general overheads and The habihty method requires that the Company's allowance for furids used dunng construction deferred tai habihties be adjusted for subsequent tax ( AFUDC). AFUDC represents the estimated rate changes and that the Company record deferred composite debt and equity cost of funds used to taxes for all temporary d6fferences between the book finance construction This noncash allowance is and tax bases of assets and habihties A portion of credited to income, except for certain AFUDC for Perry these temporary differences relate to timing Nuclear Power Plant Unit 2 (Perry Unit 2). See Note differences that the PUCO used to reduce poor years' 3(c) The gross AFUDC rate was 10 48 % 10 91%

tax expense for ratemaking purposes whereby no and 1123% in 1990,1989 and 1988, respectively deferred taxes were recorded Since the PUCO Maintenance and repairs are charged to expense as practice permits recovery cf such taxes from incurred Certain maintenance and repair expenses for customers when they become payable, the net amount Perry Unit 1 and Beaver Valley Unit 2 are being due from customers has been recorded as a regulatory deferred pursuant to the PUCO accounting orders asset in deferred charges discussed above The cost of replacing plant and For certain property, the Company received equipment is charged to the utihty plant accounts The investment tax creGis whrch have been accounted for cost of property retired plus removal costs. after as deferred credits The amortization of these deducting any salvage value is charged to the investment tax crects is reported as a reduction of accumulated provision for depreciation (Cleveland Electnc) F 27 (Cleveland Electnc)

woutd reduce carnings by as much as $21.000 000 m M AN AGEMENT,S INANCIAL NALYSIS 1991, and even more in subsequent years RESULTS OF OPERATIONS The Company has ayeed to use its best efforts . -

such as these t Ao requests for accounhng orders to Overview asoid rate macases in the 3 ears immediateh tohowing he Januars 1989 PUC0 rate order Ahich presided for 1991 E sentuah rate increases wm be necessary to three rate increases for the Con;pany. as d scussell m recogn ce the cost of out ne A capital msestment and Note 6. was designed to enab!e us to t1egin the eMec t et milabon recoserir'g in rates the C ost ot and earn a f a r f etof n Annua! sah gro Atn :s espected to aserage 3 bout on. Our a"o Aed in estment in Beaver Vaney Urt! 2 and  ? for the ne=1 severa! vears cont:ngent on tuture Perry Umt 1 The rate order improved resenues and ecc3 nom,c events h agowng the Mitations mposed cash f'oA n 1989 and 1993 and is expected to tw these des pro Ktiov and competitne constraints contmue to aprove them in 1991 t ia A e,er as Ac Am utJ ze ou' bent enorts to nu mae future rate d:Scussed mo'e fu% in the fourth and f ttth pa'agraphc incrwos threup maimong om cost redXtion and of Note 6 the phase in p!an was not desgned ta m,act, of sersice etV!s and espionna other innovatse improve earn:ngs SignitCantl beCauSP g3ns m y @ ons We n concentrate our ettorts on reta nng i

revenues 5 n tne higher rates and at wmed sam cutI m ers an:1 arm rie.s v es through mno,atse Cf oath a'e in baby onset by a CorresDondN reddCli)n r"YL eIn j ana C r w tCU m lu!: vee in tne d^tena! d nuwa' piant ereratna e pens u and ca'rpng cha'ges and are subseauenth c" set by the 1990 vs.1989 amortahon of sucn cost defenah and caneng ra: tors contat ng to the U mrease m 19N _

L - I ) b II Despde the positise t ftect tne ne A rates have Un u, t 'a,. t ' [it i f N W i s

f evenues a cash o A and t e 't 3t!w el y- neutt a! ..N< Mht wiU.t'y+

$ 12 t M C D1 17 - -

imp 3cl they h3.c on 03'nMg5 Ae f ace a numbe' of _,

,y,,,  ; gg ;yg other factors Ah:ch am tert a negats Wiuenc e on ;n .

1s ,an .7 stm ersom eammgs m 1991 and beyond lhese incum inflahan g [;,9 g

- 1 the carent econom.c reces son cod compeme forces LIV' !atter Coupica Ait'1 a des:'e to encours le The nui ' f acto' .1;( oint rig ter the increase in econom.c g' oath has prompted the Company n opeatmg m.tmu s Aas retated h the January 1989 recent > cars to enter mio ccotracts naun,, reducea me m&r Tre R : ' app % ed annual rate increases rates mth certam lame customert T Ao other f acto" im the Comp m, H 91 ettecme m February 1989 and are ha.ing a negatse irtuence on earninas inst me

off ec tw n Fetyur y 1990 The asicaaled Comoan, is cunenty recora np depreaate cn ' senu e naeau in 1E was pxha% ottset by f'uClear urh!$ al a higher IeyeI th3n Ihat whCh is idlied revenue! rC su iin i irCT a 21 decrease in reflected in rates because at the gocd pt"fDrr"a%e o' tW L M A: Tit hw Sales haas'nal %aWS decreased the umts om th( !ast se,tNa' years Second mth 2 OA necaus of !ne recemon begnrung in 1990 respect to tacmties placed a semco aher Februr, N s > ntat sai > do reasea 15< as seasonal 1933 and not in@Jded in rate bast. IN COTDan, temp raturtM , mo!O nioderate in comparison to the poo' 3 ear temperatu '

resu t>ng m reducea t

currentti reaused to record ovest enames ana ,

deprecatean as cunent emper ? , esen thcng;n such c . stcmer twaSng ana c ochng-rMated demand items are not et retiected m ratm y

wrnrr "aa. sal"s mcreased 05o as increased We a'e taMng se, era! steps to counter the aa.erse demand ham neA an e;ectnc omce and retad space elf 0 Cts of the f acto'S CScussed abo +e we a'e Aas attset n, tne ettects et red weatner Tne inciease

!ro pl e m e n t i n g Ine in a n a g e m e n t audit re,en ' Aa5 a!s > partMy o*f set Dj the ess at t

recommendations d SCP 3ed D tN Slith parayaph of re,enu ; t0010d 10 I" a Ud y 19s9 expiration et the hote O AhCh 3f e e*pACted to redJce operaPnG C M pan S B7eenWnt 10 sei a pO' tron of its Share Of y

expenses b, about M000 003 annuah, Wc ha,e Pertw Umt 1 uacac-t, to No Ed. son and Penns Aania already Sha'eG 50 of Ine espected sai nl A th Po AU customem D / reduc:ng the 1991 rate incease g'an* >d Operat. O u pemer r creawa 0 2\ in 1990 under the 19s9 rate oor H o .n e r cont:nu ng com r azed rnan ', b, lower nudeat operat,ng expense redrhon eMarls AiU De DeCof s3ry to help Ot tSet 'he aFferra t !? Perr UrU! ' a9d bea= U Yahey Unst 2 y

ettect of natJian Also the Compan is seesinq y pur mard to the tani;a fr 1!-M9 PUCO rate order and by PUCO 3;p' Cia! to accrue nucbr piant dOp4 DatiOn a' an N "at ' a tane5 other than Mderal income taxes a level An Cn is Inof e c!G5e!y aQiKd A Ih the amount rent n'; from Njner D'Opert y and gross receipts cunent!y De ng reco,aed m rati 5 b/ sad h.ng to tne ta ms T hese nueases m ope rahng e,penses Aere stra Q h t bne method he Cornp3rly a$o d seek p3It M y oiisUI bj a deirease In depreCia! ion and appro/a; to accrue post m sers : 1 mien:V ^arrena a'nTtenhm e= pense pnmaYy necauso of loAer Ch3r]es and deier d!.?p'eciaIion Chaf geS !of iac ItId a dYorifCGI'on ra!O 3 Ced n 19M for nonnuclear that are in 9 oce but not f et recogwed in rat pr pert , and W..B 'e attobataMe to longer hanW to cuam appmai et the f st accourang +st m ted he< aro m m - of longer nuclear reau st M Jd "d n Fa'n: 65 bp a m: 0 ~3 r;r , "a M g un'r e : q #d ma r N"ance outages in 135 000.000 m 1991. and more of E , m wtr e@en' '993 th n 19e b1! ir me lanes deueased geaS depend na on me pefo' man . ! Se on:ts y nm + , t eau

• a + - . r t -a n m pretar operatng inabi.tj tc dt rn app';,a; 5t the secon j reQW5t r 1 ne l

1 (Cteseed EWtoc ) FN ( Oewand Electnc t (

. Credits for carrying charges recorded in metals and automotive customers. Sales to other nonoperahng income decreased in 1990 because a industnal customers increased 2 5% The decrease in i

greater share of our investments in Perry Unit 1 and revenues from sales to Ohio Edison and Pennsylvania Beaver Valley Unit 2 were recovered in rates The Power was the result of the May 1989 expiration of the decrease in the federalincome tax provision related to Company's agreement to sell a portion of its share of nonoperating income was the result of a decrease in Perry Unit 1 capacity pretax nonoperating incomo and federalincome tax Operating expenses increased 9 2% in 1989 Lower adjustments of $18,712.000 associated with deferrals of nuclear operating expense for Perry Unit 1 previously deferred investment tax credits relating to and Beaver Valley Unit 2 resulted in a $56.000.000 the 1988 wnte-off of nuclear plant interest erpense increase in expense Fuel and purchased power increased in 1990 because of the higher level of debt expense increased largely because of the matching of outstanding which was partially offset by refinancings expense with higher fuel cost recovery revenues discussed in the preceding paragraph improved 1989 vs.1988 nuclear unit availability enabled the Company 'o sell Factors contnbuting to the 9 7% increase in 1989 power to other utilities The excess of revenues over operating revenues are as follows cost is treated as a reduction in purchased power Change in Operahrg Revenues (Decrease ) expense which cushioned the >acrease in fuel and Base Rates and Msceilaneous , $112 000 000 purchased power expense for the year Depreciation i Deterred CwiP Revenues . 43 000.000 expense increased, reflective of the increased i 5 u d .... N generation from the Company's nuclear units since )

Sa,es to Onio Edison and Penns Aania Power. (52 000 000) their depreciation is recorded based on units of- l 5140 000_000 production Nonoperating income credits for carrying charges )

The January 1989 rate order for the Company was increased in 1989 because the phase in and pre-pnmanly responsible for two major factors impacting phase in carrying charges recorded in 1989 were the increase in revenues The PUCO granted the greater than the pre-phase in carrying charges Company a 9% rate increase effective in February recorded in 1988 Interest expense increased in 1989 1989. The increase in revenues attributable to deferred because of the higher level of debt outstanding construction work in progress (CWIP) revenues in Preferred and preference dividend requirements 1989 resulted from the reducoon in the amount of decreased in 1989 because of stock redemptions deferred credits for the mirror CWIP refund obhgations to customers Fuel cost recovery revenues increased EFFECT OF INFLATION in 1989 because of a significant nse in the fuel cost recovery factors compared to 1988. The lower 1988 Although the rate of inflation has eased in recent years, l factors recogneed a greater amount of refunds to we are still attected by even modest inflation since the 1 customers ordered by the PUCO for certain regulatory process introduces a time iag during whrh replacement fuel and purchased power costs co!Iected increased costs of our labor, matenals and services are from customers dunng a 1985 1986 Davis-Besse not reflected in rates and fully recovered Moreover.

outage. Tota! kilowatt-hour sales decreased 2 3% in regulation anows only the recovery of histoncal costs 1989 The comparatively moderate summer weather in of plant assets through depreciation even though the 1989 towered sales because of reduced air costs to replace these assets would substantially condinoning usage Residential sales decreased 1.3% exceed their histoncal costs in an inflationary economy Commercia! sales increased 4 2% as a result of Changes in fuel costs do not &ct our results of continuing growth from new office buildtngs and retail operations since those costs are deferred ud outlets industnal saies decreased 2 6% poncipally reflected in the fuel cost recovery f actor included in because cf an 8 5% reduchon in sales to large pnmary customets' bills RETAINEo EARNINGS THE CLEVELAND ELECTRIC uuwNAT% COMPANY AN3 SUBSOARIES For the years ended Decemner 31, 1990 1989 , 1988 (fnousand$ Of duUa's)

Balance at Beginning of Year S 507,375 $ 459.709 $ 604 516 Additions Net income 242,328 250.219 95 De5 Deductions Dividends declared Common stock (149,199) (161 662) (198 445)

Preferred stock . (36,205) (40.769) (41.203)

Preference stock -

(124) (638)

Other, pnmanly preferred stock redemption expenses . (740) 2 394 Net increase (Decrease) 56,184 47.666 (144 807)

Balance at End of Year . 5 563,559 5 507.375 $ 459.709 The accompanying notes and summary of signif: cant accounting policies are an integral part of this statement (Cleveland Electoc) F 29 (Cleveland Electnc)

INCOME STATEMENT M CLEVELAND EHC1RiC M UVM11NG COMPANY AND SUBSIDIAHf S

,,_ For the years ended December 31, 1990 1989 1988 (thousands of dallys)

Operating Revenues $1655,844 1 $ 1 591;6_62 $ 12.151_ji78 Operating Expenses Fuel and purchased power (1) . 377,082 384 543 307.014 Other operation and maintenance 514,186 508.151 524.478 Depreciation and amortaation 175,654 193 279 189,731 Taxes, other than federal income taxes 197,454 183.120 184.813 Phase-in deferred operating expenses (33,960) (52 020) -

Pre phase in defarred operating expenses. 3,948 3 888 (104.396)

Federal income taxes . 75,099 85 275 94,654 1,309 4_63 1 1 306 233 1,196 294 Operating income . _ 346,381 265 426 255.284 Nonoperating income Allowance for equity funds used during construction. 4,531 8.362 8.052 Other income and deductions, nel 1,836 7.934 14.103 Write off of nuclear costs. - -

(?57,400)

Phase-in carrying charges . 161,598 216.851 -

Pre phase in carrying charges -

17 937 224,58;;

Federal income taxes - credit (expense) _ p0401) 1 _ (55 6_99) 53,162 147,564 _ 195 385 .

42.502 income Before Interest Charges _ _493,945 _ 480 811 _ 297 786 Interest Charges Debt interest 254,936 239 042 228.870 Allowance for borrowed funds used dunng construction. _(3,319) (7.450) _(4,304 )

_ _2_5_1,617 _ 230 592 _ 224 575 income Before Cumulative Effect of an Accounting Change 242,328 250.219 73.211 Cumulative Effect on Prior Years (to December 31,1987) of an Accounting Change for Unbil!ed Revenues (Net of income Taxes of $14,552,000) - -

21 874 Not income . . 4 242,328 250.219 95,085 Preferr6d and Preference Dividend Requirements- 36,682 40,227 42.506 Ecrnings Available for Common Stock $ 205,646 $ 209 ci92 fji2p79 (1) includes purchased power expense of $102 773,000. $104.127.000 and $31,774.000 in 1990,1989 and 1988.

respectively, related to capacity purchases from Toledo Edison The accompanying notes and summary of significant accounting pohcies are an integral part of this statement.

(Cleveland Electric) F 30 (Cleveland Electnc) n . _

l MANAGEMENT's FINANCIAL ANALYSIS l CAPITAL RESOURCES AND LIQUIDITY redemption requirements of a ppr o ura n tely

$26M00W We espect to finance citemally about We continue to need cast, for an ongoing program of 5% to 60% of our 1992 and 1993 mquaements it constrecting new facihbes and modifying costing economical we may a'so edeem add tonal sr 'urities fac* ties to meet antcipated demand for electnc under optenal rede:npton proesons See Les sernce. to comply with governmental regutations and 10(c) and (d) for information concerning hmitat ons to improve the environment Cash is also needed for On the issuance of preferred and preferente stock and mandatory retnement of secunt es Over the three. d*N year penod of 1988 1990, these const.uctoh and Our capita! reaunemento willincrease af ter 1994 as mandatory reinement needs totaled approumatey a result of the Clean An Act of 1990 (Clean Aw Act)

$775 000 000 in addton we ciercised vanous Oui future cap,ta spending will depend on the options to redeem and purchase approumate',. -

implementaten strategy we choose to achieve 5400.000.000 of our secunbes comphance with the new law See Note 3(b)

Dunna the 1988 1990 penod, the Company issued We expect to be able to rese cash as neeoed The  ;

$356 430 000 of f ast mortaage bonds and obta>ned vadabaty of capital to meet our eiterna! finamng

$56 000 000 of term banUoans in 1989 and 1990 needs however, depends upon such factors as the Company also issued $550.000.000 of secured Mancial maht conatons and our cred1 rahngs j medium term notes The Company utMed its short. Cur rent secunties rabogs for the Company are as term borrowing arrangements (explained in N:te I t ) 'ou^ 5 which resulted in tne company na,,ng s.87.110 000 of commercia! paper and $17,000 000 in notes payable [dy ,Q5 ,

to attiates outstanding at Decamber al,1990 ce, sm ,

Proceeds from these financings were used to pay our r,,e r ow nmm esp g construchon piogram costs to repay portions of pre enea gu . . ng short term debt incurred to finance the constructon program to rette redeem and purchase outstand:ng secunt es and for general corporate purposes A ante o't of the Company s investment in Perry The Company was granted rate increases etiective Unit 2 as d scussed in Note 3(c) would not reduce in 1989.1990 and 1991 pursuant to the January 1989 retained eamings suthciently to impair the Company's PUCO rate orcer See Note 6 for a d scussion of the aDety to declare d4vidends and would not affect cash ra% order anicn provides for specific levels of rate flow increases through 1991 Although the rate order The Tax Reform Act of 1986 (1986 Tai Act) required us to wnte ott certain assets in 1988 whicn provided for a 34% income tax rete in 1988 and lowered our eartygs base our current cash flow was thereaf ter. the repeal of the investment tax credit.

not impaired Internally generated cash increased in scheduled reductions in investment tax credit 1989 and 1990 from the 1988 level as a resu'l of the carryforwards less favorable depreciation rates, a new rate increases a!ternatwe rr.nimum tai t AVT) and other items Estimated casn requeements for 1991 1993 a e These changes had no sign;ficant casn flow impact in

$605.000.000 for our construction program and 1988 because we had a net operahng loss for tax 5:15 000=000 for the inandatory reaemption of debt purposes H Aever the changes resulted in increased and preferred stock We expect to finance externa!!, tan paymem> and a reducton in cash flow dunng about 33% of our 1991 construcnon and mandatory 1989 and 1990 because we were subject to the AVT F 31 i Oneland F;cctoc )

(Cleveland Ea:ctoc)

CASH FLOWS mE cavamo n Ecmc uuwm conw wo suasmnis for the years _ ended _ December 31, 1990 1989 1988 (niou w es s o n o Cash Flows hom Operating Activities (1)

Not income . $ 242,328 $ 250 219 $ 95.085 Adjustments to Reconcile Net Income to Cash from Operating Activities Depreciabon and amorteation 175,654 193.279 189.731 Deferred federal income taxes 111,029 108 261 18,650 investment tas crechts, net (17,224) (58) (10.607)

Wnte off of nuclear costs. - -

257,400 Deferrud and unbilled revenues . (38,134) (32.168) 9.200 Detened fuel , (11,410) 8.827 (33,908)

Carrying charg as capitahzed. , (161,598) (234.788) (224,585)

Leased nuclear fuel amortization 47,028 55,712 44.911 Delened operahng empenses. net (30,012) (48,132) (104,396)

Allowance for equity funds used dunng constn'chon. (4,531) (8 362) (8 052)

Amortization of reserve for Davis Besse refund obligations to customer s . -

(12 162) (20,341)

Pension se.ttlement gain. (34,517) -

Cumulative effect of an accounhng change . - -

(21,874)

Changes in amounts due from customers and others, net . (16,878) (9.251) (7,967)

Changes in inventones. (22,494) (4 919) 9,379 Changes in accounts pi; fable 39,051 (6 694) 45.601 Changes in worhng capital affechng operabans. (5,195) 29.504 5,825 Other noncash dems _ (16,275) _ 116 215) _U 7 6_5_7 )

Total Adjustments . 14,494 _ 131,310

_ _ 22 834 Net Cash from Operating Activities , _ 256,822 273.053 226.393 Cash Flows from Financing Activities (2)

Sank loans, commercial paper and other short term debt 86,688 29 (36355)

Notes payable to affikates . (15/,200) 90.200 73.000 Debt issues First mortgage bonds. 100,000 67.700 188.730 Secured medium term notes, 337,500 212,500 -

Term bank loans . . 16,000 40.000 -

Equity contnbutions from parent - -

(95)

Matunhes, redemptions and sinking tunds. (211,810) (305.741) (162,411)

Nuclear fuel lease and trust obhgations (56,129) (47,574) (44.911)

Dividends paid. (185,851) (202.444) (241.422)

Prenums, discounts and expenses _ 15,515) __( t .697 ) 1313)

Net Cash from Financing Activihes _ (76,317) (147,027) (223.977)

Cash Flows from investing Activities (2) '

Cash apphed to construction (156,769) (158,585)

Interest capitahzed as aiiowance for borrowed funds used (199 983) dunng construchon. (3,319) (7.450) (4.304)

Loans to affikates (11,000) - -

Cash withdrawn from sale and leaseback and other trusts - -

264,109 Other cash received (apphed) _(6,699 ) (7.298) 510 Net Cash from investing Achvihes . _(177,787) (173 333) 60.332 Net Change in Cash and Temporary Cash Investments. 2,718 j47 307) 62,750 Cash and Temporary Cash investments at Beginning of Year. 28,330 75.637 12.887 Cash and Temporary Cash Investments at End of Year $_31,048 $ 28 330

$_ 75 637 i (1) Interest paid was $244,000,000. $240.000.000 and $224 000,000 in 1990.1989 and 1988. respectively

, Income taxes paid were $18.589.000. $29106.000 and $84.007,000 in 1990.1989 and 1988, respechvely-

)

(2) Increases in nuclear fuel and nuclear fuellease and trust obhgations in the Balance Sheet resulting from the noncash capitahzations under nuclear fuel agreements are excluded from this statement The accompanying notes and summary of significant accounhng pohcies are an integral part of this statement (Cleveland Electnc) F 32 (Cleveland Electnc)

- . . _ f

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

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(Cleveland Electric) F-33 (Cle< eland Electoc)

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

l BALANCE SHEET

• December 31 1990 1989 onc>usands c>t amm)

ASSETS PROPERTY, PLANT AND EQUIPMENT Utility plant in service. $6,041,878 $5.878.825 Less accumulated depreciation and amortization 1,410,051 1.264 570 4,631,827 4 614 255 Construction work in progress 175,232 203 639 Perry Unit 2 . .

_ 521,464 _ 523 294 5,328,523 5.341 188 Nuclear fuel, net of amortization. 300.824 309.182 Other property, less accumulated depreciation. _ _43 429 3 _ 45.192 S,672,775 5 695 562 CURRENT ASSETS Cash and temporary cash investments. 31,048 28.330 Amounts due from customers and others. nel 179,184 102,320 Amounts due from affiliates. 19,542 6.252 Unbilled revenues . 60,700 55.193 Matenals and supphes, at average cost . 76,092 56.481 Fossil fuel inventory, at average cost 37,000 34.117 Taxes apphcable to succeeding years 155,069 145.668 Other. _

6,926 9 312 565,561 497.673 DEFERRED CHARGES Amounts due from customers for future federai income ta=es . 671,450 681,809 Unamortized loss on reacquired debt . 53,160 47.460 Carrying chargec and operating expenses, pre-phase-in 379,575 383.527 Carrying charges and operating expenses, phase in . 464,434 268,871 Other. 138,202 95 503 1,706,821 1.477,170 Total Assets . 57,945,157 $7 670 405 The accompanying notes and summary of significant accounting pohcies are an integral part of this statement i

l (Cleveland Electnc) F-34 (Cleveland Electoc) i

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

THE CLEVEL AND ELECTRIC ILLUYiNAllNG COMPANY AND SUBSIDIARIES December 31.

1990 1989 _

onoumos et oonam CAPITAllZATION AND LIABILITIES CAPITALIZATION Common shares, without par value. 105,000.000 author:2cd, 79.591,000 outstanding in 1990 and 1989 . , $1,242,074 $1.242.074 Other paid-in capital, , .

78,625 78,625 Retained earnings . 563,559 507.375 Common stock equity 1,884,258 1.828.074 Preferred stock With mandatory redempron provisions . 171,162 212.362 Without mandatory redemption provisions . 217,334 217.334 Long term debt . 2,631,911 2.336 379_

4,904,665 4 594.149 OTHER NONCURRENT LIABILITIES, pomarily nuclear fuel lease obligations ,

279,850 305.328 CURRENT LIABILITIES Current portion of long term debt and preferred stock 97,988 102,836 Current portion of lease obhgations , 64,554 56.577 Notes payable to banks and others. 86,894 206 Accounts payable . ,

177,963 138.912 Accounts and notes payable to affiliates 59,884 211,971 Accrued taxes . , 225,666 233.531 Accrued interest 53,113 45.157 Dividends declared . 12,560 13.006 Accrued payroll and vacations . 17,042 17.638 Current portion of refund obligations to customers - 32,627 Other . 8,095 8.607 803,759 861.068 DEFERRED CREDITS Unamortized investment tax credits 252,759 278,576 Accumulated deferred federalincome taxes 1,159,199 1,057,189 Reserve for Perry Unit 2 allowance for funds used donng construction . 124,398 124 398 Unamortized gain from Bruce Mansfield P! ant sale- 389,658 408.268 Other. 30,869 41.429 1,956 2 883 1,909.860 Total Capitahzation and Liabihties $7,945,157 $7.670.405 l

l l

(Cleveland Electoc) F-35 (Cleveland Electnc) i I

STATEMENT OF CUMULATIVE THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARIE'S PREFERRED AND PREFERENCE STocx 1990 Shares Current December 31 Outstanding Call Prce 1990 1989 (thousands of dollars)

Without par value, 4,000.000 preferred shares authonzed, and without par value, 3,000,000 preference shares authorized, none outstanding Pre erred. subject to mandatory redemption

$ 7 35 Senes C 180,000 $ 101 00 $ 18,000 $ 19.000 88 00 Senes E. 30.000 1.034 43 30,000 33.000 75 00 Senes F . 2.384 1.000 00 2,384 2.384 80.00 Series G - - -

800 145 00 Senes H - - - 14,244 145 00 Senes i 13,779 -

13,779 17.717 113 50 Senes K. 10 000 -

10,000 10.000 Adjustable Senes M 500.000 103 00 49,000 49,000 9125 Senes N 750.000 106 08 73,968 73,968 197,131 220.113 Less Current matunties 25,969 7.751 Total Preferred Stock, with Mandatory Redemption Provisions $171,162 $212.362 Preferred not subject to mandatory redemption

$ 7.40 Senes A. 500,000 101 00 $ 50,003 $ 50.000 7 56 Senes B. 450.000 102 26 45,071 45,071 Adjustable Senes L - 500.000 103 00 48,950 48,950 Remarketed Senes P. 750 100 000 00 73,313 73.313 Total Preferred Stock, without Mandatory Redemption Provisions $217,334 $217 334 Tne accompanying notes and summary of signincant accounting pohetes are an integral part of this statement (Cleveland Electoc) F-36 (Cleveland Electnc)

NOTES TO THE FINANCIAL STATEMENTS i (1) PROPERTY OWNED WITH OTHER UTILITIES AND INVESTORS The Company owns, as a tenant in common with other utihties and those investors who are owner participants in vanous sale and leaseback transactions (Lessors), certain generating units as hsted below Each owner owns an undivided share in the entire Unit Each owner has the nght to a percentage of the generating capabd.ty of each unit equal to its ownership share Each utikty owner is obhgated to pay for only its respective share of the construction j and operating costs Each Lessor has leased its capacity nghts to a utthty which is obhgated to pay for such Lessor's share of the construction and operating costs The Company's share of the operating expeitse of these generating units is included in the income Statement Property, plant and equipment at December 31.1990 includes the following facihties c,wned by the Company as a tenant in common with other utihties and Lessors in - Ownert,Np Piant Construchon Serw e Owner sNp Mega Power in Work Accumsta'ed Generat<ng Unit Date Share watts Source Sernce in Progress Depreaaion in Serwce (thousands of coca s)

Seneca Pumped Storage 1970 80 00% 305  % dro 5 58 344 5 554 $ 19527 Eastiake Unit 5 - 1972 68 80 411 Coa! 154 589 16% -

Daws Besse . 1977 51 39 452 Nunear 646 949 37055 131 K1 Pem und 1 and Common Fa:Ees 1987 31 11 371 Nucica- 1 606 310 5645 155529 Beaver Va4e, Unit 2 a,d Common  !

Fa:At,es ( Note 2) 196' 24 47 20t Naciear 1166(53 5 207 1201 B3 J Constvton Suspenaed (Note 3ic))

Perry Una 2 Uncertam 11 11 375 Nuclear -

$21464 -

13 634 844 5571 824 $427 04o Depreciation for Eastlake Unit 5 has been accumulated with depreciable property for all generating untts ratner than by specific generating units Ohio Edison and Pennsylvania Power purchased 80 megawatts of the Company's capacity entitlement in Perry ,

Unit 1 from November 1987 through May 1989 Revenues from this transaction were $31.831.000 and $84.068 000 j in 1989 and 1988. respectively.

(2) UTILITY PLANT SALE AND LEASEBACK TRANSACTIONS As a result of sale and leaseback transactions The Company and To:edo Edison are responsible completed in 1987, the Company and Toledo Edison under these leases for paying all taxes, insurance are co-lessees of 18 26% (150 megawatts) of Beaver premiums, operation and maintenance costs and all Val:ey Unit 2 and 6 5% (51 megawatts). 45 9% (358 other similar costs for their interests in the un ts sold megawatts) and 44 38% (355 megawatts) of Units and leased back The Company and Toledo Edison 1, 2 and 3 of the Mansfield Plant, respectively, all for may incur additional costs in corinection with capital terms of about 29% years improvements to the units The Company and Toledo As co lessee with Toledo Ed; son the Company is Ed: son have options to buy the interests back at the also oDhgated for Toledo Ea! son s lease payments. If end of the leases for the fair market value at that time To edo Edtson is unable to make its payments under or to renew the leases Additional lease proasions the Mansfield Plant and Beaver Valley Unit 2 leases, provide other purchase options along with conditions the Company would be obhgated to make such for mandatory termination of the leases (and possible payments. No payments have been made on behalf of repurchase of the leasehold interests) for events of Toledo Ed: son to date def ault. These events of default include Future minimum lease payments under these noncomphance with several hnancial covenants operating leases at December 31. 1990 are affecting the Company, Toledo Ed: son and Centenor summan ed as follows Energy contained in an agreement relating to a letter of credit issued in connection with the saie and year CNw $ds$n* leaseback of Beaver Valley Un t 2, as amended in

• * * *

• 1989 See Note 10(d) 1993 5

00jj g

63 000 5

$@jj

$ 15 000 Toledo Ed' son is selkng 150 megawatts of its Beaver Valley Unit 2 leased capacity entitiement to the 1994. 63 000 111 M Company This sale commenced in Nowember 1988 1995 53 000 n 1.000 and we ant.cipate that it wai continue at least unta Later Yea <s $1579 000 $2 592 000 1998. Purchased power expense for th:s transaction was 3102.773.G00. $104.127,000 and $18,533 000 in ICl"$'Q Q S si E94 000 $3142 000 1990,1989 and 1988. respective!y In 1988= a portion Semennual lease payments conform with the payment ( $ 16,061,000 ) of the purchased power expense was schedule for each lease- recorded in a deferred charge account pursuant to a Rental expense is accrued on a straight'hne basis PUCO accounting order Tnis amount is being over the terms of the leases The amounts recorded by amortized to expense over the hfe of the lease the Company as rental expense for the Mansfield beginn ng in 1989 The future minimum lease paiments Plant leases were $70 008.000 in both 1990 and 1989 associated witn Beaver Vahey Unit 2 aggregate and $68 010.000 in 1988 $1.936 000 000 (Cleveland Electnc) F37 (Cleveland Electoc)

(3) CONSTRUCTION AND CONTINGENCIES Beginning in July 1985, Perry Unit 2 AFUDC was -

credeted to a deferred income account untd January 1, (a) CONSTRUCTION PROGRAM 1988, when the practice was drsconhaued l The estimated cost of the Company's construct on (d) SUPERFUND SITES program for the 1991-1993 period is $648.000.000. The Comprehensn.e Envuonmental Response, including AFUDC of $43.000,000 ano excluding nuclear fuel Compensation and Liabaty Act of 1980 as amended (Superf und) estabi shed programs address:ng the cleanup of hazardous waste deposal sites emergency y (b) CLEAN AIR LEGISLATION preparedness and other issues lhe Company is The Clean Air Act will require, among other inings. a Aare of its potent.a! inwoNement in the cleanup of significant reductions in the em:ssion of sulfur dioude sesen hazardous waste 9tes We beim that the and nitrogen oudes by the Company's fossit fueled u!bmate outcome of thek matters wdl not have a i

electne generating units The Clean Air Act vi:1 requee matenal ateise effect on the Company s finanaal that sulfur dioude emissions be reduced in two cond.t on or resuus of ope *ation<

phases over a ten year period Centenor Energy s prehminary analysis indicates that comphance with the Clean Air Act may require additions aggregate cap tal expenditures by the Company af ter 1994 in the range CONTINGENCIES of $370,000.000 to $665.000.000 Comphance a!so is expected to cesult in somewhat higher fuel and (a) OPERATING NUCLEAR UNITS operation and maintenance expenses in phase one and The Company's interests in nu&ar un:ts may be even higher operation and marntenance expenses in impacted by actiuties or ments beyond the phase two (after 1999) Company s contror Operabn ; nudear generatng unds The aggregate rate increases needed to fund hase expenenced unplanned outages or extensions of comphance with the first of the two phases could be in scheduled outage because of equipment problems the range of 2% to 490 by 1999. Total comphance or new regulatory requ rements A ma;or acadent at a costs of the Clean Air Act for both phases could rcsuit nuclear f aDhty anphere in the world could cause the in aggregate rate increases in the range of 7% to 8S NRC to hmit or prohsDit the operation construction or by 2004 A more specific comphance cost estimate keensing of any noc! car unit !f cne of the Company s will become avatlable when Centenor Energi s nuclear units is tak en out of serme for an extended \

comphance strategy for the Company and Toledo penod of hme for anv teason inciud,ng an accident at Edison is further developed such unit or any other nuclear taahty. we cannot .

We beheve that Ohm law would permit the recovery predict whetner rego;atory authooties would impose of comphance costs from customers in rates unf asorable rate treatment such as tahng the '

Company s atiected un.t out of rate base An extended (c) PERRY UNIT 2 outage of one of the Company s nuc; ear units coupied Perrv Unit 2. includ:ng its share of the common mu avowe ram pand we ham a maWnd facdties, is over 50% complete. Construction of Perry aderm Mect on me Lamany s bnanaal posen and Unit 2 was suspended in 1985 by the CAPCO ^ "" I # ^D "5 companies pending future consideration of vanous options, including resumption of full construction with a (b) NUCLEAR INSURANCE revised estimated cost and comp!ehon date or The Pnce- Anderson Act hmits the habAty of the owners cancellation. No option may be implemented without of a nuclear po^er p! ant to the amount provided by the approval of each of the CAPCO companies pnvate insurance and an industry assessment plan in Duquesne. a 13 74% owner of Perry Unit 2. has the event of a nuclear inadent at any unit in the advised the Pennsylvania Pubhc Utihty Commission United States resutting in losses in e= cess of the leset that it wdl not agree to resumphon of construction nf of pn+ ate insurance (currentb 1200 000 000). the Perry Unit 2 The NRC construction permit for Perry Company's maumum potenhal assessment under that Unit 2 erpires in November 1991 The Company. which pian (assuming the othei C APCO companies were to is responsible for the construction of Ferry Unit 2. contnbute their precortionate share of any plans to apply for an ertension of the constructinn assessment) would be $70 754 000 (plus any inflation permit pnor to the erpirahon date Under NRC adjustment ) per incident but is hmited to regulations, this action wdl cause the construction 110.696 000 per year fo' each nuciear inadent permit to remain in effect whde the apphcation is The CAPCO compan:es have insurance coverage pending for damage to property at Daws-Besse, Perry and if Pecry Unit 2 were to be canceled then the Beaver Va4ev (includ:nq ieased fue! and clean up Company's net investmelt in Perry Un.t 2 (less any tan cost s ) Cow rage amounted tn 12 325 000.000 for saving) wou!d hwe to oe written off We eshmate that each site as of January 1 1991 Damage to p'opert j such a wnte att, based on the Company s investment could e,ceed the insumnce meuge by a substantia!

in this unit as of December 31 1990 ww!d have been amount if a does 1% Compani s share of such about $268,000.000 af ter taxes See ate 101d) for e< cess amount co+1 ha ce a matenS alerse effect on a disccssion of other potenhal consequences of such the Companj s t nanM arc) ton and resu'ts of -

a wnte-off cp4 rahons (Cleveland Electnc) F-38 i Cmeland Bectnc ) ,

The Company also has insuraf n.:e Overaae for the and 1991, respectively. The 6% increase effective incremental cost of any replacement power purcismt February 1,1991 has been reduced to 4 35% as (over the costs which would have been incurred had discussed below.

the units been operating) after the occurrence of The annuahzed revenue increases in 1989 and certain types o' accidents at the Company's nuclear 1990 associated with the rate order were units. The amvunts of the coverage are 100% of the $120,700,000 and $105.700.000, respectively in estimated incremental cost per week during the 52 1991, the estinntod annuahzed revenue increase week penod staning 21 weeks af ter an accident,67% resulting from th9 order, as adjusted, is $71,400.000 of such estimate per week for the next 52 weeks and The January 1989 rate order provided for the 33% of such estimate per week for the next 52 weeks. permanent exclusion from rate base of a portion of the The cost and duration or replacement power could Company's investment in Perry Unit 1 and Beaver substantially exceed the insurance coverage. Valley Unit 2 The exclusion resulted in a wnte off by the Company of $212,000,000 ($140.000,000 after tax) in 1988 Since the order effectively ekminated the (5) NUCLEAR FUEL possibihty of the Company recovenng its remaining The Company has inventories for nuclear fuel which investment in four nuclear construction projects should provide an adequate supply into the mid 1990s canceled in 1980 and recovenng certain deferred Substantial additional nuclear fuet must be obta:ned to expenses for Davis Besse. additional wnte-offs totaling supply fuel for the remaining useful hves of Davis- $45,000.000 ($28,000,000 after tax) were recorded Besse. Perry Unit 1 and Beaver Valley Unit 2 More by the Cr cany in 1988, bonging the tota! write-ofi of nuclear fuel would be required if Perry Unit 2 were nuclear costs as a consequence of the order to completed $257.000.000 ($168.000.000 af ter tax ).

In 1989, existing nuclear fuel financing The phase in plan under the January 1999 rate arrangements for the Company and Toledo Edison order was designed so that the three rate increases, were refinar'ced through leases from a special purpose coupled with then prcjected sales growth, would corpo ation The total amount of financing currently provide revenues sufficient to recover a!I operating avadable under these lease arrangements is expenses and provide a fair rate of return on the

$609,000.000 ($309.000.000 from intermediate-term Company's alioned investment in Perry Unit 1 and notes and $300.000.000 from bank creoit Beaver Valley Ur 12 for ten years beginning January 1, arrangements), although financing in an amount up to 1989 In the early years of the plan the revenues were 5900,000.000 is permitted The intermediate-term expected to be less than that required to recover notes mature in the penod 1993 1997. Beginning in operating cupenses and provide a fair return on 1991, the bank credit arrangements are cancelable on investment Therefore. the amounts of operating two years' notice by the lenders As of December 31, expenses and retum on investment not currently 1990 $314,000.000 of nuclear fuel was financed for recovered are deferred and capitaleed as deferred the Company The Company and Toledo Edison charges Since the unrecovered investment will dechne severally lease their respective portions of the nuclear over the penod of the phase in plan because of fuel and are obligated to pay for the fuel as it is depreciation and federal income tax benefits that consumed in a reactor. The lease rates are based on result from the use of accelerated tax depreciation, the vanous intermediate-term note rates, bank rates and amount of revenues required to provide a fair return commercial paper rates also dechnes Beginning in the sixth year, the reven, ,

The amounts bnanced for the Company include levels autnonzed pursuant to the phase in plan were nuclear fuel in the Davis Besse. Perry Unit 1 and designed tu be sufficient to recover that penod's Beave- Vaney Unit 2 reactors with remaining lease operating expenses. a fair retum on the unrecovered payments of $65,000,000. $28.000.000 and investment, and amortization of deferred operating

$33,000.000. respectively, as of December 31,1990 expenses and carrying charges recorded dunng the The Company s nuclear fuel amounts financed and earker years of the plan All phase in deferra!s after capeahzed also included interest charges incurred by December 31,1988 relating to these two units witi be the lessors amounting to $19.000,000 in 1990. recovered by December 31.1998 Pursuant to such

$25,000.000 in 1989 and $23.000,000 in 1988 The phaseon plan, the Company deferred the focomng-estimated future lease amorteation payments based 1990 1989 on projected consumption are $63.000.000 in both nwm, m e 1991 and 1992, $66,000.000 in 1993 $62,000 000 in oeened operaong E penses s 33 960 5 52 c23 1994 and $56.000.000 in 1995. As these payments Cart g Cha<ges are made, the amount of cred;t avaitable to the lessor becomes a vailable to finance additional nuclear fuel Eqw 110.177 135 753 assuming the lessor's intermediate term notes and $16159e ~ $2t6 est~

bank credit arrangements continue to be outstanding Under the January 1989 rate order the amount of (6) REGULATORY MATTERS deferred operating expenses and carrying charges On January 31,1989. the PUCO issued an order which scheduled to be recorded in 1991 through 1993 total provided for three annual rate increases for the 180.000 000.151.000.000 and $9 000.000.

Company of appronmately 9% 7% and 6% effectwe respectively The phasean plan was designed so that with bi!Is rendered on and af ter February 1.1989,1990 fluctuations in saies should not affect the level of (Cleveland Electnc) F 39 (Cleveland Electnc)

earnings. The order accomplishes this by allowing the putential savings attnbutable to the Company is 55 Company to seek PUCO approval to adjust cost ( $53,968.000 ) . The Company expects to begin deferrals it actual revenues are higher or lower than realizing most of the savings identihed by the audit by -

amounts projected in tha order. The order also provides the end of 1991 for the adjustment of deferra!s to reflect 50% of the net - Fifty percent of the savings identified by the Audit af ter tax sa/ings in 1989 and 1990 identified by the Panel were used to reduce the 6% rate increase management audit and approved by the PUCO as scheduted to go into etiett on February 1,1991. As discussed in the following paragraphs No change was discussed previously, the Company s rates increased made in the cost deferrals for 1989, The Company 4 35% under this provision as approved by the PUCO ,

deferred an addilsonal- $24,102.000 of cartung in January 1991 charges in 1990 and will request P'JCO approval of the The Company has entered into an agreement with defe* rat other members of the Audit Panel in which the in connection with the Company's 19S9 order and a Company has agreed to use its best efforts to avoid similar or_er for Toleda Edison, the Company Toledo rate increases in the years immediate!> following 1991.

Edison and the $ctvice Company have undergone a The 1989 urder also sets nuclear performance management audit to assure that operation and standards through 1998 Beginning in 1991. the maintenance expense savings are maximized The Company could be required to refund mcremental audit was conducted under the direction of an Audit replacement power costs if the standards are not met Advisory Panel ( Audit Panel) comphsed of We do not believe any refund will be required for the representatives of Centenor Energy. the Ohio Office of Company for 1991 Fossil-fueled power plant Consumers' Counsel and the !ndustnal Energy. performance may not be ra: sed as an issue in any rate Consumers in Apni 1990, the Audit Panel announced pioceeding before Februar/ 1994 as !ong as the that it had identified potential annual savings in Company and Toledo Edison achieve a system wide operating expenses in the amount of $98.160.000 from avadability f ac'or of at least 65% annually This Centenor Energ(s 1989 budget leve! The amount of standard was exceeded in 1989 and 1990 (7) FEDERAL INCOME TAX Federalincome tax, computed by mult+ plying income before taxes by the statutory rates is reconcded to the amount of federal income tax recorded on the books as follows.

Fo< 100 years ended Decemte 31 1993 1989 1988 Unousands a collars)

~

Oco income Befve Feoeral tncome Ta< 1337,828 1391 193 $ 151 129 Ta4 on Bac* income at Statutary Rate $114 %2 $ 133 000 $ 51384 inc* ease (Decrease) in Tai Accarated depicoabon , 7.140 4 422 6 300 investment ta cred.ts on ana;iowed nudear plant t 18 712) u -

Organaakon costs . - -

3 343 Taies omer than federal income taies 19 4693 -

(2002)

Other items = 1 {3 3 546 (2 781)

Tots Federa:inccme 1a E peme . _

$ 95 500 $,140 W4 1 56 044 (Cleveland Electnc) F 40 (Cleveland Electoc)

Federal income tax expenso is recorded in the income Statement as follows-For the yea's ended Decemtw 31.

1990 1989 1968 (thoubbnds of ODilafs)

Operetng E trenses Current 1as Provmon. .... . . . . .. . . $ 26 934 5 63 447 5 82.7M Changes m Accumueted Deterred Federalincome Tai Acce6erated derreceton end amortanton . . 40 197 35,300 24445 Afternative rnitumum tax credit. . . (1?060) (34 874) -

Saie and laaseteck transactons and amorteaton, 3 496 3,893 (1 175) ,

Property tai entense , (10 880) -

(7 069) l Deterred CWP *evenues , 11 093 11.005 (4,122) I De' erred fuel costs . , 4.763 (3155) 11529  !

System developmern costs 4 , 403 348 $ $1B Davis Besse replacement iower . . -

4136 6 910 Federalincome tai retum 6dNstments - -

(19 349)

Retooured detit ecsta - 1.887 (B??) (B72)

Dete:ed orerating eapensa: . 1,459 2 289 10 874 i Other stems . . . . . , 13 119 3020 (4 200) I investment Tai Credits . . 1 489 58 (10 607) l Total Charged to Or.erahng Extenses , 75 099 85 275 94 654 Nonorerating income Current ia: Provisen . , . . . .

. ... . (25 22$) (31 298) (4t413)

Changes n Accumuisted Deterted Feoeraiincome Tan Dave Beste rePacemer'1 l po*er . - - 3 01t Wnie off of nuclear costs . . (11.966) -

(91 643)

AFUDC and canying charges. 57 612 87.541 80 923 TLies. Other than tederal encome tases , -

5 $20 Other items . . .

t$44) r2 564)

Total Ext =mse (Credit) to Nonoterating income . 20 401 $$699 _(53 162)

Federat income Tam incisded in Cumuistive Effect of an i Accounting Change trv Untded Revenues . , , .

14 552 Totai Federal income las E rense . . , , . . $ 95 500 $140,974 5 56 044 The Company joins in the fihng of a consokdated federal income tax feturn with its affikated companies The l

. method of tax allocation approximates a sepv* return result for each company, in 1988, a change was made in accounting for income taxes from the deferred to the habihty method This change did not impact net income as the additional deferred taxes recorded were off set by a regulatory asset on ine ,

Balance Sheet.

Federalincome tax expense adjustments in 1990, associated with previously deferred investment tax credits relating to the 1988 wnte.off of nuclear plant investments, decreased the net tax provision related to nonoperating income by $18,712,000.

The favorable resolution of an issue concerning the appropriate year to recognize a property tax deduction resulted in an adjustment which reduced federalincome tax expense in 1990 by $10.100.000 ($8.207,000 ir, the fourth quarter).

For tax purposes. net operating loss (NOL) carryforwards of approximately $43,279,000, $47.448,000 and

$140.833,000 were generated in 1990,1989 and '988, respectively. The NOL carryforwards are available to reduce

- future taxable income und will expire in 2003 through 2005. The 34% tax effect of the NOLs generated in each year

($14.715,000,' $16.132.000 and $47.884,000 in 1990,1989 and 1988. respectively) is included in the above table as a reduction to deferred federat income tax relating to accelerated depreciation and amortization. Future utilization of these tax NOL carryforwards would result in recording the related deferred taxes

-- Approximately $11,504,000 of unused general business tax credits are available to reduce future tax obhgations The unused credits expire in varying amounts in 2001 through 2005 Utihzation of inese unused credits is hmited by provisions of the 1986 Tax Act and the level of future taxable income to which such credits rnay be apphed '.

The 1986 Tax Act provides for an AMT credit to be used to reduce the regular tax to the AMT level should the

-regutar tax exceed the AMT, AMT credits of $18,860.000 and $34.874.000 were generated m 1990 and 1989 respectively.

1 (Cleveland Electnc) F 41 (Cleveland Electnc)

. c,-,__,-._._ _ - - . . _ _ . , , . , . _ _ _ _ _ _ _ _ . . - . _ _ _ . , . _ _ . - , - - . _ _ . - _ _ . -

(8) RETIREMENT IN(;OME PLAN AND OTHER lhe settlenu ni MScount) f ate assumpton was

• POSTRETIREMENT DENEFITS 8 5% for December 31.1990 and 8% for December 31 1#9 The long term rate of annual compensation The Company anc Scruce Company jointh Monsor a increase assumption aas 5% for tioth December 31, noncontnbuting pension plan whrh covers au 1990 and December 31,1989 The long term late of employee groups lhe amount of retaement ben (f ts return on p!an azets assumphon was 8% in 1990 and generally depends upon the length of serwe Under 1999 certa n cucumstances, benehts can begin as early as slan assets conost pr1 manly of insestments in age 55 The p!an a:30 proudes certain death. medic al c ommon sto d . bonds. guaranteed insestment and disstaty benetts The Company s and Serme c ontracts. cash equdent secunbes and real estate Company's funding poicy is to comph with the lhe cost ut posuetaement medcal benehts Employee Retaement Income Secunty Act cf 1974 amounted to 14.100 000 in 1990. $2900 000 in 1989 guidehnes and $2200 000 in 1988 Consistent with current Dunng 1990 the Company and Seroce Company ratemahng practices these costs are recorded when offered then second Voluntary [afly Retaement pyd Opportunity Program (VEROP) Operahng e.penses in Decemt er 1990. a new accountag standard for for both companies included $ 8 000 000 of penson postretaement benefas other than pensions was plan accrua!s to cover enhanced VEROP benc hts plus ;nued Itns standard requaes emp!oyras to accrue an add bonal120 000 000 of penpon costs f or VE ROP the e pectM ' .st of suc.h oenehts dunng the benchts being paid to retgees hom both compan'es empeyec- of serace The standard also corporate funds lhe $20 000 000 is not included in requaes d.ng et a cumulatne transibon the pension data reported below Operating empenses obhabon a@ument wrnch can be fecognited for 1990 for both companies aNo included a cred=1 of imnied.aleh. sutyect to c ertan Irmitabons. or amortized

$36 000 000 rnsu'bng trom a settlement of penuan eser the ;onger of 20 3 ears or the aserage remaining obhgabons through lump sum payments to a serme penod of actue emplo,ces empNted to f ecene substantial nurnber of VEROP rebrees Net pension and benet:ts 1: Cempany and Scruce Company are VEROP costs (cred.ts) for 1988 through 1999 tot tae requned to adapt the nea standard no later than 1993 plan aere compnced of the foncwing components tuthough ae ha,e not completed an anatyus to um uq w? detennine the eMoct of adupting the new standard we (n e s s da.ct) do not espect adgbon to nave a matenal adverse pen e cvas peJ") eMect an the Company s hnanaal cond; bon of resu!!s of sm.se wu o tym os u ned operations because of e.pected future regu:atory d#ng tne oj i'4 iW l .e inteet wst on p<.m tel t**

WabwM A MMbes reorded pursuant to the standard may be esenhahi offset by regulatory assets A n m pu, am is tho (b) 14 to reflect antic:pate d future resenues anoaated with ret ovory usough rata Net awnutm na m voc 34i1 _ _

Net pensm c seat, t11 i rm ta u

u m;m ust 4 (9) GUARANTEES bentemen' ge - ' -N Under two loriq terrn co3! porChabe af rangements the Ne vej ts  !<34) iric 5 tai hdguaranteed certain loan and lease Co lhe fohowinQ table presefitS a recorlcihaban eI the Ohh0atiUnS Of t AO Uunin0 C0t11bJn' S nC 0fthCSC anangenents aho reauges payments to the trurung funded status el the p'an at December 31.1990 and 3999 c ompany for an) actual out of pocket idie mine tie m.t o u expenses tas aiance payments for coal) when the IN **) mines are Idle fur reasons beyorid the cor trol of the

( mh 5 , d <14 5 ) m:ntng company At December 31.1930 the pnnapal Anuma pu i nt w of to ti amount of the manng compan'es loan and lease ot %hns ob!qabons guaranteed by the CompLny was Veste j t.ene'.tt 1.4 i. t 3 gr> 000.000 N m eustte m is m c1 Ac tun:JetM t *m. 'a ot

• gal" ai i.'47 57 t l'et t Of f ut af f L Y% #f r.M.O liN e", b9 b4 Ot M ptQeC W F 4 9 T id Or d pht C OI l f,an 8%eM At fM r%$4 M .,ab M  %?

hfpu's O' bin i.lMltt Ovef p'U)tN! d teneU ct q4 ban B [E V5tKJjrged net ga 7 d de !? vanav n t<!6ei r. Cumpam. xd e.;merm r iM) i 1. n ;

UnremgN M 0%f fiw e(at F i ino'mw.Oas nn e, t  !+'

t eN amilie.i D.cf 19eds l3) *!iti rei ptepMJ pc s on Mt  ! .12 1 i c

(CNe!and Elechic j fC pece!and Dettoc)

(10) CAPITALIZATION 1here are no restrictions on the Company's ability t issue preferred or preference stock (a) CAPITAL STOCK TRANSACTIONS With respect to dividend and hquidation nghts, the Preferred and preference stock shares retired dunng Company's preferred stock is poor to its preference the three years ended December 31,1990 are as stock and common stock, and its preference stock is follows:

,g poor to its common stock cumulatwe Preterred and (d) LONG TERM DEBT AND OTHER ercie.ence sm sutyect to BORROWING ARRANGEMENTS Mandatory Redemption pretenes Long term debt. less current matunties, was 35 follow 5

$ 7 35 Senes C (10) (10) (10) Actua BB 00 Seres E (3) (3) (3) ggg 0,'pege U* -

(1)  !

75 00 Sero i -

(14)

B0 00 Lenes G . (1) (2) (5) {thousends d 08a4) 145 00 Senes H - (14) (4) (4) I'rst mortgage bonds 145 00 senes i . <4) (4) (43 1991 8 375% $ -

$ 35 000 Pres crexe 1991 13 75 -

4.334 5 77 50 Sews 1 -

@) (7) 1992 15 25 20 000 20 000 1992 1058 40 000 40 000 Totat . (32) (30) (47) 1992 13 75 4.334 4 334 1993 3 675 30,000 30 000 1993 8 55 50 000 50 000 (b) EOUlTY DISTRIBUTION RESTRICTIONS 1993 13 75 4.334 4 334 At December 31,1990, consohdated retained earnings 1994 4 375 25 000 25 000 were $563.559,000 The retained earnings note 1994 13 75 4.334 4 334 available for the declaratien of dwidends on the 1995 13 75 4.334 4 334 Company's preferred and common shares All of the 1995 7 00 720 720 1995 7 00 15 15 Company's common snares are held by Centenor 1995 .. 7 00 15 15 E 4 ny financing by the Company of any of its j34 j34 ,

nonutihty afhhates requires PUCO authonzation unless 2006 2010 8 83 221.750 221.750 the financing is made in connection with transactions 2011 2015 9 38 448.435 533 435 in the ordinary course of the Company's pubhc utitty 2016 2020 9 01 092 880 592 880 buriness operations in which one company acts on 2021 2022 8 22 174 300 174 300 behalf of another. ] .906,281 1.930 615 Term bank loans due 1992 1996 8 70 114 400 130 000 (c) CUMULATIVE PREFERRED AND Notes due 1993 1999. 9 32 550,000 212 500 PREFERENCE STOCK Pollution contr01 notes Amounts to be paid for preferred stock which must be due 1992 2012 iM O' L . 54 770 redeemed during the next fwe years are $26.000.000 Other - net -

6 970 8 494 in 1991 $16.000.000 in 1992 and $31.000.000 in 1otat Long-Term each year 1993 through 1995 Debt , $2 631911 $2 336 379

~ ~ ~ ~ ~ " ~ ~ ~

The annual mandatory redemption provisions are as Long term debt matures dunng the nex; hve years f ollows.

sna.es ence as foliows $72.000.000 in 1991. $99 000.000 in To be se9.nny Per 1992. $271000.000 in 1993. $42.000.000 in 1994

" * *"*d '" E*2 and $206.000.000 in 1995 P'e*"ed in 1989 and 1990, the Company issued

$550,000.000 aggregate pnncipal amount of secured asb f 19e5 1 00 mediuml nn n tes with vanous matunus rangmg 75 00 Ser.es r 2.384' 1 000 from 1993 to 1999 and annual interest rates ranging 145 00 sens i . 1,969 19ec 1900 10 000 1991 " 1.000 from 8 95% to 9 8% The no'es are secured by first 113 50 senes K A%uWit le benes M 100 000 1991 100 mortgage bonds 9125 Senes N 150 000 1993 100 Dunng 1990, the Company arranged to refund in

• Rep <esen!s remong snaies ia te receemed vaan 1 1991 1992 $78.700.000 poncipal amount of its First Mortgage sands, tan % Senes due 2012. wnien are

" AH oumedq snan to t.e redeened hne 1.1991 collateral secunty for pollution control refunding bonds The annuahzed cumulative preferred dwidend issued by a pubke autr.onty Tne authonty's bonds will requirement as of December 31,1990 is $35 000.000 be refunded at the same time. To effect the refund of The preferred dwidend rates on the Company s its bonds. the authonty entered into a contract with Senes L and M fluctuate based on prevaikng interest two institutions to dehver in 1992 $78.700 000 rates, with the dwidend rates for these issues aggregate poncipal amount of its taeenempt pollution averaging 8 38% and 7 71% respectively,in 1990 The control bonds due December 1. 2013 with an interest dwidend rate on Remark eted Senes P averaged 8 01% rate of 8% at a pnce of 97 496% for an ettectue in 1990 interest cost of 8 25% The authority s bonds w;ll be (Cleveland Electoc) F 43 (Cleveland Electoc)

_ _ _ _ _ _ _ _ _ - , ~ _ _ . _ _ _ _ _____

secured by $78.700 000 poncipal amount of the these covenants in the event of a ante ott of the Compan/s f ast Mortgage honds 8% Senes due Company's and loledo i dmon's investments in perry 2013 B 1he proceeds wdl be used to r^ deem the Unit 2. tumng unforeseen cm unstances authonty's outstanding bonds and refund the 13%

Senes F ust Mortgage Bonds in July 1992 1ho PUCO (11) SHORT TERM DORROWING authonzed the Company to record interest empense ARRANGEMENTS equal to a blend of the tu0her rate on the outstanding bonds wath the lower rate on the oc6 bonds for an lhe Company haJ 1152 000 000 of bank hoes of cred,t interest e> pense reduction of $1.000 000 in 1990 and ananaements at Decemter 31.1990 T h.s included a approomately 16.000 000 total in 1991 and 1992 130.000 000 hoe of c reat atuch prouded a The Company s mortgage consttutes a d rect f ast 15 000 000 kne of crea.t to be asaetoe to the Serme hen on substanhally all properly onned and tranchmes Company it unused tv, the Compan( lin4e were no held by the Company i =cluded from the hen among bonomngs under these bam cred t anangements at o'her things. are cash. secunhes accounts recesabie Decemtier 31,1990 fuel and supphes Short term t>orrowaq capavty authonzed by the Additional fast mortgage bonds may be msued by PUCOis 1300 000 000 The Company and Toledo the Company under its mortgage on the bass of f dison ha.e t een authonted tv the PUCO to t orroa bondable property add tions, c3 ' h or sutstout on for hem each other on a thof t term haw refundable tirbt mortgage t onds The issuance of Most bonomny arrangements under the short tenn add;tional f ast mortgage bonos tw the Company on the bank knes of credit mau9e a fee of 0 25% per year to basis of property addihons is hmited by two pro.wons be paid on any unused port on of the hnen of cred,t of its mortgage One relates to the amount of f or thobe banks mthout fee fegurements the averago bondalde property asadable and the other to evnings dadi cash balance in the tur4 accounts salmbed coverage of interest on the bonds Under the more inf ormal compensat ng tulance anananments restrictive of these provmions (curretitly, the amount of At Decemter 31 1990 the Company had bondable property avadalde), the Company would $ 8 7110.000 of conunerUal paper outstanding T he have been permitted to issue approumately commercial paper was backed bg at least an equal

$369.000.000 of bonds based upon avadabie amount of unused Dank knes of ued t bondatde property at December 31, 1990 The Company also woukt have been pemutted to issu" (12) CHANGE IN ACCOUNTING FOR UNDILLED approumately 1159 000.000 of bonds based upon REVENUES refundalde bonds at December 3 t.1990 if Peny Und 2 had been canceled and artten oft as of December 31, Poor to 198B revenum were recorded in ;he 1990. the Company would have been permitted to accounbnq penod dunng which meters were read issue approumately 120 000 000 of bonds based Ubity serace rendered Fler monmig meter read ng upon avadable bondatde property and appronmately dates through the end of a calendar mordh (unbdied

$159.000.000 of bonds based upon refundatde bonds revenues) became a part of operahng resenues in the at December 31,1990 fonamng month in January 1988 the Company An agreement relating to a letter of cred,t issued in adapted a change in account 1ng for resenues in order connection with the sale and leaseDa:L of Beaver to accrue the eshmated amount of untded revenues Vaney Unit 2 (as amended in 1989) conta,ns several at the end of each numth financial covenants ath chng the Company T oledo lhe adoption of this accounting method increased Edson and Centenor E nergy Among these are 1988 not income 13 363 000 Inet of 11,733 000 of co<enants relahng to carrungs coverage ratios and income taves) before the comulatae effect on penods capitahzation rabos lhe Company, lo!cdo i d. son and poor to January 1 1988 lhe cumulatwe etiect of the Centenor Energy are in comphance mth these change on the penods onor to Janua'y 1.1988 was covenant provoons We behe e the Company. f oledo $21874 000 (net of i!4 %2 000 of income tases)

Edtson and Centenor f nergy wm cont nue to meet and was included in 19% net income (Cleveland Electnc) f 44 Kheland Uectoc)

_ _ _ _ _ _ _ . . . _ . _ _ . _ _ _ _ . _ . _ _ _ _ _ .- __._ m .__ _ _ _ _ _ . _. _ _ _ . . _ _ . .

(13) @UARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a tabulation of the unaudited quarterly results of operations for the two years ended December 34.

1990 Qua'te's E nced i Ma'C h 31. June 30 f.e pt 30 Dec 31 (thousands of ODila4) 1990 Operating Revenues. . $386.116 1401.850 $478.384 $ 389.494 Operating income . . . . . 76.273 57,599 130.348 82.161 Net income . . 43 831 43.019 95.005 60.473 Earnings Available for Common Stock 34.280 33.682 86.043 51.641 1999 Operating Revenues. . . $381.835 $401.772 $448.091 $359,964 Operating incomo . . 79.766 91.486 111.372 2.802 Net income . . .. 71.113 63.273 89.560 26.273 Earnings Available for Common Stock . 60.586 52.761 79.729 16.916 Earnings for the quarter ended June 30.1990 were increased as a result of federalincome tax capense adjustments associated with deferred investment tax credits relating to the 1988 write-off of t'uclear plant investments See Note 7. Tne adjustments increased quarterly earnings by $18.391.000.

Earnings for the quarter ended December 31.1990 were increased as a result of year-end adjustments of

$18.030,000 to reduce depreciation expense for the year (see Summary of Significant Accounting Policies).

$24.102,000 to increase phase in carrying charges (see Note 6) and $8,207.000 to reduce federal income tax expense (see Note 7) The total of these adjustments increased quarterly earnings by $37,000.000.

l l

l l

l (Cleveland Electric) F-45 (Cleveland Electric)

t l*

l<

w

. 8ekANCIAL AND STATISTICAL REVIEW 31 Operating Revenues (thousands of dollars)

% >u , .p n in

. s ., ,, %

(une, tiw Fie g wet.g Cy aw e u- #M r tud heta, Aen at eme l v. m ,%a , ht .e un 1990 $495158 $494 370 $543 813 $122 701 $1656 042 5 (198) $1655 844 5 - $1655 844 1999 403 803 452 911 519 b54 117 220 1 '59 7M 31 5'4 1'ut t4 t 1 91002 1968, 436 413 395 it6 470 #3 M8 8?4 1 Jt 7 445 b4 1 D '

C1'N 1 451 576 1987 42B 786 389297 470 601 12 322 1 301. t f 9 UN 1 l i'c t 4 4 13 Ti71 1 324 015 19% . 410 153 3S2 773 40143 00 ;45 1 314 579 4% 1 314 '71 12 % 3 1 32' 724 1990 268 787 220 077 323 764 26 454 b % (N *4 F 19

, P ' M '.01 15 W F435t0 Operating Expenses (thousands of dollars)

. or .,

g I t atM $ ('3 *' d *,# [i pes ,W r ' h.e ; l

• w.e. in & 6 p 1,u a f ; .ed' hrchasel & 6 ( N. ' t.t r- 44 ( N w en tre me  : ,g erg,ng qw 6 % e' Wntem e A ti > t m .= 5:1 ( a fe' c 1 4t  ? wit s t . p.mu-s 1990 $377 082 $$14186 $175 654 $197 454 $ (30 012) $75 099 $1309 463 19 % 384 543 509 151 1932 9 18312? 14 9 1 J 21 e5. 75 1390 cw 198B . 307 014 524 478 169 731 184 813 i 104 f o_1 94 t 54 1 196 N4 19U 330 UEQ 425 93H 14 W 91 R 140 407 t4? K 0) '41 174 1 M6 9:'O j 1960 . 303 Siti 38B3F8 103 17') 143 m -

97 074 1 0% 054 1980, 359 iBB lia5 640 f 4 tile 01 (70 --

11 '74 743 051 e

income (thousands of dollars) e s.+

m, ,

.m.<. v. ,, m

h. me & la < twve

[g o'a bhg AftJ[K!- ( 4'1 y. k r$ . .r ' ej! l' !(u t s !

i e 4f lin. ic e ( j c', b'l Nr p i t 6 4 s" .t.e ) ( f yr ya 1990 $346 381 5 4 531 $ 1 836 $161598 $(20 401) $493 945 1999 285 426 8 302 7 934 234 7Fe i E 6 (. 9- + 1 4h] n11 19M . 255 284 8 052 1247 297 )(a) .24 595 ' 1 102 37760 1997 237 109 177 170 (41 940) 24 010 79 6 % 470 r,'i',

1996 232 070 176820 it2%) 04 544 469 185 1963. 150515 40 873 7 005 -

13 C 212 9 ,5 Income (thousands of dollars) n......

kkI.#t U r naa me Comu m h ve< u ;1 & i ann.n

{ N t of an t a.M t of an h c f ev ete A.aw e

( bg { d k[ ( Q (- M, : p ,[ -!'8 kg 4 p 3r iir pQ !p ! [,j , h l, gg ( gbrvy y(y year v *.es t Le .,  :;nsue U nr,, ts. n .e (i .ar 4 f.u k 1990 $254 936 $ (3 319) $242 328 $ -- $242 328 $36 682 $205 646 1984 238 042 (7 450l 2',0 219 - 2',0 214 43;c' JD9 932 1988. 228 879 (4 304) 73 211 21 E74(b) 95 DM 42 606 62 h79 1987 243 958 (8?985) 3?9 542 -

3.6fM 43 380 2t 6 19t; 1986- 232 133 (02 832) 299 M4 -

J>> 8 9 4 34 7t4 260 100 1960 . 112 023 (25 051) 125 381 - 12; 383 27 711 97 072 (a) inckdes es of' of nuocar cost s in the amount d 1257 430 000 in 1968 (b) in 19% a cnange in the r%tho<1 of accevMg nbr u ted re,erws. w, rives (Cleveland Electoc) F-46 (Cleveland Electoc)

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

1HE ctIviLAND Etic 1Rc stuMv1Na cowANv AND svasoAW s Electric Sales (millions of KWH) Electric Customers (yeaf end) Residential Usage s,waar a ra,e ou ac . n.,

hj A tha' >AW'i raget l'er f pr t eat Ne$demf ea' (OPW'@'i g grggsstig Agiornaq (W htat fact, y lg (on.mge ns' & (it'c. fMa- (psynes pWM (g$ tog 1990 4 716 6234 8 651 - 463 18 964 666 000 68 700 8 361 742 051 6 867 10 638 8723.18 1999. 4 789 5208 8 780 87 C01 19 3t 5 MD 760 08033 6 329 737 145 7 025 9 61 091 83 1968 . 4 802 4 998 9 013 461 472 19 610 057 092 00 bD0 8 20? 132 401 719 0 99 040 35 1987- 4 0B2 4 B18 8 390 55 485 1B430 054 021 04978 8 105 727 154 0 927 9 10 037 40 1986 4 5B0 4744 7 927 - 403 17 717 051 327 03 292 0 000 722 027 0 B10 6 94 011 34 1993 4 463 4 149 0 002 '

070 410 IB tt0 042 845 00 070 7 042 710 557 004 0 05 434 37 Load (MW & %) Energy (millions of KWH) Fuel owat w c aw, i w . ..

C ""4 45 ee'e'aud et 1ste Pea

• Cana: $ t oa 1 py ,rra na F oe' ( m i 14io r. c os o# Pean trad vr y l ac w onw %4r lua s u r.  % t cy pas 1990, 4 685 3 778 19 4 % 63.3% 16 679 6 262 20 641 (643) 20 198 1.62t 10 417 1999 4 530 3 600 14 6 05 2 14 908 6 57D 2153B (777) 20 761 1 49 10 500 1988 4 406(c) 4 007 90 59 8 15 75t 4 43D 20 230 1 091 21 327 1 09 10 517 1987 4 257 3 722 12 0 02 5 14 97t4 3 689 18 007 1 249 19 915 1 00 10 590 1950 3 775(c) 3 001 40 02 2 10 277 12 10 269 2 603 19 42 1 78 10 404 1993 . 4 353 3 325 23 0 64 3 14 460 1 083 15 509 3 69 19 403 1 07 10 035 Investment (thousands of dollars) casu Wm6 lh IMai Utu i r Actorr uai d ba ret.n h e a$ h in ert, Ut A!y hard b [$p>M eatm & V & fe"t f ue WO P344 a'v.! ha't! I hla' V ea' bet.g g AnrFh T ANm h4"1 UV2 O"f' l @ Np"$M A 1W1 Abbe'l 1990, $6 041878 81 410 051 54 631 827 5 696 696 $344 252 $5 672 776 5164 619 $7 946167 1989 5 878 825 1 204 570 4 014 255 720 933 3b4 3N 6 095 502 153 449 7 070 405 1988 5 704 746 1 081 758 4 (22 9 % 703 029 383$73 57071P2 211 D60 7 450 198 1987. 5 787 003 905 297 4 80 300 033 433 399 261 5 905 020 000 947 7 069 026 1996. 3 190 730 951 917 2 244 613 3 Ot 7 637 383 542 L 096192 070 SF5 0 209 092 1980 2 404 ES 557 659 1 840 396 8 t 1064 02259(d) ? 719 739 39b 0% 3 135 564 Capitalization (thousands of dollars & %)

reeneo s nee.em noenr3 um. ens 9Jk n th Urda!Wy Va r dak#y hejt*myW v ea' Com e Siv>fv4 ihntw F ese h: an ( q Ye* 0+t-i lea.

1990 $1884 258 38% $171 162 3% $217 334 4% $2 631911 65% $4 904 665 1989 1 228 074 40 212 30; 4 117 334 5 23M 379 01 4 094 149 1966 1 760 409 40 232 020 5 f t7 334 5 2 2Q 170 50 4 490 538 1987 1 925 719 41 ?70 045 6 f.; 334 , 4 2 317 907 49 4 731 055 1966 1 843 974 40 339017 7 144 J21 3 23114% 50 4 038 407 1980 9 2731 37 200 500 11 95 071 4 1 211 528 46 2 479 830 h) Capaty data retects otend oncatag uM outaps fa# vem.ahon v d meements w, %tated be dem of cetWaw of nawr tw aw em 6nancmg mangemen avu. ant 'o staten.ent of f 6nanc,a- Ac wndn; struam 71 (Cleve!and Electric) F -4 7 (Cie.eiand Liectric)

REPORT OF lNDEPENDENT PUBuC ACCOUNTANTS l

c / NDERSEN To the chare OAners of #

lhe Toleda [ d, son Compan, We hase aud ted the accompanong balance sheet and y ats in the perud endri Decont>er 31 1990 in statement of cumulathe preferred and preference conf of nuty A tth genef au p acc epocd accounting stoc k of the Tru edo Ed+on Compan, (a AhoN OAned pnnc p;e5 sutaud a', of Centerior Lnera, Corpo'ation) as of As d t russed f urther in the Summa'y of Syn.ficant Decembe r 31 1990 and 1989 and the related Atcounhng po!,v ; and Nott - ana 1J a chage statement', of income reta.ned ea' rungs and cash Aas nude in the metho is et rcount!na for inc ome boob for 01h of the three scars in the pencd ended ta.es and unDWed re,en ues in IDM tetroacthe to D(cemtier 31 1990 These financal statements and Janua',1 19 %

the M heNes retened to tieleA are the respongtid ty As da eussed f u'thif in We 3 ( c ) the future of of the Compan, s management Our respons.tul.t, is to f"en y Un t .' m unde, ded Construrbon has tieen espeess an opnion on these hnanc.at statements and Lutpended unce Mi 19% Va%us options are bang schK1 des llased on our aud is conOdored inc kdfi ) resum.n:) constf uction or We t on1K ted out aud.ts in accordance with cancenng the umt Yanagement can g n-e no ge ne r a h ,- accepteJ aulhng standa'cis Those assutance At v n it e,er pef r y Unit 2 Ad! go in g rece standards leque that Ac plan and perform the a;11 to or Ahether the Compan, s e%estment in that un 1 and obicon f usandide assuranc e about A hether the a return thefeon Aih ulbmateti be recovered financ ci sta'ements are free of matenal m!sstatement Our auats Aef e nude f or the purpose of fornung an An auf t Indudes exam: rung on a test bas s. eodence opirwn on the liapc Onantial statements tak en as a supporting the amounts af d d4 closures in the f1nanc'al AhWe lhe sch( dutes of The loieda [ rf son Company statements An adt a%o inc ades assesong the listed in the inda to SchedWei are presented for aaounting pnncip:es used and sgn hcant est:mati s pu'ome: of c oned,.nq A;th toe Sec unt<es and madC bi management. a5 weh ab evald3 ting the overaN [ n; hangs' Coninnn on s ri A s and are not pdf t Of the finanaal statement presentaban We tiehege that our t>aL>c hoanpal '.tatements T her,e sc hedu'es have been aud ts proade a reasonalde tmts for ouf opnion uulvcted to the aud-t:nl procedmes apphed in the in our opruon the financal statements refeMed to aud ts of the hav hoard statements and in our abOve Pf eSent !alrlp. If 1 ah material rebpeCts. the opin.or t ta fl ystate to aH riiatef tal rey >ects the I n3ncial hnanf tal pOsthDM of lhe IoiedO I(M,on Company as Cf dMa f f @f ed lo tW 'et t A!h thereirl in re!alion 10 the Dec err,t ser 31.1993 and IM9. and the retu:ts of its twc hom! staWents ta*en as a Ahofe opef ahons and its c19.h flo As f or car.h of the three CIe s ciand. (>hiO fetirux,11 19'Jl Arthur Andersen & CO

( Toleda Eda,nn) f 48 ( f o; eda i dl,un)

SUMMARY

OF SIGNIFICANT AccoVNTINo POLICIES GENERAL factor lhis matches fuel enpenses min fuel related The Toledo Edison Company (Company) is an electne utihty and a wholly owned subsdary of Centenor PRE PHASE IN DEFERRALS OF OPERATING Energy Corporahon (Centenor Energy) The Company follows the Uniform System of Accounts prescr bed by EXPENSES AND CARRYING CHARGES the Federal Faergy Aegulatory Commission (FERC) The PUCO authorized the Company to record as and adopten by The Pubhc Utilities Commission of Ohio deferred charges operating espenses Oncluding lease (PUCO) payments, depreciation and taies) and intercsi The Company is a member of the Central Area carrying charges for Beaver Vahey Power Station Unit Power Coordination Group (C APCO) Other members 2 (Beaver Valley Unit 2) from its commercial in )

include The Cleveland Electne inuminating Company service aate in No, ember 1987 throuan December 1 (Cleveland Electnc), Duquesne Light Company 1988 Af ter the PUCO determined thai Perr, Nucicar (Duquesne ) Ohio Edison Company and Pennsylvania Power Plant Un.t 1 (Perry Unit 1) was consdered Power Company The members have constructed arid used and useful' in May 1987 for regulatory operate generation and transmission facil< ties for the purposes the PUCO authonted the Company to defer use of the CAPCO companies Cleveland Electnc is operahng e>penses (including depreciahon and also a wholly owned subsidiary of Centenor Energy taies) for Perry Unit 1 from June 1987 through December 1987. when these costs began to be RELATED PARTY TRANSACTIONS recowered in rates The PUCO a'so autnonzed the d*'*"al of interest and cou t> carrpng charges Operating revenues. operahng e,penses and interest EWsw of mose associated with operahng cipenses charges include those amounts for transachons w:th for Perry Unit 1 from June 1987 through December affikated companies in the ordinary course of business 1987 and the deferral of only interest carrpng charges operahons bm January 1988 through Decemar M8 The The Company s transactions with Cleveland Electric amounts deferred for Perry Unit 1 pursuant to these are pomarily for firm power. interchange power. PUCO accounting orders were included in property, transmission hne rentals and jointly owned power plant pl ant and equipment through the commercial in service operations and construction See Notes 1 and 2 date in November 1987 Subsequent to that date.

Centenor Service Company (Service Company).

amounts deferred for Peny Unit 1 were recorded as the third wholly owned subsidiary of Centenor Energy.

defened charges Amorteation of these Beaver Va!!ey provides. at cost, management, financial. Un't 2 and Perri Unit 1 deferrals (called pre phase in administrahve. engineenng. legal and other services to defenals) began in January 1989 in accordance with the Company and other affihated companies The the January 1989 PUCO rate order dtscussed in Note Service Company bmed the Company 349.000 000.

6 The amortizabons will cont nue over the laes of the 140 000.000 and $43 000 000 in 1990 1989 and a d propMy 1988, respectively for such services PHASE IN DEFERRALS OF OPERATING REVENUES EXPENSES AND CARRYING CHARGES Customers are bmed on a monthly cycle basis for their As discussed in Note 6. the January 1989 PUCO rate energy consumption based on rate schedules or contracts authonted by the PUCO or on ord: nances order for the Company included an approsed rate with individual municipabties Effechve January 1. phaseon plan for the CompaVs investments and 1988 the Company changed its method of accounhng leasehold interests in Perry Unit 1 and Beavei Va!Iey to accrue the eshmated amount of unbilled revenues Unit ? On January 1.1989 the Compan, began recorGing the deferrais of operating esponses and (as defined in Note 12) at the end of each month inte cst and eavity carrying cnarges on deterred rate A fuel factor is added to the base rates for eiectnc service Th's factor is designed to recover from based investment pursuant to tne phase in plan customers the costs of fuel and most purchased These deferrats (cahed phase in defef ra!s) wiff be power It is reviewed semiannua!!y in a heanng before recovered by December 31 1998 the PUCO DEPRECIATION AND AMORTIZATION FUEL EXPENSE The cost of property piant and cautpment cicept for The cost of fossil fuel,s charged to fuel empense based the nuclear generahng units is depreciated over ineir on inventory usage The cost of nuclear fuel including ethmated usefullacs on a straightine basis The an interest component. m charged to fuel espense annual straigntane depreciahon provision espressed based on the rate of consuinphon Eshmated future as a pecen: of a,crage depresable uhl.h plant n nuclear fuel disposal costs are being recovered through service was 3 3% in 1990 and 3 6% in 1989 and 19B8 the base rates The 1990 rate dechned because of a change in The Conpany defers the difierences between deprecmhon rates attnbutable to longer estimated actual fuel costs and eshmated fuel costs cutrentii hves for nonnuclear property The PUCO approved inis being recovered from customers through the fuel ct.ange in depreciahon rates eHec tue Jansary 1.1990 (Toledo Edison) f 49 ( To'edo Ea. son)

when reduced dr preciabon e> pense for 1990 by DEFERRED OAIN AfdD LOSS FROM i3.930 000 and increased emnags $ ~' 500 000 SALES OF UTILITY PLAf4T Depreciabon espense for the notlear unas is tweJ on the urots Of productun method !n 1991 the lhe Cmph WHed & We and k,nr LW Nuclear Reguthory Conurestion t fAC ) api e ,ej d Danutar m 1%7 ts 9e cu W d Brme FAo dnt s+> eat entension el the operabog Mense f m the Genstm f ut (th'WM PM) n! b ma VMg Da.us Bene Nuclear Power Stabon (Dam Beue) Un.t 2 m h ow in we J Thew trana toes lhe PUCO appin,ed a change in the unis W uuted n a i+t w M Uu ! me u Manda i Punt producton dc preciaten rate for Da,as Bene ene: Ne and a ng g y y u # g gm , MW Un t 2 both Januah 1 1990 wh.ch tecogneed the Ide citewn - .! n h ; L A t r e d4 h n o --t IN inwn,m wnstanrq 1rns chanae reduced de;vecubsi c. pense im 1990 ts the apput a d.&n J v.n el b > o,er the n vms M

$3 830 000 and increased carnmas ? ? 500 00D uw. me, # ang , w enf ; m emg as tne Ettectne Ju!y 1W the Ccepan, liegan the f matang , ay q,,mpgg.,ee,pgge,ng no, y, ,gg gg.3 g g g, , 9% g g g,p y g outernal fun 1ry) of f uture de :nmne wona cosh ty its Operahng nuc-icar units pursuant to a PUCO enh r e , p ,y Cash conthbutions are nwie 10 the f unds on a straght+ne bau o er the remwnaig kentiry pts:d INTEREST CH ARGES for each umt Am0unts cu'u ntly in rate' av tmM on past esbr"ates of deconmsscomg wsts for the Dt!d <nre s t n o mr H , 'he im m e W iemed u m Compan, of M9 000 000 in 1986 aonas fm Da m n a m;ude inwn1 on nm a x tud < im nhons interest Gene and iN 000 000 m 1987 donars ( rh f or Peny Umt 1 and Beavet Vaney Urot J Attua! un nd m tua et e +r = tor W undo coretrut tm decommmuonay to(ts are espected to esceed tN w a caplaVed ;a Nae 6 i v nes aM gu . rr aL/n1 upm the rew;tmbun or eshmates !! is emected that mcreases m the cet redentphyt of ion] h f rn W t t we th ferred rpnmtent eshmates Adl be fermef atMe en f aics ret utt-eld h0m future rate proceedmy The c unent inet of ( 4ense mth !!m r@tn' We 14 a' ment .uch M ws ahd qa4 am o "C aW a t:led u,0 the re%n:h'f of 1hp bVing Iunded and re(overed from custbmHs o,er the remammg hcensing penods of the uruts e on7nat He a tho m ht a w ruwJ m awah;mt o,'er the 13e 0! the nu m 1:t N ue /,N n the pro: eeds of a approomately $ 4.000 ()00 annua lho present to e sor we w e 1 N the r't h! relemphno The funding uauaements for Boa.or Van e, Un,t no mnateahms de w hn o m m b' % rre t opense Labsf y a sindar commitment made as part of the sai and leaseback transacbon tscoued m Nlte 2 PROPERTY, PLANT AND EQUIPMENT y0ERAL INCOME TAXES The f nancal statements f ebec t the hab bty nPthoa of Propett, pet and ( ppwnt se !tated at ona.nal cnst h e ara awunk utdard by the PUCO to be account ng for income tws as a resuu of ad:enq a A ritiHi oft InC u f di'd H n it ie C Ost Of C hristnlCtk n are heA standafd tof a(CountmQi Dr in(DfDe ta'e' in 19hd dems sut.h as rewed pa,rua tw penuons fnnue The hately method requaes tt.at the Compan, <

Iven(i ts, m thayCDent and Gerhdai o,eff 4* ads and dCierred to k habdibes the adgusild IDr LUDseQuent lam rate changes and that the CDmpani uxord dderred a%an& Im funds uwd danN construchon taies f ar all temporary d tferences bet 400n the t oc+ (AfUDC) Al UDC n. pH-sents the estuaaled and tas bases of anrts and habbtms A porbon of ( epopte debt and evt cus! of funds used I.

y these te m porary dlI!ef enCe s rbale Io t!miny bnan(e con'.l r uC i dn I tl s rWfif Ah a!IoWanCe K credded to int ame e< cept fu cota n AF UDC for Perry d.fierenCes that the PUCO uwd to reduce poor ,ers Nuc! car Pow f Wt Um! J (hn, Urot 2) beo Note tax enpense for ratemA mg purpmes wheret;/ no defened tanes were tecorded Smco the PUCO 3(c) The rrov Af iJDC rate au 11 1 F 11 45 o and 11 O!' e ni 19% 1%9 and 1%R, inpechel y praCllCe permits recOv0ry Of such fa=0S from Wntenana eu ntw me chared to e> pense as customers when tney become pa,atue the net mnnunt mcuned Cata.o inantenn:+ und repaa v.penws h>r due from customers has been recoided as a regulatory asset in dderred chmges Feny U&t 1 and bea.H h ey Un,t 2 we bemg For certatn properto the Compan, recewd detened pursuant to me PUCO a: ounbna orders docussHJ at we I ht > c c st of rephang pbnt and investment tan efed ts A'hoh have been a20unted for Ogwpmen! e chmaed to tr. uta ty punt M cour ds The as deferred creatt The amorteation of th He cos! of preperly fehn d [1 6 femo mi cosjS after investment taa_ Credds !$ {epOrldi as a rf ducl Un of cnarged ta the depreClabOn espense under the Labity methSd SOO detetaq ani Qaj aW accumuand pt m im orpncanon Note 7 f9 ( 10!"d0 Lds.n)

(Toiedo Edson)

1 R3 00m in 199t and more or Ins in subuwent MANAGEMENT'S FmANCIAL ANALYSIS # " * "*"*"9 *" " D " * " " " ' " " " "

RESULTS OF OPERATIONS Inatuhty to obtaan approval of the second request Overview would reduce camings tv as much as $15 000 000 in The January 1989 PUCO rate order 6hich proeded for 1991. and cien more in sutiteauent > ears three rate increases for the Company, as d<scuss3d in The Company has agreed to use its best cHorts I

Note 0 was d(signed to enable us to tiegen such as these two requests for accounting orders to I

reco.enng in rates the cost of, and earn a fad return avoid rate increases in the > ears immM1,ateiy follo6ing on. Our a!l coed investment in Beaver Valley Unit 2 and 1991 l~ventuay rate increases wdl be necessary to Perry Un t 1 The rate order improsed revenues and recognite the cost of our new capitaliniestment and cash flow in 1989 and 1990 ovet 1988 levelb the effect of inflabon Revenues and cash how in 1991 are espected to Annual sales growth is espected to a.erage about esceed the 1988 levels Honcier. as d.scussed more 2% for the nest several years. contingent on future l fully in the fourth and f.f th paragraphs of Note 0. the econonuc e ents Recogniting the km tabons imposed phase in plan was not defagned to imp'ove earnogs b, these cales projections and compebthe constraints significantly twause gains in revenues from the we Ai!! utste our trett ettor!s to minim;te future rate higher rates and assumed sales growth are ini' increases through maimting our cost reduction and o'f set by a correspond, rig reducbon m the de' s qual.ty of scruce efforts and emplonng other innovatko nuclear plant operating empenses and carrying cnarges ophons We will concentrate our efforts on retaining and are subsequently offset by tne amorbClion of customers and ading neo ones through innovaine such cost tieferra!s and cm ying cha'ges marketing and serace inibathes Despte the pontive eMect the new rates ha e on revenues and cash floa and the relainely neutral 1990 vs.1989 impact they have on camings we f ace & number of f actors contnbunng to the shght increase in 1990 othe f artars whch wm eiert a negat~e inhuence on operahng revenues are as follows c a-11 and tierond These incluoe infiabon _

l'e .

t h' fe

onome recespon and compettwe tier. coupled mth a desire to encourage  % g,, u y,

] 479ago933) g et . Ath. has prompted the Company in sm u w omm r ec et . , to criter into contracts having reduced } _ 3po coo rates oth certan large customers Compet two forces ha,e also prompted the Company to OMer a rate The major f actor accounting for the increase in reduchon paci ane to resident al and small commercial operahng re enues was related to the January 1989 customers as dccusted in the eighth and ninth rate order The PUCO approved annual rate increases for the Company of 9% etiectwc in February 1989 and parag'aphs of Nate 6 Two other factors are hmno a M eMect .e in F ebruary 1993 The associated negative influence on earnings first. the Companhb cur'rently recording depreciation on nuclear un:ts at a revenue increase in 1990 was partial 4 offset by reduced revenues resulting from a 4 9% decrease in higher level than that wtuch is reflected in rates because of the good performance of the units over the total W^att-hour sales Industnal sales deCfeased 3 3% because of the recession beginning in 1990 last several years Second with respect to facih0es N9denhai and commercial sales decreased 3 3% and placed in service a'ter February 1988 and not included 0 4% respectuely. as seasonal temperatures were in rate base, the Company is currently required to record interest charges and depreciahon as current

• 'O

• dO'#U'" C *P8hS " IU N D" ' YC" 5 tempeakeet ruuthng in reduced customer heating expenses e,en though such items are not 3et rehected and cochng related demand Other sales actwity mrays decreased 14 5% pnmanly as a result of the We are taking several steps to counter the aberse Company's municipal utihty customers sahstying a effects of the f acto's d$ cussed above We are greater porhon of their power needs from other implementing the management audit 3ggg recommendahons dscussed in the unth paragraph O' Operating e=penses decreased t 4% in 1990 Note 6 whch are espected to reduce operahng Depreciabon and amortilabon empense decreased e>penses by about 144 003 000 annuany We ha.e pomanly because of lower depreaabon rates used in already shared 50% of the enpected savings mth 1990 for nonnuciear propert y and Davis Besse customers by redacing the 1991 rate increase granted althbutable to longer estimated Iwes and because of under the 1989 rate order Howevet continuing cost longer nuclear generahng unit refuehng and reduction eHorts mk be necetsary to help offset the maintenance outages in 1990 than in 1989 rederal eMect of inhabon Also. the Company is seeking income tanes decreased pomanly because of a PUCO approvat to accrue nucicar piant depreciahon at decrease in pretai operahng income These decreates a level whcn s more closel, abgned mth the amount in Operahng espenses were partially oMset by an currently being recovered in rates by smiching to the increase in toes other than federa! income taies straigM kne method The Company also Mll Seek resulbng from higher property and gross rece@s approval to accrue post in serece interest carrying taves and by lower rnclear operabng expense charges and def0r depreciabOn Charges for faDbbes dcInfrals for Perry Untt 1 and Beaver Valley Unit 2 tnat are a service but not yet recogm7ed in rates pursuant to the January 1989 PUCO rate order inabaty to onta n approva! of the f rst accounbng Cred ts for carrymg cnarges recorded in request would redJce e3rnings by as much as nonoperating income decreased in 1990 because a f 51 t i otedo E d, son )

(Toieco Ed; son)

meater shwe vi out inserim entu and leawhNd 2 % as a itsWt cd cont num g'onth from neo otbce interests in Perry Un,t 1 and Pea,ef Va! icy Uf ut J Acre buergs amt f( t M outi M The t ornpar atn ely recoseted m f ata Othc r income afwl deduc bons tu t, mca f ate su'nmer pathe m 198 b Ae'ed sad decreaseJ pf,manh tu ause of k+s inteest mcome because et f edu;ed a4 cmi thovng utage Hcmdentd m 1990 saw deacased J 5 inutom sies dec feased lhese d.rc Jites n'e part@ C# set by an 1 1% as mmiest gy A th in adustrd s~tM actr,-t, in mctease ef t ledc r al in; unic taK C lt Elt S fe!a$ed lU lbb9 OaSCHMIeld'eb 'i lIC I" i d $ A ibb k M bf d florMeratdn if Come f('biidirlj f?W D a decf hise In a'de M1 Id CU!!NIif !3 a F T E-l O DJ A d bibI N preu. m.vnew a m:ome and fedeid incenw to ,n Cy dt Ohe AN h tgn opi rabn] m Apni 19Mi adjtm en ts E!!IN 810 000 anra'ed Adh presmum lhat cusb ner at w M 'u' 1 1" c1the Q 'e N ors dc h ned nu estment ta. ved K ;eutag to the 1M UtM en tN ' e o t !9 nf dt vt et reach f p: ant ;rdeestc.pM6ecW m e 1 r Op! 'Md O t ul" " c! UE e d 18 9 m1W di 1990 tu auw cf n Enanm a ti the CurpaN and 104"r dMrma's N nuM at werat nq e pente for Feny a is,ef hu el et W tat puistaming Un1 1 at Pea,e Me , Un,t J nsuhd m a K5 000 OMJ mcrene m e p4 r se f uel and pun ham 1 1989 vs.1988

. pener c.peme o me r-d ta'um b t ee u M+

F ac tes conhmtm t, the 31 N mecee in 119-m e m Ne.grw shh & ' % i c o'd m m e ,

-pcteng teames a c a e s v n,g,m i du-wd m h p'ew'n parm'aph e t ', J t t' c.m , v ,,  % omi !mproced nuclea' tM 1,a ah Li v eNtMa thECompam

,  ; a i ' , ' ,

1 4 ni i + '

l' L mm 13 seh PO Aer to #tr utatU oM cr ifian ChebT1 m , ,,3 , .e-.,, t> >'r, n ctnc T he e,cu s ci naenu. ' a u c ost a ur ated as A . n.'  ; n v , y ,

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4 f y ' r ,i r f .

6 , og ,

< - ,qi d teCluC tto in (MJd Ml(11 [O Aer ( 'l440C Ah4 h -

_ J . r_ , i j '.4 5 i5 I.l 4 b us II)r!c eI I b ak e Ib ' Il a) h!55 b Ib b- fbbb ib4n, 00 e, pense f c,r the ,em Dept; MNT ( >; ense N ieawd nWec!ae of the n;rened enerabon f rom the A pomm, ta:St ty the .nnease m creratm g y g,9 stu wrunn w a m dq mo n m m re,ent e ,,n a net u rease ni 1%9 'n tre tOtd naC '

g7g,&d tme1 on ur A r f t ub c h s tu bleveU!P) [ieC!ri (d a (CJ!mn (d IIIe bsminan t b N p qg,3ty] dc at rr{jtsi /d U[T ahd traw t apa:A enm nents n ska,o Vat eyUni2  ; y,m chanp dc c'em m 1989 as a fesWt of and tfie IMfis!1 hj lYtnt IIIe sit' % f rain kkdief Yd + y  !

gg7 gq g tjpg,.9 g pgg g g g p p ;g gj y pg g3 t p Un:t 2 c c1mrwel m %cmt + r 19% an d ic ov ed m o'do'M mu ope w md pu Mu d c ~, 4 n d f,,Me J h Ws from the ManW id Punt A He of J, g ,g g g g f ,.3 m 1 % p,)c y g im a inn-e nm!h pen d m 1%B lhe Janua5 19 9 tchum nts nn1 u f aam o u ty 'he C on pr ,

rate order for the Ccmpany Am pnmanh respOns IN br 1au nwy f actm impacts the moease in EFFECT OF INFLATION revenuet The PUW granted the Compey a 9' . rate mc ume etmctwe m f etvuar,1M9 T he inyeas e m Mthough the rate et mSM i hz ened m went ges re,ef nlM a?!ributht"e IC ddern d cCntt'uctW1 A Of L m Ae are hk 39eCied tii t', t !! 'TO It4tJMatn ) M K t, the pf ce t t ' (CMP) fevenues m lit 9 resu'ted from the reg datory pucets muodo s a taw ag danng of ch reducteri in the amaant N detened c red 15 for the mcteawd costs of out uter materM 3 and LHvices are nortcr CGP ft fund otq3 tans to custt mets I uel Cost not rebetted in rates nd im, ns w el Moreowr; recc- er y revernies incre:,wd m 19% tRcause of a

, regu%hnn aC ss N the y osw M y (d hmto'KW c osts squtant n;e m the fue! cost recovery f ac as of trant assets throut depreoak 1 ee th? ugh the compmed to 1985 lhe lam 18 f actam fM ogneed com ta repme MW amts wM sutounbany a meater anount of n'unds to cuttyners ordmd bf eced then hiskf cf (mts m an mbabonyyeconony thb PUCO f or tertan rep!r ement f f! and purchYed Chany m f ue c t ' % da not Mtec t our f esuits of ponef costs conected from crtcomf s danng a 1985- operabuns tme tho < costs a'e defcned unbl 1956 Da m Bec e Outay TatN ido Aatt hof saict reN cted m o n- $m ( : tt w w c q f r;to' Culed m inc reased 2 4", in 19D Commecial sa!cs maeased customers tu RETAINED EARNfNGS

• aM oe f o! tWm ended D(:emter 31 1990 1%9 19 @

eu a <>-w

. Balance at Beginning of Year $ 99,965 1 8 614 1 297 221 Additions Na income i!cz > . 81,424 92 676 (115 452)

Deductions Dmdenas decived Common stoo (73,283) (63 DM ( C 1 711 )

Pretened smo . (25,145) i W 036; (26 269)

Othe pnmWy p'ef.:ned stoa redemphon e.penses . . (5) ,(6) (4 175)

Net incream (D> trease ) (17,009) .

10 E1 R07 C07 )

Balance at End of Year S 82,956 i W 905 i O 614 The acrempangg hotes avi summari of gn.kant accounbng pohce a'e an wp pri cf Mus Lbtement t

( oed)bdOOn) F{2 ( bOdO i

Ed'bUU}

l lNCOME STATEMENT M tottDo msoN cowen For the years ended December 31.

1990 1989 1988 (thoutandl Of 00har$)

Operating Revenues (1 ) . . . . . . . . . . . . . . . . .. . .. 8427,086 $826 803 $ 627.997 Operating Expenses Fuet and purchased power . . .. ... ... . . . . 138,222 133 400 116.161  !

Other operation and maintenance . . . .. . 373,374 372.530 358.823 l Depreciation and amortization . . . . . . . .. . . ... 75,986 87.639 75.093 i Taxes, other than federal income takes . . . . . . .. .. 79,320 72.123 80.138 )

Phase in deferred operating expenses . . . .. (16,980) (22.535) -

Pre phase in deferred operating expenses. ........ . 3,681 4.044 (83.813) )

Federal income taxes . . . .. . .. .. . . 21,041 37.285 29 242 674,644 684.486 575 644 l

Operating income . . . . . . . . .. .. 152,442 142.317 52,353 Nonoperating income (Loss)

Allowance for equity funds used during construction. . 3,352 8.568 5.452 Other income and deductions, not .. . . .. 6.149 20.361 30.233 Wnte off of nuclear costs . . . . . . . . . .. . .

(276.955) j Phase in carrying charges . . . . . . . . . . , , 43,487 82.308 -

Pre phase in carrying charges . . . . . . . .

129.632 ,

Federal income taxes - credit (expense) . . .

8,o64 (21,563) 86.244 61,652 89 674 (25.394)

Income Before Interest Charges .. . . .. . 214,094 231 991 26 959 Interest Charges Debt interest . . . . . . . . . . . . . . . . . . . . . . . . . . 135,344 144.792 150.523 -;

Allowance for borrowed funds used dunng construction. . (2,674) (5.479) (1.833) 132,670 139.313 148 690 income (Loss) Before Cumulative Effect of an Accounting Change . . . . . . . . . . . . . . ... . . . . 81,424 92,678 (121.731)

Cumulative Effect on Prior Years (to December 31,1987) of an Accounting Change for Unbilled Revenues (Net of income Taxes of $4,177,000) . . . . .. . , ,

- - 6 279 81,424 92.678 (115.452)

Net income (Loss) . ...... . . ...... . .

Preferred Dividend Requirements . . . . .. . 25,159 _ 25 390 26 983 Earnings (Loss) Available for Common Stock . . $ 56.265 $_67J88 gi42 435)

(1) includes revenues from capacity sales to Cleveland Electne of $102.773.000 $104.127.000 and $31,774.000 in 1990.1989 and 1988, respectively.

The accompanying notes and summary oi significant accounting policies are an integral part of this statement (7oledo Edison) F 53 (Toledo Edison)

if MANAGEMENT's FINANCIAL ANALYSIS CAPITAL RESOURCES AND LlOUlDITY econormcal we may amo redeem aditional secontes under ophonal redsophon gnmns he Nous We continue to need cash for an ongoina program of construcbng new tachbes and mod.tpod cushng 10 lC ) 3"d ( d ) I ' '"'D'* h"" C 0"( C *'"3 I ""'" bO" 5 tacMt es to meet antiopated oemand for electric on the issuance of pretened and preference stock and l' dChi seruce. to comply with govemmental regulabons and Ou capdal rWuenwnts AM increaw ahM 1997 by to improie the ervonment Cash is also needed far mandatory retaenient of secunties 0,er the three- about 130 000 000 to 135 000 000 as a resuit of the Dean Aa Act of MO pan Aa Ad) We bem diat year penod of 198B 1990 these construction and mandatory retaement needs totaled approiimately no M@d signihcant cap,tal cipend4tujes WW be rmund to canph adh the ne A lan W %te Mb)

$435,000.000 in aad41on we eserceed vanous options to redeem and purchase approsimatey M espect to be atre to rate cash as needed The

$275 000 000 of our secunhes *""aMIY I Co Pd"I 10 "d O'" " 'C*3i h"""D"O Donna the 1958 1990 penod; the Company msued nWds. honMr depends upon sut h f actors as

$174.100 000 of fast mortgage bonds and obta'ned a knanaal marm cond hons and our cred t ratings

$15 000 000 tenn bank ban The Company ubhzed ""ent wconws rahnm ka the company are as its short term bonowing anangements templ:ened in (IO"^3 ,,gm Note 11) which resulted in the Company haeng sns. J, u,

$23200 000 of commercial papu and $10 000.000 in ' ou "*

• we notes payable to athl:ates outstanding at December D u mn .p p t em tw tw3 31.1990 Proceeds from these hnanangs were used umsomea en mu tw to pay our construction program costs. to repar M"a um Ha te portions of short term debt incurred to hnance the construct on program. to retae redeem and purchase A ante ott of the Company 5 in.estment m Peny outstanding secunbes. and for general corporate Unit 2 as discusseo in Note 3(c) dependaig upon the purposes magn'tude and bmaig of such a wnte o'f could reduce The Company was granted rate increases ettectne retained cam!ngs suthoenUy to impa.f the Company S in 1989.1990 and 1991 pursuant to the January 1989 abAty to declare devmends. but would not attect cash PUCO rate order 5ee Note 6 for a d:scussion of the f:o*

rate order Ahich prowdea for specthe levels of rate The las Reiorm Act of 1966 (1986 Tai Act) increases through 1991. Although the rate order prooded for a 34% mcome tai rate in 1988 and requaed us to ante off certa.n assets in 1988 whch thereaf ter. the tcreat of the iruettment tan t r edit .

lowered our earnings base, our cunent cash flow was scheduled reductions in mvestment tan credd not :mpaired intertiaMy generated cash increased in carryforwards lets f avorable depreoahan ratet a new 1989 and 1990 from the 1988 level as a resutt of the atternatwe minimum tat ( AMT) and other items rate :ncreases. These changes had no significant c ash flow impac* *n Estimated cash rec 4unements for 1991-1993 are 1988 because we had a net ope'abog loss for tan

$235 000,000 for our construction program and purposes The changes resutted in decmated tai

$297 000.000 for the mandatory redemption of debt payments and an increase in cash fb6 donog 1989 and prefened stock We cipect to hnance citernally because the tax savings resu!!ing from avada!We tai about 75% of out 1931 construct on and mandatory dedu:tions were utikted on the consohdated tax return redemption requoements of appronimately in determaung the Avi in 1990. the Changes resulted

$177,000 000 We eipect to unance esternany about in increased tax payments and a reduchon in cash 60% to 70% of our 1992 and 1993 requaements it t 06 because we were sutyect to the AY1 (Toledo Edison) F 54 ( Nedo Ed. sun )

CASH Ft.ows t>< Toaoo insm ccwwu 1

For thejears ended December 31.

1990 1989 1988 __

tthousrooi s oo w s)

Cash Flows from Operating Activities (1)

Net income (Loss) . . . . . .. . .. .. $ 81,424 $ 92 678 $(115 452)

Adjustments to Reconcile Net income (Loss) to Cash itom Operating Act#vities

, Depreciation and amortization .. .. ... .... 75,986 87.639 75.093 Deferred federal income taxes . . . .. . . . 30,642 79.199 (62.598)

Investment tas credits, not .. . . . .

(17.063) 1.237 6.920 Wnte ott of nuclear costs. , . .

276.955 Deferred and unbilled revenues . . . . (22,658) (42 624) 14.642 Deferred fuel . . . . . .. .. .. .. .. .

(433) 16 259 (20.693)

Carrying charges capitalized. , . . (43,487) (82,308) (129.632)

Leased nuclear fuel amortization . . .

37,122 46.408 32 285 Deferred operat!ng empenses. net . . . . . . . . (13,299) (18.491) (83.813)

Allowance tot equity funds used during construction. . (3,352) (8.568) (5.452) i Amortization of reserve for Davis Besse refund obligations to 1 customers. . .

(12.655) (20,777)

Pension settlement gain. . ... .,.. .

(6.449) - - ,

Cumulative effect of an accounting change. ... ..,

-- (6,279)

Changes in amounts due tre ::ustomers and others, net . (9.433) (4,406) 13.472 Changes in invent] ries. . . . . .. . .. . (6,521) 1.890 904 i Changes in accounts payable .. ; . . . 17,464 8,896 19.472 l Changes in working capital atfecting operations. . . 1,528 (30.713) 11.766 I Other noncash items . . . .. ...... . . 5,503 5.896 9 358 ,

Total Adjustments . . . . .. 45,550 47.659 131.623 Net Cash from Operating Activities . . . 126,974 140.337 _ 16,171 Cash Flows from Financing Activities (2)

Bank loans, commercial paper and other short term debt . 23,200 - -

Notes payable to affikates . . . . . . . . . 16,000 -

(68.000)

Debt issues:

First mortgage bonds . . . . . . . .. .. . 67,300 56.100 50,700 Term bank loan . . . . ..... ... ... . , . 15,000 - -

Matunties, redemptions and sinking funds. . . ..... . (183,477) (65,006) (222,166)

Nuclear fuel lease and trust obligations . . .. .... (42,947) (39.015) (32.285)

Dividends paid . . . . . . . . . . ... .. . . (98,427) (88.743) (89.054)

Premiums, discounts and expenses ....... .... . .

(1 845) (925) 1,489 Net Cash from Financing Activities . . , . . , ,,_{205,196 ) (137.589) _ _ _(359 316) ,

Cash Flows from Investing Activities (2)

Cash apphed to construction . . . . .. . ... . .. .. . (80,667) (65.296) (113.174) ~

Interest capitahzed as allowance for borrowed funds used dunng construction . , , . . .. . .. . .... (2,674) (5.479) (1.833)

Loans to affiliates . . ,, . . .. .. 114,000 (114.000) --

Cash withdrawn from sale and leaseback trust. - -

109.976 Other cash ter.eived (apphed) . . . .. . . (4,022) 831 3.947 Net Cash from investing Activities. .. . 26,637 (183 944) (1,084)

Net Change in Cash and Temporary Cash investments. . . __ (51,585) (181,196) J344,229)

Cash and Temporary Cash investments at Beginning of Year. 73,692 254.888 599.117 ,

Cash and Temporary Cash investments at End of Year $ 254,888 -

8 A 107 $_71692 (1) ' Interest paid was $138.000.000, $141.000.000 and $150.000 000 in 1990.1989 and 1988 respectively. .

Income taxes paid were $2.272.000 in 1990 No income taxes were paid in 1989 and 1988 (2) increases in nuclear fuel and nuclear fuellease and trust obhgations in ts e Balance Sheet resulting from the noncash capitahzabons under nuclear fuel agreements are excluded from this statement The accompanying notes and summary of significant accounting pohcies are an integral part of this statement (Toledo Edison) F 55 (Toledo Edison)

? . .

BALANCE SHEET .

December 31.

1990 1989 owwen vt 02wn ASSETS PROPERTY, PLANT AND EQUIPMENT  ;

Uhhty plant in seruce. $2,607,010 $ 2 532 291 Less accumutated depreciation and amortization 646,193 567 197 1,960,817 1,965 094 Construction work in progress 93,154 84 580 Perry Unit 2 343,685 345 754 2,397,656 2 395.434 Nuclear fuel, net of amortization, 221,848 235 193 ]

Other property, less accumulated depreciation . h024 _ 2 125

_2 421.528 _2 632,752 CURRENT ASSETS Cash and temporary cash investments. '.2,107 73 692 Amounts due from customers and others. net 63,233 53 800 Accounts receivable fr en attiliates 29,999 35,114 Notes receivable from affihates. -

114.000 k Unbihed revenues , 20,166 23 525 Matenals and supphes. at average cost . 32,666 26 841 Fossil fuel inventory, at average cost 15,578 14 882 Taxes apphcable to succeeding years 63,375 61.967 Other. 2t473 4 815 249,597 408 636 DEFERRED CHARGES Amounts due from customers for future federal income tases . 494,454 519 469 Unamortized loss from Beaver Valley Unit 2 sale 119,623 122 911 Unamortized loss on reacquired debt - 27,404 28 528 Carrying charges and operating expenses, pre phase in 255,020 257.709 Carrying charges and operating expenses phase in . 165,310 104 843 Other. . 68,582 _6H9B 1,130,393 1.097 458 Total Assets . . $4,001,518

$ 4138 846 The accompanying notes and summary of significant accounting pohcies are an integral part of this statement (Toledo Edison) F 56 (Toledo Edison)

L _ _ _ _ _ _ _ . ______-_

l 1Hf 10,iDD ( D$ON CWi>ANY Decemtier 31 1990 1969 os,aam u aawo CAPITALIZATION AND LIABILITIES CAPITALIZATION Common shares.15 par value 60 000.000 authonzed 39,134,000 outstanding in 1990 and 1989 5 195,687 $ 195087 l Premium on capital stock 481,082 481 082 Other paid in capital . 121.059 121059 Retained eamings . 82,956 99 965 .

Common stock equity . 880,784 897.793 i Preferred stock With mandatory redemption prousions . 66,328 6B 990 Without mandatory redemption provisions . 210,000 210 000  ;

Long term debt , 1,097,326 1,197 277  ;

2J54,438 2,374 000 OTHER NONCURRENT LIABILITIES Rotund obligations to customers - 23,780 Other, primanly nuclear fuel lease obhgations . . 228,844 252 400 228,844 276 240 CURRENT LIABILITIES Current portion of long term debt and preferred stoc6 116,150 114 870 Current portion of lease obligations. . 50,389 44.480 Notes payable to bank $ and others. 23,200 -

Accounts payable . . 125,802 108 338 Accounts and notes payaole to affihates 31,626 8,311 Accrued taxes . 96,973 94,900 Accrued interest ,

31,665 39.075 Accrued payroll and vacations . 6,597 6.885 Current fortion of refund obhgations to customers 23,888 26 125 Other. .

4,628 10_749 5_10A18 453 823 DEFERRED CREDITS Unamortized investment tai credits 33,377 103,349 Accumulatett deferred federai income taies . 571,233 565 260 Reserve for Perry Unit 2 allowance for funds used dur;ng construction . . 88,295 88 295 Unamortized gain from Bruce Mansfield Plant sale 236,835 247 305 Other . _27,578 30.5J8

_1.,007,318 1 034.723 Total Capitahzation and Liabaties 54,001,518 $4138 846 (Toledo Edison) F 57 (Toledo Ed1 son)

E'- * , . . - , , . - - . _ , . _ . . . . . . . . . .. _ , , , .

STATEtAr,NT OF CUfdVLATIVE PREFERRED 'ie nat w ttc N t s.wi4 AND PREFnRFNcc STOCK I* "r't " 31 -

! 19s snxes conent _

Datanciag Coh h< e 1990 _

im (m t.c.1s ..t :i _a n )

1100 p:u satuo 3 000 000 pu ferted shares authonzed !25 gw salue 12 000 000 preferred shares authonced, and 125 par s alue 5 000 000 perfetence sha'es authonted none cotstan@n;l Preferrel sutyct to mandatori redemphon

$100 par $1100 34 825 1101 00 $ 3,483 $ 4.4 A0 9 375 150 100 103 95 15.010 16 675 25 par 2 81 2 000 000 20 87 50,000 50 000 6b,493 71 1 %

Less Current matuntiet 2d65 e 165 Total Preferred Stock, with Mandatory Redemption Provisions 5 66,328 1 689?O Preferred. not sut,;ect to mandatory redemphon 1100 par $ 4 25 100 000 104 025 $ 16,000 5 16 000 J 56. 50 000 101 00 5,000 5 000 4 25. 100.000 102 00 10,000 10 000 8 32. 100 000 10:1 46 10,000 10 000 7 76. 150 000 102 437 15,000 lb 000 7 80. 150 (100 101 65 15.000 15 000 10 00 190 000 101 00 19,000 19 000 25 par 2 21. 1 000.000 JL 90 25,000 25 000 2 365 1 400 000 2845 35,000 35 000 Senes A Aajustable t .200 000 3 75 30,000 30 000 Senen B AdjustatWe 1 200 000 30,000 30 000 Total Preferred Stock, without Mandator', Nedemption Provisions $210,000 1210 000 The accompanpng notes and summary of sqn,t cant xenunhng p%es we an interyat part of :ha, v.tatement (Toledo Edison) f^ 58 (Toleda Ld son)

NOTES TO THE FINANCIAL STATEMENTS (1) PROPERTY OWNED WITH OTHER UTILITIES AND INVESTORS The Company owns, as a tenant in common with other utilities and those investors who a'e ownertarbcipants in vanous sale and leaseback transactions (Lessors), certa.n generating units as listed below Each owner owns an undmded share in the entire un<t Each owner has the oght to a percentage of the generahng capabil ty of each unit equal to its ownetship share Each ubhty owner is obhgated to pay for only its respective share of the constructon and operating costs Each lessor has leased its capacity nghts to a ublity which is Obhgated to pay for such lessor's share of the construction and operating costs The Company s share of the operating empense of these l generating units is inClvded in the locome Statement Property; plant and equipment at December 31,1990 incudes l the following facihties owned by the Company as a tenant in common with other utilties and Lessors i pone, in O

• ner sw hant Cansescton bew e thp Mega Pone in AM Accomvwe1 Gene sh'g Um! Da4 Shwe n e'tt SNMe beWe inb yen Depr epa %n in beroce tinodaVs N 03he1)

Dan be ne 19U 48(2% 408 N xic a' 5 008 744 5 322/3 $ 119102 Pem una 1 and Common f aui hes 19N 19 91 238 Woea' 917 939 509 102 290 Deam ver y tht 2 and Common i r aphbes (N0'e 2) 19P 1(5 13 f* K ler 1817W 3 $90 16 892 Curseucten Seperded (N* 3R 1) I perr, un.t 2 Uocerwn 19 91 240  % der -

343 0M -

l 11726 4F1

=

iB46%--

$240 290 ww ,

(2) UTILITY PLANT SALE AND LEASEBACK TRANSACTIONS As a result of sale and leaseback transachons Beaver Vaticy Unit 2 lease was $72.276 000 in both completed in 1987, the Company and Cleveland 1990 and 1989 and 171.810 000 in 1988 Of the 1988 Electnc are co lessees of 18 20% (150 megawatts) of rental cepense amount for Beaver Valley Unit 2. a Beaver Valley Unit 2 and 6 5% (51 megawattst portion ($58 254.000) was recorded in a deterred 45 9% (358 megawatts) and 44 38% (35b charge account pursuant to PUCO accounhng orders megawatts) of Units 1. 2 and 3 of the Mansheld Plant, This deferred amount is being amortized to expense respect vely, all for terms of about 29b years over the Lfe of the lease beginning in 1989 As co-lessee with Cleveland Electnc, the Company The Company and Cleveland Electoc are is also obhgated for Cleveland Electoc s lease responsible under these leases for paying all taies payments 11 Cleveland Electne is unable to make its insurance premiums operat on and maintenance costs payments under the Mansfield Plant leases the cad all other similar costs for their interests in the units Company would be obhgated to make such payments sold and leased back The Company and Cleveland No payments have been made on behalf of Cleveland Electnc may incur additional Costs in connection with Electnc to d:te capital improvements to the units The Company and Future minimum lease payments under these Cleveland Electnc have ophons to buy the interests operating leases at December 31 1990 are back at the end of the leases for the fair market value at summan2ed as follows that time or to renew the leases Additional lease F o' provisions provide other purchase options along with Condshons for mandatory terminahon of the leases Year Cc , .

(and possible repurchase of tne leasehold interests) oww or mus' for eventf of def ault These events of default include I

im

'hh111 00o

]

63 000 noncomphance with several financial covenants affecting the Company, Cleseland Electne and 1994 i t t 00c w ovo Centenor Energy contained in an agreement relating to 1995 '11 000 63 000 a letter of credit issued in connection with tne sale and later Years  ? 592 000 1579 on0 leaseback of Beaver vatieg un,i 2. as amended in Tow Fu!/e MoiNm 1989 See Note 10(d)

Lease Pamis . Sy42g $1J94 03 The Company is sclhng 150 megawatts of its Beaver Va!!cy Unit 2 leased capacity entitlement to Semiannuallease payments conform w.th the payment Cleveland Electnc This sale commenced in November schedule for each lease 1988 and we anhcipate that it will continue at least Rental expense is accrued on a straight-hne basis until 1998 Revenues recorded for this transaction over the terms of the leases The amounts reco'ded by were $10?.7 73 000 1104.127,000 and $18.533 000 the Company as rental eipense for the Mansfield in 1990.1989 and 1988, respectively The future Plant leases were 144.556.000 in both 1990 and 1989 minimum lease payments associated with Bea er and 143.095 000 in 1988 Penta! expense for the Valley Unit 2 aggregate $1936 000 000 l

(Toledo Edison) F 59 (Toledo Edison) l

(3) CONSTRUCTION AND CONTINGENCIES (Superfund) estabhshed pmgrams altretsing the cicanup of hazardous waste ampaal sites, emeruency *

(a) CONSTRUCTION PROGRAM preparednen and other izues me Cornparv is The eshmated cost of the Companit conshuchon aaare ut its putential im ehement in the cleanup of two program f or the 1991-1993 penod is $ 252 000 000, hazardous waste ctes We behe e that the uttanate inciading AF UDC of $17 00C 000 and esclud;ng outcome et these nuthw 6m no1 ha<e a matenal huckat f uel ad.erse c'fect on the Company s hnancia! condition or (b) CLEAN AIR LEGISLATION The Clean Air Act wM require, among other things' (4) NUCLEAR OPERATIONS AND reduttions in the emission of sulf ur d;o nte and CONTINGENCIES nitrogen oudes by the Lompany s fossa fuNed electne generating un ts C.entenor Energi s prehm, nary (a) OPERATING NUCLEAR UNITS analysts indicates that compliance Adh the Clean An

.%e Eompany 5 ink n% in nnar unis rnai be Act by the Company is espected to resu't in somewhat

'mpacted ly achutes or e.ents be rond the higher fun and operahon and ma:ntenance eipenser Furthermcre, comphance as requae addmona, Company s conhol (iperatmg no;;em generating units hawe e pcwnM unphonM outamm or entenuons of aggregate cap tat empend'tures in the range of ~

scheduled outages because of cou pment protdems

$30 000 000 to $35.000.000 af ter 1997 to meet the nitrogen oude enussion hmitahon ard for sulfur dioude of NA reguMay reprenets A maga accdent at a and nitrogen oude emission monitors We behese that nu&at fa9ty any ANw in the Aurld could cause the reduchon'of sulf ur d>oude emis90ns 6dl not require MC to hm>t of pech:!ut the operahon. construction or instahation of scrubbers A more specchc comph:ince hcenung d any no: War und H me of the Com;iany c cost ethmate Adl become avalable when Centenor nu&ar unds 6 W en out of service for an eilended Energy S comphance strategy for the Company and PC"Od d b*CID'U"i TdLO"- #"Mng an au dent at Cleveland Electnc is furthte developed We beheve that such und of any uho nu@ar bcihty. Ae cannot Ohio law would pertrut the recovery of comphance Pf 0d'ct whether regulatory authonties wouu smpose costs 40m customers in rates Any rate increase is unf a.mabt rate neatomnt such as tMing the Companis affected untt out of rate base An entended empected to be minimal outage of one ni the Chmpany s nucleaf units coupled (c) PERRY UNIT 2 with unf avorable rate treatment coud ha e a matenal Perry Unit 2. includ og its share of the common acherse oftect on the Company s Onancd posihon und facihties. is over 50% complete Construchon of Peny resuus d operates Unit 2 was suspended in 1985 by the C APCO companies pending future consderation of vanous (b) NUCLEAR INSURANCE options, including resumpt on of full construction with a The Pnce Anderson Act hnuts the labaty of the owners revised eshmated cost and complebon date or of a nuclear power plant to the amount provided in canceliation No option may be impicmented without povate insurance and an industry assessment plan lo the approval of each of the CAPCO companies the event of a nuclear incioent at any unit in the Duquesne. a 13 74% owner of Perry Unit 2 has Un led States resulting in losses in escess of the level advised the Pennsylvania Pubhc Utihty Comm;ssion of pnvate insurance (conenur $200 000.000). the that it wdl not agree to resumption of construction of Compan(s maamum potenhal assessment under that Perry Unit 2 The NRC construchon permd for Peny plan (assuming the other CAPCO compan,es were to Unit 2 expires in November 1991 Cleveland Electoc. coninbute the4 proportionate share of any the company responsible for the ccnstruction of Perry assessment) would be $58.50E000 (plus any infianon Unit 2. plans to app!y for an extension of the adjustment; per incdent but is hmited to $8 844 000 construction permit prior to the e piration date Under per year for each nuclear incident NRC regulations. this action w dl cause the The CAPCO companes ha e insurance coserage construction permit to remain in effect ahde the for damage to property at Daos Besse Peny and apphcahon is pending Beaver Va!!ey (including leased fuel and clean-up if Pecy UM 9 t.ere to be canceled, then the costs ) Co,crage amounted to !? 325 000.000 for Company's net investment in Perry Unit 2 (less any tax each site as of Januari 1.1991 Damage to property saving) would have to be Antien off We estimate that could esteed the insurance coverage by a substantial such a wnte ott, based on the Company's investment amount It it does the Companyl share of such in this urut as of December 31,1990, would have been eicess amount could have a matenal adverse effect on about $173.000.000, af ter tases See Notes 10(b). the Compan, s financd cond, tion and results of (c) and (d) for a discussion of other potential operabons consequences of such a write ott The Company afso has insurance coverage for the Beginning in July 1995. Perrv Unit 2 AFUDC was incremental cost of any reptacenient power purchased credited to a deferred income account unbl January 1, (over the costs which would ha,e tieen incurred had 1988, when the pract ce was d6 continued the unds been operahng) af ter the occurrence of certain types of accdonts at the Company s nuc! ear (d) SUPERFUND SITES unds he amounh d the to mage are 100% of the The Comprehenswe Enuronmental Response, estimated incrementa! cost per week donna the 52-Compensation and Liabihty Act of 1980 as amended week pened starting 21 weeH af ter an accident. 67%

(Toledo Edison) F-60 (loiedo Ldison)

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

of such estimate per week for the next 52 weeks ano gmng ettect to the rate reduction proposals discussed 33% of such estimate per week for the next 52 weeks- below.

The cost and duration of replacement power could The January 1089 rate order provided for the substantially exceed the insuranco coverage permanent exclusion from rate base of a porbon of the Company s investment in Perry Unit 1. The exclusion resulted in a write off by the Company of i (5) NUCLEAR FUEL $242.000.000 ($160,000.000 after tax) in 1988  !

The Company has inventories for nuclear fuel which Since the order effectively eliminated the possibility of should provide an adequate supply into the mid 1990s the Company recovenng its remaining investment in l four nuclear construction projects canceled in 1980 I Substantial additional nuclear fuel must be obtained to supply fuel for the remaining useful hves of Davis' and recovering certain deferred expenses for Davis- l Besse, Perry Unit 1 and Beaver Valley Unit 2. More Besse. additional wote offs totakng $35 000.000 nuclear fuel would be required if Perry Unit 2 were ($21.000.000 af ter tax) were recorded by the completed Company in 1988. bringing the total write off of nucicar in 1989, existing nuclear fuel financing costs as a consequence of the order to $277.000 000 arrangements for the Company and Cleveland t'iectric ( $181.000.000 af ter tax) were refinanced through leases from a special- The phase in plan under the January 1989 rate purpose corporation The total amount of financing order was designed so that the three rate increases, currently available under these lease arrangements is coupled with then-projected sales growth, would

$609,000,000 ($309.000.000 from intermediate term provide revenues sufficient to recover all operating notes and $300,000.000 from bank cr edit e>penses and provide a fair rate of return on the <

arrangements), although firiancing in an amount up to Company's allowed investment in Perry Unit 1 and

$900.000,000 is permitted The intermediate term Beaver Valley Unit 2 for ten years beginning January 1, notes mature in the period 1993 1997. Beginning in 1989 in the early yeais of the plan. the revenues were 1991, the bank credit arrangements are cancelable on espected to be less than that required to recover two years' notice by the tenders As of December 31. operating empenses and provide a fair retum on 1990. $233.000.000 of nuclear fuel was financed for investmnnt. Therefore, the amounts of operating the Company The Company and Cleveland Electnc expenses and return on investment not currently severally lease their respective portions of the nuclear recovered are deferred and capitalized as deferred fuel and are obligated to pay for the fuel as it is charges Since the unrecovered investment will decline consumed in a reactor The lease rates are based on over the period of the phase-in plan because of various intermediate term note rates, bank rates and depreciation and federal income tax benefits that commercial paper rates result from the use of accelerated tax depreciation, the The amounts financed for the Company include amount of revenues required to provide a f air return nuclear fuel in the Davis Gesse, Perry Unit 1 and also declines Beginning in the siith year, the revenue Beaver Valley Unit 2 reactors with remaining lease levels authorized pursuant to the phase in plan were payments of $62,000.000. $18;000,000 and designed to be sufficient to recover that period s

$26.000.000, respectively, as of December 31.1990 operating expenses, a f air return on the unrecovered The Company's nuclear fuel amounts financed and investment, and amortization of deferred operating capitahzed also included interest charges incurred by expenses and carrying charges recorded dunng the the lessors amounting to $14,000.000 in 1990. earker years of the plan All phase-in deferrals af ter

$19,000.000 in 1989 and $18.000.000 in 1988 The December 31.1968 relating to these two units will be estimated future lease amortization payments based recovered by December 31,1998 Pursuant to such on projected consumption are $49.000 000 in botn phase.in plan, the Company deferred the fonowing 1991 and 1992, $50,000.000 in 1993. 548.000.000 in 1990 19e9 1994 and $43,000.000 in 1995 As these payments g.um j uiw ,

are made, the amount of credit available to the lessor Wrd rg i geses $16 980 $22 535 becomes available to finance additional nuclear fuel Ca C hames assuming the lessor"s intermediate-term notes and bank cred:t arrangements conSnue to be outstandin9 M 22 M M 691 143 4N $82 308 (6) REGULATORY MATTERS On January 31.1989, the PUCO issued an order which Under the January 1989 rate order. the amount of provided for three annual rate increases for the deferred operating expenses and carrying charges Company of approximately 9% 7% and 6% ettective scheduled to be recorded in 1991 through 1993 total with bills rendered on and af ter February 1.1989.1990 $24 000.000. $33 000.000 and $15<000.000.

dnd 1991 respectively The 6% increase ef'ectwe respectively The phase in plan was designed 50 that February 1,1991 has been reduced to 2 74% as fluctuations in sales should not affect the level of discussed bebw earnings The order accomphshes this by alloaing the The annuahzed revenue increases in 1989 and Company to seck PUCO approva! to adjust cost deferrais if actual revenues are higher or lower than 1990 associated with the rate order were $50.700 000 and $44,300.000, respectwety in 1991, the estimated amounts projected in the order The order also provides annuahzed revenue increase resulting from the order. for tne adjustment of deterrats to reflect 50% of tne net as adjusted would have been $18.600,000 before af ter tan saongs in 1989 and 1990 identified by the F-61 (Toledo Edison)

(Toledo Ed: son)

management audit and approved by the PUCO as reduction in residential rates of 3% on r,aarch 1.1991 discussed in the following paragraphs No change was and a further res;dential rate reduction of 1% on made in the cost deterrals for 1989 The Company September 1 1991 Communities accepting the reduced its deferral of carrying charges by paaage must agree to keep the Company as then sole

$13.933 000 in 1990 and wm request PUCO appro,al suppber of elec tncit y tot a penod of fue 3 eare. The of the adjustment package also permits the Company to adjust rates in in connection with it'e Company s 1989 order and a th0se commun.hes on Fetnuary 1.1994 and Fetnuar, simdar order for Cleseland Electoc the Company, 1.1995 it int!aban esceeds speof ed le,eis or undm Cteseland Electne and the Service Company have emagency coutons Ah eM tue commun,hes in ene undergone a management aud1 to assure that Company s sersice area e, cept the City of Toleda operation and maintenance expense saungs are hase accepted the rde redJchon pac kage maiumized The audit was conducted under the lhe Compan, plans to reauest PUCO approvd to direction of an Aud,t Adesory Panel ( Audit Panel) redace :ates to the same levels for the same customer composed of representabves of Centenor Energr the categones in the C:t, c.t Tc&da and the rest of ts Ohio Othce of Consumers Counsel and the Industnat seroce area if di meas noa served by the Compan, Energy Consumers in Apnl 1990, the Audit Panel recene the benetts of the loner rates annuahzed announced that it had ident f ed potential annual res erues adi be reduced by about 117 000 000 The saengs in operat:ng e=penses in the amount of revenue reductions wm not atersely affect the phase

$98160.000 from Centenor Energy s 1989 budget in p'an as the decrease in retenues e t,e m tgated level The amount of potential savings attnbutabie to by the cost reduct:ons d scusse1 above the Company is 45% ($44172,000). The Company The Con' pan, has entered into an agreement Aith expects to beg:n reahzing riost of the saangs other members of the Aud i Panel in which the idenbf ed by the aud<t by tha end of 1991. Company has ayeed to use its best e" orts to avod Fifty percent of the saengs identihed by the Aud:t rate increases in the years mmed-ately foHomng 1991 Panel were used to reduce the 6% rate increase lhe 1989 order a!so sets nucley performance scheduled to go into effect on February 1.1991 As standards through 1998 Beg,nning in 1991 ine d:scussed previously. the Company's rates increased Company could be requ-red to ref und incremental 2 74% under this prowsion as approved by the PUCO repucement poner tests if the standards are not met in January 1991 We do not behese any refund M be requned for the h a move to become more con' pet.tive in Northwest Company for 1991 F oss + f ueled po A er plant Ohio. the Company has proposed a rate reduction performance may not be raised as r n issue in any rate package to a!I incorporated commun6es in its seruce proceeana ber cre f chrumy 19N as lona as the area which are served exclusively by the Compan, on Company and Cie,eiand Dettoc achie,e a s, stem a retail basis The package cans for the ehminahon of mde a.alatuty factor et at least 65~ annuahy The the 2 74% rate increase effective February 1.1991 for standard was esteeded in 1989 and 1990 a1 residential and small commercial customers a (7) FEDERAL INCOME TAX Federalincome tai, computed t;y mult pf fing income beff e 'aies b, the staNtory rate :s reconced to the amount of federalincome tai recorded on the books as foncos i g _"r o a". q k 1 Nmtte 31 ___

ty) 544 3r w m ei a m .

Bcxp income R on) Bebre Feama: intmr. Tas i 93 Nt i 151 r ; 6 $ git ,77; Tam on im mcorre (Lon) at blah an We 1 31 W 1r* L i li i r U glat incrf ase (Decrease ) in Tan Accecated aeprec:abon 13 t3; c w r3 in,esenent tai cred u on dosf 0wed m wa' net f1' C organ 2 anon c w s -

, :4 I3mes u?%r then redera: prcome t in t s ' 94 ? *

• 4*aT Omer nems 27r 3444  ;; a ,

Totai reaera' incre ta nmse icrea t)  ! , c' i 9.w i c (ro (Toledo Edison) F 62 ( Toled; L de nn )

Federal income tax expense is recorded in the income Statement as follows:

f or thje ears ended Decemter 31 1990 1989 1988~

(190usards of dallars)

Operating Estenses Current Tat Provision. . ...._,,.... . . ,. 5 17 045 $(11458) 5 (3.132)

Changes m Accumulated Deterred Federal income 1as-Accelerated deprecaation and amortdation . 1.580 8 764 1.723 Attornative mirumum tan credit. . (5 480) 21291 -

5121 455 14,763 Sale and leaseback transactions and amo teation.  !

Property tan empense. , ,

(4 011) -

(5 058) 1 Deterred CWIP revenues . _ 9 393 11.726 (4.331)

Deterred fuel costs . , . (4 021) (1 229) 4.09B .l System devt40pment costs. 248 207 3.639 Davts Besse replacement power . - 5 OS$ $375 Federalincome tan retum a%ustments (272)

($32) (378) 4 646  :

Reacoaired debt costs .

Deferred operating eatenses . 996 (1.268) _ 4.039 Net operahng loss carrytornard. .

(2.545)

Other items . . . . . (460) 2.398 (4 223) 1.162 1.722 6 920 investment Tas Credits . ,

21 041 37 2Br, 29 242 Total Charged to Operating Expenses 1 Noncreraung income Cunent Tai Prowsion . . . . . . . ... .... (18142) ( to 129) -

Changes in Accumulated Deferrod Federaiincome Tan Davis Beste replacement power . , - - 2.709 Write ott of nuclear costs (10.157) -

(97177)

ATUDC and cartpng charges. 10 835 32 930 40543 Net operating loss carrytorward.

- - (36 831)

Other items . , , 2 900 (1138) (1 388)

Totat bpense (Credit) to Nonopnrating locome . (B 664 ) 21563 (86 244)'

Federalincome Tan included in CumuiatNe Ertect of an - - 4 177 Accounting Change for Untulled Revenues .

1otal Federat income Taa Espense (Credit) < . . S 1? 377 5 58 848 g52 B25)

The Company joins in the filing of a consohdated federal income tax return with its affiliated companies The method of tax allocation approximates a separate return result for each company.

in 1988, a change was made in accounting for income taxes from the deferred to the hability method This change did not impact net income as the add:tional deferred taxes recorded were offset by a regulatory asset on the .

Balance Sheet.

Federal income tax e> pense adjustments in 1990, associated with previously deferred investment tax credits relating to the 1988 write-off of nuclear plant investment, decreased the net tax provision related to nonoperating income by $18,810,000 The favorable resolution of an issue concerning the appropriate year to recognize a property tax deduction resulted in an adjustment which reduced federal income tax expense in 1990 by $3.911,000 ($2,168,000 in the ,

fourth quarter),

For tax purposes, not operating loss (NOL) carryforwards of approximately $28,101.000, $21,426,000 and

$187,019,000 were generated in 1990,1989 and 1988. respectively. The NOL carryiorwards are available to reduce .

future taxable income and will expire in 2003 through 2005. The 34% tax ettect of the NOLs generated in 1990 (59,554,000) and 1989 ($7,285,000) is included in the above table as a reduction to deferred federalincome tax relating to accelerated depreciation and amortization The 34% tax effect of the NOL generated in 1988

($63.586.000) is included in the above table as reductions to deferred federalincome tax relating to accelerated depreciation and amortization ($24.210,000) and to deferred federalincome tax charged to operating empenses

($2.545,000) and to nonoperating income ($36,831,000). Future utihzation of these tax NOL carryforwards would result in recording the related deferred taxes.

Approximately $20,161,000 of unused general business tax credits are available to reduce future tax obkgations The unused credits espite in varying amounts in 2001 inrough 2005 Utihzation of these unused credits is hmited by .

provisions of the 1986 Tax Act and the level of future taxable income to which such credits may be appl.ed The 1986 Tax Act provides for an AMT credit to be used to reduce the regular tax to the AMT level should the regular tax exceed the AMT An AMT credit of $5,480.000 was generated in 1990. An AMT credit offset for the consohdated tar return of $21,291.000 was generated in 1989 F-63 (T$edo Edrson)

(Toledo Edison)_

(8) RETIREMENT INCOME PLAN AND OTHER The settlement (d,scount) tale anumption was POSTRETIREMENT BENEFITS 8 SN for Decemt er 31 1990 and 8% for Decerntier 31 1989 lhe long term rate of annual compensation We sponsor a nonconthbuting pension plan which sucreace assumphon was 5% for futh December 31.

covers all employee groups The amount of retirement 1990 and Decemter 31.1999 lhe long term rate of benehts generahy depends upon the k ngth of seruce retum on pian assets aswmphon was 8% in 1990 and Under certain cucumstances, tienefits can beg.n as 1989 carly as age 55 The plan aise proudes certa n death Plan auets cons!st onmani, of investments in medical and disabihty benehts lhe Com;>an, s common stod tons guarante( d in.cstment funding pokcy is to comp!y wath the Emplo,ee contracts cash equwatnt 9 curses and real estate Retaement locome Secunty Act of 1974 gudehnes The cos. et postretwnwn! med cal benefits During 1990, the Company offe'ed its second amounted to $2 400 000 in in90. 32100 000 in 1959 Voluntary Early Retirement Opportun>ty Program and $ 1000 000 in 1988 Conwstent with current (VEROP) Operating e penses for 1990 included ratemming pract.ces these costs are recorded when

$L000 000 of penston plan accrua!s to co,er pad enhanced VEROP benehts plus an addihonal h December 1990 a new aaounhng standard ta

$8 000.000 of pension costs for VEROP benefits be,ng postretaement penehts other than pensions Aas paid to rehrees from corporato funds The 58 000 000 issued lhis standxd requaes emp%ers to accrue is not included in the pension data reported below the espected cost of such benefits danng the Operating e=penses for 1990 also inciuded a cred 1 of employees years of seruce The standard a!so

$5.000.000 resu ting from a settiement of pension requaes the record +ng of a cumulatse tranmtion ebhgeons through lump sum pa,ments to a obbadhon adjustment ohich CEn be recognged SLbstantial number et VEROP rehrees Net pension and immed, ate!,, subject to certain hmttations or amorteed VEROP costs for 1988 through 1990 were composed ove' the bnger of 20 g ars or the average remanng of the fohomng components setwee penod of active emplo,ees c s pected to tecove ,

nm m na bevhts lhe Company is reqwed to adopt the nea _

b,,Oiays, d ' standard no later than 1993 AMhough we have not pens,m Cops compieted an anal yus to determine the effect of semce mst for 1,. nms eame3 adophng the new standard _ we do rat e=pect adoption dag N &nM i 5 $ 4 $ 4 to h%e a matenal aderse effect un the Com;uny's interest (ou un pvoed teem hnanpal cond i:on or resu:ts of operahons because of uta tan 11 10 3 e.pected future regu!atory treatment Any habiht:es Ada,v revn on van assts IN (17) (IM M Corded pWsuant to the standard may t>0 0%entiahy tw1 awrauen an1 m ima: 4  ;

_ L1) ) _ c" bet by regulatory anets to reflect anbapated future Netpm o"coMs 3 1 sevenues assocated uth recosery througn rates n ROn wst -

Sdtiefnent g M iS}

No com 1 5 5 t i ; Unaer a inng term coal purchase arrangement. the Compan yhas quaranteed the ban and lease obtgat+ons of a maung compan y This arrangement The fohawing tabic picsents a reconohation cf the also requaes payments to the maung company for any funded status of the plan at December 31.1990 and actuat out-of pocket id;e mine e=penses (as advance 1989 payments for coa!) ohen the mines are idle for get ema 31 reasons be,ond the control of the nuning company At gg 4, Dt t ember 31. 1990 the poncipal amount of the IA m u ir;g mming company s loan and lease obhgations Art aanM Pesent <a'oe cf teett guaranteed by the Company was $24.000 000 Obig6 rns VCS'ed let41t $1C1 } {

Nnestea term 6 Acc. mated teett ot won 107 e Peet N futse comn+saw, ieven N n ICtai pf geCled tw;fwlt otAK # 13 1h Pian assets at tv moet -&e ty 174 Sepus ut van asse% om pryctea t D :st ubig #iun [, 42 UMecupna net 97 d;c te woav e If!Aet^n h$s A % &;1 391 en[4faf4p ([j [,${ }

Unrecopred Wr sewe M E Irav h. n BU et at Muq 1 1%7 t>eag ro w dr e G ,w s p <a, Vt av un1 m ; i c ct w i +1 >

c'her de'mf ed ; ed !s or W 13#(e *84 ' f(I(} {(tij (ioledo Ed: son) F 64 ( Toied3 [ dison)

rates, with the dividend rates for these issues (10) CAPITAllZATION averaging 9 06% and 9 84%, respectively, in 1990 (a) CAPITAL STOCK TRANSACTIONS Under its articles of mcorporation, the Company Preferred stock shares retired dunng the three years cannot issue preferred stock unless certain earnings ended December 31,1990 are as follows, ip90 39gg 3933 coverage requirements are met Based on eamings for Orwsaes N shrep 'he 12 months ended December 31,1990, the Cumutative Preferred Stock 'npany could issue at December 31, 1990 subsect to uamatw, ,proumately $7.600.000 of ad$tional preferred stock Redempton at an assumed dividend rate of 11% 11 Perry Unit 2 1100 par $1100. 00) (5) 15) had been canceled and wntten off as of December 31, 9 375. 07) (17) (17) 1990, the Company would not have been permitted to Total . r27) (22) (22) issue any additional preferred stock. See Note 3(c).

The issuance of ad$tional preferred Stock in the future Cumulative Preferred stoc> %

subsect to windatory will depend on earnings for any 12 consecuthe Reoemphon months of the 15 months preceding the date of

$25 par $3 47. - -

p 200) issuance, the interest on alllong term debt outstanding Totat . - -

03 and the dividends on all preferred stock issues

- outstanding Changes in premium on capital stock are There are no restoctions on the Company's ability to issue preference stock summarized as follows With respect to dividend and liquidation oghts, the

'990 1989 '988 Company's preferred stock is poor to its preference phousands of ootia's) stock and common stock, and its preference stock is Batance at Deginning of Year $481082 $481082 $482 M O poor to its common stock prem.um t*t or rapense -

Prererred Stoc6. - -

O 668)

(d) LONG TERM DEBT AND OTHER Baiance at End of Year . 5481 082 $481082 s481 082 BORROWING ARRANGEMENTS Long-term debt, less current matunties, was as follows:

(b) EQUITY DISTRIBUTION RESTRtCTIONS At December 31, 1990, retained earnings were Actual

$82,956,000. Substantiauy att of the retained camings y,,, d Mature NN Ne 199 1 69 were available for the declaration of dividends on the ***"O' ' # *)

Company's prefe red and common shares All of the Fire mortgage bonds Company's common shares are held by Centenor $ 70,000 1991 15 00 % $ -

Energy. A wnte ofi of the Company's investment in 36,800 Perry Unit 2, depending upon the magnitude and 1995. 10 125 -

timing of such a wnte-off, could reduce retained 1995. 11 25 60.000 60.000 earnings sufficiently to impair the Company's ability to 1996 2000. 8 69 166,378 166 378 declare dividends See Note 3(c) 2001 2005. 7 79 61,725 61,725 Any financing by the Company of any of its 2006 2010 . 9 64 101.900 101,900 nonutihty affikates requires PUCO authonzation unless 2016 2020. 8 00 67.300 -

the financing is made in connection with transactions 2021 2023. 7 93 147.800 147 800 in the ordinary course of the Company's pubhc utility 605 103 644.603 business operattons in which one company acts on Term bank loans due behalf of another.

1992 1996. 8 83 13.500 -

Notes due 1992-1997 10 64 219.430 261.715 (c) CUMULATIVE PREFERRED AND PREFERENCE STOCK Debentures due 1997 11 25 125 000 125.000 Amounts to be paid for preferred stock which must Le Pollution control notes redeemed dunng the next frve years are 52.000,000 in due 1992 2015. 11 03 136 600 166 480 both 1991 and 1992 and $12.000 000 in each year other - net -

J2 307) (521) 1993 through 1995 Total t.or.g Term The annual mandatory rederept:on provisions are as Debt . $1097 326 $1.197 -277 follows.

Sha'es Price lo be Beginrnng Per Long term debt matures dunng the next five years

• • er*d 'n Shre as follows $114.000,000 in 1991, $121,000,000 in Y$0N~ $1100. . 5.000 1979 $t00 W . W E M m W .M M M m W aN 9 37s 16 cso 1985 100 $86.000.000 in 1995 25 par 2 81 4o0 000 1993 25 The Company's mortgage constitutes a direct i/st The annuahzed cumulative preferred dividend tien on substantially all property owned and franchises requirement as of December 31,1990 is $25,000.000 held by the Company. Excluded 1 rom the hen, among The preferred dividend rates on the Company's other things are cash, securst:es, accounts receivable, Ser es A and B fluctuate based on provcihng mteres; fuel, supphes and automotive equipment (Toledo Edison) F 65 (Toledo Ecson)

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

Additional first enortgage bonds rnay be issued by (11) SHORT TERM DORROWING the Company under its mortgage on the basis of ARRANGEMENTS bondable property additions, cash or substitution for refundable first mortgage bonds lhe issuance of The Compaey had $7k%0 000 of bank hnes of cred.t additional first mortgage bonds by the Company on the anangermmts at December 31 1990 There were no basis of prcperty additons is bmited by 1wo provisions honowings unoer these bank cred.t arrangements at of its mortgage. One relates to the amount of Dn ernber 31.1990 bondable property avadab!c and the oiner to eartungs Short tHm borrowing capacity authonted by the coverage of interest on the bonds Under the rnote PUCO is $150 000 000 The Company and C!neland restoctne of these provitrons (Cunently, the camings flectn hhe been authonted by the PUCO to bonow coverage test). the Company would have becq trom each other on a short term basis permitted to issue approumately $177 000 000 of Most borro,ung arrangements under the short term bonds based upon avadable bondable preperty at bank bnes of c'ed:t reque a fee of 0 25% per war to December 31,1990 The Company at to would have be ped on any unused porhan of the hoes of cred,t been perm:tted to issue approumately $50 000 000 of f O' those bank s ilthout fee requirements. the average bonds based upon refundable bonds at December 31 dady cash batance in the bank accounts sabstied 1990 if Perry Unit 2 had been canceled and antten 'nID' mal compent at4ng balance arrangements off 'a of December 31.1990 the amount of bonds At Decemt>er 31 1990. the Company had A could have been issued by the Company wouid $23 200 000 of commercial paper outstanding The not ha e changed commerc:at paper was haded by at least an equal amount of unused Nnk kner, of cred t Certain unsecured loan agreements of the Company contain covenants relating to capitahzation rabos evnings coverage rabos and hmitations on (12) CHANGE IN ACCOUNTING FOR UNBILLED

= secured financing other than through first rnortgage ggyggggg bonds or certain other transactions An aareement relating to a letter of credit issued in con'nection with Poor to 1968, revenues were recorded in the the sale and leinseback of Beaver Valley Unit 2 (as accounhng penod dunng which rneters were read amended in 19S9) contains several knancial covenants Uhhty service rendered af ter monthly rneter reading affecting the Company. Cleveland Electnc and dates through the end of a calendar month (unb>lled Centenor Energy Among these are covenants retahng revenues) became a part of operahng revenues in the to earnings coverage ratios and capitahzat on rabos fohowing month to January 1988 the Company The Company. Cleveland Elecinc and Centenor adopted a change in accounting for revenues in order Energy are in comphance with these covenant to accrue the eshmated amount of unbmed revenues provisiens We beheve the Company, Cleveland at the end of each month Electnc and Centenor Energy wm cont nue to rneet The adophon of this account ng method increased these covenants in the event of a wnte off of the 1988 not income 3 218 000 (net of $ 112.000 of

~

Company's and Cie. eland Electnc s investments in income taxes) before the cumulahve effect on penods Perry Unit 2. bamng unforeseen circumstances pnor to January 1,198B The cumuiatwe effect of the change on the renods poor to January 1.1988 was 16 279 000 (net of $.1177 (100 of income taies) and was included in 1988 net income c

e (Toledo Edison) F 66 ( Toledo Edison)

(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) .

l The following is a tabulation of the unaudited quarterly results of operations for the two years ended December 31, 1990 OuriersInded March 31 June 30 Sept 30 Dec 31_

(thousasas of calws) l 1

1990 Operating Revenues . . . . . $203.841 $204,295 $223.201 $195 749 Operating income . . .. 38.771 28.298 39.472 45.901 Net income . . . . . . .. . . 21.604 26.971 19.420 13.429 Earnings Available for Common Stock . 15.357 20.660 13.109 7,139 f989 \

Operating Revenues. . . . . . . . . $201,144 $203.436 $219.762 $202,461 '

Operating income . . .. . .. 32.041 37.149 40.532 32.595 l Net income . . . . .... .. . .. 24.280 30.284 34.501 3.613 Earnings (Loss) Available for Common Stock 17,857 23.882 28.176 (2.627) l Earnings for the quarter er'ded June 30.1990 were increased as a result of federal income tax enpense adjustments associated with deferred investment tax credits relating to the 1988 wnte off of nuclear plant investment. See Note 7. The adjustments increased quarterly earnings by $17.907.000-Earnings foi the quarter ended December 31.1990 were decreased as a result of year end adjustments A

$13.933.000 reduction in phase in carrying charges (see Note 6) Aas partially offset by adjustments of $7.760.000 to reduce depreciation expense for the year (see Summary of Significant Accounting Policies) and $2.168.000 to reduce federat income tax expense (see Note 7). The total of these adjustments decreased quarterly errnings by

$2,000.000 1

i (Toledo Edison) F.67 (Toicdo Edison)  !

FINANCIAL AND STATISTICAL REVIEW Operating Revenues (thousands of dollars) sie.m row T et a! t otw  % u9 Ot e svig i ver I e %*.itmlul t C JWitM C tW PidAD dli Ut ' C f *tIssr! Ve%W s d 4' l i4N If C & (se5 he r W hhet I 1990 $223 920 $174 540 $235 578 $79 535 5713 573 $113 513 $627 086 $- $827 086 1969. 215 932 163 991 2?6 t.83 99 451 706 Ob4 120 749 626 e03 -

826 803 1988 200 916 142 006 19.4 521 34 961 578 094 499D3 627 90' 627 997 1987, 200 877 142 3B5 219 09B 27 646 593 00f> 15 031 605 037 -

605 037 1966, 189 292 133 841 214 274 23 bs6 561 293 11 189 572 482 -

572 482 19H0 120 0$5 83 636 137 663 29 4bH 373 2B 21 647 J94 686 6 982 401 808 Operating Expenses (thousands of dollars) otw f#& Ow stKv s ( +pift A:in lamet IN<*e o & 3 t* ie"a' blel

% , ,, u. 4 5 a e .. n, . c.e r se - i, c r ., c3 i- .n,9 1,, m ,. ... u,m rm e A mw ,- . m me...a wi 1..e. o peme 1990 $138 222 $373 374 $75 986 $79 320 $ (13.299) $ 21,041 $674 644 1999 133 439 372 530 87 639 72 123 (1B 4911 37 285 084 486 1988. 116 161 358 823 75 093 80 138 (S36131 29 242 575 644 1987, 140 176 223 307 65 503 $9 658 (39 797) 22 747 471 594 1956 15b763 167 319 3, S U' $13% -

41 150 456 402 1383 155 771 85 161 26 002 31 20. --

23 376 321 512 income (Loss) (thousands of dollars) f 0;lt f d!

o%. v,e vu<ne ex " .e s  ! a.es -- l wise Dy-a bi g Af ut C M v bon Cxvy Dett in tc< e s t Y{ g P K s' ,'1 he ( ;J P' y ht' t i 3W ,)t'b

, i k 8(MFOst I (h8K4 1990 $152 442 8 3 352 5 8 149 $ 43 487 $ 8 664 $214 094 1989 . 142 317 8 UA 23 %) 82 338 (21 563) 231 991 1988 52 353 5 452 < J46 7221(a) 129 632 f46 244 26 959 1987 133 443 112 138 t 10 934i 14 9 % 42 726 296 392 1966 116 020 129 578 11 007) -

2 024 296 000 1980. 60 350 N 443 679 -

13 21B 122 896 income (Loss) (thouands of dollars)

Verm

(\14%)

l+!se lafmngs C a%aaise- . >>ou we (tosii l M et 1 uf Ah l Nth,1 C.I ah VI Pf efNf ts.rj A w gingst 4ti De t t At UDC . At cw u g A :a#ug n me Sta, k tot Cv weion we, umec t e. t 1 >.ne C t.n ;o . cse, ) Ibanh Sim 6 1990 $135 344 $ (2 674) $ 81 424 5- S 81,424 $25159 $ 56 265 19e 9 . 144 792 ($ 470) 9J 676 92 6?H 25 343 67 Pfi8 1968 150 523 (1 833) (121 731) 6 279(b) (115 452) 26 983 (142 435) 1987 185 433 (54 272) 16S 171 105 171 42 749 122 422 1966 174:19 7 f 55 314 ) 176 91' 176 917 45 243 131 674 1960 . 70 666 (15 148) 67 178 -

67 174 '8 021 49 157 (a) Inc tades wMe ctt of nudear cWs m the amon' e' $276 955 000 in 199 (b) in 1988 a chyqe en the netnr4 d anwonSn7, fu unt&d rewmas we at At (Toledo Edison) F-68 (Toledo Edison)

l 1

1HE 10LEDO EDtSON COMPANY l Electric Sales (n.illions of KWH) Electric Customers (year end) Residential Usage Average Awefage j industeet EMr PE i'e'v" I v e., nescent ar Commercai industnal Wholesse Opet Total Residentei Commece & Othat low Custome KWH Customer l 1990. . 1950 1 614 3 617 932 496 8 609 253 965 25 822 4 555 264 342 7 492 11.444 8882.99 1989. 2 017 1 62; 3 740 1 175 495 9 049 253 234 25 803 4 434 283 471 7 989 - 10 71 855 29 1988, 2 068 1 579 3 780 938 474 8 839 251 590 25 526 4 102 281 218 8 264 9 72 802 87 1987. 1977 1 532 3 589 344 464 7 906 249 344 25 170 4 085 278 599 7 969 10 16 80966 1986.. 1 941 1 495 3 482 242 449 7 609 247 256 24 655 4 004 275 915 7 881 4 75 768 4) 1980. 1971 1282 3 165 560 410 7 388 240 142 23 532 3 818 267 492 8 232 6 40 526 66 Load (MW & %) Energy (millions of KWH) Fuel operaue Compa6y Cerensted Pure ased er Capacity yea, N,YN o Pea, Peak u M., n ,1.oad, acio . s., wea. u.  % wa Fuei P. x C.osts xs 1990 . 1752 1 515 13.5% $3.0% 5535 4 219 9 754 (499) 9 255 1.504 10 220 1989. 1 894 1 526 19 4 65 2 5 206 5 552 10 758 (1 175) 9 583 1 42 10 293 1988. 1057(c) 1 614 (52 7) 62 8 5820 3 325 9 145 385 9 530 1 69 10 174 1987. 1 698 1 484 12 6 64 9 5 916 3 218 9 134 (647) 8487 1 45 10 196 1986. 1740(c) 1 423 1B 2 64 8 6 462 12 6 474 1 689 8 163 1 82 9 860 1980. 1 700 1310 75 6 68 3 5 529 1 031 6 560 1 352 7 912 1 65 10 245 ,

I investment (thoucands of dollars)

Constructen Work in Total Utety Accumulated Prog'ess Nuclear Propert, Uh6ty Plant in Deprocehon & Net & Perry Fueisqd Plant and Piant Total ServCe Amratahon Plant Unit 2 Other E au.pment Additons Assets

% ear 1990. 82 607 010 Ss46193 $1960 817 8 436 439 8223 872 82 621 528 8 86 693 S4 001 518 1989. . 2 532 291 567 197 1 965 094 430 340 P37 318 2 632 752 77 357 4 138 846 1988. 2 438 927 487 546 1 951 381 459 104 262 514 2 672 999 132 083 4 134 672 1987. 2 600 511 419 149 2 181 362 374 274 267 069 2 822 705 380 974 4 277 587 1986. ,, 1 442 812 415 745 . 1 027 067 2 169 945 269 022 3 466 034 463 163 3 813 889 1980. I 197 774 220 629 977 145 520 239 27 424(d) 1 524 808 235 911 1 701 443 Capitalization (thousands of dollars & %)

Preferred Stocm wth Pretened Stoch wthout Mandatory Redemption Manaatory Reoempte Common Stock Ecuty Provtsens Provisions Long Term Debt Total Year

$ as0 784 39% 3 66 328 3% $210 000 9% $1097 326 49% $2 254 438 1990.

1989. 897 793 38 68 990 3 210 000 9 1 197 277 50 2 374 060 1988. , 887 442 36 71 155 3 210 000 9 1 291 444 52 2 460 041 1 096 737 39 73 340 3 240 000 8 1 400 292 b0 2 810 369 1987.

1986, 1 074 663 36 148 797 5 260 000 9 1 480 947 50 2 064 407 478 993 34 66 500 5 150 000 11 714 406 50 1 409 899 1980.

(c) Capacity cata reflects estended generating unti outages for renovaton and improvements (d) Restated for effects of capitaitration of nuclear luellease and financing anangements putsuant to Statement of Financial Accounting Standards 71 (Toledo Edisori) F 69 (Toledo Edison)

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

INDEX TO SCilEDUIES e

P_ aft Centerior Energy Corporation and Subsidiaries:

Schedule V Property, Plant and Equipment for the Years S-2 Ended December 31, 1990, 1989 and 1988 Schedule VI Accumulated Deprecir.tlon and Amortization of S-5 Property, Plant and Equipment for the Years Ended December 31, 1990, 1989 and 1988 ,

Schedule VII Guarantees of Ser arities of other Issuers for S-8 the Year Ended Cecember 31, 1990 Schedule VIII Valuation and Qualifying Accounts foi the S-9 Years Ended December 31,1990,1989 and 1988 Schedule IX Short-Term BorroM ngs for the Years Ended S-10 December 31, 1990, 1989 and 1988 Schedule X Supplementary Income Statement Information for 5-11 the Years Ended December 31, 1990, 1989 and 1988 The Cleveland Electric Illuminating Company and Subsidiaries:

S:hedule V Property, Plant and Equipment for the Years S-12 Ended December 31, 1990, 1989 and 1988 Schetele VI Accumulated Depreciation and Amortization of S-15 Property, Plant and Equipment for the Years Ended December 31, 1990, 1989 and 1988 Schedule VII Guarantees of Securities of Other Issuers for S-18 the Year Ended Decembar 31, 1990 Schedule VIII Valuation and Qualifying Accounts foi the S-19 Years Ended December 31, 1990, 1989 and 1988 Schedule IX Short-Term Borrovings for the Years Ended S-20 December 31, 1990, 1989 and 198S Schedule X Supplementary Income Statement Information for S-21 the Years Fnded December 31, 1990, 1989 and 1988 The Toledo Edison Company:

Scheeale V Property, Plant and Equipment for the Years S-22 Ended December 31, 1990, 1989 and 1988 Schedule VI Accumulated Depreciation 'ind Amortization of S-25 Property, Plant and Equi; 'ent for the Years Ended December 31, 1990, 989 and 1988 Schedule VII Guarantees of Securities f Other Issuers for S-28 the Year Ended December 31, 1990 Schedule VIII Valuation and Qualifying Accounts foi the S-29 Years Ended December 31, 1990, 1989 and 1988 Schedule IX Short-Term Borrowings for the Years Ended S-30 December 31, 1990, 1989 and 1988 Schedule X Supplementary Income Statement Information fcr S-31 the Years Ended December 31, 1990, 1989 and 1988 Schedules c~her than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the financial statements or noteu thereto.

5-1

CENTER 10R EhERGY CORPORATION AND SUBSIDIARIES

$0HEDUL.E V

• PROPERTY, FLANT AND EQUIPMEkT YEAR ENDED DECEMBER 31, 1990 (Thousands of Dollars)

Balance at Retirements Balance at Beginning of AdJi t ions or Erd of Classification Period i,t Cost $ ales Other Period Utility Plant Electric Intangible 50 $22,035 50 $0 $22,035 Production:

Steam 51,301,892 539,495 (53,055) S0 $1,338,332 Nuclear 55,029,605 5131,164 (124,608) 50 55,136,161 Hydraulic $56,300 554 $0 50 556,354 Other $13,995 $749 ($51) SO $14,693 iransmission $680,080 $15,028 ($927) $0 5694,181 Di s t ritNt ion $1,143,810 $62,309 ($6,178) SQ 51,109,941 Ceneral $185,434 $3,406 ($1,649) 50 $187,191 Total Utility Plant $8,411.116 $274,240 (536,468) 50 18,648,888 Perry Unit 2 (a) 5869,048 ($3,899) 50 $0 $865,149 Construct i on Work in Progress $288,225 (519,839) $0 50 $268,386 Nucleac Fuel 5864,821 562,447 $0 50 $927,268 other Plant $62,449 $1,136 (122) ($39) 563,524 Total Property, Plant and Equipment $10,4 95,659 $314,085 ($36,490) (539) 510,773,215 53S243333333 353335333333 233235524333 8353542388E8 431333353333 (a) includes Perry Unit 2 AFUDC subsequent to July 1985. See Schedule V!!!.

S-2

l l

)

1 1

I i

CENTER 10R EWERGY CORPORAfl0N AND sus 5fDIARIES SCHEDULE V PROPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1989 i (Thousands of Dollars)

Balance at Retirements Salance at Beginning of Additi ons or End of Classification Period at Cost $ates Other Period Utility Plantt Electric Product ion:

Steam $1,290,036 S17,470 ($5,614) SO 51,301,892 Nuclear $4,833,173 5208,809 ($12,377) SO $5,029,605 Nrdraulic $56,301 (51) 50 50 556,300 Other f*3,943 553 ($1) 50 513,995 T ransmission 5677,535 53,559 ($1,014) 50 5050,080 Dist ribut ion $1,094,766 554,837 (55,793) 50 51,143,810 General 5177,919 511,529 ($4,014) 50 $185,434 Total Utility Plant $8,143,673 $296,256 ($28,813) 50 58,411,116 Perry Unit 2 (a) $866,911 52,137 $0 SO 5869,048 Construction Work in Progress $355,821 (567,596) 50 $0 $288,225 Nuclear fuet $815,144 549,677 50 50 $864,821 Other Plant $59,945 $2,512 ($30) S22 562,449 Total Property, Plant and Equipment 510,241,494 5282,966 (s28,S43) 122 510,495,659 3EF533388833 333333338553 EStasassasas 535333333333 33334535354E (a) Includes Perry Unit 2 AFUDC subsequent to July 1985, see Schedule Vill.

S-3

CENTERIDR ENERGY CORPORAllDN AND SUBSIDI ARl[$

SCHEDULE V - PROPERif, PL ANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 19S8 (thousands of Dollars)

Balance at R et i renent s Balance at Beginning of Addi ti ons or E nd o f Classification Period at Cost Sales Other Per i od Utility Plantt Electric Production:

Steam $1,241,340 $53,830 ($5,134) 50 51,290,036 Nuclear (b) 55,195,992 591,211 (5454,030)(c) $0 54,833,173 Pydraulic $56,306 ($5) 50 $0 556,301 Other $13,877 $76 ($10) $0 513,943 fransmission (b) 5671,701 58,101 ($2,267) 50 1677,535 Distribution $1,043,350 $60,507 ($9,091) $0 51,094,7A6 General $165,548 $16,598 ($4,227) 50 $177,919 Total Utility Plant $8,388,114 1230,318 ($474,759) $0 $8,143,673 Perry Unit 2 (a) $781,028 50 $0 583,883 (d) SS66,911 Construction Work in Progress $224,679 $117,021 $0 514,121 (d) $355,521 Nuclear Fuel $ 750,5 B8 $64,556 $0 50 5815,144 Other Plant $59,785 1813 (5653) 50 159,945 Total Property, Plant and Equipment $10,206,194 $412,708 (5475,412) 198,004 $10,241,494 353333333335 333333333355 33E333333385 33125312t532 E33333333*33 (a) Includes Perry Unit 2 AFucC subsequent to July 1985. See schedute VIII.

(b) Includes reclassification of PUC0 ordered AFUDC reserve to a ref und obligation consistent with terms of the January 1989 PUC0 rate order.

(c) Inctudes $453,674,000 of PUC0 ordered write of f of Perry Unit 1 and Beaver Valley Unit 2 investnents.

(d) Results primarity f rom adoption of a new method of accountin9 for income taxes =hich requires the presentation of amounts (previously stated on a net-of tax basis) on a pretax basis.

S-4

CENTERIDR ENERGY CORPORAflON AND $US$1DI Atl[$

1 SCHEDULE VI ACCUMULATED DEPRECI Afl0N AND AMORTIZAtl0N Of PROP (RTY, PLANT AND EQUlPMENT YEAR (NDED DECEm8ER 31, 1990 (thousands of Dotters)

Additions Decbe t ions Balance at Charged to Removal Cost talance at Beginning of income Net of Salvage End of Description Period Statement other Retirements Add /(Deduc t) Period Utility Plant:

Electric Depreciation 51,828,097 $258,B68 52.685 (a) (536,468) ($5,011) $2,D48,171 Amortitation 53,670 54,403 50 50 $0 18,0 73 Total Utllity Plant $1.831,767 $263,271 (b) 52,685 (136,468) (15,011) 52,056,244 Other Property vepreciation $15,132 $2,957 (c) ($17) 50 $0 $18,072 Total 51,646,899 $266,228 52,668 ($36,468) ($5,011) $2,074,316 Nuclear Fuel . Amortization $320,446 584,150 (d) 50 10 10 5404,596 (a) Acetrulated depreciation charged to construction worA in progress.

(b) Depreciation and amortization as reported in the Income Statement includes approximately 512 million of amortization of investment tax credits.

(c) Nonutility plant expense charged to other income and deductions, net.

(d) Charged to fuel and purchased power expense.

S-5

5 .

e i ,

l CENTEs10R EhiRGY CORPORA 110N AND $UBSIDIARIES SCHEDULE VI - ACCUMJLATED DEPRECI AllDN AND AMDRTl2AT]DN OF PROPERTY, PLANT AND EDUIPMEh1 YEAR (NDED DECEMBER 31, 1989 (Thousands of Dollars)

Additions Deduc t ions Balance at Charged to Removal Cost balance at Beginning of Inc ome Net of Salvage End of Description Period Statement Other (a) Retirements A $d/(D educ t ) Peri od Utility Plant:

Electric

• Depreciation $1,565,978 $292,068 $3,595 ($28,813) ($4,731) $1,328,097

. Amortiration $3,326 $344 $0 $0 SO $3,670 Total Utility Plant $1,569,304 $292,412 (b) $3,595 ($28,813) ($4,731) $1,831,767 Other Property Depreciation $13,676 $1,4B4 (c) SD ($20) ($8) $15,132 Total $1,582,980 $29'.896 $3,595 ($28,833) ($4,739) $1,646,899 duetear Fuel - Amortization $218,326 $102,120 (d) $0 $0 $0 $320,446

............ ......c,.... ............ ............ ............ ............

(a) Accumulated oepreciation charged to construction work in progress.

(b) Depreciation and amortization as reported in the income Statement includes approximately $12 million of amortitation of irvestment tax credits.

(c) Nonutility plant expense charged to other income and deductions, net.

(d) Charged to fuel and purchased power expense.

S-6

I CthittlDR ENERGY CORPORAtl0N AND SUBSIDIARl($

SCHEDULE VI ACCLMJLATED DEPRECI ATION AhD #>t0RilZAfl0N OF PROPERTY, PLANT AND (QUllMENT YEAR INDED DECEMatt 31, 1988 (Thoaands of Dollars)

Additions Deduc t ions

............................ .... 4........................ j listance at Charged to temeval Cost Balance at l Itegiming of income het of Salvage End of l Description Period Statement Other (a) Retirements Acki/(Deduct) Period Utitity Plants (tectric Depreciation $1,321,464 $267,004 $3,534 (521,034) ($4,990) 51,5t',978 ,

Amortisation $2,982 $344 50 SO $0 $3,326 )

............ ............ ............ ............ ............ ............ l I

totat Utility Plant $1,324,446 5267,348 (b) 33.534 ($21,034) (54,990) 51,569,304 '

Other Property Depreciation $12,980 $1,323 (c) 50 (5620) (57) 513,676 Totat $1,337,426 5268,671 $3,534 (521,654) (S4,997) 51,582,980 Nuclear fuet Amortization $141,043 $77,283 (d) 50 SO S0 $218,326 (a) Accurulated depreciation charged to construction work in progress, (b) Depreciation and amortization as reported in the income Statement includes approximately $9 mit tion of amortitstion related to terminated nuclear generating units and $13 mittion of amortizvion of investment tax--

credits resulting from the change in accoeting for income taxes. The unamortized costa related to the termi-nated units were recorded as deferred charges on the Balance Sheet. The s,es ierr 31, 1988 t>alance of

$27.8 million in the deferred charge accomt was written of f at year end.

(c) konutility plant expense charged to other income and deductions, net.

(d) Charged to fuel and purchased power expense.

S-7

9 CENTERIDR EhERGY CDEPDRAllDN AhD SUBSIDI ARIES SCHEDULE Vil GUARANTEES OF SECURITIES OF OTHER ISSutRS YEAR EhDED DECEMBER 31, 1990 i

(thousands of Dollars)

Principal Amount Guaranteed and hane of issuer of Dutstanding Securities Guaranteed Title of lasue (a) and (b) Wature of Guarantee Quarto mining Company (b) Guaranteed Mortgage Bonds, Due 2000 Series A 8.25% 51,173 Principal and interest Series B 9.70% 1,145 rincipot and Interest series C 9.40% 5, 723 Principal and Interest series D 12,625% 6,810 Prireiret and Interest Series EA 10,25% 1,362 Prircipal and Interest Series EB 11.70% 1,328 Principat and Interest Series EC 11,40% 6, 64 2 Principat and Interest Series ED 14.625% 7,263 Principal and Interest Series FA 10,50% 1,046 Principal and Interest Series FB 1 1, 75 % 331 Principal and Interest Series FC 11.40% 1,341 Principal and Interest series G 9.05% 17,282 Principal and Interest Unsecured hete, Interest at prime (10%

at 12/31/90) plus 2%, Due 2000 4,1 64 Principat and Interest Equipment leases 11,2o1 Termination Value per Agreements 66,871 The Ohio Valley Coal Company First Mortgage hotes Series D 8,00% Due 1991 to 1997 6, 75 0 Principal and Interest Series E- 10 25% Due 1991 to 1997 4,125 Principal and Interest Equipnent leases 6,321 Stipulated Loss value per Agreecents term hotes- 9.53% Due 1991 to 1996 3,193 Principal and Interest

- 10,B5% Due 1991 to 1997 21,899 Principal and Interest 42,2S8 5109,159 susa==ns (a) kone of the securities were owned by the Centerior Utilities; none were held in the treasury of the issuer; and none were in default.

(b) The Centerior Utilities and the other CAPCO Group Companies have agreed to guarantee severet ty, and not jointly, their proportionate shares of Quarto Mining Company debt and lease obligations incurred white developing and equipping the mines, The amounts shown are the Centerior Utilities' nrcportionate share of the total obligations.

S-8

CENTER 10R ENERGY CORPORA 110N AND SUBS! DIAR][S SCHEDULE Vill

• VALUA110N AND 00ALIFflNG ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1990, 1989 AND 1988 (thousands of Dollars)

Addltions DedJc t ions Balance at Charged to Deductions Botence at Beginning Income from Erd of Description of Period Statement Other Reserves Other Period Reflected us Reductions to the Related Assets:

Accumleted Provision for Uncollectible Accounts (Deduction from Amounts Due from Customers and Others) 1990 $2,276 S18,739 (a) 52,805 (b) S20,794 (a)(c) SO S3,026 1989 57,001 59,429 (a) $2,000 (b) $16,154 (a)(c) 50 -52,276 1988 $5,629 S13,075 (a) S2,091 (b) $13,794 (a)(c) SO $7,001 Reflected as Reserves on the Balance Sheets Reserve for Perry Unit 2 Allowance for Funds Used During Constructton-1990 5212,693 SO SC SO S0 $212,693 1989 5212,693 S0 SO SO SO S212,693 1988 $174,600 50 $38,093 (d) SO SO S212,693 (a) InclWes a provision and corresponding write of f of mcot tectible accounts of $5,895,000, $2,598,000 and

$2,003,D00 in 1990,1989 and 1988, respectively, relating to customers which qualify for the PVC0 mandated Percentage of Incone Payment Plan. Such uncollectible accounts are recovered through a separate PUC0 approved surcharge tariff.

(b) Collection of accounts previously written off.

(c) Uncot tectible accounts written off.

(d) Results free adoption of a new method of accounting for income taxes which requires the presentation of amounts (previously stated on a net of tax basis) on a pretax basis.

S-9

CEN7ERIOR EkERGY CORPORATION AND SUS $1 DIARIES SCHEDULE IX $HORT TTRM BORROWikCS FOR THE YEARS ENDED DECEMBER 31, 1990, 1989 AND 1988 (Thousards of Dollars)

Average Weighted Daily Average Average Maxinan Weighted Daily Balance Interest Amount Amount Weighted at Erd Rate at Lutstanding Outstanding Interest of End of During the During the Rate During Category Period Pericd Period Period the Period Coornercial Paper 1990 $110,310 9.4% $163,200 $88,670 (a) 8.7% (b) 1929 $0 0.0% $55,000 55,$34 (a) 9.8% <b) 1938 $0 0.0% $123,000 $21,248 (a) 7.4% (b)

(a) Computed by dividing the total of the daily outstanding balances f or the year by 365 days (366 f or 1988).

(b) Cornputed by dividing total interest expense f or the year by the average daily balance outstanding.

S-10

CENTERIDR ENERGY CORPORATIDN AND SUS $1DI ARIES SCHEDULE X

• EUPPLEMEhiARY lhCOME STATEMEhi thFORMATION FDR THE TEAR $ ENDED DECEMBER 31, 1990, 1989 AND 1988 (thousands of Dollars)

Item 1990 1989 1988 Maintenance and Repairs - l Charged to Operating Expenses $202,248 $187,559 5199,468 l

............ ............ ............ I fames Other Than Payroll and Income fames; Charged to Operating Expenses:

Real and Personal Property Ismes $145,980 5136,477 5145,665 Dhio State Excise faxes 5101,918 592,877 591,644 Other 58,850 19,199 $11,773 Total Charged to Operating E xpenses $256,748 $231,553 $249,082 Total Charged to honoperating income $719 $759 $597 Total 5257,467 $239,312 $249,679 S-Il

THE CLEVELAND ELECTRIC ILLLMihATING IARIES COMPAkV AND SUB5ID

$CHEDULE V

• PROPERTY, Pi ANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1990 (1bousands of Dollars)

Balance at Beginning of Re t irenwent s Classification Ackfi t ions or Balance at

............. Feriod at Cost

...... Sales Erd of Utility Planti . ..

other Period Electric ..... ... .

Intangit.4 50 518,499 50 Produc t iotu $0 $18,499

{ Steam i

Nuclear $1,017,617 132,353

$3,355,765 (53,049) l Hydraulic $30,329 50 51,046,921

( $56,300 (121,322)

Other 554 50 53,414,772

$7,287 SO 5731 SD $56,354

($51) 10 Transmission 57,967

$534,813

$13,381 (5894)

Distribution $0 $547,300

$792,438

$46,167

($5,452)

Ceneral 10 $833,153

$114,605 53,342

........ ... (51,035)

.......... . 50 $116,912 Total Utility Ptant .

15,878,825 5194,856 (531,803)

SG 56,041,878 Perry Unit 2 (a)

$523,294

($1,830) 50 Construction Work in $0 5521,464 Progress

$203,639 (128,407) 50 Nuclear Fuel $0 $175,232 1482,092

$38,670 50 Other Plant SO $520,762

$59,107

$1,136

............ (522) 50

.......... . ......... $60,221 Total Property, Plant and ... ........

Equipnent

$7,146,957

$204.425 ($31,825) 333333333883 50 Ba#**WatasS3 W83rtatss333 17,319,557 (a) 333333333834 332333323338 Includes Perry Unit 2 AfUDC subsequent to July 1985

. See Schedule VI!!.

S-12

THE CLEVELAND ELECTRIC ILLUMlhATING COMPANY AND SUBSIDI ARIES SCHEDULE V PROPERTY, PLANT AND EDulPMENT TEAR ENDED DECEMBER 31, 1989 (Thousands of Dollars)

Balance at Reti renent s Balance at Beginning of Additions or E nd of Classification Period at Cost tales Other Period Utility Plants Electric Producti on:

Steam $1,013,636 59,595 (15,614) 50 $1,017,617 Nuclear $3,235,716 $120, D49 $0 $0 $3,355,765 Hydraulic $56,301 ($1) to 50 E56,300 Other $7,287 11 (51) 50 57,257 Transmission $526,820 $9,004 ($1,011) SO $534,813 Distribution $ 754,650 543,212 ($5,424) 50 5792,435 General $110,336 $8,275 (54,006) $0 $114,605 Total utility Plant $5,704,746 $190,135 ($16,056) $0 55,878,825 Perry Unit 2 (a) 5523,785 ($491) 50 50 5523,294 Construction Work in Progress $239,843 ($36,204) 50 50 $203,639 Nuclear Fuet $453,654 $28,438 50 50 $482,092 Other Plant $56,625 $2,512 (530) 50 $59,107 Total Property, Plant and Equipnent 56,978,653 51S4,390 (516,086) 50 57,146,957 (a) Includes Perry Unit 2 AFUDC subsecuent to July 1985. See Schedule Vill.

S-13

THE CLEVELAND EllCTRIC ILLUMihAT]NG COMPANY AND $UBS]DIARlES SCHEDULE Y PRDPERTY, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31,19B8 (Thousands of Dollars)

Balance at Ret i reeent s Balance at Beginning of Addi t ions or End of Classificotton Period at Cost Sales Other Per i od Utility Plant Electric Production:

Steam $967,557 $50,877 ($4,793) $0 $1,013,636 Nuc lear $3,415,183 $32,127 ($211,594)(b) 50 53,235,716 Hydraulic 556,306 (55) $0 to $56,301 Other $7,221 576 ($10) 50 $7,287 Transmission $521,893 $6,569 ($1,642) 50 5526,820 Distribution $719,330 541,096 ($5,776) 50 $754,f 50 General $100,113 $12,775 ($2,552) $0 $110,316 Total Utility Plant $5,787,603 5143,515 ($226,372) 30 55,704 146 Perry Untt 2 (a) $476,458 $0 50 547,327 (c) $5??,785 Construction Work in Progress $156,975 568,747 50 $14.121 (c) 5239,843 Nuclear Fuel 5416,786 $36,S68 $0 $0 S453,654 Other Plant $56,616 $639 ($6301 SO $56,625 Total Property, Plant and Equipment $6,894,438 5249,769 ($227,002) 561,448 $6,978,653 SSERChEEESRB R33333882853 333533E23335 SS43338333*E ESSESEEtuSST (a) Includes Perry Unit 2 AFUDC subsequent to July 1985. See Schedule Vill.

(b) 5 *O orde ed write-of f of Perry Unit i and Beaver Valley Unit 2 investments.

(c) Petults primarily f rom adootton of a new method of accounting for income taxes which requires the presentation af amounts (previously stated on a net of tax basis) on a pretaa basis.

S-14 1

THE CLEVELAND ELECTRIC ILLUMihAi!WG CDMPAWY AND SUS $1DI ARIES

$CHEDULE VI ACCUMULATED DEPRECI AflDN AWD AMORil!ATIDN OF PRDPERTY, PLAW1 AND EDulPMEh1 YEAR ENDED DECEMBER 31, 1990 (Thousands of Dollars)

Additi ons Deduc t i ons Balance at Charged to Removat Cost Balance at Beginning of Inc ome het of salvage End of Description Period Statement other (a) Retirements A$d/(Dedsct) Period Utility Plant Electric Depreciation $1,260,900 $180,872 $843 (531,803) (57,939) 51,402,873 Amortization $3,670 13,508 SO 50 SO 57,178 ictal Utility Plant $1,264,570 51S4,380 (b) 5543 (531,803) ($7,939) 11,410,051 Other Property Depreciation 513,915 $2,878 (c) 50 50 $3 $16,793 Tctat $1,278.485 $187,258 5843 ($31,803) (17,939) $1,426,844

............ ....c....... ............ ............ ............ ............

Nuclear Fuet . Amortitation 5172,910 S47,028 (d) 50 50 5: 5219,938

............ ...s........ ca.......... ............ ............ ............

(a) Accumulated depreciatici charged to construction work in progress.

(b) Depreciation and amnrtimtion as reported in the Income Statement includes approximately $9 million of snortiration of lavestmer.t tax credits.

(c) konutility plant expense chargcd to other income and deductions, net.

(d) Charged to fuel and purchased power expense.

S-15

. _ _s _ , .

J l

fME CLFyfLAND ELECTRIC ILLUMlhATING COMPANY AND SUBSIDIARIES SCHEDULL VI #CCUMUL ATED DtPRECI ATIDN AND AMORil2AllDN OF PROPER 1Y, PL ANT AND EDUIPMENT YEAR thDED DECEMatR 31, 1989 (thousands of Dollars)

A&fi tions Deduc t ions Balance at Charged to Removal Cost Balance at Beginning of income Net of Salvage End of Description Period Statement Other (a) Retirements Add /(Deduc t ) Period Utility Plants Electric Depreciation $1,076,432 S200,541 S1, 73 7 (S16,056) ($3,754 ) S1,260,900 Amortiention $3,326 S344 50 SO SO $3,670 Total Utility Plant $1,081,758 S200,885 (b) $1. 737 ($16,056) ($ 3,754 ) $1,?64,570 Other Property Depreciation $12,508 S1,435 (c) $0 ($20) (SB) $13,915 Total $1,094,266 $202,320 $1. 737 (516,076) ($3,762) 51,278,485 Naclear fuel - Amortigation $117,198 $$$,712 (d) 50 $0 SD $172,910

............ ............ ............ ............ ....tr ....s ............

(a) Accumulated depreciation charged to construction work in progress.

(b) Depreciation and amortization as reported in the Income Statement includes arproximately 58 mlLllon of amortiration of investment tax credits.

(c) Nonutitity plant expense charged to other income and deductions, twt.

(d) Charged to fuel and purchased power expense.

5-16

THE CLEVELAND ELECTRIC ILLUMINA11NG COMPANY AND SUBSIDIARifS SCHEDULE VI ACCUMULATED DEPRECI ATIDN AhD AMORTIZATION OF PRDPERTY, PLAhi AND EDUlFMENT YEAR ENDED DECEMBER 31, 1988 (Thousands of Dollars)

Additions Deduetions Balance at Charged to Removat Cost Betance at Beginning of inc ore Net of Salvage End of Descript i on Period Statement Other (a) Retirements Add /(Deduct) Period Utility Plent Electric Depreciation 5902,315 S192,354 51,700 (514,778) (53,159) 51,078,432 Amortiration $2,982 5344 50 50 SD S3,326 Total Utility Plant $905,297 $192,698 (b) 51,700 ($14,778) (53,159) $1,081,756 Other Property . Depreciation $11,834 51,274 (c) SO (5600) 50 $12,5 DS Total $917,131 $193,972 $1,700 ($15,378) ($3,159) 51,094,266 Nuclear Fuet Amortization $72,287 $44,911 (d) 50 50 SO S117,198 (a) Accunulated depreciation charged to construction work in progress.

(b) Depreciation and amortization as reported in the income Statement includes approximately 56 mit tion of amortiration related to terminated nuclear nienerating mits and $10 mittion of amortiration of investment tax credits resulting from the change in accounting for income taxes. The mamortized costs related to the termi-nated m its were recorded as deferred charges on the Balance Sheet. The December 31, 1988 balance of

$17.6 mittion in the def erred charge account was written of f at year end.

(c) lionutility plant expense charged to other income and deductions, net.

(d) Charged to fuel and purchased power expense.

S-17

THE CLEVELAND ELECTRIC ILLUM!kAf tkG COMPANY AhD SUBSIDI ARIES SCHEDULE Vil - GUARAN1EES OF SECURiflES OF OTHER ISSUERS TE AR ENDED DECEMBER 31, 1990 (Thousarris of Dot tars)

Prircipet Amount Guaranteed and Nane of lasuer of Outstanding Securities Guaranteed 11tte of Issue (a) and (b) hature of Guarantee Quarto Mining Company (b) Guaranteed Mortgage Bonds, Due 2000 s Series A 8.25% $786 Frincipal and Interest Series B 9.70% 767 Principal and Interest Series C 9.40% 3,b34 Principal and Interest Series D 12.625% 4,562 Principal and Interest Series EA 10.25% 851 Principal and Interest Series E8 11.70% 830 Principal and Interest Series EC 11.40% 4,152 Principal and Interest Series ED 14.625% 4,540 Principal and Interest Series FA 10.50% 654 Principal and Interest Series FB 11 . 75 % 207 Principal and Interest Series FC 11,40% B38 Principal and Interest Series G 9.05% 10,639 Principal and Interest Unsecured Note, Interest at prime (10%

at 12/31/90) plus 2%, Due 2000 2,603 Principal and Interest Equipment leases 7,543 Termination Value per Agreements 42,806 The Ohio Valley Coal Company First Mortgage N3tes Series D -8.00% Due 1991 to 1997 6, 750 Principal and Interest Teries E--10.25% Due 1991 to 1997 4,125 Principal and Interest Equipment leases 6,321 Stipulated Loss value per Agreements Term Notes -9.53% Due 1991 to 1996 3,193 Principal and Interest

- 10.85% Due 1991 to 1997 21,899 Principal and Interest 42,2B8 585,094 33422233 (a) None of the securities were owned by Cleveland Electric; none were held in the treasury of the issuer; and none were in default.

(b) Cleveland Electric and the other CAPCO Group Companies have agreed to guarantee severally, and not jointly, their proportionate shares of Quart-s Mining Company debt and lease obligations incurred while developing and equipping the mines. The amounts shown are Cleveland Electric's proportionate share of the total obligations.

5-18

THE CLEVELAND ELECTRIC ILLUMikATING COMPANY AND SUBS!DI ARIES I

l l SCHEDud V!li - VALUA110N AND QUALIFYlWG ACCOUNi$

FOR THE YEARS ENDED DECEMBER 31, 1990, 1989 Awo 1988 l

(Thousards of Dollars)

Atkiitions Deduetions Balance at Charged to Deduc tions Balance at Beginning Inccne from End of Description of Period S t at enent Other Reserves Other Period Reflected as Reductions to the Related Assets:

Acewulated Provision for uncollectible Accounts (Deduction f rom Amounts Due from Customers and Others) 1970 5926 515,207 (a) 51,628 (b) $15,935 (a)(c) $0 51,826 1989 $6,026 $5,742 (a) 51,062 (b) $11,904 (a)(c) 50 $926 1988 55,126 59,307 (a) $1,146 (t>) 59,553 (a)(c) SO 56,026 Reflected as Reserves on the Balance Sheet Reserve for Perry Unit 2 Allowance for funds used During Construction 199C $124,398 SO SO $0 50 $124,398 19L9 $124,398 50 SO SO $0 5124,398 1988 $102,903 $3 $21,495 (d) $0 50 $124,398 (a) Includes a provision and corresp nfing write off of uncollectible accounts of $5,597,000, 52,007,000 and 5864,000 in 1990, 1989 and 1988, respectively, relating to customers which qualify for the PUC0 mandated Percentage of income Payment Plan. Such uncollectible accounts are recovered through a separate PUC0 a; proved surcharge tarif f.

(b) Collection of accounts previously written off.

(c) Uncollectible accounts written off.

(d) Results from adoption of a new method of accounting for income taxes which requires the presentation of amo mts (previously stated on a net-of tax basis) on a pretax basis.

S-19

l THE CLEVELAND ELECTRIC ILLUMikAllkG COMPANY AhD SUBSIDI ARIES SCHEDULE IX - SHORT-TERM BORROWINGS FOR THE YEARS ENDED DECEMBER 31, 1990, 1989 AND 1988 (Thousands of Dollars)

Average Weig'ited Daily Average Average MaximLn Weighted Daily Balance Interest Amount Anuxnt Weighted 6t End Rate at Outstanding Outstanding Interest of End of During the During the kate During Category Period Feriod Period Feriod the Period Cocrercial Paper 1990 $87,110 0.5% $140,000 $87,584 (a) 8.7% (b) 19B? SD 0.0% 1% ,000 $5,534 (a) 9,8% (b) 1988 50 0.0% 5123,000 52),248 (a) 7.4% (b) s (a) Computed by dividing the total of the daily outstanding balances for the year by 365 days (366 for 1983).

(b) Computed by dividing total interest espense f or the year by the everage daily balance outstanding, S-20

THE CLEVELAND ELECTRIC JLLLMINATING COMPANY AND SUBSIDI ARIES SCHEDULE X . SUPPLEMENI ARY INCCME ST ATEMENT INFORMA110N FOR INE YEARS ENDED DECEMBER 31, 1990, 1989 AND 1988 (15ousaMs of Dollars)

Item 1990 1989 1988 Maintenance ard Repairs ..

Charged to operating Empenses $138,085 5126,778 $132,946 Taxes, Other Then Payroll and Income Taxes:

Charged to Operating Expenses:

Real ard Personal Property Taxes $106,776 $100,007 $104,601 Ohio State Excise Taxes $69,770 $63,870 561,990 Other $6,742 $6,476 56,307 Total Charged to operating Expenses $183,288 $170,353 5172,898 Total Charged to Nonoperating income $628 $668 $494 Total $183,9t6 *171,021 5173,392 S-21 I

THE TOLEDO EDISON COMPAhY SCHEDULE V - PROPERTY, PLANT AND EQUIPMEh1 YEAR ENOED DECEMBER 31, 1990 (Thousands of Dollars)

Balance at Retirements Balance at Beginning of Addi t ions or E nd of Classification Period at Cost Sales Other Per i od Utility Plant Electri:

Intangible $0 $3,536 $3 $0 $3,536 P r oduc t i on:

Steam $2B4,275 $7,142 ($6) 50 $291,411 Nuclear $ 1,673,840 $50,835 ($3,286) $0 $1,721,3S9 Other $6,708 $1B $0 $0 $6,726 Transmission $145,267 $1,647 ($33) 50 $146,831 Distribution $351,372 $16,142 ($726) $0 $366,783 General $70,829 $64 ($614) $0 $70,2 79 Total Utility Plant $2,532,291 $79,384 ($4,665) $0 $2,60 7. 010 Perry Unit 2 (a) $345,754 (52,069) $0 $0 $343,685 Construction Work in Progress SS4,586 $3,568 $0 $0 $93,154 haclear Fuel $382,729 $23,777 $0 $0 $406,506 Other Plant $3,342 $0 $0 ($39) $3,303 Total Property, Plant and Equipment $3,348,702 $109,660 ($4,665) ($39) $3,453,e58

........ ... x........... ............ ==....... 2. ..........s.

(a) Includes Perry Unit 2 AFUCC subsequent to July 1985. See Schedule V!!!.

S-22 I

THE TOLEDO EDl$0N C04PANY SCHEDULE V . PROPERTT, PLANT AND EQUIPMENT YEAR ENDED DECEMBER 31, 1989 (thousands of Dotters) tetirements Balance at Balonce et Beginning of Additions or End of Period at Cost Seles Other Period Ctessification ............ ............

Utility Plants Electric Produc ti on:

57,675 to 50 52SA ,275 steam 1276,400 31,597,457 SfS,760 ($12,377) to $1,673,640 Nuclear

$6,656 $52 $0 50 $6,708 Cther

($5,445) (53) 50 5145,267 T r ansmissi on 5150,715 511,625 ($369) $0 $351,372 Distribution 1540,116 567,583 53,254 (58) 50 $70.829 Generet ............

5106,121 ($12,757) 50 52,532,291 Total Utility Plant $2,418,927 52,628 SO $0 5345,754 Perry Unit 2 (a) 1343,126 Construction nork in 584,5 S6

$115,975 ($31,3f2) $0 $0 Progress

$21,239 $0 SO $382,729 huclear Fuet $361,490

$0 to $22 $3,342 other Plant S3,320 Total Property, P6 ant and

$98,596 (512,757) 522 53,548,702 Equipment $3,262,641

............ ....s s==..a ===ses s====

(a) Includes Perry Unit i AFUDC subsequent to July 1985. See $chedule Vill.

L S-23

=_ _-

THE TOLEDO EDISON COMPANY SCHEDULE V

• PROPERTY, PL ANT AND EQUIPALN1 YEAR ENDED DECEMBER 31, 1988 (thousands of Dollars)

Balance at Retirements Bal6nce at Beginning of Addit ions or End of Classification Period at Cost Sales Other Period Utility Plant Electric Productions steam 5273,783 S2, 95 3 ($1!6) 50 S276,400 Nuclear (b) $1,7BO,809 159,D84 (S242,436)(c) $0 51,597,457 Other $6,656 $0 50 50 56,656 Transmission (b) 5149,808 $1,532 ($625) SO 5150,715 Distribution $324,020 $19,411 ($3,315) 50 5140,116 General 565,435 13,823 (11,675) 50 $67,583 Total Utility Plant 52,600,511 586,803 (1245,387) $0 $2,438,927 Perry Unit 2 (a) $3D6,570 50 50 $36,556 (d) $343,126 Constructiort Work in Progress $67,704 548,274 50 50 $115,978 Nuclear Fuel 5333,802 527,688 50 50 5361,490 Other Plant $3,169 $174 ($23) 10 53,320 Total Property, Plant and Equipment $3,311,756 $162,939 ($248,410) $36,556 $3,262,B41 (a) Includes Perry Unit 2 AFuo subsequent to July 1985. See schedule vill.

(b) Includes reclassification of PUC0 ordered AFUDC reserve to a ref und obligation consistent with terms of the January 1989 PUC0 rate order.

(c) includes $242,080,000 of Puco ordered write off of Perry Unit 1 investment.

(d) Results primarily f rom adoption of a new method of accounting f or income taxes which requires the presentstion of amounts (previously stated on a net of tax basis) on a pretax basis.

S-24

i THE TOLED0 EDISON COMPANY l

SCMEDULE VI ACCUHULATED DEPRECI ATION AND AMORTIZATION OF PROPERTY, PLANT AND (QUlF%Ehi TEAR ENDED DECEMBER 31, 1990 (Thousands of Dollars)

Additions Deduetions Balance at Charged to Rem val Cost Balance at Begiming of inecme het of Salvage End of Period Statement Other Retirements Acki/(Dedac t ) Period Description Utility Plantt 51,842 (a) (54,665 ) W ,928 5645,298 Electric Depreciation $567,197 577.996 5895 50 SO So $895

. AmortiIation 50 578,891 (b) $1,842 t$4,665) 52,928 5646,193 Tctal Utility Plant $567,197

$1,217 $79 (c) ($17) SL $0 $1,279 Other Property . Depreciation

$78,970 $1,825 (54,665) 52,928 S647,472 Total 5568,414 537,122 (d) 50 50 50 $184,658 Nuclear Fuel . Amortization $147,536 (a) AcetmJlated depreciation charged to construction work in progress.

(b) Depreciation and amortitation as reported in the income Statement inclta$es amroximately $3 million of amortitstion of investment tax credits.

(c) Norutility plant expense charged to other income and ceductions, net.

(d) Charged to fuel and purchased power expense.

S-25 l

-" - _--.-_.__--m__m___ _____

m . . .

THE 10LEDD EDISON COMPAhY l SCHEDULE VI - ACCUMULATED CEPRECI AilDN AND AMORil2ATIDN OF PRDPERTY, PLANT AND EQUIPMENT ,

YEAR EkDED DECEMBER 31, 1989 (thousands of Dollars)

Addi t i ons Dedac t ions Balance at Charged to Removal Cost Balance at Beginning of I ncome het of Salvage End of Description Period S t a t enent Other (a) Retirements Add /(Deduc t ) Per i od Electric Utility Plant -

Depreciation $487,546 591,527 (b) $1,858 ($12,757) (5977) $567,*97 Other Prcperty - Depreciation $1,163 549 (c) 50 50 SO 11,217 Total $4SS,714 591,576 $1.858 (512,757) (1977) 5563,414

============ ==.s........ ==.......... ===......... ====........ ...,=== ....

NLetear Fuel Amortization $101,128 546,408 (d) $0 50 50 $147,536 43&338384232 3235338395f3 253323333883 WRESSSE5333s 893533333333 a3333EK33333 (a) Accumulated depreciation charged to construction worn in progress.

(b) Depreciation and amortization as reported in tb Income Statement includes approximately $4 million ;,f amortization of investment tax credits. -

(c) Nonutility plant expense charged to other income and deductions, net.

(d) Charged to fuel and purchased power expense.

S-26 g _ _ _ ___ . - _ _ _ _ - - - - - - - - - _-------- _ - -

. -.-. . . .-. .~.

THE ' 'LEDO EDISON COMPANY SCHEDULE VI ACCUMutATED DEPRECI AllDN AND AMJR112AllON OF PRDPERTY, PLANT AND EDulPMENT YEAR ENDED DECEM8ER 31,1988 (thousands of Dollars)

Addi ti ons Deduc t ions Charged to Removal Cost Balance a' Balance et Beginning of I nc ome het of Salvage End of Other (a) Retirements Add /(Deduct) Peri od Description Period Statement 1

Electric Utility Plant -

(51,831) )

5419,149 574,650 (b) 51,834 (56,256) $487.546 Depreciation

$0 ($20) (57) 11,168 Other Property Depreciation 31,146 549 (c)

(56,276) ($1,838) 548S,714 Total $420,295 574,699 $1.834 50 50 50 $101,128 Nuclear Fuel . Amortitation $68,756 $32,372 (d)

............ ....s ......

(a) Accumulated depreciation charged to construction work in progress.

- of (b) Depreciation and amortization as reported in the Income Statement includo approximately 53 mitt, amortization re'tated to terminated nuclear generating units and $3 mittion of amortization of investment tan credits resulting f rom the change in accounting for income teses. The unamortized costs related to the termi-nated units were recorded as deferred charges on the Balance sheet. The December 31, 1988 balance of

$10.2 million in the deferred charge account was written of f at year end.

(c) Nonutility plant expense charged to other income and deductions, r.et.

(d) Charged to fuel and purchased power expense.

S-27

Thi 10LEDO (CISDN COMPAkV

-SCHEDULt Vil + DVARAkitt$ OF SECutlitt$ OF Olkit ilSUtts YtAR INDID CIC!MBit 31, 1990 (thousands of Dollars)

Principel An(srit Guaranteed and Wome of lasuer of Dutstanding Securftles Cuaranteed fitte 9t issue (e) and (b) hature of Guarantee Guarto Mining Corpeny (b) t,uaNnteed Mortgage Bonds, Due 2000 Series A 8.251 4387 Principal and Interest series t 9.70% 378 Principal and Interest Series C 9.40% 1,B89 Principal and interest series 0 12.6254 2,248 erIncipet and Interest series (A 10.25% $11 Princitet and Interest Series (8 11.70% 498 Principal and Interest Series EC 11.40% 2,490 Princitet and Interest series ID 14.6254 2,723 Principal and Interest a

series FA 10.$0% 392 Principal and Interest Series 78 11.75% 124 Principal and interest Serfer FC 11.40% $03 Principel and Interest series C 9.0$4 6, 643 Principal and Interest unsecured hote, interest

.t prime (10% at 12/31/90) plus 25, Due 2000 1,$61 Principal and Interest (quipnent leaset 3,718 termination value per Agreements

$24,065 t

t (a) None of the securities were owned by Toledo (dison; none were held in the treasury of the issuer; and none were in default.

(b) fotedo (dison and the other CAPCO Group Companies have agreed to guarantee severet ty, and not jolntly, their proportionate sherss of Quarto Mining Company debt and lease obligattors incurred while developing and equlwing the mines. The amounts shown are Toledo (dison's proportionate share of the total obligations.

S-28 l

1 - . . .. -.-.. - . . - - - --- - - - - - - - - - - - - - - - - -- - - - - - - - - - - ' ~ "

l THI 10LEDO IDinDN COMeAhY SCN! DULL Vill . VALUAttok AWD QUAttifikt. ACCOUNil iDit THE ttAtt tubte DECEM61R 31,1990,1989 AWD 1968 (thousards of Dollars) 8ditions Dedxttml telai n at Charged to teduc t ions Salave at ]

leginning inc cce frca (nd of l Description of Period S t at teent Other Reserves Other Period )

1 l

Reflected as peductions to the teleted Assets: )

Accumulated Provision for Uncellectible Accounta (0eduetIon f rom Amunts Due ,

f rom Custonera ard Others) 1990 51,350 13,532 (a) 61,177 (b) 54,859 (a)(c) 50 51,200 1989 1975 53,681 (a) 1938 (b) 14,i'50 (a)(c) 50 $1,350 1988 1503 l),7e8 (a) 5945 lb) $4,241 (a)(c) 50 1975 Reflected as Reserves on the Balance Sheett Reserve for Perry Unit 2 At towance f or f uruis Used During Construction 1990 SS8,295 f,0 $0 $0 10 $t8,295 1989 558,295 10 $0 10 50 188,295 1968 $71,697 $0 $16.598 (d) SO $0 $88,295 (a) includes a provision ard corresponding wi tte of f of uncottectible accounts of $298,000, 5591,000 end

$1,139,000 In 1990,1989 and 1988, respectively, relating to custopers which Qualif y f or the PUC0 mndated Percentage of ineone Fayment Plan, such mcollectible accounts are recovered through a separate PUC0 approved surcharge tariff.

(b) Cot tection of accounts previously written of f.

(c) Uncottectible accounts written off.

(d) 8sb.lte f rom adoption of a new nethod of accounting for incere teses which requires the presentation of amounts (previously stated on a net of tas basis) on a pretaa basis.

S-29

- - - . .-.-.~.,-...,-: - - - - - _ - ~ . - - - - - . . - - _ _ . . - . -

THE TOLIDO EDI$0N CUMrAWV

$CHtDUtt IN * $NORT 1tRM BDRROWlhGt FOR ikt itAtt INDID DECEM6f t 31,1990,1989 AND 1988 (thousands of Dotters) '

Average Weighted Daily Average Average Maalpun WelDhted Dalty  ;

Balese interest Amount Amount We19hted at End Rate at Outstanding Outstanding Interest (

of Ind of During the During the kate During '

Category Period Perloc

• Period Period the Period l

Constercial Paper 1990 $23,200 9.1% $23.200 11,285 (a) 9.1% (b) 1989 SD 0.0% 10 SD (a) 0.0% (b) I 1988 10 0.0% 10 60 (a) 0.0% (b) i k

(a) Computed by dividing the total of the daily outstanding balances for the year by 365 days (366 for 1988).

(b) Computed by dividing total interest expense for the year by the average daily balance outstanding.

l t

P l

S-30 l

l

-,,_.,,_.m._ . . . , , . , . . . _ . , _ . ~ _ _ _ _ . . - _ _ , . . _ _ _ , , _ . - . , _ . - . _ - , , _ . - . . . - _ _ - . - . - - -

THE TOLIDO (Dil0W COMPAht SCktDULt X . $UttLtMih1Att thCOME $1AftMthf !klotuall0N f0R INE ttAtl (WDED DICEMstR 31,1990,1989 AWD 19f4 (thousands of Dollars)

Item 1990 1989 1988 Maintenance and Repa!rs ..

Charged to Operating tapenses $64,163 160,781 $66,622 e........... ............ ............

fanes, Other than toyrett and income f asest Charged to Operating Espenses West arv3 tersonal Proterty f ases $39,?04 536,470 541,064 Ohio 4 tate tacise fases $32,148 $?9,007 $29,654 other $2,325 51,902 $4,492 Total Charged to Orwreting tapenses $73,677 $67,379 875,210 total Charged to honoperating income

! Loss) 591 191 1103 Total 173,768 $67,470 $75,313 5-31

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

EIlllBIT INDF.X The exhibits designated with an asterisk (*) are flied herevith. The exhibits not so designated have previously been filed with the SEC in the file indi-cated in parenthesis following the description of such exhibits and are in-corporated heroin by reference.

COMMON EKillBITS (The following documents are exhibits to the reports of Centerior Energy, Cleveland Electric and Toledo Edison.)

Exhibit Number Document 10b(1)(a). CAPC0 Administration Agreement dated November 1, 1971, as of September 14, 1967, among the CAPCO Group members re-garding the organization and procedures for implementing the objectives of the CAPC0 Group (Exhibit $(p) Amendment No. 1, File No. 2-42230, filed by Cleveland Electric).

10b(1)(b) Amendment No. 1 dated January 4, 1974, to CAPC0 Adminis-tration Agreement among the CAPCO Group members (Exhibit 5(c)(3), File No. 2-68906, filed by Ohio Edison).

10b(2) CAPC0 Transmission Facilities Agreement dated November 1, 1971, as of September 14, 1967, among the CAPC0 Group members regarding the installation, operation and mainte-nance of transmission facilities to carry out the objec-tives of the CAPC0 Group (Exhibit 5(q), Amendment No. 1, File No. 2-42230, filed by Cleveland Electric).

10b(3) CAPCO Basic Operating Agreement as Amended September 1, 1980 among the CAPC0 Group members regarding coordinated operation of the members' systems (Exhibit 10.24, 1980 Form 10-K, File No. 1-956, filed by Duquesne).

10b(4) Agreement dated September 1, 1980 for the Termination or Construction of Certain Agreements by and among the CAPC0 Group members (Exhibit 10.25, 1980 Form 10-K, File No.

1-956, filed by Duquesne).

10b(5) Construction Agreement, dated July 22, 1974, among the CAPC0 Group members and relating to the Perry N:Klear Plant (Exhibit 5(yy), File No. 2-52251, filed by Toledo Edison).

10b(6) Contract, dated as of December 5, 1975, among the CAPC0 Group members for the construction of Beaver Valley Unit No. 2 (Exhibit 5(g), File No. 2 52996, filed by Cleveland Electric).

10b(7) Amendment No. 1, dated May 1, 1977, to Contract, dated as of December 5, 1975, among the CAPCO Group members for the construction of Beaver Valley Unit No. 2 (Exhibit 5(d)(4i, File No. 2-60109, filed by Ohio 1:dison).

10b(8) Contract, dated May 24, 1976, among the CAPCO Group membars for the operation of lieaver Valley Unit No. 2 (Exhibit 5(d)(4), File No. 2-56944, filed by Pennsylvania Pover).

E-1

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

E_xhibit Number Document .

3 l

10b(9) Amendment No. 1, dated May 1, 1977, tn Contract, dated Hay 24, 1976, among the CAPCO Group members for the opera-tion of Beaver Valley Unit No. 2 (Exhibit 5(d)(6), File No. 2-60109, ffled by Ohio Edison).

10b(10) Addendum No. 1, dated November 1, 1980, to Contract, dated May 24, 1976, as amended among the CAPCO Group members for the operation of Beaver Valley tinit No. 2 (Exhibit 10-9, File 90. 2-68906, filed by Ohio I.dison).

10b(11) Amendment No. 1, dated August 1, 1981, to CAPC0 Basic Operating Agreement as Amended September 1, 1980 among the CAPC0 Group members (Exhibit 10.27, 1981 Form 10 K, File No. 1-956, filed by Duquesne).

10b(12) Amendment No. 2, dated Septembet 1, 1982, to CAPC0 Basic Operating Agreement as Amended September 1, 1980 among the CAPCO Group members (Exhibit 10.29, 1982 Form 10-K, File No. 1-956, fAled by Duquesne).

10c(1) Par t i cipa tion Agreement, dated as of October 1, 1973, among Quarto, the CAPCO Group members, Energy Propertie$,

3 Inc., General Electric Credit Corporation, the Loan Participants listed in Schedules A and B thereto, Central  ;

National Bank of Cleveland, as owner Trustee, National '

City Bank, as Loan Trustee, and National City Bank, as ,

Bond Trustee (Exhibit $(z), N 1e No. 2-59794, filed by Toledo Edison). i 10c(2) Amendment No. 1, dated as of September 15, 1978, to Par-ticipation Agreement, dated as of October 1, 1973, among r

the same parties as Exhibit 10c(1) (Exhibit 5(e)(2) File No. 2-68906, Ifled by Pennsylvania Pover).

10c(3) Participation Agreement No. 2, dated as of August 1, 1974, '

-among the same parties as Exhibit 10c(1) (Exhibit 5(h)(2),  ;

File No. 2-53059, filed by Ohio Edison). '

10c(4) Amendment No. 1, dated as of September 15, 1978, to Par-ticipation Agreement No. 2, dated as of August 1, 1974,  !

among the same parties as Exhibit 10c(1) (Exhibit 5(e)(4),  !

File No. 2-68906, ffled by Pennsylvania Power).  ;

10c(5) Participation Agreement No. 3, dated at of September 15 t 1978, among the same parties an Exhibit 10c(1) (Exhibit l

5(uu), File No. 2-64609, filed by Toledo Edison).

10c(6) Participation Agreement No. 4 dated as of October 31, ,

1980, among Quarto, the CAPCO Group members, the Loan Par- >

ticipants listed in Schedule A thereto, and National City Bank, as Bond Trustee (Exhibit 10-16, File No. 2-68906, filed by Ohio Edison).

10c(7) Lease and Agreement, dated as of June 7, 1973 as amended and restated as of October 1, 1973, between Central-National Bank of Cleveland, as Trustce, and Quarto, to-

~

i gether with Guaranty, dated as october 1, 1973, with re-spect thereto by the CAPCO Group members (Exhibit 5(aa),

File No. 2-59794, filed by Toledo Edison).

l E- 2

Exhibit Number Document 10c(8) Trust Indenture and Hortgage, dated as of October 1, 1973, betveen Quarto and National Clty Bank, as Bond T:ustee, together with Guaranty, dated as of October 1,1973, with respect theteto by the CAPCO Group members (Exhibit 5(bb),

File No. 2-59794, filed by Toledo Edison).

10c(9) Amendment No. 1, dated as of August 1, 1974, to Trust In-denture and Mortgage, dated as of October 1, 1973, between Quarto and National City Bank, as Bond Trustee, together i vith Amendment No. 1, dated August 1, 1974, to Guaranty, dated as of October 1, 1973, with respect thereto by the CAPCO Group members (Exhibit 5(L)(2), File No. 2-53059, ffled by Ohio Edison).

10c(10) Amendment No. 7, dated as of September 15, 1978, to Trust Indenture and Mortgage, dated as of October 1, 1973, as amended, betveen Quarto and National City Bank, as Bond ,

Trustee, togethet vith Amendment No. 2 dated as of September 15, 1978, to Guaranty, dated as of October 1, 19 D , with respect thereto by the CAPCO Group members (Exhibits 5(e)(11) and 5(e)(12), File No. 2-68906, filed by Pennsylvania Pover).

10c(11) Amendment No. 3, dated as of October 31, 1980, to Trust ,

Indenture and Mortgage, dated as of October 1, 1973, as amended, between Quarto and National City Bank, as Bond  :

Trustee (Exhibit 10-16. File No. 2-68906, filed by Ohio Edison).

Amendment No. 3, dated as of October 31, 1980, to 10c(12) i Guaranty, dated as of October 1, 1973, with respect to the CAPCO Group members (Exhibit 10-18, File No. 2-68906, '

filed by Ohio Edison).

10c(13) Open-End Mortgage, dated as of October 1, 1973, between Quarto and the CAPCO Group members and Amendment No. I

• thereto, dated as of September 15, 1978 (Exhibit 10-5 File No. 2-68906, ilied by Ohio Edison).

10c(14) Agreement, dated October 20, 1981, among the CAPC0 Croup members regarding the use of Quarto coal at Hansfield Units 1, 2 and 3 (Exhibit 10(ff), 1981 Form 10-K, File No.

• 1-3583, filed by Toledo Edison).

Agreement, dated July 1, 1987, among the CAPC0 Group 10c(15) members reallocating the tights and liabilities of the -

members with respect to certain uranium supply contracts (Exhibit 10(if), 1982 Form 10-K, File No. 1-3583, filed by  !

Toledo Edison).

10d(1)(a) Form of Collateral Trust Indentuie among CTC Beaver Valley Funding Corporation, Cleveland Electric, Toledo Edison and Irving Trust Company, as Trustee (Exhibit 4(a), File No. i 33-18755, filed by Cleveland Elettric and Toledo Edison),

10d(1)(b) Form of Supplemental Indenture to Collateral Ttust In-denture, including form of Secuted Lease Obligation Bond (Exhibit 4(b), File No. 33-11I755, filed by Cleveland Electric and Toledo Edison).

E-3 1

n -e - ,.s w ae mm wi . ware e.e,e-w+. y. , w , y,vr y .__ee-e - w r~ y- e t-C-r*g-wa  ? -vr+remy w m w w w-* *Wr*--

B Exhibit Number Document

• 10d(2)(a) Forn, of Collateral Trust Indenture among CTC Hansfleid Funding Corporation, Cleveland Electtic, Toledo Edison and IBJ Schrode: Bank & Trust Company, as Trustee (Exhibit 4(a), File No. 33-20128, filed by Cleveland Electric and Toledo Edison).

10d(2)(b) Fotm of Supplemental Indenture to Collateral Trust In-denture, including forms of Secuted Lease obligation Bonds (Exhibit 4(b), File No. 33-20128, filed by Cleveland Llectric and Toledo Edison).

10d(3)(a) Form of Facility Lease dated as of September 15, 1987 bn-tveen The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 with the limited partnership Ovner Participant named therein, Lessor, and Cleveland Electric and Toledo Edison, Lessees (Exhibit 4(c), File No. 33-18755, filed by Cleveland Electric and Toledo Edison).

'Od(3)(b) Fotm of Amendment No, I to Farility Lease constituting Exhibit 10d(3)(a) above (Exhibit 4(e), File No. 33-18755, filed by Cleveland Electric and Toledo Edison).

10d(4)(a) Form of Facility Lease dated as of September 15, 1987 be-tween The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 vith the corporate Ov n e'.- Patticipant named therein, Lessor, and Cleveland Ele:tric and Toledo Edison, Lessees (Exhibit 4(d), File No. 33-18755, filed by Cleveland Electric and Toledo Edison),

10d(4)(b) Form of Amendment No. I to Facility Lease constituting Exhibit 10d(4)(a) above (Exhibit 4(f), File No. 33-18755, filed by Cleveland Electric and Toledo Edison).

10d(5)(a) Form of Facility Lease dated as of September 30, 1987 be-tveen Heridian Trust Company, as Ovnes: Trustee under a Trust Agreement dated as of September 30, 1987 with the Ovner Participant named therein, Lessor, and Cleveland Electric and Toledo-Edison, Lessees (Exhibit 4(c), File No. 33-20128, filed by Cleveland Electric and Toledo Edison).

10d(S)(b) Form of Amendment No. 1 to the Facility Lease constituting Exhibit 10d(5)(a) above (Exhibit 4(f), File No. 33-20128, filed by Cleveland Electric and Toledo Edison).

10d(6)(a) Form of Participation Agreement dated as of September 15, 1987 among the limited partnership 0vner Participant named therein, the Original Loan Participants listed in Schedule 1 thereto, as original Loan Participants, CTC Beaver Valley Funding Corporation, as Funding Co poration, The First Natior al Bank of .Boston, as owner Trustee. Irving Trust Company,- as- Indenture . Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit 28(a),

File No. 33-18755, filed by Cleveland Electric and Toledo Edison).

10d(6)(b) Form of Amendment No. I to Partiripadon Agreement consti-tuting Exhibit 10d(6)(a) above (Exhibit 28(c), File No.

33-18755, filed by Cleveland Elertric and Toledo Edison).

E-4

Exhibit Numb 2r Document 10d(7)(a) Form of Participation Agreement dated as of September 15, 1987 among the corporate owner Participant named therein, the Original Loan Participants listed in Schedule 1 thereto, as Original Loan Participants, CTC Beaver Valley Funding Corporation, as Funding Corporation. The First National Bank of Boston, as owner Trustee. Irving Trust Company, as Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit 28(b), File No.

33-187$$, filed by Cleveland Electric and Toledo Edison). l Form of Amendment No. 1 to Participation Agreement consti-10d(7)(b) tuting Exhibit 10d(7)(a) above (Exhibit 28(d), File No.

33-18755, filed by Cleveland Electric and Toledo Edison).

10d(8)(a) Form of Participation Agreement dated as of September 30, 1987 among the Owner Participant named therein, the Origi-nal Loan Participants listed in Schedule 11 thereto, as Original Loan Farticipants CTC Hansfield Funding Corpora-tion, Heridian Trust Company, as owner Trustee. IBJ Schroder Bank 6 Trust Company, as Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit -

28(a), File No. 33-20128, filed by Cleveland Electric and Toledo Edison).

10d(8)(b) Form of Amendment No. I to the Participation Agreement .

constituting Exhibit 10d(8)(a) abovc (Exhibit 28(b), File No. 33-20128, filed by Cleveland Electric and Toledo Edison).

10d(9) Form of Ground Lease dated as of September 15, 1987 be-tween Toledo Edison, Ground Lessor, and The First National Bank of Boston, as owner Trustee under a Trust Agreement dated as of September 15, 1987 vith the owner Participant named therein, Tenant (Exhibit 28(e), File No. 33-18755, filed by Cleveland Electric and Toledo Edison).

10d(10) Form of Site Lease dated as of September 30, 1987 between Toledo Edison, Lessor, and Hesidian Trust Company, as Ovner Trustee under a Trust Agreement dated as of September 30, 1987 with the Ovner Participant named therein, Tenant (Exhibit 28(c), File No. 33-20128, filed by Cleveland Electric and Toledo Edison).

10d(11) Form of site Lease dated as of September 30, 1987 between Cleveland Electric, Lessor, and Herldlan Trust Company, as owner Trustee under a Trust Agreement dated as of September 30, 1987 vith the Owner Participant named therein, Tenant (Exhibit 28(d), File No. 33-20128, filed by cleveland Electric and Toledo Edison).

10d(12) Form of Amendment No I to the Site Leases constituting Exhibits 10d(10) and 10d(11) above (Exhibit 4(f), File No.

33-20128, filed by cleveland Electric and Toledo Edison).  ;

E-5

I

. t Exhibit Number Document , L 10d(13) Form of Assignment, Assumption and Further Agreement dnted as of September 15, 1987 among The First National Bank of Boston, as Ovner Trustee under a Trust Agreement dated as of -September 15, 1987 vith the Ovner Participant named therein, Cleveland Electric, Duquesne, Ohio Edison, Pennsylvania Power and Toledo Edison (Exhibit 28(f), File '

!!o. 33-18755, tiled by cleveland Electric and Toledo Edison).  ;

10d(14) Form of Additional Support Agreement dated as of September 15, 1987 between The First National Bank of  ;

Boston, as Ovner Trustee under a Trust Agreement dated as  :

of September 15, 1987 with the Owner Participant named ,

therein, and Toledo Edison (1:xhibi t 28(g), File No.  :

33-18755, filed by Cleveland Electric and Toledo Edison). '

' 10d(15) Form of Support Agreement dated as of September 30, 1987 between Meridian Trust Company, as Ovner Trustee under a Trust- Agreement dated as of September 30, 1987 vith the  ;

Ovner Participant named there, Toledo Edison, Cleveland ^

Electric, Duquesne, Ohio Edison and Pennsylvania Power (Exhibit 28(e), File No. 33-20128, filed by Cleveland  ;

Electric and Toledo Edison). -

10d(16) Form of Indenture, Bill of Sale, Instrument of Transfer and Severance Agreement dated as of September 30, 1987 .

between Toledo Edison, Seller, and The First National Bank I of Boston, as Owner Trustee-under a Trust Agreement dated

-as of. September- 15, 1987 with the Ovner Participant named therein Buyer (Exhibit 28(h), File No. 33-18755, filed by '

Cleveland Electric and Toledo Edison).

10d(17) Form of Bill of Sale, Instrument of Transfer and Severance Agreement dated as of September 30, 1987_ between Toledo Edison, Seller, and Heridian Trust Company, as Ovner

• Trustee under a Trust Agreement dated as of September ?O, 1987 with the Owner Participant named therein, Buyer (Exhibit 28(f), File No. 33-20128, filed by Cleveland Electric and'Teledo Edison),

10d(18) Form of Bill of Sale, Instrument of Transfer and Severance Agreement dated as of_ September 30, 1987 between Cleveland Electric, Seller, and Meridian Trust _ Company, as. Ovner Trustee -under a-Trust Agreement dated as of September 30, i 1987 vith- the Owner Participant named therein, Buyer (Exhibit 28(g), File No. 33-20128,: filed by Cleveland t Electric and Toledo Edison),

18 Letter regarding change-in accounting principles (Exhibit '

18, June 30, 1988 Form 10-0, File Nos. 1 - 9 *. 30, 1-2323 and i 1-3583).- 1 28(a) Form 111K Annual _ Report of the_Centerior Energy Corpo-ration Employee Savings Plan for the fiscal year ended December 31, 1990 (to be filed.by amendment).

E-6

. au _. _ _-. _ _ _ _ _ _ _ _ ..

CENTERIOR ENERGY EXillBITS Exhibit Number Document .

1 3a Amended Articles of Incorporation of Centerior Energy ef-fective April 29, 1986 (Exhibit 4(a), File No. 33-4790).

3b Regulations of Centerior Energy effective April 28, 1987 i (Exhibit 3b, 1987 Form 10-K, File No. 1-9130).

10a

• Indemnity Agreements between Centerior and certain of its current directors and officers.

10e(1) Consulting Agreement, dated February 1, 1989, with R. M. Ginn pursuant to which he is to provide consulting services to Centerior for the peilod ha ch 1, 1989 through February 28, 1990 (Exhibit 10e(1), 1988 Form 10-K, File No. 1-9130).

10e(2) Employment and Consulting Agreement, dated November 30, 1989, vith P. M. Smart regarding his employment with Toledo Edison through August 31, 1990 and his providing consulting services to Centerior and Toledo Edison for the period September 1, 1990 through January 31, 1994 (Exhibit 10e(2), 1989 Form 10-K, File No. 1-9130).

22 List of subsidiaries (Exhibit 22, 1986 Form 10-K, File No.

1 9130).

24a

• Consent of Independent Accountants.

24b

• Consent of Counsel for Centerior Energy.

25 *Fovers of Attorney and certified resolution of Centerior Energy's Board of Directors authorizing the signing on behalf of Centerior pursuant to a power of attorney.

C1.EVEIAND El.ECTRIC EIllIBITS Exhibit Number Document 3a Amended Articles of Incorporation of Cleveland Electric, effective October 30, 1987 (Exhibit 3 September 30, 1987 Form 10-0, File No. 1-2323).

3b

• Regulations of Cleveland Electric, dated April 29, 1981, as amended effective October 1, 1988 and April 24, 1990.

E-7

Exhibi( Number- Document

• Ab(1) Hortgage -and Deed of Trust betveen Cleveland Electric and 3

Guaranty Trust Company of New York (now Horgan Guaranty Trust Company of New York), as Tiustee, dated July 1, 1940 (Exhibit 7(a), File No. 2-4450).

Supplemental Indentures between cleveland Electric and the Trustee, supplemental to Exhibit 4b(1), dated as follovst Ab(2) July 1, 1940 (Exhibit 7(b), File No. 2-4450).

4b(3) August 18, 1944 (Exhibit 4(c), File No. 2-9887).

4b(4) December 1, 1947 (Exhibit 7(d), File No. 2-7306).

4b(5) September 1, 1950 (Exhibit 7(c), File No. 2-8587).

Ab(6) June 1, 1951 (Exhibit 7(f), File No. 2-8994).

4b(7) Hay 1, 1954 (Exhibit 4(d), File No. 2-10830).

4b(8) March 1, 1958 (Exhibit 2(a)(4), File No. 2-13839).

Ab(9) April 1, 1959 (Exhibit 2(a)(4), File No. 2-14753).

Ab(10) December 20, 1967-(Exhibit 2(a)(4), File No. 2 30759).

4b(11) January 15, 1969 (Exhibit 2(a)(5), File No. 2-30759).

4b(12) November 1, 1969 (Exhibit 2(a)(4), File No. 2-35008).

4b(13) June 1, 1970 (Exhibit 2(a)(4), File No. 2-37235).

-4b(14) November 15, 1970 (Exhibit 2(a)(4), File No. 2-38460).

4b(15) May 1, 1974 (Exhibit 2(a)(4), F11e No. 2-50537).

Ab(16) April 15, 1975 (Exhibit 2(a)(4), File No. 2-52995).

Ab(17) April 16, 1975 (Exhibit 2(a)(4), File No. 2-53309).

14b(18) Hay 28, 1975 (Exhibit 2(c), June $, 1975 Form 8-A, File No. 1-2323).

4b(19) February 1, 1976 (Exhibit 3(d)(6), 1975 Form 10-K, File No. 1-2323).

4b(20) November 23, 1976 (Exhibit 2(a)(4), File No. 2-57375).

4b(21) July 26, 1977 (Exhibit 2(a)(4), File No. 2-59401). '

i 4b(22) September 27, 1977 (Exhibit 2(a)(5), File No. 2-67221).  ;

t l

4b(23) May 1, 1978 (Exhibit 2(b), June 30, 1978 Form 10-0, File -

No. 1-2323).

4b(24) September 1, 1979 (Exhibit 2(a), September 30, 1979 Form 10-0, File No. 1-2323).

4b(25) April 1, 1980 (Exhibit 4(a)(2), September 30, 1980 Form 10-0, File No. 1-2323).

4b(26) April 15, 1980 (Exhibit 4(b), September 30, 1980 Form 10-0, File No. 1-2323).

4b(27) Hay 28, 1980 (Exhibit 2(a)(4), Amendment No. 1, File No.

2-67221).

4b(28) June 9,-.1980 (Exhibi t 4(d), Sept ember 30, 1980 Form 10-0, File No. 1-2323).

4b(29) December 1, 1980 (Exhibit 4(b)(79), 1980 Form 10-R, File No.-1-2323).

Ab(30) July 28, 1981 (Exhibit 4(a), September 30, 1981, Form

- 10-0, Flie-No.'1-2323).

[ 4b(31) August 1.-1981 (Exhibit 4(b), September 30, 1981, Form ',

10-0, File No. 1-2323).

4b(32) March 1, 1982 (Exhibit 4(b)(3), Amendment No. 1, File No.

2-76029).

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

Exhibit Number Document 4b(33) July 15, 1982 (Exhibit 4(a), September 30, 1982 Form 10-0, File No. 1-2323).

4b(34) September 1, 1982 (Exhibit 4(a)(1), September 30, 1982 Form 10-0 File No. 1-2323).

4b(35) November 1, 1982 (Exhibit 4(a)(2). September 30, 1982 Form 10-0, File No. 1-2323).

4b(36) November 15, 1982 (Exhibit 4(b)(36), 1982 Form 10-K, File No. 1-2123).

4b(37) May 24, 1983 (Exhibit 4(a), June 30, 1983 Form 10-0. File No. 1-2323).

4b(38) May 1,1984 (Exhibit 4 June 30,1984 Form 10-0, File No.

1-2323).

4b(39) May 23, 1984 (Exhibit 4, May 22, 1984 Form 8-K, File No.

1-2323).  !

4b(40) June 27, 1984 (Exhibit 4, June 11, 1984 Form 8-K, File No.

1-2323).

Ab(41) September 4, 1984 (Exhibit 4b(41), 1984 Form 10-K, File No. 1-2323).

4b(42) November 14, 1984 (Exhibit 4b(42), 1984 Form 10-K, File No. 1-2323).

4b(43) November 15. 1984 (Exhibit 4b(43), 1984 Form 10-K, File No. 1-2323).

4b(44) April 15, 1985 (Exhibit 4(a), May 8, 1985 Form 8-K, File No. 1-2323).

4b(45) May 28, 1985 (Exhibit 4(b), May 8, 198$ Form 8-K, File No.

1-2323).

4b(46) August 1, 1985 (Exhibit 4. September 30, 1985 Form 10-0, File No. 1-2323).

4b(47) Septen.ber 1,1985 (Exhibit 4, September 30, 1985 Form 8-K, File No. 1-2323).

4b(48). November 1, 1985 (Exhibit 4, January 31, 1986 Form 8-K, .

File No. 1-2323). l 4b(49) April 15, 1986 (Exhibit 4. March 31, 1986 Form 10-0, File No. 1-2323).

4b(50) May 14, 1986 (Exhibit 4(a), June 30, 1986 Form 10-0, File No. 1-2323).

4b($1) May 15, 1986 (Exhibit 4(b), June 30, 1986 Form 10-0. File No. 1-2323).

Ab(52) February 25, 1987 (Exhibit 4b(52), 1986 Form 10-K, File No. 1-2323).

4b(53) October 15, 1987 (Exhibit 4, September 30, 1987 Form 10-0, '

File No. 1-2323),

4b(54) February 24, 1988 (Exhibit 4b(54), 1987 Form K, File No. 1-2323).

4b(55) September 15,1988 (Exhibit 4b('i5),1988 Form 10-K, File No. 1-2323).

4b(56) May 15, 1989 (Exhibit 4(a)(2)(1), File No. 33-32724).

4b(57) ' June 13, 1989 (Exhibit 4(a)(2)(ll), File No. 33-32724).

4b(58) October 15, 1989 (Exhibit 4(a)(2)(iii), File No.

33-32724).

4b(59) January 1, 1990 (Exhibit 4b(59), 1989 Form 10-K, File No.

1-2323).

E-9

4 Exhibit Number Document '

i

}

4b(60) June 1, 1990 (Exhibit 4(a), September 30, 1990 Form 10-0, J

File No. 1-2323).

Ab(61) August 1, 1990 (Exhibit 4(b). September 30, 1990 Form 10-0. File No. 1-2323).

, 10a Indemnity Agreements betveen Cleveland Electric and cer- I tain of its current directors (Exnibit 10a, 1988 Form {

10-K, File No. 1-2323).

10a(1) l Key Employee incentive Stock Flan (Exhibit 4(d), File No. '

2-37309).

10a(2) 1978 Key Employee Stock option Flan (Exhibit 1. File No.

2-61712).

22 List of subsidiaries (Exhibit 22, 1986 Form 10-K, File No. '

1-2323).

24a

• Consent of Independent Accountants.

24b I

• Consent of Counsel for Cleveland Electric.

25 *Fovers of Attorney and certified resolution of Cleveland Electric's Board of Directors authorizing the signing on behalf of Cleveland Electric pursuant to a pove'. of attorney. ,

TOLEDO LDISON EXilllllTS Exhibit Number Document 3a Amended Articles of Incorporation of Toledo Edison effec-tive September 25, 1986 (Exhibit 3a, 1986 Form 10-K, File No. 1-3583).

4 3a(1) Certificate of Amendment effective July 31, 1987 to Amended Articles of Incorporation of Toledo Edison (Exhibit 3a(1), 1988 Form 10-K, File No. 1-3583).

3b

• Code of Regulations of Toledo Edison dated January 28, 1987, as amended effective July 1 and October 1, 1988 and April 24, 1990.

4b(1) Indenture, dated as of April 1,1947, between the Company-and The Chase National Bank of the City of New York (nov The Chase Manhattan Bank (National Association)) (Exhibit 2(b), File No. 2-26908).

Supplemental Indentures -between Toledo Edison and the Trustee, Supplemental to Exhibit 4b(1), dated as follows:

i E-10 s

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

_ - _ .-. _ _ _ . _ _ ~ _ _._._ __.-____ ___ _ _

l l

Exhibit Number Document 4b(2) September 1, 1948 (Exhibit 2(d), File No. 2-26903).

4b(3) April 1, 1949 (Exhibit 2(e), File No. 2-26908).

4b(4) December 1, 1950 (Exhibit 2(f), File No. 2-26908).

4b(5) Hatch 1, 1954 (Exhibit 2(g), Flie No. 2-26908).

Ab(6) February 1, 1956 (Exhibit 2(h), File No. 2-26908). l 4b(7) May 1, 1958 (Exhibit 5(g), File No. 2-59794).  !

Ab(8) August 1, 1967 (Exhibit 2(c), File No. 2-26908).

4b(9) November 1, 1970 (Exhibit 2(c) File No. 2-38569).

4 b(l'. ) August 1, 1972 (Exhibit 2(c). File No. 2-44873).

4b(11) November 1, 1973 (Exhibit 2(c) File No. 2-49428).

4b(12) July 1, 1974 (Exhibit 2(c) File No. 2-51429).

4b(13) October 1, 1975 (Exhibit 2(c), Flie No. 2-$4627).

4b(14) June 1, 1976 (Exhibit 2(c), File No. 2-56396).=

4b(15) October 1, 1978 (Exhibit 2(c), File No. 2-62568).

4b(16) September 1, 1979 (Exhibit 2(c), File No. 2-65350).

4b(17) September 1, 1980 (Exhibit 4(s), File No. 2-69190).

Ab(18) October 1, 1980 (Exhibit 4(c). File No. 2-69190).

4b(19) April 1, 1981 (Exhibit 4(c) File No. 2-71580).

4b(20) November 1, 1981 (Exhibit 4(c), lile No. 2-74485).

4b(21) June 1, 1982 (Exhibit 4(c), File No. 2-77763). I 4b(22) September 1, 1982 (Exhibit 4(x), File No. 2-87323). l 4b(23) April 1, 1983 (Exhibit 4(c), March 31, 1983 Form 10-0, File No. 1-3583). l 4b(24) December 1, 1983 (Exhibit 4(x). 1983 Form 10-K, File No. l 1-3583). ,

4b(25) April 1, 1984 (Exhibit 4(c) File No. 2-90059).

4b(26) October 15, 1984 (Exhibit 4(r), 1984 Totm 10-K, File No.

1-3583). ,

4b(27) October 15, 1984 (Exhibit 4(aa), 1984 Form 10-K, File No.

1-3583).

Ab(28) August 1,1985 (Exhi' sit 4(dd), File No. 33-1689).

4b(29) August 1, 1985 (Exhibit 4(ee), File No. 33-1689).

4b(30) December 1,1985 (E;;hibit 4(c) File No. 33-1689).

4b(31) March 1, 1986 (Exhibit 4b(31), 1986 Form 10-X, File No.

1-3583).

4b(32) October 15, 1987 (Exhibit 4, September 30, 1987 Form 10-0, File No. 1-3583).

4b(33) September 15, 1988 (Exhibit 4b(33). 1989 Form 10-K, File No. 1-3583).

4b(34) June 15, 1989 (Exhibit 4b(34), 1989 Form 10-K, File No.

1-3583).

4b(35) October 15, 1989 (Exhibit 4b(35), 1989 Form 10-K, File No.

1-358J). '

4b(36) Hay 15, 1990 (Exhibit 4, June 30, 1990 Form 10-0, File Ho. ,

1-3583).

10a Indemnity Agreements between Toledo Edison and certain of its current diretors (Exhibit 10a, 1988 Form 10-K, File No. 1-3583).

E-11

Exhibit !Jumber Document

• 10e(2) Employment and consulting Agreement, dated tJnvemhet 30, i 1989, with P. M. Smart regarding his employment with Toledo Edison through August 31, 1990 and his ptoviding consulting services to Centerior and Toledo Edison for the period September 1, 1990 through January 31, 1994 (Exhibit 10e(2), 1989 rot m 10 K, File IJo,1-9130).

24a

• Consent of Independent Accountants.

24b

• Consent of Counsel for Toledo Edison.

25 *Povers of Attetney and cettifled iesolution et Toledo Edison's Boatd of Ditectors authorizing the signing on behalf of Toledo Edison putsuant to a power of attorney.

28(b) Form 11-K Annual Report of th9 Toledo Edison Savings incentive Plan for the fiscal year ended December 31, 1990 (to be filed by amendment).

Pursuant to Paragraph (b)(4)(iii)(A) of Item 001 of Pegulation S-E, the Regis-trants have not filed as an exhibit to this Form 10-K any instrument with respect to long-term debt if the total amount of setutitics authorized there-under does not exceed 10% of the total assets of the ipplicable Registrant and its subsidiaries on a consolidated basis, but each hereby agrees to furnish to the Securities and Exchange Commission on request any such instruments.

Pursuant to Rule 14n-3(b)(10) under the Securities Exchange Act of 1934, copies of exhibits filed by the, Registrants with this Fotm 10-K vill be fut-nished by the Registrants to share ovners upon vritten request and upon re-ceipt in advance of the aggregate fee for preparation of such exhibits at a rate of S.25 per page, plus any postage or shipping e,.penses which vould be incurred by the Registrants.

I E-12 i

n

._....._J TO: LIDO EJ:: SON COM?ANY 2990 ANNUAL REPORT A

Subsidiary of Centerior Energy Corporation

-,7 7

.....__f TO:LEJO

IJISON CON ?ANY 2990 ANNUAL REPORT A

Subsidian' of Centerior Energy Corporation l

d CONTENTS 1 About 'Eledo Edison 1 Directors 1 Officen 2 lleport of Independent l'ul> lie Accountants 3 Summary of Significant Auonntingl'olicies 5.\lillblgelnent's Illianei.ll Anal) sis, Financial Statements and Notes 22 l'inancial and Statistical lles iew 24 investor infonnation

, Al otri TOLici)o EniSox DilticcioitS The Conyuny, .i w holly ou ned suirsiduty lloherf J. l'atling, l' resident aint Chief of Centenot l'neigy Corporation, pioudes Operating Officer of Centeiio 1:ncrg) eles tiic sen it e to about 760,000 people in Corpot.itian .nul Centeriot Senit e Conipatn.

a :,;00-squate inile area of notthwestein ohio, induding the City of 'liiledo. 'I he itic hard A. .\hIlcr. Chainnan and Chicf Company aho prosides elet tric encigs at ISet utise ()f fa er of Centerior l'.ncigs w holesale to 13 inunitipally ou ned Corporation and Centenor Senice Coinpain.

distiihntion 9 stetus and one rural elet tsie (ooperatise distohntion sptetu in its senite Ia rnan C. l'hillips, Chainnan and Chief area. The Company's 2,;00 einplo>ces sene inecutisc offiter of the Compan),l'icsident ahotlt 2h4,0(10 tibloiners, ggj {hjp((3pt g ,jgp gj{g py 4,['l'}g.

e Cles cland I let tiie ill.tnunating Company Exitctri tvi: OFI'ICl?S and lact utise Vite l' resident of Centenor The 'loledo Ednon Company linergv Cutpotation.

300 Stadison .b enue U"nald ll S.aunden, I,innknt of the

~li>ledo,01143600001 (419):49.;non Compan> and Vite l'iesident of Centeriot Sen ice Company.

OlticlCI llS Chainnan and Cluef ISet utne offaer . . Isin.m C. l'inibl>s l' resident . l)onald 11. Saurniers Viec l'icsident & Chief Fountial Of fu er . Edcar ll. .\laucain Vit e l'reudeni . l' red J. l ange, Jr.

Contioller . . l'aul G. Ihnhv

'Iteasurer .Gan Af. llan kirnon Scuetary . li Ia le l'epin

RTHUR REPORT OF lNDEPENDENT Puouc ACCOUNTAMS - NDERSEN -

Io the Share OAners of 4 ne meda d, son umpan,.

! We haw e aud ted the acc ompang og tata'x e sheet a'd in out op*00 the tsum-ul sta' tant nts u tened ta statenient of cumulathe prebstred and peeterence atu e (vesent ta fl, in a4 mah nal f er pe; ts the stock of The Toieda Ed son Compan, (a Ahany owned financui p; sten et T he 10:edo I deon Company as of sutsidiary of Centenor lhergy Corporabon) as of Dec en ber 31 1930 and 19tO and the resu'ts of its

()ec ember 31. 1990 and 1989_ and the related operabans and ,ts cash hows for eac h of the three statements of inc ome retained eaqungs and cash wars in the penDd enit d Decetrber 31 1990 in hoAS tot caCh of the itiree years in itie peral cridad contornut3 A ,t h ,enerah, ac c epted ac c ouritinc)

December 31 1990 These imanaal statements a'e pnnc p es the respOns.bd ty Qt the CornJQny s tilana]erigent O;;r A9 d:q(yggd further m the Summat p O! bgnkant respons tuty is to e. press an opinion on the t Acc 0:intaq PW ms and hote: 7 and 12 a change f nanaal staiements t>ase:1 on our a4ts w as m.tle in tht mc thxn of ac c ount ng for mg ome We conducted our aud ts in accardanc e with ta.es and untJed re.enut t m inB9 retroa-~tne 13 genera:!y accepted aud:teng standards ThoSe Mnuar i 1.1988 Stdodards re(pre that we plan and pertorrn the and t to As d.scus(ed f urther in Note 3(c ) . the f uture of obta'n re3SOnable JS5uf anCe about 6hether the perry Un t 2 is undm:ded Cowrochon has been financial statements are free of matenal nnistatement suspended on e Ju!y 1985 Vanous options are teng An aud 1 includes e(amarung on a test taasis. ( sidence snr.dered, includ ng retunong constru bon or sup;>ortpq the amounts and d sclotures in the financia! cancehng me un,t Yanagement r. a n gge no statements An adt also includes assewng the anuf ance Ahr n it ewt puty Un t 2 Act go in service accounting prinOpleS used and signiflCant eshmate5 of Aht ther the con pan, , Gestment in that un i and made by management as well as evaluating the oseran a return thereon aW (J!anat4 t>e re 0,ved finanaat staternent presentat an We bebeve that our aud ts pro.ide a reasonalde bas s for our op:non Clevcland Onio I ebru3ry 12 1991 Arthu' Andef Rn & CO D

- ~ - - - ---- - - - - - - , - . - . - - - - - - - - _ _ _ _ _ _ _ _ _ , _ _ _ _ , _ _ _ _ , , , _ _ _ _ , _ _ _ _ , , _ , , _ _ _ _ ___ _

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES GENERAL lac tot in s mah rn+ La i em m. muitotanato rnef met T he hoeda [ dun Compani (neparn i r. an Hechu utiht * 'mi4 a A hoH'= o A ned su' tetsam' of C entH o

~

PRE PHASF IN DEFERRALS OF OPERATING E~ nef q~ ' L orpmat on R~entoior i nagi) 1 he t own, temens the Un@m $gtem of AG uunts p'et en!+d 19 EXPENSES AND CARRYING CHARGES the i ederal l' nent, Hepatoi r Cor m%n (I 1 HU ) Ih P(R O authcn/ed Die Wn pWi, ta R4 unf n anct adepted by lhe Pute Uhhta s Cene wi of (N dHenW ( twr . opvabrq o penses ( a n in W; he.e (PUCO) ;w ment s d,3 ge; aton ans not ;) and mh nm t The Company is a fnemb( r of tho Centfr a Att c an,m ( Ws ta Bwm M3 P a m Stahui Umt PoAef Cwn!nahon Group (CAPCO) Other mem!>ers J %,H Wi Umt J) f oun ih. c en mm ul in induQ t he Cie,emj IA t tfm dumaubw; Comtun'  % edMeniNmembH 1987 th M n;h ( Ori mter (Cacund [ wtnc) Dowsne i et Conipwr in M M !cf um n m in h4noned that Peny Nuam (Duquesne), Ohio ! CH on Company and Pento,h.inu ;gg ;gt (g79 3 z pgg; (pgj j) 3 3 7 gg g y,d Pooef Compag The mi n pers hae (onstruc ted wel med md uW in Yb inh 7 ha n'qu M ay operate gMmf alcan wtl hansnM sion f a3tms tof the apows the P' CO dh: r a d Die CompE to defer i Use of the CAPCO can' panier Cle.ebol l_let Dr 6 gpggggq g,p 6 ( Udid 'y deptguten and also a Ahony oArci subuvy of Conh nut l ot% t[i es ) tof Pen, Umt I hom kne 1%7 thurugh Dn emtu t 1F A hen U e . ( i. s t s l m in ta tie RELATED PARTY TRANSACTIONS nmned m eaws itm Put 0 Ao authonced nie d, ! coat of mtmest anJ evt3 ( a, in ; ( t u r w "

O. pef ahnq te,enues opef ahrq e nimnu" af ni inten st c.ch % e of thow w <, iated A t , olu.tahnq e penses t hWqe5 UK hide thee amounts for if af U4 tm'n M,i hn lin, lht 1 hom June !Une.. . , thr ough Deceint ret athhated Comfhints in thr: of enary [ aurse of bur no ' ' 19H7 ami the ut tenN of ons inh rest cmf sq ( twqet oper atens The Combtop A tf ansar1G6 Alth utestAamil WN

~

v' l' M N en:hef 198H Ihr amounts t h&ned for Pour lHut 1 pumant to thew are' pomanh !ct f am po Aef interchange pc her; l '(~H . l ) 't; c t n antFq O'di't 5 M 're IfnluJr"J ci;aora'ftv hansma wn bro rental;, and pnU, coned poAct (Cint ' -

, g Mt and e4 epment th'umh the ( momert ut in n 4 e opef alons and consDuttion Me ,90!Os 1 a_ nd. c

, c dMe m in,emt a f 19Hi mine@n nt to thM date C,ent enot eOcf we C,ompan y ( <och K ( C.umpany : 1 wruur A di % nel f or i,e n, l,a 1 1 AMe norded as lI!e th (d %h?y () A nt'Ud but)sdir', of (,f'nh'flN k IlUfij) defeue:t c harge Ams t.zahun of thew Beas m N,ah,ei provide { at cObt. In a n a f]t ' nie n I ; IIIlai Cla! . e

( h1 J. amt Pen y ( hi t 1 ds h nak ( ea ,ed g ne ;,hy,e in adnntbshat",e. encpru wq b g il and other sef,K es to .

the kompdip ,Uld Otiler aitiatt4l C un!{hin4's Itk' m .

A h rf m ) t e u.n in Arm e, t M) in ac r ordanc e mth the Jannwy 1 M,' IW.i f Me (ader d < c ow d in M, te Serv ic e Company te; ed the Company 99 000 DN, 6~

l,. he amc a b 7 at mo s ,, m t onhou,~ m m the b , es of t he' 90 000 00d. and 9_3 000 000 in 1Wu 1 %-9 and f ei ited peperiv

~

19M respe< tw, . for tuc h serwes REVENUES PHASE IN DEFERRALS OF OPERATING EXPENSES AND CARRYING CHARGES CuMomers me bad on a monthy cg ie tus s tof thee energy consumphon hned on rak' u hedua u A da comd in Note 6 He kn :ev o 19% PUW rMe contrat ts authonted by the PUW u on ud nant t" onh't h a Hie Cunpu'j en lu&d an appru ej f Me wth indmduW mur .o;#hN L iteC N e bruar, 1 phra in [Mn hw the Companj < incHuenD; and 19H8 the Conginy C hampd :ts rnethod of A counhny R nehM mMem m hn, N 1 and NavH My to accrue the esinated amount of untded f menus Umt . (;n Mnumi 1 1 M HC Dunpani be @ n (as dEhned in Note 12) at the end O each month n+ min'.; the def en A r~t opm ahng einemes anr1 A f uel f actor <

crS_h d ta the t use f ates tar NK toc inh nst and npt y c an y u t chm" t m danM f aN tefuce lha trtor 6 dew;ned ta f a um hom haml in ADnent ind' uant to or phase in pun cudorTmts the suds of tuU and mmt pmchaC Iid T W kna" (ta W Iduw in d&naK) A d (n' p 3 A ef it n f r C Aed u.nuannuaHy in a he an ) t dme Uu mod hi (h'nnie 31 1%

the l'UCO DEPRECIATION AND AMORTIZATION FUEL EXPENSE ;he o u of pro;u rty punt and equ vnent cu ent for

} }ie Colt of tJ ;d !ind is ( IurQ'd In !thd esptfB e Ius*MI ffb'th K h W tf alflatal}IMU!b is d1FtM EthMI ow(d IIIe A on nuntary uwp }t e M t of n W_ k o f h v I o c h dol eWn de i uwho ! ,es on a tDaqht I no Imas The an intuest compD'mnt s c hargnj tu f uH e m pens ' anrni;d strm@t le 1blar uhan pahi on e=lW" wd h.ised on the f ah: u! t unt umt hun I st mahst fMw f a g o n H,t n! au ra y c h'pmc ut h uMtv punt in nutiear hnq dmpo J ( Mts ;pe t o 'a f n .ere i lhtoff t %f4Ke An 1 Y m 19'M and 3 U in 19% and 19HH the hre f aM T he 1%D rate dt t! w f in c aw ofachavrm The Compang def cts 1M dJtac om bH Aven diae uNofah" aindnitat e to wp r eshnutW1 actual fuM r um an i t stm *d hul U MS ( unt nU, i .f % h a t uf mo: h w [ao;n f t, IN' !U M ) agipto.ed the tmaq f K ,end inen cuwrf ers lovyh the hel t hwr o th pu n Am I th" ( HN h e knu e,1.100 3

_ _ _ _ _ _ . . _ . _ . _ .. ...s

atoch reduced deprm iahon e. pense for 1990 t'i DEFERRED GAIN AND LOSS FROM .

33 930 000 and incrc ased earn,ngs $2 600 000 SALES OF UTILITY PLANT Depreaaton empense for the nuclear units is based on the un ts oi produChon niethOd in 19[4) the J N' Con n entered m!o Me ard Waseba(k y

Nuclear Regulatory Comnuswon (NRC) appro,ed a tranMbons m 1987 fW tW coM M Brwe MxWd sn yeat entenson o' the operahng kense for the GenerahW Punt (yanMJ Punt) and Dea,er Vag Dinis BeM e Nudeaf Poot r Stahan (Dmis Bes se) Und 2 m hussed m %!e 2 l$se trmbons lhe PUCO appresed a change in the urnts of- rewted m a net pn f u the ve of Mansf teki hant prodacton depreuaton rate for Daas (Wse ( rfectue a nd a net w fo' the we of Beaser Vder Unit 2 bath Januar v 1.1990 abs h recognited the Lfe eatenman of Mxh were &tened me Company is amuteng ThT t hange reduced deprOUabon empense for 1990 b, gne y p g, daned ga.o and loss o,er the terrns of

$3 630 000 and incrc ased terungs $2300 000 Wes unds we and 10au back ayeements The Lftectue Ju y 1938. the Compani tiegan the l

amartwbons Mong with the lease es per se amounts e vernal f unding it f uture decomrmswong oosts tor its a,e receded as oth. r opshn and mwtenance operahng nudear wts pursuant to a PUCO etder o pmse Cash contnbuhons are made to the funds on a straight One toss ower the remaining hcensing penod for each unit Amounts cunenty in rates me tused on INTEREST CHARGES past ethmates of decomneen4na :osts for the Company of $ 59 000 000 m 19% Mars for Dam Dcot interest icpeted m the inc ome L,tatement does

[ksse and $28 000 000 m 19B7 do/as erh for Pen, not rKlude m!eres t on nudear fuel obbgabons interest Umt 1 and Beas er V alle r Umt 2 Actual on nuclcm fuel obhgabons for tut ' under constructen dervnnwstoning c osts are espected to escoed these  % cap tatted Sec Note 5 estimates it is e+ected that mereases in the cost Losses ard gains reaheed upon the reacquthon or ebt. mate 3 Adl be recoverathe in rates r( sulhng from redemphon of long term debt are deterred Con 54 tent future rate proceed ngs The cunent het of espense Mh the regiatory rate treatngnt Such losses and being funded and recosered hom customers o,er the gams are either amarbled 0,er the remander of the tematmng bcensmq pe n od e, of the unis is ongsnM Lte of the debt issue retaed or amarbled eser approomatch $4 000 000 annuadi The present the Lie of the new dtht issue Ahen the proceeds of a fundmg regwrements for Beaser Vaher Unit 2 Mso new mue are used for the debt redemphon The sabsty a semdaf (orlim:tment rnade 35 pyt of the SWe amothf ahonb af e diluded in debt tnterebt capt+nse and leasebad transachon d,scussed in Nate 2 PROPERTY, PLANT AND EQUIPMENT FEDERAL INCOME TAXES 1he knancal statements f(f at the hab.Lty method of Property plant and equipment are stated at ono.nal a:Counhng for vKome tams as a resuit of ad@tmg a cost less anr amounts ordered by the PUCO to be new standard f ar accounhng for mcome tases m 1988 ontten o't loc!uded in the cost ut construction are lhe hatwhty method requirts that the Con pani 5 items such as related pa,ro!! tanes pensions innge deter'ed tas hal@hes tw adpted fof Cubsequent tan benehtS man 3gement and generM overheads and rbte Changes and that the Company record & tMred aho Aance for funds used dunnq constructon tases for ad tempormp dAlerences bet Aeon the bod (AFUDC) Af UDC represcrits the estimated and tan bases of assets and habihbes A porhon of composite debt and equ4 cost of funds used to these temporary ddf orc nc es relate to tirmng i nance construchon This noncash ahoAance is offerenc es that the PUCO us( d to red xe poor , cars cred.ted to income. e, cept for certain AF UDC for Perry W empense for raternaLing pu' poses wherebi no Mckar Po Aer Piant Unit 2 (Perry Unit 2) See Note deferred ta'es were recorded Stnce the PUCO 3(c) The grot > AF UDC rate was 111M 11451 pf actice permits rCCodtp of such *av es f rom and 1102to in 1990 1989 and 1989. f espeChve@

Customers when they bec orne phath the teet anount Vatntenance and repairs are chm 0ed to e penw as due trom customers has been rec orded as a rego!atory mcuned Certain ma:ntenance and repair espmus for ass 01 in deferred charges Perry Urut 1 and Bea,er Vane, Unit 2 me beina F or certa-o property the Compan/ r ec es ed

, deferred pursuant to the PUCO accounhng ordeis investment tan credas Ahth ha,e been acco;nted f or d:Scussed abo,e The cost of re;9acinq piant and as deferred credas TN amcr te at *on of these eqwpment is charqM to the uhhty plant accounts The IN esimen!las cf elts is re[>or!ed as a f(>d:Ctgn of Cost of prObelly rehf ed [du5 femobal CDsts af ter depreciation espen5e le: der lhe kdal tv method bee deduchnq any sfvage Mug qq charged to the NDte 7 Ecumsated pm on 'm depreoa%n 1

in and niure or W in submuent

- MANAGEMENT's FINANCIAL ANALYSIS 3 cars dependina on the perfornmce of the uruts RESULTS OF OPERATIONS inabaty to othn appru.al of the second request Overview Aoom redot e canunos tw as much as $15 000 000 in 1he January 1989 PUCO rate order Ah< h pruoded for 1991 and ewn more in suteeauent years three rate egreases for the Company n du ussedin lhe Compan, has a yeed to use its best efforts Nate 6, Aas desgned to enatWe us to be3n such as these t Ao rtwests for accounting orders to reco.enng in rates the cost of and earn a fair retum a tud rate incieau s in the years immed:atety fMiomra; no our anoAed in.cstment in Bea5r r Vanes Un,t 2 and 1991 L sentuay rate increases ad tie necessary to Perry Lin;t 1 The rate order mproied re.enues and ta opze the cost of our new capdal nuestment and cash flo A in 1989 and 1990 oser 19BB lese!S th" <_tfect of m!!aton Re enues and cash tba n 1991 are e pected to Annual sa:es gruatn is e.pected to average ahnut eacced the 1983 !evets IDAe*Pr. as (bcussed OKde " % f or the nes t ses t'al , ears canhngent on future fuH/ in the fourth and fif th paraaraphs of Wte O. the et unonut es ents Rec oyuzing the hnutahons intposed phase in pian Aas not desgned to impro e cattungs, b, these tales prontes and c on.pentue constraints sgmhcant@ because gmns in rewiues from the Ae 66 ubhze our tmst etteris to m.rnonte future rate hgner rates and assumed sales greath are art:ah increases through nsi imt/mq our cost rehtion and ettset b, a conespaning reduction in the detenal of quahti of seruce eficf ts and espionnu other innmathe nuckat piant operating e penses and caerpng charges opt ons We mu (antentrate nur efforts on retaantg land are sutsequenth off set by the amorh;ahon of customers and ad$ng ne A ones through mnovahwe such Cost defef rals and Ca'Iy ng charges 6

fru'L eting af M1 tef Oce initulfves CCsplie the posttbe U itect the neW f ales have on re.enues and cash flow and the relatweQ neutral 1990 vs.1989 mpact they ha.e on carrnngs Ae f ace a number of f actors ( ontnbutmo tu the ught a rease in 1990 other f actors Ahmh Am caert a neqatne inHuence on cperahng resenue! we as foHuM caminos in 1991 tnd beyond lhese include infiation h"*

(ncr q m (q,ma % ) N. ,n (i yd frW )

the current (corinmlC reCOssion and compehhg e no w_niv%< ,u 1 x._ . ,n. > ow forces it e latter. coupied Adh a desue to encourage 4, , m a u , , p , m oo y economic groath has prompted the Company in %OM 4 i 7 MW recent yeaf s to efltM into contracts ha,ing red,K ed

_ i A D:ia rates Adh certa,n iarge customers Compt hise forcer ha,e also prompttnj the Company to offer a rate lhe n ap bd

• awnhng for the mcrease m redochnn pacFale to reud"nhal and smah c ommercul operahng re,eme or related to the J.inuary 1989 customers as dscussed in the eghth and ninth rate order The PUCC approsed annual rate increases praoraphs of Ncte 6 luo other f actors are haana a f Df We U"1P3G d 9' e CM *" 'n Mauar y 1% and neQ316e luflueriCe On earrUngs Ilf sl. Ine Compan 5 E eMocthe m Ielduaf p 1990 lhe assoDated y

~

currenth recorSng depreciat$on on nut! ear units at a Mr,enue ocwaw in 1W was partiall y ottset bi h,qher level than that Ah'ch is reflocted in rates mduwd resenues resu!t ng f rom a 4 9" > decreant in bEcause of the good performance of the units ower the totaj k donatt hout nales industnal sales decreased last several 3 cars Second Arth respect la f achbes 3% auw d h_t rep i w n M nn m m 1 placed in seroce af ter f ebruary 1988 and not included dMal and commeraal sales decrered 3 3- and in rate base the C,ompani is currenhy required to 044 re s pec h.elt as seasonal temperatures Aere more moderate in companson to the poor year e record interest charges and deprcmahon as cunent temperatures. resu!hna in reduced customer heahng enpenses even though such items are not yet reflected and toohna related demand Other sales act!(ity decreat ef 14 % pomardi as a result of the We afe tM!ng sedral steps to Counter the adverse Company s mun1Cipal uhhip CullOmef s sahst)ing a ctieGts of the Idclor6 d:scussed above We are ea r ofh dt om n ds from dhd imp! = men t mg the managr ment audit g recommendabons discussed in the Suth paragraph of O ra nses decrered 14E in 1930 Note 6 v,hich are e=pec1ed to reduce operahng Depreoats and a'wrtoton e= pense deaeau d e penses by about $44 000 000 annuacy We ha*" pomar4 because of beer deprenahon rates uned m alreadj shared LON of the e pected saangs eth 3999 to, nonnuclear property and Daos Besse customers by reduang the 1991 ratt mcrease granted attnhotab!e to bnger eshmated !ses and because of under the 1989 rate nrder Honesef Lonhnumg cost bnGer nuclear generahng unit ref uehng and reduct on efforts Ml be necessary to help ottset the maintenance outages .n 1999 than m 1989 f ederal erect of initahon Ako the Company is seeking me ,me ta,es acc reased pomanh because et a PUCO approval to accrue r uclear plant depreaabon at deaere in pretu operahng mome lhese deucases a leerl Ahich is more cbsei, augned mth the amount in operahng e,penws Aere parhMy ottset by ao currenth I eing recosered in rates by s Aitching to the muease m tvet other inn federal mcome tawes stra:ght hne method T he Company a:,0 MlI sr 9 resu!bng from tsgher property and gro% rece: pts approva! to accrue post #n secoce interest canpng tams and bv b Aer nxiear operatmg eipense charges and deter depmoahnn charges for b;Mties defenab for Pcnv Umt 1 and Beaser VMey Un,t 2 that a<e in serme but not yet recogn md 'n ram pursent to the Jaway 19@ PUCO rate order inabM/ to obtaFl a[quoval of Itte hrst ac ;ountml Credits for F ar r i!riq ( f <l' ge" f eCof(led Irl i

request v,ould red Ke cammqs by as rmc h as nwporahng mnme ne mawd in 1990 baam e a

creater share et our in cstments and Wasehoid 2 7% as a retuit of contmuing growth hom new otNe .

Ir!Ier ests in herry Urrt 1 and Beaser Vaney Un>t 2 orie tmJdings and f( tan outkts lhe comparae.ely recosered in rates Other income and dedochuns, net moderate summer neather in 1989 ionered sales decreased pnmanly because of less inte < cst income because of reduced a.r cond, bon.rg usaae He9denhal in 1990 tams decreased J 5^ Industnal LWes decteased These decreases were patt;ah oftset b, an 1 1% as modest groath in mdustnW sa:en actwity in increase in federal Income f at Credits related to 1989 Aas offset enhM 4 by the impact of the loss of a tricorne f ebuihnq hom a deCf ease W brge 'ndusted CUSbmer to d nmn{g pnner s,Wm nono;>

preta, none erat nl[) erat.nq income and federa! m ome tas in D,de Ohio ahch bepn operatnq in Apnl 1969 adjustments of $18'810 000 assmated mth preneush That custorner accounted br 1 W et the Company L detened investmcnt tai credits reb 1 ng to ine 19E8 totW electnc sales m 1%8 wote oti of nuclear pbn! interest egense decreased Operahng espcnses mcreased 1B 9% in 1989 in 1990 because of rehnacrm b, the Compan, and leaer dt tnWs t of nuclear operahng e. pense f ar Perry a !oaer Wel et debt outstandm '

Un.t 1 and Bea,er VaHey Uni 2 resutted in a 365 000 000 increate in e pense I uel and purchased 1989 vs.1988 pooer e. pense increased largely because of the Factors (Ontnbubng to the 317N mcreaW in 19b9 matchina of empense with hgher fue! Cost recu,ery operahrg revenues are as tono ^ revenuei dvusted in the preceing parayaph w %se cw m on m mmoi mmm Impmed nuuear urnt a abtaty enabled the Company MR6h L, t u se t % = 5 c ua M to sen po^er to ether utmbes other than Chebod a,4 we <a a eu, ems u e oX Dectnc T he e> cess cl re,enues o,er cost is treated as

$$NCOS,s

% ,, w ma W K D A 00 i d 'eduin in pur mawd pone e,penw wtu@

cushioned the increase m fuH and purchEsed poAer "

] be (i? ; FKi eapense fDf !?le jear Depreciation etpense inCreaM'd retiec h, e of the mcreased generabon hom the A pnmary tactor f ar the increase in opeahnq Company s riuclear units unce their deprecobon is revenues was a net mcrease in 1989 in the toti nWes recorded tased on un;ts of producbon to Cleveund Dectnc of a porbon of the Compan t '

Mnopsahng income credas for Af UDC and ieased capaaty ent tk ments in Bea,er Vaney Unit 2 cangng charoes decreased m 1999 as a resuit of and the Vansheid Plant The sales from Bea,et Van , pond mastwnt m rate base punuant to the rate Un<t 2 commenced m No, ember 1988 as d&usted m uder interest e> pente and pretened duierid Note 2 The sales from the Mansheid Plant were on9 reptements decreased in 1989 because of for a th<ee month penod in 1938 The Januay 1989 r@rsnents and r Ananangs by the Company rato order for the Company was pumanly responPble far two mapr tactors impactmg the increase m EFFECT OF INFLATION revenues The PUCO granted the Company a 9" . rate increase effeCINe iri Fcbruary 1989 The increase in A!! hough the rate of mtuhon has caned m recent years revenues attributable to deferred construchon 60!k in ne are stai affectea by e,o modet inflation smce the procpess (CWiP) re.enues in 1989 resumed ham Mie regwatoy prccess mtmduces a bmo lag dunng which reduc. tan in the amount of defened cred ts for the mucaseo costs of our bbor matends and services are mirror CWiP triund obLgatons to customers F ue cost not rehected in rates and fuh recou ted Marcover.

reco,ery resenues mueased in i989 because of a tequiabon a40As ony the recovery of histoncal costs ugnibcant nse in the fuel cast reco,ery factors of plant assets through depreciabon e,en though the compared to 1988 The taaer 1988 factors recogneed costs to repbce these assets v.c Ad substanhaiy a greater amount of n.tunds to customers ordered by esteed their histonca' costs in an infuhonary qconom, the PUCO for certain replacement fuel and purchased Changes in f uel t sts do not affect our resuits ei power costs conected ham customers dunng a 1995 operabons once thc ,e costs are deferred unut 1986 Daas Besse outage Tota! knowatt haur sies rehected in the fuei c ost recover, tactor included in increased 2 4% in 1989 Commercid saa mueaseg customers bc ' _

RETAINED EARNINGS M N!NIN^m"W Fca the ,ear s ended Decemtier 31 1990 1989 1988 on m , Jaun Balance at Beginning of Year $_ 99,965 1 89 614 $ 297 221 Additions Net income (toss > 81,424 92 678 (115 452)

Deductions Omdends derared Common sinck (73,283) (63 M ) (61 711)

Preferred stock (25,145) t 19 036) (26 209)

Other poman), pretened stad redempen e pense (5) (6) (4 175)

Net increase !Devease) .(17,009) .

10 151 1207 607)

Balance at End of Year S 82,956 i 99 905 1 89 614 The accompangng notes and summa 9 of ug% cant a:m ob9 0; > ' an an m'vyW pa't d tnis statenmnt t<

l int ioa ro ite,nN u w ANY

. INCOME STATEMENT I of UF lea's Jyded_Decemtier 31 _,

i 1990 1989 1988 i p*,urm nt a,iu ro l 5827,086 1826 803 $ 627 997 Operating Revenues (1)

Opeisting Expenses fuel and purchased power 138,222 133 400 116.161 Ott.ar operabon and maintenance 373,374 372 530 358.823 Depreciahon and amorbrabon 75,986 87 639 75 093 lanes. other than federal income tanes 79,320 72.123 80.138 Phase in deferred operahng egenses (16,980) (22,535) -

Pre phase in deterred operating expenses. 3,681 4 044 (83 813)

Federal income taics . 21,041 37 285 29 242 674,644 , GB4 486 _ 575.644 Operating income . 152,442 142 317 52 353 Nonoperating income (Loss)

Allowance tu equity funds used donng construction. 3,352 8 568 5.452 Other income and deductions. net 6,149 20 361 30.233 Wnte off of nucleaf costo. - -

(276 955)

Phase in carr eng charges . 43,487 82 308 -

Pro phase in carrying charges - -

129.632 Federat income taies - credit (e= pense) _ 8,664 (.21.563) 86 244

_ 61,652 89_674 _(25 394)

Income Before interest Charges 214,094 231.991 _ 26 919 Interest Charges Debt interest 135,344 144 792 150.523 Allowance for t>orrowed funds used dunng construction (2,674) 15 479) _ (1 B33)

_132,670 133 313 148 690 income (Loss) Before Cumulative Effect of an Accounting Change 81,424 92 678 (121.731)

Cumulative Effect on Prior Years (to December 31,1987) of an Accounting Change for Unbilled Revenues (Net of income Taxes of $4,177.000) _ _ _ _6279 Net income (Loss) 81,424 92.678 (115 452) referred Dividend kequirements 25,159 25 390 _26 983 Earnings (Loss) Available for Common Stock . 5 56,265 1 67 288 $ (142 435)

(1) includes revenues from capacity sa;es to Cleveland flectoc of $102 773 000.1104.127.000 and $31.774 000 in 1990.1989 and 1988 respechvelv The accompanpng notes and summary of significant accounhng policies are an integral part of this statement M

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

l MANAGEMENT'S FtNANCIAL ANALYSIS ,

CAPITAL RESOURCES AND LIQUIDITY economical we nup atso redet m add bonal secunties l unds optena! nenttm pruens he Notes i We conbnue to need cash for an ongoing program of 1N c) and tdt for informaton concenung hmitabons construchng new facihties and mod 1f eng cushna f acihbes to meet anbc) pated demand for electric 0" lh0 ^5"3"C 0 Oi P'*"Ud "" A PTf 0' enc e stoc k and serece to compn Aith oosemnvrtal reautatens and debt Ou' capaat reaunements wm increase af ter 1997 by to impro,e the c n,aonnient Caso a aio needed for mndatory retaement of secunbes C wer the three.

atout $30 000 000 to 135 000 000 as a resu!t of the Clean Aa Act of 1990 (Clean An Act) We behe,e that year penud of 1988 1990 these corstruchon and no f urthe sgn.bcant cap tal upond tures adi be mandatory retuement needs totater, approumatef y rmnN to c mW mtn the nea taa See Note 3(b)

$435 000 000 In addDon ne vercaed sanous h espect to k awe ta raw cash as needed The options to redeem and purct'ase approomateN -

asabaty of cap ta 'o meet our estemal bnancing

$275 000 000 of our secuntes nwas ho n e s e' & pends uNn such f actors as Dunnq the 1989199D penod. the Company #Ssutd boancial ma9et cond bons and our cred t rahngs

$174100 000 of f ast rr etaaae bonds and obta;ned a Cunent secunt<es rat ngs for the Company are as

$15 000 000 term nant icin' The Company utoced its short term bono ^ing ananaements (( u p!ained in '0"O^5 eum wo ,- $

i, m , $

Note 11) which rt suhc1 in the Company haona magm 123 200 000 of commerca naper and $16 000 000 in r we %e hotes pa,able to aHiates outstand ng at December tree qq to as pw baa3 31,1990 Proceeds from these bnancings were used umeona rm em nai P4 4"eJ C a W4 te to pay our construction program costs. to repay porbons of short term da bt incuned to f nance the construchon program to rebre. redeem and purchase A ante off of the Ccmpany s investment in Perry outstand ng secunties and for ceneral corporate Unit 2 as d scussed in Note 3 t c). depending upon the purposes magnitude and bmthq of such a Ante ott could teduce The Company was granted rate incrt?ses effecthe relathed earningh suthciently to impa r the Company s in 1969,1990 and 1991 pursuant to the January 1989 ab Lty to declare dwKlends but would not affect cash PUCO cate ordu See Note 6 for a d scuss cn of the flo A rate ordef which proudes for spectbc levels of rate The lat Rcform Act of 1986 (1996 Ta. Act) mcreases through 1991 Although the rate order prooded for a 34% mcome ta= tate in 1988 and requaed us to ante off certa >n assets in 1983 Ahich thereaf ter, the repeal of the investment tan cred<t.

iowered our canungs bate our current cash 004 was schedu:ed reductions m in estment tai cred,t nct impMed InternaHy gen 0 rated cash InCr0ased in cany t or Aards less f avo'able deDreciation rates a new 1989 and 1990 from the 1988 lesel as a reSutt of the a ternatse minimum taa ( AUT ) and other items rate incrcases These changes had no signibcant cash fion niipact in Eshmated cash reqwrements for 1991 1993 are 1988 because ne had a net operahng loss for tai 1235 000 000 for our constnchon program and purposes The changes resu ted in decreated tai 1297 000.000 for 4he mandatory redemphon et debt payments and an increase n cash tto4 dunng 1989 and preferred stock We e.pect to finance este nan because the tax saongs resuthng froTi avadable tat about 75"> of our 1991 construchan and mandatory deductions were utihzed on the conschdated tax return r e ct e m p t io n requuements of appr c > im3 tely in detenruning the AYT in 1990 the changes resulted 1177 000 000 We e.pt c t 'a bnance eiternalty about in increased tax pa,mer'ts and a reduchun in cash 60' . to 70^ of out 1992 and 1991 rem.u ments it f!aw becauso we acre sun;ect to the AYT 5

. CASH FLOWS int mu 00 t pisoN coww

__lo' IMFa's ended December 31, 1990 1989 1988 o w sands u o.w o Cash Flows from Operating Activities (1)

Net income (Loss) . $ 81,424 5 92 678 $1115 4_52)

Adjustments to Reconcile Net income (Loss) to Cash from Operating Activit>es Depreciation and amortization 75,986 87.639 75 093 Deferred federal income taxes 30,642 79,199 (62.598)

Investment tax credits, net (17,063) 1 237 6.920 Write off of nuclear costs. . - -

276 955 Deterred and unbilled revenues (22,6583 (42 624) 14,642 Deferred fuel ,

(433) 16,259 (20.693)

Carrying charges capitahzed (43,487) (82.308) (129,632)

Leased nuclear fuel amorti7ation 37,122 46.408 32.285 Deferred operating c=penses, net (13,299) (18 491) (83.813)

Allowance for equity funds used dunng construction. (3,352) (8.568) (5.452)

Amortization of reserve for Davis Besse refund obhgations to customers . -

(12.655) ( 20.777)

Pension settlement gain. (6,449) - -

Cumulative effect of an accounting change. ,0.279)

Changes in amounts due from customers and others. not . (9,433) (4,400) 13,472 Changes in inventories . (6,521) 1.890 904 Changes in accounts payable 17,464 8.896 19,472 Changes in working capital aficcting operations. 1,528 (30,713) 11,766 Other noncash items _ Sf03 5.896 9.358 Total Adjustments . _ AS550 _ 47.659 131.623 Net Cash from Operating Activities . 126,374 140 337 16.171 Cash Flows from Financing Activities (2)

Bank loans. commercial paper and other short term debt 23,200 - -

Notes payable to atf.liates . . 16,000 -

(68 000)

Debt issues First mortgage bonds . 67,300 56.100 50.700 Term bank loan . 15,000 - -

Matunties, redemptions and sinking funds . (183,477) (65.006) (222,166)

Nuclear fuellease and trust obhgations (42,947) (39.015) (32.285)

Dividends paid. , (98,427) (88.743) (89,054)

Premiums, discounts and expenses _ 11 1845) _ {925) 1,489 Net Cash from Financing Activities ,(205,196) j 137.589 ) J.359 316)

C:sh Flows from Investing Activities (2)

Cash apphed to construction . (80,667) (65,296) (113,174)

Interest capitahzed as allowance for borrowed funds used dunng construction . (2,674) (5,479) (1.833)

Loans to affihates 114,000 (114.000) -

Cash withdrawn from sale and leaseback trust. - -

109.976 Other cash received (apphed) _(4,022 ) 831 3 947 Net Cash from investing Activities . 26,637 __(183 944) (1.084)

Nst Change in Cash and Temporary Cash investments. _ {51,585) J181.196) j344J29)

Cash and Temporart Cash Investments at Beginning of Year, _ 73,692 254 888 599.117 Ccsh and Temporay Cash Investments at End of Year $ . 22,107

$ _73 692 ] 51888 (1) tr.terest paid was $138 000.000, $141,000,000 and 1150.000,000 in 1990,1989 and 1988. :espectively.

Income taxes paid were $2.272.000 in 1990 No income taxes were paid in 1989 and 1988 (2) Increases in nuclear fuel and nuclear fuel lease and trust obhgations in the Balance Sheet resulting from the noncash capitakzations under nuclear fuel agreements are e>cluded from this statement The eccompanying notes and summary of significant accounting pokcies are an integral part of this statement.

9

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

BALANCE SHEET ,

December 31, 1990 1989 (thousands of dollars)

ASSETS PROPERTY, PLANT AND EQUIPMENT Util.ty plant in service. . $2,607,010 $2,532.291 Less: accumulated depreciation and amortizatior 646,193 567,197 1,960,817 1,965,094 Construction work in progress 93,154 84,586 Perry Unit 2 . 343,685 345.754 2,397,656 2.395.434 Nuclear fuel, net of amortization. , 221,848 235 193 Other property, less accumulated deprec6ation. 2,024 2.125 2,621,528 _2,632.752 CURRENT ASSETS Cash and temporary cash investments. 22,107 73.692 Amounts due from customers and others, net 63,233 53 800 Accounts recaivable from affiliates 29,999 35,114 Notes receivable from affihates. -

114.000 ,

Unbilled revenues , , 20,166 23,525 Materials aad supphes, at average cost . . 32,666 26.641 Fossil fuci inventory, at averus cost 15,578 14 882 Taxes apphcable to succeeding years , 63,375 61,967 Other . 2,473 4.815 249,597 408.636 DEFERRED CHARGES Amounts due from customers for future federalincome taxes. 494,454 519.469 Unamortized loss from Ceaver Valley Unit 2 sale . 119,623 122,911 Unamortized loss on reacquired debt . 27,404 28.528 Carrying charges and cperating upenses, pre-phase-in 255,020 257,709 Carrying charges and opei., ting expenses, phase-in . 165,310 104,843 Other , 68,582 63.998 1,130,393 1.097,458 Total Assets . $4A01,518 $4.138146 The accompanying notes and summary of significant accounting pohcies are ao integral part of this statement 10

4 THl' TOL f DO I DISON COMPANY December 31, 1990 1989 (thoiasinfkla of uollars)

CAPITALIZATION AND LIABILITIES CAPITALIZATION

( Common shares, $5 par value 60.000,000 authonted.

39.134.000 outstanding in 1990 and 1989 $ 195,687 $ 195.687 Premium on capital stock 481,082 481,082 Other paid-in capital . 121,059 121.059 Re'ained earninas . 82,956 99.965 Common stock equity 880,784 897,793 Preferred stock With mandatory redemption provisions 66,328 68,990 5 Without mandatory redemplico provisions . 210,000 210,000 Long-term debt 1,097,326 1.197.277

.2,254 438 1 2.374.06_0

. OTHER NCNCURRENT LIABILITIES Relund obligations to customers - 23,780 Other, pomanly nuclear fuel lease obhgations . 228,844 252.460 m _ 22_8,8_44 276.240 _

CURRENT LIABILITiriS g'T Current portion of long term debt and preferred stock 116,150 114,870

$ Current portion of lease obligations. 50,389 44.480 pJ Notes payable to banks and others.

Accounts payable .

23,200 125,802 108.338 "1 Accounts and notes payable to affiliates 31,626 8.311 j Accrued taxes . 96,973 94.990

% Accrued interest 3),665 39 075 Accrued payroll and vacations . 6,597 6.885

- Current portion of refund obligations to customers 23,888 26.125 Other . 4,628 10.749 C10,918 453.823 DEFERRED CREDITS Unamortized investment tax credits 83,377 103.349 Accumulated deferred federal income taxes 571,233 565,266 Reserve for Perry Unit 2 allowance for funds used dunng constructinn . 88,295 88.295 Unamortized gain from Bruce Mansfictd Plant sale. 236,835 247,305 Other. 27,578 30.508 1,007,318 1,034.723

' $4,001,518 Total Caoitahzation and Liabilihes .

$.4 138346

STATEMENT OF CUMULATIVE PREFERRED int Tottoo toison cow %NY ,

AND PREFERENCE STOCK 1990 Shares Cunent December 31 Outstanding Ca8 Puce 1990 1989 (thousands 01 dallarS)

$100 par value. 3.000,000 preferred shares authonzed. $25 par value.

12,000 000 preferred shares authorized and $25 par value, 5.000.000 preference sharcs authonzed, none outstanding Preferred, subject to mandatory redemption

$100 par $1100 34f25 $10100 $ 3,483 $ 4,480 9 375 150. 00 103 95 15,010 16.675 25 par 2.81 2,000.300 26 87 _ 50_,000 50 000 68,493 71,155 Less Current matunties 2,165 2,165 Total Preferred Stock, with Mandatory Redemption Provisions 5 66,328 $ 68 990 Preferred, not subject to mandatory redemption

$100 par $ 4 25 160.000 104 625 $ 16,000 $ 16,000 4 56. 50.000 101 00 5,000 5,000 4 25. 100.000 102 00 10,000 10.000 8 32. 100,000 102 46 10,000 10.000 7 76. 150.000 102 437 15,000 15,000 7.80. 150,000 101 65 15,000 15,000 10 00 190,000 101 00 19,000 19,000 25 par 2.21. 1,000.000 25 90 25,000 25,000 2 365 1.400.000 28 45 35,000 35.000 Senes A Adjustable 1,200.000 25 75 30,000 30,000 Senes B Adjustable 1.200,000 - 30,000 30.000 Total Preferred Stock, without Mandatory Redemption Provisions $210,000 $210.000 The accompanying notes and summary of significant accounting policies are an integral part of this statement 12

, NOTES TO THE FINANCIAL STATEMENTS (1) PROPERTY OWNED WITH OTHER UTILITIES AND INVESTORS The Company owns, as a tenant in common wdh other unhties and those investers who are owner participants in vanous sale and leaseback transactions (Lessors), certain generahng units as hsted below Each owner owns an undivided share in the entire unit Each owner has the oght to a percentage of the generating capabihty of each unit equat to its ownership share Each ubhty owner is obhgated to pay for only its respective share of the construction and operating costs Each lessor has leased its capacity nghts to a utihty which is obhgated to pay for such lessor's share of the construction and operating costs The Company s share of the operating empense of these generating units es 6ncluded in the income Statement Property. plant and equipment at December 31.1990 includes the follomng f acihties owned by the Company as a tenant in common mth other utihties and Lessors owner in Da ner sNp hant Constr uchon Seroce SNp Wp Power in W ar k Acc umulated Generana una Dee sna.e *ms suce per m e .n N*ss No,eciaban in Se<vce N 3'* d (1 * '51 Daes Besse . 1977 48 62 + 428 Noc ie ar i 6hi744 $ 32 273 $ 119102 Perry Und I and Common Facues 1987 19 91 238 N dear 917 939 5 057 102 296 Bea.e' Va!*v Unit 2 and Common F acmbes (Nse 2) . 1997 1 65 13 N Mear 181 798 3 %o 18 892 Constructen Suspendeci ( NMe 3 t c ) )

renyund2 uncen.rn 19 91 24o Ne var -

343 685 -

ilD M_-

-_ I W F_-

524 M 9 (2) UTILITY PLANT SALE AND LEASEBACA TRANSACTIONS As a resuit of sale and leaseback transactions Beaver Valley Unit 2 lease was $72,276,000 in both completed in 1987. the Company and Cleveland 1990 and 1989 and $71810 000 in 1988 Of the 1988 Electoc are co lessees of 18 26% (150 megawatts) of rental cupense amount for Bea,er Valley Unit 2. a Beaver Valley Unit 2 and 6 5% (51 megawatts), porhon ($58,254,000) was recorded in a deferred 45 9% (358 raegawatts) and 44 38% (355 charge account pursuant to PUCO accounting orders mega6atts) of Unas 1. 2 and 3 of the Manshold Plant. This deferred amount is being amortized to expense respectively, au for terms of about 29% years over tne hfe of the lease beginning in 1989 As to lessee adh Cleveland Electnc. the Company The Company and Cleveland Electnc are is a!so obhgated for Cleveland Electnc s lease responsible under these leases for paying all taxes, payments if Cleveland Electnc is unable to make as insurance premiums. operation and maintenance costs payments under the Mansfield Plant ! cases. the and all other similar costs for their interests in the units Company would be obhgated to make such payments sold and leased back The Company and Cleveland No payments have been made on bena!f of Cleveland Electnc may incur add tional costs in connection with Electric to date capital improvements to the units The Company and Future minimum lease payments under these Cleveland Electoc have options to buy the interests operatinq leases at December 31, 1990 are back at the end of the leases for the f air market value at summanzed as lohows that time or to renew the leases Additional lease Fm provisions prov:de other purchase options along with F or the C u and conditions for mandatory termination of the leases Year compw E lec tnc m%mu ei wam e W hedNleM W W W for es eits of default These esents of default include nonc o 1pl,ance with several financial Covenants 3

19a3 11i 000 63 000 affechng the Company. Cleveland Electoc and 1994 111 000 63 000 Centenor Energy contained in an agreement relating to m95 - 111 000 a 000 a letter of credit issued in connechon with the sale and LWer Years 2 % 2 000 1 579 000 leaseback of Beaver Valley Unit 2, as amended in Toia: rare unimum 1989 See Note 10(d)

Lease Pa<mems $3142 000 $1 M4 099 The Company is selnng 150 megawatts of ds Beaver Valley Und 2 leased capacity entitlement to Semiannuallease payments Conform with the payment Cleveland Electnc. Thrs sale commenced in November schedule for each lease 1988 and we anticipate that it mli continue at least Rental e, pense is accrued on a stra:ght kne basis unhi 1998 Revenues recorded for this transacbon over the terms of the leases The amounts recorded by were $102.773 000,1104127.000 and $18.533,000 the Company as rental expense for the Mansheld in 1990.1989 and 1988. respective!y The future Plant leases were 144 556 000 in both 1990 and 1989 ,nimum lease payments aswc:ated with Beaver and $43 095 000 in 1988 Rental expense for the Vav:j Unit 2 aggregate 11 936 000 000 0 l l

(Superfund) estabbshed programs addressing the (3) CONSTRUCTION AND CONTINGENCIES cleanup of hazardous waste deposal sites, emergency (a) CONSTRUCTION PROGRAM preparedness and other issues lhe Company m The estimated cost of the Company's construction aware of its potentialinvolvement in the cleanup of two program for the 1991 1993 penod is $252.000.000, hazardous waste sites We beheve that the ultimate including AFUDC of $17,000.000 and excluding outcomo of these matters will not have a matenai nuclear fuel adverse effect on the Company's financial condition or j (b) CLEAN AIR LEGISLATION The Clean Air Act wdl requae among other things- (4) NUCLEAR OPERATIONS AND reductions in the emission of sutfur dioxide and CONTINGENCIES nitrogen oxides by the Company,s fossil fueled electric generating units Centenor Energy's prehminary (a) OPERATING NUCLEAR UNITS analysis indicates that comphance with the Clean Air The Company's interests in nuclear units may be Act by the Company is expected to result in somewhat impacted by activities or events beyond the higher fuel and operation and maintenance expenses Furthermore. comphance will require addit.ona! Company's control Operating nuclear generahng units have expenenced unplanned outages or extensions of l

aggregate capital expenditures in the range of scheduled outages because of equipment problems

$30.000 000 to $35.000.000 af ter 1997 to meet the or ww regulatory requaements A major accident at a nitrogen oude emission kmitation and for sulfur deoxide nuckar facihty anywhem in the world could cause the and nitrogen oxide emission monitors. We beheve that reduction of sulfur dioxide emissions will not require NRC to hmit or prohibit the operation, construction or installation of scrubbers A more specific comphance hcensing of any nuclear unit H one of the Company's cost estimate will become avadable when Centenor nuclear units is tal en out of service for a" artended p 3 nod of time for any reason, including an aurdent at Energy s comphance strategy for the Company and Cleveland Electnc is further developed We beheve that such unit or any other nuclear facihty, we cannot Ohio law would permit the recovery of comphance predict whether regulatory authonties would impose costs from customers in rates Any rate increase is udavorable rate treatment such as taking the Company s affected unit out of rate base An extended expected to be minimal outage of one of the Compan/s nuclear units coupled (c) PERRY UNIT 2 with nnf avorable rate treatment could have a matenal adverse effect on the Company's hnancial position and Perry Unit 2, including its share of the common f acihties is over 50% complete Construction of Perry resuits of operations Unit 2 was suspended in 1985 by the CAPCO companies pending future consideration of vanous (D) NUCLEAR INSURANCE options, including resumption of f ull construction with a The Pnce- Anderson Act hmits the habihty of the owners revised estimated cost and completion date or of a nuclear power plant to the amount provided by cancellation No option may be implemented without pnvate insurance and an industry assessment plan in the approval of each of the CAPCO companies the event of a nuclear incident at any unit in the Duquesne. a 13.74% owner of Perry Unit 2, has United States resulting in losses in excess of the level advised the Pennsylvania Pubhc Utihty Comm:ssion of pnvate insurance (currently $200.000.000), the that it wdl not agree to resumption of construction of Company's maximum potential assessment under that Perry Unit 2 The NRC construction permit for Perry plan (assuming the other CAPCO companies were to Unit 2 expires in November 1991 Cleveland Electoc, contnbute their proportionate share of any the company responsible for the construction of Perry assessment) would be $58.503.000 (plus any inflation Unit 2. plans to apply for an extension of the adjustment) per incident, but is hmited to $8.844,000 construction permit poor to the expiration date Under per year for each nuclear incident NRC regulations, this action will cause ine The CAPCO companies have insurance coverage construction permit to remain in effect whde the for damage to property at Davis Besse Perry and apphcation is pend,ng Beaver Valley uncluding leased fuel and clean up If Perry Unit 2 were to be canceled, then the costs) Coverage amounted to $2,325 000.000 for Company's net investment in Perry Unit 2 (less any tax cach site as of January 1.1991 Damage to property saving) would have to be written off We estimate that could exceed the insurance coverage by a substantial such a wnte-off based on the Company's investment amount if it does. the Compan{s share of such in this unit as of December 31,1990, would have been excess amount could have a matenal adverse effect on about $173,000.000. after taxes. See Notes 10(b), the Company's financial condition and results of (c) and (d) for a discussion of other potential operations consequences of such a wnte-off The Company also has insurance coverage for the Beginning in July 1985, Perry Unit AFUDC was incremental cost of any replacement power purchased credited to a deferred income account unh! January 1 (over the costs wh4ch would have been incurred had 1988, when the practice was discontinued the units been operating) af ter the occurrence of certain types accidents at the Company s nuclear (d) SUPERFUND SITES units The amounts of the coverage are 100% of the The Comprehenmve Environmentai Response. estimated incremental cost per week munng the 52- 1 Comperation and babilty Act of 1980 as amended week penod starting 21 weeks af ter an accident,67%

14

of such estimate per week for the next 52 weeks and giving effect to the rate reduction proposals discussed 33% of such estimate per week for the next 52 weeks below The cost and duration of replacement power could The January 1989 rate order provided for the substanhally eiceed the insurance coverage permanent exclusion from rate base of a porhon of the Company's nvestment in Perry Unit 1. The exciusion resulted in a wnte off by the Company of (5) NUCLEAR FUEL $242.000.000 ($160.000,000 af ter tax) in 198-8 The Company has inventones for nuclear fuel which Since the order effectively chminated the possibihty of should provide an adequate supply into the mid 1990s the Company recovenng its remaining investment in Substantial additional nuc' ear fuel must be obta:ned to four nuclear construction projects canceled in 1980 supply fuc; for the remaining useful hves of Davis- and recovenng certain deferred expenses for Davis-Besse Perry Unit 1 and Beaver Valley Unit 2 More Besse. additional write offs totahng $35.000.000 nuclear fuel would be required if Perry Unit 2 were ($21.000.000 af ter tax) were recorded by the completed Company in 1988. bonging the total wnte off of nuclear in 1989, existing nuclear fuel hnancing costs as a consequence of the order to $277.000,000 arrangements for the Compeny and Cleveland Electric (1181,000.000 af ter tax).

were rehnanced through leases from a special- The phaseqn plan under the January 1989 rate purpose corporahon The total amount of financing order was designed so that the three rate iricreases, currently avslable under these lease arrangements is coupled with then projected sales growth, would

$609.000.000 ( $309.000.000 from intermediate term provide revenues sufficient to recover all operating notes and $300,000,000 from bank credit expenses and provide a fair rate of return on the arrangements), although financing in an amount up to Company s aHowed investment in Perry Unit 1 and

$900,000.000 is permitted The intermediate term Beaver Valley Unit 2 for ten years beginning January 1, notes mature in the penod 1993 1997. Beginning in 1989. In the early years of the plan. the revenues were 1991. the bank credit arrangements are cancelable on expected to be less than that required to recover two years' notice by the lenders As of December 31, operating expenses and provide a far return on 1990. $233,000.000 of nuclear fuu was financed for investment Therefore, the amounts os operating the Company The Company and Cleveland Electoc expenses and return on investment not currently severally lease their respective portions of the nuclear recovered are deferred and capitahzed as deferred fuel and are obhgated to pay for the fuel as it is charges Since the unrecovered investment will decline consumed in a reactor The lease rates are based on over the penod of the phasean plan because of vanous intermed, ate term note rates bank rates and depreciation and federal income tax benefits that commercial paper rates result from the use of accelerated tax depreciation, the The amounts financed for the Company include amount of revenues required to provide a fair return nuclear fuel in the Davis-Besse. Perry Unit 1 and also dechnes Beginning in the sixth year, the revenue Beaver Valley Unit 2 reactors with remaining lease hvels authonzed pursuant to the phase-in plan were payments of $02.000.000. $18,000,000 and designed to be sufficient 'o recover that penod s

$26.000.000, respectively, as of December 31.1990. operahng expenses a laa retum on the unrecovered The Company's nuclear fuel amounts financed and investment, and amorbzation of deferred operating capitakzed also included interest charges incurred by expenses and carrying charges recorded dunng the the lessors amounting to $14 000,000 in 1990, earher years of the pian All phase-in deferrals af ter

$19,000.000 in 1989 and $18,000.000 in 1988 The December 31,1988 relating to these two units will be estimated future lease amortization payments based recovered by December 31.1998 Pursuant to such on projected consumption are $49.000.000 in both phaseln plan the Company deferred the following 1991 and 1992. $50,000 000 in 1993. $48,000.000 in 3990 1989 1994 and 143.000 000 in 1995 As these payments g%, g gig are made, the amount of credit ava:lable to the lessor Defened Opcianna Expenses $22 535

---116 980 --

becomes available to finance addit onal nuclear fuel.

assuming the lessor's intermediate term notes and bank cred.1 arrangements conhnue to be outstanding U]['P Eq%

$21361 22 U6

$30 617 M 69:

$43 487 $82 308

=

(6) REGULATORY MATTERS On January 31.1989, the PUCO issued an order wh:ch Under the January 1989 rate order, the amount of provided for three annual rate increases for the deferred operating expenses and Canying charges Company of approximately 9% 7% and 6% effective schedu!ed to be recorded in 1991 through 1993 total with bills rendered on and af ter February 1,1989.1990 $24,000.000,133.000.000 and $15,000.000.

and 1991, respectively The 6% increase effective respectively The phaseln plan was designed so that February 1.1991 has been reduced to 2 74% as fluctuabons in sales should not affect 'he level of discussed below. eamings The order accomphshes this by allowing the The annuahzed revenue increases in 1989 and Company to seek PUCO approval to adjust cost 1990 associated with the rate order were $50.700.000 deterrals if actual revenues are higher or lower than and $44,300,000, respectively in 1991, the estimated amounts projected in the order The order also provides annuahzed revenue increase resulting from the order, for the adjustment ut deferrats to reflect 50% of the net as adjusted, would have been $18 600.000 before af ter-tax savings in 1989 and 1990 identified by the 15 l

management audit and approved by the PUCO as reduction in residential rates of 3% on March 1,1991 ,

discussed in the following paragraphs No change was and a further residential rate reduchon of 1% on j made in the cost deferrals for 1989 lhe Company September 1, 1991 Communities acccpting the reduced its deferral of carrying charges by package must agree to keep the Company as their sole I $13 933,000 in 1990 and will request PUCO approval suppher of electocity for a penod of f!ve years The of the adjustrrent package aiso permits the Company to adjust rates in in connection with the Company's 1989 order and a those communities on February 1,1994 and February similar order for Cleveland Electoc, the Company, 1.1995 if inflation e=ceeds specified levels or under Cleveland Electnc and the Service Company haw emergency condihons All eligible communities in the undergone a management audit to assure that Company s service area except the City of Toledo operation and maintenance expense savings are have accepted the late reduction package maximized The aud:t was conducted under the The Company plans to request PUCO approval to direction of an Audit Advisory Panet ( Audit Panel) reduce rates to the same levels for the same customer composed of representatives of Centenor Energy the categones in the City of Toledo and the rest of its Ohio Office of Consumers' Counsel and the Industnal service area If all areas now served by the Company Energy Consumers in Apol 1990, the Audit Panel receive the benefits of the lower rates annuakzed announced that it had identified potential annual revenues wdl be reduced by about $17.001000 The savings in operating empenses in the amount of revenue reductions will not adversely atiect the phase-

$98.160,000 from Centenor Energy's 1989 nudget in plan as the decrease in revenues wdl be mitigated level The amount of potential savings attributable to by the cost reductions discussed above the Company is 45% ($44,172.000) The Company The Company has entered into an agreement with expects to begin reakzing most of the savings other members of the Audit Panel in which the identified by the audit by the end of 1991 Company has agreed to use its best efforts to avoid Fif ty percent of the savings identified by the Aud t rate increases in the years immediately following 1991 Panel were used to reduce tne 6% rate increase The 1989 order also sets nuclear performance scheduled to go into effect on February 1.1991. As standards through 1998 Beginning in 1991, the discussed previously, the Company's rates increased Company could be required to refund incremental 2.74% under this provision as approved by the PUCO rep?acement power costs if the standards are not met in January 1991 We do not beheve an/ refund will be required for the in a move to become more competitive in Northwest Company for 1991 Fossil-fueled power plant Ohio, the Company has proposed a rate reduchon performance may not be ratsed as an issue in any rate package to all incorporated communities in its service proceed ng before February 1994 as long as the area which are served enciukvely by the Company on Company and Clevciond Electnc ach eve a system-a retail basis The package calls for the ehmination of wide asadabihty factor of at least 65% annually This the 2 74% rate increase effective February 1.1991 for standard Aas exceeded in 1989 and 1990 all residential and small commercial customers, a (7) FEDERAL INCOME TAX Federalincome tat computed by multiplying income before tawes by the statutory rates. is reconciled to the amount of federal income tax recorded on the books as follows f or the wars ended Decemtwr 31 1990 1989 1988 (thousands Cf dOlWS )

book income Rou) Before f ec1eral imome Ta= i 91 B01 $151526 $ (168 277i Tan on Boom income {t oss) at Statutory Rate i 31.B92 1 51.519 $ (57 214) increase (Decrease) in Ta.

Accelerated depreciat on . tB53) 5.993 529 investment tan cred<ts on d sahed nuclear pont (18 610) - -

Or;;awaton costs . - -

2 274 Tases other than tederat income taxes (2 647) (107) 4 292 Other items 2 745 1 443 (2 706)

Totai Federat income Tai Expense (Cred:t) . $ 12 377 $ 56 848 $ (52 825) i

, Federal income tax expense is recorded in the income Statement as foll.ws i

f or the vers encied Decemrer 31.

1990 1989 1988 (thousands of dollars)

Operahng L apenses Current Tai Proesion= . $ 17 045 $ ( 11.4 b8 ) 5 ( 3,1 W )

Changes in Accumulated Deterred F ederai income Tai Accelerated depreciahon and amoiteahon . 1.580 8764 1.723 Allernative minimum tan cred,t (5 480) 21 291 -

Sale and leaseback t'ansactu>ns and amortaabon. 5 121 455 14.763 Property tan empense . (4 011) -

(5 058)

Deterred CWIP revenues . 9 393 11 726 (4 331)

Detened fuel costs (4.021) (1?29) 4 698 System deveiopment costs . 248 207 3 639 Dam Desse replacement po*e" -

5 055 8 375 Federal income tan retum adjustments - --

(272)

Heacquired debt costs (532) (178) 4 646 Defened operahng e penses . 996 (1268) 4 039 Net operat ng loss carrytorward . - -

(2 545)

Cther items . t460) 2 398 (4 223) investment Tai Crod1ts . 1.162 1 722 6 920 Total Charged to Operahng E apenses . 21 041 37185 29 242 Nonoperating ir ome Current Ten Provision. (18 242) (10 129) -

Changes in Accumulated Defened F ederal income la=

Daos Besse resacement power . -- -

2709 Wnie on of nuclear costs (10 157) -

(97277)

AFUDC and cartpng charges. 16 835 32,930 46t43 Net operahng loss carryf arward . -. -

(36h31)

Other items 2900 11 238) (13H8)

Total E apense (Cradit) to Nanoperahng income . (8 664) 21563 (86 244)

Federal income Tax inc'uded in Cumulative Effect of an Accountng Change for Untn! Led Revenues . - 4 177 Total Feoeraf locome Tm Cupense {Crecit) . $ 12 377 1 58!.48 $(52 825)

The Company joins in the f4hng of a consolidated federalincome tax return with its affiliated companies The method of tax allocation approximates a separate return result for each company in 1988, a change was made in accounting for income taxes from the deterred to the liabikty method. This change did not impact net income as the additional def erred taxes recorded were off set by a regulatory asset on the Balance Sheet; Federal income tax expense adjustments in 1990, associated with previously deferred investment tax credits relating to the 1988 wnte-off of nuclear plant investment, decreased the net tax provision related to nonoperating income by $18.810,000 The favorable resolution of an issue concerning the appropriate year to recognize a property tax deduction resulted in an adjustment which reduced federal ir.come tax expense in 1990 by $3.911.000 ($2,168,000 in the fourth quarter).

For tax purposes. net operating loss (NOL) carryforwards of approximately $28,101.000, $21,426.000 and

$187,019,000 were generated in 1990,1989 and 1988, respectively The NOL carryforwards are available to reduce future taxable income and will expire in 2003 through 2005 The 34% tax effect of the NOLs generated in 1990

($9.554,000) and 1989 ($7.285.000) is included in the above table as a reduction to deferred federal income tax relating to accelerated depreciation and amortization The 34% tax effect of the NOL generated in 1988

($63,586,000) is included in the above table as reductions to deferred federal income tax relating to accelerated depreciation and amortization ($24.210.000) and to deferred federal income tax charged to operating expenses

( $2.545,000 ) and to nonoperating income ($36 831,000) Future utthzation of these tax NOL carryforwards would result in recording the related deferred taxes.

Approximately $20.161.000 of unused general business tax credits are available to reduce future tax obhgations The unused credits expire in varying amounts in 2001 through 2005 Utilization of these unused credits is hmited by provisions of the 1986 Tax Act and the level of future taxable income to which such credits may be apphed The 1986 Tax Act provides for an AMT credit to be used to reduce the regular tax to the AMT level should the regular tax exceed the AMT An AMT credit of $5,480.000 was generated in 1990 An AMT credit offset for the consohdated tax retum of $21.291,000 was generated in 1989 17

The settlement (d:Scount) rate assumption was (8) RETIREMENT INCOME PLAN AND OTHER POSTRETIREMENT BENEFITS 8 5% for December 31.1990 and 8% for December 31 1989 The long term rate of annual compensation

(

We sponsor a noncontnbuting pension plan v.nich increase assumption was 5% for both December 31.

I covers all employee groups The amount of retnement 1990 and December 31.1989 T he long term rate c' benefits genct&l!y kponds upon the length of seruce return on plan assets assumphon was 8% in 1990 and Under certain cucumstances, benefits can begin as 1989.

early as age 55 The plan also provides certain death. Plan assets consist pnmanly of investments in medical and disabihty benefits The Company's common stock. bonds. guaranteed investment funding policy is to comply with the Employee contracts. cash equwaient secanties and real estate Retnement income Secunty Act of 1974 gutdehnes The cost of postretuement medral benefits Dunng 1990, the Company offered its second amounted to $2 400.000 in 1990 $2,10u,000 >n 1989 Voluntary Earh Retnement Opportunity Program and $1.600 000 in 1988 Consistent with current (VEROP) Operating expenses for 1990 included ratemaung practices these costs are recorded when

$7.000 000 of pension plan accrua!s to cover paid enhanced VEROP benefits plus an additional in December 1990 a new accounting standard for

$8.000.000 of pension costs for VEROP benefits being postretnement benefits other than pensions was paid to retnees from corporate funds The $8.000 000 issued This standard requaes employers to accrue is not included in the pension data reported bclow the expected cost of such benefits dunng the Operating expenses for 1990 a!so included a credit of empio,ees' years of service The standard also

$5 000 000 resulting from a settlement of pension requaes the recording of a cumulative transition obhgations through lump sum payments to a obhgation adjustment which can be recognized substantial number of VEROP retnees Net pension and immed ate!y. subject to certa;n limitations. or amortized VEROP costs for 1988 through 1990 were composed over tN longer of 20 years or the average remaining of the folioMng components service penod of actrue employees expected to recerve gg gg g benefits The Company is requaed to adopt the ncw standard no later than 1993 Although ae have not pm of usars; completed an analysis to determine the effect of r e% on corts Seroce cast b tenents cameu ad?pting the new standard. ne du not expect adoption deng tu pa 5 5 $ 4 $ 4 to have a matenal adverse effect on the Company s interest cost on pmected tenent financia! cond, tion or results of operations because of otwaaben it 'O 9 expected future regulatory treatment Any liabihties Actax retu rn cn Fd an assets #2) il7) ('81 recorded Dursuant to the standard may be essentially Net amortmon anc deieux t11> 4 s off set by regulatory assets to reflect anticipated future Net penwn con 3 1 -

revenues associated Ath reco%ery through rates W ROP cost 7 -

?

(9) GUARANTEES Sememen' ga+n . (5) - -

Under a long term coal purchase arrangement the Net costs . i 5 5 ' 1 2 Company has guaranteed the loan and lease obhgations of a m:ntng company Th;s arrangement The fohomng table presents a reconcihation of the also requaes payments to the mining company for any funded status of the plan at December 31 1990 and ctual out of pocket idle mine expenses (as advance pa,ments for coal) when the mines are idle for 1989 Decerner 31 reasons beyond the control of the mininq company. At mg og December 31. 1990 the poncipal amount of the enam. e daars) '

mining company s :can and lease onhgations emana: mewt aue v wht guaranteed by the Company was $24 000.000 Otlya!onS

' vested beneht, 1101 i 92 NOfMS%d tentAIS c Accumulated Denent ot%gahon . 107 99

[Pect Of tLtdf e cOPfFSOOn P d 22 33 IOt3' [JrG}9CIed Derpf j gthqy OG l2h  ! 'l2 Ma9 assets at L3 g r wget vyyp 151 174 SWptus cd pn a%CS Car pr m mq beneht culq:Mn J2 42 Unnmogneea nei ga,n am to s vanw y tMeri nsurrotot c ard e. 4 e , %e i20) 35; bnfd ns[er.j ?M Mf '/(e jbl Iran > ' m a W y anu e f 1 1%7 rie.y aTcf h/ed WM 19 (N3 (23; i2-,

he' accred pere. con cost M r!M1 m f er emeas : <

R sanz S%eet li 1 F; ) 1 11 h

i (10) CAPITAllZATION rates. with the dividend rates for these issues averaging 9.06% and 9 84%, respectively, in 1990.

(a) CAPITAL STOCK TRANSACTIONS Under its articles of incorporation, the Company Preferred stock shares retired during the three years ann t issue pr f rr d st k uni ss certain earnings ended December 31,1990 are as follows 1990 1989 1988 coverage requirements are met Based on earnings for the 12 months ended December 31,1990, the tinousandss o shareII-CumulaSve Preferred Stock Company could issue at December 31, 1990 Subject to Mandatory approximately $7.500,000 of additional preferred stock nedempnon at an assumed dividend rate of 11%. If Perry Unit 2

$100 par $1100. (10) (5) (5) had been canceled and written off as of December 31, 9 375. (17) (17) (17) 1990, the Company would not have been permitted to Total . (27) (22) (22) issue any addihonal preferred stock See Note 3(c).

Cumutahve Preferred Stock Not

1. " # M #M

• SubsecI to Mandatory will depend _on earnings Ior any 12 consecutive Redempnon months of the 15 months preceding the date of

$25 par $3 47. - -

-(1 200) issuance, the interest on alllong term debt outstanding Tsai .

and the dividends on all preferred stock issues-n2001 outstanding.

Changes in premium on capital stock are There are no restnctions on the Company's ability summanzed as follows: to issue preference stock.

With respect to dividend and hquidation nghts, the

'990 '989 '988 Company's preferred stock is prior to its preference (thousands of co!!ars) stoCh and Common stock, and its preference stock is Balance at Beginning of Year $481.082 $481.082 $482,770 prior to its common stock.

Premium, Net of Expense -

Preferred Stock . - -

't.688)

Baiance at End nf Year . $481062 $481.082 5481.082 BORROWING ARRANGEMENTS L ng term debt. less current matunties, was as follows.

(b) EOUlTY DISTRIBUTION RESTRICTIONS At December 31, 1990, retained earnings were jetual g,c,,,,, 3,

$82,956,000. Substantially all of the retained eamings Year d Mmnty in$ereN$e 1990 1989 were available for the declaration of dividends on the g Company s preferred and common shares. All of the g Company,s common shares are held by Centenor Energy. A wnte-off of the Company's investment in 1991 15 00 % $ -

$ 70.000 Perry Unit 2. . depending upon the magnitude and 1995. 10 125 -

36.800 timina of such a wnte off. could reduce retained 1995. 11 25 60.000 60 000 eamirigs sufficiently to impair the Company's abihty to 1996 2000 . 8 69 166,378 166 378 declare dwidends. See Note 3(c). 200 b2005 . 7.79 61.725 61.725 Any financing by the Company of any of its 2006-2010. , 9 64 101.900 101,900 nonutihty afhhates requires PUCO authorization unless 2016 2020 . 8 00 67.300 -

the financing is made in connection with transactions 2021-2023. 7.93 147,800 147.800 in the ordinar/ course of the Company's pubhc utihty business operations in which one company acts on 605.103 644.603 behalf of another. Term bank loans due 1992-1996. 8 83 13.500 -

Notes duc 1992-1997 10 64 219.430 261,715 (c) CUMULATIVE PREFERRED AND PREFERENCE STOCK- Debentures due 1997 11 25 125 000 125,000 Amounts to be paid for preferred stock which must be Pollution control notes redeemed dunng the next five years are $2.000.000 in due 1992 2015. 11 03 136 600 166.480 both 1991 and 1992 and $12,000,000 in each year other - net -

(2,307) (521) 1993 through 1995 Total Long-Term The annual mar .atory redemption provisions are as Debt $1.097,326 $1.197,277 follows.

Shares Pnce To Be Beginning Per Long term debt matures donng the next five years Pedeemed in Share 33 follows: $114.000.000 in 1991 $121,000,000 in I1N par $11.00. 5000 1979 $100 E N#'*

• N' MM s 6 aM 9 375. 16.650 1985 100 $86.000.000 in 1995 25 par 2 81. 400.000 1993 25 The annuahzed cumulahve preferred dividend hen on substantially all property owned and franchises requirement as of December 31.1990 is $25,000,000 held by the Company Excluded from the hen, among The preferred dividend rates on the Company's other th,ngs, are cash. secunties, accounts receivable.

Series A and B fluctuate based on prevaihng interest fuel, supphes and automotive equipment 19

Additicnat f:rst mortgage bonds may be issued by (ii) SHORT-TERM BORROWING the Company under its mortgage on the basis of ARRANGEMENTS bondable property add br cash or suostitution for The Company had $75 550,000 of bank knes of credit l refundable first mortgage vur.ds The issuance of add >tional first nortgage bonds by the Company on the anangements at December 31.1990 There were no basis of properti additions is hmited by two provisions bonoaings under these bank credit arrangements at of its mortgage One relates to the amount of December 31.1990 bondable property available and the other to camings Short term bonowing capacity authonted by the PUCO is $150 000.000 The Company and Cleveland coserage of interest on the bonds. Under the more restnctive of these provisions (currently, the camings Electnc have been authorized by the PUCO to honow coverage test), the Company would have been from each other on a short term basis permitted to issue approumately $177,000,000 of Most borrowing arrangements under the short term bonds based upon available bondable property at bank knes of cred,t require a fee of 0 25% per year to December 31,1990 The Company also would have be paid on any unused portion of the lines of credif.

been permitted to issue approumately $56 000.000 of For those banks without fee reautrements, the average bonds based upon refundable bonds at December 31, dady cash batance in the bank accounts satisfied 1990 11 Perry Unit 2 had been canceled and wntten informal compensabng balance arrangements off as of December 31,1990, the amount of bonds At December 31, 1990. the Company had which could have been issued by the Company would $23.200.000 of commercial paper outstanding The not have changed commercial paper was backed by at least an equal Certain unsecured loan agreements of the amount of unused bank knes of credit Company contain covenants relahng to capitahzabon ratios, eamings coverage ratics and hmitabuns on (12) CHANGE IN ACCOUNTING FOR UNBILLED secured financing othet than through first mortgage REVENUES bonds or certain other transactions An agreement Poor to 1988, revenues were recorded in the relating to a letter of credit issued in connection with the sale and leaseback of Beaver Valley Unit 2 (as accounbng penod dunng which meters were read amended in 1989) contains several bnancial cosenants Utihty service rendered af ter monthly meter readtng afiecting the Company, Cleveland Electnc and dates th.ough the end of a calendar month (unbuted Centenor Energy Among these are covenants relahng resenues) became a part of operahng revenues in the to earnings coverage rabos and capitahzabon rabos following month. In January 1988, the Company The Company, Cleveland Electnc and Centenor adopted a change in accounting for revenues in order Energy are in comphance with these covenant to accrue the estimated amount of unbihed revenues provisions We beheve the Company, Cleveland at tne end of each month Electnc and Centenor Energy wdl continue to meet The adophon of this accounting method increased these covenants in the event of a write-ott of the 1988 not income $218 000 (net of $112.000 of Company's and Cleveland Electnc's insestments in income taxes) before the cumulabse effect on pends Perry Unit 2, bamng unforeseen circumstances poor to January 1.1988 The cumulative et* ne change on the penods poor to January 1 .as

$6 279 000 (net of $-t 177.000 of income  ; and was included in 1988 net income 5

- . . -- - - - -.~ . . - . -.- ~ . . -.. ~ . - .. .,

. (13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a tabulation of the unaudited quarterly results of operations for the two years ended December 31, 1990 Q

_ uwters _ F nded Marc.h 31 June 30. Sept 30, Dec 31 (thousarids of dollws) 1990 Operating Revenues. . , , , $203,841 $204.295 $223.201 $195.749 Operating income . . . 38,771 28.298 39.472 45,901 Not income . 4 . . . . . 21,004 26.971 19,420 13,429 Eamings Available for Common Stock .. 15.357 20,660 13,109 7,139 1989 Operating Revenues. .

$201,144 $203.436 $219,762 $202,461 Operating income . , , . . , 32.041 37,149 40,532 32.595 Not income . o. . . . , 24.280 30,284 34,501 3.613 Earnings (Loss) Available for Common Stock . 17.857 23.882 28,176 (2.627)

Earnings for the quarter ended June 30,1990 were increased as a result of federal income tax expenso adjustments associated with deferred investment tax credits relating to the 1988 wnle-off of nuclear plant investment See Note 7. The adjustments increased quarterly earnings by $17,907.000 Earnings for the quarter ended December 31.1990 were decreased as a result of year end adjustments A

$13.933.000 reduction in phaec in carrying charges (see Note 6) was partially ottset by adjustments of $7.760.000 to reduce depreciation expense for the year (see Summary of Significant Accounting Policies) and $2,168.000 to reduce federalincome tax expense (see Note 7). The total of these adjustments decreased quarterly earnings by

$2,000.000.

21

a FINANCIAL AND STATISTICAL REVIEW ,

Operating Revenues (thousands of dollars)

$1 ram T Olal Teta! Ic' O Heatng (l;wf aing

) car Hesent Conwraa: tex 1ostow OWw Retan emesa-e I w inc & Gas hevenues 1990. $223 920 $174 540 $235 578 $79 535 $713 573 $113 513 $627 066 $- $827 086 1989 215 932 163 991 226 080 99 451 706 054 120 749 826 803 -

826 803 1968. 200 916 142 696 199 521 34 961 578 094 49 903 627 997 -

627 997 1987. 200 877 142 365 219 096 27 646 590 006 15 031 605 037 -

605 037 1996. 189 292 133 841 214 274 23 bS6 561 293 11 189 572 482 -

572 462 1990 126 085 80 836 137 860 28 458 373 239 21 647 394 666 6 962 401 869 Operating Expenses (thousands of dollars) other F um A Ope"a ten Devreewon Ia.es (%ase m & f ede r ai lotal Purchased & & Othe, Than he phase in ir.c:nw Operatog war Power Maimenarw e Arnornianto t il F W "ed Net ia.es tapenses 1990, $138 222 $373 374 $75 986 $79 320 $ (13,299) $ 21.041 $674 644 1989. 133 400 372 530 67 639 72 123 (18 491) 37 285 684 486 1988. 116 161 358 823 75 093 80 138 183 813) 29 242 575 644 1987. 140 176 223 307 6S 503 59 658 (39 797) 22 747 471 594 1986. 158 763 167 319 37 832 51 398 -

41 150 456 462 1980- 155 771 85 161 26 002 31 202 --

23 376 321 512 income (Loss) (thousands of dollars)

F eaer a:

Omet income incorne lhcOme & T a.es- neim, operanog Af uoc- Deauchons Carreng Ciea,t mierest Y e as income E mrty Net Chages ( E umme ) Chwges 1990. $152 442 $ 3 352 $ 6 149 $ 43 487 $ 8 664 $214 094 1989. 142 317 8 568 20 361 e2 30s (2i 563) 23i soi 1988 52 353 5 452 (246 722)(a) 129 632 86 244 26 959 1987. 133 443 122 138 (16 904) 14 989 42 726 296 392 1986. 116 020 129 576 (1 6271 -

52 029 296 000 1980. 80 366 28 443 879 -

13 218 122 896 income (Loss) (thousands of dollars) ir< ome ilost) fwfare tanunijs Cumoradve Cumruat%e ttossi E kt of an i Nct of an Net Prefer'ed A.adatue Debt Af-UDC- Ac counting Arccor'hsq W.ece Stoc h for Common v ear enterest Det>i change change u nso D-aerus sw6 1990. $135 344 $ (2 674) $ 81 424 $- $ 81,424 $25159 $ 56 265 1989. 144 792 (5 479) 92 678 -

92 678 25 390 67 288 1988. 150 523 (1833) (121 731) 6 279(b) (115 4521 26 983 (142 435) 1967. 185 493 (54 272) 165 171 -

165 171 42 749 122 422 1986. 174 397 (55 314) 176 917 -

176 917 45 243 131 674 1980. 70 666 (15 148) 67 178 -

67 178 18 021 49 157 (a) includes w'ite off of nuclear costs in the amount of $276 955 000 in 1988 (b) in 1999 a change in the method of accounting for unt,aled re<enues was adopted 22

9 THE TOLEDO EDISON COMPANY Electric Sales (millions of KWH) Electric Customers (year end) Residential Usage Aveta;)e A verage A ciaae Pr(e Heverme hwksino! KWH er Pm Per year nementai comn#.aai inosina4 wNaue otte t ota! ne uacois commeroa' s otnm tots cosicmm kWu Caionw 1990 1 950 1 614 3 617 932 496 8 609 253 965 25 822 4 555 284 342 7 692 11.484 $882.99 1989. 2 017 1622 3 740 1 175 495 9 049 253 234 25 803 4 434 283 471 7 989 10 71 855 29 1988. 2 068 1 679 3 7bJ 938 474 8839 251 690 25 526 4 102 281 218 8 264 9 72 802 87 1987. 1 977 1 532 3 589 344 464 7 906 249 344 25 170 4 085 278 599 7 969 10 16 809 66 1986. 1 941 1 495 3 4't2 242 449 7 6D9 247 256 24 655 4 004 275 915 7 881 9 75 768 43 1980. 1 971 1 282 3105 560 410 7 388 240 142 23 532 3 618 267 492 8232 6 40 526 66 Load (MW & *4) Energy (millions of KWH) Fuel oveaue Capacty company GwM Ne? Ithmenty-at loc Peak Co.wat . tori Pu'c t med f e Cat Btu re Year of Pean load Ma r- pn i actor f owi Arcear Tot al Power f otat Pm kWH KWH 1990. 1 752 1 516 13.5% 63.0** 5 535 4 219 9 754 (499) 9255 1.504 10 220 1989. 1 894 1526 19 4 65 2 f 206 5 552 10 758 (1 175) 9 583 1 42 10 293

> 1988. 1057(c) 1 614 (52 7) 62 8 5 820 3 325 9 145 385 9 530 1 59 10 174 1987. I 698 1 484 12 6 64 9 5 916 3 218 9 134 (647) 8 487 1 45 10 196 1986. 1740(c) 1423 18 2 64 8 6 462 12 6 474 1 689 8 163 1 82 9 860 1990. 1760 1 310 25 6 68 3 5 529 1 031 6 560 1 352 7 912 1 65 10 245 investment (thousands of dollars) constnx non WWh in k lai Ub!ity Acc.muWad Pfgyein Nudtw Prot ert y Ubu!y hafil O pepfPDdhOn & Nt?1 br"eHV M $N1 Ndn! 4Mj NNil Total vem sue Amutizabon mant un.t 2 eine raum<ntml A 111,ons Aswis 1990. 52 607 010 $646193 $1960 817 $ 436 839 $223 872 $2 621 $28 $ 86 693 $4 001518 1989 2 532 291 567 197 1 965 094 430 340 23? 318 2 632 752 77 357 4 138 846 1988. 2 438 927 487 546 1 951 381 459 104 262 514 2 672 999 132 083 4 134 672 1967 2 000 511 419 149 2 181 362 374 274 267 069 2 822 705 380 974 4 277 587 1986. 1 442 812 415 745 1 027 067 2 169 945 269 022 3 466 034 463 163 3 813 889 1980. 1 197 774 220 629 977 145 520 239 27 424(d) 1 524 808 235 911 1 701 443 Capitalization (thousands of dollars & %)

men,ea vn. wm wevea ssxs wrnov, MdndatLVy htMiempt(en Myv100ry HWMpfen Y ear Common Stoch Equty Prouwns Pwarons t ang Term Debt Ictal 1990. S 880 784 39% $ 66 328 3% $210 000 9% $1097 326 49% $2 254 438 1089. B97 793 38 68 990 3 210 000 9 1 197 277 50 2 374 060 1988 . 887 442 36 71 155 3 210 000 9 1 291 444 52 2 460 041 1987. 1 096 737 39 73 340 3 24] 000 8 1 400 292 50 2 810 369 1986, 1 074 663 36 148 797 5 260 000 9 1 480 947 50 2 964 407 1990. 478 993 34 66 500 5 150 000 11 714 406 50 1 409 899 (c) Capac4 data reuccta extenced generating unit outages tor renovan on and improvements (d) Restatea for ettects of capitauation of nuciear fuei tease ano tenancing arren9ernents pursuant to statement of rinanaaf Account-ng siana,as 71

~ _

f INVES' LOR INFORM ATION i

i StI ARE OWNER INFORMXi'lON DIVIDEND REINVESTNIENT AND S' LOCK INQl'IRIES Ouestions regarding the Company ot stock l'URCil ASE Pl.AN AND INDIVIDU\l.

RETIR131ENT ACCOUNT (IRA)

.Iccounts shoukt be directed to Share Ow ner Servites at Centerior Energy Corporation at Centenor 1.nerg) Corporation has a Disidend the address and telephone numbers indic ated Remsestment and Stos L Punbase Plan which below for the Stock 'liansf er Agent, prosides 'lbledo Ednon share owners of Please base sour atcount number readv

"""I "

• I "b ' I""" "" " '"",* " "I tucans of puuhaung Aun of Unknor w hen calling. tonunon stutL by unesting a part or all of their (plattell) dis idends as well as making S' LOCK TRANSFER AGENT t ash imestments. In addition, individuals may Centetior Energy Corporation estabhsh an Indisidual Retirement Account Shaie ou ner Senices (Ill A) w hich im est s m Center ior connnon P.O llox 94661 sto,L through the I'lan. Infonnation relating Cles eland,011441014661 to the i lan and the lRA may be obtained in Cleseland area 642-6900 or 447. 4nn from Centenor Share ()w ner Sen it es.

Outside Clescland alca 1 $00 433 ~704 Sto(L transfers may be presented at INDEPENDl?NT ACCOUNTAN IS PNC Trust Compain of New York Arthur Andersen & Cu 40 Ilroad Street, i .fth Floor 171" East Ninth Street New York, NY 10004 Clescland,01144114 S' LOCK REGISTRAR FOR\110 K Ameritrust Company National Association 1 he Company w ill furni .h to share ou aers, Corporate Trust Disision w ithout t harge, a copy of its most recent P.O.llos6477 annual report to the Securities and Euhange Cles elcud, Oll 44101 Comuussion (Form 10 l<) and, upon payment of a reasonable fee, a copy of cat h exhibit to EXCil ANGE 1 ISTINGS Fonu R4 Requpts shoukt be directed to the Secretary of Centerior Energs Prefierred-$25 par salue-S.h4% $2.365 and Corporation at the ad&ess of the Stod

$2.51 series, Adiustable Series A and Transfer Agent.

Adiustable Series ll-New York Stott Exchange Preferred-$100 par salue-4 % % 5.32%

7 76% and 10% series- Amenean Stott Ewhange ROND AND DEllENTURE INFORMXi' ION HOND TRUSTEE AND PAYING AGENT DEllENTURE TRUSTEE AND 1%YING AGENT The Chase Nianhattan llank, N.A. National City llank Corporate Trust Adminisitation Division 1900 East Nmth Street

} New York Ila/a,14th floor Cles eland. Ohio 44114 New York, NY 1001% (216) cs 25:5 (212)676-5s;0 l

u

g_

Tile'lOLEDO EDISON CONil%NY eutxRATE u s pos1 AGE 300 Madnun Asenue . 'liacdo, oino 4%;;

PAID CL E VE L AND. OHIC+

PERMil NO. 409

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