ML18017A180

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Forwards 1980,1979,1978 Annual Financial Repts for PA Power & Light & Allegheny Electric Cooperative,Respectively & Other Financial Info Per NRC 810304 Request.Repts Available in Central Files Only
ML18017A180
Person / Time
Site: Susquehanna  Talen Energy icon.png
Issue date: 04/22/1981
From: CURTIS N W
PENNSYLVANIA POWER & LIGHT CO.
To: YOUNGBLOOD B J
Office of Nuclear Reactor Regulation
Shared Package
ML17139A110 List:
References
PLA-744, NUDOCS 8104240412
Download: ML18017A180 (1221)
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Text

REGULATORYINFORMATIONOISTRIBUTONSYSTEM(RIOS)ACCESSIONNBR08104240412DOC~DATE!81/04/22NOTARIZEDNODOCKET'ACIL:50~387SusquehannaSteamElectricStatfonrUnftisPennsylva0500038750388SusquehannaSteamElectrfcStationsUnit2rPennsylvaWi000AUTH',NAMEAUTHORAFFILIATIONCURTISrN;8~PennsylvanfaPowerLLightCosRECIP~NAME'ECIPIENTAFFILIATION"YOUNGGLOOO'zB~J~LicensingBt'anch1SUBJECTSForwards1980r1979r1978annualffnancfalreptsforPAPower"Lfght8AlleghenyElectrfcCooperatfveirespectfvely8otherfinancialinfoperNRC.810304request.Repts.avaflabiafnCentralFfleson)y~DISTRIBUTIONCODE'tBOOBSCOPIESRECEIVED:LTRJ.ENCLSI2ESTITLE:LfcenseApplfcatfonAMOTS(GeneralInfo)RKCIPIENTDCOOK/NAMEARK@RE05HYO/GEOBR13LICQUALBROKlDllEG~F'~OiE'ROGRAMINTERNAL~DIRgOIVOFLIC'8,K:07NRCPDR'2'.QABR09RUTBERGgJ~12!UTFINBR0812E211111~11~NOTES:Sendl8K3copiesFSAR8allamends'endI8,E3*copiesFSAR8allamends;84'Cc70EGG.pic.MRECIPIENTCOPIESIOCODE/NAME(LTTRENClIACTION!LIC:BR~r2'C0411STCOPIESLTTRENCL112211111110500038705000388EXTERNAL!ACRSNSIC10.3:30611LPDR03TOiTAL,NUMBEROFCOPIES"REQUIRKDS:LTTR'0,ENCL.20 PpaLTWONORTHNINTHSTREET,ALLENTOWN,PA.18101PHONEr[215)770-5151NORMANW.CURTISVicePresident~Engineering&Construction-Nuclear770.5381April22,1981Mr.B.J.Youngblood,ChiefLicensingBranch1DivisionofLicensingUPS.NuclearRegulatoryCommissionWashington,'D.C.eEgPg~gs.:7ggSUSQUEHANNASTEAMELECTRICSTATIONADDITIONALFINANCIALINFORMATIONER100450FILE841-2PLA-744

Dear.Mr.Youngblood:

ThefinancialinformationrequestedbyyourMarch4,1981letterwasgiventoMr.JimPeterson,asstatedinourletterPLA-669.Enclosedisanadditionalcopyofthisinformation.Thispackageofinformationcontainseverythingrequestedinquestions410.01through410.13.AfutureFSARamendmentwillcontainresponsestothesequestionswhichreferencetheenclosedinformation.Verytrulyyours,N.W.CurtisVicePresident-Engineering&Construction-NuclearWEB/mksEnclosurecc:withoutenclosuresR.M.Stark-USNRC:.!8XO<2.409IPAPENNSYLVANIAPOWER8LIGHTCOMPANY~cLrugagfsLaaSlr SUSQUZ2DSNASESCOSTOFOPERATIONTheattachedtables(1.A.1,1.A.2.,1.A.3)weredevelopedinresponsetoanNRCrequestforSusquehannaSESOperatingCostCata.NatureofData-AlldataarebasedonPPkL's90/downershipoftheplant,anddonotreflectsalestoAtlanticCityElectric(6.6$,or125Ãf)through1991,norreflectsbuy-backofenergyandcapacityfromAlleghenyElectricCooperative.Thecurrencyofthedataisthatbestavailableatthistime.CaacitFactors-The'basecase(1.A.1)assumesthepro)ectedcapacityfactorsasestimatedbyPPSLandtheS.M.StollerCorp.Thealternatecases(1.A.2,1.A.3)useratesasrequestedbytheNRCinitsrequest.pormat-PPSLissuhsdttingtherequesteddatainthestandardformatforthecompany,whichdiffersfromtheNBCformattachedtotheirrequest.MostoftheitemsontheNRCformareincludedinPPKL'stables.CarinChare-Thecarryingchargeincludes:DepreciationExpenseTaxes:Income,Realty,Receipts,StockInvestmentTaxCreditAcgustmentsReturnonInvestmentFuel-Thefiguresintable1.A.1comedirectlyfromtheNovember1980NuclearFuelReport.Thesecostsincludebothdirectandindirectcharges.Fuelcostestimatesfortables1.A.2and1.A.3areprorationsbasedoncapacityfactordifferentials.erationandMaintenance-Includes:OperatingExpensesotherthanFuelMaintenanceExpensesPropertyandLiabilityInsuranceCostsdetailedinTable1.A.1comefromNuclearPlanningandControlOctober1980OBlreport.0&MestimatesforTables1.A.2and1.A.3reflecta1@iincreaseinthevariableportionforeverypercentdecreaseincapacityfactor,asagreeduponbyNuclearPlanningandControls.Decommissionin(notspecifiedonNRCform)-ThecosttodecommissiontheradioactiveportionofSusquehannaPlantisbasedonS.M.Stoller'sestimateof4155million(19805).Thesinkingfundrequiredtoaccumulatenecessary2014fundsis48millionperyearforUnitPland$9millionperyearforUnit)F2.

ItemsNRCreuestedbutnotincludedeA&Gexpensesotherthanpropertyand.liabilityinsurance.Theannualcostfortheseexpensesisexpectedtobeminor.Additionally,PP5Ldoesnotnormallyaccountseparately,forinternalpurposes,AEGattributabletoanysingleplant.~Transmissionexpenses.Anytransmissioncostsdirectlyassociatedwiththeplantarecontainedintheplantcosts.Thisrepresentsaninvestmentoflessthan$2milliontotal.lb.TheaverageunitpriceperKHHexperiencedbyPPRLonsystem-widesalestoallcustomersinthecalendaryear1980was40.0389.

IA PAGE1.A:1PRELIMINARYSUSQUEHANNASESCOSTOFOPERATIONHLLLLollLet%boLl.~-19821983n8419851986~1981988CapacityFactorsUnit1Unit265%556560556560706570707070CarryingCharge$200425488487485481Operationand(4)Maintenance(6)DecommissioningTotal$2852$3677~2295816818698688941131770912873K104142~40Notes(1)PP&L90$only(2)PerNuclearDepartment(3)BasedonForecast10dataandassumptions(4)PerJuly19800&MReport&subsequentOctoberupdate(5)PerNovember1980NuclearFuelCostReport(6)SinkingfundtorecoverS.M.Stollerestimate.Notofficiallyadopted.Seediscussion.PFW3/6/81 PAGE1.A.2PRELIMINARYSUSQUEHANNASESCOSTOFOPERATIONipg'4LAOhLSOPb04Q~(2)CapacityFactors~182~18319841985=198619871988Unit1Unit250$505050505050505050505050CarryingCharge(3)$200425488487485481477Operationand(4)Maintenance$305310093104123115Fu,l(5)(6)DecommissioningTotal$278$26565718492675690713~l~l~1~1~110217~llNotes(1)PP&L90$only(2)AsrequestedbyNRCmemorandum(3)Forecast10data-assumes5/1in-servicedates(4)Basedon10/80reportbyNP&CGroup.Modifiedperagreeduponformula.Seediscussion.(5)Basedonll/80reportbyNuclearFuels.Modifiedperagreeduponformula.Seediscusaion.(6)Sinkingfund.Seediscussion.PFH3/6/81 PAGE1.A.3PRELIMINARY(2)CapacityFactors~182SUSQUEHANNASESCOSTOFOPERATIONf4LLiiOlah0boM.~1983198419851986~1981988Unit1Unit2604606060606060606060606060CarryingChargeOperationandMaintenanceFuelDecommissioningTotal$200$338$27042552175724889585176854878868648599101177024811171101772547710917725Notes(1)PP5L904only(2)PerNRCrequestPFM3/6/81 2.DecommissioninTheattachedletterfromA.A.WeinstienoftheS.M.StollerCorporationgivestheestimateofdecommissioningcostsforSusquehanna.Thisestimateisbasedonimmediatedismantlementoftheplantuponshutdown.PP&Lisassumingthatasinkingfundwillbeestablishedtorecovernearlyallcostsassociatedwiththisdecommissioning.WhilethePennsylvaniaPUCwillhavethefinalsay,thecompanybasesthisassumptiononpastPa.PUCrulingswithotherutilities.Theonlyportionofthetotalcostthatisassumedtobeunrecoverable.throughasinkingfundisabout$30million(1980)incostsnotrelatedtoradioactiveportionsoftheplant.Thesefundswillbegeneratedasneededduringdecommissioning.3.ThesecostsareincludedinStoller'sestimate(above).

THEB.M.STC3LLERCCIRPC3RATICINASubsidiaryofArthurD.Little,Inc.1250Broadway,NewYork,N.Y.10001(212)868-2800March19,1981Mr.BrianSnappPennsylvaniaPowerandLightCo.2North9thStreetAllentown,PA18101

DearBrian:

Thisletteristoconfirmtheestimatedcostof$185millionforconcurrentdecommissioningoftheSusquehannaSteamElectricStation(SSES)thatItransmittedtoyouverballyonMarch19,1981.Theattachedtableshowsthebreakdownbycostcategoryofthisestimate.Forconservatism,theestimatedcostforthedisposalofradioactivematerialsnowincludesa100Kcontingencyonthesitedisposalchargesforbothcontaminatedmaterialandprocessradioactivewaste.Contingencyontheneutron-activatedradioactivematerialhasalwaysbeenaccountedforbytheincorporationintheotherPossibleCostcategoryofthesubcategory-deepgeologicdisposalofhighlyactivatedmaterials.Theaddedcontingencyonthecostsassociatedwiththedisposaloftheselectedradioactivematerialshasbeenappliedsincetheissueofwastedisposalisarelativelyopenone,andassociatedcostestimates,maynotbeasdependableasthosedevelopedfortheothercategories.Theserevisedestimatesindicatethatthesecondunitcostseffectively$88.677million,or92Kasmuchasthefirstunit.Ifyouhaveanyquestionspleasegivemeacall.Sincerely,TheS.M.StollerCorporation~WMa~~A.A.WeinsteinManagerofEngineeringAAW/caAttachmentJ,gilbert-.5ho~gPit/~~vbI~i>yIf~c'~'ageM.Sarbersc.h-pp~~LNRaudevjbvs/)-swsc,WesternOffice:Suite500,ColoradoBuilding,Boulder,Colorado(303)449-7220

THES.M.STQLLERCQRPQRATIQNSummaryofSusquehannaDecoommissioningCostEstimates:SingleUnitDecommissioningVersusConcurrentDecommissioningofBothUnits(millionsof1980dollars)SingleUnitBothUnitsTogetherDisposalofradioactivematerialsStafflabor:-laborers,craftsnonmanualfieldpersonne1-engineeringEnergySpecialtools5equipmentMisee11aneoussupp1iesSpecialtycontractors-explosives,radwaste,envirormentalmonitoringNuclearinsuranceLicensefeesSubtotal25KContingencyTotalOtherPossibleCosts:SpentfuelshipmentFacilitydemolitionandsiterestorationDeepgeologicdisposalofhighlyactivatedmaterialsFuelchanneldisposalSubtotal25KContingencyTotalGRANDTOTAL22.95614.7000.4180.9680.05155.89113.973It'9.862.975,16.1591.0920.92921.1555.28996.3086.0396.2372.3392.18345.91329.4009.05812.4743.5184.3650.7571.7420.102107.32926.832~TV5.95030.6682.1831.85840.65910.165184.985 PennsylvaniaPoweraLightCompanyFinancialStatisticsLineNo.Item19801979'978(ThousandsofDollars)1977EarningsapplicabletocommonstockAveragecommonequity(monthlybasis)Rateofreturnonaveragecommonequity(line14line2)$12093841339532$15160507816034,68210.38%12.91%1075365935994811.471112,770804591214F01%TimestotalinterestearnedbeforeFederalincometaxes9101112EarningsavailabletocoverinterestchargesIncomebeforeinterestchargesAllowanceforborrowedfundsusedduringconstructionGrossincome,includingthetotalallowanceforfundsusedduringcon-struction(line6+line7)CurrentprovisionforFederalincometaxesDeferredFederalincometaxesInvestmenttaxcredits-netEarnings,includingthetotalallowanceforfundsusedduringconstruction,availabletocoverinterestcharges(lines8to11)$2759533265,82222089152195550879052520763551726936$354,S85829350$56102$2159317889814,246(3,223)2909225654321053691995021983124694862357969539425F9536419635801330613430802513Totalinterestcharges,excludingtheallowanceforborrowedfundsusedduringconstruction$17498261355700107539796,72314TimestotalinterestearnedbeforeFederalincometaxes-grossincomeincludingthetotalallowanceforfundsusedduringcon-struction(line12vline13]2.082'42.853.1815161718AllowanceforfundsduringconstructionEquityfundsBorrowedfundsTotalallowanceforfundsusedduringcon-struction(line16+line17)$62518957905253,1295207635,5183551722545926936$141241105205710354939519Earnings,excludingthetotalallowance.forfundsusedduringconstruction,availabletocoverinterestcharges(line12-line18)$2229955,252,80823590992S8963020TimestotalinterestearnedbeforeFederalincometaxes-grossincomeexcludingthetotalallowanceforfundsusedduringcon-struction(line194line13)1.281.862.192.672122Timeslong-termdebtinterestearnedbeforeFederalincometaxesLong-terninterestexcludingtheallowancei'orborrowedfunds,includingamortizationoidebtdiscountandexpense$1555317127,39099985291,87323Timeslong-terainterestearnedbeforeFederalincometaxes-grossincomein-cludingthetotalallowanceforfundsusedduringconstruction(line12vline22)2.342.813.073.35 PennsylvaniaPower4LightCompanyPinancialStatisticsLineNo.Item198019791978(ThousandsofDollars)197724Timeslong-terminterestearnedbeforePederalincometaxes-grossincomeex-cludingthetotalallowanceforfundsusedduringconstruction(line19vline22)1.441.982.352~8225Bondratings(endofperiod)26StandardaPoor's27,Moody'sA+AaA+AaA+Aa28TimesinterestandpreferredandpreferencedividendsearnedafterPederalincometaxes2930Earnings,includingthetotalallowanceforfundsusedduringconstruction,afterincometaxesavailabletocovertotalinterestandpreferredandpreferencedividends(line8)Dividendsonpreferredandpreferencestock$354,585$59,375317,89848,666256,43241g670246p48636g99331Totalinterestchargesandpreferredandpreferencedividends,excludingtheallow--anceforborrowedfundsusedduringcon-struction(line13+line30)$234g201'84g366149i067133,71632TimesinterestandpreferredandpreferencedividendsearnedafterFederalincometaxes-grossincomeincludingthetotalallowanceforfundsusedduringconstruction(line29-:line31)1.511.72l.721.8433Earnings,excludingthetotalallowanceforfundsusedduringconstruction,afterincometaxesavailabletocovertotalinterestandpreferredandpreferencedividends(line8-line18)$213,344212,693185g397197e09134TimesinterestandpreferredandpreferencedividendsearnedafterFederalincometaxes-grossincomeexcludingthetotalallowanceforfundsusedduringconstruction(line33vline3110.911.151~241.473536Totalallowanceforfundsusedduringcon-struction(line18)Earningsapplicabletocommonstock(line1)$141p241$120,384105,20571,035133i532.107g36549g395112,77037Totalallowanceforfundsusedduringcon-structionasapercentageofearningsappli-cabletocommonstock(line35-.line36)117.3878.8%66.2%43.8%38Marketpricepershareofcommonstockatendofperiod815.63$17.75$19.25$23.1339Bookvaluepershareofcommonstockatendofperiod$24.68825.57$25.12$24.5840Markettobookratioatendofperiod(line38-.line39)0.630.690.770.94 PennsylvaniaPower4LightCompanyFinancialStatisticsLineNo.Item198019791978(ThousandsofDollars)1977414243444546474849EarningsapplicabletocommonstockI,essiTotalallowanceforfundsusedduringconstructionPlus>DepreciationAmortization(deferral)ofrecoverablefuelandenergycostsForcedoutagereserveprovision(charge)AmortizationofpropertylossDeferredincometaxes-netInvestmenttaxcredits-netTotaladjustedearnings(lines41to48)$120,384133853210783651128770(105,205)76,151(141,241)80,726(718035)738075(498395)688035(78317)63230912815528349(27,244)(69711)3092483641983140,45218734309(3,909)29092(48391)(48319)3096,533215956016017215611995416553850Commonstockdividendsdeclared$98650683921772866863,82051Ratiooftotaladjustedearningstocomnonstockdividends(line49vline50)0.612.071.652.59525354Short-termdebtoutstandingatendofperiodBankloansCommercialpapernotes$568324$13900030,775179800323,4005556575859Capitalization-amountLong-termdebtPreferredandpreferencestockCommonequityTotal1,260849548763758592641,257,365543,3759823681,557815867287751113441$168118692742,1751250717838045843343374278310826071346061626364Capitalization-percentDong-termdebtPreferredandpreferencestockCommonequityTotal47.6'I19.532.9100.0%46.6%208133.3100.0%45.2%19.535.3100.0%48.3%18.733.0100.0%

AHSHERSTONRCSTAFFQUESTIONSRELATIVETOALLEGHENYELECTRICCOOPERATIVE,INC.FINANCIALQUALIFICATIONS1.Alleghenywill~wna10%interestinbothSusquehannaUnitNo.1andSusquehannaUnitNo.2.ThereisnodifferencebetweenthispercentageofownershipandAllegheny'sentitlementtotheelectriccapacityandoutputoftheunits.~.~2;Allegheny'sratesarefixedby.theBoardofDirectorsofAllegheny'talevelsufficienttocoverallexpenses.Alleghenyisnot'subjecttoanystateregulatorycommissionhavingjurisdictionover.itsrates.Alleghenyhasinsuredthesatisfactionofitsfinancial'bligations'nrelationtotheconstruction'andoperationofSusquehanna.throughthe45-yearcontractwithits14membercooperatives.(alsosee.4below).3.BecauseAlleghenyissubjecttonoratemakingregula-tion,ithasbeenengagedinnorater'eliefa'ctionandthereare~norateorders'nexistenceandnoraterelic'factionsarepending.Allegheny'swholesaleratestoitsmembersarereviewedbythe.RuralElectrificationAdministration(REA).REAreviewedAlleghenyscurrentratescheduleonFebruary'S,'981.Alleghenyisamembershipcooperativewith13membersinPennsylvaniaandoneinNewJersey.'achofthemembersisaruralelectricdistributioncooperativeassociation.Eachof'hemembe=shasenteredintoa45-yearcontract,withAlleghenyforthepurchaseofallofitselectricpowerand.energyrequire-mentsfor'hetermofthecontractfromAllegheny..'heratepaidbythememberstoAlleghenyisfixedbytheBoardofDirectorsofAllegheny.Each.ofthemembershasarepresentativeonsuchBoardofDirectors.Theratesarerequiredtobefi~edat,anamountsufficienttocoveralloftheexpensesofAllegheny.A'representativecopyofsuchcontractsis.attached.Theyareallidentical.5.ThereareattachedcopiesofAllegheny'.scurrent'andprioryear~financialstatements.Copiesoffuturefin'an'cial..statementswillbeprovidedannuallyasrequiredby10CFR50.71(b)..

~z AIKNÃhWTTO>MOLrsALEPO>)rRANDPOHERCOSTPOOLTHGCob'TPJ~CT~~AHEHDJ.&MTDate<iasof;'ovemberl7,1976,to.WholesalePoweranQPowerCostPoolingContract,*maQe'I~~~'Q~~~0'sofJune.21,1965,asamendedby'AmendmantQateQasofJune2l.',1972,bothbetween'ALL7GHE57.0~0ZLECTRTCCGOPEPJCZlVE,XNC.(hereinatercalleQt:he"Seller"),~~e~acooperativecorporationorganized'andexistingunderthe~:~'~~~~~olawsoftheCommonwealthofPennsylvania.anQ.:~~~~~ADAHSELZCRIGCOOPERATIVE,XMC2~~~I0~(hereinaftercalled.the"Hemb'ex"},a.cooperativecorporation'~~2~'organized,andexistingunderthelawsoft:heCommonwealthoZ~u..Pennsylvania.o~r~~~,'I'.~,",~20e'.'MiEBEAS,theSellerand,the'iembexhay~.heretoforeen-.".:~'I'ter'ed,into'aUholesalePoweranQPower'ostPooling.Cont'ract:..~4~ma8easo2Juhe'21,19~6',anBanI'~~~Amendment,theretodated'.'une'21.'.,l972~~(sai,dCon'tractas'soamendeQbeinghereinaftercalI,eQt:h"Contract"),anQnowQesiretoamendtheCont:ractincertain.n.'dditionalxespects;0700M,THEREFORE,inconsiderationofthemut:ua1under-"takingshereincontained,thepartiesheretoagreeasfo3.-lows

~~~aaa1.ThepointsofdeliveryanddeliveryvoltageshallbespecifiedinExhibitAattachedheretoandmadeaparthereof;andsuchotherpointorpointsasmaybe.agreedupon~~~~~at.bytheSellerandtheHember.'xhibitAattachedheretoshallbesubstitutedforExhibitAattachedtotheContractandreferredtoinparagraphnumbered2thereof..2.-Paragraphnumbered17oftheContract,asprevi-ously.amended.,isfurtheramendedtoreadasfollows:.'17.TERM.ThisAgreeinentshallbecome'ffectiveonlyuponapprovalinwritingbytheAd-ministratorandshallremainineffectuntil=Decem-ber31,2025,andthereafteruntilterminatedbyeither.party'sgivingtotheothernotlessthan~sj.x'monthswrittennoticeofitsintentiontoterm-inate.SubjecttothepiovisionsofArticle1hereof,servicehereunderandtheobligationoftheMembertopaytherefor,shallcommence:uponthedatepowerandenergyshallbecomeavailableunder'heaforesaidcontractbetweentheSellerand'o~erAuthorityoftheStateofNewYork."3.Exceptasexpresslyamended'erein,allofthetermsandconditionsoftheContract,'aspreviously'amended,shallremaininfullforceandeffect.4.'."ThisAmendmentiseffective'ovember171976,subj.ecttotheapprovalinwritingoftheAdmiriistrator.

EXECUTEDasofthedayandyearfirstabovementioned.ALLEGHENY.ELECTRICCOOPEPATXVE,'NC.Sellerr~~ireszente.creeryADAMSELECTRXCCOOPERATXVE,TNC.I<emberATTEST:~~\~~Presaent'ecretary

~~.,FQ'P-'hRevisedExhibitAcdNovember171976,tontractbetweenAD/Q'fSELECTRICCOOPERATIVE,INC.andALLEGflENYi:"-CT";,ICCOOPERATIVE,INC.datedJune21,1965.I.ThisFourthRevis'edExhibitAsupersedestheThirdRevisedExhibit:AdatedllMarch24,1975,effectiveNovember17,g976,subjecttotheapprovalin~writingofItheAdministratorof'theRURALELECTRIFICATIONADAAINISTRATION.E>'HIBIT.A~BrodbecksBrushRunEastBerlinGermanyGettysburgkfattover~HcCrca~OrrstownOrrt"nnaPinolaRinelyRossvilleShippensburg'finterstownYorkSpringsCOUNTYYorkAdamsAdamsAdamsAdamsYorkCumberlandFranklinAdamsFranklinYork.YorkCumberlandYorkAdams.DELIVERYPOINTSTOWNSHIPCodoruskft.PLeasantReadingGermanyCumberlandkleidelbergLowerNifflinLurganHamiltonbanSouthamptonEastHopewellHarringtonSouthamptonHorthHopewellHuntingdonDELIVERYVOLTAGE13,20013,20013,200'3,20013,20013,20023,00023,00013,20023,00013,20013,200230000~13E20013,200CAPACITY4860KVA7775PEA'860KVA3025FVA4000KVA3750>arA'750,KVA-3750WVA10370KVA7500KVA2160kQlA4000kt>A3750KVA3750KVA4320KVA'Total:15DeliveryPoints.E>ACUTEasofthe'dayandyearfirstabovementioned.~0ALIEGHEIIYEIZCTRICCOOPERATIVEIIIC.4SellerATTEST:ByRh.ubnYoselson,P'"identSecretaryADAHSELECTRICCOOPERATIVEINC.memberATTEST:V.KycTrout,~PresidentSacrctary

~~JU.S.DEPARTMEHTOFAGRICULTURE.RURALELECTRIFICATIONAD)hlHISTRATIOHREABORROWERDESIGNATIONTHEWITHINOtOO'a7o+OVSUBMITTEDBYTHEABOYEDESIGNATEDBORROWERPURSUANTTOTHETERMSOFTHELOA'NCONTRACT,ISHEREBYAPPROVEDSOLELYFORTHEPURPOSESOFSUCHCONTRACT.IDATEDJUL33)galsFORTH@AOMIHISTRATOR7~~~~II\FORM2B4RCV,~00I~~~~V~~

ls~~WHOLESALEPOWERANDPOWERCOSTPOOLINGCONTRACTAGREEMENTmadeasofJune21,1965,betweenAlleghenyElectricCoaperative,Inc.(hereinaftercalledthe"Seller"),acooperativecorporationorganizedandexistingunderthelawsoftheStateofPennsylvania;and.'AdamsElectricGooperative,Inc.(heieinaftercalledthe."Member"),.acooperativecorporationorganizedandexistingunderthelawsof'heStateofPennsylvania.WHEREAS,theSellerproposestopurchaseelectricpowerandenergyfromPowerAuthorityoftheStateofNewYork,PennsylvaniaElectricCompany,(.hereinaftercalled"Penelec"),'etropolitanEdisonCompany,(hereinaftercalled"Meted"),or.fromothersources,andtoenterintowheelingcontractswithPenelecandMeted,andmayinthefutureconstructanelectricgeneratingplantortransmissionsystem,orboth,forth'epurpose,amongothers,OfsupplyingelectricpowerandenergytoborrowersfromtheRuralElectrificationAdministration(hereinaftercalledthe"REA"),orother'uralelectriccooperatives,whichareormaybecomemembersoftheSellerandWHEREAS,theSellerhasheretoforeenteredintoorisabouttoenterintoagreementsforthesaleofelectricpowerand'nergy-similarinformtothisagreementwitha13,ofsuchborrowers'ndotherruralelectric.cooperativeswhicharemembersoftheSeller,andmayente'rintosimilarcontractswithothersuchborrowersorotherrural.electriccooperativeswhich'aybecomemembers,andWHEREAS,theMemberdesirestopurchaseelectricpowerandenergy.romtheSelleronthetermsandconditionshereinsetforth;a'ndWHEREAS.,untilsuchtimeastheSellershallhaveelectricpowerandenergyavailable'osupplyallofthe~requiiementsofitsmembers,Seller,Member,andSeller~sothermembers.desirethatthecostsoftheelectricpowerandenergypurchased:byMemberfromsuppliersotherthanSellerbepooledwiththecostsofsuchpur-chases'ytheothermembersoftheSellerandtha'ttheSelleractasthepoolihgagent,forallofitsmembers;0NOWTHEREFORE,inconsiderationofthemutualundertakingshereincontained;thepartiesheretoagreea'sfollows:~~~1.GENERAL.Th'eSellershallsellanddeliver,orcausetobedelivered,tothe.MemberandtheMembershallpurchaseandreceivefromtheSellerallelectric'owerandenergywhichtheMembershallrequirefortheoperationoftheMember'ssystemtotheextentthat'heSellershallhavesuchpowerandenergyandtherequiredtransmissionfacilitiesavailable";provided,however,thattheMembershall'avethe'ighttocontinuetopurchaseelectricpowerandenergyunderanyexistingcontractorcontractswithasupplierothertpantheSel3erduringtheremainderofthetermthereof.TheMembershallterminate,iftheSellershall,with ttheapprovaloratthedirectionoftheAdministratoroftheRuralElectrificationAdministration(hereinaftercalledthe"Administrator")gsorequest',anysuchexistingcontractor'contrac'tswithasupplierotherthantheSelleratsuchtimesasitmaylegallydoso;pro-'idedtheSellershallhavesufficientelectricpowerandenergyandthetransmissionfacilitieavailable'ofurnishtheMember'srequirements.'TheSellermaymikesuchtransmissionfacilitiesavailablebyenteringintocontractswithotherstoprovideforthe.wheelingofelectricpowerandenergy,tothedel'iyerypointsoftheMember..2.ELECTRICCHARACTERISTICSANDDELIVERYPOINTS.Electricpowerand'energytobefurnishedhereundershallbealternatingcurrent,threephase,sixtycycle.ThepointsofdeliveryanddeliveryvoltageshallbeasspecifiedinExhibitA,attachedhereto,andmadeaparthereof,andsuchotherpointorpointsasmaybeagreeduponbythe.SellerandtheMember.VoltagesaretobemaintainedwithinthelimitsofvoltagevariationmeasuredattheMember'sdeliverypointsofplusorminus1P~ofthenominalvoltage'pecifiedinExhibitA..3.CONNECTIONS.TheMember(atitdexpense),shallin-stallandmaintainfuses,disconnectingswitches,oil.switches,transformers,orotherapparatus,atthepointofconnectionsoftheMember'slinestoPenelec'sandMeted'slines,whichmayreasonablybenecessarytoenabletheMembertoreceiveandusethepowerand.energydeli>eredtoithereundera'ndwhichPenelecorMjted,asthecasemaybe,specifiesasnecessarytoprotectits.system;provided,however,thattheprotectiveequipmentspecifiedbyPenel'ecorMetedshallbeconsistentwiththatwhich,PenelecorMeted'wouldnormallyinstallontheirrespectivesystemsinlikecircumstances.4.ISOLATIONOFANYGROUNDEDLINE.Inthe"event.thattheMembershallconstructlines,or'nyportionsthereof;foroperationwith'neconductorgrounded,itshallnotifyPenelecandMetedinadvance'fitsintentionto.doso.If'Penelecor'Metedistosupply'owerandenergytqsuchlinesorportionsthereoffromlinesofthesamevoltagewhich'do'othaveagroundedconductor,thesupplyingcompanymay,atitsoption,requirethatan'solatingtransformerbe.supplied,installedandmaintainedbytheMemberfor.thepurposeof-electricallyisolatingitsgroundedlinesfromthesupplyingcompany'ssystem."IS.NON-PARALLELOPERATION.TheportionoftheMember.'electricsy'temsuppliedthroughanypointofdeliverybyPenelec'r.Metedshallnotbeoperatedinparallelwithanyothersourceofpowerunlessagreedto.previouslybytheMember,SellerandPenelecorMeted,.asthecasemay'be.~s6..NOTICEOFPLANNEDOUTAGE.'heSellershall,.ifpracticable,givetheMemberatleast14dayswrittennoticeofanyscheduledorplannedoutagewhichwouldaffectth'esupply.ofelectricitytotheMember.Incasesuchnoticeisnotpossibleorincaseofunscheduledoutages,SellershallgiveMemberasmuchnoticeascircumstancesshallpermit.C 7.INTERCONNECTEDOPERATIONS.Thepartiesrecognizethattheelectrj.cpowerfacilitiesoftheAuthority,PenelecandMetedarenormallyoperatedasapartofamajorinterconnectedandcoordinatedsystemandthatdisturbancesoriginatinginoneareacanaffectoperationswhicharegeographicallyremote.TheSellerandthe'embershalluseUeirbesteffortstoavoidinterfering.withsuchinterconnectedandparalleloperations.8.USEBYMEMBER.Alltransmissionserviceandsupple-mentalpowerandenergysujpliedbyPenelecandMetedCinderthisAgreem'entshallonlybe.fortheuseoftheSeller'smembersandtheultimatecustomersoftheSeller'smembers,and,exceptforborderlinecustomers,theMembershallnotmakeanypartoftheAuthoritypowerorsupplementalpowerandenergyavailabletoanyotherutilitysy'tem(ofanykindordescription)forresale.~9.RATE~(a)TheMembershallpaytheSellerforallelectric.powe'randenergyfurnishedhereunderattherates.andontheterms'.andconditionssetforthinExhibitB,attacQedheretoandmadeaparthereof.('b)TheBoardofDirectorsoftheSelleratsuchintervalsasitshalldeemappropriate,butinanyeventsnotlessfrequently<hanonce.ineachcalendaryear,shallreviewtheratefor.electricpowerandenergyfurn'hedher@underandundersimilaragrFementswithothermembersand,ifnecessary,shallrevise'such-ratesothatitshallproducerevenueswhichshallbe~sufficient,butonlysufficient,withtherevenues.+ftheSellerfromall'otKersources,tomeetthecostoftheoperationand'aintenance(.includingwithoutlimitation,replacements,.insurance,taxes"andadministrativeand'generaloverheadexpenses)ofthe:generatingplant,transmissionsystemandrelatedfacilities,ifany,oftheSeller,thecostofanypowerandenergypurchasedforresalehereunder-bytheSeller,thecostoftransmissionservice,theamountnecessarytomakepayments.onaccountofprincipalofandinterestonallindebtednessof.theSeller,andtoprovidefortheestablishmen<andmaintenanceofreasonablereserves.The.Sellershallcauseanoticeinwritingto.begiventotheMemberandOthermembersoftheSellerandtheAdministratoroftheREA(hereinaftercalledthe"Administrator"),whichshallsetoutalltheproposedrevisionsoftheratewiththeeffectiveda'tethere-of,whichshallbenotlessthan..thirty(30)'ormorethanforty-five(45)daysafterthedateofthenotice,andshallsetforththebasisuponwhich'therateisproposedtobeadjustedandestab-lished.TheMemberagrees".:hattheratefromtimetotimeestablishedbytheBoardofDirectorsof'heSellershallbedeemedto'esubsti'tutedfortheratehereinprovided,andagreestopayforelectricpowerand'energyfurnishedbythe.Sellertoithereunder:aftertheeffectivedateofanysuchrevisionsatsuchrevisedrates,provided,however,thatnosuchrevisionshallbe'ffectiveunlessapprovedinwritingbytheAdministrator.10.'ETERREADXNGSANDPAYMENTOFBXLLS.TheSellershallread,orc5usetoberead,metersmonthly..'AttheSeller' election',meteringmaybeattheSeller'sdeliveryvoltageoron'thelowvoltage.sideoftheMember'stransformerbanks.HheretheSellermetersonthelowvoltageside,theSellermayutilizetrans-formerlosscompensatorsatthe.meteringpointtodeterminethe-~actualdemand,energyandreactivesupplyatthedelivery'point;andifnotransformerlosscompensatorisusedatthemehering.point,.themeterr'egistrationshallbead'justedtocompensatefortransformerlosses.OnrequestoftheMember,theSellershallfurnishdatasupporting'hecompensator"settingsforthe"purpose'fchecking'suchsettings.ElectricpowerandenergyfurnishedhereundershallbepaidforattheofficeoftheSellerinHarrisburg,Pennsylvania,monthlyw'thin.ten(10)days.afterthebillthereforismailedtotheMember.IftheMembershallfailtopayanysuchbillwithinsuchten-dayperiod,theSellermaydiscontinuesupplyingservices'ereunderuponten(10)days'rittennoticetotheMemberofitsintentionsotodo.Whetherornotthe.Seller.shallhavediscontinuedsupplyingserviceshereunder,iftheMembershallfailtopayany~billsubmittedbytheSel'ler'withinthirty(30)daysaftersuchbillismailed'otheMember,'adelayedpaymentchargeof,fivepercent(5%)of.the'illshallbedueandpayable.ll.METERTESTINGANDBILLINGADJUSTMENT.TheSellershalltestprcausetobetestedandcalibratemetersbycomparison.withaccuratestandardsatintervalsnottoexceedtwenty-four(24)months.TheSellershallalsomak'eorcausetobemadespecialmetertests'tanytimeattheMember'srequest.Thecostsofal'1testsshall'bebornebytheSeller;provided,however,thatifanyspecialmetertestmadeattheMember'srequestshalldisclosethatthemetersarerecordingaccurately,theMembershallreimbursetheSellerforthe'costofsuchtest.Metersregisteringnotmorethantwopercent(2A)aboveorbelownormalshallbedeemedtobeaccurate.Thereadingsofanymeterwhichshallhavebeendisclodbytesttobeinaccura'teshallbecorrectedfortheninety(90)daysprevioustosichtestinaccordancewith'thepercentage.ofinaccuracyfoundbysuch'test.Ifanymetershallfailtoregister.foranyperiod,theMemberandtheSellershallagreeas'otheamountofenergyfurnishedduringsuchperiodandtheSellershallsendera.billtherefor.12.NOTICEOFMETERREADINGORTEST.TheSellershallnotifytheMemberinadvanceofthetimeofanymeterreadingortest.sothattheMember'srepresentativemaybepresentatsuchmeterreadingortest.'3.RIGHTOFACCESS.Dulyauthorizedrepresentativesbyeitheipartyheretoshallbepermittedtoenterthepremisesoftheotherpartyheretoatallreasonabletimesinordertocarryout.theprovisionshereof.14.CONTINUITYOFSERVICE.'heSellershallusereasonablediligencetoprovideaconstantanduni'nterruptedsupplyofelectricpowerandenergyhereunder.Ifthesupplyofelectric.andenergyshallfailorbeinterrupted,orbecomedefectivethroughactofGod or-ofthepublicenemy,orbecauseofaccident,labortroubles,oranyothercausebeyondthecontroloftheSeller,theSellershall'notbeliabletherefororfordamagescausedthereby.15.POWERCOSTPOOLINGARRANGEbKNT.UntilsuchtimeastheSel'lershallhaveelectricpowerandenergyandtherequiredtransmissionfacilitiesavailable,eitherbypurchaseorgeneration,tosupplyalloftheMember'srequirements,theMembeishallforwardthebillit.receivesfromitsothersupplierorsuppliersofelectricpowerandenergy.eachmonth,immediatelyuponreceiptthereof'tothe'elleratitsofficeinHarrisburg,Pennsylvania..TheSeller'hallpaysuchbilltotheMember'supplier.inaccordancewiththetermsthereof.TheMembershallpaytheSellerinrespectofsuchelectricpowerandenergyreceivedfrom.anothersupplierattheratesandonthetermsandconditionssetforth.inExhibitB,attachedhereto'nd.madeaparthereof-.ThepertinentprovisionsofSection9(b)andSection10hereofshallapplytothepaymentsmadebytheMembertotheSellerinrespectefelectric.powerandenergyreceivedfromanothersupplier.16.THIRDPAR~CONTRACTS.(a)TheMemberauthorizestheSellertoenterinto'theAgreementswithPowerAuthorityoft?reStateofNewYork,PenelecandMeted,attachedheretoasExhibitsC,D,andE,respectively,andmadeaparthereof,andacceptstheliability.imposedupon'tasamemberofSellerunderanyof'uchAgreements.~~(b)TheSellershallnot,exceptwiththeapprovalinwritingoftheAdministrator,enterintoanycontractfortheconstruction;acquisitionorleaseofelectricfacilitiesorengineer-ingservices'relatedthereto',orforthepurchaseofelectricpo~er:.andenergy,or'fortransmissionservices.(c).TheMember'hallnotenterintonewcontractsforthepurchaseofelectricpowerandenergywithouttheapprovalinwritingoftheSellerandtheAdminis'trator.Anysubstationorothertransmissionfacilities"constructedinthefuturebytheMembershallbei'naccordancewithplansapprovedby.theSellerandtheAdministrator.PIl17.TERM.ThisAgreementshallbecomeeffectiveonlyuponapprovalinwritingbytheAdministratora'nd.shallremainineffectuntiltheterm).nationoftheaforesaidAgreementwithPowerAuthorityoftheSta'teofNewYork,andthereafter'ntilterminatedbyeitherparty'sgivingtotheothernotlessthansixmonthswritten'oticeofitsintentiontoterminate.Subjectto'hepro-.visions'fArticle1.hereof',servicehereunderandtheobligationoftheM'emberto'paythereforshallcommenceuponthedatepowerand:energyshallbecomeavailableundertheaforesaidcontractbetweentheSellerandPo~erAuthorityoftheState'ofNewYork.

EXECUTEDthedayandyearfirstabovementioned.ALLEGHENYELECTRICCOOPERATIVEINC.SellerATTEST:President~~SecretaryAdamsElectricCooperative,Inc.MemberATTEST:PresidentSecre'ary

EXHIBITADELIVERYPOINTSh~~NAMEOFSUBSTATIONHIGHVOLTAGEJOVEVOLTAGEPinola(Shippensburg)LowerMifQin(KRBLine)(Center)23,00023,00012,47012,470Valley(Ortanna).Gettysburg.'BrushRun=Germany.Hanover(Jacob'sMill)EastBerlinBroadbecks-VinterstownCrossroads(Laurel)13>200)3,20013,20013,20013,20013,20013,200~13,20013,20012,50012,50012,5001Z,500.12,50012,50012,50012,500'2,500 e,EXHIBITBRATESFORELECTRIC7'0%'ERANDENERGYCDETERMINATIONOFAMOUNTOFAUTHORITYPOVfERANDASSOCIATEDENERGYANDSUPPLEMENTALPO%'ERANDASSOCIATEDENEE.GYSUPPLIEIXTOMEMBERMONTHJYInitiallyaportionofthepowerandenergysold.totheMemberhere-under-willbepurchasedbytheSellerfromtheAuthorityandtheremainder'hereofwillbepurchasedfromothersources.ForthisreasonthepowersoldtotheMembershall,forratepurposes,bedividedintotwoparts,desig-nated"Authoritypower"and"supplementalpower"respectively..10,342kilowatts(hereinaftercalledthe"allottedAuthoritypower")shallbeallo-catedbyAlleghenytotheMemberinitiaQy.Theamountofpowersupplied~retotheMemberinanymonth'deemedtobeAuthoritypowershallbed'eterminedbymultiplyingtheallottedAuthoritypowerbyafraction,thenumeratorofwhichshallbethesumof+hemonthlydemandsoftheMemberfor.suchmonth(determined'sthearithmeticsumoftheindividualdelivery.pointnoncoincident,15-minutemaximumdemandsduringthemonth)andthedenominatorofw'hichshallbethehighestsumofthemonthlydemandsoftheMemberestablishedineithersuchmonth'rinanyoftheprecedingelevenmonth's;provided,however,.thattheAuthoritypower'inanymonthas'husdeterminedshallnotexceedthesumofthemonthlymaximum15-minutedemandsoftheMemberinsuchmonth.Alloftheremainderofthepowerrsuppliedin'suchmonthshallbedeemedtobesupplementalpower.

L"1 TheamountofenergysuppliedtotheMemberinanymonthdeemedtobeenergyassociatedwithAuthoritypowershallbedeterminedbymulti-plyingthetotalamountofenergydeliveredtotheMemberduringsuchmonthbyafraction,the.numeratorofwhichis'theamountof,Authoritypower'uppliedtotheMemberduringsuchmonthandthedenominatorofwhichisthesumofthemonthlymaximum15-minutedemandsfortheMemberforsuchmonth.All.additionalenergysuppliedhereunderduringsuchmonthtotheMembershallbedeemedtobesupplementalenerg'y(hereinafterc'alled"supplementalenergy").~~~TheAuthoritypowershallbedeemedtobedividedamongthedeliverypoints.oftheMembereachmonthinproportiontotheratio.thatIthemonthlymaximum15-.minutedemandateachdeliverypointoftheMemberinsuchmonthbearstothesumofthemonthlymaximum15-minuter'emandsfortheMemberinsuchmonth..Theamountofenergyassociated\withthe'Authority'powerfortheMembereachmonthshallbedeemedto\'bedividedamongthedeliverypointsoftheMember.inpropo'rtiontotheratiothattheKWHofenergymeteredateachdeliverypointoftheMember'Iinsuchmonthbears'othesumoftheKVfHofenergymeteredatal)de-'IliverypointsoftheMemberinsuchmonth.If.theAuthorityatanytimeshallm'akeawithdrawalof.anyofthecontractdemandpr'ovidedinthecontractbetweentheAuthorityand,theSeller,attachedheretoasExhibitC,asprovidedinArticleII(c)of suchcontract,orifsuchcontractdemandshall'atanytimebedecreased~asprovidedinArticleII(b)ofExhibitC,suchwithdrawalordecxease,asIthcasemaybeshallbeapportionedamongtheMemberand.theother'W~membersofSellerinproportiontotheamountsoftheirrespectveamountsofallottedAuthoritypower.at.thetimeofsuch.withdrawalordecreaseandtheMember'sallottedAuthoritypowershallbereducedbysu&'pportionedamount.TheratestobechargedfordeliveredAuthoritypowerandassoc-iatedenergyandtheratestobechargedfor'supplemertalpowerande.ergyIshallbeas,follows:

AUTHORITYPOWERANDENERGYAPPLICABILITY:ApplicabletoAuthoritypower.DEMANDCHARGE:$2.22perkwofAuthoritypower.ENERGYCHARGE:0;3lcentsperkwhofenergyassociatedwithAuthoritypower.TAXPROVISIONS:Inadditiontotheratesandchargesstatedabove,thereshallbeaddedaprorat'ashareofanyincreasein'anytaximposeduponthesaleofpowertotheeller..MINIMUMCHARGE:$1.75perkwofmaximumbillingdemandestablishedduringeitherthec'urrentmonthortheprecedingelevenmonths'.

hat4SUPPLEMENTALPOWERANDENERGYAPPLICABILITY:Applicabletosupplementalpowerandenergy.First50hours'seofbillingdemand'at$';02'127'ext150hours'seof'illing'demandat.00827Excessof200hours'seofbillingdemandat.00677Inadditiontotheratesandcharges'statedabove,thereshallbeaddedaprorata,shareofanyincreaseinanytaximposeduponthesaleofpowertotheSeller.Exceptastodeliverypointseliminat'edbywrittenagreementbetweenthe'ellerandthe,Member,theminimummonthlychargeforsupplemetalpowerandenergyforeachdeliverypointshallbeattherrateof$1.75'perkilowatt'ofthemaximumbillingdemandforsupplementalpowerestablishedduringeithersuchmonthor.theprecedingelevenmonths.Iftheratioofkilowattstokilovolt-amperesrecordedatthetimeofthemonthlymaximumfifteen-minuteintegrateddemandataparticu-lardeliverypointindicatesthatthepowerfactordiffersfrom85%,themonthlybillingdemandforsupplementalpowerforsuchdeliverypoint,shallbedeterminedby(a)multiplying(i)theportionof's'uchmonthlyre-cordedmaximumfifteen-minuteintegrateddemandwhichissupplem'entalpowerby(ii)0.85and(b)'dividingtheresultsbythepowerfactorindicatedatthetimeofsaidmonthlyrecordedmaximumfifteen-minuteintegrateddemand.

NHNSYLVANIA489KR.;g'IGHT'gOMPA'NYXXHI-3Z"B~NE'GS.IIhIV,TEQF49ETIJRN:'"."Thisho~.kccrrrtaanse'xbs~s~toeach~~~thepertinent.itemscontainect;i'n5'5'3.:53,,':"PartlX/Raff,Return)..oftheCommission'sRegulations,(SZPa.'Cori.55353).

'*"AV~\\t4'ti~Ir.~~-~o~QiJt~<)PItvy*~CI'VJ\(t/)V't.')r*~>V(gfI)IJe~rtt~J~

II-A-.1G.F.VandersliceII.RATEOFRETURNA.AllUtilitiesQ.1.Providecapitalizationandcapitalizationratiosforthelastfive-yearperiodandprojectedthroughthenexttwoyears.(Withshort-.termdebtandwithout'short-termdebt.),(Company,ParentandSystem(consolidated)).a~Provideyear.-endinterestcoveragesbeforeandaftertaxesforthelastthreeyearsandatlatestdate.(IndentureandSECBases.)(Company,ParentandSystem(consolidated)).b;Provideyear-end.preferredstockdividendcoveragesforlastthreeyearsandatlatestdate(CharterandSECbases).A.l.AttachmentII-A-1,(2pages),Page1,providesyear-endcapitalizationandcapitalizationratiosforthefiveyearsendedDecember31,1979andprojecteddataforthetwoyears1980and1981.a.,AttachmentII-A-l,Page2,,providesyear-endinterestcoveragesbeforeandafter,taxforthethreeyearsendedDecember31,1979.4b.AttachmentII-A-l,Page2,providesyear-endpreferredandpreferencestockd'ividendcoveragesforthethreeyearsendedDecember31,1979.

4I'~~I.~r<<r~(<<Ih~

PennslvaniaPoweraLihtComanCaitalizationaCaitalizationRatios-Year-End(ThousandsofDollars)Long-TermDebtta)PreferredaPreferenceStockCoraaonEquityTotalPermanentCapitalShort-TermDebtTotalCapitalizationAmount$1,043'46366,375'16052$2,026,3737363021000031975Excl.ShortTerm51.5%18.130.4100.0%Incl.ShortTerm,49.7%17.529.39665%3.5'00.0'4Amount$151819993441,375722755$2,346,12360012$24061351976Excl,ShortTerm50'%18.830.8100.0%Incl.ShortTerm49'%18.430.097'%2.5100.0%Amount1977Excl.Short'erm$102609495487,375059264'48.3%18.733.0$206079134100.0%234002630534Incl.ShortTerm47.9'L18.532-799F1%0.9100.0\$1,257,365543,375902360$2,783'08192003~297511145.2%19.535.3100.0%1978Excl.ShortAmount,TermIncl.ShortTerm4202%18.333.093.5%6.5100.0%19791980Budet1981Forecast1982ForecastLong-TeraDebt(a)PreferredaPreferenceStockCommonEquityTotalPermanentCapitalShort-TermDebtTotalCapitalizationAmount$16557615867297751113441$363436374307753374149Excl.ShortTerm46~6%20.1"33'100.0%Incl.ShortTerm46~2%19.933.099'%0.9100.0>Amount$108216047775,6751256456$3685301787'263927704Excl.ShortTerm47,3820~132~6100.0%Incl.ShortTerm46.4q19.732.098.1%1.9100.0>Amount$2,095,123884,5751426346$4'06,044793164485360Excl.ShoptTerm47'\20.132.4100.08Incl.ShortTerm46.7%19.731.898281.8100.044Amount$2,187,123947'751554193$4,688,791~68OM4756889Excl.ShortTerm46.6%20.233-2100.0%Incl.ShortTerm46.0%19.932'98.6%1.4100.0%(a)Long-term.debtincludesamountduewithinoneyearandunamortizedpremiumanddiscount.mItMMII iXI.,~-,H-e)..>~-n~~(geWIP\"Ae(CVI)a,,III"Pr AttachmentII-A-1Page2PennslvaniaPoweraLihtComanYear-EndInterestCoveraes197719781979TimesInterestEarned-IndentureBasisBeforetax(required2.00times)'fter.tax3.543.33NotRequired(a)323SECBasisBeforetaxAftertax3.172.422.812.272.592.24(a)'ftertaxcoverageisnotrequiredbymortgageindenture.Year-EndPreferredandPreferenceStockDividendCoveraes~~~ITimesDividendsEarnedCharter(required1.50times)(b)Preferredstock19772.0319781.7819791.77SECBasisPreferredstockPreferredand"Preferencestock2.542.062.221.872.06l.82(b)Nocharterdividendcoveragetestisrequiredforissuanceof.*PreferenceStock II-A-2G.F.VandersliceQ.2.Providelatestquarterlyfinancialreport(CompanyandParent).A.2.AttachmentII-A-2(11pages)isPP&L'sSeptember1979QuarterlyReview.Noquarterlyreportisissuedforthe,lastquarteroftheyear.ThisdatacanbefoundinPP&L's1979AnnualReport(AttachmentII-A-3b).

At'tachmentXI-A-2.SEPTEMBER'I979PENNSYLVANIAPOWER&LIGHTCOMPANYHIGHLIGHTSCustomers,atEndofPeriod.Kilowatt-hoursofElectricityGenerated.OperatingRevenues.CapitalProvidedbyInvestors,atEndofPeriod..........ReturnonAverageCapitalProvidedbyInvestors.......FixedCostRateofLong-TermDebtandPreferredandPreferenceStock,atEndofPeriod860ojo8PPo/o12MonthsEndedSeptember3019791978981Thousand963Thousand32.2Billion32.2Billion$856Million$792Million$3.2Billion$2.8Billion1001o929ojoCommonStockDataReturnonAverageCommonEquity.EarningsPerShare............DividendsDeclaredPerShareTimesInterestEarnedBeforeIncomeTaxes.1323%$3.37$2.012.8411.83%$2.93$1.923.11DISCUSSIONOFRESULTSOFOPERATIONS,Beginningonpage2WHERETHEPP&LDOLLARGOES,illustratedonpage9FEATURESTORYONPAGE10,SusquehannaSimulatorinOperationTHISREVIEWHASBEENPREPAREDFORTHEPURPOSEOFPROVIDINGGENERALANDSTATISTICALINFORMATIONCON-CERNINGTHECOMPANYANDNOTINCONNECTIONWITHANYSALE,OFFERFORSALEORSOLICITATIONOFANOFFERToBUYANYSECURITIES.

EarningsPerShare12MonthsEndedEachQuarterDollarsPerShare$3.403.202.802.60'2.4019751976197719781979Earningspershareofcommonstockforthe12monthsendedSeptember30,1979were$3.37,up44centsfromthe$2.93persharerecordedforthe12monthsendedSeptember30,1978.Thein-creasereflectsareturntotheearningspersharefevelexperiencedin1977.TimesInterestChargesEarned12MonthsEndedEachQuarterTimesEarned(PreTax)19751976197719781979Thecompanypresentlyhasamiddle-of-the.roadbondratingbyelectricindustrystandards(RatedDoubleAbyMoody'sandFitch'sandAPlusbyStandard&Poor's).Animportantmeasureindeterminingacompany'sbondratingandcreditstandingisitsabilitytocoverinterestpayments.3.403.202.802.602.40rKDISCUSSIONOFRESULTSOFOPERATIONSEarningsSummaryEarningspershareofcommonstockforthethirquarterof1979were$0.75or$0.30higherthanearninpershareof$0.45forthesameperiodlastyear.Peshareearningsofcommonstockforthe12monthsendedSeptember30,1979were$3.37,anincreaseof$0.44fromthe$2.93recordedforthe12monthsendedSeptember30,1978.Theearningspershareincreasesforthequarterand12monthsendedSeptember30,1979overthesameperiodsin1978weredueprincipallytononrecurringitems.InSeptember1978,theCompanyterminatedminingoperationsatTheOneidaMiningCompanyresultingina$7.6millionchargeagainstnetincome.ThisactionendedtheprocedureofnotrecoveringthefullcostofOneidacoalinthefueladjustmentclauseswhichad-verselyaffectedtheCompany'snetincomeby$3.3millionduringthe12monthsendedSeptember30,1978.Theabsenceofthesechargesagainstincometogetherwithaone-timeincreaseinnetincomeofapproximately$3.2millionduetoconversionfrombi-monthlytomonthlybillinginJanuary1979weremajorfactorsintheearningsimprovementin1979.ComparativeAnalysisThefollowingdiscusseschangesinthefinancialre-sultsasreflectedontheStatementofIncomeonpage4comparingthe12monthsendedSeptember30,1979(1979period)tothe12monthsendedSeptember30,1978(1978period).Thechartsshowtrendsoverlongerperiods.EnergySalesandOperatingRevenuesElectricenergysalesincreased585millionkwhor2.7%inthe1979period.Conversiontomonthlybillingresultedinrecordingaone-timeincreaseof256millionkwhinsalesduringthefirstquarterof1979(seeFinan-cialNote3onpage7).Excludingsalesassociatedwiththeconversiontomonthlybilling,energysalesinthe1979periodincreased329millionkwhor1.5%.Operatingrevenuesforthe1979periodincreasedby$64.6millionor8.2%.Theelementsofrevenuecon-tributingtotheincreasewereasfollows(millionsofdollars):ElectricrevenuesBaserates..........$207.5Fueladjustmentclauses................(208.0)Recoveryofdeferredfuelcosts.........20.9Energyclause39.3Taxsurchargeandother................5.465.tSteamrevenues............(0.5)EffectiveOctober31,1978,theCompanyreplaceditsprincipalfueladjustmentclausewithanenergyclause.Inestablishingtheenergyclause,theCom-panyrevisedbaseratetariffstoreflectthelevelofenergycostsexperiencedin1977andalsoaddeda1-millperkwhchargetorecoverfuelcostsdeferredundertheterminatedfueladjustmentclause.Asaresuitofthesetariffrevisions,thecomponentsofcutomers'ills,asbetweenbaseratesandadjustmenclauses,changedsignificantlyinthe1979period.Thisrevisionofbaseratetariffsaccountedforapproximately

$4.964.4(26)$66.7$192.2millionoftheincreasedbaseraterevenuesinhe1979period.Additionally,baseraterevenuesincreasedapproxi-ately$9.9millionduetotheconversiontomonthlybillingpreviouslydiscussed.InterchangePowerSalesThe$66.7millionincreaseininterchangepowersalesinthe1979periodisattributabletothefollowing(millionsofdollars):Quantityofenergysold....Averagepriceofenergysold................OtherTotal...403020-10-GenerationofEnergyBillionsofKwh4030-20-10Therapidincreaseinthepriceofoilduring1979hasraisedinterchangeratessignificantly,resultinginthehigherpricereceivedforinterchangepowersales.Undertheenergyclauseadoptedlatein1978,changesininterchangepowersalesarereflectedintheamountbilledtocustomersthroughtheenergyclauseanddonothaveadirectimpactonearnings.TheaveragepricetheCompanyreceivedforinter-changepowersaleswas3.13centsperkwhinthe1979periodand2.48centsperkwhinthe1978period.FuelCostsThechangeinfuelexpenseinthe1979periodisat-tributabletothefollowing(millionsofdollars):ElectricfuelexpenseQuantityofelectricitygenerated.........$3.1Averagecostoffuelsburned............28.631.7teamheatfuelexpense(0.6)Total.$31.1Theaveragecostoffuelconsumedperkwhgener-atedwas1.55centsinthe1979periodand1.46centsinthe1978period.Thesubstantialincreaseinoilpriceswasthemajorfactorinthehigheraveragecostoffuelsburnedinthe1979period.19751976C3Oil-firedunitsDCoal-firedunitsC3Hydroelectric1977197812mos.Sept.1979ConstructonWorkInProgressvs.NetPlantInServiceBillionsofDollars$2.5TheadditionoftheMartinsCreekoil.firedunitsinrecentyearshasresultedinadiversityinPP&L'sfuelsourcerequirements.Themixofgenerationimpactstheaveragecostoffuelcon.sumed.Currently,theoil-firedunitshaveafuelcostperkwhofgenerationclosetothreetimesthecostofcoal-firedgeneration.AddingtheSus-quehannanuclearunitswilladdanotherdimen-siontoourfuelmix.2.5InterestChargesandPreferred/PreferenceStockDividendsTheincreasesininterestchargesanddividendsonpreferredandpreferencestockinthe1979periodwere(millionsofdollars):InterestchargesLong-termdebt..$19.3Short-termdebt.......................4.9Other.1.2Dividendsonpreferredandpreferencestock6.1Theincreasesinlong-termdebtinterestchargesanddividendsonpreferredandpreferencestockwereprincipallyrelatedtonewsecuritiesissuedtofinancetheCompany'sconstructionprogram.Duringthe1979period,outstandinglong-termdebtincreasedby$299millionandpreferredandpreferencestockby$69million.Interestchargesonshort-termdebtincreasedduetomoredebtoutstandingathigherinterestratesuringthe1979period.OtherOperatingExpensesTheincreasesinwagesandemployeebenefitsand(Continuedonpage11)2.01.51.01975197619771978Sept.1979QConstructionWorkinProgressDNetPlantinServiceThedollaramountoffacilitiesthecompanyhasunderconstruction(excludingnuclearfuel)hasin-creasedcomparedtothenetplantservingcustomers(plantinservicelessaccumulateddepreciation).AtSeptember30,1979theSus-quehannaunitsaccountedfor$1.3billionofcon.structionworkinprogress.Thecompany'sshareofthecurrentestimatedtotalcostofSusquehannaisabout$2.4billionwhichexceedsthe$1.9billionofnetplantinserviceattheendofSeptember1979.2.01.51.0 STATEMENTOFINCOME(Unaudited)ThousandsofDollarsThreeMonthsEndedSeptember30NineMonthsEndedSeptember30TwelveMonthsEndedSeptember30OperatingRevenues(Notes2and3)..1979$199,8921978$185,2051979$661,4841978$603,3811979$856,4411978$791,851OperatingExpensesNetcostofenergyFuel.PowerpurchasesInterchangepowersales...............Net(deferral)/amortizationoffuelandenergycosts(Note2)...............139,92712,863(126,142)117,2576,075(69,460)382,86934,785(264,529)347,11421,633(181,297)31,194(4,000)35,867(14,793)490,35741,360(315,085)459,29324,884(248,336)23,415(16,484)Wagesandemployeebenefits....Otheroperatingcosts.DepreciationIncometaxesProvision.Deferred.Investmenttaxcredits-net......Taxes,oth'erthanincome(Note4)..57,84228,25424,10818,90414,843(8,603)8,63214,46249,87224,79222,95018,24313,0213,162(330)I5,829188,99286,14474,58856,71144,101(9,015)28,06652,811172,65777,31162,68054,72927,65115,60516,52751,011240,047112,31297,75875,05849,471(256)3I,37068,204219,357101,08384,31371,46340,98518,10321,69065,178OperatingIncome.OtherincomeandDeductionsAllowanceforequityfundsusedduringconstruction.IncometaxcreditsIncome(loss)ofsubsidiaries-net(Note5)..Other-net..41,45037,66613,9107,2433424889,3304,924(7,073)707158,442147,53938,51619,4841,3672,03525,3108,340(6,164)8,563522,398478,171139,086125,210182,477169,67948,72524,7381,1843,01931,3612,1(4,929)9,439673,964622,17221,9837,88861,40236,04977,66647,995IncomeBeforeInterestCharges.............InterestChargesLong-termdebtShort-termdebtandother...............Allowanceforborrowedfundsusedduringconstruction.63,43333,4141,164(13,634)20,94445,55424,8531,830(9,330)17,35392,0046,79774,5713,582(37,752)(25,309)61,04952,844200,488161,259116,85711,18797,5605,104(47,960)(32,571)80,08470,093260,143217,674NetIncome-BeforeDividendsonPreferredandPreferenceStockDividendsonPreferredandPreferenceStock.42,48912,49728,20110,641139,43935,385108,41530452180,05946,503147,58140,400EarningsApplicabletoCommonStock..$29,992$17+60$104,054$77,863$133,556$107,181EarningsPerShareofCommonStock(basedonaveragenumberofsharesoutstanding)..$0.75$0.45$2.62$2.10$3.37$2.93AverageNumberofSharesOutstanding(thousands)40,22038,61939,76937,15339,57236,606DividendsDeclaredPerShareofCommonStock$0.51$0.48$1.53$1.44$2.015).9SeeaccompanyingFinancialNotes.

BALANCESHEET(Unaudited)ThousandsofDollarsSeptember30ASSETSUtilityPlantPlantinservice-atoriginalcost.Lessaccumulateddepreciation.Constructionworkinprogress-atcost.Nuclearfuelinprocess-atcostInvestmentsAssociatedcompanies-atequity.Nonutilitypropertyandother-atcostorless..CurrentAssetsCashandtemporarycashinvestments.Accountsreceivable,lessreserveCustomersOther.Notesreceivable(principallyfromanassociatedcompany)..Recoverablefuelandenergycosts(Note2)Coalandfueloil-ataveragecost.Materialsandsupplies-ataveragecost.OtherDeferredDebitsRecoverablefuelcosts(Note2).Stateutilityrealtytax(Note4)Other1979$2,465,254614,7491,850,5051,395,62152,9953,299,12117,3535,71723,07016,33653,73545,43127,51616,813119,66519,19214,172312,86023,55212,1156,12141,788$3,676,8391978$2,369,860547,0711,822,789986,54736,3562,845,69220,0637,06327,12611,95450,07825,29232,92463,78087,57819,40620,718311,7302,4772,477$3,187,025LIABILITIESCapitalizationPreferredandpreferencestock(Note6)Issueswithmandatorysinkingfundprovisions.....Issueswithonlyoptionalredemptionprovisions...CommonstockCapitalstockexpenseEarningsreinvested.Long-termdebt.CurrentLiabilitiesLong-termdebtduewithinoneyear..Short-termdebtAccountspayableTaxesaccrued.Deferredincometaxes.Dividendspayable.Interestaccrued.......Other.DeferredandOtherCreditsDeferredinvestmenttaxcredits.Deferredincometaxes.Other.SeeaccompanyingFinancialNotes.$381,400231,375696,629(11,414)364,6091,498,7853,161,38457,75224,53793,1217,4779,33733,09142,90727,526295,748124,66377,08717,957219,707$3,676,839$312,000231,375664,547(11,057)310,8551,256,6352,764,35570662,85857,4169,19834,09729,22833,61227,137254,25298,13952,58317,696168,418$3,187,025 STATEMENTOFCHANGESINFINANCIALPOSITION(Unaudited)ThousandsofDollarsThreeMonthsNineMonthsEndedSeptember30EndedSeptember30SOURCEOFFUNDS1979197819791978TwelveMonthsEndedSeptember319791978OperationsNetincome.Charges(credits)againstincomenotinvolvingworkingcapitalDepreciation.Noncurrentdeferredincometaxesandinvestmenttaxcredits-net..Allowanceforfundsusedduringconstruction.Other18,90413,32418,2431,87656,71124,15754,72923,757(27,544)(18,660)209(51)47,38229,609(76,268)81(50,619)(14,296)144,120121,986$42,489$28,201$139,439$108,41575,05851,02871,46329,739(96,685)603(63,936)(14,626)210,063170,221$180,059$147,581OutsideFinancingCommonstock.Preferredstock.Long-termdebt.Short-termdebt-increase..9,19550,0001085,92960,00036024,79375,000300,10881,56460,00036039,45832,08275,000300,10889,089110,000100,91259,30366,289399,901181,382407,190300,001WorkingCapital-decrease(a).........InvestmentinAssociatedCos.-decrease..NoncurrentRecoverableFuelCosts-decreaseOther-net73,14238,7664,8687,015$184,695$14I,67919,2113,78617,59416,4858,765$583,503$329,72721,6413,64412,$642,538$483,21APPLICATIONOFFUNDSConstructionExpenditures........NuclearFuelExpenditures.......AllowanceforFundsUsedDuringConstruction.$130,67713,839$102,807711$362,11415,936$284,8562,203301,782236,440116,97284,858(27,544)(18,660)(76,268)(50,619)$511,92516,640$380,0256,554(96,685)(63,936)431,880322,643SecuritiesRetiredPreferredandpreferencestock.......Long-termdebt.Short-termdebt-decrease..........DividendsonPreferred,PreferenceandCommonStock.WorkingCapital-increase'(a).........InvestmentinAssociatedCos.-increase...NoncurrentRecoverableFuelCosts-increaseOthernet............1,6001723,46933,0907828,765$184,6951727,0805,600665167,4664,0003,7165,60070638,3214,0003,76828,60229,22949596,41884,4651,106126,291111,07811,8951,22923,55211,57216,188$141,679$583,503$329,727$642,538$483,215(a)Excludesshort-termdebtandlong-termdebtduewithinoneyear.SeeaccompanyingFinancialNotes.

STATEMENTOFEARNINGSThousandsofDollarsREINVESTED(Unaudited)ThreeMonthsEndedSeptember30NineMonthsEndedSeptember30TwelveMonthsEndedSeptember30Balance,BeginningofPeriod...AddNetIncome.1979$355,21842,4891978$311,88328,2011979$321,602139,4391978$286,911108,4151979$310,855180,0591978$274,358147,581397,707340,084451,041395,328490,914421,939DeductCashdividendsdeclaredPreferredandpreferencestock.....CommonstockIssuancecostofretiredpreferredandpreferencestock12,49720,59310,64118,58835,38561,0331430,55253,91346,50379,7881440,40070,67833,09829,22996,43284,471126,305111,084Balance,EndofPeriod.$364,609$310,855$364,609$310,855$364,609$310,855FINANCIALNOTES1.InteilmFinancialStatementsTheaccompanyingunauditedfinancialstatementsshouldbereadinconjunctionwiththefinancialstate-mentsandnotesincludedintheCompany's1978AnnualReporttoshareowners.2.FuelAdjustmentandEnergyClausesInaccordancewithanorderofthePennsylvaniablicUtilityCommission(PUC),theCompanychangedelectric.tariffstoreplacethePUCfueladjustmentclausewithanenergyclauseeffectiveOctober31,1978.Costsincludedintheenergyclausegenerallyarefuelexpenseplusthecostofinterchangeenergypur-chasedlesstheamountreceivedforinterchangeen-ergysold.Inthetransitiontotheenergyclause,theCompanyreviseditsbaseratetariffstoreflectthelevelofenergycostsexperiencedduring1977.Amountscollectibleundertheenergyclausewereincludedoncustomers'illsbeginningJanuary1979.TheCompanyisrecovering,througha1-millperkwhchargetocustomers,thedeferredfuelcostswhichweretobecollectedthroughtheterminatedfuelclause.AsofSeptember30,1979,theamountofsuchdeferredcoststoberecoveredapproximated$37.4million.TheCompanyhasanadditional$7.1millionofde-ferredfuelcostsincurredastheresultofthePUCplacingatemporaryceilingonthefueladjustmentclauseduringseveralmonthsimmediatelyfollowingthe1978coalminers'trike.Inanaccountingorder,thePUCstatedthattheCompanywouldbepermittedtorecovertheamountoffuelcostssodeferred,andthe'ompanyhasrequestedthatrecoverybeac-complishedthroughapplicationofthecurrent1-millperkwhcharge.3.ConversiontoMonthlyBillingInaccordancewithaPUCorder,theCompanycon-ertedapproximately740,000customersfrombimonthlymonthlybillinginJanuary1979.Theconversionre-Itedinanestimated$9.9millionnonrecurringin-creaseinbaseraterevenuesinJanuary1979.Theadditionalrevenues,lessestimatedadditionalcostsrelatedtothemonthlybillingscheduleandrelatedin-cometaxexpense,increasednetincomebyapproxi-mately$3.2million(8centspershareofcommonstock)forthetwelvemonthsendedSeptember30,1979.4.PublicUtilityRealtyTaxRecentinterpretationsofacourtdecisionbythePennsylvaniaDepartmentofRevenuedeterminedthatcertainelectricutilitypropertywasexemptfromthePennsylvaniapublicutilityrealtytax.Asaresult,Pennsylvaniaelectricutilities,includingtheCompany,filedclaimsforrefundsofcertainprioryears'ayments,andinJune1979theCompanylowereditstaxsur-chargeratetoreflectitsreducedutilityrealtytax.InJuly1979,theutilityrealtytaxwasamendedtobroadenthetypeofpropertysubjecttotaxation,retroactivetothetaxfortheyear1978.Inaddition,aone-timetaxof10.5%onthenewlydefinedtaxablepropertywasim-posedbytheStateinordertorecovertherefundsclaimedbytheelectricutilities.TheStateisrequiredtomakeageneralrepaymentoftheamountcollectedunderthe10.5%taxtotheextentitexceedsthetotalrefundsgrantedutilities.TheCompany's10.5%taxamountedto$39.7million.FollowingproceduresestablishedbytheDepartmentofRevenue,thistaxliabilitywasreducedbytheamountoftheCompany'spendingrefundclaimsof$31.4mil-lion,andinSeptember1979theCompanypaidthenetamountof$8.3milliontotheState.IfanyportionoftheCompany'spendingrefundclaimsareultimatelydis-allowed,theamountofsuchdisallowancewouldhavetobepaidtotheState.TheCompanyrecordedthe$8.3millionpaidtotheStateasadeferredchargependingafinaldeterminationbythePUCregardingrecoveryoftheadditionaltax.TheCompanybelievesthatthe$8.3millionadditionaltaxpaidshouldberecoverablethroughthetaxsurchargeandintendstofilewiththePUCaproposaltorecoverthisamount.AdraftorderissuedbythePUConOctober3,1979wouldpermittheCompanytorecalculateitstaxsur-(Continuedonpage11)

STATISTICALSUMMARYThreeMonthsEndedSeptember30NineMonthsEndedSeptember30TwelveMonthsEndedSeptember30ElectricEnergySales-millionsofkwhResidential.Commercial.Industrial.Other.Totalelectricenergysales..........ElectricRevenues-thousandsofdollars19781,5471,3091,97917719791,5981,3121,9821745,0665,01219796,2244,2236,07760017,12419785,9674,1145,89I58416,55619798,0215,5168,0777977,82978722,41121,826Residential.Commercial.Industrial.Otherenergysales.Totalfromenergysales..Otheroperatingrevenues..Totalelectricrevenues...$72,62856,51561,6416,465$67,04252,96256,2396,221182,4642,460197,2492337$199,586$184,924$241,017164,121167,10819,947$265,537178,355186,12920,934650,9557,440592,1937,672$658,395$599,865$315,295215,086220,84226,289$340,211231,021243,23027,639777,5129,903842,10110,426$852,527$787,415SourcesofEnergySold-millionsofkwhGeneratedCoal-firedsteamstations..............Oil-Aredsteamstation.Combustionturbinesanddiesels(oil)....Hydroetectricstations..Powerpurchases.Interchangepowersales.Companyusesandlinetosses...........Totalenergysales.7,0951,2906134530(3,528)(461)5,0666,7071,24811117321(2,969)(423)5,01219,6494,252355781,603(8,061)(932)17,12417,7755,217103570995(7,049)(1,055)16,55626,0425,461387081,927(10,022)(1,743)22,41124,3566,8681078211,284(9,825)(1,785)21,826TwelveMonthsEndedSeptember30FinancialReturnanaveragecapitalprovidedbyinvestors.Returnonaveragecommonequity..........Timesinterestearnedbeforeincometaxes...GenerationGeneratingcapability-thousandsofkw(a)..Winterpeakdemand-thousandsofkw....GenerationbyfuelsourcesCoal.Oil.Hydroelectric.SteamstationavaitabilityCoaI-AredOil-firedSteamstationutilizationCoal-Ared.Oil-AredOtherDataAverageannualresidentialkwhuse.........Averagepriceperkwhforatlcustomers-centsFuelcasementsperkwh.Electriccustomers(a)Employees(a).(a)Endofperiod19791001%13.23%2.846,5464,70180.7%17.12.276.3%78.571.9%38.09,3413.761.55980,7257,59019789.29%I1.83%3.116,5364,52475.8%21.72.573.8%77.4671%47.89,2613.561.46963,3377,175 WHERETHEPP&LDOLLARGOESThepriceofelectricityistheresultofhowmuchitostsforfuel,wages,materials,services,taxesandanyotheritems.TheCompanyiscontinuallyworkingtimprovingitscosteffectiveness,butithaslittlecon-troloverthemarketpricesfortheitemsitmustpur-chasetoprovideelectricity.Thefollowingisawayoflookingatthecostofprovidingelectricserviceforthe12monthsendedSeptember30,1979.NETCOSTOFENERGY($240,047,000)Fuel-coalandoilburnedingeneratingunits.....Pluspowerpurchasedfromotherutilities...........Minuspowersoldtootherutilities..................Amortizationofdeferredfuelandenergycosts-net..$490,357,00041,360,000(315,085,000)23,415,000$240,047,000ENERGYTAXES($124,051)000)PP&Lmustpayapproximately$68millionofthisexpensefortaxessuchasgrossreceipts,capitalstock,realestate,socialsecurity,etc.Theremaining$56millionrepresentsStateandFederalincometaxexpense,includingabout$31millionrelatedto(1)deferredin-cometaxeswhichwillbepaidinfutureyearsand(2)investmenttaxcreditswhichreducetheamountofFederalincometaxespayablewiththetaxsavingssubsequentlypassedontocustomersoveraperiodoftime.EMPLOYEES($112,312,000)Likeemployeesofanyotherbusiness,PP&L'sworkersexpectfairwages,vacations,holidaysandotheremployeebenefitsfortheircontributioninprovidingelectricservice.SERVICES,SUPPLIES,RENTS,ETC.($97,758)000)P8Lrequiresallkindsofgoodsandservicestooperatethebusi-ss.Thisincludestreetrimmingtopreventserviceinterruptions,andcasualtyinsurance,researchanddevelopmentexpendi-ures,rentalofequipment,material,postage,paperandmanymoreitems.DEPRECIATION($75,058,000)'earandtearandeconomicandtechnologicalobsolescenceofequipmentandservicefacilities.COMPENSATIONTOINVESTORSPP8Lhasanetinvestmentofabout$3.3billioninelectricfacilities.Mostofthemoneyneededtofinancethesefacilitieswasprovidedbyinvestors.Theamountpaidtoinvestorsfortheuseoftheirmoneyisasmuchacostaswages,material,fueloranyotheritemrequiredtoprovideservice.INTERESTCHARGES($128,044,000)Interestonborrowedfundssuchasmortgagebonds,notesandbankloans.DIVIDENDS($126,291,000)Notallthemoneyneededtofinanceconstructionoffacilitiescanbeborrowed.Anindividualmusthavesomeequityfundsbeforeborrowingmoneytobuyahome.PP&Lmustalsohaveequityfundstoenableittoborrowmoney.PPBL'sequityfundsarerepresentedbycommon,preferredandpreferencestockandPP&Lmustpaydividendsfortheuseofthismoney.tEARNINGSREINVESTEDINTHEBUSINESS($53,754,000)Partofthecommonshareowners'arningsisputbackinthebusinesstohelppayfortheconstructionofnewelectricfa-cilities.Theavailabilityoftheseequityfundsreducestheneedtosellmoresecurities.%AXES13(:P.r)vg,>~(-n)bEP.CATIObb88~jDIVIDND------HEIVVV-E-6-----='

SUSQUEHANNASIMULATORINOPERATIONThepurposeoftherecentlydedicated$10millionTrainingCenteratournuclearpowerplantbeingbuiltjointlybyPP8LandAlleghenyElectricCooperativenearBerwickistoprovidea"bridge"foroperatorsbetweenacademictrainingandtheactualoperationofthepowerplant'stwo1,050,000-kilowattgeneratingunitswhentheyarecompletedin1982and1983.ThesimulatorintheTrainingCenterisapreciseduplicateoftheplant'scontrolroom.Butinsteadofactuallyoperatingtheplant,hundredsofdials,gaugesandswitchesconnectwithalargecomputerthatisprogrammedtosimulateactualplantoperatingcon-ditions.Thefacilityisdesignedtohelpmakesurethatfutureoperatorswillbereadyforvirtuallyanycontingency.ThetrainingofourfuturecontrolroomoperatorswasbroadandrigorousevenbeforetheybeganworkingatthesimulatorinOctober.First,thoseindividualswhohadnothadanypriorexperienceweregivenayear-longfossilpowerplanttrainingprogram.Followingthat,thecontrolroomoperatortraineestookanaca-demiccourseof20weeks,whichbeganwithare-fresherofsubjectsthatareapplicabletonuclearpower-suchasphysics,chemistry,andmathematics.Theythenstudiedanintroductiontoreactortheory,reactorkinetics,andanumberofothertechnicalsub-jectspeculiartoanuclearplant.ThosetraineeswhodidnothavepriornuclearpowerplantexperiencespenttwoweeksatPennsylvaniaStateUniversity'spoolreactorperformingreactoroperations.Followingthatcourse,thetraineesattendedafive-weekprogramthatwasconductedbytheGeneralElectricCo.inBerwickthatcoveredboilingwatertechnology.GeneralElectricissupplyingthereactorsforSusquehanna.Followingthat,theoperatortraineesspent12weeksataGeneralElectricsimulatorfacility,locatedinMorris,illinois.There,theylearnedhowtotaketheacademicconceptstheywererecentlyex-posedtointheclassroomsandtransformthemintosomepracticaloperations.Followingthiswas"certifi-cation,"whichinthiscontextmeanstheyweregiventheequivalentofaNuclearRegulatoryCommission(NRC)licensingexaminationattheGEfacility.Afterpassingthisexamination,theoperatorcandi-datesspentfourweeksataboilingwaternuclearpowerplantinConnecticut,wheretheyobservedminute-by-minuteoperationofaworkingpowerplant.Onlythen,afterwhatamountedtoanalmosttwo-yeartrainingprogram,thecandidateswerereadytocometoourSusquehannaTrainingCentersimulatortobe-ginstilladditionaltraininggearedspecificallytotheSusquehannaunits.ThetrainingprogrampriortoSusquehannawasconsidereda"foundation"thatwasprovidedtothecandidatessotheywouldbeabletobetterunderstandthespecificsoftheSusquehannaplant.AtSusque-hanna,thecandidatesunderwenta20-weekcourse.Eightofthe20weeksconsistedofformalclassroomsessions,inwhichtheyweretaughtthevarioussys-temsthatcompriseournuclearsteamsupplysysteaswellasthesystemsthatmakeupthebalanceoftplant.Thetraineesweretaughttheinteractionsthesesystemsandtheprotectivefunctionsthesesystemsserve.Theremaining12weekswerespentinanon-the-jobtrainingprogramgearedtolearningequipmentloca-tionsandperformingactual"hands-on"operations.Thisisbasicallyaprocessoflearninghowtogetaroundandoperatesomesmallerpiecesofequipment,andthenrelatingthistotheother,largersystems.Mostnuclearplantsdonothaveasimulatorthatex-actlyduplicatestheplantitself.AlthoughitisanNRCrequirementthatoperatorsspendtimeonsimulators,thetrainingsimulatorsusuallyarenotduplicatesoftheplantsinwhichtheoperator-traineewilleventuallywork.Asfarasweknow,PP&Lisoneofonlysixutilitiesthathaveanoperatingsimulator.PP&Lisnotsimplyteachingoperatorshowtostartupsystemsandgettingthemtooperateinanormalmanner,orevenrotememorizationofwhattodoinanemergency.Rather,we'einsistingthatoperatorsthink.Wewantthemtolookattheindicationsonthecontrolboard,analyzetheindications,determineex-actlywhatishappening,andthenmakeadecisiononthepropercourseofaction.Theessentialpurposeofthesimulatoristobringrealityintothetrainingpicture.Also,wewanttostressoverandoveragaintheneedforoperatorstothinkandapplytheknowledgetheyhaveacquired.Thesimulatorallowstrainersandtraineestodoalotthingstheysimplycouldnotdoinanoperatingnuclpowerplant.Inaplant,allanoperator-traineewouseeisequipmentoperatingnormally.Onoursimulator,however,wecanprogramourcom-putertodisplaysome225differentmalfunctions.Ourpeoplesimplywouldnotbeabletogetthattypeofex-posurewithobservationtraininginanoperatingplant.Thesimulatorplaysabroaderrolethanjustthetrain-ingoffutureoperatorsoftheSusquehannaplant.Itwillbeusedtoprovideinformationalandindoctrina-tionalcoursestoengineersandmanagersfromdisci-plinesotherthannuclearoperators.Recently,mem-bersofPP8L'sPowerProductionDepartmentwereex-posedtothegeneraloperationalcharacteristicsofanuclearpowerplantthroughtheuseofthesimulator.Astheunitsgointoservice,wewillbeabletotakedatafromtheplantandrevieworplaybackoperationalsituationsthroughthecomputer-drivensimulator.En-gineerswillbeabletoduplicateabnormalcircum-stancesencounteredinthenuclearunitsfordetailedanalysisorfordevelopmentoffuturetrainingprocedures.Thepossibilitiesofferedbythesimulatorareend-less.BecauseitIscomputer-driven,itscapabilitiesarelimitedonlybyourprogrammingimagination.10 DISCUSSIONOFOPERATIONS.~~Continuedfrompage3otheroperatingcostssuchasmaterialsandsupplies,approximately$6.1millionofgainsfromthesaleofntsandinsuranceprimarilyreflecttheeffectofproperty.herwagerates,inflationandthecostsofoperationdmaintenanceofnewfacilitiesplacedinservice.AllowanceforFundsUsedDuringConstructionncreaseddePreciationexPenseIsrelatedtonewfa-'heallowanceforfundsusedduringconstructioncilitiesplacedinservice.(allowance)varieswiththelevelofconstructionworkinprogressandthecostoffinancing.Thetotalallow-LossofSubsidiariesandOtherIncome-Netance(boththeequityandborrowedfundscomponents)Thesubsidiarylossinthe1978periodwasprimarilyincreased$32.7millioninthe1979period.Thein-relatedtoTheOneidaMiningCompanywitha$7.6creaserecordedwasprimarilyduetoadditionalinvest-millionchargeagainstnetincomeinthethirdquartermentintheSusquehannapowerplant.Constructionofof1978duetoterminationofminingoperations.ForSusquehannaaccountedforabout$88.9millionofthefurtherinformationseeNote5toFinancialStatements'otal$96.7millionofallowancerecordedInthe1979below.Otherincome-netinthe1978periodincludesperiod.FINANCIALNOTES...Continuedfrompage7chargefor1979toreflecttheexpansionofthetypesofpropertysubjecttotheutilityrealtytaxandtoprovidefortherecoveryofthatamountoveratwelve-monthperiod.PendingPUCapprovalofanewtaxsurchargeratetocollecttheincreased1979utilityrealtytax,theCompanyisdeferringthatportionoftherealtytaxnotbeingrecoveredcurrentlybythetaxsurcharge.Theamountbeingdeferredapproximates$1millionpernthandtotaled$3.8millionatSeptember30,1979.TheOneidaMiningCompanyInSeptember1978,theCompanyterminatedunder-groundminingoperationsatTheOneidaMiningCom-pany(Oneida),awhollyownedsubsidiary,andthere-sultingwrite-offreducedtheCompany'snetincomeby$7.6million(20centspershareofcommonstock).TerminationofminingatOneidaendedtheprocedureineffectsinceFebruary1977ofnotrecoveringthefullcostofOneidacoalinthefueladjustmentclauses.Thisprocedureadverselyaffectednetincomeby$3.3million(9centspershareofcommonstock)duringthetwelvemonthsendedSeptember30,1978.6.PreferredandPreferenceStockInaccordancewithanewSecuritiesandExchangeCommissionruling,theCompanyhasshownseparatelyontheBalanceSheetthoseissuesofPreferredandPreferenceStockwhichcontainmandatorysinkingfundprovisionsfromthoseissueswhicharenotsub-jecttosinkingfundprovisions,butwhichmaybere-deemedattheoptionoftheCompanyatapplicableredemptionprices.7.CommitmentsandContingentLiabilitiesTheCompany'sconstructionandnuclearfuelex-pendituresareexpectedtobe$1.95billionduringthethreeyears1979-1981.Expendituresrelatedtocon-structionofSusquehanna(excludingnuclearfuel)areestimatedtobeabout$1.22billionduringthesametimeperiod.TheCompany'sconstructionandnuclearfuelexpendituresfor1979areestimatedtobeapproximate-ly$570million,ofwhich$378millionwasexpendedthroughSeptember30,1979.TheSusquehannanuclearplantistheonlygenerat-ingfacilitythattheCompanyhasunderconstruction.AspartofitscontinuingreviewprocessoftheSusque-hannaproject,theCompanyinJune1979,basedonpreliminaryestimatesofrequiredconstructionchangesandthestatusoflicensingproceedingsbeforetheNuclearRegulatoryCommission(NRC),revisedtheestimatedscheduledin-servicedatesofFebruary1981forUnitNo.1andMay1982forUnitNo.2toJuly1981andOctober1982,respectively.TheCompanyhasnowcompletedamorein-depthreviewoftheSusquehannaproject,andasaresultofadditionalconstructiondelays,requireddesignchanges,decreasesinproductivityfrompreviouslyestimatedlevelsanddelaysintheoperatinglicensingproceedingsbeforetheNRC,theCompanynowesti-matesthattheIn-servicedateswillbeJanuary1982forUnitNo.1andJanuary1983forUnitNo.2.Thecom-binedeffectofthereschedulingoftheunitsandchangesinthescopeoftheprojectareexpectedtoincreasetheCompany'sshareofthetotalcostoftheunitsfromthe$1.88billionestimatedatthebeginningof1979toapproximately$2.43billion,anincreaseof$550million.8.ThirdQuarterSaleandRetirementofSecuritiesOnJuly2,1979,theCompanysoldthroughaprivateplacement500,000sharesof8.25%SeriesPreferredStock,$100par,andredeemed16,000sharesof7.40%SeriesPreferredStockInaccordancewithsinkingfundprovisions.Theproceedsfromthesalewereusedforgeneralcorporatepurposesincludingthereductionofshort-termdebtincurredtoprovidedinterimfinancingforconstructionandnuclearfuelexpenditures.11 PPa,ll'PENNSYLVANIAPOWER&LIGHTCOMPANYTwoNorthNinthStreet,Allentown,Pa.18101Telephone:AreaCode215821-5151BULKRATEU.S.POSTAGEPAIDALLENTOWN.PAPERMITNO.I04 TWONORTHNINTHSTREET,ALLEN1'OWN,PA.18101PHONE:(215)821~5151LEGALOEPARTMENTEDWARDM,NAGELVcePrescentGeneratCorrnsetanoSecretary821.5323G.D.,CAUENDOCnieiCor4rSetItegrrtatoryAttaeS821.558IAssstantCounsetMURRAYMILKMAN8215725SJANHUDDLE8215645AttorneysROBERTKFULTON8215325STEWARTJ.BERGER8215321BRYANA.SNAPP8214397HARRISM,ROSEN8215644AnorneysDAVIDJ,OULICK821.4107JOHNANTONUK8214452KATHRYNB,SOLLEY8214253PAULE,RUSSELL821.4254September12;1980RogerE.Clark,EsquireVincentButler,EsquireMr,.JamesD.CottonMelvinP.Bloom,Ph.D.Mr.MauriceBrubakerRe:PP5LTariffSulementNo'.73(R-80031114)Gentlemen:AttachedisacopyofPP5L'sMarch1980quarterlyReviewandJune1980quarterlyReview.Theyhave"beeniden-tifiedasA'ttachmentII-A-2(a)andII-A-2(b)respectivelyforthepurposeofupdatingExhibitRegs.IIRateofReturn,RegulationII-A-2.Shouldyouhaveanyquestions,pleasecall.EnclosuresVerytruly..rs,G.D.CaWiendocc:AllDivisionsTheHonorableMorrisMindlinPENN5YLYANIAP0WERILLIGH1'0MPANY AttachmentII-A-2(a)MARCH1980PENNSYLVANIAPOWER&LIGHTCOMPANYHIGHLIGHTSCustomers,atEndofPeriod.12MonthsEndedMarch3119801979990Thousand977ThousandiKilowatt-hoursofElectricityGenerated.OperatingRevenuesCapitalProvidedbyInvestors,atEndofPeriod..........ReturnonAverageCapitalProvidedbyInvestors........FixedCostRateofLong-TermDebtandPreferredandPreferenceStock,atEndofPeriodCommonStockDataReturnonAverageCommonEquity.EarningsPerShare.DividendsDeclaredPerShareTimesInterestEarnedBeforeIncomeTaxes.33.6Billion$839Million$3.5Billion9.74%925%11.65%$3.00$2.062.4731.9Billion$825Million$3.1Billion9.62%8.36%12.47%$3.13$1.953.05DISCUSSIONOFRESULTSOFOPERATIONS,Beginningonpage2FEATURESTORYONPAGE10,HomeHeatingChoiceslTHISREVIEWHASBEENPREPAREDFORTHEPURPOSEOFPROVIDINGGENERALANDSTATISTICALINFORMATIONCON-CERNINGTHECOMPANYANDNOTINCONNECTIONWITHANYSALE,OFFERFORSALEORSOLICITATIONOFANOFFERToBUYANYSECURITIES.

EarningsPerShare12MonthsEndedEachQuarterDollarsPerShare$3.403.203.002.802.602.4019761977197819791980Earningspershareofcommonstockforthe12monthsendedMarch31,1980wereS3.00,down32centsfromtheS3.32persharerecordedfortheyear1979.Malorfactorscontributingtotheearningsdeclineweretheabsenceofaone.timeincreaseinnetincomewhichoccurredinthefirstquarterof1979duetotheconversiontomonthlybilling,milderwinterweatherIn1980andcontinuedincreasingcosts.3.403.202.802.602.40DISCUSSIONOFRESULTSOFOPERATIONSEarningsSummaryEarningspershareofcommonstockforthefirquarterof1980were$0.88or$0.34lowerthanearnipershareof$1.22forthesameperiodlastyear.shareearningsofcommonstockforthe12montendedMarch31,1980were$3.00,adecreaseof$0.13fromthe$3.13forthesameperiodlastyearanddown$0.32from$3.32persharefortheyear1979.Firstquarterearningsfor1980werereducedbylowersalesofelectricitybecauseofmilderweathercondi-tionsandbytheabsenceoftheone-timeincreaseinnetincomewhichoccurredlastyearwhentheCom-panyswitchedtomonthlybillingforabout740,000cus-tomers.However,theearningsdeclinealsoreflectsthetrendwhichbeganinthefourthquarterof1979result-ingfromhighercostsbeingincurredinallareasofoperations,whichtheCompanyhasnotbeenabletooffsetthroughsavings.Asaresultofincreasingcostssuchaswages,Inter-est,rentsandmaterialsneededtomaintainfacilities,onApril29,1980theCompanyfiledwiththePennsyl-vaniaPublicUtilityCommissionarequestforanin-creaseinbaserates.Theamountofincreaserequestedwas$123millionannuallyora16%increaseinbaserates.ComparativeAnalysisThefollowingdiscusseschangesinthefinancialre-sultsasreflectedontheStatementofIncomeonpage4comparingthe12monthsendedMarch31,1980(1980period)tothe12monthsendedMarch31,1979(1979period).Thechartsshowtrendsoverlongerperiod.TimesInterestChargesEarned12MonthsEndedEachQuarterTimesEarned(PreTax)EnergySalesandOperatingRevenuesElectricenergysalesdecreased140millionkwhor0.6%inthe1980period.Excludingtheeffectoftheconversiontomonthlybillingin1979,energysalesinthe1980periodincreased116millionkwhor0.5%.Operatingrevenuesforthe1980periodIncreasedby$13.6millionor1.6%.Theelementsofrevenuecon-tributingtotheincreasewereasfollows(millionsofdollars):ElectricrevenuesBaserates.$104.7Fueladjustmentclauses................(127.4)Recoveryofdeferredfuelcosts.........11.7Energyclause........21.0Taxsurchargeandother................3.313.3Steamrevenues..................0.3Total..........................$13.619761977197819791980AnImportantmeasureIndeterminingacorn.pany'screditstandingIsitsabilitytocoverin.terestpayments.Unprecedentedhighinterestratesanddecliningearningshaverecentlycorn.binedtoreducethiskeyfinancialratio,Asaresultoftariffrevisionswhentheenergyclausebecameeffective,thecomponentsofcustomers'ills,asbetweenbaseratesandadjustmentclauses,changedsignificantlybeginninginNovember1978.ThisrevisionofbaseratetariffsresultedInapproxi-mately$108millionofadditionalbaseraterevenuesInthe1980period.Thedifferencebetweenthisamouandtheactual$104.7millionincreaseinbaserrevenuesgenerallyreflectsthedeclineinenergysali

$12.015.527.5NetCostofEnergyFuel.Thechangeinfuelexpenseinthe1980periodisattributabletothefollowing(millionsofdollars):ctricCoal-firedsteamstationsQuantityofelectricitygenerated....Averagecostoffuelburned.........Total.4030GenerationofEnergyBillionsofKwh40-30Oil-firedsteamstationQuantityofelectricitygenerated..Averagecostoffuelburned...,...TotalCombustionturbinesanddiesels(oil)..TotalelectricSteamheat.Total.17.590.6108.1(0.6)135.00.3$135.320-'0-19761977-20-1062o1301978197912mos.Mar.1980InterchangePowerSales.Thechangeininterchangepowersalesinthe1980periodisattributabletothefollowing(millionsofdollars):Quantityofenergysold...Averagepricereceivedforenergysold......Capacityreceipts.Total.hechangeinthequantityofinterchangepowersalesfromthepriorperiodreflectsincreasedgenera-tionfrombothcoalandoil-firedsteamstations.TheaveragepricetheCompanyreceivedforinterchangepowersaleswas3.78centsperkwhinthe1980periodand2.53centsperkwhinthe1979period.$50.4144.0(2.6)6191.6Theaveragecostoffuelconsumedperkwhgener-atedwas1.80centsinthe1980periodand1.46centsinthe1979period.Thesubstantialincreaseinoilpriceswasthemajorfactorinthehigheraveragecostoffuelsburnedinthe1980period.CKOil.firedunitsCoal-liredunitsClHydroelectricGenerationbyfuelsourceiscurrentlyaverag.ingabout80%fromcoalfiredunits,18%fromoilfiredunitsand2%fromhydroelectricgenera.tlon.ThechangingmixofgenerationbyfuelsourceImpactstheaveragecostoffuelcon-sumed.Currently,theoilfiredunitshaveafuelcostperkwhofgenerationclosetothreetimesthecostofcoalfiredgeneration.ConstructionWorkInProgressvs.NetPlantinServiceBillionsolDollars$2.52.02.52.0OtherOperatingExpensesTheincreasesInwagesandemployeebenefitsandotheroperatingcostssuchasmaterialsandsupplies,rentsandinsuranceprimarilyreflecttheeffectofhigherwagerates,inflationandthecostsofoperationandmaintenanceofnewfacilitiesplacedinservice.Depreciationexpensecontinuestoincreaseasnewfacilitiesareplacedinservice.1.5-.1.0$34.1(27)(0.1)8.7InterestChargesandPreferred/PreferenceStockDividendsTheincreasesininterestchargesanddividendsonpreferredandpreferencestockInthe1980periodwere(millionsofdollars):InterestchargesLong-termdebt..Short-termdebtOther.Dividendsonpreferred.andpreferencestock.(Continuedonpage8)1976197719781979Mar.1980QConstructionWorkinProgressNetPlanlinServiceThedollaramountoffacilitiesthecompanyhasunderconstruction(excludingnuclearfuel)hasIncreasedcomparedtothenetplantservingcustomers(plantinservicelessaccumulateddepreciation).AtMarch31,1980,theSusque.hannaunitsaccountedfor$1.4billionofcon.structionworkinprogress.Thecompany'sshareofthecurrentestimatedtotalcostofSus.quehannaIsabout$2.4billionwhIchexceedsthe$1.9billionofnetplantinservicealtheendofMarch1980.

STATEMENTOFlNCOME(Unaudited)ThousandsofDollarsOperatingRevenues(Note2)OperatingExpensesNetcostofenergyFuel.Powerpurchases.Interchangepow'ersales.Net(deferral)/amortizationoffuelandenergycosts(Note3)185,8409,841(108,155)127,05210,269(55,894)(31,633)(12,497)ThreeMonthsEndedMarch31198019795231,9305253,814TwelveMonthsEndedMarch3119801979$838,614$825,024593,170457,91446,17029,886(434,731)(242,884)21,317(23,792)Wagesandemployeebenefits.Otheroperatingcosts.Depreciation.IncometaxesProvision.DeferredInvestmenttaxcredits-net.Taxes,otherthanincome.55,89331,67128,57919,7617,75516,792(666)23,02768,93027,90622,91918,90416,4157,38912,25320,608225,926118,601106,23777,00843,8895,49416,17471,834221,124104,53290,76473,73642,24919,48025,31668,255Operatingincome182,812195,32449,11858,490665,163645,456173,451179,568OtherIncomeandDeductionsAllowanceforequityfundsusedduringconstruction...Incometaxcredits.Income(loss)ofsubsidiaries-net.Other-net.14,6628,8573661,01411,9765,8065821,14055,81529,5898362,15439,87620,277(6,709)3,687IncomeBeforeinterestCharges.InterestChargesLong-termdebt.Short-termdebtandother.Allowanceforborrowedfundsusedduringconstruction...NetIncome-BeforeDividendsonPreferredandPreferenceStockDividendsonPreferredandPreferenceStock....24,89919,50474,01777,99420,99618,79853,02159,19614,54711,38035,06626,6403,5393,897(17,609)(11,739)135,3318,436(57,945)85,822101,19411,249(39,637)72,806176,023163,89351,83443,09488,39457,131261,845236,699EarningsApplicabletoCommonStock.$38,474$47,816$124,189$120,799EarningsPerShareofCommonStock(Basedonaveragenumberofsharesoutstanding).AverageNumberofSharesOutstanding(thousands)...DividendsDeclaredPerShareofCommonStock..$0.88$1.2243,92039,301$0.53$0.51$3.00$3.1341,33838,585$2.06$1.95SeeaccompanyingFinancialNotes.0 BALANCESHEET(Unaudited)ThousandsofDollarsMarch31ASSETSUtilityPlantPlantinservice-atoriginalcost.LessaccumulateddepreciationConstructionworkinprogress-atcost.Nuclearfuelinprocess-atcost.InvestmentsAssociatedcompanies-atequity.Nonutilitypropertyandother-atcostorless...CurrentAssetsCashandtemporarycashinvestments.Accountsreceivable,lessreserveCustomers.interchangepowersales.Other.Notesreceivable(principallyfromanassociatedcompany)..Recoverablefuelandenergycosts(Note3).Coalandfueloil-ataveragecost.Materialsandsupplies-ataveragecost.Other'eferredDebitsRecoverablefuelcosts(Note3)Stateutilityrealtytax(Note4).OtherLIABILITIESCapitalizationPreferredandpreferencestockIssueswithmandatorysinkingfundprovisions...Issueswithonlyoptionalredemptionprovisions..Commonstock.CapitalstockexpenseEarningsreinvested.long-termdebtCurrentLiabilitiesLong-termdebtduewithinoneyearShort-termdebt.Accountspayable.Taxesaccrued.Deferredincometaxes.DividendspayableInterestaccruedOther.DeferredandOtherCreditsDeferredinvestmenttaxcreditsDeferredincometaxesOtherSeeaccompanyingFinancialNotes.1980$2,531,432647,4981,883,9341,586,82574,4423/45,2017,1356,11113,24612,13657,44526,5237,36638,60155,309137,73221,2798,888365,27913,65012,1787,70433,532$3,957,258$488,400231,375764,284(12,277)386,9781,499,1373,357,897948123,70979,97133,40429,22737,93944,53025,730375,458125,02478,88019,999223,903$3,957,2581979$2,409,798582,3291,827,4691,212,29738,009'3,077,77520,5336,43026,96353,78564,3007,655573230,07455,304105,84219,78013,225355,69733,4254,96638,391$3,498,826$333,000231,375678,217(11,183)349,3121,399,5902,980,31157,69828,03269,60342,12629,22531,47935,40725994319,564112,63273,60312,716198,951$3,498,826 SOURCEOFFUNDS~OperationsNetincome.Charges(credits)againstincomenotinvolvingworkingcapital"Depreciation.Noncurrentdeferredincometaxesandinvestmenttaxcredits-net.Allowanceforfundsusedduringconstruction......Other$53,021$59,19619,761(3,436)(32,271)2,40218,9048,642(23,715)(126)STATEMENTOFCHANGESINFINANCIALPOSITION(Unaudited)ThousandsofDollarsThreeMonthsEndedMarch3119801979TwelveMonthsEndedMarch3177,00873,73617,882(113,760)3,77049,430(79,5131(2,376)$176,023$163,893039,47762,901160,923205,170OutsideFinancingCommonstock................PreferredandpreferencestockLong-termdebt.Short-termdebt-netincrease.6,38125,000200,00010,88451,0002692,934154,844231,38186,067161,000100,70'I95,67789,74985,000200,36087443,445375,196WorkingCapital-decrease(a).InvestmentinAssociatedCompanies-decrease...NoncurrentRecoverableFuelCosts-decrease....Other-net.1,8568,0094,6796,6122,210$211,075$300,8947,38511,8608,63819,7756585643,3885589,662APPLICATIONOFFUNDSConstructionExpenditures.NuclearFuelExpenditures.AllowanceforFundsUsedDuringCo'nstruction..$131,073$118,01913,141950(32,271)(23,715)111,94395,254$507,454$470,32236,4333,157(113,760)(79,513)430,127393,966SecuritiesRetiredPreferredandpreferencestock.Lang-termdebt.Short-termdebt-netdecreaseDividendsonPreferred,PreferenceandCommonStock...WorkingCapital-increase(a).InvestmentinAssociatedCompanies-increase..........NoncurrentRecoverableFuelCosts-increase.........,Other-net.4,00057,19237,9404,000142163,97131,4803,250552,7425,60057752138,34311,5664,0003,728118,98235,56133,425$211,075$300,894$643,388$589,662(a)Excludesshort-termdebtandtong-termdebtduewithinoneyear.SeeaccompanyingFinancialNotes.

STATEMENTOFEARNINGSREINVESTED(Unaudited)ThousandsofDollarsThreeMonthsEndedMarch31TwelveMonthsEndedMarch311I8Balance,BeginningofPeriod.AddNetIncomeDeductCashdividendsdeclaredPreferredandpreferencestock.Commonstock.Issuancecostofretiredpreferredandpreferencestock..Balance,EndofPeriod.14,54723,393611,38020,100637,94631,486$386,978$349,31219801979$371,903$321,60253,02159,196424,924380,79819801979$349,312$304,407176,023163,893525,335468,30051,83486,5091443,09475,8886138,357118,988$386,978$349,312FINANCIALNOTES1.InterimFinancialStatementsTheaccompanyingunauditedfinancialstatementsshouldbereadinconjunctionwiththefinancialstate-mentsandnotesincludedintheCompany's1979AnnualReporttoshareowners.2,RateFilingOnApril29,1980,theCompanyfiledwiththePenn-sylvaniaPublicUtilityCommission(PUC)arequestfornincreaseinbaseraterevenuesofabout16percentorapproximately$123millionannually.Therequest,ifapprovedbythePUC,couldgointoeffectasearlyasJune28,1980.However,ifthePUCsuspendsthere-questandordersaninvestigationandhearings,anyincreasegrantedwouldprobablynotbecomeeffectiveuntillate1980orearly1981.3.DeferredFuelCostRecoveryThePUChasauthorizedtheCompanytorecover,througha1-millperkvhchargetocustomers,thede-ferredfuelcostswhichweretobecollectedthroughtheterminatedfuelclause.AsofMarch31,1980,theamountofsuchdeferredfuelcoststoberecoveredapproximated$27.5million.TheCompanyhasanadditional$7.1millionofde-ferredfuelcostsincurredastheresultofthePUCplacingatemporaryceilingonthefueladjustmentclauseduringseveralmonthsfollowingthe1978coalminers'trike.Inanaccountingorder,thePUCstatedthattheCompanywouldbepermittedtorecovertheamountoffuelcostssodeferred,andtheCompanyhasrequestedthatrecoverybeaccomplishedthroughap-plicationofthe1-millperkwhcharge.4.UtilityRealtyTaxRecentinterpretationsofacourtdecisionbythePennsylvaniaDepartmentofRevenuedeterminedthatcertainelectricutilitypropertywasexemptfromtheennsylvaniapublicutilityrealtytax.Asaresult,ennsylvaniaelectricutilities,includingtheCom-pany,filedclaimsforrefundsofcertainprioryears'axpayments.TheCompany'sclaimsaggregated$31.4million.InJuly1979,therealtytaxwasamendedtobroadenthetypeofpropertysubjecttotaxation,resultingInanincreasedtaxfor1979.Theincreased1979realtytaxisbeingchargedtoexpenseasitisrecoveredthroughthetaxsurchargeoveratwelve-monthperiodbegin-ningNovember1979inaccordancewithaPUCorder.Inadditiontobroadeningthetaxablepropertybase,aone-timetaxof10.5konthevalueofthenewtaxbasewasimposedbytheStateinordertooffsettherefundsclaimedbyelectricutilities.TheStateisre-quiredtomakeageneralrepaymentoftheamountcollectedunderthe10.5/otaxtotheextentthatitex-ceedsthetotalrefundsgrantedtoutilities.Aftergivingeffecttorefundclaimsof$31.4million,theCompany'sliabilityunderthe10.5ktaxamountedto$8.3million,whichwaspaidtotheStateinSeptember1979.TheCompanyrecordedthe$8.3millionpaidtotheStateasadeferredchargependingafinaldeterminationbythePUCregardingrecoveryoftheadditionaltax.TheCompanyhasbeennotifiedbytheStateBoardofFinanceandRevenuethat$26.2millionofits$31.4millionclaimsforrefundofrealtytaxwasallowedand$5.2millionwasdisallowed.ThedisallowancehasbeenappealedtotheCommonwealthCourtofPennsylvania.TheCompanybelievesthatthe$8.3millionadditionaltaxandanyrefundclaimsultimatelydisallowedshouldberecoverablethroughthetaxsurchargeandintendstofilewiththePUCaproposaltorecoveranysuchamount.5.CapitalStockOnApril23,1980,theauthorizedCommonStockoftheCompanywasincreasedfrom50,000,000sharesto75,000,000sharesandtheauthorizedSeriesPreferredStockwasincreasedfrom5,000,000sharesto10,000,000shares.6.BondSaleOnApril2,1980,theCompanysold$100millionprln-(Continuedonpage8)

FINANCIALNOTES...Continuedfrompage7cipalamountofFirstMortgageBonds,15-5/8/.Series,due2010.Proceedsfromthesalewereusedforgen-eralcorporatepurposesincludingthereductionofshort-termdebtincurredto(a)retire$57millionofma-turinglong-termdebtand(b)provideinterimfinancingforconstructionandnuclearfuelexpenditures.'.CreditAgreementsInordertoprovidefinancingflexibility,theCompanyhascompletedarrangementswithagroupofdomesticbanksforarevolvingcreditagreementforthefive-yearperiodMarch1,1980toFebruary28,1985underwhichtheCompanycanborrowandhaveoutstandingupto$400millionatanyonetime.Borrowingsunderthecreditarrangementwouldbearinterestatratesin-creasingfromprimein1980to105/oofprimebyMarch1,1984.Amountsborrowedunderthecreditagreementmaybeprepaidatanytimewithoutpenalty.ThecreditarrangementalsoprovidesthatborrowingsoutstandingonFebruary28,1985canbeconvertedtotermnoteswithinterestat110%%dofprime.One-thirdoftheprincipalamountofthetermnoteswouldmatureineachoftheyears1986,1987and1988.TheCompanyhasalsoarrangedwithagroupofforeignbanksfora$100millionrevolvingcreditagree-mentwhichpermitstheCompanytomakeshort-termborrowingsthroughMarch31,1982.Borrowingsunderthiscreditarrangementwouldbearinterestat3/8/oovertheLondonInterbankRate.Theserevolvingcreditagreementsaremaintainedbythepaymentofacommitmentfeebasedontheun-usedbalanceofthelinesofcredit.Asaresultofthesearrangements,theCompanyisintheprocessofreducingthe$200millionoflinesofcreditinplaceatDecember31,1979toabout$120million.8.SusquehannaNuclearPlantTheCompany'smostrecentestimateofthein-servicedatesfortheSusquehannanuclear-fueledgeneratingunitsisJanuary1982forUnitNo.1andJan-uary1983forUnitNo.2.Thereare,however,uncertain-tiesassociatedwiththecompletionoftheSusque-hannaunitsonscheduleandatthecostestimatedfortheproject,whichis$2.43billionfortheCompany's90percentshare.TheseuncertaintiesinvolvetheNuclearRegulatoryCommission'sabilitytoprocesstheoperatinglicensesonatimelybasisanduncertaintiesregardingpossiblefuturechangesinthescopeoftheprojectrelatedtodesignandsafetymatters,constructionprogressandpossiblegovernmentorregulatoryagencyaction.Asaresultofacurrentreviewofthecumulativeeffectofthesefactors,theCompanyhasconcludedthatthepresentlyscheduledin-servicedatesfortheSusque-hannaunitswillnotbeachieved.TheCompanyhasnotatthistimeestablishednewdefinitivecostandsched-uleestimates.However,basedoncurrentlyavailableinformationandtrends,theCompany'spresentas-sessmentisthatthein-servicedelaysshouldbelessthanoneyearandthattheaddedcostshouldnotex-ceed15/o.TheCompanyexpectsthatitwillbebetterabletoestimatethecostandin-servicedatesoftheunitsintheFallof1980whenamoredetailedreviewandas-sessmentoftheSusquehannaprojectiscompleted.DISCUSSIONOFOPERATIONS...ContinuedfrompageHighinterestratesandtheissuanceofsecuritiesre-quiredprimarilytofinancetheCompany'sconstructionprogramweremajorfactorscontributingtothein-creasesinlong-termdebtinterestchargesanddivi-dendsonpreferredandpreferencestock.Thede-creaseininterestchargesonshort-termdebtwasduetolessdebtoutstandingduringthe1980period.LossofSubsidiariesandOtherIncome-NetThesubsidiarylossinthe1979periodwas.primarilyrelatedtoTheOneidaMiningCompanywitha$7.6millionchargeagainstnetincomeinthethirdquarterof1978duetoterminationofminingoperations.AllowanceforFundsUsedDuringConstructionTheallowanceforfundsusedduringconstruction(allowance)varieswiththelevelofconstructionworkinprogressandthecostoffinancing.Thetotalallow-ance(boththeequityandborrowedfundscomponents)increased$34.2millioninthe1980period.TheincreaserecordedwasprimarilyduetoadditionalInvestmentIntheSusquehannapowerplant.ConstructionofSus-quehannaaccountedforabout$101.6millionofthetotal$113.8millionofallowancerecordedinthe1980period.

STATISTICALSUMMARY'hreeMonthsEndedMarch31TwelveMonthsEndedMarch31ElectricEnergySales-millionsofkwh(Residential.Commercial.Industrial............Other.Totalelectricenergysales.19802,611i/842,0302356,46019792,9321,6292,0512496,86119807,7455,5098,11378719798,0115,4668,02379422,15422,294ElectricRevenues-thousandsofdollarsResidential.Commercial.Industrial.OtherenergysalesTotalfromenergysales.Otheroperatingrevenues.Totalelectricrevenues.$115,99865,34060,3087,779$100,71462,23856,9477,344249,4252,434227,2432,371$229,614$251,859$330,874221,814230,48327,173$326,703229,507240,90527,228810,34410,604824,3439,878$834,221$820,948SourcesofEnergySold-millionsofkwhGeneratedCoal-firedsteamstationsOil-firedsteamstation.Combustionturbinesanddiesels(oil).Hydroelectricstations.Powerpurchases.Interchangepowersales.Companyusesandlinelosses.Totalelectricenergysales.6,6902,032ll163333(2,219)(550)6,4606,4931,64424227496(1,839)(184)6,86126,6846,165237351,961(11,469)(1,945)'2,15425,7415,417437021,543(9,476)(1,676)22,294TwelveMonthsEndedMarch31cFinancialReturnonaveragecapitalprovidedbyinvestors.Returnonaveragecommonequity.........Timesinterestearnedbeforeincometaxes..GenerationGeneratingcapability-thousandsofkw(a)...Winterpeakdemand-thousandsofkw......GenerationbyfuelsourcesCoal.Oil.Hydroelectric..SteamstationavailabilityCoal-fired.Oil.firedSteamstationutilizationCoal-fired.Oil-firedOtherDataAverageannualresidentialkwhuse..........Averagepriceperkwhforallcustomers~entsFuelcost~entsperkwh.Electriccustomers(a).Employees(a)(a)Endofperiod19809.74%11.65%2.476,5464,42779.4%18.42.276.1%79.173.3%42.88,9443.721.80990,1527,57619799.62%12.47%3.056,5364,701807%17.12.277.3%73.869.8%37.79,4163.63146976,5207,363 HOMEHEATINGCHOICESPP8Lshareownersacrossthecountryfacemanyofthesameenergydilemmasandenergyconservationchoicesthatcustomers/shareownersfaceinthecom-pany'sserviceterritory.AlthoughthefollowinganalysismakesuseofstatisticspeculiartoPP8L'sterritory,wethinktheunderlyingphilosophycanbeapplicablethroughoutthecountry.Weofferthishomeheatingin-formationasbackgroundtoyouormembersofyourfamilyorfriendswhomaybefacinginitial-choiceorconversiondecisions.PennsylvaniaPower8LightCo.neitherencouragesnordiscouragesitscustomerstouseelectricityinheatingtheirhomes.Duringthe1950sand1960s,whenthenation'snaturalresourceswereconsideredbymanytobe"limitless"andenergywasinexpensive,ahomeownerhadfourprimeconsiderationsinselectingahomeheatingsystem-theinitialcostofthesystem,oper-atingcosts,thesystem'sreliabilityanditsconvenience.UncertainSuppliesComplicateDecisionsButtheuncertainsuppliesoffossilfuelsandtheirpresentandprojectedcostshavecomplicatedthehomeheatingdecisionshomeownersfacetoday.Cus-tomersbuildinganewhome,orplanningtoinstallanewheatingsysteminanexistinghometoday,mustweightheavailabilityofthefuelsupply,stabilityofde-livery,nationalandstateenergypolicies,andthecom-parisonofenergycosts-bothcurrentandprojected.Althoughthereisnotyetawell-defined,compre-hensivenationalenergypolicy,theuncertaintyandincreasingpriceofimportedoilsuppliesareforcingthenationtoreduceitsdependencyonoil.This,inturn,hascausedsomeconcernamongpeoplewhodependonoilasahomeheatingfuel.Inmanyareas,naturalgaswasunavailablefornewapplicationsforseveralyears,butitiscurrentlyavail-ableasoneofthe'fuelstobeconsidered.Coal,anotherhomeheatingoptioninmanyareas,hasitsowninherentproblems,includingenvironmentalconcernsinvolvingthemining,transportationandburningofthefossilfuel.Electricityisnotanaturalenergysource,butanend-productthatisgenerallyproducedbyconvertingabasicenergyresource(oil,gas,coal,uranium)toanalternativeformofenergythatcanbeusedinhomesandbusinesses.Becauseofthisproductionprocess,electricityissubjecttomanyofthesameproblemsasthefuelsusedforgeneration.NoUniversalHeatingMethodThereprobablyneverwillbeauniversalhomeheat-ingmethodthatmeetstheneedsofeveryone.Whatisthemostcost-effectivemethodofheatingoneper-son'shomemaynotbethebestoptionforanother.PP&Lhascommitteditselftoprovidingthorough,objective,up-to-dateinformationtoitscustomersonthecosts,benefits,advantagesanddisadvantagesof-allhomeheatingoptionstohelpinmakingeducateddecisions.Whileaggressivelyencouragingenergyconserva-tion,PP&Lisassessingthecostandavailabilityofhomeheatingfuelsandtheimpactthatfederalandstateenergyplansmayhaveonthehomeheatingop-tionsavailabletocustomers.About53percentofPP&L's873,000residentialcus-tomershaveoil-firedhomeheatingsystems.About19percentareheatedbynaturalgas,18percentbyelectricity,9percentbycoaland1percentbyothersources.However,atpresent,61percentofthenewhomesandapartmentsbeingconstructedinPP8L'sserviceareatodayhaveelectricheatingsystems.Thiscomparesto42percentin1973.Thiscontinuingtrendofhigherpercentagesofelectrichomeheatinginnewconstructionisapointofconcernforthecompany.HowMuchFuelDoYariousSystemsUse?It'shardtocomparehomeheatingfuelswithouthav-Ingthechoicessoundlike"applesandoranges."Oilissoldtohomeownersbythegallonandtoutilitiesbythebarrel.Homeheatingsystemsuselightoil(No.2)andmostoilusedbyutilitiestorungeneratorsisheavyoil(usuallyNo.6).Homeownersandutilitiesbothbuycoalbytheton,butmostcoalburnedinhomesisan-thraciteandmostofwhat'sburnedinpowerplantsisbituminouscoal.Therearedistinctdifferencesbetweenburningfuelinthehometoproduceheatandburningtheminpowerplantsanddeliveringheating"fuel"intheformofelectricity.Muchoftheheatproducedinhomefur-nacesescapesthroughchimneysandmuchenergyislostbetweenpowerplantboilersandelectrichomeheatingunits.Nonetheless,comparisonshavebeenattempted-someofthemshowingelectricheatingtobewasteful,othersarguingadvantagestoelectricheating.BtuMeasureProvidesComparisonInpursuingacommitmenttooverallenergyconser-vatiorI,PP&Lwantedtogetabetterunderstandingofthisoften-touchysubject.Sothecompanytookalookathowmuchcoal,oilorgaswouldbeneededtopro-duceamillionBtusofhomeheating.BtuIsaBritishthermalunit-aunitofheat.Anaverage-sizehomeinPP&L'sserviceareawillneedabout51millionBtusforitsnethomeheatingrequirementsduringatypicalheatingseason.Sincethefuelusedtogenerateelectricitywillchangeasnewunitsarebroughtonline,theinforma-tiondevelopedrepresentsanaverageforthenext15years.10 Thecomparisonsarebasedonthebestinformationavailableaboutthevariousheatingsystems,includingwidelyrecognizedefficiencylevelsforbothin-homefurnacesandvariouselectricsystems,measuredfrompowerplanttoheatingunit.Inallcases,insulationlevelsareassumedtobethesame.Here'showtheanalysiscameout:TOPRODUCEAMILLIONBTUsOFHEATINAHOME(ReadAcrosstheColumns)Ittakesaboutthismuchfuel:GasCoalOil(cu.lh)(lbs.)(gals.Oil(gals.)Coal(lbs.)withGasCoalOil(Usedinthehome)(Usedinthepowerplant)1,64000(Smallamountsto01900runanyelectrical0015equipmentassociatedwithhomefurnaces)ElectricBaseboard0001390ElectricHeatPump000751Dual-fuelHeatPump005536ElectricStorage0008150Thesefiguresdon'ttakeintoaccounttheamountofenergyusedinextractingandrefininggas,coalandoilforhomeconsumption,nordotheyreflectenergyusedindeliveringthosefuelstothehome.Andtheydon'considerenergyusedtoproducecoalandoilandtodeliverthemtopowerplants.Otherfactorsnotconsideredincludedifferencesinenvironmentalimpact,effectsonpeakloadsandflex-ibilityforconservationopportunitiesoftheindividualheatingsystems.NoOptionsShouldBeRuledOutWhatisindicatedisthatitsimplyisn'tallthatclearthatanyoftheoptionsshouldberuledout'-atleastnotuntilamuchclearerpictureemerges.Thechoiceofahomeheatingsystemcontinuestobeanindividualdecisionoftenbasedonotherfactorsaswell.Theseincludetheinitialpriceofthesystem,whetherairconditioningistobepartoftheequipmentpackageandrelationshipswithcontractorsandhome-heatingequipmentdealers.And,inrecentyears,we'eseenheightenedcon-cernsonthepartofhomeownersoverthepricesandsuppliesofthevariousfuels.Aplentiful,problem-freeenergysupplyhasyettobefound.Becauseofthemanyconsiderationsdetailedhere,PP8Lfeelsthatitistooearlytocastasideanyhomeheatingoption.Recognizingthis,PP&Lwillcon-tinue,atleastfortheimmediatefuture,toneitheren-couragenordiscourageitscustomerstoheattheirhomeselectrically.PPBLisinterestedInhearingcommentsonhomeheatingoptionsfromitscustomersandshareowners.Writtencommentsshouldbemailedto:GraysonE.McNair,vicepresident-Consumer&,CommunitySer-vices,attheaddressshownonthebackcover.11 PPaLPENNSYLVANIAPOWER&LIGHTCOMPANYTwoNorthNinthStreet,Allentown,Pa.18101Telephone:AreaCode215821-5151BULKRATEU.S.POSTAGEPAIDALLENTOWN.PAPERMITNo.I04 AttachmentII-A-2(b)JUNE1980PENNSYLVANIAPOWER&LIGHTCOMPANYqt'INANCIALHIGHLIGHTSCustomers,atEndofPeriod12MonthsEndedJune3019801979990Thousand976ThousandKilowatt-hoursofElectricEnergySalesCustomers..................InterchangePower.Kilowatt.hoursofElectricityGenerated.OperatingRevenues.................CapitalProvidedbyInvestors,atEndofPeriod.......utilityPlant,atEndofPeriodNetPlantinService.......................ConstructionWorkinProgress.....~..............ReturnonAverageCapitalProvidedbyInvestors.....CommonStockDataReturnonAverageCommonEquity...EarningsPerShareDividendsDeclaredPerShare.BookValuePerShare,atEndofPeriod.TimesInterestEarnedBeforeIncomeTaxes22.1Billion11.3Billion33.6Billion$837Million$3.6Billion$1.9Billion$1.7Billion9.71%11.07%..~...~..$2.85$2.08.$25.572.3322.4Billion9.5Billion31.8Billion$842Million$3.2Billion$1.8Billion$1.3Billion960%12.22%$3.09$1.98$25.832.87DISCUSSIONOFRESULTSOFOPERATIONS,Beginningonpage2FEATURESTORYONPAGE10,RateCaseUpdatecTHISREVIEWHASBEENPREPAREDFORTHEPURPOSEOFPROVIDINGGENERALANDSTATISTICALINFORMATIONCON-CERNINGTHECOMPANYANDNOTINCONNECTIONWITHANYSALE,OFFERFORSALEORSOLICITATIONOFANOFFERTOBUYANYSECURITIES.

$3.403.203.002.802.60EarningsPerShare12MonthsEndedEachQuarterDollarsPerShare3.403.202.802.60DISCUSSIONOFRESULTSOFOPERATIONSEarningsSummaryEarningspershareofcommonstockforthsecondquarterof1980were$0.52or$0.14lowerthaithe$0.66earnedduringthesameperiodlastyear.Pershareearningsofcommonstockforthe12monthsendedJune30,1980were$2.85,adecreaseof$0.24fromthe$3.09forthesameperiodlastyearanddown$0.47from$3.32persharefortheyear1979.MajorfactorscontributingtotheearningsdeclinewerelowerenergysalestocustomersandhighercostsbeingincurredinallareasoftheCompany'soperationsasmorefullydiscussedbelow.2.4019761977197819791980Earningspershareofcommonstockforthe12monthsendedJune30,1980,were$2.85,down24centsfromthesameperiodlastyearanddown47centsfromearningsfortheyear1979.HighercostsbeingIncurredInallareasofthecompany'soperationsandadecrease'Inenergysalesweremajorreasonsfortheearn-Ingsdecline.TimesInterestChargesEarned12MonthsEndedEachQuarterTimesEarned(PreTax)2.40RateIncreaseRequestOnApril29,1980,theCompanyfiledwiththePennsylvaniaPublicUtilityCommission(PUC)arequestforanincreaseinbaseraterevenuesofabout16percentorapproximately$123millionannually.OnJune26,1980,thePUCsuspendedforfurtherinvestigationtheCompany'srequestforhigherrates.Foradditionalinformationontheratefilingseethearticleonpage10.ComparativeAnalysisThefollowingdiscusseschangesinthefinancialresultsasreflectedontheStatementofIncomeonage4comparingthe12monthsendedJune30,980(1980period)tothe12monthsendedJune30,1979(1979period).EnergySalesandOperatingRevenuesElectricenergysalesdecreased292millionkwhor1.3%inthe1980period.Excludinga256millionkwhone-timeincreaseinenergysalesduetoconversiontomonthlybillingforabout740,000customersinthefirstquarterof1979,energysalesforthe1980perioddecreased36millionkwhfromthe1979period.Milderthannormalweatherandtheeconomicrecessioncontributedtothedeclineinsales.Operatingrevenuesforthe1980periodwere$4.6millionor0.6%lessthantheywereforthe1979period.Thisdeclineinrevenuesreflectsthelowerenergysalesduringthe1980period.19761977197819791980AnimportantmeasureIndeterminingacorn.pany'screditstandinglsItsabilitytocoverIn.terestpayments.UnprecedentedhighInterestratesanddecliningearningshaverecentlycorn.blnedtoreducethgtskeyfinancialratio.NetCostofEnergyFuel.Thecostoffuelburnedtogenerateelectricityincreased$148millionor31.9%inthe1980period.Higherpricesforthecoalandoilburnedaccountedforabout$121millionoftheincreasedfuelexpense.Thebalanceofthehigherfuelcostisattributabletoincreasedgeneration,up1.8billionkwh,aportionofwhichcamefromhighcostoil-firedunits.Theaveragecostofallfuelconsumedperkwhgeneratedwas1.87centsduringthe1980periodand1.50centsduringthe1979period.Theaveragefuelcostofcoal-firedgenerationwas.08centsperkwhhigherinthe1980periodandtheaveragefuelcostoffiredoutputwasup1.65centsperkwh.

nterchanqePowerSales.Theamountreceivedforergysodtootherutilitiesduringthe1980periodas$183millionhigherthaninthe1979period.pproximately$48millionofthisincreaseisattri-butableto1.8billionkwhmoreenergysoldandabout$135millionoftheadditionalinterchangepowersaleswasduetoanincreaseintheaveragericereceivedforenergysold.Thebenefitoftheseigherinterchangepowersaleshasbeenpassedontocustomersinthewayoflowerenergyclausecharges.403020~10GenerationoiEnergyBillionsofKwh40-30-20-10OtherOperatingExpensesTheincreasesinwagesandemployeebenefitsandotheroperatingcostssuchasmaterialsandsupplies,rentsandinsuranceprimarilyreflecttheeffectofhigherwagerates,inflationandthecostsofopera-tionandmaintenanceofnewfacilitiesplacedinservice.Depreciationexpensecontinuestoincreaseasnewfacilitiesareplacedinservice.19761977Oil-firedunitsCoalfiredunitsEfHydroeleclric1978197912mos,June1980InterestChargesandPreferred/PreferenceStockDividendsInterestchargesondebtincreased$33millioninthe1980penod.Theincreaseresultedfromunprecedentedhighinterestratesinthefirsthalfof1980andnewissuesoflong-termdebt.Theincreaseindividendsonpreferredandpreferenceockresultedfromtheissuanceofadditionalck.Thenewissuesofdebtandpreferredandreferencestockwererequiredprimarilytofinanceconstructionexpenditures.Theinterestanddivi-dendrequirementsassociatedwithfundsusedtofinanceconstructionworkinprogressareoffsetbyaportionoftheallowanceforfundsusedduringconstruction(seebelow).Generationbyfuelsourceiscurrentlyaverag.ingabout80%fromcoal.firedunits,18%fromoilfiredunitsand2%fromhydroelectricgenera.tlon.ThechangingmixofgenerationbyfuelsourceImpactstheaveragecostoffuelcon.sumed.Currently,theoilfiredunitshaveafuelcostperkwhofgenerationmorethanthreetimesthecostofcoal.firedgeneration.InterchangePowerSalesMillionsofDollars$500500AllowanceforFundsUsedDuringConstructionTheallowanceforfundsusedduringconstruction(allowance)isanon.cashitemwhichservestooffsetonthestatementofincomethecostoffinancingconstruction.Theallowancevarieswiththelevelofconstructionworkinprogressandthecostoffinancing.Thetotalallowance(boththeequityandborrowedfundscomponents)increased$35millioninthe1980period.TheincreaserecordedwasprimarilyduetoadditionalinvestmentintheSusquehannapowerplant.ConstructionofSus-quehannaaccountedforabout$110millionofthetotal$123millionofallowancerecordedinthe1980penod.400300200I-400-300-200-100LossofSubsidiariesandOtherIncome-NetThesubsidiarylossinthe1979periodwasprin-c~iallyrelatedtoTheOneidaMiningCompanywitha$.6millionchargeagainstnetincomeinthethirdarterof1978duetoterminationofminingerations.197619771978197912mos.June1980Interchangepowersalesincreased$281mil~lionfrom19/6tothe12monthsendedJune30,1980.Withadoptionofanenergyclausebegin.ningNovember1978,Interchangesalesareauto.matlcallyIncludedasacreditincomputingtheenergyclauseratebilledtocustomers.

STATEMENTOFINCOME(Unaudited)ThousandsofDollarsOperatingRevenues(Note2)..1980$2D6,2861979$207,777ThreeMonthsEndedJune30SixMonthsEndedJune3019801979$438,216$461,591TwelveMonthsEndedJune301980197~$837,123$841,~OperatingExpensesNetcostofenergyFuel.Powerpurchases.Interchangepowersales...............Net(deferral)/amortizationoffuelandenergycosts(Note3)...............138,9775,507(88,736)2223115,89011,665(82,506)17,170324,81715,348(196,891)(29,410)242,94221,935(138,400)4,673616,25640,012(440,960)467,68734,572(258,403)6,370(11,779)Wagesandemployeebenefits...........Otheroperatingcosts.DepreciationIncometaxes(Note5)Provision.Deferred.Investmenttaxcredits-net.............Taxes,otherthanincome.................57,97133,19529,67319,718'2,21929,98327+6218,90412,844(7,802)7,18117,7419,010(841)(666)21,189169,249168,632113,86464,86658,25239,479131,15057,89050,48037,80829,258(413)19,43438,34916,76415,951(1,331)44,216352,061363,956221,678121,813108,34977,82240,05512,4548,32775,282665,780232,077108,85096,60074,39747,65011,50922,40769,571663,061OperatingIncome.OtherIncomeandDeductionsAllowanceforequityfundsusedduringconstruction.Incometaxcredits.Income(loss)ofsubsidiaries-net.......Other-net.15,0089,972(41)38212,6306,43544440637,03739,14529,67018,8293251,39724,60612,2411,0261,54686,15597,63558,19433,1253512,13044,14422(6,32If171,343178,69325,32119,9155D,22139.41993,80063,571IncomeBeforeInterestCharges.............InterestChargesLong-termdebt.Short-termdebtandother...............Allowanceforborrowedfundsusedduringconstruction.62,35859,06039,0334,30031,9501P'36(19,034)(12,379)136,376137,054265,143242,26474,1007,83858/905,633142,41510,999108,29711,853(36,643)(24)18)(64,600)(43,656)NetIncome-BeforeDividendsonPreferredandPreferenceStockDividendsonPreferredandPreferenceStock.24,29938,05914,82821,307377531(/0745,29591,08129,37640,10596,94922,88788,814176,32955,15576,494165,77044,646EarningsApplicabletoCommonStock..$23,231$26,246$61,705$74,062$121,174$121,124EarningsPerShareofCommonStock(basedonaveragenumberofsharesoutstanding)..$0.52$0.66$1.39$1.87$2.85$3.09AverageNumberofSharesOutstanding(thousands).44,69739,72444,33339,52742,54139,169DividendsDeclaredPerShareofCommonStock.$0.53$0.51$1.06$1.02$2.08$SeeaccompanyingFinancialNotes.

BALANCESHEET(Unaudited)ThousandsofDollarsASSETS1980June301979UtilityPlantPlantinservice-atoriginalcostLessaccumulateddepreciation.Constructionworkinprogress-atcost.Nuclearfuelinprocess-atcost.InvestmentsAssociatedcompanies-atequityNonutilitypropertyandother-atcostorless..CurrentAssetsCashAccountsreceivable,lessreserveCustomers...................................,....Interchangepowersales.Other.Notesreceivable(principallyfromanassociatedcompany)...Recoverablefuelandenergycosts(Note3).Coalandfueloil-ataveragecost.Materialsandsupplies-ataveragecost.OtherDeferredDebitsRecoverablefuelcosts(Note3)Stateutilityrealtytax(Note4)OtherLIABILITIESCapitalizationPreferredandpreferencestock~Issueswithmandatorysinkingfundprovisions......~..Issueswithonlyoptionalredemptionprovisions.......CammonstockCopitalstockexpenseEarningsreinvested.Long-termdebtCurrentLiabilitiesLong-termdebtduewithinoneyearShort-termdebt.Accountspayable.TaxesaccruedDeferredincometaxesDividendspayable.Interestaccrued.OtherDeferredandOtherCreditsDeferredinvestmenttaxcredits.Deferredincometaxes.OtherSeeaccompanyingFinancialNotes.$2462,459663,4471,899,0121,683,27380,9043,663,1897,7146,12313,8374,04649/6736,38512,3291658,072126/9523,03041,19735I,2378,66410,7398,79928,202$4,056,465$488,400231,375775,935(12,357)386,3931,664,0763,533,822958109,80761,8562,26830,65538,64535,57923,027302,795124,35976,61218,877219,848$4,056,465$2,438,120598,2291,839,8911,294,45039,1573,173,49816,2926,18922,48112/7156,07530/547,05330,22443,138121/4219,28928,847349,29328,4206,02634,446$3/79,718$333,000231,375687,434(11,404)355,2181,498,6583,094,28157,69848,00655,0299,38322,93931,84729,58627,965282,453116,33972,08714,558202,984$3+79/18 TwelveMonthsEndedJune30SOURCEOFFUNDSOperationsNetincome.Charges(credits)againstincomenotinvolvingworkingcapitalDepreciation.Noncurrentdeferredincometaxesandinvestmenttaxcredits-net...Allowanceforfundsusedduringconstruction.Other'19801979$38,059$37,753S91,081$96,949$176,329$165,7737,80839,47919,71818,90477,82212,75874,39739,580(87,800)343(2,934)2,191(6,370)10,834(48,724)(128)(34,042)559(122,794)4,330(66,313)2,961(25,009)(I)33,83896,739148,445192,29060,83821,360STATEMENTOFCHANGESINFINANCIALPOSITION(Unaudited)ThousandsofDollarsThreeMonthsSixMonthsEndedJune30EndedJune301980197919801979OutsideFinancingCommonstock.Preferredandpreferencestock..Long-termdebtShort-termdebt-netincrease...11,6529,21722,53651,000168,262100,000168,28919,97479,032179,914129,191320,85715,59825,000300,000340,59828,81685,000300,36088,501161,000168,96361,801480,265414,176WarkingCapital-decrease(a).......InvestmentinAssociatedCompaniesd-ecreasee.NoncurrentRecoverableFuelCosts-decrease.4,6235,0044,986$206,260$172,6567,3264,56811,6169,664$398,685$453,52113,3376,5543,93219,756$668,357$610,3APPLICATIONOFFUNDSConstructionExpenditures........NuclearFuelExpenditures.......AllowanceforFundsUsedDuringConstruction.$130,1856,462$113,4181,148(34,042)(25,009)102,60589,557$261,25819,602$231,4372,097(66,313)(48,724)214,547184,810$524,13041,747$484,0553,513(122,794)(87,800)443,083399,768SecuritiesRetiredPreferredandpreferencestock........Long-termdebt.Short-termdebt-netdecrease........DividendsonPreferred,PreferenceandCommonStock.WorkingCapital-increase(a)..........InvestmentinAssociatedCompanies-increase.NoncurrentRecoverableFuelCosts-increase.Other-net.69513,90238,64444,7296835,002$206,26050631,84750,68165$172,6564,00057,8874,000648143,99776,58542,87363,32753,9312,8082,793$398,685$453,5215,60057,9414,00070641,932145,140122,42912,73528,42016,593408$668,357$610,398(a)Excludesshort-termdebtandlong-termdebtduewithinoneyear.SeeaccompanyingFinancialNotes.

STATEMENTOFEARNINGSREINVESTED(Unaudited)ThousandsofDollarsThreeMonthsEndedJune30SixMonthsEndedJune30TwelveMonthsEndedJune30(alance,BeginningofPeriod...AddNetIncome1979$349,31237,7531980$386,97838,059425,037387,0651979$321,60296,9491980$371,90391,081462,984418,5511980$355,218176,3291979$311,883165,770531,547477,653DeductCashdividendsdeclaredPreferredandpr'eferencestock.....CommonstockIssuancecostofretiredpreferredandpreferencestock14,82823,81611,50720,34038,64431,84729,37647,20976,59122,88740,44063,33355,15589,98544,64677,78314145,154122,435Balance,EndofPeriod.5386,3935355,218$386,393$355,218$386,393$355,218FINANCIALNOTES1.InterimFinancialStatementsTheaccompanyingunauditedfinancialstate-mentsshouldbereadinconjunctionwiththefinan.cialstatementsandnotesincludedintheCompany's1979AnnualReporttoshareowners.2.RateFilingOnApril29,1980,theCompanyfiledwiththeennsylvaniaPublicUtilityCommission(PUC)aequestforanincreaseinbaseraterevenuesofabout16percentorapproximately$123millionannually.OnJune26,1980,thePUCsuspendedforfurtherinvestigationtheCompany'srateincreaserequest.IfthePUCdoesnotreachadecisionontheCompany'srequestpriortoJanuary28,1981,theratesfiledwouldgointoeffectatthattime,subjecttorefund.Foradditionalinformationontheratefilingseethearticleonpage10.3.DeferredFuelCostRecoveryThePUChasauthorizedtheCompanytorecover,througha1-millperkwhchargetocustomers,thedeferredfuelcosts'whichweretobecollectedthroughtheterminatedfuelclause.AsofJune30,1980,theamountofsuchdeferredfuelcoststoberecoveredapproximated$22.5million.TheCompanyhasanadditional$7.1millionofdeferredfuelcostsincurredastheresultofthePUCplacingatemporaryceilingonthefueladjustmentclauseduringseveralmonthsfollowingthe1978coalminers'trike.Inanaccountingorder,thePUCstatedthattheCompanywouldbepermittedtorecovertheamountoffuelcostssodeferred,andtheCompanyhasrequestedthatrecoverybeaccom.plishedthroughapplicationofthe1-millperkwhcharge.(UtilityRealtyTaxAsaresultofacourtdecisionandinterpretationsbythePennsylvaniaDepartmentofRevenuere-gardingthetaxablepropertybaseforthepublicutilityrealtytax,theCompany,inearly1979,filedclaimsforrefundsofcertainprioryears'ealtytaxpaymentsaggregating$31.4million.InJuly1979,therealtytaxwasamendedtobroadenthetaxbaseresultinginanincreasedtaxfor1979whichisbeingrecoveredthroughthetaxsurchargeoveratwelve.monthperiodbeginningNovember1979inaccor-dancewithaPUCorder.TheStatealsoimposedaone.timetaxof10.5/0onthevalueofthenewrealtytaxbaseinordertooffsettherefundsclaimedbyelectricutilities.Afterdeductingthe$314millionofrefundclaims,theCompany'sliabilityunderthe10.5%taxwas$8.3millionwhichwaspaidtotheStateandwasre-cordedasadeferredchargependingdeterminationbythePUCregardingrecoveryoftheadditionaltax.TheCompanyhasbeennotifiedbytheStateBoardofFinanceandRevenuethat$26.2millionofits$31.4millionclaimsforrefundofrealtytaxwasallowedand$5.2millionwasdisallowed.Thedis.allowancehasbeenappealedtotheCommonwealthCourtofPennsylvania.TheCompanybelievesthatthe$8.3millionadditionaltaxandanyrefundclaimsultimatelydisallowedshouldberecoverablethroughthetaxsurchargeandintendstofilewiththePUCaproposaltorecoveranysuchamount.5.IncomeTaxesTheInternalRevenueServicehasexaminedtheCompany'sfederalincometaxreturnsfortheyears1973and1974andhasproposedadditionaltaxesamountingto$9.4millionforthoseyears.TheCompanyhasfiledaprotestwithrespecttomostoftheassertedtaxdeficiencies.Theproposedadditionaltaxesrelateprincipallytotimingdiffer-encesinvolvingtheyearinwhichanitemisdeduc-tiblefromorincludableintaxableincome.Withutilizationofdeferredincometaxprovisionsinregardtomostoftheitems,theCompanybelievesthatanadversedispositionoftheadditionaltaxesasproposedfortheyears1973and1974wouldnothaveamaterialeffectonitsresultsofoperations.(Continuedonpage11)

STATISTICALSUMMARYThreeMonthsEndedJune30SixMonthsEndedJune30TwelveMonthsEndedJune30ElectricEnergySalesmillionsofkwhResidential.Commercial.Industrial.Other.Totalelectricenergysoles.....'.....19801P'051,2811,95716619791,6941,2812,0441785.1095,19719804,3152,8653,9874021156919794,6262,9114,09542612,05819807,7565/098,02677522,06619797,975,518,07422,358ElectricRevenues-thousandsofdollarsResidentialCommercial.Industrial.Otherenergysales.Totalfromenergysales..............Otheroperatingrevenues.Totalelectricrevenues.$77,43956/4561,3296,738202,0513,180$205,231$76,91156,49964,1816,690204,2812,668$206,949$178,152118,783118,27614,082429,2935,552~$434,845$192,909121,840124,48814,469453,7065,102$458,808$327,230229,553238,05327,276$334,625227,468237,82827,396822,11210,391827,31710,548$832/03$837,865SourcesofEnergySold-millionsofkwhGeneratedCoal-firedsteamstations................Oil-firedsteamstation.Combustionturbinesanddiesels(oil)......Hydroelectricstations.........Powerpurchases.Interchangepowersales.Companyusesandlinelosses..............Totalenergysales.6,3491,0372210249(2,483)(255)5,1096,0621,3195217576(2,695)(287)5,19713,0393,06813'373582(4,702)(804)11,56912/552,962304441,072(4,534)(471112,05826,97'I5,883217281,634(11,258)(1,913)22,06625,6545,420436921,717(9,463)(1,705)22,358WherethePP8LIncomeDollarCameFrom12MonthsEndedJune1980WherethePP&LIncomeDollarWent12MonthsEndedJune1980J(J>~e.:';~i5ResldentialRevenuessesisCommercialRevenues34c(r.-,.-I;7j"NetCostofEnergyysdI~a-t>>I:+'~6'$.EmployeesMaterials,Services,Rents,etc.Depreciation23c11C13cBc);')Q-9(Induse1a1RevenuesOtherRevenuesAllowanceforfundsusedduringconstructionandotherincome-netasIs3)e)L)Interest16c15cDividends~"-arninseinveste3cThepercentagedistributionofrevenuebyclassofcustomerhasremainedfairlyconstantoverthepastseveralyears.Duringthe12monthsendedJune30,1980,theallowanceforfundsusedduringconstruction,anoncashitem,accountedforapproximately13centsofeachIncomedollar.ThisItemservestooffsetthecostoffundsusedtofinanceconstructionworkInprogress.sAbout45centsofeachincomedollarduringthe12monthsendedJune30,1980wenttocapl~talrelatedcosts-Incometaxes,depreciation,Interest,dividendsandearningsrelnvested.Thenetcostofenergywasthenextlargestcostandrequired23centsofeachIncomedollar.

TwelveMonthsEndedJune30FinancialReturnonaveragecapitalprovidedbyinvestors.Returnonaveragecommonequity.........Timesinterestearnedbeforeincometaxes..GenerationGeneratingcapability-thousandsofkw(a)..Winterpeakdemand-thousandsofkw....GenerationbyfuelsourcesCoal.Oil.HydroelectricSteamstationavailabilityCoal-fired.Oil-flred.SteamstationutilizationCoal-Ared.Oil-flred....OtherDataAverageannualresidentialkwhuse.........Averagepriceperkwhforallcustomers-centsFuelcost~entsperkwh.Electriccustomers(a).Employees(a).19809.71%11.07%2.336,5464,42780.2%17.62.280.4%80.8745%40.88,9223.731.87989,9187,68919799.60%12.22%2.876,5364,70180.6%17.22.277.0%76.2708%3729,3263.701.509754847+44(a)EndofperiodInterestandDividendsPaIdMillionsofDollars$350350$2.5ConstructionWorkInProgressvs.NetPlantinServiceBillionsofDollars2.53003002.02.0250200-250-200-1.5150~10D~-1501001.0-50197619771978197912mos.trInterestexpenseJune1980UDividendsonpreferred/preferenceandcommonstockThecompanypaid$125millionmoreIninter-estanddividendsduringthe12monthsendedJune30,1980,thanitdidIn1976inordertocom-pensateInvestorsfortheuseoftheirmoney.SecuritiesoutstandingIncreased$1.1billionduringthis3'-yearperiod.1976197719781979June1980GConstructionWorkinProgressKNetPlantlnServiceThedollaramountoffacilitiesthecompanyhasunderconstruction(excludingnuclearfuel)hasincreasedcomparedtothenetplantservingcustomers(plantInservicelessaccumulateddepreciation).AtJune30,1980,theSusque-hannaunitsaccountedfor$1.5billionofcon.structionworkinprogress.

ALOOKATPP8cL'SREQUESTFORHIGHERHereisanupdateonPP&L'srequesttothePenn-sylvaniaPublicUtilityCommission(PUC)fora16percent,$123millionincreaseinthebaserateschargedtoresidential,commercialandindustrialcustomers.OurofficialrequestwasmadewiththePUConApril29,1980.UndercurrentPUCregulations,thecommissionallows60daysfromthefilingdateforanyonewhowishestofileaprotestagainsttherequesttobecomeapartytothecaseandtohavetheopportunitytopresenttestimonyduringpublichearingsthatthePUCmayscheduleaspartofitsinvestigationintothereasonablenessofthepro.posedhigherrates.WerequestedandreceivedermissionfromthePUCtoextendthatperiodto0dayssowecouldnotifycustomersthroughabillinsertratherthanaseparatemailing.TogiveallPP&Lcustomersabetterunderstandingoftheproceduresinvolvedinaraterequest-in-cludingwhattheycoulddotoparticipateintheprocess-wemailedoutinJuneasix-pagePUCamphletentitled,"Consumer'sGuidetoUtilityateCases."Also,duringMayandJune,wecon-ducted11"townmeetings"throughoutourserviceareawhereweofferedcustomersopportunitiesforface.to-facediscussionswithcompanyrepresenta-tivesaboutallaspectsoftheraterequest.Themeetings,whichwerenotrequiredbutwereheldonourowninitiative,werenotaswellattendedasweexpected.Atotalofabout200peoplecametothemeetings.Duringthe90.dayperiodfollowingtherateincreaserequest,10formalprotestsrelatingtotheincreasewerefiled.About75informalcomplaintsrelatingtotheproposedeliminationoftheall-electricheatingratehavebeenregistered.OnJune26,thePUCcommissionersvoted4.0tosuspendandinvestigateourrequest.Indoingso,thecommissionersrejectedaPUCstaffrecom-mendationthatthecompanybeofferedanincreaseofabout$86million.About$46millionwouldhavegoneintoeffectinJulyandtheother$40millionaddedinlateJanuary1981.Thecommissionersdecidedthatapublicrecordshouldbeestablishedshowingthereasonsforandagainsttheincrease,thatallpartiesshouldbegiventheopportunitytopresenttheirviewsinpublichearings,andthatwebegiventhechancetoIustifyourrequest.OnJuly15,representativesfromthecompany,alongwithpartiesopposingourrequest,'metatthePUCinapre-hearingconferencetodefinetheissuestobecoveredinpublichearingsandtosetthehearingdates.ThehearingsaretobeheldatthePUCofficesinHarrisburg.Atthisconference,thepresidingPUCadministrativelawjudgeurgedthecompanyandalloftheotherpartiestoworktowardasettlementofindividualissuesaswellastheentirecaseitself.Here,insummaryfashion,arethemajortariffchangeproposalsincludedaspartofourrateincreaserequest:ElectricSpaceHeatingRateEliminatedWehaverequestedthatthePUCallowustoWaterHeatingRatesEliminatedAsorderedbythePUCinourpreviousratecase,theelectricwaterheatingprovisionintheresidentialrate,whichislimitedtoresidenceswheretheelectricwaterheaterswereconnectedbeforeDec.31,1973,willbeabolished.NewRateDesignforResidentia!CustomersTherateforresidentialcustomerswouldbestreamlinedtosimplifythechargesandtoreducethenumberofstepsinthe"decliningblocks"forlargeusers.Ifthisproposalisapproved,allresiden-tialcustomersservedunderratescheduleRSwillbebilledafixedmonthlychargeof$4regardlessoftheamountofelectricityused,plusachargeof4.4centserkilowatt-hourforthefirst480kwhpermonthand.3centsperkilowatt.hourforallremainingmonthlykwhusage.ThePa.taxsurcharge,energychargeandtltemporary$0.001047(aboutone-tenthofacenperkwhrecoveryofpastfuelexpensechargewiflcontinuetoapplyindeterminingthetotalbill.10NewTime-Of-DayRatesProposedInadditiontotheeliminationofthe"frozen"residentialspaceandwaterheatingrates,PP&Lisproposingadoptionofthreenewrates.Theseratesarecalled"time.of-day"or"off-peak"rates.Undertheseratedesigns,customersarechargedtworices-onethatishigherduringthehourswhenP&Lexperiencesitsgreatestdemandforelec-tricity,andanotherthatislowerduringthehourswhendemandisreduced.OnthePP&Lsystem,theon-peakperiodrunsfrom7a.m.to9p.m.andtheoff-peakperiodisfrom9p.m.to7a.m.weekdays,SaturdayandSundayareconsideredoff-peakperiodsforthefull48-hourperiod.Thethreenewratesproposedare:~anoff-peakstorageheatingrate~anoff-peakwaterheatingrate~atimeof-dayrateexperiment.Theproposedoff-peakstorageheatingrateisdesignedforcustomerswhoareplanningtoinstallelectricheatstoragesystemsintheirhomes.Thesesystemsaredesignedtostoreheatduringoff-peahoursandthendrawoffthestoredheatdurington-peakhours.Ifapproved,customerswhoselectthisratewilbechargedamonthlyfeeof$11,and1.6centsperkwhdunngbothonandoff-peakperiods,plus$2.50RATESeliminatetheresidentialspaceheatingratesched-ule,RH,whichiscurrentlylimitedtoresidencesservedundertheratepriortoFeb.1,1972.Thoswhohavebecomeelectricheatcustomerssincethdatearebeingservedunderourgeneralresidentirateschedule.ThecompanyhasbeennarrowingthegapbetweentheratesforelectricheatingcustomersontheRHscheduleandotherresidentialcustomersinpreviousratecasesduringthepast10years.Thecurrentdifferentialisabout5percent.

perkilowattofdemandduringon-peakhours.Duringtheoff.peakhours,therewillbenodemandcharge.Theoff-peakwaterheatingrateisbeingproposedrthosecustomerswhoarewillingtohavethelectricitysuppliedtotheirelectricwaterheateronlyduringoff-peakhours.ThewaterheaterwouldbecontrolledautomaticallybyaPP&L-owned-and-maintainedtimeclock.Twometerswouldberequired-onetomeasureregularhouseholdusageandtheothertomeasurethewaterheater'usage.Customerswhovoluntarilyselectthisratewillhavea$4.50permonthfixedchargeplus1.2centsperkwhforallelectricityusedbytheirelectricwaterheaters.Otherusagewouldbebilledatthestandardresi-dentialservicerates.Hopefully,thesetworateswillcontributetoourlong-rangegoalofreducingtherateofgrowthoftheon-peakdemandforelectricity.Thetime-of-dayrateexperimentisanattemptbyPP&Ltomeasuretheeffectofpriceasamotivationforcustomerstoshifttooff.peakusage.Thisratewillbelimitedinitsapplicationto100randomlyselectedresidentialcustomersand100customerswhovolunteerfortherate.Chargeswillbean$11fixedmonthlyfeepIus5.3centsperkwhon.peakand1.6centsperkwhoff-peak.RatesStillAmongLowestThecompanyhasworkedhardtooffsettheinflation-relatedcostincreasesthathaveoccurredverthepastfewyears,andmanagementisveryoudofthefactthatPP8Lhasnotneededtoseekincreaseinbaseratesforelectricserviceformorethanfiveyears.ThelastrequestwasmadeinMarch1975,andwasallowedinitsentiretybythePublicUtilityCommissioninseveralsteps,withthelaststepgrantedinAugust1976.However,wehavecometothepointwherewecanholdoffnolonger.Allofourcosts,otherthanfuelandpurchasedpowerandchangesinstatetaxes;canberecoveredonlyfromrevenuesfrombaserates.Thesecosts,suchaswages,interest,rents,andmaterialsformaintenance,havebeenin-creasingrapidlyduetoinflation.Untillate1978wewereabletousesavingsfromimprovedplantoperationandsalestootherutilitiestooffsettheseincreasesinbaseratecosts.Butthiswaschangedinlate1978whenthenetenergychargereplacedthefueladjustmentchargeoncustomerbills.Now,andforthepast18months,savingsfromimprovedplantoperationandinterchangesaleshavebeenautomaticallypassedontoourcustomersthroughthenetenergycharge.Asaresult,PP&Lcustomerstodayarepayingaboutthesamepriceforelectricservicethattheydidayearago,inspiteofsizableincreasesinfuelandallothercosts.Acloselookatthebillsthatcustomershavepaidoverthepastfewyearswillshowthatourelectricpricescontinuetobeabargain.InSeptember1976,whentheinitialeffectofourlastraterequestwasapplied,thetotalmonthlybillforanaverageresi-dentialcustomerwhoused800kwhwas$31.69.InJune1980thatbillhadincreasedto$37.12,atotalincreaseofonly$5.43amonth,oranaverageof4.3percentannually.Eveniftheproposed16percentbaserateincreasehadbeenappliedimmediately,thebillwouldhavebeen$40.55,anaverageannualincreaseof7.1percentsinceSeptember1976.Bywayofcompari-son,theaverageannualincreaseintheConsumerPriceIndexwasabout10percentoverthisperiod.Ofthesevenmajorelectricutilitiesinthestate,PP&Lcustomerspayamongthelowestrates.PP&L'srateswouldstillbebelowaverageevenifthefullamountrequestedwerenowineffect.FINANCIALNOTES...Continuedfrompage7Oneoftheproposedadjustmentswouldrequire.theCompanytocapitalizecertaintaxes(principallysocialsecuritytaxes)thatweredeductedforincometaxpurposesintheyearincurred.Therelatedreductioninincometaxexpenseforthisitemhasbeenflowed-throughtocustomersinestablishingratesforelectricservice.IftheCompany'sprotest.ofthisitemisdisallowedandthisproposedadjust-mentwereappliedtoallyearsfrom1973to1980,theCompanyestimatesthatitwouldincuradditionalincometaxexpense,includinginterest,ofapproxi-mately$10million.TheCompanywould,however,requestthePUCtopermitrecoveryofanyadditionaltaxexpenseresultingfromanunfavorabledispo-sitionofthisitem.6.CapitalStocknApril23,1980,theauthorizedCommonStocktheCompanywasincreasedfrom50,000,000aresto75,000,000sharesandtheauthorizedSeriesPreferredStockwasincreasedfrom5,000,000sharesto10,000,000shares.7.SecondQuarter1980FinancingOnApril2,1980,theCompanysold$100millionrincipalamountofFirstMortgageBonds,15.5/8/oeries,due2010,andonJune27,1980,theCom-panysoldthroughaprivateplacement$30millionrincipalamountofFirstMortgageBonds,11-3/4/oeries,due1984.Proceedsfromthesaleofthebondswereusedforgeneralcorporatepyrposesincludingthereductionofshort-termdebtincurredto(a)retire$57millionofmaturinglong.termdebtand(b)provideinterimfinancingforconstructionandnuclearfuelexpen-ditures.TheCompanyenteredintoanagreementwiththeLehighCountyIndustrialDevelopmentAuthorityAuthority)pursuanttowhichtheAuthorityonJune8,1980issued$90,000,000oftax-exemptrevenuebondstofinanceCompanypollutioncontrolprojects.Inaccordancewiththeagreement,theCompanyconcurrentlissued$90,000,000principalamountof6h,7-78/oand8.1/8/oFirstMortgageBonds,PollutionontrolSeriesBandC,due1983-2010(Continuedonbackcover)

PALPENNSYLVANIAPOWER8LIGHTCOMPANYTwoNorthNinthStreet,Allentown,Pa.18101Telephone:AreaCode215821-5151BULKRATEU.S.POSTAGEPAIDALLENTowN.PAPERMITNo.104FINANCIALNOTES...Continuedfrompage11whichareheldbythetrusteeoftheAuthori~t'sbondsassecurityfortherevenuebonds.TheCompany'sbondshaveinterestrates,maturitydatesandredemptionprovisionscorrespondingtotheAuthority'sbonds.ProceedsfromthesaleofthepollutioncontrolbondsweredepositedinaconstructionfundheldbythetrusteefromwhichtheCompanymayrequisi-tionfundstofinancetheconstructionofcertainpollutioncontrolfacilities.Long-termdebtontheCompany'sbalancesheetreflectsthebondsissuednetoftheamountheldintheconstructionfund.8.SusquehannaNuclearPlantTheCompany'slastestimateofthein-servicedatesfortheSusquehannanuclear-fueledgenera-tingunitswasJanuary1982forUnitNo.1andJanu-ary1983forUnitNo.2.Thereare,however,uncer-taintiesassociatedwiththecompletionoftheSusquehannaunitsonscheduleandatthecostestimatedfortheproject,whichis$2.43billionfortheCompany's90percentshare.TheseuncertaintiesinvolvetheNuclearRegula.toryCommission'sabilitytoprocesstheoperatinglicensesonatimelybasisanduncertaintiesregard-ingpossiblefuturechangesinthescopeoftheprojectrelatedtodesignandsafetymatters,con-structionprogressandpossiblegovernmentorregulatoryagencyaction.Asaresultofareviewofthecumulativeeffectofthesefactors,theCompanyhasconcludedthatthepresentlyscheduledin.servicedatesfortheSus.quehannaunitswillnotbeachieved.TheCompanyhasnotatthistimeestablishednewdefinitivecostandscheduleestimates.However,basedoncur-rentlyavailableinformationandtrends,theCom-pany'spresentassessmentisthatthein.servicedelaysshouldbelessthanoneyearandthattheCompany'sshareofthecostoftheunitsshouldnotbeincreasedbymorethan15%.TheCompanyexpectsthatitwillbebetterabletoestimatethecostandin.servicedatesoftheunitsintheFallof1980whenamoredetailedreviewandas.sessmentoftheSusquehannaprojectiscompleted.9.GuaranteedObligationsDuringthesecondquarterof1980,theCompany'soilpipeiinesubsidiarycompletedarecapitalizationplaninvolvingtheissuanceof$38millionofnotesguaranteedbytheCompany.IncludingthesenottheCompanyatJune30,1980hadguarantcapitalandotherobligationsaggregating$2millionofcertainfuel.relatedsupplycompanies(principallysubsidiarycompaniesinvolvedinbitu-minouscoaloperationsandthesubsidiaryoilpipelinecompany).

DATETWONORTHNINTHSTREET,ALLENTOWN,PA.18101PHONE:(215)821.5151EDWARDM,NAGELVicePresroent.GeneralCovnsetanaSecretary8215323G.D.CALIENDOOvetCovnselItegvtatorynttarrs8215587assistantCovnsetMURRAYMILKMAN821.5725S.JANHUDDLE821~5645AtlOrneySROBERTK.FULTON821-5325STEWARTJ.BERGER8215321BRYANA,SNAPP8214397HARRISM.ROSEN8215644LEGALOEPARTMENTAtlcrneyaDAVIDJ.DULICK8214107JOHNANTONUK821~4452KATHRYNB.SOLI.EY8214253PAULE.RUSSELL8214254November17,1980Mr.Wi1liamP.Thierfelder,SecretaryPennsylvaniaPublicUtilityCommissionP.0.Box3265Harrisburg,Pennsylvania17120Re:PP5LTariffSupplementNo.73R-80031114

DearSecretaryThierfelder:

Thereareenclosedforfilinginregardtotheabove-referenceddocket,8copiesofPennsylvaniaPower4LightCom-pany'.sSeptember1980quarterlyReview.'thasbeenlabeledAttachmentII-A-2(c),andshouldbemadepartofPP5LExhibitRegsII.VerytrulyyoursG.D.CalienEnclosures.cc:TheHonorableMorrisMindlinAlbertW.Johnson,EsquireDavidM.Barasch,EsquireBernardA.Ryan,EsquireWilliamChesnutt,EsquireGreggC.Sayre,EsquirePhilipMcClelland,EsquirePENNSYLVANIAPOWERILLIGHTCOMPANY AttachmentII-A-2(c)SEPTEMBER1980VPENNSYLVANIAPOVfER&LIGHTCONPANYFINANCIALHIGHLIGHTSCustomers,atEndofPeriod.12MonthsEndedSeptember3019801979993Thousand981ThousandKilowatt-hoursofElectricEnergySalesCustomers.InterchangePowerKilowatt-hoursofElectricityGeneratedOperatingRevenues.CapitalProvidedbyInvestors,atEndofPeriod..UtilityPlant,atEndofPeriodNetPlantinService.ConstructionWorkinProgress.ReturnonAverageCapitalProvidedbyInvestors...CommonStockDataReturnonAverageCommonEquityEarningsPerShare.DividendsDeclaredPerShare....BookValuePerShare,atEndofPeriod.TimesInterestEarnedBeforeIncomeTaxes.22.2Billion10.8Billion33.5Billion$858Million$3.7Billion$1.9Billion$1.8Billion9.62%10.57%$2.71$2.10$25.452.2222.4Billion10.0Billion32.2Billion$856Million$3.2Billion$1.9Billion$1.4Billion1001%13.23%$3.37$2.01$25.982.84DISCUSSIONOFRESULTSOFOPERATIONS,Beginningonpage2LITIGATIONSETTLEMENTANDTAXABILITYOFDIVIDENDS,page10UPDATEONSUSQUEHANNANUCLEARPROJECT,page10THISREVIEWHASBEENPREPAREDFORTHEPURPOSEOFPROVIDINGGENERALANDSTATISTICALINFORMATIONCON-CERNINGTHECOMPANYANDNOTINCONNECTIONWITHANYSALE,OFFERFORSALEORSOLICITATIONOFANOFFERTOBUYANYSECURITIES.

EarningsPerShare12MonthsEndedEachQuarterDollarsPerShare$3.403.203.002.802.602.403.403.203.002.802.602.40DISCUSSIONOFRESULTSOFOPERATIONSEarningsSummaryEarningspershareofcommonstockforthet'quarterof1980were$0.61or$0.14lowertha$0.75earnedduringthesameperiodlastyear.shareearningsofcommonstockforthe12moni~endedSeptember30,1980were$2.71,adecreaseof$0.66fromthe$3.37forthesameperiodlastyearanddown$0.61from$3.32persharefortheyear1979.Whiletheeconomicrecessioncontributedtotheearningsdecline,theprincipalreasonforthedropinearningsisthatinflationhasincreasedcostsbeingin-curredinallphasesoftheCompany'soperations.SincetheCompanyhasnotbeenabletofullyoffsetthesecostincreases,additionalrevenuesareneededinordertoreversetheearningstrend.19761977"197819791980Earningspershareofcommonstockforthe12monthsendedSeptember30,1980,were$2.71,down66centsfromthesameperiodlastyearanddown61centsfromearningsfortheear1979.Theearningsdeclinereflectstheneedorincreasedelectricratesinordertooffsethighercostsbeingincurredinallareasolthecompany'soperations.ArequestforincreasedratesispendingbeforethePUC.TimesInterestChargesEarned12MonthsEndedEachQuarterTimesEarned(PreTax)19761977197819791980AnimportantmeasureIndeterminingacorn.pany'screditstandingisitsabilitytocoverin.terestpayments.Highinterestratesanddeclin.ingearningshavecombinedtoreducethiskeyfinancialratio.RateIncreaseRequestOnApril29;1980,theCompanyfiledwiththePenn-sylvaniaPublicUtilityCommission(PUC)arequestforanincreaseinbaseraterevenuesofabout16percentorapproximately$123millionannually.OnJune26,1980,thePUCsuspendedtheCompany'srequesttopermitinvestigationandhearings.ThepublichearingswerecompletedinearlyOctober1980.TheCompanyexpectsthatthePUCwillreachadecisionontheraterequestbytheendofJanuary1981.ComparativeAnalysisThefollowingdiscusseschangesinthefinancialresultsasreflectedontheStatementofIncomeonpage4comparingthe12monthsendedSeptemb1980(1980period)tothe12monthsendedSept30,1979(1979period).EnergySalesElectricenergysalesdecreased169millionkwhor0.8%inthe1980period.A256millionkwhone-timein-creaseinenergysalesduetoconversionofabout740,000customersfrombi-monthlytomonthlybillingwasrecordedduringthefirstquarterof1979.Excludingthisnonrecurringamount,energysalesforthe1980periodincreased87millionkwhfromthe1979period.Energysalesweredampenedbytheeconomicre-cession,withsalestoindustrialcustomersdeclining137millionkwhor1.7%inthe1980period.Salestoresidentialcustomers(excludingtheeffectofthebillingconversion)increased127millionkwhor1.6%andcommercialsalesincreased115millionkwhor2.1%duringthe1980period.NetCostofEnergyFuel.Thecostoffuelburnedtogenerateelectricityincreased$145millionor29.8%inthe1980period.Higherpricesforthecoalandoilburnedaccountedforabout$120millionoftheincreasedfuelexpense.Thebalanceofthehigherfuelcostisattributabletoincreasedgeneration,up1.2billionkwh,aportionofwhichcamefromhighcostoil-firedunits.The 40GenerationofEnergyBillionsofKwh40eragecostofallfuelconsumedperkwhgenerateds1.93centsduringthe1980periodand1.55centsduringthe1979period.Theaveragefuelcostwas.09.centsperkwhhigherforcoal-firedgenerationand1.56centsperkwhhigherforoil-firedgenerationinthe1980period.InterchangePowerSales.Theamountreceivedforenergysoldtootherutilitiesduringthe1980periodwas$127millionhigherthaninthe1979period.Ofthisin-crease,approximately$25millionwasattributableto0.8billionkwhmoreenergysoldandabout$102millionwasduetoanincreaseintheaveragepricereceivedforenergysold.Thehigheraveragepricereceivedforinterchangereflectsageneralincreaseinfuelcostsbeingexperiencedbyallinterchangecompanies.Thebenefitofhigherinterchangepowersaleshasbeenpassedontocustomersintheformoflowerenergyclausecharges.3010:TL-30-20-10197619771978197912rnos.Sept.1980IEICel-firedunitsP.Coal-firedunitsElHydroelectricOtherOperatingExpensesTheincreasesinwagesandemployeebenefitsandotheroperatingcostssuchasmaterialsandsupplies,rentsandinsuranceprimarilyreflecttheeffectofhigherwagerates,inflationandthecostsofoperationandmaintenanceofnewfacilitiesplacedinservice.Depreciationexpensecontinuestoincreaseasnewfacilitiesareplacedinservice.InterestChargesandPreferred/PreferenceStockDividendsInterestchargesondebtIncreased$33millioninthe1980period.Theincreaseresultedfromhighin-terestratesexperiencedinthefirsthalfof1980andnewissuesoflong-termdebt.Theincreaseindividendsonpreferredandpreferencestockresultedfromtheissu-anceofadditionalstock.Thenewissuesofdebtandpreferredandpreferencestockwererequiredprimarilytofinanceconstructionexpenditures.Theinterestanddividendrequirementsassociatedwithfundsusedtofinanceconstructionworkinprogressareoffsetbyaportionoftheallowanceforfundsusedduringcon-struction(seebelow).InterchangePowerSalesMillionsofDollars$500500400300-300Generationbyfuelsourcelscurrentlyaveragingabout80%fromcoalfiredunits,18%fromoilfiredunitsand2%fromhydroelectricunits.Currently,theoilfiredunitshaveafuelcostperkwhofgenerationmorethanthreetimesthecostofcoat-firedgeneration.AllowanceforFundsUsedDuringConstructionTheallowanceforfundsusedduringconstruction(allowance)isanon-cashitemwhichservestooffsetontheStatementofIncomethecostoffinancingconstruction.Theallowancevarieswiththelevelofconstructionworkinprogressandthecostoffinancing.Thetotalallowance(boththeequityandborrowedfundscomponents)increased$35millioninthe1980period.TheincreaserecordedwasprimarilyduetoadditionalinvestmentintheSusquehannapowerplant.ConstructionofSusquehannaaccountedforabout$118millionofthetotal$132millionofallowancerecordedinthe1980period.2DO~100q'i-.-100197619771978197912mos,Sept.1980Interchangepowersalesincreased$282mil.lionfrom1976tothe12monthsendedSeptem.ber30,1980.WithadoptionofanenergyclausebeginningNovember1978,interchangesalesareautomaticallyincludedasacreditincomputingtheenergyclauseratebigedtocustomers.

STATEMENTOFINCOME(Unaudited)ThousandsofDollarsOperatingRevenues(Note2)ThreeMonthsEndedSeptember3019801979$220,891$199,892NineMonthsEndedSeptember3019801979$659,107$661,484TwelveMonthsEndedSeptember3019801979$858,122$856,441OperatingExpensesNetcostofenergyFuel.Powerpurchases.Interchangepowersales..............Net(deferral)/amortizationoffuelandenergycosts(Note3).............159,610139,92711,80312,863(127,029)(126,142)25,72231,194484,428382,86927,15134,785(323,920)(264,529)(3,689)35,867635,940490,35738,95241,360(441,848)(315,085)89823,415Wagesandemployeebenefits..Otheroperatingcosts.Depreciation.Incometaxes(Note5)Provision.Deferred.Investmenttaxcredits-net..Taxes,otherthanincome.......70,I0633,43625,82520,19818,173(11,896)5.33722;17457,84228,25424,10818,90414,843(8,603)8,63214,462183,97098,30284,07759,67734,9374,0554,00666,390188,99286,14474,58856,71144,101(9,015)28,06652,811233,942126,995110,06579,11643,3859,1625,03282,994240,047112,31297,75875,05849,471(256)31,37068,204OperatingIncomeOtherIncomeandDeductionsAllowanceforequityfundsusedduringconstruction.Incometaxcredits.Income(loss)ofsubsidiaries-net.......Other-net.37,53841,45015,75611,121(66)8313,9107,243342488183,353158,442123,693139,08645,42629,9502591,47938;51619,4841,3672,035535,414522,39860,03937,003(56)1,72448,72524,731,1843,019690,691673,964167,431182,477IncomeBeforeInterestCharges..........,...InterestChargesLong-termdebt.Short-termdebtandother....,..........Allowanceforborrowedfundsusedduringconstruction...26,89421,98364,43263,43377,11461,402200,807200,48898,71077,666266,141260,14338,1314,31633,4141,164112,23112,15492,0046,797147,13214,151116,857'I1,187(20,548)(13,634)(57,19I)(37,752)(71,515)(47,960)21,89920,94467,19461,04989,76880,084NetIncome-BeforeDividendsonPreferredandPreferenceStock.42,53342,489133,613139,439176,373180,059DividendsonPreferredandPreferenceStock..:14,79912,49744,17435,38557,45646,503EarningsApplicabletoCommonStock...$27,734$29,992$89,439$104,054$118,917$133,556EarningsPerShareofCommonStock(basedonaverogenumberofsharesoutstanding)..$0.61$0.75$2.00$2.62$2.71$3.37AverageNumberofShoresOutstanding(thousands).DividendsDeclaredPerShareofCommonStock.SeeaccompanyingFinancialNotes.45,67140,22044,80839,76943,86839,572$0.53$0.51$1.59$1.53$2.10$2.0 BALANCESKEET(Unaudited)ThousandsofDollarsSeptember30ASSETSUtilityPlantPlantinservice-atoriginalcost.LessaccumulateddepreciationConstructionworkinprogress-atcost.Nuclearfuelinprocess-atcost.InvestmentsAssociatedcompanies-atequityNonutilitypropertyandother-atcostorless...CurrentAssetsCashandtemporarycashinvestments.Accountsreceivable,lessreserveCustomers.Interchangepowersales.Other.Notesreceivable(principallyfromanassociatedcompany).....Recoverablefuelandenergycosts(Note3).................Coalandfueloil-otaveragecost.Materialsandsupplies-ataveragecost.Other.DeferredDebitsRecoverablefuelcosts(Note3).Stateutilityrealtytax(Note4).OtherLIABILITIESCapitalizationPreferredandpreferencestockIssueswithmandatorysinkingfundprovisions...Issueswithonlyoptionalredemptionprovisions..CommonstockCapitalstockexpenseEarningsreinvested.Long-termdebt.CurrentLiabilitiesLong-termdebtduewithinoneyearShort-termdebtAccountspayableTaxesaccruedDeferredincometaxes.DividendspayableInterestaccrued.Other.DeferredandOtherCreditsDeferredinvestmenttaxcredits...DeferredincometaxesOther.SeeaccompanyingFinancialNotes.1980$2,605,004680,4881,924,5161,782,74387,2633,794,52220,6076,44927,0569,25354,94528,8766,43348937,457143,29921,95719,841322,5502,7179,29911,35223,368$4,167,496$486,800231,375798,706(12,370)389,6541,673,3893,567,5541,026175,55363,3003,86820,00339,26452,77222,776378,562129,69975,36816,313221,380$4,167,4961979$2,465,254614,7491,850,5051;395,62152,9953,299,12117,3535,71723,07016,33653,73536,6388,79327,51616,813119,66519,19214,172312,86023,55212,1156,12141,788$3,676,839$381,400231,375696,629(11,414)364,6091,498,7853,161,38457,75224,53793,1217,4779,33733,09142,90727,526295,748124,66377,08717,957219,707$3,676,839 STATEMENTOFCHANGESINFINANCIALPOSITION(Unaudited)ThousandsofDollarsThreeMonthsNineMonthsEndedSeptember30EndedSeptember30TwelveMonthsEndedSeptember30SOURCEOFFUNDSOperationsNetincome.Charges(credits)againstincomenotinvolvingworkingcapitalDepreciotion.Noncurrentdeferredincometaxesandinvestmenttaxcredits-net...Allowanceforfundsusedduringconstruction.Other.198019791980197920,19818,9044,09613,32459,67756,711(2,273)24,157(36,304)(2,208)(27,544)209(102,617)753(76,268)81$42,533$42,489$133,613$139,43919801979$176,373$180,05979,11675,0583,53151,028(131,554)(96,685)1,91360328,31547,38289,153144,120129,379210,063OutsideFinancingCommonstockPreferredandpreferencestock..Long-termdebt.Short-termdebt-netincrease...22,7709,25865,7469,19550,00010845,30651,000177,546144,77824,79375,000300,108102,07732,082111,00075,000178,112300,108151,01697,77459,303418,630399,901542,205407,190WorkingCapital-decrease(a).......InvestmentinAssociatedCompanies-decreaseNoncurrentRecoverableFuelCosts-decrease.38,64073,14219,2113,7865,9474,86815,61216,485$170,676$184,695$523,395$583,50321,64120,8353,644$692,419$642,53APPLICATIONOFFUNDSConstructionExpenditures.........NuclearFuelExpenditures........AllowanceforFundsUsedDuringConstruction.$145,006$130,6776,35913,839(36,304)(27,544)$406,263$362,114$538,459$511,92525,96215,93634,26716,640(102,617)(76,268)(131,554)(96,685)115,061116,972329,608301,782441,172431,880SecuritiesRetiredPreferredandpreferencestock.......Long-termdebt.Short-termdebt-netdecrease.......DividendsonPreferred,PreferenceandCommonStock.WorkingCapitol-increase(a).........InvestmentinAssociatedCompanies-increase.NoncurrentRecoverableFuelCosts-1,600171,6001723,46913,02178239,26433,0905,60057,904115,8484,2345,6955,600665167,46696,4185,60057,9415,60070638,3215,684151,314126,29121,166increase.Other-net.1,7138,765$170,676.$184,69523,5524,50611,5729,54216,188$523,395$583,503$692,419$642,538(a)Excludesshort-termdebtandlong-termdebtduewithinoneyear.SeeaccompanyingFinancialNotes.

STATEMENTOFEARNINGSREINVESTED(Unaudited)ThousandsofDollarsThreeMonthsEndedSeptember30NineMonthsEndedSeptember30TwelveMonthsEndedSeptember30alance,BeginningofPeriod..AddNetincome.19801979$386,393$355,21842,53342,48919801979$371,903$321,602133,613139,43919801979$364,609$310,855176,373180,059428,926397,707505,516461,041540,982490,914DeductCashdividendsdeclaredPreferredandpreferencestock,....Commonstock.Issuancecostofretiredpreferredandpreferencestock.Balance,EndofPeriod14,79924,46588141439,27233,098115,86296,432$389,654$364,609$389,654$364,6091414151,328126,305$389,654$364,60912,49744,17435,38557,45646,50320,59371,67461,03393,85879,788FINANCIALNOTES1.InterimFinancialStatementsTheaccompanyingunauditedfinancialstatementsshouldbereadinconjunctionwiththefinancialstate-mentsandnotesincludedintheCompany's1979An-nualReporttoshareowners.2.RateFilingOnApril29,1980,theCompanyfiledwiththePenn-IvaniaPublicUtilityCommission(PUC)arequestfornincreaseinbaseraterevenuesotabout16percentorapproximately$123millionannually.OnJune26,1980,thePUCsuspendedtheCompany'srequesttopermitinvestigationandhearings.ThepublichearingswerecompletedinearlyOctober1980.TheCompanyexpectsthatthePUCwillreachadecisionontheraterequestbyJanuary28,1981.However,ifthePUCdoesnotadoptafinalorderbythatdate,theratesfiledbytheCompanywouldgointoeftectatthattime,subjecttorefund.-(UtilityRealtyTaxAsaresultofacourtdecisionandinterpretationsbythePennsylvaniaDepartmentofRevenueregardingthetaxablepropertybaseforthepublicutilityrealtytax,theCompany,inearly1979,filedclaimsforrefunds3.DeferredFuelCostRecoveryTheCompanyisrecovering,througha1-millperkwhchargetocustomers,thedeferredfuelcostswhichweretobecollectedthroughthePUCfueladjustmentclausewhichterminatedOctober31,1978.AsofSep-tember30,1980,theamountofsuchdeferredfuelcoststoberecoveredapproximated$16.6million.TheCompanyhasanadditional$7.1millionofde-ferredfuelcostsincurredastheresultofthePUCplacingatemporaryceilingonthefueladjustmentclauseduringseveralmonthsfollowingthe1978coalminers'trike.Inanaccountingorder,thePUCstatedthattheCompanywouldbepermittedtorecovertheamountoffuelcostssodeferred,andtheCompanyhasrequestedthatrecoverybeaccomplishedthroughapplicationofthe1-millperkwhcharge.oftherealtytaxforcertainprioryearsaggregating$31.4million.InJuly1979,therealtytaxwasamendedtobroadenthetaxbaseresultinginanincreasedtaxfor1979.Suchincreaseisbeingrecoveredthroughthetaxsurchargeoveratvbtelve-monthperiodbeginningNovember1979.TheStatealsoimposedaone-timetaxof10.5/oonthevalueofthenewrealtytaxbaseinordertooffsettherefundsclaimedbyelectricutilities.Afterdeductingthe$31.4millionofrefundclaims,theCompany'sliabilityunderthe10.5%taxwas$8.3millionwhichwaspaidtotheStateandwasrecordedasadeferredcharge.TheCompanyhasbeennotifiedbytheStateBoardofFinanceandRevenuethatitallowed$26.2millionofthe$31.4millionofrealtytaxrefundclaimsanddisal-lowed$5.2million.Thedisallowancehasbeenap-pealedtotheCommonwealthCourtofPennsylvania.TheCompanyhasfiledwiththePUCataxsurchargeratewhichprovidesforrecoveryofthe$8.3millionadditionaltaxpaymentandthe$5.2millionrefundclaimdisallowanceoveratwelve-monthperiodbeginningNovember1980.ApplicationofthenewtaxsurchargerateissubjecttoPUCapproval.AnyamountsultimatelyreceivedasaresultottheCompany'sappealofthedisallowedrefundclaimswillbepassedontocus-tomersinthetaxsurchargerate.5.IncomeTaxesTheInternalRevenueServicehasexaminedtheCompany'sfederalincometaxreturnsfortheyears1973and1974andhasproposedadditionaltaxesamountingtoapproximately.$9.4millionforthoseyears.TheCompanyhasfiledaprotestwithrespecttomostoftheassertedtaxdeticiencies.Theproposedadditionaltaxesinvolveprincipallytheyearinwhichitemsaredeductiblefromorincludableintaxablein-come.SincedeferredincometaxeshavebeenprovidedastomanyoftheItemsincludedintheproposedad-justments,theCompanybelievesthatanadversedis-positionoftheadditionaltaxesasproposedfortheyears1973and1974wouldnothaveamaterialeffectonitsnetincome.(Continuedonpage11)

STATISTICALSUMMARYElectricEnergySales-millionsofkwhResidential.Commercial.Industrial..Other.Totalelectricenergysales..........19801,7341,4351,89617719791,5981,3121,98217452425066IThreeMonthsEndedSeptember3019806,0494,3005,88357919796,2244,2236,07760016,81117,124NineMonthsEndedSeptember3019807,8925,6317,94077919798,0215,518,07779722,24222,411TwelveMonthsEndedSeptember30ElectricRevenues-thousandsofdollarsResidential.Commercial.Industrial.Otherenergysales.Totalfromenergysales.OtheroperatingrevenuesTotalelectricrevenues.$82,715$72,62864,53656,51563,74561,6417,0556,465$260,867$265,537183,320178,355182,021186,12921,13720,934$337,317$340,211237,575231,021240,157243,23027,86627,639218,051197,2492,4412,337647,3457,992650,9557,440842,915842,10110,49410,426$220,492$199,586$655,337$658,395$853,409$852,527SourcesofEnergySold-millionsofkwhGeneratedCoal-firedsteamstations.............Oil-firedsteamstationCombustionturbinesanddiesels(oil)....Hydroelectricstations................Powerpurchases.Interchangepowersales.Companyusesandlinelosses............Totalenergysales.6,8091,4701679406(3,077)(461)5,2427,0951,2906134530(3,528)(461)5,06619,8484,53930452987(7,780)(1,265)19,6494,252355781,603(8,0611(932)16,81117,12426,6866,063316731,509(10,807)(1,913)26,0425,461387081,927(10,022)(1,743i22,24222,411WherethePP&LIncomeDollarCameFrom12MonthsEndedSeptember1980WherethePP81LIncomeDollarWent12MonthsEndedSeptember1980ResidentialRevenues34cr~~..~~iqNetCostofEnergy24c10c"P~~~a~CommercialRevenuesIndustrialRevenuesOtherRevenues24cAllowanceforfundsusedduringconstructionandotherincome-neti;I'.-.'"-,Employees5,'+2.4Materials,Services,Rents.etc.DepreciationC:i0Interestr~fDividendsaminoseinveste13c11c16c15C3cThepercentagedistributionofrevenuebyclassofcustomerhasremainedfairlyconstantoverthepastseveralyears.Duringthe12monthsendedSeptember30,1980,theallow.anceforfundsusedduringconstruction,anon.cashItem,accountedforapproximateiy14centsofeachincomedollar.Thisitemservestooffsetthecostoffundsusedtofinanceconstructionworkinprogress.About44centsofeachincomedollarduringthe12monthsendedSeptember30,1980,wenttocapitairelatedcosts-incometaxes,depre.ciation,interest,dividendsandearningsrein.vested.Thenetcostofenergyrequired24centsofeachincomedollar.

TwelveMonthsEndedSeptember30FinancialReturnonaveragecapitalprovidedbyinvestors.Returnonaveragecommonequity........Timesinterestearnedbeforeincometaxes..GenerationGeneratingcapability-thousandsofkw(a)..Winterpeakdemand-thousandsofkw......GenerationbyfuelsourcesCoal.Oil.Hydroelectric.SteamstationavailabilityCoal-Ared.Oil-fired.SteamstationutilizationCoal-fired.Oil-fired.OlherDataAverageannualresidentialkwhuse.........Averagepriceperkwhforallcustomers-centsFuelcost-centsperkwh.Electriccustomers(a).Employees(a).19809.62%10.57%2.226,5464,42779.Sod18.22.079.1%81.274.9%42.19,0483.791.93992,5327,696197910.01%13.23%2.846,5464,701807%17.12.276.3%78.571.9%38.09,3413.761.55980,7257,590(a)Endofperiod$350InterestandDividendsPaidMillionsofDollars350$2.5ConstructionWorkinProgressvs.NetPlantInServiceBillionsofDollars2.5300250200150-I'0050-0-300-250-2001502,01.5-t>>1.00."4I2.0-1,51.0,f-.5197619771978197912mos.".InterestexpenseSept.1980asDividendsonpreferred/preferenceandcommonstockThecompanypaid$139millionmoreininter-estanddividendsduringthe12monthsendedSeptember30,1980,thanitdidin1976inordertocompensateinvestorsfortheuseoftheirmon.ey.Securitiesoutstandingincreased$1.2billionfromtheendof1976toSeptember30,1980.1976197719781979SePt.1980ItfConstruclionWorkinPiogiesst!'etPlantinServiceThedollaramountoffacilitiesthecompanyhasunderconstruction(excludingnuclearfuel)hasincreasedcomparedtothenetplantservingcustomers(plantinservicelessaccumulateddepreciation).AtSeptember30,1980,theSus.quehannaunitsaccountedIor$1.6billionofcon-structionworkinprogress.

LITIGATIONSETTLENIENTANDTAXABILITYOFDIVIDENDSOnOctober22,1980,theCompanyandGeneralAtomicCo.agreedonanout-of-courtsettlementofadisputeinvolvinguraniumsupplyandfabricatednu-clearfuelassemblies.Asaresultofthesettlement,PP&Lwillreceivebothmoneyanduraniumoverthenextsevenyears.ThesettlementalsogivesGeneralAtomicanoptiontosupplyPP&Luptoanadditional2.8millionpoundsofuraniumfrom1988through1995atmarketprice.ThecompanieshaveagreedthatGeneralAtomicwillsellPP&L2.5millionpoundsofuraniumoverthenextsevenyears,through1987,atafirmprice,pluses-calation,butguaranteednottoexceedthemarketpriceInthatperiod.Inaddition,GeneralAtomicwillmakepaymentstotaling$43.9millionoverthesameperiodtoPP&Landoneofitswhollyownedsubsidiaries.ThesettlementwillhavenoeffectonPP&L'searn-ings,sinceitsbenefitswillbepassedontocustomersthroughlowerfuturerates.However,a$12.4millioncashpaymenttobemadeonDecember31,1980willbeadditionaltaxableIncometoPP&L.Inspiteoftheaddedtaxableincomefromthesettle-ment,theCompanyexpectsthatallofthedividendspaidanPP&Lcommonstockfor1980willbeanon-taxablereturnofcapital.ThisisessentiallynochangefromtheCompany'sannouncementoflastApril.Not-withstandingthefactthatsubsequentsettlementpay-mentsaretobereceived,theCompanyexpectsthenon-taxablereturnofcapitaldividendstatustocon-tinuein1981,butatasomewhattowerlevelthanin1980.UPDATEONSUSQUEHANNANUCLEARPROJECTAnumberofsignificanteventshaveoccurredrecent-lyInconnectionwithPP&L'sSusquehannanuclearpowerplantunderconstructionnearBerwick,Pa.Hereisanupdateontheproject.ConstructionlÃflestoneAnimportantconstructionschedulemilestonewaspassedonJuly26whena"fillandflush"operationwascompletedontheplant'sUnit1reactorpressurevessel.Duringthisoperationthereactorpressureves-selandassociatedpipingwerefilledwithmorethanamilliongallonsofwaterandflushedcleanofallcon-structiondirtanddebris.Thefillandflushoperationledtothesuccessfulcom-pletionofamajorfour-dayhydrostaticpressuretestonthereactorpressurevessel.Duringthismajortestthevesselwaspressurizedto1,600poundspersquareinch-significantlyhigherthanthe1,100poundspersquareinchwhichwillbeexperiencedduringnormaloperation.Thistestwasthesecondinthevessel'slifetime.Thefirstwasdoneseveralyearsagobeforeanyinletandoutletpipeswereweldedtoit.Themostrecenttestverifiestheintegrityoftheves-sel,itsweldsandmajorpiping.Thereactorpressurevesselwillhousetheunit'snuclearreactorcontainingthenuclearfuel.OrganizationChanges~ThecompanyannouncedonSept.24thatJackR.Calhoun,directorofnuclearpowerfortheTen-nesseeValleyAuthority,wastobecomeheadofPP&L'sNuclearDepartmenteffectiveNov.1.CalhounbecomesamemberofPP&L'sCorporateManagementCommitteeandassumesprincipalman-agementresponsibilityforallofthecompany'snuclearactivities,includingtheconstruction,startup,opera-tionandlong-rangesupportfortheSusquehannanu-'learplant.CalhounbringstoPP&Lagreatdepthofexperienceandknowledgeinnuclearplantoperationsandmain-tenance.HewastheseniornuclearexecutiveatTVAandhadbeenwiththegovernmentauthorityfor31yearsCalhoun'sappointmentcontinuestheprocessbe-gunlastDecembertostrengthenthecompany'scur-rentandlong-terminternalmanagementofboththeconstructionandoperatingphasesofthenuclearplant.~OnOct.1thecompanyannouncedtheappoint-mentofBruceD.Kenyonasvicepresident-NuclearOperations,effectiveNov.3,reportingtoCalhoun.Kenyonhadbeenassistantvicepresident-Nuclear.Hewillcontinuetoberesponsibleforthenuclearad-ministration,nuclearsupportandnucleartraininggroupsaswellastheplant'soperation.Additionally,thecompany'snuclearfuelsgroupwillnowreportKenyon.Projectmanagement,construction,engineeringa,licensingfunctionswillcontinuetobetheresponsibilityofNormanW.Curtis,vicepresident-Engineering&Construction-NuclearandSusquehannaprojectdi-rector.Thisrealignment,underCalhoun,wasundertakentobetterdefinefunctionsandareasofresponsibilityandprovidesaframeworkforthelong-termorganizationofthecompany'snuclearoperations.LicensingProcessAimingtopreventdelaysintheoperatinglicensehearingsfortheplant,thecompanyonOct.7askedtheNuclearRegulatoryCommission'sAtomicSafetyandLicensingBoardtoordercompletionofthelegalprocesscalled"discovery"asitrelatestoIntervenors'ontentionsabouttheplant'ssafety.InapetitionfiledwiththeASLB,thecompanyaskedtheboardtosetascheduleforthethreeintervenorswhohaven'tyetdonesotoprovideinformationre-questedbyPP&LandtheNRCstaffabouttheirsafetycontentions.Thatrequirementhasbeensuspendedfornearlyayear.PP&Lprovidedanswerstotheinter-venors'iscoveryrequestsonthesafetycontentionsmorethanayearago.ThediscoveryprocessprovidesawayforpartieslnacasesuchastheSusquehannalicensinghearingstolearntheinformationwhichotherpartieshaveonIssuesinvolved.Indiscovery,onepartycanaskotherquestionsabouttheissuessoitcanaddressthduringthehearingprocess.10 Discoveryisintendedtohelpidentifykeyissuesandcusthehearingssotheycanberesolvedfullyandinreasonablelengthoftime.It'salsodesignedtoavoidoneparty'sdelayingtheproceedingbyintroducing"new"elementsintothecaseatthelastmoment.Throughouttheprocess,intervenorshaveclaimedthatPP&L'squestionswereburdensomeandintendedforharassment.PP8L,ontheotherhand,hasinsistedthattheywerenecessary.OneintervenortookitsclaimtotheNRC.ThecommissionreferredthemattertoitsAtomicSafetyandLicensingAppealBoard,whichup-heldtheASLB'sordersthattheycomplywithdiscoveryrequirementsandsaidthequestionswereneitherun-dulyburdensomenorintendedforharassment.Italsorejectedtheintervenor'sclaimthattheASLBwasfail-ingtoprotectthegroupfromabusebythediscoveryprocess.PP&LIsconcernedbecauseitnowappearsthathearingsonenvironmentalcontentionswillbedelayed.ThecompanyistryingtoavoidfurtherdelaybyaskingtheASLBtodirecttheintervenorstogetonwithdis-coveryonthesafetycontentionsnow,ratherthanwaltuntilaftertheenvironmentalhearings,whenthepar-tieswillbebusywithworkrelatedbothtothefindingsoftheenvironmentalhearingsandpreparationforthesafetyhearings.Ittooknearlyayeartocompletethediscoveryprocessfortheenvironmentalcontentions.NewCost/ScheduleForecastOnOct.13thecompanyannouncedthatthecostftheSusquehannaplantisexpectedtobeabout$300millionmorethanasimilarestimateitmadeayearago,andin-servicedatesfortheplant'stwoelectricalgen-eratingunitswillbedelayedbyaboutthreetofiveImonthseach.Theprojectisnowestimatedtocostabout$3billion.Thefirstgeneratingunitisnowscheduledtobegincommercialoperationinthesecondquarterof1982andUnit2inthesecondquarterof1983.Ayearago,afteritscustomaryannualreviewoftheproject'scostandschedule,thecompanyestimatedtheplantwouldcostabout$2.7billion,within-servicedatesofJanuary1982forUnit1andJanuary1983forUnit2.AlleghenyElectricCooperativeinc.,aHarrisburg-basedpowersupplycooperativewhichowns10per-centoftheSusquehannaplant,willpay10percentofthetotalprojectcost.PP8L's90percentshareofthenewcostestimatefortheSusquehannaplantis$2.7~billion,up$270millionfromour$2.43billionshareoflastyear'sestimatedcost.PP8Lrecognizedearlierthisyearthatthein-servicedatesandcostestimatesdevelopedlastfallwerebe-cominglessattainable,primarilybecauseofregulatoryuncertainties.ThefiguresannouncedinOctoberarewithinthepreliminaryestimatesannouncedinthespringof1980thatthecostwouldincreasebynomorethan15per-centandthatthedelayofthein-servicedateswouldbelessthanayear.ThismostrecentforecastgivesthecompanythebestestimatetodateoftheamountofworkthatremainsontheSusquehannaproject,andtheendoftheprojectiscomingintosight.AttheendofSeptemberUnit1was87percentcompleteandUnit2was55percentcom-plete.TheincreaseinSusquehanna'scostcomparesfa-vorablyto,thatofotherlargeconstructionprojectsandtothegeneralrateofinflationduringthepastyear.Still,PP8Lisworkingtokeepcostincreasesassmallaspossibleandtofinishtheplantassoonaspossiblewithoutsacrificingsafety.FINANCIALNOTES...Continuedfrompage7OneoftheproposedadjustmentswouldrequiretheCompanytocapitalizecertaintaxes(principallysocialsecuritytaxes)thatweredeductedforincometaxpurposesintheyearincurred.Therelatedreductioninincometaxexpenseforthisitemhasbeenflowed-throughtocustomersinestablishingratesforelectricservice.IftheCompany'sprotestofthisitemisdis-allowedandthisproposedadjustmentwereappliedtoallyearsfrom1973to1980,theCompanyestimatesthatitwouldincuradditionalIncometaxexpense,In-cludinginterest,ofapproximately$10million.TheCompanywouldrequestthePUCtopermitrecoveryfromcustomersofanyadditionaltaxexpenseresultingfromanunfavorabledispositionofthisitem.6.AcquisitionofCoalReservesOnAugust25,1980,theCompanyacquiredabout8milliontonsofsurfacebituminouscoalreservesownedbyTheArcadiaCompany,Inc.anditsstock-holders.Thetransactioninvolvedtheissuanceof492,537sharesoftheCompany'scommonstockforallofArcadia'soutstandingstockandthepaymentofabout$2millionforreservesheldbystockholdersasindividuals.7.ConstructionProgramTheCompany'sconstructionandnuclearfuelex-pendituresareexpectedtoaggregate$2.37billionduringthefouryears1980-1983,including$506millionofallowanceforfundsusedduringconstruction.Thisisanincreaseofapproximately$205millionovertheexpendituresforecastedforthisperiodattheendof1979.Thehigherestimatesaredueprincipallytoincreasedcostsrequiredtocompleteconstructionofthetwonuclear-fueledgeneratingunitsattheSusque-hannastation.TheCompanyownsa90%undividedownershipinterestinSusquehannaandAlleghenyElectricCooperative,Inc.ownsa10%undividedownershipinterestinthestation.Thefour-yearcon-(Continuedonbackcover)

PALPENNSYLVANIAPOWER8LIGHTCOMPANYTwoNorthNinthStreet,Allentown,Pa.18101Telephone:AreaCode215821-5151BULKRATEU.S.POSTAGEPAIDALIENTowN.PAPERMITNO.104FINANCIALNOTES..~Continuedfrompage11'tructionexpenditureestimateincludesabout$1.37billionfortheCompany's90%shareofconstructioncostsforSusquehannaand$263millionfornuclearfuel.Constructionexpendituresfor1980areestimatedtoaggregate$600million,including$40millionfornuclearfuel.Year-to-dateconstructionandnuclearfuelexpenditurestotaled$432millionatSeptember30,1980.TheIn-servicedatesfortheSusquehannaunits,basedontheCompany'sassessmentmadeintheFallof1980,havebeenrescheduledfromJanuary1982tothesecondquarterof1982forUnitNo.1andfromJan-uary1983tothesecondquarterof1983forUnitNo.2.ThisreschedulingresultsprimarilyfromtheCom-pany'sassessmentthattheNuclearRegulatoryCom-mission(NRC)willnotbeabletocompleteitsoperatinglicensereviewoftheSusquehannaunitsinatimeframewhichisconsistentwiththeCompany'sscheduleforthecompletionofconstructionoftheunits.TheCompanycurrentlyestimatesthatits90%shareofthetotalin-servicecostoftheSusquehannaunitswillbe$2.7billion,comparedto$2.43billionestimatedintheCompany'sFall1979assessmentoftheproject.Evenwiththecurrentreschedulingofthein-servicedatesfortheSusquehannaunits,therecanbenoassurancethatfurtherdelaysandfurthercostincreaseswillnotoccurbecauseofadditionaldelaysintheNRClicensingprocessortheinabilityoftheCompanyandItscontractorstomeetconstructionschedulemile-stonesfortheunits.8.GuaranteedObligationsTheCompanyatSeptember30,1980hadguarantcapitalandotherobligationstotaling$211.0millioncertainfuel-relatedsupplycompanies(principallysubsidiarycoalcompaniesandasubsidiaryoilpipelinecompany).

II-A-3G.F.VandersliceQ.3.ProvidelatestStockholder'sReport(CompanyandParent).A.3.AttachmentII-A-3aprovidesthelatestStockholder'sReportissuedbyPP&L.AttachmentII-A-3bprovidesacopyofPP&L's1979AnnualReport.

SHAREOWNERS'EWSLETTERApril1,1980

DearShareowner:

f*fdividendishigherthanithasbeeninthepreviousquarters.OurboardofdirectorsatitsFebruarymeetingincreasedthecommondividendby2centsaquarter...from51to53cents.Thenewannualrateis$2.12.Theincreaserecognizestheneedtocompensateshareownersfortheearningsthathavebeenputbackinthebusinesstohelppayfortheconstructionofnewelectricfacilities.RecorddateforthecurrentdividendwasMarch10.Dividendsonthepreferredandpreferencestocksare:PreferredPreferred(cont.)41%.................$1.1258.75%Series.......$2.18753.35%Series.........$.83759.00%Series.......$2.254.40%Series.........$1.109.24%Series.......$2.314.60%Series.........$1.15Preference7.40%Series.........$1.85$8.00Series.......$2.007.50%Series.........$1.875$8.40Series.......82.107.75%Series.........$1.9375$8.625Series......$1.6053*8.00%Series.........$2.00$8.70Series.......$2.1758.00%SecondSeries..$2.00$9.25Series.......82.31258.25%Series.........$2.0625$11.00Series.......$2.758.60%Series.........$2.15$13.00Series.......$3.25*CoversperiodJan.25throughMarch31fff1979commondividendwasnon-taxableforfederalincometaxpurposes.Itnowappearsthatsubstantiallyallofour1980commondividendwillbenon-taxableforfederaltaxpurposes.Sincethere'sacomplexformulainvolvedincalculatingthetaxability/non-taxabilityofcommondividends,wewon'tknowforcertainhowitcomesoutuntilyear-endfiguresareavailablenextJanuary.WefiledwiththeSEC.earlylastmonthtosell$100millionoffirstmortgagebondsonMarch25.Sincewehadtogotopressbeforethatdate,wecan'ttellyouwhatinterestratethebondscarry...there'snodoubt,though,thatbecauseofcurrentmarketconditions,theratewillbelofty.Wedon'thavemuchchoice,however.Weneedtheproceedsfromthesaletoreduceshort-termdebtthatweincurredtoretirematuringlong-termdebtandtoprovideinterimfinancingforconstructionandnuclearfuelexpenditures.Wesold$51millionofanew$8.625SeriesofpreferencestockinJanuarytoanumberofinstitutionalinvestors.Theregularquarterlydividendonthenewseriesis$2.15625,but,asyoucanseeabove,it's"short"forthisquarter...reflectingthefactthatthestockhasbeenoutstandinglessthanthreemonths.OurCororateManaementCommitteehasanewmember.FredKornet,manager-CorporateAdministration,wasnamedvicepresident-CorporatePlanningonMarch1.Hisassignmentwillbetotietogetherinacompactcorporateplanninggroupthoselong-rangeplanningeffortsnowbeingcarriedoutinanumberofareasofthecompany.

Inalandmarkelectricregulatorydecision,thePennsylvaniaPublicUtilityCommissiononMarch7unanimouslyapprovedaPPRLenergy-conservinginsulatiotarifffilingwhichwillrequireminimumlevelsofinsulationthatarehigherthantypicastandardsusedtodayfornewhomesandcommercialbuildings.Thenewinsulationlevelswillhavetobemetasaprerequisitetoreceivingelectricservice...regardlessofthe'ypeofheatingbeingused.IThenewtariffwillnotgointoeffectuntilMarch1981.Thiswillallowtimeforanorderlytransitionandgivebuilderstimetoincorporatethechangesintotheirplans.fi>>>>fever-growingenergycrisis...andbecausewebelievedthateverynewhomeandbusinessbuiltwithyesterday'sinsulationlevelswilladdtotomorrow'senergyproblems.thestate'sconsumeradvocate.Editorialcommentfollowingthefar-reachingdecisionhasbeenhighlyfavorable.We'enowplanningtofilewiththePUCforhigherelectricratesinlateApril.We'ebusyrefiningtheinformationnecessarytodeterminehowmuchratereliefweneedtostayfinanciallyhealthy.It'sbeennearlyfiveyearssincewelastfiledforanincreaseinbaserates.We'eoffsetasmuchaswecantherisingcostsofgoodsandservicesweneedtoproduceelectricity.Unfortunatelywearenomoreimmunetotheravagesofinflationthanourcustomersare.ThePUCinFebruarygrantedan$85D,000increaseinsteamheatratesinHarrisburg.We'lputhalftheincreaseintoeffectthisyearandhalfinMarch1981.f<<i.>>iiffPPRL'ssystemintheearlymorninghoursofMarch1.Atthattime,allofthe7,000formerHECcustomersbecamePPRLcustomersandwillpayrateswhichinalmostalcaseswillbelowerthantheratestheyhadbeenpaying.UptothatpointHEC,withngeneratingfacilitiesofitsown,hadpurchasedpowerfromMetropolitanEdisonCo.about8milliontonsoflow-sulfursurfacecoalreserveslocatedincentralPa.Thisisthecompany'sfirstventureintosurfacecoalmining.Presentlyaboutone-thirdofthemorethan9milliontonsofbituminouscoalweuseeachyearinourserviceareapowerplantscomesfromcompany-ownedundergroundmines.We'emetthebalanceofourneedsthroughcontractswithcoalsuppliersorthroughthecoal"spot"market.~fUniversity'sStablerArena.Thismagnificentnewstructure,whichcanseatmorethan6,500people,islocatedonLehigh'sLowerSauconValleycampus...southofBethlehemandwestofHellertown,Pa.fourenergyconservationspecialistsavailabletoyoubeforethemeeting-beginningat10a.m.They'lbehappytoprovideapersonalconsultation...andhelpyoufindwaysyoumightcutdownenergyconsumptioninyourhome.Askthemforafreedo-it-yourselfhomeenergyaudit...itcouldhelpyoupinpointwaystosavemoneyonyourenergybills.Andonelastreminder...pleasesignandreturnyourproxysoyourshareswillberepresentedatthemeeting.There'sacardenclosedforyoutoreturnifyouwon'tbeabletoattendbutwouldlikeasummaryofthemeetingproceedings.Sincerely,PennsylvaniaPowerdLttthtCompanyTwoNorthNinthStreet,Allentown,Pa.1dl01Telephone(21S)d21-S'151RoertE.Capbell tj,'~~ll'~icgy,$i$,p~@73iT.~.-~r~~g~Qq;q<+g;~iy~-,e[cr'I1-7LkI((pF~lfCaJ4lJ,]~i)Ifl'(l(l0El1If1ZlI1,)IL(1'~"sli,rrpIa$~~~rcs,.~>>i';(-'.-~.4'I~C%.~"r+~~>~L~'ii1jy,CTtpPyg}',"-pg1g7,f~dIpQIIil,JKp1p',~4'4pIPkep$gglgP~p'ap(f~IFi1~J{jyp/gltJ)sanoy)~<'slip5'gPIff//i)g~~e1W~(V,)'~<<,",{f,>>pjQ~g~lh1lliPllgg~rA"--.i"i9epf,$c/~4I'n4']p~~gktJftp(Il."~~'-'-~~~n.">36>a,~~89lp]~{)e4p,yJ'p4il.~+i4~JP(pf)pgffg)0Pt/($f'/iPrgg~4gIy)I(~0iyg,Oiyb HlgMEghtsCustomers,atEndofPeriod.........~.....Kilowatt-hoursofElectricityGenerated....OperatingRevenuesCapitalProvidedbyInvestors,atEndofPeriodReturnonAverageCapitalProvidedbyInvestorsFixedCostRateofLong-TermDebtandPreferredandPreferenceStock,atEndofPeriodCommonStockData,ReturnonAverageCommonEquityEarningsPerShareDividendsDeclaredPerShare..........TimesInterestEarnedBeforeIncomeTaxes.1979987Thousand33.1Billion$860Milhon$3.4Bilhon10.00%8.76%12.91%$3.32$2.042.721978973Thousand31.4Billion$798Million$3.0Billion9.22%8.00%11.47%$2.86$1.922.98PennsylvaniaPower&LightCompanyisanelectricutilityprovidingserviceto987,000homesandbusinessesovera10,000-square-mileareain29countiesofcentral-easternPennsylvania.PrincipalcitiesinthePP&LserviceareaareAllentown,Bethlehem,Harrisburg,Hazleton,Lancaster,Scranton,WilliamsportandWilkes-Barre.ThecoverphotofeaturesJamesCullen,controlroomassistantshiftsupervisoratourSusquehannaplantbeingbuiltnearBerwick,andasimulatedoperatingdiagrambeingprojectedonamonitorinfrontofCullen.CullenisshownintheSusquehannatrainingcenterwhichwasopenedinthefallof1979andfeaturesa86milliontrainingsimulatorthatduplicatesthecontrolroomconfigurationintheplant.Asfarasweknow,PP&Lisoneofonlysixutilitiesinthiscountrywithsuchatrainingsimulatorofitsown.Theessentialpurposeofthesimulatoristobringrealityintothetrainingpicture.Thesimulatorcomputer,asthenameimplies,simulatesactualconditionsinanoperatingnuclearplant.Upto225differentmalfunctionscanbedisplayed,singlyormultiply,tobothtrainandtestanoperator'sresponse.Anysequencecanbeplayedinrealtimeorslowmotionandcanbebackedupandrepeated.Abroaderrolethanjusttrainingisenvisionedforthesimulator.Itwillbeabletoprovideinformationandindoctrina.tionalcoursestoengineersandmanagersfromdisciplinesotherthannuclearoperation.Astheunitsgointoservice,in1982and1983,wewillbeabletotakedatafromtheplantandrevieworplaybackoperationalsituationsthroughthecomputer-drivensimulator.Engineerswillbeabletoduplicateabnormalcircum.stancesencounteredinthenuclearunitsfordetailedanalysisorfordevelopmentoffutureoperatingortrainingprocedures.Seethebackcoverofthisreport.foramoreconventionalviewofthecontrolroomsimulator.ContentsPresident'sLetterYearInReviewTaskForcesRecommendImprovementsFinancialResults-1979and1978FinancialStatementsNotestoFinancialStatementsStatisticalSummaryDividendsandStockPricesSupplementaryInformationonChangingPricesOfficersandDirectorsATributetoJackBusbyInsideBack131214182532333436Cover Muchofwhathappenedin1979ofimportancetoecompanyandtheindustryreflectedinonewayorotherthenuclearaccidentatThreeMileIsland.isunderstandablethatsincemostpeoplebelievedsuchanaccidentcouldn'thappen,thepublicnowdemandstoknowwhatwentwrongandwhatwillbedonetoreducethechancesofiteverhappeningagain.Regrettably,whileworldeventscontinuetoofferabundantevidenceofthenation'sdangerousandcostlyenergyvulnerability,thiserosionofpublicconfidenceinnuclearsafetyhasaddednewuncertaintiesaboutnuclearpower'sroleinbuildingamoresecurenationalenergyfuture.Inthefloodofdetailedandsometimesconfusingconclusionsemergingfromthevariouspost-ThreeMileIslandinvestigations,itisimportanttorecognizeonebasicandconsistenttheme-onewhichfollowsaprinciplePP&Lhassupportedforalongtime.Itisthatthemajorresponsibilityforthesafeoperationofnuclearpowerplantsisinherentlythetaskofeachelectricutilitycompany.FailuretoacceptandmeasureuptothisresponsibilityistomissthefundamentallessonofThreeMileIslandandfailintheprocesstomeettheclearexpectationsofaconcernedpublic.Constructivestepstowardimprovingtheeffective-sofnuclearpowerregulationarenowunderway.tevengreatlyimprovedlicensingandregulationrenotenough.Nuclearpowerplantsnotonlymustbedesignedandbuiltwithextraordinaryattentiontoeverydetail,buttheyalsomustbeoperatedandmaintainedbypeopleandorganizationsdeeplycommittedtoperformingeveryaspectoftheirjobsinasuperiorway.Whatisrequiredismuchmorethanamatterofhavingbetterregulation.Thepublicexpectsthatutilitypeoplewilloperatenuclearplantswithadegreeofdedicationtosafetythatconstitutesvirtualself-regulation.Withoutdoubt,anytraceofcomplacencythatmayhaveexistedinthepastisgone.Pointingreassur-inglyatthesafetyrecordofnuclearpowerorattheresultsofpastsafetystudieswilldolittletoeasepublicanxieties.Publicconfidenceinnuclearpowercanberestoredonlybydecisiveactionbyindustryandgovernmentwhichdemon-stratesanuncompromisingcommitmenttosafenuclearelectricalgeneration.Andtheaggressivestepsalreadyunderwaythroughouttheelectricutilityindustrytoimprovethesafetyofallexistingaswellasfutureplantsgivesusconfidencethatthischallengewillbemet.WithinafewdaysaftertheThreeMileIslandacci-dent,PP8iLsetuptaskforcesconsistingofcompanydoutsideexpertstotakeawholenewlookatoursquehannanuclearunitsinthelightoftheThreeileIslandexperience.Thesecomprehensivereviewshaveledusbackthroughacarefulre-evalua-tionofplantdesign,plantoperation,radiationmonitoringandemergencyprocedures.Wearealsoreviewingallaspectsofourrelatedcommunicationsprogramstobesurethatwearekeepingthepublicwellinformedabouttheplant.AswehavedonesincetheoutsetoftheSusque-hannaproject,specialemphasishasbeenplacedonthequalificationsandtrainingofallthosewhowillbeinvolveddirectlyorindirectlyinthemanagementandoperationoftheplant.Thecomputer-drivensimulatorinourrecentlydedicated$10millionon-sitetrainingcenter,describedinthisreport,isanessentialelementinourcommitmenttohavingpeoplewiththebestpossibletrainingatSusque-hanna.TherecommendationsmadebytheSusquehannataskforcesarenowbeingused-alongwithotherinformationcomingfromstudiesconductedatthestateandnationallevel-toidentifywaysthatwecanmeetourresponsibilitytobuildandoperateasafenuclearplant.Farfrombeingaonce-and-doneeffort,thesestudiesareanimportantstepinalong-termcommitmenttoensurethatin-depthsafetyanalysisandauditsareacontin-uingwayoflifeintheoperationoftheSusque-hannaplant.Althoughthefocusofcompanyprioritiescon-tinuestobedirectedtoachievingthesafety,costandscheduleobjectivessetforourSusquehannanuclearunits,themanyconflictsanduncertaintiessur-roundingnuclearpowertodayhaveincreasedtheproblemsfacedincompletingconstructionwithoutcostlyscheduledelays.Recognizingtherapidlyincreasingleveloftechnicalandorganizationalsupportrequiredtobuildandsafelyoperateanuclearpowerplant,thecompanyannouncedamajorrealignmentofmanagementresponsibilities aimedatfreeingfromnon-nucleardutiesallthoseprincipallyinvolvedingettingtheplantbuilt,licensedandoperating.JohnKauffman,executivevicepresident-Operations,assumedprincipalman-agementresponsibilityforthecompletionandoperationoftheplant.ThepurposeofthesemovesistostrengthenboththeconstructionandoperatingphasesoftheSusque-hannaProjectbyconcentratingthecompany'snuclearactivitiesinasinglemajordepartmentreportingdirectlyatourCorporateManagementCommitteelevel.Theessentialreasonformovingaheadwithnuclearpowerisnotjustthatitwillprovidefuturekilowatt-hourssomewhatcheaperthancoal,theonlyotherviablealternativewewillprobablyhaveforthegenerationofelectricityoverthenext20years.Nuclearpowerisessentialifwearetohaveanymeaningfulchancetoreduceournationalenergyvulnerabilitybyhavingadependablemixofimmediatelyavailabledomesticenergyresources.Facinganuncertainenergyfuture,thechoiceisclearlynotjustnuclearorcoalorsolaroranyothersingleenergysource.Allareneededand,becauseeachhasitsuniquerisksandbenefits,wemustkeepalloftheseoptionsopenandunderactivedevelop-ment.Thereareanumberofpromisingenergyalternativescomingalong,rangingfromsolartofusion.Butsincethesesourcesarenotreadyatthistimetomakeamajorcontributiontoournationalenergysupplyneeds,coalandnuclearprovidetheonlyoptionsnowavailableforbuildingadependableenergybridgetothefuture.Recentopinionpollssubstantiateawidespreadandgrowingpublicawarenessthattheultimateriskofdelayingorstoppingthebuildingofnewgenera-tingcapacityisthatittakesmorethan10yearstocorrectashortfall.Thereisalsoagrowingconsensusthatsuchashortfallisoneriskthatisasunaccept-ableasitisunnecessary.Meetingtheneedsofthosewhodependonusforelectricservicealsodemandsourfullestcommitmenttopromotingenergyconservationandtosearchingfornewenergysources.ConservationandenergymanagementcontinuesasatoppriorityofPP&Lbecauseifwecanachieveourgoalofholdingthegrowthinpeakloadto2.5percent,wewon'tneedanypost-Susquehannagenera-tingunitsbeforethemid-1990s.DeferringthefinancialburdenofconstructingnewplantsafterourtwoSusquehannaunitscomeonlinein1982and1983willpermitustoholddownthecostofmeetingfutureenergyneeds.Wewillbeexpandingfurthertheconservationactivitieswestartedasearlyas1971.We'lbeemphasizingenergyauditsinhomesandbusinessesandexpandedresearchintoalternateenergysourcesuchassolar,wind,small-scalehydro,refusebuingandcogeneration.Anexperimentalprogrami.inprogresstoidentify,throughinfraredaerialphotography,homesandbusinesseswhichhaveinadequatethermalinsulation.Publiceducationprogramsarebeingexpandedtospreadenergycon-servationmessagestoourcustomersthroughoutourservicearea.Thesemessageswillincludepracticalinformationondo-it-yourselfprogramsconcerningbuildinginsulation,waterheaterinsulation,appli-anceefficiencies,etc.Therapidlyrisingpricesofbothoilandgas,alongwithconcernsoffutureavailability,haveaddedanadditionalconcernthatmorecustomerswillbeswitchingtoelectricity.Thisuncertaintyunder-scoresourneedtoworkevenhardertomeetourcon-servationgoals.Considerationisbeinggiventovariousadditionalmethodsbywhichpeakdemandgrowthcanbecontrolled,suchasthedevelopmentofratestructurestoencourageshiftingloadtooff-peakperiods.WearealsoexploringthefeasibilityofprovidingdirectcontrolbyPP&Lofcertaincus-tomers'oadswhichcanbeinterruptedduringpeakperiods.Lookingahead,weareconfidentthatwecansuccessfullymeetthesechallenges.Todosorequiresthecontinuedsupportandconfidentofthepublicweserve,whichinlargemeasuisearnedbyPP&Lpeoplebecauseofthededicatedcommitmenttosuperiorpublicservice.Meetingthepresentandfutureneedsofourcustomersalsoisdependentonourcompanycontinuingtobeattractivetopresentandfutureinvestors.Wearegratefultoyou,ourshareowners,foryourcontinuedconfidenceandsupport.Yourparticipationandinterestinthecompanyisessentialtoitssuccess.Asyoumayknow,ourgoodfriendJackBusbyretiredattheendofJulyaftermanyyearsofpro-gressiveandenlightenedleadershipatPP&L.NosinglestatementcouldpossiblydescribeJack'senormouscontributiontoour'company,butthewordsandpicturesontheinsidebackcoverofthisreportmayconveysomesenseofwhatJack'scareermeanttousatPP&L.Respectfullysubmitted,Robert.CampbellMarch1,1980 PP&L's1979earningswere$3.32pershareofmonstock,up46centsfrom$2.86ayearearlier.iscussionofthecompany'searningsandoperat-gresultsbeginsonpage14.DividendIncreasedThecompany'sboardofdirectorsonFeb.28increasedthequarterlydividendbythreecentsto51centspershareofcommonstockbeginningApril1,1979.Thedividendhadbeen48centsasharesinceJuly1977.SusquehannaNuclearProjectAmajorcorporatefocusforPPgt:Lin1979hasbeenourSusquehannanuclearprojectunderconstructionnearBerwick,Pa.ThatfocustookonanadditionaldimensionaftertheaccidentatMetropolitanEdison'sThreeMileIsland(TMI)nuclearplant.Whileourprimeconcernsinceconstructionbeganin1973hasbeentogettheplantbuilt,licensedandoperatingsafely,theimpactofTMIpromptedustore-examine,withanevenmorecriticaleye,everyaspectofSusquehanna'sdesign,constructionandoperatingprocedures.HerearethemajorhighlightsofactivitiesatSus-quehannaduring1979.Jan.8-The64menandwomenwhomakeuptheplant'spermanentsecuritystaffreportedfortheirfirstdayofwork.Afteranintensiveeight-weektrainingprogramthegroupbeganhandlingsecu-rityattheplantinMarch.Inadditiontothenormaldutiesofprotectingcompanypropertyandpersonnelfromcriminalacts,thesecurityforceisrequiredbytheNuclearRegulatoryCommission(NRC)tobecapableofdetectingandresistinganyhostileactionthatcouldendangerplantoperations.Jan.30-Two-and-a-halfdaysofprehearingcon-ferenceswerebeguninWilkes-BarrebytheAtomicSafetyandLicensingBoardaspartoftheNuclearRegulatoryCommission's(NCR)operatinglicenseprocedure.Thepurposeoftheconferenceswastosetgroundrules,defineissuesanddeterminethecontentofformalhearingstobeheldlaterin1980.Fourgroupswereadmittedasformalintervenorsinourlicenseproceedings.ThePennsylvaniaDepart-mentofEnvironmentalResourceswillalsopartic-ipate.March6-Anapplicationforapermittocreatea230-acrereservoirupstreamfromtheplantwassubmittedtotheSusquehannaRiverBasinCom-'q*StateandlocallegislatorsfromtheBerwichareaweregiuenanopportunitytoseeconstructionactiuityduringaMaytouroftheSusquehannaplantandtohearouranswerstothequestionstheyhadaboutthesafetyofnuclearpoweraftertheTliIIaccident.

mission.ThePondHillReservoirwouldprovidemakeupwatertotheSusquehannaRiverduringperiodsoflowflow.Inthe"giveandtake"project,waterwouldbepumpedfromtherivertothereservoirduringnormalorhighriverflow.Iftheriverflowdropsbelowaspecifiedlevel,asindroughtperiods,waterwouldbereleasedfromthereservoirtotheriver,makingupfortheriverwaterevaporatedbytheplant'scoolingprocess.March28-TheaccidentattheThreeMileIslandnuclearplantstartedawidespreadre-examinationofallphasesofnucleargeneration.April6-Companyexecutivesmetwithstatelegislators,newsreportersandthepublicatDanville,Pa.,toreportthatPP&LandAlleghenyElectricCooperative(our10percentpartnerintheSusquehannaproject)wouldcontinueworkatSusquehanna.Westressedourdedicationtobuild-ingthesafestgeneratingplantthatwepossiblycould.April25-Constructionofthenuclearplantwasagainanissueatthecompany'sannualmeetinginWilliamsport.Shareownersdefeated,bysub-stantialmargins,last-minuteproposalsrecom-mendingeitherahalttoconstructionpendingcompletionofgovernmentinvestigationsoftTMIaccident,oracceptancebytheshareowneofthecostsofcancelingtheSusquehannaprojecMay9-Thecompanyannouncedthestartofafive-pointplantreviewprogramincluding:designreview;are-examinationofradiationmonitoring;reassessmentofemergencyprocedures;reviewofqualificationandtrainingprogramsforpersonnelassociatedwiththeSusquehannaproject;andabroadeningofourcommunicationsprogramtokeepthepublicandemployeeswellinformedabouttheplant.Aspecialsectionbeginningonpage12reportsonthestatusofthesereviews.June3-About2,500personsparticipatedinananti-nuclearrallyneartheplantsiteinanareaprovidedbythecompany.Thedemonstrationwaspeaceful,therewerenoarrestsandtheareawaskeptclean.Thecompanycomplimentedthedem-onstratorsfortheirconduct.June4-WorkbeganonthefirstphaseofSus-quehannaRiverlands,a30-acreparkbeingdevel-opedaspartoftheSusquehannaproject.The$1.5 millionparkwillincludefacilitiesforpicnicking,hing,boating,hiking,bicyclingandnaturedywhenitopenstothepubliclatein1980.~June25-Thecompanyannouncedthatbecauseofconstructiondelaysandatie-upinregulatoryapprovalsthein-servicedatesforthenuclearunitsofFebruary1981andMay1982werebeingdelayedtoJuly1981andOctober1982.ItwasclearthatwithmuchoftheNRCtechnicalstafftiedupinaninvestigationofTMI,theschedulecallingforcompletionofthereviewprocessleadingtooperatinglicensehearingsbyDecember1980couldnotbemet.June29-Aspecialassistanttothepresident,RobertGombos,wasnamedtobroadencom-munityparticipationindecisionsinvolvingthenuclearplantandtoserveasadirectlinkbetweenPresidentCampbellandBerwickarearesidents.ABerwickofficeforGomboswasopenedinearly1980.July9-TheNRCmadepublicitsdraftenviron-mentalstatementrelatedtotheoperationoftheSusquehannaplant.Thestatementdescribedtheanticipatedenvironmentalimpactofthenuclearfacility.pt.25-ThecompanylearnedthattheNRCwaselayingthedatesitcouldissuethreekeyreports:theFinalEnvironmentalStatementfromOctober1979toJanuary1980;theSafetyEvaluationReportfromMarchtoAugust1980;andtheSafetyEvaluationReportSupplementfromJuly1980toJanuary1981.TheNRCalsosaidtheearliestdateforhearingsonenvironmentalmatterswouldbeMarchorApril1980andFebruaryorMarch1981forsafetyhearings.Oct.19-Thecompanydedicatedthe$10millioneducationalcenterinwhichcontrolroomoperatorsandotherSusquehannapersonnelwillbetrained.Theheartofthecenteristhemultimillion-dollar,computer-drivencontrolroomsimulatordepictedonthefrontandbackcoversofthisreport.Oct.26-Weannouncedafurtherslippageofin-servicedatesforbothunitsandanincreaseinesti-matedcosts.OurschedulenowcallsforUnit1tobeinserviceinJanuary1982andUnit2inJanuary1983.Totalcostoftheplant'stwo1,050,000-kilo-wattboilingwaterreactorunitsnowisestimatedat$2.7billion.PP&L's90percentshareofthatestimateis$2.43billion.Thescheduleslippageandincreasedcostwereattributedtoconstructiondelays,implicationsresultingfromtheTMIacci-dent,changesinthescopeoftheproject,increasesintheamountofmaterialsrequired,additionalfinancing,decreasesinproductivityfrompreviousestimates,anddelaysinthelicensingprocess.Nov.1-AtlanticCityElectricCo.agreedtoa6.6percentparticipationinthecompany'sshareoftheSusquehannaplant,extendingfromthetimetheunitsareplacedinserviceuntilSeptember1991.Underthisagreement,althoughnotadirectowner,AtlanticCitywillpayaportionoftheplant'sannualoperatingandcapitalcostsandwillreceiveelectricalgenerationequaltoitspercentageparticipation.Thisarrangement,effectiveduringtheearlyyearsoftheplant'soperation,shouldlessenthecostimpactonourcustomers.Nov.9-Concretepouringforthe540-footUnit1coolingtowerwascompleted.Theconcretepouringoperationhadbeenstoppedjust20feetfromcom-pletionafter51workerswerekilledinascaffoldcollapseatasimilarprojectinWestVirginiainApril1978.Aftermuchinvestigationofthatacci-dent,andanextensivesafetyreviewofourprojectbythoseinvolved,thecontractorbuildingthePP8:Ltowerdecidedtopumptheconcretemixturethroughapipeuptheoutsideofthecoolingtowerratherthanthepreviousmethodof.raisingconcretebucketsuptheinside.Dec.3-Amajorrealignmentofmanagementresponsibilitieswasannouncedaspartofthe~company'seffortstostrengthencurrentandlong-termconstructionandoperatingphasesoftheSus-quehannaplant.Anumberofexecutiveswereinvolvedinthereorganizationwhichwasaimedatfreeingfromnon-nucleardutiesthoseprinci-pallyinvolvedingettingtheplantbuilt,licensedandoperating.Thesemoveswerethefirststeptowardachievingourgoalofconcentratingallthecompany'snuclearactivitiesinasinglecorporateleveldepartmentrepresentedatthehighestlevelofmanagement.ConstructionBudgetFor1980thecompany'sestimatedconstructionbudgetcomesto$660million-including$59millionfornuclearfuel-comparedto$519million-includ-helate1979aerialuiewoftheSusquehannaprojectshowsthempletedcoolingtotuerforUnit1andtheeight.acreconcrete-inedpondwhichwillserueasabackupcoolingwatersourcefortheplant.

ing$24millionfornuclearfuel-spentduring1979.About$430millionofthe1980amountisallotedtoconstructionexpendituresfortheSusquehannanuclearplant.Thecompanyexpectstospendabout$1.85billionforconstructionofnewfacilitiesduringthethreeyears1980through1982.Alargepartofthatamount-$1.1billion-willgotowardconstructionofSus-quehanna,and$235millionofthatthree-yearbudgetisfornuclearfuel.FinancingDuring1979thecompanyissuedlong-tenndebtandpreferredandcommonstocktoraise$517milliontomeetconstructionandothercashrequire-mentsduringtheyear.Duringthefirstquarterof1979,weissued$200millionofbanktermnoteswhichmaturein1986.InterestonthesenotesisthesameastheprimeratethroughMarch1980,increasingto103percentofprimefortwoyearsandto105percentofprimethereafter.Duringthesecondquarter,weissued$100millionof9~/spercentfirstmortgagebondsinaprivateplacement.Wealsosoldfourissuesofpreferredstocktotaling$135milliontoinstitutionalinvestorsatdividendratesof8percentinJanuary,7.5percentinFebruary,8.25percentinJulyand8.75percentinNovember.Wesoldabout$34millionofcommonstockthroughourdividendreinvestmentplan,$2millionthroughouremployeestockownershipplan,and$45millionthroughapublicofferinginDecember.Our1980planscallforsecuritysalesof$570million.Includedwillbeabout$350millionoflong-termdebt,$110millionofpreferredorpreferencestockand$110millionofcommonstock.StartingOct.1,1980thecompanymustredeemannually12,500sharesofitsPreferenceStock,$13Seriestomeetitssinkingfundrequirements.Thecompanyhasanoptiontoredeemuptoanadditional12,500shareseachyear.Theredemptionpricewillbe$100pershareplusaccrueddividendstotheredemp-tiondate.Holdersofthesharestoberedeemedwillbenotifiedlaterthisyear.toservecustomersatthetimesofmaximumuseduringtheyear.Ourgoal-setin1977andgoingthrough1995-tokeeptheaveragecompoundpeakloadgrowtha2.5percentorless.Thiswouldenableustoextendintothe1990sthattimewhenourloadgrowthwouldexceedourgeneratingcapacity.Whileouroveralltargetis2.5percent,werecognizethatduringtheearlyyearstheloadgrowthratecouldbesomewhathigherthan2.5percent.Aswebegintoseethecumulativeeffectofearly-yearconservationefforts,though,wewouldhopetoseeaveragessomewhatbelow2.5percent.Aswebegintobuildourdatabasefortheloadgrowthreductionprogram,wefindthatourtargetappearstobewithinreach.Anoteofuncertaintyexists,though,asfuelpricesrise.Ontheonehand,weseethepossibilitythathigherpricescouldencouragemoreconservationandlowerenergyuse-includingthesalutaryeffectoflesselectricuse.Ontheotherhand,ifthecostsofotherenergyformsrisemorerapidlytherecouldbea"throwover"effectwhereoilorgasheatingcus-tomerscouldswitchovertoelectricity,possiblythwartingoureffortstoholddownloadgrowth.Theseuncertaintiesunderscoretheneedtoworkevenharderinhelpingourcustomersfindwaystoconserve.Our1979conservationeffortsincludedtlfollowing:~On-sitehomeenergyauditsbyourresidentialconsultants,andcustomerdo-it-yourselfaudits,helpedresidentialelectricityuserspinpointwheretheywerewastingenergyandhowtheycouldstopthewaste.~Wehelpedsetupandtrainadditionalenergymanagementteamsamongourindustrialandcommercialcustomers.Oncetrained,thesein-houseteamslocateenergy-wastingpracticesandrecommendcorrectiveaction.~Awardsprogramsforresidential,industrialandcommercialenergy-savingeffortshelpedtobolsterenthusiasmandproviderecognitionforsignifi-cantconservationefforts.ConservationUsingacombinationofinformation,educationandawardincentives,PP&Lin1979continuedeffortstohelpitscustomersuselessenergy.Inhelpingthemwewerealsoseekingthebenefitsthatloweredenergyuseprovidesinhelpingustomeetourlowerloadgrowthgoals.ITherearetwocomponentstoourconservationefforts:energyconservation,whichisareductionintotalenergyuse,anddemandmanagement,whichisthereductionofthemaximumorpeakloadrequired~Weworkedextensivelywithresidentialbuilders,seekingtheirparticipationintheNationalEnergyWatch(NEW)program.Homesbuilttohighinsul-ationstandardsandincorporatingotherenergy-savingmeasuresreceivetheNEWdesignationindicatingtheirenergyefficiency.Besideshelpingkeepenergybillslowerthantheywouldbeother-wise,theNEWhomesareexpectedtobenefittheiownerswithhigherresalevalue.TheNEWpgramwasalsopromotedforexistinghomesthcouldbeupgradedtomeetthestandardsoftheprogram.

~Asaninitialeffortthatcouldlaterbeexpandedthroughoutoursystem,webegananexperimentalprograminourLehighDivisionthatwouldtaketheenergyconservationmessagetothegrade-schoollevel.Wearehelpingtodevelopanenergyconservationcurriculum,incooperationwithAllentownareaeducators,thatcouldprovideacomprehensiveenergyeducationprogramforallgradestohelpyoungstersunderstandenergysourcesandalternativestopreparethemfortheenergydecisionstheywillsoonbefacing.~Atwo-dayenergydesignforumwasheldformorethan300architects,engineersandotherdesignprofessionalsinSeptember.Theparticipantsrepresentingprivatefirms,stateandfederalgovernmentagencies,majorchainstoresandeducationalinstitutionsineasternPennsylvania,NewYork,NewJerseyandtheDistrictofColumbiawereexposedtothelatestdevelopmentsfortheincorporationofenergyconservationfeaturesinthedesignandconstructionofindustrialandcommercialbuildings.~Thecompanyinitiatedaprogramandprovidedtheequipmenttohelplow-incomecustomersinsulatetheirhomes.InsulationblowingmachineshavebeenmadeavailableforuseatnocosttolocalsocialserviceagenciesandcommunityservicegroupsthroughoutthePP&Lservicearea.ThesocialserviceorganizationshavebeeninvitedbyPP8cLtodeveloptheirownprogramsofidentify-ingqualifiedcustomers,payingfortheinsulationmaterialandsupplyingthemanpowertoperformtheweatherizingwork.During1980wewillberefiningthetoolswehavetomonitorhowwearedoinginmeetingthe2.5per-centorlowerloadgrowthobjectivementionedearlier.Theimportanceofdetectinganymajordeviationingrowthpatternscouldhavelong-termimplicationsastowhetherornotwehavenewgenerationfacilitiesinplacewhentheyareneeded.Wewillalsobeexaminingthefeasibilityofputtingagoodportionofourloadundersomeformofclosercontrol-eitherthroughrateincentives,orthroughdirect-controlloadinterruptions,or,perhaps,acombinationofboth.EnergyUseElectricalusagebyPP8:Lcustomersduring1979increased3.3percentover1978.ThatincreaseinusagewasinfluencedbyweatherthatwasmoreBelow:Teachersentertainstudentswithpedalpoweredgeneratordemonstratinghowmuchenergyittakestolightfourbulbs.Right:bauchofoureducationactiuityfea.turedThomasEdisonandthe100than.niuersaryinOctober1979ofhisinventionofthefs'rstpracticalincandcsccntlamp.Farright:faunLennon,coordinatorofcon-sumereducationprograms,discussespres-entandfutureenergyissuesatateachers'n-seruiceprogram.j(pd severein1978thanthelong-termstatistical"norm."Theweatherin1979wasverynearthenorm.Hadtheweatherforbothyearsbeenrightonthenorm,our1979usagewouldhavebeenupabout4.4percent.However,inJanuaryof1979,customerswhohadpreviouslybeenbilledbimonthlywerechangedtoamonthlybillingcycle.ThischangeinflatedJanuarysalesbyabout260millionkilowatt-hours.Withoutthechange,electricalusagewouldhaveincreasedonly2.1percentover1978-or3.1percentonaweather-adjustedbasis.Anumberoffactorsinfluencetheupsordownsincustomers'nergyusage.Electricaluseusuallytracks,onadelayedbasis,ournationalandregionaleconomy.Inahealthyeconomy,expansionandbuildingplansusuallygettranslatedintoincreasedelectricuseinourserviceareaonetotwoyearslater.Conversely,wewouldexpectalowerrateofincreaseasaneconomicdownturnisreflectedinsubsequentelectricuse.Anotherinfluenceistheconservationethicthatstartedasenergypricesbegantorisedramaticallyintheearlytomid-70s.Nationalpolicy,disruptioninsupply,price,andconservationprograms,suchasPP&L's,allcombinetocreatemoremoderategainsinelectricaluse.Inflation,too,playsapart.Aspricesrise,con-sumers'ollarspurchasefewergoodsandservices.However,sincethepriceofelectricityhasnincreasedasmuchasthepriceofmanycommoditi~andservices,theeffectofinflationonoursaleshasbeensomewhatlimited.AmoderationintherateofincreaseinelectricenergyusageisgoodnewsforPP&L.Itmeans,inthelongrun,amoremanageableconstructionpro-gramandtheresultingreductionintheneedfornewoutsidefinancing.This,inturn,shouldmeanfewerrateincreasesforcustomersandstrongerfinancialperformanceforinvestors.EnergyChargeAnenergychargewasputintoeffectbyPP&Linlate1978tocomplywithaPennsylvaniaPublicUtilityCommission(PUC)order.Thecharge,whichreplacedanearlierfueladjustmentclause,takesintoaccountchangesinfossilfuelcostsplusthebenefitsofsalesto-andthecostsofpurchasesfrom-otherutilities.Becauseoftheincreasedavailabilityofourgeneratingunits,andtheirgenerallylowerfuelcosts,wewereabletoselllargeamountsofpowertoothercompaniesatacosttothemlowerthantheirownunitscouldprovide.Theamountwereceivedfromthesesalesaboveourcostwaspassedbackto(iglooÃPiJsif-)ii):/CCPartofPP&Iconseruationeffortscenteronenergyeducationinserviceareaschools.DanKrehling,aresidentialconsultantinHarrisburgshowsstudentshowasolarphotovoltaiccellcanpowerapocketradio.

PP&Lcustomersthroughtheenergychargewhich,theendof1979,wasprovidingacredit,orreduc-ninbaseratechargesratherthananenergycostadd-on.CustomersofthosecompaniesbuyingenergyfromPP&Lalsobenefitedequallythroughbillswhichwerelowerthantheyotherwisewouldhavebeen.InsulationTariffInitspendinginsulationtariff,originallyfiledwiththePUCinApril1978,thecompanyproposedthatallnewresidencesandcommercialbuildingsmeetminimuminsulationstandardsbeforeelectricservicewouldbeprovided.Publichearingswereheldontheproposalinlate1978andearly1979.Afterseveralvoluntarypostponementsoftheeffectivedateoftheproposal,madetogivethecommissiontime,toreviewallthepotentialimpactsofPP&L'sproposals,theadministrativelawjudgeinthepro-ceedingissuedarecommendedrulingwhichinmanyrespectsagreeswithPP&L'sproposal.Thejudge'decisionmustbereviewedbythefullcommissionbeforeitcouldgointoeffect.ElectricRatesOnFeb.1,1980wenotifiedthePUCofourintenttofileforratereliefinlateApril1980.Thereasonfortherequestedincreaseistobringthecompany'sratesinlinewiththeincreasingcostofprovidingservice."Ourlastrequestforhigherbaserateswasfiledin1975andwasgrantedin1976.GeneratingPlantsPP&L'sgeneratingplantsranverywellduring1979,allowingustosellmorethan11billionkilo-watt-hoursofinterchangeenergytootherutilitiesatacostlowerthanthosecompaniescouldgenerateitthemselves.Our1,515,000-kilowattMontourplantsetanewcompanygeneratingrecordofmorethan10billionkilowatt-hoursproducedduringthecalendaryear.Asfarasweknow,thetwoMontourcoal-firedunitsalsoholdnationallong-rungeneratingrecords.HersheyMergerInDecember,thecompanyaskedthePUCandFERC(FederalEnergyRegulatoryCommission)tolowHersheyElectricCo.(HEC)tomergeinto&LeffectiveMarch1,1980.Afterthemergerout7,000HECcustomerswouldbeginpayingfortheirelectricserviceundergenerallylowerPP&Lrateschedules.Thiswouldcompletetheprocessbegunin1976whenPP&LpurchasedHEC.SincethattimePP&LhasbeendoingthenecessaryconstructionworktoallowintegrationofHEC'soperationsintoPP&L's.HECdoesnothaveanygeneratingfacilitiesanduptothispointpurchaseditspowerfromMetropolitanEdisonCo.EnergySalestoGPUEarlierintheyearboththePUCandFERCfoundtobeinthepublicinterestaPP&Lproposaltoprovidemodestshort-termassistancetothethreeoperatingsubsidiariesofGeneralPublicUtilitiesCorp.(GPU)thatlosttheuseofthegeneratingunitsatThreeMileIsland.ThisassistancewasprovidedbypricingthehigherquantitiesofpowersuppliedbyPP&LthroughthePennsylvania-NewJersey-Maryland(PJM)powerpoolessentiallyatthecostofourMartinsCreekoil-firedunits,ratherthanatthehighernormalPJMpricingarrangements.WealsowantedtoalleviatethesituationwhereourcustomerswouldbenefitfromtheTMIaccident,ncethecostreductionsfrominterchangesalesflowcktothemthroughtheenergycharge.CurrentlyePJMcompaniesareseekingapprovaltomodifytheinterchangeagreementsothatlowercostpowercouldbeprovidedbyallpowerpoolmembers.StonyCreekProjectAlthoughwepresentlyseenoneedtobegincon-structionofanothergeneratingplantimmediatelyafterSusquehannaiscompleted,itappearedatyear-endthatwewouldloseoneofourdrawing-boardoptions.ThePennsylvaniaDepartmentofEnviron-mentalResourcesrecommendedtothePennsylvaniaLegislaturethatStonyCreekinDauphinCountybeofficiallydesignatedasthestate'sfirstwildandscenicriver.IfapprovedbytheLegislatureandthegovernor,thiswouldbethefirststepinaprocessthatwouldprohibitapumped-hydrogeneratingstationthatwehadhopedtosomedaybuildatStonyCreek.Althoughwetestifiedthatthiswasthebestpumped-hydrositeremaininginPennsylvania,thecompanychosenottofurtheropposethewildandscenicdesignationifitwereapprovedbythestate.BecauseoftheuncertaintyofStonyCreek'sstatus,thecompanyhasinitiatedaprocessofidentifyingandselectingalternatesitesforapossiblepumped-hydroprojectwhichcouldbebuilttomeetelectricitydemandsinthe1990sorbeyond.AnygeneratingstationsitingstudywhichPP&LconductswillbeincooperationwiththePublicAdvisoryCommittee(PAC),whichwasestablishedin1977forthespecificpurposeofreviewinganongoingstudyforafuturecoal-firedplant.PAC'smembershipincludesabout25individualsfromanumberofcommunitiesofinterestoutsidethecom-pany.Representedareenvironmentalgroups,government,laborunions,etc.CoordinationwithPACintheplantsiteselectionprocedureistheinitialphaseofacompletepublicreviewofallpossiblefutureelectricenergysupplyalternativesbeforeanyspecificoneischosen.

EnvironmentalMattersThecompanyspentabout$25millionduring1979forwaterandairpollutioncontrolequipmentatitsoperatingpowerplants.For1980thatfigurewillrisetoabout$41million.Thelargestenvironmentalexpendituresfor1979wenttowardconstructionofbagfiltersatourBrunnerIslandandHoltwoodcoal-firedpowerplants.Simplyput,abagfilteroperatesonthesameprincipleasavacuumcleanerbag.Inourcasetheexhaustgasesfromacoal-burningboilerareroutedthroughthousandsoffabricfilterbags.Thebags,someofwhichare35feetlong,trapandremoveparticulateemissions,orsmallspecksofcoalandashleftoverfromthecombustionprocess.ResearchandDevelopmentThe$4millionPP8:Lspentonresearchduring1979wentmostlytoongoingprojects.Byfarthelargestportion,$2.8million,wasallo-catedforfundingawidegamutofresearchprojectsbeingcarriedoutbytheElectricPowerResearchInstitute(EPRI),ourindustryresearchorganization.EPRIprojectsincluderesearchinsyntheticfuels,pollutioncontrol,fusion,fuelcellsandalternateenergysourcesofsun,windandbiomassconversion.Weparticipatedinorinitiatedanumberofother--projects.Anexperimentalaquaculture,orfishfaring,projectwithamajorfoodprocessorhasbeeextendedforathirdyear.Thefirsttwoyearsoftheprojecthavebeenmoderatelysuccessfulandanotheryear'sdataisneededbeforethefoodcompanydecidesonafull-scaleproject.ThefishfarmutilizesthewasteheatinthecoolingwaterdischargeatourBrunnerIslandplant.Sincefishgrowatafasterrateinwarmwaterthanintheseasonalwarm/coldcycleoccurringinnature,theaimoftheprojectistotestthecommercialfeasibilityofraisingandmarketingfishthathavebeengivenahelpinghandingrowingup.Wehavelocatedapotentialpartnerforacoopera-tiveexperimentalfloricultureprojectwhichwouldutilizewasteheatfromourMontourplantcoolingtowerstogrowflowersyear-round.Assoonastheflorist'sfinancingplansareapproved,weexpecttoseeworkbeginonalargegreenhouseneartheplant.ThewarmwaterfromthebaseofthecoolingtowerwouldbepipedtothegreenhouseandprovidetheheatneededtogrowflowersthroughoutPennsyl-vania'scoldwinters.Wewerealsofinalizingarrangementsattheendof1979toinstallexperimentalphotovoltaiccellsatthesiteofourHarwoodwindturbinenearHazleton.ChrisHerr,Kraftfood'sresidentaquaculturetechnicianatPAL'sBrunnerIslandpowerplantnearHarrisburg,showsacatfishthatisnearingmarketsizeinthecooperattuefarmingprojectwhichusestheplant'swarmwaterdischarge.0 JgAnnualMeetingTheannualmeetingofshareownerswillbeheldat1:30p.m.onWednesday,April23,1980atLehighUniversity'snewStablerArenalocatedontheLowerSauconValleycampuscomplex-southofBethlehemandwestofHellertown,Pa.Formalnoticeofthemeeting,togetherwithareservationcardformeetingattendance,willbemailedonoraboutMarch17,1980,toshare-ownersofrecordMarch10,1980.PP&LProfileEachyearthecompanypublishesthePP&LProfilecontainingmorein-depthinformationaboutthecompanythanisavailableintheannualreport.TheProfileincludesa10-yearstatisticalreviewanddiscussionofsomeofthecriticalissuesfacingPP&Lnowandintheyearsahead.Ifyouwouldliketoreceivethe1969-1979Profile,fillout,detachandmailthecardonthisflap.5iES7

Thisproject,incooperationwiththeUniversityofelaware,willbeasmall-scaletestofthefeasibilitydirectconversionofsunlightintoelectricityinPP&L'sservicearea.OurHarwoodwindturbineisnowinanautomaticoperatingmode-thatisitstartstogenerateelec-tricity,withnoattendantatthesite,whenwindsreachseventoeightmilesperhour.Weexpecttohaveayear'stestdataonthewindturbinelaterin1980andtomakeanevaluationthenonthepotentialofwind-producedelectricityincentraleasternPennsylvania.Weexpecttocompleteourgasoholresearchprojectearlythisspring.Thisinvolvestheuseofgasohol-acombinationof90percentgasolineand10percentalcohol-in21companycarsusedbytechniciansandmeterreadingpersonnel.Thetestwillprovidedataonhowthemixtureaffectsthecars'erform-anceandexhaustemissions.Althoughgasoholisnotexpectedtoprovideanyreductionincosts,itdoesholdthepotentialofreducinggasolineusebyshiftingpartoftheloadtoarenewablesource-alcohol.Earlyreportsfromthedriversofthevehiclesindicateanenthusiasticresponsetothevehicles'erformanceusinggasohol.Wearealsoinvolvedinprojectsthataretestingtheeconomicfeasibilityofconvertingcoaltogaseousandliquidform.Wesignedacontractearlyin1980hatwillallowusparticipationinthedevelopmentofprocessthatwouldconvertWestVirginiacoalintoliquidfuel.Thisprojectholdsthepotentialofdisplacingsomeoftheoilburnedinthetwo820,000-kilowattoil-firedunitsatourMartinsCreekplant.Ourresearchanddevelopmentbudgetfor1980isabout$4.2million.LaborRelationsAfterfirstbeingrejectedinJuneby62votes,athree-year$15.5millionwageandbenefitpackagewasacceptedinlateJulybyathreetoonemarginbythe4,700employeesrepresentedbytheInternationalBrotherhoodofElectricalWorkers(IBEW)Local1600.Thelaboragreementprovideda7.2percentpayincreaseinthefirstyearofthecontractand6.3percentinthesecondyearwithanagreementtodiscussthatfigureifthefederalwageguidelinesincreasefor1980.Thecontractcontainsawagereopenerwithabindingarbitrationclausefor1981.Improvementsinbenefits,includinganewdentalassistanceplan,broadermedicalplancoverageandincreasedvacationallowancesareincludedintheagreement.Essentiallythesamecontractwasoverwhelm-inglyratifiedinAugustbymembersofIBEWLocal1520whichrepresents265employeesintheScrantonea.managementChangesAnumberofmanagementchangestookplacein1979.Twodirectors,JosephSimpsonandCharlesWatts,retiredeffectiveApril25,1979,thedayofourannualmeeting.JosephSimpson,boardchairmanofHarscoCorp.ofHarrisburg,hadbeenaboardmembersince1959.CharlesWatts,educationalandbusinessconsultantandformerpresidentofBucknellUniversity,hadbeenadirectorsince1971.JackBusby,whowasPP&L'sfourthchiefexecu-tive,endedhis28-yearcareerwiththecompanyonJuly31.Hejoinedthecompanyin1951asanattor-ney,progressedtovicepresident,andthenin1956,toexecutivevicepresidentanddirector.HewasnamedPP&Lpresidentin1957andchiefexecutiveofficerin1964.Wellknownintheutilityindustry,Busbywasnamedthe1979"ManoftheYear"byElectricIightandPowermagazine,anindustrypublication,forhisleadershipininvolvingconsumersinPP&Ldeci-sionsthroughactivepublicadvisorygroups.HealsoreceivedthePennsylvaniaCatholicWarVeterans1979ManoftheYearawardforhiscommunityservice.HelaterreceivedasimilarhonorfromThePennsylvaniaSociety.AnadditionaltributetoJackBusbycanbefoundontheinsidebackcoverofthisreport.PresidentRobertCampbelltookoverthedutiesofchiefexecutiveofficerofthecompanywhenBusbysteppeddownfromthatpositiononMarch1inanticipationofhisJulyretirement.Dr.RalphW.RichardsonJr.ofStateCollege,Pa.,waselectedadirectoronAug.15.RichardsonhasbeenanadjunctprofessoratthePennsylvaniaStateUniversityandaprivateconsultantsincehisretire-mentinJuly1978asdirectorofNaturalandEnvironmentalSciencesfortheRockefellerFoundation.CharlesRussoli,manager-FinancialPlanning&Reporting,wasappointedvicepresident-FinanceonApril16,withresponsibilityforcorporatefinancialplanning,financingactivities,shareownerandinvestor-relatedservices,andtreasury,payrollandinsurancefunctions.MerlinHertzog,vicepresident-Consumer&Com-munityServices,wasappointedassistantvicepresident-HumanResource&DevelopmentandbecameamemberofPP&L'sCorporateManage-mentCommitteeeffectiveDec.1.HertzogreportstoEmmetM.Molloy,vicepresident-HR&D,andwillsucceedMolloywhenheretiresasheadofthatcorporatedepartmentinlate1980.BruceKenyon,manager-Construction,waspro-motedtoassistantvicepresident-Nuclear,effectiveDec.3.GraysonMcNair,manager-ConservationServices,waspromotedtovicepresident-Consumer&Com-munityServices,succeedingHertzog,effectiveJan.1,1980.

TaskForcesRecommendSusquehannaImprovementsFollowingtheaccidentatThreeMileIslandinMarch1979,PP&L'sCorporateManagementCommittee(CMC)establishedfivetaskforcestostudyandreportondifferentaspectsofourSusquehannanuclearpowerplantnearBerwick.Thetaskforceswerecharteredtoreview:~Radiationmonitoringandemergencycom-munications~Thedesignofthepowerplantwithrespecttoitssafetyfeatures~Personnelqualificationsandtrainingrequire-ments~Emergencyplans~PublicandemployeeinformationprogramsFollowingisabriefsummaryofeachofthecommittee'sreports:RadiationMonitoringAndEmergencyCommunicationsThistaskforcereport,preparedbyateamfromourSystemPower&EngineeringDepartment,wasareviewoftheplannedorexistingmonitoringfacilitiesassociatedwiththeSusquehannaplant.Thetaskforceconcludedthattheradiationmonitoringpresentlyisadequatetomeetoperatingneedsandoriginallicensingrequirements,butmadeanumberofrecommendationstoimproveourcapabilityinthisarea.Someoftherecommen-dationswereto:~Extendupwardthemeasuringscaleoftheplant'sexistingradiationmonitors~Installanadditionalcomputersystemtoprovide"realtime"radiationmonitoring~Expandthecomputer'senvironmentalprogramtoprovideamorethoroughassessmentofanaccidentalradiationrelease~DevelopwaystoinformthepublicandPP&Lemployeesofradiationdata~Developareliablecommunicationsystembetweentheplantandvariousoutsideagencies~Evaluatethepresentarearadiationmonitoringandcontinuousairmonitoringsystemsandtheircapabilityofhandlingeniergencyconditions~Evaluatetheadequacyofthepresentmeteor-ologicaltowerneartheplantThetaskforceconcludedthatimplementingtheserecommendationsandotherswouldimprovetheoverallperformanceandcapabilityofthestation'sradiationmonitoringandcommunicationssystems,andmayevenanticipatefuturerequirementsthatcouldbesetbytheNuclearRegulatoryCommission.area,andPP&LpersonnelalongwithrepresenttivesfromBechtelPowerCorp.,theGeneralElect'o.,ThePennsylvaniaStateUniversity,andtwconsultingfirms,NUSCorp.Inc.andMPRAssociatesInc.BechtelisresponsibleforthedesignandconstructionoftheplantandGeneralElectricisprovidingthenuclearreactors.ThetaskforceconsideredNRC"generaldesigncriteria,"otherpertinentregulationsandguides,andquestionsraisedbyindividualcommitteemembers.Thecommitteeextendeditsreviewbeyond"normalrequirements"inanattempttomeasuretheconsequencesofanaccidentontheplantandonpublichealthandsafety.Thecommitteealsoinvestigatedthetheoreticalresultsoffailurescausedbyoperatorerrorand/orequipmentfailureoverandabovenormaldesignandlicensingpractice.Thetaskforcesaidtheplant'sdesignmeetstherequirementsoftheNRCdesignandlicensingcriteria,whichdeterminewhetheranuclearplantcanbebuiltandoperated"withoutunduerisktothehealthandsafetyofthepublic."Butitrecommendedchanges,someofwhichwouldenhancePP&L'sabilitytooperatetheplantsafely.Otherrecom-mendedchangeswouldprovideadditionalprotec-tionofthecompany'sinvestment.Thetaskforcenotedthatmakingrecommendedchangeswouldenhancesafetyandwouldhelptolimittheextentofoff-sitereleasesofradioactivmaterialintheeventofanaccident.Itsaidbelievedthattheincorporationofitsrecommenda-tionswouldsignificantlyenhancethesuccessfuloperationoftheSusquehannaplantduringitslifetime.PersonnelQualificationsAndTrainingRequirementsThiscommitteeconsistedofPP&Lpeoplewithoperating,nuclear,andtrainingexperience,aswellasanindependentconsultantexperiencedinindustrialtrainingandperformanceengineering.Ir>fjqmQ~3DesignReviewThetaskforce,assignedbytheCMCtoreviewthedesignoftheplantwithrespecttoitssafetyfeatures,consistedofaprivatecitizenfromPP&L'sserviceCommunityleadersfromthcSusquehannaplantregionparticipateinpreparationoftheproject'srequiredemergencyplan.12 sanindependentconsultantexperiencedindustrialtrainingandperformanceengineering.Thecommitteewasassignedtoreviewqualifi-cationstandardsandtrainingprogramsforall'peopleinvolvedintheoperationandmaintenanceoftheSusquehannaplant,andto'nsurethatcompetentpersonnelqualificationstandardsaremaintained.Thecommittee'srecommendationsincluded:~Formulatingspecificoperationalstatements,supportinggoalsandjobmodelsaspartofanoverallcorporatepolicy~Increasingtheoperatingexperiencebaseoftheplantstaffandbroadeningthespectrumofpeoplewhoarelicensedorcertifiedasseniorreactoroperators~Enhancingtherelationshipbetweendesignersandoperatorsbydevelopingakeenawarenessofmutualresponsibilitiesandproblems~ImprovingcurrentrecruitmentpracticesWhilethecommitteefoundnooutstandingpersonnel-relatedsafetyproblems,itfoundseveralareasinwhichpersonnelqualificationsandtrainingshouldbeimproved.Itsaid,basically,thatexceptfortheplant'scontrolroomsimulatorprogram,theP&Ltrainingprogramfollowsthetraditionaldustryappioachandcurriculumandisnottask-'ented.Thecommitteealsofoundtherewasaneedtoimprovethequalificationandexperienceofthosewhowillbeassignedtooperateandmaintaintheplantinordertoelevateavailabilityandreliabilityoftheunitsbeyondnormalindustryaverages.EmergencyPlansTheEmergencyPlansCommitteeincludedrepresentativefromPP&L'scommunityservices,nuclearandlegalgroupsaswellasanoutsideconsultant.Advisingthecommitteewasagroupofplant-areacommunityleadersknownasEPAC-theEmergencyPlanAdvisoryCommittee.TheEmergencyPlandeQnesawidespectrumofemergenciesfromminorlocalizedincidentsthatrequireonlyin-plantactions,tomajoremergenciesinvolvingprotectivemeasuresbyoff-siteresponseorganizations.Theemergencyplanprovidesafour-categoryemergencyclassificationsystemthatissimilartothoseusedbythetwoprincipaloff-siteemergencyresponseagenciesinthevicinity-LuzerneCountyCivilDefenseandtheColumbiaCountyEmergencyanagementAgency.Theseagencies,alongwithestateandNRC,willbepromptlynotifiedincaseanyclassofemergency.Thetotalemergencyprogramincludesthesupportoflocal,stateandfederalemergencyorganizationsintheeventofanaccidentatSusquehanna.Detailedprovisionsaremadeforemergencypreparednesstrainingandexercisessimulatingrealemergencysituationstoensurethatprotectivemeasurescanbetakenbymembersofthepublicwithinatleasta10-mileradiusoftheplant.Includedintheplanarespecificarrangementsthathavebeenmadewithlocalorganizationsthatwillprovidesuchsupportfunctionsasfireandrescue,emergencymedicaltransportation,hospitalmedicaltreatmentandlawenforcementandtrafficcontrol.ThecommitteerevisedtheSusquehannaEmer-gencyPlantobemoreresponsivetopublicconcernsfortheprotectionofhealthandsafetyduringplantoperation.Whilefederalandstaterequirementsareintheprocessofchange,manyimportantnewconceptsanddirectivesareclearandhavebeenincorporatedintotherevisedplan.PublicAndEmployeeInformationProgramsThePolicyCommitteeonNuclearInformationreviewedPP&L'sinformationeffortsandpreparedanoverallnuclearcommunicationsplan.Atthecommittee'sdirection,amanualwascompiledwithinputfrommanyPP&LerscoveringkeyissuesonnuclearpoweringeneralandtheSusquehannaplantinparticular.Thismanual,writtenintheformofquestionsandanswers,willbeusedasbackgroundforpublicandemployeeinfor-mationprograms.Inadditiontoprintedmaterial,PP&Lplanstoexpanditsexistingspeakersprogrambyincreasingthenumberofspeakersqualifiedonenergysubjects.Acomprehensiveprogramforvolunteerswillcoverplatformtrainingandtechnicaltraining.Membersofthecommitteewilldevelopproceduresthatwillensurethattheinformationthatcomesfromtheplanttothepublicistimelyandreliable.PartofthiseffortwillbetheassessmentofthepresentSusquehannaEnergyInformationCenterlocatedneartheplant,todeterminehowtomakebetteruseofthefacility.WearealsoproducingfilmsandvideotapesthatcouldbeusedattheInformationCenterandelsewhere.Workisalsobeingdoneonproceduresonhowtoaccommodatevisitorstotheplantandtrain-ingcenterthatwouldbeconsistentwithsecurityrequirements.Moredetailedsummariesofthesereportsareavail-ablebywritingtoGeorgeKline,managerofInvestorServices,PennsylvaniaPower&LightCo.,TwoNorthNinthStreet,Allentown,Pa.18101.13 EarningsSummaryEarningspershareofcommonstockwere$3.32in1979comparedto$2.86in1978and$3.37in1977.Earningsapplicabletocommonstockincreased$26.2millionin1979comparedtoadecreaseof$5.4millionin1978.The1978and1977earningswereadverselyaffectedby27and33centspershare,respectively,duetotheclosingoftheCompany'sOneidamineandunrecoveredcostsofminingcoalatOneida.Higherthannormalforcedoutagesofgen-eratingunitsalsopenalized1978earnings.Inordertooffsetincreasingcosts,theCompanyexpectstofileinApril1980foranincreaseinbaserates.Sinceregulatoryproceedingswillbeheldtothoroughlyreviewtherequest,anyamountofrateincreasegrantedwouldnotbeexpectedtobecomeeffectiveuntillate1980orearly1981.AlthoughtheCompanyisunabletopredictthecombinedeffectofthevariousanddiversefactorsthatwillinfluencefutureoperatingresults,ofparamountimportancetotheCompanyisthecon-structionoftheSusquehannastation.Completionofthetwonuclear-fueledgeneratingunitswillrequiresubstantialcapitalexpenditures.Adequateandtimelyratereliefandtheoperatingperformanceoftheunitswhentheyareplacedinservicewillbemajorfactorsaffectingoperatingresults.ThefollowingdiscussesinmoredetailchangesinthefinancialresultsasreflectedontheStatementofIncomeshownonpage18.Theperiodscomparedaretheyears1979to1978and1978to1977.ElectricrevenuesBaseratesRecoveryofdeferredfuelcosts.Fueladjustmentclauses.......EnergyclauseTaxsurchargeandotherSteamrevenuesTotal$192.219.0(191.6)39.93.062.5(0.3)862.248.43.7(8.5)53.553.6EnergySalesandOperatingRevenuesTheCompanyderivesabout999oofitsoperatin.revenuesfromsupplyingelectricserviceandthbalancefromsupplyingsteamforheatingandotherpurposesinthecityofHarrisburg.RatesapplicabletosalestoultimatecustomersareregulatedbythePennsylvaniaPublicUtilityCommission(PUC)andaccountedfor98%oftheCompany'srevenuesfromenergysalesin1979.TheFederalEnergyRegulatoryCommission(FERC)regulatessalestoothersforresale.Energysalesfor1979increased711millionkwhor3.3'ver1978.Excludingtheeffectofconversiontomonthlybillingin1979,energysalesfortheyearwouldhaveincreased455millionor2.19oover1978.Energysalesfor1978increased643millionkwhor3.0%over1977.Formoreinformationonconservationandenergyuseseepages6and7,respectively.Thechangeinoperatingrevenuesfromtheprioryearissummarizedbelow(millionsofdollars):Increase(Decrease)19791978EarningsPerShare12MonthsEndedEachQuarterDollarsPerShare$3.403.203.002.80+fI3.002.802.602.400'L197519761977197819792400Theearningsimprovementin1979wasprimarilyduetononrecurringitems,includingtheabsenceofthe1978chargeagainstincomeresultingfromterminationofminingoperationsatasubsidiary.TheCompanyisplanningtofileforageneralincreaseinbaseratesinearl1980tooffsetcontinuedcostincreases.14 BothPUCandFERCfueladjustmentclauseswereeffectthroughOctober31,1978.Onthatdate,thempanyreplaceditsPUCfueladjustmentclauseithanenergyclause.Inestablishingtheenergyclause,theCompanyrevisedbaseratetariffsto'eflectthelevelofenergycostsexperiencedin1977andalsoaddeda1-millperkwhchargetorecoverfuelcostsdeferredundertheterminatedfueladjustmentclause.Asaresultofthesetariffrevisions,thecompo-nentsofcustomers'ills,asbetweenbaseratesand'djustmentclauses,changedsignificantlybegin-ninginNovember1978.Thisrevisionofbaseratetariffsaccountedforapproximately$175.0millionand$33.7millionoftheincreasedbaseraterevenuesfor1979and1978,respectively.GeneratedbySteamstationsCoal-firedOil-firedCombustionturbinesanddiesels(oil).Hydroelectric.Total2,320(2,132)(649)155(69)(9)98(34)1,700(2,020)NetCostofEnergyThenetcostofenergyincludesfuelexpensepluspowerpurchaseslesspowersoldtootherutilities..Thechangebyfuelsourceingenerationfromtheprioryearwas(millionsofkwh):Increase(Decrease)19791978ElectricCoal.firedsteamstationsQuantityofelectricitygenerated.Averagecostoffuelburned......Total.Oil.firedsteamstationQuantityofelectricitygenerated.Averagecostoffuelburned......Total.Combustionturbinesanddiesels(oil)Totalelectric.........~.......Steamheat.Total.829.2(24.0)12.431.741.67.7(14.5)55.541.0(2.6)80.0(0.2)879.810.8(4.3)6.5(0.3)13.9(0.3)13.6Themostsignificantfactorsintheaveragecostoffuelsburnedweretheincreasedcostofcoalin1978Thedecreasedquantityofelectricitygeneratedin1978reflectedloweravailabilityofgeneratingunitsdueto:~Reducedgenerationfromcoal-firedunitsduringthecoalminers'trikeinthefirstquarterof1978.~Higherthannormalforcedoutagesandextendedoutagesofunitsforannualmaintenancework.Theincreasedavailabilityofgeneratingunitsresultedinthequantityofelectricitygeneratedreturningtoamorenormallevelin1979witha1.7billionkwhor5.4%increaseover1978.Fuel.Thechangeinfuelexpensefromtheprioryearisattributabletothefollowing(millionsofdollars):Increase(Decrease)19791978WherethePP&LDollarWent-1979NctCostofEnergy25cEmployees12c"Services,.'upplies,etc.Ioc,ReinvestedScDividends14cInterest14cDepreciationScTaxes12cAsshownontheadjacentchart,thenetcostofenergyrep.resentsthelargestcomponentofoperatingcosts.Inaddi-tion,theCompanyincurstaxexpense,mustpayemployeewagesandbenefitsandrequiresothergoodsandservicestooperatethebusiness.Investorsarecompensatedfortheuseoftheirmoneybypayinginterestonborrowingsanddividendsonpreferred/preferenceandcommonstocks.Aportionofthecommonshareowners'arningsisputbackinthebusiness.

andtherapidincreaseinthecostofoilin1979.Theaveragecostoffuelconsumedperkwhofgenerationwasasfollows(centsperkwh):19781.262.234.101.471979Coal-firedsteamstations..............1.30cOil-firedsteamstation..........~......3.20Combustionturbinesanddiesels......4.68Totalfuel.burningstations..~.........1.65PowerPurchases.ThechangesinpowerpurchasesprimarilyreflectanallocationofenergypurchasedbythePJMinterconnectionfromotherpowerpoolswhichisinitiallyaccountedforaspurchasedpower.Mostofsuchpurchasesare"resold"tootherutilitiesandincludedininterchangepowersales.InterchangePowerSales.Thechangeininter-changepowersalesfromtheprioryearisattribut-abletothefollowing(millionsofdollars):Increase(Decrease)19791978Quantityofenergysold.............852.5(83.2)Averagepriceofenergysold.........101.98.4Capacityreceipts...................(3.8)0.2Total.$150.6(74.6)Thechangeinthequantityofinterchangepowersalesfromtheprioryeargenerallyreflectschangesingenerationduetotheavailabilityofsteamsta-tions.Therapidincreaseinthepriceofoilduring1979wasthemajorfactorinthehigherpricereceivedforinterchangepowersalesin1979.TheaveragepricetheCompanyreceivedforinterchangepowersaleswas2.43centsperkwhin1977,2.52centsperkwhin1978and3.44centsperkwhin1979.OtherOperatingExpensesTheincreasesinwagesandemployeebenefitsandotheroperatingcostssuchasmaterialsandsupplies,rentsandinsuranceprimarilyreflecttheeffectofinflationandthecostsofoperationandmaintenanceofnewfacilitiesplacedinservice.Depreciationexpensecontinuestoincreaseasnewfacilitiesareplacedinservice.IncomeTaxesTheCompany'sextensiveconstructionprogram,principallyrelatedtotheSusquehannapowerplant,hasenabledtheCompanytoclaimsubstantialamountsofinvestmenttaxcredits.Attheendof1979,anestimated$38.4millionofinvestmenttaxcreditswereavailableinexcessoftheamountwhichcouldbeusedtoreduceFederalincometaxpayments.TheseunusedinvestmenttaxcreditsmaybeusedtoreducefutureFederalincometaxesthrough1986.FormoreinformationontaxesseetheScheduleofTaxesonpage19.AllowanceforFundsUsedDuringConstructionTheallowanceforfundsusedduringconstructio(allowance)varieswiththelevelofconstructioiworkinprogressandthecostoffinancingThetotalallowanceincreased$21.6millionin1978and$34.2millionin1979.ChangesintheallowancerecordedGenerationbyFuelTypeMillionsofKwh404020110kLiI0M19751976197719782010TheadditionoftheMartinsCreekoil-firedunitsinrecentyearshasresultedinadiversityintheCompany'sfuelsourcerequirements.Themixofgenerationimpactstheaveragecostoffuelconsumed.Currently,theoil-firedunitshaveafuelcostperkwhofgenerationclosetothreetimesthecostofcoal-firedgeneration.AddingtheSusquehannanuclearunitswilladdanotherdimensiontothefuelmix.fCoal-firedunitsCOil-firedunitsQHydroelectric LossofSubsidiariesandOtherIncome-NetThenetsubsidiarylossin1978wastheresultofterminationofminingoperationsatTheOneidaMiningCompanywith$7.6millionchargedagainstnetincomein1978.ForfurtherinformationseeNote3toFinancialStatementsonpage27.Otherincome-netin1978includesapproximately$6.1millionofgainsfromthesaleofproperty,whichaccountedforasubstantialportionoftheincreaseover1977.InterestChargesandPreferred/PreferenceStockDividendsTheincreasesininterestchargesanddividendsonpreferredandpreferencestockfromtheprioryearwere(millionsofdollars):1979InterestchargesLong-termdebt$27.5Shorttermdebt..................0.7Other....................0.1ividendsonpreferredandpreferencestock.............7.04.71978principallyreflectMartinsCreekUnitNo.4beinglacedinserviceinMarch1977andtheincreasingvestmentintheSusquehannapowerplant.Con-tructionofSusquehannaaccountedforabout$65.4millionofthe$71.0millionofallowancerecordedin-1978and$97.1millionofthe$105.2millionofallow-ancerecordedin1979.TheallowanceisexpectedtocontinuetoincreaseinamountuntiltheSusque-hannaunitsareplacedinservice.Theincreasesinlong-termdebtinterestchargesanddividendsonpreferredandpreferencestockwereduetoissuanceofsecuritiesrequiredprimarilytofinancetheCompany'sconstructionprogram.During1979and1978,outstandinglong-termdebtincreasedby$297millionandpreferredandprefer-encestockby$185million.Interestchargesonshort.termdebtvaryfromyear-to-yearinrelationtotheamountofshort-termdebtoutstandingandtheinterestratesineffect.FormoreinformationontheCompany's1979financingseepage6,andformoreinformationonshort-termdebtseeNote4toFinan-cialStatementsonpage27.ConstructionWorkinProgressvs.NetPlantinServiceBillionsofDollars$53TheamountoffacilitiestheCompanyhasunderconstruc-tion(excludingnuclearfuel)isexpectedtoexceednetutilityplantinservice(originalcostoffacilitieslessaccu-mulateddepreciation)attheendof1981.AftertheSusque-hannapowerplantgoesintoservice(UnitNo.1scheduledfor1982andUnitNo.2scheduledfor1983)theCompany'splannedconstructionprogramisdramaticallyreducedasshownintheadjacentchart.1979'80'81'82'830'84E.NetPlantinServiceFConstructionWorkinProgress17 StatementofIncomeOperatingRevenues.OperatingExpensesNetcostofenergyFuelPowerpurchasesInterchangepowersalesNet(deferral)/amortizationoffuelandenergycosts(Note2)Wagesandemployeebenefits.OtheroperatingcostsDepreciationIncometaxesTaxes,otherthanincome(Note7)OperatingIncomeOtherIncomeandDeductionsAllowanceforfundsusedduringconstruction(Note1)EquityandborrowedfundsEquityfunds.IncometaxcreditsIncome(loss)ofsubsidiaries(Note3)Other-netIncomeBeforeInterestChargesInterestChargesLong-termdebtShorttermdebtandother.Allowanceforborrowedfundsusedduringconstruction(Note1).534,382454,602441,01546,58628,20839,783(382,457)(231,853)(306,456)326,29929,657(160,163)273,20337,698(172,823)40,453238,964114,837100,57776,1517773269.414677,675182,823(27,245)223,712103,47985,85173,07577,21666,404629,737168,602(7,317)167,02591,82282,35568,03591,50159,682560,420184,311(4,516)191,27782,58376,12162,47843,82849,526505,813138,334(1,567)136,51171,77368,36958,54047,29840,669423,160120,96953,12926,5381,0522,28082,999265,822126,9068,794(52,076)83,62435,51813,594(6,346)9,54752,313220,91599,4257,972(35,517)71,88022,45913,708(4,205)327735,239219,55091,5005,223(26,936)69,78745,19214,457(1,924)3,30561,030199,36479,7837,47087,25336,60511,2013532,80150,960171,92o67,93',45674,3881978197719761975ThousandsofDollars$860,498798,339744,731,644,147544,1247NetIncome-BeforeDividendsonPreferredandPreferenceStockDividendsonPreferredandPreferenceStockEarningsApplicabletoCommonStock.........EarningsPerShareofCommonStock(basedonaveragenumberofsharesoutstanding)...........182,19848,666$133,532$3.32149,03541,670107,3652.86149,76336,993112,7703.37112,11133,36878,7432.6897,54124,50973,0322.87AverageNumberofSharesOutstanding(thousands).40,23137,58733,47129,3672o,459DividendsDeclaredPerShareofCommonStock$2.041.921.891.801.800SeeaccompanyingSchedulesandNotestoFinancialStatements.18 ScheduleofTaxescomeTaxExpenseIncludedinoperatingexpensesProvisionFederalState.DeferredTaxdepreciation(classlifesystem).......RecoverablefuelandenergycostsForcedoutagereserve.Stateutilityrealtytax.Conversiontomonthlybilling............OtherInvestmenttaxcredits-net(a).............1979835,38517,16452,5495,274(20,902)(896)7,0365,02255729,09277,73221,68011,34133,0215,69514,5653,58834,80416,19350,9976,1734,128(344)656167667,4226,4632,391(1,041)51619,83177,2162,19828,34991,50193227,66143,828197819771976ThousandsofDollars197522,5478,22130,7684,540829(3,726)1,89912,98847,298IncludedinotherincomeanddeductionsProvision(credit)FederalState.Totalincometaxexpense(21,139)(5,399)(26,538)851,194(11,311)(2,283)(13,594)63,622(11,008)(2,700)(13,708)77,793(11,859)(2,598)(14,457)29,371(b)(9,164)(2,037)(11,201)36,097ReconciliationofIncomeTaxExpenseIndicatedincometaxonpre.taxincomeatcombinedFederalandStatetaxrates(shownbelow)Reductionsdueto:-Allowanceforfundsusedduringconstruction....Taxdepreciation(guidelinelivesanddecliningbalancemethod).TaxandpensioncostOther-net.TotalIncometaxexpense.CombinedFederalandStateincometaxrates-%Effectiveincometaxrates-Fo$120,59454,3596,3295,1973,51569,400$51,19451.721.9113,68737,9769,3143,892(1,117)50,06563,62253.529.9121,65126,40712,0133,7531,68543,85877,79353.534.274,90123,92516,1073,3542,1444~553029,37152.920.870,74819,3799,5742,9982,70034,65136,09752.927.0Taxes,OtherThanIncomeStategrossreceipts.StatecapitalstockStateutilityrealty.SocialsecurityandotherTotal.837,56513,05611,3107,483869,41435,45310,88513,7186,34866,40432,9329,99611,5825,17259,68228,3208,8608,0524,29449,52623,7567,2845,9803,64940,669(a)AsofDecember31,1979,theCompany'sportionofacon-solidatedunusedinvestmenttaxcreditamountedtoapproxi-mately$38.4millionwhichmaybecarriedforwardtooffsetFederalincometaxprovisionsforyearsthrough1986.(b)InvestmenttaxcreditseliminatedtheCompany'sFederalincometaxliabilityfor1976andresultedinacredittotheprovisionforincometaxesofapproximately$5.9millionrelatedtoacarrybackofinvestmenttaxcreditstoprioryears.tSeaaccompanying¹testoFinancialStatements.19 BalanceSheetAssetsDecember3119791978ThousandsofDollarsUtilityPlantPlantinservice-atoriginalcostElectricSteamheatLessaccumulateddepreciationConstructionworkinprogress-atcostNuclearfuelinprocess-atcost$2,508,8528,2672,517,119631,1411,885,9781,473,22061,3013,420,4992,392,8058,1792,400,984565,4341,835,5501,105,01037,0602,977,620InvestmentsAssociatedcompanies-atequityNonutilitypropertyandother-atcostorless16,9655,96722,93219,9596,26026,219CurrentAssetsCash(Note4)Accountsreceivable(lessreserve:1979,$3,518;1978,$3,079)CustomersInterchangepowersalesOtherNotesreceivable(principallyfromassociatedcompanies)Recoverablefuelandenergycosts(Note2)..................~Coalandfueloil-ataveragecostMaterialsandsupplies-ataveragecost~~~15,55054,12346,1026,33127,51617,451104,46820,0367759299,33613,71853,14717,1855,35832,07436,19498,93219,88214,744291,234DeferredDebitsRecoverablefuelcosts(Note2)Stateutilityrealtytax(Note7)Other18,32813,6177,51639,46133,782,22840,0374,16044,1973,339,270SeeaccompanyingSchedulesand!VotestoFinancialStatements.20 LiabilitiesDecember3119791978ThousandsofDollarsapitalizationPreferredandpreferencestockIssueswithmandatorysinkingfundprovisions..IssueswithonlyoptionalredemptionprovisionsCommonstockCapitalstockexpenseEarningsreinvested(Note5)Long-termdebt441,400231,375753,400(11,862)371,9031,499,2203,285,436312,000231,375671,836(11,070)321,6021,256,6632,782,406CurrentLiabilitiesLong-termdebtduewithinoneyearBankloans(Note4).Commercialpapernotes(Note4)AccountspayableTaxesaccruedInterestaccruedDividendspayableDeferredincometaxesOther57,93830,77567,38916,10531,45235,4659,66622,925271,71570213,000179,00357,94114,60223,07729,87419,35127,776365,326DeferredandOtherCreditsDeferredinvestmenttaxcreditsDeferredincometaxes.Other125,68981,65017,738225,077$3,782,228101,50576,08813,945191,5383,339,270SeeaccompanyingSchedulesandNotestoFinancialStatements.21 ScheduleofCapitalStockandLong-TermDebt,atDecember31PreferredStock-$100par,cumulative(a)4'/3%Series.SharesAuthorized629,9365,000,000PreferenceStock-nopar,cumulative(a).5,000,000CommonStock-nopar(a).............50,000,000Installmentsreceived(dividendreinvestmentplan)(b)Employeesubscriptions(employeestockownershipplan)(c)SharesOutstanding1979530,1894,217,5564,747,7451,980,00043,497196$53,019421,756$474,775$198,000$752,38564237353,019288,356341,375202,000671,143693AmountOutstanding19791978ThousandsofDollars$753,400671636DetailsofLong-TermDebt(d)FirstMortgageBonds(e)23/4%33/6%10'/s%3'/o%97/6%97/s%33/6%to97/s%4'/s9o5'%o8'/6%7'/4%to9'/4%8'/4%to93/4%PollutioncontrolseriesA(I)MaturityDateFebruary1,1980September1,1982October1,1982March1,1983June1,1983June1,19841985-19891990-19941995.19992000.20042005.2009(025,00060,000140,000345,000475,00027,0001,241,500AmountOutstanding19791978ThousandsofDollars$37,00037,0007,5007,500100,000100,00025,00025,00033,34233,32958,32960,000140,000345,000475,00026,5001,341,000Notes7%Bankloans(g)OtherUnamortized(discount)andpremium-net.LessamountduewithinoneyearFebruary1,1980March31,1986Various20,000200,0001,5051,562,505(5,3471,557,15857,938$1,499,22020,0001,0331,262,533(5,168)1,257,3657021,256,663(a)Eachshareofpreferred,preferenceandcommonstockisequalinvotingpowerandentitlestheholdertoonevoteonanyquestionpresentedtoanyshareowners'eeting.Therewerenosharesofpreferred,preferenceorcommonstocksreservedforconversion,warrants,optionsorotherrightsatDecember31,1979and1978.(b)SharesissuedinJanuaryofthefollowingyear(35,878sharesissuedJanuary1979and36,162sharesissuedJanuary1980).(c)18,337sharessubscribedatDecember31,1979tobeissuedthroughAugust1980.(d)Aggregatelong-termdebtmaturitiesthrough1984are(thousandsofdollars):1980,$57,938;1981,$924;1982,$108,323;1983,$58,976and1984,$34,271.Maximumsinkingfundrequirementsaggregate$21.2millionduringthefiveyears1980-1984andmaybemetwithpropertyadditionsorbonds.(e)SubstantiallyallutilityplantissubjecttotheliensoftheCompany'smortgnges.(f)PollutioncontrolseriesAbondsbearinterestatratesfrom4'%o5'%ndmatureannuallyonMay1asfollows(thousandsofdollars):1980-1983,$500;19842002,$900nnd2003,$7,400.(g)BankloansbearinterestatprimethroughMarch1980,103%o~primethroughMarch1982and105%ofprimethereafter.SeeaccompanyingNotestoFinancialStatements.22 12,00050,00025,000312,000$441,400AmountOutstandingDetailsofPreferred19791978andPreferenceStockThousandsofDollarsIssuesWithMandatorySinkingFundProvisionsSeriesPreferred7.40%$38,40040,0007.50%.15,0007.75%60,00060,0008.00%50,00050,0008.00%,Second..............10,0008.25%50,0008.75%(j)60,0009.24%(j)...................75,00075,000Preference$9.258,000$11.00(j)..................'50,000$13.00(j)............~.....25,000SharesOutstanding1979384,000150,000600,000500,000100,000500,000600,000750,00080,000500,000250,000OptionalRedemptionPricePerShare1979(h)$112.00112.00112.00112.00112.00112.00115.00115.00108.80109.7516,000150,000120,00025,00020,000100,00030,00030,00040,00025,00012,5001980.200319851984-19881983-20021985-19891985-19891985-20041981-20051980-19811981-20001980-1999SinkingFundProvisions(i)SharestobeRedeemedRedemptionAnnuallyPeriod4,17822,8786,300222377,7634,17822,8786,300222377,763IssuesWithOnlyOptionalRedemptionProvisions4'/2%Preferred...............$53,01953,019SeriesPreferred3.35%440%4.60%8.60%9.00%530,18941,783228,77363,000222,37077,630110.00103.50102.00103.00110.00110.00Preference$8.00$8.40$8.7035,00040,00040,000$231,37535,00040,00040,000231,375350,000400,000400,000105.50110.00106.00(h)Allissuesofpreferredandpreferencestocl,exceptthe$9.25PreferenceStock,containoptionalredemptionprovisions.The$9.25PreferenceStockisnotredeemableotherthanthroughthesinkingfundrequirementorvoluntaryliquidation.The$11.00and$13.00PreferenceStocksmaynotberefundedthroughcertainrefundingoperationspriortoJuly1,1985andOctober1,1984,respectively.(i)Thesinkingfundredemptionpriceis$100pershareplusaccruedandunpaiddividendstothedateofsuchredemption.Theaggregateamountofsinkingfundredemptionrequire-mentsthrough1984are(thousandsofdollars):1980,$6,850;1981,$12,350;1982,$8,350;1983,$10,850and1984,$22,850.(j)OncertainsinkingfundredemptiondatestheCompanymayredeemadditionalsharesuptothenumberofsharesoftheseseriesrequiredtoberedeemedannually.Year19791978197719761975CI@8$SharesCommon4,423Preferred,7.50%....................150Preferred,8.00%,Second............100Preferred,8.25%....................500Preferred,8.75%....................600Preferred,7.40%....................(16)Preference,$9.25...................(40)Common4,150Preferred,7.75%....................600Preference,$9.25...................(40)Common4,120Preferred,8.00%....................500Preference,$9.25...................(40)Common4,251Preferred,9.24%....................750Common3,301Preference,$11.00..................500Preference,$9.25...................200Amount$81,24215,00010,00050,00060,000(1,600)(4,000)88,84760,000(4,000)87,75350,000(4,000)82,95875,00057,04550,00020,000Capitalstockissuedor(redeemed)duringthefiveyears197o-1979wasasfollows(sharesandamountinthousands):SeeaccompanyingNotestoFinancialStatements.23 StatementofChangesinFinancialPosition1979197819771976ThousandsofDollars1975SourceofFundsOperationsNetincome.Charges(credits)againstincomenotinvolvingworkingcapitalDepreciationNoncurrentdeferredincometaxesandinvestmenttaxcredits-net...............Allowanceforfundsusedduringconstruction.OtherOutsidefinancingCommonstockPreferredandpreferencestockLong-termdebt.Shorttermdebt-netincrease..Workingcapital(excludingdebt)-decrease(a).....DepositsfromAlleghenyElectricCooperative......Investmentinassociatedcompanies-decreaseNoncurrentrecoverablefuelcosts-decrease.......Other-net.76,15129,960(105,205)1,241184,34573,07550,628(71,035)(13,774)187,92981,564135,000300,674517,23888,85360,000360168,603317,8162,279'0,0223,79621,709$729,3674,058529,825$182,198149,035149,76368,03533,579(49,395)(1,191)200,79187,97550,000100,576238,55184,215608524,165112,11162,47831,789(45,192)4,669165,85582,70575,000150,253307,95816,8946,424497,13197,54158,54015,701(36,605)7,464142,64157,76370,000225,208352,97115,166510,778ApplicationofFundsConstructionexpenditures..Nuclearfuelexpenditures.AllowanceforfundsusedduringconstructionSecuritiesretiredPreferredandpreferencestockLong-termdebt.......Short-termdebt-netdecrease$494,40124,241(105,205)413,4375,600702161,228167,530434,5762,906(71,035)366,4474,0003,7567,756362,55817,680(49,395)3308434,00020,6963661261,308394,23813,555(45,192)362,60111,05413,61824,672342,4962,79~(36,60;308,68493,11211,879104991Dividendsonpreferred,preferenceandcommonstockWorkingcapital(excludingdebt)-increase(a).....Investmentinassociatedcompanies-increase.....AcquisitionofHersheyElectricCompany....~.....Noncurrentrecoverablefuelcosts-increaseOther-net.131,883114,3381,24740,03716,517$729,367'529,825100,81331,020181524,16586,69415,3097,855497,13170,68623,9902,427510,778(a)Changesincomponentsofworkingcapital(excludingdebt)CashandtemporarycashinvestmentsAccountsandnotesreceivableCoalandfueloilRecoverablefuelandenergycosts,netofdeferredtaxes.Accountspayableandaccruedtaxes..................Other-netIncrease(Decrease).$1,83226,3086,536(9,058)(10,951)(15,946)8(2,279)(20,373)(6,147)(6,827)(5,956)17,1922,089(20,022)19,13612,27930,8743,189(26,756)(7,702)31,02012316,3946,5672,1258,501(18.401)15,309(5,352)28,757(3,568)738(22,507)(13,234)(15,166)SeeaccompanyingSchedulesandlVotestoFinancialStatements.24 StatementofEarningsReinvested'Balance,January1-AddNetIncomeDeductCashdividendsdeclaredPreferredstock...Preferencestock...................CommonstockIssuancecostofretiredpreferredandpieferencestock...................Balance,December31(Note5).......1979$321,602182,19850330029,53619,13083,21714131,897$371,9031978286,911149,035435,94622,17019,50072,6686114,344321,6021977Thous'andsofDollars237,967149,763387,73017,12319,87063,8206100,819286,9111976212,550112,111324,66113,12820,24053,32686,694237,9671975185,69597,541283,2369,39315,11646,17770,686212,550NotestoFinancia1Statements1.SummaryofAccountingPoliciesccountingSystemAccountingrecordsaremaintainedinaccordancewiththeUniformSystemofAccountsprescribedbytheFederalEnergyRegulatoryCommission(FERC)andadoptedbythePennsylvaniaPublicUtilityCommission(PUC).PrinciplesofConsolidationTheaccompanyingfinancialstatementsincludetheaccountsoftheCompanyanditswhollyownedelectricdistributionsubsidiary,HersheyElectricCompany,acquiredDecember31,1976.Allsignifi-cantintercompanytransactionshavebeenelimi-nated.AssociatedCompaniesInvestmentsinunconsolidatedsubsidiaries(allwhollyowned)andinSafeHarborWaterPowerCorporation(ofwhichtheCompanyownsone-thirdoftheoutstandingcapitalstock.representingone-halfofSafeHarbor'svotingsecurities)arerecoidedusingtheequitymethodofaccounting.Unconsoli-datedsubsidiariesareengagedincoalminingopera-tions,holdingcoalreserves,uraniumexploration,oilpipelineoperationsandrealestate.AlloperationsofunconsolidatedsubsidiariesareintheUnitedStates.TheCompanybelievesthatitsfinancialpositionandresultsofoperationsarebestreflectedwithoutnsolidationofthesesubsidiariessincetheyarenotgagedinthebusinessofgeneratingordistributingectricity.Allunconsolidatedsubsidiariescon-sideredintheaggregatewouldnotconstitutea"significantsubsidiary"asthattermisdefinedbytheSecuritiesandExchangeCommission(SEC).UtilityPlantAdditionstoutilityplantandreplacementofunitsofpropertyarecapitalizedatcost.Thecostofde-preciablepropertyretiredorreplacedisremovedfromutilityplantand,suchcost,plusremovalcosts,lesssalvage,ischargedtoaccumulateddepreciation.CostoflandretiredorsoldisremovedfromutilityplantandanygainorlossisreflectedontheState-mentofIncome.Expendituresformaintenanceandrepairsofpropertyandthecostofreplacementofitemsdeterminedtobelessthanunitsofpropertyarechargedtooperatingexpenses.AllowanceforEundsUsedDuringConstructionAsprovidedintheUniformSystemofAccounts,thecostoffundsusedtofinanceconstructionprojectsiscapitalizedaspartofconstructioncost.AfteraprojectisplacedinservicetheCompanyispermittedtoincludeinrateschargedforutilityserviceareturnon,anddepreciationof,thecostoffundssocapitalized.Thecomponentsofallowanceforfundsusedduringconstruction(allowance)shownontheStatementofIncomeunderotherincomeanddeductionsandinterestchargesarenon-cashitemsequaltothecostoffundscapitalizedduringtheperiod.TheallowanceservestooffsetontheStatementofIncomethecostoffinancingcon-struction.Theallowancerateiscomputedonanafter-taxbasis.During1975and1976,theallowanceratewascomputedsemiannuallyinaccordancewithpro-ceduresinitiatedbythePUCusingaspecifiedrateforcommonequityandthecostoffixed-ratesecur-25 itiesissuedinthetwelvemonthsprecedingthesemiannualcomputation.Since1977,theallowancehasbeencomputedinaccordancewithaFERCorderwhich(1)providesaformulafordeterminingthemaximumallowancerate,(2)providesforsemiannualcompoundingand(3)providesforsegregatingtheallowanceintotwocomponents,borrowedfundsandequityfunds.ThegrossborrowedfundscomponentisincludedasacreditintheinterestchargessectionoftheStatementofIncomeandtheremainderofthetotalallowancerecordedisshownunderotherincomeanddeductionsasequityfunds.Theallow-'ncehasnotbeenreclassifiedintoborrowedfundsandequityfundscomponentspriorto1977sincetheallocationwouldnotbecomparabletothatrequiredundertheFERCformula.DepreciationForfinancialstatementpurposes,thestraightlinemethodofdepreciationisusedtoaccumulateanamountequaltothecostofutilityplantandremovalcosts,lesssalvage,overtheestimatedusefullivesofproperty.Provisionsfordepreciationasapercentoftheaverageoriginalcostofdepreciablepropertyapproximated3.3%in1975and3.2%in1976,1977,1978and1979.RevenuesRevenuesarerecordedatthetimebillingsarerenderedtocustomers.EffectiveJanuary1,1979,allcustomershavebeenbilledmonthlyinaccordancewithaPUCorder.Priortothatdate,certaincus-tomerswerebilledmonthlyandothersbimonthly.TheCompanydoesnotaccruerevenuesrelatedtoenergydeliveredbutnotbilled.EuelandEhergyCostsRecoverableUnderAdjustmentClausesTheCompany'stariffshaveincludedfueladjust-mentclausesand,beginninginNovember1978,anenergyclause,underwhichcostsvaryingfromthelevelsallowedinapprovedbaserateschedulesarereflectedincustomers'illsafterthecostsareincur-red.TheenergyclauseappliestoallcustomersbilledunderPUCtariffsandafueladjustmentclauseap-pliestosubstantiallyallcustomersbilledunderFERCtariffs.Fuelandenergycostsrecoverableinthefuturethroughapplicationoftheclausesarede-ferredandchargedtoexpenseduringtheperiodsinwhichsuchcostsarebilledtocustomers.SeeNote2toFinancialStatementsforadditionalinformation.IncomeTaxesTheCompanyanditssubsidiariesfileaconsoli-datedFederalincometaxreturn.Incometaxesareallocatedtotheindividualcompaniesbasedontheirrespectivetaxableincomeorlossandinvestmenttaxcredits.IncometaxesareallocatedtooperatingexpensesandotherincomeanddeductionsontheStatementofIncome.Incometaxreductionsassociatedwiththeinterestexpensewhichisoffsetbytheborrowefundscomponentoftheallowanceforfundsuseduringconstructionconstitutetheprincipalitemofincometaxcreditsunderotherincomeanddeductions.DeferredtaxaccountingisfollowedforitemswheresimilartreatmentinratedeterminationshasbeenorisexpectedtobepermittedbythePUC.TheprincipalitemsareshownontheScheduleofTaxesonpage19.Othertaxreductionsrelatedprincipallytotheuseofthedecliningbalancedepreciationmethod,guide-linelivesandcertaintaxandpensioncostsareaccountedforundertheflow-throughmethod.Investmenttaxcreditsaregenerallyequalto10%of(1)thecostofcertainpropertyplacedinserviceand(2)progresspaymentsfortheconstructionofcertainfacilitiesthathaveaconstructionperiodofatleasttwoyears.Such10%taxcredits,whichresultinareductionofFederalincometaxespayable,aredeferredandamortizedovertheaveragelivesoftherelatedproperty.TheCompanyhasanemployeestockownershipplan(ESOP)whichpermitstheCompanytoclaimuptoanadditional1'/8/oinvestmenttaxcredit.AnamountequaltotheadditionalcreditutilizedispaidtotheESOPtrusteetoacquirecommonstockfromtheCompanyforemployees.RetirementPlanTheCompanyhasanoncontributoryretirementplancoveringsubstantiallyallemployees.Companycontributionstotheplanincludecurrentservicecostsandallamountsrequiredtoamortizeunfundedpriorservicecostsoverperiodsofnotmorethan20years.SeeNote6toFinancialStatementsforaddi-tionalinformation.CapitalStockExpenseNoamortizationplanisineffectforcapitalstockexpenseexceptfortheamountapplicabletothepreferredandpreferencestockserieswhicharetoberedeemedthroughsinkingfundprovisions.Suchamount($4.0millionatDecember31,1979)isamortizedtoearningsreinvestedasthestockisredeemed.EorcedOutageReserveandInsuranceAself-insurancereserveisprovidedtocovertheincreasedlevelofenergycostswhichareexperiencedwhenanyoftheCompany'smajorgeneratingunitsareforcedoutofserviceduetodamagecausedbyaccidentorotherunforeseeninsurableoccurrencesIncreasedenergycostsresultingfrompurchasinggeneratingreplacementpowerathighercostsorlos.ofinterchangesales,inexcessof$1.0millionforeachaccidentoroccurrence,arechargedtothereserve.AstocertainoftheCompany'slargegeneratingunits,26 PLEASESENDMEAPP&LPROFILE(1969-1979)NAME(PLEASEPRINTSSTREET&NUMBERCITYSTATEZIP

~'~~~~0'I~~~~~~~~~~~0 costschargeabletothereservearelimitedto$12.5illionsinceoutsideinsuranceiscarriedtocoverostsinexcessofthatamount.Thereserveisestablishedonthebasisofhistoricalexperienceand.hasbeenrecognizedinratemakingproceduresbythePUC.Anycostschargedtothereservearenotincludableintheenergyclausepaidbycustomers.AtDecember31,1979andDecember31,1978,thereservebalancewas$9.5millionand$7.8million,respectively.2.DeferredFuelCostRecoveryThePUChasauthorizedtheCompanytorecover,througha1-millperkwhchargetocustomers,thedeferredfuelcostswhichweretobecollectedthroughtheterminatedfuelclause.AsofDecember31,1979,theamountofsuchdeferredfuelcoststoberecoveredapproximated$32.2million.TheCompanyhasanadditional$7.1millionofdeferredfuelcostsincurredastheresultofthePUCplacingatemporaryceilingonthefueladjustmentclauseduringseveralmonthsfollowingthe1978coalminers'trike.Inanaccountingorder,thePUCstatedthattheCompanywouldbepermittedtorecovertheamountoffuelcostssodeferred,andtheCompanyhasrequestedthatrecoverybeaccom-plishedthroughapplicationofthe1-millperkwhhargediscussedabove.3.TheOneidaMiningCompanyIn1978,theCompanyterminatedundergroundcoalminingoperationsatTheOneidaMiningCompany(Oneida),awhollyownedsubsidiary,andtheassociatedcostsreducedtheCompany'snetincomeby$7.6million(20centspershareofcomm'onstock).In1977,awrite-offofaportionofOneida'sdevelopmentcostsreducedtheCompany'snetincomebyapproximately$6.6million(20centspershareofcommonstock).TerminationofminingatOneidaendedtheprocedureineffectsinceFebruary1977ofnotrecoveringthefullcostofOneidacoalintheCompany'sfueladjustmentclauses.Thispro-cedureadverselyaffectednetincomeby$2.5million(7centspershareofcommonstock)in1978and$4.3million(13centspershareofcommonstock)in1977.4.Short-TermDebtFinancingArrangementsShort-termdebtconsistsofbankloans(generallyborrowedforoneyearattheprimeinterestrateandprepayableatanytimewithoutpenalty)andcom-mercialpapernotes(generallymaturingwithin30to60days).Inordertoprovideinterimfinancingandback-upfinancingcapabilityforcommercialpaperotes,theCompanyhaslinesofcreditaggregating200millionwithvariousbanksthatrequireaverageannualcompensatingbankbalances(notlegallyrestrictedastowithdrawal)orthepaymentofcom-mitmentfees.Informationregardingsuchshorttermdebt,relatedinterestratesandlinesofcreditisasfollows(thousandsofdollars):Maximumaggregateshort-termdebtoutstandingatanymonth-endAveragedailyshort.termdebtoutstanding.............Weightedaverageinterestrateduringtheyear(a)Weightedaverageinterestrateatyear.endLinesofcreditatyear-endMaintainedbycompensatingbankbalancesMaintainedbycommitmentfeesCompensatingbankbalancerequirement..Annualcommitmentfeesatyearnd19791978$155,680192,003$70,53710.7%79,7078.6%12.5%10.1%$147,500$52,500$13,300$574147,50052,50013,300456(a)Calculatedbydividingshort-terminterestexpensefortheperiodbytheaverageaggregatedailyshorttermdebtout.standingduringtheperiod.6.RetirementPlanObligationsoftheCompany'sretirementplanarefundedthroughatrustfund.AtJune30,1979,theendofthefund'smostrecentfiscalyear,themarketvalueofthefund'sassetswere$127.8million,whichapproximatedcost.Pensioncostswere(millionsofdollars):1979,$14.7;1978,$13.0;1977,$11.3;1976,$9.8and1975,$8.8.AtJune30,1979,theactuariallycomputedvalueofvestedbenefitswasapproximatelyequaltothefund'sassetsatmarket,andtheactuariallycomputedunfundedpriorservicecostexceededthefund'sassetsatmarketbyapproximately$10.4million.Certainchangesintheactuarialmethod5.DividendRestrictionsTheCompany'scharterandmortgageindenturesrestrictthepaymentofcashdividendsoncommonstockundercertainconditions.Underthecharterprovisions,whicharethemorelimiting,norestric-tionsareeffectiveonthepaymentofsuchdividendsoutofearningsreinvestedatDecember31,1979.ThetermsrelatingtocertainseriesofpreferredandpreferencestockscontainprovisionstotheeffectthattheCompanywillnotdeclareorpayanydivi-dendson,ormakeanyotherdistributionofpropertywithrespectto,orpurchaseorotherwiseacquire,commonstockatanytimewhentheCompanyshallhavefailedtodischargeinfullitsobligationtoredeemsharesofthatseriesrequiredtoberedeemedpursuanttothesinkingfundsestablishedforthoseseries.Inadditiontotheserestrictions,approximately$3.1millionofearningsreinvestedwererestrictedastothepaymentofdividendsatDecember31,1979pursuanttopro'visionsofPartIoftheFederalPowerAct.27 andassumptionsandplanamendmentsmadeeffec-tiveJuly1,1979decreasedtheunfundedpriorservicecostbyapproximately$18.8millionandareexpectedtoincrease1980pensioncostsbyapproximately$1.4million.7.UtilityRealtyTaxRecentinterpretationsofacourtdecisionbythePennsylvaniaDepartmentofRevenuedeterminedthatcertainelectricutilitypropertywasexemptfromthePennsylvaniapublicutilityrealtytax.Asaresult,Pennsylvaniaelectricutilities,includingtheCompany,filedclaimsforrefundsofcertainprioryears'axpayments.InJuly1979,therealtytaxwasamendedtobroadenthetypeofpropertysubjecttotaxation,retroactivetotheyear1978.InNovember1979,theCompanyincreaseditstaxsurchargeratetoprovideforrecoveryoftheincreased1979realtytaxoveratwelvemonthperiodinaccordancewithaPUCorder.Includedinthenewtaxsurchargerateisanamounttorecoveraportionoftheincreased1979realtytaxwhichtheCompanyhaddeferredpendingapprovalofthenewtaxsurchargeratebythePUC.Inadditiontobroadeningthetaxablepropertybase,aone-timetaxof10.59oonthevalueofthenewtaxbasewasimposedbytheStateinordertorecovertherefundsclaimedbyelectricutilities.TheStateisrequiredtomakeageneralrepaymentoftheamountcollectedunderthe10.5'axtotheextentthatitexceedsthetotalrefundsgrantedtoutilities.Aftergivingeffecttopendingrefundclaimsof$31.4million,theCompany'sliabilityunderthe10.5%taxamountedto$8.3million,whichwaspaidtotheStateinSeptember1979.IfanyportionoftheCompany'spendingrefundclaimsisdisallowed,suchamountwouldhavetobepaidtotheState.TheCompanyrecordedthe$8.3millionpaidtotheStateasadeferredchargependingafinaldeter-minationbythePUCregardingrecoveryoftheadditionhltax.TheCompanybelievesthatthe$8.3millionadditionaltaxpaid,oranyadditionaltaxwhichmayultimatelybepaidasaresultofdisallow-anceofpendingrefundclaims,shouldberecoverablethroughthetaxsurchargeandintendstofilewiththePUCaproposaltorecoverthatamount.8.RentalsandLeaseCommitmentsPrincipalrentalcostsaffectingexpensewereasfollows(thousandsofdollars):ChargedtoOperatingFuelYearExpenseInventory(a)1979$14,4681,993197813,783',927197711,0232,349197610,5021,76119759,4771,276(a)Amountsrepresentrentalofrailroadcoalcarswhicharechargedtofuelinventoryandsubsequentlyincludedinfuelexpense.CapitalleaseassetsAccumulatedamortization......CurrentobligationsundercapitalleasesNoncurrentobligationsundercapitalleasesDecember3119791978$111,048103,731(53,247)~(41.884$57,80161,867$7,7048,0754,65557,649$62,35965,719Capitalizationoftheseleaseswouldnothaveamaterialeffectonoperatingexpenses.9.JointOwnershipofGeneratingPlantsAtDecember31,1979theCompanyownedun-dividedinterestsinjointly-ownedgeneratingsta-tionsasfollows(millionsofdollars):PlantInvestmentOwnershipSusquehanna(underconstruction).............$1,355.390.0070,Keystone..27.212.34Conemaugh................31.911.39TheCompanyreceivesaportionofthetotalsta-tionoutputequaltoitspercentageownershipinterest.TheStatementofIncomereflectstheCompany'sshareoffuelandotheroperatingcostsassociatedwiththetwooperatingstations.Eachparticipantprovidesitsownfinancing.10.AcquisitionofCoalReservesInFebruary1980,theCompanyenteredintoanagreementtoacquireapproximately8milliontonsAtDecember31,1979,theCompanyhadlong-ter'mleaseagreementswhichrequirefutureminimurentalsasfollows(millionsofdollars):1980,$15.1981,$14.3;1982,$13.1;1983,$11.5;1984,$9.6and1985toexpirationoftheleases,$78.1.TheCompanyalsoleasesotherpropertyundershort.termagree-mentswithrentalscurrentlyamountingtoapproxi-mately$4.6millionannually.Generally,long-termleasescontainrenewaloptionsandobligatetheCompanytopaymaintenance,insuranceandother'elatedcosts.TheleasesdonotincluderestrictionsonanyoftheCompany'sotherfinancialactivities.Certainoftheleasesarecapitalleasesinaccord-ancewithcriteriaestablishedbytheFinancialAccountingStandardsBoard.However,inkeepingwithratemakingtreatmentbythePUC,theCom-panyispermittedtoaccountforsuchleasesasoperatingleases.Theaggregateassetandliabilitybalancesthatwouldhavebeenrecordedrelativetoleasesmeetingthedefinitionofacapitalleaseareasfollows(thousandsofdollars):28 ofrecoverablebituminouscoalreservesfromThecadiaCo.,Inc.ofPennsylvaniaanditsstock-lders.TheacquisitionisexpectedtobecompletedySeptember1980,subjecttothereceiptofregula-toryapproval,andwillinvolvetheissuanceofapproximately500,000sharesoftheCompany'scommonstockforallofArcadia'soutstandingstockandthepaymentof$2millionforreservesheldbystockholdersasindividuals.11.CommitmentsandContingentLiabilitiesTheCompany'sconstructionexpendituresareexpectedtoaggregate$1.85billionduringthethreeyears1980-1982.Thisamountincludesabout$1.1billionforconstructionoftheSusquehannanucleargeneratingstationand$235millionfornuclearfuel.Expendituresforenvironmentalprotectionfacilitiesareexpectedtoapproximate$157millionduringthisperiod.Thescheduledin-servicedatesoftheSusque-hannaunitsareJanuary1982forUnitNo.1andJanuary1983forUnitNo.2.Constructionexpendi-turesfor1980areestimatedtoaggregate$660million,including$59millionfornuclearfueland$55millionrelatedtoenvironmentalprotectionfacilities.CertainoftheCompany'sgeneratingunitsarenotincompliancewithairpollutionregulationsestab-'edbythe1977AmendmentstotheFederalCleanrAct.TheCompanyisinstallingequipmentwhichexpectedtobringitsunitsintocomplianceby1981inaccordancewithconsentordersenteredintowiththePennsylvaniaDepartmentofEnvironmentalResources(DER)priortoenactmentofthe1977Amendments.However,theCompanymaybesub-jecttosubstantialfinesandpenaltiesbytheEn-vironmentalProtectionAgency(EPA).TheEPAhasadvisedtheCompanythatitdoesnotintendtoseekcivilpenalties(whichcouldamountto$25,000perdayofviolation)ifthecompliancedatesspecifiedintheDERconsentordersaremet.Basedonitsinter-pretationoftheformulaproposedbyEPA,theCompanyestimatesthatnoncompliancepenalties(whichdifferfromcivilpenalties)would,ifassessed,notexceed$2.0millionintheaggregate.TheCom-panyhasfileddatawiththeEPAprotestingtheimpositionofanypenalties.TheCompanyatDecember31,1979hadguaran-teedcapitalandotherobligationsofcertainbitu-minouscoalsuppliers(includingsubsidiarycoalcompanies)aggregating$170.8million.12.1980FinancingEventsTheCompanycompletedthefollowingsecuritytransactionsthroughFebruary1,1980:January2,1980-redeemed40,000shares($4million)ofPreferenceStock,$9.25Series,inaccordancewithsinkingfundprovisions.January25,1980-issued510,000shares($51million)ofPreferenceStock,$8.625Series,toinstitutionalinvestors.February1,1980-retired$37millionofmaturingFirstMortgageBonds,2n/49oSeries,anda$20million7%Notewhichalsomatured.Proceedsfromthesaleofpreferencestockwereusedforgeneralcorporatepurposesincludingthereductionofshort-termdebtincurredtoprovideinterimfinancingforconstructionandnuclearfuelexpenditures.13.SummaryofQuarterlyResultsofOperations(Unaudited)QuarterEndedOperatingRevenuesOperating,NetIncomeIncomeThousandsofDollarsEarningsApplicabletoCommonStockEarningsPerShareofCommonStock(a)1979March(b).June.SeptemberDecember.1978MarchJuneSeptember(c)December.227,129191,047185,205194,95847,52440,02137,66643,391$253,814$58,490207,77739,145199,89241,450199,01543,738$59,19637,75342,48942,76044,33835,87628,20140,620$47,81626,24629,99229,47834,38325,92017,56029,502$1.220.660.750.710.980.690.450.76)Basedontheaveragenumberofsharesoutstandingduringthequarter.Resultsforthefirstquarterof1979includetheeffectofconvertingapproximately740,000customersfrombimonthlytomonthlybillinginJanuary1979whichincreasedbaseraterevenuesbyapproximately39.9million.Theadditionalrevenue,lessestimatedadditionalcosts,increasedearningspershareofcommonstockbyaboutiicentsinthefiretquarterand7centsfortheyear.(c)Resultsforthethirdqunrtnrof1978indudealossrelatedtoTheOneidaMiningCompany.SneNote3toFinancialStatements.29 Nanagement'sReportontheFinancialStatementsThemanagementofPennsylvaniaPower&LightCompanyisresponsibleforthepreparation,integrityandobjectivityofthefinancialstatementsandothersectionsofthisannualreport.ThefinancialstatementshavebeenpreparedinconformitywithgenerallyacceptedaccountingprinciplesandtheUniformSystemofAccountsprescribedbytheFederalEnergyRegulatoryCommission.Inpreparingthefinancialstatements,managementmakesinformedestimatesandjudgementsoftheexpectedeffectsofeventsandtransactionsbaseduponcurrentlyavailablefactsandcircumstances.TheCompanymaintainsasystemofinternalaccountingcontrolsdesignedtoprovidereasonable,butnotabsolute,assurancethatassetsaresafeguardedandthat,transactionsandeventsareexecutedinaccordancewithmanagement'sauthorizationandrecordedproperlytopermitpreparationofreliablefinancialstatements.Theconceptofreasonableassurancerecognizesthatthecostofasystemofinternalaccountingcontrolsshouldnotexceedthebenefitsderivedandthatthereareinherentlimitationsintheeffectivenessofanysystemofinternalaccountingcontrols.Fundamentaltothecontrolsystemistheselectionandtrainingofqualifiedpersonnel,anorganizationalstructurethatprovidesappropriatesegregationofdutiesandtheutilizationofwrittenpoliciesandprocedures.Inaddition,theCompanymaintainsaninternalauditingprogramtoevaluatetheadequacy,applicationandcompliancewiththeCompany'sinternalaccountingcontrols,policiandprocedures.DeloitteHaskins&,Sells,independentcertifiedpublicaccountants,areengagedtoexamineandtorenderanopinionastowhetherthefinancialstatements,consideredintheirentirety,presentfairly,inconformitywithgenerallyacceptedaccountingprinciples,theCompany'sfinancialposition,operatingresultsandchangesinfinancialposition.Theirexaminationisconductedinaccordancewithgenerallyacceptedauditingstandardsandincludessuchproceduresbelievedbythemtobesufficienttoprovidereasonableassurancethatthefinancialstatementsarenotmateriallymisleadinganddonotcontainmaterialerrors.TheBoardofDirectors,actingthroughitsAuditCommittee,overseesmanagement'sresponsibilitiesinthepreparationofthefinancialstatements.TheAuditCommittee,whichiscomposedofdirectorswhoarenotemployeesoftheCompany,meetsperiodicallywithmanagement,theinternalauditorsandtheindependentcertifiedpublicaccountantstoreviewtheworkofeachandtoassurethateachisproperlydischargingitsresponsibilities.DeloitteHaskins&SellsandtheinternalauditorshavefreeaccesstotheAuditCommitteeortotheBoardofDirectors,withoutmanagementpresent,todiscussinternalaccountingcontrol,auditingandfinancireportingmatters.30 DELOITTEHASKINS8i.SELLSCertifiedPublicAccountantsTwoBroadwayNewYork,NewYork10004ToShareownersandBoardofDirectorsofPennsylvaniaPower8:LightCompany:WehaveexaminedthebalancesheetsofPennsylvaniaPower&LightCompanyasofDecember31,1979and1978andtherelatedstatementsofincome,earningsreinvested,andchangesinfinancialpositionforeachofthefiveyearsintheperiodendedDecember31,1979.Ourexaminationsweremadeinaccordancewithgenerallyacceptedauditingstandardsand,accordingly,includedsuchtestsof.theaccountingrecordsandsuchotherauditingproceduresasweconsiderednecessaryinthecircumstances.Inouropinion,suchfinancialstatementspresentfairlythefinancialpositionoftheCompanyatDecember31,1979and1978andtheresultsofitsoperationsandchangesinitsfinancialpositionforeachofthefiveyearsintheperiodendedDecember31,1979,inconformitywithgenerallyacceptedaccountingprinciplesappliedonaconsistentbasis.February4,1980Fisca1AgentsSecuritiesListedOnExchangesTRANSFERAGENTSFORPREFERRED,PREFERENCEANDCOMMONSTOCKIndustrialValleyBankandTrustCompany634HamiltonMallAllentown,Pennsylvania-18101IrvingTrustCompanyOneWallStreetNewYork,NewYork-10015PennsylvaniaPower&LightCompanyTwoNorthNinthStreetAllentown,Pennsylvania-18101REGISTRARSFORPREFERRED,PREFERENCEANDCOMMONSTOCKTheFirstNationalBankofAllentownHamiltonMallatSeventhAllentown,Pennsylvania-18101MorganGuarantyTrustCompanyofNewYork23WallStreetNewYork,NewYork-10015IVIDENDDISBURSINGOFFICEANDVIDENDREINVESTMENTPLANAGENTTreasurerPennsylvaniaPowerkLightCompanyTwoNorthNinthStreetAllentown,Pennsylvania-18101NEWYORKSTOCKEXCHANGEFirstMortgageBonds,10'/s%Seriesdue19824'A%PreferredStock(Code:PPLPRB)4.40%SeriesPreferredStock(Code:PPLPRA)8.60%SeriesPreferredStock(Code:PPLPRG)9.24%SeriesPreferredStock(Code:PPLPRM)PreferenceStock,$8.00Series(Code:PPLPRJ)PreferenceStock,$8.40Series(Code:PPLPRH)PreferenceStock,$8.70Series(Code:PPLPRI)PreferenceStock,$11.00Series(Code:PPLPRL)PreferenceStock,$13.00Series(Code:PPLPRK)CommonStock(Code:PPL)PHILADELPHIASTOCKEXCHANGE4'A%PreferredStock3.35%SeriesPreferredStock4.40%SeriesPreferredStock4.60%SeriesPreferredStock8.60%SeriesPreferredStock9%SeriesPreferredStock9.24%SeriesPreferredStockPreferenceStock,$8.00SeriesPreferenceStock,$840SeriesPreferenceStock,$8.70SeriesPreferenceStock,$11.00SeriesPreferenceStock,$13.00SeriesCommonStock31 StatisticalSummaryFinancialDataCapitalprovidedbyinvestors-thousands(a)(b)Returnonaveragecapitalprovidedbyinvestors-%Returnonaveragecommonequity-%.......Fixedcostrateonlong-termdebtandpreferredandpreferencestock-%(a)......CommonstockdataBookvalue(a).Dividendpayoutrate-%Dividendyield-%(c).Priceearningsratio(c).Timesinterestearnedbeforeincometaxes....Numberofshareowners-preferred,preferenceandcommon(a)................SalesDataElectriccustomers(a)Electricenergysales-millionsofkwhResidentialCommercialIndustrialOtherSourcesofenergysold-millionsofkwhGeneratedCoal-firedsteamstations................Oil-firedsteamstation(d)Combustionturbinesanddiesels(oil)....HydroelectricstationsPowerpurchasesInterchangepowersalesCompanyusesandlinelossesTotalelectricenergysales.............Averageannualresidentialkwhuse.........Averagepriceperkwhforallcustomers-cents.GenerationDataGeneratingcapability-thousandsofkw(a).Winterpeakdemand-thousandsofkw(e)..Generationbyfuelsources-%CoalOil(d)Hydroelectric~Steamstationavailability-%Coal-firedOil-fired.Steamstationutilization-%Coal-firedOil-fired.Fuelcost-centsperkwh1979$3,374,14910.0012.918.76$25.576210.385.922.72205,404987,0058,0665,5548,13580022,55526,4875,7778779933,1002,124(11,089)(1,580)22,5559,3533.756,5464,42780.017.62476.680.073.140.216519782,975,1119.2211.478.0025.12689.007.462.98205,506972,9937,7645,4087,89178121,84424,1676,42610670131,4001,319(9,010)(1,865)21,8449,1663.596,5364,701'77.020.82.273.573466.644.71.4719772,630,5349.8414.018.0124.58578.176.863.35195,229954,6137,5395,2117,69775421,20126,2996,27111573533,4201,977(12,433)(1,763)21,201'9,0633.45615464>52478.719.12.277.880.372.646.51.3519762,406,1368.8311.617.9123.45688.617.802.62184,841936,2197,2674,8747,48173220,35425,7511,9474080928,5472,126(8,358)(1,961)20,3548,9813.105,7174,51490.27.02.878.168.870.626.41.1719762,100,04.8.7612.527.7623.17639.526.592.80171,766917,9206,8184,5757,02070019,11325,3841,1498272,241(8,757)(1,847)19,1138,5282.785,7174,12292.44.53.179.075.470.131.41.04Note:StatisticsincludeHersheyElectricCompanysinceJanuary1,1977.(a)Yearend.(b)Includesshort-andlong-termdebt,preferredandpreferencestockandcommonequity.(c)Basedonaverageofmonth<ndmarketprices.(d)Oneoil.firedsteamunitbegancommercialoperationinOctober1975andasecondunitinMarch1977.(e)Thewinterpeaksshownwerereachedearlyinsubsequentyear.In1976,peakisthatwhichwouldhaveoccurredifa5%voltagereduc-tionhadnotbeenineffect.Actual1976peakwas4,425,000kilowatts.

QuarterIyDividendsandNarketPriceofVotingSecuritiesReportedMarketPrice-DollarsperShareQuarterlyDividendsDeclared1stQuarterHighLow2ndQuarterHighLow3rdQuarterHighLow4thQuarterHighLow1979CommonStock..........PreferredStock4'/e%Series3.35%4.60%7.40%(a)7.50%(a)............7.75%(a)............8.00%(a)..........~~8.00%,Second(a)....8.25%(a)8.60%8.75%(a)............9.00%..........~....9.24%PreferenceStock$8.00................$8.40................$8.70...........~....$9.25(a).............$11.00~..............$13.00...............$0.511.1250.83751.101.151.851.875(b)1.93752.002.00(c)2.0625(d)2.15(e)2.252.312.002.102.1752.31252.753.2521'/e19'/447443431'643'/247457/e207/e18%4742322445'/240/44442'/22119'/e46'/e433831'/e46e/i43'/i474319'7/e44'/e3729~/i264535'/440i/e3690'/s8490'/484/c928192848985e/49185103991037/e10010510181'/i7087~/e7210185'/e109102'/4116112108100114e/i109108100114106103'/294107'0280'/i7577i/472'/28174i/276'/e628480'/e82'/277'/484/276/e77'/266'/286'/283'/285/i7886767768'/41978ommonStock..PreferredStock4'/e%Series3.35%4.40%4.60%7.40%(a)7.75%(a)....8.00%(a)8.60%9.00%9.24%$0.481.1250.83751.101.151.851.9375(f)2.002.152.252.3124/421/222'/e20/e22%20/e21%1953i/249524851i/e47i/e50i/<4410196999099'/z100'/495'/<98'/e92'/498107'/i102105100105'/28994e/4101s/<97e/e8596891069937/e35e/e36'/c33'/235'/233%34/e31'/2534850'/24750'/247'li50'/24452495147'/e51'/24950'/444PreferenceStock$8.00.......$8.40.......$8.70.......$9.25(a)....$11.00......$13.00......2.002.102.1752.31252.753.2592'/e87'/e898586%97919386'A9199'/29295'/e8894112'/2108'/e109e/i106'/i111127/412212511912782e/i851/288e/4106'/4119e/<84'/e74'/289'A8092'/e82111101122e/<112'/zTheprincipaltradingmarketforallclassesofstockistheNewYorkStockExchangeexceptforthe335%,4.60%and900%SeriesPreferredStockswhicharelistedonthePhiladelphiaStockExchangebutaretradedprimarilyover.th~ounter.Pricerangesforthe3.35%,4.60%and9.00%SeriesPreferredStocksarebasedonthebestavailablehighandlowbidpricesduringtheperiodsandshouldbeviewedasreasonableapproximations.(a)Stockwasissuedinaprivateplacementandisnotpubliclytraded.)StockwasissuedFebruary1979;thepartialfirstquarterdividendwas$1.25.StockwasissuedJanuary1979;thepartialfirstquarterdividendwae$1.667.)StockwasissuedJuly1979;thepartialthirdquarterdividendwas$2.0396.(e)StockwasissuedNovember1979;thepartialfourthquarterdividendwas$1.2882.(f)StockwasissuedAugust1978;thepartialthirdquarterdividendwas$1.141.33 SupplementaryInfOrmatiOnOnChangingPriCeS(Unaudited)TheFinancialAccountingStandardsBoard(FASB),anorganizationthatestablish'esrulesforaccountingandfinancialreporting,hasissuedastatementthatrequiresthepresentationofcertaininformationontheeffectsofchangingpricesincorporateannualreports.InflationhasbecomeanincreasinglysignificantfactorintheeconomiclifeoftheUnitedStatesduringthelastdecade.Customaryfinancialreportinggenerallyhasnotattemptedtospecificallyreflectinflation.AmountsintheCompany'sfinan-cialreportsgenerallyreflecttheirhistoricalcostornetrealizablevalue.TheFASBstatementrequiresthatcertainaspectsofinflationbecomputedinaccordancewithprescribedtechniquesandreportedonanexperimentalbasis.TheFASBrecognizes,andtheCompanycautionsusersofthisinformation,thatthereisnoconsensusonthegeneralpracticalusefulnessofthissupple-mentaryinformation.Therearealsounresolvedimplementationproblemsandconc'eptualdiffer-encesregardingthemannerinwhichtheeffectsofchangingpricesshouldbemeasured.TheinflationdatashownbelowarepresentedincompliancewithFASBrequirements.Becauseoftheexperimentalnatureofthissupplementaryinformation,manage-menthasnotconcludedthatthedataarefairrepre-sentationsoftheimpactofinflatioonPennsylvaniaPower&LightCompany.Inaperiodofinflation,theamountofgoodsandservicesonedollarwillbuydeclines.Sincefinancialdataofteninvolvedollarsexpendedindifferentyears,itissuggestedthatcombiningorcomparingsuchdollarsismisleading.Therefore,thefollowingdatawereadjustedtodollarsofthesamepurchasingpowerbyapplicationoftheU.S.GovernmentConsumerPriceIndexforAllUrbanConsumers(CPI-U).Thisrepresentsameasurementofchangingpricesduetogeneralinflationandisreferredtoasaccountingintermsof"constantdollars".TheCompanyhaselectedtopresentthedatainaccordancewiththepartialrestatementprovisionoftheFASBstatement.Underthisprovision,utilityplant,netofaccumulateddepreciation,anddeprecia-tionexpensearetheonlyitemsrestatedtoageneralinflationlevel.Fuelinventoriesandthecostoffuelusedingenerationhavenotbeenrestatedfromtheirhi5tori'calcost.Underrateregulationtherecoveryofthecostoffuelthroughtheenergyclauseislimitedtotheactualcostofthefuelburned.The"SupplementaryStatementofIncome"shownontheadjacentpagehasbeenadjustedfortheeffect,ofincreaseddepreciationintermsofconstantdollmeasurement.Revenues,incometaxesandexpensotherthandepreciationarepresentedattheamountreportedinthebasicfinancialstatements.Setforthunder"OtherInflationImpacts"arethefollowing:1.Gainfromdeclineinpurchasingpowerofnetamountsowed.Inflationalsoaffectsmonetaryassets,suchascashandreceivableswhichlosepurchasingpowerduringinflationaryperiodssincetheseassetswillpurchasefewergoodsorservicesintime.Conversely,holdersofmonetaryliabilitiesbenefitduringsuchperiodsbecauselesspur-chasingpowerwillberequiredtosatisfytheseobligations.Forpurposesofthispresentation,thepreferredandpreferencestockissuessubjecttosinkingfundrequirementsandtheaccumulateddeferredinvestmenttaxcreditsweretreatedasmonetaryitems.TheCompany'snetmonetaryliabilitypositionwasdueprimarilytotheamountofdebtandpreferredandpreferencestocksubjecttosinkingfundsoutstandingwhichwereusedtofinancetheconstructionofutilityplant.2.Reductiontonetrecoverableamount.Undertheratemakingprescribedbytheregula-torycommissionstowhichtheCompanyissubject,onlythehistoricalcostofutilityplantisrecoverableinrevenuesasdepreciation.Therfore,theexcessofthecostofnetutilityplastatedintermsofconstantdollarsoverth.historicalcostisnotrecoverableinratesasdepreciationandisreflectedasareductiontothenetrecoverableamount.Thereductionreflectsonlytheeffectsof1979generalinflationonthehistoricalcostofutilityplant.Alsoshownontheadjacentpageareselectedcomparativefinancialdataasreported,andadjustedtothelevelofaverage1979dollars.CurrentCostDataTheFASBstatementalsoincludedprovisionsfordisclosingcertaineffectsofspecificpricechangesonacompany,or"currentcost"data.TheCompanywillincludetheadditionalcurrentcostdisclosureitemsinitsannualreporttotheSecuritiesandExchangeCommissiononForm10-K.Thereplace-mentcostdatapreviouslyincludedinForm10-Kwillnolongerbepresented.

upplementaryStatementIncomefor1979OperatingrevenuesOperatingexpensesDepreciationOther.Interestexpense.Otherincomeanddeductions-net.............Dividendsonpreferredandpreferencestock...EarningsapplicabletocommonstockEarningspershareofcommonstock76,151601,524677,67583,624(82,999)48,666726,966$133,532141,369(a)601,524742,89383,624(82,999)48,666792,184$68,314(b)$3.32$1.70(b)AsReportedAdjustedforinFinancialStatementsGeneralInflation(HistoricalCost)(InAverage1979Dollars)ThousandsofDollars$860498$860,498Netassetsatyear.end(c)OtherInflationImpactsGainfromdeclineinpurchasingpowerofnetamountsowedReductionofnetutilityplanttonetrecoverableamount$1,344,816$1,265,162$252,753$343,952(a)UtilityplantwasadjustedbyapplyingtheCPI.Uindextothehistoricalcostofsurvivingplant.Theadjustedprovisionfordepreciationwasdeterminedbyapplyingthefunctionalclassdepreciationaccrual'ratestotherespec-tiveaverageyearendbalancesofdepreciableplantadjustedforgeneralinQation.(b)Excludingtheeffectsof(1)reductionofnetutilityplanttonetrecoverableamountand(2)thegainfromdeclineinpurchasingpowerofnetamountsowed.(c)Netassets(shareowners'quity)forpurposesofthissupplementarydisclosureincludecommonequityandthepreferredandpreferencestockissueswithonlyoptionalredemptionprovisions.Thepreferredandpreferencestockissuessubjecttomandatorysinkingfundprovisionshavebeenexcludedsincetheyweretreatedasmonetaryitems.SupplementaryFive-YearComparisonofSelectedFinancialData19791978197719761975Operatingrevenues(thousandsofdollars)AthistoricalcostInaverage1979dollars$860,498798,339744,731644,147544,129$860,498889,041892,857822,090734,507CashdividendsdeclaredpercommonshareAthistoricalcost.Inaverage1979dollars$2.04$2.041.922.141.892.261.802.301.802.42Marketpricepercommonshareatyear-endAthistoricalcostInaverage1979dollarsAverageconsumerpriceindex(CPI-U)$17.7519.2523.1222.2519.75$16.7020.6427.0427.7825.84217.6195.4181.5170.5161.235 Of6cersDirectorsROBERTK.CAMPBELL,PresidentandChiefExecutiveOfficerROBERTR.FORTUNE,.ExecutiveVicePresident,FinancialJOHNT.KAUFFMAN,ExecutiveVicePresident,OperationsHARLEYL.COLLINS,VicePresident,SystemPotver&EngineeringMERLINF.HERTZOG,AssistantVicePresident,HumanResource&DevelopmentEMMETM.MOLLOY,VicePresident,HumanResource&DevelopmentLEONL.NONEMAKER,VicePresident,DivisionOperationsCHESTERR.COLLYER,TreasurerNORMANW.CURTIS,VicePresident,Engineering&ConstructionCHARLESE.FUQUA,VicePresident,SusquehannaDivisionCHARLESJ.GREEN,VicePresident,HarrisburgDivisionBRUCED.KENYON,AssistantVicePresident,lVuclearRICHARDH.LICHTENWALNER,VicePresident,InformationServicesCARLR.MAIO,VicePresident,LehighDivisionGRAYSONE.McNAIR,VicePresident,Consumer&CommunityServicesEDWARDM.NAGEL,VicePresident,GeneralCounselandSecretaryHERBERTD.NASHJR.,VicePresident,CentralDi'visionJOHNE.ROTH,VicePresident,NorthernDivisionCHARLESE.RUSSOLI,VicePresident,FinanceEDWINH.SEIDLER,VicePresident,DistributionBRENTS.SHUNK,VicePresident,LancasterDivisionJEANA.SMOLICK,AssistantSecretaryDONALDJ.TREGO,AssistanlTreasurerGEORGEF.VANDERSLICE,VicePresidentandComptrollerPAULINEL.VETOVITZ,AssistantSecretaryHELENJ.WOLFER,AssistantSecretaryCorporateManagementCommittee:RobertK.Campbell,chairman;RobertR.Fortune,JohnT.Kaufl'man,HarleyL.Collins,hfcrlinF.Hertxog,Einmethi.hiolloy,LeonLNonemekerandFredKornetJr.,manager-CorporateAdmimstrationservingasthecoinmittee'sexecutivesecretary.TheexecutiveorganisationchartoftheCoinpanyisincludedinthePP&LProfile.ROBERTK.CAMPBELL,AllentownPresidentandChiefExecutiveOfficerRALPHR.CRANMER,WillinmsportMemberofBoardofDirectors-GritPublishingCompanyEDGARL.DESSEN,HnzletonPhysician-RadiologistROBERTR.FORTUNE,AllentownExecutiveVicePresident,FinancialHARRYA.JENSEN,LancasterPresidentandChiefExecutiveOfficer,ArmstrongCorkCompanyManufacturerofinteriorfurnishingsandspecialtyproductsJOHNT.KAUFFMAN,AllentownExecutiveVicePresident,OperationsVIRGINIAH.KNAUER,Washington,D.C.President,VirginiaKnauerandAssociatesInc.ConsumerconsultantsW.DEMINGLEWIS,BethlehemPresidentofLehighUniversityHAROLDS.MOHLER,HersheyChairmanoftheBoardandChairmanoftheExecutiveCommitteeofHersheyFoodsCorporationDiversifiedmanufactureroffoodproductsJOHNA.NOBLE,ScrantonPresidentofSimpsonRealEstateCorp.RUTHPATRICK,PhiladelphiaSeniorCuratoroftheLimnologyDepartment,AcademyofNaturalSciencesRALPHW.RICHARDSONJR.,StateCollegeConsultant:AgriculturalandEnvironmentalSciencesNORMANROBERTSON,PittsburghSeniorVicePresidentandChiefEconomistofMellon.Bank,N.A.ExecutiveCommittee:RobertK.Campbell,chairman;RalphR.Cranmer,HarryA.JensenandW.DemingLewis.AuditCommittee:HarryA.Jensen,chairman;VirginiaH.Knauer,HaroldS.hiohlerandJohnA.Noble.CompensationCommittee:NormanRobertson,chairmen;EdgarLDessen,VirginiaH.KnauerandJohnA.Noble.SelectionCommittee:RuthPatrick,chairman;RalphR.Craniner,W.DemingLewis,RalphW.RichardsonJr.andNormanRobertson.CorporateResponsibilityCoimnittee:RalphR.Craniner,chairman;EdgarLDeesen,HaroldS.hiohler,RuthPatrickandRalpht'i'.RichardsonJr.TheCompany'sannualreportfiledwiththeSecuritiesnndExchangeCommissiononForm10-Kwillbeavailablemid-March.Ashareownermnyobtainncopy,atnocost,bywritingtoPennsylvaniaPower&,LightCompany,TwoNorthNinthStreet,Allentown,Pn.18101,attention:Mr.GeorgeI.Klino,InvestorServicesManager.36 ATribotetoJackBusby~P~~ad+IIlsOftenaman'swordsarethebestmeasureofwhohereallyis.FollowingareexcerptsfromaninterviewwithJackBusbyshortlybeforehisretirementlastJuly.PrintinghiswordshereisPP&L'stributetothemanwholeftanindeliblemarkonthecompany.OnPP&L"WhenIjoinedthecompanyithadaverystrong,clearcommitmenttopublicandcommunityservice.We'econtinuedthisandevenstrengtheneditalittlebitandIthinkthecompanystandstodaycommittedtothosesamevalues."OnRegulationNuclearEnergyOnPP&L'sCredibility"It'snotgoingtodoanygoodtositdownandcurseregulations.YouknowwhattheChristopherssay:'It'sbettertolightonecandlethantocursethedarkness.'ellIthinkwe'dbetterjustconcentrateontryingtomakesureweunderstandwhattheproblemsareandtrytocontributetowardsolvingthem.""Ithinkthegreatestcontributionwecouldmakeistotrytopointoutthevariouspathsthatmaybeavailable,eachoneofwhichhasapriceandacost,andadvantagesanddisadvantages,insolvingourenergyneeds.Thereisnosimpleanswerthatthisisgoodandthatisbad.Ithinkifwecanhelpthepublicunderstandthatit'snotaquestionofbeingfororagainstnuclear,itisaquestionofwhatisthebestwaytoapproachthisverycomplexproblemofhavingadequatesuppliesofenergyfortodayandtomorrow.Abigpartofthatproblemishowmuchenergydoyouwant?""Itakealotofsatisfactioninthatthecompanyhadbefore,andcontinuestohave,aprettygoodreputationforbeingadecentoutfitthat,whentheytellyousomething,it'sthestraightstuff."OnPP&LPeople"ThegreatestsatisfactionIhaveisthatthecompanyisnotnecessarilyloved,butit'sprettywellrespectedasareliablesourceofdecentpeoplewhocare,whotrytogiveyougoodanswers.We'enotfreefrommistakes,butwe'ewillingtoadmitthemandtryitoveragain."JackK.BusbyJoinedPP&I,-1951ExecutiveVicePresidentandDirector-1956President-1957ChiefExecutiveOfficer-1964Retired-1979 F"PennsylvaniaPower6LightCo.TwoNorthNinthStreet~Allentown,PA18101TelephoneAreaCode215/821-5151 II-A-4G.F.VandersliceQ.4.ProvidelatestProspectus(CompanyandParent).A.4.AttachmentII-A-4aprovidesthelatestProspectusissuedbyPP6L.AttachmentII-A-4bprovidesSecuritiesandExchangeCommissionForm10-KfortheyearendedDecember31,1979.

$100,000,000PennsylvaniaPower8LightCompanyFirstMortgageBonds,15s/e%Seriesdue2010InterestpayableApril1andOctober1DueApril1,2010TheBondswillberedeemableatanytimeattheapplicableGeneralandSpecialRedemptionPricessetforthherein,withaccruedinteresttothedatefixedforredemption,exceptthatpriortoApril1,1985noredemptionmaybemadeattheapplicableGeneralRedemptionPricewithorinanticipationoffundstobeborrowedhavinganeffectiveinterestcosttotheCompanyoflessthan15.8884%perannum.TheSpecialRedemptionPricesareapplicabletoredemptionsfromcashintheMaintenanceandReplacementFundandincertainothercircumstances.TheinitialGeneralandSpecialRedemptionPricesare115.16%and100.00%,respectively.TheCompanyhasagreednottoapplyanycashdepositedwiththeTrusteepursuanttotheMaintenanceandReplacementFundtotheredemptionoftheBondssolongasanyoftheFirstMortgageBondspresentlyOutstandingremainOutstanding.See"DescriptionofBonds".THESESECURITIESHAVENOTBEENAPPROVEDORDISAPPROVEDBYTHESECURITIESANDEXCHANGECOMMISSIONNORHASTHECOMMISSIONPASSEDUPONTHEACCURACYORADEQUACYOFTHISPROSPECTUS.ANYREPRESENTATIONTOTHECONTRARYISACRIMINALOFFENSE.PricetoUnderwritingProceedstoPublic(1)Discount(2)Company(1)(3)PerBond99.527%1168%98.359%Total$99,527,000$1,168,000$98,359,000(1)PlusaccruedInterestfromApril1,1980todateofdelivery.(2)TheCompanyhasagreedtoIndemnifythePurchasersagainstcertaincivilliabilities,includingcertainliabilitiesundertheSecuritiesActof1933.(3)BeforedeductionofexpensespayablebytheCompany,estimatedat$220,000.TheBondsareofferedwhen,asandifacceptedbythePurchasersnamedwithin,andsubjecttoapprovalofcertainlegalmattersbycounsel,priorsale,orwithdrawai,cancellationormodificationoftheofferwithoutnotice.ItisexpectedthatdeliveryoftheBondswillbemadeattheofficeofSalomonBrothers,OneNewYorkPlaza,NewYork,NewYork,orthroughthefacilitiesofTheDepositoryTrustCompany,onoraboutApril2,1980.MorganStanley&Co.IncorporatedSalomonBrothersDillon,Read&Co.Inc.E.F.Hutton&Companyinc.ShearsonLoebRhoadesInc.ThedateofthisProspectusisMarch25,1980.

INCONNECTIONWITHTHISOFFERING>THEPURCHASERSMAYOVER-ALLOTOREFFECTTRANSACTIONSWHICHSTABILIZEORMAINTAINTHEMARKETPRICEOFTHESECURITIESOFFEREDHEREBYATALEVELABOVETHATWHICHMIGHTOTHERWISEPREVAILINTHEOPENMARKET.SUCHSTABILIZING>IFCOMMENCED>MAYBEDISCONTINUEDATANYTIME.TheCompanyissubjecttotheinformationalrequirementsoftheSecuritiesExchangeActof1934andinaccordancetherewithfilesreportsandotherinformationwiththeSecuritiesandExchangeCommission.Informationconcerningdirectorsandofficers,theirremunerationandanymaterialinterestofsuchpersonsintransactionswiththeCompany,asofparticulardates,isdisclosedinproxystatementsdistributedtostockholdersoftheCompanyandfiledwiththeCommission.Suchreports,proxystatementsandotherinformationcanbeinspectedandcopiedatthepublicreferencefacilitiesmaintainedbytheCommissionat1100LStreet,N.W.,Washington,D.C.;219South

DearbornStreet,

Chicago,IL;26FederalPlaza,NewYork,NY;and10960WilshireBoulevard,LosAngeles,CA.CopiesofthismaterialcanalsobeobtainedatprescribedratesfromthePublicReferenceSectionoftheCommissionatitsprincipalofficeat500NorthCapitolStreet,N.W.,Washington,D.C.20549.TheCommonStockoftheCompanyislistedontheNewYorkandPhiladelphiaStockExchanges.Reports,proxystatementsandotherinformationconcerningtheCompanycanbeinspectedandcopiedattherespectiveofficesoftheseexchangesatRoom401,20BroadStreet,NewYork,NY,andat17thStreetandStockExchangePlace,Philadelphia,PA.Inaddition,reports,proxystatementsandotherinformationconcerningtheCompanycanbeinspectedattheofficesoftheCompany,TwoNorthNinthStreet,Allentown,PA.Nodealer,salesmanorotherpersonhasbeenauthorizedtogiveanyinformationortomakeanyrepresentationnotcontainedinthisProspectusinconnectionwiththeoffermadebythisProspectusand,ifgivenormade,suchinformationorrepresentationmustnotberelieduponashavingbeenauthorizedbytheCompany.ThisProspectusisnotanoffertosellorasolicitationofanoffertobuyinanyjurisdictioninwhichitisunlawfultomakesuchanofferorsolicitation.NeitherthedeliveryofthisProspectusnoranysalemadehereundershall,underanycircumstances,createanyimplicationthattherehasbeennochangeintheaffairsofthe'Companysincethedatehereof.INCORPORATIONOFCERTAINDOCUMENTSBYREFERENCEThefollowingdocumentsareincorporatedhereinbyreferenceandmadeaparthereof:1.TheCompany'sAnnualReportonForm10-KdatedFebruary27,1980fortheyearendedDecember31,1979.2.TheCompany'sdefinitiveProxyStatementdatedMarch17,1980inconnectionwithitsannualmeetingofshareownersscheduledtobeheldonApril23,1980.AlldocumentsfiledbytheCompanypursuanttoSections13,14or15(d)oftheSecuritiesExchangeActof1934afterthedateofthisProspectusandpriortotheterminationoftheofferingoftheBondsofferedherebyshallbedeemedtobeincorporatedbyreferenceinthisProspectusandtobeaparthereoffromthedateoffilingofsuchdocuments.THECOMPANYHEREBYUNDERTAKESTQPROVIDEWITHOUTCHARGETOEACHPERSONTQWHOMACOPYOFTHISPROSPECTUSHASBEENDELIVERED,ONTHEWRITTENREQUESTOFANYSUCHPERSON.ACOPYOFANYORALLQFTHEDOCUMENTSREFERREDTOABOVEWHICHHAVEBEENORMAYBEINCORPORATEDINTHISPROSPECTUSBYREFERENCE,OTHERTHANEXHIBITSTOSUCHDOCUMENTS.WRITTENREQUESTSFQRSUCHCOPIESSHOULDBEDIRECTEDTQPENNSYLVANIAPOWER8LIGHTCOMPANY,INVESTORSERVICES,TWONORTHNINTHSTREET,ALLENTOWN,PA.18101.

SUMMARYINFORMATIONThefollowingmaterialisqualifiedinitsentiretyby,andshouldbereadinconjunctionwith,thedetailedinformationandfinancialstatementsappearingelsewhereinthisProspectusandinthedocumentsandinformationincorporatedinthisProspectusbyreference.THEOFFERINGSecurityOffered..InterestPaymentDatesUseofProceeds.$100,000,000principalamountofFirstMortgageBondsdueApril1,2010April1andOctober1Generalcorporatepurposesincludingthereductionofshort-termdebtincurredto(a)retirematuringlong-termdebtand(b)provideinterimfinancingforconstructionandnuclearfuelexpendituresTHECOMPANYBusinessServiceAreaSourcesofGenerationduring19791978$798,339168,602OperatingRevenues(thousands)...................OperatingIncomeNefIncome-BeforeDividendsonPreferredandPreferenceStock(thousands).EarningsApplicabletoCommonStock(thousands).....EarningsPerShare.NetUtilityPlant-atendofperiod(thousands).............RatioofEarningstoFixedChargesActualProForma.149,763112,7703.37$2,690,2292.592.813.172.09AsofDecember31,1979TheCompanyderivesabout99%ofitsoperatingrevenuesfromelectricservice*Approximately10,000squaremilesincentraleasternPennsylvaniawithapopulationof2.4millionpeopleCoal-80%;Oil-18%;Hydro-2%FINANCIALINFORMATION19791977$860,498$744,731182,823184,311182,198133,5323.32$3,420,499ActualAsAdjusted(a)Capita.'tzatton(thousallos)Long-TermDebt(includingcurrentmaturities).......PreferredandPreferenceStockWithMandatorySinkingFundProvisions........WithOnlyOptionalRedemptionProvisions.....CommonEquityTotal.441,400231,3751~113,441488,400231,3751,121,798$3,343,374$3,441,731$1,557,158$1,600,158465%14.26.732.61000%(a)Asadjustedtogiveelfectto(i)theissuanceof$51,000.000ofpreferenceStock,$8.625Series.inJanuary1980,(ii)thesfnkingfundredemptionof$4,000,000otPreferenceStock,$9.25Series,inJanuary1980,(iii)theissuanceof$8,819,000ofcommonstockinJanuaryandFebruary1980underthedividendreinvestmentplan,(iv)theretirementot$57,000,000oflong-termdebtinFebruary1980,(v)estimatedadjustmentstocapitatstockexpenseand(vi)thesaleoftheBonds.

THECOMPANYTheCompanyisanoperatingutility,incorporatedunderthelawsoftheCommonwealthofPennsylvaniain1920.TheCompany'sgeneralofficesarelocatedatTwoNorthNinthStreet,Allentown,Pennsylvania18101,anditstelephonenumberis215-821-5151.ThepropertyoftheCompanyislocatedinPennsylvania(seeMap),iswellmaintainedandisingoodoperatingcondition.TheCompanyderivesabout99%ofitsoperatingrevenuesfromsupplyingelectricservice,andthebalancefromsupplyingsteaminthecityofHarrisburg.TheCompanyservesapproximately987,000customersina10,000squaremileterritoryin29countiesofcentraleasternPennsylvania(seeMap),withapopulationofapproximately2,400,000persons.Thisserviceareahasahighpercentageofopenlandasweilas111communitieswithpopufationsover5,000,thelargestofwhicharethecitiesofAlfentown,Bethlehem,Harrisburg,Hazleton,Lancaster,Scranton,Wilkes-BarreandWilliamsport.Importantindustrial,recreationalandagriculturalsectionsarelinkedtotheeasternpopulationcentersbyanextensivelimited-accesshighwaysystem.'APPLICATIONOFPROCEEDSThenetproceedsfromthesaleoftheFirstMortgageBondsofferedhereby(theBonds)willbeaddedtotheCompany'sgeneralfundsandusedforgeneralcorporatepurposesincludingthereductionofshort-termdebtincurredto(a)retire$57millionofmaturinglong-termdebtand(b)provideinterimfinancingforconstructionexpendituresandforthenuclearfuelbeingacquiredinanticipationoftheSusquehannaunitsbeingplacedinservicein1982and1983.TheCompanyexpectsthataftergivingeffecttottiesafeof$100millionprincipalamountoftheBondsitsshort-termdebtwouldbereducedtoabout$60million.CONSTRUCTIONPROGRAMTheCompany'sconstructionprogramisundercontinuingreviewandisrevisedfromtimetotimetoreffectchangesfncustomerdemand,businessandeconomicconditions,thecostandavailabilityofcapitalandotherfactors.ActualconstructioncostsanddatesofcompletionforvariousconstructionprojectsmayvarybecauseofchangesintheCompany'splans,costfluctuations,theavailabilityoflabor,materialsandequipment,environmentalregulations,licensingdelaysandotherfactors.TheSusquehannastation,whichistheonlygeneratingfacilitythattheCompanyhasunderconstrulion,v,i'.Iconsistoftwonuclear-fueledgeneratingunitseachhavinganestimatedtotalnetcapabilityof1,050,000kilowatts.AlleghenyElectricCooperative,Inc.ownsa10%undividedownershipinterestineachoftheSusquehannaunits.Accordingly,theCompany's90%shareoftheestimatedtotalnetcapabilityofeachoftheSusquehannaunitswillbe945,000kilowatts.

Thefollowingtabulationshowsactualconstructionandnuclearfuelexpendituresfor1979andtheCompany'scurrentestimateofthoseexpendituresforthethreeyears1980-1982,includingtheallowanceforfundsusedduringconstruction.TheamountsshowninthetabulationfortheSusquehannastationandnuclearfuelreflectonlytheCompany's90%shareofthosecosts.Susquehannastation.Otherconstructionexpenditures:Transmissionanddistributionfacilities...Environmental..Other.Nuclearfuelexpenditures.TotalAllowanceforfundsusedduringconstruction(whichisincludedintheaboveamounts).197919SO19811982{MillionsofDollars)$348$428$428$23995979796284754472429242849560160341024599482$519$660$697$492$105$141$177$86ConstructionoftheSusquehannaunitsisproceedingunderNuclearRegulatoryCommission{NRC)constructionpermitsissuedinNovember1973.InJuly1978,theNRCacceptedforfilinganapplicationforthenecessaryoperatinglicenseforeachSusquehannaunit.ThepetitionsoffourgroupstointerveneinthelicensingproceedingsbeforetheNRCweregrantedbytheAtomicSafetyandLicensingBoardoftheNRCinMarch1979.AtDecember31,1979,constructionofUnitNo.1wasabout75%completedandUnitNo.2wasabout47%completed.AnaccidentoccurredonMarch28,1979atUnitNo.2oftheThreeMileIslandstation(anuclear-fueledgeneratingfacilityinPennsylvaniaownedbyelectricutilitycompanieswhicharenotrelatedtotheCompany)resultinginashut-downofthatunitandsomereleasesofradiation.Thenuclearsteamsupplysystemsforthetwonuclear-fueledboilingwatertypegeneratingunitsthattheCompanyhasunderconstructionatitsSusquehannasiteareofadifferentdesignandmanufacturethanthepressurizedwatertypeatUnitNo.2oltheThreeMileIslandstation.TheCompanyhasbeenreviewingitsSusquehannaunitsinlightoftheaccidentattheThreeMileIslandstationandistakingintoaccounttheresultsofthein-depthreviewsinitiatedbytheCompanywithrespecttosafetysystemsandequipmentandoperatingproceduresandtrainingfortheSusquehannaunits.TheCompanyalsoistakingintoaccounttheresultsofvariousinvestigationsbytheownersoftheThreeMileIslandstation,theNRC,aPresidentialCommissionandothers.During1979thein-servicedatesfortheSusquehannaunitswererescheduledfromFebruary1981toJanuary1982forUnitNo.1andfromMay1982toJanuary1983forUnitNo.2.Thisreschedulingreflecteddelaysinmeetingconstructionschedulemilestones,changesinthescopeoftheproject(includingchangestomeetlicensingrequirements)whichnecessitatedchangesindesignandthe5 installationofequipmentnotpreviouslyplannedandtheimplicationsoftheThreeMileIslandaccidentontheoperatinglicenseproceedingsbeforetheNRC.Thereare,however,uncertaintiesassociatedwiththecompletionoftheSusquehannaunitsonscheduleandatthetotalcostcurrentlyestimatedfortheproject-$2.43billionfortheCompany's90%share.TheThreeMileIslandaccident,whichresultedintheNRC'sNovember1979defactomoratoriumontheissuanceoflicensesfornuclearpowerplantsandotherlicensingdelays,continuestocreateuncertaintyconcerningtheNRC'sabilitytoprocessonatimelybasistheoperatinglicensesforSusquehannaandotherapplicationspendingbeforeit.Otheruncertaintiesincludepossiblefuturechangesinthescopeoftheproject,includingchangesinthedesignofequipmentandtheincorporationofadditionalsafetyfeaturesasaresultoftheThreeMileIslandaccident,delaysinmeetingconstructionschedulemilestonesandactionstakenbyFederal,stateorlocalgovernmentsorotherregulatoryauthorities.Allofthesefactorshavecreatedahighprobabilitythatthecurrentlyscheduledin-servicedatesfortheSusquehannaunitswillnotbeachieved.TheCompanyisunableatthistimetoestimatehowlongtheunitscouldbedelayedortheamountofanyincreaseinthecostoftheunits.TheCompanyanticipatesthatevenifthein-servicedatesoftheSusquehannaunitsarefurtherdelayeditwillcontinuetohaveadequatereservestomeetprojectedcustomerdemandduringthefirsthalfofthe1980s.ThePrice-AndersonActplacesa$560million"limitofliability"forpublicliabilityclaimsthatcouldarise'fromanuclearincident.Inadditiontorequiringprivateinsurancetothefullestextentobtainable,theActprovidesforownersofnuclearreactorstobeassessedupto$5millionperoperatingreactorforeachnuclearincident,withalimitoftwoassessmentsperyear.TheActrequiresthatthedifferencebetweenthe$560millionlimitofliabilityandtheamountsobtainedthroughprivateinsuranceandassessmentsbeprovidedbyaFederalgovernmentindemnity.TheCompanyisunabletodeterminethelong-termeffect,ifany,thattheThreeMileIslandaccidentwillhaveontheavailabilityorcostofinsurance.FINANCINGThefinancingofitsconstructionprogramrequirestheCompanytoengageinfrequentsalesofsecurities,includingdebtandpreferred,preferenceandcommonstock'.Interimfinancingisobtainedfrombankborrowingsandthesaleofcommercialpaper.TheCompany's1980-1982constructionandnuclearfuelexpendituresarecurrentlyestimatedat$1.85billion.Approximatelytwo-thirdsofthisamountisexpectedtobeobtainedfromoutsidefinancingwiththebalancetobeprovidedfrominternalsources.Theestimatesofconstructionandnuclearfuelexpendituresandinternalfundssourcesincludetheallowanceforfundsusedduringconstruction.Inaddition,about$167millionofmaturingtong-termdebtobligationsand$28millionofpreferredandpreferencestocksinkingfundrequirementsareplannedtobemetduring1980-1982bysalesofsecurities.InJanuary1980,theCompanyissuedandsold$51millionofpreferencestocktoinstitutionalpurchasersinaprivateplacement.InadditiontothesaleoftheBonds,theCompanyplans,subjecttothereceiptofregulatoryauthorizationandcompletionofadefinitiveagreement,tosellprivatelytoaninstitutionalinvestoraseparateseriesof$30millionaggregateprincipalamountoffirstmortgagebondsinJune1980.ThesalesoftheBondsandtheseparateseriesoffirstInortgagebondsareseparatetransactionsnotcontingentoneachother.0 TheCompanycurrentlyhaslinesofcreditaggregating$200millionwithvariousbankstoprovideinterimfinancingandback-upfinancingcapabilityfortheissuanceofcommercialpapernotes.Inordertoprovideadditionalfinancingflexibility,theCompanyhascompletedarrangementswithagroupofdomesticbanksforarevolvingcreditandtermnoteagreementforthefive-yearperiodMarch1~1980toFebruary28,1985,underwhichtheCompanycouldborrowandhaveoutstandingupto$400millionatanyonetime.BorrowingsoutstandingonFebruary28,1985couldbeconvertedtotermnotes,one-thirdoftheprincipalamountofwhichwouldmatureonthelastdayofFebruaryineachoftheyears1986,1987and1988.TheCompanyisalsoarrangingwithagroupofforeignbanksfora$100millionrevolvingcreditagreementwhichwouldpermittheCompanytomakeshort-termborrowingsforaperiodoftwoyearsfromthedateofthatarrangement.Uponcompletionoftherevolvingcreditarrangementswiththeforeignbanks,theCompanyexpectstoreduceitscurrentlinesofcredittoabout$100million.OnMarch14,1980theFederalReserveBoardannouncedaseriesofmonetaryandcreditactionsaspartofageneralgovernmentprogramtohelpcurbinflationarypressures.Portionsoftheprogramaredirectedatlimitingthegrowthinbankloansandincertaintypesofcommitmentsbybanksforcreditlines.TheeffectofthisprogramontheCompany'soverallshort-termborrowingscannotnowbepredicted,buttheCompanybelievesthatitsarrangementswiththegroupofdomesticbanksforits$400millionrevolvingcreditandtermnoteagreementwillnotbeaffected.TheCompanyhasadividendreinvestmentplanwhichpermitsholdersofitspreferred,preferenceandcommonstocktopurchasesharesofcommonstockdirectlyfromtheCompanybyhavingcashdividendsautomaticallyreinvestedata5%discountfromthemarketpriceandbymakingoptionalcashpayments.EmployeesoftheCompanymayalsoparticipateintheplanthroughpayrolldeductions.The5%discountdoesnotapplytosharesofcommonstockpurchasedwithoptionalcashpaymentsorthroughpayrolldeductions.TheCompanyanticipatesthatothersecuritieswillbesoldduring1980.Theexactamount,natureandtimingoffuturesalesofsecuritieswill,ofnecessity,bedeterminedinthelightofmarketconditionsandotherfactors.ThemortgageindentureunderwhichtheCompany'sfirstmortgagebondsareissuedcontainscertainprovisions,principallyearningscoverageandpropertyadditionstests,limitingtheissuanceofadditionalbonds.Theearningscoveragetest,whichrequiresadjustednetearnings(asdefinedinthemortgage)foraspecifiedtwelve-monthperiodtobeatleastequaltotwicetheannualinterestrequirementsonallbondstobeoutstanding,ispresentlythemostlimitingoftheserestrictions.BasedontheCompany'searningsfortheyear1979andaftergivingeffecttotheproposedissuanceoftheBondsandtheseparateseriesof$30millionaggregateprincipalamountoffirstmortgagebonds,theearningscoveragetestwouldhavepermittedtheCompanytoissueabout$325millionprincipalamountofbonds(15%interestrateassumed)atDecember31,1979.TheCompany'schartercontainsprovisionslimitingtheissuanceofadditionalsharesofpreferredstock.Themorerestrictiveoftheseprovisionsrequiresincomebeforeinterestcharges(grossincome)ofnotlessthan1.5timesthesumoftheannuaIizedinterestrequirementsonoutstandingindebtednessandthedividendrequirementsonoutstandingpreferredstock,includingthepreferredstockbeingissued.BasedontheCompany'searningsfortheyear1979andaftergivingeffecttotheproposedissuanceof theBondsandtheseparateseriesof$30millionaggregateprincipalamountoftirstmortgagebonds,theCompanywouldhavebeenpermittedtoissueapproximately$130millionofpreferredstock(12%dividendrateassumed)atDecember31,1979.Theissuanceofadditionaldebtwouldreducetheamountofpreferredstockwhichcanbeissuedunderthisprovision.Therearenocharterprovisionslimitingtheissuanceofpreferencestock.Althoughissuancetestswouldhavetobemetatthetimethatbondsorpreferredstockareissued,theCompanydoesnotexpectthatthemortgageandcharterlimitationswilllimittheCompany'sabilitytosellthesecuritiesnecessarytomeetitscapitalrequirementsduring1980.RatioofEarningstoFixedCharges.TheCompany'sratiootearningstofixedchargesforthefiveyearsendedDecember31,1979isasfollows:19791978197719761976RatioofEarningstoFixedChargesActual.ProForma.SupplementalRatioofEarningstoFixedChargesActual.ProForma.2.402.592.872.251.982.442.592.813.172.532.652.09"Earnings"usedtocomputetheratioofearningstofixedchargesconsistofnetincome,excludingtheundistributedincomeorlossofunconsolidatedsubsidiariesandotherassociatedcompanies,plusfixedchargesandincometaxes(includingdeferredincometaxesandinvestmenttaxcredits-net)."FixedCharges"consistotinterestcharges(excludingtheallowanceforborrowedfunds)andtheestimatedinterestcomponentofmajorleaserentalsandone-thirdofallotherrents.Theproformaratioofearningstofixedchargesfortheyear1979reflectsearningsasdefinedaboveand(1)annualinterestchargesonthelong-termdebtoutstandingasofDecember31,1979lessannualintereston$57millionoflong-termdebtthatmaturedFebruary1~1980,(2)annualinterestontheBonds(15%interestrateassumed),(3)theannualinterestrequirementsonaseparateseriesotFirst.MortgageBonds(11~/4%interestrate)expectedtobeissuedinaprivateplacementinJune1980and(4)annualinterestchargeson$70millionofaverageshort-termdebt(commercialpaperatanassumedrateof14'%)assumedtobeoutstandingduringtheyear1980,based'ontheaverageshort-termdebtoutstandingduringtheyear1979.Achangeof.10%intheinterestrateoftheBondswouldresultinachar,oeofapproximately.0011intheproformaratio.Thesupplementalratioofearningstofixedchargesincludes,inadditiontotheitemsdefinedabove,theapplicableundistributedincomeorlossandtixedchargesofunconsolidatedsubsidiariesandotherassociatedcompanies.DESCRIPTIONOFBONDSGeneral.TheBondswillmatureApril1,2010,willbearinterestattherateshownintheirtitlepayableApril1andOctober1andwillbeissuedonlyinregisteredformindenominationsot$1,000andmultiplesthereof.TheBondswillbeissuedunderaMortgageandDeedofTrust,datedasofOctober1,1945,assupplemented(Mortgage)~ofwhichMorganGuarantyTrustCompanyotNewYorkisTrustee RedemptionandPurchaseoftheBonds.TheBondswillberedeemable,inwholeorinpart,on30days'otice(a)atthefollowingspecialredemptionpricesfortheMaintenanceandReplacementFund,orwithcertaindepositsandproceedsofproperty,and(b)atthefollowinggeneralredemplionpricesforallotherredemptions:lfRedeemedDuringTwelveMonthsPeriodGeneralEndingRedemplionMarch31Prices1981............107.32%1982............106.801983............106.271984............105.751985............105.231986............104.711987............104.181988............103.661989....................~.......103.141990............102.621991............102.091992............101.571993............101.051994............100.531995............100.00SpecialRodernplionPrices100.00%100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00SpecialRedemptionPrices10000%100.00100.00100.00100.00100.00100.00100.00100.00100,00100.00100.00100.00100.00100.00GeneralRedemptionPrices115.16%114.63114.11113.59113.07112.54112.02111.50110.98110.45109.93109.41108.89,108.36107.84lneachcase,togetherwithaccruedinteresttothedatefixedforredemption;providedthatnoBondsshallberedeemableatthegeneralredemptionpricespriortoApril1,1985,withborrowedfundsorinanticipationoffundstobeborrowed,havinganeffectiveinterestcosttotheCompany(calculatedinaccordancewithacceptablefinancialpractice)oflessthan15.8884%perannum.andrankonaparitywithotherseriesoftheCompany'sFirstMortgageBonds.PrincipalandinterestwillbepayableinNewYorkCityattheofficeoragencyoftheCompany,whichinitiallywillbetheprincipalofficeoftheTrustee.InterestalsowillbepayableatthegeneralofficesoftheCompanyinAllentown,Pennsylvania.ExchangesandtransfersoftheBondsmaybemadeattheprincipalofficeoftheTrusteeorattheofficesofsuchothercompaniesastheCompanymaydesignatefromtimetotime.TheCompanydoesnotpresentlyplantodesignateanyothercompanyforsuchpurpose.TherewillbenochargebytheCompanyforanyexchangeortransferoftheBonds.StatementshereinconcerningtheBondsandtheMortgagearebriefsummariesanddonotpurporttobecomplete.TheymakeuseoftermsdefinedintheMortgage,andarequalifiedintheirentiretybyexpressreferencestothecitedSectionsandArticles.TheBondsdonothaveanysinkingorimprovementfundorotherprovisionforamortizationpriortomaturity.However,allseriesofbondscreatedpriorto1973dohavesinkingorimprovementfundprovisions.

TheredemptionmaybemadesubjecttoreceiptbytheTrusteeoftheredemptionmoneysbeforethedatefixedforredemptionandtheredemptionnoticeshallbeofnoeffectunlesssuchmoneysaresoreceived.CashdepositedunderanyprovisionsintheMortgage(withcertainexceptions)maybeappliedtothepurchaseofbondsofanyseries.(Mortgage,Art.XandTwenty-fifthSupplemental~Sec.1.)MaintenanceandReplacementFund.Eachyear15~k%ofadjustedgrossoperatingrevenuesmustbespentformaintenanceandreplacementsofmortgagedelectric,gas,steamandhotwaterpropertyandcertainautomotiveequipment.TheCompanynowownsnogasorhotwaterproperty.SuchrequirementsmaybemetbydepositingcashwiththeTrustee;certifyingexpendituresformaintenanceandrepairsofsuchproperty,forgrosspropertyadditionsandforcertainautomotiveequipment;orbytakingcreditforbondsandqualifiedpriorlienbondsretired.Suchcashmaybewithdrawnonsimilarbases.TheCompanyhasreservedtheright(withoutanyconsentorotheractionbytheholdersofanyseriesofbondscreatedafterJanuary1973,includingtheBonds)tomakesuchamendmentstotheMortgageasshallbenecessarytodeletetheMaintenanceandReplacementFund.TheCompanyhasnopresentintentionofrequestingabondholders'eetingtodeletetheMaintenanceandReplacementFund.(Mortgage,Sec.39;Twent)-fifthSupplemental,Sec.2.)TheCompanyhasagreednottoapplyanycashdepositedwiththeTrusteepursuanttotheMaintenanceandReplacementFundtotheredemptionoftheBondssolongasanyofthebondsofotherseriespresentlyOutstandingremainOutstanding.(Twenty-fifthSupplemental,Sec.1.)SpecialProvisionsforRetirementoftheBonds.If,duringanytwelve-monthperiod,mortgagedpropertyisdisposedofbyorderofortoanygovernmentalauthority,resultinginthereceiptof$10millionormoreasproceeds,theCompany(subjecttocertainconditions)mustapplysuchproceeds(lesscertaindeductions)totheretirementofbondsofanyseries.TheBondsareredeemableatthespecialredemptionpricesinthatevent.(Mortgage,Sec.64.)Security.TheBonds,togetherwithallotherbondsnoworhereafterissuedundertheMortgage,willbesecuredbytheMortgage,whichconstitutes,intheopinionofEdwardM.Nagel,Esq.,GeneralCounseloftheCompany,afirstmortgagelienonalloftheCompany'sproperties(exceptthosereferredtobelow),subjectto(1)leasesofminorportionsoftheCompany'spropertytoothersforuseswhich,inhisopinion,donotinterferewithitsbusiness,(2)leasesofcertainpropertyoftheCompanynotusedinitselectricutilitybusiness,(3)minordefects,irregularitiesanddeficienciesintitlesofpropertiesandrights-of-way,whichdonotmateriallyimpairtheuseofsuchpropertyandrights-of-wayforthepurposesoftheCompany,(4)otherexceptedencumbrances,and(5)astocertainpropertysituatedprimarilyinLackawanna,Luzerne,Susquehanna,WayneandWyomingCounties,Pennsylvania,thepriorlienofTheScrantonElectricCompanyMortgageandDeedofTrust,datedFebruary15,1937,assupplemented.Ingeneral,thereareexceptedfromthelienoftheMortgageallcashandsecurities;equipment,apparatus,materialsorsuppliesheldforsaleorotherdisposition;aircraft,automobilesandothervehicles;timber,minerals,mineralrightsandroyalties;andreceivables,contracts,leasesandoperatingagreements.10 TheMortgagecontainsprovisionsforincludingafteracquiredpropertywithinthelienthereof,subjecttoanypre-existingliensandtocertainlimitationsinthecaseofconsolidation,mergerorsaleofsubstantiallyalloftheCompany'sassets.(Mortgage,Sec.87.)IssuanceofAdditionalBonds.Bondsofanyseriesmaybeissuedfromtimetotimeonthebasesof:{1)60%ofpropertyadditionstoelectric,gas,steamorhotwaterproperty,acquiredafterJune30,1945,butnotincludingnaturalgasproductionpropertyandafteradjustmentsforretirementsoffundedpropertyotherthanpropertyforsupplyingwater;(2)retirementofbondsorqualifiedpriorlienbonds;and{3)depositofcash.Withcertainexceptionsinthecaseof(2)above,theissuanceofbondsrequiresadjustednetearningsbeforeincometaxesfortwelveoutoftheprecedingfifteenmonthsofatleasttwicetheannualinterestrequirementsonallbondsatthetimeoutstanding,includingthosebeingissued,andonallindebtednessofpriorrank.Incomputingadjustednetearnings,anamountequaltotheMaintenanceandReplacementFundrequirementsmustbeusedinlieuofactualexpendituresformaintenanceandrepairsandprovisionsforpropertyretirement.Theissuanceofbondsonthebasisofpropertyadditionssubjecttoliensisrestricted.Itisexpectedthat$37.5millionofBondswillbeissuedagainsttheretirementofalikeprincipalamountofbondswhichmaturedduring1979and1980andtheremainderwillbeissuedagainstunfundedpropertyadditionsandthat,aftergivingeffecttotheissuanceoftheBonds,unfundedpropertyadditionsremainingwouldhavebeensufficienttopermittheCompanytoissueabout$770millionofbondsatDecember31,1979.Inaddition,whenthebondsofallseriesissuedpriorto1973havebeenretired,propertyadditionstheretoforefundedtosatisfysinkingorimprovementfundsforsuchserieswillreverttounfundedstatus.TheCompanyhasreservedtherighttoamendtheMortgagewithoutanyconsentorotheractionbyholdersofanyseriesofbonds(includingtheBonds)created(1)afterFebruary28,1970toincludeNuclearFuel(andsimilaroranalogousdevicesorsubstances)asPropertyAdditions,and(2)afterNovember30,1976tomakeavailableasPropertyAdditionsvariousformsofspacesatellites,spacestationsandotheranalogousfacilities,variousfueltransportationfacilities(primarilyrailroadcarsandotherrailroadequipment,tankersandothervessels),andgenerally,electric,gasandenergyorfuelproperty(includingpropertyforthedevelopmentofelectricity,gasandfuelorenergyinanyform)andwaterandsteamheatproperty.SuchpropertycouldbelocatedanywhereifdulysubjecttothelienoftheMortgageandusefulinconnectionwiththeenergy,fuelorwaterbusiness.Exceptedpropertywouldcontinuetoincludepropertyusedprincipallyfortheproductionorgatheringofnaturalgas.Theamountoftheobligationssecuredbypriorliensonmortgagedpropertymaybeincreased,providedthat,ifanypropertysubjecttosuchpriorlienshallhavebeenmadethebasisofacreditundertheMortgage,alltheadditionalobligationsaredepositedwiththeTrusteeorthetrusteeorotherholderofaqualifiedlien.However,noadditionalScrantonbondsmaybeissuedexcepltorefundorreplacethosepresentlyoutstandingunlessconsentedtobytheholdersof70%ofthebonds..(Mortgage,Secs.4to7,20to30,and46,ThirteenthSupplemental,Sec.4,Twenty-secondSupplemental,Sec.3andTwenty-fifthSupplemental,Sec.7.)ReleaseandSubstitutionofProperty.Propertymaybereleaseduponthebasesof(1)thedepositofcash,or,toalimitedextent.purchasemoneymortgages,(2)propertyadditions,afteradjustmentsincertaincasestooffsetretirementsandaftermakingadjustmentsforqualifiedpriorlien11 bondsoutstandingagainstpropertyadditions,and(3)waiveroftherighttoissuebondswithoutapplyinganyearningstests.Cashmaybewithdrawnuponthebasesstatedin(2)and(3)above.(Mortgage,Art.XIandSecs.5,31,32,37,46to50,100and118.)DividendCovenant.Nocashdividendsoncommonstockmaybepaidunlessaftersuchpaymentstheamountremaininginearnedsurplus(hereindescribedasearningsreinvested)piustheprovisionsmadesubsequenttoSeptember30,1945fordepreciationandretirementofpropertyshallequalthemaintenanceandreplacementfundrequirementsoftheMortgageforsuchperiod,lessmaintenanceexpenditures.(Mortgage,Sec.39andTwenty-fifthSupplemental,Sec.2.)ModificationofMortgage.Bondholders'ightsmaybemodifiedwiththeconsentoftheholdersof70%ofthebonds.Iflessthanallseriesofbondsareaffected,theconsentoftheholdersof70%ofeachseriesaffectedisalsorequired.TheCompanyhasreservedtheright(withoutanyconsentorotheractionbyholdersofanyseriesofbondscreatedafter1970,includingtheBonds)tosubstitute66%%for70%intheforegoingprovisions.Ingeneral,nomodificationofthetermsofpaymentofprincipalorinterestandnomodificationaffectingthelienorreducingthepercentagerequiredformodificationiseffectiveagainstanyBondholderwithouthisconsent.(Mortgage,Art.XIX,FourteenthSupplemental,Sec.4.)DefaultsandNoticeThereof.Defaultsare:defaultinpaymentofprincipal;defaultfor60daysinpaymentofinterest(15dayssolongasanybondsofthe9~/e%Seriesdue.1983-1985areoutstanding)orofinstallmentsoffundsforretirementofbonds;certaindefaultswithrespecttoqualifiedlienbonds;certaineventsinbankruptcy,insolvencyorreorganization;anddefaultfor90daysafternoticeinothercovenants.TheTrusteemaywithholdnoticeofdefault(exceptinpaymentofprincipal,interestoranyfundforretirementofbonds),ifitthinksitisintheinterestsoftheBondholders.(Mortgage,Secs.65and66andTwenty-fourthSupplemental,Sec.11.)Holdersof25%ofthebondsmaydeclaretheprincipalandinterestdueondefault,butamajoritymayannuisuchdeclarationifsuchdefaulthasbeencured.NoholderofbondsmayenforcethelienoftheMortgageunless(1)hehasgiventheTrusteewrittennoticeofadefault;(2)holdersof25%ofthebondshaverequestedtheTrusteetoactandoffereditreasonableopportunitytoactandindemnitysatisfactorytotheTrusteeagainstthecosts,expensesandliabilitiestobeincurredthereby;and(3)theTrusteehasfailedtoact.TheTrusteeisnotrequiredtoriskitsfundsorincurpersonalliabilityifthereisreasonablegroundforbelievingthattherepaymentisnotreasonablyassured.Amajorityofthebondsmaydirectthetime,method,andplaceofconductinganyproceedingsforanyremedyavailabletotheTrustee,orexercisinganytrustorpowerconferredupontheTrustee.(Mortgage,Secs.67,71,80and95.)EvidencetoBeFurnishedtotheTrustee.CompliancewithMortgageprovisionsisevidencedbywrittenstatementsoftheCompany'sofficersorpersonsselectedorpaidbytheCompany.Incertainmajormatters,theaccountant,appraiser,engineerorcounselmustbeindependent.Variouscertificatesandotherpapersarerequiredtobefiledannuallyandincertainevents,includinganannualcertificatewithreferencetocompliancewiththetermsoftheMortgageandabsenceofDefaults.CertainTaxMatters.IntheopinionofEdwardM.Nagel,Esq.,GeneralCounseloftheCompany,BondsownedbyindividualsresidinginPennsylvaniaaresubjecttothe4millsPennsylvaniacorporate loanstax.Suchtaxwillbewithheldfrominterestpaymentstosuchindividuals.Mr.NagelisalsooftheopinionthattheBondsareexemptfromexistingpersonalpropertytaxesinPennsylvania.EXPERTSThebalancesheetsasofDecember31,1979and1978andtherelatedstatementsofincome,earningsreinvested,andchangesinfinancialpositionforeachofthefiveyearsintheperiodendedDecember31~1979includedintheCompany's1979AnnualReportonForm10-K,whichareincorporatedbyreferenceinthisProspectus,havebeenexaminedbyDeloitteHaskins8Sells,independentcertifiedpublicaccountants,asstatedintheiropinioninsuchForm10-K,andaresoincorporatedinrelianceuponsuchopiniongivenupontheirauthorityasexpertsinauditingandaccounting.InformationinthetabulationoftheAssignedReservesandUnassignedReservesundertheheadings"EstimatedRecoverableReservesasofJanuary1,1978"and"Average%Sulfur(ByWeight)"underthecaption"BUSINESS-FuelSupply(Coal)"includedintheCompany's1979AnnualReportonForm10-K,whichinformationisincorporatedbyreferenceinthisProspectus,wasprovidedbyPaulWeirCompanyIncorporatedandissoincorporatedinrelianceuponauthorityofthatfirmasanexpert.Statementsmadeunderthecaption"DESCRIPTIONOFBONDS"hereinandstatementsmadeintheCompany's1979AnnualReportonForm10-KandinitsdefinitiveProxyStatementinconnectionwiththe1980annualmeetingofshareownershavebeenreviewedastomattersoflawandlegalconclusionsbyEdwardM.Nagel~Esq.,GeneralCounseloftheCompany,andhavebeenmadeinrelianceonhisauthorityasanexpert.LEGALOPINIONSThevalidityoftheBondswillbepasseduponfortheCompanybyEdwardM.Nagel~Esq.,GeneralCounseloftheCompany,andReid8Priest,NewYork,N.Y.,andforthePurchasersbySullivan8Cromwell,NewYork,N.Y.However,allmatterspertainingtotheorganizationoftheCompanyandtitlesandthelienoftheMortgagewillbepassedupononlybyMr.Nagel,whoisafull-timeemployeeoftheCompany.AstomattersinvolvingthelawoftheCommonwealthofPennsylvania,Reid&PriestandSullivan8CromwellwillrelyontheopinionofMr.Nagel.13 PURCHASERSEachofthePurchasersnamedbelowhasseverallyagreed,subjecttothetermsandconditionsoftheAgreement,topurchasefromtheCompany,theprincipalamountoftheBondssetforthoppositeitsname.NameofPurchaserMorganStanley&Co.Incorporated.SalomonBrothersDillon,Read8Co.Inc..E.F.Hutton&CompanyInc.ShearsonLoebRhoadesInc.ArnholdandS.Bleichroeder,Inc....................FolgerNolanFlemingDouglasIncorporated.Stone8Youngberg.Daniels&Bell,Inc...........................................HaasSecuritiesCorporation.Manley,Bennett,McDonald8Co.I.M.Simon8Co.Total.PrincipalAmountofBondaS25,000,00033,600,00020,000,00012,000,0006,000,0001,000,000600,000600,000300,000300,000300,000300,000$100,000,000TheAgreementrelatingtothepurchaseoftheBondsprovidesthattheobligationsofthePurchasersaresubjecttocertainconditionsprecedentandthatthePurchaserswillbeobligatedtopurchasealloftheBondsifanyBondsarepurchased,providedthat,undercertaincircumstancesinvolvingadefaultofoneormoreofthePurchaserswithrespecttoinexcessof$10,000,000principalamountofBonds,lessthanalloftheBondsmaybepurchased.DefaultbyoneormorePurchaserswouldnotrelievethenon-defaultingPurchasersfromtheirseveralobligations,andintheeventofsuchdefault,theCompanywouldhavetherighttorequirethenon-defaultingPurchaserstopurchasetherespectiveprincipalamountsoftheBondswhichtheyhaveseverallyagreedtopurchaseand,inaddition,topurchasetheprincipalamountoftheBondswhichthedefaultingPurchaserorPurchasersshallhavesofailedtopurchaseuptoanumberthereofequaltoone-ninthoftherespectiveprincipalamountsoftheBondswhichsuchnon-defaultingPurchasershaveotherwiseagreedtopurchase.TheCompanyhasbeenadvisedbythePurchasersthroughtheirRepresentatives,MorganStanley8Co.Incorporated;SalomonBrothers;Dillon,Read8Co.Inc.;E.F.Hutton8,CompanyInc.;andShearsonLoebRhoadesInc.,thatthePurchasersproposetomakeapublicofferingoftheBondsatthepublicofferingpricesetforthonthecoverpageofthisProspectus;thatthePurchasersmayallowtocertaindealersaconcessionfromthepublicofferingpriceof0.75of1%oftheprincipalamount;thatthePurchasersmayallowandsuchdealersmayreallowaconcessionof0.50of1%tocertainotherdealers;andthataftertheinitialpublicoffering,thepublicofferingpriceandconcessionsmaybechanged.

PennsylvaniaPower8;LightCompanyPPz:I,FGRM'IIG-KAnnuaReporttotheSecuritiesandExchangeCommissionFortheYearEndedDecember3'I,'l979 Vf<<lfNBIVYOILKPENNSYLVANIAPENNSYLVANIAPOWER8LIGHTCOMPANYSERVICEAREAONNTSTLVA'JASOALkeTNTNTMLTVIOEAAE4o~OMNMTSNOll,lVAllLIIOALSIAOL0stoANTooWILLIAMSSOOT0toctNbvfoSLISOVETLbhffb~ATONTOLST~loOINSMATO0VLLL0wiltto-obootNAllfTOIT0SOAfbmffoOTLLOLAT4'LTNltNtMALLSNTOWNOpfogONAOAISOuOO0Nt*SNSTLANSASTLO0GENEAATINGSTATIONSPPALI'SYLVAfAAIIAAYLAIII)IIOLTWOOO~MtAoftPISAW%SINKITOITl%ClhflQINvtleofIT'8AI,NLO'fI,,If,LP'(VMTfIVLN?I SECURITIESANDFXCHANGECOMMISSIONWashington,D.C.20509FORM10-KANNUALREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1930ForthefiscalyearendedDecember'1,1979PENNSYLVANIAPOWERRLIGHTCOMPANY(ExactnameofRegistrantasspecifiedinitscharter)CommissionFileNumber1-905PENNSYLVANIA(Stateorotherjurisdictionofincorporationororganization)23-0959590(I.R.S.Employer'dentificationNo.)TWONORTHNINTHSTREET,ALLENTOWN,PENNSYLVANIA(Addressofprincipalexecutiveoffices)Registrant'stelephonenumber,includingareacode215-821-5151SecuritiesregisteredpursuanttoSection12(b)oftheAct:18101(ZipCode)TitleofeachclassFirstMortgageBonds10-1/8%Seriesdue1982PreferredStock0-1/2%3.35%Series0.00%Series0.60%Series8.60%Series9.00%Series9.20%SeriesPreferenceStock$8.00Series$8.00Series8.70Series11.00Series$13.00SeriesCommonStock.NameofeachexchangeonwhichregisteredNewYorkStockExchange.NewYorkRPhiladelphiaStockPhiladelphiaStockExchangeNewYorkRPhiladelphiaStockPhiladelphiaStockExchangeNewYork2PhiladelphiaStockPhiladelphiaStockExchangeNewYorkRPhiladelphiaStockNewYork4PhiladelphiaStockNewYorkRPhiladelphiaStockNewYork8cPhiladelphiaStockNewYorkRPhiladelphiaStockNewYorkRPhiladelphiaStockNewYork2PhiladelphiaStockExchangesExchangesExchangesExchangesExchangesExchangesExchangesExchangesExchangesExchangesSecuritiesregisteredpursuanttoSection12(g)oftheAct:None(Titleofclass)Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1930duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.YesXCommonstock,nopar,numberofsharesoutstandingasofDecember31,197903,097,196

PENNSYLVANIAPOWERRLIGHTCOMPANYFORM10-KANNUALREPORTTOTHESECURITIESANDEXCHANGECOMMISSIONFORTHEYEARENDEDDECEMBER31,1979TABLEOFCONTENTSPARTIItemBusiness.~Pae2.SummaryofOperations~~~~~~~~~~~~~3.Properties.ParentsandSubsidiaries~~~~~~~~~~~~~~~~30315..LegalProceedings.~~~~..~~~~~~~~~336.IncreasesandDecreasesinOutstandingSecuritiesandIndebtedness337.9.10.ChangesinSecuritiesandChangesinSecurityforRegisteredSecuritiesDefaultsUponSeniorSecuritiesApproximateNumberofEquitySecurityHoldersSubmissionofMattersto'aVoteofSecurityHolders38383939IndemnificationofDirectorsandOfficers0012.FinancialStatements,ExhibitsFiledandReportsonForm8-KExecutiveOfficersoftheCompany.PARTIl13-15SecurityOwnershipofCertainBeneficialOwnersandManagers,DirectorsoftheCompanyandManagementRemunerationandTransactionsareomittedpursuanttoGeneralInstructionH~~~~~~~~

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PARTIITEM1.BUSINESS,THECOiViPANYPennsylvaniaPower2LightCompany(theCompany)isanoperatingutility,incorporatedunderthelawsoftheCommonwealthofPennsylvaniain1920.TheCompany'sgeneralofficesarelocatedatTwo'NorthNinthStreet,Allentown,Pennsylvania18101,anditstelephonenumberis(215)821-5151.TheCompanyissubjecttoregulationasapublicutilitybythePennsylvaniaPublicUtilityCommission(PUC)andissubjectincertainofitsactivitiestothejurisdictionoftheFederalEnergyRegulatoryCommission(FERC)underPartsI,IIandIIIoftheFederalPowerAct.TheCompanyisaholdingcompanyunderthePublicUtilityHoldingCompanyActof1935buthasbeenexemptedbytheSecuritiesandExchangeCommissionfromtheprovisionsofthatActapplicabletoitasaholdingcompany.TheCompanyissubjecttothejurisdictionoftheNuclearRegulatoryCommission(NRC)inconnectionwiththeconstructionoftheSusquehannaunits.See"CONSTRUCTIONPROGRAM".TheCompanyisalsosubjecttothejurisdic-tionofcertainFederal,regional,stateandlocalregulatoryagencieswithrespecttoairandwaterquality,landuseandotherenvironmentalmatters.See"ENVIRONMENTALMATTERS".TheoperationsoftheCompanyaresubjecttotheOccupationalSafetyandHealthActof1970andthecoalminingoperationsoftheCompany'ssubsidiariesaresubjecttotheFederalMineSafetyandHealthActof1977.TheCompanyderivesabout99%ofitsoperatingrevenuesfromsupplyingelectricservice,andthebalancefromsupplyingsteaminthecityofHarrisburg.TheCompanyservesapproximately987,000customersina10,000-square-mileterritoryin29countiesofcentraleasternPennsylvania(seeMap),withapopulationofapproximately2,000,000persons.Thisserviceareahasa-highpercentageofopenlandaswellas111communitieswithpopulationsover5,000,thelargestofwhicharethecitiesofAllentown,Bethlehem,Harrisburg,Hazleton,Lancaster,Scranton,IVilkes-BarreandV/illiamsport.Importantindustrial,recrea-tionalandagriculturalsectionsarelinkedtoeasternpopulationcentersbyanextensivelimited-accesshighwaysystem.During1979,about00%ofelectricoperatingrevenuescamefromresidentialcustomers,29%fromindustrialcustomers,27%fromcommercialcustomersand0%fromothers.During1979,theCompany'slargestcustomerprovidedabout0.5%ofelectricoperatingrevenuesandthesevenlargestindustrialcustomers(eachofwhosebillingsexceeded$3million)providedabout8%ofsuchrevenues.Industrialcustomersarebroadlydistributedamongindustrialclassifica-tions.

PROBLEiVlSAFFECTINGTHEELECTRICUTILITYINDUSTRYANDTHECOMPANYTheelectricutilityindustryingeneralhasbeenexperiencingproblemsof(a)increasingcostsoffuel,wages,materialsandequipment,(b)substantiallyincreasedcapitaloutlaysandlongerconstructionperiodsforlargerandmorecomplexnewgeneratingunits,(c)increasedfinancingrequirementscoupledwithperiodicallyuncertainavailabilityofbothequityandborrowedcapital,(d)pastandprospectivesalesofcommonstockbelowbookvalue,(e)theincreasingcostoffinancingconstructionexpenditureswhichisnotrecoveredcurrentlythroughratesandisoffsetonthestatementofincomebyrecordingtheallowanceforfundsusedduringconstruction,(f)fuelavailability,(g)increasedconstructionandoperatingcostsandlicensingdelaysrelatedtocompliancewithenvironmentalregulations,(h)effortstodelayorpreventtheconstructionofnucleargeneratingandrelatedfacilities,particularlyintheaftermathoftheThreeMileIslandaccident,(i)uncertaintiesastotheimpactofenergyconservationeffortsandfluctuatingeconomicconditionsonloadgrowthandfutureconstructionrequirementsand(j)regulatorylagingrantingneededrateincreasesandtheinadequacyofsuchincreaseswhengranted.TheCompanyalsohasbeenexperiencingsimilarproblemsinvaryingdegrees.AnaccidentoccurredonMarch28,1979atUnitNo.2oftheThreeMileIslandstation(anuclear-fueledgeneratingfacilityinPennsylvaniaownedbyelectricutilitycompanieswhicharenotrelatedtotheCompany)resultinginashut-downofthatunitandsomereleasesofradiation.Thenuclearsteamsupplysysteinsforthetwonuclear-fueledboilingwatertypegeneratingunitsthattheCompanyhasunderconstructionatitsSusquehannasiteareofadifferentdesignandmanufacturethanthepressurizedwatertypeatUnitNo;2oftheThreeMileIslandstation.TheCompanyhasbeenreviewingitsSusquehannaunitsinlightoftheaccidentattheThreeMileIslandstationandistakingintoaccounttheresultsofthein-depthreviewsinitiatedbytheCompanywithrespecttosafetysystemsandequipmentandoperatingproceduresandtrainingfortheSusquehannaunits.TheCompanyalsois,takingintoaccounttheresultsofvariousinvestigationsbytheownersoftheThreeMileIslandstation,theNRC,aPresidentialCommissionandothers.TheCompanyisunabletopredicttheextenttowhichtheThreeMileIslandaccidentandthereviewsandinvestigationsreferredtoabovewillrequiretheinstallationofadditionalequipmentattheSusquehannaunitsorthemodifica-tionofexistingequipment,delaythein-servicedatesoftheunitsoraffectthepresentconstructioncostestima'tes.See"CONSTRUCTIONPROGRAM"forfurtherinformationwithrespecttotheconstructionoftheSusquehannaunits.CONSTRUCTIONPROGRAM~>ATiieCornpan'y'sconstructionprograinisundercontinuingreviewaridisrevised'fromtimetotimetoreflectchangesincustomerdemand,businessandeconomicconditions,thecostandavailabilityofcapitalandotherfactors.'ctualconstructioncostsanddatesofcompletionforvariousconstructionprojectsmayvarybecauseofchangesintheCompany'splans,costfluctuations,theavailability-of'labor,materialsandequipment,environmentalregulations,licensingdelaysandotherfactors.TheSusquehannastation,whichistheonlygeneratingfacilitythattheCompanyhasunderconstruction,willconsistoftwonuclear-fueledgenerating unitseachhavinganestimatedtotalnetcapability'f1,'050,000kilowatts.AlleghenyElectricCooperative,Inc.(Allegheny)ownsa109oundividedownershipinterestineachoftheSusquehannaunits.'Accordingly,,theCompany's90%shareoftheestimatedtotalnetcapabilityofeachoftheSusq'uehannaunitswillbe945,000kilowatts.See"POWERSUPPLY'IforinformationconcerningthesaleofcapacityandenergyfromtheSusquehannaunitsforatermofyears.~4Thefollowingtabulationshowsactualconstructionandnuclearfuelexpendituresfor1979andtheCompany'scurrentestimateofthoseexpendituresforthethreeyears1980-1982,includingtheallowanceforfundsusedduringconstruction.TheamountsshowninthetabulationfortheSusquehannastationandnuclearfuelreflectonlytheCompany's90%shareofthosecosts.1979198019811982MillionsofDollars$308$028$028$239Susquehannastation.......................Otherconstructionexpenditures:Transmissionanddistributionfacilities...Environmental....................~...0thero~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Nuclearfuelexpenditures..................Total............................95979796280750072029202809560160301020599082$519$660$697$092ConstructionoftheSusquehannaunitsisproceedingunderNRCcon-structionpermitsissuedinNovember1973.In3uly1978,theNRCacceptedforfilinganapplicationforthenecessaryoperatinglicenseforeachSusquehannaunit.ThepetitionsoffourgroupstointerveneinthelicensingproceedingsbeforetheNRCweregrantedbytheAtomicSafetyandLicensingBoardoftheNRCinMarch1979.AtDecember31,1979,constructionofUnitNo.1wasabout75%completedandUnitNo.2wasabout0796completed.TheCompanyisproceedingonaschedulewhichisdesignedtoachievea'anuary1982in-servicedateforUnitNo.1anda3anuary1983in-ser'vicedateforUnitNo.2.Thereare,however,uncertaintiesassociatedwiththecompletionoftheSusquehannaunitsonscheduleandatthetotalcostcurrentlyestimatedfortheproject-$2.03billionforthe.Company's9096share.TheThreeMileIslandaccident,whichresultedintheNRC'sNovember1979defactomoratoriumontheissuanceoflicensesfornuclearpowerplantsandotherlicensingdelays,hascreateduncertaintyconcerningtheNRC'sabilitytoprocessonatimelybasistheapplicationfortheoperatinglicensesforSusquehannaandotherapplicationspendingbeforeit.Otheruncertaintiesincludepossiblefuturechangesinthescopeoftheproject,includingchangesinthedesignofequipmentandtheincorporationofadditionalsafetyfeaturesasaresultoftheThreeMileIslandaccident,delaysinmeetingconstructionschedulemilestonesandactionstakenbyFederal,stateorlocalgovernmentsorotherregulatoryauthorities.Allofthesefactorshavecreatedahighprobabilitythatthecurrentlyscheduledin-servicedatesfortheSusquehannaunitswillnotbeachieved.TheCompanyisunableatthistimetoestimatehowlongtheunitscouldbedelayedortheamountofanyincreaseinthecostoftheunits.

ThePrice-AndersonActplacesa$560million"limitofliability"forpublicliabilityclaimsthat'couldarisefromanuclearincident.Inadditiontorequiringprivateinsurancetothefullestextentobtainable,theActprovidesforownersofnuclearreactorstobeassessedupto$5millionperoperatingreactorforeachnuclearincident,'withalimitoftwoassessmentsperyear.TheActrequiresthatthedifference,betweenthe$560millionlimitofliabilityandtheamountsobtainedthroughprivateinsuranceandassessmentsbeprovidedbyaFederalgovernmentindemnity.TheCompanyisunabletodeterminethelong-termeffect,ifany,thattheThreeMileIslandaccidentwillhaveontheavailabilityorcostofinsurance.FINANCINGThefinancingofitsconstructionprogramrequirestheCompanytoengageinfrequentsalesofsecurities,includingdebtandpreferred,preferenceandcommonstock.Interimfinancingisobtainedfrombankborrowingsandthesaleofcommercialpaper.TheCompany's1980-1982constructionandnuclearfuelexpendituresarecurrentlyestimatedat$1.85billion.Approximatelytwo-thirdsofthisamountisexpectedtobeobtainedfromoutsidefinancingwiththebalancetobeprovidedfrominternalsources.Theestimatesofconstructionandnuclearfuelexpendituresaridinternalfundssourcesincludetheallowanceforfundsusedduringconstruction.Inaddition,about$167millionofmaturinglong-termdebtobligationsand$28,millionofpreferredandpreferencestocksinkingfundrequirementsareplannedtobemetduring1980-1982bysalesofsecurities.In3anuary1980;theCompanyissuedandsold$51millionofpreference.stocktoinstitutionalpurchasersinaprivateplacement.TheCompany,plans,subjecttothereceiptofregulatoryauthorizations,tosellpubliclynotinexcessof$125millionaggregateprincipalamountoffirstmortgagebondsinlateMarch1980.Inaddition,theCompanyplans,subjecttothereceiptofregulatoryauthorizationandcompletionofadefinitiveagreement,tosellprivatelytoaninstitutionalinvestoraseparateseriesof$30millionaggregateprincipalamountoffirst;nortgagebondsin3une1980.Thesesalesofbondsareseparatetransactionsnotcontingentoneachother.TheCompanyhasadividendreinvestmentplanwhichpermitsholdersofitspreferred,preferenceandcommonstocktopurchasesharesofcommonstockdirectlyfromtheCompanybyhavingcashdividendsautomaticallyreinvestedata5%discountfromthemarketpriceandbymakingoptionalcashpayments.EmployeesoftheCompanymayalsoparticipate'ntheplanthroughpayrolldeductions.The5%discountdoesnotapplytosharesofcommonstockpurchasedwithoptionalcashpaymentsorthroughpayrolldeductions.TheCompanyanticipatesthatothersecuritieswillbesoldduring1980.Theexactamount,natureandtimingoffuturesalesofsecuritieswill,ofnecessity,bedeterininedinthelightofmarketconditionsandotherfactors.ThemortgageindentureunderwhichtheCompany'sfirstmortgagebondsareissuedcontainscertainprovisions,principallyearningscoverageandpropertyadditionstests,limitingtheissuanceofadditionalbonds.Theearnings coveragetest,whichrequires'adjustednetearnings(asdefinedinthemortgage)foraspecifiedtwelve-monthperiodtobeatleastequaltotwicetheannualinterestrequirementsonallbondstobeoutstanding,ispresentlythe.mostlimitingoftheserestrictions..BasedontheCompany'searningsfortheyear1979andaftergivingeffect'otheproposedissuanceof$155millionaggregateprincipalamountoffirstmortgage-bonds,theearningscoveragetestwouldhavepermittedtheCompany.to~issueabout$300millionprincipalamountof'bonds(15%interestrateassumed)at'ecember31,1979.TheCompany'schartercontainsprovisionslimitingtheissuance.ofadditionalsharesofpreferredstock.Themorerestrictiveoftheseprovisions-requiresincomebeforeinterestcharges(grossincome)ofnot'lessthan1.5ti~nesthesumoftheannualizedinterestrequirementsonoutstandingindebtednessandthedividendrequirementsonoutstandingpreferredstock,includingthepreferredstockbeingissued.BasedontheCompany'searningsfortheyear1979andaftergivingeffecttotheproposedissuanceof$155millionaggregateprincipalamountoffirstmortgagebonds,theCompanywouldhavebeenpermittedtoissueapproximately$135millionofpreferredstock.(12%dividendrateassumed)at"December31,1979.Theissuanceofadditionaldebtwouldreducetheamountofpreferredstockwhichcanbeissuedunderthisprovision.Therearenocharterprovisionslimitingtheissuanceofpreferencestock.Althoughissuancetestswouldhavetobemetatthetimethatbondsorpreferredstockareissued,theCompanydoesnotexpectthatthemortgageandcharterlimitationswilllimittheCompany'sabilitytosellthesecuritiesnecessarytomeetitscapitalrequirementsduring1980.RATEMATTERSSalestoultimatecustomers,whichareregulatedbythePVC,accountedforapproximately98%oftheCompany'srevenuesfrownelectricsalesoverthepastfiveyears.Theremaining2%ofrevenuesfromelectricsales,representedbysalestoothersforresale,areregulatedby,FERCasareinterchangepowersales,whichareclassifiedasacredittooperatingexpenses.AnenergyclauseappliestoallcustotnersbilledunderPUCtariffsandafueladjustment-clauseappliestosubstantiallyallcustomersbilledunderFERCtariffs.PUCtariffsalsoincludeataxsurchargetorecoverthecostofincreasedPennsylvaniataxes.InMarch1975theCompanyrequestedandthePUCsubsequentlygrantedthefollowinggeneralincreasesinbaseratechargesforelectricserviceexpressedaspercentagesofannualizedrevenuesinthetestyearusedforthefinalPUCorder.Annualizedrevenuesconsistofrevenuesderivedfrombaserates',adjustmentclausesandthetaxsurcharge.I%Increase~eceuestedTestYear(TwelveMonthsEnded)IncreaseEffectiveIncreaseGranted$-Millions10.6%3uly31,1975September1975April1976August1976$21.020.037.3$>s.s3.9%3.77.010.6%

AcomplainantintherateproceedingappealedtheAugust1976decisionofthePUCgrantingthe10.6%increase.Thisappeal,whichwasdeniedbytheCommonwealthCourtofPennsylvania,raisedobjectionsregarding,amongotherthings,theexistenceandamountofdifferenceinratesbetweencertainoftheclassesofservicesprovidedbytheCompany.AnappealoftheCommonwealthCourt'sdecisioniscurrentlypendingbeforetheSupremeCourtofPennsylvania.Inordertooffsetincreasingcosts,theCompanyplanstofilewiththePUCinlateApril1980foranincreaseinbaseratesforelectricserviceusingaforwardlookingtestyearendingDecember31,1980.However,theexactamountofthebaserateincreasetoberequestedbytheCompanyhasnotbeendeterinined.SincetheCompanyanticipatesthatitsrequestwillbethoroughlyreviewedbythePUC,theamountofanyincreasegrantedisnotexpectedtobecomeeffectiveuntillate1980orearly1981.ThePublicUtilityRegulatoryPoliciesActof1978requireseachstateregulatoryauthoritytoconsidertheapplicationofcertainratedesignstandardstoeachelectricutilityunderitsjurisdiction.Inratemakingproceedingsandcere~inotherproceedings,theActauthorizesinterventionb'yanyconsumerofanyelectricutilityinvolved,andincertaincircumstancesrequirestheutilitytocompensatetheconsumerforattorneys'eesandothercostsofhisparticipation,includinghis'articipationinanyjudicialreviewprocess.SimilarcompensationunderlikecircumstancesmaybeprovidedbyFERCtointervenorsinproceedingsattheFederallevel.TheActalsocontainsprovisionspermittingintervenorstorequestjudicialreviewinstateorFederalcourtsorboth,dependingonthenatureofthernatterinvolved.TheCompanyunderstandsthatthePUChasbeenconsideringtheapplicationoftheratedsignstandardsenunerated.intheActonacasebycasebasisinconnectionwithrequestsforbaserateincreases.AltnoughtheCompanyanticipatesthatsiinilarconsiderationwillbegiventothesestandardsinitsupcomingrequestforanincreaseinbaserates,itisunabletopredicttheeffectthattheprovisionsoftheActortheactionsofthePUCwillhaveontheCompany'sratestructure,theextenttowhichtheprovisionsoftheActmayencourageinterventioninproceedingsbeforethePUCortheadditionalcoststhatmaybeincurredbytheCompanyasaresultoftheAct.FnerClauseInaccordancewithan.orderofthePUCwhichaffectedallmajorPennsylvaniaelectricutilitieswithfueladjustinentclauses,theCompanychangeditselectrictariffstoreplacethePUCfueladjustmentclausewithanenergyclausebeginninginNovember1978.Costsincludedintheenergyclausegenerallyarefuelexpensesforgenerationplusthecostofinterchangeenergypurchasedlesstheamountreceivedforinterchangeenergysold.Inconnectionwiththetransitiontotheenergyclause,theCompanyrevisedbaseratetariffstoreflectthelevelofenergycostsexperiencedbytheCompanyduring1977.'Undertheclause,energycostsvaryingfromthelevelsallowedinapproved'baserateschedules-arechargedorcieditedtocustomers'illsover'a-futuresix-monthperiod.Theenergyclausealsoprovidesforadjustingfuture'months'atesforanyoverorunderrecoveryofenergycosts.

AsofDecember31,1979,approximately$32.2millionoffuelcostswhichweretobecollectedthroughtheterminatedfueladjustmentclauseweredeferredontheCompany'sbooks.InaccordancewithaPUCorder,the'Companyisrecoveringthedeferredfuelcoststhrougha1-millperkwhchargetocustomers.TheCompanyhasanadditional$7.1millionofdeferredfuelcostsasaresultofthePUChavingplacedatemporaryceilingonthefueladjustmentclauseduringseveralmonthsfollowingtheterminationofthe1978coalminers'trike.Inanaccountingorder,thePUCstatedthattheCompanywouldbepermittedtorecovertheamountoffuelcostssodeferred,andtheCompanyhasrequestedthatrecoverybeaccomplishedthroughtheapplicationofthecurrent1-millperkwhcharge.Referenceismadeto"FUELSUPPLY-Coal"forinformationconcerningaproposedrulemakingbythePUCtodeterminetheextenttowhichthecostofcoalproducedbycontrolledminesmaynotbeincludedinaPennsylvaniaelectricutility'senergyclause.TaxSurchareIn1977theSupremeCourtofPennsylvaniaruledinacaseinwhichtheCompanywasnotapartythatcertainelectricutilitypropertywasexemptfromthePennsylvaniapublicutilityrealtytax.AsaresultofthatdecisionandinterpretationsbythePennsylvaniaDepartmentofRevenue,Pennsylvaniaelectricutilities,includingtheCompany,filedclaimsforrefundsofcertainprioryears'axpayments.In3uly1979,thepublicutilityrealtytaxwasamendedtobroadenthetypeofpropertysubjecttotaxation,retroactivetotheyear1978.InNovember1979,theCompany-increaseditstaxsurchargeratetoprovideforrecoveryoftheincreased1979utilityrealtytaxoveratwelvemonthperiodinaccordancewithaPUCorder.Includedinthenewtaxsurchargerateisanamounttorecoveraportionoftheincreased1979realtytaxwhichtheCompanyhaddeferredpendingapprovalofthenewtaxsurchargeratebythePUC.Inadditiontobroadeningthetaxablepropertybase,aone-timetaxof10.5%onthevalueofthenewtaxbasewasimposedbytheCommonwealthof.PennsylvaniatorecovertherefundsclaimedbyelectricutilitiesasaresultoftheSupremeCourtdecision.TheCommonwealthisrequire'dtomakeageneralrepaymentoftheamountcollectedunderthe10.5%tax'totheextentthatitexceedsthetotalrefundsgrantedtoutilities.Aftergivingeffecttopendingrefundclaimsof$31.0millionfortheyears1969through1977,theCompany'sliabilityunderthe10.5%taxamountedto$8.3million,whichwaspaidtotheDepartmentofRevenueinSeptember1979.TheCompany,recordedthe$8.3millionasadeferredchargependingafinaldeterminationbythePUCregardingrecoveryoftheadditionaltax.InFebruary1980,theCompanywasnotifiedthatitsclaimforarefundof$5.1millionofutilityrealtytaxfortheyears1969-1972wasbeingdisallowed.TotheextentthatanyportionoftheCompany'srefundclaimsisultimatelydisallowed,thatamountwouldhavetobepaidtotheCommonwealth.TheCompanybelievesthatthe$8.3millionadditionaltaxpaymentmadeinSeptember1979andanyrefundclaimswhichareultimatelydisallowedshouldberecoverablethroughthetaxsurchargeandintendstofilewiththePUCaproposaltorecoverthoseamounts.

POWERSUPPLYDuring1979,theCompanyproduced33.1billionkwhinplantsownedbytheCompanyandpurchased0.6billionkwhunderfirmpurchaseagreements.Duringthatperiod,theCompanydelivered11.1billionkwhandreceived1.5billionkwhaspowerpool,interchange.Approximately809t)oftheenergygeneratedbytheCompany'splantsduring1979camefromcoal-firedstations,1896fromoil-fired.stationsand29l3from.hydroelectricstations.TheCompany'spowercapability(winterrating)atDecember31,1979wasasfollows:PlantNetKilowatt~CaabilitCoal-firedsteatnstationsMontour.......................BrunnerIsland..................Sunbury........................ivlartinsCreek.........'.........Keystone......................Conemaugh....................Holtwood...oooo.o.o.o...oooo'otalcoal-fired..........Oil-firedsteamstationtViartinsCreek..................Combustionturbinesanddiesels......HydroelectrIc~~~o~~~~~~~~~~~~~~~~~TotalgeneratingcapabilityFirmpurchases--hydroelectric.......Totalcapability..........1,515,0001,464,000389,000300,000210,000(a)194,000(b)73000tt,la5,0001,640,000539,000146,000(c)6,470,00076000(c)(d)6506000(a)Company's12.34%undividedinterest.(b)Company's11.3996undividedinterest.(c)See"FRANCHISESANDLICENSES"forinformationconcerningtheexpira-tionofhydroelectricprojectlicenses.(d)FromSafeHarborWaterPowerCorporation.Thecapabilityofgeneratingunitsisbasedupontheoperatingexperi-enceandphysicalconditionoftheunitsandmayberevisedfromtimetotimetoreflectchangedcircumstances.Approximately25%oftheCompany'sgeneratingcapabilityatDecember31,1979hasbeenplacedinserviceinthelastfiveyearsand55%inthelasttenyears.Themaximumone-hourdemandontheCompany'ssystemwas4,701,000kw,whichoccurredonFebruary12,1979andincludedthesaleof52,000kwtotheLuzerneElectricDivisionofUGICorporationunderafirmpurchaseagreement.Themaximumone-hoursummerdemandwas3,617,000kw,whichoccurredonAugust16,1978andincludedthesaleof10,000kwtoLuzerne.

TheCompany'scurrentprojectionsindicateasubstantialreductionintheaverageannualgrowthofsystemwinterpeakdemandintothe1990s,ascomparedtogrowthforecastsatthetimethedecisionwasreachedtobuildtheSusquehannaunits.ThiscouldresultintheCompanyhavinggeneratingcapabilitygreaterthanconsideredcustomarytoassureservicereliability.Asaresult,theCompanyhasenteredintoanagreementwithAtlanticCityElectricCompanyunderwhichAtlanticCityElectricCompanywillpurchase,subjecttoFERCacceptance,6.6%oftheCompany'sshareofthecapacityandrelatedenergyfromtheSusquehannaunits(125megawattsofcapacitywhenbothunitsareinservice)foratermcommencingwiththein-servicedatesoftheunitsandendingSeptember1991.TheCompanyisinvestigatingotherpotentialsalesofcapacityandenergyfromtheSusquehannaunits.TheCompanyoperatesitsgenerationandtransmissionfacilitiesasapartofthePennsylvania-New3ersey-Maryland(P3M)Interconnection.TheP3MInterconnection,oneoftheworld'slargestpowerpools,includeselevencompaniesservingabout21millionpeopleina50,000squaremileterritorycoveringallorpartofPennsylvania,NewJersey,Maryland,Delaware,Virginiaandwashington,D.C.TheP3Mcompanieshadapproximately07.5millionkwofinstalledgeneratingcapacityatDecember31,1979andtransmissionlineconnectionswithneighboringpowerpoolshavethecapabilityoftransferringanadditional2.1millionkwbetweenthePJMandneighboringpowerpools.ThroughDecember31,1979themaximumone-hourdemandonthepowerpoolwasapproximately32.2millionkw,whichoccurredon3uly21,1977.TheCompanyisalsoapartytotheMid-AtlanticAreaCoordinationAgreementwhichprovidesforthecoordinatedplanningofgenerationandtransmissionfacilitiesbythecompaniesincludedinthe,PJMInterconnection.FollowingtheoutageoftheThreeMileIslandnuclearunits,theCompanyin3une1979agreedtoselltotheoperatingsubsidiariesofGeneralPublicUtilitiesCorporationthroughtheP3Mupto200megawattsofenergyifandasavailablefromtheoil-firedunitsoftheMartinsCreekstationatapriceequalto-theincrementalcostofenergyfromthoseunitsratherthaninaccordancewiththenormallyhigherP3Mpricingarrangements.Thatagreement,whichwasapprovedbythePUCandFERC,providesforterminationbyeitherpartyononeweek'notice.TheP3McompanieshavecompletedarrangementswhichwillpermittheGPUcompaniestopurchasefromP3Mupto1,100megawattsofenergyifandasavailableatthesellingcompanies'ncrementalcostofenergyplus10%.Thispricingprocedure,whichmodifiesthesplitsavingsconceptnormallyusedforP3Mtransactions,willbecomeeffectiveuponthereceiptofrequisiteregulatoryapprovalsandwillterminateattheendof1980orthereturntoserviceofThreeMileIslandUnitNo."1,whicheveroccursfirst.UpontheeffectivenessoftheagreementamongtheP3Mcompanies,theCompanyexpectsthatthe3une1979agreementbetweentheCompanyandtheGPUcompanieswillbeterminated.FUELSUPPLYCoal4SThefollowingtabulationshowstheamountofanthraciteandbituminouscoalburnedbytheCompany'sgeneratingstationsduring1979andtheestimated requirementsforcoalovertheremainderoftheestimatedusefullivesofthosestationsbasedontheplantlivesestablishedintheCompany'slast'ratecasebeforethePUC.EstimatedBurnedRequirementsDuringOverPlant1979Lives(a)MillionsofTonsAnthracite(includingpetroleumcoke)Bituminouscoal(b).................Total........................1.010.011.019.0215.0230.0(a)TheCompanyplanstomakecapitalexpendituresatitsexistingcoal-firedstationstoextendtheiroperationallivesforanindeterminateperiodwhichwouldincreasetheestimatedcoalrequirementsfromthoseshowninthetabulation.(b)IncludestheCompany'sshareofthebituminouscoalforthejointly-ownedKeystoneandConemaughgeneratingstations.'heCompany'spolicygenerallyistomaintaina05to60daysupplyofbituminouscoalatitsgeneratingstations.AtDecember31,1979,basedonestimatedusage,theCompany'sbituminouscoalinventorywassufficientforabout08daysofoperations.During1979,02%ofthecoaldeliveredtotheCompany'sgeneratingstationswasobtainedfromsubsidiaryminingcompanies(approximatelyone-thirdofwhichwaspurchasedbythosecompaniesintheopenmarket),22%undercontractsand36%throughmarketpurchases.AtDecember31,1979,theCompany'sinventoryofanthracitewasabout3.5milliontons.ThebalanceoftheCompany'srequirementsforanthracite,aswellasitsrequirementsforpetroleumcoke,overtheremainderoftheexpectedusefullivesoftheCompany'santhracite-firedgeneratingstationsisexpectedtobeobtainedbytheacquisitionofadditionalanthracitesiltbanksand'marketpur-chases.ThefollowingtabulationliststhebituminouscoalreservesownedorcontrolledatDecember31,1979bytheCompany'ssubsidiary,PennsylvaniaMinesCorporation.Thesereserves,allofwhicharelocatedinPennsylvania,arerecoverablebydeepminingoperations.Theinformationundertheheadings-"EstimatedRecoverableReservesasofJanuary1,1978"and"Average%Sulfur(ByWeight)"wasprovidedbyPaulWeir.CompanyIncorporatedonthebasisofitsindependentstudiesandtheCompanyhasincludedsuchinformationhereininrelianceuponsuchstudies.

EstimatedRecoverableReservesasofJanuary1,.1978(a)1978Production1979ProductionAverage%Sulfur(By)Ve~iht)(d)ThousandsofTonsAssignedreserves(b)Greenwich.........Rushton...........Tunnelton..........Totalassignedreserves.......Unassignedreserves(c)GreeneHill........GreeneManor......Totalunassignedreserves.......Total63,0818,0079,07280,560159,877162,682322,5590031191,0200052972,1222,1221,9885190012,9082,9082.70.51.72.93.3(a)Includesonlyprovenreservesforwhichtonnageiscomputedfromdimen-sionsrevealedinoutcropdata,mineworkingsanddrillholes.(b)Assignedreservesrepresentcoalwhichcanbeminedonthebasisofcurrentminingpracticesandtechniquesthroughtheuseofmineopeningsandplantfacilitiescurrentlyinexistenceorunderconstruction.(c)Unassignedreservesrepresentundevelopedreservesorreservesthatwouldrequiresubstantialadditionalminingfacilitiesbeforeoperationscouldbegin.(d)Rawcoal,drybasis(priortocleaning).'InAugust1978,undergroundcoalminingoperationsatTheOneidaMiningCompany(Oneida),awhollyownedsubsidiaryoftheCompany,wereterminated.EvaluationofminingconditionsandfuturepotentialbytheCompanyindicatedthatOneidacouldnotminebituminoussteamcoalfortheCompanyonaneconomicbasis.See'ote3toFinancialStatementsforinformationconcerningtheeffectonnetincomeoftheterminationofminingoperationsattheOneidamine.Underacontractwithabituminouscoalsupplier(LadyJane),theCompanyisrequiredtopurchasetheentireoutputofthemineandthesupplierisobligatedtodeep-mineitsreservestoexhaustion.ProductionattheLadyJanemineamountedto170,000tonsduring1979.Run-of-minecoalfromtheLadyJaneminehasanaveragesulfurcontentofabout3.5%.

TheCompanyalsohasacontractwithaPennsylvaniabituminouscoalproducerwhichexpiresonMay31,1983.Underthiscontract,thesupplierisobligatedtoselltotheCompanyatotalof1.2millionto1.0milliontonsofsurface-minedbituminouscoalduringeachyearofthecontractterm.During1979,about1.3milliontonsofbituminouscoalhavinganaveragesulfurcontentofabout1.9%weredeliveredtotheCompanyunderthecontract.ThecoalburnedintheCompany'sgeneratingstationscontainsbothorganicandpyriticsulfur.Mechanicalcleaningprocessesinstalledattheminesarebeingutilizedtoreducethepyriticsulfurcontentofthecoal.ThereductionofthepyriticsulfurcontenthasloweredthetotalsulfurcontentofthecoalburnedtolevelswhichpermitcompliancewithcurrentsulfurdioxideemissionregulationsestablishedbythePennsylvaniaDepartmentofEnvironmentalResources(DER).See"ENVIRONMENTALMATTERS--Air".TheregulationsapplicabletotheCompany'scoal-firedgeneratingstationsgenerallylimittheaveragesulfurcontentinany30-dayperiodtonotmorethan2.3%.Coalobtainedthroughmarketpurchasescurrentlyhasanaveragesulfurcontentofabout2.0%.TheCompanyownsa12.34%undividedinterestintheKeystonestationandan11.39%undividedinterestintheConemaughstation,bothofwhicharemine-mouthgeneratingstationslocatedinwesternPennsylvania.TheownersoftheKeystonestationhavealong-termcontract,whichmaybeextendedthrough2011,withasupplierfor90%oftheannualbituminouscoalrequirementsoftheKeystonestation.TheownersoftheConernaughstationhavealong-termcontractwithanothersupplierforatleast80%oftheannualbituminouscoalrequire~nentsoftheConeinaughstationforthelifeofthatstation.BecauseofpoorminingconditionsandotherdifficultiesbeingexperiencedbythesupplierfortheCone-maughstation,thesupplierhashadtosupplementitsdeep-mineproductionwithpurchasedcoal.TotheextentthattherequirementsoftheKeystoneandConemaughstationsarenotobtainedfromthosesuppliers,thebituminouscoalrequirementsare,withminorexceptions,obtainedfromlocalsuppliers.TheCompanybelievesthat,undercurrentlyprevailingconditions,itwouldnotbeeconomicallytdesirabletodevelopdeepminesatitsunassignedcoalreservesforthepurposeofmeeting,inwholeorinpart,thebituminouscoalrequirementsoftheCompany'sgeneratingstations.Asaresult,theCompanyisinvestigatingthepossibilityofthesaleofaportionofitsunassignedreservesatapriceapproximatingbook.value.Theextenttowhichsomeoralloftheunassignedreserveswhichareretaine'dmayeventuallybeminedtomeetthefuelrequire-mentsoffuturegeneratingstationswilldependuponfutureeconomicconditionsandotherfactorswhichcannotn'owbepredicted.Theinvestmentbysubsidiarycompaniesinunassignedreserves,whichapproximated$96millionatDecember31,1979,isfinancedbydebtobligationsguaranteeddirectlyorindirectlybytheCompany.TheCompanyisinvestigatingthefeasibilityofacquiringadditionalbituminouscoalreservesinPennsylvaniarecoverablethroughsurfaceorstrip-miningoperations.Inthisregard,theCompanyhasmadearrangements,whicharesubjecttothe'receiptoftherequiredregulatoryapprovals,toacquireallofthecapitalstockofasurface-miningoperatorinexchangefor500,000sharesofcommonstocktobeissuedbytheCompany.Inaddition,thearrangementsprovide fortheCompanytoacquirecertaincoalreservesfromthestockholdersofthatcompanyfor$2millionincash.Iftheacquisitioniscompleted,itisexpectedthatthesereserveswouldprovide'theCompanywithatleast8millionrecoverabletonsof.bituminouscoal.TheCompanyestimatesthatassignedreservesandcontracts,togetherwithcoalexpectedtobeproducedfromsurfaceorstrip-minedreservesacquiredbytheCompany,willprovideabout60%ofitsprojectedbituminouscoalrequirements'duringthenextfiveyears.Thebalanceoftheserequirementswillhavetobeobtainedthroughmarketpurchases.Theaveragedeliveredcostofcoalhasincreasedoverrecentyearsfrom$23.38pertonin1975to$30.70pertonduring1979.Theaveragedeliveredcostofcoalpurchasedduring1979wasasfollows:bituminouscoalpurchasedfromsubsidiarycompanies(includingcoalpurchasedbythosecompaniesintheopenmarket)andundercontracts,$33.85perton;bituminouscoalpurchasedbytheCompanyintheopenmarket,$29.90perton;andanthracite,includingpetroleumcoke,$10.08perton.BituminouscoalpurchasedintheopenmarketbytheCompanyanditssubsidiariesisprimarilysurface-mined.Bituminouscoalproducedbysubsidiarycompaniesisdeep-mined.During1979,aboutone-halfofthebituminouscoalpurchasedbytheCompanyundercontractswassurface-minedand,thebalancewasdeep-mined.In3une1979,thePUCinitiatedarulernakingproceedingtodeterminethereasonablenessofthepriceofcoalobtainedfromcoalininescontrolledbyPennsylvaniaelectricutilities.UndertheregulationsproposedbythePVC,thepriceofcoalobtainedfromcontrolledmineswhichwouldberecoverablethroughanenergyclausewouldbe.limitedtothelowerof:(i)theactualcostpaidbytheutilityforsuchcoal;or(ii)theweightedaveragepriceforsimilarcoalduringtheprecedingthreemonthsfrommineswhicharenotcontrolledbyPennsylvaniaelectricutilities..TheproposedregulationsprovidethatanyportionofthecostofcoalfromcontrolledmineswhichisnotrecoveredthroughtheenergyclausewouldberecoverableonlyinaseparateproceedingbeforethePUCafternoticeandhearingandforgoodcauseshown.ITheCompanyandotherPennsylvaniaelectricutilitiesareopposingtheadoptionoftheregulati'onsintheformproposedbythePUC.Inthisregard,theCompanyhasrecommendedalternativestandardsdevelopedbytheCompanyfordeterminingthereasonablenessofthepriceofcoalobtainedfromitscontrolledmines.TheCompanyisunabletopredictwhatactionthePUCmaytakewithrespecttotherulemakingorthestandardstobe'recommendedbytheCompany.IfadoptedintheformproposedbythePUC,theregulationswouldlimittheautomaticrecoveryofthecostofcoalproducedbytheGreenwich,Rushton,TunneltonandLady3aneminesbyamountswhichcouldbesubstantial.OilThetwo820,000kwoil-firedgeneratingunitsattheCompany'sMartinsCreekstationaredesignedtoburneithercrudeorresidualoilandto'adjustrapidlytochangesinloadlevelsortooperateasbaseloadunits.

UnderthePowerPlantandIndustrialFuelUseActof1978,theSecretaryoftheDepartmentofEnergy(DOE)canrequireconversionifaplanthasorpreviouslyhadthetechnicalcapabilitytousecoalasaprimaryfuelsource.TheSecretaryofDOEcanalsorequireconversiontocoaliftheconversioncanbeaccomplishedwithoutasubstantialmodificationtotheplantorasubstantialreductioninratedcapacity.Theoil-firedunitsattheMartinsCreekstationweredesignedspecificallytoburnoilandtheydonothavethetechnicalcapabilityto.burncoalasaprimaryenergysource.TheCompany'sstudiesindicatethatanyconversionoftheMartinsCreekunitswouldrequiresubstantialmodificationsandasubstantialreductionoftheratedcapacityoftheunits.During1979,theoilrequirementsfortheMartinsCreekunitswereprovidedfromforeignsources,principallyundercontractswiththreesuppliersandthebalancethroughspotmarketpurchases.TheCompanyhasagreementswithtwosupplierstoprovideupto75%oftheexpectedoilrequirementsfortheMartinsCreekunitsthroughtheendof1982.Athirdagreement,underwhichtheCompanycanpurchaseupto15%,oftheoilrequirementsfortheMartinsCreekunits,expireson3uly1,1980,unlessextendedforadditional,twelvemonthperiodsbywrittenagreementoftheparties.TheCompanycurrentlyexpectsthatitwillbeabletoacquirethebalanceofitsoilrequirementsfortheMartinsCreekunitsthrough'dditionallong-termcontractsorspotmarketpurchases.TheoperatingpermitsissuedbyDERfortheMartinsCreekoil-firedunitsliinitthesulfurcontentoftheoilburnedinthoseunitsto1%,astandardwhichtheCompanyhasbeenabletoineet.Becauseofthegreateravailabilityandlowercostofoilhavingahighersulfurcontent,theCompanyisdiscussingwithDERachangeintheoperatingperinitsfortheMartinsCre'ekunitswhichwould,undercertainoperatingconditions,allowoilhavingasulfurcontentinexcessof1%tobeburnedinthoseunitswithoutviolatingapplicableairqualitystandards.TheaveragepricepaidbytheCompanyforresidualoilwithasulfurcontentof1%deliveredtotheMartinsCreekunitshasrisenfrom$12.32perbarrelin1976to$27.56perbarrelinDecember1979.NuclearTheCompanypresentlyhasunderconstructiontwonuclear-fueledgeneratingunitsatitsSusquehannasite,See"CONSTRUCTIONPROGRAM".Inanticipationofthecommercialoperationofthoseunits,theCompanyhasmadecommitmentstomeetcertainofthenuclearfuelcyclerequirementsfortheunits.Thenuclearfuelcycleconsistsoftheminingandmillingofuraniumoretouraniumconcentrate;theconversionofuraniumconcentratetouraniumhexafluoride;theenrichmentofuraniumhexafluoride;thefabricationoffuelassemblies;theutilizationofnuclearfuelinthereactor;temporarystorageofspentfuel;andthereprocessingorpermanentdisposalofspentfuel.TheCompanyhasenteredintoagreementsforthepurchaseofuraniumconcentrateforSusquehannaintotheearly1980s.TheCompanyalsohasenteredintoanagreementwithasuppliertoprovideapproxiinately25%oftheuraniuinconcentraterequirementsforSusquehannaduringtheperiod1982through1993andisnegotiatingwithanothersupplierforthepurchaseofanadditional25%oftheestimateduraniumconcentraterequirementsfortheunitsthroughthelate1980s.

Inaddition,toprovideaportionoftheuraniumconcentratethatwillberequiredbytheSusquehannaunits,awhollyownedsubsidiaryoftheCompanyisevaluatingthefeasibilityofdevelops'ng'uraniumminingpropertiesinUtahandWyoming.AtDecember31,1979,thesubsidiaryhadinvestedapproximately$10.2millioninacquiringuraniumminingclaimsandexplorationoperations.The.Companyestimatesthatbasedonan80%capacityfactor.fortheSusquehannaunitsitwouldhavesufficientquantitiesofuraniumconcentratetopermittheoperationofeachunitforabout3'earsafteritisplacedincommercialoperation.Baseduponthepresentlyscheduledin-servicedatesandplannedfuelcyclesfortheSusquehannaunits,thefollowingtabulationshowsthe.yearsthroughwhichcontractsareexpectedtoprovidetheindicatedsegmentsofthenuclearfuelcycle.SusquehannaUnitNo.1SusquehannaUnitNo.2Conversion~oo~s~~~~o~s~~~~~~EnrichmentFabrication..................199020091990199020101990Additionalarrangements,forwhichthereisnopresentassurance,willberequiredtosatisfythefuelrequirementsoftheSusquehannaunitsovertheirestimatedusefullives.TheCompanyestimatesthat,therewillbesufficientstoragecapabilityinthespentfuelpoolsatSusquehannatoaccommodatethefuelthatisexpectedtobedischargedthrough1995.TherearecurrentlynocommerciallyoperatingfacilitiesintheUnitedStatesforthereprocessingofspentfuel.DOEhasproposedapolicyunderwhichtheFederalGovernmentwouldprovideoff-sitestorageofspentnuclearfuelinreturnforthepaymentofafee.TheCompanyisunabletoestimatewhetherorwhensuchstoragefacilitieswouldbecomeavailableortheamountofthefeestobecharged.ENVIRONMENTALMATTERSTheCompanyissubjecttocertainpresentanddevelopingFederal,regional,stateandlocallawsandregulationswithrespecttoairandwaterquality,landuseandotherenvironmentalmatters.Exceptasdescribedbelow,theCompanyispresentlyinsubstantialcompliancewithapplicableenvironmentallawsandregulations.AirTheFederalCleanAirActAmendmentsof1977(1977Amendments)include,amongotherthings,'rovisionsthat:(a)requirethepreventionofsignificantdeteriorationofexistingairqualityinregionswhereairqualityisbetterthanapplicableambient'standards;(b)restricttheconstructionofandrevisetheperformancestandardsfornewcoal-firedandoil-firedgeneratingstations;and(c)requiretheUnitedStatesEnvironmentalProtectionAgency(EPA)toimposesubstantialnon-compliancepenaltiesforfailuretocomplywithairpollution regulationsafterJuly1,1979andnewcivilpenaltiesofupto$25,000perdayofviolationforfacilitiesfoundtobeinviolationoftherequirementsofanapplicablestateimplementationplan.UnderproceduresestablishedbyDER,companiesnotincompliancewithemissionregulationshavebeenpermittedtoenterintoconsentorderswithDERwhichallowcontinuedoperationoffacilitiesduringthetimeinwhichsteps'rebeingtakentoachievecompliance.PaymentsarerequiredtobemadetothePennsylvaniaCleanAirFunduntilcomplianceisachievedwithrespecttoanyparticularfacility.In'hisregard,theCompanyandDERenteredintoaconsentorderin1975whichrequiresthatcompliancewithDERparticulateandopacityemissionsstandardsbeachievedatBrunnerIslandUnitNo.1byDecember31,1980andatBrunnerIslandUnitNo.3byJune30,1981.Undertheconsentorder,theCompanyisrequiredtomakepaymentstothePennsylvaniaCleanAirFundwhicharenotexpectedtoexceed$103,000intheaggregate.BecausetheCompanyhasbeenproceedingonaconstructionschedulewhichisdesignedtoachievecomplianceattheBrunnerIslandunitsbythedatessetforthinthe1975consentorderwithDER,theCompanywasnotabletoachievecomplianceatthoseunitsbythedateestablishedbythe1977Amendments.'venthoughtheCompanywasincompliancewithapplicableparticu-lateemissionregulationsatitsHoltwoodSteamElectricStation,inJuly1977EPAnotifiedtheCompanyofanallegedviolationofDERopacityregulationsatthatstation.FollowingdiscussionswithDERandEPA,theCompanyinJanuary1978agreedtoinstalladditionalemissioncontrolfacilitiesattheHoltwoodstation.InMay1978,theCompanyandDERsignedaconsentorderwithrespecttotheHoltwoodstationandthatconsentorderwasenteredasanorderoftheCommon-wealthCourtofPennsylvania.TheCompanyexpectsthatcompliancewiththeDERopacityregulationscanbeachievedbyMarch1,1981,thecompliancedatespecifiedintheconsentorder.Undertheconsentorder,theCompanyisrequiredtomakepaymentstothePennsylvaniaCleanAirFundaggregatingapproximatelyy60,000.BecauseBrunnerIslandUnitsNo.1andNo.3andtheHoltwoodstationwerenotbroughtintocompliancewithairpollutionregulationsbythecompliancedateestablishedbythe1977Amendments,theCompanymaybesubjecttosubstantialfinesandpenalties,includingnoncomplianceorcivilpenalties,inainountswhicharenotnowdeterminable.However,EPAhasadvisedtheCompanythatpresentlyitdoesnotintendtoseekcivilpenaltiesforfailuretomeetthecompliancedateestablishedbythe1977AmendmentsprovidedthatthecomplianceschedulesspecifiedintheconsentorderswithDERcoveringtheBrunnerIslandunitsandtheHoltwoodstationaremet.Intheeventthatthesecomplianceschedulesarenotmet,theCompanymaybesubjecttocivilpenaltiesunderthe1977Amendmentsinamountswhicharenotnowdeterminablebutwhichmaybesubstantialinamount.TheCompanyandEPAalsohavediscussedaconsentorderunderwhichnoncompliancepenaltieswouldnotbeleviedagainsttheCompanyforfailuretobringtheBrunnerIslandunitsandtheHoltwoodstationintocompliancewithairpollutionregulationsbythecompliancedateestablishedbythe1977Amendments.

EPAhasadvisedtheCompanythatnoncompliancepenaltieswillnotbelevieduntilfinalnoncompliancepenaltyregulationsareadoptedandthatsuch.finalregulationscurrentlyareexpectedtobeissuedbylateSpring1980.BasedonitsinterpretationoftheformulaproposedbyEPAinMarch1979,theCompanyestimatesnon-compliancepenaltieswithrespecttotheBrunnerIslandandHoltwoodunits~ouldnotexceed$2.0millionintheaggregate.TheCompany'sestimateofconstructionexpendituresfor1980and1981includesestimatedexpendituresduringthoseyearstoachievecompliancewithDERparticulateandopacityemissionsregulationsattheBrunnerIslandandHoltwoodunits.See"CONSTRUCTIONPROGRAM".TheprocessingofcoaltoreducethesulfurcontentpriortoburningpermitstheCompanytocomplywithcurrentstatesulfurdioxideemissionregulations.If,however,thesulfurdioxideemissionregulationsapplicabletotheCompany'sexistinggeneratingstationsareamendedtosignificantlyreducepermis-sibledischarges,theCompanymayberequiredto,furtherreducethesulfurcontentofcoalpriortoburningorinstallequipmentfortheremovalofsulfurdioxidefromfluegases.DERhasconcludedstudiesconcerningsulfurdioxideambientairqualitylevelsintheCommonwealthofPennsylvania.Asaresultofthesestudies,theSunburyareahasbeenclassifiedasanon-attainmentareawithrespecttosulfurdioxidenationalambientairqualitystandards.DERhasproposedanalternativesulfurdioxideemissionstandardfortheCompany'sSunburystationwhich,ifadopted,wouldfurtherlimitthesulfurdioxideemissionsfromthatstation.CompliancewithsuchregulationscouldrequiretheCompanytomakeadditionalexpendituresattheSunburystationinamountswhicharenotnowdeterminablebutwhichmaybesubstantial.In3anuary1980,DERadvisedtheCompanythatitmusteitherreducesulfurdioxideemissionsfromtheSunburystationordemonstratethatthesulfurdioxidestandardshavebeenattainedintheSunburyarea.TheCompanyandDERarediscussingaconsentorderforthesulfurdioxideemissionsattheSunburystationunderwhichtheCompanywouldconductstudiestodeterminewhethertheSunburyareashouldbereclassifiedasanattainmentarea.IftheSunburyareaisnotreclassified,theCompanywouldberequiredtoreducesulfurdioxideemissionsfromtheSunburystationtothe~levelsspecifiedinthealternativeemissionstandardsproposedbyDER.InSeptember1979,DERadvisedtheCompanythatonthebasisofarecenttest,oneof,thetwo150megawattcoal-firedgeneratingunitsattheCompany'sMartinsCreekstationmaynotbeincompliancewithsulfurdioxideandparticulateemissionsregulations.DERandtheCompanyhaveagreedtodiscusstheaccuracyofthetestresults,possiblestepstoassurefuturecomplianceandpotentialpenaltiesforviolationsofsuchregulations.CertainfacilitiesarebeingoperatedinconnectionwiththecoalminingoperationsoftheCompany'ssubsidiarieswithoutthepermitsrequiredbyapplicableairqualityregulations.Asaresult,suchsubsidiariesmaybesubjecttopenaltieswhicharenotexpectedtobematerialinamount.

WaterTomeetthestandardof"bestpracticablecontroltechnologycurrently'vailable"establishedbytheFederalWaterPollutionControlAct,asamendedinDecember1977(CleanWaterAct),theCompany'scoalminingsubsidiariesareplanningtoinstallwastewatertreatmentequipmentatcertainoftheirfacilitiesandhavefiledthenecessaryapplicationswithDER.Thefailurebytnesubsidiaries.tomeettheCleanWaterActstandardbyJuly1,1977maysubjectthesubsidiariestofinesandpenaltieswhicharenotexpectedtobematerialinamount.TheCleanWaterActrequirestheapplication.ofthe"bestavailabletechnologyeconomicallyachievable"byJuly1,1980withrespecttocertaindischargesfromexistingfacilitiesandauthorizesEPAtoestablishdischargelimitationsandcomplianceschedulesforcertainotherpollutants.Withrespectto"new"facilities,theCleanWaterActauthorizesEPAtoestablishstandardsofperformancewhichwillrequiretheapplicationofthe"bestavailabledemonstratedcontroltechnology".TheCleanWaterActalsorequiresthatthelocation,design,constructionandcapacityofcoolingwaterintakestructuresreflecttheapplicationofthe"besttechnologyavailableforminimizingtheadverseenvironmentalimpact".Tomeettheserequirements,EPAhasadoptedorwilladopteffluentlimitations,guidelinesandstandardsforsteamelectricstationsandguidelinesforexistingcoalmines.EPAlimitations,guidelinesandstandards.areenforcedthroughtheissuanceof,NationalPollutionDischargeEliminationSystem(NPDES)permitswhichspecifytheapplicablelimitationsondischarges.Compliancewithapplicablestateandregionalwaterqualitystandardsisaccomplishedbyrequiringtheappropriatestateorinterstateagencytoissueawaterqualitycertificationwithrespecttoeachapplication.ThetermsandconditionsofanysuchwaterqualitycertificationmustbeincorporatedineachNPDESpermit.Inaccordancewiththeprovisionsof-theCleanWaterAct,EPAhasauthorizedDERtoissueNPDESpermits,forPennsylvaniasources.TheCompanyhasreceivedNPDESpermitsfortheoperationofitsgeneratingstationsandforconstructionactivitiesattheSusquehannastationandexpectstobeabletoobtainthenecessaryrenewalsofthosepermitsonatimelybasis.ApplicationsforNPDESpermitsforthecoalminingoperationsatcertainoftheCompany'ssubsidiarieswerefiledwithDER.However,noactionhasbeentakenbyDERwithrespecttotheseapplications.DERalsoadministersstatelawsandregulationsrelating,amongotherthings,toeffluentdischargesandwaterquality.TheCompanyandDERarediscussingthenecessityofinstallingadditionalwatertreatmentfacilitiesatcertainoftheCompany'splants.Inaddition,theCompanyisreviewingwhetherthecoalminingoperationsofitssubsidiariesarebeingconductedinconformitywithapplicablelawsandregulationsandwhetheradditionalwaterqualitypermitsarenecessaryforsuchoperations.TheCompanyhasagreedwithDERtoinstalladryflyashhandlingsystemattheMontourstationtomeetcertainlimitationscontainedintheDERcertificationincorporatedintheNPDESpermitforthatstation.UnderaconsentorderwithDER,theCompanyispermittedtocontinuetheoperationsoftheMontourstationduringthetimethatthedryflyashhandlingsystemisbeinginstalled.

SRegulationsadoptedbytheDepartmentofInterior'sOfficeofSurfaceMiningReclamationandEnforcementpursuanttotheSurfaceMiningControlandReclamationActof1977,whichalsoappliestothedisposalofrefusefromundergroundmines,areexpectedtodelaytheissuancebyDERofacoalrefusedisposalpermitforPennsylvaniaMinesCorporation(PMC)andmayrequireadditionalexpendituresbytheCompany'scoalminingsubsidiariesinamountswhicharenotnowdeterminablebutwhichmaybesubstantial.TheCompanycurrentlyisinvestigatingwhetherthedisposalofcoalrefusefromtheminesownedorcontrolledbyPMCisbeingconductedinaccordancewithsuchregulationsandwhetheradditionalcoalrefusedisposalpermitsarenecessary.TheCompany'sagreementwiththeDelawareRiverBasinCommission(DRBC)withrespecttothewithdrawalofwaterfortheoil-firedunitsattheMartinsCreekstationrequirestheCompanytoprovidemake-upwateratcertaintimesortocurtailoperationofthoseunitsduringcertainperiodsoflowflowintheDelawareRiver.Inthisregard,theCompanyandcertainotherelectricutilitieshavingfacilitiesintheDelawareRiverbasinhavefiledanapplicationwiththeDRBCforapprovalofamake-upwaterreservoirprojectinthebasinandtheCompany'sshareofthecostofthereservoirduringtheyears1980-1982isincludedinitsestimateofconstructionexpendituresforthatperiod.Pendingcompletionofthereservoirproject,theCompanyhasanagreementwithNewYorkCity(theownerofwatersupplyreservoirsintheupperDelawareRiverbasin),subjecttocancellationbyeitherpartyon30days'otice,whichallowstheCompanytosupplytherequiredmake-upwaterfortheoil-firedunitsatMartinsCreekfromitsLakeWallenpaupackhydroelectricproject.See"FRANCHISESANDLICENSES".TheregulationsoftheSusquehannaRiverBasinCommission(SRBC)require'thatwaterconsumedintheoperationofnewelectricgeneratingunitsduringcertainperiodsoflowflowbereplacedortheoperationofthoseunitsbecurtailedduringsuchperiods.InconnectionwiththeconstructionoftheSusquehannaunits,theCompanyhasinitiatedactiontoobtainanadequatesupplyofmake-upwaterfromaUnitedStatesArmyCorpsofEngineers'rojectinthe'pperSusquehannaRiverbasin.Ifwaterfromthatprojectisnotmadeavailableto.neettheSRBCregulationsapplicabletotheSusquehannaunits,theCompanyplanstoconstructareservoirtoprovidemake-upwaterforthoseunits.EnvironmentalandengineeringfeasibilitystudieswithrespecttoareservoirhavebeericompletedbytheCompany.Anapplicationforreviewandapprovalofthereservoirproject,includingarequestthattheSRBC'smake-upwaterregulationsbecomeapplicabletotheSusquehannaunitsin1983(theearliestestimatedin-servicedateofthereservoirdescribedinthatapplication),hasbeenfiledwiththeSRBC.Substan-tiallyalloftheCompany'sshareofthecostofthatreservoirduringtheyears1980-1982isincludedinitsestimateofconstructionexpendituresforthatperiod.TheCompanyisunabletopredictwhatactiontheSRBCwilltakewithrespecttotheapplicationintheeventthereservoirisrequiredortheimpactthatanysuchactionmayhaveonthecostorin-servicedateofthereservoir.NuclearThe1977AmendmentsauthorizeDERtoestablishgaseousradioactiveemissionstandardsfornuclearplantsmorestringentthanstandardsestablishedbytheNRC.TheCompanyisunabletopredictwhataction,ifany,maybetakenbyDER-withrespecttogaseousradioactiveemissionstandardsortheeffectthatsuchactionmayhaveontheSusquehannaunits.

GeneralDuringtheperiod1975through1979,theCompany'sconstructionandnuclearfuelexpendituresaggregatedabout$2.1billion,'fwhichtheCompanyestimatesthatabout$101millionwasforcompliancewithFederal,stateandlocal'nvironmentallawsandregulations.Approximately$157millionofcapital'xpendituresforsuchcomplianceareincludedintheCompany's1980-1982constructionprogramanditmaybethatsubstantialadditionalexpendituresforsuchpurposesinanamountnotnowdeterminablewillberequiredduringthatperiodandthereafter.Inadditiontothemattersdescribedabove,theCompanyanditssubsidiarieshavebeencitedfromtimetotimefortemporaryviolationsofDERandEPAairandwaterqualityregulationsinconnectionwiththeoperationoftheirfacilitiesand,maybecitedforsuchviolationsinthefuture.Asaresult,theCompanyanditssubsidiariesmaybesubjecttocertainpenaltieswhicharenotexpectedtobematerialinamount."TheCompanyisunabletopredicttheultimateeffectofevolvingenvironmentallawsandregulationsuponitsexistingandproposedfacilitiesandoperations.However,itispossiblethatsuchlawsandregulationsmayrequiretheCompanytomodify,supplement,replaceorceaseoperatingitsequipmentandfacilities,delayorimpedeitsconstructionandoperationofnewfacilitiesandrequireittomakesubstantialadditionalexpendituresinamountswhicharenotnowdeterminable.FRANCHISESANDLICENSESTheCompanyhasauthoritytoprovideelectricpublicutilityservicethroughoutits.entireserviceareaasaresultofgrantsbytheCommonwealthofPennsylvaniaincorporatecharterstotheCompanyandcompaniestowhichithassucceededandasaresultofcertificationthereofby'hePUC.TheCompanyhasbeengrantedtherighttoenterthestreetsandhighwaysbytheCommonwealthsubjecttocertainconditions.Ingeneralsuchconditionshavebeenmetbyordinance,resolution,permit,acquiescenceorotheractionbyanappropriatelocalpoliticalsubdivisionoragencyoftheCommonwealth.TheCompanyoperatestheHoltwood'hydroelectricproject(102,000kwcapability)andtheWallenpaupackhydroelectricproject(00,000kwcapability),theoriginallicensesforwhichexpiredin1970and1970,respectively.PendingfinalactionontheCompany'sapplicationsfornewlong-termlicensesforbothprojects,FERChasgrantedtheCompanyinterimannuallicensestooperatetheprojects.Theinterimannuallicensesincorporatetheter'msandconditionsoftheoriginallong-termlicenses.TheCompany'sHoltwoodapplicationisbeingopposedbyamunicipalelectricsystem.TheSRBC,althoughnotapartytothelicensingproceeding,hasidentifiedtoFERCcertainissuesrelatingtofloodcontrol,waterqualityandotherenvironmentalmattersthatshouldbeconsideredinthere-licensingofHoltwood.TheFederalPowerActprovidesthatif,uponexpirationofamajorprojectlicense,theUnitedStatestakesovertheprojectoralicenseforthe projectisissuedtoanewlicensee,theoriginallicenseeshallbepaidthe"netinvestment"intheproperty,nottoexceedfairvalue,plusseverancedamages,ifany.TheHohwoodandWallenpaupackprojectsrepresentinvestmentsonadepreciatedoriginalcostbasisatDecember31,1979of$9.3millionand$11.0million,respectively.TheCompanyalsoownsone-thirdofthecapitalstockofSafeHarborWaterPowerCorporation(SafeHarbor)whichholdsamajorprojectlicensefortheoperationofitshydroelectricplant(230,000kwcapability).TheCompanyisentitledtoone-thirdofthecapacity(76,000kw)oftheSafeHarborplant.TheSafeHarborlicenseexpiresin1980;InApril1977SafeHarborfiledanapplicationwithFERCforanewlong-termlicenseandtheproposedinstallationqffiveadditional37,500kwunits.TheSRBCandanassociationoflandownersinthevicinityoftheSafeHarborplanthavebeenpermittedtointerveneintheSafeHarborlicensingproceeding.~TheadditionalunitswouldincreasethetotalcapabilityoftheSafeHarborplantto017,500kwandtheCompanywillbeentitledtoone-thirdofthetotalcapacity(139,167kw).EMPLOYEERELATIONSApproximately5,200oftheCompany's7,600employeesarerepresentedbytheInternationalBrotherhoodofElectricalWorkers(IBEW)underthree-yearagreementswhichexpireinMayand3une1982.Thoseagreementsprovideforanegotiatedwageincreaseof6.39oeffectivein1980,andareopeneronwages,mileageandperdiemallowancein1981.TheCompanyhasagreedtoreopenwagediscussionsin1980ifthe.wageandsalaryguidelinesofPresidentCarter'santi-inflation.programhavebeenincreased.

ELECTRICSTATISTICS19791978197719761975PowerCapability(thousandsofkw)Coal-firedsteamstations.Oil-firedsteamstation.....Combustionturbinesanddiescls.HydroelectricstationsFirmpurchases(hydroclcctric).Total~~~~~4~~~~~~~~~~~~~~~~~~~~~~~~4~~~~~~~~~~4~~~~~~4,105I>60053914676~54.4,135196005391067665360,136820539106760,1051,60053910676654657170,13820539106765717PeakDemand(thousandsofkw)(a).sourcesofEnergy(millionsofkwh)GeneratedCoal-firedsteamstations..Oil-firedsteamstation.....Combustionturbinesanddiesels.HydroelectricstationsPowerpurchases...Total........~~~~~~~~~~~~~~~~~~\~~~~~~~~~~~~~~~~~~~~~~~0,02726,0875,777377992120~Am0,70120,1676,026106701I319327190,5200,51025,7511,90700809212626,2996,271115735197735397306730,12225,3801,14980859224129717DispositionofEnergy(millionsofkwh)Energysalestocustomers.....Interchangepowersales(b)CompanyusesandlinelossesTotal....~~~t~~~~~~~~~~~~~~~~~22955511,089I58021,8009,010I865F221921,20112,0331763353972093508,358~19613067319,1138,757I64729717'IFuelCostofEnergyGcncratcd(centsperkwh)CostofCoalReceived,includingfreightandhandlingcost(perton)..........EnergySales(millionsofkwh)Residential..............,.Commercial............~.*Industrial...Other~~~~~~~~~~~~~~~~~Total~~~~~~~~~~~~~~~~~~~~~~~~~~1.651.071.351.171.008,0665,5508,135800Z7399,7,7605,0087,891781~~447,5395,2117,697750~22017,2674,8707,081732203546,8180,5757902070019113$30.70$29.50$25.72$25.36$23.38'OperatingRevenues(thousands)Residential~~~~~CommercialIndustrialOtherTotal.......NumberofCustomers(endofperiod)AverageUseperResidentialCustomerAverageRevenue(centsperkwh)Residential.CommercialIndustrialAllcustomersTotalOperatingExpensesperkwhofEnergySales(centspcrkwh)(b)~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(kwh)~~~~~~~~~~~~~~~~~~~~~~~~~~~~$301,987232,610200,26537,60585647987,0059,3530.200.193,003.753.00$315,691216,787220,20937~311~93~998972,9939,1660.070.012.803.592,88$296,179201,639209,52733183~740526950,6139,0633.933.872.723.052.60$2579828170,990180,95729909639724936,2198,9313.553.512.023.102.09$218,900103,673150,36525~686~538~628917,9208,5283.213.102.102.782.21Note:StatisticsoftheCompanyandHersheyElectricCompanyareconsolidatedsince3anuaryI,1977.(a)TheCompany'speakdemandoccursinthewinterseasonandwasreachedcarlyinsubsequentyear.In1976,peakisthatwhichwouldhaveoccurredifa5%voltagereductionhadnotbeenineffect.Actual1976peakwas0,025,000kilowatts.(b)Asprovidedintheapplicableregulatorysystemofaccounts,receiptsfrominterchangepowersaleshavebeentreatedasreductionsofoperatingexpenses.s Cr..MEWpoR(PEMMSYLVAMN.POWER6LIGHTCOMPANYSEANCEAREA~".TIARA'YORK~-,~-MASS.;-.PENNSYLVANIA-4'p.-4wIA640;.4>>f'~IAIINSTIVAMA':H'AKj~~ARVICEAREA%4-LIhsaiketpp,."..":-,'..,=,XP"~IIJ.CÃiT4,.RAchpp4*.-;et.VA..wAILEIOAURAcKJ2WRAIANSPPORTSRiBURYQCOidAutt'-"0SCRAPITONt0WAKSSdARRS.~+s~j.SUSSUEHAAHIA~MONTOURSIOOPKSSVRO0+~R0*-kSTROV~IIAZISTOPSMARRMSCREEKNEIV'<DRYhdt's0GENERATINGSTATIGNSOOTTSTIQS0dtHIN'AIISHTOWS~pPhJj-SAPICASTSA0SAFEHARBOR~~.-,,:,ONLAOh&BIACoalOECC?Z3HyaTOK ITEM2.SUMMARYOFOPERATIONSSTATEMENTOFINCOMEThefollowingStatementofIncomeforthefiveyearsendedDecember31,1979hasbeenexaminedbyDeloitteHaskins4Sells,independentCertifiedPublicAccountants,whoseopinionappearsinItem12(a)1.ofthisReport.TheStatementshouldbeconsidered-inconjunctionwithitsnotesandtheotherfinancialstatements,schedulesandrelatednotesappearinginItem12(a)1.ofthisReport.1979OperatingRevenuesOperatingExpenses(33)NetcostofenergyFuelPowerpurchasesInterchangepowersales.Net(deferral)/amortizationoffuelandenergycosts(Note2)WagesandemployeebenefitsOtheroperatingcostsDepreciationIncometaxesTaxes,otherthanincome(Note7).OperatingIncome.OtherIncomeandDeductionsAllowanceforfundsusedduringconstruction(Note1)(11)EquityandborrowedfundsEquityfundsIncometaxcreditsIncome(loss)ofsubsidiaries(Note3)Other-net.IncomeBeforeInterestChargesInterestChargesLong-termdebtShort-termdebtandotherAllowanceforborrowedfundsusedduringconstruction(Note1)(8)...197819771976ThousandsofDollars$860,498798,339744,731644,147534,38246,586(382,457)326,29929,657(160,163)454",60228,208(231,853)441,01539,783(306,456)(27,245)223,712103,47985,85173,07577,21666,404629,737168,602(7,317)167,02591,82282,35568,03591,50159,682560,420184,31140,453(4516)191,27782,58376,12162,47843,82849,526505813138,334238,964114,837100,57776,1517773269,414677,67518282345,19253,12926,5381,0522,28035,51813,594(6,346)95475231322091522,45913,708(4,205)3,27735,239219,55014,457(1,924)3,30561030199,36482,999265822126,9068,79491,5005,22379,7837,47099,4257,972(52,076)(26,936)69,787(35,517)71,88087,25383,6241975544,129273,20337,698(172,823)(1,567)136,51171,77368,369.58,54047,29840,669423,160120,96936,6N11,201353280150,960171,92967,9326,45674,388NetIncome-BeforeDividendsonPreferredandPreferenceStockDividendsonPreferredandPreferenceStockEarningsApplicabletoCommonStock.........EarningsPerShareofCommonStock(basedonaveragenumberofsharesoutstanding)...........182,19848,666$133,532$3.32149,03541,670107,3652.86149,76336,993112,7703.37112,11133,36878,7432.6897,54124,50973,0322.87AverageNumberofSharesOutstanding(thousands)40,23137,58733,471.29,36725,459DividendsDeclaredPerShareofCommonStock.....$2.041.921.891.80~NumberednotereferencesrelatetoNotestoFinancialStatementsinItem12(a)1.ofthisReport.

(A)Expendituresformaintenancewere(thousandsofdollars):1979,$76,098;1978,$72,803;1977,$63,013;1976,$50,906and1975,$07,956.(B)ReferenceismadetoNote1toFinancialStatementsregardingtheCompany'spolicyforrecordingallowanceforfundsusedduringconstruction(allowance).Priorto3anuary1,1977,theeffectivedateoftheFERC'sorderestablishingamethodofcomputingtheallowance,themethodusedbytheCompanydidnotprovidefordirectcompoundingandtheCompanycomputedtheallowancebyapplyingtheratetoaconstructionworkinprogress.basewhichdidnotincludetheaccumulatedallowancepreviouslyrecorded.However,anequivalentratecanbecalculatedfortheyears1975and1976byrelatingtheamountofallowancerecordedduringtheperiodtothebalancesoftheconstructionworkinprogressincludingtherelatedaccumulatedallowance.TheCompany'sallowanceratesandtheequivalentratesareasfollows:YearAllowanceRateEquivalentRate1975.1976.1977.19781979.9.25%8.757.07.98.28.3%7.9BasedontheassumptionthatfundsrequiredforconstructionfinancingwereprovidedsubstantiallyinthesameproportionastheCompany'saveragecapitalizationratiosduringeachyearandusinganafter-taxcostofdebtfor1975and1976,theportionoftheallowanceattributabletofundsprovidedbycommonequityasapercentageofearningsapplicabletocommonstockfortheyearspriortoissuanceoftheFERCorderwouldbeapproximately22%for1975and27%for1976.

MANAGEMENT'SDISCUSSIONANDANALYSISOFTHESTATEMENTOFINCOMEjTheStatementofIncomereflectstheresultsofpastoperationsandisnotintendedasanyrepresentationastotheresultsofoperationsforanyfutureperiod.Futureoperatingresultswillnecessarilybeaffectedbyvariousanddiversefactorsanddevelopments,includingtheobtainingofadequateandtimelyrateincreases,businessactivity,.customerdemand,energyconservation,interchangepowersales,taxes,laborcontracts,fuelcosts,availabilityandcostofcapital,governmentalacti'ons,en'vironmentalexpendituresandothermatters.TheCompanyisunabletopredictthecombinedeffectofthe'abovefactorsonitsfutureoperatingresults.OfparamountimportancetotheCompanyis.theconstructionoftheSusquehannastation.Completionofthetwo.nuclear-fueledgeneratingunitswillrequiresubstantialcapitalexpenditures,Adequateandtimelyratereliefandtheoperatingperformanceoftheunitswhentheyareplacedinservicewillbemajorfactorsaffectingoperatingresults.ReferenceismadetoIteml.BUSINESS-"CONSTRUCTIONPROGRAM"and"PROBLEMSAFFECTINGTHEELECTRICUTILITYINDUSTRYANDTHECOMPANY"forinformationconcerningtheSusquehannaunits.Inordertooffsetincreasingcosts,theCompanyexpectstofileinApril1980foranincreaseinbaserates.SeeItem1.BUSINESS-"RATEMATTERS".EarninsSummarEarnings.pershareof,commonstockwere$3.32in1979comparedto$2.86in1978and$3.37in1977.Earningsapplicableto,commons'tockincreased$26.2millionin1979comparedtoadecreaseof$5.0millionin1978;The1978and1977earningswereadversely,affectedby27and33centspershare,respectively,duetotheclosingof.theCompany'sOneidamineandunrecoveredcostsofminingcoalatOneida.Higherthannormalforcedoutagesofgeneratingunitsalsopenalized1978earnings.ThefollowingdiscussesinmoredetailchangesinthefinancialresultsasreflectedontheStatementofIncomeshownonpage20.Theperiodscomparedaretheyears1979to1978and1978to1977.EnerSalesand0eratinRevenuesTheCompanyderivesabout99%ofitsoperatingrevenuesfromsupplyingelectricserviceandthebalancefromsupplyingsteamforheatingandotherpurposesinthecityofHarrisburg.Energysalesfor1979increased711millionkwhor3.3%over1978.Approximately256millionkwhofthisincreasewasduetoaone-timeeffectofconvertingtomonthlybillinginJanuary1979.Excludingtheeffectoftheconversiontomonthlybilling,energysalesfor1979wouldhaveincreased055millionor2.1%over1978.Energysalesfor1978increased603millionkwhor3.0%over1977.

Thechangeinoperatingrevenuesfromtheprioryearissummarizedbelow(millionsofdollars):Increase(Decrease)19791978ElectricrevenuesBaseratesRecoveryofdeferredfuelFueladjustmentclausesEnergyclause.Taxsurchargeandother.Steamrevenues.Total.costs~~~~~~~~~~$192.219.0(191.6)39.93.062.5(0.3)~(2.208.03.7(8.5)9.953.50.153.6BothPUCandFERCfueladjustmentclauseswereineffectthroughOctober19?8.BeginninginNovember1978,theCompanyreplaceditsPUCfueladjustmentclausewithanenergyclause.Inestablishingtheenergyclause,theCompanyrevisedbaseratetariffstoreflectthelevelofenergycostsexperiencedin1977andalsoaddeda1-millperkwhchargetorecoverfuelcostsdeferredundertheterminatedfueladjustmentclause.Asaresultofthesetariffrevisions,thecomponentsofcustomers'ills,asbetweenbaseratesandadjustmentclauses,changedsignificantlybeginninginNovember1978.Thisrevisionofbaseratetariffsaccountedforapproximately$175.0millionand$33.7millionoftheincreasedbaseraterevenuesfor1979and1978,respectively.ReferenceismadetoItem1.BUSINESS-"ELECTRICSTATISTICS"for'dditionalinformationconcerningelectricenergysalesandrevenuesandtoIteml.BUSINESS-"RATEMATTERS"and"FUELSUPPLY(Coal)"foradditional'nformationconcerninggeneralrateincreasesgrantedtheCompanyandfuelandenergyclauses.NetCostofEnerThenetcostofenergyincludesfuelexpensepluspowerpurchaseslesspowersoldtootherutilities..Thechangebyfuelsourceingenerationfromtheprioryearwas(millionsofkwh):Increase(Decrease)19791978Generatedby,SteamstationsCoal-fired".Oil-firedCombustionturbinesanddieselsHydroelectricTotal~~~~~~~~~~~~~~(oil)2,320(609)(69)981,700(2,132)155(9)(30)(2i020)

Thedecreasedquantityofelectricitygeneratedin1978reflectedloweravailabilityofgeneratingunitsdueto(1)reducedgenerationfromcoal-firedunitsduringthecoalminers'trikeinthefirstquarterof1978and(2)higherthannormalforcedoutagesandextendedoutagesofunitsforannualmaintenancework.Theincreasedavailabilityofgeneratingunitsin1979resultedinthequantityofelectricitygeneratedreturningtoamorenormallevelin1979witha1.7billionkwhor5.0%increaseover1978.Fuel.Thechangeinfuelexpensefromtheprioryearisattributabletothefollowing(millionsofdollars);Increase(Decrease)19791978ElectricCoal-firedsteamstationsQuantityofelectricitygeneratedAveragecostoffuelburned.otale~~~~~~'~~~'ITOil-firedsteamstationQuantityofelectricitygeneratedAveragecostoffuelburned.otalo~~~~~~~~~~~~TCombustionturbinesanddiesels(oil)Totalelectric~0~~~~~~~~~~SteamheatTotal$29.212.0'41.6(IO.5)55.501.0(2.6)80.0(0.2)$79.8(20.0)31.77'10.8(e.3)6.5(0.3)13.9(0.3)13.6Themostsignificantfactorsintheaveragecostoffuelsburnedweretheincreasedcostofcoalin.,1978andtherapidincreaseinthecostofoilin1979.Theaveragecostoffuelconsumedperkwhofgenerationwasasfollows(centsperkwh):Coal-firedsteamstations.Oil-firedsteamstationCombustionturbinesanddieselsTotalfuel-burningstations~~~~~~~~~~19791.30('.200.681.65197819771.261.132.232.300.100.021.071.35ReferenceismadetoItem1.BUSINESS-"FUELSUPPLY"foradditionalinformationconcerningfuelsupply.

PowerPurchases.ThechangesinpowerpurchasesprimarilyreflectanallocationofenergypurchasedbytheP3Minterconnectionfromotherpowerpoolswhichisinitiallyaccountedforaspurchasedpower.Mostofsuchpurchasesare",resold"tootherutilitiesandincludedininterchangepowersales.InterchanePowerSales.Thechangeininterchangepowersalesfromtheprioryearisattributabletothefollowing(millionsofdollars):Quantityofenergysold-.Averagepriceofenergysold.CapacityreceiptsTotal.Increase(Decrease)1979-1978$52.5(83.2)101.98.0(3.8)0.2$150.6(7e.6)Thechangeinthequantityofinterchangepowersalesfromtheprioryeargenerallyreflectschangesingenerationduetotheavailabilityofsteamstations.Therapidincreaseinthepriceofoilduring1979wasthemajorfactorinthehigherpricereceivedforinterchangepowersalesin1979.TheaveragepricetheCompanyreceivedforinterchangepowersaleswas243centsperkwhin1977,2.52centsperkwhin1978and3.00centsperkwhin1979.Other0eratinExensesTheincreasesinwagesandemployeebenefitsandotheroperatingcostssuchasmaterialsandsupplies,rentsandinsuranceprimarilyreflecttheeffectofinflationandthecostsofoperationandmaintenanceofnewfacilitiesplacedinservice.Depreciationexpensecontinuestoincreaseasnewfacilitiesareplacedinservice.IncomeTaxesTheCompany'sextensiveconstructionprogram,principallyrelated."totheSusquehannastation,hasenabledtheCompanytoclaimsubstantialamountsofinvestmenttaxcredits.Attheendof1979,anestimated$38.0millionofinvestmenttaxcreditswereavailableinexcessoftheamountwhichcouldbeusedtoreduceFederalincometaxpayments.Theseunusedinvestmenttaxcreditsmaybeusedtoreducefuture.Federalincometaxprovisionsforyearsthrough1986.FormoreinformationontaxesseetheScheduleofTaxesonpage57.AllowanceforFundsUsedDurinConstructionTheallowanceforfundsusedduringconstruction(allowance),whichisanon-cashitem,varieswiththelevelofconstructionworkinprogressandthecostoffinancing.Thetotalallowanceincreased$21.6millionin1978and$30.2millionin1979.'hangesintheallowancerecordedprincipallyreflectMartinsCreekUnitNo.0beingplacedinserviceinMarch1977andtheincreasinginvestmentinthe/

Susquehannastation.ConstructionofSusquehannaaccountedforabout$65,0millionofthe$71,0millionofallowancerecordedin1978and$97.1millionofthe$105.2millionofallowancerecordedin1979.TheallowanceisexpectedtocontinuetoincreaseinamountuntiltheSusquehannaunitsareplacedinservice,ForadditionalinformationconcerningtheallowanceseeNote(B)tothe"StatementofIncome"andNote1toFinancialStatements,LossofSubsidiariesandOterIncome-NetThenetsubsidiarylossin1978wastheresultofterminationofminingoperationsatTheOneidaMiningCompanywith$7.6millionchargedagainstnetincomein1978.ForfurtherinformationseeNote3toFinancialStatements.Otherincome-netin1978includesapproximately$6.1millionofgainsfromthesaleofproperty,whichaccountedforasubstantialportionoffheincreaseover1977,InterestCharesandPreferred/PreferenceStockDividendsThein'creasesininterestchargesanddividendsonpreferredandpreferencestockfromtheprioryearwere(millionsofdollars):InterestchargesLong-termdebtShort-termdebtOther.Dividendsonpreferredandpreferencestock1979$27.50.70.17.019787.92.30.50.7Theincreasesinlong-termdebtinterestchargesanddividendsonpreferredandpreferencestockwereduetoissuanceofsecuritiesrequiredprimarilytofinancetheCompany'sconstructionprogram.During1979and1978,outstandinglong-termdebtincreasedby$297millionandpreferredandpreferencestockby$185million.<Interestcharges'onshort-termdebtvaryfromyear-to-yearinrelationtotheamountofshort-termdebtoutstandingandtheinterestratesineffect.Formoreinformationonshort-termdebt,seeiVote0toFinancialStatements.ITEM3.PROPERTIESTheMaponpage23showsthelocationoftheCompany'sserviceareaandgeneratingstations.ReferenceismadetoSCHEDULEV-UTILITYPLANTforinformationconcerningtheCompany'sinvestmentinutilityplant'.SubstantiallyallutilityplantissubjecttotheliensoftheCompany'smortgages.InformationconcerningleasesissetforthinNote8toFinancialStatements.

,~ForadditionalinformationconcerningthepropertiesoftheCompanyanditsunconsolidatedsubsidiaries,seeItem1.BUSINESS-"POWERSUPPLY"and"FUELSUPPLY"andItem0.PARENTSANDSUBSIDIARIES.TheCompany'sunconsolidatedsubsidiariesareengagedincoalminingoperations,holdingcoalreserves,uraniumexploration,oilpipelineoperationsandrealestate.AlloperationsofunconsolidatedsubsidiariesareintheUnitedStates.ITEM0.PARENTSANDSUBSIDIARIESControloverPennsylvaniaPower4LightCompany.NotApplicable.CorporationscontrolledbyPennsylvaniaPower4LightCompanyatDecember31,1979:NameofComanControlledKindofBusinessPercentVotingStockOwnedFootnoteReferenceBDWCorporationGreeneHillCoalCompanyGreeneManorCoalCompanyHersheyElectricCompanyInterstateEnergyCompanyLady3aneCollieries,IncorporatedLCALeasingCorporationTheOneidaMiningCompanyPennsylvaniaMinesCorporationRealtyCompanyofPennsylvaniaRushtonMiningCompanySafeHarborWaterPowerCorporationServiceDevelopmentCompanyTunneltonMiningCompanyUraniumResourcesandDevelop-mentCompanyRealestateUndevelopedcoalreservesUndevelopedcoalreservesElectricdistri-butionOilpipelineCoalminingRealestateCoalcleaningplantCoalminingInvestmentsandrealestateCoalminingGenerationandsaleofelec-tricityInvestmentsincludingrealestateCoalminingUraniumexplora-tionandminingNoneNone(2).None(2)100NoneNoneNone(1)(3)(1)50(7)100NoneNone~(8)(2)(2)None(2)(0)100,(5)100(6)None(2)

(1)AwhollyownedsubsidiaryofRealtyCompanyofPennsylvania.(2)AwhollyownedsubsidiaryofPennsylvaniaMinesCorporation.(3)TheCompanyhascontrolovertheoperationsofLady3aneCollieries,Incorporatedthroughanagreementdated3uly8,1965.UndergroundminingoperationsatOneidawere'erminatedin1978.ReferenceismadetoNote3toFinancialStatementsforadditionalinformation.(5)(6)Pennsylvania'MinesCorporationownsthestock'ofPemico,Inc.,whichwasnotactivelyengagedinbusinessasofthefilingdateofthisform.RealtyCompanyofPennsylvaniaownedthestockofMartinsCreekTerminalCompanywhichwasnotactivelyengagedinbusinessduring1979andwasdissolvedinearly1980.(7),TheCompanyownsone-thirdoftheoutstandingcapitalstockrepresentingone-halfofthevotingsecurities;BaltimoreGasandElectricCompanyownstwo-thirdsoftheoutstandingcapitalstockrepresentingone-halfof'thevotingsecurities.(8)ServiceDevelopmentCompanyownsthe'stockoftwocompanieseachofwhichholdaninterestincertainrealestate.TheCompanyhasfiledapplicationswiththePUCandFERCrequesting'pprovaltomergeHersheyElectricCompanyintotheCompanyeffectiveMarch1,1980.TheCompanyhasfiledanapplicationwiththePVCrequestingapprovaltoacquirealltheoutstandingcapitalstockofInterstateEneigyCompanyfromRealtyCompanyofPennsylvania.SeeItem1.BUSINESS-,"FUELSUPPLY(Coal)"forinformationconcerningtheCompanyenteringintoanagreementtoacquiretheoutstandingcapitalstockofacompanywhichownsorhasleasesforapproximately8milliontonsofrecoverablebituminouscoal.AllofthecorporationscontrolledbytheCompanyareincorporatedinPennsylvania,exceptthefollowingwhichareincorporated'inDelaware:BDWCorporation,InterstateEnergyCompanyandLCALeasingCorporation.ReferenceismadetothesectionsinNote1toFinancialStatementsentitled"PrinciplesofConsolidatio'n"and"AssociatedCompanies"regardingsubsidiariesincludedinconsolidatedfinancialstatements.Separatefinancialstatementsofsubsidiariesand50percentorlessownedcompaniesaccountedforbytheequitymethodhavenotbeenfiledduetotheirstatusofbeinginsignificantintheaggregate.

ITEM5.LEGALPROCEEDINGSReferenceismadetoItem1.BUSINESS-"CONSTRUCTIONPROGRAM"forinformationrelatingtothelicensingproceedingsbeforetheNRCwithrespecttotheSusquehannastationandtoBUSINESS-"FRANCHISESANDLICENSES"forinformationrelatingtolicensingproceedingsbeforeFERCofhydroelectricstations:ReferenceismadetoItem1.BUSINESS-"RATEMATTERS"regardinglitigationrelatedtothePUC'sAugust1976rateorderandto"ENVIRONMENTALMATTERS"regardingenvironmentalproceedingsinvolvingtheCompany.InNovember19709theCompanyfiledasuitintheCourtofCommonPleasofLehighCountyagainstGulfOilCorporation,RoyalDutchShellGroupandScallopNuclear,Inc.,individuallyandtradingasGeneralAtomicCompany.TheCompanyallegesthatGulfOil,etal.,breachedacontractpursuanttowhichtheyweretosupplyuraniumandfabricatedfuelassembliesfortheCompany'sSusquehannanuclearunitsandisseekingdamagesplusinterestandcosts.Thecasehasnotyetcometotrial.ITEM6.INCREASESANDDECREASESINOUTSTANDINGECURITIESANDINDEBTEDNESS(a).Increasesanddecreasesinequitysecurities~~1.CommonStockAsummaryof,changesduring1979intheCompany'sout-.standingcommonstock,nopar,authorized50,000,000shares,isasfollows:SharesOutstanding,December31,1978...3990733809StatedValueThousands$671,IOOIssuedduring1979Publicoffering(December1979)Dividendreinvestmentplan(January-December1979).Employeestockownershipplan(October-December1979).Outstanding,December31,19792,500,0001,816,7091066389399719600975030,3212170~752383(a)IS(a)Excludes$602cashinstallmentsreceivedunderadividendreinvest-mentplanasconsiderationfor36,162sharesofcommonstockwhichwereissuedinJanuary1980and$373ofsubscriptionsbyemployeesunderanemployeestockownershipplanasconsiderationfor18,337sharestobeissuedthroughAugust1980.BothamountsareincludedincommonstockontheBalanceSheet.

TheCompany'sReportsonForm10-QforthequartersendedMarch31,1979,June30,1979andSeptember30,1979(FileNo.1-905)describetheissuanceofcommon'stockduringthosequarters.SharesSharesofcommonstockoutstandingaslastreported(asofSeptember30,1979)inthe,Company's10-QReportforthequarterendedSeptember30,1979(FileNo.1-905)SharesofcommonstockissuedandsoldonDecember0,1979pursuanttothetermsofanUnderwritingAgreement,datedNovem-ber27,1979,includedinExhibitItotheRegistrationStatement9asamended,(FileNo.2-65872)andincorporatedhereinbyreference00938093322,500,000SharesofcommonstockissuedduringtheperiodOctober1,1979throughDecember31,1979pursuanttotheCompany'sdividendre-investmentplanasdescribedintheProspectusdatedMarch30,1979,assupplemented,(Reg-istration',StatementFileNo.2-63790)510,226SharesofcommonstockissuedduringtheperiodOctober1,.1979throughDecember31,'979pursuanttotermsofanEmployeeStockOwnershipPlanadoptedbytheCompanyin1976,andasdescribedintheProspectusdatedJuly19,1979,assupplemented,(RegistrationStatementFileNo.2-60872)f06638Totalsharesofcommonstockpresentlyoutstanding(asofDecember3i,1979)......S3997i96The2,500,000sharesweresoldtoagroupofUnderwriterspursuanttothetermsoftheUnderwritingAgreementdatedNovember2?,1979.TheproceedspaidtotheCompanybytheUnderwriterswere$009750,000(notincludingexpensespayablebytheRegistrantestimatedat$175,000).The510,226sharesofcommonstockissuedpursuanttothedividendreinvestmentplanresultedinproceedstotheCompanyof$99059,000.

TheCompanyhasanEmployeeStockOwnershipPlan(ESOP)whichpermitsittoclaimuptoanadditional1-1/2%investmenttaxcredit.AnamountequaltosuchadditionalcreditutilizedispaidtotheESOPtrusteetoacquirecommonstockfromtheCompanyforemployees.Anyadditional1/2%investmenttaxcreditcanbeutilizedonlytotheextentthatemployeescontributeanequalamounttothetrusteeforacquisitionofadditionalsharesofstock.InOctober1979,theCompanyissued865012sharesofcommonstock,nopar,tothetrusteefortheESOPatapriceof$20.35pershare,or$1,758,000,anamountequaltothel-l/2%taxcreditutilized.Anadditional20,226sharesofcommonstockwereissuedtothetrusteeinNovemberandDecember1979for$012,000($20.35pershare)forstockissuedtoemployeesmakingtheirmatchingcontributions.TheproceedsfromthepublicsaleofcommonstockandfromtheESOPanddividendreinvestmentplansaleswereaddedtotheCompany'sgeneralfundsandwereusedforgeneralcorporatepurposesincludingthereductionofshort-termdebtincurredtoprovideinterimfinancingforconstructionandnuclearfuelexpenditures.2.PreferredStockAsummaryofchangesduring1979instock,$100par,cumulative,isasfollows:Outstanding,December31,19780-1/2%,authorized629,936shares.Series,authorized5,000,000shares3~35%~~~~~~~~~~~~~~0o00%~~~~~~~~~~~~~~0~60%~~~~~~~~~~~~~~7~00%~~~~~~~~~~~~~~7~75%~~~~~~~~~~~~~~8o00%~~~~~~~~~~~~~~8o60%~~~~~~'o~~~~~~~9o00%~'~~~~~~~~~~~~~9o20%o,~~~,~~~~~~~~~~Amountissuedduring19798.00%,SecondSeries-January19797.50%Series-February1979.8.25%Series-July1979.8.75%Series-November1979Amountredeemedduring19797.00%Series-July1979pursuanttosinkingfundrequirementsOutstanding,December31,1979SharesAmount(Thousands)530,189$53,01901,783228,773.63,000000,000600,000500,000222,37077,63075000035013,705100,000150,000500,000600,0000517822,878,6,30000,00060,00050,0002252377,76375000301,375'I10,00015,00050,00060,000(16000)(1600)0707745~070775theCompany'spreferred Theissuanceofthe8.00%,SecondSeriesPreferredStockandthe7.50%SeriesPreferredStockaredescribedintheCompany'sReportonForm1.0-QforthequarterendedMarch31,1979(FileNo.1-905).Theissuanceof.the8.25%SeriesPreferredStockisdescribedintheCompany'sReportonForm10-Qfor,thequarterendedSeptember30,19?9(FileNo.1-905).OnNovember8,1979,theCompanysold,throughaprivateplacement,600,000sharesof8.75%SeriesPreferredStock,$100parvalue,toagroupofinstitutionalpurchasers.ThesalewasmadepursuanttothetermsofPreferredStockPurchaseAgreementsdatedNovemberI,1979,acopyofwhichwasfiledasExhibit2(a)-50totheCompany'sRegistrationStatement(FileNo.2-65872).ProceedstotheCompanywere$60,000,000.ExpensespaidbytheCompanyinconnectionwiththesaletotaled$225,000asofDecember31,1979.Theproceedsfromthesale=ofthe600,000sharesof8.75%SeriesPreferredStockwereaddedtotheCompany'sgeneralfundsandusedforgeneralcorporatepurposes,includingtheretirementofshort-termdebtincurredtoprovideinterimfinancingforconstructionandnuclearfuelexpenditures.ThePennsylvaniaPublicUtilityCommission,bySecuritiesCertificateNo.S-79100088approvedtheissuanceofthe8.75%SeriesPreferredStock.Thesharesofthe8.75%SeriesPreferredStockwerenotregisteredundertheSecuritiesActof1933becausethetransactioninvolvedwasatransactionbyanissuernotinvolvingapublicofferingpursuanttoSection0(2)oftheSecuritiesActof1933,asamended.Accordingly,eachcertificateforthesharesbearsalegendstatingthatthesharesrepresentedbysuchcertificatehavenotbeenregisteredundertheSecuritiesActof1933andcannotbesoldortransferredunlessanduntiltheyaresoregisteredorunlessanexemptionundersuchActisthenavailable.'toptransferinstructionswereissuedtothetransferagents.andappropriatenotationsofthetransferrestrictionshavebeenmadeontherecordsoftheCompany.ThePreferredStockPurchaseAgreementscontainarepresentationofeachofthePurchasersthatthesharesacquiredbythePurchaserswerebeingacquiredforthepurposeofinvestmentandnotwithaviewtoorfor.saleinconnectionwithadistributionoftheshares.

c3.PreferenceStockAsummaryofchangesduring1979intheCompany'spre-ferencestock,nopar,cumulativeisasfollows:Outstanding,December31,1978Series,authorized5,000,000shares$8e00~~~~~~~~~~~~$8e00~~~~~~~~,~~~~$8~70~~~~~~~~~~~~9~25~~'~~~~~~~~~11~00~~~~~~~~~~~$13~00~~~~~~~~~~~Shares350,000000,000000,000120,000500,000250000Amount(Thousands)$35,00000900000,00012,00050,00025000Amountredeemedduring1979$9.25Series-3anuary1979pursuanttosinkingfundprovisions2,020,000202,000(tr0000)(0000)Outstanding,December31,1979.1980000~198000~~~(b).Increasesanddecreasesindebtsecuritiespreviouslyreported.1.FirstMortgageBondsAsummaryofchangesduring1979intheCompany'soutstand-ingfirstmortgagebondsisasfollows(thousandsofdollars):Outstanding,December31,1978.......$192019500Amountissuedduring19799-7/896April19799-7/8963une1979Amountretiredduring19790-5/8969PollutionControlBonds,SeriesAretiredatmaturity-May1979.35,00065,000(500)Outstanding,December31,1979.......$13rtl000Theissuanceofthe9-7/8%FirstMortgageBondsisdescribedintheCompany'sReportonForm10-Qforthequarterended3une30,1979(FileNo.1-905).

2.UnsecuredLong-TermPromissoryNotesAsummaryofchangesduring1979intheCompany'soutstand-ingunsecuredlong-termpromissorynotesisasfollows(thousandsofdollars):Outstanding,December31,1978.......$209000Amountissuedduring19793anuary197960,000March1979...............190000Outstanding,December31,1979.......$220000Adescriptionoftheunsecuredlong-termpromissorynotesiscontainedintheCompany'sReportonForm10-QforthequarterendedMarch31;1979(FileNo.1-905).(c).Increasesanddecreasesindebtsecuritiesduringfourthquarter.Notapplicable.ITEM7.CHANGESINSECURITIESANDCHANGESIN.SECURITYFORREGISTEREDSECURITIESNotapplicable.ITEM8.DEFAULTSUPONSENIORSECURITIESNotapplicable.

ITEM9.APPROXIMATENUMBEROFEUITYSECURITYHOLDERSTitleofClassNumberofHoldersofRecordDecember101979CommonStock.PreferredStock0-1/296Series3.3596.0.0096.0.60%~7.00%.7.5096.7.75%.8~00%~~~8.00%,Seco8.25%.8.60%.8.75%.9.00%.9.24%.PreferenceStock$8.00Series.$8.00Series.8.70Series.9.25Series.$11.00Series$13.00Series~~ndo~~~~~~~~~151,28710,9626330,1602,019112032'12,839201,3832,0525,0005,0190,9200,97717,116~3130ITEM10.SUBMISSIONOFMATTERSTOAVOTEOFSECURITYHOLDERSAttheCompany'sAnnualMeetingofShareownersheldonApril25,1979,twoproposalsconcerningtheSusquehannastationwerepresentedbyshareowners.NeitherproposalwassetforthintheCompany'sProxyStatement.Theshareownersvotedagainsttheadoptionofthetwoproposals,eachofwhichwasopposedbymanageme'nt.ThefirstshareownerproposalrecommendedthatconstructionoftheSusquehannastationbehaltedpendingacompletereinspectionbytheNRC.Atotalof31,077,190voteswerecastagainsttheproposaland15,803voteswerecastinfavorofit.Thesecondshareownerproposalexpressedthebeliefthatthe"operationofnuclearpowerplantspresentsarealandsubstantialdangertothecorporatefinancialexistenceoftheoperator"andadvisedmanagementofshareownerwillingnesstoacceptsignificantshort-termlossesintheinterestsofreducingexposuretotheserisksandimprovingthestabilityoftheCompany'sfutureposition.Atotalof31,088,023voteswerecastagainstthisproposaland0,610voteswerecastinfavorofit.

ITEM11.INDEMNIFICATIONOFDIRECTORSANDOFFICERSArticleVIIoftheBy-LawsoftheCompanyreadsasfollows:"IndemnificationofDirectors,Officers,Etc.Section7.01.DirectorsandOfficers;ThirdPartyActions.Thecorporationshallindemnifyanydirectororofficerofthecorporationwhowasorisapartyoristhreatenedtobemadeapartytoanythreatened,pendingorcompletedaction,suitorproceeding,whethercivil,criminal,administrativeorinvestigative(otherthananactionbyorintherightofthecorporation)byreasonofthefactthatheis'rwasanauthorizedrepresentativeofthecorporation(which,forthepurposesof,thisArticle,shallmeanadirector,officer,employeeoragentofthecorporation,orapersonwhoisorwasservingattherequestofthecorporationasadirector,officer,employeeoragentofanothercorporation,partnership,jointventure,trustorotherenterprise)againstexpenses(includingattorneys'ees),judgments,finesandamountspaidinsettlementactuallyandreasonablyincurredbyhiminconnectionwithsuchaction,suitorproceedingifheactedingoodfaithandinamannerhereasonablybelievedtobein,ornotopposedto,thebestinterestsofthecorporation,and,withrespecttoanycriminalactionorproceeding,hadnoreasonablecausetobelievehisconductwasunlawful.Theterminationofanyaction,suitorproceedingbyjudgment,order,settlement,conviction,oruponapleaofnolocontendereoritsequivalent,shallnot,ofitself,createapresumptionthatthepersondidnotactingoodfaithandinamannerwhichhereasonablybelievedtobein,ornotopposedto,thebestinterestsofthecorporation,and,withrespecttoanycriminalactionorproceeding,hadreasonablecausetobelievethathisconductwasunlawful.Section7.02.DirectorsandOfficers;DerivativeActions.Thecorporationshallindemnifyanydirectororofficerofthecorporationwhowasorisapartyoristhreatenedtobemadeapartytoanythreatened,pendingorcompletedactionorsuitbyorintherightofthecorporationtoprocureajudgmentinitsfavorbyreasonofthefactthatheisorwasanauthorizedrepresentativeofthecorporation,againstexpenses(includingattorneys'ees)actuallyandreasonablyincurredbyhiminconnectionwiththedefenseorsettlementofsuchactionorsuitifheactedingoodfaithandinamannerhereasonablybelievedtobein,ornotopposedto,thebestinterestsofthecorporationandexceptthatnoindemnificationshallbemadeinrespectofanyclaim,issueormatterastowhichsuchpersonshallhavebeenadjudgedtobeliablefornegligenceormisconductintheperformanceofhisdutytothecorporationunlessandonlytotheextentthatthecourtofcommonpleasofthecountyinwhichtheregisteredofficeofthecorporationislocatedorthecourtinwhichsuchactionorsuitwasbroughtshalldetermineuponapplicationthat,despitetheadjudicationofliabilitybutinviewofallthecircumstancesofthecase,suchpersonisfairlyandreasonablyentitledtoindemnityforsuchexpenseswhichthecourtofcommonpleasorsuchothercourtshalldeemproper.

Section7.03.EmployeesandAgents.Totheextentthatanauthorizedrepresentativeofthecorporationwhoneitherwasnorisadirectororofficerofthecorporationhasbeensuccessfulonthemeritsorotherwiseindefenseofanyaction,suitorproceedingreferredtoinSections7.0iand7.02ofthisArticleorindefenseofanyclaim,issueormattertherein,heshallbeindemnifiedbythecorporationagainstexpenses(includingattorneys'ees)actuallyandreasonablyincurredbyhiminconnectiontherewith.Suchanauthorizedrepresentativemay,atthediscretionofthecorporation,beindemnifiedbythecorporationinanyothercircumstancestoanyextentifthecorporationwouldberequiredbySections7.01or7.02ofthisArticletoindemnifysuchpersoninsuchcircumstancestosuchextentifhewereorhadbeenadirectororofficerofthecorporation.Section7.00.ProcurementforEffectingIndemnification.IndemnificationunderSections7.01,7.02or7.03ofthisArticleshallbemadewhenorderedbycourt(inwhichcasetheexpenses,includingattorneys'ees,oftheauthorizedrepresentativeinenforcingsuchrightofindemnificationshallbeaddedtoandbeincludedinthefinaljudgmentagainstthecorporation)andmaybemadeinaspecificcaseuponadeterminationthatindemnificationoftheauthorizedrepresentativeisrequiredorproperinthecircumstancesbecausehehasmettheapplicablestandardofconductsetforthinSections7.01or7.02ofthisArticle.Suchdeterminationshallbemade:(1)Bytheboardofdirectorsbyamajorityvoteofaquorumconsistingofdirectorswhowerenotpartiestosuchaction,suitorproceeding,or(2)Ifsuchaquorumisnotobtainable,or,evenifobtainableamajorityvoteofaquorumofdisinteresteddirectorssodirect,byindependentlegalcounselinawrittenopinion,or(3)Bytheshareholders.Section7.05.AdvancingExpenses.Expenses(includingattorneys'ees)incurredindefendingacivilorcriminalaction,suitorproceedingshallbepaidbythecorporationinadvanceofthefinaldispositionofsuchaction,suitorproceeding,uponreceiptofanundertakingbyoronbehalfofadirectororofficertorepaysuchamountunlessitshallultimatelybedeterminedthatheisentitledtobeindemnifiedbythecorporationasrequiredinthisArticleorasauthorizedbylawandmaybepaidbythecorporationinadvanceonbehalfofanyotherauthorizedrepresentativewhenauthorizedbytheboardofdirectorsuponreceiptofasimilarundertaking.Section7.06.ScopeofArticle.Eachpersonwhoshallactasanauthorizedrepresentativeofthecorporation,shallbedeemedtobedoingsoinrelianceuponsuchrightsofindemnificationasareprovidedinthisArticle.

)lyTheindemnificationprovidedbythisArticleshallnotbedeemedexclusiveofanyotherrightstowhichthoseseekingindemnificationmaybeentitledunderanyagreement,voteofshareholdersordisinteresteddirectors,statuteorotherwise,bothastoactioninhisofficialcapacityandastoactioninanothercapacitywhileholdingsuchofficeorposition,andshallcontinueastoapersonwhohasceased'tobeanauthorizedrepresentativeofthecorporationandshallinuretothebenefitoftheheirs,executorsandadministrators,ofsuchaperson."Directors.andofficersoftheCompanymayalsobeindemnifiedincertaincircumstancespursuantto'hestatutoryprovisionsofgeneralapplicationcontainedinthePennsylvaniaBusinessCorporationLaw.TheCompanypresentlyhasaninsurancepolicywhich,amongotherthings,includesliabilityinsurancecoverageforofficersanddirectors,witha$10,000deductible($30,000aggregate)clause,underwhichofficersanddirectorsarecoveredagainstany"loss"~byreasonofpaymentofdamages,judgments,settlementsandcosts,aswellaschargesandexpensesincurredinthedefenseofactions,suits-orproceedings."Loss"isspecificallydefinedtoexcludefinesandpenalties,.aswellasmattersdeemeduninsurableunderthelawpursuanttowhichtheinsurancepolicyshallbeconstrued.Thepolicyalsocontainsotherspecificexclusions,includingdishonestyandillegallyobtainedpersonalprofitoradvantage;I'ThepolicyalsoprovidesforreimbursementtotheCompanyfor9596ofanylossincurredbyhavingindemnifiedofficersordirectorsasauthorizedbystatestatute,companyby-laws,oranyotheragreement.ITEM12.FINANCIALSTATEMENTSEXHIBITSFILEDANDREPORTSONFORM8-K(a)1.,FinancialStatementsThefinancialstatements,includingsupportingschedules,arelistedintheIndextoFinancialStatementsandSchedulesonpage09,filedasapartofthisReport.2.ExhibitsNone(b)ReportsonForm8-KThefollowingReportonForm8-Kwasfiledduringthelastquarter'oftheperiodcoveredbythisreport:

ReortdatedOctober31979Item5.OtherMateriallyImportantEventsNotificationfromtheNRCofadelayintheissuanceofcertainreportsrequiredforlicensingoftheSusquehannastation.Nofinancialstatementswererequiredtobefiledwiththeabovereferencedreport.EXECUTIVEOFFICERSOFTHECOMPANY/ThefollowingsummaryoftheCompany'sexecutiveofficersincludestheofficer'sname,position,age,abriefaccountofthebusinessexperienceduringthepastfiveyearsandtermasexecutiveofficer.OfficersareelectedannuallybytheBoardofDirectorsandserveatermdeterminablebytheBoard.Therearenofamilyrelationshipsbetweenanyoftheexecutiveofficers,noranyarrangementorunderstandingbetweenanyexecutiveofficerandanyotherpersonpursuanttowhichtheofficerwasselected.Therehavebeennoeventsunderanybankruptcyact,nocriminal,proceedingsandnojudgmentsorinjunctionsmaterialtotheevaluationoftheabilityandintegrityofanyexecutiveofficerduringthepastfiveyears.RobertI(.Cambell,President,age09Mr.CampbellbecamePresidentoftheCompanyeffectiveFebruary1,1977andeffectiveMarchI,1979assumedthedutiesofChiefExecutiveOfficeroftheCompany.PriortobecomingPresidentoftheCompany,Mr.CampbellwasanexecutiveofWesternElectricCorporation.Heservedinvariousengineeringand,managerialpositionsatWesternElectric.Hewasmanager-developmentandmanufacturingengineerandalsodirectorofmanufacturingofWesternElectric'sAllentown,Pa.Works.HewasalsogeneralmanageroftheReading,Pa.Works.In1972,hewasnamedgeneralmanageroftheAllentownWorks,servinguntilhisappointmentinJune1976asgeneralmanager-administrationforWesternElectric'sManufacturingDivisionatthecorporateheadquartersinNewYork,thepositionheheldpriortobecomingPresidentoftheCompany.Mr.CampbellisaregisteredprofessionalengineerandamemberoftheIllinoisBarAssociation.AsPresidentandChiefExecutiveOfficeroftheCompany,Mr.CampbellisresponsibleforallphasesoftheCompany'sbusiness.Hehasbeenanexecutiveofficersince1977.

RobertR.Fortune,ExecutiveVicePresident,Financial,age63DuringthepastfiveyearsMr.FortunehasservedasVicePresident,Financialand.effectiveDecember1,1975as,ExecutiveVicePresident,Financial.AsChiefFinancialandAccountingOfficerhehasresponsibilityfortheCompany's-accounting,finance,andtreasuryfunctions.Heisalsoresponsibleforthestaffservicesofpurchasingandstores,aswellastheCompany'suseofcomputers,includinganalysis,programmingandoperation.Hehasbeenanexecutiveofficersince1950.rJohnT.Kauffman,ExecutiveVicePresident,Operations,age53Duringthepast.fiveyearsMr.KauffmanhasservedasVicePresident,SystemPower4Engineeringand,effectiveJun'e1,1978,'sExecutiveVicePresident,Operations.AsVicePresident,SystemPower*Engineeringhewasresponsibleforplanning,design,construction,andoperationofthe.Company'sgeneratingstationsa'ndbulk-powertransmissionsystemandtheprocurementoffuel.InhispresentpositionheisresponsibleforassuringpropercoordinationandeffectiveperformanceofboththeDivisionOperationsandSystemPowerandEngineeringDepartments.Heisalsoresponsibleforthe"lineoperations"oftheCompanyincludingtheplanning,design,constructionandoperationoftheelectric"deliverysystem"fromthepowerplanttotheconsumer.EffectiveDecember1,1979,Mr.Kauffmanassumeddirectresponsibilityforallnuclear-relatedactivitieswithintheCompany.Hehasbeenanexecutiveofficersince1970.SI"gi'"8age57During'thepastfiveyearsMr.CollinshasservedasManager,InterconnectionAffairsandManager,System'Planning*InterconnectionAffairsand,effectiveJu'ne1,1978,asVicePresident,SystemPowerR.Engineering.AsManager,InterconnectionAffairsandManager,SystemPlanning4InterconnectionAffairshewasresponsibleforplanningthecoordinatedeconomicdevelopmentoftheCompany'sgenerating'apacityandelectricalsystemsandprovidinggeneralcoordinationoftheCompany'sinterconnectionaffairs.Inhispresent.positionheisresponsibleforplanning,design,construc-tionandoperation'oftheCompany'sgeneratingstations(otherthannuclear)andbulk-powertransmissionsystemandtheprocurementoffuel.Hehasbeenanexecutiveofficersince1978.EmmetM.Mollo,VicePresident,HumanResourceRDevelopment,age60DuringthepastfiveyearsMr.MolloyservedasVicePresident,HumanResource4Development,astaffservicesdepartmentincludingthelegal,personnel,unionrelations,informationservicesandgovernmentalrelationsfunctions.Hehasbeenanexecutiveofficersince1969.

LeonL.Nonemaker,VicePresident,DivisionOperations,age55DuringthepastfiveyearsMr.NonemakerservedasVicePresident,"DivisionOperationswithresponsibilityfortheCompany'sdistributionsystemtotheultimatecustomer,includingcustomer-orientedfunctionsinvolvingrates,customerandcommunityservices.Hehasbeenanexecutiveofficersince1970.'""'*age53DuringthepastfiveyearsMr.NagelservedasVicePresident,GeneralCounselRSecretaryhavingresponsibilityforallphasesoftheCompany'sLegalDepartment,aswellasthecorporatesecretarialfunction.Hehasbeenanexecutiveofficersince1971.GeoreF.Vanderslice,VicePresidentandComptroller,age57DuringthepastfiveyearsMr.VanderslicehasservedascorporateComptrollerand,effectiveDecember1,1975,asVicePresidentandComptrollerwithresponsibilityforallaccountingfunctionsincludinggeneral,plant,regulatoryandtaxaccountingandfinancialreporting.Hehasbeenanexecutiveofficersince1965.CharlesE.Russoli,VicePresident,Finance,age06DuringthepastfiveyearsMr.RussolihasservedasManager,FinancialPlanningandReportingand,effectiveApril16,1979,asVicePresident,Finance.AsManager,FinancialPlanningandReportinghewasresponsibleforcorporatefinancialplanningandfinancial/statisticalreportingactivities.Inhispresentpositionheis,responsibleforcorporatefinancialplanning,financingactivities,shareownerservicesandthefunctionsoftheTreasurer'soffice.Hehasbeenanexecutiveofficersince1979.ChesterR.Coller,Treasurer,age63DuringthepastfiveyearsMr.CollyerhasservedasTreasurerwithresponsibilityforcorporatefunctionsofcashoperationsandmanagement,payrollandinsurance.Hehasbeenanexecutiveofficersince1957.

PARTIIPartIIisomittedinaccordancewithGeneralInstructionHofForm10-KsincetheCompanyhasfiledwiththeSecuritiesandExchangeCommissionadefinitiveproxystatementpursuanttoRegulationIOA.InformationconcerningexecutiveofficersoftheCompanyappearsonpages03-05ofthisReport.SIGNATUREPursuanttotherequirementsoftheSecuritiesExchangeActof1930,theRegistranthasdulycausedthisAnnualReporttobesignedonitsbehalfbytheundersignedthereuntodulyauthorized.PENNSYLVANIAPOWER*LIGHTCOMPANYRegistrantBy(Signed).R.R.FortuneR.R.Fortune,ExecutiveVicePresident-Financial)February27,1980 SECURITIESANDEXCHANGECOMMISSIONWASHINGTON,D.C.20509FORM10-KANNUALREPORTFortheFiscalYear,EndedDecember31,1979ITEM12(a)1.-FINANCIALSTATEMENTSPennsylvaniaPowerRLightCompany

&ispageleftblankintentionally.

INDEXTOFINANCIALSTATEMENTSANDSCHEDULESFinancialStatements:~PaeNo.StatementofIncomefortheFiveYearsEndedDecember1979(seeItem2.)OpinionofIndependentCertifiedPublicAccountants.BalanceSheetatDecember31,'1979and1978.31,5152ScheduleofCapitalStockandLong-TermDebt.StatementofChangesinFinancialPositionfortheFiveYearsEndedDecember31,197956ScheduleofTaxesfortheFiveYearsEndedDecember31,1979.StatementofEarningsReinvestedfortheFiveYearsEndedDecember31,1979NotestoFinancialStatements.'58lSupplementalSchedules:V-UtilityPlantfortheTwoYearsEndedDecember31,1979.67Vl-AccumulatedProvisionforDepreciationofUtilityPlantfortheTwoYearsEndedDecember31,1979.XII-ValuationandQualifyingAccountsandReservesfortheTwoYearsEndedDecember31,1979.Allotherschedulesareomittedbecauseoftheabsenceoftheconditionsunderwhichtheyarerequiredorbecausetherequiredinformationisincludedinthefinancial'statementsornotesthereto.IndividualfinancialstatementsofPennsylvaniaPower4LightCompanyareomittedbecauseitisprimarilyanoperatingcompanyandthesubsidiaryincludedintheconsolidatedbalancesheetbeingfileddoesnothaveminorityequityinterestsand/orindebtednesstoanypersonotherthantheparentinamountswhichtogetherexceed5%ofthetotalconsolidatedassetsatthedateofthelatestbalancesheetfiled.

MANAGEMENT'SREPORTONTHEFINANCIALSTATEMENTS1tttThemanagementofPennsylvaniaPowerRLightCompanyisresponsibleforthepreparation,integrityandobjectivityofthefinancialstatementsandothersectionsofthisannualreport.Thefinancialstatementshavebeenpreparedinconformitywith'generallyacceptedaccountingprinciplesandtheUniformSystemofAccountsprescribedbytheFederalEnergyRegulatoryCommission.Inpreparingthefinancialstatements,managementmakesinformedestimatesandjudgementsoftheexpectedeffectsofeventsandtransactionsbaseduponcurrentlyavailablefactsandcircumstances.TheCompanymaintainsasystemofinternalaccountingcontrolsdesignedtoprovide,reasonable,butnotabsolute,assurancethatassetsaresafe-guardedandthattransactionsandeventsareexecutedinaccordancewithmanagement'sauthorjzationandrecordedproperlytopermitpreparationofreliablefinancialstatements.Theconceptofreasonableassurancerecognizesthatthecostofasystemofinternalaccountingcontrolsshouldnotexceedthebenefitsderivedandthatthere,areinherentlimitationsintheeffectivenessofanysystemofinternalaccountingcontrols.Fundamentaltothecontrolsystemistheselectionandtrainingofqualifiedpersonnel,anorganizationalstructurethatprovidesappropriatesegregationofdutiesandtheutilizationofwrittenpoliciesandprocedures.Inaddition,theCompanymaintainsaninternalauditingprogramtoevaluatetheadequacy,applicationandcompliancewiththeCompany'sinternalaccountingcontrols,policiesandprocedures.DeloitteHaskins*Sells,independentcertifiedpublicaccountants,areengagedtoexamineandtorenderanopinionastowhetherthefinancialstatements,consideredintheirentirety,presentfairly,inconformitywith"generallyacceptedaccountingprinciples,theCompany'sfinancialposition,operatingresultsandchangesinfinancialposition.Theirexaminationisconductedinaccordancewithgenerallyacceptedauditingstandardsandincludessuchproceduresbelievedbythemtobesufficienttoprovidereasonableassurancethatthefinancialstatementsarenotmateriallymisleadinganddonotcontainmaterialerrors.TheBoardofDirectors,actingthroughitsAuditCommittee,overseesmanagement'sresponsibilitiesinthepreparationofthefinancialstatements.TheAuditCommittee,whichiscomposedofdirectorswho.arenotemployeesoftheCompany,meetsperiodicallywithmanagement,theinternalauditorsandtheindependentcertifiedpublicaccountantstoreviewtheworkofeachandtoassurethateachisproperlydischargingitsresponsibilities.DeloitteHaskinsRSellsandtheinternalauditorshavefreeaccesstotheAuditCommitteeortotheBoardofDirectors,withoutmanagementpresent,todiscussinternalaccountingcontrol,auditingandfinancialreportingmatters.

OPINIONOFINDEPENDENTCERTIFIEDPUBLICACCOUNTANTSPENNSYLYANIAPOWER4LIGHTCOMPANY:WehaveexaminedthefinancialstatementsandsupplementalschedulesofPennsylvaniaPowerdcLightCompanylistedintheaccompanyingindextofinancial,statementsandschedules.Ourexaminationsweremadeinaccordancewithgenerallyacceptedauditingstandardsand,accordingly,includedsuchtestsoftheaccountingrecordsandsuchotherauditingproceduresasweconsiderednecessaryinthecircumstances.Inouropinion,theaccompanyingbalancesheetsandstatementsofincome,earningsreinvested,andchangesinfinancialpositionpresentfairlythefinancialpositionoftheCompanyatDecember31,1979and1978andtheresultsofitsoperationsandthechangesinitsfinancialpositionforeachofthefiveyearsintheperiodendedDecember31,1979,inconformitywithgenerallyacceptedaccountingprinciplesappliedonaconsistentbasis.Also,inouropinion,thesupplemental.schedules,whenconsideredinrelationtothebasicfinancialstatements,presentfairlyinallmaterialrespectstheinformationshowntherein.DELOITTEHASKINS8(SFLLSNewYork,NewYorkFebruary0,1980 AssetsDecember3119791978ThousandsofDollarsUtilityPlantPlantinservice-atoriginalcostElectricSteamheatLessaccumulateddepreciationConstructionworkinprogress-atcostNuclearfuelinprocess-atcostInvestmentsAssociatedcompanies-atequityNonutilitypropertyandother-atcostorless..$2>508,8528,2672,517,119631,1411,885,9781,473,22061,3013,420,49916,9655,96722,9322,392,8058,1792,400,984565,4341,835,5501,105,01037,0602,977,62019,9596,26026,219CurrentAssetsCash(Note4)Accountsreceivable(lessreserve:1979,$3,518;1978,$3,079).CustomersInterchangepowersales'therNotesreceivable(principallyfromassociatedcompanies)Recoverablefuelandenergycosts(Note2)...................Coalandfueloil-ataveragecostMaterialsandsupplies-ataveragecostOther15,55054,12346,1026,33127,51617,45110446820,0367,759299,33613,71853,14717,1855,35832,07436,19498,93219,88214,744291,234DeferredDebitsRecoverablefuelcosts'(Note2)Stateutilityrealtytax(Note7)Other18,32813,6177,51639,461$3,782,22840,037"4,16044,1973,339,270SeeaccompanyingSchedulesandNotestoFinancialStatements.

LiabilitiesDecember3119791978ThousandsofDollarsCapitalizationPreferredandpreferencestockIssueswithmandatorysinkingfundprovisions...IssueswithonlyoptionalredemptionprovisionsCommonstockCapitalstockexpenseEarningsreinvested(Note5)Long-termdebt....................................441,400231,375753,400(11,862)371,9031,499,2203,285,436312,000231,375671,836(11,070)321,6021,256,6632,782,406CurrentLiabilitiesLong-termdebtduewithinoneyearBankloans(Note4).Commercialpapernotes(Note4)AccountspayableTaxesaccrued.Interestaccrued..........,........DividendspayableDeferredincometaxesOtherCommitmentsandContingentLiabilities(Notes8and13)57,93830,77567,38916,10531,45235,4659,66622,925271,71570213,000179,00357,94114,60223,07729,87419,35127,776365,326DeferredandOtherCreditsDeferredinvestmenttaxcreditsDeferredincometaxesOther.125,68981,65017,738225077$3,782,228101,50576,08813,945191,5383,339,270SeeaccompanyingSchedulesand¹testoFinancialStatements.<<53 ISChCIClLllCOfCBPEtclljtSRQICkBQdKQQg-TermDCbt>atDecember31Preferred'tock-$100par,cumulative(a)4'/2%Series.SharesAuthorized629,9365,000,000SharesOutstandin'g"1979530,1894,217,5564,/47,7454,$'3,019,421,756$474,775,53,019288,356341,375AmountOutstanding19791978ThousandsofDollarsPreferenceStock-nopar,,cumulative(a)5,000,000,CommonStock-nopar(a)....,......,......,50,000,000Installmentsreceived(dividend'einvestmentplan)(b)Employeesubscriptions(employeestockownershipplan)(c)1980,00043497196$198,000$752,385642373$753,400202,000671,143693671886Detailsof'Long-TermDebt(d)FirstMortgageBonds,(e)23/4%3'/s%10'/3%3'/~%,'..................'8,',".97/3%97/s%33/3%to97/3%o4739o55/3%to8'/s%7,'/4%to9'/4%8'/4%to93/4%PollutioncontrolseriesA(f).Notes7%Bankloans(g)OtherMaturityDateFebruary1,1980September1,1982October1,1982March1,1983June1,1983June1,1984198519891990-19941995-19992000-20042005-2009(0February1,1980March31,1986Various25,00060,000140,000.345,000475,0027,0001,241,50020,000200,000'1;50520,0001033AmountOutstanding19791978ThousandsofDollars$37,00037,0007,5007,500100,000100,00025,00025,00033,34233,329:58,32960,000140,000345,000475,000265001,341,000Unamortized(discount)andpremium-netLessamountduewithinoneyear1,562,505(5,347)1,557,15857,938$1,499,2201,262,533(5,168)1,257,3657021,256,663(a)Eachshareofpreferred,preferenceandcommonstockisequalinvoting,powerandentitlestheholdertoonevoteonanyquestionpresentedtoanyshareowners'eeting.Therewerenosharesofpreferred,preferenceorcommonstocksreservedforconversion,warrants,optionsorotherrightsatDecember31,1979and1978.(b)SharesissuedinJanuaryofthefollowingyear(35,878sharesissuedJanuary1979and36,162sharesissuedJanuary1980).(c)18,337sharessubscribedatDecember-31,1979tobeissuedthroughAugust1980.(d)Aggregatelong.termdebtmaturitiesthrough1984are(thousandsofdollars):1980,$57,938;1981,$924;1982,'108,323;1983,$58,976and1984,$34,271.Maximumsinkingfundrequirementsaggregate$21.2millionduringthefiveyears1980-1984andmaybemetwithpropertyadditionsorbonds.(e)SubstantiallyallutilityplantissubjecttotheliensoftheCompany'smortgages.(f)PollutioncontrolseriesAbondsbearinterestatratesfrom4573%to5'%ndmatureannuallyonMay1asfollows(thousandsofdollars):19801983,$500;1984-2002,$900and2003,$7,400.(g)BankloansbearinterestatprimethroughMarch1980,103%primethroughMarch1982and105%ofprimethereafter.Seeaccompanying/VotestoFinancialStatements.1 AmountOutstanding1979,1978ThousandsofDollarsgFundProvisions$38,40015,00060,00050,00010,00050,00060,00075,00040,00060,00050,00075,0008,00050,00025,000$441,40012,00050,00025,000312,000DetailsofPreferredandPreferenceStockIssuesWithMandatorySinkinSeriesPreferred7.40%7.50%.......................'7.75%8.00%8.00%,Second.............,8.259o8.759o(j)...................9.24%(j)...................Preference$9.25$11.00(j)$13.00(j)SharesOutstanding1979384,000150,000600,000500,000100,000500,000600,000750,00080,000500,000250,000OptionalRedemptionPricePerShare1979(h)$112.00112.00112.00112.00112.00112.00115.00115.00108.80109.7516,000150,000120,00025,00020,000100,00030,00030,00040,00025,00012,5001980-200319851984-19881983-20021985-19891985-19891985-20041981-20051980-19811981-20001980-1999SinkingFundProvisions(i)SharestobeRedeemed.RedemptionAnnuallyPeriod4,17822,8786,300222377,7634,17822,8786,300222377,7639.00%Preference$8.00$8.40$8.7035,00040,00040,00035,00040,00040,000231,375$231,375IssuesWithOnlyOptionalRedemptionProvisions4'A%Preferred...............$53,01953,019SeriesPreferred3.359o4.40%4.60%8.60%530,18941,783228,77363,000222,37077,630350,000400,000400,000110.00103.50102.00103.00110.00110.00105.50110.00106.00(h)Allissuesofpreferredandpreferencestock,exceptthe$9.25"PreferenceStock,containoptionalredemptionprovisions.The$9.25PreferenceStockisnotredeemableotherthanthroughthesinkingfundrequirementorvoluntaryliquidation.The$11.00and$13.00PreferenceStocksmaynotberefundedthroughcertainrefundingoperationspriortoJuly1,1985andOctober1,1984,respectively.(i)Thesinkingfundredemptionpriceis$100pershareplusaccruedandunpaiddividendstothedateofsuchredemption.Theaggregateamountofsinkingfundredemptionrequire.mentsthrough1984are(thousandsofdollars):1980,$6,850;1981,$12,350;1982,$8,350;1983,$10,850and1984,$22,850.(j)OncertainsinkingfundredemptiondatestheCompanymayredeemadditionalsharesuptothenumbero'fsharesoftheseseriesrequiredtoberedeemedannually.IYear19791978197719761975ClassSharesCommon.............4,423Preferred,7.50%....................150Preferred,8.00%,Second............100Prcfcrred,8.25%....................500,Preferred,8.75%....................600Preferred,7.40%....................(16)Preference,$9.25...................(40)Commop.....................4,150Preferred,7.759o....................600Preference,$9.25...................(40)Common4,120Prefcrrcd,8.009o....................500Preference,$9.25...................(40)Common4,251Preferred,9.24%o....................750Common3,301Preference,$11.00......~...........500Preference,$9.25................."..200Amount$81,242.15,00010,00050,00060,000(1,600)(4,000)88,84760,000(4,000)87,75350,000(4,000)82,95875,00057,04550,00020,000Capitalstockissuedor(redeemed)duringthefiveyears1975.1979wasasfollows(sharesandamountinthousands):Seeaccompanying¹testoFinancialStatements.

1979197819771976ThousandsofDollars197SourceofFundsIfOperationsNetincome.Charges(credits)againstincomenotinvolvingworkingcapitalDepreciationNoncurrentdeferredincometaxesand'nvestmenttaxcredits-net...............Allowanceforfundsusedduringconstruction.Other76,15129,960(105,205)1,241184,34573,07550,628(71,035)187,92968,03533,579(49,395)(1,191)200,791$182,198149,035,149,763112,11197,54131,789(45,192)4,669165,85515,701(36,605)7464142,64162,478"58,540OutsidefinancingCommonstockPreferredandpreferencestock,Long-termdebtShort-termdebt-netincreaseWorkingcapital(excludingdebt)-decrease(a)..DepositsfromAlleghenyElectricCooperative...Investmentinassociatedcompanies-decreaseNoncurrentrecoverablefuelcosts-decrease....Other-n'et.~1'81,564135,000300,674517,2382,2793,79621,709$729,36788,85360,000.360168,603317,81620,0224,058529,82587,97550,000,'100,576'38,55184,215608524,16582,70575,000150,253307;95816,8946,424497,13157,76370,000225,20835297115,166510,778ApplicationofFundsConstructionexpenditures,'.Nuclearfuelexpenditures......................Allowanceforfundsusedduringconstruction...SecuritiesretiredPreferredandpreferencestockLong-termdebtShort-termdebt-netdecreaseDividendsonpreferred,preferenceandcommonstock.Workingcapital(excludingdebt)-increase(a).....Investmentinassociatedcompanies-increase.....AcquisitionofHersheyElectricCompany..........Noncurrentrecoverable.fuel"costs-increase'......Other-net..~.~~~~2~~~~~~~~~~$494,40124,241(105,205)413,4375,600702161,228167,530131,883165172729,367434,5762,906(71,035)366,4474,0003,7567,756114,3381,24740,037529,825362,55817,680(49,395)330,8434,00020,69636,61261,308100,81331,020181524,165394,23813,555(45192)362,60111,0541361824,67286,69415,3097,855497131342,49'7.(36,630868493,11211,879104,99170,68623,9902,427510,778(a)Changesincomponentsofworkingcapital(excludingdebt)CashandtemporarycashinvestmentsAccountsnndnotesreceivable............,...........Coaland'fueloilRecoverablefuelandenergycosts,netofdeferredtaxes.Accountspayableandaccruedtaxes..................Other-netIncrens()(Decrease).$1,83226,3085,536(9,058)(10,951)(15,946)$(2,279)(20,373)(6,147)(6,827)(5,956)17,1922,089(20,022)19,13612,27930,8743,189(26,756)(7,702)31,02012316,3946,5672,1258,501(18,401)15,309(5,352)28,757(3,568)738(22,507)(13,234)(15,166)SeeaccompanyingSchedulesandNotestoFinancialStatements.

IncomeTaxExpenseIncludedinoperatingexpensesProvisionFederalState.DeferredTaxdepreciation(classlifesystem)..Recoverablefuelandenergycosts...Forcedoutagereserve.......StateutilityrealtytaxConversiontomonthlybilling~......OtherInvestmenttaxcredits-net(a)........1979$35,38517,16452,5495,274(20,902)(896)7,0365,02255729,09277,73221,68011,34133,0215,69514,5653,588~34,80416,19350,9976,1734,128(344)6566,7667,4226,4632,391(1,041)51619,83177,2162,19828,34991,50193227,66143,828197819771976ThousandsofDollars197522,5478,22130,7684,540829(3,726)1,89912,98847,298IncludedinotherincomeanddeductionsProvision(credit)FederalState.Totalincometaxexpense(21,139)(5,399),(26,538)$51,194(11,311)(2,283)(13,594)63,622(11,008)(2,700)(13708)77,793(11,859)(2,598)(14,457)29,371(b)(9,164)(2,037).(11,201)36,097ReconciliationofIncomeTaxExpenseIndicatedincometaxonpre-taxincomeatcombinedFederalandStatetaxrates(shownbelow)Reductionsdueto:Allowanceforfundsusedduringconstruction.....Taxdepreciation(guidelinelivesanddecliningbalancemethod)TaxandpensioncostOther-netTotal.Incometaxexpense.CombinedFederalandStateincometaxrates-%.Effectiveincometaxrates-%$120,59454,3596,3295,1973,51569,400$51,19451.7'1.9113,68737,9769,3143,892(1,117)50,06563,62253.529.9121,65126,40712,0133,7531,68543,8587779353.534.274,90123,92516,1073,3542,14445,53029,37152.920.870,74819,3799,5742,9982,70034,65136,09752.927.0Taxes,OtherThanIncomeStategrossreceipts..StatecapitalstockStateutilityrealty.Socialsecurityandother.Total$37,56513,05611,3107,483$69,41435,45310,88513,7186,34866,40432,9329,99611,5825,1725968228,3208,8608,0524,29449,52623,7567,2845,9803,64940,669(a)AsofDecember31,1979,theCompany'sportionofacon-solidatedunusedinvestmenttaxcreditamountedtoapproxi-mately$38.4millionwhichmaybecarriedforwardtooffsetFederalincometaxprovisionsforyearsthrough1986.(b)InvestmenttaxcreditseliminatedtheCompany'sFederalincometaxliabilityfor1976andresultedinacredittotheprovisionforincometaxesofapproximately$5.9millionrelatedtoacarrybackofinvestmenttaxcreditstoprioryears.SeeaccompanyingNotestoFinancialStatements.

StatementofEarningsReinvestedBalance,January1AddNetIncome..DeductCashdividendsdeclaredPreferredstock.Preferencestock~....,.............CommonstockIssuancecostofretiredpreferredandpreferencestock...................Balance,December31(Note5)1979$321,602182,198503,80029,53619,13083,21714131,897$371,9031978286,911149,035435,94622,17019,50072,6686114,344321,6021977ThousandsofDollars237,967149,763387,73017,12319,87063,8206100,8192869111976212,550112,11132466113,12820,24053,32686,694237,9671975185,69597,541283,2369,39315,11646,17770,686212,550NotestoFinandaIStatementsI.SummaryofAccountingPoliciesAccountinSstemAccountingrecordsaremaintained'inaccordancewiththeUniformSystemofAccountsprescribedbytheFederalEnergyRegulatoryCommission(FERC)andadoptedbythePennsylvaniaPublicUtilityCommission(PUC).PrincilesofConsolidationTheaccompanyingfinancialstatementsincludetheaccountsoftheCompanyanditswhollyownedelectricdistributionsubsidiary,HersheyElectricCompany,acquiredDecember31,1976.Allsignificantintercompanytransactionshavebeen'liminated.AssociatedComaniesInvestmentsinunconsolidatedsubsidiaries(allwhollyowned)andinSafeHarborWaterPowerCorporation(ofwhichtheCompanyownsone-thirdoftheoutstandingcapitalstockrepresentingone-halfofSafeHarbor'svotingsecurities)arerecordedusingtheequitymethodofaccounting.Unconsolidatedsubsidiariesareengagedincoalminingoperations,holdingcoalreserves,uraniumexploration,oilpipelineoperationsandrealestate.AlloperationsofunconsolidatedsubsidiariesareintheUnitedStates.TheCompanybelievesthatitsfinancialpositionandresultsofoperationsarebestreflectedwithoutconsolidationofthesesubsidiariessincetheyarenotengagedinthebusine'ssofgeneratingordistributingelectricity.Allunconsolidated"subsidiariesconsideredintheaggregatewouldnotconstitutea"significantsubsidiary"asthattermisdefinedbytheSecuritiesandExchangeCommission(SEC).

UtilitPlantA>tionstoutilityplantandreplacementofunitsofpropertyarecapitalizedatcost.Thecostofdepreciablepropertyretiredorreplacedisremovedfromutilityplantandsuchcost,plusremovalcosts,lesssalvage,ischargedtoaccumulateddepreciation.CostoflandretiredorsoldisremovedfromutilityplantandanygainorlossisreflectedontheStatementofIncome.Expendituresformaintenanceandrepairsofpropertyandthecostofreplacementofitemsdeterminedtobelessthanunitsofpropertyarechargedtooperatingexpenses.AllowanceforFundsUsedDurinConstructionAsprovidedintheUniformSystemofAccounts,thecostoffundsusedtofinanceconstructionprojectsiscapitalizedaspartofconstructioncost.AfteraprojectisplacedinservicetheCompanyispermittedtoincludeinrateschargedforutilityserviceareturnon,anddepreciationof,thecostoffundssocapitalized.Thecomponentsofallowanceforfundsusedduringconstruction(allowance)shownontheStatementofIncomeunderotherincomeanddeductionsandinterestchargesarenon-cashitemsequaltothecostoffundscapitalizedduringtheperiod.TheallowanceservestooffsetontheStatementofIncomethecostoffinancingconstruction.Theallowancerateiscomputedonanafter-taxbasis.During1975and1976;theallowanceratewascomputedsemiannuallyinaccordancewithproceduresinitiatedbythePUCusingaspecifiedrateforcommonequityand.thecostoffixed-ratesecuritiesissuedinthetwelvemonthsprecedingthesemiannualcomputation.Since1977,theallowancehasbeencomputedinaccordancewithaFERCorderwhich(1)providesaformulafordeterminingthemaximumallowancerate,(2)providesforsemiannualcompoundingand(3)providesforsegregatingtheallowance,intotwocomponents,borrowedfundsandequityfunds.Thegross.borrowedfundscomponentisincludedasacreditintheinterestchargessectionoftheStatementofIncomeandtheremainderofthetotalallowancerecordedis'hownunderotherincomeanddeductionsasequityfunds.Theallowancehasnotbeenreclassifiedintoborrowedfundsandequityfundscomponentspriorto1977sincetheallocationwouldnotbecomparabletothatrequiredundertheFERCformula.Forfinancialstatementpurposes,thestraight-linemethodofdepreciationisusedtoaccumulateanamountequaltothecostofutilityplantandremovalcosts,lesssalvage,overtheestimatedusefullivesofproperty.Provisionsfordepreciationasapercentoftheaverageoriginalcostofdepreciablepropertyapproximated3.3%in1975and3.2%in1976,1977,1978and1979.RevenuesRevenuesarerecordedatthetimebillingsarerenderedtocustomers.EffectiveJanuary1,1979,allcustomershavebeenbilledmonthlyinaccordancewithaPUCorder.Priortothatdate,certaincustomerswerebilledmonthlyandothersbimonthly.TheCompanydoesnotaccruerevenuesrelatedtoenergydeliveredbutnotbilled.

FuelandEnerCostsRecoverableUnderAd'ustmentClauseseompanystarisaveincueuea>ustmentcausesand,beginninginNovember-.1978,anenergyclause,underwhichcostsvaryingfromthelevelsallowedinapprovedbaserateschedulesarereflectedincustomers'illsafterthecostsareincurred.TheenergyclauseappliestoallcustomersbilledunderPUCtariffsandafueladjustmentclauseappliestosubstantiallyallcustomersbilledunderFERCtariffs.Fuelandenergycosts-recoverableinthefuturethroughapplicationoftheclausesaredeferredandchargedtoexpenseduringtheperiodsinwhichsuchcostsarebilledtocustomers.SeeNote2toFinancialStatementsforadditionalinformation.IncomeTaxes,.return.Incometaxesareallocatedtotheindividualcompaniesbasedontheirrespectivetaxableincomeorlossandinvestmenttaxcredits.IncometaxesareallocatedtooperatingexpensesandotherincomeanddeductionsontheStatementofIncome.Incometaxreductionsassociatedwiththeinterestexpensewhichisoffsetbytheborrowedfundscomponentoftheallowanceforfundsusedduringconstructionconstitutetheprincipalitemofincometaxcreditsunderotherincomeanddeductions.DeferredtaxaccountingisfollowedforitemswheresimilartreatmentinratedeterminationshasbeenorisexpectedtobepermittedbythePUC.TheprincipalitemsareshownontheScheduleofTaxesonpage57.Othertaxreductionsrelatedprincipallytotheuseofthedecliningbalancedepreciationmethod,guidelinelivesandcertaintaxandpensioncostsareaccountedforundertheflow-throughmethod.Investmenttaxcreditsaregenerallyequalto10%of(1)thecostofcertainpropertyplacedinserviceand(2)progresspaymentsfortheconstructionofcertainfacilitiesthathaveaconstructionperiodofatleasttwoyears.Such10%taxcredits,whichresultinareductionofFederalincometaxespayable,aredeferredandamortizedovertheaveragelivesoftherelatedproperty.TheCompanyhasanemployeestockownershipplan(ESOP)whichpermitstheCompanytoclaimuptoanadditional1-1/2%investmenttaxcredit.AnamountequaltotheadditionalcreditutilizedispaidtotheESOPtrusteeto'acquirecommonstockfromtheCompanyforemployees.RetirementPlanemployees.Companycontributionstotheplanincludecurrentservicecostsandallamountsrequiredtoamortizeunfundedpriorservicecostsoverperiodsofnotmorethan20years.SeeNote6toFinancialStatementsforadditionalinformation.

CaitalStockExenseNoamortizationplanisineffectforcapitalstockexpenseexceptfortheamountapplicabletothepreferredandpreferencestockserieswhicharetoberedeemedthroughsinkingfundprovisions.Suchamount($0.0millionatDecember31,1979)isamortizedtoearningsreinvestedasthestockisredeemed.ForcedOutaeReserveandInsuranceAsel-insurancereserveisprovidedtocovertheincreasedlevelofenergycostswhichareexperiencedwhenany'oftheCompany'smajorgeneratingunitsareforcedoutofserviceduetodamagecausedbyaccidentorotherunforeseeninsurableoccurrences.Increasedenergycostsresultingfrompurchasingorgeneratingreplacementpowerathighercostsorlossofinterchangesales,inexcessof$1.0millionforeachaccidentoroccurrence,arechargedtothereserve.AstocertainoftheCompany'slargegeneratingunits,costschargeabletothereservearelimitedto$12.5millionsinceoutsideinsuranceiscarriedtocovercostsinexcessofthatamount.ThereserveisestablishedonthebasisofhistoricalexperienceandhasbeenrecognizedinratemakingproceduresbythePUC.Anycostschargedtothereservearenotincludableintheenergyclausepaidbycustomers.AtDecember31,1979andDecember31,1978,thereservebalancewas$9.5millionand$7.8million,respectively.2.EnergyClauseandDeferredFuelCostRecoveryReferenceismade,toinformationappearingunderItem1.BUSINESS-"RATEMATTERS(EnergyClause)"foradditionalinformationconcerningadjustmentclausesandrecoveryoffuelcostsdeferredundertheterminatedPUCfueladjustmentclause.3.TheOneidaMiningCompanyIn1978,theCompanyterminatedundergroundcoalminingoperationsatTheOneidaMiningCompany(Oneida),awhollyownedsubsidiary,andtheassociatedcostsreducedtheCompany'snetincomeby$7.6million(20centspershareofcommonstock).In1977,awrite-offofaportionofOneida'sdevelopmentcostsreducedtheCompany'snetincomebyapproximately$6.6million(20centspershareofcommonstock).TerminationofminingatOneidaendedtheprocedureineffectsinceFebruary1977ofnotrecoveringthefullcostofOneidacoalintheCompany'sfueladjustmentclauses.Thisprocedureadverselyaffectednetincomeby$2.5million(7centsper'hareofcommonstock)in1978and$0.3million(13centspershareofcommonstock)in1977.0.Short-TermDebtFinancingArrangementsShort-termdebtconsistsofbankloans(generallyborrowedforoneyearattheprimeinterestrateandprepayableatanytimewithoutpenalty)andcommercialpapernotes(generallymaturingwithin30to60days).Inordertoprovideinterimfinancingandback-upfinancingcapabilityforcommercialpapernotes,theCompanyhaslinesofcreditaggregating$200millionwithvariousbanks thatrequireaverageannualcompensatingbankbalances(notlegallyrestrictedastowithdrawal)orthepaymentofcommitmentfees.Informationregarding.suchshort-term'debt,relatedinterestrates.andlinesofcreditisasfollows(thousandsofdollars):19791978Maximumaggregateshort-termdebtoutstandingatanymonth-end.Averagedailyshort-termdebtoutstanding0~~~~~~~~~~~~Weightedaverageinterestrateduringtheyear(a)Weightedaverageinterestrateatyear-endLinesofcreditatyear-endMaintainedbycompensatingbankbalancesMaintainedbycommitmentfees.Compensatingbankbalancerequirements.Annualcommitmentfeesatyear-end~~~~~~~~~~~~$70,53779,70710.7%12.5%8.6%t10.1%$1O7,500$52,500$13,300$57'07,50052,50013,300056$155,680192,003(a)Calculatedbydividingshort-terminterestexpensefortheperiodbytheaverageaggregatedailyshort-termdebtoutstandingduringtheperiod.5.DividendRestrictionsTheCompany'scharterandmortgageindenturesrestrictthepaymentofcashdividendsoncommonstockundercertainconditions.Underthecharterprovisions,whichare-themorelimiting,norestrictionsareeffectiveonthepaymentofsuchdividendsoutofearningsreinvestedatDecember31,1979.The'ermsrelatingtocertainseriesofpreferredandpreferencestockscontainprovisionstotheeffectthattheCompanywillnotdeclareorpayanydividendson,or'akeanyotherdistributionofpropertywithrespectto,orpurchaseorotherwiseacquire,commonstockatanytimewhentheCompanyshallhavefailed.todischargeinfullitsobligationtoredeemsharesofthatseriesrequiredtoberedeemedpursuanttothesinkingfundsestablishedforthoseseries.Inadditiontotheserestrictions,approximately$3.1millionofearningsreinvestedwererestrictedastothepaymentofdividendsatDecember31,1979pursuanttoprovisionsofPartIoftheFederalPowerAct.6.RetirementPlanObligationsoftheCompany'sretirementplanarefundedthroughatrustfund.AtJune30,1979,theendofthefund'smostrecentfiscalyear,themarketvalueofthefund'sassetswere$127.8million,whichapproximatedcost.Pensioncostswere(millionsofdollars):1979,$10.7;1978,$13.0;1977,$11.3;1976,$9.8and1975,$8.8.

AtJune30,1979,theactuariallycomputedvalueofvestedbenefitswasapproximatelyequaltothefund'sassetsatmarket,andtheactuariallycomputedunfundedpriorservicecostexceededthefund'sassetsatmarketbyapproximately$10.0million.CertainchangesintheactuarialmethodandassumptionsandplanamendmentsmadeeffectiveJuly1,1979decreasedtheunfundedpriorservicecostbyapproximately$18.8million,andareexpectedtoincrease1980pensioncostsbyapproximately$1.0million.7.UtilityRealtyTaxReferenceismadetoItem1.BUSINESS-"RATEMATTERS(TaxSurcharge)"forinformationconcerninganassessmentofadditionalPennsylvaniapublicutilityrealtytax.8.RentalsandLeaseCommitmentsPrincipalrentalcostsaffectingexpensewereasfollows(thousandsofdollars):Chargedto'ear1979.19781977.1976.1975.Operating~Exense$IO,O6813,78311,02310,5029,077FuelInventor(a)1,993',9272,3091,7611,276(a)Amountsrepresentrentalofrailroadcoalcarswhicharechargedtofuelinventoryandsubsequentlyincludedinfuelexpense.AtDecember31,1979,theCompanyhadlong-termleaseagreementswhichrequirefutureminimumrentalsasfollows(millionsofdollars):1980,$15.0;1981,$10.3;1982,$13.1;1983,$11.5;1980,$9.6and1985toexpirationoftheleases,$78.1.TheCompanyalsoleasesotherpropertyundershort-termagreementswithrentalscurrentlyamountingtoapproximately$0.6millionannually.Generally,long-termleasescontainrenewaloptionsandobligatetheCompanytopaymaintenance,insuranceandotherrelatedcosts.TheleasesdonotincluderestrictionsonanyoftheCompany'sotherfinancialactivities.CertainoftheleasesarecapitalleasesinaccordancewithcriteriaestablishedbytheFinancialAccountingStandardsBoard.However,inkeepingwithratemakingtreatmentbythePUC,theCompanyispermittedtoaccountforsuchleasesasoperatingleases.

Theaggregateassetandliabilitybalancesthatwouldhavebeenrecordedrelativetoleasesmeetingthedefinitionofacapitalleaseareasfollows(thousandsofdollars):CapitalleaseassetsAccumulatedamortizationCurrentobligationsundercapitalleases.NoncurrentobligationsundercapitalleasesDecember3119791978$1119008"103,731(53207)(Sl860)~5780161867$7,70',0705S65557'6t)9~62,35965719Capitalizationoftheseleaseswouldnothaveamaterialeffectonoperatingexpenses.9.JointOwnershipofGeneratingPlantsIAtDecember31,1979theCompanyownedundividedinterestsinjointly-ownedgeneratingstationsasfollows(millionsofdollars):PlantInvestment~OwnershiSusquehanna(underconstruction)Keystone.Conemaugh.27.231.990.00961293011.39TheCompanyreceivesaportionofthetotalstationoutputequaltoitspercentageownershipinterest.TheStatementofIncomereflectstheCompany'sshareoffuelandotheroperatingcostsassociatedwiththetwooperatingstations.Eachparticipantprovidesitsownfinancing.10.AcquisitionofCoalReservesInFebruary1980,theCompanyenteredintoanagreementtoacquireapproximately8milliontonsofrecoverablebituminouscoalreservesfromTheArea'diaCo.,Inc.ofPennsylvaniaanditsstockholders.The"acquisitionisexpectedtobecompletedbySeptember1980,subjecttothereceiptofregulatoryapproval,andwillinvolvetheissuanceofapproximately500,000sharesoftheCompany'scommonstockforallofArcadia'soutstandingstockandthepaymentof$2millionforreservesheldbystockholdersasindividuals.

11.LiquidationPricesofCapitalStockTheliquidationpricesofpreferredstock,whicharepayableonaparitywitheachotherandinpreferenceoverthepreferencestockandthecommonstock,areasfollows:involuntaryliquidation$100ashare,voluntaryliquidation$100asharefortheO-l/2%PreferredStockandtheredemptionpriceineffectatthetimefortheseriespreferredstock,plusineachcaseanyunpaiddividends.Theliquidationpricesofallseriesofpreferencestock,whicharepayableonaparitywitheachotheraftersatisfactionofthepreferentialrightsofpreferredstockandinpreferencetothecommonstock,areasfollows:involuntaryliquidation$100ashare;voluntaryliquidationtheredemptionpriceineffectatthetime,withtheexceptionthatthevoluntaryliquidationpriceofthePreferenceStock,$9.25Series,is$110ashare;plusineachcaseanyunpaiddividends.12.1980FinancingEventsTheCompanycompletedthefollowingsecuritytransactionsthroughFebruary1,1980:January2,1980-redeemed00,000shares($0million)ofPreferenceStock,$9.25Series,inaccordancewithsinkingfundprovisions.January25,1980-issued510,000shares($51million)ofPreferenceStock,$8:625Series,toinstitutionalinvestors.February1;1980-retired$37millionofmaturingFirstMortgageBonds,2-3/0%Series,anda$20million7%Notewhichalsomatured.Proceedsfromthesaleofpreferencestockwereusedforgeneralcorporatepurposesincludingthereductionofshort-termdebtincurredtoprovideinterimfinancingforconstructionandnuclearfuelexpenditures.13.CommitmentsandContingentLiabilitiesTheCompany'sconstructionexpendituresareexpectedtoaggregate$1.85billionduringthethreeyears1980-1982.Thisamountincludesabout$1.1,billionforconstructionoftheSusquehannanucleargeneratingstationand$235millionfornuclearfuel.Expendituresforenvironmentalprotectionfacilitiesareexpectedtoapproximate$157millionduringthisperiod.Thescheduledin-servicedatesoftheSusquehannaunitsareJanuary1982forUnitNo.1andJanuary1983forUnitNo.2.Constructionexpendituresfor1980areestimatedtoaggregate$660million,including$59millionfornuclearfueland$55millionrelatedtoenvironmentalprotectionfacilities.CertainoftheCompany'sgeneratingunitsarenotincompliancewithairpollutionregulationsestablishedbythe1977AmendmentstotheFederalCleanAirAct.TheCompanyisinstallingequipmentwhichisexpectedtobringitsunitsintocomplianceby1981inaccordancewithconsentordersenteredintowiththePennsylvaniaDepartmentofEnvironmentalResources(DER)priortoenactmentofthe1977Amendments.However,theCompanymaybesubjecttosubstantialfines andpenaltiesbytheEnvironmentalProtectionAgency(EPA).TheEPAhasadvisedtheCompanythatitdoesnotintendtoseek.civil'penalties(which.couldamountto$25,000perdayofviolation)ifthecompliancedates.specified'intheDERconsentordersaremet.'asedonitsinterpretationoftheform'ulapr'oposed'-byEPA,theCompanyestimatesthatnoncompljancepenalties(whichdifferfromcivilpenalties)~would,ifassessed,notexceed$2.0millioninthe-'aggregate..TheCompanyhasfileddatawiththeEPAprotestingtheimpositionofanypenalties.TheCompanyatDecember31,1979hadguaranteedcapitalandotherobligationsofcertainbituminouscoalsuppliers(includingsubsidiarycoalcom-panies)aggregating$170.8million.10.SummaryofQuarterlyResultsofOperations(Unaudited)QuarterEndedEarningsApplicableOperatingOperatingNettoCommonRevenuesIncomeIncomeStock------ThousandsofDollars------EarningsPerShareofCommonStock(a)1979March(b)June.SeptemberDecember.1978MarchJune.SeptemberDecember(c)$253,810207,777199,892199,015227,129191,007185,205190,958$58,09039,10501,05003,73807,52000,02137,66603,391$59,19637p75302,08902,76000,33835,87628,20100,620$07,81626,20629,99229,07830,38325,92017,56029,502$1.220.660.750.710.'980.690.050.76(a)Basedontheaveragenumberofsharesoutstandingduringthequarter.(b)Resultsforthefirstquarterof1979includetheeffectofconvertingapproximately700,000customersfrombimonthlytomonthlybillinginJanuary1979whichincreasedbaseraterevenuesbyapproximately$9.9million.Theadditionalrevenue,lessestimatedadditionalcosts,increasedearningspershareofcommonstockbyabout11centsinthefirstquarter,butonly7centsfortheyearduetoafullyear'simpactofadditionalcostsandtheincreasingnumberofcommonsharesoutstanding.(c)Resultsforthethirdquarterof1978includealossrelatedtoTheOneidaMiningCompar)y.SeeNote3toFinancialStatements.

SCklEDULEV-UTILITYPLANTColumnA~DesertlionColumnBaanceatBeginningofPeriodColumnCAdditionsatCost(A)ColumnDRctircmcntsorSalesColumnF.OtherChangesAdd(Deduct)(B)ColumnFBalanceatEndofPeriodYearEndedDecember311979Electric"IntangibleSternumProduction..HydraulicProductionOtherProduction.Transmission.~Distribution"GeneralExperimentalPlant~HeldforFutureUses~~~~~~~~~~~~~~TotalElectric.e~~~~~~~SteamHeat$1,3231,018,99632,89332,554270,595905,41287,858e3l7e2,392,8058,17930,4357921267)30878,1736,8482352l57126,074117ThousandsofDollars1771555239312740653105441(678)(202)I8413,95748(3553)6451,049,05233,53132,680278,221978,41594,348235II(7252,508,8528,267ConstructionWorkinProgresss,NuclearFuelinProcess~TotalUtilityPlant.1,105,01037OGO~3503059368,210(C)2o2ef518~64210~4744181,473,220Gl30I4~051~640YearEndedDecember311978ElectricIntangible~~~~~~SteamProduction~HydraulicProductionOtherProduction.Transmission.Distribution.GeneralHeldforFutureUseTotalElectric.$i,3231,011,14232,50932,392279,389840,71584,817el5052,323,7921,04058,9023851626,78462,9933,4513l992,87911,83650250285,87616,764(S)(12,699)13,54092(i028)(99)1,3231,018,99632,89332,554270,595905,41287,85843~1742,392,805SteamHeat8,140122838,179ConstructionV/orkinProgress..~829,481TotalUtilityPlant.......3199177NuclearFuelinProcess....,'.3776e348,578(C)2906937e82731049~3610~93506(D)~99)1,105,01037OGO35e3Ose(A)Representsconstructionandnuclearfuelexpenditures,includingallowanceforfundsusedduringconstruction.(B)Principallyreflectstransfersoflandandfacilitiestoandfromnonutilityproperty,futureuseorotherfunctions.1978includes$13,157relatedtothcrcclasslficationofcertainlinesfromtransmissiontodistribution.1979includeswrite-offofexcessofacquisitioncostofHersheyElectricCompany'scapitalstockovernetbookvalue.(C)Netoftransferstoelectricandsteamheatplant.(D)Includes$77,315relatedtosaletoAlleghenyElectricCooperativeof10%undividedownershipintheSusquehannanuclearplantcurrentlyunderconstructionandcertainrelatedfacilities.Note:Allknownintangiblesaresetforthherein,areimmaterialinamount,andScheduleVIIisomitted.

SCHEDULF.VI-ACCUMULATEDPROVISIONFORDEPRECIATIONOFUTILITYPLANTColumnA~DeserttienYearEndedDecember311979ColumnBBalanceatBeginningofPeriodColumnCColumnDnt7dttrensCargedtoRetirementsPlusChargedtoClearingRemovalCostsThousandsofDollarsColumnEColumnOtherChangesBalanceatAddEndof(Deduct)(A)PeriodElectricSteamProduction~~HydraulicProductionOtherProduction.Transmission.DistributionGenerale~~~~$250,68010>27915,69609,852210,78757'08931,188051110866130230,616~22292102321556308,966900(123)209100281,51710,57516,78255,769200,581t>624TotalElectric~~~~562,387SteamHeat~~~~~.~~30477etat........$56543475,872279~7615121021010,89135~109262702272627)808I293631>14IYearEndedDecember311978ElectricSteamProduction~HydraulicProductionOtherProduction..TransmissionDistributionGenerale~~~~~$221,38713,80010,61652,625188,93854636Total~~~~~~~~~508908TotalElectric.~~~506,092SteamHeat~~~~~~~~225630,0654011,0806,15232,537~212372,798277~73075197197197I>1622,32613,202(87)16,60786~I6733(6)2(6,599)(B)6,550(B)(0)(s3)(53)250,68010,27915,6909,85210,78717089562,3873~007565~430(A)Accumulateddepreciationonpropertytransferredtoandfromnonutilitypropertyorotherfunctions.(B)Includes$6,558relatedtothereclassificationofcertainlinesfromtransmissiontodistribution.

SCHEDULEXII-VALUATIONANDQUALIFYINGACCOUNTSANDRESERVESColumnAColumnBColumnCColumnDColumnE~ncscriliceBalanceatBeginningofPeriodAdditionsChargedtoIncomeChargedtoOtherAccounts,DeductionsfromRescrves-Losse"orExpenses~AlicablcBalanceatEndofPeriodThousandsofDollarsYearEndedDecember311979ReservesdeductedfromassetsintheBalanceSheetUncollectibleaccountsAccumulatedprovisionfordepreciationandamortizationofnonutilityproperty.ReservesincludedinOtherDeferredCreditsForcedoutagereserve$3,0791,5637,7803,782171,730is(A)3,3031,166(A)3,5180299)510YearEndedDecember311978ReservesdeductedfromassetsintheBalanceSheetUncollectibleaccountsAccumulatedprovisionfordepreciationandamortizationofnonutilityproperty.ReservesincludedinOtherDeferredCreditsForcedoutagereserve$2,71510,0913,096926I,ou6(A)3,1327,6373,0791,5637,780(A)Amountreflects(I)thecostofplantretired,plusremovalcosts,lesssalvageand(2)accrueddepreciationonpropertytrans-ferredtoandfromutilityproperty.

SUPPLEMENTARYINFORMATIONONCHANGINGPRICES(Unaudited)TheFinancialAccountingStandardsBoard(FASB),anorganizationthat~establishesrulesforaccountingandfinancialreporting,hasissuedastatementthatrequiresthepresentationofcertaininformationontheeffectsofchangingprices.InflationhasbecomeanincreasinglysignificantfactorintheeconomiclifeoftheUnitedStatesduringthelastdecade.Customaryfinancialreportinggenerallyhasnotattemptedtospecificallyreflectinflation.AmountsintheCompany'sfinancialreportsgenerallyreflecttheirhistoricalcostornetrealizablevalue.TheFASBstatementrequiresthatcertainaspectsofinflationbecomputedinaccordancewithprescribedtechniquesandreportedonanexperimentalbasis.TheFASBrecognizes,andtheCompanycautionsusersofthisinformation;thatthereisnoconsensusonthegeneralpracticalusefulnessofthissupplementaryinformation.Therearealsounresolvedimplementationproblemsandconceptualdifferencesregardingthemannerinwhichtheeffectsofchangingpricesshouldbemeasured.TheinflationdatashownbelowarepresentedincompliancewithFASBrequirements.Becauseoftheexperimentalnatureofthissupplementaryinformation,managementhasnotconcludedthatthedataarefairrepresentationsoftheimpactofinflationontheCompany.TheFASBstatementattemptstomeasuretheeffectsofinflationintwodifferentways:l8.'-)20Constantdollars-Inaperiodofinflation,theamountofgoodsandservicesonedollarwillbuydeclines.Sincefinancialdataofteninvolvesdollarsexpendedindifferentyears,itissuggestedthatcombiningorcomparingsuchdollarsismisleading.Therefore,thefollowingdatawereadjustedtodollarsofthesamepurchasingpowerbyapplicationoftheU.S.GovernmentConsumerPriceIndexforAllUrbanConsumers(CPI-U).Thisrepresentsameasurementofchangingpricesduetogeneralinflationandisreferredtoasaccountingintermsof"constantdollars".Currentcost-Itisalsorecognizedthatinaperiodofinflation,pricesofmostgoodsandservicesincreasebutnotnecessarilyallatthesamerate.Therefore,theimpactofinflationonaspecificcompanymaybestbemeasuredbyestimatesofthechangeinpricesofthespecificgoodsandservicesthatacompanyuses.Thisiscalled"currentcost"accounting.TheCompanyhaselectedtopresentthedatainaccordancewiththepartialrestatementprovisionoftheFASBstatement.Underthisprovision,utilityplant,netofaccumulateddepreciation,anddepreciationexpensearetheonlyitemsrestatedtoageneralinflationlevel.Fuelinventoriesandthecostoffuelusedingenerationhavenotbeenrestatedfromtheirhistoricalcost.Underrateregulationtherecoveryofthecostoffuelthroughtheenergyclauseislimitedtotheactualcostofthefuelburned.

The"SupplementaryStatementofIncome"hasbeenadjustedfortheeffectofincreaseddepreciationintermsofbothconstantdollarandcurrentcostmeasurements.Revenues,incometaxesandexpensesotherthandepreciationarepresentedattheamountsreportedinthebasicfinancialstatements.SetforthunderOtherInflationImpactsarethefollowing:1.Cainfromdeclineinpurchasingpowerofnetamountsowed.Inflationalsoaffectsmonetaryassets,suchascashandreceiv-ables;vhichlosepurchasingpowerduringinflationaryperiodssincetheseassetswillpurchasefewergoodsorservicesintime.Conversely,holdersofmonetaryliabilitiesbenefitduringsuchperiodsbecauselesspurchasingpowerwillberequiredtosatisfytheseobligations.Forpurposesofthispresentation,thepreferredandpreferencestockissuessubjecttosinkingfundrequirementsandtheaccumulateddeferredinvestmenttaxcreditsweretreatedasmonetaryitems.TheCompany'snetmonetaryliabilitypositionwasdueprimarilytotheamountofdebtandpreferredandpreferencestocksubjecttosinkingfundsoutstandingwhichwereusedtofinancetheconstructionofutilityplant.2.Increaseinthecurrentcostofnetutilityplantasaresultofspecificpricechangesexperienced;TheincreaseinthecurrentcostamountofnetutilityplantisshownbeforeandaftereliminatingtheeffectsofgeneralinflationasmeasuredbytheCPI-V.3.Reductiontonetrecoverableamount.Undertheratemakingprescribedbytheregulatorycommissionsto.whichtheCompanyissubject,onlythehistoricalcostofutilityplantisrecoverableinrevenuesasdepreciation.Therefore,theexcessofthecostofnetutilityplantstatedintermsofconstantdollarsandcurrentcostoverthehistoricalcostisnotrecoverableinratesasdepreciationandisreflectedasareductiontothenetrecoverableamount.Thereductionintermsofconstantdollarsreflectsonlytheeffectsof1979generalinflationonthehistoricalcostofutilityplant.Thereductionintermsofcurrentcostiscomputedafterthegeneralinflationeffectisdeductedfromtheincreaseinthespecificpriceamountofnetutilityplant.

AsReportedinFinancial.Statements(HistoricalCost)StatedinAverae1979DollarsAdjustedon,AdjustedontheBasisoftheBasisofGeneralPriceChangesInflationExperienced(ConstantDollar)(CurrentCost)SupplementaryStatementofIncomefor1979Operatingrevenues...860098~860ee98~860098OperatingexpensesDepreciation(a),.Other.InterestexpenseOtherincome.anddeductions-netDividendsonpreferredandpreferencestockEarningsapplicabletocommonstock76,15160152977,675839620(82,999)0866672696610193696015297029893839620(82,999)48666792180~68314(b)156,96960152I47589093839620(82,999)8866680778952710Earningspershareofcommonstock....$3.321.701.31Netassetsatyear-end(c).......~1304816~1265162~1265162OtherInflation.ImpactsGainfromdeclineinpurchasingpowerofnetamountsowed.Increaseinspecificprices(currentcost)ofnetutilityplantduringtheyear(d)ReductiontonetrecoverableamountEffectofincreaseingeneralpricelevel.Excessofincreaseingeneralprice.leveloverincreaseinspecificpricesafterreductiontonetrecoverableamount.(303,952)506,787(I<3,68')(691455)(328352)$252,753'252753ete~~~~~~~~~~~~~~N~(91199)~(75599)

(a)ConstantdollarutilityplantwasadjustedbyapplyingtheCPI-Uindextothehistoricalcostofsurvivingplant.ThecurrentcostofutilityplantwasdeterminedbyapplyingconstructioncostindicesmaintainedbytheCompanytothehistoricalcostofsurvivingplant.Therespectiveadjustedprovisionsfordepreciationweredeterminedbyapplyingthefunctionalclassdeprecia-tionaccrualratestotherespectiveaverageyear-endbalancesofdepreciableplantadjustedforgeneralinflation(constantdollar)andspecificpricechanges(currentcost).(b)Includingthereductiontonetrecoverableamount,earnings(loss)applicabletocommonstockonaconstant.dollarbasiswouldhavebeen$(275,638)for'1979.(c)Netassets(shareowners'quity)forpurposesofthissupplementarydisclosureincludecommonequityandthepreferredandpreferencestockissueswithonlyoptionalredemptionprovisions.Thepreferredandpreferencestockissuessubjecttomandatorysinkingfundprovisionshavebeenexcludedsincetheyweretreatedasmonetaryitems.(d)AtDecember31,1979,thecurrentcostofnetutilityplantwas$5.87billion,whilehistoricalcostornetamountrecoverablethroughdepreciationwas$3.42billion.Selectedcomparativestatisticaldataarepresentedbelowshowingamountsasreportedandadjustedtothelevelofaverage1979dollars.SulementarFive-YearComarisonofSelectedFinancialDataOperatingrevenues(thousandsofdollars)AthistoricalcostInaverage1979dollars.CashdividendsdeclaredpercommonshareAthistoricalcost~.Inaverage1979dollars.Marketpricepercommonshareatyear-endAthistoricalcostInaverage1979dollars.Averageconsumerpriceindex(CPI-U)19791978197719761975$2.04$2.041.922.141.892.261.802.301.802.42$17.75$i6.7019.2523.1220.6427.0422.2519.7527.7825.84217.6195.4181.5170.5161.2$860,498798,339744,731644,147544,129$860p498889~041892~857822~090734>507

II-A-5G.F.VandersliceQ.5.SupplyprojectedcapitalrequirementsandsourcesofCompany,ParentandSystem(Consolidated)foreachoffuturethreeyears.A.5.Thetablebelowprovidesthelatestavailableestimatedsystemcapitalrequirementsandsourcesofcapitalfortheyears1980through1983andtheactualrequirementsandsourcesfortheyear1979.CALENDARYEAREND19791980198119821983(MillionsofDollars)CAPITALREQUIREMENTSConstructionExpenditures:Pr0duc'ti0no~~~~~~~~~~~~~~~~~~~oTransmission6Distribution....NuclearFuel...................0'ther~~~~~~~~~~~~~~~~~~~~~~~~~~TotalConstruction...........Long-TermDebtMaturities.........Preferred/PreferenceStockSinkingFund...........................0'ther~~~~~~~~~~~~~~~~o~~~~~~~~~~~~TotalCapitalRequirements$385952415$5191$525$485975919$66058$726$487.979419$69711610$724$297968217$4921081210$622$571058622$2701591410$453SOURCESOFCAPITALInternalSources..................OutsideFinancing:Long-TermDebt.................Preferred/PreferenceStock.....CommonStock...................Short-TermDebt-NetChange...TotalOutsideFinancingTotalSourcesofCapital30113581(161)$356$525325ill11044$5%$7262751251105$515$7242007560(ll)$324$62210025(34)$91$453$169$136$209$298$362 IX-A-6R.R.FortuneG.F.Vanderslice6.ProvideascheduleofdebtandpreferredstockofCompany,ParentandSystem(consolidated)asoftestyear-endandlatestdate,detailingforeachissue(ifapplicable);a~b.C~d.e.f.g~h.k.1.n.oepoDateofissueDateofmaturityAmountissuedAmountoutstandingAmountretiredAmountreacquiredGainonreacquisitionCouponrateDiscountorpremiumatissuanceissuanceexpensesNetp'roceedsSinkingFundrequirementsEffectiveinterestrateDividendrateEffectivecostrateTotalaverageweightedeffectiveCostRateA.6.SeeAttachmentIl-A-6(10pages)Pages1through4providetherequesteddataforlong-termdebtasofDecember31,1979and1980exceptforitemse,f,gand1whichareasfollows:Maturing.long-termdebteitherretiredin1979ortoberetiredin1980:197919804-5/8%PollutionControlSeriesABondsdueMay1,1979and1980$500,000$500,0002-3l4%FirstMortgageBondsdueFebruary1,198037,000,0007%NotedueFebruary1,198020,000,000OtherLong-TermDebt-Notesvariousduedates201,922438,419f.Noneg.None1.Firstmortgagebondsinkingfundrequirementsin1979.aggregated$1,845,000andweremetbypropertyadditions.Themaximumsinkingfundrequirementsfor1980are$3,050,000andmayalsobemetbypropertyadditions.

II-A-6(cont'd)R.R.FortuneG.F.VandersliceSeeAttachmentII-A-6Pages5through10providetherequesteddataforPreferredandPreferenceStockasofDecember31,1979and1980exceptforitemse,f,gand1whichareasfollows:e.Nonef.Noneg.None1.Pursuanttosinkingfundrequirements,PPSLredeemedthefollowingamountsofpreferredandpreferencestockin1979andhavethefollowingrequirementsfor1980:19791980Preference$9.25Series(40,000shares)Preferred7.40%Series(16,000shares)Preference$13.00Series(12,500shares)*$4,000,000$4,000,0001,600,0001,600,0001,250,000+PP&Lmayredeemanadditional12,500sharesofthisseriesannually.

PennalvaniaPoweraLihtCcmanComputationoftheEffectiveCostRataofFirstMortgageBondsandpollutionControlBondsSeriesatDecember311979FirstMortaeBonds23/4iSeriesdue1980101/BiSeriesdue198233/BiSeriesdue198231/2iSeriesdue198397/BiSeriesdue198333/BiSeriesdue198545/BiSeriesdue199145/BiSeriesdue199455/BiSeriesdue19966.3/4iSeriesdue19917iSeriesdue19998'1/BiSeriesdue19999iSeriesdue200071/4iSeriesdue200175/BiSeriesdue200271/2iSeriesdue200391/4iSeriesdue200493/4iSeriesdue200593/4iSeriesdue200581/4iSeriesdue200681/2iSeriesdue2007PollutionControlSeriesh(a)NominalDateof'ssue2"1-5010-1-749-1-523-1-534-3-79-6-6-798-1-5512-1-613-1-646-1-66U.-1-671-1-696-1-693-1"702-1-712-)-721-1-734-1-745-1-7511-1-75:12-1-7612-1-77Dateof~rretsrrt2-1-80.)0-1-829-1-823"1-836-1-83-6-1-858-1-8512-1-913-1-946-1-961-1-971-1-996-1-993-1-002"1-012"1-0211-034-1-045-1-0511-1-0512-1-0612-1-07AverageTermln~Yearst3083030530303030303030303030303030303030(c)PrincipalAmountIssued$37<000F000100<000F0007<500<00025,000F000100'00<00025<000,000.30,000,00030<000<00030<000,00030<000<00040,000,00040<000F00050,000,00060<000,00075<000<00080<000<00080<000,000125,000,000100,000,000150<000F000100,000,000(i)Premiumor(Discount)atIssuance$342<894(875,000)(500,000)171,300300F000470<970318,300(36,400)(80~000)24,50030,000(35<250)79~200(298'00)(1<718<750)(815,000)(1~312,500)(1,S89,000)0)CompanyIssuance~<sesse$177<894155,20965,489145'17435,311130'3692,216153,42554,72554<84365F88465,90674,78896,892110<041115<987129,660143,454142,078208<229196,460Neterases<a$37,165<00098,969'917,434'll24,854<58399<064<68924<869,96430,079,08430<146,57530,416,24530,323,4S739,897<71639<854<09449,949<71259<933,10874,854,70979,963,21379,571,940123,137,79698,982,922148<479,27198<214,540NetProceeds<etta=100'5i98'799el399.4299.0699~48100.26100.49101'9101.0899.7499.6499.9099'999.8199.9599.4698.5198.9898'998.2).(m)EffectiveCostRate~22.73i10.323'23.5310'23.404.614.595.536.677'28'69.017.26-7.647.509.309.919'68.348.6741/2i4,1/2i45/Bi45/Bi43/4i43/4i47/Bi55/BiNotescSeriesdue1977Seriesdue1978Seriesdue19'19Seriesdue1980Seriesdue1981Seriesdue1982Seriesdue1983Seriesdue20035-1-735-1-735-1-735-1-735-1-735-1-735-1-735-1-735-1-77'-1-785-1-795-1<<805-1-815-1-825-1-835-1-034567891023500,000(3)500,000(3)500,000(3)500,000500,000500<000500,00024<500<000(262,978)185<0772'7<551,94598'04~954'64.944'05.004.975.085.75(1)Determinedbytakingintoaccounttheeffectofaremetbytheretirementofbondswhichreduce(2)Effectivecostrateforeachseriesisthecostrateandnetproceedsratio.(3)RetiredasofDecember31,1979'nnualsinkingfundrequirementstheaveragetermofeachseries.ratetomaturityusingasinputstheaveragetermofeachseries,thestatedinterestforthoseserieswhichhavesucharequirementwhichV'<<',OMM

PennslvaniaPoweraLihtComanCalculationofCompositeCostRateofLong-TermDebtActualatDecember31,1979AttachmentPage2II-A-6PirstMortaeBonds2-3/4%Series10-1/88,Series3-3/88Series3-1/28Series9-7/88Series3-3/88Series4-5/88Series4-5/88Series5-5/8%Series6-3/4%Series7%Seriesdue8-1/88Series9%Seriesdue7-1/4SSeries7-5/88Series7-1/2$Series9-1/4%Series9-3/48Series9-3/4$Series8-1/48Series8-1/2%Seriesdue1980due1982due1982due1983due1983-85due1985due1991due1994due1996due19971999due19992000due2001due2002due2003due2004due2005due2005due2006due2007TotalFirstMortgageBondsPollutionControlSeriesA(d)Amount($Thousands)37600010000007,500256000100600025600030,,000300000'0600030600040000040,000506000~60000075600080600080000012560001006000150,000100000~1314500PercenttoTotal282$7.610571.907.611.902282.282282283.043043.804.565.716.096.099.517.6111.417.61100.008EffectiveCostRate~12.73%10.323.423.5310.123.404.614.595'36.677'2&.169.017.267.647.509.309.919.868.348'7(p)WeightedCostRate0.08%0.790.020.070.770.060.110~100130.150210.250.340'30.440.460.570.940.750950.668e1884-5/88Seriesdue19804-3/48Seriesdue19814-3/4%Seriesdue19824-7/88Seriesdue19835-5/8%Seriesdue200350050050050024,500TotalFirstMortgageBondsTotalPollutionControlSeriesA78Notedue1980PromissoryNotesOtherLong>>TermDebtTotalLong-TermDebt$163146500269500.2060002006000~1505615625051utalpollutionControlSeriesA6265001.891891.891.8992.44100.00484.1381691.2812.800.10100.00%4.9085~004.975.085.758e1885.697.00(2)15.1875(3)7401(4)0.09%0.090.090.105.325.69%6.88%0.100.091.940.019.02'8Notes:(1)Effectivecost:rateforeachseriesofPirstMortgageControlBondsastakenfromAttachmentII-A-6,page1(2)Nominalinterestratefor78Notedue1980.(3)Primerateineffect.(4)WeightedAverage.BondsandPollution

PennslvaniaPoweraI,ihtComanCcmutationofPreferredandPreferenceStockEffectiveCostRatebSeriesatDecember311979F00%8.60%7~40%9.24%8F00%7'5%8F00%F5048.25%8'5%SeriesSeriesSeriesSeriesSeriesSeriesSecondSeriesSeriesSeriesSeriesCumulativePreferenceStockCumulativePreferredStock3.35%Series4.60%Series4.40%Series4-1/2%Series(h)NominalDividendRate3.35%4'04.404'0F008.607.409'48F007.758.007.508.258.75(a)DateofIssue5-2-4610-21-488-5-5212-10-4512-22-541-14-701-21-708-15-736"8-7610-19-778-8-781-16-792-1-797-2-7911-8-79(c)OriginalAmountIssued$4P178,3006,300F00022'77230053'1829007,763F00022,237F00040,000200075,000F000.502000200060,000,00010F000,00015,000,00050200020006020002000Avg.PrincipalAmounttobeOutstandln1$4'78,3006'00,00022;877'0053,018~9007,763,000222237200024,000,00043,965,51731,000,00048,000F0008,000,00015,000,00040,000,00037,200,000$212029$4P1572271248,89962051I101316,82122,560'79154'73(5)47,435,627>>138,310393,860191,4321,074,709233,062293289960269678,305210,747290,0007,624'90212843,14023,808,56842,8902808302766293847,70621017,939,304142921269539i7892253(est)36,910,000(5)-(i)(k)IssuanceExpensesNotNatotptatoa~proeeads2NotProceeds~attao399.50%96.0598'28'798.2298.2399.20975699,25993999.2499.4899'799'2(o)Effoc'tiveCost~Rata43.37%4.794.465.039.168.757.469.478.067.808.067.548.298.82$8.40Series$8.70Series$8.00Series$13.00Sorios$11.00Series$9.25Series8.40%8.708F0013F0011.009'512-8-707-15-717-11-7210-10-748-28-759-30-75$40,000,00040i000200035F000,00025,000,000502000200020'002000$40,000,00040,000,00035,000,00015,500,00031,000,00012F000,000$678,905621,6215822445588,8491,084,49432,055$39,321P09539'78'793424172555142911215129P915,50611,967,94598.30'8.4598.3496.2096.5099.738.55%8.848.14.13.5111.409.28<<Afterdeducting$5,428,900attributabletocostofCompanyrefinancedissuescarriedforward.NotesI(1)DeterminedbytakingintoaccounttheeffectofannualsinkingfundrequirementsforthoseserieswhichhavesuchbytheretirementofshareswhichreducetheprincipalamountavailableforusebytheCompany.Acalculationofmustincludetheeffectofsuchprincipalrepaymentswhichhavebeenmadebydeterminingthesumoftheprincipaleachyearanddividingbythonumberofyearstheseriesistobeoutstanding.(2)Averageprincipalamounttobeoutstandinglessissuanceexpensesnet'ofpremium.(3)Notproceedsrelatedtotheaverageprincipaltobeoutstanding.(4)Theaffectivecostrateiscomputedbydividingthenominaldividendratebythenetproceedsratio.(5)Includes$87,000premium.arequirementwhicharemet>>I>thefullcosttotheCompanywn.amountsoutstandingduringnMMII AttachmentZl-A-6Page4PennslvaniaPoweraLihtComanCompositeCostRateofPreferredandPreferenceStockActualatDecember3119794-1/2%PreferredSeriesPreferred3.35%4.60'84.4089.00%8.60%7.4089.24%&.00%7.7588.008,Second7'0%8'588.75%(d)AmountOutstandin($Thousands)$53,0194,1786930022,8787976322923738940075900050,00060900010900015900050,00060,000PercenttoTotal7.8880.620943.401.153.305.7111.157.438.921.492.237.438'2EffectiveCost.Rate5.0383.374.794469.168.757.469.478.067.808.067.548.298.82(P)WeightedCostRate0.4080.020.050.150.110290.431.060.600.700.120.170.620.79Preference$8.40$8.70$8.00$13.00$11.00$9.25TotalPreferredandPreferenceStock40,00040,00035,00025900050,00080006727755.955.955.203.717.431.19100.00%8.558.848.1413.5111.409.270~510.530.420.500F850.118.43%

AttachmentPage5II-A-6PENNSYLVANIAPOWER&LIGHTCh~ANYCalculationoftheCcmositeCostRateofLang-TermDebtProjectedtobeOutstandfngAtDecarber31,1980FirstMztzaeBends10-1/FlSeriesdue3-3/8%Seriesdue3-1/2%Seriesdue9-7/Fl.Seriesche3-3/Fl.'erf,esche4-5/Fl.Seriesdue4-5/Fl..Seriesdue5-5/8%Seriesdue6-3/41Seriesdes.7%Seriesdue8-1/8%%u.Seriesche9%Seriesdue.7-1/4%Seriesdm7-5/FlSeriesdes.7-1/27.Seriesdue9-1/41Seriesdue9-3/47.Seriesche9-3/4'ISeriesdue8-1/47.Seriesdue8-1/2%%uSeriesdue15-5/FlSeriesche11-3/4%Seriesdue11-1/27.Seriesdue1982198219831983-19851985199119941996199719991999200020012002.2003200420052005200620072010(4)2010(5)2010(5)TotalFirstMortgageBondsPollutianControl4-3/41SeriesAche19814-3/4%SeriesAdue19824-7/F%%dSeriesAdue19835-5/Fl.SeriesAdue2003(D)@mintOutstaruffng000'100,0007,50025,000100,00025,00030,COO30,00030,00030,00040,00040,00050,00060,00075,00080,00080,000125,000100,000150,000100,000100,00030,000125COO$1,532,500$50050050024500PercenttoTotal6.53%0.491.636.521.631.961.961.961.962.612'13.263.924.895.225.228.166.529.796.526.521.968.16100.OtK0.52%%u0.520.5225.52Effectfve~0o40844110.32%3.423.5310.123.404.614.595.536.677.028.169.017.267.647.509.309.919.868.348.6715.9211.8711.625.00%4.975.085.75(p)WeightedCostRate0.67740.020.060.660.060.090.090.11O.U0.180.210.290.280'70.390.490.810.640.820.571.040.230.9549.16%%u0.03%0.030.031.47TotalPollutianCantzolSeriesA26,00027.081.56B%%uSeriesdue2010(5)FlSeriesdue2010(5)FlSeriesche2010(5)FlSeriesdue2010(5)30,00015,00015,00010COO31.2515.6315.6310.418.148.148.148.142.54l.271.270.85TotalPoUutionControl896.OM1CO.0027.49%%uSuamaxyTotalFfrstK>rtgageBandsTotalPollutionControlBankLoansdue1986OtherLong-TernDebt$1,532,00096,000200,000125583.757,5.2510.930.079.16/47.4912.36(2)6.98(3)7.67%0.39l.35TatalLong-TermDebt$1,829,755100.00%9.417.Notes:(1)EffectivecostrateforeachseriesofFirstMortgageBandsandPollutionControlBandsastakenfzcmAttachmentII-A-6,Page6.(2)BankloansbearinterestatprimethroughMarch1980,103%ofprimaSloughParch1982and1057.ofprimet1areafter.(3)Weightedaverage.(4)DebtissuedanApril1,1980.(5)Debtexpectedtobeissuedduring1980asreflectedfnPP&L's1980operatingbudget.(6)RetfreantsofDebtchrfng1980areshamonPage7.

AttachmentII-A-6Page7PENNSYLVAGAPO'AER6cLIGHTGMANYRetirementsofDebtDuri~1980(ThousandsofDollars)FirstMort~eBonds2-3/4%Seriesdue1980837,000PollutionControl4-5/8%Seriesdue1980500OtherLoTermDebt7/Notedue1980Other-Net20,000250Total957,750

AttachmentII-A-6Page8PENNSYLVANIA'POWER'&'LIGHT'CPiPANYCompositeCostRateofPreferredandPreferenceStockProectedtobeOutstanatDecember31,1980CumulativePreferredStockAaauntOutstandin000'(P)EffectivePercentCostRateWeightedToTotal(1)CostRate3.35/4.6F/4.4F/4.5F/9~00%8.6F/7.40/9.24%8.OF/7.75%8.OF/7.5F/8.25/8.75%9.25%SeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSecondSeriesSeriesSeriesSeriesSeries(2)94,1786,30022,87853,0197,7632223736,80075,00050,00060,00010,00015,00050,00060,00060,0000.54%0.812.956.841.002.874.749.676.457.731.291.936.457.737.733.37/4.794.465.039.168.757.469.478.067.808.067.548.298.82.9.340.02%0.040.130.340.090.250.350.920.520.600.100.150.530.680.72GzmlativePreferenceStock$8.40Series$8.70Series$8.00Series$13.00Series911.00Series99.25Series$8.625SeriesTotalCurraQativePreferredandPreferen'ceStock40,00040,00035,000'22,50050,0004,00051,000$7756755.165.164.512.906.450.526;57100.OF/8.558.848.1413.51ll.409.288.710.440.460.370.390.740.050.578.46%Notes:(1)(2)(3)EffectivecostrateforeachseriestakenfromAttachment,II-,A-6,"Page9.PreferredorPreferenceStockexpectedtobeissuedduring1980asreflectedinPP&L's1980OperatingBudget.RetirementsofPreferredandPreferenceStockduring1980throughsinkingfundprovisionsareshownonPage10.J

PEKISYI.VANIAPQKRfjLIGII'MANYComputationofPreferredandPreferenceStockEffectiveCostRatebySeriesProectedtobeOutstandinatDecember311980(II)...(A)(C)(~)-(I)(0)GrrulativePreferredStockNcminalDividendRateDateofIssueOriginalAmountIssuedAvg.PrincipalAnnottobeIssuanceExpensesNetNetofPuce(usP~mceeds2NetEffectiveProceedsCostB~atto(3~tete(43.35/Series4.60/Series4.40/Series4.505Series9.00/Series8.60!Series7.40/Series9.24%Series-8.M%Series7.75/Series8.00/SecondSeries7.5(f/Series8.25%Series8.75/Series9.25%SeriesCunulativePreferenceStock3.35/4.604.404.509.008.607.409.248.007.758.007.508.258.759.255/2/4610/21/488/5/5212/10/45-12/22/541/14/701/21/708/15/736/8/7610/19/778/8/781/16/792/1/797/2/7911/8/798/1/80$4,178,3006,300,00022,877,30053,018,9007,763,00022,237,00040,000,00075,000,00050,000,00060,000,00010,000,00015,000,00050,000,00060,000,00060,000,000$4,17S,3006,300,00022,877,30053,018,9007,763,00022,237,00024,000,00043,965,51731,000,00048,000,0008,000,00015,000,00040,000,00037,200,00060,000,000138,310393,860191,4321,074,709233,062293,89960,69678,305210,747290,000(Est)600,000(Est)7,624,69021,843,14023,808,56842,890,80830,766,93847,706,1017,939,30414,921,69539,789,25336,910,00059,400,000'8.2298.2399.2097.5699.2599.3999.2499.4899.4799.2299.00$21,029$4,157,27199.50%248,8996,051,10196.05316,821=22,560,47998.62154,37347,435,62K'9.473.37/4.794.465.039.168.757.469.478.067.808.067.548.298.829.34$8.40Series$8.70Series8.00Series13.00Series$11.00Series$9.25Series$8.625Series8.50%8.708.0013.0011.009.258.62512/8/707/15/717/11/7210/10/748/28/759/30/751/31/80$40,000,00040,000,00035,000,00025,000,00050,000,00020,000,00051,000,000$40,000,00040,000,00035,000,00015,500,00031,000,00012,000,00051,000,000$678,905$39,321,095621,62139,378,379582,44534,417,5555S8,84914,911,1511",084,49429,915,50632,05511,967,945510,000(Est)50,490,00098.3(f/o98.4598.3496.2096.5099.7399.008.55/8.848.1413.5111.409.288.71*Afterdeducting$5,428,900attributabletocostofCar+anyrefinancedissuescarriedforward.Notes:(1)Determinedbytaldngintoaccounttheeffectofannualsinkingfundrequirenentsforthoseserieswhichhavesucharequirenantwhicharenetbytheretirenantofshareswhichreducetheprincipalanountavai.lableforusebytheCcnpany.AcalculationofthefullcosttotheCon@anynustincludetheeffectofsuchprincipalrepaymentswhichhavebeenmadebydeterndningthesumoftheprincipalamountsoutstandingduringeachyearanddividingbythenu(herofyearstheseriesistobeoutstanding.(2)Averageprincipalannunttobeoutstandinglessissuanceexpensesnetofpremiu(n.(3)Netproceedsrelatedtotheaverageprincipaltobeoutstanding.(4)'iheeffectivecostrateisconfutedbydividingthenondnaldividendratebythenetproceedsratio.MM S

AttachmentII-A-6Page10EKVSYLVANIAPOVR6LIGHTCE"PAVERetirementsofPreferredandPreferenceStockDuring1980(ThousandsofDollars)PreferredStock7.40%Series$1,600PreferenceStock$13.00Series59.25SeriesTotal2,5004000$8100 IX-A-7R.R.FortuneQ.7.SupplyfinancialdataofCompanyand/orParentforlastfiveyears:a~b.C~d.e.f.h.3~Earnings-priceratio(average)Earnings-bookvalueratio(persharebasis)(avg.bookvalue)Dividendyield(average)Earningspershare(dollars)Dividendspershare(dollars)Averagebookvaluepershareyearly"Averageyearlymarketpricepershare(monthlyhigh-lowbasis)Pre-taxfundeddebtinterestcoveragePost-taxfundeddebtinterestcoverageMarketprice-bookvalueratioA.7.Therequestedfinancialdataareasfollows:19751976197719781979A.7a.Earnings-priceratio(average)(d+g)15.41%12.93%14.68%13.33%16.87%A.7b.Earnings-bookvalueratio(persharebasis)(avg.bookvalue)(d+f)12.53%11.61%14.03%11.50%12.92%A.7c.Dividendyield(aver-age)(e+g)9.66%8.68%8.23%8.95%10.37%A.7d.Earningspershare(dollars)(basedon13monthaveragenumberofcommonshareoutstand-ing)2.87$2.68$3.37$2.86$3.32A.7e.Dividendspershare(dollars)(declared)$1.80$1.80$1.89$1.92$2.04 II-A-7(cont.)R.R.FortuneA.7f.A.7g.Averagebookvaluepershareyearly(13monthaveragemonth-endbookvalue)Averageyearlymarketpricepershare(mon-thlyhigh-lowbasis)(12monthaverage)19751976197719781979$22.90$23.08$24.02$24.88$25.69$18.63$20.73$22.96$21.46$19.68A.7h,Pre-taxfundeddebtinterestcoverageA.7i.Post-taxfundeddebtinterestcoverageA.7j.Marketprice-bookvalueratio(g+f)3.062.873.543.222.912.532.502.692.582.5081.35%89.82%95.59%86.25%76.61%

II-A-8R.J.BerniniQ.8.Stateamountofdebtinterestutilizedforincometaxcalcu-lations,anddetailsofdebtinterestcomputations,undereachofthefollowingratecasebases:a.Actualtestyearb.Annualizedtestyear-endc.Proposedtestyear-endA.8.TherequestedinformationfortheyearendedDecember31,1979isprovidedinScheduleD-17ofExhibitHistoric1;informationfortheyearending,December31,1980isprovidedinScheduleD-17ofExhibitFuture1.

Ix-A-9R..J,Bernini9.Stateamountofdebtinterestutilizedforincometaxcalculationswhichhasbeenallocatedfromthedebtinterestofanaffiliate,anddetailsoftheallocation,undereachofthefollowingratecasebases:a.Actualtestyearb.Annualizedtestyear-endc.Proposedtestyear-endA.9.PennsylvaniaPower&LightCompanydoesnotutilizeanydebtinterest,whichhasbeenallocatedfromthedebtinterestofanaffiliate,inthecomputationoftaxableincome.

II-A-10G.F.VandersliceUnderSection1552oftheInternalRevenueCodeandRegula-tions1.1552-1thereunder,ifapplicable,ParentCompany,infilingaconsolidatedincometaxreturnforthegroup,mustchooseoneoffouroptionsbywhichitmustallocatetotalincometaxliabilityofthegrouptotheparticipatingmemberstodetermineeachmember'staxliabilitytothefederalgovernment.(Ifthisinterrogatoryisnotapplica-ble,sostate.)a~b.C~d.Statewhatoptionhasbeenchosenbythegroup.Provide,insummaryform,theamountoftaxliabilitythathasbeenallocatedtoeachoftheparticipatingmembersintheconsolidatedincometaxreturn.Provideaschedule,insummaryform,ofcontributions,whichweredeterminedonthebasisofseparatetaxreturncalculations,madebyeachoftheparticipatingmemberstothetaxliabilityindicatedintheconsoli-datedgrouptaxreturn.Providetotalamountsofactualpaymentstothetaxdepositoryforthetaxyear,ascomputedonthebasisofseparatereturnsofmembers.Provideannualincometaxreturnforgroup,andifincometaxreturnshowsnetoperatingloss,providedetailsofamountofnetoperatinglossallocatedtotheincometaxreturnsofeachofthemembersoftheconsolidatedgroup.InternalRevenueCodeSection1552providesforanallocationofconsolidatedincometaxfor"earnins6rofits"purposesonly.PP6Lhaselectedoption(a)(1),(i.e.,ratiooftaxableincomeofeachcompanyhavingincometototalconsolidatedtaxableincome)asmodifiedbyCommissionerofInternalRevenue(acopyoftheIRSauthorizationisincludedasAttachmentII-A-10a,1page)forconsolidatedincometaxreturnpurposesonly.PPGLhaschosen,forbookpurposesandallotherpurposes,toallocateconsolidatedFederalincometaxamongallcompanies,basedonnettaxableincomeorloss,andinvestmentcredit,ofeachcompany.Thetaxreturnfor1979hasnotbeenprepared.TheallocationoftheestimatedconsolidatedFederalincometaxamongcompaniesisshownonAttachmentII-A-10b(2pages),Page1for1979andPage2for1980.

II-A-10(cont.)G.F.VandersliceA.10.c.ContributionsorreductionstowardconsolidatedtaxpayablearealsoshownonAttachmentII-A-10b.Thecashpaymentstothefederalgovernmentforconsolidatedtaxpayablewere:1979Return1980Return4/15/796/15/799/15/7912/15/79$2,100'002,100,0001,950,00020500004/15/80$1,000,0006/51/801,000,0009/15/801,000,00012/15/80100000085200,0003/15/80(Est)800,0006/15/80(Est)800000$4000000Total$9800000A.10.d.ThelatestconsolidatedFederalincometaxreturnisforcalendaryear1978.AttachmentII-A-10d(16pages)includesexcerptsfromthisreturn.Sincethecompletereturnisavoluminousdocumentandtheyear1978isnotinvolvedineithertestyear1979or1980,wehaveonlyenclosedexcerptsfromthisreturnasAttachmentII-A-10d;additionalscheduleswillbefurnisheduponrequest.

~....~,~.~(+I:w"ic;:I'.$¹j~~rAttachmentZI-A-10aU.S.TREASUPYDEPARiM:-NT.VlASHIYGTOi425ca--mtasxao>>uacp;w.rw=-;u=-~$ltCtLVMCO~~~~ir~aoc.@NO5EPRIMT."RcC.~~'OCT13~0~0r~~0~i~~+o~~0~~~t~~~~~~~~2ennsplvaiaParer(Jji-"htCo'.MinionzuCEa~MonSreis~,iGlento(impPex~jlvanlz".~~~'~.~.~.-:.';~"'~.~,.Mention."PH9~2ey~.Treasure>>'V4P~.Gentle.-;en='.~~~~.Thisis~zSurtaxrxeayioyourletterdaedSeptenbero~395gj.iri-;;hichyourecuesiekaaarcrr~I'qfanrcaoseCmethodsox'z3'Io"at~=thetacMbM~~yox.~he.~auooferichyourcawa~~~"YouhavepraaosdtazQo~te'hecano3:cate8ia:coyou,affi3iatMgtaapun¹rthepravIs'ansofsection1552(a)(l)a=."'the3954CoCaa"upMh,iheLia~~iionsnra~~~ek~~erSeen~tiesand,~.'.ExchangeGaussianRule6-Q(b)(6)'zsallows'=Q.)giatthe'~z13.acatefKtoeachsubi8iarj'.capa.'1v'sh83~JlatcxceetXthea%auntoftax0'uch-co~.aa'fp.basal1rIonaepzratereturnc~uia.,asiSsuchca~~zcgha8ala&psilesitsizxre~a~krnson...seaarzireturnhas.s-ad.I0'.(2)Thaia<gezcessofllabilivyav~~aseparater~turniaxL".u.ch-aul:.be~IacataCtoasu'asid~~~.Col1paqy'ui:orclzue(l)abaveshMI'aeaapo--"-.Ma"~a~ca-.i?~otherayersathe~bouc~in-.Clara=thehP~c~~may-(a=otherparentcages')in+iree+woaa>ianic+LereCego4~4cn4'.mM~z.erencebe~;~etheir~cliabQguiesca!=~.-puteConaseaaraerei~casisznaihei~~ozzie<C~Apai~~=onof~weccnsall~ieaia~>w""~L~tg0Yourpro-osed,rz~aaCLes"o"rave6bzie=Lamon,Sapo-..ae-13,19/7subjecttoihecallalanthat%he11'Bliaalanr11v'1xecQCttpthetaxaQacaieCioyc"~subsi8awss."Z~loebased,juaniheiazofsuchz=,beoi,ir<bleyca.uterzsiSsracrei"nsLFtce~ilogape~z'r.fgsuch--.bleear--*<g1ire=a1,onr~ogerai~+>lossesu~a~e>>>'gsuch~idlersinn-iororsubcue!'blepcas.~~'Ilet~~ad.ourtele~ra~~oSeaiember13~19>5~are~evgcaces:ofyouruihor'~~gSarihezCOiian.ofsuchrethoC.~~~~~.'.'~V~~ya1n:s~~g~00>c:c"Co~~sxcar.~~~IEnQosure.~~Caayofthis3.etter.

.FM&YLVANIAla)rCOHIRNYRNOSUOSraxlcsEstbsatcd1979rcderalIncoaeTaxhsOf1231/79AttachmentIObPage1TaxableInconeTax8466CurrentYearCarryFor5>ardPro(s1978Invests(entCredit02'llocatlonConsol.Znv.CreditC/0hllocatedHetTax~td6PaidYhru~I2559Paen'tDue2//50~55/pennsylvaniaposer6LightCoapanyHersheyElectricCoapsnyZnterststeEnergyConpanyServiceDevelopaentCoepanyPennsylvaniaHinesCorp.TunneltonHiningConpanyRushtonHiningConpanyOneidaHinlngCoapanyQrceneHillCoalCopanyCreeneHanorCoalConpanyURADCOLCaLeasingCorp.BWCorp,RealtyCospanyofPennsylvania$99,416,920(751~700)(633>900)(400>000)(71S,9$0)152,60065,740(16,760,680)(4~787>350)(3>425,700)(3>$30>000)(477>000)$4$,731'80(19,250)(345>780)(291,600)(184,000),(328,420)70,20030,240(7~7090910)(2,2020180)(1>575>820)(l>623F800)(219,400)$(48,708,000)(6,996,800)(1)(37>800)(2>000)(311,650)(106,500)(41>830)(9,782,216)(4,912,084)(1)(4060370)(152,936)(2,43S,155)(920922)(1>275'02)(1~595,520)(1,120,868)(885'62)(93>035)$(24686,570)(383,580)(699,970)(336,936)(3>07$,225)(129,222)(1)r590)(8,98S,212)(3'970700)(2>696,688)(2,S09,462)(312,43$)$3705800700812,130(1)311,429SG8,326273'662,49G,84$104,9279,4057,295,2903'S'2S2,189>4982,037>490253,676$130706>260(72,150)(131,640)(63,$70)(578,380)(24'00)(2'80)(1,689,920)(714~280)(507,190)(471>970)(SORY760)$11,282,200(SS>400)(40100)(45,100)(3$1>600)(312200)(1,800)(1>2890800)(53),000)($90SOO)(360>900)(3S>BQO)$1>212,030(1G,87S)(63>770)(9,1S5)(113,390)3,4$0(190)(200,0GO)(90>640)(58234$)(5S,53$)(11>480)$1~212,030(16,875)(63~770)(9,1$$)(11S,390)S>4$0(190)(200,060)(900640)(SS>345)(SS,S35)(llew480)$68>154F980$$1,$32,0605(56,206,500(2(~1,152,010(2(dL620590)551,0!6,150safetyfactor(ppsLMd)'078802039409>392,120$8,200,0008S96,060596,0602039409>BQQ>QQQ88>20000008800,0008800>000ConsolidatedTaxPayable306(S31>332,060$2S,OOO)Hax.Znv.CreditUsableInvests(entCreditCarryover9292(20$21,939,940$(56,204,580)~PI602'0l($45r712>SSO$2$,000)21939940Hax.Inv.CreditUsable(812,130)(1)InvestnentCreditCarryovorTax$45r712>530(1706260112006270Inv.CreditInv.Cr.C/0(55>704>BOO)$(142694~300)1'7>311>97014>694,SOO8(38,392,830)0(1)ESOPo11/269 PENRSYLvnNZRZCNTCONamYRNOSUBSIOIRRYCONPANIESEst(usted1980PcderslZnco(aeTsxA@Of12/3180Attachx(entII-page2TaxableInccaleTsx846aCurrentYearCarryPorvsrdPresa1979Invesbs(entCroditMetTsxRllocatlonConsolZnv0~MSC0RllocstedNetTsx~MOPsynentDue4/15/8029pennsylvaniapoweraLightConpanyHersheyElectricCoapanyInterstateEnergyCoapsnyServicebevelopsentConpsnyPennsylvaniaNinesCorporationTunneltonNinlngConpsnyRushtonNiningcoepsnyOneidaNlningConpanyOreeneBillCoalCcepsnyCreeneNsnorCoalCcnpanyLCRLeasingCorp.8(atCorp.RealtyCoepsnyo!PennsylvaniaTotal:$51>513,600(483,000)(l>718,700)(400>000)616,000198,000239,900(9>000,000)(7>085,000)(4>168,000)(6,458,000)(471>000)$22>777>800$23,696,300(19>300)(222>180)(818,200)(184,000)310,96091,080110,350(4>140,000)(3,259,100)(1>917,280)(2,970,680)(219,420)$10,458,S30$(43~306,000)(6>S00,000)(1)(500,000)(SS,OOO)(1000000)$(50,461,000)$(31>396>030)(6>996>800)(1)(311~429)(568,326)(273~566)(2>496>848)(104,921)(9'0S)(7,295>290)(3,083,425)(2,189>498)(2>037>490)(253,616)8(64~521~830)(533,G09)(1>386>52G),(451'e566)(2,685,888)(68,841)945(ll>435'90)(6>342,525)(4,106,718)(S>008,170)(473,09G)$71,611>430468,4641>217>280401>7272>358,06660,43010,039,5905'68'053,605,533~,396,91941S>3663(SP(010,710(2(27,019,100221D0,129,\10Safetyfactor(ppaLCo>)$7>09S>600(65,140)(169>250)(55'40)(327>820)(8'20)950~(1~39S~700)(774>120)(501>250)(611,2SO)(51,130)3>130>030099970$4>000,000$1,173,900(16,285)(42,313)(13,960)(81,955)(2,105)237(348,925)(193>530)(1250313)(152,812)(14'32)782>507217(93$1,000>000ConsolidatedTsxPaable301($10,4s8,530)$25,000)Nax.Inv.CreditUsable"InvestxentCreditCarryoverESOpinoludedlnInvest>((entCreditCarryover2.130030$7>328,500~PLO2$23>67700003DS[223,977,DOO229,DDO(7099,~007328500Nax.Znv.CreditUsable$16,581,400(6,SOB,000)$(6,996,800)ESOlincludedinInv.CreditC/0$(50,461,000)$(49,688,210)InvCreditCarryoverZnvCredit$(49>806>000)Inv.CrC/0$(38'92<830)016,581,400$(490806>000)$(21>811~430)(6>S00,000)$(6,996,800)(1)ESOP1I/2I.

-"-'1)20cape(IIOSRIoltherfestofrIathfosiRhaaossedda(coChocblrnACeosondsfsdEehttnQ8pefsoeslMoidh)SColQOcad~CodeMoofeeorseeaofInduces<<olUseIRShheLpllatortrf)e.ffumberdstreets3.83am@CcfnpaniesIyorown,State,andZipcodeU.S.CorporationIncomeTaxReturnFnrcalendaryear197aorethertaxableyearbeginning.....1978.endlnff.................19......Ha(tteAttachmentII-A-10d')780Xtotd(F)erIdsotulfceuonnt(a)her(tselosut<<uonwIE0oco(pofaAt:tached1ammrecdptsorsnasmlRennesssdallowances2LduunCostofgoodssold(ScheduleA)and/oropeimtfons(attachschedule).3Grosspfofit~~~~~~.~~~~~~~~~~~~~~~.~~~4DIvidends(ScheduleC)~~~~~~~~~~~~~~~~~~.~~~5interestonobligationsoftheUnitedStatesandUS.Instrumentalitfes.6Othel'ntefeato,~~~~~'~~~~~~~~~~~~~~~~~7GIOSSrentS~~~~~~o~~'~.~~~~~~~~~~~~~8Grossroyalties~~~,~~~~~'~~~~~~~~~~~~~~c~9(a)CapitalgainnetIncolne(attachseparateScheduleD).(b)Netgainor(loss)fromForm4797,line11,PartII(attachForm4797);10OtherIncome(seeInstructfons-attachschedule).Il"TOTALIncome-Addlines3through10...........~~~~~~89(a)~~9b1012rCompensationotoNcefs(SchedufeE)........~.13(a)Salariesundwages2~~~13(b)Lossnevrjobscredl~4)G,GGGBalance~14Repairs(seeInstructions)~~~~~~~~~~~~~~~~~~o~~~15Baddebts(ScheduleFlfreservemethodlsused)~16Rents~~~~~~~~~~'~~~~~~~~~'~~~~~~~~'7Taxes~o~~~~~~~~~~~~~~~~~~'~~~~~~~18Intereat~~~~~~~o~~~~~~~~~~~~~~~~~~~~.19Contributions(notover5+ofline30adjustedperInstructions-attachschedule).20Amortlxatfon(attachschedule)~~~~~~~~~~~~~~~~~~~~21DepreciationfromForm4562(attachForm4562).,lessdepreciationchimedlnScheduleAandelsewhereonreturn.,BalanceQ22Depletion~~o~~~~~'~~~~~~~~~~~~~~~~~23AdVeftlelngo~~~~~~~~o~~o~~~~~~~~~~~~~~24Pension,profit.sharing,etc'plans(seeInstructions)(enternumberofplansW)25Employeebenefitprograms(seeinstructions).26Otherdeductfons(attachschedule).27TOTALdeductfons-Addllnes12thfough26...~28TaxableInc(miehefefenetopefsthlglessde(fucthmendspedafde(factions(subtractline27ff()mficell)29Losa(o)Ifetopefethglossde(hcth)n(seehstnlctfoas-attachschedule).(b)Specialdeductions(ScheduleI).........29(b)f30TaxableIncomesubtractline29ftumline28)12~13c)141617181920262730362~~~2331TOTALTAX(ScheduleJ).~32Credfhm(a)(hefpeymeatflam1977effmfedasecredit.'(b)1978thlfetedteXPeyme(IIS~~~o~~~~(c)Lessrefundof1978estimatedtexappliedforcnFofm4468.(d)Teedcposllnl:Form)tntFormTNS(ellsch)..Torsih(e)Cfe(fftframregulatedIntfestm(ultcompanies(attachForm2439)(I)ILS.taxonsperfelfuels,n(xthighhfeygeseadlubricatingoil(attachForm4139).31~~~~~~-4-rBOOvOOO-~140Q)p4IOQ-3233TAXDUE(subtractline32fromline31).SeeInstructfonGfordepositarymethodofpayment.(ChechOQlfForm2220IsatlachmhSeepass3oflnstcoctlons.)h6-..)I9SdOVERPAYMENT(sohhaotline31fromEne32).35Fdf)teramountofline34uaieahCfe(fttfte1979estimatedtex>Refund<<f>Voderpens(ilesotpeffefr,Ided<<othatIhaveoEafoloedUtlsTehdfn.Ioclodloeacc<<opsoriosschsdolhsso4Ststefoeots.SN4ioihehestoltoyhootsisdeoaodhallet,iaIsb)te,cd)diect,so4ccntplete.oedsdauonofpfepeder(otherihsntaxpsfed)IsessedonauIofof)osuonof<<hicbpreps(echsssolsaeaflsdce.turhrnod)p.z.Trafrof(no(ufoocorstoet)~seusurerPafdPfoparer'slnformatfonpfrtfrsname(oryctufs.Ifsalf~ployo(n.addFoesandZIPcodePfef)s()daisecurity"Chechifself.employed)pQE.l.rfu.+Oatetn~

Form3120(tsyayIXtH522AttachmentII-A-10dPage2portoIIy1Inventoryatbeginningofyear.2Merchandiseboughtformanufactureorsale.3Salariesandwages.4Othercosts(attachschedule).5Total~~~~~~~~~~~~~~~~~~Cohedolen1I.aktache41~6Less:Inventoryatendofyear.7Costofgoodssold-Enterheroandonline2,page18(a)Checkvaluationmethod(s)usedfortotalclosinginventory:QCostQLowerofcostormarketQOther(if"other,"attachexplanation)(b)CheckifthisisthefirstyearLIFOinventorymethodwasadoptedandused.(ifchecked,attachForm970.).(c)lftheLIFOinventorymethodwasusedforthistaxableyear,enterpercentage(oramounts)ofclosingin-ventorycomputedunderLIFO.(d)isthecorporationengaged,InmanufacturingactlvItlesf.If"Yes,"areinventoriesvaluedunderItegulationssection1A71-11(fullabsorptionaccountingmethod)?.(e)Wasthereanysuhytantlhlchangeindeterminingquantities,cost,orvaluationsbetrteenopertiagandclosingIftverttofy?..~If"Yes."attachexplanation.QYesQNoQYesQNoQYesQNolDomestibcorporationssubjectto85%deduction2Certainpreferredstockofpublicutilities3Foreigncorporationssubjectto85%deduction...~~~.Sahadulfypattachact~4Dividendsfromwhollywwnedforeignsubsidiariessubjectto100<~>odeduction(section245(b)).5Otherdividendsfrofnforeigncorporations.6IncludableIncomefrofncontrogedforeigncorporationsundersubpa*F(attachForms3646).7Foreigndividendgrossup(section78).8Qualifyingdividendsreceivedfromaffiliatedgroupsandsubjecttothe100%deduction(section243(a)9TaxabledividendsfromaDISCorformerDISCnotincludedinline1(section246(d)).10Otherdividends~~~~~~~~~~~~~~~~11Total-Enterhereandonline4.page1....~.......~.~~-~~CompensationofOfficers(Seeinstruction12}(3))~I.ffemeofofficer2.Socislsccuritynumber3.TimeCountedtohustnrssPercentofcorporstionstoctrowlltd4.Common5.PreferredS.Amountofcomyensstiony.Expensecrcountetfortcnccs-Stytyke-H-MatyheTIIff'IdI'21~t=-BadOebts-ReserveMethod(SeainstructionK5)l.Ycsr1973197419751976197719782.TaCenotesendcccountsre.ceftshtooutstsndinzetcndofyest3.Solesonnccount4.currentyrrrspfotfslon5.Rccoucries8crau-le-p-Amnrnlendedtoresenee.Amountchugedecsinstreseney.Rcsenefortrsddchtsetendofyeerl(a)85%ofScheduleC,line1.(b)60.208%ofScheduleC,line2........,~.(c)85%ofScheduleC,line3.....,.........~(d)100%ofScheduleC,line4....~,......S<h<dtsletX2Total-Seeinstructionsforlimitation.3100%ofScheduleC,line8.4Dividendspaidoncertainpreferredstockofpublicutilities(sceinstructions).5WesternHemispheretradecorporations(seeinstructions)6Totalspecialdeductions-Addlines2through5.Enterhereandonline29(b),pago~~~~~an't:ached.~~~~~~~~~~~1~o~~~~'~

PI2:NSYLVANIAIOMER6LICIIYCCNIANYANDSUBSIDIARYCCNIRNIESINCQNETAXREIURN-1978STATENElrrOtGROSSINCONEANDDEDUCTIONSAttachment11Page3I,lneNo1236789agb10CrossInccaoCrossreceiptsLess-CostofgoodssoldSubtotalGrossprofitDividendsOtherinterestRentsCrossroyaltiesNetcapitalgains(Nota1)Ordinarygainor(loss)(Note1)OtherincoaeSch,NoDDb$94,612,53962>743'8231>869,0$1808>582,136187,50013'45'111,799,70142711,011,7281,684,2192030465$787>558,128181>5004,596,148124,62611,078,4841,68$,8941102188pennsylvaniapower6Light~2MHersheyEloctria~tInterstotoServiceEnorgyDove)opaent25831,501122944,150100>000l>244$694$4,1791,010,136224316$10,698,917$10>324~491CourtDe'volopaent~ccan~HanoverUranianOtherDovolopaontResources4CcapaniesTotalsyrca~22~t>2t.>.~tt~2$94,612,$3922222,2231~869>0$18'50,44253l,8$8421(3,000)32570216311,Totalinccae810>516,410806>331,56810,731,90510,471,4541>689>231.e0aboa41,352,25212131415161718.192021222324252621ttCcaponsatlonofofficersBalarieeandwagesRopilirsBaddebtsRentsTaxesInterestContributionsAnortiretionDepreciationDopletionAdvertieingpensionplansOtheroaployoebenefitplansOtherdeductionsLesewagesdisallowed-NewTotaldeduotionsHa()BJobsCredit1>891'79225,51114,571~1973,435>0028,493,92086,2$4,216133,$28,946369,2$0Soled483110,639>80883,0$8529,53713>085,0$$10>984'39310r419>2411000001>513279$66>270,3903>399>6632,831,$2281,137,811106>995,908364,804337,11698>570>361498,58612>948,1005>304>0843$O,48O,298959132$8,5135,64996>356676,511165,8122,10$248,663812$3281420>4278>437>733107>14717>630513,4593,808>6865>012~8111,937,538178>89120>49129,69011,15113$,202149,19931864830,1396182567871814>911>942730,6l3>1899>966>99311>517>3352>097>1014273>S754,583(8>885)80(80)$46>620'~58811,909lr511435,89$2,4181,58$1>853,2$932101,358,STS$10$11>7861>912>6415,513,3523,724>69121~313,446l>74316$r7616>422>258~83>0$87S,5565,6596281,100>81$1058,348~1392829a29bTaxableinccae(loss)before.~pecialdeductionsLessNitoperatinglossLess-,SpecialdeductionsTaxableinccaeSS>664,468098566$75,708,319764,912(1,045,881)(401,870)98566554678>803$74>122~714$764>912$($>045~881)$(407>870)(2>358>STS)(10)(16>996>481)0$(2,358,515)$(10)$(16r996>481)Nota1ClassificationinrccabinodvcoluanresultingfrauconsolidatedreturnProvlslonsSooScheduleD,Pago2>Consolidated,Note2Twoothersubsidiarycospanles,inaotiveduring1978,hadpennsylvaniacapitalstocktaxdeduct(onsof>Pea)co,Ina.810>00NartinsCreekTerainalCo.810.00CrossIncoae8Deduotlons(Continued1)

IXÃhSYLVANIAI'OWER6LIGIITCOHPANYANOSUBSIDIARYCONPANISSZBCCtKTAXRSIURN-1978STAmCSNTOPORMSINCONSANOISIOCYIONSAttachmentdPage4LineNo,CrossZncone1Crossreceipts2LessCos'tofgoodssold~Subtotal3CruseprotltDividends6OtherInterest7Rents8Crbssroyalties9aNetcapitalgains9bordinarygainor(loss)10OtherincceeSch>NoACDDBCcablnedI'94>612,53962143>48231>869,0$78,250,452532,838427(3>000)325102163pennsylvaniaNinesC~>$51,507>78532,50995518,991>8307>973>77454,8524346112TunneltonNlnlng$9,202>1595,9398033>262>35633$200230RushtonNlning~C$13>475>77982154465>260,3333299OneidaNlning$20,426,816i6018,278~>348>538167,28943,54S18432$S23,584CreeneBillCoal~Coee>)Z$,37>01741>385$400>721(3>000)72,362(B>000)13447080456790CreeneNaca@CoalRealtyCo>'LCA-Leasing~>>>i>~>>~>>>>11Totalinocne$41~352>252$27>072>611$3>263>121$5>263>632$5>083>46576,746$411>52$$121,152Deductions12Cospensatlonototticers13Salariesandwages14Repaits15Baddebts16Rents11Taxes18Znterest19Contributions20Anortixatlon21Depreciation22Depletion23Advertising24pensionplans25Othereaployeebenetltplans26OtherdeductionsLessWagesdisallovedNev0'obsCredit317,7861>912>6415,513,3523>724,69121'73,4461,743163>7616,422~25883,05875,5565>659>6281,100,813276>5864>731>039.2>939>0551>984>22011,918,3711~40880,5214>503~78162,6413>973>5182>579,591784>91138'91381>405313,8971004>859271>73044e75>556809,012162,96141>2001,307,59645,775496>030205,3513530>207709>14020>333238>1572>148>3081,083~8872>482,649384,5211,615,12320048>180867,01940e638,3411~268>926186,4724~031>632l>20036,069140>8632>841>7746,8172>39226>694~>47>660',7S67>58270>017302>21668>782268,2145'463Bl,422(17>133)Totaldeductions$58>348>739$33>050>737$3>442~826$5>243>332$8>449>492$4>25S>373$2>989>4$4$76>746$719>621$121>lS'228Taxableinccne{loss)betore~peoialdeductions29aLessNet'operatingloss29bLessSpecialdeductions30Taxablefnccne{16>996>487){5>978~126)(179>705)20>300(3>366>027)(4~255~313){2>989>454)8{16>996>487)$(5>978>126)8(179>70$)$20>300$(3>366>027)$(4~255>373)$(2>989>454)0{248>102)00${248>102)022iotroyaltyongasandoil.CrossZncone8Deductions,(Concluded-2)

"-3488DetortaientotteeneetatxisticalR000000SwxlceComputationofInvestmentCreditQAttachtoyourtaxreturn.AttachmentIT.-A-10dPage5'ilHS"afee~ts)r1~~Power+Xd.ght:ComPanyan(1Subset~IdenuiyingnumberasshownonpageIofyourtaxreturn230959590IUseUteIcnnxtbelowtolistqualifiedlmrextmetttInnewandaxedpropertyacquiredorcottstntctedandpiecedhtxetviceduringthetaxyear.AholhtquxH-fiedptegrexsexpettdi(Nesmadedudegthe1978taxyearatidqualifiedprogtexsexpendituresmadeln1974,1975,1976,and1977ifyoumadetheproperelec(leoprescribedinSection46(d)(6)Iorthosetaxyears.ItptugrexsexpendibtrepmpettyIspiecedhseNicedttdttgthetaxyear,donotIixtqualiTiedprog-ressexpettdituresforthisproperly.SeeinxtntcUonforlineLIfyouatxtclaiming100%Investmentcreditoncertainships,checkthisblockQQ.SeeInstrucUonI(fordetalLrNate:Includeourshareafinvestmentlnrapertymadebyapartnership.estate.trust.smallbusinesscorporation,orlessor.vypaorpl%pettyUne(slUreyeats(99Costorbash(Seeinatrucuon07(91Applicablepetceiltasa(49Ouaflfledinvestment(Column2xcolumnaia3ormorebutfessthan55armarebutlessthan70ualiflett197<1979,197daee1977expettdittNasutpgrass197$Usedptopetty(SeeInxuucuonsfordouarlimits)(c)e)7ormore7ormore7ormore3ormarebutlessthan55armorebutlessthan77ormore~66Co~oXd~atepage5attachect2Qualifiedinvestment-Addlinesl(e)through(h)(seeInstructionMforspeciallimits).3)0%ofline2.47%(4%forpublicutilityproperty)ofcertainpmperty(seeInstructionsMandN).5CorporaUonselectingtheadditionalinvestmentcreditforcontributionstoEmployeeStockOivnershlpPlans-Attachelectionstatement(seeinstructionIandlnsttucUonforline5)(a)AddiUonal1%credit-Enter1%ofline2(b)AddiUtxtalcredit(flotmorethanSQ)-Enterallowablepetceabtgetimesadjustedline2(aUadtschedule).~6Carrybackandcanyaverofunusedcredit(s)-AttachcomputaUoII(seeInstrucUonF),7TentativeInvestmentcredit-Addlines3throuh6.8(a)Individuals-EnteramountfromFarm1040,line37,page2.(b)Estatesandtrustk-EateramountframForm1041,line27or28,pago1.(c)CarporaUons-EnteramountfromScheduleJ(Farm1120),line9,page3.9(a)Creditfortheelderly(fndividuaisonly).(b)Foreigntaxcredit~~~~~~~~~~~~~~~~~~~(c)Taxonlump.sumdlstrtbuUons(seeinstructionfarline9(c)).(d)Possessiontaxcredit(corporationsonly).(e)SecUon72(m)(5)penaltytax(individualsonly).'\10Total-Addlines9(a)through(e).11Subtractline10framline-8.I2(a)Entersmallerofline11or$25,000.SeeInstructionMforspeciallimits.(Marriedpersonsfilingseparately,controlledcorporategroups,estates,andtrusts,seeInstrucUonforline12.).(b)IflineIllsmerethanline12(a)andyourtaxyearendsIn1978,enter50%oftheexcess(ifyourtaxyurendsla1979,enter60+oftheexcess).(PublicudliUes,railroads,andaitlittte,seeIttxhucUonQ.13Total-Addlines12(a)and(b).~.!~!..@'.80qi14EntersmalierofIine7oriine13~~..~~~~~~~~~~~~~~~~~15Subtractline14fromline11.o~~~~~~~~~~'~~~~~~~~.16Enterenergypropertycreditfromline3ofSchedule8(Farm3468).17Entersmalleroftine15orline16gfthereIsnoentanline16,enterzera).ISTotalInvestmentCredit-Addlines14and17.EnterhereandonForm1040,line41;ScheduleJ(Form1120).line10(b,ae3;orthecoprarlatelineonotherreturns.0I30489,4031,422,68110981;04342.147,737240238t33424.238.33425'0019,370,66719039,66719,395,66740842,667<<0<<0>>19,395,667lfaoypartofyourinvestmentinline1or4abovevrasmadebyapaitnetship,estate,trust,smallbusiflesscorporation,orlessor,completethefoilowiflgstatementaodidantifypropertyqualifyingforthe7%or10%investmentcredit.flame(Pattnetsbly.estate,tiust,etcJ"Pfoe(eeaexoefwtitutssie~cafelfp(opertyfsdisposedofpriortothofifeyearsusedinffguliflgthefnvestmentcredit,seefnstmctionE,Fotm3468(197@

AttachmentII-A-10dPage6PENNSYLVmzaPOWER@aXXGHTCOMPLYANDSUBSIDIARYCOMPANIESINCOMETBZRETUKl1978CONSOZZDATEDINVESTMENTCREDITpennsylvaniaPoweraLightCompany>>Regular1%ESOP5%ESOPSub-TotalHersheyElectricCompanyInterstateEnergyCompanyPennsylvaniaNinesCorporationTunneltonHiningCompanyRushtonMiningCompanyOneidaMiningCompanyUraniumResourcesaDevelopment:CompanyServiceDevelopmentCompanyInvestmentCreditCurrentYear$34,894,0253,489,4031,422,681,39,806il0935,72517,807247s65832,6987,70116r9451,70512Recomputation..;;.";-Prior,Yeaxs-',;q~.InvestmentCredi~'-,'3,144;1.87"'":"222;5783,366,7651,925529LCALeasingCorporation14Sub-Total40,166,374$3s369t219UsedPxoBasePennsylvaniaHinesCoxporation$3,199(Limitationnotappli.cable)'otalInvestmentCredits320$40,166,694a'~a~~ConsolidatedForm3468Page2

AttachmentIZ-A-10dPage7PENNSYLVANIAXONER6LIGHTCOMPANYANDSUBSIDIARYCOMPANIESINCOMETAXRETURN-1978CONSOLIDATED~TMENTCREDITCARRYOVERConsolidatedunusedinvestmentcrecfit-Year1977,perreturnfiledlbESOP5%ESOP$1,286,314$840,359'.Total'~'-.=..$2,126;673'~"Less:Carrybackstoyears1974-1975-1976Less'ortioneliminatedpriortoutiliza-tionasresultofaSaleofl(%interestinSuscue-hannanuclearplant(88~689),(54~944)(143,633)Earlydispositions-Form4255,page2(1,332)(665)(1,997)$1,196,293$784,750$1,981,043~ConsolidatedForm3468Page3

"-3488peeeeeeeeeteitheTeseeueyIeiernelRereeueS66vieeComputationofinvestmentCredit)NAttachtoyourtaxreturn.AttachmentII-A-10dPage8PennsyLmudaPower8Light:Cam~yIdeoufyingnumberasshownonpage1ofyourIretm23-0959590IllsethefermatbelowtolistqueflfledInve5tmentlnnewandusedpropertyacquiredorconshucted2ndpiecedInScnicedudagthetaxycer.A(SOI(StqseII.fledprcare55expendituresmadeduringthe1978texyearendqueflfledprcare53expeadihiissmadeIn1974,1975,1976>>and1977ifyoumadethepmperelectionpieSQIhedlnSecuon46(d)(6)forthosetaxyee(3.Ifproare53expenditurepropertyhplacedhac(viceduringthe13xye3r,donotIhtqualifledpieg-ressexpendituresforthISproperly.Sccin5hucflonforlinel.Ifyouareclaiming100%investmentcreditoncertainships,checkthisblock)9DSceIn'structfonKfofdetails,Note:IncludeyourshareofinvestmentInropertymadebyaartnershl,estate,trust,smallbusinesscorporation,"orjcssof.'ypoofpeopeety19241915,1936eeu(1933progro5$oxpemutures19raUsedproperty(SeoInstrucuonsfordollarlimits)Uoo(b)(d)(e)(h)(3)Uroyears3ormarebutlessthan55ormorebutlessthan77otnlore7ofnlonh7ormore3ormorebutlessthan55ormorebutlessthan77orniofe(2)>>Coecorreasis(SeoinstreecuonC)233,2702,179,5387633253203463,569,005222963,082(3)Appiicab(~percentage33>>/~66>>20~33>>/100(6)Ouaunoeiinvestment(Col63mnZxcoi63mo3)7737571,453,02576,325r20392r71338011783370,466'Qualifiedinvestment-Addlines1(a)thmugh(h)(sceinstructionMforspeciallimits).310%ofline2........>>..>>.>>>>47%(4%forpubflcutilityproperty)ofcertainproperty(seeinstructionsMandN)......~5CorporationselectingtheadditionalinvestmentcreditforcontributionstoEmployeeStockOwnershipPlans-Attachelectionstatement(seeInstructionIandinstructfonforflne5)(a)Additional1%credit-Enter1%ofline2(b)Additbnelcredit(notmorethanSg)-EaterallaeiehlcPeccntaaetimesadlustedline2(attachschcdide).6Canybackandcanyovcrofunusedcredit(s)-Attachcomputation(seeInstructionF).~Tentativeinvcstmcntcredit-Addflncs3through6.~6~8(a)Individuals-EnteramountfroinForm1040,Ilne37,page2.(b)Estatesandtrusts-EnteramountfmmForm1041,line27or28,page1.(c)Corporations-EnteramountfromScheduleJ(Form1120),line9,page39(a)Creditfortheelderly(Individualsonly).(b)Foreigntaxcredit.(c)Taxonlump.sumdistributions(seeInstructionforflne9(c)).(d)Possessiontaxcredit(corporationsonly).(e)Section72(m)(5)penaltytaxgndlviduaisonly).acsE10Total-Addlines9(a)through(e)..~.~~.~.~.~~~-~--~~11Subtractline10froniline8~~~~~~~~~~~~~~~~~~~~~~12(a)Entersmallerofline11or525.000.SceinstructionMforspeciallimits.(Marriedpersonsfilingseparately,controlledcorporategroups,estates,andtrusts,seeinstructionforline12.).~(b)Iflinelllsmorethanline12(a)andyourtaxyearendsin1978,enter50%oftheexcess(ifyourtexyeareRC3in1979,enter609boftheexce55).(Puhflcutlflties,reilroad3,2ndaliliae3,SecIn5tnictionJ.).13Total-Addlines12(a)and(b)........~.~~~"~~~;~~14Entersmallerofline7orline13~15Subtractflne14fromflne11.16Enterenergypropertycreditfromline3ofSchedule8(Form3468).17Entersmallerofline15orflne16(ifthereisnocnonflne16.enterzero).~18TotalInvestmentCredit-Addlines14and17.EnterhereandonForm1040,line41;ScheduleJ(Form1120).flne10(b),ae3;ortheaproprlatelineonotherretums.348,940325234r894,0253r489,403',422,681.39r806r1o9lfanypartofyourinvestmentinline1or4abavewasmadebyapartnership,estate,ttust,smallbusinessco(pe(ation,orlessor,completethefollowingstatementandidentifyproperlyqualifyingforthe7%or10%imrcstmcntcredit.flame(Parueership>>csee'to>>tmse>>etc)hddrc5sProgressesoeoduUresLli~~ears(SeePage2alfpropertytsdisposedofpriortothelifeyearsusedinfiguringthefuvcstmantcrc(fit,scafn5t(uctfoltE.23ise5929ouS.COVERNMENTPRINTlNCOFRCE3197$-26333eForm3468(tave)

AttachmentII-A-10dPage9PENNSYLVANIAPOWER6LIGHTCOMPANYINCO5KTAXRETURN-1978DETAILSOPXKP?SGHENTCREDITa&a1OwnedProperty-ElectricDepartmentSteamHeatDepartmentLeasedProperty-PruleaseIBMInc.Commonwealthplan,Inc.Total3-5Years$220,00013,270~0$233,2705-7Years$,50,1901,499,593629,755$2,179,538a>M~i-e7orNore'"..~".~.Years":~"~$70~77Xa278~w,'.;'p183~~='i'f3,469,3772,081,365$76,325,203*InvestmentcreditbasehasbeenreducedforanticipatedearlyretirementsofmasspropertyunderprovisionsofReg.1.47-1(c)(2)andRev.Rul.67-378Line5(b)-Comtationofadditionalcredit(.5%maximum):Newproperty-Line1(a),Form34681(b)nltLinel(c),Sub-totalLess-Constructionexpendituresthrough12(31/76Qualifiedinvestmentafter12/31/76$77,7571,453,02576,325,20377,855,985(4,656,446)73,199~539Qualifiedprogressexpenditures-1975-1977,Line1(d)-Form3468Lessamountapplicableto1975r1976Sub-total1978,Line1(e)-Form346STotalQualifiedProgressExpendituresTotalBaseApplicablepercentageInvestmentCredit$92,713,801(59,747i680)32,966,121'78,370,466-211,336,587284,536,126-'I':005-'-'C$3.',422,'681Form3468Page2 AttachmentII-A-10dPage10PENNSYLVANIA%EONER0LXGKVCOMPANYANDSUBSIDIARY%COMHG%XBSXNCOMEGRXRETURN1978SUMMAKfOPDEPBECGLTXONSch-G1>>7Form4832$71,528,814$27,138,058PennsylvaniaPower6LightCompanyLessDepreciationcapitalized(taxbasis)IErJ'6$;98r668j',87Z;.Hershey'lectricCompanyXnterstateEnergyCompanyServiceDevelopnentCompanyCourtDevelopmentCompanyPennsylvaniaMinesCorporationTunneltonMiningCompany"RushtonMiningCompanyOneidaMiningCompanyGreeneHi13.CoalCompanyLCALeasingCorp.,910131623,8534,969,0124,426,315224r810103,865318,648',58377r472271r730709r740867r019lr20068,78298,570,361.'48r6635r072r877318r6484,5834r503r787271r730709,740867r019120068,782UraniumResources&DevelognentCo192,4182,418$80r950412$29r785r907$110r736r319LessDepreciationcapitalized1Net:~96,511$110r639i.808ScheduleG(Consolidated) r~~~~t~~4~PE&ilSYLVANXAEGWER&LIGHTCOMBOSIncomeTaxReturn-197$S-

DeareciationAttachmentII-A-10dPage11DescriptionGuidelineClassLifeSystemcVintagesthrough1957-S/LVintages1958-1970'0CbD/B150mDBS/LD/BtoS/LTotalGenera3.BuilctingsVintage1974(Rev.Proc.6?21)1975eetlN19761977II'NN1978ttIIIfTotal22234d-14e-l.4f4gElectricDenartment$5,

865,EES15,985,94332'90-17,6492,541,58824,442,48&40,796413,81528,08310,52311,947505'64SteamHeat~DetmenhTota1$105,913$5,971,03123,842.16,009785;~.32'90.';:17,649'9,320'~560,.908E49r075..24r591~563',~'40,796.:-=4X3',815'8i08310,52311,947505,164'<ClassLife(AER)System:Vintage1971-2008DB150mre15'Gen'1Bldgs.DBtoS/LVintage1972-200%DS15&-Gen'1BldgsS/X-SteamProdEStoS/LVintage1973-200%DS15&-Gen'1Bldgs.DBtoS/ZVintage1974200$ZsDBtoS/LVintage1975-200%DSDBtoS/LVintage1976-20%ZB1977200mDS19782005E3Tota3.Other:Landrights-Transmission-DistributionClearingrightsofway-TransmissionCt-DistributionSub-total-S/L4a14a-14a-14a24b-14b-14b-14b-24c-14c-14c-24d14d-24e-14e24f4g4h5b3,672~9131862i78624,90910,375,578140,814'1,59048,84310,974,645448,720102,1904,357,8893.7,65315,961,88714,88616,883,2595,534,3932,892,281'1,325,254348,3.21966,57S23,602172',9511,513.,2523,171168,5623,13S1,1923,29195820,5182,730203,5603,676,0841862,78624,90910,344,140140,81411,59048,84310,977,7S344S,720102,1904,359~081,17,65315,965,17814,886'6884,217S,554,9112,895,01371,528,814-348;121'i.,966,578'23,602172.9511,511,252CEearingrightsofway-Transmission6~1DistributionSub-totaa-ZOCeDSRevenueAgents'djustmentsGrandTotalDepreciation(.LessDepreciationCapitalized(TaxBasis)DepreciationDeduction87,173331,970419,143130,936$98,314,237$352,63587,173-~331,970419.143110,936$9S,666,87296,S11$98,570,361ScheduleG IY2rtgYLVANIAtOWER4LICIIYCONPANYANDSUBSIDIARYCONIANIESINCONETAXREIURN1978RECONCIIEINIC'FNETINCCaortuNBOOKSNITSINCOHEPERREIURNAttaChmeNC10dPage12IlneNo1'2INetinccne(loss)perbooksFederalincoeetaxZnvesbaentcreditadj.-netTaxablelnconenotrecordedonbookerDividendsaccruedin1977-taxedtn1978Transfersto/frereparentccnpanyAdjustsalesofpropertyDividendsreceivedSubtotalConbined$151,454F5239,329,01819,124r72962,50039,6436,662,040187,500pennsylvaniaPover6Light~C$149r035~46810,036,63819,803,87362r50045,$746,662r180187500NersheyElectrio$399,978333,21527'09ZnterstatoEnergy$1~247~2$2(619,267)(163,847)186,8$9953185,833733760302464,138ServiceDovolopaent~C$(14~282)(37r446)(341~7SI),393482CourtDevelopaent~rHanoverDevalopaentUranlunResourcesa~l.rr-0$(198,406)341708"198406$46834lr708Tots)sFron786,107(IBSr716)(542,406)(S,931)(140)51914ExpensesrecordodonbooksnotdeduotedaAaortlxationNaortixation-ExtraProp.IousAdjustbonddisc.,exp6pron.Sec.162(e)expensePensionplanpennsylvaniatnconetaxNorknenrscospensatlonAd).'coalinventory~~Deferredintonetaxes'enaltychargesDevelopaentcostsWrittenoffProvisionforloss-OneidaNlntngCoa'Wages-NevJobsCreditSubtotal(3r216)246,742(1,284)95,136377,42252,1901,573'591,004r5982$r926,117127,422$35,1357,605,57510000037639,196246r742(lr284)95,1361,004~59824~37lr86355,8$5(Bally)lr757r39l'12r651137'05,57595913334743988417I7574071352895l26426(3,216)377r422S1,6691,573,359198r406(405r780)7lr5SIS35r13532102016162200,1436TotaloftinesIthrough5$224r499r149$219r308~131$751r88$$2t221~54$$(379r954)flllf342rlSI$3r210$2~2SZ,OS7ZnoanerecordedonhooksnottaxedaInterestduringconstructionPrepaidrentsDividendaccruedin1978-taxablein1979Anorttsatton-chg.InbillingEquitytnearnings-subocnpanies(Net).Dividend-rekurnofcapitalSubtotal71r036r081(4,445)~62,50048,3002,671,448-0-71r033~5402r54162,50048r3001,659,023'73813884728033632Sll(ir445)I445lr012r425I01242$ScheduleN1(Continued-I)

ALEQCllclcntIIPOPO13PENNSYLVANIA)CHERILIClyCOHPANYANDSUBSIDIARYCOtPANIESnicoNETAxleam-1978RECONCZILNENTOPNETINCONZPERDOORSWITNINCONEPERREIURNLineNo8Additionaldeductionsnotrecordedonbooks<Develop>>entcostsPensionschargedtocapitalaccountsTaxeschargedtocapital6otheraccountsDeprac1ation'<>ort(ration-pollutionaquipnentDepletionSeverancepayOlftofpropertyReeovalcostsProv.-SaddebtsAsortiration-RARiteasOrganisationexpenseJo(ntventuresInterestcapltallxodSalestax-bond/stockissuesDeferredfuelooatsClearing"accountbalancesoperatingcostaAd)ustothertaxesExplorationexpendituresDeferredstrikecostsReserveforextraordinarypovercostsChargestoRes>forDiscontinuedOper>Suh-totalTotalofLines7and8PennsylvaniaPoser6lightNorah<<fElectric~Cosa~nInterstateServiceCourtEnergyDevelo(nontDevelop>antIlanoverDevelola>ant~ccsn~Urea(usResourcesI~lIotalePron979,5373<995,7693>946>97330>248>112337>716(21~130)(40>488)2,0303>946,594(94,458)106,$0258342>4537<326,79810>37127>211,074(806>137)663,257151,0191,125'057,041,0776,711,40518271603,995>7693,619,6482S,608,379337>716(40,488)2,0303>946>594(95,937)106>50210,37127,244,957(806>137)155,5806>711~4058,31S(23,883)3>282>32684>120.81501>47932017,497(14>900)8,945(9)8342<1338168isl8Bl1,osd~2>418317>3151~3II,IOI(21,130)43$>89558d>873,406629,917(ll1>12$>10$3)>3(01,4037,04),077~1827160168>834~681143~S99>7$2(13>027)3>267>41627>916lil34213423617B5ia196129lil342,1343,36(,785)9.248,$$495020797707963891$568326741632,36110Taxable(nooseL(ne6sinusLine955>664~468575>708>3798764>9128(l>045~Ballg(407>870)08(2>358'7S)S(16'96>497)ScheduleN1(Cont(need2) pERQILVANIAKNERrLlcllycONI'hliyAlloSVBSIDIARYCONPANIESINCONETAXREIVE1918RECOlleilzvh7lrormTIECONEPERDOOESNIININCONEIERREIVRNhttac)nxentIIPage14LineNo12Cosh)nod(ToPages~22Netinceae(loss)perbooksredera1InccnetaxInvestnentcreditad)ustnentTaxableinconenotrecordodonbooks>Transfersto/frc>aparent>xxllpanyAdjustsalesofpropertyExpensesrecordedonbooks-notdeducted>hnortlrationPennsylvaniaincc>aotaxNorknen'.conpensationDeferredincccaetaxosPenaltychar9esDcvelopsentcostswrittenoffI'ensionplan186>101(185,716)(542,406)(S,931)(140)(3~216)51,6691,S13,359(405,780)11~5$4535,135311>422PennsylvaniaHinos0(392,557)(459,321)(140)(3,216)(189,845).52>01641>138516.021214>669TunneltonH(ning08(17,433)18,0638>738338>137(37>960)1S>18051,513RushtonNining0-8138'15(52~138)36,5421,083>464(219>857)4,84140>S44OneidaHlning~h08"101,843~(49>010)341,603(199,919)9,19S~(32,399)62,209OrocnoHillCoalOraonoHonorCoalCcs)>~an0RealtyCo>2I'1>012,425(799)LCALeasing$(226,318)(21>184)BlM~cor.0f(S>132)6>3896Totaloflines1throughS2252OS18(160,635)$316,838$1,031,611$239,462fl>oil>626$(248>102)fl>2577Inccnerecordedonhooks-nottaxodlE>ra(tylnearnings-suhccnpan(esA44(tlonaldoduotlonsnotraoordo4onbookslDevolo(a>entcoatsTaxoschgd,tocapital5otheraccountsDepreciationDcplotionorganisationoxponseIntorastoapitallxodAdjustothortaxesDeforredstrikeoostaOperatingcostsChargestoRes.forDiscontlnue4Oper.1,012>425811>086'21,3251>342>404(21,130)586>813~4061,4037>041>01133>3401>827>160801>5981>341,204(29>928)8$03,703,761(8,025)564,$6816>783994>528407$1,718,2141~827>1609,488186>4721>200304,031,63226>55(4140>853282,841,114106>7891)012l(25(199)loa)>2579Totaloflines7and0819,248>55485,817,491$556,543$1,011,311$3>605>489$4,2$5,313$2,989,454$1,011,626f10$1>2$710TaxableincoaaLine8sinusLine9~f(16,996491)$(5,918,126)$(119705)$20300f(3~365,021)$(4,255,373)$(29894$4)0$(248,112)~-08(248,1OI)2~2>lhaAbovef(248112)e~ohedulaH1(Conoluded3)

Formlice<teratTaxComputation'ttachmentII-A-10dPage15Paso3(tlscciyearcotpoialiont,omitlines1through8aadcateronline9,IhcamountfromFona1120-FY(197879),lice5,PattIII)10(e)Foreigntaxcredit(attachForm1118)(b)Investmentcredit(attachForm3468).(c)Workincentive(WIN)credit(attachForm4874).(d)Nevfjobscredit(attachForm5884).11Totaloflines10(a),(b),(c),and(d).".~~~~.~~~~~4m~p~Va'~y~~5.~667~~~~~~~~e~~~~~~~00~~~~~~~~~12SubttactMnellfromllne9..~.~~~~~~~~~I~~~~~~13Personalholdingcompanytax(attachSchedulePH(Form1120)).14TaxfromrecomputlnlfaprioryearInvestmentcredit(attacftFonnj4255).15TaxfromrecompuUn8aprioryearWINcredit(seeInstrucUons-attachcomputatfon).16MinimumtaxontaxpreferenceItems(seeInstrucUona-attachForm4626).17Totaltax-Addlines12through16.fnterhereandonline31,pagelro~~~~~~~~~~~~~~~~~~~~Dateofdeposit(Uttdepositshordctofdatemade-Sceimttuctlon0)1Taxableincome(line30,pago1).2Eulerline1or$25,000,whlchcvciisless.(Membersofacontrolledgroupcaterone.hallofsurtaxallocation,stcinsttucUons).3Subtractline2fromline14Enterline3or$25,000,whicheverIsless.(Membersofaconttollcdgroupenterone.halfofsurtaxagocathn,scefnsttuctioas).5SubtractUne4fromUne3~~~~~~~~~~~t~~~~~~~~~~e~~s620%ofline29oo~~~~~~~~~~~~~~~~~~~~~~~~~~'I722%Ofline4~~~~o~.~~~~~~~~~~~~~~~~~~'~'~~8'e\48%ofUne5~~'.~~9incometax(Sumoflines6,7aad8otaltcmctlvetaxfnanseparateScheduleO,whicheverhfess)altDataotdepositAmountDateofdepositAmount49(1)Dldyoudsimadeductionforexpensesconnectedvritht(a)Eatcttcfnmcntfacility(boat,resort,tanch,etc.)?.u.(b)Uvlagaccommodatloas(exceptforcmpfoyccsonbusi-ness)?~~~~~~~~~~~~-~~(c)Employee'sfamiliesatconvcntlomormccUngs?.If'Ycs,"wereanyofthesecoavcnUonsormcctlngsoutsidetheUn!lcdStatesorItsposscsshas?."(d)EmployeeorfamilyvacationsnotreportedonFormW-2?.(2)EntertotalamouatdcimcdonForm1120forcntcttainmcnt,catcitclnmcntfcdliUcs,gifts,travel,aadconvcnthmofthetypeforwhichsubstaatiagonhrequiredundersccUon274(d).(ScelmttucthnY.)>H(1)Oldyouatthecndofthetaxableyearown,directlyorIndi.rect!?,507)ftormoreofthcvoUngstockofadomesticcorpo.tatlool(ForrulesofattribuUon,scesccUon267(c).).If"Ycs,"attachascheduleshowing(a)name,addtcss,andIdentifyingnumber,(b)percentageowned;(c)taxableIncomeorUoss)(e.gifaForm1120:fromForm1120,line'8,page1)ofsuchcorporationforthetaxableyearcoding<<ilhorwithinyourtaxableyear,(d)highestamountowedbyyoutosuchcorporationduringtheyear,and(c)highestamountowedtoyoubysuchcorporationduringtheyear.(2)Didcayindividual,partnership,corporation,estateortrustatthecadofthetaxable.yearown,dltccuyorIndirectly,50+ormoteofyourvotingstock?(ForrulesofauribuUon,scesccUon267(c).)If"Ycs,"complete(a)through(c).(a)Attachaschcdufashowingname,address,aadidentify.lagnumber,(b)EnterpctccahgeownedQ(c)WastheownerofsuchvoUngstockapctuxtotherthanaU3.person?(SceInstmctionS.).It"Ycs,"enterowner'scountry~(d)EaterhighestamountowedbyyoutosuchownerdunagtheecrW(c)Enterhighestamountowedtoyoubysuchownerduringtheyear~'(Note:ForpurposesofM(t)andM(2),"highestamountoweNladudcslosesaadaccouatsreceivable/payablc.)IDidyoueverdcdareastockdividend?.3TaxableIncomeorJoss)fromForm1120,Ihe28,page1,foryourtaxableyearbeginningIn:197919791977KloserouememberotecoelrollsdSmupsubiscttothepmel.shnsofsccUon1561?If"Ycs."cbtckthetypeofrchlhashlp.(1)Qparcntsubsidisty(2)Qbrothcrsistcr(3)Qcombinathnof(1)and(2)(Scesection1563.)i.Refertopage8oflastrucUonsandstatetheptindpal:Butleemecdrilrpmducorscmice~chedcla.s..attached=MOidyoufileallrequitedFonas1087,1096aad1099?NWereyouaUS.shareholderofanycontrolledforeigncorpora-tion?(ScesccUoas951aad957.)It"Ycs,"attachForm3646forecchsuchcotporcUcn~~~~~~~~~~~~0Didyou,atanytimedutiagthetaxableyear,haveanInterestinorsignatureorotherauthorityoverabank,securitieorotherfiacndalaccountinaforeigncouahy(sceinsttucUonV)?PWereyouthegrantorof,ortransferorto,aforeigntrustduringanytaxableyear,whichforeignbustwaslnbeingduringthecurrenttaxableyear,whetheroraotyouhaveanybcncfldalinterestlnsuchtrust?If"Ycs,"youmsyberequiredtofileFonas3S20.352M,or926..~QDuringthhtaxableyear,didyoupaydividends(otherthanstockdividendsaaddistributionsinexchangeforstock)lnexcessofyourcurrentandaccumalattdcamlagsaadprofits?(Scesec-tions301and316)It"Ycs,"fileFotm5452.Ifthhhaconsolidatedreturn,aaswerhereforparentcorporationandonForm851,AffdttUonSchtd-ule.foreachsubsidiary.Ycs/

Fopvpp2120(1978)BalanceSheetsneglppollpgoftapupbleyeerAttachmentEI-A-10dPage16PagoggpufoftaxableyearASSETSICash~~~~~~'~~~~2Tradenotesandaccountsreceivable..(a)Lessallo)ranceforbaddebh3htventorles~~~~~~~~~4GovtoblfgaHonr.(n)US.andInstrumentalitf(b)State,suhdfvblonsthereof,etc.SOthercurrentasseh(anschschedule)6Loanstostockholders.7Mortgageandrealestateloans.~8Otherinvestments(attachschedule)9Buildhgsandotherfbeddepnchbleasseh(n)Lessaccumulateddeprechthn.10Depletableassets.(n)LessaccumulateddepfeHonllLand(netofanyamortfzaHon)12lnfangibleassets(amorHzahfeonly)~~~(o)LessaccumulatedamorHzaHon..~13Otherassets(attachschedule)14TotalassetsUABIUTIESAHDSTOCI(IIOIDERFEQUITTISAccountspayable.16Mtgernotes,bondspayablelnlessthan1yr.17OthercurrentIfahliltles(attachschedule)18Loansfromstockholders.19Mtgesnotes,bondspayablefn1yr.ormore2OOtherHahUitlcs(attachschedule)21Capitalstocfn(n)Preferredstock.(b)Commonstock.22Pafd4norcaplblsurplus23Rehlnedearnings-Appropriated(attachsch.)24Retainedearnings-Unappmpdatcd.25Lesscostoftrsasufystock26Totalliabilitiesandstockhofdefs'qui(A)Amounta////////(8)Tote(F/rP/YZ//////////////////////';FZ/&//ZZPZZ////8Ã//////iF/////~//77/rZAA()rFPZZ/rÃZr/ZZ/////7ii-\'PVÃ/ZKi///7Hz//////&//,.F//////////FP///////////////////////r///////7Z//a/////////////i8/////////l~(C)Amount(0)Total"~~zrZZiP)WZF>Z/F~~ZK<ti(.C.~///////ReconciliationofincomeIHatfncomeperbooks....-....-.~~2Federaffncometax...,...'.~3Excessofcapitallossesovercapitalgahs.4incomesubiecttotaxnotrcconfedonbooftsthhyear(itemize)PerBooksWithincomePerReturn7incomerecordedonbooksthhyearnotin.dudedinthbreturn(itemize)(n)Tax.exempthterest$SExpensesrecordedonbooksthbyearnotdeductedlnthbreturn(itemize)(e)papeaellpae...,rO>papeapae.....e8Otducthnsfnthhtaxreturnnotchargedagahsthoof(Incomethisyear(itemize)(eppepeeaeepae.(b)OepfeHon...$6TotalofOnes1thn)ugh59Totaloflines7andB.10fncomeOfne28,page1)-Gne6fess9AnalysisofUnapropatedRetainedEarningsPerBooks(line24above)~IBalanceatbegfnnfngofyear2Hetincomeperbooks.3OtherIncreases(itemize)Bchedu5OistrihuHons:(a)Cash(b)Stock(c)Proputy6Otherdecreases(itemize)ebt~Q-aMzzch4Totaloffines1.2.and3.7TotaloflinesSand6.8Bafaoceatendofr(fine4fess7)

II-A-11G.F,VandersliceQ.11ProyideAFUDCchargedbycompanyattestyear-endandlatestdate,andexplainmethodbywhichratewascalculated:A.11.PPSLchargesallowanceforfundsusedduringconstruction(AFUDC)oneachconstructionjobexceptasfollows:Costofminorextensionsofpropertythatarecompletedwithinthirtydays.Costofpropertyandequipmentpurchasedandputintoserviceeitherimmediatelyorwithina..shorttimesuchasmeters,linetransformers,officefurnitureandequipment,laboratoryequipment,constructiontools,polereplacements,servicesandotheritemscoveredbyyearlyblanketworkorders.TheAFUDCchargeiscomputedmonthlybyapplyingtheAFUDCratetothecumulativebalanceintheconstructionaccounts(lessretentionsandAFUDC)atthebeginningofthemonthplus1/2themonthlyrateonthemonth'scharges(lessretentionsandAFUDC).Inthein-servicemonth,AFUDCiscomputedbyapplyingthemonthlyratetothecumulativebalanceatthebeginningofthemonthandadjustingthecomputedamountbytheratioofthein-servicedateto30days.PALalsoappliesthemonthlyAFUDCratetothepreviouslycapitalizedAFUDCbalanceatDecember31andJune30aslongastherelatedprojectremainsunderconstruction.TheborrowedfundscomponentofAFUDCisrecordedinAccount432andisdeterminedbydividingthetotalAFUDCrecordedbytheAFUDCrateandmultiplyingtheresultbythedebtcomponentoftheAFUDCratebeforedeductingtheincometaxeffectasfollows:AFUDCrecorded8.21/(1979AFUDCrate}x4.06%(AttaclentII-A-ll,page3)TheremainderofthetotalallowanceisrecordedinAccount419.1.SeeAttachmentII-A-11,O.3pages}.Pages1thru6providethedetailsuppliedtothePennsylvaniaPublicUtilityCommissionconcerningthecalculationofPPGL'sAFUDCrateapplicabletotheperiodJanuary1,1979toDecember31,1979.SeeAttachmentII-A-11.Pages7thru13providethedetailsuppliedtothePennsylvaniaPublicUtilityCommissionconcerningthecalculationofPAL'sAFUDCrateapplicabletotheperiodJanuary1,1980toDecember31,1980.

PennsylvaniaPowersLightCompanyAttachmentZZA11Page1AllowanceForFundsUsedDuringConstructionJanuaxy30r1979PennsylvaniaPublicUtilityCommissionP0Boz3265Harrisburg,PA17120Gentlemen:Enclosedareeightcopiesofthcomputationoftheafter-taxrateof8.218tobeusedindeteminingtheallowancefortheperiodJanuaxj1,1979thxoughDecember31,1979inaccoxdancewiththeFederalEnexgyRegulatoryCo~ssionOrderHo561.TherateviLLheapplie'QtotheGmdsinvesteQinconstructionprojectsexcludingtheaccumulateQallowance,xetentionsoncontractsandthoseconstructionprojectswhich,underourpolicy,axenotchaxgedsrithallnrance.Xnaddition,theCompanyarielidentifytheamountofaccu~-latedaLLciranceatDeceuher31,1970andJune30,1979relatedtoprojectsunderconstxuctionatthattimeandx<9.11applytheallowancexatetowchbalanceforthenextsixmonths,aslongastheprojectsremainincon-structionTheallo:ranceratetrillnotbeappliedtoanyallo:rancegene~atedduringtheperiodJanuary1,1979tI~oughJune30,1979untilJuly19/9,oxtoanyallo@ancegeneratedduringtheperiodJuly1,1979throughDecember31,1979untilJanuary1,1980.ThisprocedurehasbeenadopteQtocomplytriththeprovisionofOrderHo,561whichpxmitscompoundingofpreviouslycapitalimdallcreance,butnomorefrequentlythansemiannually.FondlyacRnowledgexeceipthyi.gningandreturningtheattachedcopyofthisletterVexytxulyyouxsrEnclosure$SigaeK)'.3.FOH7t"JE

'omponentsPennsylvaniaPower1(;LightCompanyCalculationofRatePorAllowancePorPundsUsedDuringConstruction{AFUDC)ForJanuary1,1979ToDecember31,1979{WousandsofDoLlars)AttachmentZXA-11page2SCHEDULEA1.s=Short-termdebtinterestrate(estimatefor1979)2.S=Averageshort-termdebtoutstanding(estimatefor1979)I3.d~Long-termdebtinterestrate(embeddedcostatDecember31'978)11.068$86ill9792@(SchC)4D=Long-termdebt(bilanceatDecember31,1978)~,$1i257i365(SchD)5.p=preferred/preferencestockrate(embeddedcostatDecember31~1978)6.p=preferred/preferencestock(balanceatDecem-ber31'978)7..c=Commonequitycostrate(allowedinPUCOrderdatedAugust1976)8.C=Commonequity(balanceatDecember31,1978)9.N=AveragebalanceinCYPXPplusnuclearfuel(estimatefor1979)BorrowedFundsRate839>(QchB).$543i3751428@(Sch.D)982,368.'Sch.D)$1i347i196I86,1191,257,365li347,3.96,lt257i365+543i375+982t368Ai=1106(.0639)+0792(',(1>>0639)li257336586,1191,347,196)Ai='106(.0639)+0792(4518)(.9361)Ai~0071+~0792(4229)Ai.0071+.0335=.0406or4.06<After-tax406x4833+~196-OtherPundsRateAe=Ae=Ae=MD+P+CD+P+Cc86,119gI543,375li347i19J6Lli257i365+543i375+9823368$9361]L0839(.1952)+.1628(.3530$).9361.0164+050~4~~9361(0668)0625or6.25(.1428(982,3682c783r108AFUDCRate,After-tav.1.96Ae=6.25.821 Pennsylvani.aPower6LightCompanyAttachmentZZ-A-LLpage3CalculationofRateForAllowanceForFundsUsedDuringConstruction(AFUDC)ForJanuarY1,1979ToDecember315(Continued)SCHEDULEACapitaLizationRatioCostRateWeightedCostRatePreTaxTaxWeighted'ffectCostRate951.67'*AfterTaxBorrowedFundsShort-termdebtLong-termdebtTotal6.39%42.2548,68ll06%79271>3.35406~37~o17321034@I62196Preferred/PreferenceStochCommonE~tyTotal182733.0510000$83914281534.7210318;153472821>~EffectiveTaxRatesFederalState41.17%=/468-(46@x10.5S)/10.5051.676TaxComplement=.1-51.67~48330 Pennsylvaniapower6LightCompanyAttachmentIX-A-11Page4iCompositeCostRateofprefexredandPrefex'enceStockDecember31,1978SCHEDULEBCumulativepreferredStock335460%44054.50'00%860%7;4059.24m80087.75mSeriesSeriesSeriesSeriesSeries'eriesSeriesSeriesSeriesSexies'umulativePzeferenceStockAmountOutstanding.($Thousands)'$4i1786i30022g87753,0197,76322i237.40~00075~000.50i00060i000percentto20tal07781164219.761.434.0973613.81920ll04"3371$.4.794'6",5.03.'.168757469.478057.80..0.03m.0.060190490.13036".='0.55131'.740.86EffectiveweightedCostRateCostRate$8.40.series$8.70Sexies$8.00Sexies$13.00Series$11.00Series$9;25Series40~00040t00035i00025400050i00012,0007.367'66.444.609202.218.55'848141351,ll409270630.65.0.520.62105020TotalCumulativeprefezredandpreferenceStock~543,374100-00-8.398 pennsylvaniapowersLightCompanyAttachmentPage5II-A11CalculationofTheCompositeCostRateofLong-TermDecember31,1978Debt<MEDULEFirstMortgageBondsAmountPercentEffectiveBeightedOutstandingtoTotalCostRateCostRate($Thousands)2-3/4SSeriesdue198010-1/8$Seriesdue19823-3/8%Seriesdue19823-1/2SSeriesdue19833-3/88Seriesdue19854-5/8$Seriesdue19914-5/88Seriesdue19945-5/8SSeriesdue19966-3/40Seriesdue'9977%Seriesdue19998-1/8$Seriesdue199994Seriesdue20007-1/4SSeriesdue20017-5/8$Seriesdue20027-1/28Seriesdue20039-1/4>Seriesdue20049-3/4SSeriesdue20059-3/4SSeriesdue20058-1/4$Seriesdue2006.8-1/2%Seriesdue2007TotalFirstMortgageBonds37,000100r0007,50025r00025,00030r00030r00030r00030r00040r00040r00050r00060r00075r00080r00080r000125,000100r000150r000100,00012145003.05--8230.622062062.472472472473.293294124946186.5965910.2982312358.22100.008273510323.423533.404614.59553667702816901~7'67.647.50930991.9868.34.867008$0'85002007007.011.0110140160230270370360470.490.61-1020811030717988pollutionControlSeriesA-4-5/8$Seriesdue19794-5/8$Seriesdue19804-3/4SSeriesdue19814-3/4SSeriesdue19824-7/85Seriesdue19835-5/8$Seriesdue2003TotalpollutionControlSeries50050050050050024,500A$27,00018581851.85.185,18590.78100.00%494$490500497'508575009$009009009009.522567%TotalFirstMortgageBondsTotalPollutionControlSeriesA7SMotedue1980OtherLong-TermDebtTotalLong-TermDebt$1r214r50027r000'0000'r033126253396.2082.141.5808100.008798Zr567700(1)705(2)76880120110017925due1980Notes:(1)Nominalinterestratefor7>Mote(2)Heightedaverage

PennsylvaniaPoker.6LightCompanyAttachmentpage6I'I-A-11Long-TermDebtCapitalStockandLong-TennDebtatDecember31,1978(WousandsofDollars)FirstMortgageBonds2-3/4<seriesdue19803-3/8<seriesdue198210-1/8aseriesdue19823>>1/Zsseriesdue19833<<3/8%seriesdue19854-5/8$seriesdue19914-5/8%seriesdue19945>>5/8Sseriesdue19966-3/4Sseriesdue19977-"seriesdue19998-1/80seriesdue19999Sseriesdue20007-'1/4aseriesdue20017-5/8$seriesdue20027-1/2%seriesdue20034-1/ZZ;to5-5/8$Pollutio9-1/4%seriesdue20049-3/4%seriesdue20059-3/4$seriesdue2005*8<<1/4>seriesdue2006-12sesdue200nContxol'SeriesAdue1979-2003preferredStock4-1/2-.Series3.35%4.40%460%7.40$7.75%8008860%9%9.24@preferenceStock$8.00series$8.40series$8.70series$9.25series$1100series$13.00seriesCommonE<yxity8/0era..7Note7'uein1980OtherUnamortizedDiscount:6pxemium-'netpreferredandpreferenceStockSCHEDULED37~0007s500100i000'5,00025.F00030i000.30,00030'00'30i00040i00040'0050i00060,00075,00080i00027i00080i000125,000100i0001SO,OOO100,0001~241i50020,000li033(5,168)P53~0194~17822,8786i30040'006O,OOOSOi0002212377i76375,000341~375,35~00040i000'0i00012,00050i00025,000202,000CommonstockissuedPremiumoncapitalstockInstallmentsreceivedoncommonstockCapitalstockexpenseRetainedearnings~,'Total.67lr143,87693(11157)'21,602982368

e'ttachmentIX-A>>3.1page7pennsylvaniapoweraLightCompanyAllowanceForFundsUsedDuringConstructionROBER1R.FOR1UttEExecvtiveVicePresidentFinonciol82I-$22IFebruaryI,1980PennsylvaniaPublicUti3.ityCommissionP.O.Box3265Harrisburg,PA1?120Gentlemen:Enclosedareeightcopiesofthecomputationoftheafter-taxratetobeusedindeterniningtheallowancefortheperiodJanuary1,1980throughDecember31,1980inaccordancewiththeFederalEnergyRegulatoryCondttissionOrderNo.561.,(Theratewillbeappliedtothefundsinvestedinconstruct-ionprojectsexcludingtheaccumulatedallowance,retentionsoncon-tractsandthoseconstructionprojectswhich,underourpolicy,arenotchargedwithallowance.Znaddition,theCompanywill-identifytheamountofaccumulatedallowanceatDecember31,19?9andJune301980relatedtoprojectsunderconstructionatthattimeandvillapplytheallowanceratetosuchbalanceforthenextsixmonths,aslongastheprojectsremaininconstruction.Theallowancerite.villnotbeappliedtoanyallowancegeneratedduringtheperiodJanuaxy1,1980throughJune30,1980untilJuly1980,ortoanya1-lovancegenel.atedduringtheperiodJuly1,1980throughDecember31,1980untilJanuary1,1981.ThisprocedurehasbeenadoptedtocomplywiththeprovisionofOrderNo.561whichpermitscompoundingofpreviouslycapitalizedallovance,butnonorefrecpxentlythansemi-annually.Kindlyacknowledgereceiptbysigningandreturningtheattachedcopyofthisletter.Verytrulyyours+EnclosurePENNSYLVANIAPQWEatLLIGHTCOMPANY P~sylvaniaPowera"LightCompanyCalculationofRateFoxAllowanceFoxFundsUsedDuringConstruction(AFUDC)ForJanuary1;1980toDecember31,1980r{ThousandsofDollars)Components1s=Short-teandebtinterestrate(estimatefox1980)AttachmentII-A-llpage8SCHEDULEA12.06%2S3.d45.P~Averageshort-termdebtoutstanding(estimate.for1980)=Long-termdebtinterestrate"{embeddedcostatDecember31,1979)=Long-termdebt'{balanceatDecember31,1979)=Preferred/Preferencestockrate(embeddedcostatDecember31,1979)81r4549.02%i.(SchC)$1r557r158(SchD),.8.43%(Sch.B)6.p='Preferred/preferencestock(balanceatDecem-bex31r1979)7.c~Commonequitycostrate(allowedinpUCOrderdatedAugust1976)8.C~'ommonequity(balanceatDecember31,1979)9.N=AveragebalanceinC'VIPplusnuclearfuel(estimatefor1980)BorrowedFundsRate672r775(SchD)14.28~$1,13.3,441(Sch.D)'lr771r775Ai=SdD'Ss(r~)+d(D+p+C)(1-9)81,4541,557,15817717751557158+672775+1113,441r.1206(.0460)+.0902{')(1~.p460)1,557,158(1')'1,454lr771r775Ai=1206(P460)+0902(4657)(9540)Ai=..pp55+.0902(.4443)Ai=..0055+'0401=.0456ox'568After-tax4.56x4833*=2.208OtherFundsRate9LD+P+CD+P+C81,454'72,775lr773-r775lr557rl58+672r775+1r113r441Ae=l.8340/{.0843(.2012)+.1428(.3330$)Ae=$.9540$I.0170+.0476$Ae='9540(.0646).Ae=.0616or6.168AFUDCRate,After-tax1428('){1rH.3r441'343374IAiAe220"6168.36 pennsylvaniapoweraLightCompanyAttachment1y-A&1page9CalculationofRateForAllowanceForFundsUsedDuringConstruction(AFODC)ForJanuary1,1980toDecember31,1980(Continued)SCHEDULEACapitalizationRatioCostRate'eightedCostRatePre-TaxTaxweightedEffectCostRate851-678*,AfterTaxBorrowedFundsShort-termdebtLong-termdebtTotalPreferred/preferenceStock,CommonEquityTotal4.60m44.4349.03192031.7710000%1206$9028.4314.285584.014561624.54107257-9%2.0723626~1942201624.548.36@*EffectiveTaxRatesFederalState41.17$=46%-(46%x1058)10.5051.67@TaxComplement=1-51.67~*48.33%

pennsylvaniaPoweraLightCompanyAttachmentZI-A-11Page10CompositeCostRateofpreferredandPreferenceSto~ActualatDecember31,19794-1/20PreferredSeriesPreferred3.3584.6084.4089.008&.6087.4089.2458.00$7.7588.000,Second7.5088.2598758AmountOutstanding($Thousands)$53,0194gI786~300'2i8787g76322'3738,400.75i00050,00060g00010g00015~00050,00060,000Percenttoleta17.88%062094,3401153305.71ll157438921492.237.438.92EffectiveCostPace50383374794.46.9.168757.469478.067.800.067.540.?98.82HeightedCostRate0.40%0070'50150.110.290431.060.600.700.120.3.70.67.0.79Preference$8.40$8.70~$8.00$13.00$11.00$9.25\MetalPreferredandPreferenceStock40g00040,00035,000"25,00050,0008,000$672,775'955955.203717.431.19100.008550.840.14135111409270.510.53~'0.4205'.050.118.438 PennsylvaniaPoweraLightCompany"AttachmentpagellZX-A-11CalculationofCompositeCostRateActualatDecember31,ofLong-TermDebt1979PirstMortaeBonds2-3/48Seriesdue198010-1/82sSeriesdue19823-3/8%Seriesdue19823-1/25Seriesdue19839-7/8~Seriesdue1983-85.3-3/88Seriesdue19854-5/88Seriesdue19914-5/8%Seriesdue19945-5/8KSeriesdue19966-3/48Seriesdue199778Seriesdue19998-1/88Seriesdue199998Seriesdue20007-1/48Seriesdue20017-5/88Ser'iesdue2002'7-1/20Seriesdue20039-1/48Seriesdue20049-3/44'sSeriesdue20059-'3/48Series'due20058-1/48Seriesdue2006.8-1/28Seriesdue2007TotalPirstMortgageBondsPollutionControlSeries'Amount($Thous)~$37,000100600076500256000100600025,00030,000,30,00030,00030,00040,000.40,00050,00060s00075600080,00080,000125,000,100,000150,00010000041314500PercenttoTotalI.28257610.571907611.9022&2.282282283.043043.80.4.565.716.096.099.5l.76111..417.61100.00Bfcectiv8.CostRate2s730i10.323.42'35310123.404.614595.536.677.028.16'9.017.267.647509.309-919.868.34"867WeightedCostRate00880790020070-770060-110100-130.15'210250340330.440.460.570.940.750950668.18%4-5/88Seriesdue19804-3/48Seriesdue19814-3/48Seriesdue19824-7/88Seriesdue19835-5/88Seriesdue2003$.50050050050024,500TotalFirstMortgageBondsTotalPollutionControlSeriesA78Notedue1980PromissoryNotesOtherLong-TermDebtTotalLong-TermDebt$1,314,500~26250020600020060001,50561562505TotalpollntlonContso1.SeriesA6265001.891891891&90244100.000&41381.69~1.2812.80010'00.00649085004.975.08,575&a1885697.00151875701(2)(3)0.0980.090.090.105.325.69%6-88%".0.100091.940.019.028Notes:(1)Nomina1interestratefor78Notedue1980.(2)Primerateineffect.(3)WeightedAverage.

PennsylvaniapoweraLightCompanyAttachment1X-A-11page12Long-TermDebtCapitalStockandLong-TermDebtat.December31,1979(ThousandsofDollars)SCHEDULEDFirstMortgageBonds2-3/4Sseriesdue19803-3/88seriesdue198210-1/88seriesdue19823-1/2Qseriesdue19833-3/88seriesdue19859-7/8$seriesdue1983-19854-5/88seriesdue19914-5/88seriesdue19945-5/8Sseriesdue19966-3/48seriesdue19977%seriesdue19998-1/85seriesdue199998seriesdue20007-l/4%seriesdue20017-5/8$seriesdue20027-1/2%seriesdue20034-5/8$to5-5/84PollutionC9-1/48seriesdue20049-3/4%seriesdue20059-3/4Sseriesdue20058-1/4Sseriesdue20068-1/2Sseriesdue2007ontrolSeriesAdue1980-2003NotesBankloansdue1986,interestrateatDecember31,1979-15.1987$duein1980OtherUnamortized(Discount)andPremium-netTotalLong-TermDebtPreferredandPreferenceStock37,0007,500100,00025,00025,000100,00030~00030iaoo30,00030,00040gooa.4o,ooo50,00060iaoo75,0008o,oao26g50080g000125,000loo,aoo150g0001000001,341,OOO200,00020,0001,505$1557158PreferredStock4-l/2%Series3.35%4.40%4.6087.4087.508775%'.00%8-00$,Second8".2558.60%87589$9.24%$53g03.94,17822,8786i30038,40015,00060gooo50,00010~00050ioao22123760,0007,76375000474775

pennsylvaniapoweraLightCompanyCapitalStockandLong-TermDebtatDecember31,1979(Thousands'ofDollars)AttachmentZZ-A-1.1.page13SCHEDULEDPreferredandPreferenceStock(Cont'd)PreferenceStock$8.00series$8.40series$8.70series$9.25series$11.00series$13.00seriesTotalPreferredandPreferenceStockCommonEquityCommon.stockissuedPremiumoncapitalstockCommonstocksubscribedInstallmentsreceivedoncommonstockCapital,stockexpenseRetainedearningsTotalCommonEquity35'00..'40,00040,000&F00050,00025,00019&,000S672775752,38587'373642'llg949)371r903Sl113441 II-A-12G.F.VandersliceSetforthprovisionsofCompany'sandParent'scharterandindentures(ifapplicable)whichdescribecoveragerequire-ments,limitsonproportionsoftypesofcapitaloutstand-ing,andrestrictionsondividendpayouts.PP&L'scharterandindentureprovisionswhichdescribecov-eragerequirements,limitsonproportionsoftypesofcapi-taloutstanding,andrestrictionsondividendpayoutsaresetforthinAttachmentII-A-12(8pages).

AttachmentII-A-12Page1PennslvaniaPower&LihtComanCharterandIndentureProvisionsMortgagerestrictionsonissuingbondsandpayingdividends:TheCompany'sMortgageandDeedofTrust,asamended,whichissecuredbyalienonsubstantiallyalltheCompany'spropertyandunderwhichallmortgagebondsareissued,includesinArticleV,Section27(AttachmentII-A-12,page3)andArticle1,Section7(AttachmentII-A-12,pages3thru5)andArticleVIII,Section39III(AttachmentII-A-12,.page6)restrictionsonissuingbondsandpayingdividendsassummarizedbelow:Nobondsmaybeissuedunlesstheadjustednetearningsbeforeincometaxesfortwelveoutoftheprecedingfifteenmonthsisatleasttwicetheannualinterestrequirementsonallbondsatthetimeoutstanding,includingthosebeingissued,andonallindebt-ednessofpriorrank.Incomputingadjustednetearnings,anamountequaltothemaintenanceandreplacementfundrequirementsmustbeusedinlieuofactualexpendituresformaintenanceandrepairsandprovisionsforpropertyretirement.BondsmaybeissuedonthebasisofBondretirementswithoutanyrequirementformeetingthetwotimescoveragetest.SeeSection29oftheMortgage.Nocashdividendsoncommonstockmaybepaidunlessaftersuchpaymentstheamountremaininginearnedsurplus(hereindescribedasearningsreinvested)plustheprovisionsmadesubsequenttoSeptember30,1945fordepreciationandretirementofpropertyshallequalthemaintenanceandreplacementfundrequirementsoftheMortgageforsuchperiod,lessmaintenanceexpenditures.TheCompany'sArticlesofIncorporation,asamended,includesinSection2(C)ofDivisionA(AttachmentIII-A-12,page7)andinSection1(C)ofDivisionE(AttachmentII-A-12,page8)therestrictionsonissuanceofcapitalstockandpaymentofdividendsas-summarizedbelow:TheCompanymaynotissueadditionalsharesofPreferredStockrankingpriortooronaparitywiththeexistingclassesofPreferredStockastodividendsordistributionsunlesstheCompanymeetscertaintestsastoearningswhich,ingeneral,arethattheCompanyshallhavehadduringaspecified12months'eriodprecedingsuchissuancenetearningsequaltotwiceitsannualdividendrequirementsonallPreferredStocktobeoutstandingthereafterandgrossincomeequaltooneandone-halftimessuchdividendrequirementsplusitsannualinterestcharges.

AttachmentII-A-12Page2PennslvaniaPower6LihtComanCharterandIndentureProvisionsNodividends(otherthandividendspayablebytheissuanceofCommonStock)on,orpurchasesoracquisitionsof,ordistributionson,theCommonStockshallbepaidormadebytheCompanyaggregatinganamountinexcessof(a)75%ofthecurrentyear'searningsotherwiseavailableforCommonStock,ifaftersuchpayment,purchase,acquisitionordistributiontheratiooftheaggregateofthestatedvalueofCommonStockandearningsreinvestedtototalcapitalization,includingearningsreinvested,willbelessthan25%;and(b)50%ofsuchearnings,ifaftersuchpayment,purchase,acquisitionordistribution,suchrationwillbelessthan20%.TheCompany'sArticlesofIncorporation,asamended,includesthefollowingprovisionwithrespecttothe8.75%SeriesPreferredStock:IfthisCompanyshallforanyreasonfailtodischargeinfullitsSinkingFundObligationforanysuchOctober1,thisCompanyshallnotthereafter,unlessanduntilsuchSinkingFundObligationanditsSinkingFundObligationforeachandeverypriorOctober1shallhavebeendischargedinfull,declareorpayanydividendon,ormakeanyotherdistribtuionofpropertywithrepectto,orpurchaseorotherwiseacquire,anyofitsCommonStock.ThePurchaseAgreementforthePreferenceStock,$8.625Series,containsasimilarprovisionwithrespecttoamissedsinkingfundpaymentonthe$8.625Series.TheCharterlimitstheissuanceofunsecureddebttoanamountequalto20%ofsecuredindebtednessandcapitalandsurplus.SeeArticleVIoftheCharter,DivisionA,Section2(C)(4)andDivisionB,Section2(B)(4).

AttachmentII-A-12Page3PennslvaniaPower6LihtComanMortaeandDeedofTrustArticleV,Section27NobondsshallbeauthenticatedanddelivereduponthebasisofPropertyAdditionsunless,asshownbyaNetEarningCertificate,theAdjustedNetEarningsoftheCompanyfortheperiodthereinreferredtoshallhavebeenintheaggregateatleastequivalenttotwicetheAnnualInterestRequire-mentsasshallbespecified,pursuanttotheprovisionsofsubdivision(B)ofSection7hereof,insuchNetEarningCertificate.ArticleI,Section7Theterm"NetEarningCertificate"shallmeanacertificatesignedbythePresidentoraVice-PresidentoftheCompanyandanaccountant,whounlessrequiredtobeindependent,maybeanofficeroremployeeoftheCompany,stating(A)theAdjustedNetEarningsoftheCompanyforaperiodoftwelve(12)consecutivecalendarmonthswithinthefifteen(15)calendarmonthsimmediate-lyprecedingthefirstdayofthemonthinwhichtheapplicationfortheauthenticationanddeliveryunderthisIndentureofbondsthenappliedforismade,specifying:(1)itsoperatingrevenues,withtheprincipaldivisionsthereof;(2)itsoperatingexpenses,withtheprincipaldivisionsthereof,including,butwithoutlimitation,allexpensesandaccrualsforrepairsandmaintenanceandall'ppropriationsoutofincomeforpropertyretirementnotonlyinrespectoftheMortgagedandPledgedPropertybutalsoinrespectofallotherpropertyownedbytheCompany;provided,however,that,inlieuofincludinginsuchoperatingexpensestheamountsactuallyexpendedforandtheamountsaccruedforrepairsandmainten-anceofandtheamountactuallyappropriatedoutofincomefordepreci-ationandretirementoftheMortgagedandPledgedPropertyusedprimar-ilyandprincipallyintheelectric,gas,steamand/orhotwaterutilitybusinessandoftheautomotiveequipmentoftheCompanyusedintheoperationofsuchproperty,thereshallbeincludedinsuchoperatingexpensesanamountequaltofifteenandone-halfpercentum(15-1/2%)oftheAdjustedGrossOperatingRevenues(asdefinedinSection39hereof)forsuchperiodoftwelve(12)consecutivecalendarmonths;(3)theamountremainingafterdeductingtheamountrequiredtobestatedinsuchcertificatebyclause(2)ofthisSectionfromtheamountrequiredtobestatedthereinbyclause(1)ofthisSection;(4)itsrentalexpensesforplantsorsystemsnototherwisedeductedfromrevenuesorfromotherincomeinsuchcertificate;(5)thebalanceremainingafterdeductingsuchrentalexpensesfromtheamountrequiredtobestatedinsuchcertificatebyclause(3)ofthisSection;(6)itsrentalrevenuesfromplantsorsystemsnototherwiseincludedinrevenues,orinotherincome(net),insuchcertificate;

AttachmentII-A-12Page4PennslvaniaPower&LihtComanMortaeandDeedofTrust(7)thesumoftheamountsrequiredtobestatedinsuchcertificatebyclauses(5)and(6)ofthisSection;(8)itsotherincome(net);(9)thesumoftheamountsrequiredtobestatedinsuchcertificatebyclauses(7)and(8)ofthisSection;(10)theamount,ifany,bywhichtheaggregateof(a)suchotherincome(net)and(b)thatportionoftheamountrequiredtobestatedinsuchcertificatebyclause(7)ofthisSectionwhich,intheopinionofthesigners,isdirectlyderivedfromtheoperationsofproperty(otherthanpaving,gradingandotherimprovementsto,underoruponpublichighways,bridges,parksorotherpublicpropertiesofanalogouscharacter)notsubjecttotheLienofthisIndentureatthedateofsuchcertificate,exceedsfifteenpercentum(15%)ofthesumrequiredtobestatedbyclause(9)ofthisSection;provided,however',iftheamountrequiredtobestatedinsuchcertificatebyclause(7)ofthisSectionincludesrevenuesfromtheoperationofpropertynotsubjecttotheLienofthisIndenture,thereshallbeincludedinthecalculationtobemadepursuanttothisclause(10)suchreasonableinterdepartmentalorinterpropertyrevenuesandexpensesbetweentheMortgagedandPledged,PropertyandthepropertynotsubjecttotheLienhereofasshallbeallocatedtosuchrespectiveproper-tiesbytheCompany,and(11)theAdjustedNetEarningsoftheCompanyforsuchperiodoftwelve(12)consecutivecalendarmonths(beingtheamountremainingafterdeductinginsuchcertificatetheamountrequiredtobestatedbyclause(10)ofthisSectionfromthesumrequiredtobestatedbyclause(9)ofthisSection);(B)theAnnualInterestRequirements,beingtheinterestrequirementsfortwelve(12)monthsupon.'i)allbondsOutstandinghereunderatthedateofsuchcertificate,exceptanyfortherefundingofwhichthebondsappliedforaretobeissued;(ii)allbondsthenapplied'forinpendingapplications,includingtheapplicationinconnectionwithwhichsuchcertificateismade;(iii)allQualifiedLienBondswhichwillbeOutstandingimmediatelyaftertheauthenticationofthebondsthenappliedforinpendingapplica-tions,includingtheapplicationinconnectionwithwhichsuchcertificateismade;and(iv)theprincipalamountofallotherindebtedness(exceptindebted-nessforthepaymentofwhichthebondsappliedforaretobeissuedandindebtednessforthepurchase,paymentorredemptionofwhichmoneysinthenecessaryamountshallhavebeendepositedwithorbeheldbytheTrusteeorthetrusteeorotherholderofaQualifiedLienorlienpriortotheLienofthisIndentureuponpropertysubjecttothelienofthisIndenturewithirrevo'cabledirectionsotoapplythesame;providedthat,inthecaseofredemption,thenoticerequiredthereforshallhavebeengivenorhavebeenprovidedfortothesatisfactionoftheTrustee),outstandinginthehandsofthepubliconthedateofsuchcertificate'andsecuredbylienpriortotheLienofthisIndentureuponpropertysubjecttotheLienofthisIndenture,ifsaidindebtednesshasbeenassumedbytheCompanyoriftheCompanycustomarilypaystheinterestupontheprincipalthereof.

AttachmentII-A-12Page5PennslvaniaPower&.LihtComanMortaeandDeedofTrustIncalculatingsuchAdjustedNetEarnings,alltheCompany'sexpensesfortaxes(otherthanincome,profitsandothertaxesmeasuredby,ordependenton,-netincome),assessments,rentalsandinsuranceshallbeincludedinitsoperatingexpenses,orotherwisedeductedfromitsrevenuesandincome;provided,however,thatnoexpensesorprovisionsforinterestonalyofitsindebtednessorfortheamortizationofdebtdiscountandexpenseorforotheramortizationorforanyimprovementorsinkingfundorotherdevicefortheretirementofanyindebted-ness,shallberequiredtobeincludedinoperatingexpensestobedeductedfrom,orshallbeotherwiserequiredtobedeductedfrom,itsrevenuesoritsotherincome.RentalexpensesfortiresnotownedbytheCompanyshallforallpurposesoftheNetEarningsCertificatebedeemedtobemaintenanceexpenses.IfanyoftheporpertyoftheCompanyownedbyitatthetimeofthemakingofanyNetEarningCertificateshallhavebeenacquiredduringorafteranyperiodforwhichAdjustedNetEarningsoftheCompanyaretobecomputed,theAdjustedNetEarningsofsuchproperty(computedinthemannerinthisSectionprovidedforthecomputationoftheAdjustedNetEarningsoftheCompany)duringsuchperiodorsuchpartoftheperiodasshallhaveprecededtheacquisitionthereof,totheextentthatthesamehavenototherwisebeenincludedandunlesssuchpropertyshallha'vebeenacquiredinexchangeorsubstitutionforpropertytheearningsofwhichhavebeenincluded,may,attheoptionoftheCompany,beincludedintheAdjustedNetEarningsoftheCompanyforallpurposesofthisIndenture,andshallbeincludedifsuchpropertyhasbeenoperatedasaseparateunitoriftheearningstherefromarereadilyascertainable.Thephrasephrasesofretirementaccounting"appropriationsoutofincomeforpropertyretirement",andothersimilarimportshallbedeemedtoincludenotonlychargesmadeuponaaccountingtheorybutalsochargesmadeonanydepreciationorothertheoryintendedtoprovideforretirementofproperty.TheaccountingtermsusedinthisIndentureshallbeconstruedeitherinaccordancewithgenerallyacceptedaccountingprinciplesandpracticesinuseatthetimebycompaniesoperatinglikepropertiesor,attheoptionoftheCompany,inaccordancewithgenerallyacceptedaccountingprinciplesandpracticesinuseatthedateofthisIndenture.

AttachmentII-A-12Page6PennslvaniaPower&LihtComanMortaeandDeedofTrustArticleVII,Section39(III)SolongasanyofthebondsoftheFirstSeriesremainOutstanding,theCompanywillnotdeclareorpaydividends(otherthandividendspayablesolelyinsharesofitscommonstock)onormakeanyotherdistributionsonor'acquire(unlessacquiredwithoutcosttotheCompany)anysharesofitscommonstockunlesstheprovisionsforthedepreciationandretirementofproperty(butexcludinganyprovisionsforamortizationofanyamountsincludedinutilityplantacqui-sitionadjustmentaccountsorutilityplantadjustmentaccountsorin,anyaccountsforsimilarpurposes)duringtheperiodfromOctober1,1945,tothedateoftheproposedpaymentofsaiddividendsorm'akingofsuchdistributionoracquisition,plusearnedsurplusoftheCompany(includingasearnedsurpluscurrentnetincomeavailabletobetransferredtoearnedsurplus)remaining:(a)afterpaymentofsuchdividendsormakingofsuchdistributionoracquisition;.and(b)afterdeductinganyremainderoftheamountoftheearnedsurplusoftheCompanyasofSeptember30,1945,afterdeductingfromsuchamountthechargestoearnedsurplussubsequenttoSeptember30,1945,otherthanchargestoearnedsurpluswithcorrespondingcreditstoreservesfordepreci-ationandretirementofproperty;shallbeatleastequaltotheaggregateamountsrequiredtobestatedforsuchperiodintheOfficers'ertificatesofMaintenanceandReplacementsbytheprovisionsofsubdivision(1)ofsubsection(I)ofthisSectionlesstheaggregateamountsstatedforsuchperiodinsuchOfficers'ertificatesofMaintenanceandReplacementsaspermittedbytheprovisionsofsubdivision(2)ofsaidsubsection(I),includingproportionateamountscalculatedasprovidedinsaidsubdivisions(1)and(2)foranyportionsoftheperiodelapsedsinceSpetember30,1945,nottheretoforeincludedinanyOfficers'ertificatesofMaintenanceandReplace-ments.

AttachmentII-A-12Page7PennslvaniaPower&LihtComanArticlesofIncororationasAmendedDivisionA,Section2(C)Solongasanysharesofthe4-1/2%PreferredStockareoutstanding,theCorporationshallnot,withouttheconsent(givenbyvoteatameetingheldpursuanttonoticecontainingastatementofsuchpurpose)oftheholdersofamajorityofthetotalnumberofsharesofthe4-1/2%PreferredStockthenoutstanding:(3)IssuanceofSeniorStockinAbsenceofSatsifactionofCertainEarningsRequirements.IssueanyshareofSeniorStock(theterm"SeniorStock"wheneverusedinthisArticleVIshallincludethe4-1/2%PreferredStock,theSeriesPreferredStockandanyotherclassofstockrankingpriortooronaparitywiththe4-1/2%PreferredStockandtheSeriesPreferredStockastothepaymentofdividendsordistributionofassets)inadditiontothesharesofSeniorStockthenoutstanding,eventhoughsuchstockhasbeenauthorizedpursuanttotheprovisionsofSection2(A)ofthisDivisionAandtheprovisionsofSection2(A)ofDivisionB;provided,however,thatsuchconsentoftheholdersofthe4-1/2%PreferredStockshallnotberequiredfortheissuanceofsuchstockifthenetincomeoftheCorporationdeterminedafterprovisionsfordepreciationandalltaxes,andinaccordancewithgenerallyacceptedaccountingpractices,foraperiodoftwelveconsecutivecalendarmonthswithinthefifteencalendarmonthsimmediatelyprecedingtheissuance,saleordispositionofsuchstockisatleastequaltotwicetheannualdividendrequirementsonalloutstandingsharesoftheSeniorStock,includingthesharesproposedtobeissued,andifthegrossincomeoftheCorporationforthesaidperiod,determinedinaccordancewithgenerallyacceptedaccountingpractices(butinanyeventafterdeductingtheamountforsaidperiodchargedbytheCorporationonitsbookstodepreciationexpenseandalltaxes)tobeavailableforthepaymentofinterestshallhavebeenatleastoneandone-halftimesthesumof:(a)theannualinterestchargesonallinterest-bearingindebtednessoftheCorporation;and(b)theannualdividendrequirementsonalloutstandingsharesoftheSeniorStock,includingthesharesproposedtobeissued.Thereshallbeexcludedfromtheforegoingcomputation,interestchargesonallindebtednessanddividendsonallstockwhicharetoberetiredinconnectionwiththe.issueofsuchadditionalsharesofSeniorStock.WheresuchadditionalsharesofSeniorStockaretobeissuedinconnectionwiththeacquisitionofnewproperty,thenetearningsofthepropertytobesoacquiredmaybeincludedonaproformabasisintheforegoingcomputation,computedonthesamebasisasthenetearningsoftheCorporation.

AttachmentII-A-12Page8PennslvaniaPower6LihtComanArticlesofIncororationasAmendedDivisionE,Section1(C)Solongasanysharesofthe4-1/2%PreferredStockandtheSeriesPreferredStockareoutstandingandtheaggregateofstatedcapitalofCommonStockandsurplusequalslessthan25%oftotalcapitalization,includingsurplus,theCorporationshallnotpayanydividendsonCommonStock(otherthandividendsonCommonStock.payablebytheissuanceofCommonStock),ormakeanydistributionon,or.purchaseorotherwiseacquire.forvalue,anyofitsCommonStockorotherStock,ifany,subordinatetosuch4-1/2%PreferredStockandtheSeriesPreferredStock,ifaftergivingeffecttoanysuchpayment,distribution,purchaseoracquisition,theaggregateamountofsuchdividends,distributions,purchasesandacquisitionspaidormadesubsequenttoDecember31,1945,exceeds75%oftheaggregateoftheCorporation'snetincomeavailableforCommonStocksubsequenttoDecember31,1945;andnosuchdividends,distributions,purchasesoracquisitionsmaybemadeorpaidbytheCompany,ifaftergivingeffectthereto,theratiooftheaggregateofstatedcapitalofCommonStockandsurplustototalcapitaliza-tion,includingsurplus,islessthan...25%,providedthat,whentheaggregateofthestatedvalueforCommonStockandsurplusshallhavereached25%oftotalcapitalization,includingsurplus,allrestrictionsonthepaymentofdividendsoncapitalization,includingsurplus,allrestrictionsonthepaymentofdividendsontheCommonStock,orthepurchaseoracquisitionofordistributionsontheCommonStock,shallbe,solongassuchratioremainsat25%orabove,eliminated;providedfurtherthat,afteroncehavingreachedsuchratioof25%,nodividendsonordistributions,purchasesoracquisitionsofCommonStockshallbepaidormade,aggregatinganamountinexcessof75%ofthecurrentyear'searningsotherwiseavailableforCommonStock,ifaftersuchpayment,distribution,purchaseoracquisition,theratiooftheaggregateofcapitalforCommonStockandsurplustothetotalcapitalization,.includingsurpluswillbelessthan25%andnodividendsonordistributions,purchasesoracquisitionsofCommonStockshallbepaidormade,aggregatinganamountinexcessof50%ofthecurrentyear'earningsotherwiseavailableforCommonStock,ifaftersuchpayment,distribu-tion,purchaseoracquisition,theratiooftheaggregateofcapitalforCommonStockandsurplustothetotalcapitalization,includingsurpluswillbelessthan20%.

II-A-13R.R.FortuneAttachcopiesofthesummariesoftheprojectedtwoyear'Company'sbudgets(revenue,expenseandcapital).Pro)ected1982haveCopiesoftheyears(1.page).capitalrequirementsfortheyears1980throughpreviouslybeensuppliedasresponseII-A-5.theCompany'sbudgetforrevenuesandexpensesfor1980and1981areprovidedinAttachmentII-A-13 Attachment0-A-13PennsylvaniaPower2LihtComanOperatingBudgets-ElectricYearEndedDecember311980~Budet1981Forecast(ThousandsofDollars)OperatingRevenues-OperatingExpensesNetcostofenergyFuelRecoverablefuelcostsPowerpurchasesInterchangepowersalesDeferredenergycost-net3VagesandemployeebenefitsOtheroperatingcostsTotalORMExpensesDepreciationIncometaxesProvision-FederalStateDeferredincometaxesInvestmenttaxcreditsDeferredAmortizationTaxes,otherthanincomeTotalOperatingExpensesOperatingIncome$900,853676,95322,29138,330(061,685)(22110)253,779130,581105925090,28578,5890155801058391,28516,581(2,606)863527272865$173,988$9665068739588018,01256,665(570,333)50856295,0801035057115458553,99983,60909535118,703(28,006)23,959(2,716)96196795095$171,3731/Doesnotincludetheamountofraterelieffiledforin1980.

II-A-14R.R.FortuneG.F.VandersliceDescribelong-termdebtreacquisitionsbyCompanyandParentasfollovs:a.Reacquisitionsbyissuebyyear.b.Totalgainonreacquisitionsbyissuebyyear.c.Accountingofgainforincometaxandbookpurposes.SeeresponsetoRegulationII-A-6.

II-A-15G.F.Vanderslice15.Setforthamountofcompensatingbankbalancesrequiredundereachofthefollowingratebasebases:a.Annualizedtestyearoperations.b.Operationsunderproposedrates.A.15.TherequestedinformationattheyearendedDecember31,1979isprovidedinScheduleC-8ofExhibitHistoric1;informationfortheyearendingDecember31,1980isprovidedinScheduleC-8ofExhibitFuturel.

II-A-16G.F.VandersliceProvidethefollowinginformationconcerningcompensatingbankbalancerequirementsforactualtestyear:a~b.C~d.e.f.goh.NameofeachbankAddressofeachbankTypesofaccountswitheachbank(checking,savings,escrow,otherservices,etc.).AverageDailyBalanceineachaccount.Amountandpercentagerequirementsforcompensatingbankbalanceateachbank.Averagedailycompensatingbankbalanceateachbank.Documentsfromeachbankexplainingcompensatingbankbalancerequirements.Interestearnedoneachtypeofaccount.TherequestedinformationisprovidedinAttachmentII-A-16(31pages).a.tof.Seepages1through4oftheattach-ment.g.Seepages5through31oftheattachment.h.Nointerestwasearnedonanyaccount.Banklinesofcredittotalling$200,000,000weremaintainedatDecember31,1979,tobeusedforshorttermborrowingandasback-upforcommercialpapersales.$137,500,000ofthebanklinesweresupportedbycompensatingbalancesand$10,000,000weresupportedby-floatintheBondInterestAccountatMorganGuarantyTrustCompany.Thebalancesarerequiredtorecompensethebanksforthecommitmentofimmediatelyavailablecreditandtheavailabilityofothergeneralbankservices.AllbankborrowingareavailableondemandandareprepayablewithoutpremiumorpenaltytoPPSL.Thisflexiblearrangementallowsustomaximizethemanagementofcashflowonaday-by-daybasis.OtherbankservicesavailabletoPPGLatnoextracostarefreechecking,wiretransferoffunds,issuanceofcommercialpapernotesandmoneymarketservices.Banklinesofcreditamountingto$52,5000,000whichwerenotsupportedbybalanceswereavailableatDecember31,1979,underacommitmentfeearrangement.Borrowingsundertheselinesareatprimeplus,whereas,borrowingsunderbalancesupportedlinesarestrictlyattheprimerate.InMarch1980,PP&Larrangedfora$400millionRevolvingCreditAgreementwithagroupof10domesticbanks,a$100millionRevolvingCreditAgreementwithagroupof23foreignbanks,andapproximately$120millionoflinesofcreditwithagroupofdomesticbanks.

IX-A-16(cont,)G.F.VandersliceBanksparticipatinginthetworevolvingcreditagreementsarecompensatedthroughthepaymentofcommitmentfeesinsteadofcompensatingbankbalances.Ofthe$120millionlinesofcredit:(i)958.5millionaresupportedwithcompensatingbalances;(ii)$46.4millionaresupportedwithcommitmentfees;(iii)$10millionaresupportedbyuncollectedbalancesinPP&L'sbondinterestaccount;and(iv)95millionaresupportedbyuncollectedbalancesinPPGL'sdividendaccount.

PennslvaniaPowerandLihtComanCompensatingBankBalanceRequirementsYearEndedDecember31199(aab)NameandAddressofBank~TheChaseManhattanBank1ChaseManhattanPlazaNevYork,tl.Y.10015Citibank,tl:A.399ParkAvenuetlevYork,N.Y.10043IrvingTrustCompany!OneWallStreetllewYork,N.Y.10015thnufacturersHanoverTrustCo.350ParkAvenuetlevYork,N.Y.10022ChemicalBank277ParkAvenueNevYork,tl.Y.10017FirstPennsylvaniaBank,li.A.15th5ChestnutStreetsPhiladelphia,PA19101TheFidelityBankBroadandWalnutStreetsPhiladelphia,PA19109CirardBankOneGirardPlazaPhiladelphia,PA19101PhiladelphiatlationalBankBroadandChestnutStreetsPhiladelphia,PA19101LinesofCreditCompensated~Balance(000)20,00010,00020$00010500050012,5009,0007$5001$000(c)TypeofAccount1$21,4(d)AverageAvailableMonthlyBalance(000)42,3581,0002$0711000050798589783100(elf)RequiredCompensatingBalance(000)2,0001,0002,0001,000501,250450750100(e)CompensatingBalance1010101010101010eol$'flctOffIf'oIFMMII (aab)NameandAddressofBankProvidentNationalBankBroadandChestnutStreetsPhiladelphia,PA19101hfellonBank,N.A.MellonSquarePittsburgh,PA15230PittsburghNationalBankPittsburgh,PA15230TheFirstNationalBankofAllentown649HamiltonMallAllentown,PA18101IndustrialValleyBank8TrustCo.634HamiltonMallAllentown,PA18101TheMerchantsNationalBankofAllentown702HamiltonhfallAllentown,PA18101UnionBank8TrustCompanyofEasternPennsylvania52VestBroadStreetBethlehem,PA18018TheFultonNationalBankofLancasterPennSquareLancaster,PA17604DauphinDepositTrustCompany213MarketStreetHarrisburg,PA17105LinesofCreditCompensatedBBalance(ooo)5,ooo2050005,0002,0003,0001,500500500500(c)TypeofAccount>>6~71,8.>>7~91,7,10,11(d)AverageAvailableMonthlyBalance(ooo)$5352,051500258300173505261(elf)RequiredCompensatingBalance(ooo)5oo2,000500200300150505050(e)CompensatingBalance101010101010101010OOMfC+HI (aab)NameandAddressofBankPennsylvaniaNationalBankandTrustCompanyPottsville,PA17901LinesofCreditCompensatedBalance(000)1,000(c)TypeofAccount(d)AverageAvailableMonthlyBalance(000)100(elf)RequiredCompensatingBalance(000)100(e)CompensatingBalanceg+10AmericanBankandTrustCompanyofPennsylvania35N.SixthStreetReading,PA19601NortheasternBankofPennsylvaniaWyomingAve.8SpruceStreetScranton,PA18501FirstNationalBankofSouthJerseyBlackHorsePikePleasantville,N.J.08232FirstEasternBank11WestMarketStreetWilkes-Barre,PA18701UnitedPennBank8-18WestMarketStreetWilkes-Barre,PA187111,0002,5002,0005001,00010030720050100100250200$01001010101010TheWyomingNationalBankofWilkes-Barre24W.MarketStreetWilkes-Barre,PW18701500505010NorthernCentralBank8TrustCo.Williamsport,PA17701Total500$137~50050413,68650413,30010HHIICh NOTES:"Requiredcompensatingbalanceis10$ofthelineof20$oftheborrowing,whicheverisgreater,onanannualaggregatebasisexceptforFidelityBankwhichis5'fthelineplus105oftheborrowing.TYPEOFACCOUNT1.Freecheckingandfreegeneralbankservicespluscreditavailability.2.IssuingagentforCommercialPaperNotesonanocosttousbasis.TransferAgentforissuanceofstock.PaiddirectlyforTransferAgentservice.3.TrusteeandinterestpayingagentforFirstMortgageBondsoftheformerScrantonElectricCompany.Bankiscompensateddirectlyforsuchservice.Accountisusedtofacilitatebondinterestandmaturitypayments.Freechecking.4.Maindepositoryanddisbursementaccount.TrusteeandinterestpayingagentforPollutionControlBonds,SeriesA,dueannually1977-2003.Paiddirectlyfortheseservices.6.AuthenticatingagentforFirstMortgageBonds,9-3/4'ISeries,due2005.Paiddirectlyforthisservice.7.PayrollAccount.Nocheckingcharges.8.TrusteeoftheCompany'sRetirementPlan.Compensateddirectlyfortheseservices.9.Registrarforissuanceofstock.TrusteeforEmployeeStockOwnershipPlan.Paiddirectlyfortheseservices.10.Transferagentforissuanceofstock.Paiddirectlyforthisservice.ll.DividendconsideredaSpecialDeposit.Noservicecharges.HHII awAttachmentZX-A-16'age5.TWONORT4NINTIISTRRKT>>ALLRNTOWN>>PAo18101PHONK>>'t218)8215181C.R.COLLYERTre>>r>>wer821~31Dec'embex28,1979Thispageisasampleoftheletter'enttoallbanks.ThebanksresponsesareattacheCaspages6'through31.~=~~~~MraTohnBaPlugL',~.~~~~,.~'-I~='.~.,~~".,VicePresident.TheChaseManhattanBank'ChaseManhattan'Plaza~,.:*'-:.":,"-.'~,NewYork,,N.Y.100l5I

DearMrPlum:

>>XnconnectionwiththeannualexaminationofouraccountsbyMessrs.DeloitteHaskins&Sells;Cext9.fiedPublicAccountants,wewoulidappreciate'yourconf5.xming'the'correctness'ofourmutualunderstandingregardingline'ofcreditarrangements,assetforthontheattachedsheet.Xfthe.'infoxmationiscorrectasofDecember3l,l979rpleasesoindicate'inthe'space'provided,;ifnot.correct.;pleasenoteyourexceptions.Xneitherevent,'leaseforwardtheattacheddirectlytoDeXoitteHaskins8Sells,intheenclosedenvelope.Thankyouforyourcooperation."Yoursverytruly,1qLInLeg)c.R.coti7>>~~PENNSYLVANIAPOWRRaLIGNTCOhAPANY AMOUNT.P~4STRICTIONSQN)AVAILABILITY,'.PENNSYLVANIAPOWER&LIGHTCOMPANYL1NEOFCRL'DIT1'.Rflb'.!GliMlN'3'JTIITHECHASEMANHATTANBANKASOFDECEMBER31'979L'INECOMPENSATEDBYBALANCE$20g000,000NoneAttachmentIZ-A-16Page6COMPENSATION'tIiVPiRESTRATEINTERESTPAYMENT.PREPAYMENTTERMt~~AMOUNTRESTRICTIONSONAVAILABILITYFEEPAYMENTKINTERESTRATEINTERESTPAYMENTPREPAYMENT.TERMThegxeaterof(a)tenpercentofthelineor(b)twentypex'centoftheamountborrowed,determinedonanaverageannualbasis.(Thismeansanannualaverageoftenpercentofthelineasaminimumandincreasingproportionatelyfromtenpercenttowardtwenty.percentasaverageannualusageofthelineprogressesfrom50Kto100%.)i'rime=rateineffectatyourbankfromtimetotimeduringtheperiodofborrowingAtthecloseofeachcalendarquarterandrepaymentoftheborrowingTheCompanymayprepaybankloansatanytime.Thesearrangementswillxemain'ineffectuntilterminatedinwritmgbyeitherparty.~'INECOMPENSATEDBYFEE$5000,000None8$%ofthebank'sfloatingprimerate.Quaterlvuponreceiptofcorxectinvoice.ll0%ofthebank'sprimexate.Atthecloseofeachcalendarquarterandrepaymentoftheboxrowing.7~TheCompanymayrepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedbyeitherparty.TheForegoing.IsCorrectasofDecember31,1979-,,,nPt-,..(AuthorizedSignature)'.eturnto:De1oitteHaskinssSells,3015CollegH'oegeHeightsBlvd.,Allentown,PA.181 AMOUNTRESTRICTIONSONAVAXLABILITYPENNSYLVANIAPONEn~LTc;HTCOMPANYLXN.EOF-CREDITARRANGLMENT'lsITBCXTIBANKiN.A.ASOFDECEMBER311979LINECOMPENSATEDBYBALANCE$10,000,000NoneAttachmentIX-A-16Page7COMPENSATXONRESTRATEINTERESTPAYMENTPREPAYMENTThegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverageannuaIbasis.(Thismeansanannualaverageoftenpercentofthelineasaminimumandincreasingproportionatelyfromtenpercenttowardtwentypercentasaverageannualusageofthelineprogressesfrom50$to,100')./Baserateineffectatyourbankfromtimetotimeduringtheperiodofborrowing.Atthecloseof-eachcalendarquarterandrepaymentoftheborrowing..TheCompanymayrepaybankloansatanytime.Thesearrangements.willremainineffectuntilterminatedbyeitherparty.LXNECOMPENSATEDBYFEE.AMOUNTRESTRICTIONSONAVAXLABXLITYFEEPAYMENTINTEPZSTRATEINTERESTPAYMENTPREPAYMENT$10,000,000None845ofthebank'saveragefloatingbaserate.Quarterlyuponreceiptofcorrectinvoice.110%ofthebank'sfloatingbaserate.Atthecloseofeachcalendarquarterandrepaymentoftheborrowing.kTheCompanymayrepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedbyeitherparty.TheoregoingXsCorrectasoDecember31,1979.cg(AorxzedSignate)40>~~"<"'"0'"~~mggliCE"cWI~@fanffppoI'I~E~t.(uS<turnto:DeloitteHaskins&Sells,3015CollegeHeightsBlvd.,Allentown,PA.18104

I~~AttachmentXZ-A-16Page8PENNSYLVANIAPOWER&LIGHTCOMPANYLINEOFCREDITARRANGEliENTWITHZQVXNGTRUSTCOMPANYASOFDECEMBER31.199AMOUNT;,~TRICTXONSON~LABXLXTYCOMPENSATION"INTERESTRATE.INTERESTPAYMENTPREPAYMENT'20,000,000None'...'.,*Thegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverageannualbasis..(Thismeansanannualaverageoftenpercent.of.the-lineasaminimumandincreasingproportionatelyfromtenpercent.towardtwentypercentasaverageannualusageofthe.line-progressesfrom50%to100%.)Primerateineffectatyourbankfromtimetotimeduringthe.periodofborrowing.I'tthecloseofeachcalendarquarterandrepaymentofthe'orrowing.TheCompanymayprepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedinwritingby,eitherparty.TheForegoingZsCorre'ctasofDecember31,1979./cc"tat'iAL'f'//~/rfZ~JAuthoriedSignature)Returnto:DeloitteHaskinsaSells,3015CollegeHeightsBlvd,Allentown,PA.181C PENNSYLVANIAPOe1ER&LXGHTCOMPANYLINEOFCREDXTARRANGEMENTNITHMANUFACTURERSHANOUERTRUSTCOASOFDECEi~ER31,1979AttachmentII-A-l6Page9AMOUNT"LINECOMPENSATEDBYBALANCE$10,000,000RESTRXCTIONSON~AUAILABZLXTYNoneCOMPENSATION"".RESTRATEINTERESTPAYMENTPREPAYMENT'ERMRESTRICTIONSONA~M3XLXTYFEE\FEEPAYMENTThegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverageannualbasis.(Thismeansanannualaverageoftenpercentofthelineasaminimumandincreasingproportionatelyf'romtenpercenttowardtwentypercentisaverageannualusageofthelineprogressesfrom50%to100%.)tPrimerateineffectatyourbankfromtimetotimeduringthe.periodofborrowing.IAtthecloseofeachcalendarquarterandrepaymentoftheborrowing.V'~CI4TheCompanymayrepaybankloansatanytime.lpThesearrangementswilIremainineffectuntilterminatedin.writingbyeitherparty.'LXNECOMPENSATEDBYFEE$10,000,000None8%ofthebank'sfloatingprimeontheunusedportionofLineQuarterlyuponreceiptofcorrectinvoice.INTERESTRATE~118%oftheban'-~sprimerate.fINTERESTPAYMENTAtthecloseofeachcalendarquarterandrepaymentoftheborrowing.PREPAYlKNTTheCompanymayrepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedby.eitherparty.ThFogoingZsretafemberAuthozediature)?stumto:DeloitteHaskins&Sells,3015Co11egoHeightsBlvd.,Allentown,PA.18l AttachmentII-A-16Page10PENNSXLVANXAPOWERfiLIGHTCOIIPANXLINEOFCREDITARRANGEMENTHITEI~CHEMICALBANKASOFDECEIIBER31s1979AMOUNTRESTRICTZONSONAVAZLABILZTYCOMPENSATIONPŽINTERESTRATEINTERESTPAYMENT1~PREPAYMENT~~p$500s000NoneThegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverageannual.basis.y~Primerateineffectatyourbank,fromtimetotimeduringtheperiog,ofbor~wing>~cPg~cd'~rM~~Atthecl.osetfeachcalendarquarterandrepayeantodtheborrowing.TheCompanymayprepaybankloansatany.time.'I'hesearrangementsvillremainineffectunti1terminated.iavritin,byei.therparty.I!x~ForegoingIsCorrect.~fDecember31,1979.'uthorizedSignature)'urnto:DeloitteHaskins&Sells,3015CollegeHeightsBlvd.,Allentown,PA.1Sl{

AttachmentII-A-16PagePENNSYLVANIAPOWER6LXGHTCOMPANYLINEOPCREDITARRANGEMENTWITHTHEFIRSTPENNSYLVANIABANK~NAASOPDECEMBER3179$12r500c000AMOUNTTRXCTXONSONLABZLXTYCOMPENSATIONNone'Thegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverage....'annualbasis.INTERESTRATEPrimerateineffectatyourbum,fromtimeto~eduringtheperiodofborrowing..I'NTERESTPAYMENT'tthecloseofeachcalendarquarterandrepaymentofthe.borrowing.s~~PREPAYMENT'heCompanymayprepsbankloansatanytime.TERS~Thesearrangementswillremainineffectuntilterminatedinwriting.byeitherparty.ITheForegoingXsCorrectasofDecember31,1979-orizedSignature)/peelsCvr~eu.<l~~Returnto:DeloitteHaskinsaSells,3015CollegeHeightsBlvd.,Allentown,PA.1810 AttachmentII-A-16Pete12PENNSYLVANIAPOWER&LIGHTCOMPANYLINEOFCREDITARRANGEMENTWITHTHEFIDELITYBANKASOFDECEJRER31'979AMOUNTRICTIONSON'~I~STYCOMPENSATIONINTERESTRATE-INTERESTPAYMENTPREPAYMENTTERM$9g000,000'one"e~,pFivepercentoftheLineatalltimesplustenpercentof,theborrowing.I"'rimerateineffectatyourbankfromtimetotimeduringtheperiodofborrowing.Atthecloseofeachcalendarquarterandrepaymentoftheborrowing.PITheCompanymayprepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedinwritingbyeitherparty.TheForegoincrIsCorrectasofDecember31,1979.AuorxdSgnat)PJIReturnto:DeloitteHaskinsaSells,3015CollegeHeightsBlvd.,Allentown,PA.181(

AttachmentII-A-16Page13PENNSYLVANIAPOWER5LIGHTCOMPANYLINEOFCREDITARRANGEMENTNETHGIRARDBANKASOPDECEMBER3lp1979AMOUNT~TRICTIONSONSALABILITYCOMPENSATION$7g500~000HoneThegreaterof(a)tenpercentofthelineor(b)twenty'ercentoftheamountborrowed,determinedonanaverageannualbasis.(Thismeansanannualaverageoftenpercentoftheline"asaminimumandincreasingproportionatelyf'mmtenpercenttowardtwentypercentasaverageannualusageofthelineprogressesfrom50%,to100%.)INTERESTBATEPrimerateineffectatyourbankfromtimetotimeduringtheperiodofborrowing.~'NTERESTPAYMENTAtthecloseofeachcalendarcharterandrepaymentoftheborrowing.PREPAYMENTpl'JTheCompanymayprepaybankloansatanytime.,IThesearrangementsvillremainineffectuntilterminatedinwritingbyeitherparty.TheForegoingIsCorrectasofDecember31,1979(Authorized.Signature)Returnto:DeloitteHaskins&Sells,3015CollegeHeightsBlvd.,Allentown,PA.181' AttachmentZX-A-16Page14PENNSYLVANIAPOWER6LIGHTCOMPANYLINEOFCREDITARRANGEMENTNXTHPHILADELPHIANATIONALBANKASOFDECEMBER31,1979AMOUNT~.-RXCTIONSONAVAIIdSILIACOMPENSATION$1,000,000'l~NoneThegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverageannualbasis.(Thismeansanannualaverageoftenpercentofthelineasaminimumandincreasingproportionatelyfromtenpercenttowardtwentypercentasaverageannualusageofthelineprogressesfrom50%to100%.)INTERESTRATEPrimeratein,effectatyourbankfromtimetotimeduringtheperiodofborrowing.XNTERESTPAYMENTAtthecloseofeachcalendarquarterandrepaymentofthe;.!i.-borrowxQg~AYMENTTheCompanymayprepaybankloansatanYtŽ~Pr.rQ4ThesearrangementswillremainineffectuntilterminatedII*~~/TheForegoingIsCorrectasofDecember31,1979.(AuorzzedSignture)Returnto:DeloitteHaskins8Sells,3015CollegeHeightsBlvd.,Allentown,PA.181~~

AttachmentXX-A-16Page15PENNSYLVANIAPOWER&LIGHTCOMPANYLINEOFCREDITARRANGEMENTWITHPROVIDENTNATXONALBANKASOFDECEMBER31,1979AMOUNTCTIONSONAVILITYCOMPENSATXONINTERESTRATE:INTERESTPAYMENTPRP~MENTTEE.$5F000p000INone'IThegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverage'annualbasis.(Thismeansanannualaverage-oftenpercent.ofthelineasaminimumandincreasingproportionatelyfromtenpercenttowardtwentypercentasaverageannualusage.ofthelineprogressesfrom50%to1008.)Primerateineffect.atyourbankfromtimetotimedbrDxgtheperiodofborrowing.Atthecloseofeachcalendarquarterandrepaymentoftheborrowing.~~TheCompanymayprepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedin.writingbyeitherparty.TheForegoingIsCorrect..'asofPember'1,1979.(AuorxzedSignature)JosephW.SeidleAssistantVicePresident-Januaryll,1980AI;eturnto:DeloitteHaskins6Sells,3015CollegeHeightsBlvd.,Allentown,PA.18104 PENNSYLVANIAPOljER&LIGHTCOMPANYLINEOFCREDITARRANGEMENTHITHMELLONBANK,N.A.ASOFDECEMBER31,197'9AttachmentZZ-A-16Page16AMOUNT'ESTRICTIONSONAVAILABILITYLINECOMPENSATEDBYBALANCE$20s000,000NoneCOMPENSATIONSTRATEINTERESTPAYMENTPREPAYMENTRESTRICTIONSONAVAILABILITYFK:FEEPAYMENTINTERESTRATEThegreaterof(a)tenpercentofthelineor(b)'wentypercentoftheamountborrowed,determinedonanaverage'.annualbasis.(Thismeansanannualaver'ageoftenpercentofthelineasaminimumandincreasingproportionatelyfrom.tenpercenttowardtwentypercent,asaverageannual.usageofthelineprogressesfrom50%to100%.)Primerateineffectatyourbankfromtimetotimeduringtheperiodofborrowing.Atthecloseofeachcalendarquarterandrepaymentoftheborrowing.TheCompany'mayprepaybankloansatanytime.Thesearrangementswillremainin'ffectuntilterminated&.writingbyeitherparty.ZiINECOMPENSATEDBYFEE~$10F000F000None8%ofthebank'sprime'rate'ontheunborroWedamount,of'heline.'uarterlyuponreceiptofcorrectinvoice.110%ofbank'sfloatingprime.IINTERESTPAYMENTAtthe,closeofeachcalendarquarterandrepaymentoftheborrowing.PREPAYMENTTheCompanymayrepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedbyeitherparty.TheForegoingIsCorrectasofDecember3l,1979.j(or@redSignature)ASSISTANTVfCKPRKSlOENTMELLONBANK,N.A.eturnto:DeloitteHaskinsaSells,3015CollegeHeightsBlvd.>Allentown,pA.1810'

PENNSYLVANIAPOWER&LIGllTCOMPANYLINEOFCREDITARRANGEMENTWITHPITTSBURGHNATXONALBANKASOFDECEMBER31,1979AttachmentXI-A-16Page17AMOUNTRESTRXCTXONSONAVAILABILITYLXNECOMPENSATEDBYBALANCE$5,000,000NoneCOMPENSATIONINTERESTRATEINTERESTPAYMENT2AYMENT'TERMAMOUNTRESTRXCTXONSONAVAXLABILXTYFEEIFEEPAYMENT7.p~RESTRATEXN'ZERESTPAYMENTPREPAYMENTTERM10%oftheLineor20%oftheBorrowing,whicheverisgreater,onanannualaggregatebasis.Primerateoflendingbankineffectfromtimetotime.At-thecloseofeachcalendarquarterandrepaymentoftheborrowing.TheCompanymayrepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedbyeitherparty.9~.~LINECOMPENSATEDBYFEE$7,00O,O00/None&Sofbank'sfloatingprimeforthefullLine..Quarterlyupon'receiptofcorrectinvoice.110%ofbank'sfloatingprime.Atthecloseofeach,calendarquarterandrepaymentoftheborrowing.The.Companymayrepaybankloansatanytime.VIThesearrangementswillremainineffect.untilterminatedbyeitherparty.TheForegoingIs'orrectasofDecember31,1979.td4~8;d~t-r(AuthorizedSignature)Returnto:DeloitteHaskinsaSells,3015CollegeHeightsBlvd.,Allentown,PA.1810~

PBNNSYLVANXAPONER&LIGIITCOMPANYLINEOFCREDITARRANGEMENTPITHTHEFIRSTNATIONALBANKOFALLENTOHN'SOFDECEMBER31,'979AttachmentII-A-16Page18Ai4fOUNTRESTRICTIONSONAVAXLABZLITYCOMPENSATIONINTEREST~-~PREPAYMENTTERMRESTRICTIONSON~XLABZLXTYFZEFEEPAYMENTINTERESTRATEINTERESTPAYMENTPREPAYMENTINTERESTPAYMENTLINECOMPENSATEDBYBALANCE$2,000,000NoneThegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverageannualbasis.(Thismeansanannualaverageoftenpercentofthelineasaminimumandincreasingproportionatelyfromtenpercenttowardtwentypercentasaverageannualusageofthelineprogressesfrom50%to100%.Primerateineffectatyourbankfromtimetotimeduringtheperiodofborrowing,butnotto.exceedthatoftheChaseManhattanBank,.NewYork.ilAtthecloseofeachcalendarquarterandrepaymentoftheborrowing.~<~TheCompanymayprepaybankloansatanytime..ThesearrangementswilLremainineffectuntilterminated,inwriting.byeitherparty.XX'OMPENSATEDBYFEE$1,000,000None~of1%ofthefullLine.Quarterlyznadvance.Primerat'eoflendingbankin,effectfromtimetotimeplus1%butnott'oexceedtheChaserateplus1%.'Atthecloseofeachcalendarquarterandrepaymentoftheborrowing.TheCompanymayrepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedbyeitherparty.-ForegoingZsCorrectasofDecember31,1979.',It.Qv~z(.>>.,a(AurazedSx,gnatu)CIiffordV.Schaffer,Audir.SupervisorI/II/80'cturnto:,DeloitteIIaskins&Sells,3015CollegeIIeightsBlvd.,Allentown,PA.1810 PENNSYLVANIAPOWER&LIGIITCOMPANYLINEOFCREDITARRANGEMENTWITHINDUSTRIALVALLEYBANKASOFDECEMBER31,1979AttachmentIZ-A-16Page19LINECOiMPENSATEDBYBALANCEAMOUNTRESTRICTIONSONAVAILABILITYICOMPENSATIONSTRATEINTERESTPA%LENTtPREPAYMENT~AMOUNTRESTRICTIONSONA."'"VILITYFEEFEEPAYMENTINTERESTRATEINTERESTPAYMENTPREPAYMEiNT$3p000,000NoneThegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverage:annualbasis.(Thismeansanannualaverageoftenpercentof'helineasaminimumandincreasingproportionatelyfromtenpercenttowardtwentypercentasaverageannualusageofthelineprogressesfrom50$to100%.)Primerateineffectatyourbankfromtimetotimeduringtheperiodofborrowing,butnottoexceedthatoftheChaseManhattanBank,NewYork.Atthecloseofeachcalendarquarterandrepaymentoftheboxrowing.TheCompanymayprepayhank,loansatanytime.TheseaxrangementswillremainineffectuntilterminatedMwritinghyeitherparty.\~'INECOMPENSATEDBYFEE$2,000F000None9of1%ofthefullline.Quarterlyinadvance.Primerateoflendingbankineffectfxomtimetotimeplus1%butnottoexceedtheChaserateplus1%.Atthecloseofeachcalendarquarterandrepaymentoftheborrowing.TheCompany.mayrepaybankloansat.anytime.Thesearrangementswillremainineffectuntilterminatedbyeitherparty.TheForhgoingIsCorrectasofDecember31,.1979ZNiIlSERIALVALLEY"8A'.IKTRUSTCOMPANY.~.-F>~-.r~C(AuorizedSignature)WilliamC.Pica,VicePresidentReturnto:DeloitteHaskins&Sells,3015CollegeIleightsBlvd.,Allentown,PA.183:

PENNSYLVANIAPOWER&LIGHTCOMPAIIYLXNEOFCREDITARRANGEIIENTARITHTHEMERCHANTSNATIONALBANKOFALLENTONNASOFDECEMBER31,)979AttachmentZX-A-16PageZ0AMOUNT.iRESTRICTXONSONAVAILABILITYCOMPENSATXONX~IESTRATEINTERESTPAYMENTPREPAYMENTTERM~4~AMOUNT~IRQEQRZCTXONSONA"'UQ3ZLITYFEEPAYMENTINTERESTRATEINTERESTPAYMENTPREPAYMENTLXNECOMPENSATEDBYBALANCE$1,500,000NoneThegieater.of(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverage.annualbasis.(Thismeansanannualaverageoftenpercentofthelineasaminimumandincreasingproportionatelyfrom.tenpercenttowardtwentypercentasaverageannual.usageoftheline'progressesfrom50%to100%.)Primerate-ineffectatyourbankfromtimetotimeduringtheperiodofborrowing,butnottoexceedMatofthe'hase'ManhattanBank;NewYork.Atthecloseofeachcalendarquarterandrepaymentof~theborrowing.TheCompanymayprepaybankloansatanytimei.Thes'e'arrangementswillremainineffectuntil.terminatedin:writingbyeithe'r'arty."~~C'XNECOMPENS'ATEDBYFEE'r$1,,000,000None4of1%ofthegullline.Quarterlyinadvan'ce.Primerateoflendingbankineffectfromtimetotimeplus1%butnottoexceedtheChaserateplus10.Atthecloseofeach'calendarquarterandrepaymentoftheborrowing.TheCompanymayrepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedbyeitherparty.TheForegoingIsCorrectasofDecember31,1979.(=!4J~(AuorxzedSignature)vTr.p;pr.".."..fT)E11TBeurnto:DeloitteHaskins'&Sells,3015CollegefleightsBlvd.,Allentown,PA.1810 AttachmentIZ-A-16Page21PENNSYLVANIAPOWER&LIGHTCOMPANYLINEOFCREDXTARRANGEMENTWITHUNXONBANK&TRUSTCOMPANYOFEASTERNPENNSYLVANIAASOFDECEMBER31,1979AMOUNT$500,000.R~CTRICTXONSONSALABILITYCOMPENSATXONNone~TERESTRATEINTEREST'AYMENTP~PAYMEN'2Meme@Thegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverageannualbasis.(Thismeansanannualaverageoftenpercent..ofthelineasaminimumandincreasingproportionately'romtenpercent.towardtwentypercentasaverageannualusageofthelineprogressesfrom50%to100%.)Primerateineffectatyourbankfromtimetotimeduringtheperiodofborrowing,butnottoexceedthatoftheChase.ManhattanBank,NewYork.At,thecloseofeachcalendarquarterandrepaymentoftheborrowing.The'Companymayprepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedinwritingbyeitherparty.TheForegoingIsCorrectasofDecembyg31,1979.u'xorizedEReturnto:DeloitteHaskins&Sells,3015CollegeHeightsBlvd.,Allentown,PA.lSlt AttachmentZZ-A-16Page22PENNSYLVANIAPOWER8LIGHTCOMPANYLINEOFCREDITARRANGEMENTWITHTHEFULTONNATIONALBANKOFLANCASTERASOFDECEMBER31,1979AMOUNTRZCTIONSONiE.'ALABILITYCOMPENSATIONINTERESTRATEINTERESTPAYMENTPE~PAYMENT$500,000None'~"'he'greaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determined,onan,averagearinualbasis.(Thismeansanannualaverageoftenper'centofthelineasaminimum'andincrcas"'ngproportion-atelyfromtenpercenttowardtwentypercentasaverageannualusageofthelineprogressesfrom50%to100%.)IPrimerateineffectatyourbankfromtimetotimeduringthe,periodofborrowing,butnottoexceedthatoftheChaseManhattanBank,NewYork.CkAtthecloseofeachcalendarquarterandrepaymentoftheborrowing,TheCompanymayprepaybankloansatanytime.'hesearrangementswillremainineffectuntilterminatedinwritingbyeitherparty.TheForegoingIsCorrectasofDecember31,1979.(AuthorizedSignature)/i(-7-7dReturnto:DeloitteHaskinsaSells,3015CollegeHeightsBlvd.,Allentown,PA.181 PENNSYLVANIAPOWERSLIGHTCOMPANYLINEOFCREDITARRANGEMENTWITHDAUPHINDEPOSITTRUSTCO.ASOPDECEMBER31,1979LINECOllPENSATEDBYBALANCEAttachmentIZA-16PageAMOUNTRESTRICTIONSONAVAILABILITYCOMPENSATZONINTERESTRATEC~RESTPAYMENTIPREPAYMENTA'MOUNTRESTRZCTIONSONAVAILABILITYF."~PAYMENT'500,000NoneThegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowe'd,determinedonanannual.basisPrimerateoflendingbankineffectfromtimetotime>but.nottoexceedthatofTheChaseManhattanBank.I~'Atthecloseofeachcalendarquarterandrepaymentof.theborrowing.TheCompanymayrepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminated'yeitherparty.P'LINECOMPENSATEDBYFEE$1,000,000lNone4oflSofthefullLine.Quarterlyinadvance.ZoMRESTRATEPREPAYMENTPrimerateoflendingbankineffectfromtimetotimeplus1%butnottoexceedtheChaserateplus1%.INTERESTPAYMENTAtthecloseofeachcalendarquarterandrepaymentoftheborrowing.TheCompanymayrepaybankloansatanytime.TERMThesearrangementswillremainineffectuntilterminatedbyeitherparty.,TheForegoingIsCorrectasofDecember31,1979.(AuthorizedSxgnat)C.P.I~cwski,r.VicePresident-SeniorLoanOfficerSigned:January4,1980Returnto:.DeloitteHaskins&Sells,3015CollegeHeightsBlvd.,Allentown,PA.1810' AttachmentII-A-16Page84PENNSYLVANIAPOWER&LIGHTCOMPANYLINEOFCREDITARRANGEMENTWITHPENNSYLVANIANATIONALBANKANDTRUSTCO.ASOF.DECEMBER31199AMOUNTRESTRICTIONSONAVAILABILITYSENSATIONINTEREST.RATEINTERESTPAYMENTPREPAYMENTTERN41,000,000None10%oftheLineor20%of.theBorro~ving,whicheverisgreater,onanannualaggregatebasishPrimerateoflendingbankineffectfromtimetotime,.butnottoexceedthatofTheChaseManhattanBank.Atthecloseofeachcalendarquarterandrepaymentoftheborrowing.TheCompanymayprepaybankloansat,anytime.Thesearrangementswillremainineffectuntilterminatedinwritingbyeitherparty,ForegoingIsCorrectasofDecember31,1979.PennsaniaNationalBankh.TrustCo..(AorizedSignature)VicePres&:LoanOfficerReturnto:DeloitteHaskins&Sells,3015CollegeHeightsBlvd.,Allentown,PA.1810":

PENNSYLVANlAPOWER6LIGHTCOMPANYLINEOFCREDITARRANGEMENTWITHAMERICANBANK'NDTRUSTCOOFPA.ASOFDECEMBER31,1979LINECOMPENSATEDBYBALANCEAttachmentIZ-A-16Page25AMOUNT$1,000,000RESTRICTIONSONAVAILABILITYNoneI~RESTRATEThesearrangementswillremainineffectuntilterminated"inwritingbyeitherpaxty.L'INECOMPENSATEDBYFEECOMPENSATXONThegreaterof(a)tenpercent.ofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverageannual.basis.(Thismeansanannualaverageoftenpercentofthelineasaminimumandincreasingpr'oportionately.fromtenpercenttowardtwentypercentasaverage.annual.usageoftheline'progressesfrom50%to100%.)Primerateineffect.atyourbankfromtimetotimeduringtheperiodofborrowing,butnottoexceedthatoftheChaseManhattanBank,NewYork..INTERESTPAYMENTAtthecloseofeachcalendarquarterandrepaymentof.theborrowing.PREPAYMENT.TheCompanymayprepaybankloansatanytime.AMOUNTRESTRXCTXONSONA+MABXLXTYFEEFEEPAYMENTINTERESTRATEINTERESTPAYMENTPREPAYMENTTERM$1,000,000None9of1%of.the'fullLine,*Quarterlyinadvance.'rimerateoflendingbankineffect.romtimetotimepIus-I'4butnot'oexceedtheChase'rageplus18.Atthecloseofeachcalendarquarterandrepaymentoftheborrowing.TheCompanymayrepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedbyeitherparty.TheForegoingIsCorrectasofDecember31,1979.AuthorizedSignature)gg]~~Returnto:DeloitteHaskins&Sells,3015CollegeHeightsBlvd.,Allentown,PA.181(

PENNSYLVANIAPOWER6LIGIlTCOMPANYLINEOFCREDITARRANGEMENTWITHNORTHEASTERNBANKOFPENNSYLVANIA~~3.9Z9LINECOMPENSATEDBYBALANCEAttachmentT'K-A-16PageAMOUNT.PZSTRICTIONSONAVAILABILITYCOMPENSATXONIINTERESTRATEINTERESTPAYMENTPREPAYMENT'MOUNTRESTRICTIONSON~%XLABILXTYFEE$2,500,000NoneThegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverageannualbasis.(Thismeansanannualaverageoftenpercentofthelineasaminimumandincreasingproportionatelyfromtenpercenttowardtwentypercentasaverageannualusageofthelineprogressesfrom,50%to100%,.).Primerateineffectatyourbankfromtimetotimeduring'heperi.odofborrow'ing,butnottoexceedthatof'heChase-ManhattanBank,NewYork.Atthecloseofeachcalendarquarterandrepaymentofthe.borrowing.TheCompanymayprepaybankloansatanytime.Thesearrangementswi.llremainineffectuntilterminatedinwritingbyei.ther'arty.,"XZNECOMPENSATED'YFEE$500,000None4of'Softhe.fullLine.FEEPAYMENT'NTERESTRATEQuarterlyinadvance.Primerateoflendingbankineffectfromtimetotimeplus1%butnottoexceedtheChaserateplusLS.XNTERESTPAYMENTAtthecloseofeachcalendarquarterandrepaymentoftheborrowing.PREPAYMENTTERNTheCompanymayrepaybankloans.atanytime.Thesearrangementswillremainineffectuntilterminatedbyeitherparty./.ForegoingXsCorrectasofDecember31,iL79..i)P(~,PFC.(/C~i.Cr'i~.CZc(.%.+~id<~c(,..(AuthorizedSignaure)I(/'C'.eturnto:Deloittdalakins6Sells,8015CollegelloightsBlvd.,Allcntq~n,PA.lS10

~IPENNSYLVANIAPONEI!5I'IGIITCOMPANY~LINEOFCREDITARRANGEMENTNXTIIFIRSTNATIONALBANKOFSOUTIIJERSEYASOFDECEMDER31,1979AttachmentIX-A-16Page27PiOUNTRESTRICTIONSONAVAILADXLITYCOMPENSATXON**ISTRATE'~~'NTERESTPAYMENTP'r,~"~~..PREPAYMENTTERMAMOUNTRESTRXCTIONSONAV.~:VILITYFEE-FEEPAYMENTINTERESTRATEINTERESTPAYMENTPREPAYMENTTERMLXNECOMPENSATEDBYBALANCE$2,000,000NoneThegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanavexageannualbasis.(ThismeansanannualaverageoftenpercentoftheLineasaminimumandincreasingproportionatelyfromtenpercent,towardtwentypercentasaverageannualusageofthelineprogressesfrom50%to100%.)'rimerate'ineffectatyouxbankfromtimetotime.duringtheperiodofborrowing,butnottoexceedthatoftheChaseManhattanBank,NewYork.Atthecloseofeachcalendarquarterandrepaymentof'heborrowing.TheCompany.mayprepaybankloansatanytime.Theseax'xangementswillremaini'neffectuntil'erminatedQx.writingbyeitherparty.'iINE'COMPENSATEDBYFEE$1000,000None.3iof1%ofthe-fullLine..-Quarterlyinadvance.'rimerateoflendingbankineffectfromtimetotimeplus1%butnottoexceedtheChaserateplus1%.Atthecloseofeachcalendarquarterandrepaymentoftheborrowing.TheCompanymayrepaybankloansatanytime.Thesearrangementsvillremainineffectuntiltexminatedbyeitherparty.TheForegoingXsCorrectasof3)ecember31,1979,**PerourletterofJuly3,1979,depositsare~tobeaconstant!OXofthetotallineof$2,000,000.00.(Authors.zedSignature)E.G.Baker,SeniorCommercialLoanOfficer,Cashier'"turnto:Deloitteltaskins6Sells,3015CollegeHeiglstsBlvd.,Allentown,PA.1&10',

4PENNSYLVANIAPONER6LIGHTCOMPANYLINEOFCREDITARRANGEMENTWITHFIRSTEASTERNBANKASOFDECEMBER31,1979LINECOMPENSATEDBYBALANCEAttachmentII-A-16Page28AMOUNT,RESTRICTIONSONAVAILABILITYCOMPENSATIONSTRATEJ-ZNTERESTPAYMENTPREPAYMENTRESTRICTIONSONA~~LABZLZTYFEEFEEPAYMENTINTERESTRATEINTERFSTPAYMENTPREPAYMENT$500,000NoneThegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverageannualbasis.(Thismeansanannualaverageoftenpercent'fthelineasaminimumandincreasingproportionatelyfromtenpercenttowardtwentypercentasaverageannualusageofthelineprogressesfrom50%to100%.)Primerateineffectatyourbankfromtimetotimeduringtheperiodofborrowing,butnottoexceedthatoftheChaseManhattanBank,NewYork.Atthecloseofeachcalendarquarterandrepaymentoftheborrowing.IiTheCompanymayprepaybankloansatanytime.Thesearrangementswillr'emainineffectuntilterminatedinwritingbyeitherparty.XiZNECOMPENSATEDBYFEE$500,000None4of1%ofthe'fullLine.Quarterlyinadvance.Primerateoflendingbankineffectfromtimetotimeplus1%butnottoexceedtheChaserateplus18.Atthecloseofeachcalendarquarterandrepaymentoftheborrowing.TheCompanymayrepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedbyeitherparty.TheForegoingZsCorroctasofDecember31,1979.,Pc'Z,.Z(AuthorizedSignature):turnto:DeloitteHaskirs&Sells,3015CollegeHeightsBlvd.,Allentown,PA.1810, AttachmentIZ-A-16Page29PENNSYLVANIAPONER&LIGHTCOMPANYLZNEOFCREDITARRANGEMENTWITHUNITEDPENNBANKAMOUNTr~r~RICTZONSON.DLABILITYICOMPENSATIONr.INTERESTRATEINTERESTPAYMENTJPAYMENTTERN$1000,000None~~Thegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverageannualbasis.(Thismeansanannualaverageoftenpercentoftheineasaminimumandincreasingproportionatelyfromtenpercenttowardtwentypercentasaverageannualusageofthelineprogressesfrom50%to100%.)Primerateineffectatyourbankfromtimetotimeduringtheperiodofborrowing,butnottoexceedthatoftheChaseManhattanBank,New'ork.Atthecloseofeachcalendarquart'erandrepaymentoftheborrowing.TheCompanymayprepaybankloansatanytime.Thesearrangements'illremainineffectuntilterminatedinwritingbyeitherparty.TheForegoingIsCorrectasofDecember31,1979.{(AuthorizedSignature)Sentg>>'1NgqPpegir]errtReturnto:DeloitteHaskins&Sells,3015CoLlegeHeightsBlvd.,Allentown,PA.1810 PENNSYLVANIAPOWER&LIGHTCOMPANYLINEOFCREDITARRANGEMENTl'/ZTHAttachmentZZ-A-16THEHYOMZNGNATIONALBANKOFllZLEES-BARREPage30ASOFDECEMBER31,1979I~ST'RATEINTERESTPAYMENT~gPREPAYMENTTERMAMOUNTRESTRICTIONSONAVAZLtd3ZLZTYCOMPENSATIONLINECOMPENSATEDBYBALANCE$500,000NoneThegreaterof(a)tenpercentofthelineor(b)twentypercentoftheamountborrowed,determinedonanaverageannualbasis.(Thismeansanannualaverageoftenpercentofthelineasaminimumandincreasingproportionatelyfromtenpercenttowardtwentypercentasaverageannualusageofthelineprogressesfrom50%to100%.)Primerateineffectatyourbankfromtimetotimeduringtheperiodofborrowing,butnotto.exceedthat.oftheChaseManhattanBank,NewYork.At.thecloseofeachcalendarquarterandrepaymentoftheborrowing.TheCompanymayprepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedinwritingby.eitherparty'.LINECOMPENSATEDBYFEEAMOUNTRESTRICTIONSONA'P~>>..LABILITYFE~hFEEPAYMENT'NTERESTRATEINTERESTPAYMENTPREPAYMENT$500F000None4of18ofthefullLine.Quarterlyinadvance.Primerateoflendingbankineffectfromtimetotimeplus1%but'nottoexceedtheChaserateplus1%.Atthecloseofeachcalendarquarterandrepaymentoftheborrowing.TheCompanymayrepaybankloansatanytime.Thesearrangementswillremainineffectuntilterminatedbyeitherparty.TheForegoingIsCorrectasofDecember31,1979.IVi'AVOVil"'K~!."hhLOANllOr'"I:.'ApthorizedSigna~re):<.'turnto:DeloittrHaskins&Sells'015CollegeHeightsBlvd.,Allentown,PA.1Slp AttachmentEI-A-3.6Page31PENNSYLVANIAPOWER6LIGHTCOMPANYLINEOFCREDITARRANGEMENTWITHNORTHERNCENTRALBANK&TRUSTCOASOFDECEMBER31,1979AMOUNT$500,000RZCTIONSONrLABZLETYCOMPENSATIONNoneThegreaterof(a)tenpercentofthelineor(b)twentypercent.oftheamountborrowed,determinedonanaverageannualbasis,(ThismeansanannualaverageoftenpercentoPthelineasaminimumandincreasingproportionatelyfromtenpercenttowardtwentypercentasaverageannualusageofthelineprogressesfrom50%to100%.)IINTERESTRATEPrimerateineffectatyourbankfromtimetotimeduringthe-periodofborrowing,butnottoexceedthatoftheChaseManhattanBank,NewYork.4INTERES'ZzPAYMENTAtthecloseofeachcalendarquarterandrepaymentoftheborrowing.PAYMENTTERMTheCompanymay.prepaybankloansatanytime..Thesearrangementswillremainineffectuntilterminatedinwritingbyeitherparty.January07;1980TheForegoingZsCorrectasofDecember31,1979.(AutrizedSignature)Ass.'ttoAuditor,AuditDept'cc:C/LoanDept.Returnto:DeloitteHaskinsaSells,3015CollegeHeightsBlvd.,Allentown,PA.181(

II-A-17G.F.VandersliceProvidethefollowinginformationconcerningbanknotespayableforactualtestyear:a~b.C~d.e.LineofCreditateachbank.Averagedailybalancesofnotespayabletoeachbank,bynameofbank.Interestratechargedoneachbanknote(Primerate,formularate,orother).Purposeofeachbanknote(e.g.,construction,fuelstorage,workingcapital,debtretirement).Prospectivefutureneedforthistypeoffinancing.a&b.TherequestedinformationisprovidedinAttachmentII-A-17(2pages).c&d.Therewerenobanknotesoutstandingforthetestyear.e.PP&Lwillcontinuetoneedthistypeoffinancingto(1)purchaseandcarryfuelinventories,(2)carryaccountsreceivable,(3)provideforperiodiclargecashneedssuchastax,dividendandinvestmentpay-ments,(4)supplytemporaryfundsforunexpectedcashrequirements,and(5)provideinterimfinancingfortheconstructionofadditionstogeneration,transmissionanddistributionfacilities.Theneedforbanklinesofcreditwillincreasetoprovideforflexibilityinourfinancingprogramandtoprovideadequateresourcesshouldanemergencysituationoccur.Forexample,unfavorablemarketconditionsmightarisecausingatemporarydefermentofaplannedsaleofsecurities.Inrecenttimes,ithasbecomemoreevidentthatemergencyfinancingcapabilitymustalwaysbeavailabletoensurecontinuedfinancingofday-to-dayoperationsandcapitalconstructionprograms.InMarch1980,PP&Larrangedfora$400millionRevolvingCreditAgreementwithagroupof10domesticbanks,a$100millionRevolvingCreditAgreementwithagroupof23foreignbanks,andapproximately$120millionoflinesofcreditwithagroupofdomesticbanks.Banksparticipatinginthetworevolvingcreditagreementsarecompensatedthroughthepaymentofcommitmentfeesinsteadofcompensatingbankbalances.Ofthe$120millionlinesofcredit:(i)$58.5millionaresupportedwithcompensatingbalances;(ii)$46.5millionaresupportedwithcommitmentfees;(iii)$10millionaresupportedbyuncollectedbalancesinPP&L'sbondinterestaccount;and(iv)$5millionaresupportedbyuncollectedbalancesinPP&L'sdividendaccount.

BankNamePennslvaniaPower&LihtComnaBankNoteandCreditLineDataYearEndedDecember311(a)LinesofCreditActiveReserveTotalAttachmentII-A-17Page1(b)AverageDailyBalanceofNotesPaableooo)(ooo)(oooChaseManhattanBankCitibankIrvingTrustCompanyManufacturersHanoverTrustMorganGuarantyTrustChemicalBankFirstPennsylvaniaBankFidelityBankGirardBankPhiladelphiaNationalBankProvidentBankMellonBankPitts'buxghNationalBankFirstNationalBankofAllentownIndustrialValleyBankMerchantsBankofAllentownUnionHank&TrustFultonNationalHankNationalCentralBankCommonwealthNationalBankDauphinDepositTrustPennsylvaniaNationalBankAmericanBank&TrustCompany10$00010,00020,00010,00010,00010,000500-0-12,5007$5001,0005$000-0-9,00020,00010,0005,0002,0003,0001$5005007,'0001,0002,0001,OOO20,00020$00020,00010,00050012,5009,0007$5001,0005,00030,00012,0003,0005,0002,5005005005001,0001,000-0>>1,0001$0001,000-0-1,000500190001$0001,5oo1,0002,000020,00005,000025,000r0 AttachmentZl-A-17Page2BankNamePennslvaniaPower5LihtComnanBankNoteandCreditLineDataYearEndedDecember311(a)LinesofCreditActiveReserveTotal(b)AverageDailyBalanceofNotesPaable(000)(000)(000)NortheasternBankFirstNationalBankofSouthJ'erseyFirstEasternBankUnitedPennBankWyomingNationalBankNorthernCentralBankTOTAL2,500450043,0002,0005001,000500~001,0005005003,0001,0001,0001,000~004138,500061,5000200,000000 II-A-18G.F.VandersliceSetforthamountoftotalcash(allcashaccounts)onhandfrombalancesheetsforlasttwenty-four(24)calendarmonthsprecedingtestyear-end.ThetablebelowprovidesthetotalcashonhandfromPPGLbalancesheetsforthemonthlyperiodJanuary1978throughandincludingDecember1979.PPGLhasnotprojectedmonthlycashbalancesforthefuturetestyear.However,itisex-pectedthatcashbalanceswillrangefrom$12to$15millionpermonthduringthefuturetestperiod.PennslvaniaPower&LihtComanCashonHandJanuar1978throuhDecember19791978JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember1979JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember$13,494,.56613,566,23413,354,83612,392,01914,168,63513,025,89312,793,17412,440,20511,895,00314,560,65813,695,17413,634,98813,576,26212,972,98213,726,60713,593,77312,349,89312,484,17813,657,10512,316,64112,271,21012,356,61712,215,99215,467,296 II-A-19R.R.FortuneQ.19.SubmitdetailsonCompanyorParentcommonstockofferings(pastfiveyearstopresent)asfollows:a0b.cod.e.f.goh.m.n.0~DateofProspectusDateofofferingRecorddateOfferingperiod-datesandnumberofdaysAmountandnumberofsharesofofferingOfferingratio(ifrightsoffering)PercentsubscribedOfferingpriceGrossproceedspershareExpensespershareNetproceedspershare(i-'j)Marketpricepersharel.Atrecorddate2.Atofferingdate3.OnemonthaftercloseofofferingAveragemarketpriceduringoffering1.Pricepershare2.Rightspershare-averagevalueofrightsLatestreportedearningspershareattimeofofferingLatestreporteddividendsattimeofofferingA.19.TherequesteddataaresuppliedinAttachmentII-A-19(1page).

AttachmentZZ-A<<19PennslvaniaPoweraLihtCoanAnalysisofPublicOfferingsofCommonStock(1975-1979)DateofprospectusDateofofferingRecorddateOfferingperiod-datesandnumberofdaysAmountandnumberofsharesofoffering-Offeringratio(ifrightsoffering)PercentsubscribedOfferingpriceGrossproceedspershareExpensespershare(Zssuanceandsellingexpenses,in-cludingunderwritingdis-countsandcommissions)Netproceedspershare(i-j).Marketpricepersharel.Atrecorddate2;Atofferingdate3.OnemonthaftercloseofofferingAveragemarketpriceduring,offering1.Pricepershare2.Rightspershare-averagevalueofrightsLatestreportedearningspershareattimeofoffering-twelvemonthsended(asre-portedineachprospectus)3/29/783/29/78NA3/29/773/29/77NAll/27/7911/27/79NAaob.Cod.3/30/763/30/764/2/754/2/75NA.NANANAe.NANA$18.50$18.50NANA$22.125$22125NANA$21.50$2150NANA$2000$20.00NANA$18.00$1800~$0.67$17.83$0.69$21.44$0.59$20.91$063$1937NA$20.00$20.50$0.88$17.12k.1.NA$18.50$17.625NA$21.875$21.125NA$21375$22.50NA$18.00$18125NANANANANANAn.$3.37$3.28(9/30/79)(2/28/78)$268$287$307(12/31/76)(12/31/75)(12/31/74)o.Latestreporteddividendsattimeofoffering(asre-portedineachprospectus)$201$1.92$1.80$180$1.772,500,0003000000320000035000003000,000 II-A-20G.F.VandersliceProvidelatestavailablebalancesheetandincomestatementforCompany,ParentandSystem(consolidated).PPGLfollowsthepracticeofpreparingbalancesheetsand'ncomestatementsonaquarterlybasis.TherequestedinformationfortheperiodendedMarch31,1980willnotbeavailableuntilafterPPGL'santicipatedfilingdate.However,theinformationwillbeprovidedasshortlyaspossiblethereafter.Inaddition,PPSLwillprovidecom-parativebalancesheetsandincomestatementsonaquarterlybasisduringthetermoftherateproceedings.

TWONOR1'HNINTHSTREET,ALI.ENTOWN,PA.18101PHONE:(215)821~5151LEGALDEPARTMENTEDWARDM.NAGELVroePrenoenr.GenererCounselenrsSecrererrr8215323G,D.CALIENDOChelCeurleelIler1ulerer7Nfeee8215587MURRAYMILKMAN821.5725S.JANHUDDLE8215845ArrorneysROBERTK.FULTON8215325STEWARTJ.BERGER8215321BRYANA.SNAPP8214337Anerne7SHARRISM.ROSEN821584~DAVIDJ.DULICK821.4107JOHNE.ANTONUKJR.8214452XQG%i~KKZKEEexXKXkMay12,1980Mr.WilliamP.Thierfelder,SecretaryPennsylvaniaPublicUtilityCommissionP.O.Box3265Harrisburg,,Pennsylvania17120Re:PP5LTariffSupplementNo.73R-80031114

DearMr.'Thierfelder:

Thereareenclosed,inregardtotheabove-.refer-enceddocket,8copiesofPP5LIsBalanceSheetandIncomeStateITIentasofMarch31,1980.EachoftheenclosedhavebeenlabeledII-A-20andshouldbemadepartofPP4LExhibitRegs.II.ThelatterwasoneofthevolumesfiledonApril29,1980insupport.ofaproposedbaserateincrease..yrulyours,G..CaliendoEnclosurescc:Mr.CharlesASmetak(4copies)AlbertN.Johnson,Esquire(2copies)WalterN.Cohen,Esquire(4copies)PENNSYLVANIAPOWERILLIGHTCOMPANY II-A-20G.F.VandersliceProvidelatestavailablebalancesheetandincomestatementforCompany,ParentandSystem(consolidated).SeeAttachmentII-A-20(6pages)whichprovidestherequesteddataasofMarch31,1980.

PennslvaniaPower6LihtCorn@anLatestAvailableBalanceSheetAssetsandOtherDebitsAttachmentII-A-20Page1Acct.No.101103105107108TitleofAccountUtilityPlantElectricplantPlantinserviceExperimentalelectricplantunclassifiedPlantheldforfutureuseConstructionworkinprogressGrosselectricplantAccumulatedprovisionfordepreciationNetelectricutilityplantMarch31,1980$2,480,560,341.07234,576.6042g346g928~711,586,786249.704~109g928g096F08(644,137747.70)3J465'~790~348'8March31,1979$2,347~416,458.92233,825.5643,751,717.111,212163i981.153,603,565,982.74(576985529.39)3,026,580,453.35101107108120.1SteamheatplantPlantinserviceConstructionworkinprogressGrosssteamheatplantAccumulatedprovisionfordepreciationNetsteamheatutilityplantNetutilityplant,lessnuclearfuelNuclearfuelinprocessNetUtilityPlant8,290,337.0938,870.288g329g207~373,361,001.05)4,968,206.328g223g872~4123,821.008g247g693~413116,044.01)5131,649.403g470g758g554~7074,442,013.653,031,712,102.7538,009,334.743,545,200568.353,069721437.491122123.1124128131132135136141142143144145146OtherPropertyandInvestmentsNonutilitypropertyAccumulatedprovisionfordepreciationandamortizationofnonutilitypropertyNetnonutilitypropertyInvestmentinsubsidiarycompaniesOtherinvestmentsOtherspecialfundsTotalOtherPropertyandIn-vestmentsCurrentandAccruedAssetsCashInterestspecialdepositsWorkingfundsTemporarycashinvestmentsNotesandaccountsreceivableNotesreceivableCustomeraccountsreceivableElectricSteamheatOtheraccountsreceivableAccumulatedprovisionforuncollectibleaccounts-creditElectricSteamheatTotalnotesandaccountsreceivableNotesreceivablefromassociatedcompaniesAccountsreceivablefromassociatedcompanies3,592,906.19432i994.93)3,159,911.267g135g173~782g930g174~9221,055.2413,246,315.2012g128,000.408,161.111~000g689~2115,842.4060,396,072.81567,995.2932g710,668.07(3,709,890.18)89,961,853.5738~584g730~751,387,697.035,371,649.041246212.28)4g125g436~7627,839,891.732g293~597~6011399.4934,270,325.5813,726,607.495,958.761,124,472.1140,000,000.0023,763.6065~773g684~09433,368.1112,897,789.38(3,217g900.79)11,349.26)75,899i355.1330g050g000~001~001~02016 PennslvaniaPower&LihtComanLatestAvailableBalanceSheetAssetsandOtherDebitsContinued)AttachmentII-A-20Page2Acct.wo.TitleofAccountMarch31,1980March311979151151152152154163165171172174174174181182183184185186190CurrentandAccruedAssets(Continued)MaterialsandsuppliesFuelstock-electricFuelstock-steamheatFuelstockexpensesundistributed-electricFuelstockexpensesundistributed-steamheatPlantmaterialsandoperatingsupplies-electricStoresexpenseundistributed-electricTotalmaterialsandsuppliesPrepaymentsOthercurrentandaccruedassetsInterestanddividendsreceivableRentsreceivableRecoverablefuelcostsRecoverableenergycostsOtherTotalothercurrentandaccruedassetsTotalCurrentandAccruedAssetsDeferredDebitsUnamortizeddebtexpenseExtraordinarypropertylossesPreliminarysurveyandinvestigationchargesClearingaccountsTemporaryfacilitiesMiscellaneousdeferreddebitsNoncurrentrecoverablefuelcostsOtherTotalmiscellaneousdeferreddebitsAccumulateddeferredincometaxes-forcedoutagereserveTotalDeferredDebits$136g613i978~10$865,471.19251,171.441,656.0220i974i774~18304,318.12159gOlli369.053,714,427.602g041~110~4122,615,628.0032i693~817F002,131,610.8859i482~166~29365,279,095.011,943,966.71957,905.64396,135.00li750~949.11(9,419.36)13g649g740.3714g842~943~6528,492i684.025,368,274.0038,900495.12105,004,235.24526,005.91309,576.321,665.1419g098i080~42442,419.22125381,982.257,333,133.7221,444.442,198,816.0022,122,597.0033i18li598F002,537,982.5060,062,437.94354584967.561,596,165.651,106,794.30551,058.05842i634.20(19,079.42)33i424g962~00871,921.7434,296883.744i374,656.0042,749,112.52TotalAssetsandOtherDebits$3,962,626,473.68$3,501,325843.15

PennslvaniaPower8LihtComanLatestAvailableBalanceSheetLiabilitiesandOtherCreditsAttachmentII-A-20Page3Acct.wo.201202204207212214215.1216216.1TitleofAccountProprietaryCapitalCommonstockissuedCommonstocksubscribedPreferred&preferencestockissuedPremiumoncapitalstockInstallmentsreceivedoncapitalstockCapitalstockexpenseAppropriatedretainedearnings-amortizationreserve-FederalUnappropriatedretainedearningsUnappropriatedundistributedsubsidiaryearningsTotalProprietaryCapitalbIarch31,1980March311979$763g269i288~79232,000.61719g774g500F0087,000.00782,528.71(12J363g852F08)$677g526g404~82564g374g500~0087,000.00690,939.19(llf270g500~33)3,062,721.32343,046,191.923,062,721.32383i208g864~60706,582.443,203403.521,858759634.39li580720660.44221224225226Long-TermDebtBondsOtherlong-termdebtUnamortizedpremiumonlong-termdebtUnamortizeddiscountonlong-termdebt-debit1f304i000i000~0020li339,414.50782i072.79(6036231.97)1i241i500i000~00220~890i890~37840,298.96(5943i105.82)1500085,25S.321457,288,083.51224LessamountduewithinoneyearBondsOtherlong-termdebt500i000.00447764.50947764.5037i500g000~0020,198022.37S7,698,022.37TotalLong-TermDebt1,499,137490.821,399590,061.14221224231232234235235236237238240241283CurrentandAccruedLiabilitiesLong-termdebtduewithinoneyearBondsOtherlong-termdebtNotespayableAccountspayableAccountspayabletoassociatedcompaniesCustomerdepositsElectricSteamheatTaxesaccruedInterestaccruedDividendsdeclaredhfaturedinterestTaxcollectionspayableAccumulateddeferredincometaxes(A)RecoverablefuelcostsRecoverableenergycostsTotalaccumulateddeferredincometaxesMiscellaneouscurrentandaccruedliabilitiesTotalCurrentandAccruedLiabilities500,000.00447,764.50123,709,000.0066,938,471.069,955,917.03li042~4916512,970.0033,403,956.8444i529i632F0037,939,149.218,273.613i076J983~6512i083g278~0017,144,132.0029,227410.0024530.60375457950.1537i500i000~0020gl98,022.3728J032i000F0059g972g542~045,826,821.95942,998.158,770.0041,787,199.3835g406i576~853lg479il06~406,071.263i09li587.23lli828i529.0017i396164.0029,224i693.0024937264.05318413652.68

AttachmentII-A-20Page4PennsvlvaniaPower&LihtComanLatestAvailableBalanceSheetLiabilitiesaOtherCreditsContinued)Acct.No.252253255281282283TitleofAccountDeferredCreditsCustomeradvancesforconstructionOtherdeferredcreditsAccumulateddeferredinvestmenttaxcreditsElectricSteamheatAccumulateddeferredincometaxes-acceleratedamortizationpropertyCertifieddefensefacilitiesPollutioncontrolfacilitiesTotalacceleratedamortizationpropertyAccumulateddeferredincometaxes-otherpropertyClasslifedepreciationsystemElectricSteamheatDeductionofcostsofremovingretireddepreciablepropertyElectricSteamheatFuelcosts-testgeneration-electricTotalotherpropertyAccumulateddeferredincometaxes-otherIioncurrentrecoverablefuelcostsOtherTotalother.TotalDeferredCreditsMarch311980598,965.539,381,747.24124g848g873~30175,068.002g006~559182564,899.004571,458.1838,039,473.29141,021.0014,871,531.5134,965.007501306.0060~588~296F807,587,264.8411501,813.5019,089,078.34'219253,487.39March31,1979415,440.923,763,685.05112,253,107.32178,448.002g746g972~372,691,055.005,438,027.3732~768f467~00130i880.0013g373g024~0036,106.007,749,286.0054,057,763.0017g986g214~00413872.3018,400,086.30194,506,557.96OperatingReserves265Miscellaneousoperatingreserves10017910.938094,910.93TotalLiabilitiesandOtherCredits(A)DeferredincometaxesapplicabletothecurrentportionofrecoverablefuelcostsandrecoverableenergycostsarerecordedinAccount283,butarere-portedascurrentliabilitiestocorrespondtothecurrentassetclassifica-tionofsuchcostsreportedinAccount174.

PennslvaniaPowersLihtComanAttachmentII-A-20page5LatestAvailableStatementofIncomeTwelveMonthsEndedMarch31,1980Acct.No.TotalElectricSteamHeat400401402403407408.1409.1410.1411.4411.6411.7418418.1419419.1421421.1424.UtilityOperatingIncomeOperatingRevenuesOperatingExpensesOperationexpensesMaintenanceexpensesDepreciationexpensesAmortizationofpropertylossesTaxesotherthanincometaxesStategrossreceiptsStatecapitalstockStateutilityrealestateOtherIncometaxesFederalStateProvisionfordeferredincometaxesFederalStateProvisionfordeferredincometaxes-creditFederalStateInvestmenttaxcreditadjustment-netGainsfromdispositionofutilityplantLossesfromdispositionofutilityplantTotalUtilityOperatingExpensesNetUtilityOperatingIncomeOtherIncomeandDeductionsOtherIncomeNonoperatingrentalincomeEquityinearningsofsubsidiarycompaniesInterestanddividendincomeAllowanceforequityfundsusedduringconstructionMiscellaneousnonoperatingincomeGainondispositionofpropertyTotalOtherIncomeOtherIncomeDeductionsLossondispositionofpropertyMiscellaneousincomedeductionsTotalOtherIncomeDeductions$826,474,748.65822082,020.714392,727.94360i154i663~9279,583,037.8976,78S,309.00308,832.0036g069F8016313i920i812~0013,350,239.007i833,417.72355i548i457~2879i025i147~8376i506i558~00308,832.0036,069,801.6313i897i538~0013,340,186.00"7,774,235.184i606i206~64557,890.06278,751.0023,274.0010,0S3.0059,182.5431i328i440F0012i803i697~0042,062,475.0010,727,954.0031i885i706~0012i944i127~0042,053,287.0010i725i604~00(557,266.00)(140,430.00)9,188.002i350.00(38i289t626~44)(38i287i622~44)(9i620g131~55)(9i619i597SS)~16,193,955.0016,197,335.00(2,004.00)(534.00)(3,380.00)(142,656.80)461,968.00(142,656.80)461968.0032,995.581,178,188.214,917328.9455,812,651.341,422.61225181.9162167768.5991324.462659391.742,750,716.20653,532187.37648688906.134843281.24172942561.28173393114.58 pennsylvaniapoweraLightCompanyAttachmentII-A-20page6LatestAvailableStatementofIncome(Continued)TwelveMonthsEndedMarch31,1980Acct.No.408.2409.2427428429OtherIncomeandDeductions(Continued)TaxesApplicabletoOtherIncomeandDeductionsTaxesotherthanincometaxesIncometaxesFederalStateTotalTaxesApplicabletoOtherIncomeandDeductionsNetOtherIncomeandDeductionsIncomeBeforeInterestChargesInterestChargesInterestonlong-termdebtAmortizationofdebtdiscountandexpenseAmortizationofpremiumondebt-creditOtherinterestchargesAllowanceforborrowedfundsusedduringconstructionNetInterestChargesTotal$128,062.96(23g570g57500)88877654.43261820215.71135,331,736.79517,803.64(58,226.17)7,950,913.40(57,944,738.94)85,797,488.72ElectricSteamHeatNetIncome$176,022,726.99 II-A-21G.F.VandersliceQ.21.ProvideOriginalCost,TrendedOriginalCostandFairvalueratebaseclaims.A.21.TherequestedinformationattheyearendedDecember3X,1979'sprovidedinScheduleC-1ofExhibitHistoric1;informationfortheyearendingDecember31,1980isprovidedinScheduleC-1ofExhibitFuture1.Withregardtofairvalue,PP&Lisprovidingfairvalueratebasedata(seeAttachmentII-A-21,1page)inasmuchastheregulationapparentlyrequiresthefilingofsuchdata.Itshouldbenoted,however,thattheprovidingoffairvaluedatabyPP&LdoesnotnecessarilymeanthattheCompanybelievessuchdatashouldbeprovided.Itismerelyrespon-sivetoaCommissionrequirement.

AttachmentII-A-21PENNSYLVANIAPOWERfLIGHTCOMPANY~airValueRateBaseAsofDecember31,1980(ThousandsofDollars)MeasuresofValueExhibitFuture1Refer'enceAmount'~lfeihtAmountOriginalCostFive-YearFairValueRateBaseC-1C-1$2,135,24167.4e(a)$1,439,1523053998326o(b)995603100.0~o$2q434q755(a)PercentofcapitalizationshowninExhibitFuture1,ScheduleB-9representedbydebtandpreferredandpreferencestock.b)PercentofcapitalizationshowninExhibit,Future1,,ScheduleB-9representedbycommonequity.

II-A-22R.J.Bernini22.ProvideOperatingIncomeclaimsunder:(i)Presentrates(ii)Proformapresentrates(annualized&normalized)(iii)Proposedrates(annualized&normalized)b.ProvideRateofReturnonOriginalCostandFairValueclaimsunder:(i)Presentrates(ii)Proformapresentrates(iii)ProposedratesA.22.TherequestedinformationfortheyearendedDecember31,1979isprovidedinScheduleD-1ofExhibitHistoric1;informationfortheyearendingDecember31,1980isprovidedinScheduleD-1ofExhibitFuture1.Withregard.tofaux'alue,pleaserefertotheresponsetoRegulationXI-A-21.

II-A-23G.F.Vanderslice23.Listdetailsandsourcesof"OtherPropertyandInvestment,""TemporaryCashInvestments,"and"WorkingFunds"ontestyear-endbalancesheet.A.23.AttachmentII-A-23(7pages)providestherequestedinfor-mationforOtherPropertyandInvestments,TemporaryCashInvestmentsandWorkingFundsasofDecember31,1979andDecember31,1980.

AttachmentII-A-23Page1PennslvaniaPower&LihtComanOtherPropertyandInvestments,TemporaryCashInvestmentsandWorkinFundsDecember31,1979December31,1980OtherPropertyandInvestmentsNonutilityProperty-Account121PreviouslyDevotedtoPublicService10.96acres,CityofHarrisburg,formerlytheCedarSteamElectricStation0.02acre,CityofWilkes-Barre,formerlygasholdersite0.15acre,BoroughofCarlisle,CumberlandCounty,formerlyportionoftheCarlisleSteamElectricStationStorehouseandshopatAllentownSubstationformerlypartofAllentownSteamElectricStation0.23acre,SouthWhitehallTownship,,LehighCounty,formerlytheCetroniaSubstation1.78acresandbuildinginCityofHarrisburgformerlyusedforservicedepot15acres,CityandTownshipofLancaster,LancasterCounty,formerlyusedforservicedepotLandwithfenceinBoroofSouderton,MontgomeryCounty,formerlyusedassiteforsubstationBuildingintheBoroofBerwick,ColumbiaCounty,formerlyusedforstorehouseandgarage0.20acre,BoroofNorthampton,NorthamptonCounty,formerlyusedforsubstationsite228.09acres,RushTownship,SchuylkillCountyandNesquehoningBoro,CarbonCounty,formerlytheHautoSteamElectricStation474.48acresandstructureintheTownshipofExeter,LuzerneCounty,formerlytheStantonSteamElectricStation'30,295(Nochangesassumed)3453,58613,1521,085180,3482,2102,0435,2421,3878,187203,035 AttachmentII-A-23Page2PennslvaniaPower&LihtComanOtherPropertyandInvestments,TemporaryCashInvestmentsandWorkinFundsDecember31,1979December31,1980369.16acres,ManorTownship,LancasterCounty,formerlytheManorCoalPlantLand,buildingandimprovementsintheBoroughofMilton,Northumber-landCounty,formerlyusedforstorehouseLandandimprovementsintheCityofAl.lentown,LehighCounty,formerlyportionoftheMeadowSubstationLandandimprovementsintheCityofHarrisburg,DauphinCounty,formerlyportionoftheElmwalSubstationLandandimprovementsintheBoroofCarlisle,CumberlandCounty,formerlyportionofthePennCedarSubstationLandadjacenttotheLancasterDivisionServiceCenterinEastHempfieldandManheimTownships,LancasterCountyLandinPineGroveTownship,SchuylkillCounty,formerlyportionofthePineGroveSteamElectricStationLand,structuresandimprovementsintheBoroughofLykens,DauphinCounty,formerlyportionoftheLykensSteamElectricStationLandinHoweTownship,PerryCounty,formerlytheNorthNewportSubstationsiteLandintheBoroughofLiverpool,PerryCounty,formerlytheLiverpoolSubstationsiteLandintheVillageofKleinfelters-ville,HeidelbergTownship,LebanonCounty,formerlytheKleinfelters-villeSubstationsiteLandintheVillageofLampeter,WestLampeterTownship,LancasterCounty,formerlytheLampeterSubstationsite$70,32015,9991,1124,7913,09318,5044498318520398(Nochangesassumed)

AttachmentII-A-23Page3PennslvaniaPower&LihtComanOtherPropertyandInvestments,TemporaryCashInvestmentsandWorkinFundsDecember31,1979December31,1980.LandintheVillageofRockhill,ConestogaTownship,LancasterCounty,formerlyportionoftheRockhillHydroElectricStationsiteLandintheBoroughofSelins-grove,SnyderCounty,formerlyportionoftheSouthSelins-groveSubstationsiteLand,officefurnitureandequipmentintheBoroughofWestPittston,LuzerneCounty,formerlyportionofthePittstonAreaIndustrialDevelopmentCommitteeHeadquartersLandinAbingtonandGlenburnTown-ships,LackawannaCountyLandintheBoroughofDuryea,LuzerneCountyLandintheCityofLockHavenClintonCounty,formerlytheSilkAlleySubstationsiteLandintheCityofAllentown,LehighCounty,formerlytheNorthHallSubstationsiteLandintheBoroughofMilton,NorthumberlandCounty,formerlyportionoftheMiltonSwitchingStationsiteLandinConoyTownship,LancasterCountyLandintheCityofAllentown,LehighCounty,formerlytheLehSubstation.siteLandinHeginsTownship,SchuylkillCounty,formerlytheGoodSpringSubstationsiteLandandcertainimprovementsinStrasburgTownship,Lan-casterCounty,formerlytheWalnutRunSubstationLandinMarticTownship,LancasterCounty,formerlysurplusbasinlandatHoltwoodHES481741731023,2598,11467464,7195931862,682235(Nochangesassumed)

AttachmentII-A-23Page4PennslvaniaPower&LihtComanOtherPropertyandInvestments,TemporaryCashInvestmentsandWorkinFundsDecember31,1979December31,1980LandandimprovementsintheCityofAllentown,LehighCounty,formerlyportionoftheRittersvilleSubstationLandandimprovementsintheCityofWilliamsport,LycomingCounty,formerlyportionoftheVallamontSubstationIandintheBoroughofMontoursville,LycomingCounty1,370(Nochangesassumed)4,3481502654,702654702NotPreviouslyDevotedtoPublicService18.6'4acres,ManheimTownship,LancasterCountyPropertiesinUpperMacungieTownship,LehighCountyPropertynorthofMartinsCreekPlantsite,LowerMt.BethelTownship,NorthamptonCounty263.33acresinvarioustownships,JuniataCounty275.08acresinWhiteDeerTown-ship,UnionCounty305acresinPalmerandBethlehemTownships,NorthamptonCountyStructuresandequipmentatthePequeaCreekRecreationAreainLancasterCountyLandinUpperPaxtonTownship,DauphinCounty64minoritemslessthan$100,000each251,685118g848357,8061,199g278112,536550,030791,4413,628,8543628854118<797(Nochangesassumed)128,433AccumulatedProvisionforDepreciationandAmortizationofNonutilityProperty-Account12284,283,556S4283556S(446730)

AttachmentII-A-23Page5PennslvaniaPower6LihtComanOtherPropertyandInvestments,TemporaryCashInvestmentsandWorkinFundsDecember31,1979December31,1980InvestmentsinSubsidiaryandAssociatedCompanies-EquityMethod-Account123.1RealtyCompanyofPennsylvaniaCommonStock-150sharesAdvances-OpenAccountUndistributedEarningsServiceDevelopmentCorporationCommonStock-100sharesUndistributedEarningsPennsylvaniaMinesCorporationCommonStock-10sharesCapitalContributionHersheyElectricCompanyCommonStock-584shares5-1/4%NoteAdvances-OpenAccountUndistributedEarningsLCALeasingCorporationDemandNotesSafeHarborWaterPowerCorporationCommonClass"B"Stock(Voting)-100,000sharesUndistributedEarningsInterstateEnergyCompanyCommonStockUndistributedEarningsArcadiaCoalCompanyCommonStockand/orothersecurities8,015,000347,5421,833,2401,804,519334,149105,03214,077,981701,2502,012,4151,185,868850,0003,315,497359,92402494241815,000347,542(861,110)1,804,519361,149105,0321850,0003,315,497359,9241,00010000000016298554*OtherInvestments-Account124GreaterHazletonCommunityAreaNewDevelopmentOrganization,Inc.-Mortgages(4)GreaterPittstonChamberofCommerce-Mortgages(2)GreaterTamaquaIndustrialDevelop-mentEnterprise-MortgageIndustrialDevelopmentFundofClintonCounty-MortgageMiltonAreaDevelopmentAssociation-Mortgages(2)Scranton-LackawannaIndustrialBuildingCompany-Mortgages(2)$370,999286,604247,039192,58180,000456,499(Nochangesassumed)

AttachmentII-A-23Page6PennslvaniaPower&LihtComanOtherPropertyandInvestments,TemporaryCashInvestmentsandWorkinFundsDecember31,1979December31,1980ShamokinAreaIndustrialCorporation-MortgageGreaterPottsvilleIndustrialDevelopmentCorporation-MortgageMahanoyAreaJointIndustrialCorporation-MortgageMountCarmelDistrictIndustrialFund,Inc.-MortgageShenandoahChamberofCommerce-MortgageUpperPerkiomenIndustrialDevelopmentCorporation-MortgageEmployeesRelocationAcquisitions-VariousNotesSunburyNewEnterprisesExpansionDrive,Inc.-VariousNotesConfront,Inc.-PromissoryNotewithoutinterestHarrisburgAreaIndustrialDevelop-mentCorp.-2-1/2%BondsGreaterBerksDevelopmentFund-2-1/2%BondsSunburyAreaIndustrialDevelopmentPlan-6%BondsElizabethtownDevelopmentCorp.CapitalStock-70sh'aresRadiationManagementCorporationCapitalStock-100sharesRenovoCommunityTradeAssociationCommonStock-1shareOther-Nominalbookinvestmentof$1.00each(llitems)$70,000109,60425,00072,00020,0007,03850,0003,000.50075,0005,0006,0003,50012,500200$2093075(Nochangesassumed)$2093075OtherSpecialFunds-Account128U.S.GovernmentPostOffice-AdvanceforpostagepermitsCityofAllentown-DepositUnitedAirLines,Inc.-DepositBoroughofMauchChunk-DepositLuken'sStewart&Co.-InsurancepremiumHummelsWharfMunicipalAuthorityDepositMechanicsburgGas&WaterCo.-Equity-watermain17,6041,0004252004510$19285(Nochangesassumed)$19285 AttachmentII-A-23Page7PennsylvaniaPower&LihtComanOtherPropertyandInvestments,TemporaryCashInvestmentsandWorkinFundsDecember31,1979December31,1980TemporaryCashInvestments-Account136NoneNoneWorkingFunds-Account135EmployeetemporaryadvancesEmployeepermanentadvancesOfficecashfundsChangefundsRelocationadvancesTuitionadvancesReceivedfordepositMAACAgreementPa.ElectricCo.,OperatorofJointOwnedStations-KeystoneSteamGenerationStation,Shelocta,PAConemaughSteamGeneratingStation,NewFlorence,PATreasurer'sWorkingFund94,29830,86019,0911,555280,092100,1842514,103222,120341,7008369081177944(Nochangesassumed)$1177944 II-A-24G,F.VandersliceQ.24.AttachchartexplainingCompany'scorporaterelationshiptoitsaffiliates(SystemStructure).A.24.Therequestedchart,togetherwithexplanatorytextaresuppliedonAttachmentII-A-24(5pages).

AntII-A-24Pa.FfrrsglgcsstsQrQAISIQITttlM'AsrSIASTTCONFAL'TOyFINNSTSTANIA5ICTICCINITIDQNICICONFASTIotcc~I~I~laclgyCoop<<ayFftsitrlcastsNIN55cogFoallloNgeltNrloelg/t<<tetFo<<ctColptllrlesISCJI<<IlesfylaelJlacIyWalccoeat'tattle~IceIspeal~svICACarper>tieslee<<lagCorpore\losItlaelCCseltlopscslCast<<ay'Coo1tPt1CIOp4CotC4apcs7LTeaiceIs<<altar~1<<4OrestesPt.eosrcteoaJPeelltpocslCoapee7Oce<<aeOr<<catWaerCoolNllICoolCosy<<ayCoop<<aytgtOaclglNl~legCorporal!osga4toa'leaacllaaNl~IogNlalogFoepesyCoaNay~sitsrage<<JloIseeallclpetcJCecal~fliesofoaOJJltlaael~eaelgl~ryCOJcsescrgersitsesttser,ttesaleatyogis~I~1I1~IIo1SateI,I,Oaet~Ir4aea<<4.IOet~l<<IL4eoc4I~C4allalofopcl~114sr57ogltcst~I AttachmentII-A-24Page2AFFILIATESOFPP6L1.PENNSYLVANIAMINESCORPORATION(PMC)(IncorporatedinPennsylvania)~a.PMCownsalloutstandingcapitalstockof:TunneltonMininComan(Tunnelton)and(2)0RushtonMininComanRushton).Thesetreecompany.esPMC,TunneltonandRushton)operatethreeundergroundmines,togetherwithcoalcleaningandloadingfacilities.Thesefacilitiesarelocatedasfollows:PMC-nearGraham,PennsylvaniaTunnelton-Saltsburg,PennsylvaniaRushton-OsceolaMills,PennsylvaniaPP)Lpurchases,and.consumesinitsgen-eratingfacilities,allcoalproducedbythesecompanies;(4)TheOneidaMininComanOneida,whichoper-atescoalcleaningandloadingfacilitiesnearArmagh,Pennsylvania.PP5Lpurchases,andconsumesinitsgeneratingfacilitiesallcoalcleanedandloadedbyOneida;GreeneHillCoalComanandGreeneManorCoal~Coman,otowz.cowncoalreservesatvariouslocate.onsinGreeneCounty,Pennsylvania;UraniumResourcesandDevelomentComan(URADCO),wic1s3.nteus1ness0acqu1r1ngpotentialuranium-bearingpropertiesandexploringforuraniumore.URADCOmaintainsanofficeinGrandJunction,Colo-rado,andownsandleasespropertieswhicharelocatedprincipallyinCarbonandAlbanyCounties,Wyoming,andSanJuanCounty,Utah;andPemico,Incororated,whichisinactive.AllsubsidiariesandaffiliateslistedareincorporatedinPennsylvaniaunlessotherwisenoted.

AttachmentII-A-24Page3b.PMCalsooperatesasaserviceorganizationforalltheaforesaidsubsidiaries,exceptURADCO.Inthiscapacity,itcarriesoutaccountingandrecord-keepingfunctions,andprovidesoperationalandmanagerialdirectioninsuchareasaspersonnel,safetyandinsurance.2.INTERSTATEENERGYCOMPANY(IEC),whichisaDelawarecorporation,ownsanmalelongoilpipelineandcertainassociatedfacilities.Thepipelineorigi-natesatMarcusHook,Pennsylvania,whereoilisreceivedandstoredbySunOilCompany.ThisoilistransportedthroughtheaforesaidIECpipelinetoPP6LandtoJerseyCentralPower4LightCompany.IECwaspreviouslyasubsidiaryoftheRealtyCompanyofPennsylvania(seebelow).OnFebruary29,1980,PP6LreceivedPUCapprovaltoacquireallofIEC'soutstandingcapitalstock.*3.REALTYCOMPANYOFPENNSYLVANIA(RCP)a.RCPownsalloutstandingcapitalstockoftwoDelaware-charteredcorporations:(1)BDNCororation,whichownspropertyuponwxccertainoilstoragefacilitiesaresituated.ThesefacilitiesareusedtostoreoilwhicheventuallypassesthroughtheIECpipelinedescribedabove;(2)LCALeasinCororation,whichownsandoperateswareoustingandopen-groundstoragefacilitiesinChester,Pennsylvania.b.RCPalsoownsrealpropertywhoseuseisnotdirectlyrelatedtoutilityoperations.4.SERVICEDEVELOPMENTCOMPANY(SDC)-SDCownsvariousreaestateinvestmentsxnitsownnameandasaco-venturer.SDCalsoownsalloftheoutstandingcapitalstockof:(1)HanoverDevelomentComan,whichownspartofaresiento.alz.nustrz,aparkand,AsperordersinDocketNos.A-80101951-F.500,S-80014522andS-8'0014523.

AttachmentII-A-24Page4(2)CourtDevelomentComan,whichownscertainrealestate.5.SAFEHARBORWATERPOWERCORPORATION(SafeHarbor)SaeHaror,xnwz.cPolsaone-txrowner-shipinterest*,ownsandoperatesa230N'1hydro-electricfacilitywhichislocatedinLancasterandYorkCounties.PP5Lisentitledtoone-thirdofthisfacility'scapacityandoutput.6.RADIATIONMANAGEMENTCOMPANY(RMC)-RMC,inwhichLolsaone-sextownerszpinterest,wasformedin1969inresponsetoaNuclearRegulatoryCommission(NRC)mandatethatanycompanyhavinganuclearpowercommitmentestablishanemergencymedicalprogram.RMC'spresentactivitiesinclude:(1)=operation,attheUniversityofPennsylvaniaHospital,ofafacilitywhichisdesignedtoprovideemergencyradiological-medicalservicesforindividualswhosufferradiationexposure.(RMCalsooffersconsultingservicesrelatedtoprovisionofsuchemergencyservices.);(2)carryingoutofprogramsfordecontaminationofareasinwhichradiation-relatedindustrialaccidentsoccur;and(3)provisionofradiologicalandwaterpollute;onmeasurements.andpredictions,asrequired'pvariousgovernmentalentities,7.'A'DYJ'ANE'COLL'IERIES'INCORPORATED'('L'a'dZa'ne}-Lady'neoperatesanunergrounmanetogeterwith.cleaningandloadingfacilitiesinPenfield,Pennsylvania.PP5LdoesnotownthecapitalstockofLadyJane,butcontrolsitsoperationsbyagreement.PPPLpurchases,andconsumesinitsgeneratingfacilities,allcoalproducedbyLadyJane.*Theremaininginteres'tiqownedbyByltimoreGasandElectricCompany.Othercompanieswhich.ownequalinterestsareAtlanticCi,'tpElectricCompany,BaltimoreGas5ElectricCompany,Phila-delphiaElectricCompany,PotomacElectricPowerCompanyandPublicServiceElectricPGasCompany.DelmarvaPower0LightCompanyandGeneralPublicUtilitiesCorporationalsoareparticipantsinthiscompany~soperations.

AttachmentII-A-24Page5NOTEONANTICIPATEDACQUISITIONOFSUBSIDIARY-OnFebruary7,1,Lsigneacontractunerwicitagreed,subjecttoregulatoryapprovals,toacquire,amongotherthings,alloftheissuedandoutstandingcapitalstockoftheArcadiaCompany,Incorporated,ofIndiana,Pennsylvania.TheArcadiaCompanyisinthesurfacecoalminingbusiness.ThecoalwhichitproducesisnotcurrentlysoldtoorconsumedbyPPgL.NOTEONMERGERWITHHERSHEYELECTRICCOMPANY-OnMarch1,1980,HerseyElectricCompany,anelectricistributioncompanyservingtheareainandaroundHershey,Pennsylvania,mergedwithPP<L.ThemergerhadbeenapprovedbythePUCatDocketNos.A.00099763F002andA.00024924F200.PriortothemergerHersheyhadbeenanaffiliateofPP5L.

II-A-25R.R.FortuneJ.F.Brennan25.Iftheutilityplanstomakeaformalclaimforaspecificallowablerateofreturn,providethefollowingdatainstatementorexhibitform:a~b.c~d.e.f.Claimedcapitalizationandcapitalizationratioswithsupportingdata.Claimedcostoflong-termdebtwithsupportingdata.Claimedcostofshort-termdebtwithsupportiagdata.Claimedcostoftotaldebtwithsupportingdata.Claimedcostofpreferredstockwithsupportingdata.Claimedcostofcommonequitywithsupportingdata.A.25.SeetestimonyandexhibitsofRobertR.FortuneandJosephL.Brennan.

II-A-26G.F.VandersliceR.J.BerniniQ.26.Providethefollowingincometaxdata:a~b.Consolidatedincometaxadjustments,ifapplicable.Interestfortaxpurposes(basis).A.26.a.None.b.l.Interestonlong-termdebt,amortizationofdebtdiscountandexpense,amortiza'tionofpremiumondebt,interestonshort-termdebtandTaxesAssumedonInterestareallocatedbetweenvariousdepartmentsonbasisofaverageofnetbalancesatthebeginningof,theyearandendof'heyearintherespectivePlantAccounts(includingConstructionWorkinProgress),InvestmentsinAssociatedCompanies,OtherInvestments,andOtherSpecialFunds.2.Interestoncustomers'epositsisallocatedbetweenvariousdepartmentsonbasisofbalancesinA/C's23510and23590,Customers'eposits,atendofthecurrentmonth.3.SeeScheduleD-17ofExhibitHistoric1andExhibitFuture1forthenormalizationofinterestincomputingincometaxes.

ExhibitJFBlPENNSYLVANIAPOWER&LIGHTCOMPANYExhibittoAccompanyDirectTestimonyofJosephP.Brennan,PresidentAssociatedUtilityServices,Inc.ConcerningPairRateofReturn c~

ExhibitSchedule1AnnualRateofInflation"Years1970-1979,Inclusiveand1980EstimatedPercentChangeYearlyintheConsumerPriceIndex12.010.08.06.04.02.00.0II70717273747576777879Years"Theannualrateofinflationasdeterminedbypercentchangeinthean-nualaverageConsumerPriceIndexaspublishedintheFederalReserveBulletin.'970-5.9/71-4.3723~31973-6.2%,1976-5.8%1979-11.3%80-Estimatedtobedoublediit74-11.077-6.5 ExhibitSchedule2RateofReturnonAveraeBookCommonEuit1)HistoricComparisonofPennsylvaniaPower&LightCompany,S&P400Industrials,Hoody's24PublicUtilitiesandFiveCompanyBarometerGroupfortheYears1969-1978Inclusive1978197719761975197419731972197119701969PennsylvaniaPower&LightComan211.7%14.311.812.712.711-311.411.410.012.2S&P~400314~4%13.413.913.014.513.812.111.311.713.4Hoody's~243)11.3%11.511.410.910.411.512.5ll.811.712.6Baro'meter~Grou3)11.4%12.211.911.212.012.212.812.913.114.0AverageRateofReturn.rageCommonEquityRatio(4)12.0%30%13.2%68%11.6%34%12.4%35%AverageCommonEquityComponent(RatioxRate)3.6%9.0%3.9%4.3%Notes:(1)RateofReturnonAverageBookCommonEquity=incomeavailableforcommonequityaveragebeginningandendingyear'sbalanceofbookcommonequity.(2)Basedonfinancialstatementsasoriginallyreportedineachyearofthestudyperiod.(3)Arithmeticaverageofachievedresultsforallindividualcompaniesinthegroup.(4)Arithmeticaverageofindividualcommonequityratiosforallcompaniesineachgroup.CommonEquityRatio=year-endbalanceofbookcommon,equity.year-endbalanceoftotalcapitalization(includingcurrentmaturitiesoflong-termdebtandshort-termdebt).SourceofInformation:AssociatedUtilityServices,Inc.computerizeddatabaseStandard&Poor'sCompustatServices,Inc,UtilityCompustatIIInteractiveDataCorporation

4'C.ExhibitSchedule3Market/BookRatio(1HistoricComparisonofPennsylvaniaPower&LightCompany,S&P400Industrials,Moody'24PublicUtilitiesandFiveCompanyBarometerGroupfortheYears1969-1978InclusiveYear1978197719761975197419731972197119701969PennsylvaniaPower&LihtCo.(2)86.9%95.489.277.379.6102.4117.8118.4122.0155.7S&P4~00(3128.2%134.8151.9140.1150.9227.2273.9255'229.9297.8Moody's~24389~7%99.292.877'80.0112.6135.8148.0144.4173.8Barometer~Grou396.4%108.2101.683.187.0115.2134.7150'149.0179.6Notes:(2)(3)Market/BookRatio=averageofyearlyhigh-lowmarketprice.averagebe-ginningandendingyear'sbookvaluepershare.Baseduponbookvaluescalculatedfromfinancialstatementsasoriginallyreportedineachyear.Arithmeticaverageofachievedresultsforallindividualcompaniesinthegroup.SourceofInformation:AssociatedUtilityServices,Inc.computerizeddatabaseStandard&Poor'sCompustatServices,Inc.UtilityCompustatIIInteractiveDataCorporation

ExhibitSchedule4Earnins/PriceRatioUnadusted(1)HistoricComparisonofPennsylvaniaPower&LightCompany,S&P400Industrials,Moody's24PublicUtilitiesandFiveCompanyBarometerGroupfortheYears1969-1978InclusiveYear1978197719761975197419731972197119701969PennsylvaniaPower&LihtCo.13.2%14.712.916.116.011.410.010.08.38.0S&P~COO211.7%10.310.710.813.49.05.75.15~95.5Moody's~24(212.8%11.812.614.713.510.39.48.3,8.47.4Baxoineter~Grau212.0%11.411.913.514.010.69.68.89.17~9rageEarnings/PriceRatio:5YearsEnded19780YearsEnded197814.6%12.111.4%8.813.1%10.912.6%10.9AverageCommonEquityRatio(3):5YearsEnded197810YearsEnded197831%3068%6834%3436%35CommonEquityComponent:5YearsEnded197810YearsEnded19784.5%3.67.8%6.04'%3.74.5%3.8Notes:(1)Earnings/PriceRatio=reportedearningspershare.averageyeaxlyhigh-lowmarketprice.(2)Arithmeticaverageofachievedresultsforallindividualcompaniesinthegroup.(3)Arithmeticaverageofindividualcommonequityratiosforallcompaniesineachgroup.CommonEquityRatio=year-endbalanceofbookcommonequity.year-endbalanceoftotalcapitalization(includingcurrentmaturitiesoflong-termandshort-termdebt).SourceofInformation:AssociatedUtilityServices,Inc.computerizeddatabaseStandard&Poor'sCompustatServices,Inc.UtilityCompustatIIInteractiveDataCorporation

ExhibitSchedule5DividendYield1)HistoricComparisonofPennsylvaniaPower&LightCompany,S&P400Industrials,Hoody's24PublicUtilitiesandFiveCompanyBarometerGroupforeheYears1969-1978InclusiveYear1978197719761975197419731972197119701969PennsylvaniaPower&LiheCo.8.9%8.28'10.19.87.56.66.76.85.5S&P400(2)4.2%3.93.44.14.32.92.42.63.22.7Ifoody's24(2)9.0%8.18.39.89'6.75.95.65.95.0Barometer~Garou(2)8.9%7.78.210.09.77.46.55.96.35.3Notes:(1)DividendYield=yearlydividendspershare.averageyearlyhigh-lowmarketprice.(2)ArithmeticaverageofachievedresultsforallindividualcompaniesinthegroupSourceofInformation:AssociatedUtilityServices,Inc.computerizeddatabaseStandard&Poor'sCompustatServices,Inc.UtilityCompuseatIIInteractiveDataCorporation hJ ComparisonofInteRateTrendsforInvestor-OwnedPublicUtilityandIndustrialCompaniesYears1955196019651970-1979and1980toDate'earsBaaRatedAaaRatedAaRatedARatedPublicPublicPublicPublicUtilitiesIndustrials~SreadUtilitiesIndustrials~SpreadUtilitiesIndustrials~SreadUtilitiesIndustrials~Urea..955.960965970971972973974975976977978979anuary1980ebruary1980arcb19803.094.474.508.317.727.467.608.719.038.638.198.879.8611.3312.7513.333.004.284.457.777.056.977.288.428.618.237.868.589.39.10.8512.0112.59.09.19.05.54.67.49.32.29.42.40~33.29.47.48~74.743.134.534.528.528.007.60.7.729.049.448.928.439.1010.22-ll.9513.1914.093.114.394.507.947.237.11.7.408.648.908.598.048.749.6511.1612.2612.93.023.22.144.78.024.58.588.69.778.16.497.72.327.84.409.50.5410.09.339.29.398.61.369.29.57.10.49.79-12.27.9313.551.1614.653.164.584.558.337.617.367.638.909.218.888.368.949.9111.4812.4213'9.06.20.03.36.55.36.21.60.88.41.25.35.58.791.131.363.434.974.789.188.638.178.179.8416.969.829.069.6210.9612'214.4215.263.475.114.929.008:377.99'.079.1410.269.678.879.3510.4211.9212.7313.64(.04)(.14)(.14).18.26.38.10.70.70.1519.27.541.001.691.62ate:Allyieldsaredistributedyields.ourceofInformation:Moody'sInvestorsService,Inc.(PublicUtilityManualsandBondSurveys)MOOO'Ift0 l

PENNSYLVANIAPOHERANDLIGfiTCOMPANYCAPITALIZATIONANDFINANIALS'1'ATISTICS1974-197'3,INCLUSIVEAMOUNTOFCAPITALEMPLOYEDTOTALPERMANENTCAPITALSfiORT-TERMDEBTTOTATCAPITATEMPLOYED1978$2,783,11019?,000$3,33,1$0$7.,026,37073,630$~00.ODO$2,346,13060.0100,40$2,607,14023,400$33330,40Soma=-I=a~a197719761$f75~THOUSANDSOFDOLLA~RS1974$14743,3$in85,910$~2.~$10PERCENTINCREASE1979OVER197462.6%INDICATEDAVERAGECAPITALCOSTRATES(1)VBG-TERMDEBTPREFERR'EDSTOCKFINA.'TCIALRATIOS-tlARKETBASEDEARNINS7PRICERATIOMARKET/AVERAGEBOOKRATIODIVIDEVIDYIELDPFRCNTCfiAMEINEARNINGSPERSHAREYEARLYDIVIDENDPAYOUTRATIO7.9%8.11342%86.98.9(15.1)67'7.5%8.0'4~7%e5.48.225'56.67.2%84312.9%89~28.6(6.6)67.76.9%7.416.1%77.310'(0.3)63'6'%6.916.0%794694812.161.629-5%17.45YFARAVERAGE14.5%85.79.13~7.63.4CAPITALSTRUCTURERATIOSLONG-TERMDEBTPREFERREDSTOCKCOMMOVEQUITYBASCDONTOTALCAPITALrTOTALDEBT,INCLUDISVGSfiORTTFRMPREFERREDSTOKCOLTMONEQTJITYRATEOFRCTURNONAVERAGEBOOKCO41$fONEQUITY45.2%19'35'100.0%49.7%18~333'100.0'%1.7%49.3%18'33'100.0%48.8%18.532'100.0%14.3%50.4%18~930.81000%51.6%,18'30.1100.0%11.8%51.5%.184130.4100.0%53.2%179'100.0%12.7%52.5%17.030.5inn.0%54.7%16.229'100.0'%2.7>>49.6%18.432an100.0%5144%17.830.8100.0%12.6%RATEOFRETURNONAVERAGEBOOKCOMMONEQUITYOVFRINDICATEDAVERAGELOVINGTERMDEBTCOSTRATE3.8%6.8%4.6%5.8%6.6%5.5%COVERAGES-IVCL.ALTAFC(2)BEFOREINCOlETAXES:ALLINTERESTCHARGESAFTERINCOMETAXES'LLINTERESTCHARGESOVERALLCOVERAGE'LLINTEREST+PFD.DIV.3~OX2.41.73.4X2451.82.6X2'1.72.8X23I~72.9X2.41.92.9X2.41.7COVERAGES-EXCTATLAFC(3)BEFOREINCOlF,TAXES,ALT<INTERESTCHARGESAFTERINCOMETAXESALL~IfiTERESTCHARGESOVERALLCOVERAGE:ALLINTEREST+PFD~DIVQUALITYOFEWRVLINGROTHERINC.PRE-TAXGROSS.IN'NCL~AFC(4)AFC/INCOMEAVAILABLEFORCOMMONEQUITYEFFECTIVEINCOMETAXRATEINTERNALCASHGENERATION/GROSSCONSTP.(5)COMMONDIVIDENDCOVERAGE(6)SRT:T!AGEqFnnNnTES.2'X147,>>14223.2%66'290924'202X2~8X2'1.514.9%43.83442304621X1.TT1.320.4%57.420.820'2.4X2'X14814419.1%50'27.021'244X2'X2'1~513.5%32'29.\25.927X2.4X1~9'rfM&f!$ff$AO18.2%fCV.50.0OthI7'X PENNSYLVANIAPOWER6LIGHTCOfPANYCAPITALIZATIONANDFINANCIALSTATISTICS1979ExhibitSchedule7Page2of12AMOUNTOFCAPITALEMPLOYEDTOTALPERffANENTCAPITALSHORT-TERMDEBTTOTALCAPITALEMPLOYEDINDICATEDAVERAGECAPITALCOSTRATES(1)LONG-TERMDEBTPREFERREDSTOCK1979(THOUSANDSOFDOLLARS)$3,343,37430775$33741499.0%8.4FINANCIALRATIOS-MARKETBASEDEARiNINGS/PRICERATIOMARKET/AVERAGEBOOKRATIODIVIDENDYIELDPERCENTCHANGEINEARNINGSPERSHAREYEARLYDIVIDENDPAYOUTRATIO17.2%75.910.416.162.3CAPITALSTRUCTURERATIOSBASEDONTOTALPEIQfANENTCAPITAL:LONG-TERMDEBTPREFERREDSTOCKCOMMONEQUITYBASEDONTOTALCAPITAL:TOTALDEBT,INCLUDINGSHORT-TERMPREFERREDSTOCKCOi~fMONEQUITY46.7%20.133'100.0%47.1%19.933.0100.0%RATEOFRETURNONAVERAGEBOOKCOMMONEUITY12.7%RATEOFRETURNONAVERAGEBOOKCO>fMOiVEQUITYOVERINDICATEDAVERAGELONGTERMDEBTCOSTRATE3.7%COVERAGES-INCLUDINGALLAFC(2)BEFOREINCOMETAXES:ALLINTERESTCHARGESAFTERINCOMETAXES:ALLINTERESTCHARGESOVERALLCOVERAGE:ALLINTEREST+PFD.DIV.27x2.31.7COVERAGES-EXCLUDINGALLAFC(3)BEFOREINCOMETAXES:ALLINTERESTCHARGESAFTERINCOMETAXES:ALLINTERESTCHARGESOVERALLCOVERAGE:ALLINTEREST+PFD.DIV.1.9x1.61.2UALITYOFEARNINGSOTHERINCOME/PRE-TAXGROSSINCOMEINCLUDINGAFC(4)AFC/INCOMEAVAILABLEFORCO~ifMONEQUITYEFFECTIVEINCOMETAXRATEINTERNALCASHGENERATION/GROSSCONSTRUCTION(5)COiifMONDIVIDENDCOVERAGE(6)29.4%78.821.912.71.6xSEEPAGE3FORNOTES.

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ExhibitSchedule7Page3of12PennslvaniaPower&LihtComanCapitalizationandFinancialStatistics197S-1974InclusiveNotes:I(1)Computedbyrelatingactuallong-termdebtinterestorpreferredstockdividendsbookedtoaverageofbeginningandendinglong-termdebtorpreferredstockreportedtobeoutstanding.(2)Coverages-includingallAFC-representthenumberoftimesavailableearnings,includingAFC(allowanceforfundsusedduringconstruction)asreportedinitsentiretyincludedasincome,coverfixedcharges.Fortheyears1978and1977,AFCincludesallowanceforborrowedandotherfundsusedduringcon-struction.(3)Coverages-excludingallAFC-representthenumberoftimesavailableearnings,excludingAFC,coverfixedcharges.(4)Otherincome/Pre-taxgrossincomeincludingAFCisnon-operatingincome(netofexpenseandtaxes)includingallAFCasreportedinitsentirety,asapercentageofincomeavailableforfixedcharges,includingallAFC,beforeincometaxes.(5)Internalcashgeneration/Grossconstructionisthepercentageofgrossconstructionexpenditures,excludingallAFC,providedbyinternallygeneratedfundsfromoperations,excludingallAFC,andafterpaymentofallcashdividends.(6)Commondividendcoverageistherelationshipofinternallygen-eratedfundsfromoperations,excludingallAFC,andafterpay-mentofpreferredstockdividendstocommondividendspaid.SourceofInformation:AssociatedUtilityServices,Inc.computerizeddatabaseStandard&Poor'sCompustatServices,Inc.UtilityCompustatIIInteractiveDataCorporation CI1t~II,~'

PennslvaniaPor&LihtCo'manAnalysisofPublicOfferingsofCommonStockYears1974-1979DateofProspectusNumberofSharesOffered11-27-793-29-782,500,0003,000,0003-29-773,200,0003-30-763,500,0004-2-753,000,0007-10-742,200,000DollarAmountofOfferingOfferingPrice$18.50$22.125$21.50$20.00$18.00$17.00$46,250,000$66,375,000$68,'800,000$70,000,000-$54,000,000$3,740,000UnderwritingDiscountGrossProceedstoCompanyActualCompanyExpensesNetProceedstoCompanyEarningsPerShare(1)for12MonthsEndedAnnualizedDividendsPerShare.6017.90.62521.50.07(3).04$17.83$21.46$2.01$1.92$3.37$3.28(9-30-79)(2-28-78).5520.95.04$20.91$2.90(2-28-77)$1.80.5919.41.03$19.38$2.87(12-31-75)$1.80.8517.15.03.$17.12$2.92(4)(2-28-75)$1.801.0215.98~05$15.93$2.62(5-31-74)$1.80BookValuePerShare(2)asofEarnings/NetProceedsRatioDividendYieldonOfferingPriceNetProceeds/BookRatioCommonEquityRatioBasedonPermanentCapital:ActualProFormaAfterNewFinancing$25.98(9-30-79)18.9%10.9%68'%32.6%33.1%$24.60(12-31-77)15.3%8.7%87.2%33.0%34.6%$23.46(12-31-76)13.9%8.4%89.1%30.8%32.8%$23.20(12-31-75)14.8%9.0%83.5%30.4%32.7%$22.91(12-31-74)17.1%10.0%74.7%30.6%32.6%$22.78(4-30-74)16.4%10.6%69.9%30.3%31.6%Notes'.(1)(2)(3)(4)SourceofInformation:ProspectusforeachofferingandCompany'sAnnualReporttoF.E.R.C.(Form1)Asrevealedin"heprospectusbeforedilutionfromadditionalsharesofferedorbeforeanyincreaseinearn'ngsrelatedtotheuseoftheproceedsfromthesale.Ascalculatedfromtheprospectusbasedonactualsharesoutstandingbeforeeffectofadditionalsharesoffered.Estimatedfromtheprospectus.Beforenonrecurringamountrelatingtoaccountingchange.COm0COm0DOCCI".00 1CIP1 PennslvaniaPower&LihtComanHarketPressure,IssuanceandSellingExpensesStudyforPublicOfferinsofCommonStockfortheYears1974-1979Inclusive~AvevaeDateofoffering11-27-793-29-783-29-773-30-764-2-757-10-74Underwriters'iscountasapercentofofferingprice3.24%2.82%2~56%2.95%4.72%6.00%3.72%Companyissuanceexpensesasapercentofofferingprice.38.18.19.15.17.29.23Totalissuanceandsellingexpenses3.623.002.753.104.89.6.293.95ifarketpressureonofferingpriceusingaverageclosingpriceduringtendayperiodprecedingtheS-7registra-tiondate5.234.442.913.891.800.473.12Totalissuanceandsellingexpensesandmarketpressure8.85%7.44%5.66%6.99%6.69%6.76%7.07%SourceofInformation:CompanyOfferingProspectusesCAO00OlDQvWrt00 ExhibitSchedule7Page6of12PennslvaniaPower6LihtComanCalculationofIssuanceandSellingExpensesasaPercentofOfferinPriceDateofOfferin11-27-793-29-783-29-773-30-764-2-757-10-74Underwriters'iscountPerShare$0.600.6250.550.590.851~02OfferingPrice$18.5022.12521.5020.0018.0017.00Underwriters'iscount-asaPercentofOfferinPrice3.24%2.822.562.954.726:00DateofOfferinCompanyIssuanceExpensePerShareOfferingPriceCompanyIssuanceExpenseasaPercentofOfferinPrice11-27-793-29-783-29-773-30-764-2-757-10-74$0.070.040.040.030.030.05'18.5022.12521.5020.0018.0017.00.38%.18.19.15.17.29SourceofInformation:Prospectusforeachoffering

PennslvaniaPower&LihtComanMarketPressureforPublicOfferingofCommonStockonNovember27,1979ExhibitSchedule7Page7of12PennsylvaniaPower&LihtCompanyDowJonesTradinDate10-17-7910-18-7910-19-7910-22-7910-23-7910-24-7910-25-7910-26-7910-29-7910-30-79ClosingPrice-$18.87518.87518.5018.0017.87517.87517.7517.62517.62518.00IndexUtilityAverae(1)102.64102.64101.1599.5998.2798.2498.3899.5999.83100.58IndexIndicatedPressureAveragePriceDuringTenDayPeriodPrecedingS-7Date$18.10100.0910-31-79(2)'1-26-79(3)reringPricetoPublic(4)$18.50102.21102'1100.03106.73107.54106.63107.444.42%(5)5.23%(6)Notes:(1)(2)(3)(4)(5)(6)DowJonesUtilitiesclosingaverages.CompanyfilesFormS-7RegistrationStatementwiththeS.E.C.Lastreportedsalepriceastakenfromcoverofprospectus.Dateofoffering(11-27-79).Marketpressureonlastreportedsaleprice=DowJonesUtilityIndexof11-26-79minusPennsylvaniaPower&LightCompanyIndexonofferingprice(106.63%-102.21%=4.42%).Marketpressureonofferingprice=DowJonesUtilityIndexof11-27-79minusPennsylvaniaPower&LightCompanyIndexonofferingprice(107.44%-102.21%=5.23%).SourceofInformation:Company'sOfferingProspectusS&PDailyStockPriceRecord JI~U' ExhibitSchedule7Page8of12PennslvaniaPower&LihtComanMarketPressureforPublicOfferingofCommonStockonMarch29,1978TradinDate2-9-782-10-782-13-782-14-782-15-782-16-782-17-782-21-782-22-782-23-78PennsylvaniaPower&LightCompanyClosingPrice-Index$23.0023.0022.7522.7522.62522.62522.5022,5022.5022.375DowJonesUtilityAverae(1)105.62105.65104.33104.33103.96103.55103.52102.89102.54102.64IndicatedIndexPressureAveragePriceDuringTenDayPeriodPrecedingS-7Date$22.66103.902-24-78(2)3-29-78(3)eringPricetoPublic(4)$22.12521.87596.54$22.12597.64103.21106.06106.06102.08102.085.54%(5)4.44%(6)Notes:(1)(2)(3)(4)(5)(6)DowJonesUtilitiesclosingaverages.CompanyfilesFormS-7RegistrationStatementwiththeS.E.C.Lastreportedsalepriceastakenfromcoverofprospectus.Dateofoffering(3-29-78).Marketpressureonlastreportedsaleprice=DowJonesUtilityIndexof3-29-78minusPennsylvaniaPower&LightCompanyIndexonofferingprice(102.08%-96.54%=5.54%).Marketpressureonofferingprice=DowJonesUtilityIndexof3-29-78minusPennsylvaniaPower&LightCompany,Indexonofferingprice(102.08%-97.64%=4.44%).SourceofInformation:Company'sOfferingProspectusS&PDailyStockPriceRecord fI~t~V~4 ExhibitSchedule7Page9of12PennslvaniaPower&LihtComanMarketPressureforPublicOfferingofCommonStockonMarch29,1977TradinDate2-11-772-14-772-15-772-16-772-17-772-18-772-22-772-23-772-24-772-25-77PennsylvaniaPower&LihtComanClosingPrice--Index$22.2522.0022.2522.12522.12522.12522.37522.2522.2522.25DowJonesUtilieyAverae(l106.08105.89105.83106.95106.82106.69106.21105.86105.60104.97IndexIndicatedPressureAveragePriceDuringTenDayPeriodPrecedingS-7Date$22.20106.092-28-77(2)~-29-77(3)eringPricetoPublic(4)$22.37521.875$21.5098.5496.85105.29105.83105.8399.7699.761.22%(5)2.91%(6)Notes:(1)(2)(3)(4)(5)DowJonesUtilitiesclosingaverages.CompanyfilesFormS-7RegistrationStatementwiththeS.E.C.Lastreportedsalepriceastakenfromcoverofprospectus.Dateofoffering(3-29-77).Marketpressureonlasereportedsaleprice=DowJonesUtilityIndexof3-29-77minusPennsylvaniaPower&LightCompanyIndexonofferingprice(99.76%-98.54%=1.22%).(6)Marketpressureonofferingprice=DowJonesUtilityIndexof3-29-77minusPennsylvaniaPower&LightCompanyIndexonofferingprice(99.76%-96.85%=2.91%).SourceofInformation:Company'sOfferingProspectusS&PDailyStockPriceRecord ExhibitSchedule7Page10of12PennslvaniaPower&LihtComanMarketPressureforPublicOfferingofCommonStockonMarch30,1976TradinDate2-11-762-12-762-13-762-17-762-18-762-19-762-20-762-23-762-24-762-25-76PeniisylvaniaPower&LihtComanyClosingPrice.-Index921.12521.2521.37521.12521.12521.12521.12521.12521.2521.25DowJonesUtilityAverae(1)89.3189.1588.0387.5288.4889.3489.3788.8988.6787.97IndicatedIndexPressureAveragePriceDuringTenDayPeriodPrecedingS-7Date$21.1988.672-26-76(2)~-30-76(3)0ieringPricetoPublic(4)021.0020.0020.0094.3894.3887.5887.1487.1498.2798.273.89%(5)3.89%(6)Notes:(1)(2)(3)(4)(5)(6)DowJonesUtilitiesclosingaverages.CompanyfilesFormS-7RegistrationStatementwiththeS.E.C.Lastreportedsalepriceastakenfromcoverofprospectus.Dateofoffering(3-30-76).Marketpressureonlastreportedsaleprice=DowJonesUtilityIndexof3-30-76minusPennsylvaniaPower&LightCompanyIndexonofferingprice(98.27%-94.38%=3.89%).Marketpressureonofferingprice=DowJonesUtilityIndexof3-30-76minusPennsylvaniaPower&LightCompanyIndexonofferingprice(98.27%-94.38%=3.89%).SourceofInformation:Company'sOfferingProspectusS&PDailyStockPriceRecord III,~s$~

PennslvaniaPower&LihtComanMarketPressureforPublicOfferingofCommonStockonAril2,1975ExhibitSchedule7Pagellof12TradinDate2-13-752-14-752-18-752-19-752-20-752-21-752-24-752-25-752-26-752-27-75PennsylvaniaPower&LihtComanClosingPrice=-Index$19.2519.37519.62519.87519.62519.62519.62519.5019.0018.50DowJonesUtilityAverae(1)81.4281.7081.6481.6181.9081.9681.0379.5679.5079.50IndicatedIndexPressureAveragePriceDuringTenDayPeriodPrecedingS-7Date$19.4080.982-28-75(2)2-75(3)818.7518.00~eringPricetoPublic(4)$18.0092.7892.7879.3876.5976.5994.5894.581.80%(5)1.80%(6)Notes:(1)(2)(3)(4)(5)(6)DowJonesUtilitiesclosingaverages.CompanyfilesFormS-7RegistrationStatementwiththeS.E.C.Lastreportedsalepriceastakenfromcoverofprospectus.Dateofoffering(4-2-75)~Marketpressureonlastreportedsaleprice=DowJonesUtilityIndexof4-2-75minusPennsylvaniaPower&LightCompanyIndexonofferingprice(94.58%-92.78%=1.80%).Marketpressureonofferingprice=DowJonesUtilityIndexof4-2-75minusPennsylvaniaPower&LightCompanyIndexonofferingprice(94.58%-92'8%=1.80%).SourceofInformation:Company'sOfferingProspectusS&PDailyStockPriceRecord Illl ExhibitSchedule7Page12of12PennslvaniaPower&LihtComanMarketPressureforPublicOfferingofCommonStockonJul10,1974TradinDate5-30-745-31-746-3-746-4-746-5-746-6-746-7-746-10-746-11-746-12-74PennsylvaniaPower&LightCompanyClosingPrice"Index$19.12519.25020.12519.75019.62519.37519.25019.25019.12518.125DowJonesUtilityAverae(1)73.5973.3674.3974.7774.7775.3575.2574'974.5174.10IndicatedIndexPressureAveragePriceDuringTenDayPeriodPrecedingS-7Date$19.306-13-74(2)~-10-74(3)$18.12517.00ieringPricetoPublic(4)$17.0088.0888.0874.5173.7265.9865.9888.5588.550.47%(5)0.47%(6)Notes:(1)(2)(3)(4)(5)(6)DowJonesUtilitiesclosingaverages.CompanyfilesFormS-7RegistrationStatementwiththeS.E.C:Lastreportedsalepriceastakenfromcoverofprospectus.Dateofoffering(7-10-74).Marketpressureonlastreportedsaleprice=DowJonesUtilityIndexof7-10-74minusPennsylvaniaPower&LightCompanyIndexonofferingprice(88.55%-88.08%=0.47%).Marketpressureonofferingprice=DowJonesUtilityIndexof7-10-74minusPennsylvaniaPower&LightCompanyIndexonofferingprice(88.55%-88.08%=0.47%).SourceofInformation:Company'sOfferingProspectusS&PDailyStockPriceRecord PennslvaniaPowe.LihtComanCapitalStructureandRelatedRatiosBasedUponInvestor-ProvidedCapitalActualatDecember311979andEstimatedatDecember311980ActualatDecember311979RatiosEstimatedatDecember311980RatiosAmountOutstandin($000's)Excl.S-TDebtInc1S-TDebtAmountOutstandin($000's)Excl.Incl.S-TS-TDebtDebtFirstMortgageBondsPollutionControlBondsOtherLong-TermDebtTotalLong-TermDebt$1,314,50026,500221505156250546.7%46.2%$1,532,500(3)96,000(4)201,255(5)182975547.4%46.5%PreferredandPreferenceStock:PreferredStockPreferenceStockTotalPreferredandPreferenceStock474,77519800067277520.1'9.9533,175(6)242,500(7)77567520.119.7CommonStockCapitalStockExpenseRetainedEarnings(2)TotalCommonEquityTotalPermanentCapitalTotalShort-TermDebtTotalCapitalEmployed753,400(11,862)37190311134413,348,72130775$337949633.2100.0%33.099.10.9100.0%863,239(8)(12,972)(9)406189(10)12564563,861,88674526(11)$393641232'100.0%31.998.11.9100.0%Seepage2forNotesComment:TheCompany'sconstructionexpendituresincludingnuclearfuelpaymentsareestimatedtobe$660millionin1980.$8fLO'C0m

"~ExhibitSchedule8Page2of2PennslvaniaPower&LihtComanCapitalStructureandRelatedRatiosBasedUponInvestor-ProvidedCapitalActualatDecember311979andEstimatedatDecember311980Notes:Includescurrentportionduewithinoneyear.(2)Includesunappropriatedundistributedsubsidiaryearnings.(3)Reflectsthematurityof$37million27/8%FirstMortgageBondsonFebruary1,1980,andissuanceof$100.0million155/8%Serieson'April1>1980thefirmcommitmentof$30.0millionof113/4%SeriesonJune30,1980andtheproposedissueof$125.0millionadditionalFirstMortgageBondsinthelastquarterof1980.(4)Reflectsthematurityof$500,000of45/8%PollutionControlBondsonMay1,1980andtheproposedissueof$70million8.00%SeriesPollutionControlBonds.(5)Reflectsthematurityof$20million7%NoteonMay1,1980and$250,000maturityofOtherLong-TermDebt.(6)(>>Reflectsthesinkingfundrequirementof$1.6million7.40%SeriesPreferredStockonJuly1,1980andtheproposedissueof$60millionPreferredStock.Reflectsthesinkingfundrequirementsof$2.5million$13.00SeriesPref-erenceStockonOctober1,1980,$4.0million$9.25SeriesPreferenceStockonJanuary2,1980andissuanceof$51.0millionof$8.625SeriesCumulativePreferenceStockonJanuary25,1980.(8)Companyprovidedestimateofcommonequitywhichreflectstheproceedsoftheproposed$50millionfromthepublicsaleof2.5millioncommonshares,$10million(500,000shares)fortheexchangeofCompany'sstockforassetsofArcadia(surfacecoalminingoperation)and$49.8millionfromthedivi-dendreinvestmentplanandemployeestockownershipplan.(9)Companyprovidedestimateofcapitalstockexpense.(10)Companyprovidedestimateofretainedearnings.(11)Companyprovidedestimateofshort-termdebt.'ourceofInformation:Companyprovideddata.

  • PennslvaniaPower6LihtComanCalculationoftheCompositeInterestRateofActualatDecember311979Long-TermDebtExhibitSchedule9Page1of323/4%101/8%33/8%31/2%97/8%33/8%45/8%45/8%55/8%63/4%781/8%971/4%75/8%71/2%91/4%93/4%93/4%81/4%81/2%SeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueFirstMorteaeeBonds19801982198219831983-19851985199119941996199719991999200020012002200320042005200520062007AmountOutstandin($000's)$37,000-100,0007,50025,000100,00025,00030,00030,00030,00030,00040,00040,00050,00060,00075,00080,00080,000125,000100,000150,000100,000PercenttoTotal2.82%7'.61'.0.57.1.907.611.902.282.282.282.283'43.043.804.565.716.096.099.517.6111.417.61EffectiveInterestRate(1)2.73%10.323.423.5310.123.404.614.595.536.677.028.169.017.267.647.509.309.919.868.348.67WeightedInterestRate0.08%0.790.020.070.770.060.110.100.130.150.210.250.340.330.440.460.570.940.750.950.66TotalFirstMortgageBondsPollutionControlSeriesA45/8%Seriesdue198043/4%Seriesdue198143/4%Seriesdue198247/8%Seriesdue198355/8%Seriesdue2003TotalPollutionControlSeriesA$1314500500.500.50050024500$26500100.00%1.891.891.891.8992.44100.00%4.90%5.004.975.085.758.18%0.090.090.090.105.325.69%TotalFirstMortgageBonds$1,314,500TotalPollutionControlSeriesA26,500BankLoansdue1986200,0007%Notedue198020,000OtherLong-TermDebt1,50584'3%1.6912.801.280.108.18%5.6915.1875,(2}7.00(3)7.01(4)6.88%0.101.940.090.01TotalLong-TermDebt$1562,505100.00%9.02%(3)(4)EffectiveinterestrateforeachseriesofFirstMortgageBondsandPollutionControlBondsastakenfromSchedule9,page3.Weightedaverageprime.interestrateatDecember31,1979asprovidedbytheCompany.Nominalinterestratefor7%Notedue1980.Weightedaverage.

PennslvaniaPower6LihtComanCalculationoftheCompositeInterestRateofLong-TermDebtEstimatedatDecember311980ExhibitSchedule9Page2of3101/8%33/8%31/2%97/8%33/8%45/8%45/8%55/8%63/4%781/8%971/4%75/8%71/2%91/4%93/4%93/4%81/4%81/2%155/8%SeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueosedSeriell3/4%13%PropFirstMortaeBonds1982198219831983-1985198519911994199619971999199920002001200220032004200520052006200720102010(2)sdue2010AmountOutstandin($000's)1OO,OOO7,50025,0003.00,00025,00030,00030,00030,00030,00040,000.40,00050,00060,00075,00080,00080,000125,000100,000150,000100,000100,00030,000125,000PercenttoTotal6.53%0.491.636.521.631.961.961.961.962.612.613.263.924.89.5.225.228.166.529.796.526.521.968.16,EffectiveInterestRate(1)10.32%3.423.5310.123.404.614.59'5.536.677.028.169.017.267.647.509.309.919.868.348.6715.9211.8713.13WeightedInterestRate0.67%0.020.06o.660..060.090.090.110.130.180..210.290.280.370.390.490.810.640.810.571.040.231.07TotalFirst'ortgageBonds$1,532500100.00%9.27%PollutionControlSeriesA43/4%Seriesdue198143/4%Seriesdue198247/8%Seriesdue198355/8%Seriesdue2003TotalPollutionControlSeriesA8%ProposedSeriesdue20108%ProposedSeriesdue20108%ProposedSeriesdue20108%ProposedSeriesdue20105005005002450026,00030,00015,00015,00010,0000.52%0.520.5225.5227.0831.2515.6315.6310.415.00%4.975.085.758.148.148.148.140.03%0.030.031.471.562.541.271.270.85TotalPollutionControl$96000100.00%7.49%$1,532,50096,000200,0001255100.00%TotalFirstMortgageBonds83.75%9.27%7.76%TotalPollutionControl5.257.490.39BankLoansdue198610,9312.36(3)1.35OtherLong-TermDebt0.076.98(4)~~~TotalLong-TermDebt$1,829',7559.50!Notes:(1)EffectiveinterestrateforeachseriesofFirstHortgageBondsandPollutionControlBondsastakenfromSchedule9,page3-(2)FirmcommitmentfromMetropolitanLifefor$30.0millionon-June30,1980-ll3/4%Series.(3)Basedonestimateof12%primeat,December31,1980.~(4)Weiahtedaverage.

ComputationoftheEffectiveInterestRateofMortgageBondsandPollutionControlBondsbSeriesati~er3119802232i/101/8%33/8%31/2%97/8%33/8%45/8%5/8%SS/Sx63/4%781/8%971/4%7S/SX71/2%91/4%.93/4%93/4%81/4%81/2%155/8%113/4%13SeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesNominalDateofIssueBondsdue1980due1982due1982due1983due1983-85due1985due1991due1994due1996due1997due1999due1999due2000due2001due2002due2003due2004due2005due2005due2006due2007due2010due2010due20102-1-5010-1-749-1-523-1-534-3-79-6-6-798-1-5512-1-613-1-646-1-6611-1-671-1-696-1-693-1-702-1-71.2-1-721-1-734-1-745-1-75'l-1-7512-1-7612-1-774-1-806-30-80(est.)10-15-80Dateof~Haturir.2-1-8010-1-829-1-823-1-836-1-83-6-1-858-1-8512-1-913-1-946-1-96ll-1-97,1-1-996-1-993-1-002-1-012-1-021-1-034"1-045-1-05ll-1-0512-1-0612-1-074-3.-806-3Q-1Q10-15-10AverageTerminYears3083030530303030303030303030303030303030303Q.30PrincipalAmountIssued$37,000,000-100,000,0007,500,00025,000,000100,000,00025,000,00030,000,00030,000,00030,000,00030,000,00040,000,00040,000,00050,000,00060,000,00075,000,00080,000,00080,000,000125,000,000100,000,000150,000,000100,000,000100,000,00030,000,000125,000,000Premiumor(Discount)atIssuanceS342,894(875,000)(500,000)171,300300,000470,970378,300(36,400)(80,000)24,50030,000(35,250)79,200(298,400)(1,718,750)(875,000)(1,312,500)(1,589,000)(1,641,000)(210,000)(875,000)CompanyIssuance~Exense@$177.894155,20965,489145,417435,311130,03692,216153,42554,72554,84365,88465,90674,78896,892110,041115,9871295660143,454142,078208,229196,'460220,00090,000375,000NetProceeds37.36p,00098,969,7917,434,51124,854,58399,064,68924,869,96430,079,08430,146,57530,416,24530,323,45739,897,71639,854,09449,949,71259,98310874;854,70979,963,21379,571,940123,137,79698,982,922148,479,27198,214,54098,139,00029,700,000123,750,000NetProceedsRatio100.45%98.9799.1399.4299.0699.48100.26100.49101.39101.0899.7499.6499'099.8999.8199.9599.4698.5198.9898.9998.2198.1499~0099.00EffectiveInterestRate2.73%10.323.423.5310.123.404.614.595.536.677.028.16F017.267.647.509.309.919.868.348.671S.92fll.87'.1313+PollutionControlSeriesA41/2%Seriesdue197741/2%Seriesdue197845/S%Seriesdue197945/8%Seriesdue198043/4%Seriesdue198143/4%Seriesdue198247/8%Seriesdue198355/8%Seriesdue20038%ProoosedSeriesdue8%ProposedSeriesdue8%ProposedSeriesdue8%ProposedSeriesdue5-1-735-1-735-1-735-1-735-1-73I51735-1-735-1-7320106-1-8020107-1-8020109-1-802010'2-1-805-1-775-1-785-1-795-1-805-1-81'5-1-825-1-835-1-036-1-107-1-109-1-1012-1-1056789102328282828500,000500,000500,000500,000500,000500,000500,00024,500,00030,000,00015,000,00015,000,00010,000,000(262,978)I(375,000)(187,500)(187,500)(125,000)185,07775,00037,50037,50025,00027,551,945'9;550,00014,775,00014,775,0009,850,00098.4098.598.598.598.5495o4.86m494c4.90'.00~4.975.OSP)se7'.14m8.14o8.148.14Ž k0T ExhibitSchedule10Page1of3PennslvaniaPower&LihtComanCompositeCostRateofPreferredandPreferenceStockActualatDecember31,1979CumulativePreferredStock:AmountOutstandin($600's)PercentToTotalEffectiveCostRate(1)WeightedCostRate3.35%4.60%4.40%4.50%9.00%8.60%7.40%9.24%8.00%7.75%8.00%7.50%8.25%8.75%SeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSecondSeriesSeriesSeriesSeries4,1786,30022,87853,0197,7632223738,40075,00050,00060,00010,00015,00050,00060,000H0.62%0.943.407.881.153.305'111.157.438.921.492.237.438.923.37%4.794.4'65.039.168.757.469.478.067.808.067.548.298.820.02%0.050.150.400.11,,0.290.431.060.600.700.120.170.620.79CumulativePreferenceStock:$8.40Series$8.70Series$8.00Series913.00Series$11.00Series09.25Series40,00040,00035,00025,00050,0008,000955.955.203'17.431-198.558.848.1413.5111.409.280.510.530.420.500.850.11TotalCumulativePreferredandPreferenceStock$672775100.00%8.43%Notes:(1)EffectivecostrateforeachseriestakenfromSchedule10,page3.

ExhibitSchedule10Page2of3PennslvaniaPower&LihtComanCompositeCostRateofPreferredandPreferenceStockEstimatedatDecember311980CumulativePreferredStock:AmountOutstandin($000's)PercentToTotalEffectiveCostRate(1)WeightedCostRate3.35%4.60%4.40%4.50%9.00%8.60%7.40%9.24%8.00%7.75%8.00%7.50%8.25%8.75%13%PrSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSecondSeriesSeriesSeriesSeriesoposed'eries4,17.86,30022,87853,0197,7632223736,80075,00050,00060,00010,00015,00050,00060,00060,0000,54%0.812.956.841.002.874.749.676.457.731.291.936.457.737'33.37%4.794.465.039.168.757.469.478.067.808.067.548.298.8213.130.02%0.040.130.340.090.250.350.920.520.600.100.150.530.681.02CumulativePreferenceStock:$8.40Series$8.70Series$8.00Series$13.00Series$11.00Series$9.25Series$8.525Series40,00040,00035,00022,50050,0004,000510005.16'.164.512.906.450.526.578.558.848.1413.5111.409.288.710.440.460.370.390.740.050.57TotalCumulativePreferredandPreferenceStock$775;675100.00%8.76%Notes:(1)EffectivecostrateforeachseriestakenfromSchedule10,page3.

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.......,...,..ComutationofPreferredandPreference~tockEffectiveCostRatebSeriesCumulativePreferredStockNominalDividendRateDateofIssueOriginalAmountIssuedAveragePrincipalAmounttobeOutstanding(1)IssuanceExpensesNetofPremiumNetProceeds(2)NetProceedsRatio(3)EffectiveCostRate(4)3.35%Series4.60%Series4.40%Series4.50%Series9.00%Series8.60%Series7.40%Series9.24%Series8.00%Series7.75%Series8.00%SecondSeries7.50%Series8.25%Series8.75%Series'3%ProposedSeriesCumulativePreferenceStock3.35%4.604'04.509.008.607.409.248.007.758.007.508.258.7513.005-2-4610-21-488-5-5212-10-45-12-22-541-14-701-21-708-15-736-8-7610-19-778-8-781-16-792-1-797-2-79ll-8-798-1-807,763,00022,237,00040,000,00075,000,00050,000,00060,00000010,000,000"5,000,00050,000,00060,000,00060,000,0007,763,00022,237,00024,000,00043,965,51731,000,00048,000,0008,000,00015,000,00040,000,00037,200,00060,000,000$4,178,300.$4,178,3006,300,0006,300,00022,877,30022,877,30053,018,90053,018,90021,029248,899316,821154,373138,310393,860191,4321,074,709233,062293,89960,69678,305210,747290~000:c~c600000~'~$4,157,2716,051,10122,560,47947,435,627'c7,624,69021,843,14023,808,56842,890,80830,766,93847,706,1017,939,80414,921,69539,789,25336,910,00059,400,00099.50%96.0598.6289.4798.2298.-2399.2097.5699.2599.3999.2499.4899.4799.2299.003.37%4.794.465.039.168.757.469.478.067.808.067.548'98.8213.13$8.40Series$8.70Series$8.00Series$13.00Series$11.00Series$9.25Series$8.625Series8.40%8.708.0013.0011.009.258.62512-8-707-15-717-11-7210-10-748-28-759-30-751-30-80$40,000,00040,000,00035,000,00025,000,00050,000,00020,000,00051,000,000.$40,000,00040,000,00035,000,00015,500,00031,000,00012,000,00051,000,000678,905621,621582,445588,8491,084,49332,05551,000%$39,321,09539,378,37934,417,55514,911,15129,915,50711,967,94550,490,00P98.30%98.4598.3496.2096.5099.7399.008.55%8.848.1413.5111.409.288.71':Afterdeducting$5,428,900attributabletocostofCompanyrefinancedissuescarriedforward.Estimated.Notes:(1)Determinedbytakingintoaccounttheeffectofannualsinkingfundrequirementsforthoseserieswhichhavesucharequirementwhicharemetbytheretirementofshareswhichreducetheprincipalamountavailablefor~~~usebytheCompany.AcalculationofthefullcosttotheCompanymustincludetheeffectofsuchprincipal~+~~~~repaymentswhichhavebeenmadebydeterminingthesumoftheprincipalamountsoutstandingduringeachyearmm~~anddividingbythenumberofyearstheseriesistobeoutstanding.(2)Averageprincipalamounttobeoutstandinglessissuanceexpensesnetofpremium.(3)Netproceedsrelatedtotheaverageprincipaltobeoutstanding.4)C)(4)Theeffectivecostrateiscomputedbydivid'ngthenominaldividendratebythenetproceedsratio.

C410 MOODY'S24PUTILITIESCAPITALIZATIONANDFIN..LSTATISTICS(1)1974-1978,INCLUSIVEAMOUNTOFCAPITALEMPLOYEDTOTALPERMANEtJTCAPITALSHORT-TERMDEBTTOTALCAPITALEMPLOYED1978$2,532,46046,790$2,579,250197719761975(THOUSAtlDSOFDOLLARS)$2,345,420$2,180,700$2,019,57046,24042,45049,650$2,391,660$2,223,150$2,069,2201974(8)$1,846,05081,720$1,927,770PERCENTINCREASE1978OVER197433.8%INDICATEDAVERAGECAPITALCOSTRAES(2)LONG-TERttDEBTPREFERREDSTOCKFIIJANCIALRATIOS-MARKETBASEDEARNINGS/PRICERATIOMARKET/AVERAGEBOOKRATIODIVIDENDYIELDPERCENTCHANGEINEARtiINGSPERSHAREYEARLYDIVIDENDPAYOUTRATIOCAPITALSTRUCTURERATIOSBASEDOiNTOTALPERMANENTCAPITALLOiJG-TERMDEBTPREFERREDSTOCKCOMMONEQUITYBASEDOtiTOTALCAPITAL:TOTALDEBT,INCLUDINGSHORT-TEPZIPREFERREDSTOCKCOMMOIJEQUITY7~2%7.512.8'%9.79.04.173.050.2%12.936.9100.0i51.3%12.636.1100.Oi7.1%7.4ll.8%99.28.15.072.450.o%13.336.110D.Olt51.9%13.035.1100.0i6.9%7.512.6%92.88.37.369.052.2%13.034.8100.0i53.2%.12.834.0100.0II6.7%7.114.7%77.49.86.771.153.0%13.133.9100.0i54.4%12.732.9100.O'L6.3%6.713.5'%0.09.5(4~8)72~653.6%13.233.2ioo.oi56.1%12.531.4100.0i14.3%11.95YEARAVERAGE13.1%87.88.93.771.651.9>>13.135.0100.0i53.4%12.733.9100.OiRATEOFRETURNONAVERAGEBOOKCOM)1ONEQUITYRATEOFRETURiNONAVERAGEBOOKCO!utONEQUITYOVERZNDICATEDAVERAGELOtJG-TERMDEBTCOSTRATECOVERAGES-INCL.ALLAFC(3)BEFOREItJCOMETAXES:ALLINTERESTChARGESAFTERINCOMETAXES:ALLI?JTERESTCHARGESOVERALLCOVERAGE:ALLINTEREST'PFD.DIV.COVERAGES-EXCL.ALLAFC(4)BEFOREINCOMETAXES:ALLINTERESTCHARGESAFTERINCOMETAXES:ALLINTERESTCHARGESOVERALLCOVERAGE:ALLINTEPEST+PFD.DIV.QUALITYOFEARNINGSOTHERINC./PRE-TAXGROSSIN'tJCLAFC(5)AFC/INCOMEAVAILABLEFORCOMMONEQUITYEFFECTIVEINCOMETAXRATEINTER'JALCASHGENERATIOti/GROSSCONSTR.(6)COMttONDIVIDEiiDCOVERAGE(7)SEEPAGE2FORNOTES.ll.3%4.1%3.OX2.31.92.6X2.01.614.4%36.732.248.72.7X11.5%2.9X231.9~2.6X2.01.613.9%35.330.253.02.9X11.4%4.5%2.8X2~31.82.5X2.01.613.5%33.428.151.83.0X10.9%4.2%2.6X2.21.82.3X1.91.513.5%34.424.938.92.8X10.4%4.1%2.5X2.1i1.8~2.1X1.81.516.9%.41.318.330.32.6X4.3%2-8X2.21.82.4X1.91.614.4%36'26.744.52'X.-WM&O00tD(DAO'cr.0(DChf Mood's24PublicUtilitiesCapitalizationandFinancialStatistics(1)1978-1974InclusiveExhibitSchedule11Page2of6Notes:AllCapitalizationandFinancialStatisticsforMoody's24PublicUtilitiesarethearithmeticaverageoftheachievedresultsforeachindividualcom-panyinthegroup.(2)Computedbyrelatingactuallong-termdebtinterestorpreferredstockdiv-idendsbookedtoaverageofbeginningandendinglong-termdebtorpreferredstockreportedtobeoutstanding.Coverages-includingallAFCrepresentthenumberoftimesavailableearn-ings,includingAFC(allowanceforfundsusedduringconstruction)asre-portedinitsentiretyincludedasincome,coverfixedcharges.Fortheyears1978and1977,AFCincludesallowanceforborrowedandotherfundsusedduringconstruction.(4)Coverages-excludingallAFCrepresentthenumberoftimesavailableearn-ings,excludingallAFC,coverfixedcharges.Otherincome/Pre-taxgrossincomeincludingAFCisnon-operatingincome(netofexpenseandtaxes)includingallAFCasreportedinitsentirety,asapercentageofincomeavailableforfixedcharges,includingallAFC,beforeincometaxes.Internalcashgeneration/Grossconstructionist'epercentageofgrossconstructionexpenditures,excludingallAFC,providedbyinternallygen-eratedfundsfromoperations,excludingallAFC,andaEterpaymentofallcashdividends.(7)CommondividendcoverageistherelationshipofinternallygeneratedfundsEromoperations,excludingallAFC,andafterpaymentofpreferredstockdividendstocommondividendspaid.(8)1974financialratiosarecalculatedexcludingnon-recurringcumulativeeffectofaccountingchangeandextraordinaryitemstobeconsistentwithsubsequentyears.Thenamesofthecompaniesare:BaltimoreGasandElectricCompanyBostonEdisonCompanyCarolinaPowerandLightCompanyCentralHudsonGas&ElectricCorp.CentralMainePowerCompanyCincinnatiGas&ElectricCompanyClevelandElectricIlluminatingCo.CommonwealthEdisonCompanyConsolidatedEdisonCompanyofNewYork,Inc.DaytonPower&LightCompanyDelmarvaPower&LightCompanyDetroitEdisonCompanyFloridaPowerCorporationHoustonIndustriesIncorporatedIdahoPowerCompanyIndianapolisPowerandLightCompanyNortheastUtilitiesPacificGasandElectricCompanyPennsylvaniaPower&LightCompanyPhiladelphiaElectricCompanyPublicServiceCompanyoEColoradoSouthernCaliforniaEdisonCompanyTampaElectricCompanyUtahPower&LightCompanySourceofInformation:AssociatedUtilityServices,Inc.computerizeddatabaseStandard&Poor'sCompustatServices,Inc.Utility.CompustatIIInteractiveDataCorporation ExhibitSchedule11Page3of6PennsylvaniaPowerandLightCompany,Moody's24PublicUtilities,andFiveCompanyBarometerGroupMood'sBondRatinsatYears'nd1974-1979YearsEnded197919781977I197619751974PennsylvaniaPower&LightCompanyAaAaAaAaAaAaFiveComanBarometerGrouAtlanticCityElectricCompanyBaltimoreGas&ElectricCompanyCincinnatiGas&ElectricCompanyClevelandElectricIlium.CompanyPublicServiceElectric&GasCo.AaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaAaMood's24PublicUtilitiesBaltimoreGas&ElectricCompanyBostonEdisonCompanyCarolinaPower&LightCompanyCentralHudsonGas&Elec.'orp.CentralMainePowerCompanyC<'atiGas&Elec.CompanyandElectricIlium.CompanyCnwealthEdisonCompanyConsolidatedEdisonCompanyofNYDaytonPower&LightCompanyDelmarvaPower&LightCompanyDetroitEdisonCompanyFloridaPowerCorporationHoustonLightingandPowerCo.IdahoPowerCompanyIndianapolisPower&LightCo.NortheastUtilitiesCompany,.(1)PacificGas&ElectricCompanyPennsylvaniaPower&LightCo.PhiladelphiaElectricCompanyPublicServiceCo.ofColoradoSouthernCaliforniaEdisonCo.TampaElectricCompanyUtqhPower&LightCompanyAaBaaAAAAaAaAAAABaaAAaAAaAaAaAAaAaAaAAaBaaAAAAaAaAaBaaAABaaAAaAAaAaAaAAaAaAaAAaBaaAAAAaAaAaaBaaAABaaAAaAaAaAaAaAAaAaAaAAaBaaBaaAAAaAaAaaBaaAABaaA'aAaAaAaAaAAaAaAaAAaBaa,BaaAAAaAaAaaBaaAABaaAAaAaAaAaAaAAaAaAaAAa(2)Baa(2)AAaAAa(2)AaaAaa-(3)A(2)A(2)Baa(2)A(2)AaaAaAaAaAaA(2)AaAaAaANotes:(1)NortheastUtilities,aholdingcompany,doesnothavebondswhichareratedbyMoody's.TheoperatingsubsidiariesofNortheastUtilitieshavevariousbondratings.(2)Downgradedduring1974.(3)BondratingsuspendedbyMoody'sSourceofInformation:Moody'sBondSurvey;Moody'sPublicUtilityManual ExhibitSchedulellPage4of6PennsylvaniaPowerandLightCompany,Moody's24PublicUtilities,andFiveCompanyBarometerGroupStandard&Poor'sBondRatinsatYears'nd1974-197919791978YearsEnded19771976.1975.1974PennsylvaniaPower&LightCompanyA+A+A+A+'.A+FiveComanBarometerGroupAtlanticCityElectricCompanyBaltimoreGas&ElectricCompanyCincinnatiGas&ElectricCompanyClevelandElectricIlium.CompanyPublicServiceElectric&GasCo.A+AA-AA-AA-AAA+AA-AAAAAAAAA-AAAAAAMood's24PublicUtilitiesBaltimoreGas&ElectricCompanyBostonEdisonCompanyCarolinaPower&LightCompanyCenralHudsonGas&Elec.Corp.C~1MainePowerCompanyCnatiGas&Elec.CompanyClevelandElectricIlium.CompanyCommonwealthEdisonCompanyConsolidatedEdisonCompanyofNYDaytonPower&LightCompanyDelmarvaPower&LightCompanyDetroitEdisonCompanyFloridaPowerCorporationHoustonLightingandPowerCo.IdahoPowerCompanyIndianapolisPower&LightCo.NortheastUtilitiesCompanyPacificGas&ElectricCompanyPennsylvaniaPower&LightCo.PhiladelphiaElectricCompanyPublicServiceCo.ofColoradoSouthernCaliforniaEdisonCo.TampaElectricCompanyUtahPower&LightCompanyAA-BBBAA-BBB+AA-AA-AA-AAABBBA+AAAAAN/RAA-A+A-AA-AAAAAA-AA-BBBAA-BBB+AAAAAAAAABBBA+AAAAAN/RAA-A+A-AA-AAAAAAAA-BBBAA-BBB+AAAAAAA-AABBBA+AAAAA-N/RAA-A+A-AAAAAAAAAA-BBBAA-=BBB+AAAAAABBB+AABBBAAAAAA-N/RAA-A+A-AAAAAAAAAA-BBBAA-BBB+AAAAAABBBAABBBAAAA+AA-N/RAA-A+AAAAAAA-AAABBBAAAAAAAAABBAABBBA-AAAA+AAN/RAAA+AAAAAAA-AScofInformation:Standard&Poor'sCorporationBondGuide 0

sExhibitSchedule11Page5of6PennsylvaniaPowerandLightCompany,Moody's24PublicUtilities,andFiveCompanyBarometerGroupYearsEnded1979-19781977197619751974PennsylvaniaPower&LightCompanyFiveCompanyBarometerGroupAtlanticCityElectricCompanyBaltimoreGas&ElectricCompanyCincinnatiGas,&ElectricCompanyClevelandElectricIllum.CompanyPublicServiceElectric&GasCo.N/RIIII11IIIIIIIIIIN/RttaastIIaallIIIItlIIN/R11allaIIIIIIIIIIN/RllaastIIIIIIIIN/RtlaltIIIIIIIIN/RMood's24PublicUtilitiesBaltimoreGas&'ElectricCompanyBostonEdisonCompanyCarolinaPower&LightCompanyCentral11udsonGas&Elec.Corp.Cer>~alMainePowerCompanyCnatiGas&Elec.CompanyC..andElectricIlium.CompanyCommonwealthEdisonCompanyConsolidatedEdisonCompanyofNYDaytonPower&LightCompanyDelmarvaPower&LightCompanyDetroitEdisonCompanyFloridaPowerCorporation11oustonLightingandPowerCo.IdahoPowerCompanyIndianapolisPower&LightCo.NortheastUtilitiesCompany(2)PacificGas&ElectricCompanyPennsylvaniaPower&LightCo.PhiladelphiaElectricCompanyPublicServiceCo.ofColoradoSouthernCaliforniaEdisonCo.TampaElectricCompanyUtahPower&LightCompanyN/RIIII1111N/RIIItIIIIIlbaallN/R11IIIIItIIbassIIIIIISSSII11IlaaltItIIIIIIIlIIIlIIIIaaIIN/RIIIIN/RIIIlN/RIIIIItaallN/RII11ItII"baa"IIIItlaII"II11I1aallIIII11IIII11II11ItaaslN/RII11N/RllbaallIIIIN/RIlaallIIIIIIIIN/R11IIN/RIIIIIIII11II1111IIIIIIN/RIIIItlaattN/Rtlbaall11IIN/RIIaIIII11IIIIN/RII11N/RIlbaal111IIIIItIIII11IIIIIIIl~lI11IIN/RIIIIIlaalIN/R"baa"N/RN/RII11IIaIIN/R1111N/R"baaII11IIIIII11ttaallIIII1111IIIIIIIIIlaallN/RIIIIN/Rs'baaN/RN/RIIatlsisallN/R1111N/R"baa"IIIIN/RN/RIsaIIssaats11IIN/RttaatsN/RllIINotes:(1)Moody'sRatingPolicyReviewBoardextendeditsratingservicestoincludequalityevaluationonpreferredstocksonOctober1,197'3.(2)NortheastUtilities,aholdingcompany,doesnothavebondswhichareratedbyMoody's.TheoperatingsubsidiariesofNortheastUtilitieshavevariousbondratings.SourceofInformation:Moody'sPublicUtilityIManual;Moody'sBondSurvey

~~ExhibitSchedule11Page6of6PennsylvaniaPower&LightCompany,Hoody's24PublicUtilities,andFiveCompanyBarometerGroupStandard&Poor'sPreferredStockRatins1974-197919791978YearsEnded19771976'9751974PennsylvaniaPower&LightCompanyIA.-AAAAFiveComanBarometerGrouAtlanticCityElectricCompanyBaltimoreGas&ElectricCompanyCincinnatiGas&ElectricCompanyClevelandElectricIlium.CompanyPublicServiceElectric&GasCo.BBB+AA-A-A-A+BBB+AA-AAA+BBB+AA-AAA+BBBAA-AAABBBAA-AAAN/RAAAAAAHood's24PublicUtilitiesBaltimoreGas&ElectricCompanyBostonEdisonCompanyCarolinaPower&LightCompanyCentralHudsonGas&ElectricCorp.Centrali~fainePowerCompanyCincinnatiGas&ElectricCompanyC'"elandElectricIlium.CompanynwealthEdisonCompany~lidatedEdisonCompanyofNYDaytonPower&LightCompanyDelmarvaPower&LightCompanyDetroitEdisonCompanyFloridaPowerCorporationHoustonLightingandPowerCo.IdahoPowerCompanyIndianapolisPower&LightCo.NortheastUtilitiesCompanyPacificGas&ElectricCompanyPennsylvaniaPower&LightCo.-PhiladelphiaElectricCompanyPublicServiceCompanyofColoradoSouthernCaliforniaEdisonCompanyTampaElectricCompanyUtahPower&LightCompanyAA-BBBAA-BBBA-A-AA-A-BBBABBBAAAAA+N/RAABBBA+AAAAAA-AA-BBBAA-BBBAAAAA-BBABBBAAAAAN/RAABBBA+AAAAAAAA-BBBAA-BBBAAAABBBBBBABBBAAAAAN/RAABBBA+AAAAAAAA-BBBAA-BBBAAAABBBBBBABBBAAAAA+N/RAABBBAAAAAAAAA-BBBAA-BBBAAAABBBBBABBBAAA-AA+N/RAABBBAAAAAAAAABBBAAAAAAABBBBBABBBAAAAAAAN/RAAABBBAAAAAAASourceofInformation:Standard&Poor'sCorporationStockGuide BAROMETERGROUPOF2LECTRICCOMPANIESCAPITAlIZATIONAND1.CIALSTATISTICS1)1974-1978,INCLUSIVEAMOUNTOFCAPITALEMPLOYEDTOTALPER%4ANEiVTCAPITALSHORT-TERNDEBTNOTESPAYABLETOTALCAPITALEMPLOYEDINDICATEDAVERAGEACTUALCAPITALCOSTRATES(2)1978$2,156,1156,778~Y219779761975(THOUSANDSOFDOLLARS)$2,026,209$1,903,965$1,759,70326,61712,98330,17952,8255591,.I48~5.8821974$1,669,59353,2452,838PERCENTINCREASE1978OVER197425.5%LONG-TERIIDEBTPREFERREDSTOCKFINANCIALRATIOS-MARKETBASEDEARNINGS/PRICERATIOMARKET/AVERAGEBOOKRATIODIVIDENDYIELDPERCENTCHANGEINEARNINGSPERSHAREYEARLYDIVIDENDPAYOUTRATIOCAPITALSTRUCTURERATIOSBASEDONTOTALPERMANENTCAPITAL:LONG-TERMDEBTPREFERREDSTOCKCOMMONEQUITYBASEDONTOTALCAPITAL:TOTALDEBT,INCLUDINGSHORT"TERMPREFERREDSTOCKCCt'%L%1ONEQUITYRATEOFRETURNONAVERAGEBOOKCO~IMONEQUITYRATEOFRETURNEARNEDONAVERAGEBOOKCO>LMONEQUITYQVERINDXCATEDAVERAGELONG-TERiIDEBTCOSTRATECOVERAGES-INCLUDINGALLAFC(3)BEFOREINCOMETAXES:ALLINTERESTCHARGESAFTERINCOMETAXES:ALLINTERESTCHARGESOVERALLCOVERAGE:ALLINTEREST+PFD.DIV.COVERAGES-EXCLUDINGALLAFC(4)BEFORE11VCOMETAXES:ALLXNTERESTCHARGESAFTERINCOMETAXES:ALLINTERESTCHARGESOVERALLCOVERAGE:ALLINTEREST+PFD.DIV.7.0%7.612.0%96.48.9(1.0)74.648.4%13.837.81D0.0%48.6%13.737.7100.0%11.4%4.4%3.3X2.51.93.0X2.21.7.6.9%7.711.4'%08.27.79.669~249.1%-14.236.7100.0%49.5%14.136.4100.0'i12.2%5.3'%.2X2.51.92.9X2.11.66.7%8.011.9%101.68.211.270.350.9'%4.135.0100.0%51.3%14.034.7100.0'111.9%5.2%3.0X2.51.92.6X2.11.66.9%7.713.5%83.110.0(5.7)75.251.8%13.634.61D0.0%53.0%13.3337100.0'>>11.2%4.3%2.6X2.31.82.3X1.91.56.2%7.214.0%87.09.73.070.552.0%144034.0100.0%54.0%13.432.6100.0%12.0%5.8%2.5X,2.41.9;2.1X1.91.512.9%5.65YEARAVERAGE12.6%95.38.93.472.050.4%14.035.6100.0'151.3%13.735.0100.0%11.7%5.0%2.9X2.41.92.6X2.01.6QUALITYOFEARNINGSOTHERINC./PRE-TAXGROSSNC.INCL.AFC(5)AFC/INCOMEAVAILABLEFORCOMMOiVEQUITYEFFECTIVEINCO:IETAXRATEINTERiVALCASHGENERATION/GROSSCONSTR.(6)CO%L%10%VDIVIDENDCOVERAGE(7)12.0%28.832.851~02.7X12.4%,30.831.854.22.SX13.8%33.924.055.42.6X14.3%35.020.342.92.2X19.8%42.69.123.12.OX14.5%~34.223.645.32.5XMcQW0II3II3rC4U'or.0II3SEEPAGE2FORNOTES.

j11 BarometerGrouofFiveElectr'icComaniesCapitalizationandFinancialStatistics(1)1978-1974InclusiveExhibitSchedule12Page2of2Notes:(1)AllCapitalizationandFinancialStatisticsforBarometerGroupofFiveElectricCompaniesarethearithmeticaverageoftheachievedresultsforeachindividualcompanyinthegroup.J(2)Computedbyrelatingactuallong-termdebtinterestorpreferred-stockdiv-.idendsbookedtoaverageofbeginningandendinglong-termdebtorpreferredstockreportedtobeoutstanding.(3)Coverages-includingallAFC-representthenumberoftimesavailableearnings,includingAFC(allowanceforfundsusedduringconstruction)asreportedinitsentiretyincludedasincome,coverfixedcharges.Fortheyears1978and1977,AFCincludesallowanceforborrowedandotherfundsusedduringconstruction.(4)Coverages-excludingallAFC-representthenumberoftimesavailableearnings,excludingallAFC,coverfixedcharges.(5)Otherincome/Pre-taxgrossincomeincludingAFCisnon-operatingincome(netofexpensesandtaxes)includingallAFCasreportedinitsentiretyasapercentofincomeavailableforfixedcharges,includingallAFC,beforeincometaxes.Internalcashgeneration/Grossconstructionisthepercentageofgrossconstructionexpenditures,excludingallAFC,providedbyinternallygen-eratedfundsfromoperations,excludingallAFC,andafterpaymentofallcashdividends.(7)Commondividendcoverageistherelationshipofinternallygeneratedfundsfromoperations,excludingallAFC,andafterpaymentofpreferredstockdividendstocommondividendspaid.Thenamesofthecompanieswhocomprisethegroupinclude:AtlanticCityElectricCompanyBaltimoreGas&ElectricCompanyCincinnatiGas&ElectricCompanyClevelandElectricIlluminatingCo.PublicServiceElectric&GasCompanyFurtheritemsofcomparisonbetweenthebarometergroupandPennsylvaniaPower&LightCompanyareshownbelow:AverageforFiveBarometerGrouComaniesPennsylvaniaPower&LightComan1978OperatingRevenues($Hillions)1978OperatingRevenues,PercentDistributionElectricGasOther$987.880.9%18.60.5100.0%$798.399.5%0.5100.0%SourceofInformation:AssociatedUtilityServices,Inc.computerizeddatabaseStandard&Poor'sCompustatServices,Inc.Utility.CompustatIIInteractiveDataCorporation

1979IndicationofHar'sedEquityCostRateofSimilarRisk.rprisesWithoutReardtoImactofGrowthLatestTwelve19?9HonthsReportedDividendsEarninsPerSharePerShare1979Hi-LowHarketPrice1979YearEndBookValueUnadjustedEarnings/PriceRatioEarnings/Harket/BookDividendBookRatioYieldRatioPennsylvaniaPower&LightCo.Hoody's24PublicUtilities(2)$3.32(12-31-79)$2.01$19.25$25.60(3)17,.2%14.2%11.3%10.3%80.5%130/104/752/BarometerGroupofFiveElectricCompanies:AtlanticCityElectricCo.BaltimoreGas&ElectricCo.CincinnatiGas&ElectricCo.ClevelandElectricIlium.Co.PublicServiceElectric&GasCo.AverageforBarometerGroup$2.36(12-31-79)3.40(12-31-79)2.59(12-31-79)2.42(12-31-79)2.85(12-.31-79)$1.7652.361~961.922.20$18.5623.5618.8117.5620.56$21.6330.0720.4320.19(3)27.2912.7%14.413,813.813.913.7%10.9%$1.312.712.010'11.5%9.5%10'10.410.910.710.3%85.8%78.492.187.075.383.7%Hoody'sPublicUtilitySupplementsTheWallStreetJournalAssociatedUtilityServices,Inc.computerizeddatabaseCompanies'nnualReportstoStockholdersNotes:(1)Arithmeticaverageofindividuallycomputedratiosforeachcompanyinthegroupusinglatestreportedearningspershare,1979dividendspaidpershare,1979,averagehi-lomarketpricesand1979estimatedyear-endbookvaluepershare-whereactualsarenotavailable.(2)Actualyear-end1978bookvalue(+)1979earningspershare(-)1979dividendspaid(=)1979estimatedbookvalue.SourceofInformation:fDO00m0I~QU'C0m SpotIndicationofMa"ksedEquityCostRateofSimilarRiskprisesWithoutReardtoImactofGrowthLatestTwelveHonthsReportedEarninsPerShareCurrentDividendPerShare4-17-80MarketPrice1979YearEndBookValueUnadjustedEarnings/PriceRatioEarningsMarket/BookDividendBookRatioYieldRatioPennsylvaniaPower&LightCompanyMoody's24PublicUtilities(2)$3.32(12-31-79)$2.12$18.125$25.60(3)18.3%15.1%13.0%11.3%11.7%11.6%70.8%74.9%BarometerGroupofFiveElectricCompanies:AtlanticCityElectricCo.BaltimoreGas&ElectricCo.CincinnatiGas&ElectricCo.ClevelandElectricIlium.Co.PublicServiceElectric&GasCo.AverageforBarometerGroup$2.363.402.592.422.85(12-31-79)(12-31-79)(12-31-79)(12-31-79)(12-31-79)$1.842.442.042.002.20$16.7522.12516.87516.5018.875$21.6330.0720-4320'9(3)27.2914.1%15.415.314.715.114.9%10.9%11.312.712.010.411~5%11.0%11.012.112.111.711.6%77.4%73.582.681.769.276.9%Notes:(1)Arithmeticaverageofindividuallycomputedratiosforeachcompanyinthegroupusinglatestreportedearningspershare,currentdividendspershare,4-17-8Qmarketpricesand1979estimatedyear-endbookvalue(1979actualwhereavailable)pershare.(2)Actualyear-end1978bookvalue(+).1979earningsper.share(-)1979dividendspaid(=)1979estimatedbookvalue.Sou"ceofInformation:Hoody'sPublicUtilitySupplementsTheWallStreetJournalAssociatedUtilityServices,Inc.computerizeddatabaseCompanies'nnualReportstoStockholdersMPlo009IDCLU'rr0Q ExhibitSchedule13Page3of6RecentRateCaseActivitPennslvaniaPowerandLihtComanNorecentrateactivity.FiveElectricComanBarometerGrouAtlanticCitElectricComanrInFebruary,theCompanyfiledanamendedrequestwiththeNewJerseyBoard.ofPublicUtilitiesforan$84.4millionrateincrease.TheCompanyrequestsaboostintheallowablerateofreturnoncommonequityto14.5%andtheinclus'ionintheratebaseoftheSalem82andIndianRiver/4units,bothscheduledtocomeon-streamthisfall.TheCompanyproposedthattheincreasetakeeffectbySeptember1st.(ValueLineInvestmentSurveyofApril4,1980).BaltimoreGas&ElectricComanInNovember1979,theCompanyfiledforanincreaseof$147.0millionannually.TheCompanysaidthefilingwiththePublicServiceCommissionofMarylandseeksannualrateincreasesof$123.0millionfromelectric,$22.5millionfromgasand$1.5millionfromsteamrates.(Moody'sPublicUtilityNewsReportofNovember16,1979,Volume51,page2253).CincinnatiGas6ElectricComanTheCompanyplanstoaskthePublicUtilitiesCommissionofOhiofora$55,000,000'ateincreaseduetoincreasingcostofoperationandfortheconstructionofnewandreplacementfacilities.TheCompanywillmakeitsapplicationinMay,butisnotifyinggovernmentauthoritiesnow,asrequiredunderOhiolaw.ThenewratesarenotexpectedtogointoeffectbeforeMarch1981.Therateincreaseaverages10.8%.(Moody'sPublicUtilityNewsReportofMarch7,1980,Volume51,page2057).ClevelandElectricIlluminatinComanTheCompanywillapplyforanannualizedrateincreaseofasmuchas$165,000,000.Ifapproved,theincreasewouldbecomeeffectiveinthespringaf1981.'Therateincreaseisnecessarybecauseofinflationarypressures,theneedtomodernizeexistingfacilitiesandtoinstallpollutioncontrolequipment.TheCompanyhasearnedlessineachofthepastthreeyearsthanauthorizedbythePublicUtilitiesCommissionofOhio.Thestatutoryreturnwassetat10.09%for1979,yettheactualrateofreturncame(Moody'sPublicUtilityNewsReportofApril8,1980,Volume51,pagetheamountrateoftoonly8.62%.1983).Public"ServiceElectric6GasComanTheNewJerseyBoardofPublicUtilitiesgrantedtheCompanyanannualincreaseof$191,600,000or8%.TheCompanyhadsoughtarateincreaseof$374~500,000TheregulatorsalsoallowedtheCompanytochargecustomersanother$140,000,000overthenext26monthsforincreasedfuelandpurchasedpowercosts'naddition,theCompanywastoldhowmuchitcouldrecoverforthecostsassociatedwithitseffortstobuildnuclearpowerplantsoffthecoastofNew~~~Jersey,aprojectthatwasterminatedin1978.TheBoardrulesthattheCompany:ouldrecoup$174,500,000overa20-yearperiod,about$13,300,000lessthantheCompanysought.(Moody'spublicUtilityNewsReportofApril18,1980,Volume51,page1953).

EarningsPerSProjectionsbReconizedInvestorReurtinFinancialServices~Cnman1979ReportedE.P.S.Estimated1980E.P.S.Percent~ChaneValueLineInvestmentSurveStandard&Poor'sEstimated1980PercentE.P.S.~ChaneEstimated1982-84E.P.S.PublishedCompoundAnnualRateofChangeEstimated1977-79to1982-84ValueLineInvestmentSurvePennsylvaniaPowerandLightCompany$3.32$2:70(18.7%)$3.20NilFiveBarometerGroupCos.:AtlanticCityElectricCo.BaltimoreGas&ElectricCo.CincinnatiGas&ElectricCo.ClevelandElectricIlium.Co.PublicServiceElec.&GasCo.FiveCompanyAverage$2.363.402.592.422.85$2.453.302.702'03.00a3.8%(2.9)4,319.8.5.36.1%$-3.602.753.105.9%6.28.87.0%(1)$2.954.103.102.953.604.5%(2)5.04.5(2)3.0(2)4.54.3%Note:(1)Averagebaseduponthenumberofcompaniesreportedinthegroup.(2)Publishedcompoundannualrateofchangeestimated1976-78to1982-84.SourceofInformation:ValueLineInvestmentSurveyofFebruary1,1980andApril4,1980andStandard&Poor'sEarningsForecasterofAprilll,1980NÃoXlQfDDU'Ct0QCh 4

ResultsoEDisco;.shFlowAnalysisUsinHistoricandValueLineProectedP/EMultilesCurrentDividend4-17-80LatestCurrentPerMarketReportedP/EShare~Pt<<1~EPSIRett~1DCFReturnRateUsingDCFReturnRateUsingProectedP/EMultileHistoricP/EMultileValueReturnRate10YearEst.DCFLineEst.DCFSpreadCurrentDividend1982-84Avg.SellingReturnProjectedSellingReturnResultingDividendGrowthEst.P/EPriceRateP/EPriceRateFromDifferentPennsylvaniaPower&LightCo.$18.125$3.324.5x$2.1211.3%2.5X'$3.208.lx$25.9220.1X7.5x$24.0018.3%1.8XFiveComanBarometerGrou:AtlanticCityElectricCompanyBaltimoreGas&ElectricCompanyCincinnatiGas&ElectricCompanyClevelandElectricIlium.CompanyPublicServiceElectric&GasCo.$16.7522.12516.87516.5018.875$2.366.4x$1.8411.0X4.5X$2.953.405.62.4411.05.04.102.595.92.0412.15.03.102.425.7.2.0012.13.52.9528556220117603609.2x8.79.89.38.3$27.1422.7X35'722.730.3826.427.4424.329.8823.09.5x8.09.09.08.5$28.0323'X32.8020.727.9024.326.5523.530.60..23.60.8%2.02.10.80.6Average5.8x11.6%4.8%Hotes:(1)Astakenfrompage2ofSchedule13.(2)Estimatedfor1976-78and1977-79to1982-84,asreportedinValue.LineInvestmentSurveyofFebruary1,1980andApril4,1980.(3)AsreportedinValueLineInvestmentSurveyofFebruary1,1980andApril4,1980.(4)TenyearaverageP/Emultiplefortheyears1970-1979,inclusive.(5)ComputedbymultiplyingthetenyearaverageP/Emultipletimestheestimated1982-84E.P.S.(6)TheDCFreturnrateistherateofdiscountthatequalsthepresentvalueoftheestimatedsellingpriceandthefuturedividendsstartingwiththecurrentdividendpershareandbygivingrecognitiontotheestimateddividendgrowthrateasreportedinValueLinewiththecurrentmarketpricebeforetheeffectofmarketpressure,sellingandissuanceexpenses.(7)ValueLineprojectedP/Emultipleestimatedfor1982-84.(8)Computedbymultiplying.ValueLine'sprojectedP/Emultiplebytheestimated1982-84E.P.S.SourceofInformation:AssociatedUtilityServices,Inc.computerizeddat"baseTheValueLineInvestmentSurveyofFebruary1,1980andApril4,1980WcflWQAOolD(DQO'gV.+rk08M40 4I

CurrentDividendYieldandHistoricF'v~.-randProjectedCompoundGrowthRatesofEarninsPerSharDividendsPerShareandBookValuePerShare'ividendYieldEarningsPerShareCompoundGrowthRatesDividendsPerShareCompoundGrowthRatesBookValuePerShareCompoundGrowthRatesAverageofLast12Months(')Spotat~4-17-80)PastFiveYearsProjectedPast1977-79toFive1982-84YearsProjected1977-79to1982-84PastFiveYearsProjected1977-79to1982-84PennsylvaniaPower&LightCompany11.2/'1.7%4.0%3.0%2.5%2.0%Nil~BarometerGroupofOperatingElectricComanies:AtlanticCityElectricCompany(2)BaltimoreGas&ElectricCompanyCincinnatiGas&ElectricCompany(2)ClevelandElectricTllum.Company(2)PublicServiceElectric&GasCo.10F1%10.811.211.71.1.4'1.0%11.012l2~11.7l.0%2.01.54.04.54.5%5.04.53.04.52.5%3.02'3.04.04.5%5.05.03.56.04.5%2.53.04.5(l.5)3.0%3.03.03.03.5Average11.0%1'.6%2~6%4.3%3.0%4.8%2.6%3.1%Note:(1)Theaveragedividendyieldwascomputedbyrelatingtheindicatedannualizeddividendrateandmarketpriceonthelasttradingdayofeachmonhfo"the12monthsendingMarch31,1980,asreportedinthemonthlyStandard&Poor'sStockGuide.(2)Compoundgrowthratesprojectedforearningspe"share,dividendspershareandbookvaluepersharearefrom1976-78to1982-84.Sou'rceofInformation:Val'innvestmentSrreyor"ebra"y1,1980andApril4,1980Standa"d&Poor'sMonthlyStockGuiceTheWallStreetJournal4M-Ã0SQCLOcrCWrt08

'IIIt.,\l IndicationofBareRentRatefortheUseoalExposedtothePublicUtilityR'skandSensitivityofinta"'estRat'oAnnualRateofInflationTwent-FiveYearsEnded1977AveaeforYears1953-57,inclusive1958-62,inclusive1963-67,'nclusive1968-72,inclusiveCOLUMNAAverageYieldonMoody'sAaRatedPublicUtil'tBonds1)3.39%4.384.847.56COLUMNBIndicatedAverageRateofInflation(21.18%1.501.984.62COLUMNCIndicatedBareRentRateforUseofCapitalatLowSecuredRisk(A-B)2.21%2.882.862.941973'974('97519761977~>I>(7.72%9.04'9.448.928.438.36(3)~~6.2%11.09.15.86.56.17(3)1.52%(1.96)0.343.]21.932.19(3)(2)(l,~~~Distributedyie'dsaspublishedbyM>oody'sInvestors.Service,Inc.I(~(~I'IAs.measuredbyth"annualchangeintheConsumerPriceIndexaspublishedbytheUnitedStatesBure'auofLaborStatistics..(3)Rapresnts.theaveragefortheyears19731976and1977.Theyears1974and1975havebeeneliminatedfromthefive-.yearaveragen(led1977since.theaverageinterestratesfor1974and1975understatetheimpac"ofinfla-tionwh'chwzswellbeyondtheexpectationofinvestorso"forecastersand/orthedegreeofprotectioninvestorswereabletogetduetosupplyanddemandforcesatwork.Tneaverageoftheyears1976and1977indicatedbarerent'lra".efalls'Wthinc¹indicatedbarerentrateforthepriornear'wenty-fiveyearperiod.Itshouldbenotedthatth'stypeofcalculationfor.anindividualyearcanproducedistortedresultsbecauseinterestrates'ealsoaffected,atleastintheshortrun,byactionsandpoliciesoftheU.S.Government.Thisistrueof1973,atleastinpart,Iftheyear.1973iseliminatedfromthecalculation,thetwoyears1976and1977wouldave=age2.53%.inzlly,therateof'inflatonfor1979,basedupon12monthlyfigures,was'11.3%.In.early1980,investorsappeartobeableoorotectthemselvesand/orxpectinflationtobeatarateof111/2%(14.09%AaaredbondyieldforMarcl:1980lass21/2%barerent"a"),M~O((>IU'Wft(D ExhibitSchedule15Page1of11PennslvaniaPower&LihtComanIndicatedReturnRateRequirementonCommonEquityUsingasaStandardBefore-IncomeTaxOverallRateofReturnofNon-UtilityCompanies(S&P400)AdjustedinRecognitionofFinancialandBusinessRiskDifferencesDescritionRatiosBefore-incometaxactuallyachievedafterattritionand,lagoverallrateofreturnforS&P400Industrialsprospectiveasanaverage21%x70%-torecognizebusinessriskdifferencesbetweentheS&P400andPennsylvaniaPower&LightCompany14.70%Less:Provisionsforincometaxesbaseduponassumed30%averageexperiencedeffectiveincometaxrate(line1or14.70%lessline4or4.50%=10.20%x30%)3.06After-incometaxoverallrateofreturn11'4Long-termdebtcomponent(47.4%long-termdebtratiox9.50%long-termdebtcostrate)'IComponentavailableforpreferredstockandcommonequity(line3lessline4)4.507~14Preferredstockcomponent(20.1%preferredstockratiox8.76%preferredstockcostrate).1.76Componentavailableforcommonequity(line5lessline6)5.38%Indicatedafterattritionandlagreturnrateona32.5%commonequityratiousingasastandardcomparablebefore-incometaxoverallrateofreturnofnon-utilitycompaniesandrecognizedbusinessriskdifference(line7.32.5%commonequityratio)16.5%

ComparisonofHistoricPre-TaxOverallRateofReturnofS&P400withHoody's24PublicUtilities,FiveCompanyBarometerGroupandPennsylvaniaPower&LightCompany,IncludinandExcludinAFCfortheYears1969-1978InclusiveYearsS&P4001)Pre-.TaxOverallR/RIncludingAFCExcludingAFCHood's24(1)Pre-TaxOverallR/RIncludingAFCExciudingAFCFiveCompanyBarometerGrou(1Pre-TaxOverallR/RIncludingAFCExcludingAFCPennsylvaniaPower&LihtComanPre-TaxOverallR/R1978197719761975197419731972197119701969Average21.83%21.0020.7919.4021.0520.0617.7016.6817.5820.0919.62%11.38%11.0710'69.779~169.499.969.499.5110.4910.09%9.97%9.709'28.587.868.268.778.508.679.878.95%ll.44%ll.4310'49.559.089.419.739.8810.2511.5510.27%10.24%10.048.978'57.387.858.268.679.2210.798.97%11.42%12.8810.1510.5910.6210.249.668.417.098.739.98%8.88%10.928.158.739-399.218.536.996.118.008.49%Note:(1)Arithmeticaverageofachievedresultsforeachindividualcompanyinthegroup.SourceofInformation:AssociatedUtilityServ'ces,Inc.computerizeddatabaseStandard&Poor'sCompustatSe"vices,Inc.UtilityCompustatIIInteractiveDataCorporationWM&0OQS0AU'DC0Q I

IndicationofBusinessRiskDifferenceBetweenHoody's24ElectricUtilitiesandS&P400IndustrialsfortheYears1969-1978LineIo.TenYear1978197719761975197419731972197119701969Averae.'hodr's24ElectricUtilities1.Earnings/PriceRatio(Unadjusted)S&P<<00Industrials2.Earnings/PriceRatio(Unad5usted)CocnonEquityRatio(BasedUponTotalCaitalEnloed3.S&P400Industrials4.1!oody's24ElectricUtilities5.Difference(line3lessline4)12.8X11.8X12.6Z14.7Z13.5Z10.3X9.4X8.3Z8.4X7.4X10.9X11.7X10.3X10.7Z10.8X13.4X9.0X5.7X5.1X5.9Z5.5X8.8X67.9X69.2X69.2X.67.7X65.9X67.7X68.2X67.3X66.2Z67.8X67.7X36.135.134.032.931.433.233.433.233.735.034.031~8Z34.1X34.2X~34.8'4.5Z34'5X34.8Z34.1X32.5X32.8X33.7XCalculationofEarnings/PriceRatiofortheS&P400Industrials'nRecognitionofFinancialRiskDifferences:6.AdditionalRateofReturnRequirenentforS&P400IndustrialsinRecognitionofLowerFinancialRisk(line5x0.20)6.4X6.8X7~OZ7.0X6.9X6.9Z7.0Z6.8X6.5X6.6X6.8X7.S&P400IndustrialsEarnings/PriceRatio(fronline2)8.Total(line6plusline7)~ll.18.1X10.317.1Z10.710.813.49.05.75.15.95.58.8~17.7'7.8X20.3X15.9X12'Z~11.912.4Z12.1Z15.6X9.IndicationofBusinessRiskDifferencesBetweenMoody's24ElectricUtilitiesandS&P400Industrials(line1oline871Z69X~7183X67X~6~t,ZgZ68X61X70XConfront:Datashownonlines1,2,3and4arearithneticaverageoftheindividualratiosforeachconpanyintherespectivegroups.Sourceofinformation:AssociatedUtilityServices,Inc.conputerizeddatabaseWchM0OoQ(DPMCIHCt00 4

IndicationofBusinessRiskDifferenceBetweenFiveBarometerGroupCompaniesandS&P400IndustrialsfortheYears1978-1969InclusiveLineNo.FiveElectricComanBarometerGrou9.1X9.6X8.8%11.9%10.6%l.Earnings/PriceRatio13.5X14.0%12.0X11.4%19781977197619751974197319721971197019697.9XTenYear~A10.9%S&P400Industrials:Earnings/PriceRaio(Unadjusted)CommonEquityRatio(BasedUponTotalCaitalEmloved:11.7X10.3X10.7%10.8%13.4X9.0X5.7%5.1%5.9%5.5/8.87.3.4.5.S&P400IndustrialsFiveCompanyBarometerGroupDifference(line3lessline4)67.9%37.730.2%69.2%36.432.8%69'Z67'X65'X67'X682X67'X662Z67'Z67'734.733.732.634.634.335.735.737.335.334.5X34.0%33.3%33.1%33.9X31.6Z30.5%30.5X32.4%CalculationofEquivalentE/BRequirementfortheS&P400IndustrialsinRecognitionofFinancialRiskDifferences:AdditionalRareofReturnRequirementforS&P400IndustrialsinRecognitionofLowerFinancialRisk(line5x0.20).6.0%6.6X6.9X6.8X6.7X6.6X6.8%6.3Z6.1Z6.1/6.5X7.0~S&P400IndustrialsEarnings/PriceRatio(fromline2)Total(line6plusline7)11.717.7i10.316.9/10.717.6%10.813.49.05.75.15.95.58.817.6%20.li15.6%12.5X11.4%12.0X11.6%15.3%IndicationofBusinessRiskDifferencesBetweenFiveCompanyBarometerGroupandS&P400Industria's(line1wline868%68%..68%~I~77X70%68Z777.77X76X-68XCo-.sent:Datashownonlines1,2,3and4arearithmeticaverageoftheindividualratiosforeachcompanyintherespectivegroups.SourceofInformation:AssociatedUtilityServices,Inc.computerizeddatabase&to&QOOQ(D8CU'Wrt0toWtn C4 IndicationofBusinessRiskDifferenceBetweenPennsylvaniaPowerandLightCompanyandS&P400IndustrialsfortheYears1978-1969InclusiveLineRo.PennsvlvaniaPowerandLihtComnanEarnings/PriceRatio(Unad)usted)13.2X14.7Z12.9X16.1X197819771976197519741973197219711970196916.0X11.4X10.0X10.0X8.3X8.0XTenYear~A*12.1X2~S&P400Industrials:Earnings/priceRatio(Unadgustedill7X1037107X1087134X9OX57y51X59X55X88Xa~4.o~C~onEquityRatio(BasedUponTotalCaitalEmloed:S&P400IndustrialsPennsylvania'owerandLightCompanyDifference(line3lessiine4)I~67.9X33.034.9Z69.2X69.2X67.7X65.9X67.7X68.2X67.3X66.2X67.8X67.7X32.730.129.329.130.630.029.328.328.930.136.5X39.1Z38.4X36.8X37.1X38.2X38.0X37.9X38.9X37.6X6.CalcuationofEquivalentE/BRequirementfortheS&P400IndustrialsinRecognitionofFinancialRiskDifferences:AdditionalRateofReturnReouirementforS&P400IndustrialsinRecognitionofLowerFinancia~Risk(line5x0.20)7.0X7.3X7.8X7.7X7.4X7.4X7.6X7.6X7.6X7.8Z7.5X7.S&P400IndustrialsEarn'ngs/PriceRatio(fromline2)Total(line6plusline7)11.710.310.710.813.49.05.75.15.95.518.7Z17.6Z18.5X18.5X20.8X16.4Z13.3X12.7X13'X13.3X8.816.3Z9.IndicationofBusinessRiskDifferencesBetween?enn.Power&LightCompanyandS&P400Industrials(line1+line8.71X84Z70X.87X77X70X75X79X'1X60X74XC~ent:Datashownonlines2and3arearithmeticaverageoftheindividualratiosforeachcompanyinthegroup.Sourceofinformation:AssociatedUtilityServices,Inc.computeizeddat"basedCA&A)0Oo(D<o00'LnC0lDILn LineXo.IndicationofCommonEquityCostRateMovementRelativetoaChangeinCommonEquityRatioBasedUponS&P400BeforeIncomeTaxOvera'1AchievedEarnings,ifFinancedLikeMoody's24fortheYears1969-19781978.97719761975197419731972197119701969TenYear~Aera*1.BeforeincometaxoverallrateofreturnforS&P400Industrials2.Less:Provisionforincometaxesbaseduponanassumed50Zeffectiveincometaxrate(line1lessline4x50X)3.Aferincometaxoverallrateofreturn4.Long-termdebtcomponentasdevelopedonline.'7below5.Componentavailableforpreferredstockandcormnequity(line3lessline4)6.Preferredstockcomponentasdevelopedonline20below7.Componen.availableforcommonequity(line5lessline6)9.1112.728.7112.298.6012.197.9311.478.8412.218.4811.587.3410.366.869.827.4310.158.8311.263.613.593.603.553.383.103.032.972.732.439.118.708.597.928.838.487.336.857.428.830.970.980.980.930.880.800.730.670z530.458.14Z7.72X7.61X6.99X7.95X7.68X6.60X6.18X6.89X8.38X2i.83/21.COX20.79X19.40X21.05Z20.06X17.70Z16.68X17.58X20.09X19.62Z8.2111.413.208.21'.797.42X10.IndicatedreturnrateonMoody's24co~nequityratio(line7+line12)Achievedrateofreturnonaveragebookco~nequityforS&P400IndustrialsDifference(line8lessline9)22.1X14.47.7XI>h,~21.4X'!3.4S.OX13.98'.OX13.07.6X21.9Z20.6Z14.59.4Z13.88.1X23.9X21.9X19.0X12.16.9X17.9X11.36.6X197X11.7S.OZ22.7X13.49.3X21.1X13.27.9X11.S&P400Industrialscommonequityratio(1)12.Hoody's24columnequityratio(2)13.Difference(line11lessline!2)70.6Z36.933.7X71.7X36.135.6X71.8X34.837.0X70.5X33.936.6Z70.5X33'37.3X71.5X35.036.5Z71.3X34.736.6X70.7X34.536.2X70.3X35.035.3X71.8X36.934.9X71.1Z~35.36.OX14.Indicatedcommonequitycostratemovementrelativetochangeincommonequityratio(line10+'ne13)0.23Z0.23X0.22Z0.21X0.25X0.22X0.19X0.18Z0.23X0.27X0.22XContinuedonpage7.WtoKlDOOoocrCU'Crrt0lDMVll

.IndicationofCommonEqui.tyCostRateMovementRelativetoaChangeinCommonEquityRatioBasedUponSbp400BeforeIncomeTaxOverallAchievedEarnings,ifFinancedLikeMoody's24fortheYears1969-1978LineXo.TenYear1978197719761975197419731972197119701969Averae15.Moody's24long-teradebtratio(2)16.Moody's24indicatedlong-termdebtcostrate(3)li.Moody's24long-terndebtcomponent(line.15xline16)18.Moody's24preferredstockratio(2)19.Moody's24indicatedpreferredstockcostrate(3)20.Moody's24preferredstockcomponent(line18-line19)50.2X50.6X52'X53.0Z53.6X52.5X53.1X54.0X54.6X53.9X52.8X7.2X7'X6.9X6.7%6.3X5.9X5.7X5.5X5.0X4.5Z6.1X7.5X7.4Z7.5X,0.97X0.98Z0.98X7.lX6.7Z6.4X6.0X5.8X5.1X4.9X6.5X0.93X0.88X0.80X0.73X0.67Z0.53Z0.45X0.79X3.61Z.3.59X3.60X3.55X3.38X3.10X'3.03X2.97X2.73X2.43X3.20Z12.9X13.3X13.0X13.1X13.2X12.5Z12.2X11.5X10.4X9.2Z121XComment:DatashovnonlinesI,9,11,12,15,16,18and19arearithmeticaverageoftheindividualratiosforeachcompanyintherespectivegroups.Votes:(1)(2)(3)CommonequityratioforS&P400Industrialsbasedupontotalpermanentcapitalexcludingshort-terndebt.CapitalstructureratiosforMoody's24ElectricUril'tiesbasedupontotalpermanentcapiralexcludingshore-terndebt.Indicatedlong-teradebtcostrateandpreferredstockcostratefo"Moody's24ElectricUtilitiescomputedbyrelatingactualLong-terndebtinterestorpreferreddividendsbookedtoaveragebeginningandendinglong-termdebtorpreferredstockreportedtobeoutstanding.SourceofInformation:AssociatedUtilityServices,Inc.computerizeddaabaseCA00O0QQU'C0(DI

LineHo.20o~5~7.10.BeforeincometaxoverallrateofreturnforS&?400IndustrialsLyons:Provisionforincometaxesbaseduponanassumed.50Xeffectiveincometaxrat(lineIless'ine4x50X)AfterincometaxoverallrateofreturnLong-teradebtcomponentasdevelopedonline17belowComponentavailableforpreferredstockandco~nequity(line3lessline4)Preferredstockcomponentacdevelopedonline20below.Componentavailablefo"commonequity(line5lessline6)Indicatedreturn-rateonBarometerGroupofFiveElectricCompanies(line7+line12)Achievedrateofreturnonaveragebookco.~onequityforS&P400IndustrialsDifference(line8lessline9)21,83%21OOX20'9X19,40X21,05X2006%17,70%16,68%17,58%2009%19,62/9.2212.618.8112.193.393.398.6912.107.9211.483.413.578.9212.138.4411.627.3010.406.809.883.223.183.113.087.4410.148.9011.192.702.308.2411.383.149.228.808.697.918.918.447.296.807.448.898.241.051.091.131.051.010.830.830.500.390.338.17X7.71%7.56Z6.86Z7.90%7.61Z6.46X6.30X7.05%8.56%0.82:7.42%21.6>>21.0%21.6X19~BX23.2Z21.4%18.6X17.4%19'X21.6%20.6%14.472X13.47.6%13.97.7X13.06.8X14.58.7%13.87.6X12.16.5711.36.1%11.777X13.48.2%13.2IndicationofCommonEquityCostRate!1ovementRelativetoaChangeinCommonEquityRatioBasedUponS&PBeforeIncomeTaxOverallAchievedRateofReturnifFinancedLikeFiveCompanyBarometerGroupfortheYears1978-1969InclusiveTenYear1978197719761975197419731972197119701969Averae11.1213.S&P400Industrialscommonequityratio(1)70.6>>BarometerGroupcommonequityratio(2)37.8Difference(line11lessline12)32.8X71.7%36.735.0%71.8%35.036.8%70.5%34.635.9%70.5%34.036.5%71.5%35.536.07.71.3%34.836.5X70.7%36.334.4%70.3i36.334.0X71.8X39.732.1%71.1%36.135.0%14.Indicatedcommonequitycostratemovementrelativetochangeincocaonequityratio(line10+line13)0.22X0.22/0.21X0.19X0.24%0.21%0.18%0.18>>0.23"0.26i0.21%Continuedonpage9.

LineNo.IndicationofCommonEquityCostRateNovemencRelativecoaChangeinCommonEquityRatioBasedUponS&PBeforeIncomeTaxOverallAchievedRaceofReturnifFinancedLikeFiveCompanyBarometerGroupfortheYears1978-1969Inclusive1978197719761975197419731972197119701969TenYear~Aer15.16.'7.BarometerGrouplong-cernBarometerGroupindicatedcostrate(3)BarometerGrouplong-tm(line15xline16)18.BarometerGrouppreferred19.BaromecerGroupindicatedcostrate(3)20.BarometerGrouppreferred(line18xline19)debcratio(2)long-cerndebcdebtcomponentstockratio(2)preferredstockstockcomponent48.4X7.03.39X13.8X7.6l.05X49.1X'0'X6.93~39X14.2X7.71.09751.8%52.0X52.2X52.7X6.26.1'.96.96.73.11X3.18X3.41%3.57X3.22Z13.6%14.OX12.4%12.4X6.76.77.77.28.01.05X1.01Xl.13/0.83X0.83X54.0X5.73.08X9.8%5.10.50X55.1/4.92.70X8.6X4.5AO.39X52.3%4.42.30%8.0X4.10.33%51.9X6.13.14X12.1X6.50.82%Comment-Datashounonlines1,9,11,12,15,16,18and19arearithmeticaverageoftheindividualratiosforeachcompanyincherespectivegroups.Notes:(I)(2)(3)Cor:monequityratioforS&P400Induscrialsbasedupontotalpermanentcap'talexcludingshort-terndebt.CapitalstructureraciosforBarometerGroupofFiveEleccricCompaniesbaseduponcocalpermanentcapicalexcludingshort-termdebt.Indicated.long-terndebtinterescraceandpreferredstockcoscrateforBarometerGroupofFiveElecrricCompaniescomputedbyrelatingactuallong-cemdebcinterestorpreferreddividendsbookedtoaveragebeginningandendinglong-termdebtorpreferredstockreportedtobeoutstanding.SourceofInformation:AssociatedUtilityServices,Inc.computerizeddatabase

LineNo.1'ndicationofCommonEquityCostRateklovementRelativetoChangeinCommonEquityRatioBasedUponS&P400BeforeIncomeTaxOverallAchievedRateofReturn,ifFinancedLikePennslvaniaPower&LihtComanfortheYears1978-1969InclusiveTenYear1978197729761975197419731972197119701969Averae3.5.7.8.10.BeforeincomeaxoverallrateofreturnforS&P400IndustrialsLess:Provisionforincometaxesbaseduponanassumed50Xeffectiveinccmetaxrate(line1lessline4x50X)AfterincometaxoverallrateofreturnLong-termdebtcomponentasdevelopedonline17belowComponentavailableforpreferredstockandcommonequity(line3lessline4)Preferredstockcomponentasdevelopedonline20belowComponentavailableforcommonequity(line5lessline6)IndicatedreturnrateonPennsylvaniaPower&LightCompany(line7+line12)AchievedrateofreturnonaveragebookcanonequityforS&P400IndustrialsDifference(line8lessline9),9.1312.708.6912.318.5812.217.9311.478.9312.128.4711.597.3610.346.889.807.4210.168.6811.418.2111.413.573.623.633.553.203.132.982.922.752.743.219.138.691.581.498.58l.567.928.928.467.366.881.341.171.241.231.137.410.858.678.200.461.197.55X7.20X7.02X6.58X7.75X7.22X6.13X5.75Z6.56X8.21Z7.01X21.4Z21.8X22.8X21.6X25.4X23.0X19.0X18.4X21.1X25'X22.0X14.47.0X'3.48.4Z13.98.9Z13.08.6Z14.510.9X13.89.2X12.16.9X11.37.1X11.79.4X13.411.9X13.28.8X21.83Z21.00X20.79Z19.40X21.05X20.06Z17.70X16.68X'17.58Z20.09X19.62ZS&P400Industrialscommonequityratio(1)70.6XPennsylvaniaPower&Lt.corn.eq.ratio(2)35.3Difference(linelllessline'2)35.3X71.7X33.038.7X71.BX30.841.0X70.5Z30.440.1X70.5Z30.540.0X71.5X31.440.1X71.3X32'39.1X70.7X31.239.5X70.3Z31.139.2Z71.8X32.539.3X71.1X31.839.3X14.Indicatedcommonequitycostratemovementrelativetochangeincommonequityratio(line10+line13)0.20Z0.22Z-0.22X0.21Z0.27X0.23Z0.18X0.18X0.24X0.30X0.22X~'tContinu'edonpage11.&MAOOo00I~Q.0'Prtlb0th~I 8t IndicationofCommonEquityCostRateMovementRelativetoChangeinCommonEquityRatioBasedUponS&P400BeforeIncomeTaxOverallAchievedRateofReturn,ifFinancedLikePennslvaniaPower6LihtComanEortheYears1978-1969InclusiveLineNo.I15.16.17~18.19.20Penn.Power&Lt.Penn.Power&Lt.costrate(2)Penn.Power&Lt.(line15xlinePenn.Power6Lt.Penn.Power&Lc.coscratePenn.Power6Lt.(line18xlineTenYear~AllrIlong-termdebtratio(2)indicatedlong-teradebt45.2X48.3X50.4X51.5Z52.5Z50.4X49.7Z51.3X52.8X57.0Z50.9Z7.57.26.96.16.26.05.75.24.86.3long-termdebtcomponent16)3.57Zpreferredstockratio(2)19.5Xindicatedpreferredstock813.62Z18.7X~I8.03.63X3.55X3.20Z3.13Z2.98X18.8X18.1X17.0X18.2X18.1X8.36.96.86.82.92X2.75X2.74X3.21X17.5Z16.1X10.5X17.3X6.55.34.46.9preferredstockcomponen19)1.58Z1.49X1.56X1.34X1.17X1.24X1.23X1.13X0.85X0.46X1.19X197819771976'1975197419731972197119701969Comment:Datashownonlines1,9,ll12'5'6>18and19arearithmetic.averageoftheindividualraciosforeach.companyintherespectivegroups.~."-~cINotes:(i)(2)(3)Coc=enequityratioforS6P400irduscrialsbasedupon"oalpermanencap'lexcludingshort-teradebt.CapitalstructureratiosforPennsylvaniaPower&LightCompanybasedupontotalpermanentcapitalexcludingshor-termdebt.Indicatedlong-termdebtinteresrateandpreferredstockcostrateforPennsylvaniaPower&LightCompanycomputedbyrelatingactuallong-termdebtinterestorpreferreddividendsbookedtoaveragebeginningandendinglong-termdebcorpreEerredstockreportedtobeoutstanding.SourceofInformation:AssociatedUtilityServices,Inc.computerizeddatabase~rWMW0ac60k'U'CIlb0 ExhibitSchedule16Page1of3~penna1vaniapowen6LihtComanVagariesoftheMarket1974-1979Inclusive1974JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember~Hih,217/8225/823217/8201/2193/818181/4163/8i73/8171/817Low193/4211/221181/218171/8161/816131/2147/8161/215Short-TermMarketVariabilit(1}(9.2)(0.6)(4.0)(18.2)(21.7)(21.7)(21.3)(17.4)(25.0)(18.5)0.8(13.7)1975JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember193/420187/8181/419197/8197/8191/8191/8193/8193/4193/4155/8181/8175/8175/8i77/8183/8i8i/2181/8175/8173/4183/4183/8(8.8)6.6(10.8)(11.9)(5.3)0.7(2.6)(8.8)(11.3)(7.2)(2.0)(52)1976JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember213/8211/2215/8203/4203/4203/82121'13/4211/222221/2195/8201/2191/820193/4193/82020201/2203/8207/8211/4(0.6)3.8(10.5)(7.0)(8.7)(6.6)(3.6)(1.8)(2.4)(3.0)(4.0)(1.2)

ExhibitSchedule16Page2of3PennslvaniaPower6LihtComanVagariesoftheMarket1974-1979Inclusive1977JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember~Hih221/2233/8223/S225/823241/4243/4251/8243/8237/S241/2241/8Low211/222203/4213/822221/2237/8225/823221/2223/4221/4Short-TermMarketVariabilit(1)(23)'22)(7.8)(8.6)(1.7)(0.6)3.8(6.7)(7.1)(10.4)(6.7)(6.8)1978JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember233/S241/4225/8221/8'2215/S211/2221/2217/8213/4211/42122i/4222i3/S211/421201/2205/8211/821i9i/2195/819(92)(8.8)(8.6)(17.4)(72)(7.3)(6.3)(23)(2.3)(13.3)(10.3)(12.6)1979JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember207/82121i/S201/4207/8207/8205/821201/4195/8183/4183/4191/4201/4201/4191/8iS3/4191/S191/8203/8l91/2171/2173/S175/8(9.4)(3.6)(3.0)(8.9)(11.2)(5.6)(8.4)(2.4)(5')(16.7)(13.0)(10.2) 0 ExhibitSchedule16Page3of3PennslvaniaPower&LihtComanVagariesoftheMarket1974-.1979InclusiveAveraeShort-TermMarketVariabilit197419751976197719781979(14.2)(5.6)(38)(4.8)(8.4)(8~2)LarestSinleDeclinesinEachYear:197419751976197719781979(25.0)(11.9)(10.5)(10.4)(13.3)(16.7)SeptemberAprilMarchOctoberOctoberOctober813.50's.$17.625vs.$19.125vs.$22.50vs.~$19.50vs.$17.50vs.JulyFebruaryJanuaryAugustAugustAugust918.00020.00$21.375$21.125822.50$21.00(12.615YearAveragePorrhePeriod1975-1979,InclusiveNote:(1)Computedbyrelatingeachmonth'slowtothehighmarketpriceofprecedingtwomonths.SourceofInformation:Standard6Poor'sStockGuideDailyStockPrice.RecordoftheNewYorkStockExchange C~v ExhibitSchedule17Page1of2PennslvaniaPower&LihtComan~mmaryofInputsEmployedtoArriveataJudgmentRegardingaMarket-DeterminedCostRateofCommonEquityandReturnRateRequirementonBookValueofCommonEquityCapitalBeforeMarketPressure,SellingandIssuanceExpensesandVaariesoftheMarketEarnins/PriceRatios1974-19781979(4)Spot1980(5)Earnins/NetProceedsRatios1974-1979(6)BareRent-Prosective1980DiscountedCashFlowAnalsis(fromSch.13,.pg.5)ComarableEarnins(7)PennsylvaniaPower&LihtComan14.6%(1)17.218.316.1%17.5%3.3%18.316.5%Moody's24PublicaUtilities13.1%(2)14.215.1N/AN/Aj.4.7%N/AN/ABarometerGroupof5ElectricComaniesX2.6%(3)13.714.9N/AN/A15.7%231N/AInutsandIndicatedResults:dendYieldSpotYield(4-17-80)(5)1979(BasedonAverageHigh-LowMarketPrice)(4)11.7%10.411.6%10.311.,6%10.3GrowthRates5YearIlistoricalEPSGrowthRateValueLineEstimated1980EPSGrowthRate(8)ValueLine5YearProjectedEPSCompoundGrowthRate(9)ValueLine5YearProjectedDIP.S.CompoundGrowthRate(9)LowYield+LowGrowthRateHighYield+HighGrowthRateMid-PointLowYield+HighGrowthRateHighYield+LowGrowthRateMid-Point3.2%(1)(18.7)2.5(8.3%)14.93.313.6%(7.0)3.33.7%(2)N/AN/AN/A14.0%(10)15.3(10)14.7-14.0%(10)15.3(10)14.73.4%(3)6.14.34~8.13.7%17.715,716.4%15.015.7page2forNotes.

ExhibitSchedule17Page2of2PennslvaniaPower&LihtComanSummaryofInputsEmployedtoArriveataJudgmentRegardingaMarket-DeterminedCostRateofCommonEquityandReturnRateRequirementonBookValueofCommonEquityCapitalBeforeMarketPressure,SellingandIssuanceExp'ensesandVaariesoftheMarketNotes:(1)FiveyearaverageascalculatedonSchedule7,page1.(2)FiveyearaverageascalculatedonSchedule11,page1.I(3)FiveyearaverageascalculatedonSchedule12,page1.(4)AscalculatedonSchedule13,pagel.(5)AscalculatedonSchedule13,page2.(6)Calculatedfromearnings/netproceedsratiosshownonSchedule7,page4.(7)AscalculatedonSchedule15,pagel.(8)AscalculatedonSchedule13,page4.(9)AsshownonSchedule13,page6.(10)CalculatedbyusingtheonlyavailablegrowthrateforMoody's24PublicUtilitiesof5yearhistoricalasboththehighandlowgrowthrate.

C ExhibitSchedule18Page1of2Q>>PennslvaniaPower6LihtComanFairRateofReturnUsinDecember311979ActualDataTeofCaitalLong-TeanDebtPreferredandPreferenceStockCommonEquityRatios46.7%20.133.2OriginalCostRate9.02%8.4317.50FairValueCostRate9.02%8'315.50OriginalCortMeightedCostRate4.21%1.695.81FairValueMeightedCostRate4.21%1.695.15'Total100.0%11.71%11.05%If171/2%wasthereturnraterequirementforthecommonequitypartofanoriginalcostratebaseactuallyachievedafterattritionandlag,theoverallrateofreturn'.ativetoanoriginalcostmeasureofvaluewouldbe11.7%(33.2%x17.50%=5.81%w.21%+1.69%).Theimplicitbefore-incometaxcoverageforinterestonthedebtpartofanoriginalcostratebasewouldbe4.1timesassuminga30%effectivein-cometaxrate(5.81%+1.69%=7.50%.70%=10.71%+4.21%=14.92%;4.21%=3.5x)andafter-incometaxcoverageforinterestonthedebtpartofanoriginalcostratebasewouldbe2.8times(11.71%.4.21%)whilethecoverageofallfixedchargesre-latedtothefixedcapitalpartoftheoriginalcostratebasewouldbe2.0times(11.71%-5.90%(4.21%+1.69%)).

0 ExhibitSchedule18Page2of2PennslvaniaPower&LihtComanFairRateofReturnUsinDecember311980EstimatedDataTeofCaitalLong-TermDebtPreferredand'referenceStockCommonEquityRatios47.4%20.i32.3OriginalCostRate9.50%8.7615.50FairValueCostRate9.50%8.7613.50OriginalCostWeightedCostRate4.50%1.765'4Fair~ValueWeightedCostKate4.50%1.764.39Total100'%11.30%10.65%If15.5%wasthereturnraterequirementforthecommonequitypartofanoriginalcostratebaseactuallyachievedafter'attritionandlag,theoverallrateofre-rnrelativetoanoriginalcostmeasureofvaluewouldbe11.30%(32.5%x15.5%.l.04%+4.50%+1.76%).Theimplicitbefore-incometaxcoverageforinterestonnedebtpartofanoriginalcostratebasewouldbe3.2timesassuminga30%effec-tiveincometaxrate(5.04%+1.76%=6.80%.70%=9.71%+4.50%=14.21%.4.50%=3.2x)andafter-incometaxcoverageforinterestonthedebtpartofanoriginalcostratebasewouldbe2.5times(11.30%.4.50%)whilethecoverageofallfixedchargesrelatedtothefixedcapitalpartoftheoriginalcostratebasewouldbe1.8times(11.30%".6'6%(4.50%+1.76%)).Comment:Bondinvestorsandratingagenciesdonotonlylookatthecurrentandprospectivelevelofcoverage,butthefiveyearhistoricalaverageaswell.IfitisassumedPennsylvaniaPower6LightCompany'sexperiencedlevelofcoveragewerecalculatedrelativetoanoriginalcostmeasureofvaluewithanassumedoverallrateofreturnof11.30%for1980,thefiveyearaveragesended1980availabletopresentinvestorsinfixedincomeobligationswouldbe:BeforeIncomeTaxCoverageofInterestChargesIncludinAllAFCAfterIncome=TaxCoverageofInterestChargesIncludinAllAFC.OverallCoverageofInterestChargesandPreferredStockDividendsIncludinAllAFC1976197719781979802.6x3.43.02.73.23.Ox2~3x2.52.42.4x2~32.517x1.81.71.7x1.71.8 C

e"-"--'-"""-IndicardResultsofOperationsGoingLevelatExistingelectricServiceRatesandProFormaatProposedi.~tesiftheRateBaseisFinancedinHarmonywiththeCapitalStructureRatiosandFixedCapitalCostRateEstimatedatDecember311980forthePro'ected'D~elveHonthsEndedDecember311980.LineNo.DescritionRatiosGoingLevelat.ProFormaatProosedRates2.4.BeforeincometaxoverallrateofreturnLess:ImpactofassumedattritionbeforeincometaxesAfterattri.ionbutbeforeincometaxoverallrateofreturnIncometax:AsclaimedbyCompanyAdjustments12.48%(1)12.484.46(2)18.26%(3)2.00(4)16.267.40(5)(1.00)(6)5.Afterincometaxoverallrateofreturn(line3lessline4)8.029.866.Less:Long-termdebtcomponent(47.4%long-termdebtratiox9.50%long-termdebtcostrate)4.504.507.Componentava-lableforpreferredandpreferencestockandcommonequity3.525.369.Less:Preferredandpreferencestockcomponent(20.1%preferredstockratiox8.76%preferredstockcostrate)ComponentavailableforcommonequityFinancialRatiosInterestCoverage:Beforeincometax(line3.line6)Afterincometax(line5.line6)Overallcoverageofinterestandpreferredandpreferencestockdividends(1ne5.sumoflines6and8)Returnrateforcommonequitycomponentoftheratebase(componentavailableforcommonequity".32.5%commonequityratio)1.761.76%2.8x1.81.354/'.763.60%3.6x2.21.611.1%0000mIQOI0mSeepage2forNotes.

AE\WE:I(ExhibitSchedule19Page2of2PennslvaniaPower6LihtComanIndicatedResultsofOperationsGoingLevelatExistingElectricServiceRatesandProFormaatProposedRatesiftheRateBaseisFinancedinHarmonywiththeCapitalStructureRatiosandFixedCapitalCostRateEstimatedatDecember31,1980fortheProjectedTwelveMonthsEndedDecember31,1980Notes:Sumofnetoperatingincomegoinglevelatexistingratesof$171.313millionandrelatedincometaxesandequivalentsof$95.265millionor$266.578millionofpre-taxnetoperatingincomerelatedtoclaimedoriginalcostmeasureofvalueof$2,135.241million.(2)Incometaxesandequivalentsgoinglevelatexistingratesof$95.265millionrelatedtoclaimedoriginalcostmeasureofvalueof$2,135.241million.(3)Sumofnetoperatingincomeproformaatproposedratesof$231.835millionandrelatedincometaxesandequivalentsof$158.055millionor$389.890millionofpre-taxnetoperatingincomerelatedtoclaimedoriginalcostmeasureofvalueof$2,135.241million.(4)Assumedimpactofattritionandlagbeforeincometaxesof2.0%oftheoriginalcostratebaseatproposedrates.Attritionandlagisassumedtobealreadyreflectedinpresentratesonagoinglevelbasis.(5)Incometaxesandequivalentsproformaatproposedrateof$158.055millionrelatedtoclaimedoriginalcostmeasureofvalueof$2,135.241million.(6)Incometaximpactofassumedattritionandlag(2.00%attritionandlagbeforeincometaxesx50%assumedincometaxrate)of1.00%.'ourceofInformation:CompanyExhibitC-lforMeasuresofValueD-1forStatementofIncome

~er+~4 PennsylvaniaPowerS.LightCompanyDD~AnnuaReporttotheSecuritiesandExchangeCommissionFortheYearEndedDecember3'I,'l980

CommissionFileNumber1-905PENNSYLVANIAPOWERdcLIGHTCOMPANY(ExactnameofRegistrantasspecifiedinitscharter)SECURITIESANDFXCHANGECOMMISSIONWashington,D.C.20509FORM10-KANNUALREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1930ForthefiscalyearendedDecember31,1980PENNSYLVANIA(Stateorotherjurisdictionofincorporationororganization)23-0959590(I.R.S.EmployerIdentificationNo.)TWONORTHNINTHSTREET,ALLENTOWN,PENNSYLVANIA(Addressofprincipalexecutiveoffices)Registrant'stelephonenumber,includingareacode215-770-5151SecuritiesregisteredpursuanttoSection12(b)oftheAct:18101(ZipCode)TitleofeachclassFii'stMortgageBonds10-1/8%Seriesdue1982PreferredStock0-1/2%3.35%'Series0.00%Series0.60%Series8.60%Series9.00%Series9.20%SeriesPreferenceStock88.00Series$8.00Series8.70Series11.00Series13.00SeriesCommonStockNameofeachexchangeonwhichregisteredNewYorkStockExchangeNewYorkRPhiladelphiaStockExchangesPhiladelphiaStockExchangeNewYorkRPhiladelphiaStockExchangesPhiladelphiaStockExchangeNewYork4PhiladelphiaStockExchangesPhiladelphiaStockExchangeNewYorkdcPhiladelphiaStockExchangesNewYork4PhiladelphiaStockExchangesNewYorkRPhiladelphiaStockExchangesNewYorkRPhiladelphiaStockExchangesNewYork4PhiladelphiaStockExchangesNewYork2PhiladelphiaStockExchangesNewYorkBcPhiladelphiaStockExchangesSecuritiesregisteredpursuanttoSection12(g)oftheAct:None(Titleofclass)Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1930duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.YesXNo(Continued)

SECURITIESANDEXCHANGECOMMISSION)Vashington,DC20509FORM10-KANNUALREPORTPURSUANTTOSECTION13or15(d)OFTHESECURITIESEXCHANGEACTOF1930Estimatedaggregatemarketvalueofthevotingstock(common,preferredandpreference)heldbynonaffiliatesatthebeginningofFebruary1981$1,288,000,000Commonstock,nopar,numberofsharesoutstandingatFebruary2,198151,033,870Documentsincorporatedbyreference:Registranthasincorporatedhereinbyreferencecertainsectionsofits1981NoticeofAnnualMeetingandProxyStatementwhichwillbefiledwiththeSecuritiesandExchangeCommissionnotlaterthan120daysafterDecember31,1980.SuchProxyStatementwillprovideinformationrequiredbythefollowingpartsofthisreport:PartII-Item9.DirectorsandExecutiveOfficersoftheRegistrantPartII-Item10.ManagementRemunerationandTransa'ctions Item2.309.5~6.7.9.10.PENNSYLVANIAPOWERRLIGHTCOMPANYFORM10-KANNUALREPORTTOTHESECURITIESANDEXCHANGE,COMMISSIONFORTHEYEARENDEDDECEMBER31,1980TABLEOFCONTENTSPARTIBusiness0~~~~~~~~~~~~~~~~~~Properties.LegalProceedingsSecurityOwnershipofCertainBeneficialOwnersandManagementExecutiveOfficersoftheRegistrant.PARTIIMarketfortheRegistrant'sCommonStockandRelatedSecurityHolderMatters.SelectedFinancialData.Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperation.FinancialStatementsandSupplementaryData.PARTIIIDirectorsandExecutiveOfficersoftheRegistrant.ManagementRemunerationandTransactions.PARTIVExhibits,FinancialStatementSchedules,ReportsonForm8-K.andSignatures.ExhibitIndex.~Pae1191920222525252659596063 PARTIITEMl.BUSINESSTHECOMPANYPennsylvaniaPowerdcLightCompany(theCompany)isanoperatingutility,incorporatedunderthelawsoftheCommonwealthofPennsylvaniain1920.TheCompany'sgeneralofficesarelocatedatTwoNorthNinthStreet,Allentown,Pennsylvania18101,anditstelephonenumberis(215)770-5151.9ITheCompanyissubjecttoregulationasapublic'tilitybythePennsylvaniaPublicUtilityCommission(PUC)andissubjectincertain'fitsactivitiestothejurisdictionoftheFederalEnergyRegulatoryCommission(FERC)underPartsI,IIandIIIoftheFederalPowerAct.TheCompanyisaholdingcompanyunderthePublicUtilityHoldingCompanyActof1935buthasbeenexemptedbytheSecuritiesandExchangeCommissionfromtheprovisionsofthatActapplicabletoitasaholdingcompany.TheCompanyissubjecttothejurisdictionoftheNuclearRegulatoryCommission(NRC)inconnectionwiththeconstructionoftheSusquehannanuclear-fueledgeneratingunits,eachofwhichwillhaveacapabilityof1,050,000kilowatts.TheCompanyownsa90%undividedinterestineachofthoseunitsanditsshareofthecapabilitywillbe905,000kilowatts.TheCompanyisalsosubjecttothejurisdictionofcertainFederal,regional,stateandlocalregulatoryagencieswithrespecttoairandwaterquality,landuseandotherenvironmentalmatters.TheoperationsoftheCompanyaresubjecttotheOccupationalSafetyandHealthActof1970andthecoalminingoperationsoftheCompany'ssubsidiariesaresubjecttotheFederalMineSafetyandHealthActof1977.TheCompanyderivesabout99%ofitsoperatingrevenuesfromsupplyingelectricservice,andthebalancefromsupplyingsteaminthecityofHarrisburg.TheCompanyservesapproximately1,000,000customersina10,000-square-mileterritoryin29countiesofcentraleasternPennsylvania(seeMap),withapopulationofapproximately2,000,000persons.Thisserviceareahasa'highpercentageofopenlandaswellas111communitieswithpopulationsover5,000,thelargestofwhicharethecitiesofAllentown,Bethlehem,Harrisburg,Hazleton,Lancaster,Scranton,Wilkes-BarreandV/illiamsport.Importantindustrial,recre-ationalandagriculturalsectionsarelinkedtoeasternpopulationcentersby.an'xtensivelimited-accesshighwaysystem.During1980,about00%ofelectricoperatingrevenuescamefromresidentialcustomers,28%fromindustrialcustomers,28%fromcommercialcustomersand0%fromothers.TheCompany'slargestcustomerprovidedabout0.3%ofelectricoperatingrevenuesduring1980andtheninelargestindustrial customers(eachofwhosebillingsexceeded$3million)provided,about8.5%ofsuchrevenues.Industrialcustomersarebroadlydistributedamongindustrialclassi-fications.PROBLEMSAFFECTINGTHEELECTRICUTILITYINDUSTRYANDTHECOMPANYTheelectricutilityindustryingeneralhasbeenexperiencingproblemsof(a)increasingcostsoffuel,wages,materialsandequipment,(b)substantiallyincreasedcapitaloutlaysandlongerconstructionperiodsforlargerandmorecomplexnewgeneratingunits,(c)increasedfinancingrequirementscoupledwithperiodicallyuncertainavailabilityofbothequityandborrowedcapital,(d)pastandprospectivesalesofcommonstockbelowbookvalue,(e)theincreasingcostoffinancingconstructionexpenditureswhichisnotrecoveredcurrentlythroughratesandisoffsetonthestatementofincomebyrecordingtheallowanceforfundsusedduringconstruction,(f)fuelavailability,(g)increasedconstructionandoperatingcostsandlicensingdelaysrelatedtocompliancewithenvironmentalregulations,(h)effortstodelayorpreventtheconstructionofnucleargeneratingandrelatedfacilities,particularlyintheaftermathoftheaccidentattheThreeMileIslandstation(anuclear-fueledgeneratingfacilityinPennsylvaniaownedbytheoperatingsubsidiariesofGeneralPublicUtilitiesCorporation),(i)uncertaintiesastotheimpactofenergyconservationeffortsandfluctuatingeconomicconditionsonloadgrowthandfutureconstructionrequirementsand(j)regulatorylagingrantingneededrateincreasesandthedegreeofadequacyofsuchincreaseswhengranted.ThesefactorsareaffectingtheCompanyinvaryingdegreesatatimewhen(a)itiscompletingconstructionofthetwonuclear-fueledgeneratingunitsattheSusquehannastationand(b)ithasheavyrequirementsforsalesofsecuritiesandcapitalcostsarehigh.TheissuanceofsecuritiestofinancetheCompany'scontinuingconstructionprogramwilldependupongeneralmarketconditions,theCompany'sabilitytomeetissuancetestsandotherfactors,includingthereceiptoftimelyandadequateraterelief.CONSTRUCTIONPROGRAM,FINANCINGANDRATEMATTERSSee"ReviewoftheCompany'sFinancialConditionandResultsofOperations"beginningonpage27forinformationconcerning:(a)theCompany'sconstructionprogram,includingthestatusoftheconstructionandlicensingoftheSusquehannastation;(b)theCompany'sfinancingplans,includingtheabilityoftheCom-panytomeetthetestsrequiredfortheissuanceofadditionalfirstmortgagebondsandpreferredstock;and(c)thedecisionofthePUCpermittinganincreaseofapproximately$97millionannuallyintheCompany'sbaseraterevenues,effec-tive3anuary30,1981.POWERSUPPLYtDuring1980,theCompanyproduced32.9billionkwhinplantsownedbyitandpurchased0.3billionkwhunderfirmpurchaseagreements.Duringthat period,theCompanydelivered9.8billionkwhandreceived1.1biiliorikwhaspower'oolintercharige.Approximately81%oftheenergygeneratedQtheCompany'splantsduring1980camefromcoal-firedstations,17%fromoil-Aredstationsand2%fromhydr60lectricstations.TheCompany'spowercapability(winterrating)atDecember311930wasasfollows:P.lantNetKilowatt~CaabilitCdal-firedsteamstationsMOntOur1~111~v11'1111~~~1~1'111'vBrunnerIsland.......~......~.....Sunbury.v1Ill~11~1'1~1~111'1l'll~vMartinsCreek,.....v....v..v...vlKeystone............COnemaughvv'vvv'll'll~1~1v~~~vvvHOltWOOd11~~11~1~~111~~1-~1~1~1votalcoal-fired.....~......,Oil-firedsteamstationMartinsCreek..-.......;....--.;.~Combustion;turbinesanddiesels......1.HydrOeleCtriC1111-1'll~11~~~.~1~1~~1Totalgeneratingcapability..Firmpurcnases-hydroelectric.....;;...Totalcapability........;...I,515,OOQI,o6e,ooa389,0(IO300,O0l02I0,000(a)I9e,oaO(b)790000,105,0001,600,00005395000III60006,070,00076000(c)6506000(a)Company's12130%undividedinterest.(b)Company's11.39%undividedinterest.(c)FromSafe.Harbor.WaterPower.Cor'por.ation.Thecapabilityofgeneratingunitsisbaseduponanumberoffactors,incfudingtheoperating.experienceandphysicalconditionoftheunits,andmayberevisedfromtimetotimetorefl'ectchangedcircumstances.Approximately13%oftheCompany'sgenerating.capabilityatDecember31',1980hasbeenplacedinserviceinthelastfiveyearsand53%inthelasttenyears.DroughtconditionsintheSusquehannaRiverbasin,haveresultedinareduction;oftheoutputfromtheCompany'sHoltwoodhydroelectric-station(102,000kwcapability)andfromthehydroelectricstationownedbySafeHarborWater.PowerCorporation.Asaresultofsimilarconditions-intheDelawareRiverbasin,,theDelawareRiverBasinCommission(DRBC)injanuary1981'ssuedanorder.directing,theCompanytominimizereleasesfromitsLakeWallenpaupackhydroelectricproject(00,000kwcapacity)fortheproduction.ofelectr'icityduringthewinterandspringinordertoallowthelaketoberefill'edby3une1',198I.The'ompanydoesnotcurrentlyexpectthatthereducedoutputfromthosehydro-el'ectricstationswilladverselyaffectitsabilitytomeetcustomerdemandsbutisunabletopredicttheextenttowhichaworseningofdroughtconditionsintheSusquehannaandDelawareRiver'asinswillresultin'dditionalactionsbytheSusquehannaRiverBasinCommission'(SRBC)ortheDRBCwhichcouldrestricttheoperationoftheCompany'scoaland'oil-firedsteamstations.

Themaximumone-hourdemandontheCompany'ssystemwas0,905,000kw,whichoccurredon3anuary13,1981andincludedthesaleof110,000kwtotheLuzerneElectricDivisionofUGICorporationunderafirmpurchaseagreement.Themaximumone-hoursummerdemandwas3,908,000kw,whichoccurredonSeptember2,1980andincludedthesaleof2,000kwtoLuzerne.TheCompany'scurrentprojectionsindicateasubstantialreductionintheaverageannualgrowthofsystemwinterpeakdemandintothe1990s,ascomparedtogrowthforecastsatthetimethedecisionwasreachedtobuildtheSusquehannaunits.ThiscouldresultintheCompanyhavinggeneratingcapabilitygreaterthanconsideredcustomarytoassureservicereliability.Asaresult,theCompanyhasenteredintoanagreementwithAtlanticCityElectricCompanyunderwhichAtlanticCityElectricCompanywillpurchase,subjecttoFERCacceptance,6.6%oftheCompany'sshareofthecapacityandrelatedenergyfromtheSusquehannaunits(125megawattsofcapacitywhenbothunitsareinservice)foratermcommencingwiththein-servicedatesoftheunitsandendingSeptember1991.TheCompanyisactivelypursuingotherpotentialsalesofcapacityandenergyfromtheSusquehannaunits.TheCompanyoperatesitsgenerationandtransmissionfacilitiesasapartofthePennsylvania-NewJersey-Maryland(PJM)Interconnection.TheP3MInterconnection,oneoftheworld'slargestpowerpools,includeselevencompaniesservingabout21millionpeopleina50,000squaremileterritorycoveringallorpartofPennsylvania,New3ersey,Maryland,Delaware,Virginiaandwashington,D.C.TheP3Mcompanieshadapproximately07.5millionkwofinstalledgeneratingcapacityatDecember31,1980andtransmissionlineconnectionswithneighboringpowerpoolshavethecapabilityoftransferringanadditional2.1millionkwbetweentheP3Mandneighboringpowerpools.ThroughDecember31,1980themaximumone-hourdemandontheP3Mwasapproximately30.0millionkw,whichoccurredonJuly21,1980.TheCompanyisalsoapartytotheMid-AtlanticAreaCoordinationAgreementwhichprovidesforthecoordinatedplanningofgenerationandtransmissionfacilitiesbythecompaniesincludedintheP3MInterconnection.AsaresultoftheoutageoftheThreeMileIslandnuclearunits,theP3Mcompanies,aspartofasettlementagreementapprovedbyFERC,completedanarrangementwhichwillpermittheoperatingsubsidiariesofGeneral-PublicUtilitiesCorporationtopurchaseupto1,700tnegawattsofenergyperhour,upto7millionmegawatts,peryear,fromP3M,ifandasavailable.Thatentitlementistobereducedbyone-halfofthepurchasesmadebytheGPUcompaniesoutsideofP3M.Salesunderthisarrangementaretobepricedatthesellingcompanies'ncrementalcostofenergyplus10%.Thisagreement,whichmodifiesthesplitsavingsconceptnormallyusedforP3Mtransactions,becameeffectiveinOctober,1980andwillterminateattheendof1981orthereturntoserviceofThreeMileIslandUnitNo.1,whicheveroccursfirst.SincetheamounttheCompanywouldreceivefromanysalesunderthisarrangementwillbelessthanunderthenormalP3Msplitsavingsconcept,theCompany'scustomerswouldabsorbthedifferenceintheformofhigherenergyclausecharges.In3anuary1981,theDistrictofColumbia'sPeoples'ounselappealedtheFERCapprovalofthesettlementagreementtotheUnitedStatesCourtofAppealsfortheDistrictofColumbia.

FUELSUPPLYCoalThefollowingtabulation'showstheamountofanthraciteandbituminouscoalburnedbytheCompany'sgeneratingstationsduring1980andtheestimatedrequirementsforcoalovertheremainderoftheestimatedusefullivesofthosestationsasestablishedintheratecasedecidedbythePUCon3anuary30,1981.BurnedDuring1980EstimatedRequirementsOverPlantAves(a)Millionsof'TonsAnthracite(includingpetroleumcoke)......Bituminouscoal(b).......................otal.............................T0.810.110.916.0<00.0216.0(a)TheCompanyplanstomakecapitalexpendituresatitsexistingcoal-fired.stationstoextendtheiroperationalliveswhichwouldincreasetheesti-matedcoalrequirementsfromthoseshowninthetabulation.(b)IncludestheCompany'sshareofthebituminouscoalforthejointly-ownedKeystoneandConemaughgeneratingstations.~TheCompany'spolicygenerallyistomaintaina05to60daysupplyofbituminouscoalatitsgeneratingstation's.AtDecember31,1980,basedonestimatedusage,theCompany'sbituminouscoalinventorywassufficientforabout55daysofoperations.LaborcontractsbetweenmineownersandtheUnitedMineWorkersofAmericaexpireonMarch27,1981.Inanticipationofpossiblestrikes,theCompanyisattemptingtoincreaseitscoalinventoryovernormallevels.During1980,03%ofthecoaldeliveredtotheCompany'sgeneratingstationswasobtainedfromsubsidiaryminingcompanies(approximately00%ofwhichwasmarketpurchasesbythosecompanies),23%waspurchasedundercontractsand30%waspurchasedonthemarket.AtDecember31,1980,theCompany'sinventoryofanthracitewasabout0.7milliontons.ThebalanceoftheCompany'srequirementsforanthracite,.aswellasitsrequirementsforpetroleumcoke,overtheremainderoftheexpectedusefullivesoftheCompany'-santhracite-firedgeneratingstationsisexpectedtobeobtainedbytheacquisitionofadditionalanthracitesiltbanksandmarketpur-chases.ThefollowingtabulationliststhebituminouscoalreservesownedorcontrolledatDecember31,1980bytheCompany'ssubsidiary,PennsylvaniaMinesCorporation(PMC).Thesereserves,allofwhicharelocatedinPennsylvania,arerecoverablebydeepminingoperations.Theinformationundertheheadings"EstimatedRecoverableReservesasof3anuary1,1980"and"Average%Sulfur(Weight)"wasprovidedbyPaulWeirCompanyIncorporatedonthebasisofi independentstudiesandtheCompanyhasincludedsuchinformationhereininrelianceuponsuchstudies.Estimated,RecoverableReservesasof3anuary1,1980(a)'verage%1980Sulfur(ByProduction~We)ht)(d)rThousandsofTonsrAssigned.reserves(b)Greenwich...........Rushtonee~~~~~~~~~~~Tunnelton...........~Totalassignedreserves.........Unassignedreserves(c)(e)GreeneHill.........~otale~~~~~~~~~~~~~~~~~~T62,6038,712878rr80,099)598772399761,95050009529905~29rr52.70.51.72.9(a)Includesonlyprovenreservesforwhichtonnageiscomputedfromdirnen-sionsrevealedinoutcropdata,mineworkingsanddrillholes.'b)Assignedreservesrepresentcoalwhichcanbeminedonthebasisofcurrentminingpracticesandtechniquesthroughtheuseofmineopeningsandplantfacilitiescurrentlyinexistenceorunderconstruction.'c)Unassignedreservesrepresentundevelopedreservesorreservesthatwouldrequiresubstantialadditionaldeepminingfacilitiesbeforeoperationscouldbegin.(d)Rawcoal,drybasis(priortocleaning).(e)InDecember1980,theCompanyleaseditsGreeneManorcoalreservestoRoyalLandCompany(RoyalLand),asubsidiaryofTheStandardOilCompany(Ohio).TheGreenManorreservesareestimatedtocontainapproximately177millionrecoverabletonsofbituminouscoal.IfnotterminatedbyRoyalLandpriortoDecember31,1981,theleasewillextendthrough2001andmaybeextendedbyRoyalLandforanindefiniteperiodthereafter.TheleasearrangementsobligateRoyalLandtopayminimumandproductionroyaltieswhichwillbeadjustedperiodicallytoreflectchangesinaspecifiedpriceindex.TheCompanyestimatesthattheamountofminimumroyaltiespayablepursuanttotheleasethrough2001willpermitittorecovermorethanitsinvestmentinthosereserves.TheinvestmentintheGreeneManorreserves,whichapproximated$03.0millionatDecember31,1980,isfinancedbydebtobligationsguar-anteeddirectlyorindirectlybytheCompany.ThedecisiontodisposeoftheGreeneManorreservesresultedfromlowerprojectedloadgrowthanddiminishedneedforcoalduringthebalanceofthis'entury.TheextenttowhichtheGreeneHillreservesmayeventually beminedtomeetthefuelrequirementsoffuturegeneratingstationswilldependuponfutureeconomic'conditionsandotherfactorswhichcannotnowbepredicted.TheinvestmentbysubsidiarycompaniesintheGreeneHill'reserves,whichapproximated$60.8millionatDecember31,1980,isfinancedbydebtobligationsguaranteeddirectlyor",'indirectlybytheCompany.rDuring1980,theCompanyacquiredadditionalbituminouscoalreservesinPennsylvaniawhicharerecoverablethroughsurface-miningoperations.Inthisregard,theCompanyinAugust1980acquiredall.ofthecapitalstockofTheArcadiaCompanyinatransactioninvolvingtheissuanceof092,'537sharesoftheCompany'sco'mmonstockandthepaymentofabout$2millionincash.TheArcadiareservesareestimatedbytheCompanytocontainapproximately8millionrecoverabletonsofbituminouscoal.Subsequenttotheacquisition,productionfromtheArcadiareservestotalledabout60,000tonsofwhichlessthan10,000tonswasdeliveredtotheCompany.TheCompanyiscurrentlyreceiving100%ofthe'roductionfromtheArcadiamine.UnderacontractwithLady3aneCollieries,Inc.(anassociatedbitumi-nouscoalsupplier),theCompanyisrequiredtopurchasetheentireoutputofthemineandLady3aneisobligatedtodeep-mineitsreservestoexhaustion.ProductionattheLady3anemineamountedto199,000tonsduring1980.Run-of-minecoalfromtheLady3aneminehasanaveragesulfurcontentofabout3.5%.TheCompanyalsohasacontractwithanunassociatedbituminouscoalsupplierwhichexpiresonMay31,1983.Underthiscontract,thesupplierisobligatedtoselltotheCompanyatotalof1.2millionto1.0milliontonsofsurface-minedbituminouscoalduringeachyearofthecontractterm.During1980,about1.3milliontonsofbituminouscoalhavinganaveragesulfurcontentofabout1.7%weredeliveredtotheCompanyunderthecontract.ThecoalburnedintheCompany'sgeneratingstationscontainsbothorganicandpyriticsulfur.MechanicalcleaningprocessesinstalledattheCompany'ssubsidiaryandassociatedminesarebeingutilizedtoreducethepyriticsulfurcontentofthecoal.ThereductionofthepyriticsulfurcontenthasloweredthetotalsulfurcontentofthecoalburnedtolevelswhichpermitcompliancewithcurrentsulfurdioxideemissionregulationsestablishedbythePennsylvaniaDepart-mentofEnvironmentalResources(DER).See"EnvironmentalMatters--Air".TheregulationsapplicabletotheCompany'scoal-firedgeneratingstationsgenerallylimittheaveragesulfurcontentinany30-dayperiodtonotmorethan,2.3%.Coalobtainedthroughmarketpurchasescurrentlyhasanaveragesulfurcontentofabout1.9%.TheCompanyownsa12.30%undividedinterestintheKeystonestationandan11.39%undividedinterestintheConemaughstation,bothofwhicharemine-mouthgeneratingstationslocatedinwesternPennsylvania.TheownersoftheKeystonestationhavealong-termcontract,whichmaybeextendedthrough.2011,withasupplierfor90%oftheannualbituminouscoalrequirementsoftheKeystonestation.TheownersoftheConemaughstationhavealong-termcontractwithanothersupplierforatleast80%oftheannualbituminouscoalrequirementsoftheConemaughstationforthelifeofthatstation.BecauseofpoorminingconditionsandotherdifficultiesbeingexperiencedbythesupplierfortheCone-maughstation,thesupplierhashadtosupplementitsdeep-mine'productionwithpurchasedcoal.Totheextentthattherequirements.oftheKeystoneand Conemaughstationsarenotobtainedfromthosesuppliers,the,bituminouscoalrequirementsare,withminorexceptions,obtainedfromlocalsuppliers.ITheCompanyestimatesthatassignedreservesandcontracts,togetherwithcoalexpectedtobeproducedfromsurfaceorstrip-minedreservesacquiredbytheCompany,willprovideabout6096ofitsprojectedbituminouscoalrequirementsduringthe'next'iveyears.Thebalanceofthese,requirementswillhavetobeobtainedthroughmarketpurchases.Theaveragedeliveredcostofcoalhasincreasedoverrecentyearsfrom$29.50pertonin1978to$33.78pertonduring1980.Theaveragedeliveredcostofcoalpurchasedduring1980wasasfollows:bituminouscoalpurchasedfromsubsidiarycompanies(includingcoalpurchasedbythosecompaniesinthe-openmarket)andundercontracts,$36.50perton;bituminouscoalpurchasedbytheCompanyintheopenmarket,$32.27perton;andanthracite,includingpetroleumcoke,$16.69perton.BituminouscoalpurchasedintheopenmarketbytheCompanyanditssubsidiariesisprimarilysurface-mined.Bituminouscoalproducedbysubsidiarycompaniesisprimarilydeep-mined.During1980,aboutone-halfofthebituminouscoalpurchasedbytheCompanyundercontractswassurface-minedandthebalancewasdeep-mined.In3une1979,thePUCinitiatedarulemakingproceedingtodeterminethereasonablenessofthepriceofcoalobtainedfromcoalminescontrolledbyPennsylvaniaelectricutilities.UndertheregulationsproposedbythePUC,thepriceofcoalobtainedfromcontrolledmineswhichwouldberecoverablethroughanenergyclausewouldbelimitedtothelowerof:(i)theactualcostpaidbytheutilityforsuchcoal;or(ii)theweightedaveragepriceforsimilarcoalduringtheprecedingthreemonthsfrommineswhicharenotcontrolledbyPennsylvaniaelectricutilities.Theproposedregulationsprovidethatanypor'tionofthecostofcoalfromcontrolledmineswhichisnotrecoveredthroughtheenergyclausewouldberecoverableonlyinaseparateproceedingbeforethePUCafternoticeandhearingandforgoodcauseshown.TheCompanyandotherPennsylvaniaelectricutilitiesareopposingtheadoptionoftheregulationsintheformproposedbythePUC.Inthisregard,theCompanyhasrecommendedalternativestandardsdevelopedbytheCompanyfordeterminingthereasonablenessofthepriceofcoalobtainedfromitscontrolledmines.TheCompanyisunabletopredictwhatactionthePUCmaytakewithrespecttotherulemakingorthestandardsrecommendedbytheCompany.IfadoptedintheformproposedbythePUC,theregulationswouldlimittheautomaticrecoveryofthecostofcoalproducedbytheCompany'scoal-miningsubsidiariesandtheLady3aneminebyamountswhichcouldbesubstantial.AnauditoftheCompany'scoalmining,purchasingandcleaningoperationsperformedbytheBureauofAuditsofthePUCreported,amongotherthings,thatthecurrentcostofcoalproducedfromthedeepminereservesownedbyPMCismoreexpensivethancoalpurchasedintheopenmarketandthatcoalpurchasedandcleanedatthecleaningplantlocatedattheformerOneidamineismoreexpensivethansimilarcoalwhichcouldbeboughtintheopenmarket.Asaresult,thePUCinDecember1980orderedtheCompanytoretainanoutsideconsultanttoperformacomprehensive-reviewoftheCompany'sc'oalacquisitionpracticesandprocedures.TheCompanyhasadvisedthePUCthatitwillfullycooperateincarryingoutthatorder.

OilThetwo820,000kwoil-firedgeneratingunitsattheCompany'sMartinsCreekstationaredesignedtoburneithercrudeorresidualoilandtoadjustrapidlytochangesinloadlevelsortooperateasbaseloadunits.Underthe.PowerPlantan'dIndustrialFuelUseActof1978,theSecretaryoftheDepartmentofEnergy(DOE)canrequireconversionofaplantthathas.orpreviouslyhadthetechnicalcapabilitytousecoalasaprimaryfuelsource.The,SecretaryofDOEcanalso'requireconversiontocoal'iftheconversioncanbeaccomplished.withoutasubstantialmodificationtothe,"plantorasub-stantial.reduc'tioninratedcapacity.Theoil-firedunitsattheMartinsCreekstationwere,designed.specificallytoburnoilandtheydonothavethetechnical.capabilitytoburncoalasaprimaryenergysource.TheCompany'sstudiesindicatethatanyconversionoftheMartinsCreekunitswouldrequiresubstantialmodifica-tionsandasubstantialreductionofther'atedcapacityoftheunits.During1980,theoilrequirementsfortheMartinsCreekunitswereprovidedfromforeignsources,principallyundercontractswiththreesuppliersandthebalancethroughspotmarketpurchases.TheCompanyhasagreeme'ntswithtwosupplierstoprovideupto75%oftheexpectedoilrequirementsfortheMartinsCreekunitsthroughtheendof1982.Athirdagreement,underwhichtheCompany,canpurchaseupto15%oftheoilrequirementsfortheMartinsCreekunits,expireson3uly1,1981,unlessextendedforadditionaltwelvemonthperiodsbywrittenagreementofthe.parties.TheCompanycurrentlyexpectsthatitwillbeabletoacquirethebalanceofitsoilrequirementsfortheMartinsCreekunitsthroughadditionalcontractsorspotmarketpurchases.TheoperatingpermitsissuedbyDERfortheMartinsCreekoil-firedunitslimitthesulfurcontentoftheoilburnedinthoseunitsto1%,astandard'hichtheCompanyhasbeenabletomeet.Becauseofthegreateravailabilityandlowercostofoilhavingahighersulfurcontent,theCompany,aftersuccessfultestoperationsinOctober1980using1.5%sulfuroil,hasrequestedachangeintheoperatingpermitsfortheMartinsCreekunitswhich,undercertainoperatingconditions,wouldallowoilhavingasulfurcontent.ofupto1.5%tobeburnedin.thoseunitswithoutviolatingapplicableairqualitystandards.TheaveragepricepaidbytheCompanyforresidualoildeliveredtothe,MartinsCreekunitshasrisenfrom$13.09perbarrelin1978to$26.00perbarrelin1980.NuclearInanticipationofthecommercialoperationoftheSusquehannaunits,theCompanyhasmadecommitmentstomeetcertainofthenuclearfuelcyclerequirementsforthoseunits.Thenuclearfuelcycleconsistsoftheminingandmillingofuraniumoretouraniumconcentrate;theconversionofuraniumconcentratetouraniumhexafluoride;theenrichmentofuraniumhexafluoride;thefabricationoffuelassemblies;theutilizationofnuclearfuelinthereactor;temporarystorageofspentfuel;andthereprocessingorpermanentdisposalofspentfuel.TheCompanyhasenteredintoagreementsforthepurchaseoftheuraniumconcentraterequirementsfortheSusquehannaunitsthrough1987and-9'-

approximatelyone-quarterofthoserequirementsfortheperiod1988-1993.Deliv-eriesundertheseagreementsareexpectedtoprovidesufficientquantitiesofuraniumconcentrates(basedonan80%capacityfactorfortheunits)topermitUnitNo.1tobeoperatedforabout7Y~yearsafteritisplacedincommercialoperationandUnitNo.2tobeoperatedforabout6'earsafteritisplacedincommercialoperation.TheCompanyhasalsoenteredintoagreementsforothersegmentsofthenuclearfuelcycle.Baseduponthepresentlyscheduledin-servicedatesandplannedfuelcyclesfortheSusquehannaunits,thefollowingtabulationshowstheyearsthroughwhichcontractsareexpectedtoprovidetheindicatedsegmentsofthenuclearfuelcycle.SusquehannaUnitNo.1SusquehannaUnitNo.2Conversion0~~~~~~4~~~~~~~~~~Enrichment.................,Fabrication..................199020091995199020101995Additionalarrangementswillberequiredtosatisfythefuelrequire-mentsoftheSusquehannaunitsovertheirestimatedusefullives.TheCompanyestimatesthattherewillbesufficientstoragecapabilityinthespentfuelpoolsatSusquehannatoaccommodatethefuelthatisexpectedtobedischargedthrough1995.TherearecurrentlynocommerciallyoperatingfacilitiesintheUnitedStatesforthereprocessingofspentfuel.However,DOEhasproposedapolicyunderwhichtheFederalGovernmentwouldprovideoff-sitestorageofspentnuclearfuelinreturnforthepaymentofafee.TheCompanyisunabletoestimatewhetherorwhensuchstoragefacilitieswouldbecomeavailableortheamountofthefeestobecharged.During1980,UraniumResourcesandDevelopmentCompany(URADCO),awhollyownedsubsidiaryoftheCompany,terminateditsuraniumexplorationanddevelopmentactivitiesandbegantodisposeofitspropertiesandassets.'eeNote10toFinancialStatementsforinformationregardinga$12.0millioncashpaymentreceivedbyURADCOinDecember1980aspartofthesettlementoflitigationbetweentheCompanyandGeneralAtomicCompany.TheterminationofURADCO'soperationsisnotexpectedtohaveasignificanteffectontheCompany'sfinancialstatements.ENVIRONMENTALMATTERSTheCompanyissubjecttocertainpresentanddevelopingFederal,regional,stateandlocallawsandregulationswithrespecttoairandwaterquality,landuseandotherenvironmentalmatters.Exceptasdescribedbelow,theCompanyispresentlyinsubstantialcompliancewithapplicableenvironmentallawsandregulations.AirTheFederalCleanAirAct'Amendmentsof1977(1977Amendments)include,amongotherthings,provisionsthat:(a)requirethepreventionofsignificant'eteriorationofexistingairqualityinregionswhereairqualityis10-drevisens;andimposeollutionbetterthanapplicableambientstandards;(b)restricttheconstructionofan'theperformancestandardsfornewcoal-firedandoil-firedgeneratingstatio(c)requiretheUnitedStatesEnvironmentalProtectionAgency(EPA)tosubstantial'non-complian'cepenaltiesforfailuretocomplywithairpregulationsafter3uly1,1979anddiscretionarycivilpenaltiesof..upto$25,000perdayofviolationforfacilitiesfoundtobeinviolationoftherequirementsofanapplicablestateimplementationplan.UnderproceduresestablishedbyDER,companiesnotincompliancewithemissionregulationshavebeenpermittedtoenterintoconsentorderswithDERwhichallowcontinuedoperationoffacilitiesduringthetimeinwhichstepsarebeingtakentoachievecompliance.PaymentsarerequiredtobemadetothePennsylvania'CleanAirFunduntilcomplianceisachievedwithrespecttoanyparticularfacility.Inthisregard,theCompanyandDERenteredintoaconsentorderin*1975whichrequiresthatcompliancewithDERparticulateand'opacityemissionsstandardsbeachievedatBrunnerIslandUnitNo.1byDecember31,1980andatBrunnerIslandUnitNo.3by3une30,1981.ThatconsentorderwasenteredasanorderoftheCommonwealthCourtofPennsylvaniainOctober1980.CompliancewiththeDERstandardswasachievedatBrunnerIslandUnitNo.1inOctober1980andtheCompanyexpectsthatcompliancecanbeachievedatBrunnerIslandUnitNo.3bythedatespecifiedintheconsentorder.Undertheconsentorder,theCompanyisrequiredtomakepaymentstothePennsylvaniaCleanAirFundwhicharenotexpectedtoexceed$103,000intheaggregate.BecausetheCompanyhadbeenproceedingonaconstructionscheduledesignedtoachievecomplianceattheBrunnerIslandunitsbythedatessetforthinthe1975consentorderwithDER,theCompanywasnotabletoachievecomplianceatthoseunitsbythedateestablishedbythe1977Amendments.EventhoughtheCompanywasincompliancewithapplicableparticu-lateemissionregulationsatitsHoltwoodSteamElectricStation,in3uly1977EPAnotifiedtheCompanyofanallegedviolationofDERopacityregulationsatthe-Holtwoodstation.FollowingdiscussionswithDERandEPA,theCompanyin.3anuar'y1978agreedtoinstalladditionalemissioncontrolfacilitiesatHoltwood.InMay1978,theCompanyandDERsignedaconsentorderwithrespecttotheHoltwoodstationandthatconsentorderwasenteredasanorderoftheCommon-wealthCourtofPennsylvania.CompliancewiththeDERopacityregulationswasachievedattheHoltwoodstationinNovember1980,priortotheMarch1,1981compliancedatespecifiedintheconsentorder.Undertheconsentorder,theCompanymadepaymentstothePennsylvaniaCleanAirFundaggregatingapproxi-mately$60,000.BecauseBrunnerIslandUnitsNo.1andNo.3andtheHoltwoodstationwerenotbroughtintocompliancewithairpollutionregulationsbythecompliancedateestablishedbythe1977Amendments,theCompanymaybesubjecttosubstantialfinesandpenalties,includingnoncomplianceorcivilpenalties,inamountswhicharenotnowdeterminable.However,in1980EPAadvisedtheCompanythatitdidnotintendtoseekcivilpenaltiesforfailuretomeetthecompliancedateestablishedbythe1977AmendmentsprovidedthatthecomplianceschedulesspecifiedintheconsentorderswithDERcoveringtheBrunnerIslandunitsandtheHoltwoodstationweremet.ThoseschedulesweremetforBrunnerIslandUnitNo.1andfortheHoltwoodstation.IntheeventthatthecompliancescheduleforBrunnerIslandUnitNo.3isnotmet,theCompanymaybesubjectto0 civilpenaltiesunderthe1977Amendmentsinanamountwhichisnotnowdeterminablebutwhichmaybesubstantial.EPAhasadvisedtheCompanythatnoncompliancepenaltieswouldnotbeleviedagainsttheCompany,ifatall,untilsuchtimeastheEPAissuesanoticeofnoncompliance.Althoughnosuchnoticehasbeenreceived,theCompanyestimates,basedonitsinterpretationoftheformulaestablishedbyEPAregula-tions,thatnoncompliancepenaltieswithrespecttoBrunnerIslandUnitNo.3wouldnotexceed$100,000intheaggregate.TheCompanydoesnotexpectthatanysuchnoticesofnoncompliancewillbeissuedwithrespecttoBrunnerIslandUnitNo.1andHoltwood.,InSeptember1980theCompanyreceivednotification'fromtheSierraClub,aprivatenonprofitcorporation,allegingthattheoperationof.theCompany'sBrunnerIsland,Units1and3isand,sinceJune1,1977,hasbeeninviolationofanemissionstandardorlimitationundertheFederalCleanAirAct.UndertheCleanAirAct,theSierraClubmaycommenceacivilsuitindistrictcourtagainsttheCompanytoenforcetheCleanAirActemissionstandardorlimitation.TheCompanyisuncertainastowhatfurtheraction,ifany,willbetakenbytheSierraClubinthismatter.TheprocessingofcoaltoreducethesulfurcontentpriortoburningpermitstheCompanytocomplywithcurrentstatesulfurdioxideemisisonregulations.If,however,thesulfurdioxideemissionregulationsapplicabletotheCompany'sexistinggeneratingstationsareamendedtosignificantlyreduceper-missibledischarges,theCompanymayberequiredtofurtherreducethesulfurcontentofcoalpriortoburningorinstallequipmentfortheremovalofsulfurdioxidefromfluegases.DERhasconcludedstudiesconcerningsulfurdioxideambient'irqualitylevelsintheCommonwealthofPennsylvaniaandhasclassifiedtheSunburyareaasanonattainmentareawithrespecttosulfurdioxidenationalambientairqualitystandards.Asaresult,DERhasproposedanewsulfurdioxideemissionstandardfortheCompany'sSunburystationwhich,ifadopted,wouldfurtherlimitthesulfurdioxideemissionsfromthatstation.CompliancewiththenewstandardcouldrequiretheCompanytomakeadditionalexpendituresattheSunburystationinamountswhicharenotnowdeterminablebutwhichmaybesubstantial.In3anuary1980,DERadvisedtheCompanythatitmusteitherreducesulfurdioxideemissionsfromtheSunburystationordemonstratethatthesulfurdioxidestandardshavebeenattainedintheSunburyarea.TheCompanyandDERarediscussingaconsentorderforthesulfurdioxideemissionsfromtheSunburystationunderwhichtheCompanywouldconductstudiestodeterminewhethertheSunburyareashouldbereclassifiedasanattainmentarea.TheCompanyhasdevelopedatentativeprogramtoconductadditionalstudiestosupplementthefiveambientairmoni-toringstationsinstalledintheSunburyarea.CertainfacilitiesarebeingoperatedinconnectionwiththecoalminingoperationsoftheCompany'ssubsidiarieswithoutthepermitsrequiredbyapplicableairqualityregulations.Asaresult,suchsubsidiariesmaybesubjecttopenaltieswhicharenotexpectedtobematerialinamount.

Water,To;meetthestandardof"bestpracticablecontroltechnologycurrently.available"establishedbytheFederalWaterPollutionControlAct,asamendedinDecember1977(CleanWaterAct),theCompany'scoalminingsubsidiariesareplanningtoinstallwastewatertreatmentequipmentatcertainoftheirfacilities,andhavefiled.thenecessaryapplicationswithDER.Thefailurebythesubsidiaries-.tomeettheGleanWaterActstandardby3uly1,1977maysubjectthesubsidiariestofines.andpenaltieswhicharenotexpectedtobematerialinamount.TheCleanWaterActrequirestheapplicationofthe'bestavailabletechnologyeconomicallyachievable"by3uly1,1980withrespecttocertaindischargesfromexistingfacilitiesandauthorizesEPAtoestablishdischarge.limitationsaddcomplianceschedulesforcertainotherpollutants.~)Withrespectto,"new"facilities,theCleanWaterActauthorizesEPAtoestablishstandardsofperformancewhichwillrequiretheapplicationofthe"bestavailabledemonstratedcontroltechnology".TheCleanWaterActalsorequiresthatthe!~location,design,constructionandcapacityofcoolingwaterintakestructuresreflecttheapplicationof.the"best*technologyavailableforminimizingtheadverseenvironmentalimpact".Tomeettheserequirements,EPAhasadoptedorwilladopteffluentlimitations,guidelinesandstandardsforsteamelectricstationsandguidelinesforcoalmines.,EPA.limitations,guidelinesandstandardsareenforcedthroughtheissuance,ofNationalPollutionDischargeEliminationSystem(NPDES)permitswhichspecifytheapplicablelimitationsondischarges.InaccordancewiththeprovisionsoftheCleanWaterAct,EPAhasauthorizedDERtoimplementtheNPDESprogramforPennsylvaniasources.Compliancewith'pplicablewaterqualitystandardsisassuredbyDERreviewofNPDESpermitconditions.TheCompany.hasreceivedNPDESpermitsfortheoperationofitsgeneratingstationsandforconstructionactivitiesattheSusquehannastation.Pendingdevelopmentandevaluationofadditionaldata,certainoftheCompany'sNPDESpermitshavebeenextendedbyDERbeyondtheirexpirationdate.TheCompanyexpectstobeabletoobtainthenecessaryrenewalsofitsNPDESpermitsonatimelybasis.ApplicationsforNPDESpermitsforthecoalminingoperationsatcertainoftheCompany'ssubsidiarieswerefiledwithDER.However,noactionhasbeentakenbyDERwithrespecttotheseapplications.DERalsoadministersstatelawsandregulationsrelating,amongotherthings,toeffluentdischargesandwaterquality.TheCompanyandDERarediscussingthenecessityofinstallingadditionalwatertreatmentfacilitiesatcertainoftheCompany'sgeneratingstations.Inaddition,theCompanyisreviewingwhetherthecoalminingoperationsofitssubsidiariesarebeingcon-ductedinconformitywithapplicablelawsandregulationsandwhetheradditionalwaterqualitypermitsarenecessaryforsuchoperations.TheCompanyhasagreedwithDERtoinstalladryflyashhandlingsystemattheMontourstationtomeetcertainlimitationscontainedintheDERcertificationincorporatedintheNPDESpermitforthatstation.,UnderaconsentorderwithDER,theCompanyispermittedtocontinuetheoperationsoftheMontourstationduringthetimethatthedryflyashhandlingsystemisbeingdesignedandinstalled.

RegulationsadoptedbytheDepartmentofInterior'sOfficeofSurfaceMiningControlandReclamationActof1977,whichalsoappliestothedisposalofrefusefromundergroundmines,areexpectedtodelaytheissuancebyDERofacoalrefusedisposalpermitforPMCandmayrequireadditionalexpendituresbytheCompany'scoalminingsubsidiariesinamountswhicharenotnowdeterminablebutwhichmaybesubstantial.TheCompanycurrentlyisinvestigatingwhetherthedisposalofcoalrefusefrom"theminesownedorcontrolledbyPMCisbeingconductedinaccordancewithsuchregulationsandwhetheradditionalcoalrefusedisposalpermitsarenecessary.TheCompany'sagreementwiththeDRBCwithrespecttothewith-drawalofwaterfortheoil-firedunitsattheMartinsCreekstationrequirestheCompanytoprovidemake-upwateratcertaintimesortocurtailoperationofthoseunitsduringcertainperiodsoflowflowintheDelawareRiver.Inthisregard,theCompanyandcertainotherelectricutilitieshavingfacilitiesintheDelawareRiverbasinhavefiledanapplicationwiththeDRBCforapprovalofamake-upwaterreservoirprojectinthebasinandtheCompany'sshareofthecostofthereservoirduringtheyears1981-1983isincludedinitsestimateofconstructionexpendituresforthatperiod.Pendingcompletionofthereservoirproject,theCompanyhasanagreementwithNewYorkCity(theownerofwatersupplyreservoirsintheupperDelawareRiverbasin),subjecttocancellationbyeitherpartyon30days'otice,whichallowstheCompanytosupplytherequiredmake-upwaterfortheoil-firedunitsatMartinsCreekfromitsLakeWallen-paupackhydroelectricproject.AsaresultofdroughtconditionsintheDelawareRiverbasin(see"PowerSupply"),theDRBCinJanuary1981declaredabasin-wideemergencyinanefforttoregulatewaterandwatersourcesintheDelawarebasin.ThatdeclarationplacestheoperationoftheWallenpaupackhydroelectricprojectunderthedirectionoftheDRBCuntilthedroughtemergencyisover.TheregulationsoftheSRBCrequirethatwaterconsumedintheoperationofnewelectricgeneratingunitsduringcertainperiodsoflowflowbereplacedortheoperationofthoseunitsbecurtailedduringsuchperiods.InconnectionwiththeconstructionoftheSusquehannaunits,theCompanyhasinitiatedactiontoobtainanadequatesupplyofmake-upwaterfromaUnited'tatesArmyCorpsofEngineers'rojectintheupperSusquehannaRiverbasin.IfwaterfromthatprojectisnotmadeavailabletomeettheSRBCregulationswhichwillbecomeapplicabletotheSusquehannaunitsasofJuly1,1980,theCompanyplanstoconstructareservoirtoprovidemake-upwaterforthoseunits.Environ-mentalandengineeringfeasibilitystudieswithrespecttoareservoirhavebeencompletedbytheCompany.AnapplicationforreviewandapprovalofthereservoirprojecthasbeenfiledwiththeSRBC.SubstantiallyalloftheCompany'sshareofthecostofthatreservoirduringtheyears1981-1983isincludedinitsestimateofconstructionexpendituresforthatperiod.TheCompanyisunabletopredictwhatactiontheSRBCwilltakewithrespecttotheapplicationintheeventthereservoirisrequiredortheimpactthatanysuchactionmayhaveonthecostorin-servicedateofthereservoir.SolidandHazardousWasteRegulationsadoptedbytheEPAinMay1980underthe1976ResourceConservationandRecoveryAct(RCRA)identifycertainsubstancesashazardouswastesandestablishrequirementswithrespecttothegeneration,transportation,treatment,storageanddisposalofthosesubstances.

Basedupontheresultsofasurveyofitssolidwastepractices,the,CompanyhasXilednoticewith.theEPAindicatingthatthegenerationofhazardous:wasteis.beingconductedattheSusquehannasiteandthattheCompanymaybeatransporterofhazardouswaste.TheCompanyiscontinuiag,toreviewitsoperations,todeterminewhetheradditionalnoticesmustbefiledwithEPA.TheCompanyisrequiredtocomplywithfinalregulationsregarding,offsiteshipmentsandtemporaryonsitestorageofhazardouswastesatallsitesdeterJninedWbegeneratingsuchsubstances.Inaddition,theCempanyissubjecttocertaininterimdesignandoperatingstandardsinthetreatment,storageanddisposalof.suchwastesandisrequiredtoobtainpermitsforsitesatwhichsuchoperationsaneconducted.nuclearThe1977AmendmentsauthorizeDERtoestablishgaseousradioactiveemission.standardsfornuclearplantsmorestringentthanstandar.dsestablishedbytheNRC.TheCompanyisunabletopredictwhataction,ifany,maybetakenbyDERwithrespecttogaseousradioactiveemissionstandardsortheeffect.thatsuchactionmayhaveontheSusquehannaunits.GeneralDuring-theperiod1978through1980,theCompany'sconstructionandnuclearfuelexpendituresaggregatedabout$1.55billion,ofwhichtheCompanyestimatesthatabout$95millionwasforcompliancewithFederal,stateandlocalenvironmentallawsandregulations.Approximately$119millionofcapitalexpendituresforsuchcomplianceareincludedintheCompany's1981-1983constructionprogramanditmaybethatsubstantialadditionalexpendituresforsuchpurposesinanamountnotnowdeterminablewillberequiredduringthatperiodandthereafter.Inadditiontothemattersdescribedabove,theCompanyanditssubsidiarieshavebeencitedfromtimetotimefortemporaryviolationsofDERandEPA'airandwaterqualityregulationsin'connectionwiththeoperationoftheirfacilitiesandmaybecitedforsuchviolationsinthefuture.Asaresult,theCompanyanditssubsidiariesmaybesubjecttocertainpenaltieswhicharenotexpectedtobematerialinamount.TheCompanyisunabletopredicttheultimateeffectofevolving.environmentallawsandregulationsuponitsexistingandproposedfacilitiesandoperations.However,itispossiblethatsuchlawsandregulationsmayrequire,theCompanytomodify,supplement,replaceorceaseoperatingitsequipmentandfacilities,delayorimpedeitsconstructionandoperationofnewfacilitiesandrequireittomakesubstantialadditionalexpendituresinamountswhicharenotnowdeterminable.FRANCHISESANDLICENSESTheCompanyhasauthoritytoprovideelectricpublicutilityservicethroughoutitsentireserviceareaasaresultofgrantsbytheCommonwealthof PennsylvaniaincorporatecharterstotheCompanyandcompaniestowhichithassucceeded-andasaresultofcertificationthereofbythe,PUC."TheCompanyhasbeengrantedtherighttoenterthestreetsandhighwaysbytheCommonwealthsubjecttocertainconditions.Ingeneralsuch'onditionshavebeenmetbyordinance,resolution,permit;acquiescenceorother-actionbyanappropriatelocalpoliticalsubdivisionoragencyoftheCommonwealth.TheCompanyoperatestwohydroelectricprojects:Wallenpaupack(00,000kwcapability)andHoltwood(102,000kwcapability).'uring1980,theCompanyreceivednewlong-termlicensesfortheoperationof,bothprojects.Then'wWallenpaupacklicenseexpiresin2000andthenewHoltwoodlicenseexpiresin2010.TheCompanyalsoownsone-thirdofthecapitalstockofSafeHarborWaterPowerCorporation(SafeHarbor)whichholdsaprojectlicensefortheoperationofitshydroelectricplant(230,000kwcapability).TheCompanyisentitledbycontracttoone-thirdofthecapacity(76,000kw)oftheSafeHarborplant.InSeptember1980,SafeHarborreceivedanewlong-termlicensewhichextendsuntil2030andapprovestheinstallationoffouradditionalgeneratingunits.TheadditionalunitswouldincreasethetotalcapabilityoftheSafeHarborplantto380,000kwandtheCompanywillbeentitledtoone-thirdofthetotalcapacity(127,000kw).FERCreservedjudgmentwithrespecttotheinstallationofafifth37,500kwunituntilsuchtimeasadditionalwaterqualitystudiesaredeveloped,performedandfiledwithFERCandtheeconomicdesirabilityofthefifthunitisre-evaluatedtakingintoaccounttheresultsofsuchstudies.ThenewHoltwoodandSafeHarborlicensesrequiredevelopment,inconsultationwithappropriategovernmentalagencies,ofmutuallysatisfactorystudyplansrelatingtowaterqualityandotherenvironmentalmatters.SubsequenttotheissuanceofthenewlicensesforHoltwoodandSafeHarbor;theSRBCandthePennsylvaniaFishCommission(PFC)filedandFERCgranted,subjecttofurtherconsideration,applicationsforrehearingwithrespecttothoselicenses.Thoseapplicationsallege,amongotherthings,thatFERCshouldhaveimposedfurtherrequirementsinthenewlicensesrelatingtofloodcontrolandwaterqualitymanagementandthatadjudicatoryhearingsshouldhavebeenconductedwithrespecttocertainissuesraisedduringtherelicensingproceedings.In1980,FERCdeniedtheSRBCandPFCapplications.TheSRBChasrequestedtheUnitedStatesCourtofAppealsfortheThirdCircuittosetaside,modifyorotherwisereviewFERC'sdecision.FERCisexpectedtoholdaseparatehearinginSeptember1981toinvestigatevariousmeasurestoenhancefishingresourcesintheSusquehannaRiverBasin,includingthepossibleinstallationoffishpassagefacilitiesattheHoltwoodandSafeHarborprojects.

EMPLOYEERELATIONSApproximately5,200oftheCompany's7,700employees,ererepresentedbytheInternationalBrotherhoodofElectricalWorkers(IBEW)underthree-yearagreementswhichexpireinMayand3une1982.Thoseagreementsprovideforareopeneronwages,mileageandperdiemallowanceinmid-1981.

NET.TOTEMP5%YILitN4.:iRL%aVAl4.TLSICIQSCIINTSNSNSLLNinSDSTr~m~~W~WWraSL3DOSSLLSSO0~LSSUNSNLYSCTTSVCLSOaNISSNSLNLO00,INSSSHSLNCISTSS0HA.0WILC~MAATSLSCLLIEKILhNTOWNQI.Ls',DC4IPENNSYLVANlAPOWER6LtGHTCOMPANYSERVICEAREAEP-STSCLLDSDSNSI-DOENERATINOSTATIONS ITEM'2.PROPERTIESTheMap,on.page1,8shows.thelocationoftheCompany's,servicearea.and.generating:stations.Referenceismadeto"ReviewoftheCompany's,FinancialConditionand.'Results:,of-Operations,"beginningon,page27for-informationconcerningtheCompany,'s,.construction,program,includingthestatusofthe,constructionand,licensing,oftheSUsquehanna.nuclear-fueledgeneratingstation..ReferenceismadetoSCHEDULEV-UTILITYPLANTfaninformationconcerningtheCompany's,investmentinutilityplant.Substantiallyalt,utility,plant,is..subject:to;the.liensofthe.Company!s-mortgages.Information,concerningleasesis-set,forth,inNoie10,toFinancial.Statements.For.,additionalinformationconcerningthepropertiesof,theCompanysee.Item,1'.,BUSINESS-'-'POWERSUPPLY"and"FUELSUPPLY"..ITEM"3.LEGALPROCEEDINGSReferenceis.madeto"Review~oftheCompany's.FinancialConditionand.Results,ofOperations"beginningon,page27forinformationconcerningtheCompany.'s,construction,program,,includingthe,statusoftheconstructionandlicensing;ofthe.Susquehannanuclear-fueledgenerating.station.Referenceis,madeto.Item1.BUSINESS-"FRANCHISESANDLICENSES,"'orinformationrelatingtolicensingproceedingsbefore.FERC'fhydroelectric.stations..Reference,is,madetoItem1.,BUSINESS-"ENVIRONMENTALMATTERS"regarding-environmentalproceedingsinvolvingtheCompany.Referenceismade.toNote10.toFinancialStatementsregardinganout-,of-courtsettlement.ofasuitfiled.againstGulfOilCorporation,RoyalDutchShellGroupandScallopNuclear,Inc.,individuallyandtradingasGeneralAtomicCompany.,Referenceisalsomadeto"ReviewoftheCompany'sFinancialConditionandResultsofOperation"forinformationconcerningtheJanuary30,1981decisionofthePUCpermittinganincreaseofapproximately$97millionannuallyintheCompany'sbaseraterevenues.,InFebruary1981,oneofthecomplainantsintherateproceedingfiledacomplaintwiththePUCallegingthatthetarifffiledbytheCompanyforcertainlargepoweruserswasinconsistantwithastipulationenteredintobytheCompanyandthe.otherpartiestotheproceeding.ThiscomplaintdoesnotquestionthePUC'sJanuary30,1981decisionwithrespecttomeasuresofvalues,levelofrevenuesorrateofreturn.

ITEM0.SECURITYOWNERSHIPOFCERTAINBENEFICIALOWNERSANDMANAGEMENTTheCompany'sRestatedArticlesofIncorporationdividesitsvotingstockintofourclasses:0-1/2%PreferredStock,SeriesPreferredStock,PreferenceStockandCommonStock.ThefollowinginformationisfurnishedwithrespecttopersonswhotheCompanybelieves,basedonitsrecords,beneficiallyownedasofDecember10,1980morethanfivepercentoftheoutstandingsharesofanyclassofvotingstockundertheCompany'sRestatedArticlesofIncorporation:TitleofClassNumberofSharesPercentPercentofNameandAddressofBeneficiallyofallVotingBeneficialOwnerOwned(a)ClassStockSeriesPreferredThePrudentialInsuranceCompanyofAmericaPrudentialPlazaNewark,NJ07101868,00019.0%1.5%SeriesPreferredMetropolitanLifeInsuranceCompanyOneMadisonAvenueNewYork,NY10010672,50015.11.2PreferenceGMACCommercial-Corporation767FifthAvenueNewYork,NY10022250,00010.30.0(a)Reportedinthiscolumnasbeneficiallyownedareshareshelddirectlyofrecordorinthenameofanomineefortheshareowner'saccountandincludes100,000sharesofSeriesPreferredStockwithrespecttowhichThePrudentialLifeInsuranceCompanyofAmericalhasinvestmentorvotingpower.ThefollowinginformationwithrespecttostockoftheCompanyownedbythepersonsnominatedforelectionasdirectorsoftheCompanyatthe1981AnnualMeetingisasofDecember31,1980andincludessharesbeneficiallyownedandsharesownedthroughinvestmentand/orvotingpower.Certainofthenomineeshavedisclaimedbeneficialownershipofcertainofthesharessoheld.

NomineeTitleofClassNumberofSharesBeneficiallOwned'a)Invest'mentorRoswellBrayton.RobertK.CampbellRalphR..CranmerEdgarL.DessenRobertR.Forturle.HarryA.'3ensen3ahnT.KauffmanWieDemingLewis:HaroldS.Mohler3ohnA.'NobleRalphW..Richardson,Jr,.NormanRobertsonCommonCommonCommonPreferenceCommonCommonCommonCommonCommonCommonCommonCommonCommon3003,7435002541Q5,4612008093153002,0001001951,.500I10060.'502i294CommonPreference(c)Reportedinthiscolumnare'shareswithrespecttowhichdirectorsandofficershaveorshareinvestmentorvotingpower,whetherornotthesecuritiesareheldfortheirbenefit.IncludedaresharesdirectlyownedbycertainrelativeswithwhomtheofficersanddirectorsarepresumedtosharevotingorinvestmentpowerforpurposesofreportssubmittedundertheSecuritiesExchangeActof1934,asamended.(d)DoesnotincludeCliffordL.Alexander,3r.orFrancesR.HesselbeinwhowereelecteddirectorsonFebruary1,1981andwho,asofMarch3,1981,eachowneddirectly100sharesoftheCompany'sCommonstock.All.37.officers4,029anddirectorsas85agroup(d)(a)Noneofthenomineesbeneficiallyownsasmuchastwoone-hundrethsofonepercentof.the.outstandingsharesofanyclassoftheCompany'sequitysecurities.Thegroupofall37officersanddirectorsoftheCompanyintheaggregatedoesnotownmorethaneightone-hundrethsofonepercentoftheoutstandingsharesofanyclass.oftheCompany'se'quitysecurities.(b)Reportedinthiscolumnaresharesheldofrecordindividuallyorjointlywithothersorheldinthenameofabank,brokerornomineefortheindividual'saccount.InthecaseofMessrs.Campbell,Fortune,Kauffmanandthe25officersoftheCompanyasagroup,thiscolumnalsoincludessharesofCommonStockheldfortheirbenefitbytheTrusteeundertheCompany'sEmployeeStockOwnershipPlan.-2.1-ITEM9.EXECUTIVEOFFICERSOFTHEREGISTRANTThefollowingsummaryoftheCompany'sexecutiveofficersincludestheofficer'sname,position,age,abriefaccountofthebusinessexperienceduringthepastfiveyearsandtermasexecutiveofficer.OfficersareelectedannuallybytheBoardofDirectorsandserveatermdeterminablebytheBoard.Therearenofamilyrelationshipsbetweenanyoftheexecutive'fficers,noranyarrangementorunderstanding'etweenanyexecutiveofficerandanyotherpersonpursuanttowhichtheofficerwasselected.Therehavebeennoeventsunderanybankruptcyact,nocriminalproceedingsandnojudgmentsorinjunctionsmaterialtotheevaluationoftheabilityandintegrityofanyexecutiveofficerduringthepastfiveyears.JlRobertK.Cambell,President,age50Mr.CampbellbecamePresidentoftheCompanyeffective"February1,1977andeffectiveMarch1,1979assumedthedutiesofChiefExecutiveOfficeroftheCompany.PriortobecomingPresidentoftheCompany,Mr.CampbellwasanexecutiveofWesternElectricCorporation.HeservedinvariousengineeringandmanagerialpositionsatWesternElectric.HewasgeneralmanageroftheReading,Pa.Works,generalmanageroftheAllentownWorks,andgeneralmanager-administrationforWesternElectric'sManufacturingDivision.Mr.CampbellisaregisteredprofessionalengineerandamemberoftheIllinoisBarAssociation.AsPresidentandChiefExecutiveOfficeroftheCompany,Mr.CampbellisresponsibleforallphasesoftheCompany'sbusiness.Hehasbeenanexecutiveofficersince1977.RobertR.Fortune,ExecutiveVicePresident,Financial,age60DuringthepastfiveyearsMr.FortunehasservedasExecutiveVicePresident,Financial.AsChiefFinancialandAccountingOfficerhehasresponsibilityfortheCompany'saccounting,finance,andtreasuryfunctions.Heisalsoresponsibleforthestaffservicesofpurchasingandstores,aswellastheCompany'suseofcomputers,includinganalysis,programmingandoperation.Hehasbeenanexecutiveofficersince1950.Mr.Fortune'snormalretirementdatewouldbeDecember1,1981,buttheCompany'sBoardofDirectorshasrequestedMr.Fortunetopostponehisnormalretirementdateforoneyear.JohnT.Kauffman,ExecutiveVicePresident,Operations,age50DuringthepastfiveyearsMr.KauffmanhasservedasVicePresident,SystemPower*Engineeringand,effectiveJune1,1978,asExecutiveVicePresident,Operations.AsVicePresident,SystemPowerREngineeringhewasresponsibleforplanning,design,constructionandoperationoftheCompany'sgeneratingstationsandbulk-powertransmissionsystemandtheprocurementoffuel.

llInhis:presentpositionheisresponsibleforassuringpropeg.coordinationandeffectiveperformanceoftheDivisionOperations,System,PowerandEngineeringandNuclearDepartments.Heisresponsibleforthe"lineoperations"oftheCompanyincludingtheplanning,design,constructionandoperationoftheelectric"deliverysystem"fromthepowerplanttotheconsumer.Hehasbeenanexecutiveofficersince1970.JackR.Calhoun,SeniorVicePresident,Nuclear,age61Mr.CalhounbecameSeniorVicePresident,NucleareffectiveNovember1,1980.Prior;tobecomingSeniorVicePresident,Nuclear,Mr.'CalhounwasDirectorofNuclearPowerfortheTennesseeValleyAuthority(TVA).rHeservedin.variouspositions.duringhis31yearsattheTVAincludingsuperintendentofTVA'sfirst,nuclearplant.AsSeniorVicePresident,Nuclear,Mr.Calhounhasprincipalmanage-mentresponsibilityforalloftheCompany'snuclearactivities,includingtheconstruction,startup,operationsandlong-rangesupportforthe"Company'sSusquehannaSteamElectricStationwhichiscurrentlyunderconstruction.HehasbeenanexecutiveofficersinceNovember1980.Rage58DuringthepastfiveyearsMr.CollinshasservedasManager,InterconnectionAffairsandManager,SystemPlanningRInterconnectionAffairsand,effectiveJune1,1978,asVicePresident,SystemPower*Engineering(namedSeniorVicePresidenteffectiveApril1,1980).AsManager,InterconnectionAffairsandManager,SystemPlanningRInterconnectionAffairshewasresponsibleforplanningthecoordinatedeconomicdevelopmentoftheCompany'sgeneratingcapacityaridelectricalsystemsandprovidinggeneralcoordinationoftheCompany's=interconnectionaffairs..Inhispresentpositionheisresponsibleforplanning,design,construc-tionand,operationoftheCompany'sgeneratingstations(otherthannuclear)andbulk-powertransmissionsystemandtheprocurementoffossilfuel.Hehasbeenanexecutiveofficersince1978.MerlinF.Hertzo,SeniorVicePresident,HumanResourceRDevelopment,age09DuringthepastfiveyearsMr.HertzoghasservedasDirector,Systems'ndComputerServices,VicePresident,ConsumerRCommunityServices,AssistantVicePresident,HumanResourcehDevelopmentand,effectiveJanuary1,1981,SeniorVicePresident,HumanResou'rceRDevelopment.Inhispresentpositionheisresponsibleforastaffservicesdepartmentwhichincludesthelegal,personnel,unionrelations,corporatecommunications,publicaffairs,safetyandsecuritysections.HehasbeenanexecutiveofficersinceJanuary1,1981.

LeonL.Nonemaker,SeniorVicePresident,DivisionOperations,age56DuringthepastfiveyearsMr.NonemakerservedasVicePresident,DivisionOperations(namedSeniorVicePresidenteffectiveApril1,1980)withresponsibilityfortheCompany'sdistributionsystemtotheultimatecustomer,=includingcustomer-orientedfunctionsinvolvingrates,customerandcommunityservices.Hehasbeenanexecutiveofficersince1970.~H".1,iPi,RSage50DuringthepastfiveyearsMr.NagelservedasVicePresident,GeneralCounselRSecretaryhavingresponsibilityforallphasesoftheCompany'sLegalDepartment,aswellasthecorporatesecretarialfunction.Hehasbeenanexecutiveofficersince197l.GeoreF.Vanderslice,VicePresidentandComptroller,age58DuringthepastfiveyearsMr.VanderslicehasservedasVicePresidentandComptrollerwithresponsibilityforallaccountingfunctionsincludinggeneral,plant,regulatoryandtaxaccountingandfinancialreporting.Hehasbeenanexecutiveofficersince1965.CharlesE.Russoli,VicePresident,Finance,age47DuringthepastfiveyearsMr.RussolihasservedasManager,FinancialPlanningandReportingand,effectiveApril16,1979,asVicePresident,Finance.AsManager,FinancialPlanningandReportinghewasresponsibleforcorporatefinancialplanningandfinancial/statisticalreportingactivities.Inhispresentpositionheisresponsibleforcorporatefinancialplanning,financingactivities,shareownerservicesandthefunctionsoftheTreasurer'soffice.Hehasbeenanexecutiveofficersince1979.ChesterR.Coller,Treasurer,age60DuringthepastfiveyearsMr.CollyerhasservedasTreasurerwithresponsibilityforcorporatefunctionsofcashoperationsandmanagement,payrollandinsurance.Hehasbeenanexecutiveofficersince1957.

PARTIIITEM5.MARKETFORTHEREGISTRANT'SCOMMONSTOCKANDRELATEDSECURITYHOLDERMATTERSInformationforthisitemissetforthinthesectionentitled"CommonStockPriceandDividendData"onpage52ofthisreport.ITEM6.'SELECTEDFINANCIALDATAInformationforthisitemissetforthinthesectionentitled"SelectedFinancialData"onpages35and36ofthisreport.ITEM7.MANAGEMENT'SDISCUSSIONANDANALYSISOFFINANCIALCONDITIONANDRESULTSOFOPERATIONInformationforthisitemissetforthinthesectionentitled"ReviewoftheCompany'sFinancialConditionandResultsofOperation"onpages27through33ofthisreport.

ITEM8.FINANCIALSTATEMENTSANDSUPPLEMENTARYDATAFinancialstatementsandsupplementarydataaresetforthonthepagesindicatedbelow.FinancialStatements:StatementofIncomefortheThreeYearsEndedDecember31,1980.ScheduleofTaxesfortheThreeYearsEndedDecember31,1980.BalanceSheetatDecember31,1980and1979.ScheduleofCapitalStockandLong-TermDebt..StatementofChangesinFinancialPositionfortheThreeYearsEndedDecember31,1980StatementofEarningsReinvestedfortheThreeYearsEndedDecember31,1980NotestoFinancialStatements.~Pae383901OpinionofIndependentCertifiedPublicAccountants.SupplementaryInformationonChangingPrices.SummaryofQuarterlyResultsofOperations.FinancialStatementSchedules:52VI-VIII-IX-UtilityPlantfortheThreeYearsEndedDecember31,1980.AccumulatedProvisionforDepreciationofUtilityPlantfortheThreeYearsEndedDecember31,1980ValuationandQualifyingAccountsandReservesfortheThreeYearsEndedDecember31,1980.Short-termBorrowingsfortheThreeYearsEndedDecember31,1980SupplementaryIncomeStatementInformationfortheThreeYearsEndedDecember31,19805355565758 ReviewoftheCompany'sFinancialConditionandResultsofOperationTrendsandeventsaffectingtheCompany'sfinancialconditionandresultsofoperationsduringthethree-yearperiod1978-1980andcertain'factorswhichareexpectedtohaveimportantimpactsonfutureoperationsarepresentedinthissectionofthereport.ThediscussionfocusesontheCompany's=constructionprogram,financingrequirements,ratereliefneedsandoperatingresults.OfprimeimportancetotheCompany'sfuturefinancialconditioniscompletingandplacingintocommercialoperationthetwonuclear-fueledgenerat-ingunitsnowunderconstructionattheSusque-hannaplant.Substantialexpendituresandoutsidefinancingwillberequiredduringtheperiod1981-1983inordertocompletetheunits.Moreover,theabilitytoincreaseelectricratesatthetimetheunitsgointocommercialoperationinordertoadequatelysupporttheCompany'sinvestmentintheseunitsandalsotheoperatingperformanceoftheunitswhentheyareinservicewillbemajorfactorsaffectingfutureoperatingresults.Thefinancialstatementswithaccompanyingschedulesandnotes,theselectedfinancialdataandthesupplementaryinformationonchangingpricespresentedelsewhereinthisreportprovidemoredetailedinformationontheCompany'sfinancialconditionandresultsofoperations.ConstructionTheconstructionandpurchaseofnewfacilitiesis,requiredtomeetthefutureenergyneedsofcustomers,tocomplywithpollutioncontrol,safetyandotherstandardsandtoreplacewornoutorobsoleteequip-ment.Newgeneratingunitsgenerallyrepresentthemostcostlyprojectsinanelectricutility'sconstruc-tionprogramandhavethegreatestimpactonmagnitudeofannualconstructionexpendituresSusquehannaPlantTheSusquehannaplantistheonlygeneratingfacilitythattheCompanyhasunderconstructionatthistimeandaccountedfor$1.7billionofconstructionworkinprogressatDecember31,1980.AlleghenyElectricCooperative,Inc.ownsa10%undividedownershipinterestintheSusquehannaplantandpaysonacurrentbasisitsproportionateshareofconstructionandnuclearfuelexpenditures.Susquehannawillconsistoftwonuclear-fueledgeneratingunitseachhavinganestimatedtotalnetcapabilityof1,050,000kilowatts,theCompany's90%shareofthecapabilityofeachoftheunitsbeing945,000kilowatts.AdditionoftheSusquehannaunitswillfurtherdiversifytheCompany'sgeneratingcapabilitybytypeoffuel,therebyreducingthepotentialadverseimpactsofaninterruptioninthesupplyofonetypeoffuel.AtDecember31,1980,constructionofUnitNo.1wasabout90%completedandUnitNo.2wasabout57%completed.Thecur-rentlyscheduledin-servicedatesfortheunitsarethesecondquarterof1982forUnitNo.1andthesecondquarterof1983forUnitNo.2,butthesedatesmaybedelayed,asdiscussedlaterinthisreview.ConstructionoftheSusquehannaunitsisprocingunderNuclearRegulatoryCommission(NconstructionpermitsissuedinNovember1973.Thenconstructionper'mitswillexpirebeforetheunitscanbecompleted.Accordingly,theCompanyfiledanapplicationwiththeNRCinJanuary1981toextendtheconstructionpermits.UndertheNRC'sregula-tions,thefilingofthatapplicationhastheeffectof$2$ConstructionWorkinProgressvs.NetPlantinScrviccBillionsofDollars10DiversificationofGeneratingCapabilitybyFuelTypeMillionsofKw2.0-Nuclear1.5Oil1.07677787980~ConstructionworkinprogressMNetplantinservice6570NuclearClOil~Hyd758085ProjectedIKilCoalC3iiydroelectric ctinuingthesepermitsuntiltheapplicationhasacteduponbytheNRC.CompanymustreceiveoperatinglicensesfromtRCbeforeitcanloadnuclearfuelintotheunitstogenerateelectricity.TheNRChasacceptedforfilinganapplicationforthenecessaryoperatinglicenseforeachunit.Theissuanceoftheoperatinglicensesisbeingcontestedbyfourgroupsofinter-venorsinthelicensingproceedingsbeforetheNRC.PotentialDelaysoftheSusquehannaPlantOverthepastseveralyears,changesinthescopeoftheSusquehannaproject(includingadditionalsafety.featuresresultingfrominvestigationsoftheaccidentattheThreeMileIslandnuclearplant),delaysinmeetingconstructionschedulemilestones,expandedNRCrequirementsandincreasedpricesformaterialsandlaborhavecauseddelaysintheestimatedin-servicedatesoftheSusquehannaunitsandcon-tributedtoincreasesintheestimatedcosttocompletetheunits.Delaysanduncertaintiescontinuetobeencoun-teredintheNRClicensingprocess.Asaresult,theCompanycurrentlyexpectsthatunlessitissuccessfulinitseffortstoacceleratethepresentNRClicensingschedule,therewillbeadelayofaboutoneyearinthe,in-servicedatesfortheSusquehannaunits.Theunitsalsobedelayedbecauseoftheinabilityoftheanyanditscontractorstomeetconstructionedulemilestonesandunforeseenequipmentmodificationrequirements.Delayswillresultinincreasedconstructioncostsandfinancingrequirementstocompletetheunits.TheCompanycurrentlyestimatesthatitsshareofthecostoftheunitswouldincreasebyabout$450millionforaone-yeardelayofbothunits,butuntiluncertaintieswithrespecttothelengthofanysuchdelaysareresolved,theexactamountofthecostincreaseisnotdeterminable.Therefore,thecostsassociatedwiththeSusquehannaunitsandrelatedfinancingincludedinthisreportarebasedonthein-servicedatesoftheSusquehannaunitsoccurringinthesecondquarterof1982'and1983.ExpenditureRequirementsThescheduleatthebottomofthispageshowsactualconstructionandnuclearfuelexpendituresfortheyears1978-1980andtheCompany'scurrentestimateofthoseexpendituresfortheyears1981-1983.TheamountsshownintheschedulefortheSusque-hannaplantandnuclearfuelreflecttheCompany's90%shareofthosecosts.TheCompany'sshareofthetotalin-servicecostoftheSusquehannaunits,ex-cludingnuclearfuel,isestimatedtobe$2.7billion,ofwhichabout$1.0billionremainstobespent.ExpendituresforSusquehannaaccountedforap-proximately71%oftotalconstructionexpendituresduringtheyears1978-1980andareprojectedtoaccountforabout63%oftotalconstructionexpend-ituresduringtheperiod1981-1983.TheCompany'sconstructionplansarerevisedfromtimetotimetoreflectchangesincustomerdemand,businessandeconomicconditions,thecostandavailabilityofcapitalandotherfactors.ActualconstructioncostsanddatesofcompletionforvariousconstructionprojectsmayvaryfromthoseestimatedinthescheduleatthebottomofthispagebecauseofchangesintheCompany'splans,costfluctuations,theavailabilityoflabor,materialsandequipment,environmentalregulations,licensingdelaysandotherfactors.ConstructionandNuclearFuelExpenditures(MillionsofDollars)---Actual---197819791980---Estimated---198119821988ConstructionexpendituresSusquehannaplant(a)Otherconstructionexpenditures:TransmissionanddistributionfacilitiesEnvironmentalOther$348$380$317$463$374$1408419154353$43895102284824194955492444$519$593829495413741635864649563340866275$735$625$415NuclearfuelexpendituresTotalAllowanceforfundsusedduringconstruction(whichisincludedintheaboveamounts)..............~$71$105$141$192$150$70(a)Anadditional$90millionexpectedtobespentonSusquehannarelatedfacilitiesduringtheperiod1981-1983isincludedintheamountsshownunderthecaptions"Environmental"and"Other".28-FinancingThefinancingofitsconstructionprogramrequirestheCompanytoengageinfrequentsalesofsecurities,includingdebtandpreferred,preferenceandcommonstock.Interimconstructionfinancinghasbeenobtainedprincipallyfromthesaleofcommercialpapernotes.Outsidefinancing,includingchangesinshort-termdebt,totaled$1.21billionduringthethreeyears1978-1980.Inthissametimeperiod,fundsgeneratedfromoperations,includingthenon-cashallowanceforfundsusedduringconstruction(allowance),totaled$804million.Theoutsidefinancingwasneededprimarilytoprovidefundsforthe$1.55billionofconstructionandnuclearfuelexpendituresincurredduringthatperiod,whichamountalsoincludestheallowance.DetailsoftheCompany'ssourcesoffundsduringthethreeyears1978-1980aresetforthintheStatementofChangesinFinancialPosition,page03.Constructionandnuclearfuelexpendituresforthethreeyears1981-1983arecurrentlyestimatedat$1.78billion.Approximately50Foofthatamountisexpectedtobeobtainedfromoutsidefinancingwiththebalancetobeprovidedfrominternalsources.Inaddition,$239millionformaturinglong-termdebtobligationsand$32millionforpreferredandpref-erencestocksinkingfundrequirementsareplannedtobemetduring1981-1983bysalesofsecurities.Thechartsbelowshowhistoricalandprojectedcapitalrequirementsandsourcesofcapital.Theprojecteddataarebasedonthecurrentlyestimatedconstructioncostsandscheduledin-servicedatesfortheSusquehannaunitsandassumethatadequateandtimelyratereliefwillbegrantedwhenthoseunitsareplacedinservice.Asthechartsindicate,bothcapitalrequirements(primarilyconstructionandnuclearfuelcosts)andoutsidefinancingareexpec.toremainathighlevelsin1981and1982anddein1983,principallyreflectingthescheduledcotionoftheSusquehannaunits.TentativeSecuritiesSalesUnderitstentativefinancingplanfor1981,theCompanyexpectstoissuethefollowingsecurities(millionsofdollars):Long-termdebt(a)$325Preferredorpreferencestock............70Commonstock120$515(a)Includes$25millionofexpecteddrawdownsfromthepollutioncontrolconstructionfund.InFebruary1981,theCompanysold$67millionprincipalamountoffirstmortgagebondstoinstitu-tionalpurchasersinprivateplacementsandhasagreedtosellprivatelytoinstitutionalinvestorsanadditional$33millionoffirstmortgagebondsinMay1981.LegaLRestrictionsonEinancingThemortgageindentureunderwhichtheCom-pany'sfirstmortgagebondsareissuedcontainscertainprovisions,principallyearningscoverageandpropertyadditionstests,limitingtheissuan(ofadditionalbonds.Theearningscoveragewhichrequiresadjustednetearnings(asdefinethemortgage)foraspecifiedtwelve-monthperiobeatleastequaltotwicetheannualinterestrequire-mentsonallbondstobeoutstanding,ispresentlythemostlimitingoftheserestrictions.BasedontheCompany'searningsfortheyear1980,andaftergivingeffecttothesaleof$67millionprincipalCapitalRequirementsMillionsofDollars8800Sourcesof'apitalMillionsofDollars8800200787980818283A<<IP<<j<<<<MSusquehannaconstructionexpendituresC3OtherconstructionandnuclearfuelexpendituresMOther(principallyretirementofsecurities)787980818283Al1PjMKBOutsidefinancingC3Other(principallyfromoperations,includingtheallowanceforfundsusedduringconstruction,lessdividends) amountoffirstmortgagebondsinFebruary1981,the'ngscoveragetestwouldbe2.07times.Withthisageratio,theCompanycouldissueabout$38ionprincipalamountofadditionalbonds(148/4%interestrateassumed).TheCompanyanticipatesthattheincreaseinelectricrateswhichbecameeffectiveonJanuary30,1981willresultinanimprovementofadjustednetearnings(asusedforthemortgagebondissuancetest)throughout1981.WhiletheexactamountofbondswhichtheCompanywouldbepermittedtoissueunderthemortgageprovisionwilldependonfutureearningsandbondinterestratesatthetimeofissuance,theCompanyestimatesthatitsadjustednetearningswillbeadequatetopermittheCompanytocompletethelong-termdebtportionofits1981tentativefinancingplanthroughtheissuanceofbonds.TheCompany'schartercontainsprovisionslimit.ingtheissuanceofadditionalsharesofpreferredstock.Themorerestrictiveoftheseprovisionsrequiresincomebeforeinterestcharges(grossincome)ofnotlessthan1.5timesthesum'ofannualizedinterestrequirementsonoutstandingindebtednessandthedividendrequirementsonoutstandingpreferredstock,includingthepreferredstockbeingissued.Basedonearningsfortheyear1980,theamountoflong-termdebtandpreferredstockoutstandingatDecember31,1980and,aftergivingeffecttotheissuanceof$67millionofbondsinFebruary1981andmountofshort-termdebtthenoutstanding,thepany'sgrossincomewouldbe1.42timesthesumannualizedinterestandpreferredstockdividendrequirements.UndersuchcircumstancestheCom-panywouldnotbepermittedtoissueanyadditionalpreferredstock.However,theissuancetestmustbecalculatedbasedoncurrentdataatthetimethepreferredstockistobeissued.TheCompanyalsoanticipatesthattheJanuary1981rateincreasewillimprovegrossincome(asusedforthepreferredstockissuancetest)throughout1981.WhiletheexactamountofpreferredstockwhichtheCompanywouldbepermittedtoissueunderthecharterprovisionwilldependonfutureearningsandinterestanddividendratesineffectatthattime,theCompanyestimatesthatitwouldbeabletocompleteits1981plansforthesaleofpreferredorpreferencestockthroughtheissuanceofpreferredstock.How-ever,iftheCompanyshouldbeunabletopassthepreferredstockissuancetest,itcouldissuepreferencestockwhichisnotsubjecttoanycharterprovisionswhichlimititsissuanceonthebasisoftheCompany'searnings.Theexactamount,natureandtimingofsalesofsecuritiesinthe1981-1983periodwill,ofnecessity,bedeterminedinthelightofmarketconditions,theCompany'sabilitytomeetissuancetestsandotherfactors,includingthereceiptoftimelyandadequaterateincreases.CreditArrangementsToprovidefinancingflexibility,theCompanycur-rentlyhascreditarrangementswithvariousbanksaggregating$620million.Thesearrangementsincludeinformallinesofcreditaggregating$120millionand$500millionofrevolvingcreditandtermnoteagreements.ForadditionalinformationconcerningthesecreditarrangementsseeNote6toFinancialStatements.EinancialIndicatorsCertainkeyindicatorsoftheCompany'sfinancialconditionhavedeclinedoverthepastfewyears.AsshownintheSelectedFinancialDataonpage35,theTimesInterestChargesEarned12MonthsEndedEachQuarterTimesEarned(PrcTax)16ReturnonAverageCommonEquityandEmbeddedCostofLong-TermDebtPercent1412108+rr~r~r076777879807677787980~Returnonaveragecommonequity~~Embeddedcostoflongtermdebt timesinterestearnedandratioofearningstofixedchargeshavedeclinedsince1977.Theembeddedcostrateoflong-termdebthasincreasedfrom7.779oin1976to10.60%in1980andthereturnonaveragecommonequityin1980was10.389o,thelowestrateexperiencedinthe5-yearperiod.WiththeJanuary1981rateincrease,theCompanyexpectsimprove-mentsinearningsperformance,interestchargecoverageandtheamountofinternallygeneratedfundsduringtheyear1981.RateIncreaseGrantedOnJanuary30,1981,thePennsylvaniaPublicUtilityCommission(PUC)issuedarateorderontheCompany'sApril1980requestforincreasedelectricbaserates.TheorderfoundthattheCom-panyhadjustifiedadditionalbaseraterevenuestotal-ing$101million.Ofthatamount,approximately$97millionwasapplicabletoPUCtariffsandtheseincreasedrateswentintoeffectforelectricityusedonandafterJanuary30,1981.TheCompany'slastrateincreasefilingbeforethePUCwasmadeaboutfiveyearsearlier,inMarch1975,andthefinalamountofthatincreasebecameeffectiveinAugust1976.BaserateswereadjustedinNovember1978whentheenergyclausewasadopted,buttherewasnochangeinthecustomer'stotalbill.Duringthefiveyearperiodfromtheendof1975totheendof1980,themonthlybillforanaverageresidentialcustomerwhouses800kwhpermonthincreasedfrom$27.90to$36.67,atotalincreaseof$8.77amonthoranaverageof5.69oannually.IftherecentbaserateincreasehadbeenineffectinDecember1980,theaverageresidentialcustomer'sbillwouldhavebeen$40.21permonth,anaverageannualincreaseof7.69osinceDecember1975.Bywayofcomparison,theaverageannualincreaseinConsumerPriceIndexwasabout9.2'verthisperiod.ThechartsbelowillustratethebillingcomponeisandtotalbillofanaverageresidentialcustomerandalsoshowcomparativechangesinthetotalbilltotheConsumerPriceIndex.ResultsofOperationsEarningspershareofcommonstockwere$2.64in1980,$3.32in1979and$2.86in1978.Thispatternindicatesasubstantialimprovementin1979earningsover1978,followedbyadeclinein1980.However,certainnonrecurringitemsaffected1979and1978earnings.Earningspershareweredepressedby27centsin1978duetotheclosingoftheCompany'sOneidamineandthenonrecoveryofaportionofthecostsofminingcoalatOneida.In1979,conversionofabout740,000customersfrombimonthlytomonthlybillingincreasedearningspersharebyapproxi-mately7cents.Thecombinedeffectofthesetwoitemsaccountedforabout34centsofthetotal46centsincreaseinpershareearningsfrom1978to1979.TheCompany'searningstrendcanthereforebeviewedasamodestimprovementin1979withasubstantialdeclinein1980.Thedeclinein1980earningspersharereflectsacombinationoftheeffectsofinflationwhichescalat,thecostsofprovidingelectricserviceinallphastheCompany'soperations,andthefactthatelectricenergysaleswereessentiallythesameas1979,duetodepressedeconomicconditionsandcustomers'onservationefforts.TherateincreasewhichbecameeffectiveonJanuary30,1981shouldprovideadditionalrevenuesneededtoreversethedownwardearningstrendexperiencedin1980.AverageResidentialBill(800Kwhmonthlyusage)DollarsperMonth540TotalBill35TaxsurchargeEnergyclauseIFuelclause6040AvcragcResidentialBillComparedtothcConsumerPriceIndexPercentCumulativeincreasefromDecember19752015Baseratecharge10107677I%ITaxsurchargeC3Energyclause787980~FuelclauseBaseratecharge7677787980C3Averageresidentialbill(800kwhmonthlyusage)E3Consumerpriceindexforallurbanconsumers ollowingisadiscussionoftrendsintheCom-'senergysales,revenues,operatingexpensesinancingcostswhichinfluencedoperatingrtsduringtheperiod1978-1980.EnergySalesandOperatingRevenuesSalestoultimatecustomersaccountedforapprox-imately98%oftheCompany'srevenuesfromelectricsalesoverthepastthreeyears.RatesapplicabletosuchsalesareunderthejurisdictionofthePUC.Theremaining2%ofrevenuesfromelectricsalesaresalestoothersforresalewhichareregulatedbytheFederalEnergyRegulatoryCommission(FERC)asareinter-changepowersales,whichareclassifiedasacredittooperatingexpenses.Electricenergysalesincreased3.0%in1978com-paredto1977.Excludinganonrecurring256millionkwhincreasein1979salesduetothechangefrombi-monthlytomonthlybilling,totalenergysalesin-creased2.l%%uoin1979and0.9%in1980.Iftheeffectsofvariationsinweatherwerealsoeliminated,theCompanyestimatesthatenergysalesin1980wouldhavebeenslightlylessthansalesin1979.Thelevelofsalesin1980wasimpactedbytheeconomicrecessionandenergyconservationeffortsbycustomers.TheSelectedFinancialDataonpage35showsthedetailofrevenuefromenergysalesbycomponentsofcstomers'ills.BeginningNovember1978,theanyreplaceditsPUCfueladjustmentclauseanenergyclausewhichisdesignedtotrackthegycostforthepriorsixmonthsaboveorbelowtheapprovedlevelinbaserates.AFERCfueladjustmentclauseappliestosubstantiallyallcustomersbilledunderFERCtariffs.Inadoptingtheenergyclause,theCompanyrevisedbaseratetariffstoreflectthelevelofenergycostsexperiencedin1977.Thesetariffrevisionsaccountedformostofthelargevariationinrevenuebilledbybaseratesandfuelandenergyclausesfrom1978to1979asshownintheSelectedFinancialData.Begin-ningNovember1978,thePUCalsopermittedtheCompanytoincludea1-millperkwhchargeincustomers'illstorecoverfuelcostsdeferredundertheterminatedfueladjustmentclause.TheCompanyexpectsthatthedeferredfuelcostswillbefullyrecoveredin1981.Asurchargeoncustomers'illsrecoversthecostofcertainstatetaxesabovethelevelincludedinbaserates.Thesurchargeappliestothestatecapitalstock,corporatenetincome,grossreceiptsandutilityrealtytaxes.SeeNote9toFinancialStatementsonpage@7forinformationconcerningrecoverythroughthesurchargeofanadditionalrealtytaxassessmentin1979.NetCostofEnergyThenetcostofenergyapplicabletotheenergyclausechargeincludesfuelexpenseassociatedwithgenerationplusinterchangepowerpurchaseslesstheamountreceivedforinterchangepowersoldtootherutilities.AsshownontheStatementofIncomethenetcostofenergyalsoincludesthedeferralandamortizationoffuelandenergycostsrecoverablethroughadjustmentclauses.Thecostoffuelconsumedtogenerateelectricityincreased$80millionor17.7%from1978to1979and$101millionor19.0%from1979to1980.Theincreasein1979fuelexpensecomparedto1978wasprincipallyattributabletogreatergenera-tionfromcoal-firedunitsandthehighercostofoilburnedattheCompany'soil-firedMartinsCreekunits.Coal-firedgenerationhadbeenreducedin197883.40EarningsPerShare12bionthsEndedEachQuarterDollarsPerShareMajorComponentsoftheNetCostofEnergyMillionsofDollars87005002.4076777879807677787980-32-~glFuelexpenseInterchangepowersaleslesspowerpurchases-thisamountisdcductcdfromfuelcostsindeter-miningthenctcostofenergyC3Netcostofenergy duetothecoalminers'trikeandhigherthannormalforcedoutages.In1979and1980,generationfromcoal-firedunitsincreased,reflectingimprovedavail-abilityoftheunits.Increasesinthepricesoffuelsburnedaccountedformostofthehigherfuelexpensein1980comparedto1979.Thehighrateofavailabilityandfavorableoper-atingcostsofgeneratingunitsenabledtheCompanytosellsubstantialquantitiesofenergytootherinter-connectedutilities.ThepriceofenergytheCompanysellstointerconnectedutilitiesis,inmostinstances,setmidwaybetweentheCompany'scosttoproducetheenergy(principallyfuelcosts)andthecostthepurchasingutilitywouldhaveincurredtoproducethesamequantityofenergy.Thusthebenefitsofinter-changetransactionsaresplitequallybetweenthebuyerandseller.Undercurrentregulations,theamountreceivedbytheCompanyfromthesesaleswasflowedthroughtocustomersintheformofacredittoenergyclausecharges.IncomeTaxesTheCompany'sconstructionexpenditureshaveenabledittoclaimsubstantialamountsofinvest-menttaxcredits.Attheendof1980,anestimated$84millionofinvestmenttaxcreditswasavailableinexcessoftheamountusedtoreducefederalincometaxpayments.Theseunusedinvestmenttaxcreditsmaybeusedtoreducefuturefederalincometaxesthrough1987.TheInternalRevenueServicehasexaminedtheCompany'sfederalincometaxreturnsfortheyears1973-1976andhasproposedadjustmentswhichcouldresultinadditionaltaxesforthoseyears.Foraddi-tionalinformationconcerningthisandothertaxmattersseetheScheduleofTaxesonpage38andNote5toFinancialStatementsonpage06.AllowanceforEundsUsedDuringConstructionTheallowanceforfundsusedduringconstru(allowance)isanon-cashitemwhichservestoofsetontheStatementofIncometheinterestexpenseandpreferredandpreferencedividendsincurredtofinancefacilitiesunderconstruction.Inaddition,theallowanceprovidesareturnoncommonequityin-vestedinconstructionprojects.Theallowancevarieswiththelevelofconstructionworkinprogressandthecostoffinancing.Increasesintheamountofboththeequityandborrowedfundscomponentsoftheallow-ancerecordedfrom1978to1980weredueprimarilytotheincreasedlevelofconstructionworkinprogress.ConstructionofSusquehannaaccountedforabout$282millionofthetotal$317millionofallowancerecordedduringthethreeyears1978-1980.Theamountofallowancerecordedwillcontinuetoin-creasewhilethetwoSusquehannaunitsareunderconstruction.Aftereachunitisplacedinservice,theCompanywouldexpecttorecoverthroughelectricrates,areturnon,anddepreciationof,itsinvestmentinthatunit,includingthecapitalizedallowance.InterestChargesandPreferred/PreferenceStockDividendsDuringthe1978-1980period,theCompany'sout-standinglong-termdebtincreased$554millionandoutstandingpreferredandpreferencestockincre$255million.Theissuanceofadditionalsecuresultedintheannualinterestrequireinentson1termdebtincreasingfrom$99millionattheendof1977to$191millionattheendof1980andtheannualdividendrequirementsonpreferredandpreferencestockincreasingfrom$40millionto$62millionduringthesametimeperiod.Thisrepresentsa$114millionor82Foincreaseintheannualcostofsuchsecuritiesoverthethree-yearperiod.GenerationofEnergyBillionsofKwh40InterestandDividendsPaidMillionsofDollars2010607677MOilfiredunitsC3Coalfiredunits787980WHydroelectric-33-7677787980CIInterestexpensemmiDividendsonpreferred/preferenceandcommonstock Management'sReportontheFinancialStatements'hemanagementofPennsylvaniaPower&Lightnyisresponsibleforthepreparation,i.yandobjectivityofthefinancialstatementsaothersectionsofthisannualreport.ThefinancialstatementshavebeenpreparedinconformitywithgenerallyacceptedaccountingprinciplesandtheUniformSystemofAccountsprescribedbytheFederalEnergyRegulatoryCommission.Inpreparingthefinancialstatements,managementmakesinformedestimatesandjudgementsoftheexpectedeffectsofeventsandtransactionsbaseduponcurrentlyavailablefactsandcircumstances.TheCompanymaintainsasystemofinternalaccountingcontrolsdesignedtoprovidereasonable,butnotabsolute,assurancethatassetsaresafeguardedandthattransactionsandeventsareexecutedinaccordancewithmanagement'sauthorizationandrecordedproperlytopermitpreparationofreliablefinancialstatements.Theconceptofreasonableassurancerecognizesthatthecostofasystemofinternalaccountingcontrolsshouldnotexceedthebenefitsderivedandthatthereareinherentlimitationsintheeffectivenessofanysystemofinternalaccountingcontrols.Fundamentaltothecontrolsystemistheselectionandtrainingofqualifiedpersonnel,anorganizationalstructurethatprovidesappropriatesegreationofdutiesandtheutilizationofwrittenpandprocedures.Inaddition,theCompanyQnsaninternalauditingprogramtoevaluatetheadequacy,applicationandcompliancewiththeCompany'sinternalaccountingcontrols,policiesandprocedures.DeloitteHaskins&Sells,independentcertifiedpublicaccountants,areengagedtoexainineandtorenderanopinionastowhetherthe.financialstatements,consideredintheirentirety,presentfairly,inconformitywithgenerallyacceptedaccountingprinciples,theCompany'sfinancialposition,operatingresultsandchangesinfinancialposition.Theirexaminationisconductedinaccordancewithgenerallyacceptedauditingstandardsandincludessuchproceduresbelievedbythemtobesufficienttoprovidereasonableassurancethatthefinancialstatementsarenotmateriallymisleadinganddonotcontainmaterialerrors.TheBoardofDirectors,actingthroughitsAuditCommittee,overseesmanagement'sresponsibilitiesinthepreparationofthefinancialstatements.TheAuditCommittee,whichiscomposedofdirectorswhoarenotemployeesoftheCompany,meetsperiodicallywithmanagement,theinternalauditorsandtheindependentcertifiedpublicaccountantstoreviewtheworkofeachandtoassurethateachisproperlydischargingitsresponsibilities.DeloitteHaskins&SellsandtheiriternalauditorshavefreeaccesstotheAuditCommitteeortotheBoardofDirectors,withoutmanagementpresent,todiscussinternalaccountingcontrol,auditingandfinancialreportingmatters.

1Sel'ectedFirxancialDataI'ncomoItems-thousand'sOperatingrevenuesOperatingincomeAllowanceforfundsused:during'construction.Netincome..-..Earnfngsapplicabletocommonstock1980$885,451168,659141'+4I179,759120,3841979$860,'498182,823105,205182,198133',532'9'ZSiv$'9@339168,602'1",035149,035107,36519VV$744',731184,31149,395149,763112;7701976$1'5,192112,'ill78;743Balance.Sheet.Items-thousands(a)Netutilityplantinservi'ceConstructionworkandnuclear.fuelirrprogress....Totalassets$1,954,762$1,885,9781,951>403,534>5214,300,0803,'782,'228$1',835;550'1,822,984$1,639,4811',142/70867,245740,6283',339,'2703,050,322','667,297Long-termdebt.Preferred,andpreference.'stock.With:si'nkingfundrequirementsWithout,sinking,fund:requi'rements........,.....Commonequity'hort'-term.debt,,Total'apitalprovided;by-investors510;800231,3751,250,717'6,324',860,'908'41,400231,3751,113,44130;7753,'374',149312;000231';375982,'868192@032,978,111'56,000231,375859;26423,'4002,'630,534'10,'000231',375722,75560,0122,406,1'361,811,6921,557,1581,257,8651,'260,4951,181,994FinancialRatiosReturnonaverage.capital'rovidedibyinvestors-%.Returnonaverage.common.equity-%Embeddedcostrates(a)Long-termdebt-%.Preferred'ndpreference.stock-%Ti'mesinterestearnedbeforeincometaxesRati'oofearningstofixed,charges.(b)Company.onlyCompanyand:associated,companiescombfned'.Depreciation,as%ofaveraged'epreciableproperty...CommonStock'ataNumberofsharesoutstanding-thousandsYear-end,AverageEarningspershareDividendsdeclaredpershare.Taxability:of.dividendincome-%(c)Bookvaluepershare(a)Marketval'ueper.share(a).Dividendpayoutrate-%Dividendyield-%(c)(d)'riceearningsratio(d)FuelCostData,Costperkwhgenerated-centsCoal-fired.steamstations.Oil-firedsteamstationCombustion.turbinesanddiesels(oil)............TotalCostoffuelreceivedatsteamstationsCoal-pertonCrudeandresidualoil-perbbl.Employees(a)9.7010.3810.608;492.'102.051.903'.2.50,627'5,598$2.64.120$24.68$'5/88212.016.681.404.557.891.96$33.78$26.447,70210.0012.919.028.432.'722.592'.403.2'3',497'0,231'3.32$2.0439$25.57$17~/462'0.385.921'.303.'204.681.65$30.70~$18.817,5909.22.11.47';928.392.982.81';593.2'9,07437,587$2.86$1.9293'2K12$'9'/r68'.00726'262.234'.101.47'29.54'13.097,2449.8414.018.8311.617.92'.778.47,8.533'.352.6234,92333,471$3.37$1.89100$24.58$.23'/>i578'.176.8630,80329,367$2.68$1'.8094$23.45$22'/4688.617.80$25.72$13.736,914$25.36$12.346,7531.13',1'.09'.302.'14'.023.481.351.17(a)Year-end..(b)'Fixedchargesconsistofinterestonshort'-andlongtermdebt;otherinterestchargesandtheestimatedinterest'componentofri.(c)Basedonholding,oneshareof,common'tockfor,theentireyear.(d)'asedonaverageofmonth.endmarketprices.

SalesDatariccustomers(a)ricenergysales-millionsofkwhsidential.Commercial........................Industrial.Other198019798,0565,7437,9107848,0665,5548,135800999,525987,0051978972,9937,7645,4087,8917811977954,6137,5395,2117,6977541976936,2197,2674,8747,481732Sourcesofenergysold-millionsofkwhGeneratedCoal-firedsteamstationsOil-fired,steamstationCombustionturbinesanddiesels(oil)Hydroelectricstations.PowerpurchasesInterchangepowersales.~.......CompanyusesandlinelossesTotalelectricenergysalesAverageannualresidentialkwhuse...........22,49326,5965,6923353332,8541,415(9,798)(1,978)22,4939,20522,55526,4875,7773779933,1002,124(11,089)(1,580)22,5559,35321,84424,1676,426106v70131,4001,319(9,010)(1,865)21,8449,16621,20126,2996,27111573533,42011977(12,433)(1,763)21,2019,06320,35425,7511,9474080928,5472,126(8,358)(1,961)20,3548,931ElectricRevenueDataByclassofservice-thousandsResidential.Commercial.IndustrialOtherenergysalesTotalfromenergysaleseroperatingrevenues.TotalelectricoperatingrevenuesBybillingcomponents-thousandsBaseratesFuelandenergyclauses.RecoveryofdeferredfuelcostTaxsurchargeandotherTotalfromenergysalesAveragepriceper'kwh-centsResidentialCommercial.Industrial.......Totalforultimatecustomers.....Totalforallcustomers$349,714246,024245,51328,480$341,987232,610244,26527,664$315,691$296,179216,787201,639224,209.209,52726,65224,184$257,828170,990180,95721,653869,73110,595846,5269,941783,33910,659731,5298,999631,4288,296$880,326$856,467$793,998$740,528$639,724$437,732168,326$734,62257,00922,87055,230$733,19449,63322,71740,982$541,042200,1573,67038,470$492,627208,03330,86925,3704.344.283.103.903.874.244.193.003.793.754.074.012.843.623.593.933.872.723.483.453.553.512.423.133.10$869,731$846,526$783,339$731,529$631,428GenerationDataGeneratingcapability-thousandsofkw(a).Winterpeakdemand-thousandsofkw(e)..Generationbyfuelsource-%CoalOilHydroelectric.Steamstationavailability-%Coal-firedOil-fired.Steamstationutilization-%Coal-fired-fired.6,5464,94581.017.41.678.779.673.039.56,5464,42780.017.62.476.680.073.140.26,5364,70177.020.82.273.573.466.644.76,5464,52478.719.12.277.880.372.646.55,7174,51490.27.02.878.1.68.870.626.4(c)winterpeaksshownwerereachedearlyinthesubsequentyear.The1976peakisthatwhichwouldhaveoccurredifa5%voltagereductionhadnotbeenineffect.Actual1976peakwas4,425,000kw.

l'tatementOfInCOme(ThousandsofDollars)198019791978OperatingRevenues(Note2).OperatingExpensesNetcostofenergyFuelPowerpurchasesInterchangepowersales...Net(deferral)/amortizationoffuelandenergycosts(Note3)IVagesandemployeebenefitsOtheroperatingcostsDepreciationIncometaxes(Note5)Taxes,otherthanincome(Note9)OperatingIncomeOtherIncomeandDeductionsAllowanceforequityfundsusedduringconstruction.IncometaxcreditsIncome(loss)ofsubsidiaries(Note4)Other-netIncomeBeforeInterest,ChargesInterestChargesLong-termdebt............Short-termdebtandotherAllowanceforborrowedfundsusedduringconstructionNetIncome-BeforeDividendsonPreferredandPreferenceStockDividendsonPreferredandPreferenceStockEarningsApplicabletoCommonStock...........EarningsPerShareofCommonStock(basedonaveragenumberofsharesoutstanding).............$885,451635,77841,399(419,587)(4,391)253,199131,618107,58380,72655,73087,936716,792168,65962,18942,8521251,708106,874275,533154,59020,236(79,052)95,774179,75959,375$120,384$2.64$860,498534,38246,586(382,457}40,453238,964114,837100,57776,1517773266,414677,675182,82353,12926,5381,052228082,999265822126,9068,794~(52,07683,624182,19848,666$133,532$3.32$798,339454,60228,208(231,853)(27,245)223,712103,47985,85173,07577,21666,404629,737168,60235,51813,594(6,346)9,54752,313220,91599,4257,972(35,517771,880149,03541,6706107365$2.86AverageNumberofSharesOutstanding(thousands).DividendsDeclaredPerShare'fCommonStock.....45,598$2.1240,231$2.0437,587$1.92SeeaccompanyingSchedulesand1VotestoFinancialStatements.

SCheduleOfTaXeS(ThousandsofDollars)omeTaxExpenseeludedinoperatingexpensesProvisionFederalStateDeferredTaxdepreciation(classlifesystem).RecoverablefuelandenergycostsForcedoutagereserveStateutilityrealtytax.ConversiontomonthlybillingOtherInvestmenttaxcredits-netIncludedinotherincomeanddeductionsProvision(credit)FederalStateTotalincometaxexpense1980$36,48610,55247,0385,3012,0132,232(3,424)(558)9696,5332,15955,730(34,136)(8,716)(42,852)$12,8781979$35,38517,16452,5495,274(20,902)(896)7,0365,022557(3,909)29,09277,732(21,139)(5,399)(26,538)$51,1941978$21,68011,84133,0215,69514,565~3,58851624,36419,83177,216(11,311)(2,283)(13,594)$63,622onciliationofIncomeTaxExpenseicatedincometaxonpre.taxincomeatcombinedfederalandstatetaxrates(shownbelow)..........Reductionsdueto:Allowanceforfundsusedduringconstruction......Taxdepreciation(guidelinelivesanddecliningbalancemethod)TaxandpensioncostOther-net.Total..IncometaxexpenseCombinedfederalandstateincometaxrates-%Effective,incometaxrates-9o$99,53572,9794,6426,1572,87986,657$12,87851.76.7$120,59454,3596,3295,1973,51569,400$51,19451.721.9$113,687.37,9769,3143,892(1,117)50,065$63,62253.529.9Taxes,OtherThanIncome'tategrossreceipts.StatecapitalstockStateutilityrealty.SocialsecurityandotherTotal.$39,00514,83525,9838,113$87,936$37,56513,05611,3107,483359,414$35,45310,88513,7186,348$66,404SeeaccompanyingNotestoFinancialStatements.38 BalanCe"SheetatDecember31(ThousandsofDollars)'Assets1980,1979UtilityPlantPlantin.service-at-originalcostElectricSteamheatLess.accumulateddepreciationConstructionworkinprogress-atcostNuclearfuelinprocess~atcost(Note14)$2,640,3018,4352,648;736693,9741,954,7621,874,39777,0063,006166$2,508,8528,2672,517,119'631,141.I;885,9781,473,22061,3013,"420;499InvestmentsAssociatedcompanies~atequityReceivablefromlitigationsettlement(Note14).Nonutilitypropertyandother-atcostorless..20;614311500'5;64357,75716,9655,967,22,932CurrentAssetsCashAccounts.receivable(lessreserve:.1980,$3,552;1979,.$3,518)CustomersInterchange;powersales.Other.Notesreceivable(1979includes$27,500receivablefromanassociatedcompany)..Recoverablefuelandenergy-costs(Note3)Fuel(coalandoil)-ataveragecost.......................Materials.and.supplies-at.averagecostOther'6,154-62,95835,5635;70888640,876126,87722,70713,201314,93015,55054,12346,102'6,33127,51617,451104,468.20,0367,759299,336DeferredDebitsRecoverable.fuelcosts(Note3)Stateutilityrealtytax(Note9)Other12,656"8',57221,228$4,300,08018,32813,'6177,51639,461$3,782,228See.accompanyingSchedulesandNotestoFinancialStatements.~-'39-Liabilities19801979pitalizationCommonstockCapitalstockexpense'arningsreinvested.CommonequityPreferredandpreferencestockWithsinkingfundrequirementsWithoutsinkingfundrequirements.Long-termdebt...........$869,445(12,436)393,7081,250,717510,800231,3751,810,6663,803,558$753,400(11,862)371,9031,113,441441,400231,3751,499,2203,285,436CurrentLiabilitiesLong-termdebtduewithinoneyearCommercialpapernotesAccountspayableTaxesaccrued.InterestaccruedDividendspayableDeferredincometaxesOther1,02656,32472,64318,46238,87042,03322,48226,608278,44857,93830,77567,38916,10531,45235,4659,66622,925271,715DeferredandOtherCreditsDeferredinvestmenttaxcredits.DeferredincometaxesOtherCommitmentsandContingentLiabilities(Notes10and15)127,85275,36614,856218,074$4,300,080125,68981,65017,738225,077$3,782,228SeeaccompanyingSchedulesand¹testoFinancialStatements.

ScheduleofCapitalStock..and,Long-TermDebtatDecember31PreferredStock-$100par,-cumulative(b)4'/z9oSeries..SharesAuthorized(a)629,93610,000,000'haresOutstanding1980530,1894,466,5564,996,745,3$53,019446,656499675Outstanding-ThousandsofDollars198019"$53,421,756$474;775PreferenceStock-nopar,cumulative(b)..5,000,000CommonStock-nopar(b).................75,000,000Installmentsreceived(dividendreinvestmentplan)Employeesubscriptions(employeestockownershipplan)Long-Term'Debt(c)FirstMortgageBonds2s/4%3%9o10'/s%3'/8'o97/s%97/s%11%%a~~~~~~~~~~~,~'~9$/s9o3959o14%.4Ys9o55/s%to9%7'/4'o9s/49o8'/49o.to15Ys%Pollutioncontrol4s/4%to5Ys9oSeriesA6%SerieaB77/s%to8'/s%SeriesCLessamountheldinconstructionfundNotes'7%Bankloans(e)Other(interestatratesup,to89o)Unamortized(discount)andpremium-net.Lessamountduewithinoneyear12,425,00050,627,288MaturityDateFebruary1,1980September1,1982October1,1982March1,1983June1,1983June1,1984December15,1984June1,1985August1,1985December1,19901991-19951996-20002001-20052006-2010(d)April1,1983(d)February1,1980March31,19861981-1989$242,500$868,690'755'869,445$7,500.100,00025,00033,34233,32930,000.33,32925,000125,00060,000190,000520,000350,00026,00070,00020,000(30,244)1,618,256200,0001,8301,820,086(8,394)1,811,6921,026$1,810,666$198,000$752,385642373$753,400$37,0007,500100,00025,00033,342.83,32933,32925,00060,000190,000520,000250,0001,341,00020,000200,0001,5051,562,505(5,347)1,557,15857,938$1,499,220(a)In1980theauthorizedsharesofcommonstockwereincrensedfrom50,000,000to75,000,000andtheauthorizedsharesofseriespreferredstockwereincreasedfrom5,000,000to10,000,000.(b)Eachshareofpreferred,preferenceandcommonstockisequalinvotingpower,andentitlestheholdertoonevoteonanyquestionpresentedtoanyshnreowners'eeting.(c)Aggregatelongtermdebtmnturitiesthrough1985are(thousandsofdollars):1981,$1,026;1982,$108,415;1983,$129,068;1984,$64,363and1985,$59,350.Maximum.sinkingfundrequirementsaggregate$24.9millionthrough1985andmaybemetwithpropertyadditionsorbonds.Seeaccompanying¹testo.FinancialStatctncnts.(d)Pollutioncontrolbondsmatureannuallyasfollows(thou-sandsofdollars):(i)SeriesAonMay1,1981.1983,$500;1984.2002,$900and2003,$7,400(ii)SeriesConApril1,2000,$4,000;20062009,$2,000and2010,$8,000."(e)Bankloansbearinterestat103%ofprimethroughMarch1982and105%ofprimethereafter.(f)Theaggregateamountofsinkingfundredemptionrequire-mentsthrough1985are(thousandsofdollars):1981,$12,350;1982,$8,350;1983,$10,850;1984,$22,850and1985,$52,850.(g)OncertainsinkingfundredemptiondatestheCompanymnyredeemadditionalsharesuptothenumberofsharesoftheseseriesrequiredtoberedeemedannually.TheCompanyredeemedanadditional12,500sharesofthe$13.00PreferenceStockin1980.0 rementssofPreferredreferenceStock(h)ithSinkingFundRequiSeriesPreferred7.40%7.50%7.75%8.00%8.00%,Second.........8.25%8.75%9.24%10.76%(i).............Preference$8.625(i)$9.25$11.00$13.00Outstanding-ThousandsofDollars19801979$38,40015,00060,00050,00010,00050,00060,00075,000$36,80015,00060,00050,00010,00050,00060,00075,00026,50051,0004,00050,00022,5008,00050,00025,000$510,800$441,400SharesOutstanding1980368,000150,000600,000500,000100,000500,000600,000760,000265,000510,00040,000(j)500,000225,000OptionalRedemptionPricePer"Share1980$112.00112.00112.00112.00112.00112.00115.00115.00115.00NoneNone108.25(k)109.10(k)16,000150,000120,00025,00020,000100,00030,000(g)30,000(g)63,QQQ(g)102,00040,00025,000(g)12,500(g)1981-200319851984-19881983.20021985-19891985-19891985-20041981-20051986-19901986-199019811981-20001981-1998SinkingFundProvisions-at$100pershare(f)SharestobeRedeemedRedemptionAnnuallyPeriodWithoutSinkingFundRequirements4'/BoPreferred...............$53,019SeriesPreferred3.36%.~4,1784.40%22,8784.60%......6,3008.60%~222379.00%.......7,763Preference$8.0035,0008.4040,0008.7040,000$231,375$53,0194,17822,8786,30022,2377,76335,00040,00040,000$231,375530,18941,783228,77363,000222,37077,630350,000400,000400,000110.00103.50102.00103.00107.001Q7.00105.50107.00106.00(h)Liquidationpricesp'ershareofpreferredstock(payableinpreferenceoverthepreferencestock)andpreferencestockareasfollows(plusineachcaseanyunpaiddividends):InvoluntaryVoluntaryClassLiquidationLiquidation4~5%Preferred$100$100SeriesPreferred$100RedemptionpriceineffectPreference$100Redemptionpriceineffect,exceptforthe$8.625Serieswhichis$100.(i)Intheeventthatdividendsonthesestocksconstituteareturnofcapitalforfederalincometaxpurposesorthereisalossorreductionofthedividendreceiveddeductionavailabletocorporateholdersofsuchstock,theCompanywouldberequiredtomakeindemnitypaymentstotheownersofthestockuponitssaleorredemptioninordertoprovideanagreeduponeffectiveyieldafterfederalincometaxes.TheCompanyestimatesthatasofDecember31,1980itcouldberequiredtomakesuchindemnitypaymentsnotinexcessof$1.0millionwithrespecttothePreferenceStock,$8.625Series.(j)The4O,OOOsharesofthisseriesoutstandingatDecember31,0wereredeemedinJanuary1981.(k)The$11.00and$13.00PreferenceStocksmaynotberefundedthroughcertainrefundingoperationspriortoJulyI,1985andOctoberI,1984,respectively.Capitalstockissuedor(redeemed)duringthethreeyears1978-1980wasasfollows(sharesandamountinthousands):YearClassSharesAmount1980Common7,130$116,305Preference,$8.625..................51051,000Preferred,10.75%..................26526,500Preferred,7.40%....................(16)(1,600)Preference,$9.25...............,...(40)(4,000)Preference,$13.00..................(25)(2,5OO)1979Common4,42381,242Preferred,7.50%....................15015,000Preferred,8.00%,Second...........10010,000Preferred,8.25%....................50050,OOOPreferred,8.75%....................60060,000Preferred,740%....................(16)(1,600)Preference,$9.25...................(40)(4,000)1978Common..................4,15088,847Preferred,"l./5%....................60060,000Preference,$9.25...................(40)(4,000)Seeaccompanying1VotestoFinancialStatements.

StatementOfChangeSinFinanCialPOSitiOn(Thousan'BsofDollars)SourceofFundsOperationsNetincomeCharges(credits)toincomenotinvolvingworkingcapitalDepreciationNoncurrentdeferredincometaxesan'dinvestmenttaxcredits-net..................Allowanceforfundsusedduringconstruction.OtherOutsidefinancingCommonstockPreferredandpreferencestock..Long-termdebt.........................Short-termdebt-netincrease(decrease)Workingcapital(excludingdebt)-decrease(a).Investments-decrease-.Litigationsettlement(Note14)Noncurrentrecoverablefuelcosts-decreaseOther-net....................................1980,$179,75980,726(3,707)(141,241)(1,762)113175116,04577,500315,52025,549534,61422,50231,50018,328$720,7191979$182,19876,15129,960(105,205)1,241-184,34581,564135,000300,674(161228)356,0102,2794,09021,709$568,4331978$149,03573,07550,628(71,035)(13,774)187,92988,85360,000360168,603317,81620,0222,900$528,667ApplicationofFundsConstructionexpendituresNuclearfuelexpendituresAllowancefor.fundsusedduringconstruction.SecuritiesretiredPreferredandpreferencestock.Long-termdebtDividendsonpreferred,preferenceandcommonstockReceivablefromlitigationsettlementInvestments-increaseNoncurrentrecoverablefuelcosts-increase.Other-net.$548,74444,055(141,241)451,558.8,10057,93866,038157,88131,5005,8987,844$720719,$494,40124,241(105,205)413,437'5,6007026,302131,88316,811$568,433$434,5762,906(71,035)366,4474,0003,7567,756114,338'8940,037$528,667(a)Changesincomponentsofworkingcapital(excludingdebt)CashandtemporarycashinvestmentsAccountsandnotesreceivable,Fuel(coalandoil).Recoverablefuelandenergycosts,netofdeferredtaxes...AccountspayableandaccruedtaxesOther-netIncrease(Decrease).$(9,396)(28,957)22,40910,609(7,611)(9,556).$(22,502)$1,83226,3085,536(9,058)(10,951)(15,946)$(2,279)$(20,373)(6,147)(6,827)(5,956)'7,1922,089$(20,022)SceaccompanyingSchedulesand)VotestoFinancialStatements.

StatementOfEarningeReinVeSted(ThousandsofDollars)198019791978ce,January1dNetIncome.DeductCashdividendsdeclaredPreferredstock-atrequiredannualrates.'.........Preferencestock-atrequiredannualrates.........Commonstock-pershare:1980,$2.12;1979,$2.04;1978,$1.92Issuancecostofretiredpreferredandpreferencestock..IBalance,December31(Note7)I$371,903179,759551,66236,57822,79798,50673157,954$393,708$321,602182,198503,80029,53619,13083,21714131,897$371,903$286,911149,035435,94622,17019,50072,6686114,344$321,602NotestoFinancialStatementsI.SummaryofAccountingPoliciesAccountingRecordsAccountingrecordsaremaintainedinaccordancewtheUniformSystemofAccountsprescribedbyderalEnergyRegulatoryCommission(FERC)doptedbythePennsylvaniaPublicUtilitymission(PUC).PrinciplesofConsolidationEffectiveMarch1,1980,HersheyElectricCom-pany,formerlyawhollyownedelectricdistributionsubsidiary,wasmergedintotheCompany.TheaccompanyingfinancialstatementsforperiodspriortoMarch1,1980reflectaconsolidationoftheaccountsoftheCompanyandHershey.AssociatedCompaniesInvestmentsinunconsolidatedsubsidiaries(allwhollyowned)andinSafeHarborWaterPowerCorporation(ofwhichtheCompanyownsone-thirdoftheoutstandingcapitalstockrepresentingone-,halfofSafeHarbor'svotingsecurities)arerecordedusingtheequitymethodofaccounting.Unconsoli-datedsubsidiariesareengagedincoalminingopera-tions,holdingcoalreservesanduraniumproperties,oilpipelineoperationsandrealestate.AlloperationsofunconsolidatedsubsidiariesareintheUnitedStates.TheCompanybelievesthatitsfinancialpositionandresultsofoperationsarebestreflectedwithoutconsolidationofthesesubsidiariessincetheyarenote,edinthebusinessofgeneratingordistributingity.Allunconsolidatedsubsidiariescon-bintheaggregatewouldnotconstitutea"significantsubsidiary"asthattermisdefinedbytheSecuritiesandExchangeCommission.UtilityPlantAdditionstoutilityplantandreplacementofunitsofpropertyarecapitalizedatcost.Thecostofde-preciablepropertyretiredorreplacedisremovedfromutilityplantandsuchcost,plusremovalcosts,lesssalvage,ischargedtoaccumulateddepreciation.CostoflandretiredorsoldisremovedfromutilityplantandanygainorlossisreflectedontheState-mentofIncome.Expendituresformaintenanceandrepairsofpropertyandthecostofreplacementofitemsdeterminedtobelessthanunitsofpropertyarechargedtooperatingexpenses.SubstantiallyallutilityplantissubjecttotheliensoftheCompany'smortgages.AllotoanceforFundsUsedDuringConstructionAsprovidedintheUniformSystemofAccounts,thecostoffundsusedtofinanceconstructionprojectsiscapitalizedaspartofconstructioncost,AfteraprojectisplacedinservicetheCompanyispermittedtoincludein'rateschargedforutilityserviceareturnon,and.depreciationof,thecostoffundssocapitalized.Thecomponentsoftheallow-anceshownontheStatementofIncomeunderotherincomeanddeductionsandinterestchargesarenon-cashitemsequaltothecostoffundscapitalizedduringtheperiod.TheallowanceservestooffsetontheStatementofIncometheinterestchargesondebtanddividendsonpreferredandpreferencestockincurredtofinanceconstruction.Inaddition,areturnoncommonequityusedtofinanceconstruc-tionisimputed.Theallowancerateiscomputedonanafter-taxbasisinaccordancewithaFERCorder.Thebor-rowedfundscomponentisthepre-tax.amountofinterestcapitalized.Theremainderofthetotalallowanceisrecordedasallowanceforequityfunds.

Depreciation.Forfinancialstatementpurposes,thestraightlinemethodofdepreciationisusedtoaccumulateanamountequaltothecostofutilityplantandremovalcosts,lesssalvage,overtheestimatedusefullivesofproperty.Provisionsfordepreciationasapercentoftheaverageoriginalcost,ofdepreciablepropertyapproximated3.2%in1980,1979and1978.RevenuesRevenuesarerecordedatthetimebillingsarerenderedtocustomers.TheCompanydoesnotaccruerevenuesrelatedtoenergydeliveredbutnotbilled.EffectiveJanuary1,1979,allcustomershavebeenbilledmonthlyinaccordancewithaPUCorder.Priortothatdate,certaincustomerswerebilledmonthlyandothersbimonthly.EnergyCostsRecoverableUnderAdjustmentClausesTheCompany'sPUCtariffsincludeanenergyclauseunderwhichcostsvaryingfromthelevelsallowedinapprovedbaserateschedulesarereflectedincustomers'illsafterthecostsareincurred.TheenergyclausebecameeffectiveNovember1978con-currentwiththeterminationofaPUCfueladjust-mentclause.AfueladjustmentclauseappliestosubstantiallyallcustomersbilledunderFERCtariffs.Fuelandenergycostsrecoverableinthefuturethroughapplicationoftheclausesaredeferredandchargedtoexpenseduringtheperiodsinwhich"suchcostsarebilled.tocustomers.IncomeTaxesTheCompanyanditssubsidiariesfileaconsoli-datedfederalincometaxreturn.Incometaxesareallocatedtotheindividualcompaniesbasedontheirrespectivetaxableincomeorlossandinvestmenttaxcredits;IncometaxesapplicabletotheCompanyareallocatedtooperatingexpensesandotherincomeanddeductionsontheStatementofIncome.Incometaxreductionsassociatedwiththeinterestexpensewhichisoffsetbytheborrowedfundscomponentoftheallowanceforfundsusedduringconstructionconstitutetheprincipalitemofincometaxcreditsunderotherincomeanddeductions.DeferredtaxaccountingisfollowedforitemswheresimilartreatmentinratedeterminationshasbeenorisexpectedtobepermittedbythePUC.TheprincipalitemsareshownontheScheduleofTaxesonpage38.InitsJanuary1981ratedecision,thePUCdis-allowednormalizationofstateandfederalincometaxesontimingdifferencesrelatedtotaxdeprecia-tioncomputedundertheclasslifesystemandthecurrentdeductionofremovalcostsforincometaxpurposes.Accordingly,'ffectiveasofJanu1,1981,theCompany"discontinueddeferrraccounting,forsuch'jtems.ThischangecountingpolicywillhavenoeffectonnetincmesincetheCompany'selectricrateswillreflecttheaccountingchange.Othertaxreductionsrelatedprincipallytotheuseofthedecliningbalancedepreciationmethod,guide-linelivesandcertaintaxandpensioncostsareaccountedforundertheflow-throughmethod.Investmenttaxcredits,whichresultinareductionoffederalincometaxespayable,aregenerallyequalto10%of(1)thecostofcertainpropertyplacedin'erviceand(2)progress'paymentsfortheconstruc-tionofcertainfacilitiesthathaveaconstructionperiodofatleasttwoyears.Such10%taxcreditsaredeferredandamortizedovertheaveragelivesoftherelatedproperty.TheCompanyhasanemployeestockownershipplan(ESOP)whichpermitsittoclaim.uptoanadditional1'/2%investmenttaxcredit.AnamountequaltotheadditionalcreditutilizedispaidtotheESOPtrusteetoacquirecommonstockfromtheCompanyforemployees.RetirementPlanTheCompanyhasanoncontributoryretirementplancoveringsubstantiallyallemployees.Cocontributionstotheplanincludecurrentcostsandallamountsrequiredtoamortizeunti.edpriorservicecostsoverperiodsofnotmorethan20years;CapitalStockExpenseNoamortizationplanisineffectforcapitalstock;expenseexceptfortheamountsapplicabletothose'eriesofpreferredandpreferencestockwhicharerequiredtoberedeemedthroughsinkingfundprovisions.Assuchstockisredeemed,therelatedcapitalstockexpenseisamortizedtoearningsreinvested.ForcedOutageReserveandInsuranceTheCompanyhasutilizedaself-insurancereservetocoveraportionoftheincreasedlevelofenergy-costsexperiencedwhenanyofitsmajorgenerating;unitswereforcedoutofserviceduetodamagecaused-byaccidentorotherunforeseeninsurableoccur-rences.Thereservewasestablishedonthebasisof,historicalexperienceandhadbeenrecognizedin=ratemakingproceduresbythePUC.InitsJanuary1981ratedecision,thePUCruledthattheannualprovisionforthereservewolongerberecoverablethroughelectric,Accordingly,effectiveasofJanuary1,198',e>Companystoppedaccruingtheprovisionforthereserve.II 2.RateIncreaseril1980,theCompanyfiledwiththePUCarforanincreaseinbaserateelectricrevenuesofaproximately$123millionannuallybasedonafuturelookingtestyearendedDecember31,1980.OnJanuary30,1981,thePUCissuedarateorderontheCompany's'requestforincreasedelectricbaserates.TheorderfoundthattheCompanyhadjustifiedadditionalbaseraterevenuestotaling$101million.Ofthatamount,approximately$97millionwasapplicabletoPUCtariffsandthis13%increaseinbaserateswentintoeffectforelectricityusedonandafterJanuary30,1981.3.DeferredFuelCostRecoveryTheCompanyisrecovering,througha1-millperkwhchargetocustomers,thedeferredfuelcostswhichweretobecollectedthroughthePUCfueladjustmentclausewhichterminatedOctober1978.AsofDecember31,1980,theamountofsuchdeferredfuelcoststoberecoveredapproximated$11.1million.Anadditional$7.1millionofdeferredfuelcostswasincurredastheresultofthePUCplacingatemporaryceilingonthefueladjustmentclauseduringseveralmonthsfollowingthe1978coalminers'trike.Inanaccountingorder,thePUCstatedthattheCompanywouldbepermittedtorertheamountoffuelcostssodeferred,andtheCyhasrequestedthatrecoverybeaccom-pthroughapplicationofthe1-millperkwhch'arge.TheCompanyexpectstorecoverbytheendof1981thetotal$18.2millionofdeferredfuelcostswhichwouldhavebeencollectedbytheterminatedPUCfueladjustmentclause.4.TheOneidaMiningCompanyIn1978,theCompanyterminatedundergroundcoalminingoperationsatTheOneidaMiningCompany(Oneida),awhollyownedsubsidiary,andtheassociatedcostsreducedtheCompany'snetincomeinthatyearby$7.6million(20centspershareofcommonstock).TerminationofminingatOneidaendedtheprocedureineffectsinceFebruary1977ofnotrecoveringthefullcostofOneidacoalin'theCompany'sfueladjustmentclauses.Thispro-cedureadverselyaffectednetincomeby$2.5million(7centspershareofcommonstock)in1978.6.IncomeTaxesTheInternalRevenueService(IRS)hasexaminedtheCompany'sfederalincometaxreturnsfortheyears1973through1976andhasproposedadjust-me~whichwouldresultinadditionaltaxesa'ngtoapproximately$28.2millionforthoseyZheCompanywillprotestmostofthepro-pos"adjustments,andbelievesthatevenifanadversedispositionofitsprotestregardingtheadjustmentsoccurred,therewouldnotbeamaterialeffectonnetincome.TheCompanyhasprovideddeferredincometaxaccrualswithrespecttothelargestproposedadjust-ment,and,furthermore,expectsthatarecentlypublishedIRSrulingforanunassociatedcompanywouldapplytothisitemandtherebyeliminate$22.1millionoftheproposedadditionaltaxes.TheonlyothermajoradjustmentproposedbytheIRSwoulddisallowthedeductionofcertaintaxes(principallysocialsecuritytaxes)thattheCompanycapitalizedforbookaccountingpurposes.Iftheprotestofthisitemweredisallowed,theCompanyestimatesthatitwouldincuradditionalincometaxexpense,includinginterest,ofapproximately$10millionfortheyears1973to1980.Thereductionsinincometaxexpensewhichresultedfromthisdeductionhavebeenflowedthroughtocustomersinestablishingratesforelectricservice.Accordingly,ifthistaxliabilityisincurred,theCompanywillseekpermissionfromthePUCtorecovertheamountfromcustomers.AtDecember31,1980,theCompany'sportionofaconsolidatedunusedinvestmenttaxcreditaggre-gatedapproximately$84millionwhichmaybecarriedforwardtooffsetfederalincometaxpro-visionsforyearsthrough1987.6.CreditArrangementsToprovidefinancingflexibility,theCompanyhasthefollowingcreditarrangementswhichaggregate$620million.Informallinesofcredittotaling$120millionareestablishedwithvariousbankswhichrequirethatcompensatingbalancesbemaintained(notmaterialinamounttotheCompany'sfinancialpositionandborrowingcosts)orthepaymentofcommitmentfees.Borrowingsundertheselinesofcreditaregenerallyforoneyearattheprimeinterestrateandmaybeprepaidatanytimewithoutpenalty.ArevolvingcreditagreementwithagroupofdomesticbankspermitstheCompanytoborrowandhaveoutstandingupto$400millionatanyonetimethroughFebruary1985.Amountsborrowedwouldbearinterestatratesincreasingfromprimein1981to105%ofprimeatMarch1,1984andcouldbepre-paidatanytimewithoutpenalty.Borrowingsout-standingattheendofFebruary1985couldbeconvertedtotermnoteswithinterestat110%ofprime.One-thirdoftheprincipalamountofsuchtermnoteswouldmatureineachoftheyears1986,1987and1988.ArevolvingcreditagreementwithagroupofforeignbankspermitstheCompanytomakeshorttermborrowingsupto$100millionthroughMarch1982.Borrowingsunderthisagreementwouldbearinterestat'/8%overtheLondonInterbankRate.TherewerenoborrowingsoutstandingunderthesecreditarrangementsatDecember31,1980.Therevolvingcreditagreementswereenteredintoin 1980andaremaintain'edbythepaymentofacom-mitmentfeebasedontheunusedbalance.Commit-mentfeesincurredtomaintaintheCompany'screditarrangementsaggregated$2.4millionin1980and$0.7millionin1979.7.DividendRestrictionsTheCompany'scharterandmortgageindenturesrestrictthepaymentofcashdividendsoncommonstockundercertainconditions.Underthecharterprovisions,whicharethemorelimiting,norestric-tionsareeffectiveonthepaymentofsuchdividendsoutofearningsreinvestedatDecember31,1980."CertainseriesofpreferredandpreferencestockscontainprovisionstotheeffectthattheCompanywillnotdeclareorpayanydividendson,ormakeanyotherdistributionofpropertywithrespecttocommonstock,orpurchaseorotherwiseacquirecommonstockatanytimewhentheCompanyshallhavefailedtodischargeinfullitsobligationtoredeemsharesofthatseriespursuanttothesinkingfundrequirements.Inadditiontotheserestrictions,approximately$3.1millionofearningsreinvestedwererestrictedastothepaymentofdividendsatDecember31,1980pursuanttoprovisionsofPartIoftheFederalPowerAct.8.RetirementPlanPensioncostschargedtoexpensefor1980,1979and1978were$17.3million,$14.7millionand$13.0million,respectively.Theactuarialpresentvalue'ofaccumulatedplanbenefitsandplannetassetsattheendoftheplan'srecentfiscalyearsareasfollows(thousandsofdollars):June3019801979Actuarialpresentvalueofaccumulatedplanbenefits:(a)Vested$145,863$127,597Nonvested......~.........4,5933,652$150,456$131,249Netassetsavailableforbenefits$150,857$127,816(a)Excludesaccumulatedplanbenefitswhicharetheobligationoffourinsurancecompaniesunderallocatedinsurancecontracts.Theassumedrateofreturnusedindeterminingtheactuarialpresentvalueofaccumulatedplanbenefitswas6%for1980and1979.Aplanamend-menteffectiveMay1,1980providingforincreasedbenefitstoretiredemployeesincreasedtheactuarialpresentvalueofvestedaccumulatedplanbenefitsatJune30,1980by$5.6million.9.UtilityRealtyTaxIn1979,aone-timestatetaxof10.5%onthevalueofpublicutilityrealestatewasimposed.TheCompanyhasbeenassessed$13.5millionunderthistax,ofwhichithaspaid$8.3millionandissingthepaymentof$5.2millionwiththeComm1thCourtofPennsylvania.Theentireamounti.eenrecordedasadeferredchargeandisbeingrecoveredthroughthetaxsurchargeovera12-monthperiodbeginningNovember1980.AnyamountsultimatelyreceivedastheresultoftheCompany'sappealwillbepassedontothecustomersinthetaxsurchargerate.AtDecember31,1980,theCompanyhadlong-termleaseagreementswhichrequirefutureminimumrentalsasfollows(millionsofdollars):1981,$15.1;1982,$13.9;1983,$12.3;1984,$10.4;1985,$and1986toexpirationoftheleases,$71.1.The(nyalsoleasesotherpropertyundershort-teiee-mentswithrentalscurrentlyamountingtoaIiroxi-mately$5.6millionannually.Generally,long-termleasescontainrenewaloptionsandobligatetheCompanytopaymaintenance,insuranceandotherrelatedcosts.TheleasesdonotincluderestrictionsonanyoftheCompany'sotherfinancialactivities.Certainoftheleasesarecapitalleasesinaccord-ancewithcriteriaestablishedbytheFinancialAccountingStandardsBoard.However,inkeepingwithratemakingtreatmentbythePUC,theCom-panyispermittedtoaccountforsuchleasesasoperatingleases.Theaggregateassetandliabilitybalancesthatwouldhavebeenrecordedrelativetoleasesmeetingthedefinitionofacapitalleaseareasfollows(thousandsofdollars):CapitalleaseassetsAccumulatedamortization....December3119801979$112,330$111,048(58,234)(53,247)$54,096$57,801Current.obligationsundercapitalleasesNoricurrentobligationsundercapitalleases$7,964$7,70451,36554655$59,329359Capitalizationoftheseleaseswouldnot"h'aveamaterialeffectonoperatingexpenses.10.RentalsandLeaseCommitmentsPrincipalrentalcostsaffectingexpensewereasfollows(thousandsofdollars):ChargedtoOperating"FuelYearExpenseInventory(a)1980$15,818$2,008197914,4681,9931978i..13,7831,927(a)Amountsrepresentrentalofrailroadcoalcarswhicharechargedtofuelinventoryandsubsequentlyincludedinfuelexpense.

11.JointOwnershipofGeneratingPlantsDecember31,1980,theCompanyownedun-edinterestsinjointly-ownedgeneratingsta-onsasfollows(millionsofdollars):Susquehanna(underconstruction).......Keystone.............Conemaugh..........PlantInvestment'Ownership$1,735.190.00'Fo27.312.3432.111.39TheCompanyreceivesaportionofthetotalsta-tionoutputequaltoitspercentageownershipinterest.TheStatementofIncomereflectstheCompany'sshareoffuelandotheroperatingcostsassociatedwiththetwooperatingstations.Eachparticipantprovidesitsownfinancing.12.AcquisitionofCoalReservesInAugust1980,theCompanyacquiredalltheoutstandingcapitalstockofTheArcadiaCompany,Inc.inatransactioninvolvingtheissuanceof492,537sharesoftheCompany'scommonstockandthepaymentofabout$2million.Arcadiaisinthesurfacecoalminingbusinessandownsapprox-imately8milliontonsofbituminouscoalreserves.~~ssociatedCompanyTransactionseCompanypurchasesbituminouscoalfromassociatedcompaniesatapricegenerallyequaltotheentireoperatingcostsofthosecompanies.Purchasesofcoalfromassociatedcompanieswere(thousandsofdollars):1980,$191,909;1979,$166,217and1978,$113,699.AnoilpipelinesubsidiarytransportsoiltooneoftheCompany'sgeneratingstationsinaccordancewithaPUCapprovedtariff.Theoiltransportationchargeswere(thousandsofdollars):1980,$7,922;1979,$9,590and1978,$9,571.During1980,theoilpipelinesubsidiaryrefinanceditscapitalrequirementsbyobtainingoutsideloans,guaranteedbytheCompany,andrepaid$27.5millionithadborrowedfromtheCompany.SeeNotes4,12and15toFinancialStatementsforadditionalinformationconcerningtransactionsinvolvingassociatedcompanies.14.SettlementofNuclearFuelLitigationIn1980,theCompanyandGeneralAtomicCom-pany(GAC)enteredintoanagreementtosettlelitigationinvolvingGAC'sobligationtosupplyuraniumandfabricatednuclearfuelassembliesfortheCompany'sSusquehannanuclear-fueledunits.Tagreementprovides(1)thatGACmakecashentstotheCompanyduringtheyears1981gh1987totaling'$31.5million,(2)tha'tGACmeacashpaymentof$12.4milliononDecember31,1980toUraniumResourcesandDevelopmentCompany(URADCO),awhollyownedsubsidiaryoftheCompany,toreimburseURADCOforexpensesincurredinanefforttoobtainuraniumsuppliesfortheSusquehannaunits,(3)thatGACselltotheCompany2.5millionpoundsofuraniumduringthe.years1982through1987,atapriceexpectedtobebelowthemarketprice,andguaranteednottoexceedthemarketpriceand(4)thatGAChasanoptiontosupplytotheCompanyupto2.8millionpoundsofuraniumatmarketpricesduringtheyears1988through1995.The$12.4millioncashpaymentwasreceivedbyURADCOonDecember31,1980.AlleghenyElectricCooperative,Inc.,aco-owneroftheSusquehannaunits,willbeentitledto10%ofthe$31.5millioncashpayments.Theamountofpay-mentstobereceivedbytheCompanyhasbeenrecordedasacredittonuclearfuel.15.CommitmentsandContingentLiabilitiesTheCompany'sconstructionandnuclearfuelexpendituresareexpectedtoaggregate$1.78billionduringthethreeyears1981-1983,including$412millionofallowanceforfundsusedduringcon-struction.Thethree-yearexpenditureestimateincludesabout$977millionfoi'heCompany's90%shareofconstructioncostsfortwonuclear-fueledgeneratingunitsattheSusquehannaplantand$223millionfornuclearfuel.Constructionexpendituresfor1981areestimatedtoaggregate$735million,including$86millionfornuclearfuel.Seethesectionentitled"PotentialDelaysoftheSusquehannaPlant"onpage28forinformationconcerningpossibledelaysinthein-servicedatesoftheSusque-hannaunitsandincreasedcoststocompletetheunits.ThreeoftheCompany'sgeneratingunitswerenotbroughtintocompliancewithairpollutionregula-tionsbythecompliancedatesestablishedbythe1977AmendmentstotheFederalCleanAirAct.Equipmentwasinstalledin1980attwooftheunitstobringthemintocompliance,andtheCompanyisinstallingequipmentwhichisexpectedtobringthethirdunitintocompliancebymid-1981.ThisscheduleisinaccordancewithconsentordersenteredintowiththePennsylvaniaDepartmentofEnvironmentalResources(DER).However,theCompanymaybesubjecttosubstantialfinesandpenaltiesbytheEnvironmentalProtectionAgency(EPA).TheEPAhasadvisedtheCompanythatitdoesnotintendtoseekcivilpenalties(whichcouldamountto$25,000perdayofviolation)ifthecompli-ancedatesspecifiedintheDERconsentordersaremet.BasedonitsinterpretationoftheformulaproposedbyEPA,theCompanyestimatesthatnoncompliancepenalties(whichdifferfromcivilpenalties)would,ifassessed,notexceed$100,000.TheCompanyatDecember31,1980hadguaran-teedcapitalandotherobligationstotaling$216.3millionofcertainfuel-relatedsupplycompanies(principallysubsidiarycoalcompaniesandasubsidiaryoilpipelinecompany).

SOpinionofInde'pendentCertifiedPublicAccountantsPennsylvaniaPower&LightCompany:WehaveexaminedthefinancialstatementsandsupplementalfinancialstatementschedulesofPennsylvaniaPower&LightCompanylistedunderItem8'onpage26.0urexaminationsweremadeinaccordancewithgenerallyacceptedauditingstandardsand,accordingly,includedsuchtestsoftheaccountingrecordsandsuchotherauditingproceduresasweconsiderednecessaryinthecircumstances.Inouropinion,theaccompanyingbalancesheetsandstatementsofincome,earningsreinvested,andchangesinfinancialpositionpresentfairlythefinancialpositionoftheCompanyatDecember31,1980and1979andtheresultsofitsoperationsandthechangesinitsfinancialpositionforeachofthethreeyearsintheperiodendedDecember31,1980,inconformitywithgenerallyacceptedaccountingprinciplesappliedonaconsistentbasis.Also,inouropinion,thesupplementalfinancialstatementschedules,whenconsideredinrelationtothebasicfinancialstatements,presentfairlyinallmaterialrespectstheinformationshowntherein.DELOITTEHASKINS&SELLSNewYork,NewYorkF<ebruary4,1981SupplementaryInformationonChangingPrices(Unaudited)TheFinancialAccountingStandardsBoard(F<ASB),anorganizationthatestablishesrulesforaccountingandfinancialreporting,hasissuedastatementthatrequiresthepresentationofcertaininformationontheeffectsofchangingprices.InflationhasbecomeanincreasinglysignificantfactorintheeconomiclifeoftheUnitedStates.Customaryfinancialreportinggenerallyhasnotattemptedtospecificallyreflectinflation.TheF<ASBstatementrequiresthatcertainaspectsofinflationbecomputedinaccordancewithprescribedtechniquesandreportedonanexperimentalbasis.TheFASBrecognizes,andtheCompanycautionsusersofthisinformation,thatthereisnoconsensusonthegeneralpracticalusefulnessofthissupple-mentaryinformation.Therearealsounresolvedimplementationproblemsandconceptualdifferencesregardingthemannerinwhichtheeffectsofchangingpricesshouldbemeasured.TheFASBstatementattemptstomeasuretheeffectsofinflationintwodifferentways:1.Constantdollars-Inaperiodofinflation,theamountofgoodsandservicesonedollarwillbuydeclines.Sincefinancialdataofteninvolvesdollarsexpendedindifferentyears,itissuggestedthatcombiningorcomparingsuchdollarsismisleading.Theconstantdollarmethodshowstheeffectsofgeneralinflationbyadjustingdatatodollarsofthesamepurchasingpowerbyapplica-tionoftheU.S.GovernmentConsumerPriceIndexforAllUrbanConsumers(CPI-U).Theconstantdollarmethodsimplyre.amountsrecordedonacompany'sbookstothelevelofaveragedollarsforthecurrentyear.Forexample,theaverageCPI-Uwas170.5in1976and246.8in1980.Therestatementof$1.00ofpropertyacquiredin1976toaverage1980dollarswouldbeaccomplishedbymultiplyingthe$1.00bytheratio246.8i170.5resultingin$1.45ofpropertyintermsofaverage1980dollars.2.Currentcost-Inaperiodofinflation,pricesofmostgoodsandservicesincreasebutnotneces-sarilyallatthesamerate.Thecurrentcostmethodshowstheimpactofinflationonaspecificcompanybymeasuringtheestimatedchangeinpricesofthespecificgoodsandservicesusedbythatcompany.TheCompanyhaselectedtopresentthe"Supple-mentaryStatementofIncome"datainaccordancewiththepartialrestatementprovisionoftheFASBstatement.Underthisprovision,utilityplant,netofaccumulateddepreciation,anddepreciationexpensearetheonlyitemsrestatedtoreflectgeneralinflation(ConstantDollars)andspecificpricechanges(Cur-rentCost).Fuelinventoriesandthecostoffuelusedingenerationhavenotbeenrestatedfromtheirhistori-calcostsinceunderrateregulation,therecoveryecostoffuelislimitedtotheactualcostoftburned.Revenues,incometaxesandexpensesthandepreciation.arepresentedattheamountsreportedinthebasicfinancialstatements.

Setforthunder"Other',InflationImpacts"arethewing:ainfromdeclineinpurchasingpowerofnetamountsowed.Inflationalsoaffectsmonetaryassets,suchascashandreceivables,whichlosepurchasingpower~duringinflationaryperiodssincetheseassetswillintimepurchasefewergoodsorservices.Con-versely,holdersofmonetaryliabilitiesbenefitduringsuchperiodsbecauselesspurchasingpowerwillberequiredtosatisfy'heseobligations.Forpurposesofthispresentation,thepreferredandpr'eferencestockissueswithsinkingfundrequire-mentsandtheaccumulateddeferredinvestmenttaxcreditsweretreatedasmonetaryitems.TheCompany'snetmonetaryliabilitypositionwasdueprimarilytotheamountofdebtandpreferredandpreferencestockwithsinkingfundsoutstandingwhichwereusedtofinancetheconstructionofutilityplant.2.Increaseinthecurrentcostofnetutilityplantasaresultofspecificpricechangesexperienced.Theincreaseinthecurrentcostamountofnetutilityplantisshownbeforeandaftereliminatingtheeffectsofgeneralinflationasmeasuredbythe.CPI-V.3.Adjustmentofnetutilityplanttonetrecoverableamount.UndertheratemakingprescribedbytheregulatorycommissionstowhichtheCompanyissubject,onlythehistoricalcostofutilityplantisrecoverableinrevenuesasdepreciation.Therefore,thedifferen'cebetweentheamountofutilityplantstatedintermsofconstantdollarsandcurrentcost(afterdeductingtheeffectsofgeneralinflation)andthehistoricalcostisreflectedasanadjustmenttonetrecoverableamount.'headjustmentintermsofconstantdollarsreflectsonlytheeffectsofgeneralinflationonthehistoricalcostofutilityplantandisareductionin1980.Theadjustmentintermsofcurrentcostiscomputedafterthegeneralinflationeffectisdeductedfromtheincreaseinthespecificpriceamountofnetutilityplantandin1980resultedinawrite-uptonetrecoverableamountbecausethegeneralpricelevelincreasedsubstantiallymorethanspecificprices.pplementaryStatementof'omefor1980(ThousandsofDollars)OperatingrevenuesOperatingexpensesDepreciation(a)Other.InterestexpenseOtherincomeanddeductions-netDividendsonpreferredandpreferencestockAsReportedinFinancialStatements(HistoricalCost)$885,45180,726636,066716,79295,774(106,874)59,375765,067$120,384EarningsapplicabletocommonstockOtherInflationImpactsGainfromdeclineinpurchasingpowerofnetamountsowed.Increaseinspecificprices(currentcost)ofnetutilityplantduringtheyear(c).IncreaseincurrentcostofnetutilityplantifchangeingeneralpricelevelwereappliedExcessofincreaseingeneralpriceleveloverincreaseinspecificpricesAdjustmentofnetutilityplanttonetrecoverableamount-write.up(reduction).165,241636,066801,30795,774(106,874)59,375849,582$35,869(b)173,184636,066809,25095,774(106,874)59,375867,525$27,9263263372$263,372$383,811(713,158)$(329,347)$(333,995)$3,295Adjustedon'djustedontheBasisoftheBasisofGeneralPriceChangesInflatioExperienced(ConstantDollar)(CurrentCost)(StatedinAverage1980Dollars)$885,451$885,451(a)ConstantdollarutilityplantwasdeterminedbyapplyingtheCPI-Uindextothehistoricalcostofsurvivingplant.Thc..-.,currentcostofutilityplantwasdeterminedbyapplying".onstructioncostindicesmaintainedbytheCompanytotheistoricalcostofsurvivingplant.Therespectiveadjustedprovisionsfordepreciationweredeterminedbyapplyingthefunctionalclassdepreciationaccrualratestotherespectiveaverageyear-endbalancesofdepreciableplantadjustedforgeneralinflation(constantdollar)andspecificpricechanges(currentcost).(b)Includingthereductiontonetrecoverableamount,earnings(loss)applicabletocommonstockonaconstantdollarbasiswouldhavebeen$(298,126)for1980.(c)AtDecember31,1980,thecurrentcostofnetutilityplantwas86.66billion,whilehistoricalcostornetamountrecoverablethroughdepreciationwas83.91billion.

Thefollowingschedulepresentsasummaryofselecteddatacomparingitemsastheyarenormallyreportedinfinancialstatementsorotherstatisticalsummariestoitemsadjustedforchangingprices.The"IncomeItems"arepresentedforonlythetwoyearsthattheFASBhasrequiredthatthecalcula'tionbemade.Shownunder"OthhrSupplementaryDat.five-yearcomparisonofitemsasnormallyrel.andasadjustedtoaverag'e1980constantdollar~yapplyingtheCPI-Uindex.SupplementaryComparisonofSelectedData(ThousandsofDolla'rs)IncomeItems-ConstantDollarandCurrentCostAmountsinAverage1980DollarsEarningsApplicabletoCommonStockAsreportedConstantdollarsCurrentcost.EarningsPerShareofCommonStockAsreportedConstantdollarsCurrentcost.ExcessofIncreaseinGeneralPriceLevelofNetUtilityPlantOverIncreaseinSpecificPricesofNetUtilityPlantAdjustmentofNetUtilityPlanttoNetRecoverableAmount-write.up(reduction)ConstantdollarsCurrentcostGainfromDeclineinPurchasingPowerofNetAmountsOwedNetAssetsatYear-End(a)AsreportedConstantdollarsCurrentcost.........OtherSupplementaryDataOperatingRevenuesAsreportedAverage1980constantdollars.............CashDividendsDeclaredperCommonShareAsreportedAverage1980constantdollars...........MarketPriceperCommonShareatYear-EndAsreportedAverage1980constantdollars...........AverageConsumerPriceIndex(CPI-U)......19801979$'120,38435,86927,9262.640.79'.61$133,53277,48159,7883.321.931.49329,347209,449(333,995)3,295(390,107)(162,965)$885,451885,451$'860,498976,4182.122.122.042.3215.62~14.92246.817.7519.05217.5263,372286,6701,482,0921,344,8161,415,5581,434,9361,415,5581,434,9361978$798,3391,008,3421.922.4319.2523.41195.41977$744,7311,012,6701.892.5623.1230.67181.51976$644,147932,4081.802.6122.2531.50170.5(a)Netassets(sharcowners'quity)forpurposesofthissupple.mentarydisclosureincludecommonequityandthepreferredandpreferencestockswithoutsinkingfundrequirements.Thepreferredandpreferencestockswithsirikingfundrequire.mentshavebeenexcludedsincetheyweretreatedasmonetaryitems.

SummaryofQuarterlyResultsofOperations(Unaudited)"1980MarchJune.SeptemberDecember.OperatingRevenues$231,930206,286220,891226,344$49,11837,03737,53844,966$53,02138,05942,53346,146OperatingNetIncomeIncomeThousandsofDollarsEarningsApplicabletoCommonStock$38,47423,23127,73430,945EarningsPerShareofCommonStock(a)$0.880.520.610.651979March(b)$253,814June...............................207,777September~'....199,892December199,015(a)Basedontheaveragenumberofsharesoutstandingduringthequarter.Thetotalofthefourquarterlyearningspershareamountsdonotequalearningspersharcfortheyearduetochangesinthenumberofcommonsharesoutstandingduringtheyearandrounding.(b)Resultsforthefirstquarterof1979includetheeffectofconvertingapproximately740,000customersfrombimonthly$58,49039,14541,45043,738$1.220.660.750.71$59,196$47,81637,75326,24642,48929,99242,76029,478tomonthlybillingwhichincreasedbaseraterevenuesbyapproximately$9.9million.Theadditionalrevenue,lessrelatedadditionalcosts,increasedearningspershareofcommonstockbyabout11centsinthefirstquarter,butonly7centsfortheyearduetoafullyear'simpactofrelatedaddi~tionalcostsandtheincreasingnumberofcommonsharesoutstanding.CommonStockPriceandDividendDataTheprincipaltradingmarketfortheCompany'scommon.stockistheNewYorkStockExchange.ThestockisalsolistedonthePhiladelphiaStockExchange.Thenumberofrecordholdersofcommonstockwas157,316asofDecember10,1980.ThehighandlowsalespricesoftheCompany'scommonstock'orthepasttwoyearsasreportedbyTheWallStreetJournal(asCompositeTransactions)wereasfollows:HighLow19801stQuarter.$18~/s$14'/22ndQuarter..........20'A14/83rdQuarter....197/s16'/24thQuarter.177/e147/819791stQuarter.21'/819'/~2ndQuarter.207/818~/43rdQuarter.............2119~/s4thQuarter.............1978~177'eCompanyhaspaidquarterlycashdividendsonitscommonstockineveryyearsince1946.Thedividendspaidpersharein1980and1979were$2.10and$2.01,respectively.ThemostrecentregularquarterlydividenddeclaredbytheCompanywas53centspershare(equivalentto$2.12perannum)paidJanuary1,1981.Futuredividendswillbedependentuponfutureearnings,financialre-quirementsandotherfactors.TheCompanyhasestimated(onthebasisofadeterminationwhichissubjecttoapprovalbytheInternalRevenueService)thatallofits1980commonstockdividendswillbenon-taxableforfederalincometaxpurposesasdividendincome,butwillconstituteareturnofcapitalwhichreducesthetaxcostbasisofthesharesonwhichthedividendswerepaid.TheCompanypresentlyesti-matesthatthenon-taxablereturnofcapitalstatusofcommonstockdividendswillcontinuein1981butatasomewhatlowerlevelthanin1980.SeeNote7to~FinancialStatementsforinformationconcerningdividendrestrictions.

SCHEDULEV-UTILITYPLANTColumnA~DeserilionYearEndedDecember311980ColumnBBalanceatBeginningofPeriodColumnCColumnDAdditionsRetirements.atCost(A)orSalesThousandsofDollars"ColumnEOtherChangesAdd(Deduct)(B)ColumBaanceEndoPeriodElectricIntangiblee~~~~~SteamProduction..HydraulicProduction.OtherProductionTransmissionDistribution.GeneralExperimentalPlantHeldforFutureUse.~~~~~~~~~~~~~~~TotalElectric~~~~~~~~~~SteamHeat...~~~~~~~~$6t519009305233,53132,680278,2219789015909308235el7252,508,8528,26700979681615832,35566,15009203290210793801703,52833173597"10,61176715,7092719024(O26)(O22)~9251(222)6051908693t)730331032,665311,0031,033,52897,362235oe20229640930189035ConstructionWorkinProgress19073)2200013190(C)eo055TotalUtilityPlant.e0516eo592799NuclearFuelinFrocess........61301~15711(17)(28350)(D)(28589)198705397770060600139YearEndedDecember311979ElectricIntangible.SteamProductionHydraulicProduction.OtherProductionTransmissionDistribution.GeneralExperimentalPlantHeldforFutureUse.~~~~~~~~~~~~~~~~~~~~~TotalElectricSteamHeate~~~~~~~~~~~~ConstructionWorkinProgress$1,3231,018,99632,893329550270,5959059t)1287,858ll317ll2,392,8058,1791,105,010TotalUtilityPlant.3543050NuclearFuelinProcess.......370603070357921267,30878,1736,8t)8235215712690701173689210(C)2e2el5186e217715552399127()065310300133~10t)70(678)(202)I8013,95708~3553)0186190(1990533,53132,680278,2219783015909308235el7252,508,8528,26719073922061301O05(6OO SCHEDULEV-UTILITYPLANT-(Continued)ColumnA~DescrilionYearEndedDecember311978ColumnBBaanceatBeginningofPeriodColumnCColumnDAdditionsRetirementsatCost(A)orSalesThousandsofDollarsColumnEColumnFOtherChangesBalanceatAddEndof(Deduct)(B)PeriodElectricIntangible......SteamProductionHydraulicProduction.OtherProductionTransmission'.Distribution.General.....,.HeldforFutureUse.~~~~e~~1,3231,011,14232,50932,392279,389840971584,817el5058,9023851626,78462,9933,45135991,04052987911,836502502(8)4(12>699)13,54092~102&)1,3231,018,99632189332,554270,595905,41287,858e3570TotalElectricSteamHeat.....~ConstructionWorkinProgress2,323,7928,140829,48185,876122348,578(C)2906TotalUtilityPlant.~&l99377e37e&2NuclearFuelinProcess........3776e16,76473,049~36I0~93506(E)(99)(99)2,392,8058,1791,105,010370603se3059(A)Representsconstructionandnuclearfuelexpenditures,includingallowanceforfundsusedduringconstruction.(rincipallyreflectstransfersoflandandfacilitiestoandfromnonutilityproperty,futureuseorotherfunctions,1978eludes$133157relatedtothereclassificationofcertainlinesfromtransmissiontodistribution.1979includeswrite-offofxcessofacquisitioncostofHersheyElectricCompany'scapitalstockovernetbookvalue.(C)Netoftransferstoelectricandsteamheatplant.(D)RepresentsCompany'sportionofamountreceivablefromlitigationsettlementwhichwascreditedtonuclearfuelinprocess.(E)Includes$773315relatedtosaletoAlleghenyElectricCooperativeof10%undividedownershipintheSusquehannanuclearplantcurrentlyunderconstructionandcertainrelatedfacilities.Note:Allknownintangiblesaresetforthherein,areimmaterialinamount,andScheduleYilisomitted.

ColumnA~DescritinnSCHEDULEVl-ACCUMULATEDPROVISIONFORDEPRECIATIONOFUTILITYPLANTnmiVColumnBColumnCColumnDColumnEAs76tttnnssiiBalanceat.ChargedtoRetirementsPlus'OtherChangesBeginningChargedtoClearingRemovalCostsAddThousandsofDollarsColumnFBalanceatEndofPeriodYearEndedDecember311980ElectricSteamProduction..HydraulicProductionOtherProduction.Transmission.DistributionGeneral$281,51710,57516,782.55,769200,58118620SteamHeatTotal~~~~~~~~3293~6311stTotalElectric....627,80832,8050601,0916,77036,903~200980,002280~80726218218'218-3,7513217363112,770630'17,9915~I799683(ioS)'(97)(ii5)310,57815,00717,70061,991260,60220520690I0023572693970YearEndedDecember311979ElectricSteamProduction.HydraulicProductionOtherProduction.Transmission.DistributionGeneral$250,68010,27915,69649,S52214,78717089Total'~~"'0~~~~~565030TotalElectric...;562,387SteamHeat...'....300731,1880511,0866,30234,616~222975,872279~761512102102102321556308,96690010,89135~IO926(123)209140270i2272281351710,57516,78255,769200,58118620627,8083293631IIIIYearEndedDecember311978ElectricSteamProduction.HydraulicProductionOtherProduction,Transmission.DistributionGenerale~~~~~~~~~~~$221,38713,80010,61652,625ISS,938le686Total0~~~~~50S908TotalElectric.~..506,092SteamHeat........285630,0650011,0806,15232,537~212372,798277~730751971971971,16202932613,202(8;16,60786~I6733(6)2(6,599)(B)6,550(B)0)(53)~53)250,68010,27915,69609,852210,78717089562,3873007565030(A)Accumulateddepreciationonpropertytransferredtoandfromnonutilitypropertyorotherfunctions.(B)Includes$6,558relatedtothereclassificationofcertainlinesfromtransmissiontodistribution.

SCHEDULEVIII-VALUATIONANDQUALIFYINGACCOUNTSANDRESERVESColumnA~oeecriliceYearEndedDecember311980ColumnBBalanceatBeginningofPeriodColumnCAdditionsChargedChargedtoOthertoIncomeAccountsThousandsofDollarsColumnDDeductionsfromReserves-LossesorExpenses~AllcarrreColumnEBalanceatEndofPeriodReservesdeductedfromassetsintheBalanceSheetUncollectibleaccountsAccumulatedprovisionfordepreciationandamortizationofnonutilityproperty.ReservesincludedinOtherDeferredCreditsForcedoutagereserve(C)$3,5189,5103,000182,018110(A)3,366(27)(B)6,7373155258851195YearEndedDecember311979ReservesdeductedfromassetsintheBalanceSheetUncollectibleaccountsAccumulatedprovisionfordepreciationandamortizationofnonutilityproperty.<eservesincludedinOtherDeferredCreditsForcedoutagereserve$3,0791,5637,7803,78217I)73015(A)3,3031,166(B)3,5180299,514YearEndedDecember311978ReservesdeductedfromassetsintheBalanceSheetUncollectibleaccountsAccumulatedprovisionfordepreciationandamortizationofnonutilityproperty.$2,7150993,096181,006(A)3,1323,0791,563ReservesincludedinOtherDeferredCreditsForcedoutagereserve.......10,0919267,6377,780(A)Amountreflectsaccrueddepreciationonpropertytransferredtoandfromutilityproperty.(B)Amountreflectsthecostofplantretired,plusremovalcosts,lesssalvage.(C)SeeNoteItoFinancialStatements,"ForcedOutageReserveandInsurance"forinformationconcerningtheCompany'sterminatingtheaccrualforthisreservebeginningin1981duetoarateorderofthePennsylvaniaPublicUtilityCommission.

SCHEDULEIX-SHORT-TERMBORROWINGSColumnACategoryofAggregateShort-Term~BorrowineColumnBBalanceatEndo!PeriodColumnCColumnDMaximumWeightedAmountAverageOutstandingInterestDuringtheRate~PeriodA)ThousandsofDollarsrColumnEAverageAmountOutstandingDuringthe~PeriodBColumnPAverageInterestRateDuringthePeriod(CYearEndedDecember311980BankLoansCommercialPaper$56P32018.1%$187P071$1,683$136,10013.6%12.3%YearEndedDecember311979BankLoans(D)~~~~~~~CommercialPaper.~~~~~$30,77512.5%$155,680$36$70,50111.7%10.7%YearEndedDecember311978BankLoansCommercialPaper$13,000$179,003II.0%10.1%$13,000$179,003$5e5$79,16210.9%8.6%(a)Outstandingatanymonth-end.(B)Averagedailyamountoutstanding.(C)Calculatedbydividingapplicableinterestexpensefortheperiodbytheaverageaggregatedailydebtoutstandingduringtheperiod.(D)$13,000ofbankloanswereoutstandingforonlyonedayduringtheperiod.

SCHEDULEX,-SUPPLEMENTARYINCOMESTATEMENTINFORMATIONCOLUMNAItemCOLUMNBAmount198019791978(ThousandsofDollars)MaintenanceExpenseByUtilityPlantClassificationProduction.Transmission.DistributionOther0~~~~~~~~~$51,1270301632,1803253$0038283,12925,8172324$029290093532031152081$90576~76098$72803Allotheritemsrequiredbythisscheduleareomittedbecausetheydonotexceed1%oftotalrevenuesorbecausetherequiredinformationisincludedinthefinancialstatementsorrelatedschedulesandnotesthereto,

'PA'RTIIIITEM'9..'DIRECTORS,AND'EXECUTIVEOFFICERSOF'THE'REGISTRANTInformation'for,this.itemconcerningdirectorso',theCompanymillbeset,forth.inthesectionentitled"TheNominees"::inthe'Company!s1981Notice-.of'Annual:Meeting.andProxy'Statement,whichwill'be.filedwiththeSecurities,andExchangeCommission:notiaterthan120daysafter:,December31,1980,andwhichinformationisincotporated,herein,byreference.;Informationrequired.bythisitemconcerningtheexecutiveofficersoftheCompanyissetforthon,pages22through20ofthisreport.~P<4D'IITEM10.MANAGEMENTREMUNERATIONAND'TRANSACTIONS0Informationforthisitemwillbesetforthinthesectionsentitled"CertainReportableTransactions","RemunerationofOfficersandDirectors".and"RetirementBenefits"intheCompany's1981NoticeofAnnualMeetingandProxyStatement,whichwillbefiledwiththeSecuritiesandExchangeCommissionnotlaterthan120daysafterDecember31,1980,andwhichinformationisincorporatedhereinbyreference.

PARTIVITEM11."'XHIBITS,FINANCIALSTATEMENTSCHEDULESANDREPORTSONFORM8-KFinancialStatements,SchedulesandSupplementaryInformationIncludedinPartIIofthisReport'asFollows:FinancialStatementsStatementofIncomefortheThreeYearsEndedDecember31,1980ScheduleofTaxesfortheThreeYearsEndedDecember31,1980BalanceSheetatDecember31,1980and1979ScheduleofCapitalStockandLong-TermDebtStatementofChangesinFinancialPositionfortheThreeYearsEndedDecember31,1980StatementofEarningsReinvestedfortheThreeYearsEndedDecember31,1980NotestoFinancialStatementsOpinionofIndependentCertifiedPublicAccountantsSupplementaryInformationonChangingPricesSummaryofQuarterlyResultsofOperationsFinancialStatementSchedulesVI-VIII-IX-UtilityPlantfortheThreeYearsEndedDecember31,1980AccumulatedProvisionforDepreciationofUtilityPlantfortheThreeYearsEndedDecember31,1980ValuationandQualifyingAccountsandReservesfortheThreeYearsEndedDecember31,1980Short-termBorrowingsfortheThreeYearsEndedDecember31,1980SupplementaryIncomeStatementInformationfortheThreeYearsEndedDecember31,1980Allotherschedulesareomittedbecauseoftheabsenceoftheconditionsunderwhichtheyarerequiredorbecausetherequiredinformationisincludedinthefinancialstatementsornotesthereto.

Exhibits:See',ExhibitIndexonpage63.ClReportsonForm'8-K:tNoreportsonForm8-Kmerefiledduringthethreemonthsended,December31,1980.

SIGNATUREPursuanttotherequirementsofSection13or15(d)oftheSecuritiesExchangeActof1930,theRegistranthasdulycausedthisreporttobesignedonitsbehalfbytheundersigned,thereuntodulyauthorized.PENNSYLVANIAPOPOVERRLIGHTCOMPANYRegistrantB(Signed)R.K.CambellR.K.Campbel-PresidentandChiefExecutiveOfficerPursuanttotherequirementsoftheSecuritiesExchangeActof1930,thisreporthasbeensignedbelowbythefollowingpersonsonbehalfoftheRegistrantandinthecapacitiesandonthedateindicated.TitleB(Signed)R.K.CampbellR.K.Campbell-PresidentandChiefExecutiveOfficerPrincipalExecutiveOfficerB(Signed)R.R.Fortune~~~R.R.Fortune-ExecutiveVicePresident-FinancialPrincipalFinancialandAccountingOfficerCliffordL.Alexander,Jr.RoswellBraytonRobertK.CampbellRalphR.CranmerEdgarL.~DessenRobertR.FortuneFrancesHesselbeinHarryA.JensenJohnT.KauffmanW.DemingLewisHaroldS.MohlerRalphlV.Richardson,Jr.NormanRobertsonDirectorsB(Signed)R.K.CampbellR.K.Campbell,Attorney-in-factDateMarch01981 PENNSYLVANIAPO%'ER2LIGHTCOMPANYEXHIBITINDEX,ThefollowingExhibits.indicatedby,anasteriskprecedingthe.Exhibit.numberarefiled.herewith.ThebalanceoftheExhibitshaveheretofore'beenfiledwiththeCommissionandpursuanttoRule12(b)-32areincorporatedhereinbyreference.+3(a)+3(b)lk(a)-2O(a)-9Le(a)-10CopyofRestatedArticlesofIncorporationCopyofBy-lawsCopyof.EmployeeStockOwnership'Plan(Exhibit.'l(a)toRegistrationStatementNo.2-60872)eMortgageand.Deedof-TrustdatedasofOctober1,1905,betweentheCompanyandGuarantyTrustCompanyofNewYork(nowMorganGuarantyTrustCompanyofNewYork),as0'rustee(Exhibit2(a)-0toRegistration'StatementNo.2-60291)Supplement,datedasofJuly1,1907,tosaidMortgageandDeedofTrust(Exhibit2(a)-5toRegistrationStatementNo.2-60291)Supplement,datedasofDecember1,1908,tosaidMortgageandDeedofTrust(Exhibit2(a)-6toRegistrationStatementNo.2-60291)Supplement,datedasofFebruary1,1950,tosaidMortgageandDeedofTrust(Exhibit2(a)-7toRegistrationStatementNo.2-60291)Supplement,datedasofMarch1,1953,tosaidMortgageandDeedofTrust(Exhibit2(a)-8toRegistrationStatementNo.2-60291)Supplement,datedJuly1,1950,tosaidMortgageandDeedofTrust(Exhibit2(b)-5toRegistrationStatementNo.2-19255)Supplement,datedasofAugust1,1955,tosaidMortgageandDeedofTrust(Exhibit2(a)-10toRegistrationStatementNo.2-60291)Supplement,datedasofDecember1,1961,tosaidMortgageandDeedofTrust(Exhibit2(b)-7toRegistrationStatementNo.2-19255)Supplement,datedasofMarch1,1960,tosaidMortgageandDeedofTrust(Exhibit2(a)-12toRegistrationStatementNo.2-60291)Supplement,datedasofJune1,1966,tosaidMortgageandDeedofTrust(Exhibit2(a)-13toRegistrationStatementNo.2-60291)+Filedherewith Supplement,datedasofNovember1,1967,tosaidMortgageandDeedofTrust(Exhibit2(a)-10toRegistrationStatementNo.2-60291)Supplement,datedasofDecember1,1967,tosaidMortgageandDeedofTrust(Exhibit2(a)-15toRegistrationStatementNo.2-60291)Supplement,datedasofJanuary1,1969,tosaidMortgageandDeedofTrust(Exhibit2(a)-16toRegistrationStatementNo.2-60291)Supplement,datedasofJune1,1969,tosaidMortgageandDeedofTrust(Exhibit2(a)-17toRegistrationStatementNo.2-60291)Supplement,datedasofMarch1,1970,tosaidMortgageandDeedofTrust(Exhibit2(a)-18toRegistrationStatementNo.2-60291)Supplement,datedasofFebruaryI,1971,tosaidMortgageandDeedofTrust(Exhibit2(a)-19toRegistrationStatementNo.2-60291)Supplement,datedasofFebruary1,1972,tosaidMortgageandDeedofTrust(Exhibit2(a)-20toRegistrationStatementNo.2-60291)Supplement,datedasofJanuary1,1973,tosaidMortgageandDeedofTrust(Exhibit2(a)-21toRegistrationStatementNo.2-60291)Supplement,datedasofMay1,1973,tosaidMortgageandDeedofTrust(Exhibit2(a)-22toRegistrationStatementNo.2-60291)Supplement,datedasofApril1,1970,tosaidMortgageandDeedofTrust(Exhibit2(a)-23toRegistrationStatementNo.2-60291)Supplement,datedasofOctober1,1970,tosaidMortgageandDeedofTrust(Exhibit2(a)-20toRegistrationStatementNo.2-60291)Supplement,datedasofMayI,1975,tosaidMortgageandDeedofTrust(Exhibit2(a)-25toRegistrationStatementNo.2-60291)Supplement,datedasofNovember1,1975,tosaidMortgageandDeedofTrust(Exhibit2(a)-26toRegistrationStatementNo.2-50831)

O(a)-ZeO(a)'-2S.Supplement,dated,asofDecember1,andDeed.ofTr'ust(Exhibit2(a)-26toNo.2-:57633)Supplement,.datedasofDecember-1,andDeed.ofTrust(Exhibit-'2(a)-28toNo.-2-6029.1i)1976,tosaid..MortgageRegistrationStatement.1977~tosaidMortgageRegistrationStatement(a)-"Z6"O(a)-27.e(a)-Z8O'(a)'-29-+e(a)'30.Supplement,-dated.asofApril1,1979,tosaid'hlortgageandDeedofTrust(Exhibit2(a)-'29toRegistrationStatement,No.2-:-65872),Supplement,datedasofApril.1,1980,to'said:Mortgage:and.'eedofTrust(Exhibit.2(a)-.30toRegistration;StatementNo.".2:--66852),.'upplement,-dated:as:ofJune.',1980;..tosaid.Mortgageand;DeedofTrust(ExhibitNo..0(a)31toRegistrationStatementNo.2-69713)Supplement,-dated..asofJune.1',1980,tosaid.Mortgage,and.'eedofTrust(ExhibitNo.0(a)-32'toRegistrationStatementNo.-.2-69719)Supplement,-datedas'of:December-l,1980,tosaidMortgageandDeed.ofTrust+0(a)-31:-Supplement,dated..asofFebruary1,1981,tosaidMortgageandDeed,ofTrust+O(a)-32O'(a)-33e(a)'-3eO(a)-35O(a)-36Supplement,datedasof.February1,1981,tosaidMortgagearidDeedofTrust.Mortgage:andDeedof".Trust,datedasofFebruary15,,1937,betweenTheScrantonElectricCompany(towhichcompanytheCompanyis.successorbymerger),andChemicalBankRTiustCompany(nowChemicalBank)andHowardB.-Smith(P.J;Gilkeson,successor),asTrustees(Exhibit'-Dto.RegistrationStatement.No.2-6289)Supplement;datedasofNovember1,1906,,tosaidMortgageandDeedofTrust(ExhibitB-'1toForm1-MD'RegistrationStatementNo..2-6289)Supplement,datedasofApril1,1908,tosaidMortgage.andDeedofTrust(Exhibit2(a)-31toRegistrationStatementNo.2-60291)Supplement,datedasofMay15,1952,tosaidMortgage.andD'eedofTrust'(Exhibit2(a)-32toRegistrationStatementNo.2-60291)+se..erewst Supplement,datedasofSeptember1,1952,tosaidMortgageandDeedofTrust(Exhibit2(a)-33toRegistrationStatementNo.2-60291)Supplement,datedasofJanuary31,1956,tosaidMortgageandDeedofTrust(Exhibit2(a)-30toRegistrationStatementNo.2-60291)Supplement,datedJanuary31,1956,tosaidMortgageandDeedofTrust(Exhibit2(d)-6toRegistrationStatementNo.2-19255)InstrumentprovidingforresignationofIndividualTrusteeandappointmentofsuccessorIndividualTrusteeundersaidMort-gageandDeedofTrust(Exhibit2(a)-36toRegistrationStatementNo.2-60291)InstrumentprovidingforresignationofIndividualTrusteeandappointmentofsuccessorIndividualTrusteeundersaidMort-gageandDeedofTrust(Exhibit2(a)-37toRegistrationStatementNo.2-60291)InstrumentprovidingforresignationofIndividualTrusteeandappointmentofsuccessorIndividualTrusteeundersaidMort-gageandDeedofTrust(Exhibit2(a)-37toRegistrationStatementNo.2-58290)PreferredStockPurchaseAgreement,datedJuly11,1973,betweentheCompanyandThePrudentialInsuranceCompanyofAmerica(Exhibit2(a)-00toRegistrationStatementNo.2-60830)CompositeconformedcopyofPreferredStockPurchaseAgree-ment,datedOctoberll,1977,betweentheCompanyandthepurchasersnamedtherein(Exhibit2(a)-02toRegistrationStatementNo.2-60291)CompositeconformedcopyofPreferredStockPurchaseAgree-ment,datedAugust7,1978,betweentheCompanyandthepurchasersnamedtherein(Exhibitb(1)-03toRegistrationStatementNo.2-63790)CompositeconformedcopyofLoanAgreement,datedasofOctober1,1978,betweentheCompanyandthelendersnamedtherein(Exhibitb(l)-06toRegistrationStatementNo.2-63790)CompositeconformedcopyofPreferredStockAgreement,datedJanuary15,1979,betweentheCompanyandthepurchasersnamedtherein(Exhibitb(I)-00toRegistrationStatementNo.2-63790)CompositeconformedcopyofPreferredStockPurchaseAgree-ment,datedJanuary26,1979,betweentheCompanyandMinnesotaMiningandManufacturingCompany(Exhibitb(l)-05toRegistrationStatementNo.2-63790) u.(a)'-.50~Composite:conformed'copyosBond.Purchase.Agreementdated'pril<3'j.1.979,',between.theCompany,and.thepurchasersnamed'hereinI(Exhibit',2(a)-,08,toRegistration.Statement"-No:,2'-.65872)~Conformed>copy:ofP'referred'Stock,Purchase.'A'greement,.dated!A'prilT.,',1979,'etweentheCompanyand~Metropolitan'-L~ife.IhsuranceCompany:(Exhibit;7'o.Registration~Statement".No:.2'-.-6587.2))O(a)'->IIConformed;copy.of:Preferred'Stock.Purchase.-A'greement",,dated'ovember1:.,..1979between~the.CompanyanditHepurchasersnamedItherein:(Exhibit-:2(a)'.-511taRegistration~Statement:No:.2-'66852)$e(a)'.-SZ-.Cbnformecbcopy~of:Preference'tock;P'urchaseAgreementdated!January,Z5>>1'980;,between~theCompanyand>tHe'.purchasers-:named".therein>(Exhibit!2(a)-,'2.',tcOR'egistratiomStatementtNo".,2-'66852))<<e(a)'.-59<Conformedlcopy;ofRevolving.Credit,Agreemend,dated',as>>ofIMarch>>1980;,between'he;Companyand'.the.'enders>>named.'herein~<<u(a);-SV~W(a)'-.55~<<e(a);-56Conformed'opy.of:Letter.-Agreement.datedMarch31'1980'.between.the:CompanyandCreditSuisse-First.Boston;-L'imited,',as>>A'gent.for..the.lenders.-named.thereinComposite.conformedcopy'f:P'referred'Stock,Purchase.A'gree-.ment,',dated,as.of:October'28',,1'980;,betweentheCompany,anditHe.purchasers>>namedtherein~Conformed>>copy:of.B'ondPurchaseA'greement,-,dated;February1',.1981~,-,between'heCompany;andthe.purchasersnamed>>therein<<e(Z).-'S7Conformed.copy.ofB'ond.PurchaseAgreement;,datedFebruary'";,1'98.1,.between:theCompanyand,MetropolitanL'ifeInsuranceCompany<<O(g'->8.ConformedcopyofB'ond.,Purchase.Agreement;,dated.,February1',.1'981,between:theCompanyandthepurchasers.named'herein~10(a)>1'0(b)'opyof'Employment~Agreement,.dated.asof!November.1'1980',.betweentheCompanyandJackR..CalhounSenior*Vice.President-.'uclearof,.the.CompanyCopy.of'.Interconnection'greement,'-,datedSeptember26;,1956;,amongPublic,ServiceElectric.R.G'as.:Company,,Philadelphia~,ElectricCompany,the;Company;BaltimoreGas.R,Electric'ompany,,;,Pennsylvania<Electric',Company,Metropolitan,Edison'ompany,,New;J'erseyPowerR;L'ight:CompanyandJerseyentral~PowerRLight;Company.(Exhibit',5(e)~to.,RegistrationStatement."No..2-"6029;1),",<<Fieg<ercwl-67"-

10(b)-110(b)-210(b)-310(b)-010(b)-510(b)-610(b)-710(b)-810(c)10(d)10(e)10(f)CopyofSupplementalAgreement,datedJanuary28,1965,tosaidInterconnectionAgreement(Exhibit13(d)-1toRegistrationStatementNo.2-26170)CopyofSupplementalAgreement,datedApril1,1970,tosaidInterconnectionAgreement(Exhibit5(f)-0toRegistrationStatementNo.2-51312)CopyofSupplementalAgreement,datedJune15,1977,tosaidInterconnectionAgreement(Exhibit5(e)-5toRegistrationStatementNo.2-60291)CopyofSchedule7.03,RevisionNo.1issuedDecember12,1977tosaidInterconnectionAgreement(Exhibit5(b)-7toRegistra-tionStatementNo.2-65872)CopyofSchedule5.05issuedJanuary19,1979tosaidInterconnectionAgreement(Exhibit5(b)-5toRegistrationStatementNo.2-65872)CopyofSchedule0.01,RevisionNo.2andSchedule9.01,RevisionNo.1issuedMarch15,1979tosaidInterconnectionAgreement(Exhibit5(b)-9toRegistrationStatementNo.2-65872)CopyofInterimModificationstoSchedules6.03and7.01,InterimSchedule10.1andArticle15,alleffectiveOctober1,1980,tosaidInterconnectionAgreement(Exhibit20(b)-7totheCompany'sForm10-QReport(FileNo.1-905)forthequarterendedSeptember30,1980)CopyofAgreementofSettlementandCompromisedatedasofJuly25,1980amongthepartiestosaidInterconnectionAgreement(Exhibit20(b)-8totheCompany'sForm10-QReport(FileNo.1-905)forthequarterendedSeptember30,1980)PollutionControlFacilitiesAgreement,datedasofMay1,1973,betweentheCompanyandtheLehighCountyIndustrialDevelopmentAuthority(Exhibit5(z)toRegistrationStatementNo.2-60830)CopyofParticipationAgreement,datedasofMarch18,1977,betweentheCompanyandAlleghenyElectricCooperative,Inc.(Exhibit5(dd)toRegistrationStatementNo.2-60291)CopyofCapacityandEnergySalesAgreement,datedSeptem-ber20,1979,betweentheCompanyandAtlanticCityElectricCompany(Exhibit5(o)toRegistrationStatementNo.2-65872)CopyofSettlementAgreement,datedOctober22,1980,betweentheCompanyandGeneralAtomicCompany(Exhibit20(k)totheCompany'sForm10-QReport(File1-905)forthequarterendedSeptember30,1980)

>>I2(a)+12(b)+20(a)ComputationofRatioofEarningstoFixedChargesComputationofSupplementalRatioofEarningstoFixed~ChargesConsentofExperts+20(b)-ConsentofPaulWeirCompany,Incorporated+Filederewith PennsylvaniaPovrem'.LightCompanyCommonStock(withoutnominalorparvalue)3,500,000SharesOutstandingsharesofCommonStockare,andthesharesofCommonStockofferedherebywillbe,listedontheNewYorkandPhiladelphiathStockExchanges.ThereportedlastsalepriceoftheCommonStkonoconeNewYorkStockExchangeonNovember25,1980was$16Vsershare.perlntheopinionofcounselfortheCompany,theCommonStockisexemptfromexistingpersonalpropertytaxesinPennsylvania.THESESECURITIESHAVENOTBEENAPPROVEDORDISAPPROVEDBYTHESECURITIESANDEXCHANGECOMMISSIONNORHASTHECOMMISSIONPASSEDUPONTHEACCURACYORADEQUACYOFTHISPROSPECTUS.ANYREPRESENTATIONTOTHECONTRARYISACRIMINALOFFENSE.PerShareTotalPricetoPubtic$16.375$57,312,500Underwriting0tscountsendCommissions(1)$.65$2,275,000ProceedstoCompany(2)$15.?25$55,037,500(1)TheCompanyhasagreedtoindemnitytheseveralUnderwritersagainstcertaincivilliabilities,includingliabilitiesundertheSecuritiesActof1933.(2)BeforedeductionofexpensespayablebytheCompanyestimatedat$160,000.ThesharesofCommonStockareofferedbytheseveralUnderwriterswhen,asandifissuedbtheCompanyandaccetedbthesniissueyteItisexpectedthatthepyeUnderwritersandsubjecttotheirrighttorejectordersinwholeorinart.CommonStockofferedherebywiilbereadyfordeliveryinPhiladelhiarinpa.Pennsylvania,onoraboutDecember3,1980.TheFirstBostonCorporationDrexelBurnhamLambertIncorporatedBacheHalseyStuartShieldsIncorporatedMerrillLynchWhiteWeldCapitalMarketsGroupMerrillLynch,Pierce,Penner8,SmithIncorporatedThedateofthisProspectusisNovember25,1980.

INCONNECTIONWITHTHISOFFERINGTHEUNDERWRtTERSMAYOVERALLOTOREFFECTTRASTRANSACTIONSWHICHSTABIL)ZEORMAINTAINTHEMARKETPRICEOFTHE'TOCKOFTHECOMPANYATALEVELABOVETHATWHICHMIGHTOTHERWISEPREVAILINTHEOPENMARKET.SUCHTRANSACTIONSMAYBEEFFECTEDONTHENEWCKEXCHANGETHEPHILADELPHIASTOCKEXCHANGEORINTHEOVER-THE-COUNTERMARIiET.SUCHSTABILIZING,IFCOMMENCED,MAYBEDISCONTINUEDATANYTIME.TheCompanyissubjecttotheinformationalrequirementsoftheSecuritiesExchangeActof1934andinaccordancetherewithfilesreportsandotherinformationwiththeSecuritiesandExchangeCommission.Inormationconcernigi.Ift'ncerningdirectorsandofficers,theirremunerationandanymaterialinterestofsuchpersonsintransactionswiththeCompany,asofparticulardates,isdisclosedinproxystatementsdistributedtostockholdersoftheCompanyandfiledwiththeCommission.Suchreports,proxystatementsandotherinformationcanbeinspectedandcopiedatthepublicreferencefacilitiesmaintainedbytheCommissionat1100LStreet,N.W.,Washington,D.C.;219South

DearbornStreet,

Chicaao,IL;26FederalPlaza,NewYork,NY;and10960WiishireBoulevard,LosAngeles,CA.Copiesofthismateriacanasoeoi'IbobtainedatprescribedratesfromthePublicReferenceSectionofthehintonD.C.20549.TheCommissionatitsprincipalofficeat500NorthCapitolStreet,N.W.,Washington,...eCommonStockoftheCompanyislistedontheNewYorkandPhiladelphiaStockExchanges.Reports,tdthrinformationconcerningtheCompanycanbeinspectedandcopiedattherespectiveofiicesoftheseexchangesatRoom401,20BroadStreet,NewYork,NY,andat17SreeandStockExchanePlace,Philadelphia,PA.Inaddition,reports,proxystatementsandotherandtocxcangeinformationconcerningtheCompanycanbeinspectedattheofficesofteopy,hComanTwoNorthNinthortomakeanNodealer,salesmanorotherpersonhasbeenauthorizedtogiveanyinformationortomaeanyrepresentationnotcontainedinthisProspectusinconnectionwiththeoffermadebythisProspectusand,ifgivenormade,suchinformationorrepresentationmustnotberelieduponashavingbeenauthorizedbytheompany.isrohC.ThisProspectusisnotanoffertosellorasolicitationofanoffertobuyinanyliveofthisjurisdictioninwiciisunhichitisunlawfultomakesuchanofferorsoiicitation.NeitherthedeivrynimlicationthatProspectusnoranysalemadehereundershall,underanycircumstances,createanyimpiitherehasbeennochangeintheaffairsoftheCompanysincethedatehereof.INCORPORATIONOFCERTAINDOCUMENTSBYREFERENCEThefollowingdocumentsareincorporatedhereinbyreferenceandmadeaparthereof:1.TheCompany'sAnnualReportonForm10-KfortheyearendedDecember31,1979.2.TheCompany'sdefinitiveProxyStatementinconnectionwithitsannualmeetingofshareownersheldonApril23,1980.3.TheCompany'sQuarterlyReportsonForm10-QforthequartersendedMarch31~1980,June30,1980andSeptember30,1980.4.TheCompany'sCurrentReportonForm8-KdatedJune,26,1980.Alocumensieyldtf'IdbtheCompanypursuanttoSections13,14or15(d)oftheSecuritiesExchangeActof1934afterthedateofthisProspectusandpriortothe.terminationoftheoferingoStockofferedherebyshallbedeemedtobeincorporatedbyreferenceinthisProspectusandtobeaparthereoffromthedateoffilingofsuchdocuments.THECOMPANYHEREBYUNDERTAKESTOPROVIDEWITHOUTCHARGETOEACHPERSOTOWHOMACOPYOFTHISPROSPECTUSHASBEENDELIVERED,ONTHEWRITTENREQUESTOFANYSUCHPERSON,ACOPYOFANYORALLOFTHEDOCUMENTSREFERREDTOABOVFWHlCHHAVEBEENORMAYBEINCORPORATEDINTHISPROSPECTUSBYREFERENCE,OTHERTHANEXHIBITSTOSUCHDOCUMENTS.WRITTENREQUESTSFORSUCHCOPIESSHOULDBEDIRECTEDTOPENNSYLVANIAPOWER8LIGHTCOMPANY,INVESTORSERVICES,TWONORTHNINTHSTREET,ALLENTOWN,PA.18101.

SUMMARYINFORMATIONThefollowingmaterialisqualifiedinitsentiretyby,andshouldbereadinconjunctionwith,thedetailedinformationappearingelsewhereinthisProspectusandinthedocuments,includingfinancialstatementsandotherinformation,incorporatedinthisProspectusbyreference.THEOFFERINGCommonStock3,500,000(46,160,146sharesoutstandingatSeptember30,1980)Generalcorporatepurposesincludingthereductionofshort-termdebtincurredtoprovideinterimfinancingforconstructionandnuclearfuelexpendituresNewYorkandPhiladelphiaStockExchanges(Symbol:PPL)SecurityOffered.NumberofSharesUseofProceedsListed1980PriceRange(ThroughNovember24)....ClosingPriceNovember25(NYSE).........MostRecentQuarterlyDividend..............FORMATIONEndedSeptember30,1980197719781979(Unaudited)$744,731$798,339$860,498$858,122184,311168,602182,823167,431OperatingRevenues(thousands).OperatingIncome(thousands).TotalAllowanceforFundsUsedDuringConstruction(thousands).NetIncome-BeforeDividendsonPreferredandPreferenceStock(thousands).......EarningsApplicabletoCommonStock(thousands)....EarningsPerShareofCommonStock........................DividndsDeclaredPerShareofCommonStock.......NelUtilityPlant-a'.endofperiod(thousands)............EnergySales(millionsofkwh).49,39571,035105,205131,554149,763112,7703.371.89$2,690,22921,201149,035182,198176,373107,365133,532118,9172.863.322.711.922.042.10$2,977,620$3,420;499$3,794,52221,84422,55522,242AsofSeptember30,1980(unaudited)20Vz-14'6%530pershare(equivalentto$2.12perannum).See"DividendsonCommonStock"forinformationconcerningthereturnofcapitalstatusofdividendsontheCommonStockfor1980and1981.THECOMPANYBusiness..TheCompanyderivesabout99%ofitsoperatingrevenuesfromelectricserviceServiceArea.....................Approximately10,000squaremilesincentraleasternPennsyl-vaniawithapopulationof2.4millionpersonsSourcesofGenerationduringthetwelvemonthsendedSeptember30,1980.....Coal-80%;Oil-18%;Hydro-2%FINANCIALINCapitalization(thousands)Long-TermDebt(includingcurrentmaturities)..............PreferreoandPreferenceStockWithMandatorySinkingFundProvisions...............WithOnlyOptionalRedemptionProvisions............CommonEquity.Total.Actual$1,674,415AsAdjusted(a)$1,799,41547.5%486,800231,3751,175,990510,800231,3751,243,48813.56.132.9100.0%$3,568,580$3,785,078(a)Asadjustedtogiveeffectto(i)thesinkingfundredemptionof$2.5millionofpreferenceStock,$13.00Series.onOctober1~1980.(ii)theissuanceofcommonstockinoctober1980undertheDividendReinvestmentandEmployeestockownershipPlans,(iii)theprivateplacementof$26.5millionotSeriespreferredStockonOctober31,1980,(iv)theproposedissuanceandsaleof$125millionofFirstMortgageBondsand(v)theestimatednetproceedsfromthesaleoftheCommonStockofferedhereby.

THECOMPANYTheCompanyisanoperatingutility,incorporatedunderthelawsoftheCommonwealthofPennsylvaniain1920.TheCompany'sgeneralofficesarelocatedatTwoNorthNinthStreet,Allentown,Pennsylvania18101,anditstelephonenumberis215-821-5151.ThepropertyoftheCompanyislocatedinPennsylvania(seeMap),iswellmaintainedandisingoodoperatingcondition.TheCompanyderivesabout99%ofitsoperatingrevenuesfromsupplyingelectricservice,andthebalancefromsupplyingsteaminthecityofHarrisburg.TheCompanyservesapproximately993,000customersina10,000squaremileterritoryin29countiesofcentraleasternPennsylvania(seeMap),withapopulationofapproximately2.4millionpersons.Thisserviceareahasahighpercentageofopenlandaswellas111communitieswithpopulationsover5,000,thelargestofwhicharethecitiesofAllentown,Bethlehem,Harrisburg,Hazleton,Lancaster,Scranton,Wilkes-BarreandWilliamsport.Importantindustrial,recreationalandagriculturalsectionsarelinkedtotheeasternpopulationcentersbyanextensivelimited-accesshighwaysystem.APPLICATIONOFPROCEEDSTheCompany.isofferinghereby3.5millionsharesofCommonStockandexpectstosellatapproximatelythesametime$125millionprincipalamountofFirstMortgageBonds(theBonds).ThesalesoftheCommonStockandtheBondsareseparatetransactionsnotcontingentuponeachother.ThenetproceedsfromthesalesoftheCommonStockandtheBondswillbeaddedtotheCompany'sgeneralfundsandusedforgeneralcorporatepurposesincludingthereductionofshort-termdebtincurredtoprovideinterimfinancingforconstructionexpendituresandforthenuclearfuelbeingacquiredinanticipationoftheSusquehannaunitsbeingplacedinservicein1982and1983.TheCompanyexpectsthataftergivingeffecttothesalesoftheCommonStockandtheBondsitsshort-termdebtwouldbereducedtoabout$30million.See"UNDERWRITING"forinformationconcerningtheoptionoftheCompanytoselllessthanalloftheCommonStockundercertaincircumstances.CONSTRUCTIONPROGRAMTheCompany'sconstructionprogramisundercontinuingreviewandisrevisedfromtimetotimetoreflectchangesincustomerdemand,businessandeconomicconditions,thecostandavailabilityofcapitalandotherfactors.ActualconstructioncostsanddatesofcompletionforvariousconstructionprojectsmayvarybecauseofchangesintheCompany'splans,costfluctuations,theavailabilityoflabor,materialsandequipment,environmentalregulations,licensingdelaysandotherfactors.TheSusquehannastation,whichistheonlygeneratingfacilitythattheCompanyhasunderconstruction,willconsistoftwonuclear-fueledgeneratingunitseachhavinganestimatedtotalnetcapabilityof1,050,000kilowatts.AlleghenyElectricCooperative,Inc.ownsa10%undividedownershipinterestineachoftheSusquehannaunits.Accordingly,theCompany's90%shareoftheestimatedtotalnetcapabilityofeachoftheSusquehannaunitswillbe945,000kilowatts.ConstructionoftheSusquehannaunitsisproceedingunderNuclearRegulatoryCommission(NRC)constructionpermitsissuedinNovember1973.InJuly1978,theNRCacceptedforfilinganapplicationforthenecessaryoperatinglicenseforeachSusquehannaunit.ThepetitionsoffourgroupstointerveneinthelicensingproceedingsbeforetheNRCweregrantedbytheAtomicSafetyandLicensingBoardoftheNRCinMarch1979.AtSeptember30,1980,constructionofUnitNo.1wasabout87%completedandUnitNo.2wasabout55%completed.

Evenwiththecurrentreschedulingofthein-servicedatesfortheSusquehannaunits,therecanbenoassurancethatfurtherdelaysandfurthercostincreaseswillnotoccurbecauseofadditionaldelaysintheNRClicensingprocessortheinabilityoftheCompanyanditscontractorstomeetconstructionschedulemilestonesforthe,units.TheCompanyanticipatesthatevenifthein-servicedatesoftheSusquehannaunitsarefurtherdelayeditwillcontinuetohaveadequategeneratingreservestomeetprojectedcustomerdemandduringthefirsthalfofthe1980's.FINANCINGThefinancingofitsconstructionprogramrequirestheCompanytoengageinfrequentsalesofsecurities,includingdebtandpreferred,preferenceandcommonstock.Interimfinancingisobtainedfrombankborrowingsandthesaleofcommercialpaper.TheCompany's1980-1983constructionandnuclearfuelexpendituresarecurrentlyestimatedat$2.37billion.Approximately60%ofthisamountisexpectedtobeobtainedfromoutsidefinancingwiththebalancetobeprovidedfrominternalsources.Theestimatesofconstructionandnuclearfuelexpendituresandinternalfundssourcesincludetheallowanceforfundsusedduringconstruction.Inaddition,therearecapitalrequirementsofabout$296millionformaturinglong-termdebtobligationsand$38millionforpreferredandpreferencestocksinkingfundrequirementsduringthe1980-1983period.During1980theCompanyhasissued$130millionoffirstmortgagebonds,$51millionofpreferencestockand$26.5millionofpreferredstock.TheCompanyalsoissued$90millionoffirstmortgagebondsinJune1980tosupportalikeprincipalamountoftax-exemptpollutioncontrolrevenuebonds.TheCompanyexpectsthatabout$55millionoftheproceedsofthatofferingwillbeexpendedduring1980withthebalancetobedrawndownin1981asadditionalexpendituresaremadeforpollutioncontrolfacilities.TheCompanyhasadividendreinvestmentplanwhichpermitsholdersofitspreferred,preferenceandcommonstocktopurchasesharesofcommonstockdirectlyfromtheCompanybyhavingcashdividendsautomaticallyreinvestedata5%discountfromthemarketpriceandbymakingoptionalcashpayments.EmployeesoftheCompanymayalsoparticipateintheplanthroughpayrolldeductions.The5%discountdoesnotapplytosharesofcommonstockpurchasedwithoptionalcashpaymentsorthroughpayrolldeductions.Duringthefirsttenmonthsof1980,theCompanyhasobtained$46.6millionundertheplan.ThemortgageindentureunderwhichtheCompany'sfirstmortgagebondsareissuedcontainscertainprovisions,principaHyearningscoverageandpropertyadditionstests,limitingtheissuanceofadditionaibonds.Theearningscoveragetest,whichrequiresadjustednetearnings(asdefinedinthemortgage)foraspecifiedtwelve-monthperiodtobeatleastequaltotwicetheannualinterestrequirementsonallbondstobeoutstanding,ispresentlythemostlimitingoftheserestrictions.BasedontheCompany'searningsforthetwelvemonthsendedSeptember30,1980andaftergivingeffecttotheproposedissuanceoftheBonds,theearningscoveragetestwouldhavepermittedtheCompanytoissueanadditional$90millionprincipalamountofbondsatSeptember30,1980(14.5%interestrateassumedineachcase).

TheCompany'schartercontainsprovisionslimitingtheissuanceofadditionalsharesofpreferredstock.Themorerestrictiveoftheseprovisionsrequiresincomebeforeinterestcharges(grossincome)ofnotlessthan1.5timesthesumoftheannualizedinterestrequirementsonoutstandingindebtednessandthedividendrequirementsonoutstandingpreferredstock,includingthepreferredstockbeingissued.BasedontheCompany'searningsforthetwelvemonthsendedSeptember30,1980andaftergivingeffectto(i)theissuanceof$26.5millionofpreferredstockonOctober31,1980,(ii)theissuanceoftheBonds,(iii)theissuanceoftheCommonStockofferedhereby,(iv)theamountofshort-termdebtexpectedtobethenoutstandingand(v)interestratelevelscurrentlyineffect,theCompany'sgrossincomewouldbeabout1.48timesthesumofitsannualizedinterestanddividendrequirements.UndersuchcircumstancestheCompanywouldnotbepermittedtoissueanyadditionalpreferredstockonthebasisofitsearningsforthetwelvemonthsendedSeptember30,1980.However,theissuancetestmustbecalculatedatthetimethepreferredstockisissuedand,therefore,theCompany'sabilitytoissueadditionalpreferredstockunderthischarterprovisionwilldependongrossincome,theamountofoutstandingindebtednessandpreferredstockandinterestandpreferredstockdividendratesatthattime.Therearenocharterprovisionslimitingtheissuanceofpreferencestock.Theexactamount,natureandtimingoffuturesalesofsecuritieswill,ofnecessity,bedeterminedinthelightofmarketconditions,theCompany'sabilitytomeettheissuancetestsandotherfactors,includingthereceiptoftimelyandadequaterateincreases.TheCompanymaintainslinesofcreditaggregating$120millionwithvariousbankstoprovideinterimfinancing.Inordertoprovideadditionalfinancingflexibility,theCompanyhasarevolvingcreditandtermnoteagreementwithagroupofdomesticbankswhichpermitstheCompanytoborrowandhaveoutstandingupto$400millionatanytimethroughFebruary28,1985.BorrowingsoutstandingonFebruary28,1985canbeconvertedtotermnotes,one-thirdoftheprincipalamountofwhichwouldmatureineachoftheyears1986,1987and1988.TheCompanyalsohasarevolvingcreditagreementwithagroupofforeignbankswhichwouldpermittheCompanytomakeshort-termborrowingsofupto$100millionthroughMarch31,1982.Therearenoborrowingsoutstandingundertheserevolvingcreditagreements.RATEMATTERSSalestoultimatecustomers,whichareregulatedbythePennsylvaniaPublicUtilityCommission(PUC),accountedforapproximately98%oftheCompany'srevenuesfromelectricsalesoverthepastfiveyears.Theremaining2%ofrevenuesfromelectricsales,representedbysalestoothersforresale,areregulatedbytheFederalEnergyRegulatoryCommission(FERC)asareinterchangepowersales,whichareclassifiedasacredittooperatingexpenses.AnenergyclauseappliestoallcustomersbilledunderPUCtariffsandafueladjustmentclauseappliestosubstantiallyallcustomersbilledunderFERCtariffs.PUCtariffsalsoincludeataxsurchargetorecoverthecostofincreasedPennsylvaniataxes.Inordertooffsetincreasingcosts,theCompanyfiledwiththePUCinlateApril1980arequestforanincreaseinbaseraterevenuesofabout16%orapproximately$123millionannually.TheCompany'srequestisbasedonaforwardlookingtestyearendingDecember31,1980.InJune1980,thePUCsuspendedtheCompany'srequesttopermitinvestigationsandhearings.ThepublichearingswerecompletedinearlyOctober1980.TheCompanyexpectsthatthePUCwillreachadecisionontheraterequestbyJanuary28,1981.However,ifthePUCdoesnotadoptafinalorderbythatdate,theratesfiledbytheCompanywouldgointoeffectatthattimesubjecttorefund.

INTERIMRESULTSThefollowingamountsforthetwelvemonthsendedSeptember30,1979andSeptember30,1980areunauditedbutintheopinionoftheCompanyincludealladjustments(whichcompriseonlynormalrecurringaccruals)necessaryforafairpresentationofsuchamounts(thousandsofdollars,exceptpershareamounts):12MonthsEndedSopternber301980$858,122167,4311979$856,441182,477OperatingRevenues..OperatingIncomeAllowanceforFundsUsedDuringConstruction(equityandborrowedfundscomponents)-anon-cashitem..96,685131,554NetIncome-BeforeDividendsonPreferredandPreferenceStock.....180,059176,373EarningsApplicabletoCommonStock.................133,556118,917EarningsPerShareofCommonStock..................3.372.71TheCompany'searningsdeclineisprincipallyattributabletothehighercostsbeingincurredinallphasesoftheCompany'soperations.Toreversethisearningstrend,theCompanyhasfiledwiththePUCforanincreaseinbaseraterevenuesofapproximately$123millionannually.Inaccordancewithregulatoryprocedures,theCompanyrecordsanallowanceforfundsusedduringconstruction(allowance)whichisanon-cashitemthatservestooffsetontheStatementofIncomethecostoffinancingconstruction.Thetotalallowancerecorded(boththeequityandborrowedfundscomponents)hasincreasedsubstantiallyoverthepastfewyearsprimarilyduetoadditionalinvestmentintheSusquehannaunits.TheamountofallowancerecordedwillcontinuetoincreasewhilethetwoSusquehannaunitsareunderconstruction.Aftereachunitisplacedinservice,theCompanywouldexpecttorecoverthroughelectricratesareturnon,anddepreciationof,itsinvestmentinthatunit,includingthecapitalizedallowance.COMMONSTOCKMARKETPRICESThehighandlowsalespricesoftheCompany'sCommonStockduringtheperiodsindicatedasreportedbyTheWa/IStreetJournal(asNewYorkStockExchangetransactionsthroughJanuary23,1976andthereafterasCompositeTransactions)wereasfollows:YesrHighLowYearHigh'ow19752015819791stQuarter................21Vs19'/41976.22ih19t/s2ndQuarter................207/e18s/41977.25'/a20~/i3rdQuarter.................2119Vs19781stQuarter................24'/421V24thQuarter................19%17%2ndQuarter................22Ve20Vs19801stQuarter................18%14V~3rdQuarter................22'/s20%2ndQuarter................20814%4thQuarter................21s/4193rdQuarter................197/s16'thQuarter(throughNovember24)177/s16/4 ThereportedlastsalepriceoftheCommonStockon'theNewYorkStockExchangeonNovember25,1980was$16%apershare.ThebookvalueoftheCommonStockatSeptember30,1980was$25.45pershare.UponthesaleoftheCommonStockofferedhereby,thebookvaluepershareatthatdateonaproformabasis,reflectingestimatednetproceedstotheCompany,wouldhavebeen$24.76.DIVIDENDSONCOMMONSTOCKTheCompanyhaspaidquarterlycashdividendsonitsCommonStockineveryyearsince1946and,since1975,haspaiddividendsintheamountsshowninthefollowingtabulation.Futuredividendswillbedependentuponfutureearnings,financialrequirementsandotherfactors.AmountPorYoorsharo1975...................................$1.801976.1.801977.1.86Year197819791980TheCompanyhasestimated(onthebasisofadeterminationwhichissubjecttoapprovalbytheInternalRevenueService)thatallofits1980CommonStockdividendswillbenon-taxableforFederalincometaxpurposesasdividendincometotherecipientsofsuchdividendsbutwillconstituteareturnofcapitalwhichreducesthetaxcostbasisofthesharesonwhichthedividendswerepaid.TheCompanypresentlyestimatesthatthenon-taxablereturnofcapitalstatusofCommonStockdividendswillcontinuein1981butatasomewhatlowerlevelthanin1980.TheregularquarterlydividendpaymentdatesarethefirstdaysofJanuary,April,JulyandOctoberofeachyear.ThemostrecentregularquarterlydividenddeclaredbytheCompanywas53centspersharepaidonOctober1,1980.TheCompanyexpectstoconsideronNovember26,1980thedeclarationofadividendpayableJanuary1,1981toholdersofrecordonDecember10,1980.TheCommonStockofferedherebywouldbeentitledtothatdividend.DESCRIPTIONOFCOMMONSTOCKTheoutstandingCommonStockis,andtheCommonStockofferedherebywhenissuedandpaidforwillbe,fullypaidandnon-assessable.ThefollowingisasummaryofcertainprovisionsoftheCompany'sArticlesofIncorporationandmortgages,copiesofwhichareexhibitstotheRegistrationStatement.DividendRights.SubjecttotheArticlesofIncorporationandmortgagerestrictionsondividendsreferredtobelowandtothepreferentialrightsofthepreferredstockandpreferencestock,dividendsmaybedeclaredontheCommonStockoutoffundslegallyavailableforthepaymentthereof.

DividendRestrictions.TheCompany'sArticlesofIncorporationprovidethatnodividends(otherthandividendspayablebytheissuanceofCommonStock)on,orpurchasesoracquisitionsof,ordistributionson,theCommonStockshallbepaidormadebytheCompanyaggregatinganamountinexcessof(a)75%ofthecurrentyear'searningsotherwiseavailableforCommonStock,ifaftersuchpayment,purchase,acquisitionordistributiontheratiooftheaggregateofthestatedvalueofCommonStockandearningsreinvestedtototalcapitalization,includingearningsreinvested,willbelessthan25%;and(b)50%ofsuchearnings,ifaftersuchpayment,purchase,acquisitionordistribution,suchratiowillbelessthan20%.TheCompany'smortgagecontainsaprovisionwhich,ingeneral,restrictsthepaymentofCommonStockdividendsincashiftheeffectthereofwillbetobringtheaggregateofearningsreinvestedplustheprovisionsfordepreciationtoapointbelowthemaintenanceandreplacementfundrequirementswhichhavenotbeensatisfiedbyactualexpenditures.SuchprovisiondidnotresultintherestrictionofanyportionofearningsreinvestedoftheCompanyatDecember31,1979.AnassumedmortgageontheformerScrantonElectricCompanypropertiesacquiredbymergerin1956alsocontainsrestrictionsonthepaymentofCommonStockdividendswhichdonotlimittheavailabilityofearningsreinvested.ThetermsrelatingtocertainseriesoftheCompany'spreferredstockandpreferencestockcontainprovisionstotheeffectthattheCompanywillnotdeclareorpayanydividendson,ormakeanyotherdistributionofpropertywithrespectto,orpurchaseorotherwiseacquire,CommonStockatanytimewhentheCompanyshallhavefailedtodischargeinfullitsobligationtoredeemsharesrequiredtoberedeemedpursuanttothesinkingfundsestablishedforthoseseries.VotingRights.Exceptashereinafterotherwisesetforth,theholderofeachshareofpreferredstock,preferencestockandCommonStockhasonevoteonanyquestionpresentedtoanyshareowners'eeting,amajorityinnumberofsharesregardlessofclassbeingconsideredamajorityinvalueorininterestwithinthemeaningofanystatuteorlawrequiringtheconsentofshareownersholdingamajorityininterestoragreateramountinvalueofstockoftheCompany.Ifandwhendividendspayableonanypreferredstockshallbeinarrearsinanamountequivalenttotheannualdividendrateormorepershareandthereafteruntilalldividendsonthepreferredstockinarrearsshallhavebeenpaid,theholdersofthepreferredstock,votingasasingleclass,shallbeentitledtoelectamajorityofthefullBoardofDirectors,andtheholdersofthepreferencestockandCommonStock,votingseparatelyasaclass,andsubjecttotherightsoftheholdersofpreferencestockasdescribedbelow,shallhavetherighttoelecttheremainingdirectors.Ifandwhendividendspayableonthepreferencestockshallbeinarrearsinanamountequivalenttooneandone-halftimestheannualdividendrateormorepershareandthereafteruntilalldividendsonthepreferencestockinarrearsshallhavebeenpaid,theholdersofthepreferencestockvotingasasingleclass(andsubjecttorightsofholdersofpreferredstock)shallbeentitledtoelecttwodirectors.UnderPennsylvanialaw,allshareownersoftheCompanyhavetheunconditionalrightofcumulativevotingintheelectionofdirectors.LiquidationRights.Aftersatisfactionofthepreferentialliquidationrightsofthepreferredstockandthepreferencestock,theholdersoftheCommonStockareentitledtoshare,ratably,inthedistributionofallremainingassets.PreemptiveRights.TheholdersofCommonStockdonothavepreemptiverightsastoadditionalissuesofCommonStock.10 CertainTaxMatters.IntheopinionofcounselfortheCompany,theCommonStockisexemptfromexistingpersonalpropertytaxesinPennsylvania.Listing.TheCommonStockislistedontheNewYorkandPhiladelphiaStockExchanges.TransferAgentsandRegistrars.TheTransferAgentsfortheCommonStockarecertainemployeesoftheCompany,IndustrialValleyBankandTrustCompany,Allentown,PA,andMorganGuarantyTrustCompanyofNewYork,NY.TheRegistrarsareTheFirstNationalBankofAllentown,PA,andMorganGuarantyTrustCompanyofNewYork,NY.EXPERTSThebalancesheetsasofDecember31,1979and1978andtherelatedstatementsofincome,earningsreinvested,andchangesinfinancialpositionforeachofthefiveyearsintheperiodendedDecember31,1979includedintheCompany's1979AnnualReportonForm10-K,whichareincorporatedbyreferenceinthisProspectus,havebeenexaminedbyDeloitteHaskins8Sells,independentcertifiedpublicaccountants,asstatedintheiropinioninsuchForm10-K,andaresoincorporatedinrelianceuponsuchopiniongivenupontheirauthorityasexpertsinauditingandaccounting.InformationinthetabulationoftheAssignedReservesandUnassignedReservesundertheheadings"EstimatedRecoverableReservesasofJanuary1,1978"and"Average%Sulfur(ByWeight)"underthecaption"BUSINESS-FuelSupply(Coal)"includedintheCompany's1979AnnualReportonForm10-K,whichinformationisincorporatedbyreferenceinthisProspectus,wasprovidedbyPaulWeirCompanyIncorporatedandissoincorporatedinrelianceuponauthorityofthatfirmasanexpert.StatementsmadehereinandinthedocumentsincorporatedbyreferenceinthisProspectusastomattersoflawandlegalconclusionshavebeenreviewedbyEdwardM.Nagel,Esq.,GeneralCounseloftheCompanyandRobertK.Fulton,Esq.,AttorneyfortheCompany,andhavebeenmadeinrelianceupontheirauthorityasexperts.11 NumberofSharesNumberofShares25.00050.00015.00050,0007,00050,0007,00025,00050.00015.00025.0007,0007,000RotanMosleIncL.F.Rothschitd,Unterberg,Towbln...........R.Rowland&Co.~Incorporated.................SalomonBrothers..H.B.Shaine&Co.,Inc.ShearsonLoebRhoadesInc.....................SmithBarney.HarrisUpham&Co.Incorporated.E.W.SmithCo.Stifel,Nicolaus&CompanyIncorporated...Sutro&Co.Incorporated............................ThomsonMcKinnonSecuritiesInc............Tucker,Anthony&R.L.Day,Inc..............Vercoe&CompanyInc.WarburgParibasBeckerIncorporated........Wertheim&Co.~Inc.Wheat,FirstSecurities,Inc........................DeanWitterReynoldsInc....,.....................WarrenW.York&Co.~Inc.........................JamesA.Leavens,inc.LeggMasonWoodWalker,Incorporated............LehmanBrothersKuhnLoebIncorporated.........A.E.Masten&Co.~Incorporated.....,....,..........McDonald&CompanyTheMilwaukeeCompany...................................Moore&Schiey,Cameron&Co........................Morgan,Olmstead,Kennedy&Gardner,Incorporated.Moseley,Hallgarten,Estabrook&WeedenInc..W.H.Newbold'sSon&Co.,Inc........................TheOh'loCompany.Oppenheimer&Co..Inc....................................Parker/Hunterincorporated...............................Philips,Appel&Walden,Inc.............................Piper,Jaffray&HopwoodIncorporated..............Prescott,Ball&Turban.......................................RauscherPierceRefsnes.Inc............................Raymond,James&Associates,Inc..................TheRobinson-HumphreyCompany,lnc...........50,0007,00015,00015,00025,00025,0007,00050,00050,00025,00050,00015,0007,00025.00025,00025,00025,00040,0007,00025,00025,00025,0007,00025.0007,0003,500,000Total.Wm.C.Roney&Co..TheUnderwr'onditionsrecedltingAgreementprovidesthattheobligationsoftheUnderwritersaresubjecttocertainpent.ThenatureoftheunderwritingcommitmentissuchthattheUnderwriterswillbeobligatedtopurchaseallotthesharesofCommonStockofferedherebyprovidedthat,undercertainconditionsinvolvingdefaultsbyoneormoreoftheUnderwriterswhichaggregatemorethan350,000shares,theCompanymayeitherterminatesuchAgreementorrequireeachnon-defaultingUnderwritertopurchasethenumberofsharessetforthoppositeitsnameaboveplus%ofsuchnumberofshares.TheCompanyhasbeenadvisedbyTheFirstBostonCorporation,DrexelBurnhamLambertIncorporated,BacheHalseyStuartShieldsIncorporatedandMerrillLynch,Pierce,Fenner8SmithIncorporated,asRepresentativesoftheUnderwriters,thattheUnderwritersproposetooftersuchCommonStocktothepublicinitiallyatthepublicofferingpricesetforthonthecoverpageofthisProspectusand,throughtheRepresentatives,tocertaindealersatsuchpricelessaconcessionof50cpershare;thattheUnderwritersandsuchdealersmayallowadiscountof10cpershareonsalestootherdealers;andthatthepublicofferingpriceandconcessionsanddiscountstodealersmaybechangedbytheRepresentatives.13

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4~~~~~~~'~~~4~'ItIllI~.~~~~~~~~'~~.~'~III~t~~~t~II~~~~~.~~~~~;~II~I~~l~'~~~~~~~'~~~~~~~~~~~~~t'ItI~'~~~~~~~~'~~~~~'I~lI~lI~I~~~~~~~~~~~~~~~~~t~II~II~~~~~~~'~~~'~~~'~~~~~'t~~~~t~~t~'t~'~tl',~t~I~I~~~~'~~~~~~t~~~~II~II~I~lII~I~4'~~~~,'~~~'~~~~~,~~t~~~II~ItI~~'~+~~L~~~~~~,~l~I~III~Il SFCURITIESANDEXCHANGECOMMISSIONWashington,DC20549Form10-QQUARTERLYREPORTUNDERSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934ForQuarterEndedSetember301980CommissionFileNumber1-905PENNSYLVANIAPOWER&LIGHTCOMPANY(Exactnameofregistrantasspecifiedinitscharter)PENNSYLVANIA(Stateorotherjurisdictionofincorporationororganization)23-0959590(I.'R.S.EmployerIdentificationNo.)TWONORTHNINTHSTREETALLENTOWNPENNSYLVANIA(Addressofprincipalexecutiveoffice)18101(ZipCode)Registrant'stelephonenumber,includingareacode215-821-5151Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.YesNoCommonstock,nopar,numberofsharesoutstandingasofSeptember30,198046160146 PENNSYLVANIAPOWERaLIGHTCOMPANYFORM10-QFORTHEQUARTERENDEDSEPTEMBER30,1980INDEXPartI.FinancialInformation:Statement.ofIncomePacaeNo.Management'sDiscussionandAnalysisoftheStatement'fIncomeBal'ance'Sheet10Statement'f.Changes'.in:FinancialPos'i'tion'.-StatementofEarningsReinvestedFinancialNotes1212PartII.OtherInformationExhibitIndexSignature.212834 PENNSYLVANIAPOWER6LIGHTCOMPANYSTATEMENTOF)NCOME{Unaudit$d)ThousandsofDollarsOperatingRevenues(Note2)....,.1980$220,8911979$199,892ThreeMonthsEndedSeptember30'1979$661,4841980$659,107NineManthsEndedSeptember30TwelveMonthsEndedSeptember3019801979$858,122$856,441OperatingExpensesNetcostafenergyFuel.Powerpurchases.interchangepowersales..............Net(deferral)/amortizationoffuelandenergycosts(Note3).............Wagesandemployeebenet)ts..Otheroperatingcosts.Depreciation.incometaxes(Note5)Provision.Deferred.Investmenttaxcredits-net...Taxes,otherthanincome.......Operatingincome.OtherIncomeandDeductionsAllowanceforequityfundsusedduringconstructian.Incometaxcredits.:income(loss)ofsubsidiaries-net.......Other-net.incomeBeforeInterestCharges....,.........InterestChargesLong-termdebt.Short-termdebtandother.....,.........Allowanceforborrowedfundsusedduringconstruction.159,6IO11,803(I27,0291139,92712,863('I26,142)484,428382,86927,15134,785(323,920)(264,529)25,72270,10633,43625,82520,19831,19457,84228,25424,10818,904(3,6S9)183,97098,30284,07759,67735,867188,99286,14474,58856,71118,173(11,896)5,33722,174183,35337,53814,843(8,603)8,63214,462158,44241,45034,9374,0554,00666,390535,414123,69344,101(9,015)28,06652,811522,398139,08615,75611,121(66)83)3,9107,24334248845,42629,9502591,47938,51619,484l,3672,03526,8942),98364;43263,43377,1146I,402200,807200,48838,1314,31633,4141,'I64I)2,23112,15492,0046,79767,19461,04921,89920,944(20,548)(13,634)(57,191)(37,752)635,940490,35738,95241,360(44),848)(3)5,085)89823,415233,942126,995110,06579,116240,047I)2,31297,75875,05860,03937,003(56)1,72498,710266,14)48,72524,7381,1843,01977,666260,143147,13214,151116,85711,187(71,515)(47,960189,76880,08443738549,4719.162I.(256)5,03231,37082,99468,204690,691673,964.167,431182,477NetIncome-BeforeDividendsonPreferredandPreferenceStock42,533DividendsonPreferredandPreferenceStock...14,79942,489133,61312,49744,174139,439176,373180,05935,38557,45646,503EarningsApplicabletoCommonStock...$27,734$29,992$89,439$104,054$118,917$133,556EarningsPer.ShareofCommonStock(basedonaveragenumberofsharesoutstanding)..$0.61$0.75$2.00$2.62$2.7I$3.37AverageNumberofSharesOutstanding(thousands).DividendsDeclaredPerShareofCommonStock.45,671$05340,22044,808$0.51$1.5939,76943,86839,572$1.53$2.10$2.01SeeaccompanyingFinancialNotes.

PENNSYLVANIAPOWER&LIGHT'OMPANYMANAGEMENT'SDISCUSSIONAND.ANALYSISOFTHESTATEMENTOFINCOMEThefollowinganalysisexplainsmaterialchangesinprincipalitemsontheStatementofIncomecomparingquarterlyandyear-to-dateperiods.asfollows,(1)thethreemonthsendedSeptember30,1980tothethreemonthsendedJune30,1980,(2)thethreemonthsendedSeptember30,1980tothe.threemonthsendedSeptember30@1979@and(3)theninemonthsendedSeptember30,1980totheninemonthsendedSeptember30,1979.Reference-ismadetotheStatementofIncomeonpage3andthe.summaryofchangesinprincipalitemsfortheperiodsshownbelow(thousandsofdollars):ThreeMonths-EndedSep.30,1980Sep.30,1980vs~vsIncrease(Decrease)NineMonthsEndedSep.30,1980vsSe.301979,OperatingrevenuesFuelexpensePowerpurchases.Interchangepower;salesNetdeferral=of'uel'ndenergycosts,"Incometaxescharged.tooperatingexpensesOtheroperating,expenses-wagesaemployeebenefits,.otheroperatingcosts,depreciationandtaxesotherthan.incometaxesAllowanceforfundsusedduringconstructionEquityfundsBorrowedfundsIncometaxcreditschargedtootherincomeanddeductionsandotherincome-netInterestonlong-term,debt,short-termdebtandotherDividends.,onpreferredandpreferencestockEarningsapplicable-tocommonstockEarningspershareofcommonstockAveragenumberofsharesout-standing(thousands)$14,60520,6336,296'38;-29323,4994,111(2,142)7481,514825(886)(29)$4,503$0.09974$,20,99919p683(1,060)887(5,472)(3,258)15,9051,8466,9143,0657,8692,302(2,258)(0.14)5,451$(2,377)101,559(7,634)59g391(39p556)(20il54)38il926,91019,4398,80225,5848,789$(14,615)$(0.62)5,039 PENNSYIVANIAPOWER6IIGHTCOMPANY~~TheStatementofIncomereflectstheresultsofpastoperationsandisnotintendedasanyrepresentationastotheresultsofoperationsforanyfutureperiod.Futureoperatingresultswillnecessarilybeaffectedbyvariousanddiversefactorsanddevelopments,includingtheobtainingofadequateandtimelyrateincreases,performanceofgeneratingstations,weather,businessactivity,customerdemand,energyconservation,interchangepowersales,taxes,laborcontracts,fuelcosts,fuelavailability,availabilityandcostofcapital,governmentalactions,environmentalexpendituresandothermatters.TheCompanyisunabletopredictthecombinedeffectoftheabovefactorsonitsfutureoperatingresults.Becauseresultsforinterimperiodscanbedisproportionatelyinfluencedbythesefactors,theresultsofoperationsforinterimperiodsarenotnecessarilyindicativeofresultsortrendsfortheyear.EarninsandOtherSummarFinancialInformationTheCompany'searningshavedeclinedduring1980comparedtothesameperiodsin1979principallyduetothehighercostsbeingincurredinallphasesoftheCompany'soperations.Toreversethisearningstrend,theCompany,onApril29,1980,filedwiththePennsylvaniaPublicUtilityCommission(PUC)foranincreaseinbaseraterevenuesofabout16percentorapproximately$123millionannually(seeFinancialVote2onpage12).TheCompanysmortgageindentureandchartercontaincertainearningscoveragetestswhichmustbemetbeforeadditionalmortgagebondsorpreferredstockmaybeissued.Thedeclineinearningsperformancetogetherwithhighinterestandpreferreddividendrateshavecausedareductionintheearningscoverageratiosapplicabletotheissuanceofmortgagebondsandpreferredstock.Theexactamount,natureandtimingoffuturesalesofthesesecuritieswill,ofnecessity,bedeterminedinthelightofmarketconditions,theCompany'sabilitytomeetsuchearningscoveragetestsandotherfactors,includingthereceiptoftimelyandadequaterateincreases.Therearenocharterprovisionslimitingtheissuanceofadditionalpreferencestock.,OfparamountimportancetotheCompanyistheconstructionoftheSusquehannanucleargeneratingstation.Completionofthetwonuclear-fueledunitswillrequiresubstantialcapitalexpenditures.Thegranting,bythePUC,ofelectricratesadequatetosupporttheCompany'sinvestmentintheseunitsandtheoperatingperformanceoftheunitswhentheyareplacedinservicewillbemajorfactorsaffectingfutureoperatingresults(seeFinancialNotellonpage19)..EnerSalestoCustomersSalesofelectricenergyduringthethirdquarterof1980increased133millionkwhor3%comparedtothesecondquarterof1980and176millionkwhor38comparedtothethirdquarterof1979.Warmerthannormalweatherwasafactorinhighersalestoresidentialandcommercialcustomersduringthethirdquarterof1980whileenergyconsumedbytheindustrialsectordeclinedduetotheeconomicrecession.

PENNSYLVANIAPOWER6LIGHTCOMPANYEnergysalesforthefirstninemonths.of-1980decreased.57millionkwhfromthesameperiodin1979,afterexcludingtheone-timeincreaseof256millionkwhsalesrecordedi'nthe.firstquarterof1979duetotheconversionofabout740,000residentialcustomers"frombi-monthlytomonthlybilling.Thisrelativelyflatsales,patternreflectsthe.combinedeffectsofmanyfactors.includingweathervariations,withami'lder"thannormalwinterbuthotterthannormalsummer,theeconomicrecessionandconservationeffortsbycustomers.0eratinRevenuesThechangesinoperatingrevenuesfortheperiodscomparedwereasfollows(thousandsofdol'lars):ThreeMonthsEndedNineMonthsEndedSep.30,1980Sep.30,1980Sep.30,1980vs~vsvs~Increase(Decrease)ElectricrevenuesBase-rates-FueladjustmentclausesRecoveryof'deferredfuelcostsEnergyclause*Tax:surchargeandotherSteam'revenuesTotal5',249791279,967(161)15,261~656j$146056,8494432498,960440520,90693620999(7,081)588(163)(5,277)8,875(3,058)681~62,377)Thechangesinbaseraterevenuesandrecoveryofdeferredfuelcosts(ata.l-mill,perkwhrate)fortheperiodscomparedgenerallyreflectthevariationsinenergysalespreviouslydiscussed.Energyclauserevenuesrecordedreflectacombinationofchangesinenergysales,.andtheamountbywhichenergycostsareaboveorbelowthelevelincludedinbaserates.Taxsurchargerevenuesarehigherduringthethree-and-ninemonthsendedSeptember30,1980comparedtothesameperiodsin1979principallyduetorecoveryofincreasedutilityrealtytax(seeFinancialNote4onpage13).

pENNsYLvANIApowERaLIGHTcoMpANYThechangeinfuelexpensefortheperiodscomparedwasattributabletothefollowing(thousandsofdollars):ThreeMonthsEndedSep.30,1980Sep.30,1980VS~vsIncrease(Decrease)NineMonthsEndedSep.30,1980vs~Se.301979ElectricCoal-firedsteamstationsQuantityofelectricitygeneratedAveragecostoffuelburnedTotalOil-firedsteamstationQuantityofelectricitygeneratedAveragecostoffuelburnedTotalCombustionturbinesanddieselsTotalelectricSteamheatTotal6,419(1392)502720,839(6376)14463L124020,730~97)820633$(3,771)3~4646,35012506188561082198631528196832,56518232207978,485.7136979854676101,327232$101~559Changesingenerationfromcoal-firedunitsduringtheperiodscomparedgenerallyreflectthetimingofoutagesforannualmaintenanceoverhaulsandforcedoutagesofunitsduetoequipmentfailure.Generationfromoil-firedsteamunitsistoalargedegreedependentonthepowerneedsofotherutilitiesinthePJMInterconnection.Theaveragecostoffuelsconsumedperkwhofgenerationforthe1980periodscomparedtothe1979periodswasasfollows(centsperkwh):ThreeMonthsEndedNineMonthsEndedCoal-firedsteamstationsOil-firedsteamstationCombustionturbinesanddieselsTotalfuelburningstationsSep.30919801.3704.388.771.92Sep.30,19791.3203.525.751.66Sep.30,19801.3804.537.831.98Sep.30,19791.2902.964.601.59

'PENNSYLVANIAPOWER&LIGHTCOMPANY.Interchane.-PowerSalesVariationininterchangepowersalesfortheperiodscomparedwasattributableto'thefollowing'(thousandsofdollars):ThreeMonthsEndedSep.30,1980Sep.30,1980vsvs~NineMonthsEndedSep.30,1980"vsIncrease(Decrease)Quantity.'of.energysold'Averagepricereceivedforenergy,sold."Capacity.receipts.Total,$21,233179060$38,293$(16,024)17,581~670)$887$(9,227)69,274"'(656)959391'"The'average'priceperkwhtheCompanyreceivedforinterchangepowersalestwas'4.'13'0"forthe'thirdquarterof1980comparedto3.574forthesecondquarter'of1980and3.560forthethird'quarterof1979.Forthefirstninemonthsof'1980the'average-pri'ceperkwhreceivedforinterchangepowersaleswas4.16C,compar'edto3;270.for'thefirstninemonthsof1979.Thehigheraveragepricereceived'for-interchangereflectsageneralincreaseinfuelcostsbeingex-periencedby'allinterchangecompanies.Thebenefitofhigherinterchangepowersaleshasbeen.passedontocustomersintheformoflowerenergyclausecharges.NetDeferralAmortizationofFuelandEnerCosts'The'amount.shown.ontheStatementofIncomeunderthiscaptionrepre-'sents'fuel'.'andenergy=costsrecoverableinthefuturethroughapplicationof~automaticadjustment,clauses'which'aredeferredandchargedtoexpenseduringtheperiodsinwhich.suchcostsarebilledtocustomers.Italsoincludestheamountofpreviously,deferredfuelcostsrecoveredthrougha1-millperkwhchargetocustomers(seeZinancialNote3onpage12).IncomeTaxes,IncometaxexpensereflectedontheStatementofIncomeincludesincometaxeschargedtooperatingexpensesandincometaxcreditsincludedinotherincomeanddeductions.Changesintotalincometaxexpensearegenerallyrelatedtochangesintaxableincomewhichapproximatesnetincomeexcludingincometaxesandexcluding'theallowancesforfundsusedduringconstruction.SeeFinancial'Note5onpage13forinformationconcerningaproposedtaxassessmentbytheInternalRevenueServiceasaresultofanauditoftheCompany's1973and1974federalincometaxreturns.Other0eratinExensesThe'ompanyhasexperiencedalong-termtrendofincreasesinotheroperatingexpensesprincipallyreflectingtheeffectsofinflation,higherwage:ratesandincreasesassociatedwithoperationandmaintenanceofnewfacilitiesplacedinservice.TheseincreasingcostswereamajorreasonintheCompany's.need'to.fileinApril1980foranincreaseinbaseraterevenues."

PENNSYLVANIAPOWER&LIGHTCOMPANYTaxesotherthanincometaxesgenerallyreflectthreePennsylvaniataxes:thegrossreceiptstaxwhichisleviedagainstutilitiesbasedon4.5%oftheirrevenues;theutilityrealtytaxwhichisbasedon3%ofthe,depreciatedoriginalcostofautility'srealproperty;andthecapitalstocktaxwhichisbasedon1%ofthevaluationoftheCompany'scapitalstock.SeeFinancialNote4onpage13forinformationconcerningtheCompany'sdeferringthechargetoexpenseof-aportionofthe,utilityrealtytax.AllowanceforFundsUsedDurinConstructionTheallowanceforfundsusedduringconstruction(allowance)isanon-cashitemwhichservestooffsetontheStatementofIncomethecostoffinancingconstruction.Theallowancevarieswiththelevelofconstructionworkinprogressandthecostoffinancing.Increasesintheamountofboththeequityandborrowedfundscomponentsoftheallowanceforallperiodsbeingcomparedweredueprimarilytotheincreasedlevelofconstruction'workinprogressrelatedtoconstructionoftheSusquehannanuclearplant.TheamountofallowancerecordedwillcontinuetoincreasewhilethetwoSusquehannaunitsareunderconstruction.Aftereachunitisplacedinservice,theCompanywouldexpecttorecoverthroughelectricratesareturnon,anddepreciationof,itsinvestmentinthatunit,includingthecapitalizedallowance.CostofFixedIncomeSecuritiesIncreasedinterestchargesonshort-andlong-termdebtforthequarterandninemonthsendedSeptember30,1980comparedtothesameperiodsfor1979wereprincipallyduetomoredebtoutstandingandtothehigherinterestratesexperienced.ThedecreaseindividendsfromthequarterendedJune30,1980tothequarterendedSeptember30,1980isaresultoftheredemptionof16,000sharesof7.40%SeriesPreferredStockonJuly1,1980,pursuanttosinkingfundprovisions.IncreasesindividendsfortheperiodsendedSeptember30,1980comparedtothesameperiodsin1979reflectthedividendsonadditionalsharesofstockissued.

PENNSYLVANIAPOWER6LIGHTCOMPANYBALANCESHEET(Unaudited),ThousandsofDollarsSeptember30ASSETSUtilityPlantPlantinservice-atoriginalcost..Lessaccumulateddepreciation,Constructionworkinprogress-atcost.Nuclearfuelinprocess-atcost.InvestmentsAssociatedcompanies-atequity...Nonutilitypropertyandother-atcostorless..CurrentAssets'ashandtemporarycashinvestments.~Accountsreceivable,lessreserveCustomers.InterchangepowersalesOther..Notesreceivable(principallyfromanassociatedcompany)..Recoverablefuelandenergycosts(Note3)..............Coalaridfueloil-ataveragecost.'Materialsandsupplies-ataveragecost.Other.DeferredDebitsRecoverablefuelcosts(Note3).Stateutilityrealtytax(Note4)...Other.1980$2,605,004680,4881,924,5161,782,74387,2633,794,52220,6076,44927,0569,25354,94528,8766,43348937,457l43,29921,95719,841322,5502,7179,29911,35223,368'1979$2,465,254614,7491,850,5051,395,62152,9953,299,121'7,353,5,71723,07016,33653,73536,6388,79327,51616,813119,66519,19214,172312,86023,55212,1156,12141,788LIABILITIES~'CapitalizationPreferredandpreferencestockIssueswithmandatorysinkingfundprovisions........Issueswithonlyoptionalredemptionprovisions......Commonstock.'Capitalstockexpense.Earningsreinvested.Long-termdebt.$486,800'381,400231,375231,375696,629798,706(12,370)(11,414)389,6541,673,3893,567,554364,6091,498,7853,161,384$4,167,496$3,676,839CurrentLiabilitiesLong-termdebtduewithinoneyearShort-termdebt.AccountspayableTaxesaccfuecl.Deferredincometaxes.DividendspayableInterestaccruedOtherDeferredandOtherCreditsDeferredinvestmenttaxcredits.Deferredincometaxes.Other.SeeaccompanyingFinancialNotes.-10-1,026175,55363,3003,86820,00339,26452,77222,776378,562129,69975,36816,313221,380$4,167,49657,75224,53793,1217,4779,33733,09142,90727,526295,748124,66377,08717,957219,707$3,676,839 PENNSYLVANIAPOEMI'4LICI4TCCIÃANYSTATEMENTOFCHANGESINFINANCIALPOSITION(Unaudited)ThousandsofDollarsThreeMonthsNineMonthsEndedSeptember30EndedSeptember30TwelveMonthsEndedSeptember30SOURCEOFFUNDS198019791980197919801979OperationsNetincome.Charges(credits)againstincomenotinvolvingworkingcapitalDepreciation.Noncurrentdeferredincometaxesandinvestmenttaxcredits-net...Allowanceforfundsusedduringconstruction.Other.20,19818,9044,09613,32459,67756,711(2,273)2415779,11675,0583,53151,028(27,544)209(36,304)(2,208)28,31547,382(102,617)753(76,268)8189,153144,120(131,554)1,913129,379(96,685)603210,063$42,533$42,489$133,613$139,439$176,373$180,059'utsideFinancingCommonstock.Preferredandpreferencestock...Long-termdebtShort-termdebt-netinCrease....22,7709,25865,7469,19550,00010845,30651,000177,546144,77824,79375,000300,108102,077111,000178,112151,01632,08275,000300,10897,77459,303418,630399,901542,205407,190WorkingCapital-decrease(a).......InvestmentinAssociatedCompanies-decrease.NoncurrentRecoverableFuelCosts-decrease.38,640,73,14219,21121,6413,7863,6445,9474,86815,61216,48520,835$170,676$184;695$523,395$583,503$692,419$642,538APPLICATIONOFFUNDSConstructionExpenditures.........NuclearFuelExpenditures........AllowanceforFundsUsedDuringConstruction$145,006$130,677$406,263$362,1146,35913,83925,96215,936(36,304)(27,544)(102,617)(76,268)115,061116,972329,608301,782$538,459$511,92534,26716,640(131,554)(96,685)441,172431,880SecuritiesRetiredPreferredandpreferencestock.......Long-termdebt..Short-termdebt-netdecrease.......DividendsonPreferred,PreferenceandCommonStock..WorkingCapital-increase(a).........investmentinAssociatedCompanies-increase.NoncurrentRecoverableFuelCosts-1,6001,600171723,46913,02178239,26433,0905,60057,904115,8484,2345,6955,600665167,46696,4185,60057,941151,31421,1665,6845,60070638,321126,291increaseOther-net.....171387654,50611,5729,54223,55216,188$170,676$184,695$523,395$583,503$692,419$642,538(a)Excludesshort-termdebtandlong-termdebtduewithinoneyear.SeeaccompanyingFinancialNotes.

PENNSYLVANIAPOWER6LIGHTCOMPANYBalance,,Beginningof,Period..AddNetIncome.19801979$386,393$355,21842,53342,489428,926397,707STATEMENT'F.E'A'RNINGSREINVESTED(Unaudited)ThousandsofDollarsThreeMonthsEndedSeptember30NineMonthsEndedSeptember301980"1979$371,903$321,602133,613139,439505,516461,041TwelveMonthsEndedSeptember3019801979~$364,609$310,855176,373180,059540,982490,914~'Deduct'Cashdividendsdeclared'referredandpreferencestock..........Commonstock........................~Issuancecostofretiredpreferred,and,'preference.stock.......:"-'iBalance,'.EndofPeriod...14,79924,4651,2,49720,59344,17471,67435,38561,03357,45646,50393,85879,788881414141439,27233,098115,86296,432151,328126,305$389,654$364,609$389,654$364,609$389,654$364,609;FINANCIALNOTESl.InterimFinancialStatements'The:,accompanying,unauditedfinancialstatementsshouldbereadi'ncon-junctionwiththefinancialstatementsandnotesincludedintheCompany'sAnnualReporttotheSecuritiesandExchangeCommissiononForm10-Kfortheye'arended=December31,1979.2.RateFilingOnApril.,29,-1980,theCompanyfiledwiththePennsylvaniaPublicUtilityCommission'(PUC)arequestforanincreaseinbaseraterevenuesofabout16percentor'pproximately$123millionannually.OnJune26,1980,thePUCsuspendedthe'ompany'srequesttopermitinvestiaationandhearings.ThepublichearingswerecompletedinearlyOctober1980.TheCompanyexpectsthatthePUCwillreachadecisionontheraterequestbyJanuary28,1981.However,ifthePUCdoesnotadoptafinalorderbythatdate,theratesfiledbytheCompanywouldgointoeffectatthattime,subjecttorefund.3.DeferredFuelCostRecovery"TheCompanyisrecovering,througha1-millperkwhchargetocustomersrthedeferredfuelcostswhichweretobecollectedthroughthePUCfueladjustmentclausewhichterminatedOctober31,1978..AsofSeptember30,1980,theamountofsuchdeferredfuelcoststoberecoveredapproximated$16.6million.The'ompanyhasan.additional$7.1millionofdeferredfuelcostsincurredasthe'resultofthePUCplacingatemporaryceilingonthefueladjustmentclauseduringseveralmonthsfollowingthe1978coalminers'trike.Inan12 PENNSYLVANIAPOh~ER&LIGFTCOMPANYaccountingorder,thepUCstatedthattheCompanywouldbepermittedtorecovertheamountoffuelcostssodeferred,andtheCompanyhasrequestedthatrecoverybeaccomplishedthroughapplicationofthe1-millperkwhcharge.4.UtilityRealtyTaxAsaresultofacourtdecisionandinterpretationsbythePennsylvaniaDepartmentofRevenueregardingthetaxablepropertybaseforthepublicutilityrealtytax,theCompany,inearly1979,filedclaimsforrefundsoftherealtytaxforcertainprioryearsaggregating$31.4million.InJuly1979,therealtytaxwasamendedtobroadenthetaxbaseresultinginanincreasedtaxfor1979.Suchincreasei'sbeingrecoveredthroughthetaxsurchargeoveratwelve-monthperiodbeginningNovember1979.TheStatealsoimposedaone-timetaxof10.5%onthevalueofthenewrealtytaxbaseinordertooffsettherefundsclaimedbyelectricutilities.Afterdeductingthe$31.4millionofrefundclaims,theCompany'sliabilityunderthe10.5%taxwas$8.3millionwhichwaspaidtotheStateandwasrecordedasadeferredcharge.TheCompanyhasbeennotifiedbytheStateBoardofFinanceandRevenuethatitallowed$26.2millionofthe$31.4millionofrealtytaxrefundclaimsanddisallowed$5.2million.ThedisallowancehasbeenappealedtotheCommonwealthCourtofPennsylvania.TheCompanyhasfiledwiththePUCataxsurchargeratewhichprovidesforrecoveryofthe$8.3millionadditionaltaxpaymentandthe$5.2millionrefundclaimdisallowanceoveratwelve-monthperiodbeginningNovember1980.Appli-cation.ofthenewtaxsurchargerateissubjecttoPUCapproval.AnyamountsultimatelyreceivedasaresultoftheCompany'sappealofthedisallowedrefundclaimswillbepassedontocustomersinthetaxsurchargerate.5.IncomeTaxesTheInternalRevenueServicehasexaminedtheCompany'sfederalincometaxreturnsfortheyears1973and1974andhasproposedadditionaltaxesamountingtoapproximately$9.4millionforthoseyears.TheCompanyhasfiledaprotestwithrespecttomostoftheassertedtaxdeficiencies.Theproposedadditionaltaxesinvolveprincipallytheyearinwhichitemsaredeductiblefromorincludableintaxableincome.Sincedeferredincometaxeshavebeenprovidedastomanyoftheitemsincludedintheproposedadjustments,theCompanybelievesthatanadversedispositionoftheadditionaltaxesasproposedfortheyears1973and1974wouldnothaveamaterialeffectonitsnetincome.OneoftheproposedadjustmentswouldrequiretheCompanytocapitalizecertaintaxes(principallysocialsecuritytaxes)thatweredeductedforincometaxpurposesintheyearincurred.Therelatedreductioninincometaxexpenseforthisitemhasbeenflowed-throughtocustomersinestablishingratesforelectricservice.IftheCompany'sprotestofthisitemisdisallowedandtheproposedadjustmentwereappliedtoallyearsfrom1973to1980,theCompany13-PENNSYLVANIAPOWER&L'IGHT*COMPANYestimatesthatitwouldincuradditionalincometaxexpense,includinginter-est,ofapproximately$10million.TheCompanywouldrequestthePUCtopermitrecoveryfromcustomersofanyadditionaltaxexpenseresultingfromanunfavorabledispositionofthisitem.6.,Preferred.andPreferenceStockTheauthorizedPreferredandPreferenceStock(allcumulative)oftheCompanyisdividedintothreeclasses;4-1/2%preferredStock,SeriespreferredStockand,PreferenceStockconsistingofthefollowingatSeptember30,1980(thousands.of.dollars):ParValueSharesAuthorizedOutstandinAmountPreferred4-1/2%.Series$100$100'629,93610,000,000530,1894201556$53,019420156Total,Preference4,731,745$473,175aopar5,000,0002,450,0008245,000At"September30,1980,theCompanyhadnoPreferredorPreferenceStockreservedforconversion,warrants,optionsorotherrights.DetailsofPreferredandPreferenceStockoutstandingatSeptember30,1980areasfollows(thousandsofdollars):IssuesWithMandatorySinkinPundProvisionsSharesIssuesWithOnlyOptionalRedemtionProvisionsSharesSeriesPreferred,7.40%7.50%7.75$,8.00%8.00%,Second8.2588-75%9'4%368,000150,000600,000500,000100,000500,000600,000750,000$36680015,00060,00050600010600050600060,00075,0004-1/2aPreferredSeriesPreferred3.35%4.40%4.60%8.60%9.00%41,7832286773636000222637077,63046178226878663002262377,763530,189$53,019Preference$8.625$9.25$11.00$13.00Total510,00040,000500,000250,0005160004,00050,000250008486800Preference$8.00$8.40$8.70Total3506000400,000400,00035,00040,00040,0008231375 PENNSYLVANIAPOWER6LIGHTCOMPANYSinkingfundprovisionsandoptionalredemptionpricesofthePreferredandPreferenceStockatSeptember30,1980areasfollows:SinkinFundProvisionsSharestobeRedeemedAnnually($100RedemptionPeriodIssuesWithMandatorySinkingFundProvisions0tionalRedemtionPriceFinalSept.30,Yearl980priceEffectiveSeriesPreferred7.40%7.5087.7588.00%8.00%,Second8.25%8.75%9.24816,000150,000120,00025,00020,000100,00030,00030,0007/81-7/034/857/84-7/8810/83-10/024/85-4/897/85-7/8910/85-10/047/81-7/05$112.00112.00112.00112.00112.00112.00115.00115.00$100.00100.00100.00100.00'100.00100.00100.00101.0019981985198719971988198820011991Preference$8.625$9.25$11.00$13.00102800040,00025,0001285001/86-1/90None(a)None1/81NoneNone7/81-7/00108.80(a)100.00199510/80-10/99109.75(a)100.001994IssuesWithOnlyOptionalRedemptionProvisions4-1/28Preferred110.00110.00SeriesPreferred3.35%4.40%4.6088.6089.00%103.50102.00103.00107.00107.00103.50102.00103.00101.00101.0019901990Preference$8.00$8.40$8.70105.50110.00106.00101.001987101.001986101.001984(a)The$13.00Seriesand$11.00SeriesPreferenceStockmaynotberefundedthroughcertainrefundingoperationspriortoOctober1,1984andJuly1,1985,respectively.IntheeventthatthenormaldividendonthePreferenceStock,$8.625Series,constitutesareturnofcapitalforFederalincometaxpurposesorthereisalossorreductionofthedividendreceiveddeductionavailabletocorporateholdersofsuchstock,theCompanyisrequiredtomakecertainindemnitypaymentsinordertoprovidetheownerswithanagreeduponeffectiveyieldafterFederalincometaxes.Ifsuchcircumstancesarise,theCompany,atitsoption,mayredeemallthestockthenoutstandingataredemptionpriceof$100pershare.

PENNSYLVANIAPOND6LIGHTCOMPANYOn;certainsinkingfundredemptiondatesofthe8;.75%SeriesPreferred,9.248,Series.Preferred,,$11,.00Preference-and$13..00Preferencestocks,theCompanymayredeemadditionalsharesuptothe.numberofsharesoftheseseriesrequired..to.beredeemedannually.Therighttoredeemadditionalsharesoftheseseriesinanyyearisnotcumulativeanddoesnotreducethesinkingfundrequirement,ofanysubsequentyear.1983$10,8501982$8,3501984$22,8501985$52,850Theaggregateamountsofsinkingfundredemptionrequirementsthrough1985are"-(thousands,;ofdollars):~1980.81981$69850$12,350(a),$5,600ofthe1980sinkingfundrequirementsweremetasofSeptember30,1980,andonOctober1,1980,theCompanyredeemed$2,500(25,000shares}of$13.00Preference-Stock,which.includestheredemptionofanadditional12,500.sharesofsuchstock.On-,October-31,1980,theCompanysoldthroughaprivateplacement265',000sharesof'0.75$SeriesPreferredStock,$100par.Sinkingfundprovisionsofthisseries,require-that,53,000sharesofthestockberedeemedannually.duringthe.,-per.iod;1986,,through1990.Proceedsfromthesilewereusedforqeneralcorporatepurposesincludingthereductionofshort-termdebtincurredtoprovideinterim-financingforconstructionandnuclearfuelexpenditures.7..CommonStockCommonStock-noparconsistedof75,000,000authorizedsharesofwhich46,160,146shareswereoutstandingatSeptember30,1980.TherewerenosharesofCommonStockreservedforconversion,warrants,optionsorotherrightsatSeptember30,1980.OnAugust.25,1980,theCompanyissued492,537sharesofCommonStockinconnectionwiththeacquisitionofcertaincoalreserves.ForadditionalinformationseeFinancialNote10onpage19.InOctober1980,theCompanyissued685,640sharesofCommonStockunderits,DividendReinvestmentPlanforproceedsof$10,810,000andalsoissued155,855sharesofCommonStock,tothetrusteefortheCompany'sEmployeeStockOwnershipPlanforproceedsof$2,948,000.On.October30,1980,theCompanyfiledwiththeSecuritiesandExchangeCommissiona,registrationstatementforapublicofferingof3,500,000sharesofCommonStock.TheofferingisscheduledforlateNovember1980andtheproceeds.willbeusedforgeneralcorporatepurposesincludingthereductionofshort-termdebtincurredtoprovideinterimfinancingforconstructionandnuclearfuelexpenditures.

PENNSYLVANIAPOWERaLIGHTCOMPANY8.Long-teemDebtLong-termdebtoutstandingconsistedofthefollowingatSeptember30,1980(thousandsofdollars):FirstmortgagebondsNotesBankloansdue1986,interestat1038ofprimethroughMarch1982and1058ofprimethereafterOtherUnamortized(discount)andpremium-netTotalLessamountduewithinoneyearTotallong-termdebt$1,480,282200,0001,8657732)1,674,4151~026$1,673,389FirstmortgagebondsconsistedofthefollowingseriesatSeptember30,1980(thousandsofdollars):Series3-3/8%10-1/8%3-1/2a11-3/4%9-7/8%3-3/8S4-5/8%4-5/8S5-5/8S6-3/4%788-1/8%Due19821982198319841983-19851985199119941996199719991999Outstandin$7,500100,00025,00030,000100,00025,00030,00030,00030,00030,00040,00040,000Series9%7-1/4%7-5/8%7-1/2S9-1/4%9-3/4%9-3/4%8-1/4%8-1/2815-5/8%(a)(b)Due2000200120022003200420052005200620072010Outstandin$50,00060,00075,00080,00080,000125,000100,000150,000100,000100,00026,00046,782(a)4-3/4%to5-5/8%PollutionControlSeriesAdueannually:$500,1981-1983;$900,1984-2002;$7,400,2003.(b)6SPollutionControlSeriesBdue19837-7/8%and8-1/8%PollutionControlSeriesCdue2000-2010Lessamountheldinconstructionfund$70,0002000090,00043218$46,782 PENNSYLVANIAPOWER&LIGHTCOMPANYThe;amountoflong-'termdebtmaturingineachcalendar"year'through.'19'85is(thousandsof"dollars)!~1980a1981$57,938$19026198219831984$1089415$1299068$6493631985$59,350(a)$'57,904of,thelong-termdebtmaturingin1980wasrepaidasofSeptember309.1980.OnOctober30,1980,theCompanyfiledaregistration'statementwiththeSecuritiesand'ExchangeCommissionforthe'saleof$125million'principalamount"'of'FirstMortgage.Bonds.Thesaleis'scheduledforlateNovember1'980.and"the,9proceedswillbeused-forgeneralcorporatepurposesincluding,the'reduction.ofshort-termdebtincurredtoprovideinterim.financing'.for."con-struction.andnuclearfuelexpenditures.'The.maximum.aggregateannualsinkingfund.requirementsthrough19'85of'.theoutstanding.mortgagebondsare(thousandsof.dollars):~1980a1981'$19775$390501982$4,45019831984$49813$5986219'85S6,738(a)"All-ofthe.1980sinkingfundrequirementsweremetasofSeptember30,1980.Iaessersinking'fundrequirementswillapply'fortheyears1981-1985if3.ong-.termdebtis50%orlessofnetproperty.TheCompanyhastherighttoaleet.sink'ingfundrequirementswithpropertyadditionsorbonds.SubstantiallyallutilityplantissubjecttotheliensoftheCompany'smortgages.9."Cre'dit'AgreementsTheCompany.hasarevolvingcreditagreementwitha'group.of.'domesticbanks'.under",whichthe.Companycanborrowand'haveoutstandingup'to'$400million.atahyone"time'through.February1985.Amountsborrowedbear.interestat'rate'sincreasing.from:primein1980to105%ofprimebyMarch1,1984.andmay.beprepaidatanytimewithoutpenalty.Borrowingsoutstandingatthe'end.of'February1985=.can,beconvertedtotermnoteswithinterest'at1108.ofprime.One.thirdofthe'pri'ncipalamountofsuchtermnoteswouldmatureineachoftheyears'1986,1987and1988.'TheCompanyalso:hasa,$100-millionrevolvingcreditagreementwith.agroup"o'fforeignbanks-whichpermitstheCompanytomakeshort-termborrowingsthroughMarch1982.Borrowingsunderthisagreementbearinterestat3/8%overtheLondonInterbankRate.

PENNSYLVANIAPOWER6LIGHTCOMPANYTherewerenoborrowingsoutstandingundertheserevolvingcreditagree-mentsatSeptember30,1980.Therevolvingcreditagreementsaremaintainedbythepaymentofacommitmentfeebasedontheunusedbalance.TheCompanymaintainsadditionallinesofcreditwithvariousbankstotaling$120millionatSeptember30,1980.Averageannualcompensatingbankbalancesarerequiredtqmaintain$68.5millionoftheselinesofcreditand$51.5millionrequirethepaymentofcommitmentfees.10.AcquisitionofCoalReservesOnAugust25,1980,theCompanyacquiredabout8milliontonsofsurfacebituminouscoalreservesownedbyTheArcadiaCompany,Inc.anditsstock-holders.Thetransactioninvolvedtheissuanceof492,537sharesoftheCompany'scommonstockforallofArcadia'soutstandingstockandthepaymentofabout$2millionforreservesheldbystockholdersasindividuals.11.CommitmentsandContingentLiabilitiesTheCompany'sconstructionandnuclearfuelexpendituresareexpectedtoaggregate$2.37billionduringthefouryears1980-1983,including$506millionofallowanceforfundsusedduringconstruction.Thisisanincreaseofapproximately$205millionovertheexpendituresforecastedforthisperiodattheendof1979.Thehigherestimatesaredueprincipallytoincreasedcostsrequiredtocompleteconstructionofthetwonuclear-fueledgeneratingunitsattheSusquehannastation.TheCompanyownsa908undividedownershipinterestinSusquehannaandAlleghenyElectricCooperative,Inc.ownsa108undivided.ownershipinterestinthestation.Thefour-yearconstructionexpenditureestimateincludesabout$1.37billionfortheCompany's90%shareofconstruct-ioncostsforSusquehannaand$263millionfornuclearfuel.Expendituresforenvironmentalprotectionfacilitiesareexpectedtoapproximate$164millionduringthisperiod.Constructionexpendituresfor1980areestimatedtoaggregate$600million,including$40millionfornuclearfueland$45millionrelatedtoenvironmentalprotectionfacilities.Year-to-dateconstruction'andnuclearfuelexpenditurestotaled$432millionatSeptember30,1980.ConstructionoftheSusquehannaunitsisproceedingunderNuclearRegu-latoryCommission(NRC)constructionpermitsissuedinNovember1973.InJuly1978,theNRCacceptedforfilinganapplicationforthenecessaryoperatinglicenseforeachSusquehannaunit.ThepetitionsoffourgroupstointerveneinthelicensingproceedingsbeforetheNRCweregrantedbytheAtomicSafetyandLicensingBoardoftheNRCinMarch1979.AtSeptember30,1980,constructionofUnitNo.1wasabout87%completedandUnitNo.2wasabout558completed.AnaccidentoccurredonMarch28,1979atUnitNo.2oftheThreeMileIslandstation(anuclear-fueledgeneratingfacilityinPennsylvaniaownedbyelectricutilitycompanieswhicharenotrelatedtotheCompany)resultinginashut-downofthatunitandsomereleasesofradiation.Thenuclearsteamsupplysystemsforthetwonuclear-fueledboilingwatertypegeneratingunits19-PENNSYLVANIAPOWER6LIGHTCOMPANYthatthe'CompanyhasunderconstructionatitsSusquehannasiteareofadifferent'esignandmanufacturethanthepressurizedwatertypeat,UnitNo.2oftheThreeMileIslandstation.TheCompanyhasbeenreviewingitsSusquehannaunitsinlightoftheaccidentattheThreeNileIslandstationandistakingintoaccounttheresultsofthesereviewsaswellastheresultsofvariousinvestigationsbytheownersoftheThreeMileIslandstation,theNRC,aPresidentialCommissionandothers'withrespecttosafetysystemsandequipment,operatingproceduresandtraining.Aspartofitscontinuingreviewofconstruction,theCompanyperiodicallymakesadetailedassessmentofprogressandcostsfortheSusquehannaunits.BasedontheCompany'sassessmentmadeintheFallof1980,thein-servicedatesfortheSusquehannaunitshavebeenrescheduledfromJanuary1982tothesecondquarterof1982forUnitNo.1andfromJanuary1983tothesecondquarterof'983forUnitNo.2.ThisreschedulingresultsprimarilyfromtheCompany's"assessmentthattheNRCwillnotbeabletocompleteitsoperatinglicense'eviewoftheSusquehannaunitsinatimeframewhichisconsistentwiththe.Company'sscheduleforthecompletionofconstructionoftheunits.The.Companycurrentlyestimatesthatits908shareofthetotalin-servicecostoftheSusquehannaunitswillbe$2.7billion,comparedto$2.43billionestimatedintheCompany'sFall1979assessmentofthepxoject.Inadditiontotheprecedingtotalin-servicecost,theCompanyestimatesthatabout$90millionwillbeexpendedontheSusquehannaunitsandrelatedfacilitiesthrough1983forcapitalimprovementstobecompletedaftertherespectiveunitsareplacedinservice.Evenwiththecurrentreschedulingofthein-servicedatesfortheSusquehannaunits,therecanbenoassurancethatfurtherdelaysandfurthercostincreases.willnotoccurbecauseofadditionaldelaysintheNRClicensingprocessortheinabilityoftheCompanyanditscontractorstomeetconstruct-ivnschedulemilestonesfortheunits.TheCompanyanticipatesthatevenifthein-servicedatesoftheSusquehannaunitsarefurtherdelayeditwillcontinuetohaveadequategeneratingreservestomeetprojectedcustomerdemandduringthefirsthalfofthe1980's.CertainoftheCompany'sgeneratingunitsarenotincompliancewithairpollutionregulationsestablishedbytheFederalCleanAirActAmendmentsof1977.See"PartII,LegalProceedings,Item1.(b),forinformationconcerningthe'possibleassessmentofpenaltiesinamountswhicharenotnowdeterminablebut'hichmaybesubstantialinamount.The"CompanyatSeptember30,1980hadguaranteedcapitalandotherobligationstotaling$211.0millionofcertainfuel-relatedsupplycompanies(principallysubsidiarycoalcompaniesandasubsidiaryoilpipelinecompany).20-PENNSYLVANIAPOWER&LIGHTCOMPANYPARTIIItem1.OTHERINFORMATIONLealProceedins(a)InMay1979,followingtheaccidentattheThreeMileIsland(TMI)nuclearstation,ownedbyGeneralPublicUtilities(GPU),theCompanyagreedtosellGPUupto200,000kilowattsofenergyperhouratcostfromPP&L'sMartinsCreekoil-firedunits.Inaddition,inOctober1979,anagreementwasenteredintobetweenGPUandotherPennsylvania-NewJersey-Maryland(PJM)companiesforGPUtopurchaseupto1,100,000kilowattsofpoweratapriceequaltothecostofenergydeliveriestoPJMplus10percent.ThePJMagreement,whichwouldhaveterminatedtheCompany'sprioragree-mentwithGPU,wasnotputintoeffectpendingapprovalbytheutilitycommissionsofVirginia,MarylandandtheDistrictofColumbia.ThePennsylvaniaPublicUtilityCommission(PUC)approvedthePJMAgreementinNovember1979.InMarch1980,GPU,asaresultoftheimpactoftheoutageatTMIgrequestedthattheFederalEnergyRegulatoryCommission(FERC)issueanOrderrequiringtheutilitymembersofthePJMpowerpooltosellGPUupto1,100,000kilowattsperhouratapriceequaltotheseller'saveragecostofdeliveryplusanyothercostsreason-ablyallocableto,supplyingsuchservice.GPU'sfilingrequestedthatthisreliefcontinueuntilsuchtimeasthe-MIUnit1resumesoperationonacontinuingbasis.Generally,PJMtransactionsutilizethe"splitsavings"pricingconcept-energyissoldinthePJMatapricewhichismidwaybetweenwhatitcoststhesellingutilitytogeneratetheenergyandwhatitotherwisewouldhavecostthebuyingutilitytogeneratetheenergyfromitsownplants.GPU,initsFERCfiling,alsoinvitedFERCtoconsiderthebroaderquestionoftheappropriatenessofthesplitsavingsconcept.TheCompanyfiledaresponseinwhichitopposedgrantingofthereliefrequestedbyGPUbutexpressedawillingnesstoperformundertheagreementreachedbythePJMmembersinOctober.Initsresponse,theCompanyreaffirmeditspositionthatthesplitsav-ingsconceptisanappropriatepowerpoolpricingmechanism.OnOctober1,1980,FERCapprovedanAgreementofSettlementandCompromisewhichhadbeensubmittedbythePJMmembers.Thetermsofthesettlementagreement,whichbecameeffectiveOctober1,1980,provide,amongotherthings,thatGPUwillbeabletopurchaseamaximumof1,700,000kilowattsofenergyperhour,upto7billionkilowattsperyear,fromPJM.Theseentitlementsaretobereducedbyone-halfofthepurchasesmadebyGPUoutsidePJM.Thesettle-mentagreement,whichterminatedtheproceedingbeforeFERC,will21-PENNSYLVANIAPOKER6LIGHTCOMPANYremainineffectuntilTMIUnit1isoperatingonacontinuing~basis.or;-untilDecember,31,1981>whicheveroccursfirst.Thecostofthe'.GPUpurchases"isbasedontheaverageincrementalcostoftheseller,'sdeliveriestoPJMplus10percent;AllenergypurchasedabovethelimitwillbepricedunderthenormalPJM"splitsavings,""pricingarrangement.Underthesettlementagreement,theCompany'sMay1979.agreementtosellGPUenergyfromitsMartinsCreeki,'oi1-firedunitshas:beenterminated.(b)The,;Federal,CleanAirActAmendmentsof1977(1977Amendments)include,amongotherthings,provisionsthat:(a)requirethepreventionofsignificantdeteriorationofexistingair"qualityinregionswhere"airqualityisbetterthanapplicableambientstandards;(b)restricttl.econstructionof'andrevisethe'perfor-mancestandardsfornewcoal-firedandoil-firedgeneratingsta-tions;.and='(c)requiretheUnitedStatesEnvironmentalProtection.Agency(EPA)to.imposesubstantialnoncompliancepenalties=forfailure'tocomplywithairpollutionregulationsafterJuly1,1979andnew-civil.penaltiesofupto$25,000perdayofviolationfo>>facilitiesfound-tobeinviolationofthe.requirements-ofanapplicablestateimplementationplan.Under-procedures"establishedbythePennsylvaniaDepartmentof'*EnvironmentalResources(DER),companiesnotincompliancewithDER"emissionregulationshavebeenpermittedto-enterintoconsent""orderswithDERwhichallowcontinuedoperationoffacilitiesduringthetimeinwhichstepsarebeingtakentoachievecom-pliance-.PaymentsarerequiredtobemadetothePennsylvaniaCleanAir,Funduntilcomplianceisachievedwithrespecttoanyparticularfacility.Inthisregard,theCompanyandDERenteredintoaconsentorderin1975which.requiresthatcompliancewithDERparticulateandopacityemissions,standardsbeachievedatBrunnerIslandUnitNo.1'yDecember31,1980andatBrunnerIslandUnitNo..3byJune30,1981.Undertheconsentorder,theCompanyisrequiredtomakepaymentstothe.PennsylvaniaCleanAirFundwhicharenotexpectedtoexceed$143,000.intheaggregate.Thisconsentorderwasadoptedas'an'orderofthePennsylvaniaCommonwealthCourton.October14,1980.-..Because..the.Companyhasbeenproceedingonaconstruction.schedule.whichisdesignedtoachievecomplianceattheBrunner-.Islandunitsbythedatessetforthinthe1975consentorderwithDER;theCompanywasnotabletoachievecomplianceatthoseunitsbythedateestablishedbythe1977Amendments:Eventhough'theCompanywasincompliancewithapplicableparticu-lateemissionregulationsatitsHoltwoodSteamElectricStation,inJuly1977EPAnotifiedtheCompanyofanallegedviolationofDER22 PENNSYLVANIAPOWER&LIGHTCOMPANYopacityregulationsatthatstation.FollowingdiscussionswithDERandEPA,theCompanyinJanuary1978agreedtoinstalladdi-tionalemissioncontrolfacilitiesattheHoltwoodstation.InMay1978,theCompanyandDERsignedaconsentorderwithrespecttotheHoltwoodstationandthatconsentorderwasenteredasanorderoftheCommonwealthCourtofPennsylvania.TheCompanyexpectsthatcompliancewiththeDERopacityregulationscanbeachievedbyMarch1,1981,thecompliancedatespecifiedintheconsentorder.Undertheconsentorder,theCompanyisrequiredtomakepaymentstothePennsylvaniaCleanAirFundaggregatingapproximately$60,000.BecauseBrunnerIslandUnitsNo.1andNo.3andtheHoltwoodstationwerenotbroughtintocompliancewithairpollutionregula-tionsbythecompliancedateestablishedbythe1977Amendments,theCompanymaybesubjecttosubstantialfinesandpenalties,includ-ingnoncomplianceorcivilpenalties,inamountswhicharenotnowdeterminable.However,EPAhasadvisedtheCompanythatpresentlyitdoesnotintendtoseekcivilpenaltiesforfailuretomeetthecompliancedateestablishedbythe1977AmendmentsprovidedthatthecomplianceschedulesspecifiedintheconsentorderswithDERcoveringtheBrunnerIslandunitsandtheHoltwoodstationaremet.Intheeventthatthesecomplianceschedulesarenotmet,theCompanymaybesubjecttocivilpenaltiesunderthe1977.Amendmentsinamountswhicharenotnowdeterminablebutwhichmaybesubstan-tialinamount.TheCompanyandEPAalsohavediscussedaconsentorderunderwhichnoncompliancepenalties.wouldnotbeleviedagainsttheCompanyforfailuretobringtheBrunnerIslandunitsandtheHoltwoodstationintocompliancewithairpollutionregulationsbythecompliancedateestablishedbythe1977Amendments.EPAhasadvisedtheCompanythatnoncompliancepenaltieswillnotbelevied,ifatall,untilJanuary1,1981.BasedonitsinterpretationoftheformulaproposedbyEPAinMarch1979,theCompanyestimatesnoncompliancepenaltieswithrespecttotheBrunnerIslandandHoltwoodunitswouldnotexceed$100,000intheaggregate.InSeptember1980theCompanyreceivednotificationfromthe.SierraClub,aprivatenonprofitcorporation,allegingthattheoperationoftheCompany'sBrunnerIslandUnitsNo.1andNo.3is,andsinceJune1,1977,hasbeeninviolationofanemissionstandardorlimitationundertheFederalCleanAirAct(CleanAirAct).UndertheCleanAirAct,theSierraClubmaycommenceacivilsuitinfederaldistrictcourtagainsttheCompanytoenforcetheCleanAirActemissionstandardorlimitationsixtydaysaftersuchnotice.TheCompanyisuncertainastowhatfurtheraction,ifany,willbetakenbytheSierraClubinthismatter.

PENNSYLVANIAPOWER&LIGHTCOMPANY.(c)"The.'.CompanyoperatestheHoltwoodhydroelectricproject,(102,000kwcapability),,the:.originallicenseforwhichexpiredin1970.Rend-.ingfinal..actionontheCompany'sapplicationfornewlong-termlicensesfortheHoltwoodproject,whichwas.opposedbyamunicipalelectric-,system,FERCgrantedtheCompanyinterimannuallicensestooperate.the.project.TheSusquehanna'River.BasinCommission(SRBC),.althoughnotapartytothelicensingproceeding,identi-fiedtoFERCcertainissuesrelatingtofloodcontrol,waterqualityand"other.:environmental.matters,.thatitallegedshouldbecon-.sideredin.therelicensingofHoltwood..In.September1980,the.Companyreceivedanewlong-term1icensefortheHoltwoodprojectwhichextendsuntilSeptember1,2004."-'The-Companyalsoownsone-.thirdofthecapitalstockofSafeHarbor.'Water.Power.Corporation(SafeHarbor)whichholdsamajor.projectlicense.forthe-operationofitshydroelectricplant(230,000kw:capability)..TheCompanyisentitledtoone-thirdofthecapacity(76,000-kw).:oftheSafeHarborplant.In,April,1977Safe.Harborfiled;an<<.;applicationwithFERCforanew1ong-termlicenseandthe.proposed.installationoffiveadditional37,500kwunits.TheSRBC<<andan::associationoflandownersinthevicinityoftheSafeHarborplant,werepermittedtointerveneintheSafeHarborlicensingproceeding..The..additionalunitswould.increasethetotalcapa-bility.of.theSafe,Harborplantto417,500kwandtheCompanywill-..beentitled,toone-thirdofthetotalcapacity(139,167kw).XnSeptember1980,SafeHarborreceivedanewlong-termlicensewhich::extendsuntilApril22,2030.Thenewlicenseapprovestheinstallationoffouroftheadditionalunits.FERCreservedjudgment.withrespecttotheinstallationof.thefifthunituntil.;such,time.,asadditionalwaterqualitystudiesaredeveloped,per-,formed:andfiledwithZERCandtheeconomicdesirabilityofthefifth".unit.:isre-evaluatedtakingintoaccounttheresultsofsuch.studies.'The.new,HoltwoodandSafeHarbor,licenses,requiredevelopment,inconsu1tationwithappropriategovernmentalagencies,ofmutuallysatisfactorystudy,plansrelatingtowaterqualityandotheren-vironmenta1matters."The.SRBCandthePennsy1vaniaFishCommissionhave,filedandZERChasgranted,applicationsforrehearingwithrespecttothere-licensing.ofHoltwoodandSafeHarboralleging,amongotherthings,thatFERC.shouldhave.imposedfurtherrequirementsinthenewlicenses.relating.,tofloodcontrolandwaterqualitymanagementandthatadjudicatoryhearingsshouldhavebeenconductedwithrespecttocertainissuesraisedduringtherelicensingproceedings.24-PENNSYLVANIAPOWER&LIGHTCOMPANY(d)FERCpillholdaseparatehearinginSeptember1981toinvestigatevariousmeasurestoenhancefishingresourcesintheSusquehannaRiverBasin,includingthepossibleinstallationoffishpassagefacilitiesattheHoltwoodandSafeHarborprojects.TheCompanyandGeneralAtomicCompany(GAC),apartnershipofGulfOilCorporationandScallopNuclear,Inc.,haveenteredintoanagreement,datedOctober22,1980,tosettleanactionbroughtbytheCompanyintheCourtofCommonPleasofLehighCountyin1974.IntheactiontheCompanysoughtdamagesfromGACforitsfailuretodelivertoPP&LuraniumandfabricatedfuelelementsfortheCompany'sSusquehannanuclearpowerplant,andGACfiledcounter-claimsagainsttheCompany.Underthesettlement,GACwillselltotheCompany2.5millionpoundsofuraniumduringtheyears1982-1987atapriceexpectedtobebelowthemarketprice,andguaranteednottoexceedthemarketpriceduringthatperiod.Deliveriesofuraniumunderthesettle-mentagreementandotherexistingsupplyarrangements,areexpectedtoprovidealloftheCompany'srequirementsforuraniumthrough1987.Inaddition,theCompanyhasgivenGACanoptiontosupplyupto2.8millionpoundsofuraniumatmarketpriceduringtheyears1988through1995.GACwillalsomakepaymentstotaling$43.9millionovertheperiod1980through1987totheCompanyandasubsidiary,UraniumResources&DevelopmentCompany(URADCO)fordamagesresultingfromGAC'sfailuretodeliveruraniumandfabricatedfuelassembliestotheCompany.AfterreimbursementofURADCOforexpensesincurredinanefforttoenhancetheCompany'suraniumsupplies,thepaymentswillbeusedtoreducethecostofuraniumfueltotheCompany'sratepayersthroughoperationoftheCompany'snetenergyclause.ThesettlementwillhavenoeffectonthenetincomeoftheCompany.Item5.IncreaseinAmountOutstandinofSecuritiesorIndebtedness1.CommonStock(a)CommonStock,withoutnominalorparvalueSharesofCommonStockoutstandingaslastreported(asofJune30,1980)intheCompany'sForm10-QReportforthequarterendedJune30,1980.(FileNo.1-905)44,936,803sharesSharesofCommonStockissuedonAugust25,1980inconnectionwiththeacquisitionofthecapitalstockofTheArcadiaCompany,Inc.pursuanttotheAgreementandPlanofReorganizationdatedDecemberlg1979.492,537shares25-PENNSYLVANIAPOWER&LIGHTCOMPANYItem5.IncreaseinAmountOutstandinofSecuritiesorIndebtedness'(Cont'd)SharesofCommonStockissuedduringtheperiodJuly1,1980throughSeptember30,1980.pursuanttotheCompany'sDividendReinvestmentPlan,asdescribedintheProspectusdated.April10,1980,whichisincludedintheRegistrationStatement(FileNo.2-67059)andincorporatedherein.byreference.726,256sharesISharesofCommonStockissuedduringtheperiodJuly1,1980through,September,30,1980pursuanttothetermsofanEmployeeStockOwnership'PlanadoptedbytheCompanyin1976,andasdescribedintheRegistrationStatemeniFileNo.2-64872.4,550sharesTotal.sharesofCommonStockpresentlyoutstanding(asofSeptember30,1980),.46,160,146shares(b)The492.,537sharesofCommonStockwereissuedtoacquireallofArcadia's.outstandingcapitalstock.TheCompanyassignedavalueof$9,,235,,000toitsinvestmentinArcadiawithacorrespondingcredittoCommonStock.Theacquisitionalsoinvolvesthepaymentofabout$2millionforcoalreservesheldbyArcadia'sstockholdersasindividuals.The726,256sharesofCommonStockwereissuedbytheCompanyduringthe.'periodJuly1,1980throughSeptember30,1980pursuanttoitsDividendReinvestmentPlanresultinginproceedstotheCompanyof$13,339,000.Foramorecompletedescriptionoftheoperationofthe',DividendReinvestmentPlan,referenceismadetotheProspectusdatedApril10,1980(FileNo.2-67059).The4,550sharesofCommonStockwereissuedtotheTrusteebytheCompanyduringtheperiodJuly1,1980throughSeptember30,1980pursuant-toitsEmployeeStockOwnershipPlan,atapriceof$20.35pershare,or$92,000.ForamorecompletedescriptionoftheoperationoftheEmployeeStockOwnershipPlan,referenceismadetotheProspectusdatedJuly19,1979(FileNo.2-64872).(c)None.(d)The,proceedsfromthesalesofCommonStockdescribedhereinwereaddedtotheCompany'sgeneralfundsandwereusedforgeneralcorporatepurposesincludingthereductionofshort-termdebtin-curredtoprovideinterimfinancingforconstructionandnuclearfuelexpenditures.

PENNSYLVANIAPOWER6LIGHTCOMPANY(e)ThesharesofCommonStockissuedtothestockholdersofTheArcadiaCompany,Inc.werenotregisteredundertheSecuritiesActof1933becausethetransactioninvolvedwasatransactionbyanissuernotinvolvingapublicofferingpursuanttotheSecuritiesActof1933,asamended.Accordingly,eachcertificateforthesharesbearsalegendstatingthatthesharesrepresentedbysuchcertificatehavenotbeenregisteredundertheSecuritiesActof1933andcannotbesoldortransferredunlessanduntiltheyaresoregisteredorunlessanexemptionundersuchActisthenavailable.StoptransferinstructionswereissuedtothetransferagentsandappropriatenotationsofthetransferrestrictionshavebeenmadeontherecordsoftheCompany.ThesharesacquiredbythestockholderswerereceivedinconnectionwiththeacquisitionofthecapitalstockofTheArcadiaCompany,Inc.bytheCompany.The726,256sharesofCommonStockissuedpursuanttotheDividendReinvestmentPlanwereregisteredundertheSecuritiesActof1933,asamended,(FileNo.2-67059).The4,550sharesofCommonStockissuedpursuanttotheEmployeeStockOwnershipPlanwereregisteredundertheSecuritiesActof1933,asamended,(FileNo.2-64872).(f)None.Item9.ExhibitsandReortsonForm8-E(a)SeeExhibitIndexonpage28.(b)NoreportsonForm8-KhavebeenfiledforthethreemonthsendedSeptember30,1980.27 PENNSYLVANIAPOWER&LIGHTCOMPANYExhibitIndexChrtainofthefollowingExhibits'refiledherewithandareindicated,assuchby'nasterisk'receding:theexhibitnumber.CertainotherExhibit's-haveheretofore"been-filedwith;theCommissionandpursuanttoRegulation"~201'.24,areincorporatedherein.byreference.*4(a)*4(b)4'(c)CopyofRestatedArticlesofIncorporationCopyofBy-laws-Copy-ofEmployeeStock,Ownership.Plan(Exhibit.1(a)toRegistrationStatementNo.2-.'6'4872)20,(a)-1MortgageandDeedofTrustdatedas:ofOctober1',,1945,betweentheCompanyandGuarantyTrustCompanyof"New.York(nowMorganGuarantyTrust'ompanyofNewYork),-asTrustee(Exhibit2(a)-4toRegistrationStatement,No.2-.'0291)20(a);2.Supplement,datedasofJuly1,1947,tosaidMortgageandDeedofTrust(Exhibit2(a)-5'oRegistrationState-mentNo-.2-60291)20(a)-3"Supplement,datedas-ofDecember1,1948',tosaid'Mort-gage'ndDeedofTrust(Exhibit2(a)-6toRegistrationStatementNo.2-60291)20(a)-4Supplement,datedasofFebruary1,1950,tosaidMort-gageandDeedof'Trust'(Exhibit2'(a)-7'oRegistrationStatementNo.2-60291)20,(a)-5Supplement,datedasofMarch1,1953,tosaidMortgageand.DeedofTrust(Exhibit2(a)-8toRegistrationState-mentNo.2-60291)20(a)-6'upplement;datedJuly1,1954,tosaidMortgageand'eed"ofTrust-(Exhibit2(b)-5:toRegistrationStatementNo;2-19255)20(a)-7"Supplement,datedasofAugust1,1955,to'aidMortgageandDeedofTrust(Exhibit2'(a)-10toRegistrationStatementNo.2-60291)20,(a)-8'upplement,datedasofDecember1,1961,tosaidMort-gageand-DeedofTrust(Exhibit2(b)-7toRegistrationStatementNo.2-19255)20(a)-9'upplement,datedasof,March1,1964,tosaidMortgageandDeedofTrust(Exhibit2(a)-12toRegistrationStatementNo.2-60291)20(a)-10*FiledherewithSupplement,datedasofJune1,1966,tosaidMortgageandDeedofTrust(Exhibit2(a)-13toRegistrationStatementNo.2-60291)28-PENNSYLVANIAPOWERaLIGHTCOMPANYSupplement,datedasofNovember1,1967,tosaidMort-gageandDeedofTrust(Exhibit2(a)-14toRegistrationStatementNo.2-60291)Supplement,datedasofDecember1,1967,tosaidMort-gageandDeedofTrust(Exhibit2(a)-15toRegistrationStatementNo.2-60291)Supplement,datedasofJanuary1,1969,tosaidMort-gageandDeedofTrust(Exhibit2(a)-16toRegistrationStatementNo.2-60291)Supplement,datedasofJune1,1969,tosaidMortgageandDeedofTrust(Exhibit2(a)-17toRegistrationStatementNo.2-60291)Supplement,datedasofMarch1,1970,tosaidMortgageandDeedofTrust(Exhibit2(a)-18toRegistrationStatementNo.2-60291)Supplement,datedasofFebruary1,1971,tosaidMort-gageandDeedofTrust(Exhibit2(a)-19toRegistrationStatementNo.2-60291)Supplement,datedasofFebruary1,1972,tosaidMort-gageandDeedofTrust(Exhibit2(a)-20toRegistrationStatementNo.2-60291)Supplement,datedasofJanuary1,1973,tosaidMort-gageandDeedofTrust(Exhibit2(a)-21toRegistrationStatementNo.2-60291)Supplement,datedasofMay1,1973,tosaidMortgageandDeedofTrust(Exhibit2(a)-22toRegistrationStatement-No.2-60291)Supplement,datedasofApril1,1974,tosaidMortgageandDeedofTrust(Exhibit2(a)-23toRegistrationStatementNo.2-60291)Supplement,datedasofOctober1,1974,tosaidMort-gageandDeedofTrust(Exhibit2(a)-24toRegistrationStatementNo.2-60291)Supplement,datedasofMay1,1975,tosaidMortgageandDeedofTrust(Exhibit2(a)-25toRegistrationStatementNo.2-60291)Supplement,datedasofNovember1,1975,tosaidMort-gageandDeedofTrust(Exhibit2(a)-26toRegistrationStatementNo.2-54831)

PENNSYLVANIAPOWER&LIGHTCOMPANYSupplement,datedasofDecember1,1976,tosaidMort-gageandDeedofTrust(Exhibit2(a)-26toRegistrationStatementNo.2-57633)Supplement,datedasofDecember1,1977,tosaidMort-gageandDeedofTrust(Exhibit2(a)-28toRegistrationStatementNo.2-60291)Supplement,datedasofApril1,1979,tosaidMortgageandDeedofTrust(Exhibit2(a)-29toRegistrationStatementNo.2-65872)Supplement,datedasofApril1,1980,tosaidMortgageandDeedofTrust(Exhibit2(a)-30toRegistrationStatementNo.2-66852)MortgageandDeedofTrust,datedasofFebruary15,1937,betweenTheScrantonElectricCompany(towhich:companytheCompanyissuccessorbymerger).andChemicalBankaTrustCompany(nowChemicalBank)andHowardB.Smith(P.J.Gilkeson,successor),asTrustees(ExhibitDtoRegistrationStatementNo.2-6289)Supplement,datedasofNovember1,-1946,tosaidMort-gageandDeedofTrust(ExhibitB-1toForm1-MDRegis-tration.StatementNo.2-6289)Supplement,datedasofApril1,1948,tosaidMortgageandDeedofTrust(Exhibit2(a)-31toRegistrationStatementNo.2-60291)Supplement,datedasofMay15,1952,tosaidMortgageandDeedofTrust(Exhibit2(a)-32toRegistrationStatementNo.2-60291)Supplement,datedasofSeptember1,"1952,tosaidMortgageandDeedofTrust(Exhibit2(a)-33toRegistra-tionStatementNo.2-60291)Supplement,datedasofJanuary31,1956,tosaidMort-gageandDeedofTrust(Exhibit2(a)-34toRegistrationStatementNo.2-60291)Supplement,datedJanuary31,1956,tosaidMortgageandDeedofTrust(Exhibit2(d)-6toRegistrationStatementNo.2-19255)Instrumentprovidingforresignationof,IndividualTrusteeandappointmentofsuccessorIndividualTrusteeundersaidMortgageandDeedofTrust(Exhibit2(a)-36toRegistrationStatementNo.2-60291)

PENNSYLVANIAPOWER&LIGHTCOMPANYInstrumentprovidingforresignationofIndividualTrusteeandappointmentofsuccessorIndividualTrusteeundersaidMortgageandDeedofTrust(Exhibit2(a)-37toRegistrationStatementNo.2-60291)InstrumentprovidingforresignationofIndividualTrusteeandappointmentofsuccessorIndividualTrusteeundersaidMortgageandDeedofTrust(Exhibit2(A)-37toRegistrationStatementNo.2-58290)LoanAgreementdatedFebruary9,1973,betweentheCom-panyandTheChaseManhattanBank,N.A.,asamended(Exhibit2(a)-39toRegistrationStatementNo.2-60834)PreferredStockPurchaseAgreement,datedJulyll,1973,betweentheCompanyandThePrudentialInsuranceCompanyofAmerica(Exhibit2(a)-40toRegistrationStatementNo.2-60834)PreferenceStockPurchaseAgreement,datedSeptemb'er22,1975,betweentheCompanyandAlcoStandardCorporation(Exhibit2(a)-41toRegistrationStatementNo.2-60834)CompositeconformedcopyofPreferredStockPurchaseAgreement,datedOctoberll,1977,betweentheCompanyandthepurchasersnamedtherein'(Exhibit2(a)-42toRegistrationStatementNo.2-60291)CompositeconformedcopyofPreferredStockPurchaseAgreement,datedAugust7,1978,betweentheCompanyandthepurchasersnamedtherein(Exhibitb(l)-43toRegis-trationStatementNo.2-63794)CompositeconformedcopyofLoanAgreement,datedasofOctober1,1978,betweentheCompanyandtheLendersnamedtherein(Exhibitb(1)-46toRegistrationStatementNo.2-63794)CompositeconformedcopyofPreferredStockAgreement,datedJanuary15,1979,betweentheCompanyandthepurchasersnamedtherein(Exhibitb(l)-44toRegistra-tionStatementNo.2-63794)CompositeconformedcopyofPreferredStockPurchaseAgreement,datedJanuary26,1979,betweentheCompanyandMinnesotaMiningandManufacturingCompany(Exhibitb(l)-45toRegistrationStatementNo.2-63794)CompositeconformedcopyofBondPurchaseAgreement,datedApril3,1979,betweentheCompanyandthepur-chasersnamedtherein(Exhibit2(a)-48toRegistrationStatementNo.2-65872)

PENNSYLVANIAPOWER&L'IGHT'COMPANY'0(a)-47ConformedcopyofPreferredStockPurchaseAgreement,datedApril17,1979,betweentheCompanyand"Metropoli-tanLifeInsuranceCompany(Exhibit7toRegistrati'on.StatementNo.2-65872)20(a)-48'ConformedcopyofPre'ferredStockPurchase"Agreement,datedNovember1,1979,betweentheCompany,and:thepurchasersnamedtherein(Exhibit2(a)-51toRegistra-tionStatementNo.2-66852),20(a)-49ConformedcopyofPreferenceStockPurchaseAgreementgdatedJanuary25,1980,betweenthe.Companyandthepurchasersnamedtherein(Exhibit2(a)-'52to-Registra-tionStatementNo2-66852)""20(b)CopyofInterconnectionAgreement,datedSeptember26,1956,amongPublicServiceElectric&GasCompany,'PhiladelphiaElectricCompany,'the'Company,BaltimoreGas&ElectricCompany,PennsylvaniaElectric-Company,"MetropolitanEdisionCompany,NewJerseyPower&Light'CompanyandJerseyCentralPower&'LightCompany(Ex-hibit5(e)toRegistrationStatementNo.2-60291);20'(b)-1CopyofSupplementalAgreement,datedJanuary28,,1965,tosaidInterconnectionAgreement(Exhibit13(d)-1.toRegistrationStatementNo.2-26170);"20(b)-2CopyofSupplementalAgreement,"datedApril1,.1974,tosaidInterconnectionAgreement(Exhibit5(f)-4toRegis-trationStatementNo.2-51312)'.20(b)-3CopyofSupplementalAgreement,datedJune15,l977,tosaidInterconnectionAgreement(Exhibit5(e)-5to'Regis-trationStatementNo.2-60291)"20(b)-4'20(b)-5CopyofSchedule7.03,RevisionNo.1issued'December12,1977.tosaidInterconnectionAgreement(Exhibit5(b)-7toRegistrationStatementNo.2-65872)CopyofSchedule5.05issuedJanuary19,1979'to"said'InterconnectionAgreement(Exhibit5(b)-5toRegi'stra-tionStatementNo.2-65872)'.20(b)>>6CopyofSchedule4.01,RevisionNo.2andSchedule9.01,RevisionNo.1issuedMarch15,1979tosaidIntercon-nectionAgreement(Exhibit5(b)-9toRegistrationState-mentNo.2-65872)*20(b)-7CopyofZnterimModi,ficationsto'chedules6.03.and7.01,InterimSchedule10.1andArticle15,alleffectiveOctober1,1980,tosaidInterconnectionAgreement"*Filedherewith PENNSYLVANIAPOWER&LIGHTCOMPANY*20(b)-8CopyofAgreementofSettlementandCompromisedatedasofJuly25,1980amongthepartiestosaidIntercon-nectionAgreement20(c)MemorandumofAgreementregardingKeystoneElectricGeneratingStation,datedDecember7,1964,betweentheCompanyandAtlanticCityElectricCompanyetal.(Ex-hibit5(j)toRegistrationStatementNo.2-60291)20(d)KeystoneOperatingAgreement,datedDecember1,1965,betweenPennsylvaniaElectricCompanyandtheCompanyetal.(Exhibit5(k)toRegistrationStatementNo.2-60291)20(e)MemorandumofOwners'greementregardingConemaughSteamElectricStation,datedAugust1,1966,betweentheCompanyandAtlanticCityElectricCompanyetal.(Exhibit5(l)toRegistrationStatementNo.2-60291)20(f)ConemaughOperatingAgreement,datedDecember1,1967,betweenPennsylvaniaElectricCompanyandtheCompanyetal.(Exhibit5(m)toRegistrationStatementNo.2-60291)20(f)-1SupplementNo.1,datedJune4,1969,tosaidConemaughOperatingAgreement(Exhibit5(m)-1toRegistrationStatementNo.2-60291)20(g)CopyofMid-AtlanticAreaCoordinationAgreement,datedMay25,1979,betweentheCompanyandAtlanticCityElectricCompany,etal.(Exhibit5(g)toRegistrationStatementNo.2-65872)20(h)PollutionControlFacilitiesAgreement,datedasofMay1,1973,betweentheCompanyandtheLehighCountyIndustrialDevelopmentAuthority(Exhibit5(z)toRegis-trationStatementNo.2-60834)20(i)'opyofParticipationAgreement,datedasofMarch18,1977,betweentheCompanyandAlleghenyElectricCooper-ative,Inc.(Exhibit5(dd)toRegistrationStatementNo.2-60291)20(3)CopyofCapacityandEnergySalesAgreement,datedSeptember24,1979,betweentheCompanyandAtlanticCityElectricCompany(Exhibit5(o)toRegistrationStatementNo.2-65872)*20(k)CopyofSettlementAgreement,datedOctober22,1980/betweentheCompanyandGeneralAtomicCompany.*Filedherewith33 PENNSYLVANIAPOWER6LIGHT'COMPANY'ntheopinionoftheCompany,theaccompanying.unauditedfinan-cialstatementscontainalladjustments(consisting:ofonly.normal,recur-ringaccruals)necessarytopresentfairlythefinancialpositionas-ofSeptember30,1980andSeptember30,1979,theresultsofoperationsforthethreemonthsandninemonthsendedSeptember30,1980andSeptember30,3.979andthechangesinfinancialpositionfortheninemonthsendedSeptember30.,1980andSeptember30,'979.SIGNATUREPursuanttotherequirementsoftheSecurities"Exchange'Act"of1934,theregistrant"hasdulycausedthisreport'tobesigned',onits.behalfbythe-undersignedthereuntodulyauthorized,.PennslvaniaPoweraLihtComan(Registrant)DateOctober311980(Signed)R.R.Fortune'R.'R.FortuneExecutiveVicePresident-Financial BEFORETHEPENNSYLVANIAPUBLICUTILITYCOMMISSIONRATEINVESTIGATIONDOCKETNO.R-80031114COMPLAINTDOCKETNOS.R>>80031114C001,etal.R-80031114-PennsylvaniaPublicUtilityCommissionR-8003114C001-LehighValleyPowerCommittee,etal.v~PennsylvaniaPower&LightCompanyRECOMMENDEDDECISIOiVOFTHEADMINISTRATIVELAWJUDGE(SubjecttoCommissionApproval)MorrisMindlinAdministrativeLawJudgeDatea'.December12,1980 BE.FORETHEPENNSYLVANIAPUBLICUTILITYCOMMISSIONRATEINVESTIGATIONDOCKETNO.R-80031114COMPLAINTDOCKETNOS.R-80031114C001,etal.R-80031114C-80031114C001C-80031114C002C-80031114C003C-80031114C004C<<80031114C005C-80031114C006C-80031114CQ07C-80031114C008PennsylvaniaPublicUtilityCommissionLehighValleyPowerCommittee,etal.PhilipStarrWalterW.Cohen,ConsumerAdvocateWillardVerbitskyTrippParkCivicAssociationBethlehemSteelCorporationPoconoDowns,Inc.SusquehannaEnvironmentalAdvocates,Inc.M&M/Mars,Inc.,Intervenerv~PennsylvaniaPower&LightCompany,Respondent

TABLEOFCONTENTSOFRECOMMENDEDDECISIONATR-80031114,ETAL.DATED:DECEMBER15,1980SUBJECTPAGF.NUMBERIndexofTablesIntroductionTheCompanyBAFurtherBriefPreliminaryStatementRateBaseElectricPlantHeldforFutureUseCWIP-PollutionControlFacilitiesInvestmentinCoalReservesFuel,Materials,andSuppliesInventoryCashWorkingCapitalCommissionAuditAdjustmentDepreciationReserveSummaryRateofReturnCapitalStructureCostofDebtCostofPreferred'andPreferenceStockCostofCommonEquityFairRateofReturnRevenuesandExpensesOperatingRevenuesOperatingExpenses-GeneralObservationEducationalAssistanceExpenseAreaEconomicDevelopmentProgramExpense-RecreationalFacilitiesRateCas'eExpenseFeeLinesofCreditMajorForcedOutageInsuranceLeasedEquipmentExpenseAnnualDepreciationExpenseMiscellaneousOperatingExpenseIssuesIncomeTaxesInterestDeductionTaxDepreciationTaxNormalizationConsolidatedTaxLossesNonjurisdictionalSalesRateStructureConclusionRecommendedOrder138101013131717222224252626282831333336373738394041434445'474750505558616264 INDEXOFTABLESTable~PaeNe.Respondent'sClaimedMeasuresofValueandRateofReturnasofDecember31,198010aCommissionStaffRateBaseAdjustments.10bIIIConsumerAdvocateRateBaseAdjustments10cIVRespondent'sClaimedOperatingIncomeatProposedRates,YearEndedDecember31,1980TrialStaffRevenue/ExpenseAdjustments33a33bVIConsumerAdvocateRevenue/ExpenseAdjustments33c RECOifiafEHDEDDECISIONBYTHEADHINISTRATIVELA!fJUDGE:OnApril29,1980,tneRespondent,PennsylvaniaPower&LightCompany,filedSupplementNo.73toTariffElectricPa.P.U.C.No.198,tobecomeeffectiveJuly28,1980.TheSupplementcontainsproposedchangesinrates,calculatedtoproduce$123,312,000inadditionalannualrevenues.Theseadditionalannualrevenuesrepresentapprox-imately16%ofad)ustedbaseraterevenues,calculateduponthebasisofafuturetestyear,endingDecember31,1980.ByOrder,adoptedJune26,1980andenteredJuly8,1980,theCommissioninstitutedaninvestigationonitsownmotiontodeterminethelawfulness,justness,andreasonablenessoftheRespondent'sexistingandpro-posedrates,rulesandregulations.SupplementNo.73wassuspendeduntilJanuary28,1981byoperationoflawfortheseven-months'eriod,providedunderSection1308ofthePublicUtilityCode,66Pa.,C.'S.g1308.TheCommis-siondirectedassignmentoftheproceedingtoanadministra-tivelawjudgeforhearingandrecommendeddecisionsComplaintsandinterventionfolloweduponthe Respondent'sfiling,asindicatedinthecaption.TheCom-missionTrialStaffpartiaipatedinduecourse.TheGov-ernor'sEnergyCouncilpetitionedtointervene.Itspeti-tionwasdeniedinitiallybutwasgrantedlater.TheCoun-cilthendeclinedtoparticipatebecauseofthedelayedenablement.Pursuanttohisassignment,thepresentpresidingofficerconductedaprehearingconferenceonJuly15,1980.TneCommission'sinvestigationandthecomplaintswerecon-solidatedforhearinganddisposition.EighteendaysofhearingswereheldbetweenAugust5andOctober2.Thetranscripts.total1,961pages;TheRespondentsubmitted25writtenstatementsofdirect'andrebuttaltestimonyfrom14witnessesandsub-mitted18exhibitsofsubstantialvolume.Itrespondedtonumerousinterrogatoriesanddatarequests,alsoinsubstan-tialvolume.Theotherpartiespresented24writtenstate-mentsfrom16witnessesandalsosubmittednumerousexhibit".Settlementdiscussionsresultedinsomeagreementandproducedtwostipulations,towhichweshallrefer,intheareasofratestructureanddepreciation.DetailedbriefsandreplybriefsweresubmittedbytheRespondent,theCommissionTrialStaff,andthe ConsumerAdvocate.OralargumentwasheldonNovember5,1980.Thematterisnowbeforeusforrecommendeddecision.THECO~ifPANYTheRespondentwasincorporatedonJune4,1920underthelawsofthisCommonwealthasaconsolidationofeightelectriccompanies.OnNarch1,1980,theformerHersheyElectricCompanywasmergedintoit.TheRespondentpresentlyservesa10,000squaremileterritoryin29coun-tiesincentral-easternPennsylvania.Itsterritoryhasapopulationofabout2,400,000andcontainsextensiveagriculturalandindustrialregionsaswellasover800majorcommunities,includingthecitiesofAllentown,Bethlehem,Harrisburg,Lancaster,Scranton,Wilkes-BarreandWilliamsport.Fortheyear,endingDecember31,1980,theCompany,includingtheformerHersheyElectricCompany,willserveover1,000,000.jurisdictionalcustomers.Inbroadmagnitude,itsprojectedrevenuesforthetestyearareintheareaof$900million.TheRespondentalsosupplieswholesaleelectricserviceto14Pennsylvaniaboroughsandoneelectricutilitycompany.ItprovideselectricservicetotheLuzerneElectric DivisionofU.G.I.underafirmpowersupplyagreement.ThesewholesaleservicesaresubjecttotheregulatoryjurisdictionoftheFederalEnergyRegulatoryCommission(FERC).TheCompanyownsandoperatesfivesteamandtwohydroelectricgeneratingstationsaswellasanumberofcombustionturbineanddieselunits.Additionally,itisentitledto12.34%oftheKeystonestationand11.39%oftheConemaughstation,twomine-mouthplants,)ointlyownedwithothercompanies.TheCompany'generatingcapabilityalsoincludesthepurchaseof76,000kwfromthehydroelec-tricplantofSafeHarborMaterPowerCorporation,one-thirdofwhichisownedbytheRespondent.TheCompany'stotalgeneratingcapabilitywas6,546mwatDecember31,1979.Itssystemconsistsofanintegratedpowertrans-missionsystemwith980milesoflines,operatingat230,000voltsorhigher,morethan270substationsofacapacityof10,000kvaandover,andmorethan47,000milesofdis-tributionlines,operatingatlessthan230,000volts.TheRespondent'sgenerationandtransmissionfacilitiesareinterconnectedwiththePennsylvania-NewJersey-Haryland(PJH)Interconnection.ThePJ~LfIntercon-nectionconsistsofelevencompanies,servingabout21>000>000peopleina50,000squaremileterritory,coveringall

orpartofPennsylvania,NewJersey,Maryland,Delaware,VirginiaandtheDistrictofColumbia.Pursuanttoanin-terconnectionagreement,filedwithFERCandsubjecttoitsexclusivejuri8diction,thePJMmemberscoordinatetheirbulkpowersystemstoachieveeconomiesandahighdegreeofservicereliabilitythroughcoordinationofoperations.Wesupposethatthiscustomaryprofileofapublicutility,seekinganincreaseinrevenues,isintendedtolendameasureofinterestedcomprehensionoftheidentity,character,andmagnitudeofthissourceofavitalpublicutilityservice.Wearewonttotakethisserviceforgranted.WemightaddskeletalstatisticstotheRespondent'sprofile.Weconsiderit,however,moreappropriatetofleshouttheRespondent'profile.Atyear-end1979,thesystemwasfunctioningthrough7,590employees.Theseemployeeswerepaid'$182,204,000inwagesandemployeebenefitsfortheiroperating,constructionandotheractivities.Atyear-end1979,theCompanywasownedby205,404shareowners,owning50,224,941sharesandrepresentingapprox-imately$1~8billioninequityinvestment.Ofthesharehold-ers,approximately131,000owned100sharesorlessand approximately~6.6millionsharesintotal.Theshareownersincludedmen,women,andjointtenants,'rustees,etc.;brokers;insurancecompanies;churches,schools,etc.;banks,trustfuhds,etc.,'orpor-ations;andbanknominees.Oftheseshareowners,33%comefromtheRespondent'sserviceareaand32%fromotherplacesinourstate.Atourrequest,theRespondentsuppliedadditionalprofilematerial.Anupdatedprofileofshareowners(Exh.250.0001002)asofJuneofthisyearshowsnosignificantdifferencefromourstatistics,culledfromanearlierex-hibit(Exn.200.2000901).Respondentalsosuppliedareporton.a.surveyofitsshareholders,entitled"WhoOwnesP.P.&L;?"Thereportwaspublishedin1976.ItindicatesthebroadbaseofRespondent~'shareowners.Thereport(Exh.250.0001001)concludes"thattherealownersofP~P.&L.prettymuchareaveragepeople."Amongthecharacteristicsof"atypicalowner"arethattheowner"ismorelikely,femalethanmaleandover60yearsold;""hasanannualincomeofbetween$10,000and$20,000;"and"purchasedthestockatleastfiveyearsagotosupple-mentretirementincome."Itistoberememberedthatmanyinstitutionalinvestorsaresimplyrepresentativesofindi"vidualandtypicalinvestors..

Wehaveaddedameasureofidentity,becausethereisaremarkableunawarenessoverthehumanaspectofcorporateenterprise.Thereisalsoaremarkableunawarenessandindifferenceoverthefactthat,whateverthesourcesofcapital,averysignificantportionderivesfromthesavingsofandforordinarypeople.Identitiesarelostinlargenumbers.

AFURTdERBRIFFPRELIi~fINARYSTATEMENTTheRespondentisse'eking,inroundnumbers,$120millioninadditionalannualrevenuesfromitsjurisdictionalcustomers.TheCommissionStaffrecommendsanentitlementof$71million.TheConsumerAdvocaterecommends$46million.Reasonshuddersamidthesedisparities.Thevoluminous,virtuallyannualorbiennialre-litigationofrepeatedapplicationsforrateincreaseshasbeenlikenedto"reinventingthewheel".ThisRespondent,uncharacteristically,waslastbeforetheCommissionina,;majorrateproceedingin1976.(RID221).Thepresentproceeding,fullyvoluzninous,hasthecharacteristicofreinventionofthewheelbylitigation.,Amongthepanoplyofissues,theRespondentem-phasizesitsdeterioratingfinancialcondition.TheStaffemphasizesthattheoverallincreaseshould"bewhateverisjustifiedasaresultofthedecisionsontheindividualissues"(ReplyBrief,p.4).TheStaffhasaddressedapproximatelythirtyissuesintheareasofrevenues,ex-penses,andratebase.TheConsumerAdvocatehasoverlappedmostoftheseissuesandaddedafewofhisown.Ofcourse,therearelegitimateandsignificant issues.Someofthese,properlychallengingpolicy,aregiventendentiousattention'.Otherissuesarisefromanattitude,typifiedbythenotionthatresearchanddevelop-mentexpenseisillegitimateintheabsenseofsuccessfulresult.(T.1579-1580).Stillotherissueshaveamateri-ality,typifiedbynineStaffadjustments,rangingfrom$3,000to$58,000inincomeeffeet.TheStaffrecommendsacostofequityof14.3%,just2basispointsovertheCommi'ssion'findinginAugust,1976.TheConsumerAdvocaterecommends12.8%,virtually150basispointsbelowtheCommission'slastfindingandover100bas'ispointsbelowthecouponrateoftheRespond-ent'smostrecentbond.issue.Theserecommendationsaremadewitha.sanguineassuranceofprospectivefairness,atatimewhentheRespondent'srecentcommonstockissuebroughtnetproceedspershareat62%ofrecentbookvaluehpershare.Unfortunately,wearecompelledtodealwithalltheseissues,virtuallywhilestandingononeleg.

RATEBASETheRespondentclaimsameasureofvalueof$2,141,399,000atoriginalcostdepreciatedasofthefuturetestyearend,December31,1980.Withadjustments,theStaffrecommends$2,066,200,000.TheConsumerAdvocaterecommends$2,020,813,000.Theseclaimsandrecommendationsaresum-marizedinthetablesonthesucceedingpages.Fortunately,theprincipalsandtheactivepartiesearlyagreedtoadjudicatethiscaseonthebasisofafairandadequaterateofreturn,applicabletoafairvalueatoriginalcostdepreciated.Wewelcomethissensibleagree-ment,aswewelcomethedisappearanceofthemythofrepro-ductioncostortrendedoriginalcostintothehistoryofutilityregulationinourjurisdiction.Weareconcernedwithanoriginalcostratebase,qualifiedundertheregulatoryprincipleofitsbeingusedanduseful.ElectricPlantHeldForFutureUseTheRespondent'sratebaseclaimincludes$40>394,000inelectricplantheldforfutureuse.Thisplantincludeslandforfuturegeneratingstations;landandrights-of-wayforfuturetransmiss'ionplants;land,rights-of-way Table1PENNSYLVA.'GAIAPOWER6LICHTCO."PAiJYMeasuresofValueandRateofReturnAsofDecember31.1980(ThousandsofDollars)OrizinalCostOrig'nalFilineRevisedElectricplantElectricplantinserviceReserve$2,600,371$2,600,371700,083700.083Net19002881,900.288AdditionsandDeductionsElectricplantheldforfutureuseConstructionworkinprogessactuallyinserviceNon-revenueproducingCWIPsoontobeinservice-netConstruct'onworkinprogress-pollutioncontrolprojectsRetirementsassoc.'atedwithconstructionworkinprojects-poll'ut'oncontrolprojects'nvestmentincoalreserves40,39440,394(717)~775040,39440,394(717)7750NetAdditionsandDeductionsDepreciatedElectricPlant87,8211,988.10987,8211,988.109WorkingCapitalWorkingcapitalFuelstockandmaterialsandoperatingsuppliesTotalWorkingCapital51,830168,263220.09357,988168263226.251DeductionsAccumulateddeferredtaxesonincomeCustomeradvancesforconstruction72,53043172,530431TotalDeductionsMeasuresofValue72,96172.961$2135,241$2.141.399ProformareturnsatproposedratesDollars(RevisedD-l,Col.5)Z\231,835$235,312'10.86K10.99Z10a TABLEII$1,000OriainalCostPerResondent-(ExhibitFuture.l-C-l-Revised)*$2,141,399FuelReserves(StatementNo.ifJG-1)CoalReserves(StateentHo.iUG-1)LandHeldForFutureUse(StatementNo.KJG-1)CashWorkingCapital(StatementHo.GF&l)CustomerDeposits(StatementHo.~i-1)AuditAd)ustment(StatementNo.RWS-1)(33,371)(7,750)(23,657)(12,886)(1,008)(770)DeferredTaxes(StatementNo.WFD-1)CompensatingBankBalance(Brief)4,756(513)TotalPerTrialStaff$2,066,200"-*~AsprovidedbyPennsylvaniaPower&LightCompany.+*IftheALJand/ortheCommissiondoesnotentirelydisallowPPSL'sexpenseclaimforforcedoutage"insurance",theratebaseshouldberedu'cedby$4,921,000,theaverageamountcontributedbycus-tomerstothe"insurance"fund.lob ScheduleBRevised10/29/80TABLEITZPENNSYLVANTAPONEEANDLTGNTCOMPANYMEASURESOFVALUEDECEMBER31,1980($000)2.CWlP-PollutionCont,olProjects3.DisallowanceofCoalReserveClaimsCashWorkingCapital-TaxLagAsClaimedbyRespondentOCARecommendedAdjustments1.ElectricPlantHeldforFutureUseOriinalCost~2,141,399(40,394)(39,677)(7,750)(J.,925)5.Work'ngCa@ital-CompensatingBankBalances(513)6.7.8.BankBalancesInterestandPreferedStockDiv'dendLagMaterialsandSuppliestoConstructionDeferredTaxes(AsaresultofMr.Rothschild'sFlow-ThroughAdjustment(15,265)(16,029)967$2,020,813SOURCE:(A)SecTestimonyofWitnessCotton.10c andotherpropertyforfuturedistributionplant;andlandforfuturebuildings,primarilyservicecentersites.De-tailsarefoundinExhs.Regs.Z-A-14,FuturelA-C-1,andFuture1-C-3.Thedetailsaresupportedwithoraltestimony.TheacquisitionsarejustifiedbytheRespondentintermsofprudentandnecessarymanager-'aljudgment.Thefactorsofjudgmentincludethedemandinglegalobligationofcontinualreadinesstoprovideadequateservice,there-quirementsoflong-rangeplanning,thedangersofscarcityofland,theexpectableescalationoflandvalues,theex-pectabledevelopmentofenvironmentalregulations,andal-togetherthedifficultiesofprovidingforthefuture.TheStaffreferstotheCommission'sten-yearruleforexpecteduse.It,therefore,recommendstheex-'lusionof$23,657,000oflandheldforfutureuse,becausettheexpecteduseis"after1990.".MerecommendthattheCommissionearlyreviewitstenyearrule.Ajudgment,dictatedbyprudence,oughtnot,inprinciple,confrontanarbitrarytime-limitation.Timepreventsourelaborationofrecommendedchange.Thenotionofmatchingcustomerobligationswithcustomerusehasbeenoverworked.Recognitionofitsnarrow

ct~I~\andungenerousspiritisimplicitintheten-yearrule.Prudentplanningforthefutureisacurrentobligation,'hecurrentusefulnessofwhichisintrinsictothedis-charge,initself,oftheobligation.Ifeachgenerationfairlyextendsitselfforthebenefitofthenext,thecon-tinuitywillbeequitableand,undoubtedly,willnotbewith-outcurrentandongoingbenefit.Muchofthetalkofmatch-ingsmacksofpayinglateronanever-expandingandgrowinginstallmentplan.Theconcernoverpotentialityandcostoferrorinplanningdoesnotovercomeus.Iftheplanningisprudent,errorisacostofliving.Thecostshouldnotbewhollytheinvestors',becausetheinvestmentstemsfromobligationandnotfromrisk,takenforhighprofit.Intheunregu-latedmarketplace,alittlelesstodaymaymeanmoretomor-row;notsointheregulatedprecinct.TheConsumerAdvocaterecommendstheentiredis-allowanceoffuture-useplant,becauseitwillnotbeusedandusefulinthecurrenttestyearfoipresentratepayers.Hepointstouncertaintiesbutwouldconcedeanallowanceinthenatureoftheallowanceforfundsusedduringcon-struction.Theserecommendationsareunacceptable.Sincebelievethatadeliberaterevisionofpolicywithrespecttofuture-uselandisdesirableandwecannotprovideit,we arecompelledtoaccepttheStaff'recommendationanddis-allow$23,657,000.ConstructionWorkinProgress-PolutionControlFacilitiesTheRespondent'sclaimisfor$40,394,000forpro-jects,describedinthetopicalheading.TheStaffdoesnotchallengethisclaim.TheConsumerAdvocatedoesonthebasisthattheprojectswillnotbecompletedandbecomeusedandusefulwithinthetestyear.WeconsiderthattheRespondent'sclaimcomeswithintheparametersoftheCom-mission'spronouncementofpolicyinthisarea.We,there-fore,approvetheclaim.InvestmentinCoalReservesByitsOrderatApplicationDocketNo.A-00102184,adoptedandenteredJuly17,1980,theCommissionappro'vedtheRespondent'sapplicationforapprovalofitsacquisitionofalltheoutstandingcapitalstockofArcadiaCo.,Inc.Thetransaction,involvingthestockacquisition,alsoin-volvedthepurchaseofcertain.coalreserves,forcash,fromindividualstockholdersoftheacquiredcorporation.Set-tlementwashadonthetransactioninAugust,1980.Weshallnottracethedetailsoftheacquisition.Theessenceistheacquisitionofapproximately8,000,000

tonsincoalreserves.'eshallnottracetheattributionof$7millioninoriginalcostfortheacquisitionofthesecoalreserves.InMarch,1980,theRespondentexerciseditsoptiontoacquirethemineralrightsforabout1,666acresoftheso-calledHolland/'Aitchell/Colavecchiproperties..These'propertiesareestimatedtocontain1,000,000tonsofbituminouscoalreservesandarelocatedabout15milesfromtheArcadiareserves.AgaintheRespondenturgestheinclusionoftheseacquisitionsinitsratebasebecausetheyrepresentprudent,necessary,andrealisticmanagerialjudgment.ThecurrentmarketvalueoftheArcadiareservesisestimatedtobe$12million.Bothsetsofreservescontainstrippablebitumi-nouscoal,ofhighqualityandlowsulphurcontent.Theyofferaneconomicalalternativetotheprospectofneededinstallationofcleaningequipmentunderdevelopingenviron-mentalrequirements.TheRespondentseestheprospectofsavingsincoalcostsoverthelongterm.TneRespondentintendsandexpectssavingsforitscustomers,particularlyastheRespondentreliesuponitscheapercoal-firedgener-ationplants.Theavailabilityofeconomicalcoalreservesisscarcer.TheRespondentestimatesthedepletionofsur-facebituminouscoalreserveswithintwentytotwenty-five-14>>

years.Ownershipisseenasanassuranceofsupplyandaninsuranceagainstthevagariesofthemarketanditsesca-latingprices.Arcadiaisproducingcoalpresently.TheRespond-entproposesthat,solongasitcanbuyacceptablecoalatlowermarketprices,itwillsellthehigher-qualityArcadiacoalandapplytheresultantreve'nuesandprofitstoreducethecoalcoststoitscustomers.TheRespondentrequiresassurancethat,initsuseofArcadiacoal,itwillnotbesubjectedtothevicariousandfluctuatingstandardoflowermarketprices.SofarasArcadiacoalisconcerned,inviewofitspresentmining,theRespondent'smanagerialjudgmentisentitledtocredit.Theproposalforinclusioninratebaseissensibleandsufficientlysafeguarded.TheCommissioncanarrangeaccountingdetailswiththeRespondent.TheStaffandtheConsumerAdvocatepointtothefailureoftheRespondent'sOneidadeep-miningoperationandpositallkindsofrisksofutilitycoaloperation,includingescalatingcostsandunionization.Whatistotallylackingisathoughtfulandcomprehensiveviewofthefutureofcoalanditseconomicsinenergyproduction.ThereismuchPthoughtfulliteratureontheneedforourgettingreadyforanenergyemergencyinviewofimpendingoilcrisesbytaking

accountofproblemsofuse,availability,andtransportationofcoalasoneofthevitalsourcesofenergy.Itisanarrogationofjudgmenttobelievethatallkindsofregulatoryandpublicconcernsoverrisksareauto-maticallyandrightfullytranslatableintoregulationsforthepublicgood.Wedonotbelievethatanymanagementofamajorutilitywouldundertakerisksoflosswithabandoninexpectationthattheconsumingpublicwillpickupthertab.Ifwearenotreadytoexercisedeliberate,informed,andpracticalregulatoryjudgment,weshouldnotnegatemanagerialjudgmentinexpectationthatwemayhaveabasisfordifferinginthefuture.TheStaffandtheConsumerAdvocatesuggestanalternativeofallowingcarryingcostsinthenatureofAFUDC.Arcadiaisagoingoperation,andweseenovirtueintemporizing.'Thefigureof$7,000,000asoriginalcostisnotindispute.WerecommendapprovaloftheinclusionoftheArcadiainvestmentinratebaseat$7,000,000'heHoli'andcoalreservesarenotinoperation.They,poseapxoblemofpolicyrevision,comparabletothatforlandheldforfutureuse.Werecommendthefreshdevel-opmentofapolicyofcoalreservesbytheCommission~

Underthecircumstances,wedonotrecommendtheinclusionofthe$750,000oforigina].costfortheHolland/~Iitchell/Colavecchicoalreserves.FuelHaterialsandSuppliesInventoryTheRespondent'sclaimforcoalandoilinventoryisfor$148,227,000.Itdevelopeda13-months'veragequantityandappliedtheprojectedinventorypricesattestyearend,December31,1980.TheStaffrecommendsadisal-lowanceof$33,371,000.Itproposesthatthefuelinventoryshouldbelimitedtoatwomonths'veragesupplyforthesystemonthebasisofprojectedtestyearuseandaverageprices.TneRespondent'scalculationisamethod,hereto-forefrequentlyapprovedbytheCommission.Inourview,theStaff'srecommendationisaregulatorycontrivancethatbearsnoreasonablerelationshiptothejudgment,whichgovernstheavailabilityoffuelanditsreadinessforuse.MedonotaccepttheStaff'recommendation~TheRespondentclaims$20,036,000inratebaseforitsmaterialsandsuppliesinventory.TheConsumerAdvocateisagainconcernedwithmatchingcustomerobligationwithcustomerbenefit.Becausesomematerialsandsupplies,estimatedbytheConsumerAdvocateat80/onyearlyaverage, e

maybecharacterized,likethereplacementofalightpoleascapitalinstallation,suchportionofinventory,tobecapitalizedinthefuture,shouldonlyaccrueAFUDC,u'ntiltheseitemsareactuallyplacedinservice.Sinceitwouldbelessofanightmaretofollowaveragesthanindividualitems,theConsumerAdvocaterecommendsan80%reductionoftheRespondent'sclaim.TheCommissionhas,withreason,nevermadesuchdistinctions.MedonotaccepttheCon-sumerAdvocate'recommendation.CashMorkingCapitalAmongtheelementsoftheRespondent'sclaimforcash~orkingcapitalistheRespondent'sclaimof$513,000forworkingcapital,r'equiredtosupportminimumbankbal-ancesfor$53,500,000inlinesofcredit.TheRespondentoffsets$3.5milliondollarsoffloat(checksissuedbutnotcleared)againsttheminimumrequirementof$4,013,000.BecausetheRespondentusesunsegregatedaccountsforpay-mentofoperatingandmaintenanceexpenses,theStaffsug-geststhattheminimumbalancesintheseaccountsareusedtofinancethecompany'068expensesandthattheirallow-anceincashworkingcapitalwouldconstituteadoublere-turn..Medonotunderstandtherationale.Aminimumbankbalance,bydefinitionandnature,maynotbeused~-,18-Itdoesnotmatterwhetheritwouldexistinaseparateaccountorinan'unsegregatedaccount,usedforpaymentofexpenses.Theunsegregatedaccountaffordstheoffsetoffloat,forwhichtheRespondenthasgivencredit.Thecal-culationoffloatisundisputed.ThereisnoevidencethattheRespondentnassoemployeditsbankaccountsastovio-latetheminimumbankbalancerequirementsorhasmiscalcu-latedormisrepresentedthebenefitoffloat..MedonotaccepttheStaff'recommendation.TheConsumerAdvocaterecommendsdisallowanceofthiselementofcashworkingcapitalbecauseitisassoci-atedwithconstructionworkinprogress.ThealternativecompensationforthiselementofcapitalinvestmentwouldbeAPUDC.TheConsumerAdvocate'srefinedtreatmentofminimumbankbalancesdoesnotcommenditselftous.TheStaffrecommendsareductionofratebaseby$1,008,000onaccountofworkingcapital,providedfromcustomerdeposits.Itthenproposesanincreaseof$91,000inRespondent'sexpenses,representinginterestat9%onthecustomerdepositbalance.Theprincipleiscorrect.Veaccepttherecommendation.TheStaffandtheConsumerAdvocaterecommendthedeductionofaccumulateddebtinterestandpreferredstockdividendsfromcashworkingcapitalasfundsavailablefor

unrestrictedusebytheRespondent.ItistruethatsuchadjustmenthasbeenroutinelymadebytheCommissionduringthelastfourorfive'earsandthattheCommission'sactionhasbeenaffirmedbytheCommonwealthCourt.Likeotherutilities,confrontedwiththisadjustment,theRespondenthasmadeaforcefulargumentthatwhatisallowedtoautilityisafairreturnandnotallotmentsofrevenuesonaccountofobligationsforpaymentofdebtinterestandpreferredstockdividendsandthatafairreturnisnotdifferentiallydivisibleintotheseveralcostsofcapital.TheCommissionhasrefusedourowndistinctionbetweenin-terestanddividends,preferredorcommon.TheCommission'spolicy,asananswertotheRespondent'sargument,appearsfixed.TheRespondentseekstobuttressitsargumentwiththetestimonyofPaulR.Moul(StatementNo.XIV,pp.5etseq.).Inrespectoftheinterestadjustmenttocashwork-ingcapital,thewitnesstestified:"Inmyopinion,suchanadjustmentisunwar-ranted.Isaythisinlightofthefactthat.theyieldtomaturitycalculationisthebasisforwhichtheembeddeddebtcostrateiscomputedfordeterminingthecostofdebtcapitaltobeincludedinthefairrateofreturnopportunity.Iftheintervalfortheprovisionofinterestisdifferentfromsemi-annually,thenthecompanyisdenieduseoffundsrequiredforpaymentofinterestduringtheperiodoftimerepresentedbyareductionfromthesix-monthintervaltoa

~~lessertime.Itwouldbetherequirementfortheprovisionofinterestmorefrequentlythaneverysixmonthsthataffectsthedebtcostrata,calculatedonabasisofyieldtomaturity.BasedonStaffWitness~Lfarkovciadjustment,ratepayerswouldreceiveadoublebenefitfortheeffeetofthetimevaluerelatedtopaymentofinterestsemi-annuallyandthedeductionfromcashwork-ingcapitalrequirement."(St~XIV,pp.5-6).Theargumentispremised,itappearstous,uponthecon-ceptoftheutility'sentitlementtothe.useofrevenues,goingfortheperiodicpaymentofinterest.Wemustad-mitthatwedonotunderstandthewitness'urthercon-tentionthata"downwardadjustmentincashworkingcap-ital"fairlyentailsahigherembeddedcostrateandthusahighercostofcapitalandrateorreturn.TheRespondentalsopointstootnerjurisdic-tions,holdingviewscontrarytoourCommission.WeaccepttherecommendationsoftheStaffandtheConsumer~Advocateforareductiontoratebaseonaccountofaccumulateddebtinterestandpreferredstockdividendsintheamountof$12,886,000inviewof-theCommission'spronouncedpolicy.TheConsumerAdvocateproposesanadditionalreduction'ntheRespondent'scashworkingcapitalre-quirementsonthebasisthatadditionalfederalincometaxfundswouldbeavailablefromrevenues,ifthe Respondentmadeitsquarterlyincometaxpaymentsuponan80%estimateofitsliability.TheRespondent,infact,baseditstestyearclaimforincometaxliabilityuponitsliabilityintheprioryear,1979,inaccordancewiththeInternalRevenueCode'sprovision.WeconsidertheConsumerAdvocate'srecommendationmisconceivedanddonotacceptit.CommissionAuditAdustmentOnthebasisofanauditbytheCommission'sBureauofAudits,theStaffhasproposedaratebasead-)ustmentof$770,342.Itisunopposedandaccepted.DepreciationReserveTheRespondent,withitsfilinganditspresen-tationoftestimony,"proposedthat,sincethe'PP&LReserve'easonablyrepresentsrecoveryoninvestment,itistheproperreservetobeusedasthedeductionapplicabletoanoriginalcostratebase."TheRespondentstressedthattheaccrualoraccumulationofitsdepreciationreservewasaccomplishedinaccordancewiththeCommission'sex-pressedviewsondepreciationpolicyandpractice,OnOctober23,1980,theRespondentfiledaPetitionToApproveAndNakePartOfRecondTheStipulationPartiesWithRespectToCertainDepreciationIssuesand furtherfiledaStipulationWithRespectToCertainDepreciationIssues.Boththe'Petition'andtheStipu-lationareincorporatedformallyintotherecord.TheStipulationwasexecutedonbenalfoftheRespondent,theCommissionTrialStaff,'ndtheConsumerAdvocate.TheLehighValleyPowerCommitteeandtheHeth-lehemSteelCorporationindicatedthattheydidnotopposetheStipulation.Nootherpartyexpressedopposition.TheStipulationisconditioneduponandsubjecttotheacceptanceofthePresidingOfficerandtheCommis-sion.ThePetitionandtheStipulationrecitethedevel-opmentoftheproceedingintheareaofdepreciation,theconsiderableeffortsatadjustmentofopposingviews,andthemeritsoftheagreementandstipulationwithresoecttovariousdepreciationissues,relatedtothereserveandtheannualdepreciationexpense.TheConsumerAdvo-catereservedhispositionwithrespecttoannualdepre-ciationexpense.Weshallrefertothatpositionwhenwedealwithrevenuesandexpenses.WearepersuadedbytheexpertiseofthepartiesandtheevidenceoftheirdiligenceandsenseofpublicpurposethattheStipulationshouldbeapproved.Werecom-menditsapprovaltotheCommission.Thus,inviewoftheRespondent'suniquelyacceptablerecordsanddepreciation

~~policies,policyandpracticemaybebroughtrealisticallyintoharmonyintheveryimportantareaofdepreciation.TheStaff'sbriefconfirmsitsapprovaloftheStipulation,"asmodifiedintherebuttaltestimonyofi>fr.Beamer,"theRespondent'switnessandexpert.Itappearsto,usthattheStaff,isreferringtothewitness'tate-mentVI-AandthattheStip'ulationisfullycomprenensiveandsufficientforitsimplementation,includingthepro-visionforanongoingmonitoringsystem.SummarvThesummaryofourrecommendedreductionsofratebaseare,asfollows:LandHeldforFutureUseCoalReservesCustomerDepositsCashWorkingCapitalAuditAdjustmentTotal$(000)(23,657).(750),(1,008)(12,886)~770>(39,071)Therecommendedallowancefor.ratebaseatoriginalcostdepreciatedis,asfollows:ClaimedLessreductionsAllowance$2,141,399,00039,071,000$2,102,328,000 RATEOFRETURNByletter,dated'ecember2,1980,theRespond-ent,bycounsel,reportedfortherecordtheresultsofthesaleofcommonstockbytheRespondentonNovember25,1980.Weaccepttheinformationfortherecordaslate-fileddata.Thetermsofthesalewere,asfollows:1.Totalsharessold::3,500,0002.Pricetopublic:pershare$16.375total:$57,312,5003.Underwritingdiscountandcommission:pershare$.65$2,275,0004.Estimatedissuanceexpense:$160>0005.ProceedstoPP&L:pershare$15.68total$54,877,500OurattentionwasinvitedtothebookvalueofRespondent'scommonstockatSeptember30,1980at$25.45ashare(Exh.Regs.II-A-2(c)).Withearningsat$2.71forthe12montnsendedS'eptember30,1980,theearningston'etproceedsratioforthenewissuewas17.28%.Wenotethat,fortheweekendedDecember5,1980>theniarketpriceofRespondent'commonstockstoodat$15~625~Forthe12months,endedSeptember30,1979,theRespondent'searningspersharewere$3.37.Forthe12months,ended September30,1980,theywere$2.71.Thedeclineinearningshasbeensteady.WhentheRespondentpointstoadeterioratingfinancialcondition,'tdoessowithreason.WhenthestockmarketexperiencedaspurtofeuphoriaonNovember20,1980andtheDowJonesclosedabove1,000forthefirsttimesince1976,wewereinter-estedtoobservethattheRespondent'scommonstockfell1/4andclosedat$16.625.Wearereluctanttoacceptrefinedpostulatesofcostofcommonequity,fromwhichimplicationsaredrawnthattheRespondent'sshareownersaregettingwhattheydeserveandwhattheyexpect,orthattheyareconfrontingnomorethantheriskstheyassumed.CaitalStructure'ponatestyear-endbasis,takingaccountofrecentsalesofbondsandpreferredstock,theRespondenthaspositedcapitalratiosof48.0%debt,19.3%preferredandpreferencestock,and32.7%forcommonequity.Weperceivenosignificantdisputeandacceptthepositedcapitalstructure.Weshallreferlatertolate-fileddata.CostofDebtByletter,datedNovember25,1980,theRespondent~

~~Ubycounsel,reportedthesaleof$125,000,000offirstmort-gagebondsonNovember24,1980.Thelate-fileddatawith'Irespecttothesaleofthesebondsisacceptedintothere-cord.Thepriceperunitwas$100.00;theproceedsperunit,$99.3579;theunderwritersdiscounts,$0.6421;thedue-date,December1,1990;thecouponrate,14%;andtheeffectivecostrate,includingestimatedissuancecosts,14.16/.Wheretherewaslesserforecast,therewashigherreality.Wheretherewasanticipationofalowercostrateforashorterterm',thecostratemayhavebeenlower;buttheratewas,indeed,high~Wewouldconsideritanunfairexerciseofexpertise,regulatoryorotherwise,toprojectlong-termmoderationofcapitalcostsforpurposeofpresentratemaking.------.-TheRespondent,withitsletterofNovember25,1980,submittea,asaRevisedAttachmentB,a'e-calculationofthecompositecostrateofitslong-termdebt,projectedtobeoutstandingattestyear-end,at9.51/insteadoftheprior9.44%.ItwillbenotedthattheRespondenthasleftunchangedtheinterestuponbankloans,due1986,at103%ofprimefromMarch,1980throughNarch,1982and105%ofprimethereafter.TheRespondenthasassumedandmadeitscalculationuponaprimerateof12%.Wehavehadtimetonotearevisionofthecurrentprimeratetotherecord20%.

~\~~CostofPreferredandPreferenceStockTheRespondenthadpro)ectedaproposedissueof$60,000,000ofpreferredstockforOctober,1980.Byletter,datedNovember19,.1980,theRespondent,bycounsel,reportedthesaleof$26.5millionofpreferredstockonOctober31,1980.Thecostratewas10.75%.Theoriginalcostratehadbeenpro)ectedfor9.25%.TheRespondentre-calculatedtheembeddedcostforpreferredandpreferencestockat8.49%~IWeshall,hereinafter,recapitulatetheRespond-ent'scapitalization,embeddedcosts,andweightedcostsofcapital.Again,weanticipatenosignificantdisputeandaccepttheRespondent'calculations.CostofCommon-EauitTheStaffargues,onthebasisofthetestimonyofitsStaffexpert,thattheRespondent'spropercostrateforcommonequitycapitalis14.3%.TheConsumerAdvocate'srecommendationis12.8%~TheCommission'findingwas14.28%in1976.Inourview,therecommendationsof'theStaffandtheConsumerAdvocatearetotallyunpersu'asive.BothareprimarilybasedupontheD.C.F.methodology.Whateverthemeritofthismethodologyformoneymanagement,ithas,.inourview,nomeritforfairregulatory)udgment'.

~\~~~TheD.C.F.methodologyisathindisguiseforbias,forexample,intheselectionofcurrentdividendyieldandexpectedgrowthrate.Itinvolveswhollyun-realisticassumptionsaboutfixedpay-outratiosandearnings-priceratios.Wedonotminimizethecomplexitiesofdetermin-ingafaircostofcommonequity.Theywillnotbesolved,however,withmathematicalandstatisticalequations,in-corporatingunrealisticassumptionsandpresumptions.ThereisplentyofliteratureonthetheoreticalvirtuesandrefinementsoftneD.C~F.methodologyforcalculatingthepresentvalueofaninvestment.Wnateverthevalueo'themethodologyinthehandsofthosewhohandleotherpeople'smoney,andwehaveyettoseeevidenceofitssuc-cessfulemployment,theutilityinvestorhaslittlecauseforconfidenceinitsuseinregulation.Weagreethatearnings-priceratiosorprice-earningsratiosareastartingpointforjudgmentinthedeterminationofcostofequity.WehaveyettoseeaD.C.F.calculationinastockmarketreportorabroker'report.Anearnings-priceratio,viewedcurrentlyandoverarelevantperiod,isthebestpointofdepartureforajudgmentoncostofequitycapital.Itplacesearningsandpriceinarealisticanddiscerniblerelationship.

Theambiguityofoverstatementorunderstatementofcostfromtheratioisunlikelytobesignifantforutilitystockinanypracticalsituation.TheRespondent'sexpertfound'4.6%tobetheaverageearnings-priceratiofortheRespondentfortherecentperiodfrom1974earnings-priceratioatthrough1978..Theunadjusted'year-end1979was17.2%Theun-adjustedearnings-priceratioinAprilofthisyearwas18.3%.(Resp.Exh.JFB1,Sched;17).Thecurrentearnings-priceratioisintherangeof17.3%.Allthefinancialexpertsinthisproceedingagreethat,attheveryleast,themarkettobookratio~shouldstandat1.0,atleast.Arecentratiowouldbearound60%.Sucharatiorepresentsawholesaledestruc-tionofinvestmentvalues.Weseenoneedforarecita-tionofdataoverrecentperiodsforearningstobookratiosandmarkettobookratios.Concernoverthefrac-tionalcosteffectsofmarketpressureandissuancecostisasuperfluity.Weseenoreasonforcomparisonwithotherpublicutilitiesorelectricutilities.Theirfinancialsituationpresentsapoorbasisforcomparison.Anothersuperfluityisthecomparableearningstest.

WeaccepttherecommendationoftheRespondent'sexpertat15.5%.Circumstancehasrendereditmorethanreasonable.Itisamere.9%overtheaverageearnings-priceratiofortheperiodfrom1974through1978.Itisconsiderablybelowrecentandcurrentearnings-priceratios.Itis,indeed,amere1%to2%overcostratesforhigh-gradebonds.Weseenoneedfurthertore-inventthewheel.WefindnoreasontoignoretheCommission'sfindinginits1976Orderandtoconsidera10%increaseunwarrantedaftermorethan4yearsofinflation.FairRateOfReturnThecompositecostofcapitalfromourrecommen-dationsis11.27%.Werecommendthiscostasafairrateofreturn.Theproformacalculation,baseduponthelatest-fileddataofwhichweareaware,is,asfollows:CapitalizationEmbeddedCostWeightedCostLongTermDebtPreferred/PreferenceCommon$15850.0742.21256.5481932.0~3;79.51%8.49%4.56%1.64%5.072$35848.7100.0%11.27%(SeeResp.Exh.Future1,B-6,Revised,andB-7,Revised;seeResp'etterstothePresidingOfficer,dated11/19/80,ll/25/80,and12/2/80,enteredintherecordofthispro-ceeding.)>>31-

Weareconvincedthatourrecommendationisafaircostandafairreturnand,therefore,afairelementinthecostofservice.Weagecertainthat,inanyreal-isticterms,itwillaffordnomore,atbest,thanafairopportunityforsafeguardingandmaintainingintegrityofexistinginvestmentandaccesstocapitalmarketsatlessercosts.Wearenotoblivioustotheimpactofinflationeitheruponthesupplierofserviceortheconsumerofservice.Weconsiderourrecommendationfairinthefaceofinflation.Aftermorethanfouryears,theRespondentisseekingapprox'matelya16%increaseinbaseratereve-nues.Therearefewsectorsinoureconomy,eitherinareasofnecessities'orotherwise,wheresucharecordofrestraintexists.Thegradationsofinequityfrominfla-tionrequiremuchmorefundamentalreliefandsolutionthanavertingthefaircostof'tilityserviceandthefairexpectationsofutilityinvestors.Wesuggestadistinctionbetweenreasonandrationalization.Thereareplentyofrisks,atwhichutilityinvestorsplacetheirsavings,withouttheaddedriskofsingulartreatment.

~\~'EVENUESANDEXPENSESOnsucceedingpages,wesetforthatableofRespondent'sOperatingIncome,showingOperatingRevenuesandOperatingExpenses,broadly;asummarytableoftheStaff'srecommendedadjustments;andasimilartablefortheConsumerAdvocate.TheConsumerAdvocaterecommendsthattheRespond-ent'sproformaoperatingincomemustbeincreasedby$1;939,000toadjustforafailuretonormalizethe'orecastoftest-yearsalesandthustoreflectnonrecessionaryeconomicconditions.TheConsumerAdvocatecontendsthattheRespond-ent'sproj'ectionreflectsarecessionaryannualgrowthrateof2.5Xratherthanaconservativelynormalized,nonreces-sionarygrowthrateof3%.Withdueregardforconservatism,wefailtoseethereflectionofanabnormalitybetweenthetwogrowthrates.Theprimaryquestionisoneofproformatypical-ityfortheperiodoflikelyviabilityofrates.Wecon-sidertherecommendationamoststrainedapplicationoftheruleforadjustingforabnormalconditions.TheRespondent'sactualfiguresofoperatingin-comeforLhesixmonths,endedJune30,1980,are$4,324,000belowthebudgetedfigures.Howeverthefiguresfor.the

TABLEIVPENilSYLV~iIAPOP"-R&LIGHTCO~PA;tYOperatingIncomeAtProposedRatesYearEndedDecember31,1980(ThousandsofDollars)OperatingRevenuesOperatingExpensesOperationandPwintenanceDepreciationProvisionforTaxesTaxesOtherthanIncomeProForaatProposedRates$918,5064432628286535,750IncomeTaxesPennsylvaniaFederal'eferredIncomeTaxes18,66097,817PennsylvaniaFederal(1,739)(7,360)InvestmentTaxCreditsDeferralAmortizationofDeferments-Credit16,587(2.648)TotalTaxesTotalOperatingExpensesOperatingIncome1570676831948235.31233a TABLEVTrialStaffPositionSummaryAd)ustmentsforRateHakingPurposes12HontlisEndedDec.311980ICustomerLoadCrowthHlscellaneousIncomeDeduction:CompiiterRelatedResearch-'ayro11-Non-Vti1ity:AreaEconomicDevelopment<EmployeeTuition6SocialAct;TrainingExp.-ST.IIT.iOiitsldeServices..'ecreationalFacilitiesFringeBenefitsc';HemberslliI)Dili'siI.easedVehicleExp.iAdvertisingExp.!Payroll-PublicAffairsIAmortizeRateCaseExp.;LineofCreditFxp.DepreciationjDepreciationIncomeTaxesClassLifeADR-Dep.CostofReinovalConsolidatedTaxes".InterestExl>ense,CustomerDposftsInterestExpense'I'ota1TrialStaffReferenceSt.No.JHK-2St.No.JIP-1St.No.JJP-1St.No.JJP-1St.No.J.)P-1St.No..I.lp-lSt.Ho.JJP-1St.Ho.JJP-1~St.No.JJP-1St.No.JJI'-1St.Ho.J.lp-lSt.No.JJP-1St.No.JJP-1St.Ho,JJP-1BriefBriefSt.Ho.DI.B-l1'erStipulationSt.No.WFD-1St.No.tIFD-1BriefBreif-Sel).3St.Ho.JHK-1OperatingRevenues'0790739(60)(85)(94i)(898)(219)(5)(11037)(211)(115)(584)(1,134i)(23)(33)(57)(1,379)(2,997)30218594676315721584il792249636426354i038494244490492504851014i24i59091(~8499)18(967)(288)(190)(6)(978)(3,789)(1,096)(525)(1,167)(39)(3,715)TaxesOperatingOthertlianStateFederal~ExonseeIncomeIncomeTnxincomeTexEffectonIncome4273044474511103521106582935701117296932,997(302)4,7561,384i5251,357(46)~14081 TableVIPBttttSYI.VANIAPOWEttANDI.IGIITCOHPAt)YIIIIO-I'<OIII~IAIlCOIIB12HorlT)lslwnltlGDl?CrHnra311980($000)Do~seri>):ion(AJ:1~NormalizationofI)avenues2.AnnualizedDepreciationlxpcnsc3.HajnrFnrcedOutageIn'.I.easedB<tuipmcntExpense5.Ga)cstnltl)olesalcCustomersll>>dcrl'Bl)cTariffs6.Cnm<<)itmo>>tBees7.}'lnw-ThroughofStateTaxDcprccintio>>8.Inture"tDolluctionforl>>co<1)4!TaxPurposesOperatingl)ove))uos$1>939>>1,084Opc)4)tin<II?xnc>>sosL(3,059)(3,900)(608)(2~708)(96l)pndcralandStateIn<!ornaT4)x96>51,941.3031~348(747)EffectonI>>cnme9743,0591,9593051,0841,360967.747Effecto>>IIA'A~UQIIQP.4I$(1,986)(6,236)(3,994)(662)(2,210)(2,772)(1,9ll)(1,522)9.Aru)ualizedTaxDepreciationExpo>>suClaia)$3023<4112421~10'2<)$2'84026211'4lll421(2,092)Sg')4/45~f:4g.)Vln.<"n..'.lSO)lRCE)(h)Seetestimo>>YofMitnessCotton.(l))Difference)>etwoenthe$11,481asshown1)crea>>dthc$14,177asshownonSchedule1())cviso<l)0/29/80)is$2,696whichi"astil>>)latedamountco>>coll))>>g<toproci<>Linn<!xpensu.tlat:A<1just)>><A>>tBi<J>>)eo<<>n~n.EDOIL testyearturnout,weanticipatenoabnormality,forwhichtheConsumerAdvocate'srecommendationwouldbeappropriate.TheRespondent'sprojectionsarefairandsoundinformu-lationand,wehope,nottoooptimisticinviableprospect.WedonotaccepttheConsumerAdvocate'srecommendation.(SeeResp.Ezh.HJB93.)..TheStaffhasproposedanadditionalnormaliza-tionadjustmentof7,063,850kwh,purportedlyproducing$906,526ofnormalizedoperatingrevenuesonaccountofcustomerloadgrowth.TheStaffcontendsthattheRespond-entdidnotproperlytakeaccountofloadgrowthfromnewcustomersaadincreasedus'age.TheStafffurthercontendsthattheRespondentfailedproperlytopricetnenormalizedkwhsales.TheRespondentcomputeditsannualizationadjust-mentconsistentlywiththepreparationofits1980salesforecastforthecustomergroups.Itcomputedgrowthratesfromthehistoricsalesgrowthrateforeachmarketsectorduringthepas'tthreeyears,andappliesthesegrowthratestothe1980projectedsalesbycustomerclasses.Theannual-izationwasthenassumedathalftheannualaveragegrowth.Incrementalpricesperkwhwerethencomputedforderivationofrevenues.Itsmethod,Respondentcontends,moreaccu-ratelyreflectschangesinaverageuseandinnumberof

customersandpresentsamoreaccuratecompositereflectionofgrowthinusageandinnewcustomers.TheRespondent,contendsthattheStaff'smethodemploysproblematicalestimatesofyearendnumberofcustomers,improperre-lianceuponcomponentsorcategoriesofservicewithinclassesbecauseofinherentlysignificantvariationsofindividualcustomerusewithincategoriesofservice,andgivesduplicatedweighttonewcustomersanditsincremen-tal-costpricingofincreasedusagebyexistingcustomers.IfweaccepttheRespondent'sbudgetingprocess,weseenoreasonfornotacceptingadjustments,madecon-sistentlywiththeprocess.TheRespondent'spositionappearsauthenticandpersuasivetous.WerefusetheStaff'srecommendation.TheStaffalsosuggestsanormalizationoftheRespondent'skwhsalestotheU.G.I.Corporation,becauseasupplyagreementbetweentheAlleghenyPowerSystem'ndU.G.I.willterminateattheendof1980anditisexpectedthat.theRespondentwillreplacethissourceofsupply.TheStaffsuggestsanadjustmentof$2,593,304for10,602,000kwhofnormalization.Themagnitudeofthissupplywill\alsoturnonthemagnitudeofU.G.I.'sowngeneration~TheRespondentcountersthatthesuggested-adjust-mentisapost-test-yearadjustmentofrevenuesandshould

notin'thisregard,besingledoutofequallycertainpost-test-yearincreasesinexpensesfromwages,otheremployeecosts,andotheroperatingcosts.Again,wecannotacceptsingularrefinementsofad)ustment,theeffectsofwhicharetovitiatetheviabilityofallo~edrates.Certainly,knownchangesaretobetakenaccountof,iftheycanbeassessedwithfaircertaintyandiftheyhaveasingularpotentialfordistortion.WerefusetheStaff'srecommendationofthenor'malizationforU.G.Xsales.OperatingExpenses-GeneralObservationWearewontto'cceptattritionasaninevitableaccompanimentofinflationandanunavoidableincidentof'hedischargeofregulatoryresponsibilities.Attritiontakesonaglossofequitablytolerablejustification.Atourrequest,theRespondentsuppliedsomedataonitsexperiencedincreasesinoperationandmainten-anceexpenses.XtsuppliedExh.250.0001003.Theexhibitcontainsanillustrationofattritioninearnings.ThefiguresaffordacomparisonbetweentheCom-mission'sallowablerevenuesandexpensesinitsOrder,datedAugust26,1976,andtheRespondent'sdataforthetestyear,endingDecember31,1980.Theillustration

showsanincreaseof31.8%inrevenuesand46.7%inoper-atingexpenses,netofincreaseinenergyrelateditems.Operationandmaintenanceexpensesincreasedby71%,forexample.Employeeexpensesincreasedby60%.Taxesotherthanincomeincreasedby90%.Thedecreaseinreturn.onoriginalcostiscalculatedat18%.EducationalAssistanceExoenseTheRespondenthashadatuitionrefundprogramsince1959,theexpenseofwhichhasbeenapprovedbytheCommissioninallpriorrateproceedings.Theprogramre-imbursestuitiontoemployees,whopursuestudies,directlyrelatedtotheirjob.TheStaffproposesadenialofthisclaimforoperatingexpenseasunwarranted.Thisproposalisoneofanumberofartificialproposals.Wecannotconceiveadisallowanceofsuchacommon,enlightened,andbeneficialpolicyastheRespondent'sEducationalAssistanceProgram.TheStaff'srecommendationisrefused.AreaEconomicDevelopmentProramExpenseThenatureofthisexpenseisreadilyapparentfromthetopicalcaption.TheStaffsuggestsdisallowanceofthe$898,000budgetedbecause,initsview,thisprogramis intendedsimplytocreategoodwillfortheRespondentandisdirectedtopromotinguseofelectricityinviolationofpoliciesofconservation.WecannotcomprehendtheStaff'sposition.TheRespondent'sprogramnasbeenwidelyandjustifiablycom-mended.Ithasbeeneffectiveandbeneficial,notonlytotheRespondentbutbroadlytothepublicinitsareasofservice.(Resp.Exh.No.GEM-12).WerefusetheStaff'srecommendation.RecreationalFacilitiesTheRespondenthasbudgeted$210,532foroperationandmaintenanceofcertainrecreationalfacilities,whichitownsandwhich,unlikeotherfac'lities,whichitownsandoperatesinconnectionwithlicensedhydro-electricprojects,itisnotrequiredtooperateandmaintain.Thewisdomoftheseexpendituresis.denied,becaus'etheirgeo-graphiclocationspreventusebyallP.P.&L.customersardbecauseareferendumbyP.P.6L.'scustomers'woulddisclosedisapprovaloftheexpense.Alltheacilitiesareaccessible.Areferendumwouldbeanundueextensionofpoliticalprinciples.TheStaff'sobjectionsaredenied.

RateCaseExpenseTheStaffrecommendsafive-yearamortizationof$187,000ofratecaseexpenseinsteadofatwo-yearamor-tizationat$37,000;thusa$57,000redu'ction.WedonotquestiontheappellateaffirmanceofCommissiondiscretion.When,however,theStaffoffersuntenablerecom-mendationstotheCommission'sdiscretion,wecannotacceptthem.Thebaldassertionthatratepayersshouldnotbeex-pectedtopayalltheseexpensesoveraperiodofonlytwoyearsisunacceptable.Atatimewhensubstantialattri-tionisindisputable,prolonginganincurredexpenseisagratuitousimposition..TheStaffarguesthat"theCommissionshouldalsoconsiderthatratecasesbenefittheinvestoratleastasmuchastheratepayer.TrialStaffsubmitsthatitwouldbeappropriatetoconsideranequalsharingoftheexpensesbetweeninvestorsandratepayers.,"Itisaperversenotionthattheownerofanasset,whomakesitavailablefortheuseofanother,shouldsharethecollectionexpenses.TheStaffclinchesitsrecommendationwiththesuggestionthatfive-yearamortizationtendstodissuadeunnecessarilyquickfilingsoecauseoftheaddeddelayin>>39-recoveringtheexpensesofpriorratecases.Thereisnoempiricalevidencethatthe$57,000ofrecommendedreductionwilldelaytheRespondent'snextfilinginanymeasurabledegree.WecannotaccepttheStaff'srecommendationandurgetheCommissiontoreconsideritsfive-yearamortizationrule.FeeLinesofCreditInMarch;1980,theRespondentincreaseditspro-visionforlinesofcreditto$605million.Thearrangementfor$551.5millioninvolvedcommitmentfeesat1/2of1%oftnelineofcredit.Thustheannualfeewouldbe$2,758,000.Thefeewouldapplytotheunusedamountofcredit,butthelinesaresetasinsuranceagainsttheneedforfundsto~redeemcommercialpaperortopaybills.Oddlyenough,managementmadethesearrangementsunderconditions,strik-inglysimilartocurrentconditions,thatis,prevailinghighinterestrates,creditrestrictionsandactionsbytheFederalReserveBoardtoreducetheavailabilityofmoney.TheStaffhalf-concedestheprudenceofthemana-gerialjudgmentandhalf-denigratesthejudgmentbecausetnearrangementisinthenatureofinsuranceandmaynotbeneededandbecausetheRespondenthassuppliednodocu-

mentaryprooftnatpurchasersofco'mmercialpaperrequiretheassuranceofrepayment~thatlinesofcreditprovide.Nolawprecludestheacceptanceofcredibleoraltestimony.Inthisareaoffinancialmanagement,thereisnowarrantatalltodisregardtheopinionsandjudgmentonthescoreofprudenceincircumstances,wheretheexpertiseofman-agementisunquestioneo,itscredibilityisunimpeached,andunusualf'nancialandeconomicconditionsarealltooobvious.WecannotaccepttherecommendationoftheStaffkl~forareductionofthe.commitmentfeesbynaif,thatis,by$1,379,000.TheConsumerAdvocateproposesadisallowanceoftheentireamountofthecommitmentfeesbecause,iftheyarenecessary,tneyareproperlyincludableintheRespond-ent'sAPUDCrate.Asanalternative,thesefeesshouldbeviewedasanabnormalexpenseand,therefore,amortized.WecannotaccepttheConsumerAdvocate'srecommendationsWedonotconsidersucnfeesabnormalforthetimes.WedoconsidertheirtreatmentwithAFUDCasabnormalandobjectionable.Ma'orForcedOutageInsurancePoranumberofyears,Respondenthasmaintainedaself-insurancereserveforthepurposeofcoveringincreasedenergycosts,resultingfrompurchasingorgeneratingreplace-mentpowerathighercostsorlosingrevenuesfrominter-cnangesalesincasesofmajoroutages.Atestyearoutagecostof$3,900,000hasbeenprojectedasanelementofclaim.Theproceedswouldbecreditedtothisreserve,againstwhichanyexperiencedincreaseinpowercostsfromaforcedoutagewouldbechargedandexcludedfromtheenergyclause.TheRespondentmaintainsoutsideinsurancetocovercostsinexcessof$12.5million.BoththeStaffandtheConsumerAdvocateobjecttothearrangementforthereserveasaprepaymentchargeagainstthecustomer.TheStaffproposesthat,iftheex-penseclaimformajorforcedoutagecostsisallowed,theratebaseshouldbereducedby$4,921,000,atas"theaverageamountcontributedbycustomerstothe'insurance'und".Tracingthehistoryofthisso-calledfund,theRespondentmaintainsthatanysuchbalanceoriginatedasshareholderfundsandisattributabletothem.WeconsidertheRespondent'sproposalandarrange-men'tsensible.Inview,however,oftheoutsideinsuranceandtneexpectablereductioninimpactofmajoroutagecostsupontheenergyclause,wewouldavoidpresentdisputeovertheadvisabilityofthechargeandtherate-basetreatmentoffundbalances.Werecommend,therefore,disallowanceoftheexpenseclaimintheamountof$3,900,000andthe reductioninratebaseinanyamount.TheRespondentmayproposere'nstitutionofthistypeofclaimandreserve,asexperiencemayindicate.LeasedEouiomentExpenseTheRespondentleasesaportionofitsvehicular,construction,andofficeequipment.Oneoftheelementsof.themonthlyrentalconsistsoftheratechargedtoitsles-soron=90-daydealer-placedpromissorynotes,issuedbythelessoronthe15thdayoftheprecedingmonth.TheRespond-entusedaninterestcomponentof11%inpreparingitsbud-get~LastApril,.theapplicableinterestrateroseto19.8%.TheRespondentnormalizeditsrentalexpensewithrespecttothisinterestcomponentat19.8%andaddedanadjustmentof$608,000foroperatingexpenses.Forthesevenmonths,endedJuly,1980,theRespondent'sactualrentalexpensewasabout$360,000overitsbudget.TheStaffproposedareductioninexpenseof$1,134,400onthebasisofemployinganinterestcomponentof11.175%astheactualrate,chargedtotheRespondentfor'themonthofJune,1980.TheStaffthuseliminatedtheadjustedincreaseof$608,000andfurtherreducedtheclaimby$526,400'nmakingitscalculation,theStaffaveraged

outalltheothercomponentsforthefivemonths,endedHay31,1980,butdidnotaverageoutthe.interestrate,whichaveragedatabout16K.TheConsumerAdvocaterecommendedonlytheeliminationoftheadjustmentat.$608,000.Respondent'sactualexperiencewithitsbudgetandrecentrealitiesininterestratessuggeststhatwedonottinkerwitntheRespondent'sclaim.WedonotaccepttherecommendationsoftheStaffortheConsumerAdvocate.AnnualDepreciationExpenseUnderthetermsoftheStipulation,towhichwehavereferredearlier,theRespondentandtheStaffhaveagreeduponanannualtestyeardepreciationexpenseof$82,865,000.(Stipulationpp.14-16).Thisagreemententailsadecreaseof$2,996,584onaccountofchangeddeactivationdatesforseveralplantsandfixingalifespanof25yearsfortheRespondent'sinternalcombustionturbines.Itfurtherentailsanincreaseof$301,680indepreciationexpenseonaccountoftheso-called"true-upprocess"oftheP.P.&L.reserve.Weshalltakeaccount'oftheseadjustments.TheConsumerAdvocatereserveditspositionwithrespecttoanadditionalreductionof$3,059,000inannualdepreciationexpense.Thisadditionalreductionisbased

uponanannualexpense,relatedtoaverageplantinserviceduringthetestyear.The'Respondent'sandtheStaff'sagreementisbaseduponannualexpense,relatedtoratebaseattheendofthetestyear.Thebasisfortheagreedex-penseoftheRespondentandtheStaffisthatitaffordspioperratemakingcorrelationandaccordswithCommissionpolicy.WeagreeanddenytheConsumerAdvocate'srecom-mendations~Hf.scellaneousOperatingexpenseIssuesAsappearsfromourTableV,theStaff'ssummaryofrevenueandexpenseadjustments,anumberofitems,asidefromincometaxesandinterestexpense,havenotyetbeendealtwitnbyus.Weneednotlistthem.TheStaffdidnotbriefthemeitherinitsiMainBrieforitsReplyBrief.Weconsiderthemwaived.WhileweandtheCom-missionhaveapositiveobligationtoaddressissueswhetherornottheyareraised,neitherwenortheCommissionarecalleduponeodealwithissuesor'oresolveissues,raisedbyparties,onthataccountalone,argued'fthoseissuesarenotInrespectoftheStaff'sunarguedissues,wearenotcalledupontosearchtherecordintheseareas,todistilltheStaff'sargument,andtorespond.Thegeneral factis,ourrecollectionisthat,ineachoftheseareas,theStaff'spositionseitherlackmeritontheirfaceorthereiscountervailingevidenceoftheirlackofmerit.We,therefore,refusetheunbriefedandunarguedrecom-mendationsoftheStaff.

INCOMETAXESInterestDeductionIncalculatingitsinterestexpensedeductionforincometaxpurposesforthetestyear,theRespondentmulti-pliedthetestyearratebasebytheweightedinterestcostrateofitslong-termdebt.Thismethodisaformularyfordetermining"actual"interestandconsequently"actual"taxes.Incalculatingtheratebase,theRespondentdeducteditsinvestmenttaxcredits,accruedunderthefederalrevenuelaws.Thefederalrevenuelawsrequirethataccruedin-vestmenttaxcredits,inourviewofthelaw,bepermittedtoearntheoverallrateofreturn.WeagreewiththeRespondentthat"recentdecisionsoftheCommonwealthCourthaveindicatedthatactualinterestshouldbethebasisforthedeductionincomputingallowableincometaxexpense.T.W~PhillipsGas&OilCompanyv.Pa.P.U.C.,Pa.CommonwealthCt.,412A2d1118(1980);BellTel.Co.v.Pa.P.U.C.,47Pa.'CommonwealthCt.614,408A2d917(1979);TheBellTel.Co.of'Pa.v~Pa~P.U.C;>17Pa.CommonwealthCt.333,331A2d572(1975)~WeagreewiththeRespondent.Thefactthataformularymethodisusedforcalculating"actual"interestdoesnot altertheintentorpurposeoftheruleoflawandregula-tion.TheConsumerAdvocateargues"thatPP&L'sinterestexpenseclaimisinconsistentwithitstestyearratebaseclaimandwouldprovideawindfalltoinvestorsbyallowingPP&Ltoearnonits'TCinvestment'tarategreaterthantheoverallcostofcapitaldeterminedforratemakingpur-poses.Furthermore,sucharesultiscontrarytothere-quirementsoftheInternalRevenueCode.OCASt.3,pp.36-38."TheStaff,generally,joinsintheConsumerAdvocate'position.TosaythattheRespondent'scalculationiscon-trarytotherequirementsoftheinternalrevenuecodeiscompletelywrong.Onthecontrary,theConsumerAdvocate'recommendationthattheinvestmenttaxcreditsbeincludedintheratebaseforthepurposesofcalculatingtheinter-estdeductionisitselfaviolationofthepurposeoftherequirementthattheaccruedinvestmenttaxcreditsbeper-mittedtoearnattheoverallrateofreturn.Oureconomyhasbeenandwillcontinuetobein-creasinglyshortofcapital.Taxprovisionsforaccelerateddepreciationandinvestmentcreditshavebeendesignedtoavailcapitalneedswithcashflowfunds.Itisgenerallybelievedthatthesetaxprovisionswillhavetobes'till

~~~~moreliberali"ed.Forutilities,therehavebeenrestrictionstovouchsafetheavailabilityofthesecashflowfundsandincidentallytolimittheeffectoftheseprovisionsontaxrevenues.Itisrhetorictospeakintermsof"windfalltoinvestors".Awindfallmaybedefinedas"acasualorunexpectedacquisitionoradvantage."Theacquisitionoradvantage,flowingfromthesetaxprovisions,isintended.Animplicationofimproprietyorofdisadvantagetotheratepayerdisservespublicunderstanding.iThereisnoimproprietyintheadvantage,suchasitis,ofareturnonnon-investorsupplied,buttax-derived,funds.Thereisnojustifiabledistinctiontobemadebetweenbefore-taxandafter-taxcostofcapitalorrateofreturn.TheConsumerAdvocate'sandtheStaff'sproposedinclusionofinvestmenttaxcreditsinratebaseforthepurposeofcalculatingtheinterestdeductionisimproperinprincipleandinlaw.Ourcalculationoftheinterestdeductionis,asfollows:

AllowedRateBaseLess:ITCRateBaseforInterestCalcu-lation($000)$2,102,328139,451.1,962,877Long-TermDebtRatioX.48ProFormaRateBaseDebtComponent942,181EmbeddedLong-TermDebtCostInterestDeductionRespondent'sAnnualizedInterest(Resp.Exh.Future1,D-17)Z.095189,60188,831IncreaseinInterestDeduction$770TaxDepreciationTheConsumerAdvocateobjectsthattheRespondenthasannualizeditstaxdepreciationexpensedeductionratherthanitshavinguseditsunadjustedtest-year~deduction.TheobjectionisbaseduponthesamepremiseofmismatchingwhichunderliestheConsumerAdvocate'spositionearlierondepreciationexpense.WerefusetheConsumerAdvocate'srecommendationhereforthesamereasonofrefusalofthedepreciationexpenserecommendation.TaxNormalizationGenerally,theRespondenthasusedandcontinuestouseliberalizeddepreciationandhasflowedthroughthebulkoftheliberalizeddepreciationbenefits.Itelected>

however,totakeadvantageoftheClassLifeAssetDeprecia'-tionRange(ADR),providedunderthe1971federalRevenueAct.Underthe1971Act,utilitieswerepermittedtoshortenlivesofproperty,acquiredafter1970,byabout20%incomparisonwithpriorprovisions.TheADRprovisionsalsopermittedcurrentdeductionofcostsofremoval.TheRespondentelectedtoemployandtonormalizethetaxbenefits,producedbyADR,whileflowingthrough,aswenoted,thebulkoftheotherliberalizeddepreciationbenefits.TheRespondenthasexplai'nedthehistoryofitstreatmentanditselectiontoavailitselfofthecompara-tivelylimitedbenefitsof,ADRnormalization.Itarguesthat"customerchargesoverthetimeframeinwhichpropertywillprovideservicewillbeloweronanactualbasisorapresentvaluebasis."Itpointstotheusuallyclaimedbenefits,fromnormalization,ofimproveddebtcoverages,improvedqualityofearnings,improved.cashflow,andlowercostsoffinancing.Itcitesforthesupportoftheprincip1'eoftaxnormalization'anumberofregulatoryagenciessuchastheFederalEnergyAdministration,theFederalEnergyRegulatoryCommission,theFederalCommunicationsCommission,theInterstateCommerceCommission,theSecuritiesandExchangeCommission and45ofthe50stateregulatorycommissions.ItcitestheAccounting.PrinciplesBoardoftheAmericanInstituteofCertifiedPublicAccounts,'heMassachusettsAccountantsforPublicIssues,andtheNationalRegulatoryResearchInstitute.TheRespondentproducedconsiderabletestimony,includingthatofJohnF~Utley,PartnerandNationalDirector-,RegulatedBusinessofDeloitteHaskins&Sells,aninternationalfirmofcertifiedpublicaccountants,onvariousaspectsoftaxnormalizations(Resp.StatementXI,Exhs.1,2,63).TheRespondentalsorecallstheCommission'sStatementofPolicy,issuedJune24,1970,underwhich,untilrecently,theCommissionpermittednormalizationofstateincometaxes.TheStaffandtheConsumerAdvocateobjecttonormalizationinprincipleandinviewofrecentCommissionpolicy.TheCommission'sStatementofPolicyof1970can"onlybeunderstoodasarecognitionoftherequirementfornormalizationunderthe,federaltaxlawsandthevoluntaryrecognitionofnormalizationforstateincometaxpurposesunderthelegislativepurposeandpolicyofthefederaltaxlaws.Among,thecitationsoftheRespondent'sexpertMr.Utley,wasthenoticeofproposedrulemaking,issuedbyt'eFederalEnergyRegulatoryCommissionatitsDocketNo.RM80-42(45FederalRegister,No.66,4/3/80,pp~220522053 etseq.).SurrebuttaltestimonywaspresentedbyStaffwitness,WilliamF.Doyle,withwhichtheStaffwitnesspresentedaletter,datedJune27,'1980,addres"edbyourChairmantotheSecretaryofFERC.Inthisletter,theChairmanexpressedreservationsaboutFERC'sstudyandproposedruleonnormalization.Intheletter,theChairmanreferredtoourCommission'sstudiesofnormalizationversusflow-through.We,atfirst,requestedthatevidenceofthesestudiesbeintroduced.WhentheStaffofferedtointroducethematthecloseofthecase,we,onreconsideration,consideredittoolateforintroduction.WefeelthattheStaffhadanobliga-tiontoproduce,insupportofitsposition,thefullmeasureandqualityofevidence,availabletoit,atasufficientlyearlytimetohaveaffordedallpartiesandthepresidingofficerafullopportunityofreview.TheRespondenthasproducednothingthathasnotbeeninthe,publicdomainforaconsiderableperiod.ThereisnoquestionofourCommission'spowertodenynormalizationforstateincometaxpurposes.ThereisalsonoquestioninourmindthatFERCfirmlysupportstheprincipleoftaxnormalizationandpresentsanelaborateargumentandstudyinsupportoftheprinciple.1TheStaffisinerrorincharacterizingHr.Utleystestimonyasanadmission"thatintermsofpresentdollars, basedonhisstudy,flow-throughischeaperthannormal-ization(Tr.1763-1764)."Mr.Utley'stestimonyis,asfollows:"However,myviewis,asyou'know,consideringthatinabsolutedollarsitismorecostlyforflow-through,andconsideringonapresentvaluemodethatitisapproximatelythesame,thatthefourspecificothe"benefitsofnormalizationhavetobebroughtintoplaytomakeasound)udgmentonit."(SeeResp.Exh.JFU2).Xntermsofdata,applicable.totheRespondentorgenerally,thereisnoevidencethat"flow-throughischeaperthannormalization"forthecustomer.Thereisindisputableevidenceofthebenefitsofnormalizationintermsofaddressingcapitalfundneeds.Tospeakintermsof"phantomtaxes"istomisconceivetheessenceofSpublicpolicy.Toimplyspecialprivilegeforinvestorsignorestheauthenticmeaningofbenefit.Weseenothingwrongwithhavingconsumerspayanormalizedtaxforavitalutilityservice.Ifthatiswhatsoundpublicpolicyrequires,a"cheaper"paymentforthatserviceisanevasionofobligation,ironicallywhenitisnotevenclearthatitischeaper.Whenoneconsiderstheproposedreductioninexpenseby$1,255,000fortheclaimedADRnormalizationunderstateincometaxlawsagainstthegreaterbenefitsofflow-through,whichtheRespondenthasprovidedvoluntarilyunderfederaltaxlaws~

k' theproposal,makingeveryallowanceforfuturecumulativeeffect,isverynarro~.Itisonlyamodicumofconfidenceinmanagerialjudgmentthatitwouldnotmakesuchaverylimitedclaim,afterexhibitingitsconcernforconsumerinterests,withoutaconvictionofneed.~WerefusetherecommendationsoftheStaffandtheConsumerAdvocateandrecommendtheacceptanceoftheRespondent'sADRnormalizationclaim.WerecommendthattheCommissionreviewthequestionofflow-throughv.normalizationunderstateincometaxlawsandissueadeclarationofpolicy,afterdetailedstudyandallowanceofpubliccomment.ConsolidatedTaxLossesTheRespondentfilesconsolidatedfederaltaxreturnswithitssubsidiaries.Theonlytaxeffect,withwhichweareconcerned,centersinthetaxlosses,asso-ciatedwithOneidaHiningCompany,anaffiliate.TheOneidaundergroundminewasabandoned,latein1978.Itisestimatedthatthisaffiliatewillhavehadtaxlossesofover$17millionfor1979.(Resp.St.II-A)~TheRespondentsufferedalossof$27,579,000fromitsOneidainvestment.(Resp.Exh.'Euture1B).WhateverthetaxarrangementshavebeeninrespectoftheotheraffiliatesoftheRespondent,theonlyaffiliateinquestionisOneida.Ithasapparentlybeenthepractice oftheRespondenttomaketaxpaymentstoOneida,equalto'hetaxsavings,derivedfromOneida'slosses.Thus,between1976and1979,theRespondentmadetotalpaymentsof$2,624,357toOneida.Ztalsopaid$697,850toOneidaearlyin1980onthebasisofpriorestimatesoftheconsolidatedtaxfor1980.TheRespondentexpectsthatthefinalamountfor1980willneedadjustment.(Resp.Exh.250.1002005).TheRespondenthasmadeitsincometaxclaiminthisproceedingonthebasisofitsownoperationsandwithoutregardto'extraordinarytaxlossesofitsOneidaaffiliate.TheStafftakesthepositionthattheRespondent'scustomersareentitledtotheconsolidatedtaxbenefitofsuchlossesand'hattheRespondent'staxclaimshould,accordingly,bemeasuredaftereffectoftheselossesontheconsolidatedtaxreturn.TheStafftotalsthepaymentsbetween1976and1979andrecommendsa5-yearamortizationat$524,871inreductionoftheratemakingincometaxallowance.Thestaffarguesthat"taxpaymentspreviouslypaidtoOneidaandcollectedfromratepayersintheformofincometaxeswillneverbenefittheratepayers"andthat"onlyactualexpensesareproperexpensesforratemakingpurposes."Apparently,hadOneida<<56-S continuedinoperation,thepaymentsfromtheRespondenttoOneidawouldhavegonetowardthereductioninthepriceofcoal,soldbyOneidatotheRespondent.Wedonotknowhowthesepastpaymentsfrom1976through1979relatetobenefits,properlyallowabletotheRespondent'scustomers.TheRespondentarguesthatitscustomersarenotentitledtothebenefitsoftheextraor-dinarytaxlossesunlesstheysharetheRespondent'sinvest-mentlosses.If,accordingtotheRespondent,thetaxbenefitsareallowedtoitscustomers,assuggested'bytheStaff,theymakecJaimfora5-yearamortizationoftheir$27,579,000lossat$5,516,000peryear.Itisourjudgmentthatanyregulatoryrulewithrespecttoallowanceforactualincometaxesuponaconsolidatedreturndoesnotandshouldnotapplytoextraordinarylosses,availablefromanaffiliateupontheterminationofitsoperation.Totakeaccountofsuchextraordinarylossesappearstoustobegross'lyinequitable.WerefusetheStaff'srecommendationandtheconsequentrecommendationoftheRespondent.

NONJURISDICTIONALSALESTheRespondentpresenteditsproformafiguresonatotalcompanybasis.'tcalculatedthat,ofthe$123,312,166ofrateincreases,$2,695,804wouldcomefromitsnonjurisdictional(FERC)sales.Itchargeditselfwiththefullrevenueeffectofservingtheresalecustomersunderthesamebaseratesandenergychargeswhichitproposesforitsretailcustomers.ThenonjurisdictionalcustomersweretreatedliketheRespondent'scustomersunderitsLP-4,LP-5orLP-6rates.Thusitprojected,ineffect,anincreaseof18.8%inrevenuesfromthenonjurisdictionalcustomers'heyweretreated,ineffect,asthoughtheywerejurisdictionalcustomers,inviewofthenatureoftheservicetothem,undertheLPrates.(Resp.Exh.'Future1,D-3,p.2).TheStaffandtheConsumerAdvocateelicited,fromtheRespondentsomecalculations,baseduponacostofservicestudyfortheyearended,December31,1978,whichindicatedthatthenonjurisdictionalsaleswereproducinglessthanthesystemaveragerateofreturn.Allocatedrevenues,expenses,ratebaseandreturnwerebrokenoutattherequestoftheStaffandtheConsumerAdvocate.(Resp.Exhs.200.20148,pp.16-1&16-3;250'005002).<<58-

TheobjectingpartiestakeseriousexceptiontotheRespondent'sfailuretopresentitscaseonajurisdictionalbasis.The/requestthattheRespondenthenceforthbeorderedtodoso.TheRespondentcontendsthatithastraditionally,initsPennsylvaniaretailratecases,treatedtheresalecustomersforratepurposes'asiftheywereretailcustomersbecausetheyhavethesameservicecharacteristics.Meanwhile,theStaffandtheConsumerAdvocatehavecastabout,makingcalculations,whichhavetobecontingentupontheultimatefindings,tobringtheFERCcustomerstoasystemaveragerateofreturn.Inourview,thequalityofjusticehasbeenseverelystrained.ThattheRespondentmightnotbepermittedtoraisetheratesoftheFERCcustomerstoajurisdictionallevelisofnomomenttotheobjectingparties.Similarly,itisofnomomentthatcustomers,withinclasses.ofservice,arenevertreatedseparatelyfromtheirclassesandarenotmeasuredseparatelyagainsttheircontributiontorateofreturn.WeconsidertheRespondent'sapproachsensible.Onlyintheroughestwaycouldabreakoutofrevenues,expenses,andratebaseforthesefewFERCcustomers,andthenonthebasisofa1978costofservicestudy,affordameasureoftherateofreturn,attributabletothesecustomers.Whatsuchabreakoutwouldaffordwould beanothernumberofissuesforaratecase,unlesstheresultproducedasatisfactoryreductionintheRespondent'srevenuerequirementfromjurisdictionalsales.Needlesstosay,wedonotaccepttherecommendationsoftheStaffandtheConsumerAdvocateinthisarea.

RATESTRUCTUREOnOctober3,1980,therewerefiledaJoint4PetitiontoApnroveandNakePartofRecordtheStipulationofPartiesonRateStructureIssuesandaStipulationofPartiesonRateStructureIssues.TheJointPetitionandtheStipulationwereexecutedandfiledonbehalfoftheRespondent,theCommissionTrialStaff,theConsumerAdvocate,theLehighValleyPowerCommittee,andtheBethlehemSteelCorporation,allactiveparticipants.ThePetitionandtheStipulationareadmittedintotherecord.TheStipulationisconditioneduponandsubjecttotheacceptanceandapprovalofthepresidingofficerandtheCommission.ThePetitionandtheStipulationarefullyexplanatory.TheCommissionTrialStaffsubmittedaseparatestatementinexplanationofitssupportofthePetition.ThePetitionandtheStipulationarefullycomprehensive,includingaprovision,governingallocationofanyallowedincreaseinrevenues.totheRespondent.(Stipulation,p.6).Thedocumentsreflectskillanddiligenceandthefruitsofcompromise,allinthepublicinterest.'eapprovethePetitionandtheStipulationandrecommendapprovaltotheCommission.

CONCLUSIONWehaveadjustedtheRespondent'sclaimfornetoperatingincomeattheproposedratesforthetestyear,endedDecember31,1980,asfollows:($000)ProFormaatProposedRatesOperatingRevenues$918,506OperatingExpensesOperation&MaintenanceDepreciationTaxesTotalOperatingExpenses439,36382,865158580680808OperatingIncome8237698WeearlierrecommendedafairvalueofratebaseatO.C.D.intheamountof$2,102,328,000.Ourrecommendedfairrateofreturnhasbeen11.27%inaccordancewithourcalculatedcostofcapital.ThustheallowablereturnornetoperatingincometotheRespondentwouldbe,asfollows:RatebaseFairrateofreturnAllowablereturn$2,102,328,000x.1127$236,933,000Itisseenthattheproposedrateswould,byproformacalculation,produceanetreturninexcessoftheallowablereturnby$765,000andthattheoperatingrevenueswouldbeexcessivebyapproximately$1,600,000.

Giventheformulationofrate-caseaccounting,wecanhardlymeasureexcessinsuchfinetermsandadjustratesinsuchfineter~s..Werecommendacceptanceoftheproposedrates,subjecttotherate-structureStipulation.Suchrateswould,onaverage,representa16Xincreaseoverpresentbaserates.TheRespondent'requestandourallowancearesignificantlybelowwhatisexpectablyrealizableunderprevailingeconomicandfinancialconditions.Itwouldbesheerpretenseforustopredictafuturecontextfortheproposedrates.WedoknowthattheCommissionrequiresongoingquarterlyreports.Thesereportsaresmallcomfortforinadequateearnings.Theyare,however,aready,timely,andeffectivemeansformonitoringandactinguponearlyindicationofexcessivereturn.Inthelastanalysis,weareallawareoftheinjuriousprogressionofinflation.Weexpressourconvictionthatwecannottreatthemaladywithaspirinsorplacebos.Weneedthebestforthrightthinkingofourbestminds,arealisticconcurrenceinfundamentalremedies,andacommonwilltoapplysuchremedies.

RECOMMENDEDORDER(SubjecttoCommissionApproval)ITISRECOMMENDED,ASPOLLOMS:1.TheStipulationofPartiesonRateStructureIssues,filedinthisproceeding,isherebyapprovedandmadeapartofthisorder,as.thoughitwerefullysetforthherein.2.TheStipulationofPartiesWithRespecttoCertainDepreciationIssues,filedinthisproceeding,isherebyapprovedandmadeapartofthisorder,asthoughwerefullysetforthherein.3.TheRespondentmayfile,effectiveforservicerenderedonandafterthedateofthisorderorwithin30daysthereafter,astheRespondentmayelect,atariffortariffsupplement,containingratestoprovidetotalannualrevenuesof$918,506,000,.exclusiveofrevenuesfromtheStateTaxAdjustmentSurchargeandtheEnergyAdjustmentCharge,"ascomputedandallowedhereinatthelevelofsapportionedand1andnonjurisdictionaloperationsatDecember31,1980,andaallocatedhereinbetweenjurisdictionasales.4.TheRespondentshallfile,withthetariffortariffsupplement,detailedcalculations,demonstratingthatI1theratesdocomplywiththerequirements,setforthhereinandincludingtheprovisions,relatedtoRat'eStructure.

S 5.Theseveralcomplaintsshallbedeemedallowed,dismissedordisallowed,aswillhavebeenindicatedbytherecommendationsinthisDecision.6.Uponthefilingofanacceptabletariffortariffsupplement,asprescribedherein,theinquiryandinvestigationatR-80031114andtheconsolidatedcomplaintproceedingsshallthereuponbeterminated;andtherecord,markedclosed.RECOMMENDEDTOTHEPENNSYLVANIAPUBLICUTILITYCOMMISSIONBy:AdministrativeLawJudgeDated:December12,1980

$gCQMMQNN/EALTHOFPENNSYLVANIA".:""~r;"'jPENNSYLVANIAPUBLICUTILITYCQMIVIISSIQNP.Q.BOX3265,HARRISBURG,Pa.17120January30,1981LEGALDEPARTMENTiINREPLYPLEASEREFERTOOURFILER-8003114GennaroD.Caliendo,AttorneyPennsylvaniaPowerhLightCompanyTwoNorthNinthStreetAllentown,Pennsylvania18101Pennsy'lvaniaPublicUtilityCommission,et/alv~PennsylvaniaPowerhLightCompanyToWhomItMayConcern:ThisistoadviseyouthattheCommissionatPublicMeetingheldjanuary30,1981adoptedanOpinionandOrderinconnectionwiththeabove-entitledproceeding.AcopyoftheOpinionandOrderisenclosedforyourrecords.Verytrulyyours,fao/jzEncls.CertifiedMailReceiptRequestedWilliamP.ThierfelderSecretary PENNSYLVANIAPUBLICUTILITYCOt91ISSIONHarrisburg,PA17120PublicHeetingheldJanuary30,1981CommissionersPresent:SusanM.Shanaman,Chairman,concurringinpart,dissentinginpartHichaelJohnson,dissentingJamesH.Cawley,concurringinpart;dissentinginpartLindaC.Taliaferro,concurringinpart,dissentinginpartPennsylvaniaPublicUtilityCommission,etal.R-80031114V.PennsylvaniaPower8LightCompanyOPINIONANDORDERBYTHECOI1MISSION:I.INTRODUCTIONOnApril29,1980,PennsylvaniaPowerSLightCompany(Respon-dentorPPGL),filedSupplementNo.73toTariff-ElectricPa.P.U.C.No.198,tobecomeeffectiveJuly28,1980,containingproposedchangesinratescalculatedtoproduce$123,312,000inadditionalannualrevenues=.SupplementNo.73wassuspendedbyoperationoflawfortheseven-months'eriodendingJanuary28,1981.66Pa.C.S.51308.OnDecember15,1980,AdministrativeI,awJudgelforrisiiindlinissuedhisRecommendedDecisionwhereinherecommendsapprovaloftheratesasproposed.OnDecember23,1980,ExceptionswerefiledbytheOfficeofConsumerAdvocateandPhilipStarr.OnDecember29,1980,ExceptionswerefiledbyTrialStaffandRespondent.ReplyExceptionswerefiledbyRespondent,TrialStaff,andtheConsumerAdvocate.II.RATEBASEA.IntroductionAllpartiestothisproceedinghaveagreedtoadjudicatethiscaseonthebasisofafairvalueequaltotheoriginalcostmeasureof1/Theseadditionalannualrevenuesrepresentapproximately16/ofadjustedbaseraterevenues,calculateduponthebasisofafuturetestyear,endingDecember31,1980.

value(OC).Accordingly,weshallutilizePPGL'sOCof$2,141,399,000asourpointofbeginning,tobeadjustedinaccordancewithourdis-cussionoftheissuesbelow.B'.PlantHeldforFutureUse.Respondent'sclaimedoriginalcostmeasureofvalueincludes$40,394,000ofelectricplantheldforfutureuse.(PPGLEx.Future1A-C-1).Thisplantincludeslandforfuturegeneratingstations;landandright-of-wayforfuturetransmissionplant;land,rights-of-wayand.otherpropertyforfuturedistributionplant;andlandforfuturebuildings,primarilyservicecentersites.(PPSIEx.Future1-C-3).Respondentarguesthattheseinterestsinlandhavebeenacquiredbecauseitwasnecessaryandprudenttodosoinordertomeetitscontinuedobligationtoprovideadequateservicetoitscustomers(PPGLS-UII,pp.35-37).PPGLalsoquestionsourlongstandingpolicyofallowingtheinclusionofplantheldforfutureuseinratebaseonlywhentheplansforutilizationofthelandandorplantindicatethattheseitemswillbecomeusedandusefulwithinten(10)years.TheOfficeofConsumerAdvocate(OCA)drawsaninterestingcomparisonbetweenplantheldforfutureuseandconstructionworkinprogress.TheOCAarguesthatbeforethesitesinquestionbecomeusedanduseful,considerableconstructionand/orimprovementmustoccur;andbeforetheseexpendituresareincludedwithinratebaseasplantinservice,themajorityoftheseexpendituresprobablywillbeclassifiedasConstructionWorkinProgress,whichisgenerallyexcludedfromratebase.TheOCAarguesthatitwouldbeinconsistenttoincludeplantheldforfutureuseinratebaseduringtheyearspriortoconstructionandthenexcludethelandandconstructionuntilthefacilitiescomeonlinebecauseitisclassifiedasConstructionWorkinProgress.OCAfurtherarguesthatplantheldforfutureuseisnotpresentlyusedandusefultocurrentratepayersandifwedesiretoprovideareturnonthisland,weshouldprovideanAllowanceforFundsUsedDuringCon-struction,'ratherthanincludingitinratebase(OCASt.3,p.11).kTheOCA'sfinalargumentfocusesuponourpastpracticeofdisallowingplantheldforfutureuseforwhichdefiniteplanswerenotavailable.Pa.P.U.C.v.WestPennPowerCo.,R-78100685,August30,1979,at17-19.TheOCAhasconcludedthatuncertaintiesconcerningfutureelectricaldemandcausesdoubtastothenecessityforthecon-structionofproposedplant.TheOCAarguesthatthislackofdefiniteplansfortheconstructionofplantissufficientgroundsforthedisallowanceofthecostoflandreservedfortheseplants.CommissionTrialStaff(Staff)reliesuponpriorCommissioncaseswhichheldthatlandforwhichadefiniteplanforuseexistedandforwhichthein-servicedatewaswithintenyearsfromtheendoftheestyear(areasonableperiodoftime)wastobeincludedinratebase.PaP.U.C.v.PhiladelhiaElectricComan,R-79060865(1980);Pa..P.U.C.v.PennslvaniaElectricCompan,R.I.D.599(1979);Pa.P.U.C.v.PennslvaniaElectricComoan,R.I.D.392(1978).Staff'sanalysisof PPGL'sExhibitI-A-14indicatesthatthedateofanticipateduseforamajorityofthelandarespecifiedbyasingleoralternativedatewithinthenexttenyears.StaffproposesthatPPGL'sproposedratebasebedecreasedby$23,656,509,thisamountrepresentingthoseitemsonPPGL'sexhibitI-A-14bearingthenotation,"After1990"forthedateofanticipateduse.StaffarguesthatPPSLhasclearlyfailedtomeetitsburdenofproofonbothpartsofthetestforinclusioninratebaseinthat:(1)thereisnodefiniteplanforuse;and(2)theusewillnotbewithinareasonableperiodoftime;beingdefinedbytheCommis-sionasten(10)years.TheALJ(R.D.10-13)reluctantlyacceptstheproposalsetforthbyStaff,stating:(W)ebelievethatadeliberaterevisionofpolicywithrespecttofuture-uselandisdesirableandwecannotprovideit....PPGLexcepts.Wehaverecognizedthatlandheldforfutureuseisproperlyincludedinratebaseuponthemeetingoftwocriteria.AsstatedinPa.P.U.C.v.PennslvaniaElectricCoan,R.I.D.172(1976):ItisthecurrentpolicyofthePennsylvaniaPublicUtilityCommissiontoallowtheinclusionoflandheldforfutureuseinratebasewhendefinitelansareavailableandsaidutilizationwilloccurwithinareasonabletime.TheCommissionhasearmarkedareasonabletimeinrecentratedecisionsasbeinguptotenyears.(Emphasisadded).Applyingthispolicytothefactspresentedintheinstantcase,weshallnoteliminateallproposedplantheldforfutureuseassuggestedbytheOCA.Further,wedonotsubscribetotheOCA's.analogybetweenplantheldforfutureuseandCWIP.PurusanttotheUniformSystemofAccounts,approvedbyus,thecostoflandpurchasedforuseinthefutureisincludedinaccount105(Electricplantheldforfutureuse).WedonotfindanyprovisionwithintheUniformSystemofAccountseitherrequiringorpermittingtheinclusionofthecostoflandwithinaccount107duringconstructionofimprovementsontheland(Contructionworkinprogress-Electric),rather,thiscostshouldremaininaccount105untilclosedtoaplantinservicelandaccountwhenthefacilityconstructeduponitisplacedinservice.Incontrast,theCWIPaccountisnormallylimitedtoexpendituresforimorovementsconstructedontheroert.AlthoughconstructiononthelandmustbebookedtotheCWIPaccount,thecostoftheJ~nditselfremainsinaccount105untilcompletionoftheproject.-Therefore,,werejecttheConsumerAdvocate'sanalogy.2/SeeUniformSystemofAccounts,GeneralInstruction7

~~l1Staffhasarguedthatanylandheldforfutureusewhichwillnotbeinservicewithin10yearsshouldbeexcludedfromratebase,whereastheALJhasrequestedthatwereconsiderthislimitation.AsstatedbyStaff,thetestforinclusionwithinratebaseconsistsoftwoparts:(1)theremust,beadefiniteplanforuse,and(2)theusemust"bewith'nareasonableperiodoftime.WehavedefinedareasonableThetenyearperiodwasselectedtorepresentareasonable'.timebaseduponevidencereceivedindicatingthatthedesignandcon-structiontimeperiodofageneratingplantwas,onaverage.,tenyears.Inthepresent,case,testimonyhasbeenreceivedwhichindicatesthatthetimerequiredforconstructionofnewgeneratingplantvariesfrom10to15ormoreyears(PPGLS-VII,p.36).Respondentw'ouldhaveusreexamineourtenyearperiodandextendourdefinitionofareasonabletimeto15ormoreyears.While15yearsmaybeareasonableperiodoftimeforlandwhichwillbeutilizedforthesiteofageneratingplant,i"wouldappearreasonabletoassumethatdistributionandtransmissionstationsandlineswouldbestartedandcompletedduringatimeperiodwhichwoulddifferfromthatofgeneratingplant.Thus,whileatenyearperiodmaybeappropriatefortransmissionanddistributionsystems,a15-20yearperiodmaybeappropriateforgeneratingplant.Further,weareoftheopinionthatthedateofutilizationforlandforgeneratingplantwouldvaryaccordingtothetypeofplantbeingconstructed.WeagrewithPP&Lthatareexaminationofourpolicyisappropriate,butareoftheopinionthataproceedinginvolvingallutilitiessimilarlysituateismoreappropriatethantreatingthisissueinvolvingalongstandingpolicyonacasebycasebasis.PPGLfurtherarguesprudentmanagementpracticesdictatetheearlyacquisitionofthisscarcecommodity.Byemployinga10yearstandardinthepast,wehavealreadyrecognizedtheincreasedscarcityofsuitablelandandthatprudentmanagementrequirestheacquisitionofparcelsoflandwellinadvanceoftheanticipateddateofconstruction.Aspreviouslystated,thestandardof10yearsismerelyaguide.The10yearperiodwasourdeterminationoftheamount"ofleadtimeforthepurchaseoflandforconstructionwewouldconsiderreasonablefor*purposesofinclusioninratebase.Ifthecurrenttrendofspiralingcostsoflandcontinues,andwehavenoreasontobelieveitwillabate,thereturnoninvestmentpaidbytheratepayersbyincludinglandheldforfutureuseinratebasenowwillnotsurpasstheincreasedfuturecostsoftheland.Accordingly,weareprepared,inappropriatesituations,toreexamineourtenyearpolicy.Theaddi'tionalcriterion,thattheremustexistadefiniteplanforuse,willnotbewaived.Applyingthissecondcriteriontothefactspresentedhere,wefindthatPPGL'srequestforinclusionofallofitslandheldforfutureuseinratebasemustbedenied.Anexam-inationofPPGL'sExhibitI-A-14indicatesitemswithdatesofuseenteredas"After1990".Suchanotationdoesnotindicatetousadefiniteplanforuse,andweshallnotallowtheinclusionoftheseitemsinratebase.Accordingly,weshallreduceratebaseby$23,656,509.4

C.CWIP-PollutionControlFacilitiesRespondenthasincludedinitsclaimedoriginalcostmeasureofvalue$40,394,000,representingconstructionworkinprogress-pollutioncontrolfacilities,less$717,000inretirementsassocicatedwiththeseprojects(PP&LEx.FuturelA-C-1).TheconstructioninquestionistakingplaceatBrunnerisland,MartinsCreek,Sunbury,Holtwood,andMont'our(PPGLEx.Future1-C-6)inordertomeetthePennsylvaniaDepartmentofEnvironmentalResourcesairandwaterpollu-tioncontrolregulations(N.T.169).Staffhasnotchallengedtheproposal.TheConsumerAdvocatearguesthatpollutioncontrolequipmentiseitherpartofnewplantconstructionorisrequiredforcontinueduseofanexistingfacility,concludingthatinpurelyoperationaltermsthereshouldbenoregulatorydistinctionmadebetweenequipment,designedforthegenerationofelectricityand'thatdesignedforpollutioncontrol.Thustheyargue,unlessthepollutioncontrolequipmentisusedanduseful,atestappliedtoallplant,itshouldbeexcludedfromratebase.OCAfurtherarguesthattheinclusionofpollutioncontrolCWIPinratebaseismerelyamethodofextendingthefuturetestyearfurtherintothefuture.Inallowingtheclaim,theALJmerelystates,"[W]econsiderthattheRespondent'sclaimcomeswithintheparameters'ftheCommis-sion'spronouncementofpolicyinthisarea."(R.D.13).TheConsumerAdvocateexcepts.OurpolicyhasmostrecentlybeenexplainedinPa.P.U.C.v.BellTelephoneComoan(PetitionforReconsideration),R-78120719(August22,1980)whereinwestated:Whendeterminingwhethertoincludeconstructionworkinprogressinratebase,traditionallywehaveconsideredifsuchprojects:(1)werecompleted,ortobecompletedwithinashorttimepasttheendofthetestyear,(2)werereasonablyidentifiableasnon-revenueproducing,(3)werereasonablyidentifiableasnon-expensereducing,(4)didnotaffectthelevelofoperationsattheendofthetestyear,(5)im-provedenvironmentalconditions,(6)improvedthequalityandreliabilityofservice,(7)improvedsafety,(8)disclosedthattheamountclaimedwasactuallyexpensedbyautility,and(9)weresignificant,relevant,andsubstantial.Whilewegenerallyhavecon-sideredallnineitemsindeterminingwhetheraconstructionworkinprogressprojectshouldbeincludedinratebase,onlyonrareoccasions,ifany,didagivenprojectsatisfyallnine criteria.Therefore,werepudiateanyinti-mationinpriordecisionswhichhastheeffectofrequiringthatallnineconsiderationsmustbesatisfied.Inaddition.,anotherstandardhasevolvedwithspecificregardtopollutioncontrolprojects.Wehavestated:Theallowanceofpollutioncontrolexpendituresasusedanduseful'snoadditionalcustomerswouldbeaddedandnoadditionalcapacitywassuppliedasaresultofsuchpollutioncontrolfacilities,noadditionalrevenuewasproducedbytheconstructionofsuchfacilitiesandnoreductioninexpenseswouldresult.CKSuchunusualexenditureswhichwillneverberevenueroducinwillneverincreaseener-ation,andcouldnothavebeenreasonablyforeseenatthetimeoftheinitialconstruction,shouldnot,inouropinion,bemeasuredwiththeidenticalcriteria-asotherconstructionworkinprogressinregardtostrictcomplianceorin-serviceprinciple(Emphasisinoriginal).Pa.P.U.C.v.WestPennPowerCo.,32PUR4th245,253-254(1979).WefindthatthepollutioncontrolequipmenttobeinstalledonexistingPPGLgeneratingstationssatisfiesnumerouscriteriasetforthinBell.Accordingly,weshallallowPPGL'sclaiminratebase.Insodoing,however,weshallcontinuetodistinguishbetweenpollutioncontrolequipmentutilizedforexistingandnewplant.D.CoalreservesByOrderenteredJuly17,1980,weapprovedRespondent'sapplicationforapprovalofitsacquisitionofalltheoutstandingcapitalstockofArcadiaCo.,Inc.,whichincludedthecoalreservesownedbythatcompany.Inaddition,inMarch,1980,Respondentexer-ciseditsoptiontoacquirethemineralrightsforapproximately1,666acresofthesocalledHolland/Mitchell/Colavecchiproperties.TheOCAandStaffopposeinclusionofanyfundsassociatedwithacquisitionorrepresentingthevalueofthecoalreserveswithinm'easuresofvalue.TheConsumerAdvocatearguesthattherisksasso-ciatedwithcoalminingaresignificant,andratepayersshouldnotbeforcedtobeartheserisksbyincludinginvestmentincoalmining operationsinratebase.(OCASt.3,p.13).Further,theOCAarguesthatitisnotknownwhenthesecoalreserveswillbeextractedcom-pletelyandthusbecomeusedanduseful.Asafinalconsideration,theConsumerAdvocatepointsoutthatPPGLisunabletomakeanyfirmestimateasto:thefuturepriceofthecoaltobemined(N.T.805,837);whowillpurchasetheArcadiacoal(N.T.770,780,796);whowillminethecoal(N.T.838);orwhatthetermsofthecontractfortheoperationofthecoalminewillbe(N.T.839).Staff'sobjectionsaresimilarinnature;itarguesthat(1)thereisnodefiniteminingplanforthereserves;and(2)although,ArcadiaPP&Lispresentlyproducingcoal,itisnotbeingsoldtoPPGLasPPGLisabletobuyspotmarketcoalatacostlowerthanitcanmine,Arcadiacoalbut,astheinvestmentwasprudentlymade,anallowanceshouldbemadeforPPGI.tocapitalizethecarryingcosts;andrecoveritbackfromtheratepayersinthecostofArcadiacoal.throughPPGL'senergyclauseifandwhenthecoalissoldtoPPSL.TheAdministrativeLawJudgeproposestoincludetheArcadiacoalmineinvestmentwithinratebase,asitisanoperatingminewhileexcludingtheHollandCoalreservesuponapplyingthesameconsideration.TheStaffandOCAexcept.WeareinagreementwithStaffandtheConsumerAdvocatethatduetothenon-utilizationofcoalpresentlybeingminedatArcadiaforusebyPPM.,themineisnotusedandusefulforregulatorypurposes,.andisproperlyexcludedfromratebase.Weareaware,however,thatthecoalfromtheArcadiaMinemaybepurchasedandburnedbyPPGLintheproductionofelectricityonasporadicbasis;viz.,whenthepriceoftheArcadiacoalincludingcarryingcostsislessthanthespotmarketprice.RatherthanincludeandexcludethisitemfromratebasedependinguponwhetherPPSLisburningtheArcadiacoal,weagreewiththeparties'lternativeasdescribedbyPPGL'switnessFortuneasfollows:Thealternativeistotreatthecoalreservesasanassetofthesubsidiaryandfinancethecarryingcostofthereservesthroughthesubsidiary.Thiswouldinvolvecapitalizing.thecarryingcostofthereservessimilartothewaythecostoffinancingConstructionWorkinProgressiscapitalizedthroughtheAllowanceforFundsUsedDuringConstruction.Suchcapitalizati'onoffinancingcostsisnecessarytoequitablyallocatethecostofthesecoalreservesovertheperiodsinwhichthecoalis.actuallymined.(PPGLS-IA,p.10).InthismannerthecarryingcostswouldbecapitalizedandrecoveredfromratepayersthroughPPGL'senergyclauseasthecoalissoldtoPPM,.(N.T.776-777).-7 Byprovidingsuchtreatment,weareencouragingtheacquisitionofcoalsuppliestoinsuretheadequacyofsuppliesfortheproductionofelectricity,whileprotectingtheratepayersbyallowingrecoveryoftheportionofthecapitalizedcostsassociatedwiththatcoalsoldtoPPGL.AnadditionalsafeguardisPPGL'scoalpurchasingpracticesandourcontinuedauditingofthePPGL.energyclause.Respondenthasincludedwithinitsclaimedmeasureofvaluetheamountof$226,251,000representingworkingcapitalrequirementsforoperationandmaintenanceexpenses,fundsinvestedindeferredenergycosts,prepayments,adjustmentsforaccruedtaxes,workingcapitalrequiredtomaintainminimumbankbalances,andinvestmentinfuelstockandmaterialsandoperatingsupplies.(PPMS-II,p.21,28;PPGLEx.FuturelA"C-1).TheStaffandConsumerAdvocatehavequestionedtheproprietyof:(1)theclaimforfundsinvestedinfuelstocks;(2)minimumbankbalances;and(3)theaccruedtaxadjustment.Further,adjustmentshavebeenproposedbyStaffandOCAforaccumulated,debtinterestand-preferredstockdividends,andtheforcedoutagereserveclaimedbyPPSL.1.FuelStocks,MaterialsandSunliesInventorOftheabovetotalof$226,251,000thecompanyhasclaimedforworkingcapital,$168,263,000isassociatedwithcoalandoilusedasfuel,aswellasthematerialsandsuppliesininventoryatvarious=service.areas.(PPKS-II,p.28;PPGLEx.Future1-C-9,p.1).TrialStaffproposesareductionincashworkingcapitalintheamountof$33,371,000toreflecta2-monthsupplyoffuel.Staff'sadjustmentisbaseduponactualtestyearconditionsratherthantheexperienceofPP&Lforprioryear(StaffStmtMJG-1;MJG-lA).TheAdministrativeLawJudgedismissesStaff'sclaim.Staff'stwomonth'ssupplyoffuelinventoriesapparentlyisbasedupontheircalculationoftheburnrateofvariousunits.,Our.reviewoftherecordindicatesthatStaffhasfailed'osubstantiateitsuseofatwomonthsupplyinventory.Further,areviewofStaff'smethodologyindicatesafailuretoconsiderthefactthatvariousgeneratingunitsareoutofserviceforvaryingtimeperiodsduetoscheduledorforcedoutagesandarenotincurringanyfuelexpenseduringsuchperiods.TheConsumerAdvocateexceptstotheALJ'srejectionofitsadjustment)~materialsandsupplies,requestingthatwedisallow$16,029,000-inordertoexcludethatsegmentoftheworkingcapital3/WehavenotedthemethodologyutilizedbytheOCAproducesaresultwhichdiffersfromitstestimony,viz.80!of$20,360,000equals$16,288,000not$16,029,000ascomputedbytheOCA.

claimwhichOCAestimateswillbechargedascapitaladditionsinthefuture.TheOCAarguesthatproperaccountingproceduresrequireamatchingofinventorywiththoseratepayerswhowillbenefitfromitsuse.Therefore,currentratepayersshouldnotberequiredtopayforcurrentinventorywhichwillbecapitalizedinthefuture(N.T.1629).OCAarguesthattheportionofmaterialsandsuppliesinventorywhichwillbechargedtocurrentexpensemaybeincludedinmeasuresofvalue.However,theOCAargues,materialsand'uppliesinventorytobecapital-izedinthefutureshouldaccrueanAllowanceforFundsUsedDuringConstructionuntiltheseitemsareactuallyplacedinservice.(OCA,-'tatement3,.p.21).TheOCAhascomputeditsadjustmentuponastudypreparedbyPP&Lwhichconcludedthat,80%ofmaterialsandinventoryexcludingfuelin1979wasdistributedtoacapitalaccount.Wehaverecognizedpreviouslythatinvestmentinfuelinven-toriesandmaterialsandsuppliesareproperelementsofworkingcapital..Pa.P.U.C.v.PhiladelhiaElectricComan,31PUR4th15(1978).Inthatproceeding,argumentswereraisedidenticaltothoseraisedhere.Westated:WeconsideredthisissueinapriorratecaseatR.I.D.295.TheHearingExaminerthereindidnotconsideritfeasibletoattempttoallocateaportionofmaterialsandsuppliestoCWIP.Weagreedandseenoreasonatthistimeandonthebasisofthisrecord,tochangeourpositiononthissubject.Id.at37.Wearenotconvincedthattheapproximately80%ofmaterialsandsupplieswhicharetobeeventuallychargedtocapitalshouldbetreatedasCWIPnorareweconvincedthatanattempttosegregatethoseitemswhicharetobecapitalizedisfeasible.Itemsmaytechnically"passthrough"theCWIPaccountbutmaynotremainlong.Wefailtofindevidenceinthisrecordindicatingthatachangeinourpolicyisappropriate.Whetherthecostofmaterialsandsupplieseventuallyiscapitalizedorexpensed,theinventories,inlargepart,doassurethe,continuityofservicetocurrentratepayers.Assuch,thisisabenefittocurrentratepayersrenderingareturnonthecostofthematerialsandsuppliesappropriate.OCA'sexceptionisdenied,andweshallallowPPGL'sworkingcapitalclaimof$168,263,000representingfundsinvestedinfuelstocksandmaterialsandsupplies.2.,HinimumBankBalancesRespondenthasclaimed$513,000forworkingcapitaltosupportminimumbankbalances(PPGLEx.Future1A-C-8,p.6)whichinturnsupportlinesofcreditwithelevenbanks(PPGLS-II,p.27).Tosupport$53,500,000inlinesofcredit,PPGLmustmaintain$4,013,000inminimumbalances(PPGLS-II,pp.27-28;PPGLEx.FuturelA-C-8).Undernormal,conditionsthiscanbeoffsetby$3,500,000of"float"(checksissuedbutnotclearedbybanks).Hence,anetamountof$513,000inworkingcapitalisrequested.BothStaffandtheConsumerAdvocatehaveproposedadjustments.

Cl TheAdministrativeLawJudgeconcludedthattherecouldbenooverlapbetweenminimumbankbalancesandcashworkingcapitalusedforoperationandmaintenanceexpenses,because"aminimumbankbalance,bydefinitionandnaturemaynotbeused"(R.D.,p.18).TheConsumerAdvocateandStaffexcept.OCAarguesthatminimumbankbalancesproperlyareconsideredanelementofthecostofshort-termdebtandattachedspecificallytoCWIPwhichis,bydefinition,notusedandusefultocurrentratepayers.OCAwitnessCottonexplainsthatifminimumbankbalanceswereincludedwithinthecostofshort-termdebtandthereforeincludedwithintheAFUDCrateandalsogivenratebasetreatment,ratepayerswouldpayforminimumbankbalancestwice,viz.,oncethroughratebasetreatmentintheproposedratesandagainthroughtheAFUDC.accrualonfutureplant'whichwilllatercomeintoservice.StaffassertsinitsexceptionsthattheALJ,inhischarac-terizationofminimumbankbalances,hasoverlookedthefactthatthesourceofminimumbankbalancesmaybecustomerprovidedfunds.Compensatingbankbalancessupportlinesofcreditwhichinturn,supportanimportantsourceofcashreservesatthelowestpossiblecost.Further,thesebalancesalsopermittheCompanytoobtainshorttermloansatalowerrateofinterestcostthanwouldotherwisebeavailable,andsupportawiderangeofnormalbankingservicesprovidedbythebanksgenerallywithoutaspecificfeebeingcharged.Insupportofitsclaim,PPM.citesourdecisioninPa.P.U.C.v.PhiladelphiaElectricComan,(PECOI)R.I.D.438(1978),whereinwefoundPECO'sclaimforcompensatingbankbalancestobereasonableandproperlyincludableinthecashworkingcapital.Staffcitesalateropinionforthepropositio'nthatthebalancesusedtofinancetheCompany'soperatingandmaintenanceexpensescanbeusedtofulfillthebank'scompensatingbalancerequirements.Pa.P.U.C.v.PhiladelhiaElectricComanv,(PECOII)R-79060865(1980Thefactualsituationpresentedtous'differsfromthatpre-sentedinR-79060865.Inthatcase,weadjustedminimumbankbalancesinrecognitionofthe"float"presentinbankaccounts.Inthecasepresentlybeforeus,PPGLhasrecognizedthissourceoffunds,eliminatingtheneedinthiscaseforanadjustmenttominimumbankbalancessimilartothatmadeinPECOII.Metherefore,denytheExceptionsofStaffandtheOCAandallowPPSL'sclaim.3.CustomerDeositsStaffhasrecommendedandtheAIJhasadopteda.reductionof$1,008,000ofworkingcapitalrepresentingfundsprovidedthroughcustomerdepositswhileincreasingexpenses$91,000toreflectthepaymentofinterestat9%onthecustomerdepositbalance.NoexceptionhasbeentakentotheALJ'streatmentofthisissue.10-Wehavemadethisdeductioninthepast-andbaseduponthe4/recordbeforeus,seenoreasontodeviatefromthatpractice.4.AccumulatedDebtInterestandPreferredStockDividendsBothStaffandtheConsumerAdvocatehaverecommendedthedeductionofaccumu'lateddebtinterestandpreferredstockdividendsfromcashworkingcapitalasfundsavailableforunrestrictedusebyRespondent.Recognizingourpolicyonthisissue,theALJhasreducedcashworkingcaptialintheamountof$12,886,000.Respondentexcepts,arguingthatuponreceiptoffundsfromcustomers,aportionofwhichincludesreturn,thosefundslose"theircharacterofcustomer-suppliedfundsandbecomethepropertyofthecompanyandtheinvestor.Further,PP&Larguesthatinterestandpreferreddividendswhenpaidarechargeableforaccountingpurposesnottoratepayersasanexpense,,buttoinvestorfundsasa"belowtheline"item.AsstatedbytheALJ,ithasbeenourpolicytoexcludetheseitemsfromourcalculationofcashworkingcapitalonthetheorythatthesecustomer-suppliedmonies,whichoccurbyreasonofthecollectionoftheinterestanddividendexpensesfromratepayersmonthlyanddis-bursementorpaymentofinterestoneachissuancesemi-annuallyorquarterly,provideasourceoffundstocarryRespondentacrossthelagbetweenrenditionofservicesandreceiptofrevenues,andaretherefore.aprbperoff-settocashworkingcapital.SeePeoplesNaturalGasCo.v.PennslvaniaPublicUtilitCommission,Pa.CommonwealthCt.415A.2d937(1980).Itisbecausethefundsareavailableforanycorporatepurposethatitispropertorecognizethefactthatthesefundsreducetheneedforinvestorsuppliedworkingcapitaluponwhichareturnmustbeprovided.'hefactthatthecompanyhasthesefunds-available,betweenreceiptfromratepayersandpaymenttoinvestors,indicatesaneedtorecognizethecost-freecapitalsuppliedbyrate-payers.PP&L'sargumentthatthefundsaretheinvestors'ropertyandthereforemustbeimmediatelytreatedascomingoutoftheinvestors'ockethasbeen.rejected.SeeUGICo.v.PennslvaniaPublicUtilitCommission,Pa.CommonwealthCt.,410A.2d923(1980);PeoplesNaturalGasCo.v.PennsylvaniaPublicUtilitCommission,ElectricComoanv.PennslvaniaPublicUtilitCommission,Pa.CommonwealthCt.,417A.2d819(1980).WefindnospecialconditionswithinPP&Lwhichwouldcauseustodeviatefromourenun-ciatedpolicy.ThereforeweshallrecalculatePP&L'scashworkingcaptial,anddecreaseratebaseby$13,437,000.4/Pa.P.UAC.v.PennslvaniaElectricComan,R.I.D.392(1978);Pa.P.U.C.v.PhiladelphiaElectricComan,R.I.D.438(1978);Pa.P.U.C.v.WestPennPowerComoan,R-78100685(1978).11 5.FederalIncomeTaxFundsTheOCArecommendsa$3,849,000reductionintheCompany'sworkingcapitalclaimarguingthatPPGLisrequiredtopayamaximumof80%ofitsfederalincometaxexpenseintheyearsuchtaxaccrualoccursand20%inthefollowingyear(OCAStatement3).excepted.TheALJrejectedthisargumentandtheConsumerAdvocatehasTheConsumerAdvocatebasesitsrecommendationuponSection6655oftheInternalRevenueCodewhichprovidesfortheimpositionofpenal-tiesifestimatedtaxpaymentsarelessthan80%ofthefinaltaxdue.I.R.C.$6655(a),(b)(1).Thereexists,however,anexceptionwithintheInternalRevenueCodewhichwouldallowautilitytopreventtheimposi-tionofapenaltywithoutresortingtoestimationofthetaxdueforthecurrentyear.Section6655(d)(l)provides:(d)EXCEPTION-Notwithstandingtheprovisionsoftheprecedingsubsections,theadditiontothetaxwithrespecttoanyunderpaymentofanyinstallmentshallnotbeimposedifthetotalamountofallpaymentsofestimatedtaxmadeonorbeforethelastdateprescribedforthepaymentofsuchinstallmentequalsorexceedstheamountwhichwouldhavebeenrequiredtobepaidonorbeforesuchdateiftheestimatedtaxwerewhicheverofthefollowingisthelesser-'I(1)Thetaxshownonthereturnofthecorporationfortheprecedingtaxableyear,ifareturnshowingaliabilityfortaxwasfiledbythecorporationfortheprecedingtaxableyearandsuchprecedingyearwasataxableyearof12months.Thus,prudentmanagementpracticeswoulddictateacomparisonofthe80%calculatedtaxwiththepreceedingyear'sactualtaxliability,andmakingpaymentbaseduponthesubsection(d)exception,avoidingthepossibilityofpenalty,exceptwhenthe80%calculationissignificantlybelowthepreviousyear'staxliability.Thiscourseofactionisparticularlyadvisibleif,asisthecasewithPPGL(PP&LEx.200-20033,p.2)the80/ofthecurrentyeartaxisgreaterthan100%oftheprioryear'stax.Wedeemsuchcashmanagementtobeadvantageoustotheratepayers.Further,assumingPPGLpays80/ofitsestimated1980taxliabilityduring1980,theremaining20%wouldbeduethefollowingyear.Viewingtheentirecalendar1980year,thefirstpaymenttobemadewouldbeforthe1979taxyearwiththesecond,third,andfourthpaymentsduringcalendar1980beingmadeforthe1980taxyear.Testi-monyhasbeenintroducedthatPPMpays25/ofitsestimatedtaxoneachofthefollowingdates:April15,June15,September15andDecember1512-(PPGLS-II,p.25;PPGLEx.Historic1,C-8,p.6;PPSLEx.Future1A,C-8,p.5).Accordingly,PPSLactuallypays100%ofitstaxliabilityinonecalendar~ear.WedenytheConsumerAdvocate'sexception.Ourdecisioninthiscaseshouldnotbeconstruedasdictatingthemethodofmakingestimatedtaxpayments.Rather,weareoftheopinionthatmanagementshouldretaindiscretioninthismatter.F.CommissionAuditAd'ustmentOnthebasisofanauditbytheCommission'sBureauofAudits,Staffhasproposedanoriginalcostmeasureofvaluedeductionof$770,342.Thisadjustmenthasnotbeenopposedandwillbeaccepted.G.DereciationReserveOnOctober23,1980,RespondentfiledaPetitionToApproveAndMakePartOfRecordTheStiulationofPartiesWithRespecttoCertainDereciationissuesandfurtherfiledaStiulationwithResecttoCertainDereciationIssues.TheStipulationwasexecutedonbehalfoftheRespondent,theCommissionTrialStaff,andtheConsumerAdvocate.TheLehighValleyPowerCommitteeandtheBethlehemSteelCorporationindicatedthattheydidnotopposetheStipulation.Nootherparty'xpressedopposition.WearenotapprovingtheStipulationmerelybecausenopartyhasexpressedopposition,rather,inviewofRespondent'sacceptablerecordsanddepreciationpolicies,wefindittobeinthepublicinterest.WeapprovetheStipulationasmodifiedintherebuttaltestimonyofMr.Beamer.H.~SummauInviewoftheforegoingwefindafairvalueratebasetobe$2,100,908,000asshownonTableI.III.RATEOFRETURNA.CapitalStructureRespondenthasclaimedcapitalstructureratiosof48.0/debt,193%preferredandpreferencestock,and32.7'/forcommonequity,takingaccountofthemostrecentsalesofbondsandpreferredstock.Nopartyhasexceptedtothisclaim.WefindPPGL'sactualcapitalstructureappropriateforthisproceeding.B.CostofDebtRespondenthasclaimedandtheAIJhasacceptedacostofdebtof9.51%whichreflectsRespondent'smostrecentlyissueddebt.Nopartyhasexceptedtothisfinding.Accordingly,wefindRespondent'sclaimed9.51%costofdebttobereasonableforthisproceeding.13

C.CostofPreferredandPreferenceStockRespondenthasclaimedandtheALJhasacceptedarecalculatedembeddedcostofpreferredandpreferencestockof8.49%whichreflectstheissuanceof$26.5millionofpreferredstockonOctober31,1980.Noexceptionshavebeenfiled.Wefindanembeddedcostofpreferredandpreferencestockof8.49%tobereasonableforpurposesofthisproceeding.D.CostofCommonEauitAnissueofmajorproportioninallrateproceedingsisadeterminationoftheappropriaterateofreturncomponent.BeforeusisanarrayofcomputationspresentedbyexpertsforPPSL,theConsumer.Advocate,andTrialStaff.Thevarianceoftherangesandrecommen-dationspresentedinthiscaseisparticularlyindicativeofthelackofprecisioninthisendeavor.Forexample,theConsumerAdvocaterecommendsareturnof12.8/,theStaff14.3/;andRespondent15.5/.Theserecom-mendationsarearesultofcalculationsforminganincrediblerange,of~11.5%to18.3'/,whichrangeresultsinapossibledisallowanceof$81millionfromthecompany'srequestedincreaseof$123million,toan"increaseof$13millionabovethecompany'srequest-ora$94milliondifference.PPGi'switnessBrennanutilizesfivemethodstodeterminehisrecommendation:(1)astudyofearnings-priceratios;(2)earnings-netproceedsratios;(3)adiscountedcashflowanalysis;(4)thebarerentorriskpremiumanalysis;and(5)comparableearnings.ConsumerAdvocatewitnessRothschildreliesprimarilyuponthediscountedcashflow(DCF)methodtoarriveathisrecommendation,whileTrialStaffwitnessMuthutilizedthreemethods:(1)earnings-priceratioanalysis;(2)Risk-premiumanalysis;and(3)DCF.Theresultsoftheseanalysesareasfollows:E/PE/NPDCFBareRentComparable~EaaninaPPGL17.2-18.316.118.317.516.5OCA12.813.6611.54Staff11.7-17.313.0-15.013.75-15.75WitnessBrennanstudiedearningstopriceratiodataforthetenyearperiod1969through1978forPPM,theStandard6Poor400Industrials,Moody's24utilities,andafive-companybarometergroup.Inadditiontothisdata,Mr.Brennanobservedthemarketdatafor1979aswellaspartof1980.Mr.BrennanfoundearningspriceratiosforPPSLasfollows:14-

PeriodE/PRatio1974-19781979Spot198014.6%17.2'/18.3/AlthoughHr.iiuthutilizedearningspriceratiostodeterminehisrecommendedreturn,hediscountsthismethodduetotherelativelyhighbookearningsachievedoverthelastseveralyears(1977-14.03'/,1978-11.51/and1979-13.09/perTrialStaffEx.DEl-lA,Sch.14).Staffarguesthattheserelativelyhighearnings,whenutilizedwithstockpriceswhichanticipatealowerlevelofearningsbecauseofSusquehannaNuclearPlantconstruction,overstatethecostofcapitalonaprospectivebasis.TheConsumerAdvocatearguesthattheearningspriceratiomethodisincapableunderpresentmarketconditionsofaccuratelyesti-matingthecost,ofcommonequity,asitmerelyreflectsalevelofearningscoincidentwiththeaveragemarketpriceofthestockexperiencedwhiletheseearningswereachieved.Ifearningsareinsufficient,viz.,withamarkettobookratiooflessthan1.0,theinformedinvestorwilldiscountanyvalueofearningswhichwillberetainedbytheutility.ItshouldalsoberememberedthattheearningsutilizedforthepurposeofthiscalculationarenotallpaidtoinvestorsbutaportionareretainedbyRespondent.Wepreviouslyhaverecognizedthattheearningstopriceratiomayoverstatethecostofcommonequity:Weconcludethatutilizationofearnings/priceratioshasmanyinfirmitiesindeterminingafuturefairreturnoncommonequity,unlessoneiswillingtospeculateasto[the]effectoftheinvestors'ppraisaloffutureearningsupontherealizedearnings/priceratio.Forpurposesofthiscase,wechoosenotinindulgeinsuchspeculation,particularlywhenmostanalystsagreethatutilitystockshavebeenundervaluedthroughoutthe1970's,whichmeanstousthat,theoutlookonthepartofpro-spectiveinvestorshavebeenunnecessarilyandunreasonablypessimistic....WhiletheCommission,hasinthepast,frequentlyrelieduponearnings/priceratioasanindicatorofafair'uturereturnforcommonequity,theunusuallybearishviewofinvestorstowardutilitystocksinrecentyearshasdiminisheditsusefulnesstosomeextent.PennslvaniaPublicUtilitCommissionv.NationalFuelGasDistribution,R-79070956(August28,1980).WehavenotbeenpersuadedthatthemethodutilizedbytheRespondentandStaffinthiscasehasbeencured15 ofitsinfirmitiesdespitethefactthatRespondentmaintainsthatnosuchdepressedorpessimisticmarketcurrentlyexists,andshalldiscountthecalculationsproducedwhileatthesametimebeingawareoftheirexistence.Wenotethatallpartiesalsohaveemployedthediscountedcashflow(DCF)method,resultinginarangeoffindingsbetween12.8/(OCA)to18.3%(PPSI,).Thismethodisbasedupontheprinciplethatthepresen'tvalueofstockisadiscountedvaluereflectingthefutureanticipatedpayoutstotheinvestor.Inordertocalculatethecostofequitythefollowingformulaisutilized:Costofequity=(dividend/marketprice)+futuregrowth.Whileundernormalcircumstances,.thecontroversyislimitedtothefuturegrowthcomponent,inthiscaseallportionsoftheequationarechallenged.OCAwitnessRothschildhascalculatedadividendyieldof10.86/forHoody's24electricutilitiesatJune'0,1980(OCASt.1,Sch.1,pp.1,la,Sch.2,pp.2,2a).Hr.Brennan'sDCFanalysisemployeddatapublishedinValueLineInvestmentSurvey,historicaldataandrecentmarketdataofstockpricesforPPGLandhisbarometergroup(PPGLEx.JFB-1,Sch.13,p.5).WenotethatPPGL'sdividendyieldas'fApril17,1980,was11.3%withagrowthrateof2.5%whiletheyieldonthefivecompany)arometergroupwas1'1.6$withacorrespondinggrowthrateof4.8/-.WitnessBrennanhascomputedaDCFreturnrateof20.1%witha10yearaverag'eP/Eratioof8.1timesandanestimatedsellingpriceof$25.92,andareturnof18.3'/withaValueLinepro-jectedP/Eratioof7.5.timesandanestimatedsellingpriceof$25.92.AlthoughValueLineisarecognizedinvestorservice,we.findthattheirexpectationsofgrowtharesomewhathigh.Weshallconsider,butnotexclusivelyrelyupon,theseprojectionsindeterminingourcostofcommonequity.Staff'sanalysisofdividendyieldindicatesforPPGLanaverage9.11/yieldfortheyears1973-1979;11.28%forthetwelvemonthaverageperiodendedJune30,1980,and11.16/baseduponAugust19,1980spotprices.WitnessHuthdiscountstheuseofahistoricdividendyieldasanoverestimationofPPSL'sfutureperformancesinthestockmarketandrecommends'prospectivedividendyieldforPPRLof10.5%to11.5/.WenotethatPPSL'sdividendyieldatOctober31,1980,wasapproximately12.0%.Asthisdataisclosesttotheendofthefuturetestyearandthemostrecentavailable,weshallutilizethisfigureinourDCFcalculation.SeeDuauesneLihtComanv.Pa.P.U.C.,174Pa.SuperiorCt.62,99A.2d61(1953).5/ItshouldbenotedthatPPGL'scurrentP/Eratiois4.5timeswhilethecurrentbarometergroupaveragewas5.8times.

SS ThesecondstepinaDCFanalysisistodevelopagrowthelementindicativeofthegrowthratetobeexperiencedduringtheprospectiveperiod.OCAwitnessRothschildutilizedthecurrentlevelofearningsandthepercentageofearningsactuallyretainedtoarriveata2.0/growthcomponent.Next,Mr.Rothschildreducedhis2.0%growthfactorby.84/toreflectearningsdilutionwhichisexpectedtooccurasaresultofthecontinuedsaleofcommonequitybelowbookvalue.Additionaladjustmentstoallowforfinancingcostsandmarketpressure(.11%)andtoaccountforPPM,'shigherthanindustryaveragelevelofsalestoindustrialcustomers(.02%).Theresultant12.3'/.returnisfurtherincreased(.5%)toaccountforPPSL'slowerthanaveragepercentageofcommonequityinitscapitalstructureandthushasagreaterfinancialriskthantheaverageelectricutility.Staffrecommendsagrowthestimaterangeof2.5%to3.5/baseduponananalysisofPP&L'shistoricandprospectivegrowthrates.Wefindthisrangetobereasonableandwouldtendtowardtheupperlimitofthisrangeasourgrowthestimate.WeshallutilizePPGL'smostrecentdividendyieldof12.0%toarriveatourcostofequitycomputedviaaDCFmethodof15.5'/.Afinalmethodutilizedbyallpartieshasbeendescribedasthebarerent,marketstructureofyields,orriskpremiummethod.Underthismethod,acostofcommonequityisdeterminedbyadding:(1)theallowanceforthebarerentortimevalueofmoney;(2)anallowanceforrisk;and(3)anallowanceforinflation.Itisassumed,forpurposesofthiscalculation,thatthecurrentcostofdebtincludesthebarerentplusanallowanceforinflation,leavingthedeterminationoftheriskportionoftheequation.WitnessRothschildutilizesacostofAaaUtilitydebtonJune26,1980,of10.96%anda1964-1978riskpremiumof2.7%toarriveathis13.66/figure(OCASt.1,Sch.2',p.3a).Staff,ontheotherhand,utilizesa10.75%-11.75%doubleAbondratingwitha3.0/to4.0%estimatedrisk-premiumrange(StaffStm.DHM-1,p.20),toarriveatarangeof13.75/'to15.75%underthisanalysis.Mr.BrennanutilizedthecurrentcostratesforAabondsof13%withariskpremiumof3.3/to5.6/toarriveatarecommended17.5%costofequity(PPGLEx.DHM-1,Sch.6,7,11,12).AtthetimeMr.BrennancalculatedhisAabondrate,wewereinthemidstofrapidlyrisinginflationwhichhasslowedtosomeextent.WefindthatWitnessBrennan'scurrentcostrateof13%toberepresentativeofanticipateddoubleAbonds,thecurrentPPGLbondrating,andshalladoptthiscostforourBareRentcalculation.InviewofthisdoubleAbondrating,weconsiderPPSLtobeofmoderaterisk.Accordingly,wearefavorablydisposedtowardStaff'sproposedriskpremiumof3.0%.TheindicatedcostofequityforourBareRentcalculationis16.0'/.Inordert'oarriveatanallowedlevelofjustandreasonablerates,itisappropriatetoselectonefiguretorepresentarateofreturnonCommonEquity.Weshalltakearoundedmidpointofthemethods17 S

reliedupon:DCF-15.5%,andBareRent-16.0/.Accordingly,wefindatargetreturnonCommonEquitytobe15.75%andanoverallrateofreturnof11.35%calculatedasfollows:ComoonentCapitalStructure%RateofReturnCompositeCostDebtPreferredCommonEquity48.019.332.79.51/8.4915.754.56/1.645.15Overallrat'eofreturn11.35%Our15.75%CommonEquityreturncomparesfavorablywiththatrecommendedbyStaffandRespondentasitistheuppercaluclationofStaff's13.75-15.75'/rangeandisalsowithintherangetestifiedtobyPPM,'switnessBrennan.IV.REVERESRespondenthasclaimedalevelofproposedratesof$918,506,000.AdjustmentshavebeenproposedbyTrialStaffandtheConsumerAdvocate.A.NormalizationofTestYearSalesandCustomerLoadGrowthPPGLhascomputed1980futuretestyearrevenuesbaseduponthehistoricsalesgrowthrateforthepastthreeyearsforeachmarketsector.Thesecomputedgrowthrateswerethenappliedtothe1980projectedsalesbycustomerclassesandanannualaveragegrowthinkwhsaleswasdeterminedforeach.One-halfofthatamountwasassumedtobetheannualizationsalesadjustment(PPSLS-V,p.9;PPGLEx.Regs.III-D-8,pp.11-14).Inordertoassignarevenuefiguretotheseprojections,Respondentappli'edincrementalpricesperkwhasderivedbyananalysisofmonthlykwhuseandbaseraterevenuesforeachclassoverthepastseveralyears(PPKS-V,p.9;PPKEx.Regs.D-8,pp.11-14).TheConsumerAdvocateproposesanincreaseinproformaoper-atingincomeby$1,939,000toreflectwhatitconsidersanerroneouseconomicassumptioninitsprojectionsonthepartofPPGL.TheCon-sumerAdvocatesubmitsthatasaleslevelof22,687GNH,testifedtobyPPSLitnessBaldwin(N.T.983,PPGLEx.Regs.I-B-6B,p.17andPPGLEx.FutureI,D-3,p.2),whileperhapsareasonableestimateoftheactualoperatingresultsforthe1980year,isabnormallydepresseddue'otheimpactofthepresentrecession.TheOCAargues,thatinordertoreflecttypicalsalesandrevenuesfortheperiodtheratesaretobeburhv.PennsylvaniaPublicUtilitCommission,187Pa.SuperiorCt.341,144A.2d648(1958);PennsylvaniaPublicUtilityCommissionv.Phila-delhiaElectricComanv-GasDivision,25PUR4th492(1978),andPennsylvaniaPublicUtilitCommissionv.PeolesNaturalGasCo.,51'a.PUC(1977).18-TheOCA'scriticismofPPSL'sforecastrelatestotheutili-zationbyPPRLofajudgmentmodelinadditiontoaneconomicmodelwhencalculatingprojectedsales.ThePPghLstudyconsistsofanestimateof1979yearendresults(lasttwoquarters)whichassumedrecessionarysaleslevels.Further,the1980judgmentforecastassumedarecessioninthefirstquarterof1980.Theseestimatesreflecttheimpactofarecessionupontestyearsalesintwoways:first,the1979baseperiodisdepressedbelownormalbyone-halfyearofrecession,andsecond,the'980projectionassumescontinuedrecessionarysalesintothetestyear(N.T'.977).OCAarguesthatbyutilizingtheunadjustedjudgmentfore-castmethod,PPGL'sGWHresultequatestoaneffectiveannualgrowthrateof2.5~~fortheperiod1978through1980,contrastedwith.PPGL'seconometricmodel,withgrowthrateswhichrangefrom3.4/annuallyfora"slackU.S.economy"to6.3'/,undera"prosperousU.S.economy".(OCASt.3,p.23andPPGLEx.250.2005001).Baseduponhisobservationsandtheabovedata,OCAwitnessCottonrecommendsagrowthrateof3/beutilizedfornormalizedtestyearpurposes(OCASt.3,p~25andSch.12).Staffhasproposeda$906,526revenueadjustmentandacon-comitantincreaseinexpensesof$39,000toreflectsegregationofcustomersloadgrowthintoitscomponentparts,viz.,changesinthenumberofnewcustomersandchangesinexistingcustomerusage;properpricingofthederivednormalizedsales;andthenormalizationofsalestoU.G.I.-Luzerne.Ofthistotal,$293,304,representssalestoU.G.I.-Luzerne,treatedelsewhereinthisOpinionandOrder.TheAIJinhisRecommendedDecision(R.D.33-3Qrejectsbothpositions,citingPPGL'sactualoperatingincomefigures-andtheacceptanceofRespondent'sbudgetingprocess.Initially,wefailtorecognizetherelationshipofPPGL'sbudgetingprocesswiththeforecastoffuturesalesrelieduponbytheALJ.Aprojectionoffutureexpensesadjustedforinflationatll%isnotidenticaltoaprojectionofrevenuesdependentuponincreasedcustomerload.WerejecttheOCA'sprojectionofa3'/loadgrowth.Thecurrentinflationarytrendhasseennewconstructionseverelylimited,causingaslowerthannormalgrowthinnewcustomers,whilesimul-taneouslycausingexistingcustomerstoconserveorotherwiserestricttheirelectricalusage.Ontheotherhand,Staff'sproposalhascon-siderablemerit.Staff,assumingPPSL'sgrowthof2.5'/,hasdividedthatgrowthintonewcustomergrowthandgrowthinusagebyexistingcustomers.WeareoftheopinionthatsuchsegregationisnecessaryinordertoproperlypricePPSL'sgrowthandapproximatetherevenuestobederivedfromthisgrowth.6/PPGL'sactualfiguresofoperatingincomeforthesixmonth'sendedJune30,1980,are$4,324,000belowthebudgetedfigures.19 S

Electricalserviceisdividedinto"blocks"ofconsumption,'designedtorecovercostsofproducingthekwhconsumed.Thepriceperkwhwithineachblockisconstant,whereasthepriceperkwhbetweenblocksdecreasesasconsumptionincreases.PPM,haspriceditsloadgrowthasifthegrowthoccurredinthelater,lowerpriced,blocks.However,Staff,bysegregatingloadgrowthintonewandexistingcus-tomers,haspricedloadgrowthinamannerwhichproperlyreflectsactualgrowth,asfollows:(1)asPPSLhasdonewithexistingcustomers,viz.,pricingincreasedconsumptioninthelaterblocks;and(2)byspreadinganticip'atedconsumptionovertheentire"block"system,therebyreflectingconsumptionofthenewcustomersinthehigherpricedinitialblocks.WeareoftheopinionthatthemethodemployedbyStaffcloselyresemblestheloadgrowthtobeexperiencedbyPPSL.WeshalladoptthisportionofStaff'sexceptionandadjustrevenuesaccordingly.B.SalestoUGI-LuzerneStaffproposesanadjustmentof$293,304tonormalizethesaleofpowertoUGI-LuzerneElectricDivision.SalestoUGIareexpectedtoincreaseattheendof1980asaresultoftheterminationofasupplyagreementbetweentheAlleghenyPowerSystem(APS)andUGI.ItisexpectedthatRespondentwillreplacethissourceofsupply.TheALJhasrejectedthisadjustmentstating:Again,wecannotacceptsingularrefinementsofadjustment,theeffectsofwhicharetovitiatetheviabilityofallowedrates.(R.D.p.36).Wedonotagree.AlthoughtheprecisemagnitudeofPPSL'ssalestoUGIispresentlyunknown,andisdependentupontheavailabilityofUGI'sHunlockGeneratingUnit,themagnitudeofthecurrentAPSagreementindicatesthatStaff'sadjustmentisconservative.WeshallacceptStaff'sadjustmentandgrantitsexception.V.EXPENSESANDDEPRECIATIONRespondenthasclaimed$526,127,000inexpensesanddepre-ciation,exclusiveoftaxes.Weshallusethisfigureasourpointofbeginningandadjustaccordingly.A.EducationalAssistanceExpenseRespondenthasincludedwithinitsclaim$194,000foritstuitionrefundprogramand$25,000forotheractivities.Staffhasopposedtheclaimarguingthattherecordlackstestimonywhichwouldindicatethattheseexpensesaredirectlyrelatedtotheemployee'sjob20 8

(StaffEx.JPP-l,p.9).Wedonotagree.Testimonyhasbeenpresentedwhichestablishesthatanimportantcriterionforapprovalofcoursesunderthetuitionrefundprogramisadirectrelationshiptotheemployee'sjob.(PP&LStatementIII-AandRJB-l).Weareoftheopinionthatsuchprograms,ascurrentlyadministeredbyPP&L,willbeofbenefittoitsratepayersbyencouragingemployeestoimprovetheirjobperformance'hrougheducationandthefreeexchangeofideas.WethereforeacceptPP&L'sclaim,denyingStaff'sexception.B.AreaEconomicDevelomentProramsPP&Lhasbudgeted$898,000foritsAreaEconomicDevelopmentPrograminordertoaidinthelocationanddevelopmentofalltypesofindustryinPP&L.'sserviceterritory.Staffhaschallengedthisclaim,arguingthattheprogramisaformofpromotionaladvertising,.pro-hibitedbythisCommission.Further,StaffarguesthatbaseduponthelackofevidencethatPP&L'sactivitieshaveprovidednewindustriesandnewjobs,baseduponthepossibilitythatsuchactivitiescouldexacer-bateloadgrowth,andbaseduponthefactthatsuchactivityisnotproperlywithinthepurviewofutilityoperations,theexpensemustbedisallowed.Wedisagree.Pennsylvaniaisfacedwithadecliningindustrialbaseandeconomicproblems.PP&Lisfacedwithadiminishingloadgrowth.Itisentirelypossiblethatifthiscurrenttrendcontinues,PP&Lwil'l,uponcompletionofitsnewgeneratingfacilities,finditselfwithunusedcapacity.Wedeemitadvisable,thatautilityundertakeeffortstomaximizetheutilizationofgeneratingcapacitybothcurrentlyavailableandthatalreadyunderconstruction.WealsofindthatthetypeofundertakingbyPP&Lhereisnotinviolationofoursalespromotionregulations.Staff'sexceptionsaredenied.C.RecreationalFacilitiesRespondenthasbudgeted$210,532foroperationandmaintenanceofcertainrecreationalfacilitieswhichitownsandoperates.Staffproposestheeliminationofexpensesassociatedwiththosefacilitiesnotspecificallyrequiredbyfederaloperatinglicenses,arguingthatthefacilitiescannotbeutilizedbyallPP&i.customersbecauseoftheirlocation.TheALJinrejectingStaff'spositionstatesthatallfacil-itiesareaccessibletothegeneralpublic.Weagreethatanadjustmentshouldbemadebutnot,baseduponthelocationreasoningoftheALJ.TheoperationandmaintenanceofthesefacilitiesbearsnorelationtothebusinessofPP&L,viz.,theproviding'ofelectricservicetoitscustomers.Weareoftheopinionthat,asthesefacilitiesdonotbenefittheratepayersofPP&I.,theyshouldnotbeburdenedwithanyoftheircosts.Thosepersonsdirectlybenefitingfromtheavailabilityofthefacilitiesshouldberesponsiblefortheoperationandmaintenanceexpensesassociatedwiththeiruse.21 Cl D.RateCaseExpensesRespondenthasclaimedatwo-yearamortizationofratecaseexpenses.Staffhasopposedthisclaimarguinginfavorofafiveyearamortization.TheAdministrativeIawJudgehaschosentoignoreourrecentdecisionswithregardtoratecaseexpenses.OurpositionwasinitallysetforthinourOrderinPennslvaniaPublicUtilitCommissionetal.v.PhiladelphiaSuburbanWaterComan,R-79040824(1980).Our.-positionwasreiteratedinourOrdersinPennslvaniaPublicUtilitPublicUtilitCommissionv.CarneieNaturalGasComoan,R-79100977(1980),inPennsylvaniaPublicUtilitCommissionetal.v.NationalFuelGasDistributionCorporation,R-79090956(1980).InNationalFuelGasDistributionCorporation,westated:[B]arringunusualandcompellingcircumstancestothecontrary,wewillpermittheamortizationoftheunamortizedbalanceofpast(unnormalized)ratecaseexpensesandwillnormalizethepresentallowance.Whilewehave,inrecentcases,util-izedorlookedtoathree-yearlifeexpectancyofprospectiveratesasaguide,itisnotthesolecriteriafordetermininganormalizationallowance.Alsotobeconsideredisthereasonablecosts,onaverage,ofaratecasepresentation.Conse-quentlycurrentratecaseexpenseisnottobeviewedasanexpensetoberecovered,butmerelyasaguideindeterminingareasonableannualexpenseallowanceforthefuture.Ifapart-cularutilityshoulddecidetoexpandmoreorlessthanitsallowance,forwhateverreasonitmaychoose,thatisamanagementdecisionforittomake.Ourdecisioninthisandeverycaseistodeterminethereasonableannualexpenseallowancetobechargedtoratepayers.Uiewedinthislight,issuesastothereason-ablenessorlackofreasonablenessofcurrentexpenseshavemeaningonlyinsofarastheymaycastlightupontheappropriateandreasonablefutureallowancetobegranted.Inthisinstance,weshallamortizetheunamortizedbalanceofpastratecaseexpensesovertenyearsandshallagainutilizeathreeyearexpectedlifeoffutureratesasaguidetoapropernormalizationallowance.Wewillallowanormalizedamountforcurrentratecaseexpensetobecollectedfromratepayers;wewillnotpermittheamortizationofcurrentratecaseexpense.

i Consistentwithourestablishedpolicy,weshallutilizeathreeyearexpectedlifeoffutureratesasaguidetoapropernormal-izationallowance.Accordingly,ourallowanceforratecaseexpenseis$62>000.E.FeeLinesofCreditInMarch1980,Respondentincreaseditslineofavailablecreditfrom$200millionto$605million.Ofthe$605millioncurrentlyavailable,$551.5millionismaintainedbythepaymentofcommitmentfeesequalto1/2of1%of.thelineofcredit.PPGLseekstorecoverthisannualfeeof$2,758,000(PPKS-III,p.14;PPGLEx.Future1A-D-2).PPGLarguesthatmaintenanceofthislineofcreditisnecessitatedbytherecenthighinterestrates,creditrestrictions,actionsbytheFederalReserveBanktoreducemoneyavailability,andalsoserveasatypeofinsurancepolicyintheeventitneedsfundstoredeemcommer-cialpaperortopaybills.PPM,alsostressesthatthesecommitmentfeesaresomewhatcheaperthancompensatingbankbalances(N.T.265).Staffseekseliminationofone-h'alfoftheclaimedexpense,arguingthatinviewofthecompensatingbankbalancesavailabletoPPGL,thefeesupportedlinesofcreditwouldbenecessary.onlyinthesamedirefinancialcircumstancesunderwhichtheCompanywouldneedthelinesofcreditfinancedbythecompensatingbankbalances.AlthoughweagreewithStaff'sunderlyingtheory,wecannotacceptStaff'scompromise,aone-halfdisallowance.TheConsumerAdvocatepresentsalternativepositions:(1)thedisallowanceofthefeessincethefeesareproperlyincludableinPPGL'sAFUDCrate;or,(2)ifviewedasanabnormalexpense,areproperlyamortizedoverareasonabletimeperiod.OCAwitnessCottontestifiedthat:Commitmentfees,iftheyarenecessary,representacostof'short-termdebtandthereforeshouldbeconsidered,forratemakingpurposes,asanallowanceincostofshort-term-debt--notinpro-formaexpense.Includingcommitmentfeesinpro-formaexpensedeterminationiswrongsinceshort-termdebtisappropriatelyconsideredinthecostofcapitalorasacomponentindeterminingtheappropriateAFUDCrateaccrualforconstructionprojects.(OCASt.3,pp.27-28).AsPPRL,incalculatingitsAFUDCrate,assumesthatallconstructionworkinprogressisfinancedthroughshort-termdebt,andascommitmentfeesshouldbeincludedincalculatingthecostofshort-term'debt,theAFUDCrateshouldeventuallycompensatePPGLforitscommitmentfeesbyincreasingtheultimatevalueofplantinservice.Therefore,theOCAargues,ifcommitmentfeesareseparatelyallowedinPPSL'stestyearexpensedetermination,thepossibilityofaduplicativereturniscreated(OCASt.3,p.28).

Earlier,inthisOpinionandOrderweallowedPP&Ltoreceiveareturnonfundsusedasminimumbankbalancestosupportalineofcreditof53.5million.Undernormalcircumstances,theminimumbankbalancelineofcredit,wouldbeavailablefornormaloperations,asasubstituteforthepaymentofservicefees,andforborrowingstofinanceconstruction.However,inlightofthe-magnitudeofthelineofcreditmadeavailablebytheannualcommitmentfeessoughttoberecoveredhere,$605million,weshallviewthislineofcreditbeingavailableforuseinthetemporaryfinancingofconstructionpurposesandthe$53.5millionlineofcredit'eingavailablefornormaloperations..Assuch,thiscreditisanotherformofshort-termdebtuponwhichAFUDCis:tobeaccrued.Further,itisassumedthatthesefundswillbeusedforgeneralpurposesonlyafterthe"linesofcreditsupportedbytheminimumbankb'alancesareexhausted.Asweobservedearlier,theminimumbankbalancesupportedlineofcreditavailabletoPP&Lhasnotbeenused.Accordingly,weshallnotburdenPP&L'sratepayerswithwhatmaybeconsideredduplicativelinesofcredit.WeshalldisallowRespondent'sclaim.F.ForcedOutaeInsuranceRespondenthasclaimed$3,900,000asaself-insurancereservetocovertheincreasedlevelofenergycostswhichareexperiencedwhenanyofRespondent'smajorgeneratingunitsareforcedoutofserviceduetodamagecausedbyaccidentorotherunforeseeninsurableoccurrences.PP&LarguesthatintheabsenceofthisinsurancereserveallincreasedpowercostsnotcoveredbyPP&L's$12.5millionoutsideinsurance,wouldbechargedtoPP&L'scustomersthroughthenetenergyclause.Amajoroutagewouldresultinabruptincreasesinthatcharge.,BoththeTrialStaffandtheConsumerAdvocateopposethisclaim.Staffarguesthatthisclaimisnotinsurance,butapre-paymentofpotentialexpenses.TheOCAadvancesthesameargument.DespitetheALJconsideringPP&L'sproposalsensible,hedisallowstheclaim,stating:Inview,however,oftheoutsideinsuranceandtheexpectablereductioninimpactofmajoroutagecostsupontheenergyclause,wewouldavoidpresentdisputeovertheadvisabilityofthechargeandtherate-basetreatmentoffundbalances.Werecommend,therefore,dis-allowanceoftheexpenseclaimintheamountof$3,900,000andthereductioninratebaseinanyamount.(R.D.42-43).WeshallrejectRespondent'sclaimandelaborateupontheALJ'sreasoning.PP&Lispresentlyrecoveringfromratepayerstheannualpremiumof$2.3million.toprovidecoveragetoPP&Landitscustomersintheeventofamajorcatastrophicoutageofoneofitstwolargecoalplants

(il.T.871).Despitethiscoverage,PPGLwouldhavetheratepayerprovideafundwhichwouldbedrawnupon,onadollarfordollarbasis,wheneveranoutageoccurred.Fromthetimecollectionofthesefundsbeginsuntilanoutageoccurs,PPGLwillhavefreeuseofthesecustomerprovidedfundsreducingitspermanent-financingneedsinotherareas.If-amajoroutagedoesnotoccurthisfundwillcontinuallygrow;Thereisnoassurancethatratepayerswouldeverbenefitfromthesepayments.Second,PPRLhasinplace,asdoallelectricutilities,a'uelclausedesignedtopermittherecoveryofcosts,includingcostsarisingfromthepurchaseofpowerduringanoutage.Ithasnotbeen'emonstratedonthisrecord,thatthismechanismofcostrecoverywillnotpermitPPSLtorecoveranycostsproperlyincurred.WeseenoreasontoforceratepayerstoadvancefundstoPPGLinordertocircum-ventthenormaloperationofthefuelclause.Finally,approvalofPPGL'splanwouldplaceuponpresentratepayersaburdenforthebenefitoffutureratepayers,aconceptforeigntogeneralratemakingprinciples~Inviewoftheforegoing,weshalldenyRespondent'sclaim.G.LeasedEuiomentExensePPSLleasesaportionofitsequipmentthroughagreementwithPruLease,Inc.,asubsidiaryofthePrudentialInsuranceCompanyofAmerica(PPSLEx.FutureI-D-II).Oneoftheelementsofthemonthlyrentalconsistsoftheinterestratechargedtoitslessoron90-daydealer-placedpromissorynotes,issuedbythelessoronthe15thdayoftheprecedingmonth.Respondentused.aninterestcomponentof11%inpreparingitsbudget.LastApril,theapplicableinterestrateroseto19.8%.TheRespondentnormalizeditsrentalexpensewithrespecttothisinterestcomponentat19.8%andaddedanadjustmentof$608,000foroperatingexpenses.ForthesevenmonthsendedJuly,1980,theRespon-dent'sactualrentalexpensewasabout$360,000overitsbudget.Staffproposedareductioninexpenseof$1,134,400onthebasisofemployinganinterestcomponentof11.175/astheactualrate,chargedtotheRespondentforthemonthofJune,1980(StaffEx.JPP-1).Thus,Staffhasthuseliminatedtheadjustedincreaseof$608,000andfurtherreducedtheclaimby$526,400.Inmakingitscalculation,theStaffaveragedoutalltheothercomponentsforthefivemonthsendedHay31,1980,butdidnotaverageouttheinterestrate,whichaveragedatabout16/.TheConsumerAdvocaterecommendedonlytheeliminationoftheadjustmentat$608,000.TheALJ(R.D.44)hasrejectedtheOCAandStaffadjustments.TheOCAexcept'PGLwitnessifichaelBerishtestifiedthatthe18%April,1980ratewasthehighestratePPRLhaseverexperienced.(il.T.712)Further,PP&LExh.22-2014,p.2,indicatesthatthe18%April,1980ratewasthehighestrateinthetestyearandthattheratefellbacktoa9.375%-25 levelinJuneof1980.WeareoftheopinionthatPP&L'sbudgetedrateof11'twhileinexcessofhistoricalrates,accuratelyreflectscondi-tionsrepresentativeofnormaltestyearoperation.Weshallre'ducethetestyearexpenseclaimforleasedequipmentby$607,000,andgranttheConsumerAdvocate'sexception.H.AnnualDereciationUnderthetermsoftheStipulationreferencedearlier,Respon-dentandStaffhaveagreeduponanannualtestyeardepreciationexpenseof$82,865,000.(Stipulationpp.14-16).Thisagreemententailsadecreaseof$2,996,584duetochangeddeactivationdatesforseveralplantsandthefixingofalifespanof25years"forRespondent'sinternalco'mbustionturbines.Itfurtherentailsan'ncreaseof$301,680indepreciationexpenseduetotheso-called"true-upprocess"ofthePP&Lreserve.TheConsumerAdvocatereserveditspositionwithrespecttoanadditionalreductionof$3,059,000inannualdepreciationexpense.Thisadditionalreductionisbaseduponanannualexpense,relatedtotheyear-endratebase.TheALJrejectedtheOCAadjustment.TheOCAexcepts.Wefindthattheannualizedincometaxdepreciationexpenseitemsadjustedtothelevelbeingexperiencedattheendofthetestyearisconsistentwithgenerallyacceptedtestyearconcepts.Weshallnotdistortthetestyearconcept.WedenytheConsumerAdvocate'sexception.I.MiscellaneousIssuesStaff,initssummaryofrevenueandexpenseadjustments,has-proposedcertainadjustmentsnotaddressedbytheAIJ.Oftheseadjust-mentsweshallacceptone.Staffhaseliminateda$5,000expenseforthetrainingofSteamHeatemployees.'P&Lhasagreedthatrecoveryofthisexpensewasinappropriateforthiscase.Accordingly,weshallreduceexpensesby$5,000.VI.TAXiSA.IntroductionPP&Lhasclaimed$121,317,000foralltaxes.Weshallusethisfigureasourpointofbeginningandadjustaccordingly.B.interestDeductionIncalculatingitsinterestexpensedeductionforincometaxpurposesforthetestyear,Respondenthasmultipliedthetestyearratebasebytheweightedinterestcostrateofitslong-termdebt.Respondent,incomputingthetestyearratebasefortaxpurposes,hasreducedthe 8

~~IratebasebysubtractingitsAccumulatedInvestmentTaxCredit.BothStaffandtheOCAhaveproposedadjustments.TheALJrejectstheadjust-mentonthetheorythatifanybenefittoinvestorsoccurs,itwasintended.Tothisfinding,StaffandOCAexcept.TheInvestmentTaxCredit(ITC)isafederaltaxcreditallowingcompaniesanadditionalfirstyeardeductionfornewproperty.Atthetime,theITCwasenacted,intheearly1970's,utilitycompaniesweregiventhreeoptions.First,theunamortizedbalanceoftheinvestmenttaxcreditshouldbeviewedasaratebasededuction;sec'ond,theamor-tizationofthecredit,whichamortizationrelatedtotheusefullifeoftheassetwhichproducedthecredit,shouldbeflowedthroughtoincomeoverthelifeoftheasset;third,theinvestmenttaxcreditwasto)~flowedthroughtoincomeorbetreatedinanywaydeemedappropriate-.Fromaregulatorystandpoint,theITCproducesfundswhicharenon-investorsupplied,butaresuppliedbytheFederalGovernment.Assuch,traditionalratemakingtreatmentdi:ctatesthatiteitherbeexcludedfromratebase,includedinratebasewithanassignedcostofzero.Unfortunately,theInternalRevenueCodeprovidesthatthecreditwillbelostfortaxpurposesifweweretoreduceratebasebytheentireamountofthecredit.However,theI.R.C.doespermittheratableflow-throughofthebenefitsofthiscrediti$/ratebaseisreducedbynomorethanaratableportionofthecredit.-26U.S.C.$46(f)(2).Thus,ratebasewouldincludeonlytheunamortizedportionoftheinvestmenttaxcredit.Incalculatingqurdollarreturn,ratebasetimestherateofreturn,iftheunamortizedinvestmenttaxcreditisincludedinratebase,asrequiredbyfederallaw,theratepayerwouldprovideareturnonthosefundssuppliedbythegovernment.Tobeconsistent,therate-payersshouldreceiveanybenefitarisingoutoftheinclusionofthesefundsinratebase.Thisbenefitisprovidedbythedeductionoftheinterestexpensenormallygeneratedbydebtforincometaxpurposes.Further,itisassumedthatthesegovernmentsuppliedfundsareasurrogatefordebt,preferred,andequitycapitalwhichnormallywouldberaisedbyoutsidefinancing.Byapplyingarateofreturntothesefunds,wearetreatingthemasifthiscapitalwassuppliedinidenticalproportionstothatsuppliedbytheinvestor.Havingappliedtherateofreturntothesefunds,werewetofailtoaccordthemtheP7/It>>shouldbenotedthatthethirdoptionwasonlypresentedtocertaincompanies.8/Theratableportionisdeterminedbytheperiodoftimeusedincomputingdepreciationexpense.26U.S.C.$46(f)(6).

sametaxstatusasinvestorsuppliedfunds,wewouldbe,creatinganadditionpoolofdollarsavailablefor~~turntoinvestors,effectivelyincreasingthereturnonCommonEquity.-UnderPPSL'sproposal,ratepayersarebeingchargedonceforthetaxexpense,andasecondtimeforareturnonpropertypaidforbythetaxexpensedollars,andwouldnotbeprovidedthebenefitoftheassociatedtaxdeductionforinterestcomputationpurposes.WefindthattheadjustmentproposedbyOCAandTrialStaffreflectthisbenefit.WegrantTrialStaff'sandOCA'sexceptions.C.TaxDepreciationTheConsumerAdvocateclaimsthatRespondenthas,byannual-izingitstaxdepreciationexpensedeductionratherthanitsunadjustedtestyeardeduction,hasoverstateditsincometaxliabilityby$1,026,000.ForthereasonssetforthinoursectionondepreciationexpensewedisallowtheConsumer.Advocate'sclaimanddenyitsexceptions.D.TaxNormalizationPPM,takesadvantageoftheprovisionsofthefederaltaxlawswhichpermittheuseofliberalizeddepreciation,and,unlikemostPennsylvaniaelectricutilities,flowsthroughalmostallofthetaxreductiveeffectsofitsuseofthedoubledecliningbalancemethod.PPGLhashoweverelectedtoemploynormalizationofthetaxbenefitsproducedbytheClassLifeAssetDepreciationRange(ADR)provisionsoftheInternalRevenueCodeamendmentsof1971.BothTrialStaffandtheConsumerAdvocateproposeanadjustmenttoreflecttheflow-throughofthebenefitsofADRtoPPGL'scustomers.TheALJhasrejectedthesearguments.BothStaffandOCAexcept.Section167(1)oftheInternalRevenueCodeprovidesthebasisuponwhichthe"flow-through"verses"normalization"controversvarises.Undertheprovisionsofthatsubsection,apublicutilitywasrequiredtoelectwhethertoflowanybenefitsarisingoutoftheutilizationofaccelerateddepreciationforpost1969expansionpropertythroughtoratepayers,ortonormalize(spreadoverthelifeoftheasset)thebenefits.In1971,theInternalRevenueCodewasamendedtoprovideaguidetoservicelivesofassets,whichifemployed,wouldgenerallynotbesubjecttointernalRevenueServicechallenge.Simultaneously,regulationswereadoptedwhichprovidedforthetreatmenttobeaffordedtheadditionalbenefitstobederivedfromuseofADR.Ourreviewoftheseregulations,inparticularI.R.C.Reg.gl.167(a)-11(b)(6),indi-catestousthatifautilityhadelectedtonormalizethebenefitsof9/Asthereturnoflong-termdebtandpreferredstockisfixedatthetimeofissuance,thispooloffundswouldbeavailablefortheCommonEquityholders.

post-1969expansionproperty,normalizationofADRbenefitsisrequired.TheInternalRevenueCodeandRegulationspromulgatedthereunder,aresilentastotherequirementofflow-throughfortheADRbenefitsifflow-through*is'adoptedforpost-1969expansionproperty.PPGLadvancestheargumentthatcustomerchargesoverthetimeframeinwhichthepropertywillprovideservicewillbeloweronanactualbasisorapresentvaluebasis(S-Xa;S-XI;JFU-2,3,4).Unfor-tunately,StaffwasprecludedbytheALJfrompresentingstudieswhichmayindicateotherwise.Wetherefoxe,shallreservejudgmentastothevalueofPAL'sstudyandthebenefitsofflow-throughversesnormal-ization.Indevelopinganappropriateandreasonablelevelforincometaxes,weareguidedbytheInternalRevenueCodeandt)~"actualtaxespaid"doctrineasenunciatedbytheCommonwealthCourt.-WheretheCodeissilentonthetreatmenttobeaffordedaparticularmatter,weperceiveourdutytoapproximatetheactualtaxestobepaidbytheutility,andpassthatcost,andonlythatcost,ontoratepayers.Thus,inPa.P.U.C.v.PhiladelhiaElectricCompany,R.I.D.438(February5,1979westated:Undertraditionalregulatoryconcepts,utilitycompanyshareholders(investors),notthecon-sumersfurnishthecapitalnecessaryfortheoperationofthebusiness.However,ineffect,normalizationprovidescustomer-providedinterest-freeloanstotheutility.Ittakescapitalfromcaptivecustomers.Weconsideritimpropertoallownormalizationexcept:(1)uponevidencethatthedeferred-taxeswillinfactbepaidwithinthereasonablyforesee-ablefuture;or(2)wherenormalizationisrequiredbylawinordertoobtainthebenefitsofaccelerateddepreciation.Ageneralpolicyofpermittingnormalizationofsuchtaxsavingsmayhavebeenappropriateinthepastasanencouragementtoelectricutil-itiestosubstantiallyexpandtheirplantinvestmenttomeetaprojectedcriticalshortageinproductionfacilitiesandatatimewhentheoverallimpactupontheconsumerswasnotsigni-ficant.Butnowsuchpolicymustbeexaminedinthelightofpresent-daycircumstancessincei0/Gee~eneeall,T.U.PhillinsGasandOilCe.e.Pa.P.U.C.,Pa.CommonwealthCt.,412A.2d1118(1980);BellTelephoneComoanofPennslvaniav.Pa.P.U.C.,47Pa.CommonwealthCt.614,408A.2d917(1979);BellTeleohoneComanvofPennsylvaniav.Pa.P.U.C.,'17Pa.CommonwealthCt.333,331A.2d572(19?5).

S suchnormalization,incombinationwithmanyotherfac'tors,isalargeburdentoratepayers.Subjecttotheaboveexceptions,flow-throughofsuchtaxsavingsisconsistentwiththesound,long-standingprincipleofreflectinginratesanallowanceforacostthatisnogreaterthanthecostactuallyandprudentlyincurredbytheutility.Vhenratesareestablishedonthebasisofanallowanceforincometaxeswhichisgreaterthantheincometaxliabilitythatwouldbeimposed,ontheCompanyunderproformaconditionsusedinratedetermination,thereisamismatch.betweenthecostactuallyincurredbytheCompanyandtheassociatedchargesconcur-rentlyimposedonratepayers.Tosaythatsuchnormalizationincreasesthepre-taxinterestcoverageoftheCompanyisnoanswer.Thesamecouldbesaidoftheallowanceofexcessiverates.SeealsoPa.P.U.C.'.NationalFuelGasDistributionCor.,R-79090956(1980);Pa.P.U.C.v.VestPennPowerCo.,34PUR4th245(1979);Pa.P.U.C.v.HetroolitanEdisonComan,28PUR4th555(1979);Pa.P.U.C.v.PennslvaniaElectricComan,28PUR4th209(1979).Inviewofourenunciatedpolicy,weshallreducePPRL'sincometaxclaimtoreflectflow-throughoftheADRbenefits'.ConsolidatedTaxLossesPPSLfilesa=consolidatedfederaltaxreturnwithitssub-sidiaries.StaffhaschallengedthetaxeffectuponPPSL'staxclaimofonlyoneofi,tssubsidiaries,theOneidaHiningCompany.TheOneidaundergroundminewasabandonedlatein1978.Ithasbeenestimatedthatthisaffiliatewillhavehadtaxlossesinexcessof$17millionfor1979.(PPSLSt.II-A).Respondenthassufferedalossof$27,579,000fromitsOneidainvestment(PPRLEx.Future18).IthasapparentlybeenthepracticeoftheRespondenttomaketaxpaymentstoOneida,equaltothetaxsavings,derivedfromOneida'slosses.Thus,between1976and1979,theRespondentmadetotalpaymentsof$2,624,357toOneida.Italsopaid$697,850toOneidaearlyin1980onthebasisofpriorestimatesoftheconsolidatedtaxfor1980.TheRespondentexpectsthatthefinalamountfor1980willneedadjustment.(PPSLEx.250.1002005).TheRespondenthasmadeitsincometaxclaiminthispro-ceedingonthebasisofitsownoperationsandwithoutregardtoextraordinarytaxlossesofitsOneidaaffiliate.TheStafftakesthepositionthattheRespondent'scustomersareentitledtotheconsolidated taxbenefitofsuchlossesandthattheRespondent'staxclaimshould,.accordingly,bemeasuredaftereffectoftheselossesontheconsolidatedtaxreturn.TheStafftotalsthepaymentsbetween1976and1979andrecommendsa5-yearamortizationat,$524,871inreductionoftherate-makingincometaxallowance.Thestaffarguesthat"taxpaymentspreviously'paidtoOneidaandcollectedfromratepayersintheformofincometaxeswillneverbenefittheratepayers"andthat"onlyactualexpensesareproperexpensesforratemakingpurposes".TheALJrejectsStaff'sargumentstating:Itisourjudgmentthatanyregulatoryrulewithrespecttoallowanceforactualincometaxesuponaconsolidatedreturndoesnotandshouldnotapplytoextraordinarylosses,availablefromanaffiliateupontheter-minationofitsoperation.(R.D.57).Staffexceptstothedisallowanceofitsadjustment.Oneofthepurposesofthefilingofaconsolidatedtaxreturnistoallowonecompanytotakeadvantageoflossessufferedbyothersparticipatinginthefiling.AlthoughwearesurethatPPGL,uponacquisitionoftheOneidamine,didnotintendalosstooccur,alossdidoccur,andwearefacedwiththetaxconsequences.NedonotdoubtPPSL'sargumentsthattheexpensesincurred.areborne.byitsshareholders;however,wecannotignorethebasicfactthatifitwerenotforthetaxableincomegeneratedbyPPSL,thetaxlossesofOneidawouldnotbeavailableasanoffsettothetaxablerofitsoftheoeratinsubsidiaries.AswestatedinPa.P.U.C.v.VestPennPowerCo.,32PUR4th245(1980);Theselossesofthechroniclosscom-paniesareunusablebythembecausethetaxsavingsbenefitsofthelosseswouldhavebeenlostforeverhadeachmemberinthesystemfiledtaxreturnsseparately.Thechroniclosscompanies,becauseofthecon-stantlosses,cannottakeadvantageofthecarry-backandcarry-forwardtaxprovisionsoftheInternalRevenueCode.InthepriorMestPennratecase,wecitedfederalPo<<erCommissionv.UnitedGasPieLineCo.,386V.S.237(1967),whichheld:Unitedhasnotfileditsownseparatetaxreturn.Insteadithadjoinedwithothersinafilingofaconsolidatedreturnwhichresultedintheaffiliatedgroup'spayingalowertotaltaxthanwouldhavebeenduehadtheaffiliatesfiledonaseparate-returnbasis...-31 Ratesfixedonthisbasiswouldgivethepipelinecompanyanditsstockholdersnotonlythe'fairreturntowhichtheyareentitled,butalsothefullamount.ofanexpenseneverinfactincurred.Insuchcircumstances,thecommissioncouldproperlydisallowthehypotheticaltaxexpenseandholdthatratesbasedonsuchunrealcostsofservicewouldnotbejustandreasonable.AcceptanceofPPRL'sargumentwouldresultinhavingratepayers=:paythefullamountofanexpenseneverinfactincurredbyPPGLbecauseitdoesnotfileaseparatetaxreturn.UnitedGasproperlyrecognizedthatactualtaxespaidshouldbeusedindeterminingtheincometaxallowance,ratherthanthehypotheticaltaxadvocatedbyPPEL.Further,supportforourconclusion,thatPPGL'sfederalincometaxesshouldreflectanallocableportionofthetaxsavings,isfound'nWesternPa.WaterCo.v.Pa.P.U.C.,Pa.CommonwealthCt.,422A.2d906(1980),whereintheCourtheld:[T]hattheCommissionmayproperlyexclude'portionofautility'staxexpensewherethereisevidencethattheutilityhasnotbeenaffordeditsfairshareofbenefitsfromfilingaconsoli-datedtaxreturnwithaparentcorporation.Wecannotcondoneapleawhichwouldallowaparentcompanytocollecta"phantomtax."Inreality,itisneverpaidtothegovernment,butpassedonasaprofittotheshareholderbywayofasubsidiary-claimednon-existanttaxexpenses.ThefactthatRespondentmakes'paymentstoOneidaequaltothetaxsavingsderivedfromOneida'slossesdoesnotalterourreasoning,but,ratherreinforcesit.Thispaymentdoesnotaltertheamountoftaxableincomereportedontheconsolidatedreturn.Further,althoughnotaddressed,itispossiblethatthefundsutilizedtopayOneidawereratepayersuppliedthroughpaymentsmadeinprioryearsforalevelofincometaxesoffsetbytheOneidaloss.Accordingly,weshallgrantStaff'sexceptionandreduceRespondent'sclaimforincometaxesby8525,000.VII.RATESTRUCTURECounselforRespondent,OCA,andStaff,inthisproceedingsubmittedaratestructurestipulationproposingacertainratestructure"forRespondentandarecommendedallocationofrevenuesamongthevariouscustomerclasses.Thestipulationisapproved.Weare,concernedhowever,withthegeneralpracticeoftheapprovalofastipulationbyanAdministrativeLawJudgewithoutanontherecordpresentationoftheviewsoftheparties.AswestatedinPa.P.U.C.v.EletroolitanEdison~Cnman,R.ID.626(Haach14,1979):1-32"

fA]stipulationofratestructureissueseffectivelyisolatesusfromtheviewsofthepartiesonextremelyimportantissues.Consequently,weexpectinthefuture,regardlessoftheexistenceofastipulation,thatratestructureissueswillbefullydevelopedupontherecordandfullysummarizedintheRecommendedDecisioninorderthatwemaybefullyinformedofthevariousviewsofthepartiesindecidingratedesignissues'ThisstatementwasnotintendedtoapplyonlytolietropolitanEdisonCompany,butratherisastatementofourviewswithrespecttoallstipulations.Thus,despitetheacceptanceoftheStipulationinthiscase,weexpectallALJ'sto=ensurethedevelopmentofacompleterecord,andpresenttous,intheirRecommendedDecision,anexplanationastowhyitisinthepublicinterest.VIII.CONCLUSIONInviewoftheforegoingdiscussion,'efindtheappropriatelevelofjurisdictionandnon-jurisdictionalrevenuestobe$896,274,000;THEREFORE,ITISORDERED;1.ThatPennsylvaniaPower8LightCompanyshallnotplaceintoeffecttheratescontainedinSupplementNo.73toTariffElectric-Pa.P.U.C.No.198,thesamebeingfoundunjust,unreasonableandthereforeunlawful.2.ThatPennsylvaniaPower8LightCompanyisherebyauthorizedtofiletariffortariffsupplementscontainingrateswhichareconsistantwithourfindingsherein,designedinaccordancewithourdiscussionandfindingsregardingratestructure,whichwillproducetotaljurisdictionalandnon-jurisdictionaloperatingrevenuesnotinexcessof$896,274,000,exclusiveofStateTaxAdjustmentSurchargeRevenues.3.Thattariffsortariffsupplementsmaybefileduponlessthanstatutorynotice,and,pursuanttotheprovisionsof52Pa.Codeg3.321(b),thetariffsorsupplementsmaybefiledtobecomeeffectiveforservicerenderedonorafterJanuary30,1981.4.ThatPennsylvaniaPower8LightCompanyshallfiledetailedcalculations,atsuchtimeasitshallfilerevisedtariffsorsupplements,demonstratingthattheratesthereincontainedaremadeincompliancewiththeprovisionsofthisOrder.5.ThatPennsylvaniaPower6LightCompanyshalldesigntheratesapprovedhereininaccordancewiththeStipulationagreedtobythepartiesandapprovedbyus.

6.ThatPennsylvaniaPower8LightCompanyshallallocateitsallowedjurisdictionalandnon-jurisdictionalratebaseincreasesoastoachieveequivalentratesofreturnfornon-jurisdictionaloperations*atthesystemaveragereturnrequirement.7.ThatPennsylvaniaPower8LightCompanyshall,inanyfuturegeneralrateincreaseapplications,fileonaPennsylvaniajuris-dictionalbasisonly.8.Thatexceptashereingranted,allexceptionstotheRecommendedDecisionaredenied.BYTIECOH>1ISSION,(SEAL)WilliamP.ThierfelderSecretaryORDERADOPTED:January30;1981ORDERENTERED:January30,1981.34

TABLEIRATEBASE000RecommendedbtheALJBytheCommissionOriginalCostlieasureofValueClaimedbyRespondent:2,141,3992,141,399Adjustments:PlantHeldforFutureUse.CoalReservesHollandArcadiaDeferredTaxesCostofRemovalClassLifeADRCustomerDepositsCashWorkingCapitalAuditAdjustmentTotal(23,657)(750)(1,008)(12,886)~770)~39071)(23,657)(750)(7,000)1,3844,756(1,008)(13,446)(770)~40491)RateBase2102.3282,100908

/f~

SVIIIIARYOFRl:.Vl:.NIIILSRXI'I',HSI)SANI)TAXI',.~>$000$I'resentRatesPl'oposcd1/ltaLe1<<crcase-$Pr<>pox<dRatesI'roposcd/(pcrILstes--Ilricf)68II.)>vAdi<<st-tl>>at8Propos<'dRatesRcv<il>leRrqulrc--<>>cntAdj<<st.-)>>cntI'crRccosnendc<lDerisionRatesS<<pportc<lI)J>ltcspon-dcnt<)pcratinpRcv<noes<795,194123,312918,5069J8,50G918,506Operat.inshcvcnueOcductlonst<)pcrationandILsin-t<'na<<CCl)cprccint.ionTaxes-0t.lierInro>>>cTaxes:~tateFrdera1DeferredStateF<deralinvest<<cutTaxCreditsAcfcrri)lAl><irtizatlonofI)cfcro<ents-Credit443,2Ci285,5C)032,854JO>3514G,857(1,739)(7,360)16,587-0--0-2,89G8,4i0151,527-0--0-4>4i3,2C)735>750Ai4i3>26282>8Ci535,75018.75298,384(1,739)(7,3GO)1G>58718>GGO97>817(1,719)(7>360).)]C)~587(2>Ci4i8)~2>C>48)(3,899)1,513Ai39>36382,8C)5158,580Total~C>23724iC)2824G8G54i868~3194(~238C))~C)80>S08I'ct.InroncAvailableForRetiirn:171470a60~488231~95823~53J2~23862376987G5236,933h.ltellase:R;itcofReturn:2,1Ail,3998.0122,14ii,3992,14il39910.83210.9922,J02,32811.3122,102,378)11.272

eTABLEIISESfARYOFREVENUESEXPENSESANDTAXES($000)BCommissionAdjust-ments$.~Ad'ectedRevenueRequire-mentAdjust-mentAllowanceOperatingRevenues:OperatingRevenueDeductions:907919,413(23,139)896,274OperationandHaintenanceDepreciationTaxes-OtherIncomeTaxes:StateFederalDeferredStateFederalInvestmentTaxCreditsDeferralAmortizationofDeferments-Credit(7,383)4~18435,87982,865-35,768(463)(6,260)115,057(11,285)435,87982,86535,305103,772TotalNetIncomeAvailableForReturn:~13625)669569(11748)14532249844(11391)657821238453RateBase:RateofReturn:2,100,90811.89%2,100,90811.35%

1/Respondent'sExhibitFuture1A,RevisedD-l,16thDocumentFolder.2/AlthoughtheALJdeterminedthatRespondent'sproposedrateswouldproducereturninexcessofallowablereturnby$765,000(excessrevenueofapproximately$1,600,000)herecommendsacceptanceoftheproposedratesbyindicating,"[W]ecanhardlymeasureexcessinsuch'finetermsandadjustratesinsuchfineterms."3/Theseadjustmentsaretothecolumnidentifiedas"ProposedRates(perBrief)".4/CommissionExpenseAdjustments:RecreationalFacilitiesRateCaseExpenseFeeLinesofCreditForcedOutageInsuranceLeasedEquipmentExpenseTrainingExpenseSteamHeatEmployeesCashWorkingCapitalCustomerDepositsLoadGrowth(211)(32)(2,758)(3,900)(607)(5)9139($7383)5/RevenueAdjustmentExpenseAdjustmentGrossReceiptsTaxonRevenueAdjustmentTaxFactorIncreaseinRevenueTaxes$90773838,290~188,272x.497674$4,117TaxAdjustments:ConsolidatedTaxesInterestExpenseCostofRemovalClassLifeADR(525)(3,712)(1,384)(4756)TotalTaxAdjustment($6,260)

COMMONWEALTHQFPENNSYLVANIAPENNSYLVANIAPUBLICUTILITYCQMMISSIQNP.Q.BQX3265,HARRISBURG,Pa.17120February.5,l981INREPIYPLEASEREFERTOOURFILEGennaroD.Caliendo,AttorneyPennsylvaniaPower&LightCompanyTwoNorthNinthStreetAllentown,Pa.18101~<PC<K3'PP~)FFBQ6198)LEGAL'EPARTMENTPennsylvaniaPublicUtilityCommission,et/alv~PennsylvaniaPowerALightCompany/ToWhomItMayConcern:PleasebeadvisedthatweareenteringaSupplementalOpinionandCorrectedOrderthisdayinconnectionwiththeabove-entitled.proceeding.,KindlyattachtheenclosedordertotheonepreviouslyenteredonJanuary30,190l.JZI>>I:lu.~~{ert,I'~rILIa~IReceiptRequestedWilliamP.ThierI'elderSecretary PENNSYLVAilIAPUBLICUTILITYCOMMISSIONHarrisburg,PA17120PublicMeetingheldJanuary30,1981CommissionersPresent:SusanM.Shanaman,ChairmanMichaelJohnson,dissentingJamesH.CawleyLindaC.TaliaferroPennsylvaniaPublicUtilityCommission,etal.v~PennsylvaniaPower&LightCompanyR-80031114SUPPLEMENTALOPINIONK%)CORRECTEDORDERBYTHECOMMISSION:ThefollowingisprovidedtosupplementandcorrectourOpinionandOrderadoptedandenteredJanuary30,1981:RATESTRUCTURE(SlipOpinion,p.32)InourOpinionandOrderenteredJanuary30,1981,weindi-catedthatanexplanationastowhyastipulation,tenderedtousforapprovalisinthepublicinterest,isdesirableinaRecommendedDecision.Wedonotdeviatefromthisposition,however,ourstatementshouldnotbeconstruedasadeterminationthatthepartiestotheinstantproceedingdidnotdeveloptheratestructureissuesduringthepresentinvestigation.Onthecontrary,weareawarethatIndustrialIntervenors,'heOfficeofConsumerAdvocate,TrialStaff,andRespon-.'-dentdidsubmittestimony,indicatingthatthestipulatedratestructurewasinthepublicinterest.OurcommentswereintendedtoplaceallAdministrativeLawJudgesonnoticeastowhatweconsidertobetheirdutywith.regardtostipulations,andwerenotintendedtobecriticalofanypartyinthisproceedihg.NON-JURISDICTIONALSALES(SlipOpinion,p.34)TheAdministrativeLawJudgeadequatelysummarizesthisissue'aswellasthepositions.ofvariouspartiesasfollows:TheRespondentpresenteditsproformafiguresonatotalcompanybasis.Itcalculatedthat,ofthe$123,321,166ofrateincreases,~$2,695,804wouldcomefromitsnonjurisdictional(PERC)sales.Itchargeditselfwiththefullrevenueeffectofservingtheresalecustomers underthesamebaseratesandenergychargeswhichitproposesforitsretailcustomers.ThenonjurisdictionalcustomersweretreatedliketheRespondent'scustomersunderitsLP-4,LP-5orLP-6rates.Thusitprojected,ineffect,anincreaseof18.8%inrevenuesfromthenonjurisdictionalcustomers.Theyweretreated,ineffect,asthoughtheywerejurisdictionalcustomers,inview'ofthenatureoftheservicetothem,undertheLPrates.(Resp.Exh.Future1,D-3,p.2).TheStaffandtheConsumerAdvocateelicitedfromtheRespondentsomecalculations,baseduponacostofservicestudyfortheyearended,December31,1978,whichindicatedthatthenonjurisdictionalsaleswereproducinglessthanthesystemaveragerateofreturn.Allo-catedrevenues,expenses,ratebaseandreturnwerebrokenoutattherequestoftheStaffandtheConsumerAdvocate.,(Resp.Exhs.200.20148,pp.16-1616-3'50.2005002).Theobjectingpartiestakeseriousexcep-tiontotheRespondent'sfailuretopresentitscaseonajurisdictionalbasis.TheyrequestthattheRespondenthenceforthbeorderedtodoso.TheRespondentcontendsthatithastradi-tionally,initsPennsylvaniaretailratecases,treatedtheresalecustomersforratepurposesasiftheywereretailcustomersbecausetheyhavethesameservicecharacteristics.Mean-while,theStaffandtheConsumerAdvocatehavecastabout,makingcalculations,whichhavetobecontingentupontheultimatefindgngs,tobringtheFERCcustomerstoasystemaveragerateofreturn.WeagreewiththeTrialStaffthatrevenueshouldbeimputedtothenon-jurisdictionalclassofcustomersatthesystemaveragerateofreturn.WesodirectedthisinOrderingParagraph6ofourpreviousOrderandfurtherdirectedinOrderingParagraph7thatRespondenthenceforthfileallrateincreaseapplicationsonaPennsylvaniajurisdictionalbasisonly.Allpartiesagreethatsomeamountofrevenueabovethenon-jurisdictionaltariffratesbeimputedtothenon-jurisdictional'customers.Staffcontendsinitsexceptionsthat:

Respondenthasassignedthesenon-juris-dictionalcustomerstoLPratesbaseduponthevoltagelevelofdeliverytothenon-jurisdictionalcustomer.Theerrorofthistreatmentistheassumptionthatvoltagelevelisconsonentwithcosttoserve.Thereisnoevidenceinthisrecordtosuggestthatsimplybecausewholesalecustomersareservedatindustrialcustomervoltagetheywouldthenhavetheloadcharacteristicsofanindustrialcustomer.Weagree.Stafffurthercontends:Infact,thecommunitiesbeingservedatwholesaleratesarealmostentirelyresidentialincharacter.Ifaloadstudywereperformedonthesecustomersitisreasonabletoassumetheloadpatternwouldcloselytrackrespon-dent'sjurisdictionalresidentialload.IfaloadstudywoulddivulgethattheloadpatternswouldcloselytrackRespondent'sjurisdictionalresideniialload,wewouldhaveorderedthatRespondentimputerevenuestothenon-jurisdictionalcustomersattheresidentialrateofreturn.Absentdatafromaloadstudy,whichwouldindicatewhetherthenon-jurisdictionalcustomersareliketheLPratecustomersortheresidentialcustomersorsomeotherclassofcustomers,weconcludeitisappropriatetoimputerevenuetothenon-jurisdictionalcustomersatthesystemaveragerateofreturn.INTERESTCALCULATION(SlipOpinion,TableIIandNotes)Initsbrief,RespondentsubmittedarevisedstatementofoperatingincomereflectingchangesinannualdepreciationasaresultofaStiulationwithResecttoCertainDereciationIssues.ChangeswerenotrequiredinmeasuresofvaluebecauseRespondent'sexhibitsregardingtheratebaseimpactofthestipulationwereincludedintheoriginalfiling.ArecalculationofthedebtinterestdeductionforincometaxpurposeswasalsoincludedinRespondent'sbrieftoreflectthemostrecentcostoflong-term,debt.OurpreviousOrderdidnottakethisrevisedclaimintoconsiderationinTableII.Forthisreason,arecalculationofTableIIandthenotesofexplanationisrequired.Inaddition,wemustexpressourdissatisfactionwithwhathas-becomeageneralpractice,viz.,thelatefilingofexhibitsandthepresentationofneworalternativeclaimsbywayofbrief.Thisshouldnotbeconstruedasprohibitingthesummationofaparty'sontherecord.-positionorclaiminordertoprovidetheALJandCommissionwiththe.,necessaryinformgtiontoreachaninformeddecision.WerealizethatcompliancewithourRegulationsregardingtheuseofafuturetestyearrequirethefilingofactualdatawhenitismadeavailable.Weintend infuturecases,toviewthisdataasinformationtobeusedtoverifythebudgetedfiguresandnotasarevisedclaim.MeshalldiscouragethepartiesfrompresentingneworalternativeclaimsbywayofBrief.Basedupontheforegoing,wefindtheappropriatelevelofjurisdictionalandnon-jurisdictionalrevenuetobe$897,612;000;THEREFORE,ITISORDERED:1.OurpriorOrderissupplementedandcorrectedtotheextentpreviouslydiscussed.2.ThecorrectedTableIIandnotesofexplanationattachedheretoaremadeapartofthisSulemental0inionandCorrectedOrder.BYTHECOMMISSION,(SEAL)illiam.ThierfeldeSecretaryORDERADOPTED:January30,1981ORDERENTEREDFES51381 TABLE1RATEBASE$000RecommendedbtheALJBytheCommissionOriginalCosthfeasureofValueClaimedbyRespondent:Adjustments:PlantHeldforFutureUseCoalReservesHollandArcadiaDeferredTaxesCostofRemovalClassLifeADRCustomerDepositsCashWorkingCapitalAuditAdjustmentTotal2,141,399(23,657)(750)(1,008)(12,886)~770)~39'71)2,141,399(23,657)(750)(7,000)1,3844,756(1,008)(13,446)(770)(40491)RateBase2102,320210090B 81IIIIIARVOkkl:.Vl;I'ul:.8RXPRRRRSAknTAXI:.6~800rc'sentRatesPropose<litsleIncreaseJ~8I'ropos<dRatesRYRcsJ)unde<)tI'roposedRatesIIrl<(L8Ad)>>st-clcintsI'roposcdRatesRcven>>eR<<I<<Irc-IXC>>LA<Ii>>st-ncntI'crkccommcn<lcdl!ccislonRatesSupport<dhyRcspondent<!pcratinkk<vcn<<cs!OpcratinkRcvcnucI)CJ<<ctious:7<JS,I94i123;312918,506918,506918,506<)pcr<<tionanJIlain-tC<1IIICCI)eprcciationTaxes-Otlicrlni'.>>is<'<ixI's~~tat'rderaII!ifi!rr<dhtat.i!V<JcralInvcst<Icnt'faxI:rcdit'sI!cfcrra1Aia>>rtizationofI)efcrisents-Credit443,2Ci2R5,560'.I2,854J0,3514(i,857(1,739)(7,360)l(i,587~2648)=-0--0-2,8968,40151,527-0--0--0-44i3~26285,5C)035,75018.75298,384(1,739)(7,160)lfi,587~2()48)44')82624822,86535,75018,6CiO97,817(1,7'l9)(7,3C)0)16,587~2~648)J(3,899)1,513Gi39,36382,865158,580Tota1Ci23724X6"-824686~548C)8~3J94~2138G)6~80808lietI>>roueAvaIInbleI'orReturn:17J4670604IIB2339582353I223II62376987G5-23G,933g.1tcIhlsc'ateofReturn:2,141,3998.01X2914il~3992~141939910.83X10.99X2,102,32811.31Z2,102,328411.27Z TABLEIISl&MRYOFREVENUESEXPENSESANDTAXES($000BCommissionAdjust-.,ments~AdustedRevenueRequire-mentAdjust-mentAllowanceOperatingRevenues:OperatingRevenueDeductions:907919,413(21,801)897,612OperationandHaintenanceDepreciationTaxes-.OtherIncomeTaxes:StateFederalDeferredStateFederalInvestmentTaxCreditsDeferralAmortizationofDeferments-Credit(7,383)4~435,87982,8651835,768(436)(5,601)-i115,716(10,633)435,87982,86535,332105,083TotalNetIncomeAvailableForReturn:RateBase:RateofReturn:~12966)670228~11069)13873249185~10732)2,100,90811.86%6591592384532,100,90811.35%

~7~.I~a',~7,~~~1/Respondent'sExhibitFuturelA,RevisedD-l,16thDocumentFolder.2/3/AlthoughtheALJdeterminedthatRespondent'sproposedrateswouldproduce.returninexcessofallowablereturnby$765,000(excessrevenueofapproximately$1,600,000)herecommendsacceptanceoftheproposedratesbyindicating,,"[W]ecanhardlymeasureexcessinsuchfinetermsandadjustratesinsuchfineterms."'Theseadjustmentsaretothecolumnidentifiedas"ProposedRates(perBrief)".4/CommissionExpenseAdjustments:RecreationalFacilitiesRateCaseExpenseFeeLinesofCreditForcedOutageInsuranceLeasedEquipmentExpenseTrainingExpenseSteamHeatEmployeesCashWorkingCapitalCustomerDepositsLoadGrowth75/RevenueAdjustmentExpenseAdjustmentGrossReceiptsTaxonRevenueAdjustmentTaxFactorIncreaseinRevenueTaxes(211)(32)(2,758)(3,900)(607)(5)9139($7,383)90773838,290~18)8,272x.497674$4,117TaxAdjustments:ConsolidatedTaxesInterestExpenseCostofRemovalClassLifeADR(525)(3,053)(1,384)(4756)TotalTaxAdjustment($5,601)

%I@ppi,')piI,~~COMMONWEALTHOFPENNSYLVANIAPENNSYLVANIAPUBLICUTILITYCOMMISSIONP.O.BOX3265,HARRISBURG,Pa.17120.March27,1981INREPLYPLEASEREFERTOOURFILER-80031114I[~NEIIP(IIMAR301981lEGALDEPARTMENIPennsylvaniaPublicUtilityCommission,etal.V.PennsylvaniaPower&LightCompany1ToWhomXtMayConcern:ThisistoadviseyouthataConcurringandDissentingOpinionofCommissionerCawleytotheCommission'sOrderadoptedJanuary30,1981,hasbeenissuedintheaboveentitledproceeding.AcopyofthisConcurringandDissentingOpinionofCommissionerCawleyhasbeenenclosedforyourrecords.Verytrulyyours,grF.nels.Cert.NailReceiptRe@.WilliamP.ierfeldeSecretary PennsylvaniaPublicUtilityCommissionPennsylvaniaPower8LightCompanyR-80031114CONCURRINGANDDISSENTINGOPINIONOFCOMMISSIONERCAWLEYTaxNormalization.ImustrespectfullydissentfromthatpartofourOrderwhichrequirestheCompanyto"flowthrough",ratherthan"normalize",thetaxbenefitsofaccelerateddepreciationofpropertymadepossiblebyprovisionsoftheFederalRevenueActof1971relatingtotheClassLifeandAssetDepreciationRangesystems.+From.1956to1971,theCompanytookadvantageofac-celerateddepreciationforFederalIncomeTaxpurposes(byusingtheDoubleDecliningBalancemethod)and"flowedthrough"(ratherthanelectingto"normalize")thebenefitstoitscustomersforratemakingpurposes.The1971Actadded5167(m)totheInternalRevenueCodewhichprovidedfortheClassLifeSystem+forpropertyplacedinservicebefore1971,andtheAssetDepreciationRangeSystem(ADR)forpropertyplacedinserviceafter1970.Ingeneral,under5167(m),theTreasuryisgivenau-thoritytoprescribeusefullivesofassetsbyclassesandtopermittaxpayers(includingpublicutilities)+toelecttousethesystem.Forthosesoelecting,theInternalRevenueServicepermitsdepreciationliveswithinarangeof20percentaboveorbelowtheclasslife.

PP&LelectedtoemployandnormalizethetaxbenefitsproducedbytheADRprovisionswhile-continuingtoflowthroughthebulkoftheaccelerateddepreciationbenefitsattributabletotheDoubleDecliningBalancemethod.ThenormalizationamountsasclaimedbyPPGLare:StateFederal..TotalClassLifeADRDepreciation967,0003,789,0004,756,000CostofRemovingRetiredProperty+288,0001,096,000l,384,000Total1,255,0004,885,0006,140,000ThemajorityheredeniesthisnormalizationofADRbenefitsandprovidesthattheybeflowedthrough.Ibelievethisrequirementofflow-throughinsteadofnormalizationisincorrectandshortsightedforatleastfourreasons:(1)denialofnormalizationiscontrarytotheintentofCongress;(2)presentratepayersareundeservedlybenefitedattheexpenseoffutur'eratepayers;(3)presentratepayersaresentincorrectpricesignalsastothetruecostofservice,whichdiscouragesconservationofenergyresources;and(4)flow-throughhasanadverseeffectondebtcoverages,qualityofearnings,andcashflow,allresultinginincreasedcostsoffinancingtotheutility,whichultimatelyistothedetrimentofratepayers.(1)DenialofnormalizationiscontrartotheintentofConressAccelerateddepreciationwasfirstemployedintheUnitedStatestostimulateinvestmentinfacilitiesusedfor nationaldefense.AsthetestimonyofCompanywitnessG.F.Vanderslice,P.P.8L.Exhibit;200.10007at1-2,explains:"PPEI,'sfirstsignificant.encounterwithtaxnormalizationwasinconnectionwiththe'emergencydefensefacilities'rovisionsoftheInternalRevenueCodeapplicableattimesduringWorldWarIIandtheKoreanconflict.Certainkindsofpropertyconsideredessentialinnationaldefenseproduction,uponqualifyingforacertifi-'ateofnecessity,wereconsideredemergency.-defensefacilities.Asaninducementtoencourage'nvestmentinsuchvitalfacilities,theCodepermittedatotaltaxdepreciationwrite-offofsuchpropertyoverafive-,yearperiodratherthanthefulllifeofsuchproperty."Theemergencydefensetaxprovisionswere,purelyandsimply,incentivestoinduceinvestmentindefenseproductionfacilitieswhichmight,inafewyearsbeunneededorobsolete.Foranon-regulatedindustry,theinducementwasclear.Thebusinessriskinvolvedinasignificantcapitalinvestmentwasgreatlyreducedbytheassurancethatmuchoftheinvestmentcouldberecoupedinfiveyearsbywayoftaxpaymentsforegonebythefederalgovernment,bywayofthefastdepreciationwrite-off."Betweenpublicutilitieswithqualifyingfacil-.itieswhichwereexpectedtolastforafulllife,andtheirregulatorycommissions,therewasvir-tuallyunanimousagreementthatthefive-yeardepreciationwrite-off,for.alloraportionofthecostofvariousutilityfacilities,consti-tutedataxdeferment--not,ataxsaving.Only100%oftaxdepreciationcouldbetakenforafacilityoveritslife.Ifallthetaxdepre-ciationdeductionsweretakeninfiveyears,therewouldbeacorrespondingtaxincreasebecauseofthelackofanyannualdeductionforitsremaininglife."Thus,regulatoryauthoritiesandutilitiesem-ployeddeferralaccountingandratetreatment,foremergencydefensefacilities.Theconceptwaspopularlyknownas'acceleratedamortization.'nitially,regulatoryauthoritiesrequirednor-malizationoftaxexpensebut,differedinthetreatmentofthedeferralbalance;laterthebalancegenerallybecameregardedasarate-base

deduction.VirtuallyallutilitiesincludingPPSI',hadfacilitieswhichqualifiedfornecessitycertification.Regulatoryauthorities,includingthePennsylvaniaPublicUtilityCommission,au-thorizednormalizationoftaxesbywayofdeferraltreatment."ThenwiththeRevenueActof.1954,theCongressex-tendedeligibilitytoincludeallinvestmentmadebybusiness.AsstatedbytheHouseWaysandNeansCommittee,othercountrieswereusingthistechniquetostimulatecapitalinvestment."Variousformsoffasterwrite-offoffixedassetshavebeenalmostuniversallyadoptedinrecentyearsbycountrieswithmodernincometaxsystems.AmongsuchcountriesareGreatBritain,Canada,andSweden.Theresultsofliberalizeddepre-ciation'olicieshavegenerallybeenfavorablejgstimulatingplantmodernizationandexpansion."~Furthermore,existingdepreciationmethodswereviewedasanimpedimenttoplantmodernization.TheHouseCommitteestated:"Thereisevidencethatthepresentsystemofdepreciationactsasabarriertoinvestment,particularlywithrespecttoriskycommitmentsinfixedassets.Comparativelyslowratesofwrite-offtendtodiscouragereplacementofobsolete,equipmentandthejpstallationofmodern,up-to-datemachinery."BoththeHouseWaysandNeansCommitteeandtheSenateFinanceCommitteewantedtheRevenueActof1954toapplytoallsectorsoftheeconomystating:"ForallsegmentsoftheAmericaneconomyliberalizeddepreciationpoliciesshouldassistmodernizationandexpansionofindustrialcapac-ity,withresultingeconomicgrowth,increaseproduction,andahigherstandard.ofliving."+Therefore,accelerateddepreciationwasviewedasareplacementforasystemwhichdidnot,adequatelyencourageregulatedandunregulatedbusinesstoundertaketherisksof expansionand/ormodernization.Thenewsystemwouldencouragebusinesstotakerisksbyprovidingsomeofthefinancingre-quiredforexpansion.BoththeHouseandSenateCommitteereportsarespecific:"Thefastertaxwrite-offwouldincreaseavailableworkingcapitalandmateriallyaidgrowingbugi;nessesinthefinancingoftheirexpansion."~DespitetheintentofCongress,manyregulatedcompaniesdidnotelectaccelerateddepreciation.Theywerejustifiablyconcernedthatflow-throughwouldberequiredbyregulatorycommissionsforratemakingpurposes,therebyde-privingthemofthesourceofcapitalwhichCongressintendedtobeproducedbyaccelerateddepreciation,whilemakingnopro-visionsforthetaxobligationdeferredtoalaterperiod.+Numerousregulatoryagenciesdidindeedrequireutilitieselectingaccelerateddepreciationtoimmediatelyflow-throughthetaxsavings.Infact,inthelate1960'sseveralagencieswentsofarastoimputeaccelerateddepreciationindeterminingthefederaltaxexpenseofutilities,andflowedthroughtheresul-tanttaxdeferrals,eventhoughtheparticularutilitiesinvolvedwereusingstraightlinedepreciationandinfactpayingthegreatercurrentfederalincometaxes.Thisthwartedthefi-nancingaspectsoftheintentofthelaw.TheCompany'switness,Mr.Vanderslice,confirmsthisonpages2and3ofhisstatement:"Subsequently,in1956,theInternalRevenueCodeprovidedforliberalizeddepreciation.Ingeneral,theCodepermittedaccelerateddepreciationpur-suanttothedecliningbalance,thesumofthe year'sdigitsorotheracceptablemethods,whichprovidedfortakinggreatertaxdepreciationdeductionsintheearlyyearsofpropertylifeandlessinlateryearsascomparedtothe'straightline'qualamountsoverestimatedlife.TheclearlystatedCongressionalintentofthesetaxprovisionswastoencourageallindustrytoinvestcapitalinnew,modern,moreefficientproductivefacilities.'gain,itwasacurrent.federaltax-foregoneinducementtostimulatecapitalinvestmentbyreducinginvestmentrisksbyguaranteeingitsearlierrecoupment.Thestimulusconceptwhichhadworkedinawareconomywastobeemployedinapeacetimeeconomy."Thistime,however,manyregulatoryauthoritiesconcludedthatforutilitieswithcontinuallyexpandingplant,the.annualtaxdeductionusingliberalizeddepreciationwouldneverbelessthanitwouldhavebeenusingstraightlinedepreciation.Mathematicalmodelsdemonstratedthatifpropertywasnotdealtwithonaunitorvintagebasis,.butratheronatotalbasis,theannualliberalizedtax.depreciationdeductionforagrowingplantbasewouldalwaysexceedsuchdeductiononastraight,linebasis.They,therefore,heldthatliberalizeddepreciation>gouldproducetaxsavings-notdeferrals.~Manycommissions,includingthePPUC,therefore,requiredthatthelowertaxbenefitsbeflowedthrough,thusre-flectinganoveralllowercostofservice."PP&Lhadoriginallyfavoredtaxnormalizationforliberalizeddepreciation.However,theadoptionofflow-throughasaregulatoryrequirementren-deredthatviewmoot.Itsdecisionwaslimitedthentoelectingtouseliberalizedtaxdepre-ciationornot.Itelectedtouseliberalizedtaxdepreciationinthehopethatthelowercostsofserviceandtheconcomitantratelevelssoproducedwouldbebeneficial,bothtoitselfandtoitsratepayers,ascopperedtocontinueduseofstraightlinedeductions."~Whetheradoptedforfinancialreporting,orimputed,theratereductionsresultingfromflow-throughwereviewedwithalarmbyCongressbecausesubstantialtaxreductionswereoc-curringwhichwerenotintended.TheHouseWaysandMeansCommitteeexplained:

'I"In.general,flowingthroughthetaxdeferraltothecustomersofautilitythatisalreadyearningitsmaximumpermissableprofitonitsinvestment,resultsinadoublingoftheGovernment'slossofrevenuefromtheuseofacceleratedmethodsofdepreciationfortaxpurposes.Thisisbecausethecurrenttaxreductionreducestherateschargedtothecustomers,whichinturnreducestheutility'staxableincomeandthereforereducesitsincometax.Thissecondleveloftaxreduc-tionispassedonlpqtheutility'scustomers,withthesameeffect."~Inaddition,theintentionofCongresstoaidplantmodernizationwasbeingthwarted.Abill(H.R.6659)wasin-troducedintheHouseofRepresentativesonFebruary7,1969todealwithbothoftheseproblems.Thepurposeofthebillasdescribedbyitssponsors:"H.R.6659.AbilltoconfirmthepurposeoftheaccelerateddepreciationprovisionsoftheInternalRevenueCode,andtoavoidlossofthefederalrevenuesinthecaseofregulatedtaxpayersthroughtheapplicationoftheseproviyjo~scon-trarytotheintent,ofCongress.Thisbill.waspassedwithmodification,becameknownastheTaxReformActof1969,andisnowembodiedin5167(1)oftheInternalRevenueCode.Asenacted,5167(1)placedafreezeontheelectionofflow-throughandmandatednormalizationforthosetaxpayerselectingtochangefromstraightlinetoaccelerateddepreciation.Thismeantthatregulatedcompanieswhichhadpreviouslyelectedflow-0hroughforratemakingpurposescouldcontinuetoflow-throughorcouldelecttonormalizeifpermittedbytheirregulatorycommissions.Regulatedtaxpayerschangingfromstraightlinetoaccelerateddepreciationwererequiredtonormalizeandthecommissionscouldnotflow-throughtoratepayersthedecreaseinFederaltaxliabilityresultingfromtheuseofaccelerated

depreciation.Inessence,ifaregulatoryagencyimputedflow-throughinsettingratesforautilitywhichwasnormalizingdeferredtaxes,theutilitylosttherighttouseaccelerateddepreciationfortaxpurposes.Itshouldbenotedthattheculpritwasnotseentobetheutilities.Instead,Congressperceivedthetaxrevenuelossasresultingfromregulatoryagenciesimposingflow-throughonutilities,"oftenagainstthewillofthetaxpayerutilities.",~Ofcourse,Congress,asanalternativetothenor-malizationrequirement,couldhavesimplydeniedutilitiestheuseofaccelerateddepreciation.Thisapproachwasrejectedbecause"intoomanycases,thiscouldplaceregulatedutilitiesatanunfaircompetitivedisadvantage,bothintermsofthesaleoftheirproductsorservicesandtheirattractivenesstoequityinvestors.Also,thiswouldresultinprompt,substantialand15/wilde-spreadutilityrateincreases."-Itisapparent,then,that.Congressfavorednotonlyaccelerateddepreciationbutnormalizationoftheresultingbenefits.Clearly,Congresssufferedthelo'ssoftaxrevenuesbecauseofflow-throughonlytotheextent.thatithadbeenpermittedpriorto1970and,generallyastopost-1969property,onlytothose"grandfathered"utilitieswhichcontinuedtoflowthroughratherthanelectingnormalization(asdidPP6L).~Asnotedpreviously,5167(m)dealingwithADRwasaddedtotheInternalRevenueCodein1971withADRnormalizationbeingseenbyCongressas"substantiallysimilar"tothe1969treatmentofaccelerateddepreciationmethods.~

TheADRregulationshavebeeninterpretedtomeanthat,ifanacceleratedmethodofdepreciationmaybeusedwithflow-dthroughaccountingunder5167(1)(asisthecase'withPP&Lsinceitusedaccelerateddepreciationandflowedthroughpriorto1969,electednottonormalizeafter1969,andthereforewasd'ggtaxesresultinfromtheADRelectionmaeitherbeflowedthrouhornormalizedwithout'eoardizintheavailabilitofADR~Consequently,themajorityhasacceptedTrialStaff'spositionthat,"InaccordancewiththeusualpolicyoftheCom-mission,onceitisestablishedthatnolawprohibitsflow-through,nofurtherproofisnecessarytorequirethecompanytoflowthroughthesetaxbenefits.~Undisputably,fortaxableyearsbeginningafterDecember31,1970,PP&L(whichhadbeenusingacceleratedde-preciationandflowingthebenefitsthrough)couldhaveelectedonorbeforeJune29,1970,tochangetononaccelerateddepre-ciation(straightline)or,withthepermissionofthisCommis-sion,toaccelerateddepreciationwithnormalizationwithrespect,topost-1969propertywhichincreaseditsproductiveoroperationalcapacity+-anditdidnotdoso.+Thus,sincePP&Lhastraditionallyflowed-throughthebenefitsofaccelerateddepreciation,thisCommissiondoesnotjeopardizes'uchbenefitsresultingfromtheuseofClassLifeADRsystemsbyinsistingthattheyalsobeflowedthrough.

Theessenceofthecongressionalintent,however,wasnotnormalizationvs.flow-through,oreventhattherewasalossoftaxrevenuesduetoflow-through.Theessence,theentire~uroae,ofallowingaccelerateddepreciationwaetocreateincentiveto"maintainthepresenthighlevelofinvestmentinplantandequipment",thuspromoting"economicgrowth,'increasedproduction,andahigherstandardofliving."~ii~22Therefore,althoughthisCommissionhasbeentechni-callycorrectbytraditionallytakingadvantageofCongress'oleranceofflow-through,therecanbenodoubt,thatbydoingsotheCommissonessentiallyhasbeenfrustratingtheintentofCongress.Asarecentstudyconcluded:"However,it.isimpossibletoreviewthelegislativehistoryinitsentiretywithoutdrawingtheconclusionthatCongressintendedthetaxbenefitstoreducetheafter-taxcostsasso-ciatedwiththeacquisitionofcapitalassets,andthat,theresultingtaxsavingsshouldbeavailableforfinancingfurthercapitalinvestment.Flow,throughtreatmentofthetaxbenefitsisincon-sistentwiththisgoal.Toarguethat,flowthroughtreatmentisnotinconsistentwithCongressionalintentinadoptingthetaxprovisionsrequiresmaintainingthatCongressdidnotunderstandthedistinctionbetweenpassinganoveralltaxratereductionandadoptingtaxexpendituresdesignedspecificallytosubsidizetheacquisitionofcapitalassetq3Pespiteconsiderableevidencetothecontrary.'Ž(2)Presentrateoaersareundeservedlbenefz.tedattheexenseoffutureThequestionofwhetheraccelerateddepreciationresultsinataxdeferralorinataxsavingshasbeendebatedtforyears.~

"Somearguethattheinitialhighafter-taxincomeisillusory,sayingthatalthoughtaxesarebeingdeferredtemporarily,theymust,eventuallybepaidinfull.Consequently,thisgroupsuggestscredit-ingtheincreasedearlyyears'ncometoareservefordeferredtaxes,thenbringingitbackintoincomeinthelateryears.Thisprocedurelevelsoutor'normalizes'rofits..Othersdisagree,maintainingthatsolongasfirmscontinuegrowingandaddingdepreciableassets,thetaxpaymentwillcontinuetobedeferred.Theygoontosaythatmostfirms,.andespeciallythoseinthe.-utilityindustry,canexpectcontinuousgrowthhenceapermanentdeferral.Thisgroup,there-fore,recommends'flgrj.ngthrough'eferredtaxestoreportedincome."~GarfieldandLovejoyintheirPublicUtilityEconomicsaddressthiscontroversyandgivewhatIconsidertheappropriateanswer:"Aquestionarisesastowhetheracceleratedde-preciationresultsinataxdeferralorinataxsaving.Thisquestionhasbecomeparticularlyimportanttoregulatorycommissionsindecidingwhetherpublicutilitiesshouldbepermittedtoretainthebenefitsofaccelerateddepreciationinratemaking.Asidefromthepossibilityofachangeinincometaxratesonewayoranother,.thisquestionmustbeviewedfromtherespectivestandpointsofonepropertyunitandofthecompanyasawhole.Takingfirstthesituationwithrespecttoasinleunitofproert,thereseemstobenodoubttataccelerateddepreciationresultsinataxdeferralandnotataxsaving.Inthiscase,lesstaxispaidduringtheearlyyearsofservicelifethanwouldbepayableunderthestraightlinemethod,andagreatertaxwouldbepayableinthelateryears.Thetotaldepreciationdeductionsfortaxpurposesequaltheoriginalcostoftheproperty,and,assumingconstanttaxrates,thetotaltaxeffectisunchangedandequalregardlessofthemethodofdepreciationemployed."Itispossible,undersomeassumptions,totakethepositionthatataxsavingresultsfromac-celerateddepreciationwheretheentirecompanyisconsideredandnot'ustasanlepropertyunzt.Theassumptz.onsare,fxrst,thatcorporatetaxratesremainunchangedandthatSection167remainsinthelaw.Asecondandratherextremeassumption contemplatesthatthecompanyexperiencesever-'ontinuousgrowth,andthatthetaxpayer'stotaloutlaysfornewplantandequipmentarethesameorlargerineachsubsequentyearandthatthenewpropertyhasthesamelifeexpectancy.Then,thetotaldeductionsfortaxpurposesunderaccelerateddepreciationinanysubsequentyearwouldnotbelessthanthetotalofsuchdeductionsunderthestraight-li'nemethod.Undersuchcircumstances,thetaxreductionsobtainablethroughtheuseofaccelerateddepreciationwouldneverbeoffsetby.futuretaxincreases.Accordingly,itispossibletoconcludethatatazsavingwouldresult.How-ever,whatthetazlawsmayprovideandwhattheannualfutureadditionstoplantmaybeafteronedecade,ortwoorthree,areplainlyanyone'guess.TheFederalPowerCommissionarguedsuccessfullyintheSupremeCourt-thattheforegoingassumptions,leadingtotheconclusionthatataxsavingwouldresult,'...areatbestlargelyspeculativeandconjectural.'heCommis-sion.alsomaintained,successfully,that'ItwaswithintheCommission'sQpcretiontodeclinetomaketheseassumptons.'"~,ThenotionthatgrowthinplantresultsinpermanenttaxsavingswassoundlyrejectedrecentlyintheFederalEnergyRegulatoryCommission'srulemaking(RM80-42),:."Afinalimportantconceptrelatingtotheissueoftimingdifferencesandinter-periodtazallocationisthatof'continualtaxdeferral.'hisisassociatedwiththecompositeeffectsovertimeofa'combinationoftimingdifferencesaffectingacompany.A'continualtaxdeferral'riseswhen,overtime,thetotaltaxbenefitassociatedwithnewtimingdifferencesequalsorexceedsthetotalvalueofthe.reversalsoccurringfromearliertimingdifferences.Asaresult,underanor-malizationpolicy,apositivebalanceofac-cumulateddeferred.taxesreflectingthecollectionofmoretaxesinratesthanhavebeenpaidbythecompanycouldexistintotheforeseeablefuture."Continualtaxdeferralsareoftenreferredtobythemisnomer'permanenttaxsavings.'histermhastheconnotationthattaxesarenotonlyde-ferredbutarealsosomehowpermanentlyforgiven.Thisisinaccurate.Regardlessofthenumberofindividualtimingdifferencesaffectingagiven utility,eachsuchtimingdifferencewillreversesothat,overthelifeofthetransaction,thetotalamount,ofthetransactionrecognizedforrate-makingwillequalthetotalamountrecognizedfortaxpurposes."Kiefer,inhisstudyofaccelerateddepreciationforTheNationalRegulatoryResearchInstitute,comestothesameconclusion:"Asafinalnote,thereisoneotherargumentthatisfrequentlyusedtojustifyflowthroughrate-makingtreatment,whichdoesnotfitneatlyintotheaboveframework.Thisistheargumentthataccelerateddepreciationreallyamountstoapermanentforgivenessoftax,notataxdeferral,andsincethereisnodeferredtaxliabilitythereisnojustificationforadeferredtaxaccount.Thisargument,isbasedontheobservationthatifthefirmdoesnotdecreaseinsize,itsdeferredtaxaccountwillgrowtoacertainsizeandneverdiminish;andifthefirmgrowscontinuously,itsdeferredtaxaccountwilldolikewise.Thecon-clusionisdrawnthatthedeferredtaxesarenever,infact,paid,andsothereisnoneedtoprovidefortheminadeferredtaxaccount."Thisargumentislargelyoneofsemantics.Taxesdeferredbecauseofaccelerateddepreciationare,.ofcourse,eventuallypaid.However,inagrowingfirm,whenthepreviouslydeferredtaxescomeduenewlargertaxdeferralsarebeingreceived;thus,thedeferredtaxaccount,growsratherthanshrinks.Thismaycreatethecasualimpressionthatthetaxesaredeferredforeverandneverpaid.Xfthiswerereallythecase,however,thedeferredtaxaccountwouldgrowevenmorerapidly,itsgrowthbeingundiminishedbytherepaymentofpreviouslydeferredtaxes.Thedeferredtaxaccountcontinuestogrowdespiterepaymentsjustasanyaccountofitemswhichcontinuouslyrol'lover--accountspayable,accountsreceivable,outstandingloanbalances,etc.--willgrowinagrowingfirm."Ofcours@,withtheinvestmenttaxcreditthereisnodeferredtaxliability,anditisinthiscasethat'thedefectsinthe'continuous.deferral'rgumentarethemostvisible.Thepurposeofaccountingproceduresandofutilityratemaking proceduresistoaccuratelyreflecttheimpactoftransactionsonthefinancialconditionoftheutility.Theinvestmenttaxcreditdoesnotrepresentataxdeferral,butitisataxbenefitintrinsicallyassociatedwiththeacquisitionofcapitalassetsanddesignedtoreducethecapitalcostsofowningthoseassets.Thequestiontheniswhetherthetaxbenefitshouldbetreatedinthe'accountingsystemasifitwereaone-yearreductioninthetaxrate,orareductionin,theeffectivecostofacapitalassetwhichshouldbeamortizedoverthelifeoftheasset.Clearlyforaccuratereportingandratemakingitshouldbereportedasthelatter,taxdeferralorno.Seeninthislight,theaccumulateddeferredinvestmenttaxcreditandthedeferredtaxaccountaremecha-nismsofaccuratelyreflectingtheeconomicimpactofthesetaxbenefits.ontheutilitycompanies,regardlessoftheexistenceornon-existenceofdeferredtaxes."The'continuousdeferral'argumentissometimesadvancedinsuchawayastoimplythatsolongasthetaxpayments'continuetobedeferred',utilityrateswillbehigherundernormalizationthantheywouldbeunderflowthrough.However,thereisnonecessaryrelationshipbetweenthe'gpgtinuousdeferral'ftaxesand'utilityrates."~Imustconclude,asGarfieldandLovejoydid,thataccelerateddepreciationresultsinataxdeferral,notatax~savin.Therefore,"theprocessofnormalizationprovidesegualtreatmentforsuccessivegenerationsofcustomersandavoidsgivingpresentcustomersawindfallatthepossibleexpenseoffutureratepayersor,possibly,stockholders."(3)Presentrateaersaresentincorrectricesinalsastothetruecostofservo.ce,whichdiscouraesconservationofenerresourcesItisasadfactthat.themosteffectivecon-servation-inducingtoolisprice.Ifthecostgetshighenough,peoplewillcutback.

Theavowedpurposeofrequiringflow-throughoffederalincometazbenefitsistolowerthecostofservicetopresentratepayerstoreflectthe"actualtaxespaid"bytheutility.Thevalidityofthisapproachhinges,ofcourse,onthetaxesneverhavingtobepaid("tazsaving").Sincelbelievethetaxeswilleventuallybecomedueandowing("tazdeferral"),thenflow-throughdoesgreatviolencetothisCommission'sdeterminedeffortstoencourageconservationofenergyresources.Sincetaxesarealegitimatecostofautility'sservice,ratepayers,nothavingbeensentthetrue28/costoftheserviceprovidedtothem,willinalllikelihoodhaveconsumedsubstantiallymoreenergythaniftheyhadbeenmadeawareofitstruecost.(4)Flow-throuhadverselaffectsdebtcoveraes,ualztofearnznsandcashflowThisissobasic,andsoantitheticaltoCongress'oals,thatanextendeddiscussionisunnecessary.Mr.Vanderslicesummarizedasfollows:e"Thedeferredtreatmentimprovesdebtcoverages.Thisisbecause,whennormalizationisrecognizedforratepurposes,thenormalizationcompanyhashigherrevenuesintheinitialyearsof.propertylifewith,theresultinghigherpretaxincomelevelsthanthecompanyonaflow-throughbasis.Theresultantimprovementindebtcoveragesintheearlyyearscan,ofcourse,betogreat.advantageinenablingthecompanytoobtainadequatefinancingandatlowercosts."Itimpxovesthequalityofearnings.Normalizationimprovesthequalityofthecompany'searningsduetothefactthatthecompanyisrecovering,onatimelybasis,theamountsrequiredforfuturetaxpaymentsand,

this,ofcourse,removesthespectreofpossibleinabilitytorecoverthetaxamountsatsomelaterdate,eitherbecauseofachangeinregulatorypostureorbecauseofdecliningcustomerusage."Normalizationimprovescashflowandcanlowerthecostoffinancing.Thisbenefitaccruestothecompanythroughthecollectionandretentionof'ncometaxdollarswhich,althoughattributabletocurrentcostofservice,arenotpayableuntilsomefuturedate.On'aflow-throughbasis,ofcourse,therewillbenocollectionofthetaxdollarsuntiltheybecomepayableatthelaterdate,andthereforethere'snocashflowbenefittothecompany.AsrecognizedbytheFPCintheTranswesternPipelinesdecisionin1971,thesedeferralsareinterest-freeloansfromthegovern-ment,andconsequently,thereisaninterimad-vantagetotheoperatingcompanyinthattheadditionalcashisavailableforinvestmentinfacilitiestoconductutilityoperations.Theimprovedcashflowcanresultineitherlowercostofmoneythroughtheuseofthesefunds,orinimprovedservicesbyaddingfacilitieswhichotherwisecouldnotbefunded.Thesefundscanbeofsubstantialbenefittoacompany'sfinancingprogramandcanfacilitatetheoverallfinancingoftheoperation.Reducedriskswillproduceloweroverallcostsandultimatelytheselowercostswillbenefit.theconsumers.Actually,mostofthebenefitslist+grillultimatelyresultin~lowercapitalcosts."~Thesebenefitsaccruetotheratepayer,theutilityandtheinvestorandareprimarilyaresultofavoidingsubstantialaddedrisk.Enshort,onecanarguewhetheraccelerateddepre-ciationresultsintaxdeferralsortaxsavings,but,likeitornot,most.oftheinvestorsontheNewYorkStockExchange(tospeaknothingofbanksandotherinstitutionallenders)aresophisticatedenoughtoknowwhatflow-throughreallymeans-ariskierinvestment.

What,istheneteffectfortheratepayerofthisper-ceptionofincreasedrisk?AstudyofutilitybondyieldsoriginallyissuedintheUnitedStatesduring1973-78demonstratedthattheyieldtomaturityonpublicutilitydebtcapitalissuedduringthesampleperiodwassignificantlyhigherforautilityonflow-through,allotherthingsbeingequal.Thedegreeoftheincreasewasapproximately24to29basispoints.-Morerecently,anotherstudyoverthesameperiodoftimeindicatesthatthecostofequitycapitalforacompanyoperatingunderflow-throughwouldbeapproximately29basispointshigherthantheaveragecost.ofequityforpublicutilities.-'1/Asamostpoignantexample,however,isPP&Litself.EnNovember,1980,whilethiscasewasunderway,Standard&Poor'sCorporationdowngradedtheseniordebtandpreferredstockofPP&L,citingamongotherthings"weakearningsandcashflowmeasures"which"presentthemselvesasclearriskelementstoholdersofseniorsecurities."~Sinceelectricpublicutilitiesmustrelyonprivateinvestors(ratepayerrevenuesaregenerallyinadequateinordertoprovideforneededplantconstruction,transmissionanddis-tributionfacilities,andoperatingcapital),theneteffectonratepayersofsuchdowngradingsandincreasedperceptionsofriskishigherratesduetothehighercost.ofcapitaltotheutility.

Mhyshouldratepayersberequiredtopaythesehighercostsofdoingbusiness?BecausePP6Landmostlargeutilitiesareinvestor-owned(notthatpublicly-ownedutilitiesarefreefromthesameneedforoutsidecapitalthecostofwhichisalsopassedontocustomers),and,inafreeenterprisesystem,dueprocessoflawrequiresthisCommissi'ontoallowsuchcostsinratesasanordinarycostofdoingbusiness.Havingestablishedthatflow-througheventuallyraisesrates,Iwouldconcedethatacost.-benefit,analysiswouldbe'Vneededtodeterminewhethertheaddedcostof.capitaltoaflow-throughcompanywaspossiblyoffsetbytheincreasedbenefitsoflowerratestocurrent.consumers.Inotherwords,isitbettertoflowthroughtaxbene-fitstominimizecurrentratesbecausethoserateswouldstillbecheaperthan"normalized"ratesevenwiththehighercapitalcoststothecompany?Ithinknot,becauseanysuchcost,-benefitanalysiswouldhavetoincludethebenefitsoriginallyintendedbyCon-gressinpermittingaccelerateddepreciation--constantmod-ernizationofequipmentandfacilities,thuspromoting"economicgrowth,increasedproduction,andahigherstandardofliving."Thesebenefitsare,ofcourse,difficulttomeasure,but,attheleast,theiraccomplishmentmeansbetterutilityserviceandincreasedemploymentinmanysectorsofoureconomy.Evenwithlowercurrentratesdespitehighercapitalcostsduetoflow-through,whatisthetruevalueofsuchratesiftheselargercongressionalgoals(whichareachievableonlythroughnormalization)arefrustrated?

TheonlypossiblereasonIcanconceiveforimposingflow-throughwouldbetheinflation-devalueddollarswithwhichfutureratepayerscouldpaytheincreasedtaxeswhichwilleven-tuallybecomedue.Better,suchreasoninggoes,toallowcurrentratepayerstokeepmoreoftheirdollarsatpresentvalues.Thisreasoning,however,ignoresthefactthatutilitiesh1~~lp'ddqreliableserviceatreasonablerates.HowlongcanPP6Lfulfillthoseobligationsandyetcontinuetoraiseneededcapitalatexcessivelyhighinterestratesandattheexpenseofdilutingthevalueofalready-issuedstockbysellingnewissuesbelowbookvalue?Thecongressionalintentwastoease.thisburden,totheultimatebenefitofconsumers,bytemporarilyforegoingreceiptoftaxescollectedfromratepayersandthusproviding"taxfree"loanstoutilities(andnonregulatedbusinessesaswell).Frustrationofthisprogramadverselyaffectstheutilityandinexorablytheratepayers,andeventuallyourentireeconomy.ItheieforewouldpermitPP&KtonormalizethebenefitsoftheClassIifeADRsystem.OtherIssuesTherearethreeotherissueswithwhichIdisagree.Briefly,anyimputationofrevenuestonon-juris-~dictionalcustomersamountstoadeterminationbythisCommissionthatthewholesaleratesareunreasonable.suchadeterminationrestsinsteadentirelywiththeFederalEnergyRegulatoryCom-mission.

AstotheCompany'sclaimforfeelinesofcreditexpense,Iviewthismaintenanceoflinesofcreditasaprudentmanagerialdecision,althoughIbelievetheclaimcouldhavebeenprovedinmoredetail.However,todenytheclaimaltogether,particularlyinlightofthecircumstancesexistingwhensuchdecisionwasmade,isunfairMondaymorningguarterbacking.Finally,astotheissueofconsolidatedtaxlosses,relatingtotheabandonmentoftheOneidaMiningCompany(aPP&Isubsidiary)undergroundmine,Ibelievethat,whennopartoftherisksofthenonregulatedentityareassumedbythecustomersoftheregulatedutility,thenthosecustomersshouldnotbenefitfromanylossesoccurringinthenonregulatedentity.~Inshort,astheFederalPowerCommissionconcluded,"Inouropinionautilityshouldberegulatedonthebasisofitsbeinganindependententity;thatis,autilityshouldbecon-sideredasnearlyaspossibleonitsownmeritsandnotonthoseofitsaffiliates."~Despitemydisagreementwiththeselastthreeissues,Iamsatisfiedthatwehavesufficientlyincreasedtheoverallrateofreturnsoastooffsettheadverseeffectoftheselastissuesasreflectedinourfinalorder.Thisbeingso,andsincemypositionastotaxbenefitflow-throughisthatitistechnicallycorrectunderthefactsofthiscase,butmanifestlyunwise,Icananddoconcurinthefinalresultofourorder.March17,1981ommz.ssz.oner

PP&LFootnotes1/Beforeproceeding,however,itisessentialtodefinetheterms"normalization"and"flow-through".P.J.GarfieldandW.F.Lovejoy,intheirtreatisePublicUtilitEconomics112-113(1964),havedonesosuccinctly:"Oneapproachtotheregulatorytreatmentofaccelerateddepreciationiscalled'normal-ization.'tassumesthat.theresultofaccelerateddepreciationisataxdeferral.Underthisapproach,thecommissionwill'normalize'heitem,coveringfederalincometaxexpenseinthecostofserviceusedforthepurposeofmakingrates.Normalization.istheadjustmentofthetaxexpenseforratemakingpurposessothatitreflectstheamountwhichwouldhavebeenpayableifthestraight-linemethodhadbeenusedtocomputethedepreciationexpensedeductioninthecompany'staxreturn.Inotherwords,thecommissionallowstheutilitytouseanacceleratedmethodtocalculatethede-preciationdeductionfortaxpurposes,butcalculatesthetaxexpenseforrate-makingpurposesbyusingadepreciationdeductionbaseduponthestraight-linemethod.Thus,theincometaxexpenseforrate-makingpur-posesiscalculatedwithoutgivingeffecttothestatutoryprovisionsforaccelerateddepreciationwhichthetaxpayermayhaveelectedfortaxpurposes.Theexcess'fthisnormalizedtaxallowanceovertheactualtaxischargedtotaxexpenseandcreditedtoareservefordeferredtaxesortoarestrictedsurplusaccountnotdistributableasdividends.Subsequently,inlateryears,whentheactualtaxexpenseexceedsthatcalculatedunderthestraight-linemethod,theexcessoftheactualtaxoverthenormalizedtaxiscreditedtotaxexpense,andthereservefordeferredtaxesortherestrictedsurpluswillbewrittenoffbyequivalentdebits.Inthismanner,thefederalincometaxexpenseforagivenperiodreflectsthefulltaxattributabletotheincome'orthatperiod."

"Asecondapproachtothetreatmentofaccelerateddepreciationiscalled'flow-through'.Thisapproachassumesthatthelargerdepreciationdeductionsfortaxpurposes,availableunderacceleratedmethodsduringtheearlyyearsofpropertylife,resultinapermanenttaxsavingratherthanadeferral.Wherestatecommissionsadoptflow-through,theyalsomayconcludethatCongressinenactingataxstatutedidnot.intendtoaffecttheregu-lationofintrastateutilityrates.Insuchcases,utilitiesadoptingaccelerateddepreciationfortaxpurposesarenotallowedtoprovideforeitherareservefordeferredtaxesorarestrictedsurplustomeetthedeferredincometaxeswhichmaybecomepayableinthelatexyearsoftheservicelifeofthepropertybeingdepreciatedbyanacceleratedmethod."Thus,underflow-through,thecostofserviceforrate-makingpurposesincludesanamountforincometaxeswhichreflectsthetaxde-ductionprovidedbyuseofanacceleratedmethod.Inshort,actualtaxesareincludedinthecost.ofservice.Sincetheincometaxexpensethuscalculatedforrate-makingpur-posesislessthantheamountcalculatedunderstraight-linedepreciationintheearlyyears,thebenefitofthecurrentreductionintaxesresultingfromtheuseofacceleratedmethodsisallowedtoflowthroughtotheconsumerintheformofalowercostofservice.Underthismethod,consumersreceivethebenefitsofaccelerateddepreciationthroughthereducedtaxexpenseforrate-makingpurposes,wherethedeductionsforaccelerateddepreciationaregiveneffect."~2SeeH.R.Rep.No.533,92dCong.,1stSess.35(1971);S.Rep.No.437,92ndCong.,1stSess.52(1971).at33and49,respectively.+4TheCompanyinitiallyclaimedtheseamountsforcostofremovalaspermittedbyprovisionsofthe1971TaxAct,but,afterstrenuousTrialStaffobjectionthattherewerenotimingdifferencesforsuchcostsrequiringnormalization,theissuewasnotpursued.~5H-R.Rep.No.1337,83dCong.,2dSess.24(1954)-

g6~7Id.at22.H.R.Rep.No.1337,suuranote5,at24;seealsoS.Rep.No.1662,83dCong.,2dSess.26(1954).Id.~9"Allutilitycompanieswouldprobablyuseaccelerateddepreciationiftheyweresureofbeingpermittedtonormalize.Whydocompanieshavesuchastrongfearofflowthrough?First,wehaveseenthatintheutilityindustrythebenefitsofaccelerateddepreciationaregenerallypassedontoratepayers.Thebenefitsarepassedonquicklyunderflowthrough,andunderalmostanyassumptionaboutfuturegrowthflowthroughrateswillhavetobeincreasedatsometimeinthefuture.Underconditionsofdeclininggrowthnormalizedcom-paniesmustalsoseekrateincreasestomaintaintheirallowedrateofreturn,butthemagnitudeoftheirnecessaryrateincreasesisnowherenearthatofflowthroughcompanies.Quiteobviously,ifautilityindustryshouldsufferthesametypeoftechnologicalobsolescencethatbefelltherailroadindustrywiththeadventofautomotivetransportation,thenthefinalresultofflowthroughwouldbethatcurrentratepayerswouldbenefit,butthatfuturestockholders(orcreditors)wouldsuffer."Thesecondreasonwhyutilitiesprefernormalizationrelatestouncertaintiesoverthepermanenceofliber-alizeddepreciation.Ifliberalizeddepreciation.shouldberepealed-andin1966Congresssuspendedarelatedinvestmentincentive,theinvestmenttaxcredit,aswellastheuseofaccelerateddepreciationonbuildings-thenmanyflowthroughutilitieswouldbeforcedtoseekimmediaterateincreases.Totheextentthatutilitycommissionsmightdelaygrantingsuchincreasesprofitswouldsuffer.Normalizedcompanies,ontheotherhand,wouldnotfinditnecessarytoincreaseratesbecauseofsuchchanges.(However,normalizedcompanieswouldhaveareducedcashflow,sotheywouldfinditnecessarytoraisemoreoutsidecapitalthanwouldotherwisebeneeded.)".Brigham,"TheEffectsofAlternativeTaxDepreciationPoliciesonPublicUtilityRateStructures,"XXNationalTaxJournal217-18(1967)(emphasisinorzgxnal).Seedisoussioninfraatnumberedparagraph2(thisfootnoteaddedtotext).~11"However,sincechoosing[straightlinedepreciation]requiresgivingupthetaxdeferralwithitssub-stantialbenefitstotheutilitycustomers,thereseemstobenologicaljustificationforautilitycommission's 8

permittingcompaniesunderitsjurisdictiontocontinueusingstraightlinedepreciationfortaxpurposes.Usingtaxescomputedonthebasisofstraightlinedepreciationasanallowablecostofserviceamountstodenyingratepayerstheimportantbenefitsofaccelerateddepreciation.Thecompanycouldincreaseitscashflowsandthusobtaininterest-free.capitalintheformofdeferredtaxes.Byrefusingtouseaccelerateddepreciation,thecompanyisrefusingtoacceptthiscapitalcontribution.Whilesuchapolicycanbejustifiedfromthecompany'spointofview,itishardtoseehowitcanberationalizedbyaconscientiousutilitycommission.Untilevidencetothecontraryispresented,onecanonlyconcludethatautilitycommissionthatpermitsstraightlinedepreciationisderelictinservingitscommunity'spublicinterest."Brigham,suoranote9,at218(emphasisinoriginal).H.R.Rep.No.413,91stCong.,1stSess.132(1969).SeealsoS.Rep.No.552,91stCong.,1stSess.172(1969);GeneralExplanationat150.S.Rep.No.552,91stCong.,1stSess.172(1969);GeneralExplanationat150.H.R.Rep.No.413,91stCong.,1stSess.132(1969)."Considerationoflegislativeactioninthisareais[further]complicatedbythefactthatmanyutilitiesdonothaveeffectivemonopolieswhileothersdo;manyutilitiesareingrowingindustrieswhileothersarelosingground;[and]manyutilitiescompete(totheextenttheyfaceanycompetition)onlywithotherregu-latedutilitieswhileotherscompetewithbusinessesnotsubjecttogovernmentalrateregulation."S.Rep.No.552,~suranote14,at172;GeneralExplanationat150-51.ThisCommissionhastraditionallyflowedthroughthebenefitsofthedeferralofliabilityforstateincometaxes.Ithereforedonotdissentfromthesametreat-mentofsuchtaxesinthiscasebecauseofthecom-petitivedisadvantagesjustdescribedwhichwouldbeimposedonPP&Zifnormalizationwashererequired.InotethatthefinalregulationspromulgatedinJune1974makeitclearthatthetaxdeferraltobenor-malizedisonlythedeferraloffederalincometaxliabilityresultingfromautility'suseofaccelerateddepreciation.InsofarasIRC$167(1)isconcerned,otherbook-taxtimingdifferenceswithrespecttostateincometaxes,FICAtaxes,constructioncosts,orother

taxesanditemsmaybeeitherflowedthroughornor-malized.SeeIRCRegs.51.167(a)-l(a)(1)and~CitofLosAnelesv.PublicUtilitiesCommission,7C.3d331,338<<342,497P.2d785,791-93(1972).Tosummarize,"Section167(l)generallyprohibitsutilitiesfromclaiming.taxdeductionsbasedupondepreciationmethodsotherthan'straight-line'nlesscertainconditionsaresatisfied.Thetaxlawpermitsautilitytoclaimaccelerateddepreciationforpropertyplacedinutilityservicepriorto1970onlyiftheutilityusedaccelerateddepreciationin1968;flow-throughaccountingispermittedbytheIRSonlyifthatmethodwasinuseinJuly,1969(IRC5167(l)(l)).Astosimilarpropertyplacedinserviceatalaterdate(post-1969replacementofproperty),theIRSpermitsaccelerateddepreciationeitherwithnormalizationaccountingorifflow-throughaccountingwasusedinJuly,1969(IRC5167(l)(2)).Takentogether,thetwoprovisionsallowutilitycommissionstorequireflow-throughaccountingforpre-1970andpost,-1969replace-mentpropertywithoutjeopardizingacceleratedde-preciationdeductionsifflowthroughwaspracticedinJuly,1969.However,whenthecurrenttaxlawwasenacted,italsoallowedutilitiesasamatterofrighttoclaimaccelerateddepreciationonso-calledpost'.-1969expansionproperty(newplantincreasingproductiveoroperationalcapacity)--butonlysolongasnormali-zationaccountingwouldbeused(IRC5167(1)(4)(A)).Theresultisthateventhoughutilitycommissionsretaindiscretiontoapproveratemakingaccounting-methods,approvalofflow-throughaccountingwillcausecertainutilities(thosehavingmadetheelectionunderparagraph(4)(A)andthosewhichdidnotuseflow-throughaccountingin1969)tolose.theirrightstoclaimaccelerateddepreciationtaxdeductionsforpost-1969expansionproperty.""RecentDecisionsonAcceleratedDepreciationandTaxNormalization",Pub.Util.Fort.,May8,1980,at49.H.R.Rep.No.533,92dCong.,1stSess.32(1971);-S.Rep.No.437,92dCong.,1stSess.47(1971).SeealsoS.(Conf.)Rep.No.553,92dCong.,1stSess.40(1971).Regs.gl.167(a)-11(b)(6)(i);Rev.Rul.74-66,1974-1C.B.58.TrialStaffBriefat45.+20IRC5167(1)(4)(A);Regs.51.167(1)-2.

21/"PP6LelectedtonormalizethetaxbenefitsoftheADRliberalizeddepreciation.Again,itsdecisionrestedonanumberofconsiderations.ItbelievedthatdeferraltreatmentwasinaccordwithCongressionalintent,whichhadrecentlybeenmadeclearbeyondanylegitimatequestion.PPSLrecognizedthattheADRprovisionsoftheCodemayverywellbeshort.-lived.Thereisnoquestionthatiftheyareeliminated,ataxdeferralsituation,andnotataxsavingsituation,hasbeencreated.EvenifADRisretainedintheCode,taxdeferralwillresultbecauseitsusecanmeanthatalltaxdepreciationonpropertycanbeuseduppriortoexpirationoftheactualservicelife.ThefactthatADRdeferralswouldprovideasourceoffundsduringaperiodwhenlargeamountsofcapitalhadtobeattractedalsowastakenintoaccount.PP&Lhadrecentlyhaditsratelevelssetand,therefore,couldelectnormalizationforADRwithoutanyimmediateburdenonitscustomersbecausetherateleveleffectofnormalizationwastheequivalentofnothavingelectedADR.IfADRisnotnormalizedanditissubsequentlyeliminated,itmightwellrequireimmediateraterelieforresultinasub-stantialerosionofPPSL'sreturnatthetime."PPEcLExhibit200.1007,~suraat4.~22H.R.Rep.No.1337,~suranote6,at24;6.Rep.No.1662,suoranote7,at26.+23D.Kiefer,AcceleratedDepreciationandtheInvestmentTaxCreditznthePubis.cUtile.tIndustr:ABackroundA~nalsrs100(TheNatronaiRegulatoryResearchInstatute,1979).+24SeeNote,"TheEffectonPublic-UtilityRateMakingofZiberalizedTaxDepreciationUnderSection167,"69Harv.Z.Rev.1096(1956);Note,"LiberalizedDepreciationandPublicUtilityRateRegulation,"13Stan.L.Rev.610(1961);Swiren,"AcceleratedDepreciationTaxBenefitsinUtilityRateMaking,"28U.Chi.Z.Rev.629(1961);Note,"LiberalizedDepreciation:AboutFacebytheFPC",50Va.L.Rev.298(1964).SeealsoHearingsBeforetheCommitteeonNaysandMeansoftheUnitedStatesHouseofRepresentativesontheSubjectofTaxReform,91stCong.,1stSess.3535-3969(1969),andHearingsBeforetheCommitteeonFinanceoftheUnitedStatesSenateonH.R.13270toReformtheIncomeTaxLaws,91stCong.,1stSess.4965-4982(1969).Forthemostrecentcongressionaltreatmentofthesubject,seeHearingonH.R.6806andH.R.3165BeforetheCommitteeonWaysandMeansoftheUnitedStatesHouseofRepresentativesontheSubjectofAccountingTreatmentoftheInvestmentTaxCreditandAccelerated

~sDepreciationforPublicUtilityRatemakingPurposes,96thCong.,2dSess.,ser.87(1980);H.R.Rep.No.1210,96thCong.,2dSess.(1980);andS.Rep.No.1038,96thCong.,2dSess.(1980).~25Brigham,suoranote9,at204.26/F.Garfield&N.Lovejoy,suoranote1,at111-112(emphasisadded).27/Kiefer,suoranote23,at101-102.Foranexcellentdiscussionofthisissue,andtaxnormalizationgen-erally,seePP&LStatement.XI(WitnessJohnF.Utley,CPA)~28GalvestonElectricCo.v.Galveston,258U.S.388(1922).~29P.P.&L.Exhibit200.1007at5-6.~30Berndt,SharpandWatkins,"UtilityBondRatesandTaxNormalization,"XXXIVTheJournalofFinance1211-20(December,1979).~31Morris,"TheEffectofTaxFlowThroughontheCostofPublicUtilityDebt,"Pub.Util.Fort.,November6,1980,at22.SeegenerallyE.Brougham&J.Pappas,LiberalizedDereciationandtheCostofCaital(1969).~32Standard&Poor'sFixedIncomeInvestor,November15,1980,at39.~33SeeGillmore,"ThreeIssuesinUtilityTaxAllowanceDeterminations,"Pub.Util.Fort.,September1,1977at15-17.~34ReFloridaGasTransmissionCo.,47FPC341,93PUR3d477(1972).

BEFORETHEPENNSYLVANIAPUBLICUTILITYCO?IYiISSIOiVPennsy1vamia.Peh1xcQci.kx<~yCommissionPennsylvaniaPyrexkXight,CcmpanyDocketNo.R-80031114JOINT-PETITIONTOAPPROVEANDMAKEPARTOFRECORDTHESTIPULATIONOFPARTIESONRATESTRUCTUREISSUESPennsylvaniaPowersLight,Company(PPGL),theTrialStaffofthePennsylvaniaPublicUtilityCommission(Staff),theOfficeofConsumerAdvocate(ConsumerAdvocate),theLehighValleyHPowerCommittee(PowerCommittee)andtheBethlehemSteelCor-poration(Bethlehem),theactiveparticipantsintheabove-captionedproceedingsandat.individualcomplaintdocketswhichhavebeenconsolidatedtherewith,hereby=respectfullypetitiontheHonorableMorrisMindlin,presidingAdministrativeLawJudge,toapprovetheStipulationofthepartiesattachedheretoandmadeaparthereofandinsupportthereofrepresentasfollows

l.OnApril29,1980PPGLfiledSupplementNo.73toTariffElectric-'Pa.P.U.C.=No.198tobecomeeffectiveJune28,1980.BaseduponatestyearendingDecember31,1980,saidtariffsupplementproposed,interalia,arateincreaseintheamountof$123,312,000.2.Subsequenttosaidfa.ling,theadministrativestaffofthePennsylvaniaPublicUtilityCommission(Commission)engagedinextensiverev'iewofthefilinganditssupportingdatawhichincluded,interalia,responsestotheCommission'sfilingregulationsandinitialdirecttestimony.Inaddition,PPGL,StaffandConsumerAdvocate,participatedinthedis-coveryprocessbywayoftelephonediscussions,conferencesandbothinformalandformaldatarequestsandresponsesthereto..3..ByOrderdatedJune26,1980,theCommissiondidnotallowSupplementNo.73tobecomeeffective,institutedaninvestigationandthesaidSupplementNo.73wassuspendedbyoperationof,lawforsevenmonthsuntilJanuary28,1981.

~s 4.Apre-hearingconferencewasheldbeforetheHonorableMorrisMindlin,presidingAdministrativeLawJudge,on.July15,1980.5.Extensivediscoveryhasbeenengagedinbyallpartieswithrespecttoratestructureissues.PPGLhasprovidedresponsestodatarequestsandformalinterrogatoriesrelatingtoratestructureissuesallofwhichhavebeenincorporatedintotherecordasexhibitsofPPGL."Eighte'e'n(18)daysofhearingshave.beinheld.Cross-examinationhastakenplaceonPP&Z'sinitialdirecttestimony,filingdataanddataresponseexhibitevidencerelatingtoratestructureissues.Thedirecttestimonyandrelatedexhibitevidenceofallotherpartiesonratestructureissueshavebeenfiledandacceptedintotherecord.IncludedaspartoftheratestructureissueevidencereferredtohereinisdirecttestimonyandexhibitevidenceofPPGL,StaffandPowerCommitteedealingwiththe3 S

ratemakingstandardsandlifelinerateprovisionsofthePublicUtilityRegulatoryPoliciesActof1978(PURPA).7.Attheinitialpre-hearingconference,Adminis-trativeLawJudgeMindlinconductedageneraldis-cussioninwhichthepossibilitiesofsettlementwereexploredinaccordancewiththeCommission'srulesofpractice.Thepartiesundertooktogiveseriousconsiderationtosuchpossibilityand,whileatalltimesthepartieshavecontinuedtomoveaheadvigorouslywiththecase,considerablesettlementdiscussionandnegotiationhasbeenconductedamongtheparties.Thepartieshaveexploredboththepossibilityofreachinganamicableoverallsettlementor,inthealternative,limitinganddisposingofindividualissuesbystipulation.8.Althoughunabletoagreeonanoverallsettle-mentoftheproceeding-,-thepartieshavereachedagreementontheissuesrelatingtoratestructure.Althoughtheywouldnotbeabletoagreeuponthedetailsofeachandeveryunderlyingfactleadingtotheirrespectiveconclusions,thepartiescanagreeupon P~,

aproposedsettlementofallratestructureissuesandareinfullagreementthat.itwouldbeinthepublicinterestandthatof'PSL'scustomersgenerallytoresolvesuchissuesintheinstantproceedings.TheattachedStipulationrepresentstheagreementandproposedsettlementofsuchissuesbytheparties.9.AlltheactivelyparticipatingpartiestothisproceedinghavejoinedintheattachedStipulationofPartiesonRateStructureIssues.10.Itisafundamentalprincipleofalllegalprocessincludingadministrativeproceedings,toencouragelitigantstoarriveatthesettlementofissuesandthelimitationofissuesbyagreement.Thebenefitstothepublicinthesavingoftimeandhumanandmaterialresourcesistooobvioustorequireelabora-tion.ll.TheCommission'sregulationswhichgovernthismatterare.clea.rand.-theyaresetcuthereinasfollows52Pa.Code53.141.Subectsforrehearinconferences.(a)Inordertomakepossibleamoreeffectiveuseofhearingtimeinformalproceedings,andtootherwiseexpeditetheorder3yconductanddispositionofsuchproceedingsandtoservetheendsofjusticeandthepublicinterest,itisthepolicyoftheCommissiontoarrangeforconferencesbetweenpartiestosuchproceedingstoconsiderthefollowingmatters:

(1)Thepossibilitiesforsettlementofthe'roceeding,subjecttotheapprovaloftheCommission.(4)Suchothermattersasmayaidinexped-itingtheorderlyconductanddispositionoftheproceedingandthefurtheranceofjustice,includingmattersspecifiedin1Pa.Code535.112(relatingtoconferencestoexpeditehearings).(b)Theprovisionsofsubsection(a)ofthissectionsupplementtheprovisionsof1Pa.Code535.112(relatingtoconferences'oexpeditehearings).1Pa.Code535.112.Conferencestoexeditehearings.Atanyprehearingorotherconferenceswhichmaybeheldtoexpeditetheorderlyconductanddispositionofanyhearing,theremaybeconsidered,inadditiontoanyoffersofsettlementorproposalsofadjustment,thepossibilityofthefollowing:(1)Thesimplificationoftheissues.(3)Theobtainingofadmissionasto,orstipulationsof,factsnotremainingindispute,ortheauthenticityofdocumentswhichmightproperlyshortenthehearing.(4)Thelimitationofthenumberofwitnesses(6)Suchothermattersasmayproperlybedealtwithtoaidinexpeditingtheorderlyconductanddispositionoftheproceeding.

b~Ib 12.Pursuanttotheaboveprinciples,thecleardirectionoftheCommission's'regulationsandthesuggestionsandencouragementofthepresidingAdministrativeLawJudge,thepartieshavedili-gentlyandaggressivelypursuedthepossibilityofsettlementandthelimitationofissues.Severalconferenceshavebeenheldamongthepartiesatwhichthefilingandsupportingmaterialanddatarequestresponses,theresultsofbothformalandinformaldiscoveryandtheevidenceofrecordwerequestioned,discussedandanalyzed.Uponthebasisofsuchstudyandanalysisoftherecord,thepartieshavereachedtheagreementwithregardtoratestructureissueswhichisreflectedintheattachedStipulation.Thedirect,testimony,cross-examinationandexhibitevidenceofrecordatthetimeoftheexecutionoftheStipulation,andwhichthepartiessubmitfullysupportsthesame,islistedonExhibitA,attachedhereto,andsuchrecordevidenceisincorporatedasaparthereofbyreference.

l1rAJ~AC 13.Thepartiessubmitthattheireffortsandtheresultsthereofhavebeeninthepublicinterest.Allpartiesbelievethattheprincipleoflimitationofissuesbyagreementisfullyapplicabletoadmini=strativeproceedingsand,particularlyappropriatetoutilityrateproceedings.Theunnecessaryexpendi-tureoftimeandcostsofhearing,briefingandargumentwithrespecttoratestructureissueswillbeavoided.Theadministrativeprocessofthisrate1proceedingwillbeexpedited.Bothhumanandmaterialresourceswillbe.conserved.14.ThepartiessubmitthattheallocationofratesandthedispositionoftheotherratestructureissuesinaccordancewiththeattachedStipulationasfair,reasonableandjust,andconsistentwiththeprovisionsofboththePennsylvaniaPublicUtilityCodeandthePublicUtilityRegulatoryPoliciesActof1978.15.Thepartiessubmitthatthepublicinterest,thelawandtheCommission'sownregulationsmakeitappropriateandadvisableforthepresidingAdmini-strativeLawJudgetoapprovethestipulationofthepartiesandincorporateitaspartoftherecordintheseproceedings,and,inhis.decision,recommend

~I3V ittotheCommissionforapprovalforthepurposes.ofthisproceedingandwithregardtotheratesof.PPGL,asthoughtheCommissionhadmadespecific-findingsafterhearingontheratestructureissues.WHEREFORE,onthebasisofalloftheforegoing,theaforesaidpartiesrespectfullyrequestYourHonorapprovetheStipulationofPartiesonRateStructureIssues,incorporateit,intherecordand,inYourdecision,recommendittotheCommis-'ionforapprovalforthepurposesofthisproceedingandwithregardtotheratesofPP&LasthoughtheCommissionhadmadespecificfindingsafterhearingsontheratestructureissues.Respectfullysubmitted, 3)IhiJl ExhibitAPage1ofFILINGl1ATERIALulationsI-B-6Forecast~Sub'ect~PaeaTotal24III-A-47III-D-,2III-D-3III-D-8III-D-10III-D-14III-D-15III-D-16III-D-19IV-C-1IV-C-2IV-C-3IV-C-4IV-C-5IV-C-6IV-C-11IV-C-14IV-C-16IV-C-17IV-C-18IV-C-19IV-C-20IV-C-21i'ifholesaleCustomerRateofReturnResaleRevenuesResidentialgCommercialHeatingSalesAnnualizationAdjustmentsOperatingRevenuesSummary(Historic5FutureD-3)UncollectibleRecoveriesDeterminationofNetBillingGrossBillingPenaltiestoCustomersBillsGrowthPatternsofUsagegCustomersNumbersRateSchedulesWithoutFuelChargeBillingComparison(AppendixB)BillingAnalysisCost5Revenuevs.UsageCost5Revenuevs.LoadFactorReactivePowerChargeRevenuesPeakDayStatistics20LargestCustomersSystemLoadCurveResidentialLoadCurvesLoadDurationCurvesLoadOccurrenceCurvesBillingHistoryLoadCurvesSourceofData123152ll69.21153213271ll181636691312~59(ExhibitsAJB1AJB2AJB3Historic1Future1TariffChangesCostofServiceDigestofProposedChangesA-1StatementofReasonsD-3OperatingRevenueAdjustmentA-1StatementofReasonsD-3OperatingRevenueAdjustment5016740~80 TILCV",ACl"rI ExhibitAPage2of-2-TestimonStatementVStatementVaPURPAIssues~Sub'ct~PaeaTotal21.19InterroatoriesPUCStaffInformalMay5May5May5-May5May5-¹1¹2¹3¹4¹SKNHSalesAverageNumberofCustomersKNHSalesIncrementalPricesIncrementalPrices183141May7-¹3May7-¹4May7-¹5AverageNumberofCustomersPeakLoadEstimate(1980)EnergySalesEstimate(1980)PUCStaffFormalJul21(Set.II)200.10017200.10018200.10019200.10020200.10021200.10022200.10023200.10024200.10025200.10026200.10027Street5AreaLightingExpenseUGIProjectedSalesMonthlyDemandCalculationsMeterInvestmentEnergyCostAdj.toCostofServicePowerFactorsCapacitorInvestmentCapacitorAccountingLPRatesResidential.RateFutureTestYearRevenues11221122157610134ConsumerAdvocate-Ma30SetI)200.20006200.20052200.20060200.20062EnergyClauseMeterReadingChangesinBillingPracticesNeatherAdjustmentsConsumerAdvocate-Jul22(SetIII)(200.20144200.20145200.20146200.20148200.20152ForecastForecastIncrementalRevenuesFERCRevenues5ExpensesFERCRevenues5Expenses1014 RJt

~~~.IInterroatories-3-~Sub'ctExhibitAPage3of4~PaesTotalBethlehemSteelCororation-Jul25200.30001200.30002200.30003200.30004BethlehemSteelHourlyDemandBillFrequencyAnalysisHeating5CoolingDegreeDaysEnergyClausegPreferredFuelExpenseRevenue36743375LehihVallePowerCommittee200.40010200.40011200.40012200.40013200.40014200.40015200.40017200.40018FuelAdjustmentSheetsDemandAllocationFactorsNorkpapersofDemand,Energy5Cust.CostsDemand,Energy5CustomerCharges(Res.5LP-6)FuelCostPerKNHCustomerLoadsNorkpapersofCostCurvesKNHSales702261313162DataResonsesPUCTrialStaff250.1005001250.1005002250.1005003Beth.Steel5ConRailFourtoOneHr.MeasurementKNHResidentialUsageElectricUsevs.IncomeSurveysConsumerAdvocate250.2005001250.2005002Long-RangeOutlookRevenuesRequiredfor10.29'oReturnfromFERC228TranscritAugust13August19gAugust27September10361-477Cross-examinationofA,J,Baldwin487-614Cross-examinationofA,.J,Baldwin456-996Cross-examinationofA,J.Baldwin1294-1368Cross-examinationofJ,A,Rothschild1274074337 I.f(,,'\(ffL,~4IIC470

~~ExhibitAPage4of4-4-DirectTestimony5ExhibitsofPartiesPUCTrialStaff~Subect~PaeaTotallYalterJepakNJ-1RateStructureNJ-2PURPAStandards201535BethlehemSteelCororationJamesLimThomasLawLehihVallePower~~MauriceBrubakerExhibitMEB1ExhibitMEB2AlanChalfontExhibitRateStructureExhibitBSC-1PURPAIssuesExhibitBSC-2ExhibitBSC-3CommitteeCostofServiceCostofServiceResultsDesignofRatesPURPASectionIII(>d)StandardsPURPAIssues181,1311~336162544233~17 l-p 4~BEFORETHEPENNSYLVANIAPUBLICUTILITYCOMMISSIONIPennsylvaniaPublicUtilityCommissionv'.DocketNo.R-80031114PennsylvaniaPower6LightCompanySTIPULATIONOF=PA'RIES~'NRATESTRUCTURE'ISSUESPennsylvaniaPower6LightCompany(PPGL),theTrialStaffofthePennsy'lvaniaPublicUtilityCommission(Staff),theOfficeofConsumerAdvocate(ConsumerAdvocate),theLehigh<<lleyPowerCommittee(PowerCommittee)andtheBethlehemSteelCor-.poration(Bethlehem),theact'ive.participantsin'theabove-captionedproceedingandatindividual-complaintdocketswhichPhavebeenconsolidatedtherewith,'herebyagree.andstipulatefortherecordasfollows:.l.OnApril29,1980PPGLfiled'SupplementNo.73toTariffElectric-Pa.P.U.C.No,,198tobecome'ffectiveJune28,1980.Basedupon'.a,testyear

\StI4II endingDecember31,1980,saidtariffsupplementproposed,interalia,arateincreaseintheamountof$123,312,000.2.Subsequenttosaidfi.ling,theadministrativestaffofthePennsylvaniaPublicUtilityCommission(Commission)engagedinextensivereviewofthefilinganditssupportingdatawhichincluded,interalia,responsestotheCommission'sfilingregulationsandinitialdirecttestimony.Znaddition,PPGL,StaffandConsumerAdvocate,participatedinthedis-coveryprocessbywayoftelephonediscussions,conferencesandbothinformalandformaldatarequestsandresponsesthereto.3.ByOrderdatedJune26,1980,theCommissiondidnotallowSupplementNo.73tobecomeeffective,institutedaninvestigationandthesaidSupplementNo.73wassuspendedbyoperationoflawforse'venmonthsuntilJanuary28,.1981.4.Apre-hearingconferencewasheldbeforetheHonorableNorrisNindlin,presidingAdministrativeLawJudge,onJuly15,1980.2

~~a'I'IlI(I~+4' 5.Extensivediscoveryhas"beenengagedinbyallpartieswithrespecttoratestructureissues.PP&LhasprovidedresponsestodatarequestsandformalinterrogatoriesrelatingtoratestructureissuesallofwhichhavebeenincorporatedintotherecordasexhibitsofPPGL.6.Eighteen(18)daysof'earingshavebeenheld.Cross-examinationhastakenplaceon*PPGL'sinitialdirecttestimony,filingdataanddataresponseexhibitevidencerelatingtoratestructureissues.Thedirecttestimonyandrelatedexhibitevidenceofallotherpartiesonratestructureissueshavebeenfiledandacceptedintotherecord.7.IncludedaspartoftheratestructureissueevidencereferredtohereinisdirecttestimonyI'ndexhibitevidenceofPPSL,StaffandPowerCommitteedealingwithther'atemakingstandardsandlifelinerateprovisionsofthePublicUtilityRegulatoryPoliciesActofl978(PURPA).8.At,theinitialpre-hearingconference,Adminis-trativeLawJudgeMindlinconductedageneraldis-cussioninwhichthepossibilitiesofsettlementwereexploredinaccordancewiththeCommission'srulesofpractice.Thepartiesundertooktogiveserious

~t considerationtosuchpossibilityand,whileatalltimesthepartieshavecontinuedtomoveaheadvigorouslywiththecase,considerablesettlementdiscussionandnegotiationhasbeenconductedamongtheparties.Thepartieshaveexploredboththepossibilityofreachinganamicableoverallsettlementor,inthealternative,limitinganddisposingofindividualissuesbystipulation.9.Althoughunabletoagreeonanoverallsettle-mentoftheproceeding,asaresultofdiligentlypursuingtheforegoingdiscussions;thepartieshavereachedagreementontheissuesrelatingtoratestructure.Althoughtheywouldnotbeabletoagreeuponthedetailsofeachandeveryunderlyingfactleadingtotheirrespectiveconclusions,thepartiescanagreeuponaproposedsettlementofallratestructureissuesandareinfullagreementthatitwouldbeinthepublicinterest,andtheinterestsofPP&L's..customersgenerally.toresolvesuchissuesintheinstantpro-ceeding.,ThisStipulationrepresentstheagreementandproposedsettlementofsuchissuesbythepartieswhichareasfollows:(a)PowerFactor.PP&Lwillundertaketomakeaninvestigationandanalysisofreactivepowersupply

'

onitssystemonacomprehensivebasis,includingtherequirementforandlocationoffacilities,thepurposesservedbysuchfacilities,thecostsofsuchfacilities,theeconomicfeasibilityofmeteringindividualreactiveloadsandare-evaluationofthemethodologyitpresentlyemploystoreflectsuchcostsinitscost,ofserviceallo-cationstudies.TheresultsofsuchstudywillbepresentedinthenextmajorratefilingbyPPGLtogetherwithastatementofpositionastotheconsiderationithasgivensuchstudyinsaidfiling.(b)ConsolidationofRateSchedules.PPGL.willIundertaketomakeaninvestigationand-analysisofthefeasibilityandreasonablenessofconsoli-dationintooneratescheduleofthe,s'eryicesnowprovidedunderRateSchedulesLP-5,LP-6,L-landL-3.Theforegoingrateschedulesareapplicabletoserviceatavoltagelevelof66kvoraboveandpresentlyincorporatespecificqualifyingprovisionsapplicabletothecustomersservedundersuchschedules.TheresultsofsuchinVestigationwillbepresentedinthenextmajorratefilingofPP&Ltogetherwithastatementofpositionastotheconsiderationithasgivensuchinvestigationinsaidfiling.

I (c)DemandMeterin-"S1idinWindow".PPGLwillundertaketostudytheeffectofemployingasystemformeasuringdemandsforlargepowercustomersonthebasisoftheirhighestfifteen(15)minuteaveragedemandusingasystemwhichbeginssuchfifteen(15)minutemeasuringperiodsatfive(5)minuteintervals.Theresultsofsuchstudy-willbepresentedinthenextmajorratefilingofPPELtogetherwithastatementofpositionastotheconsiderationithasgivensuchinvestigationinsaidfiling.(d)AllocationofIncrease.PPGLwill,insofaraspracticable,alloca'teanyincreaseinrevenuerequirements,whichresultfromproceedingsattheabove-captioneddocket,totheseveralrateschedulesinthemannerandproportionsetforthonAttachment.A,hereto.AttachmentAreflectstheagreeduponallocationofrevenuesonthebasisofPPGL'stotalclaimedrevenuerequirements.Itisagreedthatiftheseproceedingsauthorizesomeothertotalrevenuerequirement,-thenPPGLwill,insofaraspracticable,allocatetheallowedincreaseinrevenuesinthesameproportionsasindicatedonAttachmentA.Forexample,AttachmentAindicatesthatattheestimatedrevenuelevelof

$118,727,690,applicabletoPennsylvaniaretailcustomers,thisStipulationprovidesthatthelevelofrevenuesallocabletoexistingresidentialcustomersservedundertheRSrateschedulewouldbe$39,786,802(line1,AttachmentA),or33.5%;accordingly,ifadifferentrevenuelevelisultimatelyallowedinthiscase,suchresidentialcustomers'llocationthereofwouldbe33.5%.Bywayofillustration,ifatotalrevenuelevelofgll0,000,000wasallowed,suchresidentialcustomers'llocationthereofwouldbe33.5%,or$36,850,000.XtisPPGL'spositionthatalegitimateobjectiveintheallocationofanyincreaseinrevenuerequire-mentsistomovetowardgeneralequalizationofreturncontributionsbytheseveralrateorcustomerclassesofservice.Thereareotherpartieswhodonotagreewiththatobjective.However,allpartiesagreethatbaseduponPPGL'scostofserviceallocationstudytheallocationproposedinthisStipulationrepresentsamoderatemoveinthatdirectioninthattherateofreturnoftheclassestendtomovetowardratherthanawayfromaveragerateofreturn.However,byjoininginthisStipulation,TrialStaffdoesnot.agreethatPPsL'scostofserviceallocationstudyreflectsthecostofservicetocustomerclasses ac'curately.AttachmentB,usingPP&L'scostofserviceallocationstudy,setsouttherateofreturnforeachrateclassonanindexbasis,asapercentofsystemreturnunderpresentrates,asproposedbyPP&LinthefilingandasproducedbythisStipulation.(f)ResidentialRateSchedule.PP&LwilldesigntheRSrateschedule,applicablegenerallytoresidentialcustomerstoconsistofacustomerchargeandKwhchargesincorporatingtheuseofthreeblocksorsteps.AttachmentCsetsforthboththerateexpressionsand,ingraphicform,thepercentagechangesinchargesatvariouslevelsofusagecomparingPP&L'sinitiallyproposedRSratescheduleandanexampleoftheRSrate.design.proposedinthisStipulation.(g)LarePowerRates.PP&LwilldesigntheLP-4,LP-5,LP-6,L-1andL-3rateschedules,applicabletolargepowerservice,soastomovetheformofsuchratesclosertoadesignwhichreflectsacustomercharge,ademandchargeandaflatenergyorKwhcharge,moreconsistentwiththeproportioninwhichthecostsofsuchelementsareincurredasindicatedbyPP&L'scostofser-viceallocationstudy.

(h)TimeofDaRates.PPGLhasreviewedtheresidentialtimeofday.rateschedulesproposedinthisproceedingwiththeobjectiveofincor-Aporatingthereinprovisionstoprotectcustomerswhomakeaninvestmenttoqualifyforsuchser-vicefromunreasonablelossintheeventofunforeseendevelopmentsadverselyaffectingthecostsofthe'energyrelationshipsuponwhich'uchratescheduleshavebeenpremised.Inordertotakeadvantageoftheproposed.RTSrateschedule,acustomerwillhavetomakeaninvestmentinthermalstorageequipment.Currentestimatesindicatethatthiswouldresultinestimatedsavingsinchargesfor-electricserviceof$20.00amonth,underaverageconditions.Therefore,iftheproposed'ratescheduleisapprovedbytheCommis-sion,PPGLwillincorporatethefollowingexpresstarifflanguageintherateschedule:RATESCHEDULERTSRESIDENTIALSERVICE-THERMALSTORAGECONTRACTPERIODNotlessthanoneyear.AsaguaranteeagainstthewithdrawalofthisratefromtheTariffwithin10yearsofthedateofitsapplicationtoaspecificlocation,theCompanywillcompensatethecontemporaryratepayerattherateof$20.00permonthfortheremainderofthe10yearperiod.

(i)PURPAStandards.ThepartiesagreethatonthebasisoftheevidentiaryrecordintheseproceedingsitwouldbeappropriateforpresidingAdministrativeLawJudgeNindlintoapproveandmakethefollowingspecificrecommendations,totheCommissioninconnectionwiththePURPAstandards:(1)TheCostofServiceStandard(PURPA5111(d)(1))isappropriateforimplementation~byPPGL.TheratestructureandratedesignsincorporatedinthisStipulationofpartiesgiveappropriateconsiderationtothecostofprovidingservicetoeachcustomerclass.Judicialandadministrativenoticeshouldbe"taken,.ofthefacttheFederalEnergyRegulatoryCommission(FERC)inimplementingSection133IofPURPA,relating.toGatheringXnformationOnCostsOfService,requiresPPGL,andotherHelectricpublicutilities,tofilecertainreportspursuanttoitsrulingsatDocketNo.RM79-6.PPGLagreesthatinitsnextmajorratefilingitwillprovidethereportwhichitmakestoFERCatsuchdocketwhichcontainsthedatarelatedtoSection115(a)ofPURPA.10

(2)TheDeclininBlockRateStandard.(PURPASill(d)(2))isappropriateforimplementationbyPPGL.BasedupontheevidenceofrecordandthisStipulation,theratestructureswhichwillbereflectedintherateschedulesintheseproceedingssatisfythisstandard.(3)'heTimeofDaStandard(PURPAgill(d)(3))isappropriateforimplementationbyPPGL.PPGLhasproposedtheRXrateschedule,anexperimentaltimeofdayrate;theRTSrateschedule,atimeofdayrateapplicabletothermalstorage;andtheRNOratescheduleforcontrolledwaterheating.PPGL'sgeneralserviceandlargepowerratesincludeoff-peak-pricingprovisions.Thetimeofdaystandard3.ssat3.sfied.(4)TheSeasonalRateStandard(PURPAgill(d)(4))isnotappropriateforimplementationbyPPGL.TherecordevidenceisconsistentwiththerecordevidenceintheCommission'sstate-widerule-makingproceedingat76PRMD-7anddoesnotindicateanysignificantvariationinPPGL'sseasonal coststoservecustomerswhichshouldberecognized'nratesforservice.Oneoftheprincipleobjectivesofthisstandardis-toattainfullerutilizationofelectricfacilities.PPGLhasachievedhighutilizationofitsproductionfacilities,tothebenefitofitscustomers',throughitssalesofinterchangehinthePJMpowerpool.(5)TheInterruatibleRateStandard(PURPAgill(d)(5))isappropriateforimplementationbyPPSLatthistime.TherecordevidencedisclosesthatPPGL'scostcharacteristicsandgeneratingcapacitycircumstancesmakeinterruptibleserviceofdoubtfulpracticalvalueasamethodforloadmanagement.However,PPGLhasproposedanewruletoits\Tariff(Rule4L)whichoffersinterruptibleserviceonacontract.basistocustomerswithmonthlydemandsinexcessof2000Kw.PPGLagreestomonitoritsexperiencepursuanttothisruleandinthenextmajorratefilingwillreportthereonandpresentastatementofpositionwithrespectthereto.Forthepurposesofthisproceedingthisstandardissatisfied.l2

(6)TheLoadManaementTechniuesStandard(PURPAgill(d)(6))isappropriateforimple-mentationbyPPGL;Therecordevidenceestab-lishesthat.PPsLhasforanumberofyearsbeenembarkeduponabroadrangeofprogramswhichprovidebothitselfanditscustomersthebenefitsofload'managementtechniquesdesignedtoreducedemandandbecosteffectiveovertime.Thisstandardissatisfied.(7)TheMasterMeteringStandard(PURPAgill(b)(1))isappropriateforimplementationbyPPGL.OnApril1,197'8,PPGLfiledSupple-mentNo.52toTariffElectric-Pa.P.U.C.No.198entirelyeliminatingmastermeteringserviceapplicationsafteracertaindate.TheCommission,initsOrderofMarch7,1980atDocketNo.R-78040578hasapprovedPPsL'sproposalalthoughanappealfrom'thatOrderispendingbeforetheCommonwealthCourtofPennsylvania.Thisstandardissatisfied.13 k(8)TheAutomaticAd'ustmentClauseStandard(PURPAgll3(b)(2))isnotappropriateforimplementationbyPPGL.TheratemakingstandardsapplicabletotheenergyadjustmentclauseinPPGL'sTariffaresetforthspecif-icallyandcomprehensivelybystatuteandCommissionorders,andregulations.Theserequirementsincludeanannualhearingandreviewproceedingastotheoperationof,fuelandenergyclausesaswellasforperiodicauditbytheCommission(66Pa.C.S.:51307);thefilingofspecifictariffprovisionsrelatingtooperation,reviewandrefundproceduresandmonthlyreportingrequirementsdetailingsources,vendorsandpricesforfuelforeachgeneratinglocationpursuanttoordersofthe'Commission(InvestigationDocketNo.214);andtheregulationsoftheCommissioncoveringFuelProcurementPoliciesandPro-cedures(52Pa.Code5569.1through69.7).Theserequirementsare,inmanyrespects,considerablymoreextensivethanthePURPAstandards.14 (9)TheInformationtoConsumersStandardPURPA5113(b)(3))isappropriateforimple-mentationbyPPGL.TherecordandtheCommission'sregulations(52Pa.Codef553.51,534lg5342'3~43'345'351'352'3.53,56.15,56.31,56.201)governingPPGL'sactivitiesinthisregardestablishthatPPGL'scustomercommunicationsprogramsmeetthisstandard.(10)TheProceduresForTerminationofElectricService(PURPA5113(b)(4))isappropriateforimplementationbyPPGL.Therecordshowsthatasaresultofpro-ceedingsat76PRMD-10theCommissionhasinplacecomprehensiveregulationsandpro-ceduresrelatingtoserviceterminationswhichprovideforadequatenotice,opportunityformediation,informalandformalcomplaintsandbillsettlementproceduresunderthedirectsurveillanceoftheCommission'sBureauofConsumerAffairs(52Pa.Code5556.81through56.99and56.211).PPGL'spracticesaregovernedbytheseCommissionregulationsandprocedures.Thisstandardissatisfied.15 (11)TheAdvertisingStandard(PURPAgll3(b)(5))isappropriateforimplementationbyPPGL.TherecordshowsthatPPGL'sadvertisingtakestheformofnoticeandadviceto'ustomersonconservation,billingprocedures,safety,serviceareaeconomicdevelopmentandsimilarsubjects.Thisstandardissatisfied.(12)TheLifelineRateStandard(PURPA5114)isnotappropriateforimplementationbyPP&L.TherecordshowsthatPPSL'sexaminationoftherelationshipbetweenelectricuseandincomedoesnotindicatethatthereisasufficientcorrelationtoformavalidpremisefortheratemakingprocess.PPGL'sevidenceconcludesthatalifelinerateascontemplatedbyPURPAwouldcreateinequities,causecomplaintsanddisruptiveeffects,benefitsomecustomersnotinneedofaidinproviding"essentialneeds"forelectricserviceandincreasetheburdenonsomecustomerswhichmaybeinneed.PPGL'sevidenceofrecordsuggestsseveralotherpossibleprogramswhichit,16 believeswouldmoredirectlyaddresstheneedsofcustomersoflimitedmeansinpayingforessentialelectricservice.10-ThepartiesagreethatthisStipulationisconsistentwiththestatedpurposesofPURPAwhicharetoencourage"(1)conservationofene'rgysuppliedbybyelectricutilities;"(2)theoptimizationoftheefficiencyofuseoffacilitiesandresourcesbyelectricutilities;and"(3)equitableratestoelectriccon-sumers."ll.Thepartiesrecognizethatthesettlementofratestructureissuesonafair,reasonableandjustbasisasproposedbythisStipulationisinthepublicinterestinthatitwillservetopromotetheexpeditiousprocessingoftheseproceedingsandwillavoidtheexpenditureofthetimeandcostsrequiredforhearing,briefingandargumentandtheunnecessaryexpenditureofresources,bothhumanandmaterial.12.ThisStipulation,resultingasithasfromextensivediscovery,referencetotheevidenceofrecordandseriousnegotiation,isproposedbythe17 partiestosettleallratestructureissuesandwithoutanyadmissionorprejudicetoanypositionswhichanypartymightadoptduringsubsequentpro-@ceedings,atthisoranyotherdocket,ifthisStipu-lationisrejectedbythepresidingAdministrativeLawJudgeortheCommission.'tisspecificallynotedthattheratestructuretestimonyoftheStaff,BethlehemSteelandthePowerCommitteehasbeenacceptedintothisrecordwithout.cross-examinationandwithoutprejudice.totherightsofallotherpartiestocross-examinationintheeventthisStipulationisrejected.13.Intheopinionoftheparties,theseStipulationsarejust,reasonableandlawfulandarefullysupportedbythetestimonyandexhibitevidenceofrecord.14.ThepartiesherebyagreetorequestthatthepresidingAdministrativeLawJudgeNorrisMindlinapprovethisStipulation,incorporateitintherecordand,inhisdecision,recommendittotheCommissionforapprovalforthepurposesofthisproceedingandwithregardtotheratesofPPSLasthoughtheCommis-sionhadmadespecificfindingsafterhearingsontheseratestructureissues.18 THISSTIPULATIONisconditioneduponandsubjecttotheacceptanceandapprovaloftheAdministrativeLawJudgeandthePennsylvaniaPublicUtilityCommission.Further,recognizingthatthisStipulationresultsfromextensivediscoveryanddis-cussionandreflectscompromisesbybothsides,ifitisnotacceptedbyAdministrativeLawJudgeandtheCommission,without,modification,thennoinferenceadversetoanypartyshallbedrawntherefrom.Finally,itisexpresslyunderstoodbythepartiesthat.thisStipulationisconditionalandshallhavenoforceoreffectunlessadoptedbytheCommission.SignedandSealedByThePartiesAforesaidthisdayofC,~,1980.9-AttachmentAPENNSYLVANIAPOWER6LIGHTCONPANYAllocationofProposedIncreaseBasedonSalesof1980LineNo.RateScheduleAs'iledAmountAs.AgreedforStiulationPurosesAmount12345678910ll1213141516171819202122232425262728293031GS-1GS-3=LP-4LP-5LP-6BLFCSAS."fSHSL-3(R)L-1(R)TS(R)SI-1(R)SI-2(.R)SI-4(R)SI-6(R)SI-5(R)GS-5(R)GS-6(R)GH-4(R)RH(R)GH-1(R)GH-2(R)GH-3(R)Total*RSwithoutWaterHeatingProvisionRSwithWaterHeatingProvision$41,095,17816.808,417,35918,1SS,24812,131,7244,403,92110,704,53027,8104,811491,1721,231,37638,9672,097,778429,1385,13320,147155,93364,0074,5111,58159,1051,090,7063~437I99610,670,8041,523,261775,5991,692,40314.4114.0615.3814.9315.6516.5221.3816.1416.0010.5716.8915.7316.6720.3527.0929.9129.8944.8520.2020.5318.7319.8818.4418.2818.87$118,730,19816.1428p560I8331589$12534,34619.3439,786,80216.27.8,983,96819,859,72412,131,7244,403,9219,856,37625,8914,811468,0441,'183,66038,9671,789,756393,1264,73620,147155,93364,007.4,5111,58159,1051,090,7063,671,11110,434,6301,652,127848,5761,793,75015.3815.3815.3814.9314.4115.3821.3815.3815.3810.5714.4114.4115.3820.3527.0929.9129.8944.8'520.2020.5320.0019.4420.0020.0020.00$118,727,69016.1427,651,6171S.3812,135,18518.72

Pttac4nentPennslvaniaPower&LihtComanCostofServiceAllocationRatesofReturnatPresentandProosedRevenueLevelsPresentRevenueLevelsProosedRevenueLevelsPerStiulationPerFilinRateClassRSGS-1GS-3LP-4LP-5LP-611.0611811.871279.9510810.6910.07114108%of~Setem8.33897.277811.1110.1913.6014,6612.8313.7813.37%of~Setem918411212010511311011.0310.1313.7714.9012,83,13.7813.08%of~Setem9183113122105113107CommercialSpaceHeating7.34789.9782.10.1583Street&AreaLightingTotalSystem9.439.3510110012'68912.1810011.9712.1898100 ePENNSYLVANIAPOWE~DLIGHTCOMPANYPercentageincreaseinmonthlybillbetwesentrate(RSO)forresidentialserviceoutthewaterheatingprovisionwiththeoriginndwiththestipulatedresidentialratedesign120100O80~~RS-COMPANYORIGINALPROPOSAL------$4.00/MO4.4g/KWHfirst480KWH3.3g/KWHexcessKWHLUÃCj:iQJECL360%0OGlRS-EXAMPLEFORSTIPULATION$3.40/MO5.1g/KWHfirst200KWH3.7g/KWHNext820KWH3.2g/IGvVHexcessKWH50010001hoa200025003000HONTHL'tKNH3500OOOO0500

120PENNSYLVANIAPOWEREDLIGHTCOMPANYPercentageincreaseinmonthlybillbetweenntrate(RSW)forresidentialservicedingthewaterheatingprovisionwiththeorigi~ndwiththestipulatedresidentialratedesign~~~~10060KORS-COMPANYORIGINALPROPOSAL------q4.00/MO4.4g/KWHfirst480KWH3.3g/KWHexcessKWHRS-EXAMPLEFORSTIPULATION$3.40/MO5.1$/KWHfirst200KWH3.7g/KWHnext820KWH3.2g/KWHexcessKWH20008001000i500200025003000HONTHL'tKNH8500%000 Lwssas4ak1~ILllklkL%llAJ&kLllJJJJl'VilaVVlllk.ChilA120Percentageincreaseinmonthlybillbetweelectricspaceheatingservicewiththeoriginsentlimitedrate(RH}fortheresiden>-,.~:.,withthestipulatedresidentialra('~'~~ZO100Il-IfIll~w~RS-COMPANYORIGINALPROPOSAL------04.oo/Mo4.4g/KWHfirst480EWH~3.3g/KWHexcessKWHz60RCLUJL)%0RS-EXAMPLEFORSTIPULATION-$3.40/MO5.1$/KWHfirst200EWH3.Vg/KWHnext820KWH3.2g/KWHexcessKWHQJL3KQJ.lL2050010001500200025003000.HONTHLYNNH8500OOOO45005000Qrt%rtrtIp4JIo6n

BEFORETHEPENNSYLVANIAPUBLICUTILITYCOMMISSION.PennsylvaniaPublicUtilityCommissionV.PennsylvaniaPowerPLightCompanyDocketNo.R-80031114PETITIONTOAPPROVEANDMAKEPARTOFRECORDTHESTIPULATIONOFPARTIESWITHRESPECTTOCERTAINDEPRECIATION-ISSUESPennsylvaniaPower5LightCompany(PP5L),herebyrespectfullypetitionstheHonorableMorrisMindlin,presidingAdministrativeLawJudge,toapprovetheStipulationOfPartiesWithRespectToCertainDepreciationIssues,attachedheretoandmadeaparthereofandtoopentherecordandincorporatethesaidStipulationtherein,andinsupportthereofrepresentsasfollows:l.OnApril29,1980PP4LfiledSupplementNo.73toTariffElectric--Pa.P.U.C.No.198tobecomeeffectiveJune28,1980.BaseduponatestyearendingDecember31,1980,saidtariffsupplementproposed,interalia,arateincreaseintheamountof$123,312,000.

2.Subsequenttosaidfiling,theadministrativestaffofthePennsylvaniaPublicUtilityCommission(Commission)engagedinextensivereviewofthefilinganditssupportingdatawhichincluded,interalia,responsestotheCommission'sfilingregulationsandinitialdirecttestimony.Inaddi-tion,PPgL,theTrialStaffoftheCommission,(Staff)andtheOfficeoftheConsumerAdvocate(ConsumerAdvocate),participatedinthediscoveryprocessbywayoftelephonediscussions,conferencesandbothinformalandformaldatarequestsandresponsesthere-to.'ms3.ByOrderdatedJune26,1980,theCommissiondidnotallowSupplementNo.73tobecomeeffective,institutedaninvestigationandthesaidSupplementNo.73wassuspendedbyoperationoflawforsevenmonthsuntilJanuary28,1981.4.Apre-hearingconferencewasheldbeforethe'HonorableMorrisMindlin,presidingAdministrativeLawJudge,onJuly15,1980.S.Extensivediscoveryhasbeenengagedinbyallpartieswithrespecttodepreciationissues.PP5Lhasprovidedresponsestodatarequestsandformal interrogatoriesrelatingtodepreciationissuesallofwhichhavebeenincorporatedintotherecordasexhibitsofPPgL.6.Eighteen(18)daysofhearingshavebeenheld.Cross-examinationhastakenplaceonthedirecttestimony,filingdataanddataresponseexhibitevidencerelatingtodepreciationissues.7.Attheinitialpre-hearingconference,Adminis-trativeLawJudgeMindlinconducteda'generaldis-'ussioninwhichthepossibilitiesofsettlementwereexploredinaccordancewiththeCommission'srulesofpractice.Thepartiesundertooktogiveseriousconsiderationtosuchpossibilityand,whileatalltimesthepartieshavecontinuedtomoveaheadvigorouslywiththecase,considerablesettle-mentdiscussionandnegotiationhasbeenconductedamongtheparties.Thepartieshaveexploredboththepossibilityofreachinganamicableoverallsettlementor,inthealternative,limitinganddisposingofindividualissuesbystipulation.3 8.Althoughunabletoagreeonanoverallsettle-mentoftheproceeding,thepartieshavereachedagreementoncertainissues.relatingtodepreciation.Althoughtheywouldnotbeabletoagreeuponthedetailsofeachandeveryunderlyingfactleadingtotheirrespectiveconclusions,thepartiescanagreeuponaproposedsettlementofcertaindepreciationIissuesandareinfullagreementthatitwouldbeinthepublicinterestandthatofPPgL'scustomersgenerallytoresolvesuchissuesintheinstantproceedings.TheattachedStipulationrepresentstheagreementandproposedsettlementofsuchissuesbytheparties.9.ThreeofthefiveactivelyparticipatingpartiestothisproceedinghavejoinedintheattachedStipulation.Theotherparties,theLehighValleyPowerCommitteeandBethlehemSteelCorporation,haveadvisedthattheydonotopposethisPetition.10.Itisafundamentalprincipleofalllegalprocess,including,administrativeproceedings,toencouragelitigantstoarriveatthesettlementofissuesandthelimitationofissuesbyagreement.Thebenefitstothepublicinthesavingoftimeandhumanandmaterialresourcesistooobviousto

requireelaboration.ll.TheCommission'sregulationswhichgovernthismatterareclearandtheyaresetouthereinasfollows:52Pa.Code53.141.Subectsforrehearinconferences'a)Inordertomal:epossibleamoreeffectiveuseofhearingtimein-'formalproceedings,andtootherwiseexpeditetheorderlyconductanddispositionofsuchproceedingsandtoservetheendsofjusticeandthepublicinterest,it.isthepolicyoftheCommissiontoarrangeforconferencesbetweenpartiestosuchproceedingstoconsiderthe'followingmatters:(1)Thepossibi:1'itiesforsettlementoftheproceeding,subjecttotheapprovaloftheCommission.(4)Suchothermattersasmayaidinexped-itingtheorderlyconductanddispositionoftheproceedingandthefurtheranceofjustice,includingmattersspecifiedin1Pa.Code535.112(relatingtoconferencestoexpeditehearings).(b)Theprovisionsofsubsection(a)ofthissectionsupplementtheprovisionsof1Pa.Code535.112(relatingtoconferencestoexpeditehearings).1'a.Code535.112.Conferencestoexeditehearins.Atanyprehearingorotherconferenceswhichmaybeheldtoexpeditetheorderlyconductanddis-positionofanyhearing,theremaybeconsidered,inaddition'toanyoffersofsettlementorproposalsofadjustment,thepossibilityofthefollowing:(1)Thesimplificationoftheissues.5 (3)Theobtainingofadmissionasto,orstipulationsof,factsnotremainingindisputes,ortheauthenticityofdocumentswhichmightproperlyshortenthehearing.(4)Thelimitationofthenumberofwitnessess.(6)Suchothermattersasmayproperlybedealtwithtoaidinexpeditingtheorderlyconductanddispositionoftheproceeding.12.Pursuanttotheaboveprinciples,thecleardirectionoftheCommission'sregulationsandthesuggestionsandencouragementofthepresidingAdministrativeLawJudge,thepartieshavedili-gentlyandaggressivelypursuedthepossibilityofsettlementandthelimitationofissues.Severalconferenceshavebeenheldamongthepartiesatwhichthefilingandsupportingmaterial-anddatarequestresponses,theresultsofbothformalandinformaldiscoveryandtheevidenceofrecordwereque'stioned,discussedandanalyzed.Uponthebasisofsuchstudyandanalysisoftherecord,theparties=havereachedtheagreementwithregardtode-preciationissueswhichisreflectedintheattachedStipulation.Thedirecttestimony,cross-examinationandexhibitevidenceofrecordatthetimeoftheexecutionoftheStipulation,andwhichtheparties6 0

~~submitfullysupportsthesame,islistedonExhibitA,whichisattachedtotheStipulationandsuchrecordevidenceisincorporatedasaparthereofbyreference.13.PP5Lsubmitsthattheeffortsofthepartiesandtheresultsthereofhavebeeninthepublicinterest.Allpartiesbelievethattheprincipleoflimitationofissuesbyagreementisfullyappli-cabletoadministrativeproceedingsand,particularlyappropriatetoutilityrateproceedings.14.PP5Lsubmitsthatthedispositionofdepre-ciationissuesinaccordancewiththeattachedStipulationisfair,reasonableandjust,andconsistentwiththeprovisionsofthePennsyl-vaniaPublicUtilityCode.1S.PPgLsubmitsthatthepublicinterest,thelawandtheCommission'sownregulationsmakeitappropriateandadvisableforthepresidingAdministrativeLawJudgetoapprovetheStipulationandincorporateitaspartoftherecordintheseproceedings,andinhis7 decision,recommendittotheCommissionforapprovalforthepurposesofthisproceedingandwithregardtotheratesofPPgL,asthoughtheCommissionhadmadespecificfindingsafterhearingonsuchissues.NHEREFORE,onthebasisofalloftheforegoing,Penn-sylvaniaPowerPLightCompanyrespectfullyrequestsYour'onor.approvetheStipulationOfPartiesNithRespectToCertainDepreciationIssues,opentherecordandincorporateitthereinand,inYourdecision,recommendittotheCommissionforxapprovalforthepurposesofthisproceedingandwithregardtotheratesofPPgLasthoughtheCommissionhadmadespecificfindingsafterhearingsonsuchissues.Resptfullysubmitted.G.D.Caliendo,ChiefCounselRegulatoryAffairsDated:October23,19808

'~

CyBEFORETHEPENNSYLVANIA,PUBLICUTILITYCOMMISSIONPennsylvaniaPublicUtilityCommissionv~PennsylvaniaPower5LightCompanyDocketNo.R-80031114STIPULATIONOFPARTIES1<ITHRESPECTTOCERTAINDEPRECIATIONISSUESPennsylvaniaPowergLightCompany(PP5L),theTrialStaffofthePennsylvaniaPublicUtilityCommission(Staff),andtheOfficeofConsumerAdvocate(ConsumerAdvocate),par-ticipantsintheabove-captionedproceedingandatindividualcomplaintdocketswhichhavebeenconsolidatedtherewith,herebyagreeandstipulatefortherecordasfollows:l.OnApril29,1980PPgLfiledSupplementNo.73toTariffElectric-Pa.P.U.C.No.198tobecomeeffectiveJune28,1980.Baseduponatestyear endingDecember31,1980,saidtariffsupplementproposed,interalia,arateincreaseintheamountof$123,312,000.2.Subsequenttosaidfili.ng,theadministrativestaffofthePennsylvaniaPublicUtilityCommission(Commission)engagedinextensivereviewofthefilinganditssupportingdatawhichincluded,interalia,.responsestotheCommission'sfilingregulationsandinitialdirecttestimony..Znaddition,PPaL,StaffandConsumerAdvocate,participatedinthedis-coveryprocessbywayoftelephonediscussions,conferencesandbothinformalandformaldatarequestsandresponsesthereto.3.ByOrderdatedJune26,1980,theCommissiondidnotallowSupplementNo.73tobecomeeffective,institutedaninvestigationandthe'saidSupplementNo.73wassuspendedbyoperationoflaw-forseven'Imonthsuntil.January28,1981.4.Apre-hearingconferencewasheldbeforetheHonorableMorrisMindlin,presidingAdministrativeLawJudge.,on,July15,1980.

5.Extensivediscoveryhasbeenengagedinbyallpartieswithrespecttoannualandaccrueddepreciation.PPGLhasprovidedresponsestodatarequestsandformalinterrogatoriesrelatingtheretoallofwhich'havebeenincorporatedintotherecordasexhibitsofPP&L.6.Eighteen(l8)daysofhearingshavebeenheld.Cross-examinationhasbeenconductedwithrespecttoPPEL'sinitialdirecttestimony,filingdataand!dataresponseexhibitevidencerelatingtoannualandaccrueddepreciationaswellasthedirecttestimonyandrelatedexhibitevidenceoftheStaffandCon-sumerAdvocate.7.Attheinitialpre-hearingconference,AdministrativeLawJudgeHindlinconductedageneraldiscussioninwhichthepossibilitiesofsettlementwereexploredinaccordancewiththeCommission'srulesofpractice.Thepartiesundertooktogiveseriousconsiderationtosuchpossibilityand,whileatalltimesthepartieshavecontinuedtomoveaheadvigorouslywiththecase,considerablesettlementdiscussionandnegotiationhasbeenconductedamongtheparties.PThepartieshaveexploredboththepossibilityofreachinganamicableoverallsettlementor,inthealternative,limitinganddisposingofindividualissuesbystipulation.

8.Althoughunabletoagreeonanoverallsettle-mentoftheproceeding,asaresultofdiligentlypursuingtheforegoingdiscussions,thepartieshavereachedagreementwithrespecttoallbutoneissuerelatingtoannualand.accrueddepreciation.Thepartiesare,infullagreementthatitwouldbeinthepublicinterest,and'theinterestsofPP&L'scustomersgenerallytoresolvethedepreciationissuesintheinstantproceedinginaccordwithsuchagree-ment.ThisStipula'tion'representstheagreementandproposedsettlementofsuchissuesbythepartieswhichareasfollows:(a)Theevidenceofrecordestablishesthat,pursuanttothedirectionoftheCommissioninitsOrderofAugust26,19,76atR.X.D.No.221PP&Linitiatedtheuseofalife-spandepreci-ationsystemapplicabletoitselectricSteamProductionandOtherProductiongeneratingplant(hereinafterreferred'oasgeneratingplant).(b)TheCommission.'sOrderprovidedthatPP&Lshould:continuetoemploytheso-calledaverageservicelifedepreciationsystemforhydroelectric!generation,transmission,distributionandgeneral1/plant.1/PriortosaidOrder,PP&Lhademployedthewhole-life,straightline,accountgroupdepreciationsystemfoxallelectricplant.M.ssystememploysaverageservicelifeandretirementdispersionparametersbaseduponanalysesofa~xetirmant~oerienooffacilitiesandengineeringjudpmt.'Iheresultantparameterswere~liedtoinmstmentinplantbyaccountirrespectiveoflocationorvintage.-

(c)TheCommission'Ordercontainedthefollow-ingdirective:"Hehavestatedpreviouslythattheentireelectricindustryisprojectinglargeamountsofnewcapitalrequirementsinthemagni-'udeofbillionsofdollarsforconstructionofgeneratingstations,transmissionlines,distributionsystems,andotherimprovementsinthenextfivetotenyears.Insomeinstances,theprojectionsforinvestmentinnewplantwillalmostequalthepresentinvest-.mentinplant.Itis,therefore,,importantthatproper'ndreasonabledepreciationpracticesbeestablishedwhicharefairandreasonabletoboththecustomerandtheutility.Accordingly,weintendtoinstituteamonitoringprogramfortheannualdepreciationratesfornewgeneratingunits.E"InordertoensuretheproperrecoveryoftheoriginalcostofMartinsCreekUnitNo.3,weorderrespondenttosubdivideandmain-tainitsaccountingrecordstoshowaseparatedepreciationreservebyaccountforeachofitsnewgeneratingstationunitsforratemakingpurposes.Respondentmayfurthersubdivideanaccount,whereitdeemsnecessary,becauseofuniquelifecharacter-isticsofcertainitemsofpropertycontainedtherein.Inaddition,respondentisdirectedtoutilizetheannualdepreciationratesallowedintheserateproceedingsforratemakingpurposesandtosub-mitthefollowinginformationatleasteverythreeyears,commencingwiththedateofthisOrder,fortheaforementionedunits:(l)anyinterimretirementexperience,whichhas=takenplaceforthesenewunitsaswellaspre-existingunits,(2)anymajorretirementsand/oradditions

intheinterimperiod,whichwouldaffecttheestimatedlife-spanaccrualrate,(3)respondent'slatestplansandprojectionscon-cerningestimatedterminalordeactivationdates,(4)projec-tionsofrespondent'system-peakloadandreservemargin,and(5)respondent'splansforaddingandretiringcapacity.RespondentisdirectedtocontacttheCommission'sstaffinregardtotheindividualunit'saccrualratesbyaccounts."(d)FollowingtheproceedingsandpursuanttoitsunderstandingoftheCommission'sdirective,PP&Lestablishedits"PP&LReserve"foritsgeneratingplantasofDecember31,1975onthefollowingbasis:(i)Thecalculatedtheoreticalreservepro-ducedbyapplyingtheratesderivedfromthelife-spanparametersusedintheCommission'sOrderproducedacalculatedtheoreticalreserverequirementforeachaccountateachgeneratingplant.AtDecember31,-1975,thistheoreticalreservetotaled$170,663,088comparedtothebookreserveforthesamegeneratingplantof$183,437,481.(ii)Althoughthebookreservewasapproximately$13millionhigher,andthusconstitutedagreaterratebasereduction, PP&L'ssimulationstudyofitsgeneratingplantdepreciationrecordspertainingtoannualrates,plantadditionsandretirements,foralltheyears1949through1975,indicatedthatitreflectedareasonablemeasureoftherecoveryofinvestmentinsuchplantatthattime.(iii)PP&Lestablished.the"PP&LReserve"applicabletogeneratingplantatDecember31,1975bypro-ratingthetotalamountofitsbookreserveovertheaccountsateachgeneratingstationinthesameproportionsasthecalculatedtheoreticalreservecalcu-lation.(iv)Atalltimessubsequentthereto,PP&LhascontinuedtochargeannualdepreciationinstrictaccordancewiththeparameterssetoutintheCommission'sOrder.Xtsrecordsspecificallydisclosetheeffectuponthe"PP&LReserve"ofactualgeneratingplantadditions,transfers,retirementsandannualaccruals.Therefore,atDecember31,1979the"PP&LReserve"representsareasonable4measureoftherecover'yofinvestmentingeneratingplantatthatdate.Theprojection ofsuchreservetoDecember3l,l980usedinthisproceedingalsorepresentsareasonableestimateofsuchrecoveryatthatdate.(v)PP&L'sfilingproposedthat,sincethe"PP&LReserve"reasonablyrepresentsrecoveryofinvestment,itistheproperreservetobeusedasthedeductionapplicabletoanoriginalcostratebase.(e)TheLifeSpanmethodemploysestimatesofinterimretirementsateachgeneratingplantuponthebasisofstudyofpastexperienceandtheapplicationofjudgment.,ThepartiesrecognizethatactualinterimretirementsmaydifferfromthetheoreticalinterimretirementsfromyearÃtoyear.Staffraisedtheconcernthat,undersuchcircumstances,useofthe"PP&LReserve"mightpermitunrecoveredinvestmenttoremaininratebaseforeverintheeventofretirementswhichwerenotfullydepreciated.PP&Lrespondedtothatconcernbytestimonyandexhibitevidencewhichpresenteda"True-UpProcess"whichmakesuseofPP&L'uniquerecord'eepinganddataretrievalsystems.ThefollosvingisadescriptionoXtheprocess; (i)PP8:Lhasestablishedandmaintainsauniquegeneratingplantandrelatedreserverecordcontrolsystemwhichprovidestheabilitytoretrieveandreportplantandreserveactivityindetailandwithspecificity.Thus,PPhLhastheabilitytomonitor,foreveryyearbeginningwithcalendaryear1976,boththeleveloftheoreticalorexpectedinterimretirementsandtheactualinterimretire-mentsforeachaccountateachpowerproductionlocation;and.(ii)PP8:Lwillobtainforeachyeartheactualinterimretirementsforeachaccountateachpowerproductionlocationfromthe,rec'ordsystemofplant,transactions;and(iii)PPkLwillobtainforeachyeartheexpectedinterimretirementsforeachaccountateachpowerproductionlocationbyapplyingtheestimateddeactivationdateandestimatedinterimsurvivorcurveparameterstovintageplantdatabyaccountbylocation;and(iv)PP8:Lwillforeachyearcomparetheactualinterimretirementstotheexpectedinterimre-tirementstoarriveatavariance;and (v)PPELwillsummarizethevariancesobtainedforafive-yearperiodandamortizeonefifthofthetive-yearmovingaveragevariance.(vi)Theamounttobeamortizedmaybepositiveornegativeandwillbeaddedtoorsubtractedfromtheannualaccrual.Aftertheinitialvari-ancetobeamortizedisestablishedthenforeachsubsequentyearthevariancefortheoldestyearwouldbedropped,thevarianceforthemostrecentyearwouldbeaddedandanewfive-yearvariancelevelwouldbecalculated.Althoughthismaychangetheamounttobeamortized,itwillnotbeofanyconsequenceaslongasarecordisconstructedoftheamountsamortizedeachyearcomparedtotheactualfive-yearmovingaveragevariance.10

Theparties,uponthebasisoffullexamina-tion,studyanddiscussionconcerningthisprocessagreethatitisreasonableandfairandfullysatisfiestheconcernexpressedbythe(f)Staffcontendsthatdespitetheexistance~ofthe"True-UpProcess"theremaybecircumstancesinthefuturewheretheCommissionmightnotagreetothefullcapitalrecoveryoftheinvestmentrelatedtocertaininterimretirements.Staffagreesthataninterimretirementofsuchcharactermightberarebut,nevertheless,contendsthattheCommissionshouldbeinapositiontoprelimin-arilyreviewanddeterminethestatusofsuchinterimretirements.Inresponsetothisconcern,PPGL'hasagreedtoimplementa"ReviewProcess"tobeincorporated,togetherwiththe"True-UpProcess,"'withthe"PPGLReserve"system.The"ReviewProcess"wouldbeasfollows:(i)Ifaninterimretirementoccurswhichisofsuchmagnitudethatitwouldcausetheannualinterimretirementvarianceforaparticularpowerproductionlocationtoexceed11

5%ofthetotalannualaccrualforthatloca-tion,the"ReviewProcess"willbeinitiated;and(ii)PP8:LwillthereafterprovidetotheCommission'adetaileddescriptionofthepropertyinvolvedinsuchinterimretirementtogetherwithastatementofthereasonsforretirement;and(iii)TheCommissionwillreviewtheinforma-tionprovidedandmakeaninitialdeterminationastowhethertheinvestmentrepresentedbysuchretirementshallbeincludedforrecoveryaspartofthe"True-UpProcess";and(iv)ACommissiondeterminationthattheentireinvestmentrepresentedbysuchretirementshouldnotbeincludedforrecoveryinthe"True-UpProcess"wouldnotprecludePPELfrompursuinganylegaloradministrativeremedy,includingmakingapplicationtotheCommissionpursuanttotheprovisionsofBalanceSheetAccountNo.182oftheUniformSystemofAccountsrelatingtoExtraordinaryPropertyLosses,andwouldnotprejudiceanyactiontheCommissionmaytakewithrespectthereto.12

(gjThepartiesagreethatthe"ReviewProcess"baseduponthe5%triggerateachpowerproductionlocationappearstoassurethatareasonablebalancewillbeachievedsothatrelativelylargeinterimretirementswillnotbelostintheaveragingprocessontheonehandand,ontheother,itwillassurethattheCommissionanditsStaffwillnotbeburdenedwiththetaskofreviewingnumerousandinsignificantinterimretirements.PPGLagreestoreviewitsexperiencewiththe"ReviewProcess"withtheCommissionanditsStaffperiodicallytoascertainwhetherthatexperienceindicatesthatsomehigherlevelthan5%wouldbeappropriate.(h)Thepartiesagreethat.withtheinstitutionofanongoingmonitoringsystem,whichincludesthesaid"True-UpProcess"andthe"ReviewProcess",theuseofthe"PP&LReserve"inthiscaseandhereafterprovidesassurancethatneithermorenorlessthanPP&L'sgeneratingplantinvestmentwillberecoveredindepreciationchargesincostofservicetocustomersandthat',the"PP&LReserve"atanypointintimewillreflecttheamountofinvestmentrecoveredfromcustomersatthattime.13 (i)ThepartiesagreethatPP&LhasbothspecificandcomprehensiverecordsanddatacontrolandretrievalcapabilitiesinplacewhichgivePP&Ltheuniqueabilitytomonitorandmaintainthe>>PPGLReserve"accuratelysothatatanypointintimeitwillprovideamorecorrectreflectionoftheactualrecoveryofinvestmentthanwouldacal-culatedtheoreticalreserve.(j)Thepartiesagreethat,inviewofthefore-going,the>>PPGLReserve>>shouldbeapprovedbytheCommissioninthiscaseandapprovedforadoptionbyPP&L,,withtheassociated>>True-UpProcess"and"ReviewProcess"components,asthePongoingsystembothforbookandratemakingpur-posesapplicabletoPPGL.(k)ThepartiesagreethatPPGL'sexistinguniquerecordkeepingand'datacontrolandretrievalsystemsandcapabilitiesmaketheuseofthe>>PPGLReserve"systemboththemostpracticableandmostreasonableforPPGL.(1)Thepartiesagreethattogetherwiththeapprovalandadoptionofthe>>PPSLReserve"thespecificlifespanswithrespecttocertaingeneratingplantshallbe:14

-

(i)TheestimateddeactivationdateofSunburyS.E.S.willbetheyear2000inaccordancewiththeStaffrecommendation.Thiseffectivelyresultsinalifespanofapproximately50yearsforthispowerpro-ductionunit.(ii)TheestimateddeactivationdateofNartinsCreekNo.3andNo.4willbetheyear2010inaccordancewithStaffrecom-mendation.Thiseffectivelyresultsinalifespanofapproximately35yearsforthispowerproductionunit.(iii)Thefollowingestimateddeactivatingdateswillbeusedforthecombustionturbineslistedbelow:CombustionTurbineAllentownHazwoodMilliamsportHarrisburgJenkinsFishbachNestShoreLockHavenEstimatedDeactivationDate19921992199219921992199419941994Life~San2525252525252525TheselifespansalsoagreewiththeStaffrecommendation.15 (iv)AllotherestimateddeactivationdateswillbeacceptedasfiledbyPPErLinthisproceeding.(v)Allestimateddeactivationdateswillbesubjecttoreviewinanysubsequentratefilings.(m)Thepartiesagreethattheimpactofusingtheabove-referencedestimateddeactivationdatesistodecreasePPRL'sclaimedannualdepreciationby$2,996,584.Ontheotherhand,anamountof$30l,680willbeaddedtotheannualaccrualtoallowfortheamortizationofthepositiveinterimretirementvari-'nceproducedbythe"True-UpProcess".Thenetresultingtotalannualdepreciationexpenseagreedtoasproperinthiscasebytheparties,exceptforConsumerAdvocate,is$82,865,000.TheConsumerAdvocatecontendsthatannualdepreciationshouldbedeterminedonthebasisofaverageoperatingplantinserviceinthetestperiodratherthanonplantinserviceattheendofthetestperiod,andrecom-mendsanannualdepreciationexpenseof$79,806,000.

VI~~~Cy(n)Thepartiesagreethatthe"PPELReserve"forgeneratingplantintheamountof$333,173,504isacceptedastheproperreservetobedeductedfromelectricplantinserviceDecember31,1980toarriveattheratebasecomponentofPPGL'soriginalcostratebase.(o)Assetforthinsubparagraph(b)hereof,PPGLemploysthewhole-life,straightline,accountgroupdepreciationsystemforallelectricplantotherthangeneratingplant.ThepartiesagreethatPP&L'depreciationstudyrepresentsareason'ablemethodology'ndthatitproducesproperaverageservicelinesandretirementdispersionsbyaccountsforHydroelectricGeneration,Transmission,Distri-butionandGeneralPlant.ThepartiesfurtheragreethatthetotalreserveforsuchplantatDecember31,1980istheamountof$366,909,496andisacceptedastheproperreservetobedeductedfromsuchelectricplantinservicetoarriveat/theratebasecomponentofPPGL'soriginalcostratebase.17 0

(p)Thepartiesrecognizethatthesettlementofdepreciationissuesonafair,reasonableandjustbasisasproposedbythisStipulationisinthepublicinterestinthatitwillservetopromotetheexpeditious,processingoftheseproceedings.(q)ThisStipulation,resultingasithasfromextensivediscovery,referencetotheevidenceofrecordandseriousnegotiation,isproposedbythepartiestosettlealldepreciationissueswiththeexceptionofthedeterminationofannualdeprecia-tionasproposedbyConsumerAdvocate(see(m)above)andwithoutany.admissionorprejudicetoanypositionswhichanypartymightadoptduringsubse-qu'entproceedings,atthisoranyotherdocket,ifthisStipulationisrejectedbythepresidingAdmin-istrativeLawJudgeortheCommission.(r)Intheopinionoftheparties,thisStipulationisjust,reasonableandlawfulandisfullysupportedbythetestimonyandexhibitevidenceofrecord.Thedirecttestimony,cross-examinationandexhibit18 evidenceofrecordatthetimeoftheexecutionoftheStipulation,andwhichthepartiessubmitfullysupportsthesame,arelistedonExhibitA,attachedhereto,andsuchrecordevidenceisincorporatedasaparthereofbyreference.(s)ThepartiesherebyagreetorequestthatthepresidingAdministrativeLawJudgeMorrisMindlinapprovethisStipulation,incorporateitintherecordand,inhisdecision,recommendittotheCommissionforapprovalforthepurposesofthisproceedingandwithregardtotheratesofPP8:LasthoughtheCommissionhadmadespecificfindingsafterhearingsonthesedepreciationissues.(t)Thepartieshereby.agreetorequestthatthepresidingAdministrativeLawJudgeMorrisMindlinandthePennsylvaniaPublicUtilityCommissionorderthatinthefuturePPQLshallmaintainthe"PPELReserve",incorporatingtheassociated"True-UpProcess"and"ReviewProcess",instrictaccordancewiththeparameterssetoutinthisStipulationsothatPPRL'srecordswillspecificallydisclosetheeffectuponthe"PPE:LReserve"ofactualgeneratingplantadditions,transfers,retirementsandannualaccruals.

THISSTIPULATIONisconditioneduponandsubjecttotheacceptanceoftheAdministrativeLawJudgeandthePennsyl-vaniaPublicUtilityCommission.Further,recognizingthatthisStipulationresultsfromextensivediscoveryanddiscussionandreflectscompromisesbybothsides,ifitisnotacceptedbyAdministrativeLawJudgeandtheCommission,withoutmodifica-tion,thennoinferenceadversetoanypartyshallbedrawntherefrom.Finally,itisexpresslyunderstoodbythepartiesthatthisStipulationdoesnotprecludetheConsumerAdvocatefrompursuingtheaforesaidannualdepreciationexpensecal-culationissueinthisoranyothersubsequentproceedingandfurtherthatthisStipulationisconditionalandshallhavenoforceoreffectunlessadoptedbytheCommission.SignedandSealedByThePartiesAforesaidthis33Idayof'6W,1980.Q5]gCO20 40 ExhibitAPage1of3ReulationsI-A-3I-A-4I--A-5I-A-6I-A-7I-A-9I-A-11I-A-17I-B-8III-A-45.FILINGMATERIAL-DEPRECIATION~Sub'ctDepreciationMethods5LifeStudyEstimatesAnnualgAccruedDepreciationonOriginalCostLifeTables5SurvivorCurvesCalculatedvs.BookDepreciationSurvivorCurves5AnnualAccrualRatesCumulativeDepreciatedOriginalCostTrendedOriginalCost5AccruedDepreciationCumulativeDepreciatedTrendedOriginalCostNetSalvage,GrossSalvage,CostofRemovalBookReserveforGeneratingStationsChargesinDepreciationAllocations~PaeeTotal1'11iExhibitsJOB1JOB2~JOB5JOB6JOB7JOB8JOB9Historic1DepreciationMethodology5ValuationSummariesValuationDetailsforElectricPlantLifeStudyDescription5SummaryLifeSpanning5PlantActivity-PowerProductionUnitsFuturePlantEstimationand'ValuationSummariesValuationDetailsforFutureElectricPlantSupplementalDepreciationDataC-1MeasuresofValue5RateofReturnC-2ElectricPlantInServiceC-4RetirementsAssociatedwithCNIP-InServiceC-5RetirementsAssociatedwithCNIP-SoontobeInServiceC-6RetirementsAssociatedwithCNIP-PollutionControlD-1OperatingIncomeD-15AdjustmenttoDepreciation1382939613625329345111 ExhibitAPage2of3ExhibitsFuture1Future1AFuture1B~subectC-1MeasuresofValue5RateofReturnC-2ElectricPlantinServiceC-6RetirementsAssociatedwithCNIP-PollutionControlD-1OperatingIncomeD-15AdjustmenttoDepreciationC-1MeasuresofValue5RateofReturnC-1MeasuresofValue5Rate'ofReturn~PaeaTotal17TestimonStatementIVDirectTestimonyofJ.0.BeamerStatementIVASupplemental'TestimonyofJ..0.Beamer4318InterroatoriesPUCFormal-Jul21SetII)200.10031200.10032200.10033200.10034InterimRetirementCurves(Accounts3126314)SunburyModifications,AdditionsReplacementsPP5LReservevs.CalculatedReserveAdjustmentsAlterationstoLifeSpans10ConsumerAdvocate-Ma30(SetI)200.20022200.20024AccumulatedProvisionforDepreciationPlantinServiceNoLongerAccruingDepreciation1027DataResonsesConsumerAdvocate250.2006001AnnualDepreciationExpenseEstimates5Differences ExhibitAPage3of3TranscritAugust27September3September10~Sub'ect925-956Cross-examinationofJ.0,Beamer1014-1089Cross-examinationofD..L,Birx1396-1408Cross-examinationofJ.A,Rothschild~PaeaTotal7512DirectTestimonofPartiesPUCTrialStaffStatementDLB-1DirectTestimonyofDonaldL,BirxConsumerAdvocateStatement2Statement3TestimonyofJamesA.RothschildRe:AccountingIssues(Pages2-6).TestimonyofJamesD.CottonRe;.AccountingIssues(Page26)20Total~l PENNSYLVANIAPOWER5LIGHTCOMPANYEXHIBITHISTORICISummaryofMeasuresofValue.P;RateofReturnfortheYearEndedDecember311979Thisbookcontainsaseriesofschedules(seeTableofContents)whicharegroupedasfollows:A-StatementofReasonsB-FinancialStatements,Securities5CapitalStructureasofDecember31,1979C-MeasuresofValueasofDecember31,1979D-OperatingIncome5AdjustmentstheretoasofDecember31,1979.

PENNSYLVANIAPOWER6LIGHTCOMPANYTABLEOFCONTENTSSECTIONA-REASONSFORPROPOSEDINCREASEA-1StatementofReasonsSECTIONB-BOOKSTATEMENTSBalanceSheetatDecember31,1979ElectricService-StatementofNetUtilityOperatingIncome-YearEndedDecember31,1979B-3ElectricService-OperatingRevenuesforYearEndedDecember31,1979B-4ElectricService-OperationandMaintenanceExpenses-,YearEndedDecember31,1979iB-5B-6ElectricService-DetailofTaxes-YearEndedDecember31,1979Historical(Embedded)CostofDebtCapitalatDecember31,1979jU.storical(Embedded)CostofPreferredandPreferenceStockCapitalatDecember31,1979B-8B-9HistoricalCapitalStructures-YearsEnded1970-1979RateofReturnatDecember31,1979SECTIONC-MEASURESOFVALUEC-2C-3C-4MeasuresofValueandRatesofReturnElectricPlantinServiceElectricPlantHeldforFutureUseConstructionWorkinProgressActuallyinServiceC-5NonrevenueProducingElectricConstructionWorkinProgressSoontobeinServiceC-6C-7ConstructionWorkinProgress-PollutionControlProjectsInvestmentinCoalReservesWorkingCapital

PENNSYLVANIAPOWER&LIGHTCOMPANYTABLEOFCONTENTSSECTIONC-MEASURESOFVALUE(Continued)C-9C-10FuelStockandMa,teria,laandOperatingSupplies"AccumulatedDeferredTaxea.onIncomeSECTIOND-OPERATINGINCOMED-1D-2D-3D-4D-5D-6D-7D-8D-9D-10D-llOperatingIncomeProFormaatPresentRatesandProposedRatesAdjustmentstoIncomeAdjustmentstoOperatingRevenueAdjustmentstoEnergyCostsAdjustmentstoMajorForcedOutageInsuranceAdjustmentstoWagesAdjustmentstoEmployeeBenefitsAdjustmentforCommitmentFeesAdjustmenttoRateCaseExpensesAmortizationofFloodCostsAdjustmentofRentExpenseforLeasedEquipmentD-12AdjustmenttoOutsideServices(notapplicabletohistorictestyear)D-13AdjustmenttoPensionFundManagementExpensesD-14Research6DevelopmentExpenses(notapplicabletohistorictestyear)D-15D-16D-17D-18D-19D-20AdjustmenttoDepreciationAdjustmerittoTaxesOtherThanIncomeAdjustmentstoFederalandPennsylvaniaIncomeTaxesAdjustmenttoDeferredIncomeTaxesAdjustmenttoDeferredInvestmentTaxCreditAdjustmenttoAmortizationofDeferredInvestmentTaxCredit A-1R.R,FortuneSTATEMENTOFREASONSFORTHEPROPOSEDRATEINCREASEThepurposeofthisfilingistobringPennsylvaniaPower&LightCompany's(PPGL}ratesforelectricutilityser-viceinlinewiththecostofprovidingthatservice.Currentstudiesindicatethatpresentratesdonotadequatelycoverthecurrentcostofprovidingelectricserviceandthatwithoutratereliefby1981,PPGL'sfinancialsituationwillseriouslyde-teriorate.PPGL'slastrequestforratereliefwasmadeinMarch,1975.SincethatrequestPP6L'snetplanthasincreasedbymorethan$450millionbytheadditionofnewfacilitiestoprovidefortheincreasedservicedemandsofitsc'ustomers.Also,duringthisperiodinflationhascausedPPGL'soperatingandfinancingcoststoescalatedramatically.ThishasresultedinadeteriorationoftheCompany'srateofreturn.Thus,forthe12monthsendedDecember31,1979,presentratesproducedareturnof8.4percentonoriginalcostandfortheyearendedDecember31,1980itisestimatedthatpresentrateswillpro-duceareturnofapproximately8percent.InitsorderissuedinAugust,1976theCommissionfound9.83percentreturnonoriginalcosttobereasonable.Furthermore,additionalfacilitieswillbeaddedandthecostofwages,interestandmaterialscoveredbyexist'ingbaserateswillcontinuetoincreaseinthefuturedueto

inflation.Asaresult,theCompanycannolonger---throughincreasedefficiencies---continuetoabsorbtheseevermountingcostsandalsoprovideadequatereliableservicetodayandinthefuture.Theonlyrecourse,therefore,istoseekreliefthroughanincreaseinthebaserateschargedforelectricservice.Thedecisiontoseekratereliefwasreachedonlyafterverycarefulexaminationofavailabledataandforecasts.PPSLfullyrecognizestheimpactinflationhashadandishavingonitscustomersandreadilyunderstandsthesensitivityofitscustomerstoanyrateincrease.However,theCompanyhasnowreachedthepointwhereprudencedictatesthatitseekabaseratead)ustmenttomeetpresentdayconditionsandcosts.Theaveragehistoricalcostoffixedincomesecuritiesincreasedbyafullpercentagepointto8,83percentattheendof1979,com-paredto7.83percentallowedbytheCommissioninPP&L'slastfiling.Thisiseasilyunderstoodwhenitisnotedthatgl.lbillionofnewfixedincomesecuritiesweresoldduringthisperiodwheninterestrateswereunusuallyhigh.Replacementofmaturingdebtsecuritieswithanaverageinterestratebelow3percentaccountedfor$124millionofthesesecuritysales.Thus,thecontractualpaymentsofinterestandpreferreddividendsaretakingahigherproportionofwhatevertotalreturnisactuallyearned,whichresultsinquitesizablereductionsintherealizedreturnoncommonequity.

TheCommission'slastrateorderdeterminedthatarateofreturnoncommonequitywhichequatedto14.28percentonbookvaluewasfairandreasonable.Etisestimatedthattheactuallyrealizedrateofreturnonbookequityfromelectricoperationswilldropbelow9percentfor1980andbelow7per-centfor1981,withoutraterelief.Thereturnonbookcommonequityactuallyrealizedisthelifebloodofahealthyutilityandmustbemaintainedatadequatelevelstopermittheraisingofcapitalatreasonablerates.Otherwisereliableservicecannotbeprovidedataneconomicalcost.Thepresentrequestseeksanincreaseinbaseratesofabout$123millionayearor16percent.Althoughmanymayviewa16percentincreaseassizable,itshouldbenotedthatatpresent,PPGLratesrankamongthelowestinthestateandthatthispositionwillremainunchangednotwithstandingtheamountrequestedherein.PPGL'sabilitytogainandholdthisfavorablepositionrestslargelyonimprovedpowerplantoperationandincreasedsalesonthePennsylvania-NewJersey-Maryland(PJM)Interconnec-tion.Savingsfromnetinterconnectionpowersaleshave4136(~.Fb,j-/galg('(f9<7months)andhthesesavings>havebeendirectlyandautomaticallysubstantiallyreducingthecostofelectricitytoourcustomersthroughtheoperationoftheenergyclause.Priortoreplace-mentofthefueladjustmentclausewiththeenergyclauseonOctober31,1978,savingsfromnetinterconnectionsaleswereavailabletooffsetincreasingbaseratecosts.ThebenefitstoourcustomersfrominterconnectionsalessincePP&L'slastrateincreaseareclearlydemonstratedbythetrackingofthemonthlybillofanaverageresidentialcustomerfromSeptember,1976(firstfullbillingafterPF&L'slastrateincreasewasgrantedinAugust,1976)toApril,1980.Thechargefor800kwhpermonthincreasedfrom$31.70toonly$35.76---atotalincreaseofabout$4.00ora3.4percentaverageannually.Indeed,inApril,1980ourcustomersarepayingaboutthesamepriceforelectricservicethattheydidayearago---notwithstandingsignificantincreasesinfuelandothercosts.Benefitsofinterconnectionsaleswillcontinuetobepasseddirectlythroughtocustomersbyoperationoftheenergyclause.PP&LRatePhilosohAsthisCommissionisaware,ithasbeenPP&L'sphilos-ophy.overtheyearstokeepitsratestocustomersataslowalevelasitreasonablycanandtoonlyseekmoderateratechangesonatimelybasis.Therecordinthisregardspeaksforitself.Thus,PP&Lproposedratedecreasesinperiodsofdecliningcostsasintheearly1960's.Astheeconomicclimatechangedtooneofincreasingcosts,PP&L'sbaserateincreasesallowedbytheCommissioninthe1970'swereasfollows:

1970......5.0%1971......4.41972...,..6.21974......5.2%1975......3.91976......3.7April7.0AugustAlthoughitcontinuestobeourphilosophytoseekmoderatetimelyratechanges,PP&Lisalsocommitted---andindeedischargedbylaw---toprovideadequatereliableandcontinuouselectricpublicutilityserviceondemand,todayandinthefuture.Therefore,inadditiontoprovidingqualityelectricservicetoday,PP&Lmustplan,designandconstructfacilitiesoverlongleadtimestoinsurethatitwillmeetitsobligationstoserveasneeded.PP&Lcanonlydothissuccess-fullyifitisabletomeetitscurrentcostsofprovidingservice.Accordingly,PP&L'sratesforserviceshouldmatchthecostofprovidingthatserviceasitisexperienced.And,ifthecostsofprovidingthatservicecontinuetoincrease,asallpresentstudiesseemtoindicate,ratesmustultimatelyreflectthatcostofserviceifPP&Listosatisfyitsobliga-tionsandtoattractinvestorswillingtoprovidethecashneededtofinancetheconstructionofnecessaryfacilities.Timely,moderaterateadjustments,asPP&L'sownexperiencehasshown,canprovidelong-termbenefitstoitscustomersbothinthequalityofserviceandinthecosttheymustbear.Thepresentfilingattemptstosatisfytheseseveralfobjectives.TariffSupplementNo.73providesforanannualincreaseinbaseratesofapproximately$123million---based onafuturetestperiodendingDecember31,1980.Thisresultsinanincreaseontheaverageofapproximately16percentwithvariationstoindividualcustomersrangingfromabout13percentto20percentdependingonrateclassificationandlevelofuse.RateofReturnTheincreasedrateswillproduceafairandreasonablerateofreturnonplantinservice.Therequestedratelevelsaredesignedtoproducea10,86percentreturnonoriginalcostandwillproduceareturnoncommonof14.45percent(seeExhibitFuture1,ScheduleB-9).InitsorderatR,I.D.221inAugust,1976,theCommissionfounda9.83percentreturnonoriginalcostratebasetobereasonableandallowedareturnoncommonequityof14.28percent.InviewofthelargeincreasesinthecostrateofallsecuritiessincetheCommission'sorderin1976,itisclearthatthereturnsrequestedareconservativeandreasonable.Almostthree-fourthsoftheincreaseinreturnisduetothehighercostoffixedincomesecuritiesissued.RateBaseMeasuresofvaluefortheperiodendingDecember31,1979arefoundinExhibitHistoric1;andfortheperiodending'December31,1980arefoundinExhibitFuture1.Ingeneral,measuresofvalueincludephysicalfacilitiesandinvestmentcomponentswhichareonthebasisofpriorCommissionapprovalandacceptances.

0eratinIncomeTheresultsofoperationsfortheperiodsendedDecember31,1979andDecember31,1980arefoundinExhibitsHistoric1andFuture1.Adjustmentswhichhavebeenmadetooperatingincomeitemsareonlythoserequiredtoeliminatecostsnotincludedinbaseratesandtonormalizeoperatingrevenuesand.coststolevelswhichexist,attheendofbothtestperiods.Ingeneral,PP&Lhasattemptedtoadheretothefollowingprinciplesindesigningratelevelsinthisfiling.First,theproposedratelevelsforthevariousrateclassesadhereascloselyaspossibletothecosttoservethoseclasses.Inthisregardwewereguidedbycostallocationstudies.Thesestudiescombineaccounting,operatingandloadresearchdatatodeterminetheassignmentoftotalproposedrevenuerequirementstotheindividualclasses.Thesestudiesprovidereasonablyreliablemeansofestablishingthereturnsbeingearnedbyeachclassandtherelationshipsofsuchreturntoeachotherandtotheproposedsystemreturn.Second,PPGL'sratedesignphilosophyincludesanefforttomakeitsratessimplerandeasiertounderstandandadminister.Thusfewernumberofdifferentpricesfordemandandenergywithinagivenratewerecreated.Also,explicitchargesforthecustomer,demandandenergycostcomponents arebeingstatedwhereitispracticaltodoso.ThethirdguidelineisbasedonthebeliefthatpricingcancontributetotheCompany'slong-rangegoalofreducingtherateofgrowthofthesystem'sonpeakdemand.InthisfilingPPSLproposesseveralratesandratechangestowardthisend.Toencourageamorelevelizeduseofserviceandavoidanceofhighdemands---ademandchargeapplicabletolargeuseresidentialcustomers.Toencouragetheuseofoff-peakelectricalthermalstorageheatingsystems---arateforresidentialstorageheatingsystems.Toencouragethetransferofdemandsforelectricwaterheaterstotheoff-peakperiod---arateforoff-peakelectricwaterheatingservice.Toencouragegeneralservicecustomerstocon-ductmoreoftheiroperationsduringtheoff-peakperiod---theoff-peakprovisionforallgeneralservicerateshasbeenredesignedandmademoreattractive.

PENNSYLVANIAPOWER&LIGHTCOMPANYB-BOOKSTATEMENTSIndexB-1-BalanceSheetatDecember31,1979B-2-ElectricService-StatementofNetUtilityOperatingIncomeYearEndedDecember31,1979B-3-ElectricService-OperatingRevenuesforYearEndedDecember31,1979B-4-ElectricService-OperationandMaintenanceExpensesforYearEndedDecember31,1979B-5-ElectricService-DetailofTaxesYearEndedDecember31,1979B-6-Historical(Embedded)CostofDebtCapitalatDecember31,1979B-7-Historical(Embedded)CostofPreferredandPreferenceStockCapitalatDecember31,1979B-8HistoricalCapitalStructures-YearEnded1970-1979B-9RateofReturn-atDecember31,1979

PennslvaniaPower&LihtComanBalanceSheetAssetsandOtherDebitsB-1Page1G.F.VandersliceAcct.No.101103105107108101107108120.1121122123.1124128131132135141142143144145146TitieofAccountUtilityPlantElectricplantPlantinserviceExperimentalelectricplantunclassifiedPlantheldforfutureuseConstructionworkinprogressGross.electricplantAccumulatedprovisionfordepreciationNetelectricutilityplantSteamheatplantPlantinserviceConstructionworkinprogressGrosssteamheatplantAccumulatedprovisionfordepreciationNetsteamheatutilityplantNetutilityplant,lessnuclearfuelNuclearfuelinprocessNetUtilityPlantOtherPropertyandInvestmentsNonutilitypropertyAccumulatedprovisionfordepreciationandamortizationofnonutilitypropertyNetnonutilitypropertyInvestmentinsubsidiarycompaniesOtherinvestmentsOtherspecialfundsTotalOtherPropertyandIn-vestmentsCurrentandAccruedAssetsCashInterestspecialdepositsWorkingfundsNotesandaccountsreceivableNotesreceivableCustomeraccountsreceivableElectricSteamheatOtheraccountsreceivableAccumulatedprovisionforuncollectibleaccounts-creditElectricSteamheatTotalnotesandaccountsreceivableNotesreceivablefromassociatedcompaniesAccountsreceivablefromassociatedcompaniesDecember311979$2i457i010i159234,57741,724i63914731358933i972il05i2683346523,8948,267,194333038,300,49750075643i351i531i4586130114334128326014,283i5563,854g82624i942,4182,093,075192853090960415g467g29631i5151,177t94415,84255i696,773247,332Slg865,832(3F500I746)10430797327,500,000lg164,529 PennslvaniaPower&LihtComanBalanceSheetAssetsandOtherDebitsContinuedB-1Page2G.F.VandersliceAcct.No.151151152152154163165172174174174181182183184185186190TitleofAccountCurrentandAccruedAssets(Continued)MaterialsandsuppliesFuelstock-electricFuelstock-steamheat'uelstockexpensesundistributed-electricFuelstockexpensesundistributed-steamheatPlantmaterialsandoperatingsupplies-electricStoresexpenseundistributed-electricTotalmaterialsandsuppliesPrepaymentsOthercurrentandaccruedassetsRentsreceivableRecoverablefuelcostsRecoverableenergycostsOtherTotalothercurrentandaccruedassetsTotalCurrentandAccruedAssetsDeferredDebitsUnamortizeddebtexpenseExtraordinarypropertylossesPreliminarysurveyandinvestigationchargesClearingaccountsTemporaryfacilitiesMiscellaneousdeferreddebitsNoncurrentrecoverablefuelcostsOtherTotalmiscellaneousdeferreddebitsAccumulateddeferredincometaxesForcedoutagereserveOtherTotalaccumulateddeferredincometaxesTotalDeferredDebitsDecember311979103g616g424730,951119,51489119i593g973248985124310,7383g884,354li000,61122,198,430(4g747i909)159816820049300297893i6491,937pl601,035g996383,448665,167(8,721)18,328,19815672612340008105,107,856214039532li89543,335755TotalAssetsandOtherDebits$3,784971609 PennslvaniaPower&LihtComanBalanceSheetLiabilitiesandOtherCreditsB-1Page3G.F.VandersliceAcct.No.201202204207212214215.1216216.1221224225226221224221224231232234235235236237238240241283242TitleofAccountProprietaryCapitalCommonstockissuedCommonstocksubscribedPreferred&preferencestockissuedPremiumoncapitalstockInstallmentsreceivedoncapitalstockCapitalstockexpenseAppropriatedretainedearnings-amortizationreserve-FederalUnappropriatedretainedearningsUnappropriatedundistributedsubsidiaryearningsTotalProprietaryCapitalLong-TermDebtBondsOtherlong-termdebtUnamortizedpremiumonlong-termdebtUnamortizeddiscountonlong-termdebtLessamountduewithinoneyearBondsOtherlong-termdebtTotalLong-TermDebtCurrentandAccruedLiabilitiesLong-termdebtduewithinoneyearBondsOtherlong-termdebtNotespayableAccountspayableAccountspayabletoassociatedcompaniesCustomerdepositsElectricSteamheatTaxesaccruedInterestaccruedDividendsdeclaredMaturedinterestTaxcollectionspayableAccumulateddeferredincometaxes(A)RecoverablefuelcostsRecoverableenergycostsTotaldeferredincometaxesMiscellaneouscurrentandaccruedliabilitiesTotalCurrentandAccruedLiabilitiesDecember311979$752g385g064373,108672i774g50087g000641,879(lli948,819)3,062g721365il26i75337131811,7862153871i341i000g000221,505,203795,197155715817237,500,0002043841957938419149921975337,500g00020,438g41930,775,00054,509,8619,261,4341,008i23413,37015g992,07031,451,93435,465,20931'272,380,57011,867i712(2,202009)966570321,764313S270257744 PennslvaniaPoweraLihtComanBalanceSheetLiabilities&OtherCreditsContinuedB-1Page4G.F.VandersliceAcct.No.252253255281282283TitleofAccountDeferredCreditsCustomeradvancesforconstructionOtherdeferredcreditsAccumulateddeferredinvestmenttaxcreditsElectricSteamheatAccumulateddeferredincometaxes-acceleratedamortizationpropertyCertifieddefensefacilitiesPollutioncontrolfacilitiesTotalacceleratedamortizationpropertyAccumulateddeferredincometaxes-otherpropertyClasslifedepreciationsystemElectricSteamheatDeductionofcostsofremovingretireddepreciablepropertyElectricSteamheatFuelcosts-testgeneration-electricTotalotherpropertyAccumulateddeferredincometaxes-otherNoncurrentrecoverablefuelcostsStateutilityrealtytaxConversiontomonthlybillingOtherTotalotherTotalDeferredCreditsDecember31197943lg4867,343,514125,329,721177,5732g178,3972596438477483536,686,924138,65714g690,93335,34975633015911516410,185,7167,035,9575I022g324348,52422,592,521219,764,814OperatingReserves265Miscellaneousoperatingreserves9,513,911TotalLiabilitiesandOtherCredits3784971609(A)Deferredincometaxesapplicabletothecurrentportionofrecover-ablefuelcostsandrecoverableenergycostsarerecordedinAccount283,butarereportedascurrentliabilitiestocorrespondtothecurrentassetclassificationofsuchcostsreportedinAccount174.

HERSHEYELECTRCB-1Page5G.F.VandersliceBALANCESHEETASSETSANDOTHERDEBITSAcct.No.101107108TitleofAccountUtilityPlantUtilityplantinserviceConstructionworkinprogressGrossutilityplantAccumulatedprovisionfordepreciationofutilityplantinserviceNetUtilityPlantDecember31,197999,882,745512289,933,9737666983131135142143154165174CurrentandAccruedAssetsCashWorkingfundsAccountsreceivableCustomeraccountsreceivableOtheraccountsreceivableTotalaccountsreceivablePlantmaterialsandoperatingsuppliesPrepaymentsRentsreceivableMiscellaneouscurrentandaccruedassetsTotalCurrentandAccruedAssets51,2952001,074g70419,4131094117193,11398,0065,654651,442,450183185186DeferredDebitsPreliminarysurveyandinvestigationchargesTemporaryfacilitiesNoncurrentrecoverablefuelcostsTotalDeferredDebitsTotalAssetsandOtherDebits3,448(534)1443889144680310556236 HERSHEYELECTRCCOMPANYB-1Page6G.F.vandersliceBALANCESHEETLIABILITISAND0CREDITSAcct.No.201211216TitleofAccountProprietaryCapitalCommonstockissuedMiscellaneouspaidincapitalUnappropriatedretainedearningsTotalProprietaryCapitalDecember311979$29,200880,30043543495263849223Long-TermDebtAdvancesfromassociatedcompaniesTotalLong-TermDebt27137872713787232235236237241242CurrentandAccruedLiabilitiesAccountspayableCustomerdepositsTaxesaccruedInterestaccruedTaxcollectionspayableMiscellaneouscurrentandaccruedliabilitiesTotalCurrentandAccruedLiabilities1,202,99517,132112,82648,30634,191426351,458085255282283DeferredCreditsOtherdeferredcreditsAccumulateddeferredinvestmenttaxcreditsAccumulateddeferredincometaxes-otherpropertyClasslifedepreciationsystemDeductionofcostsofremovingretireddepreciablepropertyTotalotherpropertyAccumulateddeferredincometaxes-otherNoncurrentrecoverablefuelcostsTotalDeferredCreditsTotalLiabilitiesandOtherCredits448,901182,29028,57748055766324126921,12051510556236 B-2G.F.VanderslicePENNSYLVANIAPOWZR&LIGHTCOMPANYStatementofNetUtilityOperatingIncomeElectricServiceYearEndedDecember311979Acct'o.PP&L~HersheTotal400401)402)OperatingRevenue(B-3)OperatingExpensesOperationandMaint.(B-4)$844529445$12031579$856561024PowerProduction311,729,169Transmission7,371,727Distribution43,784,387CustomerAccounts19,773,318CustomerServiceandInformationalExpenses4,120,172Sales810,538Administrative&General517930059,219,585493,969162,02Q11,894378441320,948,7547,371,72744,278,35619i935,3384,132,066810,53852171446TotalOperationandMaintenanceExpense403Depreciation407AmortizationofPropertyLoss4393823161026590944964822575,623,316308,83275,871,651308,83269,321,85553,162,368248,335408.1409.1655,214(53,117)IncomeTaxes(B-5)DeferredIncomeTaxes(B>>5)53%215,485TaxesOtherthanIncomeTaxes(B-5)68,666,641410.1411.1ProvisionDeferredinPriorYears-Credit45,958,279(50,'.291,879)1,276,544(861,094)47,234,823(51,152,973)411.4411.6InvestmentTaxCredit(D-5)DeferredAmortizationofDeferments-CreditGainsfromDispositionofUtilityPlant31,742,699(2,641,183)(120526)31,742,699(7,176)(2,648,359)12Q526TotalOperatingExpensesOperatingIncome66184398011524615673368595$182685465S506964$183192429 B-3G.F.VanderslicePENNSYLVANIAPOWER6LIGHTCOMPANYElectricService0eratinRevenuesforYearEndedDecember311979Aeer.SalesofElectricit(1)PPGL(2)~Herehe(3)Total440Residential$339~219j226$2767i830$341~987j056442CommercialIndustrial444Publicstreetandhighwaylighting445Othersalestopublicauthorities446Railroadsandrailways447Resale448Interdepartmentalsales227,472,287240,257,3359,817,07221,7703,159,90714,592,186944775,137,4394,007,90772,688232,609,726244,265,2429,889,76021,7703,159,90714,592,18694477TotalSalesofElectricity83463426011985864846620124Other0eratinRevenues450Forfeiteddiscounts451Miscellaneousservicerevenues454Rentfromelectricproperty456OtherelectricrevenuesTotalOtherOperatingRevenues2,238,883141,6404,223,3533291309989518540,48752282,238,883141,6404,263,8403,296537457159940900TotalElectricOperatingRevenues$844529445$12031579$856561024 PENNSYLVANIAPOMERglLIGllTCOHPANYElectricServiceOperationandMaintenanceExpensesYearEndedDeces>her311979POMERPRODUCTIONEXPENSESSTEAMOMERGENETIOOPERATION500OperationSupervisionandEngineering501Fuel502Stea>aExpenses505ElectricExpenses506HiscellaneousStoa>aPowerExpenses507RentsTotalOperationHAINTENANCE510MaintenanceSupervisionandEngineering511HaintenanceofStructures512HaintenanceofRollerPlant513MaintenanceofElectricPlant514MaintenanceofHlscellaneousStea>sPlantTotalHaintenanceTotalPowerProductionExpenses-Stea>aPowerHYDRAULICPOMERGENERATIONOPERATION535OperationSupervisionandEngineering536MaterforPo~er537HydraulicExpenses538ElectricExpenses539HiscellaneousllydraulicPowerGenerationExpenses540RentsTotalOperationMAINTENANCE541HaintenanceSupervisionandEngineering542MaintenanceofStructures543MaintenanceofReservoirs,DamsandMaterways544HaintenanceofElectricPlant545MaintenanceofMiscellaneousHydraulicPlantTotalMaintenanceTotalPowerProductionExpenses-HydraulicPower(I)PPEiL$2>71900415390619>343(h)7056502552,473,7089,664,867464630562506044953,2342,145,81425,790>54210,354,125209930641343021603849865$115,61731,8624470201433,169284>6245790I310271$45,38762,311622,578290,5843~36251I357111$2675302(2)~007010$$(3),Tot,al$2,719,041539,619,343(A)7,565,2552>473,7089,664,867464630562506844953,2342,145081425,790,54210>354,125209930641343021~603049065$115,6173118624470201433,169284,6245790I31027145,38762>3116220578290,584336251I357111~2675302(h)Cost-Coal6OilOther-Fuelunloading,handling,etc.Total$527,356,26472263079$539619343 FENILSYLVANIATONER4LICIITCOMPANTElectricServiceOperationondHaintenanceExpensesYearEndedDeccnber311979OIIIERPOVERGENERATIONOPERATION546OperstfonSupervisionandEngineering547Fuel548CenerstfonExpenses549HfscellaneousOtherPovcrCcneratfonPxpcnsesSSORents0?PP6L$102,2971,731,058(A)92,27519>933857353$(2)~liershe(3)Total$102,2971,731.058(A)92,27519,933857353TotalOperation28029162802916HAINIBIANCE5SIHafntenanceSupervisionandEnglncerfng552NafntenanceofStructures553NafntensnceofGeneratingsndElectricPlantTotalNafntenancc97>98461>874I675851I83570997,98461,874I67$'8511835709TotalPoverProductionExpenses-OtherPoverOTIIERPOMERSUPPLYEIPENSES$46386254638625555PurchasedPover556SystenControlsndLoadDispatchingSS7HajorForcedOutageProvision557RecoverableEnergyCost$57RccoverablcFuelCostSS7OtherExpenses$(345,612.546)(8)$2,443,4171,734,00018,783,29421>669>828I54730410>366>036$(335>246>510)2,443,4171,734,00018,783,294(1>146>4SI)20>523>377I547304TotalOtherPovcrSupplyExpensesTotalPovcrProductionExpensesTIULNSNISSIONEXPEIISES(299434703921958529021511893117291699219585320948754OPERATION560OperationSupervisionsndEnglnecrlngS61LoadDispatching562StationExpensesS63OverheadLfneExpensesS65Transufssfono!ElectrlcftybyOthersS66HiscellancousTrsnenlsslonExponses567RentsTotalOperotfon8806,4138I,651,040560,29062,406797,880320,820434454242294$806>4131,651>040560,29062,406797,880320,820434454242294(A)Cost-OilOther-Fuelunloading,handling,etc.TotalID)roverPurchased-PfrnIntorchange-PurchasedInterchange-DeliveredInstallodcapacityChargeTotalI5720>86910,18981573l>0582>IGS>74434,670,295(381F8005005)~GSG>580)~5365,655.5465~c4 TRANSHISSIONEXPENSES(Continued)PENNSYLVANIAPOWERSLIGllTCOHPANYElectricServiceOperationandHaintenanceExpensesYearEndedDecember311979HAINTENANCE568HaintenanceSupervisionandEngineering569HaintenanceofStructures570HaintenanceofStationEquipment571HaintenanceofOverheadLines573HaintenanceofHiscellaneousTransmissionPlantTotalHaintenanceTotalTransmissionExpensesDISTRIBUTIONEXPENSESOPERATION580OperationSupervisionandEngineering581LoadDispatching582StationExpenses583OverheadLineExpenses584UndergroundLineExpenses.585StreetLightingandSignalSystemExpenses586HeterExpenses587CustomerInstallationsExpenses588HiscellaneousDistributionExpenses589RentsTotalHaintenance(1)PPSL$177,4036381711,568,327948,5683719643129433~7371727$18971,8011,983,1811,289,5602,468,765233,684416,9901,919,8692,284,0324,461,3051458159184$7345(2)~>ers1e$$18,09713,55256,97927,5104,84545,2773,39829,30238378237338(3)Total$177,40363,1711,568,327948,56837196431294337371727$1,989>8981,983,1811,303,1122,525,744261>194421,8351,965,1462,287>4304,490)607149653618724683HAINTENANCE590Haintenance591Haintenance592Haintenance593Haintenance594Haintenance595Haintenance596Haintenance597Haintenance598HaintenanceSupervisionandEngineeringofStructuresofStationEquipmentofOverheadLinesofUndergroundLinesofLineTransformersofStreetLightingandSignalSystemsofHetersofHiscellaneousDistributionPlant1,086,610364,85028585,08316,261,8981>36310482>067,983666,380803>7419744954,9892,01431,08189,98052,51610,93013,6541,4671>1418599366>8642,616,16416,351,8781,415>5642,078)9136808034805,20897449TotalHaintenanceTotalDistributionExpenses25297$4243784387256631~49396925553673~44278356 CUSTOHERACCOUNTSEXPENSESPENNSYLVANIAPOWER84LIGHTCOHPANYElectricServiceOperationandHaintenanceExpensesYearEndedDecember311979OPERATION901Supervision902HeterReadingExpenses903CustomerRecordsandCollectionExpenses904UncollectibleAccounts905HiscellaneousCustomerAccountsExpenses(1)PAL$301,6664,582,99110,569,6413,699,600619420(2)~>eeche$6,72527,912111,71915,664(3)Total308,3914,610,90310>681,3603,715,264619420TotalCustomerAccountsExpenses~19773318~16202019935338CUSTOHERSERVICEANDINFOIMTIONALEXPENSESOPERATION907Supervision908CustomerAssistanceExpenses909InformationalandInstructionalExpenses910HiscellaneousCustomerServiceandInformational$117,1143,156,765502>830343463$1,8146,9373,143$118,9283,163,702505>973343463TotalCustomerServiceandInformationalExpensesSALESEXPENSES~4120172~11894~4732066OPERATION911Supervision912DemonstratingandSellingExpenses913AdvertisingExpenses916HiscellaneousSalesExpensesTotalSalesExpensesADHINISTRATIVEANDGENERALEXPENSESOPERATION920AdministrativeandGeneralSalaries921OfficeSuppliesandExpenses923OutsideServicesEmployed924PropertyInsurance925injuriesandDamages926EmployeePensionsandBenefits928RegulatoryCommissionExpenses929DuplicateCharges-Credit930HiscellaneousGeneralExpenses931Rents-OfficeBuildingsTotalOperation$103,953348,95845,227312400$810,538$14,253,6958,047,8573,405,0384,081,5322,254,73712>697,69540,058(1,144,567)5,829,95380659~49546657$$$107,77819>4016,9159)57710)804129,1695177211181300597$103,953348,95845,227312400$810,538$14,361,4738,067,2583,411,9534,091,1092,265,54112,826,86440,058,'(1,144,567),~5,835,725'91840~49847254 PENNSYLVANIAPOWER6LIGIITCOMPANYElectricServiceOperationandMaintenanceExpensesYearEndedDecember311979MAINTENANCE932MaintenanceofGeneralPlantTotalAdministrativeandGeneralExpensesTotalElectricOperation6MaintenanceExpenses(1)PP&L224634851793005439382316(2)~Heeche~77044370441~10265909(3)Total232419252171446449648225ae9292390>I4747g90479~en49 PENNSYLVANIAPOt>ER&LIGHTCOMPANYElectricServiceDetailofTazesYearEndedDecember311979(1)PP&L(2)~84B-5Cor.VaT>eerSB,CS(3)TotalTaxesOtherthanIncomeTaxesStateandLocalCapitalStockGrossReceiptsLocalRealEstatePublicUtilityRealtyLocalFranchise,Poles&WirePublicUtilityComsissionExpenseStateUnemploymentCompensationSalesandUseOcherTotalStateandLocalFederalFederalUnenploymcntCompensationFederalOldAgeBenefitsFederalHighMayUseTotalFederalTotalTaxesOtherThanIncomeIncomeTazesFederalStateTotalIncomeTaxesDeferredIncomeTaxesPzovisionforDeferredIncomeTazesClassLifeSystemsRemovalCostDeferredFuelCostsDeferredEnergyCostsPAPublicUtilityRealtyTaxConversiontoMonthlyBillingTotalProvisionforDeferredIncomeTazcsProvisionforDeferredIncoseTaxesCreditClassLifeSystemEmergencyFacilitiesPollutionControlFacilitiesRemovalCostTestPovcr-MartinsCreekOther-ManorCoalPlantDeferredFuelCostsDeferredEnergyCostsPAPublicUtilityRealtyTaxMajorForcedOutage$12,985,81S37,026,967185,272Il>295,6083001,331,892389,794351,05463566705310,8074,789,12950999366866664135,92S,25417287231TsS'il>>5,261,0051,959,8172,426,05724,012,4657,276,611502232445958279(758,101)(126,156)(595,248)(247,980)(87,131)(13,622,856)(33,717,791)(240,654)~895962)$47,000538,6637,7212,51418>3635,362U13626210021,39232,06675434212655.214(53,117)2,9441,273,6001276544(739)(860,355)$13,032,81837,565>630192,99311,298,122~3001,350,255395,156351,071136264187707312,1994,821,19575451341486932185535,875,13717287231~s5,263,9491,959>8173,699,65724,012,4657,276,611502232447234S23(739)(758>101)(126,156)(595,248)(247,980)(87,131)(14,483,211)(33,717,791)(240>654)~895962TotalDeferredIncomeTazes~4333600)TrolProSofarfSr>ofrro0TrroooToror-fro614~50291879)~86109441545051152.9733918150Investmcnt,TaxCreditsDeferredAmortizationofDefermentsTotalInvestmcntTaxCreditTotalAllTaxes31,742,699~2641183)29101516~746650042~7176717641010.37131,742,699~2.64835929094.3403147660413BreakdovnofnctdeferredincometaxesbetveenFederalandStateissho>6nonScheduleD-18.

PENNSYLVANIAPOWER&LXGHTCOMPANYCalculationoftheCompositeCostRateofLong-TennActualatDecember31,1979B-6Page1R.R.FortuneFix'stMortaeBondsAmountOutstanding.($000's)PercenttoTotalEffectiveWeightedCostRate(l)CostRate2-3/410-1/8%3-3/8~3-1/2%9-7/8%3-3/8%4-5/8%4-5/8%5-5/Sh6-3/4%7%8-1/Sh9%7-3./4%7-5/8@7-1/2L9-1/4%9-3/4%9-3/4%8-1/4%8-1/2%SeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSexiesSeriesSeriesSeriesSeriesSeriesSeriesSeiesdue1980due1982due1982due1983due1983-due1985due1991due1994due1996due1997due1999due1999due2000due2001due2002due2003due2004due2005due2005due2006due20071985TotalFirstMortgageBonds$37,000100,0007,50025,000100,00025,00030,00030,00030,00030,00040,00040,00050,00060,00075,00080,00080,000125,000100,000150,000100,000$1,314,5002.82%7.610.571.907.611.902.282282.282.283043.043.804565.716.096099.517.6111.417.61100.00$273%10323.423.5330l23.40'.614.595.536.677.028.169.017.267.647509.309.91~9.868.348.670~08t0.790020.070,770.060.11F100130.150,210,250.340,330'40.460.570,940.750.950,668.18%PollutionControlSeriesA4-5/8%Seriesdue19804-3/4%Seriesdue19814-3/4%Seriesdue19824-7/8%Seriesdue19835-5/8%Seriesdue2003TotalPollutionContx'olSeriesAS~aryTotalFirstMortgageBondsTotalPollutionControlSeriesABankLoansdue19867%Notedue1980OtherLong-TermDebtTotalLong-'TermDebt50050050050024,500$26,500$1,314,50026,500200,00020,000ls505$1'62,5051.89%1.891.8918992.44100.00%84.13%1.6912801.280.10100.00%'.90t5.004.975.085.758,38%5,69151875(2)7..00(3)703.(4)0.0&t0.090.090.105,325,69h6.88%0,101940.090019~02%Notes:(2)(3)(4)EffectivecostrateforeachseriesofFirstMortgageBondsandPollutionContxolBondsastakenfromB-6,page2.Averagepximerateineffect.Nominalinterestratefor7%Notedue1980.Weightedaverage.

ComputationofthePENNSYLVANIAPOWER6LIGHTCOMPANYEffectiveCostRateofFirstMortgageBondsandPollutionControlBondsBSeries,atDecember31,1979FirstMortgaeBondsNominalDateofIssueAveragePrincipalDateofTerminAmount~MaturdtYearsIssuedPremiumor(Discount)atIssuanceCompanyIssuance~ExusesNetProceedsNetProceedsRatioEffectiveCostRate2-3/4%10-1/8%3-3/8%3-1/2%9-7/8%3-3/8%4-5/8%4-5/8%5-5/8%6-3/4%7%8-1/8%9%7-1/4%7-5/8%7-1/2%9-1/4%9-3/4%9-3/4%8-1/4%8-1/2%SeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesdueduedueduedue19801982198219831983-852/1/5010/1/749/1/523/1/534/3/79-6/6/798/1/5512/1/613/1/646/1/6611/1/671/1/696/1/693/1/702/1/712/1/721/1/734/1/745/1/7511/1/7512/1/7612/1/77due1985due1991due1994due1996due1997due1999due1999due2000due2001due2002due2003due2004due2005due2005due2006due20072/1/8010/1/829/1/823/1/836/1/83-6/1/858/1/8512/1/913/1/946/1/9611/1/971/1/9c}6/1/993/1/002/1/012/1/021/1/034/1/045/1/05ll/1/0512/1/0612/1/073083030530303030303030303030303030303030$37,000,000100d000d0007,500,00025,000,000100,000,00025,000,00030,000,00030t000d00030,000,00030,000,00040,000,00040,000,00050,000,00060,000,00075,000,00080,000,00080,000,000125,000,000100,000,000150,000,000100,000,000$342,894(875,000)(500,000)171,300300,000470,970378,300(36,400)(80,000)24,50030,000(3S,250)79,200(298,400)(1,718,750)(875,000)(1,312,500).(1,589,000)$177,894155,20965,489145,417435,311130,03692,216153,42554,72554,84365,88465,90674,78896,892110,041115,987129,660143,454142,078208,229196,460$37,165,00098,969,7917,434,51124,854,58399,064,68924,869,96430,079,08430,146,57530,416,24530,323,45739,897,71639,854,09449,949,71259,933,10874,854,70979,963,21379,571,940123,137,79698,982,922148,479,27198,214,540100.4598'799.1399.4299.0699.48100.26100.49101.39101.0899.7499.6499'099.8999.8199.9599.4698.5198.9898.9998.212.7310.323.423'310.123.404.614.595.536.677.028.169.017'67.647.509.309.919.868.348.67PollutionControlSeriesAdue197'74-1/2%SeriesSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdue19781979198019811982198320034-1/2%4-5/8%4-5/8%4-3/4%4-3/4%4-7/8%5<<5/8%5/1/735/1/73.5/1/735/1/735/1/735/1/735/1/735/1/735/1/775/1/785/1/795/1/805/1/815/1/825/1/835/1/034567891023500,000500,000500,000500,000500,000500,000500,00024,500,000(262'78)185d07727SSld94598~400PD4.954.864.944.905.004.975.085'5wbSIltI PENNSYLVANIAPOWER6LIGHTCOMPANYCompositeCostRateofPreferredandPreferenceStockActualatDecember31,1979B-7Page1R.R.FortuneCumulativePreferredStock:AmountOutstanding($000's)PercentToTotalEffectiveCostRate(1)WeightedCostRate3.35@4.60%4.40%4.50%9.00%8.60%7.40$9.24%8.00%7.75%8.00$7.50%8.25%8'5%SeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSecondSeriesSeriesSeriesSeries$4,1786,30022,87853,0197,76322I23738,40075,00050,00060,00010,00015,00050,00060,0000.62%-0.943'07.881~153.305.71~11.157'38.921.492.237'38.923.37%4.794.465.039.168.757.469.478.067.808.067.548.298.820'280.050.150400'l0290'31~060.600.700'20.170.620'9CumulativePreferenceStock:$8.40Series$8.70Series$8.00Series$13.00Series$11.00Series$9.25Series40,00040,00035,00025,00050,0008,0005.955.955.203.717.431.198.558.848.1413.5111.409.280.510.530.420-500.850.11TotalCumulativePreferredandPreferenceStock$672,775100.00%8.43%Notes:(1)EffectivecostrateforeachseriestakenfromB-7,page2.

PENNSYLVANIAPOWER&LIGHTCOMPANYComtationofPreferredandPreferenceStockEffectiveCostRateBSeries9.00%8.60%7.40%9.24%8.00%7.75%8.00%7.50'%.25%875%SeriesSeriesSeriesSeriesSoriosSeriesSecondSeriosSeriesSeriesSoriosCumulativePreferenceStockCumulativePreferredStock3.35%Series4.60%Series4.40%Series4-1/2%SeriesNominalDividendRate3.35%4.604.404.509.008.607.409.248.007.758.007.508.25875DateofIssue5/2/4610/21/488/5/5212/10/45-12/22/541/14/701/21/708/15/736/8/7610/19/778/8/781/16/792/1/797/2/7911/8/79OriginalAmountIssued$4,178,3006,300,00022,877,30053,018,9007,763,00022,237,00040,000,QQO75,000,00050,000,00060,000,00010,000,00015,000,00050,000,00060i000i000Avg.PrincipalAmounttoboOutstandin1$4,178,3006,300,00022,877,30053,018,9007,763,00022,237,00024,000,00043,965,51731,000,00048,000,0008,000,00015,000,00040,000,00037I200i000IssuancoExpensesNetofPremium$21,029248,899316,821154,373138,310393,860191,4321,074,709233,062293,89960,69678,305210R747290i000(Est)Not~occedsta2$4,157,2716,051,10122,560,47947R435R627>>7,624,69021,843,14023,808,56842,890,80830i766i93847,706,1017,939,30414,92li69539,789,25336i910i000NotProceedsRatio(3)99.5096.0598.6289.4798.2298.2399.20g7.5699.25gg.3999'49948994799~22EffectiveCostRato(4)3'7%4.794.465.039.168.757.469.478.067.808'67.548.298828.55%8.848.1413.5111.409.2898.3098.45983496.2096.5099.73tulSDRItnoM$8.40Series8.40%12/8/70$40,000,000'40,000,000$678,905$39,321,0958.70Serios8.707/15/7140,000,00040,000,000621,62139,378,379$8.0QSeries8.007/11/7235ROQOROOQ35,000,000582,44534,417,555$13.00Series13.0010/10/7425,000,00015,500,000588,84914,911,151$11.00Series11.008/28/7550RQQQRQQO'1ROOOROQQ1,084,49429,915,506$9.25Series9.259/30/I520,000,00012,000,00032,05511,967,945*Afterdeducting$5,428.900attributablotocostofCompanyrefinancedissuescarriedforward.Notes:(1)DeterminedbytakingintoaccountthoaffectofannualsinkingfundrequirementsforthoseserieswhichhavesucharequirementwhicharometbythoretirementofshareswhichreducetheprincipalamountavailableforusebytheCompany.AcalculationofthefullcosttotheCompanymustincludetheeffectofsuchprincipalrepaymentswhichhavebeenmadebydeterminingthesumofthoprincipalamountsoutstandingduringeachyearanddividingbythonumberofyearsthoseriesistobooutstanding.(2)Averageprincipalamounttobeoutstandinglessissuancoexpensesnetofpremium.(3)Netproceedsrelatedtotheaverageprincipaltobooutstanding.(4)Theeffectivecostrateiscomputedbydividingthenominaldividendratebythenetproceedsratio.Ot PENNSYLVANIAHNER&LIQECOMPANYtKstoricalCaitalStructure(MillimsofDollars)Capitalization:1970197119721973197419751976197719781979LongTermIhbtPreferredandPreferenceStockConanEquityTotal$514.4$576.7$635.0$753.0$914.3$1,043.9$1,182.0$1,260.5$1,257.3$1,557.2156.4196.4231.4271.4296.4366.4441.4487.4543.4672.835L3412.17l62,6~532.~g~722.8859.3982.41113.4i973.99~1124.4~1278.5~1494.0~1743.4~2026.4~2346.2~2607.2~2783.1$3343.4CapitalStructureRatios:lungTermDebtPreferredandPreferenceStockCamonEquityTotal52.8%%u16.131.1100.0%51.3/17.531.2100.0%%u49.7%%u18.1322100.0%50.4%18.231.4100.F%%d17.018.130.630.4100.0%100.F/52.4%51.5%50.4%18.830.8100.F/48.3/18.733.0100.F/19.535.3100.F%%d20.1333100.0%45.2%%u46.6%P024 B-9R.R.FortunePENNSYLVANIAPOWER&LIGHTCOMPANYRateofReturnDecember311979CapitalizationRatio(B-8)EmbeddedCostReturnLongTermDebtPreferred&PreferenceCommon46.620.133.39.02%(B-6)8.43(B-7)14.504.201.694.83Total100.0%10.72%

PENNSYLVANIAPOWER&LIGHTCOMPANYC-MEASURESOFVALUEIndexC-1C-2C-3C-4MeasuresofValueandRatesofReturnElectricPlantinServiceElectricPlantHeldforFutureUseConstructionWorkinProgressActuallyinServiceC-5NonrevenueProducingElectricConstructionWorkinProgressSoontobeinServiceC-6ConstructionWorkinProgress-PollutionControlProjectsC-7C-8C-9C-10-InvestmentsinCoalReservesWorkingCapitalFuelStockandMaterialandOperatingSuppliesAccumulatedDeferredTaxesonIncome PEHHSYLVAHIAPOWER&LIGHTCOHPAHYMeasuresofValueandRateofReturnAsofDecember31,1979ReferenceC-2C-2C-3C-4C-4C-5C5C-6C-6C-7C-BC-9C-10B-lElectricPlantElectricPlantinServiceReserveforDepreciationHatAdditionsandDeductions'lectricplantheldforfutureuseCHIPactuallyinserviceRetirementsassociatedwithCHIPactuallyinserviceHon-revenueproducingCHIPsoontobeinserviceRetirementsassociatedwithnon-revenueproducingCHIPsoontoboinserviceCHIPpollutioncontrolpro)actsRetirementsassociatedwithCHIPpollutioncontrolpro)ectsInvestmentincoalreservesHetadditionsanddeductionsDepreciatedElectricPlantworkingCapitalworkingcapitalPuelstockandmaterialsTotalSub-totalDeductionsAccumulateddeferredtaxesonincomeCustomeradvancesforconstructionTotalHeasuresofValueOriginalCost$2,466,892'04637,591,2541,829,301,65041,724,6391,087,071(23,570)8,929,020(276,585)69,021,900(1,210,716)7,750,000127,001,7591,956,303,40933,828,281143'08,780177,237,0612,133,540,47068,008,933431,48668,440,419$2s065,100e0511979Level$5,009,338,3571,872,813,3843,136,524,97341,724,6391,087,071(66,316)8,929,020(1,110,747)69~021'00(2,863,079)7,750,000124,472,4883,260,997,46133,828,281143,408,780177,237,0613'38,234,52268,008,933431,48668.440419$3,369,794,1031977-1979Level$4'56'83,131le776,017,5652,980,865,56641,724,6391,087,071(64,063)8,929,020(1,051,732)69,021,900(2,718,497)7,750,000124,678,3383,105,543,90433,828,281143,408,780177,237,0613,282,780,96568,008,933431,48668,440e419$3,214,340,5461975-1979I.evel$4,478,615,4561,670,130,4122,808,485,04441,724,6391,087,071(60,718)8,929,020(988,295)69,021,900(2,541,649)7,750.000124,921,9682s933e407,01233,828,281143,408,780177,237,0613,110,644,07368,008,933431,48668,440,419$3,042,203,654proformsreturnatpresentratesDollars(D-l)proformareturnatproposedratesDollars(D-1)$173,492,6158.4(Ht$221,389,63810.72'173,492,6155.15%$221,389,6386.57a$173,492,6155.40%$221,389,6386.89%$173'92,6155.7(%$221,389,6387.28%Aoo PENNSYLVANIAPOWER&LIGHTCOMPANYElectricPlantinServiceatDecember311979(2)(3)TrendedOriinalCost(4)DescritionOriginalCost1979AverageLevel1977-1979Level1975-'1979Level~PP&L(ASteamProductionPlantHydraulicProductionPlantOtherProductionPlantTransmissionPlantDistributionPlantGeneralPlantIntangiblePlantElectricPlant-PP&LHersheElectricCo.(BDistributionPlantGeneralPlant$1,049,052,46433,531,47432,679,668278,221,352969,145,39793,734,41364539124570101599,269,027613718ElectricPlant-Hershey9882745TOTALELECTRICPLANT$2466892904$2,089,218,919249,271,96180,768,225536,484,5431,822,709,874211,091,376645991499019028918,309,04583902319148068$5009338357$1,973,189,105233,404,77775,413,812514,414,2101,743,250,474198,151,6556453914738469424171625,015788692184137074756883131$1,845,447,673218,430,63370,266,099488,432,7411,652,361,561185,463,081645391446104717916,823,05574522217568277$44786154560M4OI00mNote:ElectricPlantinServicedetailbyaccountisprovidedasfollows:(A)ExhibitJOB1;Section3(B)ExhibitJOB1;Section4 PENNSYLVANIAPOWER&LIGHTCOMPANYReserveforDereciationatDecember311979TrendedOriinalCostDescritionOriginalCost1979AverageLevel1977-1979Level1975-1979LevelOtherProductionPlant(A)TransmissionPlant(B)DistributionPlant(B)GeneralPlant(B)IntangiblePlant(B)16,781,66859,759,620244,318,11119,898,842PP&LSteamProductionPlant(A)$281,644,022HydraulicProductionPlant(B)12,579,884$783,879,107137,496,65643,902,428160,782,771658,182,91081,957,527$740,205,428128,567,24441,005,522153,862,224629,166,52976,854,886$692,320,471120,104,36938,223,174145,816,313595,842,72971,755,762ReserveforDepreciation-PP&LHersheElectricCo.$634982147$1866201399$1769661833$1664062818DistributionPlant(C)GeneralPlant(C)2,533,170759376,475,2541367316,227,860127872$5,946,758120836ReserveforDepreciation-Hershey$2609107$66119856355732$6067594TotalReserveforDepreciation$637591254$1872813384$1776017565$1670130412OWen0mmNote:DetailsupportingtheReserveforDepreciation-Electricissetforthasfollows:(A)ExhibitJOB6(B)ExhibitJOB1Section3(C)ExhibitJOB1Section4 C-3G.F.VandersliceW.F.HechtPENNSYLVANIAPOWER6LIGHTCOMPANYElectricPlantHeldForFutureUseDecember31,1979PRODUCTIONPLANTTotalLandforfuturegeneratingstations$11,295,246TRANSMISSIONPLANTRightsofwayforproposedtransmissionlinesLandforproposedsubstationsites18,080,108715,541TotalTransmissionPlant18,795,649DISTRIBUTIONPLANTRightsofwayforproposeddistributionlinesLandforproposedsubstationsitesOtherdistributionproperty7,171,3661,626,'809242,896TotalDistributionPlant9~041,071GENERALPLANTLandforfuturebuildings2,592,673Total(B-l,Page1)AmountsclaimedforElectricPlantHeldForFutureUserepresentinvestmentinlandandrightsofwayrequiredforfacilitieswhichmustbebuiltinfutureyearstoaccommodatethegrowingneedsofourcustomers.Thesesiteswereacquiredinadvanceoftheactualconstructiondatessincesiteswhichmeetsystemrequirementsaswellasbeingacceptablefromanenvironmentalandotherecologicalstandpointsarebecomingmoredifficulttoobtainandmaynotbeavailablewhenthefacilitiesareneeded.TheCompany'stotalinvestmentinElectricPlantHeldForFutureUseatDecember31,1979was$41,724,639.RefertoresponsetoRegulationI-A-14foradditionalinformation.

C-4Page1G.F.VanderslicePENNSYLVANIAPOWER&LIGHTCOMPANYConstructionWorkinProressActuallinServiceatDecember311979AtDecember31,1979,certainnewfacilitiesrepresentingtotalestimatesof$1,087,071hadbeenplacedinservicebutthedocumentationofcompletionwasnotreceivedfromfieldforcesintimetomakethetransferfromConstruc-tionWorkinProgresstoPlantinServicepriortoclosingthebooksatDecember31,1979.ThefollowingshowsthetotalestimatesforConstructionWorkinProgressActuallyinServicebytheplantaccountstowhichtheexpendituresshownonpage2wererecordedshortlyafterDecember31,1979.RefertoresponsetoregulationI-A-12foradditionalinformation.AccountNo.DescritionTotalEstimatesTransmissionPlant352StructuresandImprovementsTotal$8700087000DistributionPlant360.4364.2364.6364.4364.8365366367368.2LandandLandRightsLandRightsTowersandFixturesTowersandFixturesClearingLandandRightsofWayPolesandFixturesPolesandFixturesClearingLandandRightsofWayOverheadConductorsandDevicesUndergroundConduitUndergroundConductorsandDevicesLineTransformersOverheadType42,61739,0012,198470,494337918375,0524,8979,79422100TotalGrandTotal1000071$1087071 PENNSYLVANIAPOWER&LIGHTCOMPANYC-4Page2G.F.VandersliceJ.O.BeamerRetirementsAssociatedwithConstructionWorkInProgress-InServiceDecember311979No.AccountDescritionOriginalCostTrendedOriinalCost19791977-19791975-1979LevelLevelLevel361.0362.0DistributionStructures&ImprovementsStationEquipment$15,00058000$123,241$115,010209068205707$108,304195615TotalRetirementsLessCalculatedDepreciation73,00049430332,309320,717303,919265993256654243201Net$23570$66316$64063$60718 C-5Page1G.F.VandersliceW.F.HechtPENNSYLVANIAPOWER&LIGHTCOMPANYNonrevenueProducingConstructionWorkinProgressSoonToBeInServiceAtDecember311979Amountsclaimedfornonrevenueproducingelectricconstructionworkinprogresssoontobeinservicerepresentestimatedtotalamountstobeexpendedonthetypeofprojectsoutlinedbelow.ThespecificprojectsincludedaresimilartothoseallowedasratebaseinthedeterminationbythePUCinthepriorPennsyl-vania,Power&LightCompanyRateOrderatR.I.D.221etaldatedAugust26,1976.Onlyprojectswhichmeetthefollowingcriteriaareincludedintheamountsshown:(1)tobecompletedwithinashorttimepasttheendofthetestyear,(2)identifiableasnonrevenueproducing,(3)identifiableasnonexpensereducing,(4)notaffectingthelevelofoperationsattheendofthetestyear,(5)improveenvironmentalconditions,orthequalityandreliabilityofservice.Propertytoberemovedfromserviceconcurrentwiththesenewfacilitiesisshownonpage2.TheCompany'stotalinvestmentinelectriccon-structionworkinprogressatDecember31,1979was$1,473,135,893.RefertoresponsetoregulationI-A-13foradditionalinformation.DescritionAmount.AmountExpendedtoEstimatedto>>/>>/>>TotalElectricPlantProductionExpendituresforfacilitiesrequiredtoprovideadequatecapacityandservicereliabilityforloadsexistingintestyear.$5,077,922$327,978$5,405,900TransmissionInstallationoffacilitiesrequiredtoimproveservicereliabilityandqualityofsupplyforloadsexistingintestyear.242,18081,820324,000Distribution4kVto12kVchangeover247,70362,147309,850Installationoffacilitiestoimproveservicereliabilityandqualityofsupplyforloadsexistingintestyear.180,73390,037270,770GeneralInstallationoffacilitiestoimproveservicetocustomersservedintestperiod.17475268709742618500Total$7,496064$1,432956$8929020 PENNSYLVANIAPOWER&LIGHTCOMPANYC-5Page2G.P.VacdezsllceJ.o.Bea$$erRetirementsAssociatedwithElectricConstructionWorkinProgressSoonToBeInServiceAtDecember311979TrendedOriinalCostNo.Account~Descrfcsee19791977-1979Level1975-1979LevelSteamProductionSunburyS.E.S.312.0BoilerPlantEquipment8380008209950S199930S187044MartinsCreek83&84S.E.S.314.0TurboGeneratorHoltwoodS.E.S.312.0BoilerPlantEquipmentDistribution1000100001360286501265,27283117525524360.4362.0364.4364.8365.0366.0367.0368.2369.0373.2LandRightsStationEquipmentPoles&FixturesClearingLandandR/W-PolesOverheadConductors&DevicesUndergroundConduitUndergroundConductors&DevicesTranf.OverheadTypeServicesSt.Lght.&Sig.Sys.-Merc.Vapor70091,30020$90030017,3008,0002,9006006,200200700285,47747,7361,16433.37218$3364,8989588,221360700280,88745,0671,09631,79917,0054,8299197,883344700267010842,9401,01829,61616,0664,7468297,749323148400401222390529371095General389.0Land&LandRights390.2Struc.&Imp.=Buildings390.4Struc.&Imp.-AirCond.Equip.74,400474,5002170074,4006,013,9256967974,4005,640,7046542074,4005,257,18860758570600615800457805245392346TotalRetirementsLessCalculatedDepreciation768,0004914156,799,18656884396,399,53153477995,977,1844988889NetS276585Sl110747Sl051732S988295 C-6Page1PENNSYLVANIAPOWER&LIGHTCOMPANYG.F.VandersliceW.F.HechtConstructionWorkinProgress-PollutionControlProjectsDecember311979DescritionAmount(a)BrunnerIslandInstallnecessaryequipmenttoprovidepermanentsulfuricacidfeedsystemtotheIncidentalWasteTreatmentBasinasrequiredbytheNationalPollutantDischargeEliminationSystempermitforthebasin.$132,000Upgradeexistingflyashpipingandmodifycontrolstoallowashsystemtoremovequantitiesofashproducedbyfuelpresentlyburned.62,000(b)InstallaheavygaugeoilresistantPUClinerintheexistingcatchbasinsurroundingtheNo.1andNo.2fueloilstoragetanksandthetransferoiltank.50,000Installacid/causticsodafeedsystem,pHcontrolandmonitoringequipment,andrelatedfacilitiesatAshBasinNo.4toeliminateillegaldischargeofplantwastewater.189,000Constructnewashbasin(No.6)forthedisposalofashandprovidethenecessaryfacilitiestosluicetheashtothebasin.3,971,000(b)InstallapHcontrolfacilityonAshBasinNo.6consistingofacid/causticfeedsystem,pHmonitoringandcontrolsystem,pumphousebuilding,bodyandeyewashstationandfloatingwalkwayaccesstopHprobe.587,000Constructanewashbasin(No.7)forthedisposalofbottomash.Theworkincludestheconstructionofembankments,dischargestructureanddischargelinetotheriver.2,038,000InstallacompletebagfilterflyashcollectorsystemtogettheparticulatedischargefromUnitNo.1intocompliancewiththerequirementsofthePennsylvaniaDepartmentofEnvironmentalResources.15,533,500(b)InstalltwonewelectrostaticprecipitatorstooperateinserieswithanddownstreamoftheexistingprecipitatoronUnitNo.3.23,700,000InstalladditionalauxiliaryelectricequipmenttosupplyloadsimposedbytheadditionofabagfilteronUnitNo.1andelectrostaticprecipitatoronUnitNo.3.5,100,000Installwalkwaybetweentheexistingboilerplatformandthepenthouseoftheprecipitatortocarrypersonnelandequipmentrequiredtodonormalroutinemaintenanceontheprecipitator.40,000(a)Estimatedexpendituresthrough12/31/80(b)Relatedretirementnetofcalculateddepreciationshownonpage5.

PENNSYLVANIAPOHER&LIGHTCO>PANYC-6Page2G.F.VandersliceN.F.HechtConstructionNorkinProgress-PollutionControlProjectsDecember31,1979DescritionAmount(a)BrunnerIsland(continued)Upgradeprecipitatorbyinstalling.newrappercontrols,hopperleveldetectorsandanenclosurearoundthehoppers.ThisprojectisrequiredtomaketheprecipitatormorereliableandtocomplywiththePennsylvaniaDepartmentofEnvironmentalResourcesstandards.557,000Regradeandseedtheareaimmediatelynorthofthecoalpileandplantentranceroadinordertoremovethepresentacidponda45,000Aesthetic,treatmentofAshBasinNo.3includingsedimenta-tionbasins,finegrading,topsoiling,seedingandconstructionofdrainageditchesandculverts.300000TotalBrunnerIsland852304500MartinsCreekInstallaverticalturbinepumpoverUnitsNo.1and2condensers'ealwell.Includedwiththisworkarestructuralmodificationstothesealwellandthepowersupplyandcontrolsforpump/motoroperations.Thispumpisintendedtosupplysluicewatertotheashremovalsystem.129,000Constructanew30acrebasinandinstallrelatedfacilitiesforthedisposalofflyash.3,000,000InstallclosedcircuitTVsystemontopofUnitNo.3boiler.ThisprojectisrequiredtomonitorstackemissionsonUnitsNo.1,2,3and4stacks.60,000UpgradeprecipitatoratUnitsNo.1and2byinstallingaprogrammablerappercontxolsystem,hopperheatersandhopperflyashhighlevelalarms.101400(b)TotalMaxtinsCreekS3290400~SunbutModifyUnitsNo.3and4rawwatersupplyfacilitiestoassureadequatereliablesupplyofrawwatertoflyashremovalsystemhydroveyors.86,000Purchaseagravitydisplacementoil-waterseparatortanktobeinstalledatthecombustionturbinegeneratorsite.Tocollectoil-waterrunofffromthefueloiltankandunloadingarea.100,000(a)Estimatedexpendituresthrough12/31/80.(b)Relatedretirementnetofcalculateddepreciationsshownonpage5.

PENNSYLVANIAPOWER&LIGHTCOMPANYC-6Page3'.P.VandersliceW.P.HechtConstructionWorkinProgress-PollutionControlProjectsDecember311979DescritionAmount(a)~Sunbut(continued)InstallachlorinationsystemtomeettherequirementsfortheNationalPollutantDischargeEliminationSystempermitforchlorine.309,000(b)InstallsheetmetalcontainmentpansbeneathUnitsNo.3and4precipitatortransformerrectifiersets.Topreventoilleakagefromtransformerrectifiersetsfromenteringstormdrains.StormdrainsdischargeintotheSusquehannaRiver.52,000ProvideadditionalflyashstoragefacilitiestoconformtotheNationalPollutantDischargeEliminationSystemguidelinesandthePennsylvaniaDepartmentofEnvironmentalResourcesregulations.151,000RaiseAshDamNo.3tenfeettoallowforadditionalstorageofflyash.175,000InstallanautomaticcalibrationcheckingsystemforSOmonitorsforUnitsNo.3and4.InstallanewS02monitoringsystemforUnitsNo.1and2.Installplatformextensionsunderhydroveyorlinestoprovideaccesstopipingwithouttheuseofspecialapparatus.TotalSunbury76,00040,00032000$1021000HoltwoodInstallasludgeremovalsystemfortheIncidentalWasteBasintoincreasestoragecapacityandwaterquality.45,000InstallacompletenewbagfiltercollectorsystemtoreplacetheexistingscrubberforUnitNo.17.5,269,000(b)Relocateconstructionwarehouse/crewfacilityinordertoprovideasiteforanewbagfilterinstallation.470,000(b)PreparesitefornewbagfilterinstallationatUnitNo.17asrequiredbyorderofthePennsylvaniaDepartmentofEnvironmentalResources.616000(b)TotalHoltwood$6400000(a)Estimatedexpendituresthrough12/31/80.(b)Relatedretirementnetofcalculateddepreciationshownonpage5.

PENNSYLVANIAPOWER&LIGHTCOMPANYC-6Page4G.F.VandersliceW.F.HechtConstructionWorkinProgress-PollutionControlProjectsDecember311979DescritionAmount(a)MontourInstallhardpipingforincinerationofchemicalmetalcleaningwastestoUnitsNo.1and2boilers.ThisprojectisrequiredtomeetthestandardsofthePennsylvaniaDepartmentofEnvironmentalResourcesandtheFederalEnvironmentalProtectionAgency.160,000InstallacompleteflyashhandlingsystemforUnitsNo.1and2toeliminatedischargeofarsenicladenashconveyingwatertotheChillisquaqueCreek.3,905,000Installaheavygaugeoilresistantvinyllinerintheexistingcatchbasinsurroundingthe500,000gallonmainfueloilstoragetanktocollectanyoilthatwouldotherwiseseepintotheground.101,000Installcooling.towercausticpumpsandpHmonitorsfor'nitsNo.1and2toprovideproperfeedingandmonitoringofcausticandkeepingdeteriorationtoaminimum.43,000ConstructanewAshBasinNo.2withcenterbarrierorseriesofbarrierstofacilitateefficientandequaldepositionofashandpyrites.1,418,000InstallautomaticcalibrationcheckingsystemforS02monitorsatUnitsNo.1and2tocomplywiththePennsylvaniaDepartmentofEnvironmentalResourcesrequirements.109,000Installnewheatersandadditionalairblowercapacitytoincreasethetemperatureandflowofairtotheprecipitatorinsulatorcompartments,andinsulatetheexistinginsulatorcompartments.179,000SafetymodificationsforUnitsNo.1and2precipitatortobringequipmentintocompliancewiththeOccupationalSafetyandHealthAdministrationstandards.91000TotalMontourTotalPollutionControlS6006000$69021900(a)Estimatedthru12/31/80.(b)Relatedretirementnetofcalculateddepreciationshownonpage5.

PENNSYLVANIAPOWER&LIGHTCOMPANYRetirementsAssociatedwithConstructionWorkInProgressPollutionControlProjectsDecember311979TrendedOriinalAccountNo.AccountDescrition19791977-1979Level1975-1979LevelSteamProduction314.0SunburyS.E.S.TurboGeneratorUnits24000$105264$97926$90924312.0MartinsCreekf/1&82S.E.S.BoilerPlantEquipment500010615101089457312.0311.0312.0BrunnerIslandS.E.S.BoilerPlantEquipmentHoltwoodS.E.S.StructuresandImprovementsBoilerPlantEquipmentTotalHoltwood73580030,0001000000103000094,1101675052100,35917590001859359176916218750711785583167049488,33415670861655420390.6GeneralStructures&ImprovementsTotalRetirementsLessCalculatedDepreciationNet1344001,929,200718484$1210716114713110759414,997,4404,738,72021343612020223$2863079271849710027874,429,0821887433$254164900~,WC5oqISQ9C4S0n0 C-7G.P.UanderslicePENNSYLVANIAPOWER&LIGHTCOMPANYInvestmentinBituminousCoalReservesYearEndedDecember311979Thereasonforacquiringstrippablebituminouscoalreservesistosecurecontroloverhighquality,lowsulfurbituminouscoalreservesatacompetitiveprice.Insupplyingelectricity,PP&Lhasacontinuingandlongtermneedtosecuresourcesoffuelnecessarytooperateitsgeneratingplants,mostofwhicharedesignedtoburnbituminouscoal.Operatingthoseplantsissubjecttovariousenvironmentalprotectionmeasures,includinglimitationsonsulfuremissions.TheArcadiaandHolland/Mitchell/Colavecchicoalreservesarerelativelylowinsulfurcontent.ThequalityofthereservesissuchthatneitherwashingorblendingwillberequiredtoshipaproductthatmeetsPP&L'sspecificationswithregardtosulfur,fusionandashcontent.Accordingly,thesereservesshouldbecompetitivebothwithotherlowsulfurcoalandwiththealternativeofinstallingcleaningequipmentatgeneratingstationstomeetincreasinglymorerestrictivesulfuremissionlimitations.ArcadiaCoalReservesOnFebruary7,1980,PP&Lsignedanagreementtoacquiretheestimated8milliontonsofrecoverablebituminouscoalreservesoftheArcadiaCompany,Inc.ofIndianaCounty,Pennsylvania.TheacquisitionisscheduledtobecompletedbySeptember,1980sub)ecttoseveralconditions,however,includingapprovalbythePennsylvaniaPublicUtilityCommission.Amount$7,000,000Holland/Mitchell/ColavecchiOnMarch4,1980PP&Lexerciseditsoptiontoacquirethemineralrightsforabout1,666acresoftheHolland/Mitchell/Colavecchipropertiescontaininganestimated1milliontonsbituminouscoalreserves.Thesecoalreservesareonly15milesfromtheArcadiaReservesdescribedabove.750000TotalInvestmentinBituminousCoalReserves$7750000 C-8Page1G.F.VanderslicePENNSYLVANIAPOWER&LIGHTCOMPANYWorkingCapitalDecember311979OperationandMaintenanceExpenses(Page2)DeferredEnergyCosts-Recoverable(Page3)AveragePrepayments(Page4)AccruedTaxAdjustment(Page5)MinimumBankBalance(Page12)Total$29,503,3453,527,3923,445,863(3,536,319)888000$33828281 PENNSYLVANIAPOWER&LIGHTCOMPANYWorkingCapitalRequiredforOperationandMaintenanceExpensesDecember311979C-8Page2G.r.VandersliceLineNo.6789101112131415a617Average~Daa(a)$455,546,56832(a)347,745,47234(a)66,071,6403934712171035089,727,96512,351,63116,255,563275,485,04210,376055655,581,2701,17409694,939,816173,740,311111612226163225148,167,6692810525647433753057266(b)Revenuefrom15-dayduedatecustomersRevenuefrom20-dayduedatecustomersRevenuefrom30-dayduedatecustomersInterchange(net)TotalLess:Averagelaginpaymentofoperationandmaintenanceexpenses:Salarypayroll$HourlypayrollEmployeebenefitsBituminouscoalAnthraciteCoalFreightbillsPetroleumCokeoiaMartin'sCreekUnitP3&P4OilMartin'sCreekUnit83&84oiatransportationOtherTotal(b)$$14,577,490,17611,823,346,0482,576,793,9601214925985041126890034$987,007,615197,626,09616,255,5636,060,670,924269,790,456889,300,32037,599,008123,495,4002,432,364,354228,694,7323473463642$1471626811018Averagelaginreceiptofrevenue($41,126,890,034+$1,216,485,390)19Averagelagindaysinpaymentofoperationexpenses($14,716,268,110+$753,057,266)20Averagelagindaysbetweenpaymentofoperatingexpensesandreceiptofrevenues21Operatingexpense22Perday($753,057,266+365days)23Requirement($2,063,171x14.3days)33.819.514.3$753,057,266(b)2,063,171(a)MidpointofthirtydayserviceperiodLagbetweenmeterreadingdateandbillingdateNumberofdaysfrombillingdatetoaveragepaymentdate15days15days15days444133215342039CUSTOMERSDUEDATE~15das~20das30days(b)Adjustedoperationandmaintenanceexpense(D-l,line2,Col.3)Energy/fuelcostrecoverablethroughenergyclause(D-4)Netinterchangedelivered-classifiedasrevenueforpurposesofthisscheduleTotalLess:Non-cashitemsUncollectableaccountsexpense-perbooksyearended12/31/79(B-4,Majorforcedoutage-adjusted(D-5)Deferredfuelcost-perbooksyearended12/31/79(B-4,Pg.2)Total$415,922,78819,462,815347121710782,507,313Pg.4)3;715,2644,064,95521669828$753057266 C-8Page3G.F.VanderslicePENNSYLVANIAPOWER6LIGHTCOMPANYDeferredEnergyCostsDecember311979DeferredEnergyCosts-'RecoverableDeferredIncomeTaxes-RecoverableEnergyCostDeferredEnergyCost-NetofTaxes$7,298,556(A)3771164(B)$3527392(A)Energycostdeferredpertestyearconditions(adjustedforannualizedsales).Thisrepresentsa4-1/2monthofenergycostswhichwouldbetheestimatedamountdeferredatanygiventime.4.5mo.xnetenergycostrecoverableof$19,462,815=$729855612.0mo.(D-4,Page1)(B)Effectivetaxrateof53..67%.

PENNSLVANIAPOWER6LIGHTCOMPANYComputationofAveragePrepaymentsExcludingTaxesYearEndedDecember311979C-8Page4G.P.VandersliceTotalInsuranceRentsVehicleRegistrationPostageDecember1978January1979FebruaryMarchAprilyJuneJulyAugustSeptemberOctoberNovemberDecember$4,136,2774,384,4054,189,9703,727,7523,627,8003,444,9693,252,9703,084,8512,649,8432,261,3343,319,8093,626,1053,090,128$3,841,0083,782,2873,789,2313,458,4663,139,4902,831,5982,807,4252,443,6522,113,4891,861,2902,709,3743,178,2402,799,141375,610219,88558,761366,042212,85650,128304,689211,50168,912324,257192,26060,736167,814137,627107,40876,315337,164306,448275,643244,362268,085236,668204,375173,193$72,345$1737203$49,72158769443,227103,11745,95363,35188,96960,86780,49163,04749,51051,23057,058Total$44,796,213$38,754,691$2,517,982$2,708,305$815,235MonthlyAverage$3,445,863$2,981,130$193,691$208,33162,711 PPGLEXHIBITHISTORIC1Revised8/6/80C-8RevisedPage5G.F.VanderslicePENNSYLVANIAPOWER&LIGHTCOMPANYAccruedTaxAdjustmentDecember311979ProFormaTaxes12MonthAdjustmentYearEndedAverageForAccruedReference12/31/79FactorTaxesFederalIncomeTaxD-l,Line5$78,790,133Col.5(8~8)$(67933p532)PennsylvaniaIncomeTax(a)27,182,0212.7733p915PennsylvaniaGrossReceiptsTax(b)42,000,71312.45,208,088PennsylvaniaCapitalStockTax(c)13,699,972124ld698p797PennsylvaniaPublicUtilityTaxTotalll298122$1729709619.91,118,514$1,825,782PennslvaniaIncomeTax$18,061,806(D-l,Line6,Col.5)x10.5/6.977=$27182021PennslvaniaGrossReceitsTaxActualyearended12/31/79(B-5)Adjustmentduetoannualizedrevenues(D-16)$19,348Adjustmentduetoproposedrates(D-17)1951800Total81971148$37,565,63045mills$1,971,148x20mills4435083Total$42000713PennslvaniaCaitalStockTaxActualyearended12/31/79(B-5)Adjustment(D-16)Adjustmentduetoproposedrates(D-17)Total$13,032,818(5,100,217)287382$821998310mills$8,219,983x6mills$13699972 age5G.F.VanderslicePENNSYLVANIAPOWER&LIGHTCOMPANYAccruedTaxAdjustmentDecember311979FederalIncomeTaxProFormaTaxes12MonthAdjustmentYearEndedAverageForAccruedReference12/31/79FactorTaxesD19Line5$78p790133(ll9)$(9p376p026)Col.5PennsylvaniaIncomeTaxPennsylvaniaGrossReceiptsTaxPennsylvaniaCapitalStockTaxPennsylvaniaPublicUtilityTaxTotal(a)(b)(c)B-527,182,02142,000p71313,699,97211298122$172970961(.4)9.39.36.8(108,728)3,906,0661,274,097768272$(3536319)PennslvaniaIncomeTax$18,061806(D-l,Line6,Col.5)x10.5/6.977=PennslvaniaGrossReceitsTax$27182021Actualyearended12/31/79(B-5)Adjustmentduetoannualizedrevenues(D-16)$19,348Ad5ustmeotduetoproposedrstes(D-17)1951800Total51971148$37,565,63045mills$1,971,148x20millsTotal4435083$42000713PennslvaniaCaitalStockTaxActualyearended12/31/79(B-5)Adjustment(D-16)Adjustmentduetoproposedrates(D-17)Total$13,032,818(5,100,217)287382$821998310mills$8,219,983x6mills$13699972 LineNo.PriorYearAvailableinCurrentYearPENNSYIVANIAPOWERANDLIGHTCOHPANYAVERAGEPERCENTOFFEDERALINCONETAXAVAILABLEAFTERPAYOUTTOTALJAN.FEB.NAR.APRILHAYJUNEJULYAUG.SEPT.OCT.NOV.DEC.1CumulativeCollections2CumulativePayments3PriorYearAvailableCurrentYearAvailableinCurrentYear1.0998.91100.00100.00100.00100.00100.00100.00100.00100.00100.00.100.00100.00100.00loo.ooloo.ooloo.ooloo.ooloo.ooloo.ooloo.ooloo.ooloo.ooloo.oolao.ao1.094CumulativeCollections2.3710.6720.l329.24,'7.6445.5453.2060.8968.78,76.6084.3892.44CumulativePayments5April1525%6June1525%7Sept.1525%8Dec.1525%12.5025.0025.0025.0025.0025.0025.0025.0025.0012.5025.0025.0025.0025.0025.0025.0012.5025.0025.0025.0012.509CurrentYearAvailable10Total-PriorYearandCurrentYearAvailablellAveragePercentAvailable106.88l05.798.822.37.10~6720.13~~7803.00.89.6.283.2010.896."28l28l0.6?20.1316.7412.648.041.60~1.609.389.384.944.94NOTE:PaymentsApril15June15Sept.15Dec.1525%25%25%25%A4m02muonIm8oco~228m2o~m0Q<VnO2gp PENNSYLVANIAPOWERANDLIGHTCOHPANYAVERAGEPERCENTOFFEDERALINCOHETAXAVAILABLEAFTERPAYOUTLineNo.PriorYearAvailableinCurrentYearTOTALJAN.FEB.HAR.APRILHAYJUNEJULYAUG.SEPT.OCT.NOV.DEC.1CumulativeCollections2CumulativePayments3PriorYearAvailableCurrentYearAvailableinCurrentYear4CumulativeCollectionsCumulativePayments5April1525$6June1525$7Sept.1525$8Dec.1525K100.00100.00100.00100.00100.00100.00100.00.100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.004.7414.2323.6432.5140.6648.4456.0563.8371.7479.5287.3195.6212.5025.0025.0025.0025.0025.0025.0025.0025.0012.5025.0025.0025.0025.0025.0025.0012.5025.0025.0025.0012.509CurrentYearAvailable13.29.71.2323.20.0115.0.9.0513.83.9.24.5212.318.1210Total-PriorYearandCurrentYearAvailablellAveragePercentAvailable143.2911.944.7414.2323.6420.0115.6610.946.0513.839.244.5212.318.12NOTE:PaymentsApril1525%June1525XSept.1525/Dec.1525/~nnI00Dmg'imnIqn.O PENNSYLVANIAPOWERANDLIGHTCONPANYAVERAGEPERCENTOFSTATEINCOHETAXAVAILABLEAFTERPAYOUTLineNo.PriorYearAvailableinCurrentYearTOTALJAN.FEB.HAR.APRILHAYJUNEJULYAUG.SEPT.OCT.NOV.DEC.1CumulativeCollectionsCumulativePayments2PreviousYear-90X3April15-10$4PriorYearAvailableCurrentYearAvailableinCurrentYear98.91100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.0090.0090.0090.0090.0090.0090.0090.0090.0090.0090.0090.0090.005.0010.0010.0010.0010.0010.0010.0010.0010.0033.9110.0010.005.005CumulativeCollections2.37'0.6720.1329.2437.6445.5453.2060.8968.7876.6084.3892.44CumulativePayments6April1572$7Sept.159%%d8Dec.159X9Current.YearAvailable66.12)2.3710.6736.0072.0072.0072.0072.0072.0072.0072.0072.004.509.009.009.004.5020.13(6.76)(34.36)(26.46)(18F80)~(ll.ll)(7.72)~(4.40)3.386.9410Total-PriorandCurrentYearAvailablellAveragePercentAvailable(3221)ii@2820~6730.13(l76)(34~36)(26~46)(18~80)(llell)(7~72(4.40)3~386.94(2.68)NOTE:PaymentsApril1572$ThisYearSept.159gThisYearDec.159gThisYearApril1510$NextYearAeegeeeQQOPe+cocotf0MM8e4O

PFNNSYLVANIAPOWERANDI.IGNTCONPAlIYAVERAGEPERCENTOFSTATEINCONETAXAVAILABLEAFTERPAYOUTLineNo.PriorYearAvailableinCurrentYearTOTALJAN.FEB.WAR.APRILHAYJUNEJUIYAUG.SEPT.OCT.NOV.DEC.1CumulativeCollectionsCumulativePayments2PreviousYear-90$3April15-10$4PriorYearAvailableCurrentYearAvailableinCurrentYear5CumulativeCollectionsCumulativePayments6April1572%7Sept.159%8Dec.159g100.00100.00100.00100.00.100.00100.00100.00100.00100.00100.00100.00100.0090.0090.0090.0090.0090.0090.0090.0090.0090.0090.0090.0090.005.0010.0010.0010.0010.0010;0010.0010.0010.0035.0010.0010.0010.005.004.7414.2323.6432.5140.6648.4456.0563.8371.7479.5287.3195.6236.0072.0072.0072.0072.0072.0072.00,72.0072.004.509.009.009.004.509CurrentYearAvailable29.71.71.2323.3.931.323.55.958.17.71.8.3110.1210Total-PriorandCurrentYearAvailablellAveragePercentAvailable5.2914.7424.2333.641.5131.34)(23.5615.95)(8.17)4.76(1.48)6.3110.12.44NOTE:PaymentsApril1572%ThisYearSept.159gThisYearDec.159%ThisYearApril1510$NextYearomIu0h0 PENNSYLVANIAPOWERANDLIGIITCOHPANYAVERAGEPERCENTOFPA.GROSSRECEIPTSTAXANDPA.CAPITALSTOCKTAXAVAILABLEAFTERPAYOUTLineNo.PriorYearAvailableinCurrentYearTOTALJAN.FEB.HAR.APRILHAYJUNEJULYAUG.SEPT.OCT.NOV.DEC.ICumulativeCollectionsCumulativePayments2PreviousYear-90$3April15-IOX4PriorYearAvailableCurrentYearAvailableinCurrentYear98.91100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.0090.0090.0090.0090.0090.0090.0090.0090.0090.0090.0090.0090.005.0010.0010.0010.0010.0010.0010.0010.0010.0033.918.9110.0010.005.005CumulativeCollections2.3710.6720.1329.2437.6445.5453.2060.8968.7876.6084.3892.44CumulativePayments6April15-90K45.0090.0090.0090.0090.0090.0090.0090.0090.007CurrentYearAvailable183.122.37l0.6720.13(15.76)(52.36)(44.46)(36.80)(29.11)'21.22)-(13.40)(5.62)2.448Total-PriorandCurrentYearAvailable9AveragePercentAvailable(149.21)11.2820.6730.13(10.76)(52.36)(44.46)(36.80)(29.ll)(21.22)(13.40)(5.62)2.44(12.43)NOTE:PaymentsApril15April1590$ThisYearIOXNextYearANoCrnOAenN&OCOmi<VCOg PEHHSYLVANIAPOQERANDLIGIITCOHPANYAVERAGEPERCENTOFPA.GROSSRECEIPTSTAXANDPA.CAPITALSTOCKTAXAVAILABLEAFTERPAYOUTLiueHo.PriorYearAvailableinCurrentYearTOTALJAN.FEB.HAR.APRILt!AYJUNEJULYAUG.SEPT.OCT.NOV.DEC.1CumulativeCollections100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00CiimulativePayments2PreviousYear-90$3April15-10$4PriorYearAvailableCurrent.YearAvailableinCurrentYear90.0090.0090.0090.005.0035.0010.0010.0010.005.0090.0090.0090.0090.0090.0090.0090.0090.0010.0010.0010.0010.0010.0010.0010.0010.005CumulativeCollectionsCumulativePayments6April15-90$7CurrentYearAvailable4.7414.2323.6432.5140.6648.4456.0563.8371.7479.5287.3195.6245.0090.0090.0090.0090.0090.0090.0090.0090.00I.71.71.2323.12.99.31.533.952.1718.210.82.95.28Total-Prioran4CurrentYearAvailable(111.7114.7424.2333.647.4949.3441.56(33.95(26.17)18.2610.482.69)5.629AroaePacentAjlable~9.31HOTE:PaymentsApril15April1590$TbisYear10$NextYearnnm~00p'mn.40pn'O PENNSYLVANIAPOWERANDLIG)ITCOMPANYAVERAGEPERCENTOFPA.UTILITYREALTYTAXAVAILABLEAFTERPAYOUTLineNo.PriorYearAvailableinCurrentYearTOTALJAN.FEB.MAR.APRILMAYJUNEJULYAUG.SEPT.OCT.NOV.DEC.1CumulativeCollections2CumulativePayments3PriorYearAvailableCurrentYearAvailableinCurrentYear98.91100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00(1.09)(1.09)4CumulativeCollections2.3710.6720.13i29.2437.6445.5453:2060.8968.7876.6084.3892.445CumulativePaymentsJune1-IOOX6CurrentYearAvailable7Total-PriorandCurrentYearAvailable8AveragePercentAvailable100.00100.00100.00100.00100.00100.00100.00(118.12)2.3710.6720.1329.2437.64(54.46)(46.80)(39.11)(31'2)(23.40)~(15.62)(119.2l)1.2810.6720.13.29~2437.64(54.46)(46.80)(39.11)(3122)(23.40)(l5.62)(7.56)(9.93)Note:PaymentJune18OlMNChQ84n

~~

PENNSYLVANIAPONERANDLIGNTCOMPANYAVERACEPERCENTOFPA.UTILITYREALTYTAXAVAILABLEAFTERPAYOUTLineNo.PriorYearAvailableinCurrentYearTOTALJAN.FEB.MAR.APRILMAYJUNEJULYAUG.SEPT.OCT.NOV.DEC.1CumulativeCollections2CumulativePayments3PriorYearAvailableCurrentYearAvailableiuCurrent,Year4CumulativeCollections100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00.100.00100.00100.00100.00100.00100.00100.00100.00100.00100.004.7414.2323.6432.5140.6648.4456.0563.8371.7479.5287.3195.625CumulativePaymentsJune1-IDOL6CurrentYearAvailable&1.71.71.2323.32.510.100.00100.00100.00100.00100.00100.00100.0051.53.953.1728.220.812.9.387Total-PriorandCurrentYearAvailable8AveragePercentAvailable81.714.7414.2323.6432.5140.6651.5643.9536.1728.26(20.48)(12.694.3&Note:PaymentJune1 PENNSYLVANIAPOWER&COMPANYRevenues-PercentWeihtedAmounllectedandAvailableTotalJan.Feb.Mar.Apr.MayJuneJulyAug.Sept.Oct.Nov.Dec.PriorYearinCurrentYearJanuaryFebruaryMarchApril9.529.52'.309.308.438.439.47X9.47X9.47%9'29.308.43MayJune7.887.677.887.677.887.67DETAILSAMEASFEBRUARYJulyAugustSeptemberOctoberNovemberDecember7.567.997.837.737.868.767.567.997.837.737.867.677'67.997.837.737.868.76Total100.00Z98-91100.00X100.00X100~OOZ100.00Z100.00X100.00Z100.00X100.00Z100.00X100.00X100.00ZCurrentYearJanuaryFebruaryMarchApril9.47X9'29.308.432.378.292.389.47X9.47X2.338.14F118.339.529.529.529.529.529'29.529.529.529.309.309.309.309.309.30=9.309.307.38'.438.438.438.438.438.438.439.47X9.47Z9.47Z9.47X9.47X9.47X9.47X9.47Ze5't3ChM+NCngMayJuneJulyAugustSeptemberOctoberNovemberDecember.7.887.677.567.997.837.737.868.761.976.901.927.886.711.897.887.676.622.007.887.677.566.991.967.887.677.567.996.851.937.887.677.567'97.836.761.977.887.677.567.997.837.736.872.19AhjmVCmommsnmV'0Total100.00Z2.37%10.67%2013%2924%37-64%4554%532(A60+89%68.78%7660%84.38%92.44%

PENNSYLVANIAPOWER6l.ICNTCOMPANYRevenues-PercentWeihtedAmountCollectedandsilablePriorYearinCurrentYearJanuaryFebruaryHarchApril9.47X9.47Z9.529.529.309.308.438.43TotalJan.Peb.Mar.Apr.HsyJuncJulyhug.Sept.Oct.Nov.Dec.HayJune7.887.677.887.67DETAILSAMEASJANUARYJulyAugustSeptemberOctoberNovemberDecember7.567.997.837.737.868.767.567.997.837.737.868.76Total100.00X100.00Z100.00X100.00X100.00X100.00X100.00X100.00X100.00X100.00X100.00X100.00X100.00XCurrentYearJanuaryPcbruaryHarchApril9.524.769.529.529.529.529.529.529.529.529.529.529.304.659.309.309.309.309.309.309.309.309.308.434.228.438.438.438.438.438.438.438.439.47X4.74X9.47X9.47X9.47X9.47X9.47X9.47X9.47Z9.47X9.47Z9.47X9.47XMayJuneJuly7.887.677.563.947.883.847.887.673.787.887.677.567.887.677.567.887.677.567.887.677.567.887.677.56AugustSeptemberOctoberNovemberDcccmhcrTotal7.997.837.737.868.764.007.993.927.997.833.877.997.837.733.937.99n7.837.73o~7.864.38g,100.00X4.74Z14.23X23.64X32.51X40.66X4&.44X56.05X63.83X71.74Z79.52X87.31X95.62X PENNSYLVANIAPOWER&LIGHTCOMPANYMonthlyRevenues(A)andPercentofAnnualRevenues1977to1979InclusiveJanuaryFebruaryMarchAprilJuneJulyAugustSeptemberOctoberNovemberDecember1979AmountPercent80,486,93979,718,38571,500,242675055,36965,846,32263,600,56567,765,43564,847,22762,207,34863,019,115694721709.659.568.588.057.907.638.137.787.467.568.33$780130,774(A)9.37%1978AmountPercent$73,024,6659.32%73,877,3029.4375,276,5979.6166,506,5418.4961,599,8367.8659,399,9577.5858,A28,A307.4661,918,1617.9161,578,9507.8661,075,2957.8061,874,6587.90687056108.781977Amount$71,157,024Percent9.74%674863429.2369,020,7969.4563i429$3838.6859,820,4198.1956,369,0537.7254,797,8487.5055,460,6527.5957,937,6257.9357,494,1767.8758,124,2177.9659,506,6828.14ThreeYearTotalAmount$222,312,463Percent9.47%177,489,6477.56187,621,2217.99183,920,3537.83181,406,8607.73184,400,4557.862056641228.76223,385,0379.52218,424,3659.30197,827,2028.43185,024,2587.88180,044,1277.67Total$833649891(A100.00X$783266002100.00X$730604217100.00%$2347520110100.00%(A)Excludesinterdepartmental.(B)Excludes$10,785,077ofrevenueduetochangetomonthlybilling.p.A~OCISm4n8 C-8Page12G.F.VanderslicePENNSYLVANIAPOWER6LIGHTCOMPANYWorkingCapitalRequiredforMinimum(Compensating)BankBalancesYearEndedDecember11979(ThousandsofDollars)No.NameofBank1.LinesofCreditwith11Banks2.Float(c)TotalLineofCreditRequiringMinimumBalances12/31/80(a)$58,500,000$58500000(2)PercentageofLineofCreditRequiredForMinimumBankBalances(b)7.5%(3)MinimumBalancesReuired$4,388,000(d)(3500000)S888000(a)Inconnectionwithlinesofcreditattheabovebanks,theCompanyisrequiredtomaintainminimumbankbalances.Theselinesofcreditareexpectedtorequireaminimumbalanceat12/31/80of$4,388,000.(b)Arrangementswiththesebanksareexpectedtorequirethataverageminimumbankbalancesbemaintainedequalto7.5%ofthelineofcredit.(c)Checksissuedbutnotclearedbythebanks.(d)Roundedtonearestthousand.

C-9Page1G.P.VanderslicePENNSYLVANIAPOWER6LIGHTCOMPANYFuelStockandMaterialsandOperatingSuppliesDecember311979LineNo.FuelStockCoalStockatsteamelectricstations(C-9,Page2)(13-monthaverage)Oilstockatstations(C-9,Page3)(13-monthaverage)3'uelStockexpenseundistributed(B-l,Page2)4TotalFuelStock5MaterialsandOperatingSupplies(C-9,Page4)6Total$72,086,89851,166,297119514123,372,70920036071$143408780 PBRISYLVANIAPINER&LlgEKN'ANYCoalinTonsatHcnthEndPerBooksTotalBrtanerIslandBinmfnousRntourBittlafnousCreekBltualnousacteatroHoltuoodacteatroKeystensCaxanugh~BadBBBIJg~fJJtSystaaltPsBI38~1978Deccaber1979JanuaryFebruaryMarchAprilJulyAugustSepteaberOctoberNoveabcrDcccaber4,188,3234.092,3914,001,3814,101,9054,356,145773,242744,182622,796632,950839,3024,574,923',017,5894,470,927,1,017,5824,099,9984,017,2783,985,0134,150,7224,120,248661,449644,742646,520594,852563,350708,878671,640689,094733,013728,898748,067686,511645,4&3542,852490,426659,?22659,6514873010474500664718110,338116,564106,118102,038113,427125,46894,712109,416108,686105,684102,85074,54387873155,7031,011,058133,802122,4181,023,253134,872148,1571,029,830131,257122,6871,071,637140,252110,5411,090,294139,445137,7431,073,644136,452141,9591,077,480133,823130,6791,098,268130,907119,5191,136,962129,88197,5221,156,484128,32587,1291,169,500126,84183,9131,140,827132,09095629112996512820047,00034,42924,16730,36053,42076,76192,115115,683129,499137,304148,018134,12119,751109,50116,771121,254128,04611,74211,885126,98815,078123,89414,000119,10810,150117,19889,61587,31799,213&9,26883,49764,7628,1409,1327,80610,07518,68212805920963104,441994,95699,6461,010,712107,2011,001,48788,9371,026,79293,6751,068,792110,4461,119,128105,3451,972,99693,1791,025,87187,4151,019,59390,6981,019,476110,6191,019,476122,3701,019,476110,9771,015,114TotalRnthlyAverageCoalStockinTensPricePerTon-AverageInventoryPricelB12-31-79TotalValue~55032264923305686289531357717155359914209202172614711509361741751359661132494914,3138694,233,251710,235663,766104,440119,5M1,093,015132,78188,53413,398104,589101,9181,101,067y33.3333.2337.8631.896.0720.45$14.9814.8926.2836.001.18$72,086,898$23,672133205694439540983,811.110$6,634.601$2,715.371$1,326,239$199,496$2,748,599$3,669.048$1,299,259 SteattlectrlcSceclaaCellcneItatIncCreAUOtlealdcatdaalSatrel~OllteQuercttyet1910DaeeaterltltJaaacyyabnaaryAprilHaySctcaderOctcbcrttneaterOaceabcr~i4.404,N$l.2$6.4))3.$09.24$l,)N.8914.854,)IS4.>>d.)rna.an.na4.4yi.61$4.49).ns4.9)a.9294.Nl.1$1IhrurnerIateaa234.0258~dc4$.882CreA~ta44,)l)294.4704'I.illS0,2)l276,lid248.74042.94$42,)l)40.484$).4D)4,70)41.011)1,4414),tot306.5404).tn40,041298.70)42.$102)8.4744).293294.0554).2504).146290.27042.9114$.)tl4.0)I.NI278.$)I40.9214$,02440191242802464249~mrI)$.)42I902.onI)I.)oa1.141.SII86.$141.478,242110.1242.192.022101.0)dt.5ll,l)610$.)l)1.961.1460),3>>2.054.99901.554).957.44$114.dll2.016.419ISd,atd2,360.944I2).0521.479.690114.7)a1.$54,891tordotI424$,>>I0~De)1,721AltncaaIN.od)I'Iatbarti0).591)46.07$45,)01428.ON4l.NI41t.ooo3$,$)9447.00345.93742.0>>44,11)44.4ll443,00040.1S040,21)444.000)).60$cC0.0002).41$COS.OO41,70111.590ato.oro45.94$21,975llS.I25179.489114.12S141.500>>,n)IN,115174.12$2$,47t101.2$093.92014$.42$I)1.250)1.110)1.50634,13224.4$1107.500SSC47491.044Iot.)15156.250))l.t>>111.640142.01)9$.0)l1)t,489)$,584441.0004),0)9441.00040.)82>>1.00044,$063$,1)9110.00010$)250192010).7$010)7$04500)IIO,)13141.IN1$3,1$041)IS4)$00047lll4)IdlCraltlacyeadtne41IaattancaatJenklnet2.IN92.)Ntl.lN90.42$N,od)01.50087,04)~1.50093,75401,1$701.1$1Skaa%vn146.144Ito.dt)Ill.4)dIn.)9676.54$$).0$789.76148,)lrtN,14)07.50090.42$89.061N.06397.017In.)7614d.l)0142.$007$.34991.06)01,500N.06186.S6101,1N11,67090,80167.363154.250'91.14890.0>>84,48$$9.488N.06184I06075N.4llN.)$$)50.0rO149.NO88.7$386,459N.od)07.1$7In.)96V~tllId).59$n.ldd9I.75082.01)0).12$19$.12$N).)lt171.Ioa111,704I/1.7041%.$12ISO.)n18).1991$2.100180.4$21911022$1,7562>>.98$.)17.7S9286.)ll)Io.dea3)$.1))tto.l)l)51.150111,216)I'I.l22311640>>I07451~dN3461N2$$4Se585)6514704)9llco94515004175549000546441cci4)72070Il)Ild$)627180611156260I1$0941IifdNl2104981109$2ta971$492174704)NodnItnthlyAreredeOllSteaklaQuantity4,387.745246.29942,65845.02S111.1101.077,4503S.5N424.4CA43.$74)4.3$71$9.155N.SSI17$,297N,ttaN.S)lN10)1422)0Sr,241n.loa102.0>>>>6.950triceIer4llen/dactelAaeriaeIrnarncecylrlceet12/)I/1941416Na779.427.l92.508.IdSl.4014844174TecelVcha151146,297lit21928llo29944I174201SSO49926411291Slt$>>.240$26.744499.8$)aaa073N0514$NSit04835'91114514$9144570995on4744,245nfqaOt~nn C-9Page4G.P.VanderslicePENNSYLUANIAPOWER&LIGHTCOMPANYMaterialsandOperatingSuppliesDecember311979AccountPPGIPerBooks~BetahaTotal154PlantMaterialsandOperatingSupplies(B-1)163StoresExpenseUndistributed(B-1)Total$19,593,973$193,113248985$19842958$193113$19,787,086248985$200360'71 C-loG.F.VanderslicePENNSYLVANIAPOWER&LIGHTCOMPANYAccumulatedDeferredTaxesonIncomeAtDecember311979Acceleratedamortization(B-l,Page4)$4,774,835Classlifedepreciationsystem-electric36,715,501(A)Deductionofcostsofremovingretireddepreciableproperty-electric14~738~988(B)Testfuel-MartinsCreek7,315,321(C)Conversiontomonthlybilling4464288(D)Total$68008,933(A)PPGL-Balance12/31/79(B-l,Page4)Hershey-Balance12/31/79(B-l,Page6)Total(B)PPGL-Balance12/31/79(B-l,Page4)Hershey-Balance12/31/79(B-l,Page6)Total(C)Balance12/31/79(B-l,Page4)LessoneyearamortizationTotal$36,686,92428577$36715,501$14,690,93348055$14,7389887,563,301247980$7315321(D)Balance12/31/79(B-l,Page4)LessoneyearamortizationTotal$5,022,324558036$4464288 PENNSYLVANIAPOWER&LIGHTCOMPANYD-OperatingIncomeIndexD-1D-3D-4D-5D-7D<<8D-9OperatingIncomeProFormaPresentRatesandProposedRatesAdjustmenttoIncomeAdjustmenttoOperatingRevenueAdjustmenttoEnergyCostsAdjustmenttoMajorForcedOutageInsuranceAdjustmenttoRagesAdjustmenttoEmployeeBenefitsAdjustmenttoCommitmentFeesAdjustmenttoRateCaseExpensesD-10D-11D-12D-13D-14D-15D-16AmortizationofFloodCostsAdjustmenttoRentExpenseforLeasedEquipmentAdjustmenttoOutsideServices(notapplicabletohistorictestyear)AdjustmenttoPensionFundManagementExpensesResearchandDevelopmentExpenses(notapplicable.tohistorictestyear)AdjustmenttoDepreciationAdjustmenttoTaxesOtherthanIncomeD-17D-18AdjustmentAdjustmenttoFederalandPennsylvaniaIncomeTaxestoDeferredIncomeTaxesD-19D-20AdjustmenttoDeferredInvestmentTaxCreditAdjustmenttoAmortizationofDeferredInvestmentTaxCredit PENNSYLVANIAPOHERSLIGHTCOHPANYOperatingIncomoProPormaatPresentandProposedRatesYearEndedDecember31,1979LineNo.1OperatingRevenuesOperatingExpenses2OperationandHaintenance3DepreciationProvisionforTaxesTaxesOtherThanIncomeAsPerBooksOfAccount~B-2I$85625612024449,648,22575,871,65169,321,855(2)Adjustments(D-2)$(84,787,344)(33,725,437)4,765,584(37,478,237)(3)ProFormaatPresentRates(Col.1+2$771,773,680415,922,78880,637,23531,843,618(4)RateIncreaseScheduleD-17,.6$97,590,000(D)2,239,182(5)ProPormaatProposedRates(Col.3+4$869,363,680415,922,78880,637,23534,082,80010IncomeTaxesPederalStateDeferredIncomeTaxesFederalInvestmentTaxCreditsDeferralAmortizationofDeferments-CreditsTotalTaxes35,875,137(A)17,287,231(A)(3,230,152)(B)(687'98)(C)312742,699(226484359)147,660,413'2'2113,828(53878B052)(4,033,293)(1,015,433)248,073(205,089)(462248,203)37;988,965'1,409,179(7,263,445)(1,703,431)31,990,772(2,853,448)101,412,21040,801,1686,652,62749,692,97778,790,13318,061,806(7,263,445)(1,703,431)31,990,772(2233,442)151,105,18712AmortizationofPropertyLoss-HanorCoalPlant1314TotalOperatingExpenses15OperatingIncomeGainfromtheDispositionofProperty308,832(120,526)67343682595$183,192,429120,526(75,087,530)$(9,699,814)308,832598,281,065$173,492,61549,692,977$4728972023308,832647,974,042$221,389,638(A)B-5(8)D-18,Pago1,Col.1(C)D-18,Page1Col.2(D)Amountofratoincreasojustified,baseduponhistoricaltestyearendedDecember31,1979.4aIHo ScheduleD-4D-5D-6D-7D-8D-9D-10D-11D-12D-13D-14D-17D-18D-19D-20'PENNSYLVANIA'POWER'6TIGHT'COMPANYAdjustmentstoIncomeYearEndedDeceaher31,1979ihOperatingrevenueeratinandMaintenanceExoensesEnergycostsMajorforcedoutageinsuranceRagesEaployeebenefitsCoarrrLtaentfeesRatecaseexpenseFloodexpenseLeaseexpenseOutsideservices(notapplicabletohistorictestyear)PensionfundmanageaentResearchandDevelopmnt(notapplicabletohistorictestyear)TotalDepreciationAnnualdepreciationProvisionforTaxesTaxesotherthanincomePennsylvaniacapitalstocktaxPennsylvaniagrossreceipttaxPennsylvaniarealtytaxTotalIncoaeTaxesFederalPennsylvarriaTotalDeferredIncoaeTaxesFederalStateInvestmentTaxCreditDeferredAmrtizationofdeferaents-creditTotalTaxesGainfrorathedispositionofpropertyTotalOperatingExpensesTotalAdjustaentsR.J.Bernini$(84,787,344)(45,023,432)2,330,9553,068,4772,209,5072,733,00045,439319,567431,6450159,405(33725,4374,765,584(5,100,217)11,298122(37478,237)2,113,828(5,878,052)(3,764,224(4,033,293)(1,015,433)248,073(205,089)46,248,203)120,526(75087530S(9,699,814)

LineNo.~eOII\ISaleotElectrcAcI(2)(3)(4)ttotorse4ttreoentRatesCol.10AsouotReferencePZNNTTLVANIAPOUTS4LICNTCOYPAÃrwtsealorscisgReveaw~srEndedDeceaber311979(5)(6)Ad)uocseatsCol.3~I.03>Pg.28Col.10ASSouot'ReferenceO.Spece140salas>in(7)RJoberoinilelIttCLtsto'O.C.JurisdictionalCusosers1.RateRavesw2~DeterredEselExpenseR14er4716>414>614line318871589d9~S$0Line314(d258064)Line46NetdecteaseiatevenuesresultingCol.44Line46ttoaanawlitationofwleaand.effeteotbillingcooversiooto~oothl7b4414~228717~446LineSls22>7178466Cole63.EoergyClauseRevoaw4.Tax'gurchargeRevenue5.Tocalta.PeU.C.(LineI+24344)F..R.C.JurisdtctnaslCustouers,S9,947,466LineSl,Col.740,744,002Liae31,Colef~82023II1251,II.~~39787ole(3989478466)(40>7448002)~820932EaoTgycostscoveredbychoewrgyclausestooocinclledediathc~xpcoscc14ised~thwTotuiriog~lisiaationofenetgyciawerevenues~torpurposesofthisfiliog,theportionofthosePesnsylvaniataxescoveredbychetaxsurchargeareootincludedincheCaxesc)Oined,thusrequitingeliaiaatioaotcaxsurchargereveauw.6.RateReveoue7twlClawsRaveaw9>S61>640Linc35>Col.C9>627>603line35465896SLine47~4>II631135.~6944IlCol.7Line47Ad4itionalrevenwsdueCo~oal541144cionof44144~4~TocalP.E.R.C.(Lines447)~9.TocalgalesotElectricity(LinesS44)~4L0~31Line3S>~144~7227$Colo4831634258ll16,~755792ICl.I55563~8~487OthereraRevenues10.DelayedPaysencCharges2.234,483Line37,Col.82,234,48S11.OtherElectricRevcauesTotalOther(Linea10411)13.TocalRevenwttCL(Lines9412)7~6560418Il.~746302Col.4~989SII29,9955195Cl.l~9966593llIe,$7630'll476Col.4dl45494~rsl51714.RaceRsveaw15.turchasetooerEwrgcacyCostttovisisa16.Purchasetouer'tuelCoscAdjwtseat17.TaxgatchargoRsvesw6,902,241LineC2,Col.43>4598211Line428Col.7985>237239,1S5LineC2>Col,58~6fS>489Line4241,751,208Line44(384598223))(94S,2S7)(2398235)Aaaualito4BersbeysaleslevelstPPCLtatelevelPurchasepolecrssdfuelcoo'cscovete4byapplicableclausesateaotincludediocheexpenseclaissd,CbusrecuiriageliatsatioooftevenwsPorPurPosesofchistDiagstheportionotchosePennsylvaniacasescoveredbycbet44ourcbotgeetcnotincludedinthccaxesclaise4,thusre%airingelisiastiooOtC44Surchargetcveoues~ld.OtherOperatingRevenwIll43,45115ll43Cl.419.TotalBsrshoy(Liaas14chru14)~10339ll45,6699104~3~375Il.I20.Total(Liaes13+19)aeSb5510251ll,CI.I3721373680llISI~781I94IIIl,Col.124LineSS,Cole13 Pennalean)aPaver&LIGhtCcnAnnualRevenuesusrrenteesforAnnualisatianBasedonConditicnsfor12konthsEndedDecenher31,1979GupissantNo.73toPa.P.U.C.No.198LineNa.RateGchedu)eNo.OfCwtanersAsOfDec.11rSaleskkhRateTaxSurcharDeerredFuelExnseFuel&EnerGyAdustnentonsonecerAnnusRevenueTotalSaleskWhAdTsxSurcharGe.DeferredFuelExp.1.047~kvhEnerGyAGJustnent1.824>/kvh10ustedConditionskonthsEndedDeceanerI1proYarnsR>!van>>eTotal12345678910Il12131415161718192122232425262728293031C-ICS-3IJ>-4LP-5IP-6BLFCRIGL-3(R)L-1(R)T(R)SI-1R)GI-2R)GI4R)GI5R)GGA(R)O<-4(R)RH(R)GH-I(R)GH2(R)Of-3(R)Inter-Dept.TotalTariff198ig2.33298>2299>900599742811185982911192171113631>41971,4748813,815281980,1726,290,600,230S245,271,873SI3,964,855$6,586,258988>327>3393>372,904,0442,687,331,700I>178,118,5003>150>921>BOO3,739,382518,9503)>684>54878>010>1141,960,148567>708,000114>949>000532>797I,)37,6566,9761273>444>46753.749161,777679638>702>4001>VOV>428,575258,000,559144,962>349305,482,3242,403>04056>335,020122.177,73973>711>85028>198,59764~587>940165,81319,2252,933,2187>599>024325>72511,427>8792,669,34530,650111,837572>4152l6>7513.4925,699,88619>240,21653,526,7678>453>9044,412,2889>0)>0>2643,175,1086,8?6,>>44,148,8781>589>0933,651,6279>2691~105165>199432,28318,397657,520157>5791,'7436,36932,86812>334199321>8431>104>8953>133,779484,563259>935537,25)1>034>V793,531~I1312,813>6361>233,4903>299>0153>91554333>17481,6772>052594>390120>3525581~1917,3043,60656169,381668,7211,787,678270>121151,776319>8402,51621,697,675,417S716,814,614S40>748,002S22>717,466S11,068,4071,886,7226,518>2105,210,6076>116>2406,87789752>619131,8883>2791>055>036212,6301>0351,92111,8035,83391318,6221,151>0322>730,614463>711229,093474>3544,269S39,947,86662,431,629139>103>89485,884,97133>313>25077,654,822185,87421,770>184,210),'244',872349.45313,734,8253>159>90633>986121,324624,390238,5243>8386,509,13222>164>86461,178>S389,672,3055>053>09210,371>70994,477988>327>3393>372>904,0442,687,331,7001>178>118>5003,150>921>8003.739,382518>95031>684,54878,010,1141,960,148567,708,000114>949>OOO532>797l>137>6566976,1273>444>46753,749161,777,679638,702,4001,707,428,575258,000,559144>962>349305,482,3242,403,04056>335>OcO122>177>V39'73,711>85028>198,59764,587>940165,81319>2252>933>2187,599>024325>72511,427,8792,669,34530>650111>837572,415216>V513.4925,699,88619,240,21653>526>7678,453>9044,412>2889,040,264482022794S21697675477$71681461442768913936>290>600>230$245>271>8734>365>9645,712>6682,185>3915>005,56512>8511,490227,324588>92425,244885,661206,8742,3758,66744>36216,7gB271441>7411>491>1174,148>324655,178341>952700>6206>4241,034>7793>531>4312,813,6361>233>4903>299>0153>91554333>17481,6772>052594>390120>3525581>1917,3043,606169>381668,7211,787,678270,127151>776319>8402516S55>553>130S22>717>466S19,008,570S6,586,2581,802,7096>152,1774>901>6932,148,8885,f47,2816,82194757>793142,2903.5751,035,499209,6679722>07512>7246,28398295>0821,164,9933>114>350410>593264,411557,2004,38363,538,472141>330,12287,139,84733,766,36678,639,801189,40022>2053>251,5098>411>91535659613>943>4293>205,2383b,555123>770636,805243>4383>9176,606,0go22,565,04762>577>1199,849,8025>170>42710>617>92496>219S39,576,559S834,661,769$11,474,055S282,340,756123567891011121314151617181920212324'25262728293032333412KV)ERC66KV)ERCUGI)ERCTotalTariff)'ERC36TotalBothTariffs169>935,300S2>940>751371,469,6005>110>68742>2370001,510>202583,641,900S9,561,64022>281>317>377S726>376>254440>748,002S22,717>466S1,571,1463>273>52644,844,672Sbb>792,538S4,511,8978,384,2)31>510>202S14,406,312169>935>300371,469,60042,237,0002>940,7515,110,6871>510>202583,641,900S9,561,640S834>634>26022>281>317>377S726,376>254$55>553,130S22,717,466S1,571>1163>273>526S4,511,8978,384,2131>510>202Sbb>421>231S849>068>081$4,844,672S14,406,3)23233343738DelayedPsyaentChsrdeOtherElectricRevenueTotalk)scelleaeous42>238>8837,656,3029,895>1852>238>8837,656,3029,895,1852,238,8837,656,3029,895,1852,238,8837,656,3029,895>185ActualTotal980,188I22,281,317,3?fS736,27>>439$40748,002$22,717,466S44,792,538S844.529.44522.281.317,377S736,271,439S55553>130S22717466S44,421,231$858,963,26614344HersheyElectricActwlOtherElectricRevenueAnnualitation&AdJ.45TotalHersheyElectricI6,8116,817275,936,8126,>~,28145>715275>936>872S6,947,996239,135S4>844>448S11>985,86445,715S12>031>579275.936,872(603,221)275,333,6518>668,84345>715(Q>354)~8,699,204671,835S288>506(1>190)(632)670,645S288,274503,309S10,132,89345,715(1>100)(18,276)502>209S10>160>33241424344454647PPOCAnnwlitation&AdJ.)TRCAnnualisation&AdJ.59>180>Bg65,222>830(825,064)65,963(63,942)S61,g6210794646,736(719,098)4SGrandTotal22,557,254,249S743,219435(40,987,137S227174664963698685656102422621054474421154256159,833J23,067,702S45,078,122S868,517,1g948S)0QIP~M tuaaaleaataracer4IIt4ttaate4Is>eaaDatesfor12hosthatala4Deccsher31,1979les>stNotors2.U.CYo.I4us>caCurst\caat~10Ltasao.I235678910ll1213lf16171819202122t3242526"1282931aateSet>cuteCIICC3It\IP-5SLI3(IIIS(I)51I(I)SIN(I)SI4(I)SI5(I)044{I)OIR(I)Al(I)OI-I(I)OI.2(I)OI-3(4)later-heat.totaltariff198No.OfCcatossraAaOfe.II98>2299i9005997428ll1829II19217llI363I,LI971~47l8813.8'Pi>>81Salestt>>utaxSurcharCeC,t>y0,600.230(245,271,873SX9>008,$70&88>327>3393,372,904,044t,CSI,331,VOO1il18>118,5043.150e921>SCO3.739>382518,95031>C8l,fto'78,010,1141,960,148114,949,000532>797I,I37,6$63,444,467$3,749ICI,777,679638,1Ot,LOO1>VOZ>ICS>575258,000>5>9XLL,>M,3492,lo3,04056>3)f>020122,177>73973~ill>850165,81319,22$2>933>2187>frf3>024325.72511,427>SI92>669>$$Ill>837STI,llf216,7513,492S,CW,SSC19,240>21653,5'6,1678,4$3,9A4>412>2859,040>2(A4~365,964$,7126782>18$>39X5>00$>56512,8511,490227>324,5242$,244SSS,CCI~,8742>31$8,66744,36216,1982ZIlLI>1\11>l91,111L,X48,324655,1783LI,9$2Vco,6206,42\tt>697>675>47787XC,81l>614($5,$$3>X30rcrre4fuelErr.IAA~rsh8C.SSC.WI>034>7793.531,4312>813,6361,233.4503.299>0153,915$4333>17484,6772>052$94,390120,3$2$$81,1917>3043>COC169,3SI(68,721I>'787,678270>1271$1,776319>8402,$16Stt>VIV>466rar443ectseatX.S24~auaVII>474>CSSI,Sco,vo96,'Xft',XVT\~901,6932,148,888S,TLT,ISI6,82154757,793I\2,2903>SVSl>03$il99209,(6797212,72l6>tg295,0821>XCL>9933>xxhi350470,593264,ill557,200439>576>$$9'rsee63,$38,472IL1,330>12287,139,84733IVCC.36678,639,(DXIS),loo22>2053>251>5098>411>91$356,59613>943,4293,2C6,23834,$$$123,tlo636,80$243>4383>9176,CO6,ofo2t>565,CA762,577,1199I849>8025>X10>427lo>617>92496>2196834,(61,'6964>L52>896X39,35S,9298$,'048',733VLI695>953193,20523,3353,406,6398,81l,868360,15413>358>0483>089>23335.759134,596727,482281,5816,870,07322P3>SCS64,161,88810,012,(IA5,218>85410,146,16294>$518>IIV>87617178,X>jo4,210,0$110,108,01327>392l,llo\13,4211,215>8LL34,4291.930>169$>10922>7$915S,O6764,830I~$66l>110,1873,603,652Xo>641,1211,558>900SCCISCCI,ZOSISSS11>6558832>823>505SIIC>009>291ocreaearCurreattateaeAscestt*(286>477>$488LI>20$,67510~faxSurchar16.80CII>686>3>014.41ILA615.3S14.93If.6$16.5221.3S16.1416.0010.$7x6.891$.7316.6120.3529.91Ll.8520.$318.1319.8818.4418.'2818.81I\.06l879,084lo>549,2446,l38,189t>4$3>33$ll,6261,166257,883667,28621,2CAl>oilKA233,8$52.10710,189$5>07021>3163831>729,O)44>8$7>509757,9C9395>067~>4847,15816.XS663>OLL,TIXDcferre4tuelIxt.~1.04~xvhl>034,V793,$31,L312,813,6363.299>oxf3,91$54333,17481,6Tlt,052$94>350120>352SSSl>1917>3043,6c6169,3816CS,1211,187,618270>XVV1f1>776319>8402,$16422>717,466taergfA43actseaI1,824atuhtotalceaseOurreattotalAsoea'II8411>474>0$$I)th>224>2XX843>trt3>4$$1>SCC,VO96>ISt>1774>501>6932,148,8885>747>2816,821541f7>793142,2903r5151>03$>499209,6679?22>015Xt>7246,2$829$,08tI,XCL>9933,114.350LVO,593XA>LII557>2004.38372>169,ICS159,588>78199,202,251g,t44,361,396>73321856126>5913,15$,4899>l06>121393>04$1$,999,1LI3,6$3,10739>frk148,051SC2,580312,786f,5957>854>60126,4c6,90673.927,42$6,030,10812,436,686IOS,COS8.630,99612,462,40(e>4>LTl>99$10>756>93229,X6'l4>386503>980X>294>20636>4492>055,712446,8695>44124>2SI16$>T7569,348l>6181,248>5113,841,85911>350~3c61,661,69X8$9,6811>818,76212,389839>f76>f598958>162>VOXSI23>500>932I'sseaueX6>8135S13.(A13.2613.6815.lo19.7$1$.50lf.3910.2214.7413SA15~1$196226.0328.l918.5017.0318.1416.8716.6311.13IL.80I3567891011121314151617181921232425262728293031323334I>>ltIIRCCCxtrtxcIt,letiotueltartffIIIC16XC9,935>~371,469,600lt>237>00082,940>vfI5,110,CS?l>$10,202583,641,>~89>561,6408l,fvx>ILC3>273>SW4>SA>67244>SIIPi78,384,2131,$10>tct4IL,Lc6,3123,743,8696,700,3341,510>202803>1181,589,647CII>9&>40$8.2.392>76$27.3137.108I.STI,IIC3>273>526803>IIS1>$89>(A75,315,olf9>973,8(01>SXO>202S4,844,672816,799,01782352,76517.8o18.96ICCx323334totalIotatariffslateIaraeatOarseOtherXlectrleRecess>etotalHtuvltaoecucActualtotal98x>188rjtQ>x(rx22.28X~317>3Tl4726>376>254Sff>'f53>130I',23S,SSI7,(r>CISxt9>OB>ISS22,281,317,3778736,271,43945$,553,130Lt>ZIV>466M>VIV>~(ll>\tl>231Cll>421>t31C(AS,CCSCIIX2,23S,8837>656,3029Pvf>185((AL>778>310Sxxs,tct>0562>600,0157>~r)0212>0008Xo,s>8,3178373,132(8$8,963,2668855,046,627(118,715.18816.30863,044,m16,13.161613(63>OLL,TIXS22,717,466822,717,466SLL>42X>23X8914>961>TlSSltf>893,6972,CO0,0157,668,3028Xo>268>3178313>132(44,421,23X498$,230,0958126,266>829.14.8316.13.163.7714.'lOLlLtL3LflCLVDerelictElectricActualOtherIlectrxcDsecaueAaacalltatleoI443,totalDsrahefElectricIteCAsxsealttatxco4AAI.ItaloAacrsllestlca4AIJ~Crudtotal6,8176,817tlf>936,87238,668,84345,715((03,221)(X5,354)27$,333651S8,699,20467x,835(1>xfo)670,64$$9>I(f>.8968(82$,064)8(63,942)65>>96322,621,054,7$44744,211$42856,159,8338288>9CC(632)8288,274Cl>962423.CCV,VO2$03.309(1,100)8107,94646,736(45>018122810,132>8934$,115(X8,276)8xo>1(o>M2(719,098)lxt>6994868,$17>199810>071>46245715(17>838)1,402,619(2,484)8xo>099>339SI~Lco>13$(958,$59)86,880(X33>495)20,91T(864,274,2878120,062,7l516.1816.18762,410(x.35o)16.098'l61>OCO'6.1S31.718(72,563)1613(63733Oli82(6,506(632)4288,2Th61,962823>CCZ>V02503.3c9(l,xco)8lx>626>0874$>VIS(20,920)I493.194(2,QA)502,209811,650,8828I,L90,550107,946l6,736(SCIi21L)133,616(142,116)20>917CLS,CllS>Xtt8996>X53>379CX27,636>XSO14.7\IL.LZ1.4.6119.7618.56llL2Lll6LT*FuturetestyearendedDecember31,1980(ExhibitFuture1)proposedappliedtothehistorictestyearconditions.rateincrease%,(DIOC)(A)(8 PennsylvaniaPower&LihtCompanyAdjustmentstoRevenuesYearEndedDecember31,1979D-3Page4ADJ.BaldwinOnpage2ofScheduleD-3incolumns1through8areactualconditionsfortheperiod.Columns9through14containcertainadjustmentsasfollows:-~STherateof7.75%(applicableinApril,1980)wasappliedtobaseraterevenuestosimulatemorecurrentconditions.HersheyElectricCompanyRevenuesfromHersheycustomerswereadjustedtoPP&Lexistingratelevelsandriders.(Line41)AnnualizationThreelinesdealwithannualizedsalesandrevenues.Line44istheHersheyElectricportion;Line46thePa.P.U.C.jurisdictionalportion;Line47theFERCjurisdictionalportion.ThedetailofthecalculationsareatRegulationIII-D-8.'Thefirst8columnsofScheduleD-3onpage3aretheadjustedconditionstakenfrompage2.Columns9to17containthefollowingadjustments:-RateRevenues'ThevariouseffectsoftheproposedratesonbaseraterevenuesbothastoannualamountandpercentareshowninColumns10and11.DetailsofthederivationoftheseamountscanbefoundatRegulationIV-C-3(a).~l!Therateof7.57%wasappliedasthatistheratecalculatedtoapplyifthetotalrateincreasehadbeenexperiencedin1979.DeferredFuelExpenseRevenuesshowninColumn13arethesameasactualcollectedattherateofl.047millsperKwh.EnergyClauseRevenuesinColumn14arecalculatedattherateof1.824millsperKwhderivedbyusing1979energycostsasadjustedandannualizedsalesintheenergyclauseformula.TotalRevenuesinColumn15arethetotalestimatedrevenuesfor1979assumingthebaserateincreasehadbeenineffect,therevised'faxSurchargeandrelativelycurrentlevelsofDeferredFuelExpenseandEnergyClause.Thelatterthreeitemsweredevelopedandshownhereinordertocreateanoveralllevelofannualrevenuesgenerallycoincidentwiththelevelslikelytoexistiftherateincreasewereinplace.Thetotaleffectbyrateclasses,bothamountandpercentisshowninColumns16and17.

D-4Page1PENNSYLVANIAPOWER&LIGHTCOMPANYAdjustmenttoEnergyCostsYearEndedDecember311979W.RmScheffleyR.J.BerniniLineNo.DescritionReferenceAmountEnergycostrecoverablethruenergyclause-PP&LactualsalesandcostsScheduleD-4,Page28(19,462,815)IncreaseinenergycostrecoverablethrubaseratesduetoinclusionofHersheyforafullyearannualizedeffectandannualizedPP&LsalesScheduleD-4,Page32,442,262Eliminationofrecoverableenergycost-PP&LScheduleB-4,Page2(18,783,294)Eliminationofrecoverablefuelcost-HersheyPurchasePower-HersheyScheduleB-4,Page2ScheduleB-4,Page21,146,451(10,366,036)Adjustment-decreaseinenergycosts0(45023432)Tonormalizeenergycosts,theHersheyElectricCompanymergerwithPP&LonMarch1,1980wasassumedtobeineffectduringthetestyearwiththePP&LsystemsupplyingpowertoHersheycustomers.Forpurposesofthisfiling,theactualenergyclauserevenuesforPP&Lhavebeeneliminated,aswellastheactualfueladjustmentrevenueforHershey(ScheduleD-3,Page1).TherelatedenergycostrecoverablethrutheenergyclauseforPP&Lhasbeeneliminatedonline1above.Energycostsrecoverablethrubaserateshavebeenincreasedonline2abovetoreflectHersheyforafullyearattheannualizedlevelaswellasannualizedPP&Lsales.Lines3and4eliminatetherecoverableenergyandfuelcostfromexpensesforPP&LandHersheyirespectively.HersheypurchasedallofitspowerfromMetropolitanEdisoninyearendedDecember31,1979.Tonormalizeenergycosts,purchasepowerofHersheyiseliminatedonline5.

PENNSYLVANIAPOWER&LIGHTCOMPANYD-4Page2W.RmScheffleyR.J.BerniniEnergyCostRecoverableThroughEnergyClauseYearEndedDecember311979ThisadjustmenteliminatestheenergycostsrecoverablethroughtheEnergyClause.SincethecalculationassumesnolaginrevenuerecoveryofenergycostsincurredduringthetestyearthedebitfordeferredenergycostrecordedtoexpenseperbooksiseliminatedonScheduleD-4,Pagel.LineNo.DescritionReferenceAmountFuelSteamPowerGenerationOtherPowerGenerationInterchangeReceiptsDeliveries5NetEnergyExpenseScheduleB-4,Page1ScheduleB-4,Page2ScheduleB-4,Page2ScheduleB-4,Page2527,356,2641,720,86934,678,295(381800005)S18195542310Sales-KWHPPUCJurisdictionalCustomersFERCJurisdictionalCustomersTotalInterdepartmentalCompanyUseTotalSales(A)ScheduleD-3,Page2,Line35,Col.3ScheduleD-3,Page2Line30,Col.421,695,272,43758364190022,278,914,33727403,04011256465322393882030121314NetEnergyCost-Mills/KWHBaseofEnergyClauseNetEnergyCostOverBaseMills/KWHLine5.11Line12-Line138.1257.228.89715NetEnergyCostRecoverablethroughEnergyClause(Lines6+9)xLine14$19462815(A)PPUCJurisdictionalLess:InterdepartmentalScheduleD-3,Page2Line31,Col.3ScheduleD-3,Page2Line30,Col.321,697,675,477240304021695272437

PENNSYLVANIAP(M'R&LIGHZCOMPANYD-4Page3W.R.ScheffleyR.J.BerniniEnergyCostApplicabletotheIncreaseinSalesResultingfromtheInclusionofHersheyandAnnualizationofSalesYearE'ndedDecember31,1979LineNo.IncreaseinSales-KHHHersheyPP&LAnnualizationPPUCJurisdictionalCustomersFERCJurisdictionalCustomers'ReferenceD-3,Page2,Line45,Col.9D-3,Page2,Line46,Col.9D-3,Page2,Line47,Col.9275,333,65159,180,8965,222,8303~3973737IncreaseinEnergyCostPPUCJurisdictionalCustoaers(Line1+2)x7.228mills/kwh(a)$2,417,871FERCJuriscictionalCustomersLine3x4.670mills/kwh(b)Total24,391$2,442,262(a)BaseofenergyclauseapplicabletoPPUCJurisdictionalCustaners.(b)BaseoffueladjustaentclauseapplicabletoFERCJurisdictionalCustoaers.

D-5Page1W.R.ScheffleyPENNSYLVANIAPOWER&LIGHTCOMPANYMajorForcedOutageInsuranceYearEndedDecember311979LineNo.1Annualaverageexperiencedoutage-MWdays(Page2)2Averageannualexposure-MWdays(Page3)3Experiencedannualoutagein%(Line1.Line2)4ExposureinMegawattsinDecember1979(Page3)5Totaltestyearexposure-MWdays(5770x365days)6Projectedoutageduringtestyear-MWdays(Line5xLine3)7CostperMWday(Page4)8Projectedoutagecostduringtestyear(Line7xLine6)11,7991,904,497.62%5,7702,106,05013,058$311.3084,064,9559Actualperbooksprovisionforyearended12/31/79(B-4,Page2)10Adjustment-increaseinexpense173400082330955Aself-insurancereserveisprovidedtocovertheincreasedlevelofenergycostswhichareexperiencedwhenanyoftheCompany'smajorgeneratingunitsareforcedoutofserviceduetodamagecausedbyaccidentorotherunforeseeninsurableoccur-rences.Increasedenergycostsresultingfrompurchasingorgeneratingreplacementpowerathighercostsorlossofinterchangesalesarechargedtothereserve.AstocertainoftheCompany'slargegeneratingunits,costschargeabletothereservearelimitedto$12.5millionsinceoutsideinsuranceiscarriedtocovercostsinexcessofthatamount.ThereserveisestablishedonthebasisofhistoricalexperienceandhasbeenrecognizedinpriorratemakingproceduresbythePUC.Anycostschargedtothereservearenotincludableintheenergyclausepaidbycustomers.TheCompanyhadnogeneratingunitsoutofserviceduetomajordamagecausedbyaccidentorotherunforeseenoccurrencesduring1979.

PENNSYLVANIAPONER6LIGHTCOMPANYMAJORFORCEDOUTAGE1975-1979Year1975StationandUnitNonaSireofUnita>>CauseofOutaeFromThruDurationofOutacHcgawattMegavattOutofDays~DasServiceOfService1976197719781979NoneBrunnerIsland3Hontour2Hontour2BrunnerIsland3BrunnerIsland3BrunnerIsland3Hontour2None730750750740740740750NighCasContentInUnitTransformer2-8BoilerFeedPumpPireDamage2-BBoilerFeedPumpPireDamageReducedRatingLovPressureTurbineBlade-GovernorEndofTurbineLovPressureTurbineBlade-GeneratorEndofTurbineLovPressureTurbineBladeTubeRuptureandPenthouseDamage3/30/771/22/781/29/782/24/783/11/785/20/785/31/784/09/771/28/782/09/783/10/783/24/786/02/786/14/787ll141314157307503757407407407508>0305,2504,12510,3609,62010>36011>250TotalOutage1975-19795-YearAverageAnnualOutage~58995~11799 PENNSYLVANIAPOWER&LIGHTCOMPANYINSTALLEDCAPACITYSTEAMELECTRICGENERATINGPLANTS1974-1979D-5Page3W.R.Scheffley197419751976197719781979EndofYear-M~eawatts4,125.04,941.04,941.05,770.05,760.03770.0Total5-YearAverageAnnualMegawatts5,217.8Megawattsz365Days31307.05,217.81904497MWExosure

PENNSYLVANIAPOWER6LIGHTCOMPANYD-5Page4FORCEDOUTAGECALCULATIONOFCOSTPERNlDAYBASEDONCAPABILITYATDECEMBER311979Annualcapacityfactor-X(Page5)Capacitymw(Page3)OneHourOutput-mwh(line1xline2)DailyOutput-mwh(line3x24hours)Steamstationsfuelcostincludingfuelstockexpense-millsperkwh(Page6)Steamstationsfuelexpense(line4xline5)AverageReplacementCostMillsperkwh(Page6)AverageDailyReplacementCost(line4xline7)Extracostofreplacement(line8-line6)ExtracostperMWday(line9.line2)63.85,770.3,681.388,351.218.44$1,629,19638.7783,425,376$1,796,180S311.30 D-5Page5W.R.ScheffleyPENNSYLVANIAPORER6LIGHTCOMPANYCapacityFactorYearEndedDecember311979(1)StationCapabilityHourlyMR(2)StationCapabilityYearlyMRCol.(1)x24Hrsx365Das(3)ActualGenerationMRH(4)CapacityFactor-%Col.(3)+(2)SrunnerIslandMontourSunburyMartinsCreek81682HoltwoodKeystoneConemaughTotalCoalMartinsCreek836841,46412,824,6409,595,481300732101942,628,000639,4801,839,60016994401,457,948527,1361,218,5837322844,13036,178,80026,487,12916401436640057767631,50013,140,00010,389,6783893,407,6402,566,01974.879.175.355.582.466.243.173.240.2Total5770505452003226389263.8 D-5Page6W.R.ScheffleyPENNSYLVANIAPOWER&LIGHTCOMPANYMajorForcedOutageSteamStationFuelCostandReplacementCostDecember1979LineNo.AveraeSteamStationFuelCost-December1979CostofFuelConsumedforSteam1Generation2MKWHGenerated3AverageSteamStationFuelCost-MillsperKWH(line1.line2)$58,690,7033,183,39718.44RelacementCostofPower-December1979InterchangeDeliveriesReceiptsTotal$49,881,9023022697$52904599Deliveries-MKWHReceipts-MKWHTotal1,235,6011291231,36472410ReplacementCostofPower-MillsperKWH(line6.line9)38.77 PENNSYLVANIAPOWER4LIGHTCOMPA'KR.JSBerniniAd)ustmenttoWagesYearEndedDecember311979I.B.E.W.LOCAL~84II160061520OtherTotalAveragebi-weeklypayrollperemployeepriortoincrease$947$715$703$214Numberofemployeesattimeofincrease2,2984>72725347Averagebi-weeklytotalpayrollpriortoincrease$2>176>206$3>379>805$177>859$10~058EffectivedateofwageincreaseWageincrease-X3-5-796.7X5-14-797.2Z6-11-797.2X5-14-797.2XWageincrease-$'s(Line3ZLine5)$145,806$243,346$12,806$724Payperiods(biweekly)intestyearnotreflectingincrease4.43(A)9.43(B)11.43(C)9.43(B)TotalwageincreasenotreflectedintestyearAveragebi-weeklypayrollperemployeepriortoincrease(Line1X(Line5+100Z))Averagebi-weeklypayrollpriortoincrease(Line2XLine9)Effectivedateofincrease(Paidandbookedin1980)Wageincrease-XWageincrease-$(Line10ZLine12)PayperiodsintestyearnotreflectingincreaseTotalwageincreasenotreflectedintestyear(Line13ZLine14)Total(Line8+Line15)63.2X(D)toexpense99.0Z(D)toelectric$645,921$2,294,753$1>010$2,320,98012-24-793Z$69,62926$1,810,354$146>373$6~827$3>093>87461,810,354849042288309947283068477PayperiodsinYearPayperiodsreflectingincreasePayperiodsnotreflectingincrease8dasinlastaeriodof197914daysperpayperiod8>.5726.0021.574.4326.0016.579.4326.0014.57~ll.3(D)ActualperyearendedDecember31,)979 D-7R.J.BerniniPENNSYLVANIAPOWER'&LIGHTCOMPANYAdjustmentstoEmployeeBenefitsYearEnded"December311979AmountPensionGroupLifeInsuranceHospitalizationMajorMedicalDisabilityDental(effectiveJanuary1,1980)LongevityAccidentalDeath&DismembermentTotal014,657,0002,664,3365,214,576724,668816,1801,126,764570,072157152S2593074863.2%(A)toExpense(Line9x63.2%)99.0%(A)toElectric(Line10x99.0%)Supplementalpensioncost(100%toExpense)Totalemployeebenefitstoexpense(Lines11&12)Actualyearended12/31/79employeebenefitstoexpense($14,187,935(a)x99.0%toelectric)Adjustment-increasedemployeebenefits(Line13-Line14)1638823316,224,3513121216,255,56314046056S2209507(A)Actualperyearended12/31/79 D-8R.J.BerniniPENNSYLVANIAPOWER&LIGHTCOMPANYRevolvingCreditAgreementsandLinesofCreditCompensatedwithFeesYearEndedDecember311979No.NameofBank(1)RevolvingCreditAgreementsorLineofCredit,ReuirinFees(a)(2)AmountofFeeRevolvingCreditAgreementwith10U.S.banks$400,000,000$2,000,0002.RevolvingCreditAgreementwith23Foreignbanks100,000,000500,0003~MiscellaneousLinesofCreditwith20banks46500000233000(b)Total$546500000$2733000(a)InconnectionwiththeRevolvingCreditAgreementsandlinesofcreditattheabovebanks,establishedduringMarch,1980theCompanyisrequiredtocompensatethebankswithfeesapproximating1/2of1%ontheamountofeachbank'sparticipationintheRevolvingCreditAgreementsortheamountofeachbank'slineofcredit.(b)Roundedtonearestthousand D-9Page1R.J.BerniniPENNSYLVANIAPOWER&LIGHTCOMPANYAdjustmenttoRateCaseExpenseYearEndedDecember311979Five-yearamortization(D-9,Page2)ActualperBooks-12/31/79(B-4,Page4)IncreaseinExpense885,49740058$45459Ratecaseexpendituresarechargedtoexpensewhenincurred.Company'sclaimforratecaseexpensesisbaseduponanamor-tizationofratecaseexpensesoverafiveyearperiodperR.I.D.221datedAugust26,1976.

PENNSYLVANIAPOWER6LIGNTCOHPANYRegulatoryCommissionExpenseYearEndedDecember311979Year19751976197719781979(1)R.I.D.221$314,71989,89616,621(2)R.I.D.2156,250(3)Total$314,71989,89616,6216,250(4)1975$62,943(5)1976$62,94417)979(6)1977$62,94417,9793,324(7)1978$62,94417,9793,324(8)1979$62,94417)9793,3241,250Total'421236~6250~42746685497

R.J.BerniniPENNSYLVANIAPOWER&LIGHTCOMPANYAmortizationofFloodCostsYearEndedDecember311979LineNo.FloodexpensesforTropicalStormAgnes:PayrollMaterials&SuppliesPurchasesVehicleUseRepairstoLockHavencombustionturbineInsuranceDeductiblesApplicableto:81,850,969134,263268,963151,966347,339BrunnerIslandStationMontourStationOtherTotalFloodCosts100,000132,748209419$319566710One-YearAmortization($3,195,667+10years)S319567ExpensesassociatedwithTropicalStormAgneswhichhitthePennsylvaniaPower&LightCompanyserviceareainJune1972areshownabove.ThePennsylvaniaPublicUtilityCommissionatR.I.D.84-testyearendedApril30,1973permitteda10yearamortizationofthisamountstartingwiththeyear1974.TheamortizationwasagainpermittedbythePennsylvaniaPublicUtilityCommissionatR.I.D.221-testyearendedJuly31,1975.

R.J.BerniniPENNSYLVANIA'POMP.&LIGHZCOMPANYAdjustaenttoRentEzpensesforLeasedEquipmentYearEndedDecember31,1979PP&Lleasesaportionofitsequipaentsuchaspassengercars,trucks,constructionequipmtandofficeequipment,throughaLeasingAgreemtwithPruLease,Inc.asubsi~ofthePrudentialInsuranceConpanyofAxica.Thenunthlyrentalfortheleasedequipmentconsistsofa"MonthlyRentCoaponent"whichistheamortizationthe"AcquisitionCost"oftheleasedequipmentplusanavauntcomputedbymultiplyingthe"EstimatedMarutValue"oftheequiprrentmultipliedbyapercentageequaltooneandeighttenthsofonepercentplustheratechargedtotheLessoron90daydealerplacedpromis-sorynotesissuedbyLessoronthefifteenthdayoftheprecedingaunth.The"EstimatedMarketValue"oftheequipmentisequaltothe"AcquisitionCost"lessthetotalaggregate"RnthlyRentComponents"paidwithrespecttosuchequipaent.Whenthe"EstimatedMarketValue"ofaunitofequipmenthasbeenreducedtozero,themonthlyrentfortheunitisthreedollarsperaunth.LineNo.1KnthlyRentCoaponentchargeezperiencedduringtheyearendedDecember31,.19792EstimatedMarketValuebasedonaverageofMarketValueforyearendedDecenher31,19793ActualratechargedfornunthofDecember,1979824,009,53115.8%%u$5,489,9734InterestcomponentofrentalchargeLine2xLine33,793,5065ChargeforequipmentfullyamortizedbasedontheyearendedDecember31,1979458796TotaladjustedrentalforyearendedDecember31,19797Year1979%toezpense-actual8Adjustedezpense(Line6x7)9Actualezpense-yearended12/31/7910Adjustment-increaseinezpense9,329,35848.2%4,496,7514065106431,645

D-12R.Z.BerniniPENNSYLVANIAPOMER6LIGHTCOMPANYAd)ustmenttoOutsideServicesYearEndedDecember311979Thisadjustmentisnotapplicabletothehistorictestyear.

PENNSYLVANIAPOWER&LIGHTCOMPANYD-13Page1R.J.BerniniPensionFundManagementExpenseYearEndedDecember311979FundManaer(1)Amount~earterl(2)ForQtr.Ended(3)AmountAd)ustedKleinwortBensonMcCowan,Inc.MellonBank,N.A.PutnamAdvisoryCompaniesWilmingtonCapitalMgt.,Inc.WatnikandCompany(A)$22,21030,50732,06416,0484,50012-31-7912-31-7912-31-7912-31-7912-31-79.S88,840122,028128,25664,19218,000TotalAdjustedActualperbooksyearended12-31-79(D-13,Page2)421,316261,911Adjustment-IncreaseinExpense$159405PP&L'sRetirementPlanhistoricallywasmanagedsolelybytheMellonBank.Mellon'sfeewasappliedtoallplanassetsandcoveredinvestmentmanagementaswellasthecustodianandotherrelatedservices.Onarelativebasis,Mellon'sfeewasverylow.Unfortunately,onbotharelativeandanabsolutebasis,theperformanceofourRetirementPlanassetsundertheirsupervisionwasalsorelativelypoor.Inanefforttoimproveperformanceontheretirementplanassets,PP&L'sRetirementBoardin1979determinedtoretainadditionalmoneymanagers.Thehope,andexpectation,wasthatastableofmanagerswithsuperiorhistoricalrecordsanddifferinginvestmentstyleswouldprovidebothalessvolatilepatternofresultsaswellasanimprovedtotalrateofreturnonplanassets.EffectiveMay1,1979threenewmanagerswereretainedinadditiontoMellonBank.PutnamAdvisoryCompanies,WilmingtonCapitalManagement,Inc.andKleinwortBensonMcCowan,Inc.areeachresponsiblefor20%ofPlanassetswhileMellonretainssupervisionover40%ofPlanassets.Supplieroffundperformanceanalysissystems.(A)

PENNSYLVANIAPOWER&LIGHTCOMPANYD-13Page2R.J.BerniniPensionFundManagementExpense-ActualExpenseYearEndedDecember311979FundManaerAmountPerBooksDatePaidForQtr.EndedKleinwortBensonMcCowan,Inc.IIIIIIIIMellonBank,N.A.PutnamAdvisoryCompaniesWilmingtonCapitalMgt.Inc.ItIIIIIt514,13321,25425>91925,59028,39229,73719,32131,17110,46515,61116,0487-12-7910-10-791-3-79'-4-7910-10-7910-23-7911-26-7911-26-798-3>>798-3-7910-25-796<<30-79(A)9-30-7912-31-783-31-796-30-799-30-796-30-79(A)9-30-796-30-79(A)9-30-7912-31-79Total(B)(B)Watnik&Company(B)15,0004,5004,770$2619117-9-7910-8-794-11-79WatnikSystemsModel129-30-79ComputerSystem6-30-79Rental(A)MayandJuneonly.(B)SupplierofFundPerformanceAnalysisSystem R.J.BerniniPENNSYLVANIAPOWER6LIGHTCOMPANYAdjustmenttoResearchandDevelopmentYearEndedDecember311979Thisadjustmentisnotapplicabletothehistorictestyear.

PENNSYLVANIAPOWER&LIGHTCOMPANYR.J.BerniniJ.O.BeamerAdjustmenttoDepreciationYearEndedDecember311979PlantinServiceDepreciation$78,210,920(A)Less:Clearing(B)Adjustmentrelatingtocustomeradvanceforconstruction(ExhibitJOB1,Section4)210,0005817$77,995,103AmortizationofNegativeNetSalvage(ExhibitJOB1,Section8)2642132TotalDepreciationperBooks(D-l,Col.1,Line3)$80,637,23575871651Ad5ustment-IncreaseinExpense$4765584Theplantinservicedepreciationof$78,210,920representstheannualdepreciationcalculatedonbothPP&LandHersheyplantasof12-31-79,usingaverageservicelivesandlifespansasfiledinthisratecase.Deductionstothisamountinclude$210,000associatedwithclearingaccountsand$5,817associatedwithcustomeradvancesforconstruction.Anadditionalamountof$2,642,132,whichrepresentsthefiveyearaverageofnegativenetsalvage,isaddedtotheannualdepreciation.ThistreatmentofnegativenetsalvageisprescribedbythePa.PublicUtilityCommission.(A)PP&LCompany(ExhibitJOB1,Section3)$77,893,559HersheyElectricCompany(ExhibitJOB1,Section4)317361$78210920(B)$209,845fromclearingwaschargedtoyearended12-31-79actualdepreciationperbooks.

PENNSYLVANIAPOWER&LIGHTCOMPANYD-16Page1R.J.BerniniAdjustmenttoTaxesOtherthanIncomeYearEndedDecember311979PennslvaniaCaitalStockTaxAdjustmenttoreflectincreaseintaxablevalueduetoadditionalequitycapitalandeliminationoftheamountoftaxwhichiscoveredbysurchargerevenues.EstimatedTaxapplicabletoElectricDept.810mills(D-16,Page2)$13,221,001LessamountofPennsylvaniaCapitalStockTaxcoveredbysurcharge.($13,221,001X4/10mills)Less:Expenseperbooks(B-5)Ad)ustmentPennslvaniaGrossReceitsTax5288400$7,932,601I3032818$(5100217)Adjustmenttoeliminatetheamountoftaxrecoveredbysurchargerevenue.Amountperbooksrecoveredbyenergyclause-PP&L($39,947,866(D-3,Page1,Line3,Col.1)Pa.P.U.C.X45mills)$(1,797,654)Amountperbooksrecoveredbyfueladjustmentclauses-Hershey($4,844,448(D-3,Page1,Lines15+16,Col.1)Pa.P.U.C.X45mills)(218,000)Amountofgrossreceiptstaxperbookscoveredbysurcharge($34,350,466(D-16,Page3)X25/45mills)Grossreceiptstaxonannualizedrevenueandcurrent.ratelevels($967,418(A)X20mills)(19,083,592)19348$(21,079,898)(A)'HersheyElectric(D-3,Page1,Line14,Col.5)PPUCAnnualization(D-3,Page2,Line46,Col.10)FERCAnnualization(D-3,Page'2,Line47,Col.10)Less:CitizensElectricPennalvaniaRealtTax$16751'08.(825,064)65,96324689$967,418Ad)ustmenttoeliminatePennsylvaniaRealtyTaxwhichisentirelycoveredbysurcharge(B-5)$(11298122)

D-16Page2R.J.BerniniPENNSYLVANIAPOWER&LIGHTCOHPANYPennsylvaniaCapitalStockTaxYearEndedDecember311979LineNo.1978SettlementbyPennsylvaniaDepartmentofRevenueliostCurrent)1$3112209206x$1,150,000,000$3,191,067,937AverageEquity12/31/7712/31/78$1,346,638,9601525743058$1,121,581,200TotalAverage6RatioofLine1toLine5$2872382018$143619100978%78910ll1213Additions(Reductions)ofEuitPreferredstockissuedPreferredstockredeemedPreferencestockredeemedCommonstockCapitalstockexpenseRetainedEarningsTotaladditionsCaitaldurin1979135,000,000(1,600,000)(4,000,000)81,563,564(792,324)~50301090$26047233015Total16Taxat10mills17Electric(Line16x99.8%(A))14Portionapplicable(Line6xLine13)203168417$1324749617$13247496$13221001(A)Actualyearended12/31/79.

D-16Page3R.J.BerniniPENNSYLVANIAPOWERANDLIGHTCOMPANYGrossReceiptsTaxPerBooksSubjecttoSurchargeRecoveryYearEndedDecember311979Grossreceiptstaxperbooks(B-5)Amount$37,565,630Less:Grossreceiptstaxrecoveredby:Pa.PUCenergyclause-PP&L(D-16,Page1)Pa.PUCfuelclauses-Hershey(D-16,Page1)FERCfuelclause$3,938,317(A)x45mills(1,797,654)(218,000)(177,224)PP&Ldeferredfuelexpenserider$22,717,466(D-3,Pg.1,line2,col.1)x45mills(1022286)Netgrossreceiptstaxsubjecttosurchargerecovery$34350466(A)FERCfueladjustmentrevenue(D-3,Pg.1,line7,col.1)Less:CitizensElectric$4,844,672906355Total$3938317 PENNSYLvANIAREERaLIGHTCCMPANYCamputationofIncomeTax-ElectricYearEndedDecember31,1979(3)(4)(S)D17Page1R.J.Bernini(6)LineNo19101112131415PerBaoks$856,561,024449,64S,225755871,65169,321585535,875,13717,287,231(3,2305152)(687,998)31,'7428699(256485359)3088832(120,526)16Net103,075,866OperatingRevenuesOperatingExpensesOperationandMaintenanceDepreciationTaxesOtherThanIncomeIncomeTaxes-pederalIncomeTaxes-StateDeferredZncomeTaxes-PederalDeferredZncomeTaxes-StateInvestmentTaxCredit-DeferralAmortizationAmortizationofPrapertyLassGainfromDispositionofPropertyTotalOperatingExpense673368.565OperatingZncame183~192,429LessiInterestExpense80,116,563(33,725,437)C,765,584(37,478,237)2,1138828(5,878,052)(45033,293)(15015,433)248,073(2055089)D2D-15D16D-17D17D18D18D-19D20120,526(75,087,530)(95699,814)1~1D.5~9~33110343)D2D2D-2D-17AmountRef$(84,'787,344)D3ProFort)aAtPresentRatesRateIncreaseProFarmsAt.~Pd3C15,922,78880,637,235315843861837,9885965lid409,179(7,2635445)(1,703,431)31,990,772(2,853,448)308,S322,239,182405801,1686,652,6274153922,78880,637,23534,082,80078,790,13318,061,806(7,263,445)(1,703,431)31,990,772(2,853,448)308,8325988281,06173,492,61581,527.09291,965,52349,692,97747,897,02347,897,023~4g~4~2215389,63881,527,092139,862,546$771,773,680$97,590,000S869,363,6801718192021222331,742,699(2,648,359)1,734,000(45760,038)(5,289,210)75,8715651242526272829303132333435363738394041,4255,318163.5381334344Pa.TaxableInccme4546Pa.Taxat10.51(Rounded)Pa.Taxat7.5\(6.977eff.rate)(Rounded)AdjustProvisionforpossibleDeficiencies17,171,02494,200IncomeTaxAdjustmentsrFederalIncomeTaxStateIncomeTaxDeferredZncameTax-FederalDeferredZncameTax-StateInvestmentTaxCredit-ProvisionAmortizationProvisionforMajorParcedOutageTaxesCap(.talizedPensionsCapitalizedBookDepreciationDepreciationChargedtoClearingAccounts209,845TaxDepzeciation(95,239,109)RemovalCosts(4,0008000)AmortizationofPropertyLass308,832DeferredEnergyExpense18,7S3,294DeferredFuelExpense21,6695828DeferredPurchasedPaverCosts(1,445,519)BookBasisvsTaxBasis-PuelInventoryMethod(1,375,217)ClearingAccountssPayrollEqualization(69S,686)PORTATaxDeferredonBooks(13,617,104)BillingChangedtoMonthlyBasis(95720,000)Amortization-RARItems(665145)Miscellaneous(104,056)FloodCostAmortizationPs5d01)d&P)d~837,874)TaxableNetIncome(16thru41)162,838,916Pa.IncomeTaxDeductionTaxPreferenceInccme2,113,828(5'785052)(4,0335293)(15015,433)248,073(205,089)28330,955(1045566)4,76555844,157,511(18,783,294)15445,519lr375,217698,68613,617,104105800,000319,567741,974(12,S61)4(5,761,845)(94,200)D17D-17D18D18D-19D20D-5D17D-15D-17D17D-17D-17D-17D-17D1037,988596511,4095179(7,263,445)(lr7038431)318990,772(2,8535448)4,064,955(4,760,038)(553935776)80,637,235405801,1686,652,6274209,845(910818598)(4,000,000)308,83221,669,82855,318163,525,57211,409517995,350,8186,652,6271,080,000(665145)(104,056)319,56'7~837,874)163,58058909533505818785790,133185061,806(75263,445)(1,703,431)31,990,772(25853,448)4,064,955(45760,038)(5,393,776)80,637,235209,845(915081,598)(45000,000)308,83221,669,8281,080,000(668145)(104,056)319,567(837,874)2585931570855,318258,876,390188061,806484950NetTaxLiabilityAdjustment-PriorYearTaxes4TotalPa.Incan)eTax17,265822422,007(5,8568045)~22,007)$17,287,231$(5,878,052)11540951796,652,62718,061,806$114095179S6r6525627$1850618806SlFederalTaxableIncome(Line42-Lines45or46)$145,667,892$6503,8194152~171711S88698,191S240,869,9D2525354555657PederalTaxS46iless$19,250(Rounded)LaserZnvestmentTaxCreditAdjustProvisionforPossibleDeficienciesNetTaxLiabilityAdjusts)ent-PriorYearTaxesPortionofHersheyTaxCreditsNotDsableBecauseafL(mita-tionsonConsolidatedIncomeTaxReturns66,988,042(31,9905772)385,80035,383,0701988098293.9692~9918695(385,800)2,605,895(1985098)(293,969)695979,737(31,990,772)37,988,965408801,168405801,168110,780,905(31,990,772)78,790,13358TotalFederalZncameTax$35,875.137$2,113,828S3769888965$405801,168$7857905133(A)Pa.TaxableIncomeforPPCLonly-excludingersheysinceHersheywasinanetlossposition. D-17Page2R.J.BerniniPENNSYLVANIAPOWER&LIGHTCOMPANYAdjustmenttoInterestDeductionforIncomeTaxPurposesYearEndedDecember311979RateBase(C-1)Less:AccumulatedInvestmentTaxCredit$2i065i100i051125512011(A)Ratebaseadjustedforbaseforannualizedinterestcomputationli939I588i040Longtermdebtratio(B-8)RatebaserepresentedbydebtEmbeddedcostoflongtermdebt-%(B-6)AnnualizedinterestInterestforyearendedDecember31,1979Increaseininterestdeduction46.6%903i848i0279.02%81,527,09280116563(B)lg4101529(A)PP&L(B-l,Page4)Hershey(B-l,Page6)Total$125,329,721182290$125512011(B)Totalinterestperbooks$132,190,797Interestcost-allowanceforfundsusedduringconstruction52074234NetS80116563 D-17Page3R.J.BerniniPENNSYLVANIAPOWER6LIGHTCOMPANYAdjustmenttoDepreciationDeductionForIncomeTaxPurposesYearEndedDecember311979LineNo.TaxDepreciationonyear-endbaseatDecember31,1979:Applicabletopropertydepreciatedonastraight-linebasisusingguidelineliveswhereapplicab'leApplicabletopropertydepreciatedonadecliningbalancebasisusingguidelineliveswhereapplicableApplicabletopropertydepreciatedonadecliningbalancebasisemployingADRlivesTotalTaxDepreciationusedinaccruingincometaxesforyearendedDecember31,1979DecreaseinTaxDepreciation$2,723,354(A)18,121,86570236379(B)91,081,59895239109(C)$4157511(A)PPELHersheyTotal$2,421,460301894$2723354(B)PP&LHersheyTotal$70,213,46522914$70236379(C)PP6rLHersheyTotal$947983,235255874$95239109 PENNSYLVANIAPOWER&LIGHTCOMPANYOtherAdjustmentofFederalandStateIncomeTaxesDuetoOtherItemsYearEndedDecember311979D-17Page4R.J.BerniniDecreaseintaxableincomeduetothecapitalizedportionofpensioncosts:TotalPortiontoEenseAnnualcontribution(D-7)Supplementbenefit(D-7)TotalLess:PortiontoexpensePortiontocapitalActualcapitalized-Year12/31/79Additionalpensioncostscapitalized$14,657,00031212$14,688,21292944365,393,7765289210$104566$9,263,22463.2%31212100.0%$9294436Increaseintaxableincomeduetotheeliminationofdeductionfordeferredpurchasepowercosts$1445519Increaseintaxableincomeduetotheeliminationoftaxdeductionofthefollowingitems,inaccordancewiththeCompany'sPennsylvaniaPublicUtilityCommissionOrderofMarch28,1972:Bookbasisvs.taxbasis-fuelinventorymethodClearingaccountsandpayrollequalization$1375217698686IncreaseintaxableincomeduetotheeliminationofthedeductionforthePURTAtaxdeferralperbooks$13617104 PENNSYLVANIAPOWER&LIGHTCOHPANYD-17Page5R.J.BerniniAdjustmentofFederalandStateIncomeTaxesDuetoOtherItemsYearEndedDecember311979Increaseintaxableincomeduetothenormalizationoftheeffectofchangingthebillingofbi-monthlycustomerstoamonthlybasis.Theapproximateincreaseinrevenueduethischangeis$10,800,000.Fortaxpurposesthisamountwillbeamortizedoveraten-yearperiod.Thenormalizedneteffectwouldbeanincreaseintaxableincomeof1/10thof$10,800,000or$1,080,000.Actualtaxdeductionadjustmentperbooks$9,720,000(A)AdditionalrevenuerecordedinyearendedDecember31,1979$10,800,000Plus:Amortizedovera10yearbasisfortaxpurposes(10/x$10,800,000)1080000Adjustment$10800000(A)AdditionaltotalrevenuerecordedinyearendedDecember31,1979$10,800,000(rounded)Taxdeductionadjustment(90%x$10,800,000)9720000Taxadjustmentperbookstaxcomputation-increaseintaxableincome$1080000 D-17Page6R.J.BerniniPENNSYLVANIAPOWER6LIGHTCOMPANYTaxesRelatedtoAdditionalRevenueFromProposedRateIncreaseDecember3119791AdditionalRevenuefromProposedRateIncrease$97,590,000Less:PennsylvaniaGrossReceiptsTaxapplicabletoadditionalrevenue(20millsxLine1)$1,951,800PennsylvaniaCapitalStockTax(6millsxLine8)2873825PennsylvaniaCorporateNetIncomeTax(6.977%(a)xLine4)6TaxableIncomeforFederalIncomeTax7FederalIncomeTax(46%xLine6)8OperatingIncome(Line6-Line7)4TaxableIncomeforPennsylvaniaCorporateNetIncomeTax.2239,18295,350,818665262788,698,19140801168$47897023(a)Basedontax'rateof7-1/2%appliedtopost-taxincome.

tENNSTLVANTAPO'JEk4LICNTCONtANTAdfuscnentscoDeferredTucanaTaxesTearr>odedDecaaberSl1979018pads1R.J.DernfnfLia>>No.Pedar4)DeferredPerRooksScareTotaltroFocusDodecdxfstfndAdI>acus>oceAndsadRacesraearacSCsteToCaiFederal.StateTotal1Accelerate4anorcfcationofenerdencyf4cilitfaa8(d84>303)5(73~7S8)5(7$8~101)5$$(684>303)8(7S>798)8(758~101)2hcceleracedsnortisatfonofpollutioncontrolfacflfcies(126,024)(132)(126>1$6)(126,024)(132)(126,1Sd)Portionofcax4epreciacion~risindftonshorcenindlivesby201underthec)444lifedepreciatioasyscans4,193,6601,069,5Sl5>263,211(43813))(111740)(549,dlO)(A)3>7$5>530SS7>8114,713'414Coscofres>ovfndretireddepreciableproperty1>079>158285,4111,364,56923,9S)$,$4929,7791>lOS>088291,2601,S94,S48$'featpaverNarcinsCreek(202>800)(4S>180)(247>980)(102>800)(45el80)(247>S80)6Abnornallossonracfrcnencofproperty-NanotC041tlant(69,290)(lie841)(dl~1Sl)(69>290)(17>841)(87,131)7aRecoverab)efuelcoscs-ttdL(d>921>468)(2~275>3Sl)(11~196>799)($,921,468)(2>27$>S31)(11~196>799)lbRacovetablefuelcoscs-Bershey340>00473,240413~244(340>00>)(73>240)(41'44)8Recoverableenerdycases(7>733>082)(1>972>244)(Sel05>326)7>733>082l>972>2449>705>3269Recoverablets.tublicVtilftyRealtyTax10Coaversconto~oochlybillfncs,eod,lel4>001>7241,4'29,7961,020,6007,035957(5,606,161)(1,429,796)(7,035,9$7)S>022~324(4~446>360)(l>134>000)(5>5d0>360)(h)(444>636)(123>400)(ssd,osd)11Nasorforce4oucsda713892182070895962996502447501704400A1673$424268202100S6212Total320152S687998S3918150S4033293S101$433S5048726S7263445$170)431S8966876(A)SeeD18,POSO2 PENNSYLVANIAEOWER&LIGHTCOMPANYprovisionforDeferredIncomeTaxes-AdjustmentsYearEndedDecember31,1979D18page2R.J.BerniniCalculations(2)(3)pedexalTaxStateTax(4)TotalAdjustmenttoProvisionDuetoClassLifeDereciation(ADR):TaxdepreciationonpropertydepreciatedonliberalizedbasisandADRlives$70d236d379(A)4lel7%10.5%DepreciationonliberalizedbasiswithoutADRlivesAdditionaldepreciationduetoADRProvisionperbooksDecreaseinprovision.61,114,373(B)$9,122,006$3,755,5304,193,660(438,130)$957d811$4d713d3411,069,5515,263,211(llld740)(549d870)BillinChangedtoMonthlBasis:Amortization-over10years($10,800,000+10yrs.)ProvisionperbooksDecreaseinprovision$1,080,000(444,636)(113,400)4;001,7241,020,600(4d446a360)(1d134d000)(558,036)5,022,324(5,580,360)Ma'orForcedOutae:Adjustedmajorforcedoutage(D-5)$4,064,955(1a673d542)(426d820)(2,100,362)ProvisionperbooksIncreaseinprovision(713,892)(182,070)(895,962)$(959,650)$(244,750)$(1,204,400)"PAL~xexete(A)$70d213d465$22a914$70,236,379(B)$61,098,906$15,467(Book)$61,114,373 R.J.BerniniPENNSYLVANIAPOWER&LIGHTCOMPANYAdjustment:ofPriorYearDeferralofInvestmentTaxCreditYearEndedDecember311979AdjustedyearendedDecember31,1979-DeferredInvestmentTaxCredits$31,990,772ActualyearendedDecember31,1979-DeferredInvestmentTaxCreditsperBooks(D-l,Col.1,line9)31742699*Adjustment-IncreaseinDeferredInvestmentTaxCredit$248073*Bookdeferralincludes$(248,073)adjustmentofprioryears. D-20R.J.BerniniPENNSYLVANIAPOWER6LIGHTCOMPANYAmortizationofDeferredInvestmentTaxCreditYearEndedDecember311979YearCreditDeferred4%CreditAnnualAmortization1972-OwnedPropertyLeasedProperty$243,02742,4801973-OwnedPropertyLeasedProperty1974-OwnedPropertyLeasedProperty1975-OwnedPropertyLeasedProperty1976-OwnedPropertyLeasedProperty1977-OwnedPropertyLeasedProperty10%Credit254,18934,60895,28370,965212,7082,78498,27212,4641975-OwnedPropertyLeasedProperty1976-OwnedPropertyLeasedProperty1977-OwnedPropertyLeasedProperty1978-OwnedPropertyLeasedProperty1979-OwnedPropertyLeasedPropertyHersheB-2TotalLessAmortizationperBooks(D-l,Col.1,Line10)Ad)ustment-IncreaseinAmortization139,221109,460454,75570,235251,61635,645236,59667,555344,40970,00071762,853,4482648359S205089ThisadjustmentnormalizestheamortizationofDeferredInvestmentTaxCreditstotheyearendlevelforPPGL. PENNSYLVANIAPOWER6LIGHTCOMPANYEXHIBITFUTUREISummaryofMeasuresofValuePRateReturnfortheYearEndingDecember31,1980Thisbookcontainsaseriesofschedules(seeTableofContents)whicharegroupedasfollows:A-StatementofReasonsB-FinancialStatements,CostofCapital5CapitalStructureasofDecember31,1980C-MeasuresofValueasofDecember31,1980D-OperatingIncome4AdjustmentstheretoasofDecember31,1980. PEWSYLVA~HMR6LIGRZCOMPANYTABLEOFQR~SSECZIONA-BEASTSFORPROPOSEDINCR1RSEA-1StatementofReasonsSECZIONB-BOOKSZAXEMENTSB-1B-2B-3B-6B-7BalanceSheetatDecember31,1980ElectricService-StateaentofOperatingIncome-YearEndedDecember31,1980ElectricService-OperatingRevenuesforYearEndedDecember31,1980ElectricService-OoerationandMaintenanceExpenses-YearEndedDecember31,1980ElectricService-DetailofTaxes-YearEndedDecenber31,1980HistoricalNohedded)CostofDebtCapitalatDecerber31,1980Historicalgmbedded)CostofPreferredandPreference.StockCapitalatDecem'ber31,1980HistoricalCapitalStructures-YearsEnded1971-1980BateofReturnatDecember31,1980SECZIONC-ME'ASViKSOFVAIIlEC-1C-2C-3C-5~iuresofValueandRatesofRetuxnElectricPlantinServiceElectricPlantHeldforFutureUseConstructionWorkinProgressActuallyinServiceNonrevenueProducingElectricConstructionBoricinProgressSoontobeinService PENNSYLVANIAPOWER6LIGHTCOMP%VSTABLEOFCONZENTSSECTIOVC-M".ASUBESOFVALUE(Contid)C-6C-7C-8C-9C-10ConstructionWorkinPro'gress-PollutionControlprojectsInvestaentinCoalReservesWorkingCapitalFuelStockandMaterialsandOperatingSupoliesAccumulatedDeferredTaxesonIncomeD-1OperatingIncomeProFora+atPresentRatesandProposedRatesD-3D-5D-6D-7D-9D-10D-11D-12D-13D-14D-16D-17D-18AdjustmentstoIncoaeAdjustmentstoOperatingP~enuesAdjustmentstoEnergyCostsAdjustmenttoMajorForcedOutageInsuranceAdjustmentstoWagesAdjustmentstoEmployeeBenefitsAdjustmentforCoamitmentFeesAdjustmenttoRateCaseExpensesAmortizationofFloodCostsAdjustmentofRentExpenseforLeasedEquipmentAdjustmenttoOutsideServicesAdjustmenttoPensionFundManagementExpensesAdjustmenttoResearchandDevelopmentExpensesAdjustmenttoDepreciationAdjustaenttoTaxesOtherKhanIncoaeAdjustmentstoFederalandPennsylvaniaInccaeTaxesAdjustmenttoDeferredIncomeTaxes A-1R.R.FortuneSTATEMENTOFREASONSFORTHEPROPOSEDRATEINCREASEThepurposeofthisfilingistobringPennsylvaniaPower&LightCompany's(PP&L)ratesforelectricutilityser-viceinlinewiththecostofprovidingthatservice.Currentstudiesindicatethatpresentratesdonotadequatelycoverthecurrentcostofprovidingelectricserviceandthatwithoutratereliefby1981,PP&L'sfinancialsituationwillseriouslyde-teriorate.PP&L'slastrequestforratereliefwasmade'inMarch,1975.SincethatrequestPP&L'snetplanthasincreasedbymorethan9450millionbytheadditionofnewfacilitiestoprovidefortheincreasedservicedemandsofitscustomers.Also,duringthisperiodinflationhascausedPP&L'soperatingandfinancingcoststoescalatedramatically.ThishasresultedinadeteriorationoftheCompany'srateofreturn.Thus,forthe12monthsendedDecember31,1979,presentratesproducedareturnof8.4percentonoriginalcostandforthe'yearendedDecember31,1980itisestimatedthatpresentrateswillpro-duceareturnofapproximately8percent.InitsorderissuedinAugust,1976theCommissionfound9.83percentreturnonoriginalcosttobereasonable.Furthermore,additionalfacilitieswillbeaddedandthecostofwages,interestandmaterialscoveredbyexi'stingbaserateswillcontinuetoincreaseinthefuturedueto

inflation.Asaresult,theCompanycannolonger---throughincreasedefficiencies---continuetoabsorbtheseevermountingcostsandalsoprovideadequatereliableservicetodayandinthefuture.Theonlyrecourse,therefore,istoseekreliefthroughanincreaseinthebaserateschargedforelectricservice.The.decisiontoseekratereliefwasreachedonlyafterverycarefulexaminationofavailabledataandforecasts.PPGLfullyrecognizestheimpactinflationhashadandishavingonitscustomersandreadilyunderstandsthesensitivityofitscustomerstoanyrateincrease.However,theCompanyhasnowreachedthepointwhereprudencedictatesthatitseekabaserateadjustmenttomeetpresentdayconditionsandcosts.Theaveragehistoricalcostoffixedincomesecuritiesincreasedbyafullpercentagepointto8.83percentattheendof1979,com-paredto7.83percentallowedbytheCommissioninPP&L'slastfiling.Thisiseasilyunderstoodwhenitisnotedthat91,1billionofnewfixedincomesecuritiesweresoldduringthisperiodwheninterestrateswereunusuallyhigh.Replacementofmaturingdebtsecuritieswithanaverageinterestratebelow3percentaccountedfor$124millionofthesesecuritysales.Thus,thecontractualpaymentsofinterestandpreferreddividendsaretakingahigherproportionofwhatevertotalreturnisactuallyearned,whichresultsinquitesizablereductionsintherealizedreturnoncommonequity. TheCommission'slastrateorderdeterminedthatarateofreturnoncommonequitywhichequatedto14.28percentonbookvaluewasfairandreasonable.Itisestimatedthattheactuallyrealizedrateofreturnonbookequityfromelectricoperationswilldropbelow9percentfor1980andbelow7per-centfor1981,withoutraterelief.Thereturnonbookcommonequityactuallyrealizedisthelifebloodofahealthyutilityandmustbemaintainedatadequatelevelstopermittheraisingofcapitalatreasonablerates.Otherwisereliableservicecannotbeprovidedataneconomicalcost.Thepresentrequestseeksanincreaseinbaseratesofabout$123millionayearor16percent.Althoughmanymayviewa16percentincreaseassizable,itshouldbenotedthatatpresent,PP6Lratesrankamongthelowestinthestateandthatthispositionwillremainunchangednotwithstandingtheamountrequestedherein.PPGL'sabilitytogainandholdthisfavorablepositionrestslargelyonimprovedpowerplantoperationandincreasedsalesonthePennsylvania-NewJersey-Maryland(PJM)Interconnec-tion.Savingsfromnetinterconnectionpowersaleshaveby4)QhYaof~t~e46~~illio~months)andthesesavingshavebeendirectlyandautomaticallysubstantiallyreducingthecostofelectricitytoourcustomersthroughtheoperationoftheenergyclause.Priortoreplace-mentofthefueladjustmentclausewiththeenergyclauseonOctober31,1978,savingsfromnetinterconnectionsaleswereavailabletooffsetincreasingbaseratecosts.ThebenefitstoourcustomersfrominterconnectionsalessincePP&L'slastrateincreaseareclearlydemonstratedbythetrackingofthemonthlybillofanaverageresidentialcustomerfromSeptember,1976(firstfullbillingafterPP&L'slastrateincreasewasgrantedinAugust,1976)toApril,1980.Thechargefor800kwhpermonthincreasedfrom$31.70toonly$35.76---atotalincreaseofabout$4.00ora3.4percentaverageannually.Indeed,inApril,1980ourcustomersarepayingaboutthesamepriceforelectricservicethattheydidayearago---notwithstandingsignificantincreasesinfuelandothercosts.Benefitsofinterconnectionsaleswillcontinuetobepasseddirectlythroughtocustomersbyoperationoftheenergyclause.PP&LRatePhilosohAsthisCommissionisaware,it'asbeenPF&L'sphilos-ophy.overtheyearstokeepitsratestocustomersataslowalevelasitreasonablycanandtoonlyseek'oderateratechangesonatimelybasis.Therecordinthisregardspeaksforitself.Thus,PP&Lproposedratedecreasesinperiodsofdecliningcostsasintheearly1960's.Astheeconomicclimatechangedtooneofincreasingcosts,PP&L'sbaserateincreasesallowedbytheCommissioninthe1970'swereasfollows: 1970......5.0%1971......4.41972......6.21974......5.2%1975......3.91976......3.7April7.0AugustAlthoughitcontinuestobeourphilosophytoseekmoderatetimelyratechanges,PP&Lisalsocommitted--.-andindeedischargedbylaw---toprovideadequatereliableandcontinuouselectricpublicutilityserviceondemand,todayandinthefuture.Therefore,inadditiontoprovidingqualityelectricservicetoday,PP&Lmustplan,designandconstructfacilitiesoverlongleadtimestoinsurethatitwillmeetitsobligationstoserveasneeded,PP&Lcanonlydothissuccess-fullyifitisabletomeetitscurrentcostsofprovidingservice.Accordingly,PP&L'sratesforserviceshouldmatchthecostofprovidingthatserviceasitisexperienced.And,ifthecostsofprovidingthatservicecontinuetoincrease,asallpresentstudiesseemtoindicate,ratesmustultimatelyreflectthatcostofserviceifPP&Listosatisfyitsobliga-tionsandtoattractinvestorswillingtoprovidethecashneededtofinancetheconstructionofnecessaryfacilities.Timely,moderaterateadjustments,asPP&L'sownexperiencehasshown,canprovidelong-termbenefitstoitscustomersbothinthequalityofserviceandinthecosttheymustbear.Thepresentfilingattemptstosatisfytheseseveralobjectives.TariffSupplementNo,73providesforanannualincreaseinbaseratesofapproximately$123million---based onafuturetestperiodendingDecember31,1980.Thisresultsinanincreaseontheaverageofapproximately16percentwithvariationstoindividualcustomersrangingfromabout13percentto20percentdependingonrateclassificationandlevelofuse.RateofReturnTheincreasedrateswillproduceafairandreasonablerateofreturnonplantinservice.TherequestedratelevelsIaredesignedtoproducea10.86percentreturnonoriginalcostandwillproduceareturnoncommonof14.45percent(seeExhibitFuture1,ScheduleB-9).InitsorderatR.I.D.221inAugust,1976,theCommissionfounda9.83percentreturnonoriginalcostratebasetobereasonableandallowedareturnoncommonequityof14.28percent.InviewofthelargeincreasesinthecostrateofallsecuritiessincetheCommission'sorderin1976,itisclearthatthereturnsrequestedareconservativeandreasonable.Almostthree-fourthsoftheincreaseinreturnisduetothehighercostoffixedincomese'curitiesissued.RateBaseMeasuresofvaluefortheperiodendingDecember31,1979arefoundinExhibitHistoric1;andfortheperiodendingDecember31,1980arefoundinExhibitFuture1.Ingeneral,measuresofvalueincludephysicalfacilitiesandinvestmentcomponentswhichareonthebasisofpriorCommissionapprovalandacceptances. 0eratinIncomeTheresultsofoperationsfortheperiodsendedDecember31,1979andDecember31,1980arefoundinExhibitsHistoric1andFuturel.Adjustmentswhichhavebeenmadetooperatingincomeitemsareonlythoserequiredtoeliminatecostsnotincludedinbaseratesandtonormalizeoperatingrevenuesandcoststolevelswhichexistattheendofbothtestperiods.Ingeneral,PPGLhasattemptedtoadheretothefollowingprinciplesindesigningratelevelsinthisfiling.First,theproposedratelevelsforthevariousrateclasseslfadhereascloselyaspossibletothecosttoservethoseclasses.Inthisregardwewereguidedbycostallocationstudies.Thesestudiescombineaccounting,operatingandloadresearchdatatodeterminetheassignmentoftotalproposedrevenuerequirementstotheindividualclasses.Thesestudiesprovidereasonablyreliablemeansofestablishingthereturnsbeingearnedbyeachclassandtherelationshipsofsuchreturntoeachotherandtotheproposedsystemreturn.Second,PPSL'sratedesignphilosophyincludesanefforttomakeitsratessimplerandeasiertounderstandandadminister.Thusfewernumberofdifferentpricesfordemandandenergywithinagivenratewerecreated.Also,explicitchargesforthecustomer,demandandenergycostcomponents arebeingstatedwhereitispracticaltodoso.ThethirdguidelineisbasedonthebeliefthatpricingcancontributetotheCompany'slong-rangegoalofreducingtherateofgrowthofthesystem'son-peakdemand.InthisfilingPP&Lproposesseveralratesandratechangestowardthisend.Toencourageamorelevelizeduseofserviceandavoidanceofhighdemands---ademandchargeapplicabletolargeuseresidentialcustomers.Toencouragetheuseofoff-peakelectricalthermalstorageheatingsystems---arateforresidentialstorageheatingsystems.Toencouragethetransferofdemandsforelectricwaterheaterstotheoff-peakperiod---arateforoff-peakelectricwaterheatingservice.Toencouragegeneralservicecustomerstocon-ductmoreoftheiroperationsduringtheoff-peakperiod---theoff-peakprovisionforallgeneralservicerateshasbeenredesignedandmademoreattractive, PENNSYLVANIAPOMB,6LIGKCMANYB-BXKSIMfXEGSIndexB-1-BalanceSheetatDecember31,1980B-2-ElectricService-StatenentofOperatingInclineYearEndedDecenher31,1980B-3-ElectricService-OperatingRevenuesforYearEndedDecember31,1980B-4ElectricService-OperationandMaintenanceExpensesforYearEndedDecember31,1980B-5ElectricService-DetailofTaxesYearEndedDecember31,1980B-6-Historical(Embedded)CostofDebtCapitalatDecember31,1980B-7-Historicalgahedded)CostofPreferredandPreferenceStockCapitalatDecember31,1980B-8-HistoricalCapitalStructures-YearEnded1971-1980B-9-RateofReturnatDecember31,1980 PennslvaniaPower6LitCcaeanBalanceSheetAssetsandOtherDebitsThousandsoDolarsPage1Acct.No.101103105107108101107108120.1123.1124128131132135141142143144145146TitleofAccountUtilityPlantElectricplantPlantinserviceExperimentalelectricplantunclassifiedPlantheldforfutureuseConstructionworkinprogressGrosselectricplantAccumulatedprovisionfordepreciationNetelectricutilityplantSteamheatplantPlantinserviceConstructionworkinprogressGrosssteamheatplantAccumulatedprovisionfordepreciationNetsteamheatutilityplantNetutilityplant,lessnuclearfuelNuclearfuelinprocessNetutilityplantOtherPropertyandInvestmentsNonutilitypropertyAccunulatedprovisionfordepreciationandamortizationofnonutilitypropertyNetnonutilitypropertyInvestmentinsubsidiarycompaniesOtherinvestrrentsOtherspecialfundsTotalOtherPropertyandInvestmentsCurrentandAccruedAssetsCashInterestspecialdepositsWorkingfundsNotesandaccountsreceivableNotesreceivableCustomeraccountsreceivableElectricSteamheatOtheraccountsreceivableAccumulatedprovisionforuncollectibleaccounts-creditElectricSteamheatTotalaotesandaccountsreceivableNotesreceivablefromassociatedcompaniesAccountsreceivablefromassociatedcompaniesDecember31,198092,614,17323541,7251915,2677~5(695,529)7%7778,377330(3,566),7120,401~oT1.'.K4,284(447)3,83716,2992,0931922,24815,467321,1781663,39528036,668(3,400)(10)1,164 PennslvaniaPower6LiptComoanBalanceSheetAssetsandOtherDebits(Continued)ousanoDoarsPage2Acct.Ho.151151152152154163165172174174174181183184185186190TitleofAccountCurrentandAccruedAssets(Continued)MaterialsandsuppliesFuelstock-electricFuelstock-steamheatFuelstockexpensesundistributed-electricFuelstockexoensesundistributed-steamheatPlantmaterialsandoperatingsupplies-electricStoresexpenseundistributedelectticTotalmaterialsandsuppliesPrepayoentsOthercurrentandaccruedassetsRentsreceivableRecoverablefuelcostsRecoverableenergycostsOtherTotalothercurrentandaccruedassetsTotalCurrentandAccruedAssetsDeferredDebitsUnamortizeddebtexpenseExtraordinarypropertylossesPrelimin'~surveyandinvestigationchargesClearingaccountsTemporaryfacilitiesM.scellaneousdeferreddebitsNoncurrentrecoverablefuelcostsOtherTotalmiscellaneousdeferreddebitsAccumulateddeferredincomtaxesForcedoutagereserveOtherTotalaccumulateddeferredincomtaxesTotalDeferredDebitsDecember311980163,8951,191189119,7872495,313,9831,00120,09517,3611,598,02725728383665(9)10,395',150,150TotalAssetsandOtherDebits94,388,542 PennslvaniaPower&LitCanBalanceSheetLiabilitiesandOtherCreditsousands0DoarsPage3Acct.'o.201202204.207212214215.1126216.1221224225226TitleofAccountProprietaryCapitalCommonstockissuedComnonstocksubscribedPreferred&preferencestockissuedPremiumoncapitalstockInstallmntsreceivedoncapitalstockCapitalstockexpenseAppropriatedretainedearnings-amortizationreserve-FederalUnappropriatedretainedearningsUnappropriatedundistributedsubsidiaryearningsTotalProprietaryCapitalLong-TermDebtBondsOtherlong-termdebtUnamortizedpremiumonlong-termdebtUnamortizeddiscountonlong-termdebt-debitDeceaher311980862,534775,67587930(13,284)3,063402,08010461,653,500201,255735(8677)224221224231232234.235235236237238240241283242LessamountduewithinoneyearBondsOtherlong-termdebtTotalLong-TermDebtCurrentandAccruedLiabilitiesLang-termdebtduewithinone-yearBondsOtherlong-termdebtNotespayableAccountspayableAccountspayabletoassociatedcorrpaniesCustomerdepositsElectricSteamheatTaxesaccuredInterestaccruedDxvLdendsdeclaredWituredinterestTaxcollectionspayableAccumlateddeferredincomtaxes(A)RecoverablefuelcostsRecoverableenergycostsTotaldeferredincomtaxestKscellaneouscurrentandaccruedliabilitiesTotalCurrentandAccruedLiabilities50042492K184588950042475,00057,3679,2621,008131,30239,05043,753322,38111,1619222253H21,8720272347 PennslvaniaPower6cLitCoanBalanceSheetLiabilitiesandOtherCredits(Continued)ThousandsofDollarsPage4Acct.No.252253255281282283TitleofAccountDeferredCreditsCustomeradvancesforconstructionOtherdeferredcreditsAccumulateddeferredinvestmenttaxcredits-ElectricSteamheatAccumulateddeferredincometaxes-acceleratedanurtizationpropertyCertifieddefensefacilitiesPollutioncontrolfacilitiesTotalacceleratedannrtizationpropertyAccumulateddeferredincometaxes-otMrpropertyClassLifedepreciationsystemElectricSteamheatDeductionofcostsofrenovingretireddepreciablepropertyElectricSteamheatFuelcosts-testgeneration-electricTotalotherpropertyAccumulateddeferredincometaxes-otherNoncurrentrecoverablefuelcostsConversiontomonthlybillingOtherTotalotherTotalDeferredCreditsDecember3119804317,793139,4511681,4912,47042,18714716,124337315504,4644571OperatingReserves265MiscellaneousoperatingreservesTotalLiabilitiesandOtherCredits11530$4388542(A)DeferredincometaxesapplicabletothecurrentportionofrecoverablefuelcostsandrecoverableenergycostsarerecordedinAccount283,butarere-portedascurrentliabilitiestocorrespondtothecurrentassetclassifica-tionofsuchcostsreportedinAccount174. B-2G.F.VanderslicePENNSYLVANIAEX'"&LIGHT'COMPANYlars)HersheyElectricCompanyPP&L2Rnths(a)TotalElectricServiceStatementofBudgetedOperatingIncoaaYearEndedDecember31,'1980(ThousandsofDol400OperatingRevenue(SeeB-3)$900853$2,688$903,541401)402)OperatingExpenses:OperationandMaint.Exp.(SeeB-4)PowerProductionTransQKLssionDistributionCustoaerAccountsCustomerServiceandInformationalExpensesSalesAdadnistrativeandGeneral345,5428,00746,36522,4324,57591462,45021176242378347,6598,00746,42722,4744,57891462528TotalOperationandMaintenanceExpense403DepreciationExpense490,285.785892,30249258778633408409410.1411.1411.4411.4Taxes(SeeB-5)TaxesOtherthanIncomeTaxesIncoaeTaxesDeferredInconeTaxesProvisionDeferredinPriorYears-CreditInvestmentTaxCreditsDeferred.AaartizationofDeferments-CreditTotalTaxes86,35256,41918,961(17,676)16,5812646157,991142(128)23286,49456,29119,175(17,676)16,5872648158223TotalOperatingExpensesOperatingIncoae7268652578173,988$110729443174098(a)HersheyElectricCoapanywasmergedintoPP&LasofMarch1,1980.RevenuesandexpensesrelatedtoformerHersheycustomersandoperationsareincludedaspartofPP&L'sbudgetedoperationsfortheperiodsubsequentto~ich1,1980. B-3G.F.VanderslicePENNSYLVANIAP(MK&LIGHZ(XMPANYElectricServiceBudetederat'evenue'forYear'nded'December'31;1980(ThousandsofDollars)SalesofElectriciResidentialConnercialIndustrialPublicAuthori.'tiesRailroadsSalesforResaleSalesRevenue$349,530245,556264,90310,2283,36916687890273HersheyElectricCo.(2Morithsa)7681,142754132677Total$350,298246,698265,657.10,2413,36916687892950OthereratinRevenueForfeitedDiscountsMiscellaneousServiceRevenueRentalofElectricPropertyOtherOtherOperatingRevenue2,3741694,3693,668105801012,3741694,379366910591TotalElectricOperatingRevenue$900853$2688$903,541(a)HersheyElectricCompanywasmergedintoPPKasofMarch1,1980.RevenuesandexpensesrelatedtoformerHersheycustonersandoperationsareincludedaspartofPAL'sbudgetedoperationsfortheperiodsubsequenttoMarch1,1980. PENNSYLVANIAHIER&LIGHTCPPANYElectricServiceBudgetedOperationandMaintenanceE5q>easesYearEndedDecember311980usanorsB-4Page1G.F.VandersliceM.J.BeriahPowerPraductianSteamPowerGenerationesOperation500501502505506507OperationSupervisionandEngineeringFuelSteamExpensesElectricExpensesMiscellaneousSteamPaarExpensesRentsTotalOperationKdntenance510MaintenanceSupervisionandEngineering511MaintenanceofStructures512MaintenanceofBoilerPlant513MaintenanceofElectricPlant514MaintenanceofMiscellaneousSteamPlantTotalKdntenanceHersheyElectricCccpany(b)PP&L~2Nmths)$3,208$679,156(a)8,2502,755'0,5864647044191,0902,23527,03510,730215043240Total$3,208679,1568,2502,75510,5864647044191,0902,23527,03510,730215043240TotalPowerProductionExp.-SteamPower747659draulicPowerGeneration747659Operation535536537538539OperationSupervisionandEngineeringWaterforPc+mrHydraulicExpensesElectricExpensesMiscellaneousHydraulicPowerGenerationExpensesRentsTotalOperation1373544948030361410137354494803036Maintenance541Maintenance542Maintenance543KdntensnceWaterways544Kdntenance545MaintenancePlantSupervisionandEngineeringofStructuresofReservoirs,DamsandofElectricPlantofMiscellaneousHydraulic5369632-3215369632321TotalKdntenanceTorsiPam'ProductionExpenses-HydraulicPower28102810(a)CostofcoalandoilOther-Fuelunloading,handling,etc.$665,87013,286$679,156(b)HersheyElectricCaapanywasmergedintoPP&LasofMarch1,1980.RevenuesandexpensesrelatedtoforaerHersheycustorrersandoperationsareincludedaspartofPP&L'sbudgetedoperationsfortheperiodsubsequenttoMarch1,1980. PENNSYLVANIAPCS.6LIGHT03MPANYElectricServiceBudgetedOperationandMaintenanceExpensesYear'ndedDecember'1,1980usBzl0arsB-4Page2'.F.VandersliceM.J.BerishHersheyElectricOther'ower'Gerier'ation~PP~2MonZisTotalOperation546547548549550Maintenance551552553OperationSupervisionandEngineeringFuelGenerationEzpensesMiscellaneousOtherPowerGenerationExpensesRentsTotalOperationMaintenanceSupervisionandEngineeringMaintenanceofStructuresMaintenanceofGen'cratingandElectricPlantTotalMaintenance112$8,838(a)100.178549,921103631;681',8471128,838100.178549,921103631,6811,847TotalPowerProductionEzp.-OtherPower~~IOtherPowei'S1'nses555PurchasedPower'56SysteniControlandLoadDispatching557RecoverableFuel'osts557Deferred'nergyCosts557MajorForcedOutageCost557OtherEzpenses11768(423,355)(b)2,5302,86722,291(22,110)(413)2,016159611768(420,825)2,86722,291(22,'523)2,0161596TotalOtherPowerSupplyEzpensesTotalPowerProductionEzpensesTr'anmission'nses(416695)345,54221172117(414,578)347,659Operation560561562563565566567OperationSupervisionandEngineeringLoadDispatchingStationEzpensesOverheadLineEzpensesTransmissionofElectricitybyOthersMiscellaneousTransmissionExpensesRents1,0051,78358166863386431,0051,7835816686338643TotalOperation(a)Costofoil$8,821Other-Fuelunloadinghandling,eto.'7888384727(b)Interchange-Receipts936,250Deliveries(461,685)Net~~25)SafeHarbor'2,080Total8423,3554,727 PENNSYLVANIAPOWER&LIQKCCNPANYElectricServiceB-4Page3G.F.VandersliceM.J.BerishTransmissionMaintenanceHersheyElectricCompany(2,'KinthsTotales(continued)PP&LBudgeted(herationmdYaintenanceExpensesYearEndedDecember311980ThousandsoDolars568569570571573MaintenanceSupervisionandEngineeringMaintenanceofStructuresMaintenanceofStationEquipmentMaintenanceofOverheadLinesMaintenanceofMiscellaneousTrans-missionPlantTotalMaintenanceTotalTransmissionZ+enses248621,54898232808007248621,5489823,2808007DistributionensesOperation580581582583584585586587588589OperationSupervisionandEngineeringLoadDispatchingStationExpensesOverheadLineExpensesUndergroundLineExpensesStreetLightingandSignalSystemExpensesHeterExpensesCustomerInstallationsExpensesMiscellaneousDistributionExpensesRentsTotalOperation2,9202,22613331,138253781,5812,2985,864149719,260541571121710622,9252,22613371,153323791,5932,2995,871150719,322Naintenance590591592593594595596597598MaintenanceMaintenanceMaintenanceMaintenanceMaintenanceNaintenanceMaintenanceSystemsMaintenanceNaintenancePlantSupervisionandEngineeringofStructuresofStationEquipmentofOverheadLinesofU'ndergroundLinesofLineTransforEsofStreetLightingandSignalofMetersofMiscellaneousDistribution1,6903742,58317,45113772,087596857901,6903742,58317,4511,3772,087596'85790TotalMaintenanceTotalDistributionExpenses27,10546,365622710546427 PBVSYLVA%AHER&LI(ZZ(DPAVlElectricServiceBudgetedOperationandMaintenanceExpensesYearEndedDeccnher311980B-4Page4G.F.VandersliceM.J.BerishCustcmerAccountses('IhousandsofDollars)CompanyPPSL2MonthsTotalOperation901Supervision902&terReadingExpenses903CustcaerRecordsandCollectionExpenses904UncollectibleAccounts905MiscellaneousCustcaarAccountsExpensesTotalCustoadAccountsExpensesCustomerServiceandInformational~es4,47813,3313,50877522432$2$34274,4852913,36043,5127754222,474Operation907Supervision908CustomerAssistanceExpenses909InforantionalandInstructionalAdvertisingExpenses910MLscellaneousCustomerServfceandInforaationExpensesTotalCustcaarServiceandInformationExpensesSalesExpenses1283,470457512823,472156541334578Operation911Supervision912DemonstratingandSellingExpenses913AdvertisingExpenses916MLscellaneousSalesExpensesTotalSalesExpenses1163785136991411637851914AdministrativeandGeneralExpensesOperation920AdministrativeandGeneralExpenses921OfficeSuppliesandExpenses923OutsideServicesEmployed924PropertyInsurance925InjuriesandDamages926EmployeePensionsandBenefits928RegulatoryCcamissionExpenses929DuplicateCharges-Credit930~cellaneousGeneralExpenses931Rents-OfficeBuildingsTotalOperation16,20010,9954,5744,3612,41016,07434(1,238)6,60793601102816,228511,00024,57624,36332,4133416,10834(1,238)16,6083967860,188.Maintenance932MaintenanceofGeneralPlantTotalAdsdnistrativeandGeneralExpensesTotal.ElectricOpemtionand&intenanceExpenses23402340624507862,528@90285$2302$fi92587,Note:PP&LandHersheyElectricCcmpanybudgetOperationand~ajntenance~usesbyaajorcategoryofexpense.AlistofPAL'sbudgetitemsissetforthinBhibitMJB5.Excludingenergycostswhichweredirectlyassignedtoanaccount,thisstatementbyaccountwaspreparedbydistributingthePAL1980budgetexpendituresbybudgetitemtothevariousFERCaccostsbasedon&esaneratiosasthe1979actualexpendituresbyaccountforeachbudgetitem.HersheyElectricCompany'sbudgetedexpendituresweredistributedtoeachFERCaccountbasedontheratioof1979actualexpendituresbyFERCaccounttothetotalofOperaticnand~~hintenanceExpenses. 'ENNSYLVANIAHER&LIGHZG)M)ANYElectricServiceBudgetedDetailofTaxesYearEndedDecefrher311980thousandsofDollars)PP&LHersheyElectricB-5G.F,VandersliceM,J.BeriahTotal910ll121314151617181920212223242526272829303132TaxesOtherThanInccaaTaxesStateandLocalCapitalStockGrossReceiptsLocalRealEstatePublicUtilityRealtyPublicUtilityClxmissionExpenseStateUnenployaantCcmpensationSalesandUseTotalStateandLocalFederalFederalUnemploymentCanpensationFederalOldAgeBenefitsTotalFederalTotalTaxesOtherThanInaxeInccKIGTaxesStateFederalTotalIncoanTaxesInvestmentTaxCreditDeferredAmortizationofDefermentsNetInvestmentTaxCreditDeferredInccanTaxes(b)ProvisionforDeferredTaxesClassLifeDepre~~tionSystemRear)valCostsDeferredEnergyCost-NetTotalProvisionProvisionforDeferredTaxes-CreditSmthlyBillingAdjustanntPURZA.TaxReversalRecoverableFuelCostsExtraordinaryPropertyLossProvisionforMajorCasualtyPollutionControlFacilitiesRent)valCostAsnrtizationEmergencyFacilitiesTestPotmr-MartinsCreekTotalCredits$14,97639,8616524,2781,38041234581317$4,6883475035886352$14,8394158056419$16,581~2Q613935$5,4702,067ll424818961(558)(2,727)(11,518)(87)(1,042)(126)(683)(687)~24817676$81202131~135$7~7~142~(128)$6.~2~41213S214$14,98439,9816724,2791,383413,814524,695Q347)68.5842886.494$14,8394145256,291$16,587~264!!813939$5,4712,06711637~19175'558)(2,727)(11,518)(87)(1,042)(126)(683)(687)~248)~817.676).TR/og(a)HersheyElectricCan@anywassurgedintoPP&LasofMarch1,1980.Revenuesandexpensesrelatedtofora'ersheycustararsandoperationsareincludedaspartofPP&L'sbudgetedoperationsfortheperiodsubsequenttoMarch1,1980.(b)BreakdownofnetdeferredincoaataxesbetweenstateandfederalisshownonScheduleD-18,Pagel. PENNSYLVANIAHER&LIQKC044PANYB-6Page1~R.,R.FortuneCalculationoftheCcapositeCostRateofLong-TeanDebtProjectedtobeOutstandingAtDecenher31,1980First&xteBonds10-1/F/3-3/8%3-1/2%%u9-7/S%%u3-3/F/4-5/S%%u4-5/8%%u5-5/8%%u6-3/4%%u,7%%ue8-1/S%%u9/7-1/4%7-5/8%7-1/2%9-1/4%9-3/4/9-3/4%%u.8-1/4/8-1/2%15-5/S%%de11-3/41ll-l/2%%u.Seri.esdueSeriesdueSeriesdueSeriesdueSeriesdueSexiesdueSexiesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSerieshmSexiesdueSeriesdueSeriesdueSexiesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdueSeriesdue1982198219831983-198519851991199419961997199919992000200120022003200420052005200620072010(4)2010(6)2010(5)Total'First8'ortgageBandsPollutionContml@nantOutstanding~000'$100,0007,50025,000100,00025,00030,00030,00030,00030,00040,00040,00050,00060,00075,00080,00080,000125,000100,000150,000100,000100,00030,000125000PercenttoTotal6.53/0.491.636.521.631.961.961.961.962.612.613.263.924.895'25.228.166.529.796.526.521.968.16~1532500100.007.Effective~tostRote110.32%%ue3.423.5310.123.404.614.595.536.677.028.169.017.267.647.509.309.919.868.348.6715.9211.87'1.62WeightedCostRate0.67%%u,0.020.060.660.060.090.090.110.130.180.210.290.280.370.390.490.810.640.82'.571.040.230.95~9.16;4-3/4/SeriesAdue19814-3/4%SeriesAdue19824-7/F/SexiesAdue19835-5/8/SeriesAdue2003$500500500245000.52%%ue0.520.5225.525.00%%ue4.975.085.750.03%0.030.031.47TotalPollutionCcntmlSeriesA8%Seriesdue2010(5)S%%uSeriesdue2010(5)F/Seriesdue2010(5)8%Seriesdue2010(5)TotalPollutionContml26,00027.08-30,00015,00015,0001000031.2515.6315.6310.41896,000100.M28.148.148.148.141.562.54l.271.270.857.49%SummaryTotalFirstBvrtgageBondsTotalPollutionControlBankLoansdue1986OtherLong-TermDebt$1,532,50096,000200,000125583.75%5.2510.930.079.16%%u.7.4912.36(2)6.98(3)7.67%0.391.35TotalIong-TennDebt81829755100.m9.41%Notes-(1)EffectivecostrateforeachseriesofFirstRetgageBondsandPollutionContmlBondsastakenfromScheduleB-6,Page2.(2)BankloansbearinterestatprimethroughMarch1980,103%ofprimethroughMarch1982md105%%uofprimathereafter.(3)Weightedaverage.(4)DebtissuedcnApril1,1980.(5)Debtexpectedtobeissuedduring1980asreflectedinPP&L's1980operatingbudget.(6)PP&LhassignedanagreementwithaninstitutionalinvestorforthesaleinJune1980ofthe$30,000,000of11-3/4%SexiesMortgageBonds. PBSSYLVANIAHX~fcLIQFKNPANYCcnputationoftheEffectiveCostRateofFirstkhrtgageBondsandPollutionControlBendsatDceenber3119803-3/SX4-5/BX4-5/SX5-5/SX6-3/4X7X8-1/SX9X7-1/4X7-5/SX7-1/27.9-1/4%9-3/47.9-3/47.8-1/47.8-1/2X15-5/SX11-3/4Xll-l/2XSeriesdu1985Seriesdue1991Seriesdue1994Seriesduc1996Seriesduc1997Seriesdue1999Seriesdue1999Scricsduc2XOSeriesduc2001Seriesduc2002Seriesdue2003Seriesdue2004Seriesdue2005Seriesdue2005Seriesdue2006Seriesdue2007Seriesdue2010(4Seriesduc2010(6Seriesdue2010(5PollutionControlSeriesAFirstportoBonds10-1/SXSeriesdue1982-3-3/SXSeriesdue19823-1/2XSeriesdue19839-7/SXSeriesdue1983-85NcadnalDateofIssue10/1/749/1/523/1/534/3/79-6/6/798/1/5512/1/613/1/646/1/6611/1/671/1/696/1/693/1/702/1/712/1/721/1/734/1/745/1/75ll/1/7512/1/7612/1/774/1/806/30/8010/15/80Dateof~Blllltt10/1/829/1/823/1/836/1/836/1/858/1/8512/1/913/1/946/1/96ll/1/971/1/996/1/993/1/002/1/012/1/021/1/034/1/045/1/05ll/1/0512/1/0612/1/074/1/106/30/1010/15/1039333030303030303030303039303030303030AveragTcGll~Years1)83030thru5PrincipalAtauntIssued$100,000,0007,500,00025,000,000100,000,00025,000,00030,000,00030,000,00030,000,00030,NO,OOO40,000,00040,000,MO50,000,00060,000,00075,000,00080,000,00080,000,000125,000,000100,000,000~150,000,000100,000,000100,000,00030,000,000125,030,000Prcmiunor(Discount)atIssuance(875,000)(500,000)171,300300,000470,970378,300(36,400)(80;000)24,50030,000(35,250)79,200(298,400)(1,718,750)(875,000)(1,312,500)(1,589,000)(1641,000)t2M',000>(875,000)CccpanyIssuance~Eenscs$155,20965,489145,417435,311130,03692,216153,42554,72554,84365,88465,90674,78896,892110,041115,987129,660143,454142,078208,229196,460220,00090,000375,000NetProceeds$98.969,7917,434,51124,854,58399,064,68924,869,96430,079,08430,146.57530,416,24530,323,45739,897,71639,854,09449,949,71259,933,10874,854,70979,963,21379,571,940123,137,79698,982,922148,479,27198,214,54098,139,00029,700,000123,750,000NetProceedsRatio98.9799.1399.4299.0699.48100.26100.49101.39101.0899.7499.6499.9099.8999.8199.9599.4698.5198.9898.9998.2198.1499.0099.00EffectiveCostRate(2)10.323.423.5310.123.404.614.595.536.677.028.169.017.267.647.509.309.919.868.348.6715.9211.8711.624-1/2X4-1/2X4-5/SX4-5/SX4-3/47.4-3/47.4-7/SX5-5/SXBX87.SXSXSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesduc1977duc1978duc1979due1980duc1981duc1982due1983duc2003due2010(5)duc2010(5duc2010(5duc2010(55/1/735/1/735/1/735/1/735/1/735/1/735/1/735/1/736/1/807/1/809/1/8012/1/805/1/775/1/785/1/795/1/805/1/815/1/825/1/835/1/036/1/107/1/109/1/1012/1/10456789102328282S.28500,000(3)500,000(3)500,000(3)500,m500,000500,000500,00024,500,00030,000,00015,000,000I5,000,00010,000,000(375,000)(187,500)(187,500)(125,m)75,00037,50037,50025,000(262,978)185,07727,551,94529,550,00014,775,00014,775,0009~850,00098.4098.598.598.5'8.54.954.864.944.905.004.975.085.758.148.148.148.14Notes:(1)Determinedbytakingintoaccosttheeffectofannualsinkingfundrequirenantsforthoseserieswhichhavesucharcquireaantwhicharenatbytheretircnantoftxmdswhichreducetheaverageteanofeachseries.(2)Effectivecostrateforeachseriesisthecostratetomaturityusingasinputstheaveragetermofeachseries,thestatedinterestrateandnetproceedsratio.(3)RetiredasofDccenber31,1979.(4)DebtissuedApril1,1980.(5)Debtexpectedtobeissuedduring1980asreflectedinPP&L's1980OperatingBudget.(6)ppQ,hassignedanagreenantwithaninstitutimalinvestorforthesaleinJr'980ofthe$30,000,000of11-3/4XSeries&rtgageBonds. B-6Page3R.R.FortunePENNSYLUNGAPO'AER&LIGHTQMPANYRetirementsofDebtDurin1980'ThousandsofDollars)FirstMortoeBonds2-3/4%Seriesdue1980$37,000PollutionControl4-5/8%Seriesdue19805007/Notedue198020,000250Total@7750 B-7Page1R.R.FortunePENNSYLVANIA"POWER'&'LIGHT'COMPANYCompositeCostRateofPreferredandPreferenceStockProectedtobeOutstan'tDecember31,1980CumulativePreferredStockAnountOutstandin000sPercentToTotalEffectiveCostRate(1)WeightedCostRate3.35%%u4.6F/o4.4F/4.5F/9.OF/8.6F/7.4F/9.24%8.OF/7.75/8.OF/7.5F/8.25/8.75%9.25%%uSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSeriesSecondSeriesSeriesSeriesSeriesSeries(2)94U86,30022,87853,0197,7632223736,80075,00050,00060,00010,00015,00050,00060,00060,0000.54%0.812.956.841.002.874.749.676.457.731.291.936.457.737.733.37/4.794.465.039.168.757.469.478.067.808.067.548.298.829.340.02/0.040.130'40.090.250.350.920.520.600.100.150.530.680.72CunIUlativePreferenceStock$8.40Series$8.70Series$8.00Series$13.00Series$11.00Series$9.25Series58.625SeriesTotalCumulativePreferredandPreferenceStock40,00040,00035,00022,50050,0004,00051,0007756755.165.164.512.906.450.526.57100.0F/8.558.848.1413.5111.409.288.710.440.460.370.390.740.050.578.46%Notes:(1)EffectivecostrateforeachseriestakenfromScheduleB-7,Page2.(2)PreferredorPreferenceStockexpectedtobeissuedduring1980asreflectedinPP&L's1980OperatirgBudget.(3)RetirementsofPreferredandPreferenceStockduring1980throughsinkingfundprovisionsareshawnonPage3. PERISYLVANIAPGi1ER6fLIQiTCOMPANYConputationofPreferredandPreferenceStockEffectiveCostRatebySeriesProectedtobeOutstandinatDecerrber311980CunulativePreferredStockNominalDividendRateDateofIssueOriginalAmountIssuedAvg.PrincipalAnrrrnttobeIssuanceExpensesNetNetofPceafcmspeeds2NetEffectiveProceedsCostR~atio3~Race43.35%Series4.60o/Series4.40%%ueSeries4.50%%uSeries9.00%Series8.60/Series7.40/Series9.24%Series8.00/Series7.75/Series8.MKSecondSeries7.50/Series8.25%Series8.75/Series9.25/Series3.35/4.604.404.509.008.607.409.248.007.758.007.508.258.759.255/2/4610/21/488/5/5212/10/45-12/22/541/14/701/21/708/15/736/8/7610/19/778/8/781/16/792/1/797/2/7911/8/798/1/80$4,178,3006,300,00022,877,30053,918,9007,763,00022,237,00040,000,00075,009,00050,000,00060,009,00010,090,00015,000,00050,000,00060,090,09960,000,000$4,178,3906,300,00022,877,30953,018,909,7,763,00922,237,00024,090,00043,965,51731,009,00048,009,0098,000,00015,000,00040,000,00037,200,00060,009,000$21,029248,899316,821154,373138,310393,860191,4321,074,709233,062293,89969,69678,305210,747290,000(Est)600,000(Est)$4,157,2716,051,10122,560,47947,435,62M7,624,69021,843,14023,808,56842,890,80830,766,93847,706,1017,939,30414,921,69539,789,25336,910,00059,400,00099.50%96.0598.6289.4798.2298.2399.2097.5699.2599.3999.2499.4899.4799.2299.093.37%4.794.465.039.168.757.469.478.067.808.067.548.298.829.34GxrulativePreferenceStock$8.40Series$8.70Series$8.00Series$13.00Series11.00Series9.25Series$8.625Series8.40%%u12/8/708.707/15/718.007/ll/7213.0010/10/7411.008/28/759.259/39/758.6251/31/80$40,000,00040,000,00035,000,00025,009,00050,000,00020,000,00051,000,000$40,000,00040,009,00035,000,00915,500,00031,000,00012,000,00051,009,099$678,905$39,321,095621,62139,378,379582,44534,417,555588,84914,911,1511,084,49429,915,50632,05511,967,945510,000(Est)50,490,09098.30/98.4598.3496.2096.5099.7399.008.55/.8.848.1413.5111.409.288.71*Afterdeducting$5,428,900attributabletocostofCompanyrefinancedissuescarriedforward.Notes:(1)Deternd.nedbytakingintoaccounttheeffectofannualsMcirgfundrequiranentsforthoseserieswhicharenetbytheretirennntofshareswhichreducetheprincipalanountavailableforusebytheCompany.totheCompanynustincludetheeffectofsuchprincipalrepaynantswhichhavebeenmadebydeterndningoutstandingduringeachyearanddividingbythenxrber.ofyearstheseriesistobeoutstanding.(2)Averageprincipalanxrunttobeoutstandinglessissuanceexpensesnetofprendun.(3)liatproceedsrelatedtotheaverageprincipaltobeoutstanding.(4)'heffectivecostrateisconjputedbydividingthenominaldividendratebythenetproceedsratio.havesucharequirenantwhichAcalculationofthefullcostPthesumoftheprincipalanrruntsw)eefrile3'ef B-7Page3R.R.FortunePEGSYLVANXAPO~6LIGHTGRPANYRetirementsofPreferredandPreferenceStockDuring1980,(ThousandsofDollars)PreferiedStock7.40%SeriesAmunt91,600PreferenceStock$13.00Series$9.25SeriesTotal2,5004000$8,100 PENNSYLVANIAHNER69LIQECCHPANYitalStructure(M.llions.ofDollars)Capitalization:197119721973197419751980(a)LongTermDebtPreferredandPreferenceStockCamnnEquityTotal$576.7$635.0$753.0$914.3$1,043.9$1,182.0$1,260.5$1,257.3$1,557.2$1,821.0196.4231.4271.4296.4366.4441.4487.4543.4672.8775.7351.3,412.1469.6532.7616.1722,8859.3982.41.113.41.256,5~1124.4741,278.5~1494.0$1.743.4$2,026.4~2346.2242,607.2~2,783.1~3Wi3.4~3853,2CapitalStructureRatios:IongTermDebtPreferredandPreferenceStockCamonEquityTotal51.3K17.531.2100.0%%u49.7/18.132.2100.0K50.4%18.231.4100.F/52.4%17.030.6100.0%%u51.5%50.4%18.118.8=48.3K45.2%18.719.530.430.833.035.3100.0K100.F/100.F/100.F/46.6%%u420.133-347.3%20.132.6100.0%%u100.F/(a)Projected B-9R.R.FortunePENNSYLVANIA'EX'cLIGHT'GMPANYRateofReturnPo'ected'at'December'31;1980LongTermDebtPreferredandPreferenceCoarsenTotalCapitalizationRatio(B-8)47.3%%u20.132.6100.F/Embedded'Cost9.41%(B-6)8.46(B-7)14.45'Return4.45%l.7010.86% PENMLVAVIAPVAER6LIGHTCOWARDC-HE'TSURESOFVALUEC-1-MeasuresofValueandRatesofReturnC-2ElectricPlantinServiceC-3-ElectricPlantHeldforFutureUseC-4-ConstructionWorkinProgressActuallyinServiceC-5-NonrevenueProducingElectricConstructionWorkinProgressSoontobeinServiceC-6-ConstuctionWorkinProgress-PollutionControlProjectsC-7-InvestmentinCoalReservesC-8-WorkingCapitalC-9-FuelStockandMaterialandOperatingSuppliesAcazaulatedDeferredTaxesonIncome H2VSYLVANIAP09AER&LIGHZCO'PANY5asuresofValueandRateofReturnAsofDecerber31,1980(ThousandsofDollars)C-1G.F.Vanderslice(2)(3)(4)TrendedOriinalCostRef.No.ElectricPlantC-2ElectricplantinserviceC-2ReserveNetOriinalCost$2,600,371700083AveragePricelevel~Averee$5,122,485$4,865,06719751291,873,1345-~Averee$4;581,0661.761308190028831473562,9919332819758AdditionsandDeductionsC-3ElectricplantheldforfutureuseC-4ConstructionworkinprogressactuallyinserviceC-5Non-revenueproducingCWIPsoontobeinservice-netC-6Constructionworkinprogress-pollutioncontrolprojectsC-6Retirementsassociatedwithconstructionworkinprogress-pollutioncontrolprojectsC-7InvestmentincoalreservesNetAdditionsandDeductions'0,39440,394(717)7750~8782140,39440,394(1,613)7750~86925.40,39440,394(1,530)7,750~8700840,39440,394(1,430)7750)87.108DepreciatedElectricPlant198810932342813078,9412906866WorkingCapitalC-8WorkingcapitalC-9FuelstockandmaterialsandoperatingsuppliesTotalWorkingCapi.talDeductionsC-10AccumulateddeferredtaxesonincomeB-lCustaneradvancesforconstructionTotalDeductions".InsuresofValue51,830168263220,09372,530431~72961~213524151,830168263220,09372,53043172,961~338141351,830168263220,09372,530431~7296183,226,07351,830168263220,09372,53043172,96183053,998ProformareturnsatpresentratesDollars(D-l,Col.3)%%uiProformreturnsatproposedratesDollars(D-l,Col.5)$171,313$171,'313$171,313$171,313802%%ui507%%ui,531%5,6I%%ue$231,835$231,835$231,835$231'35%%ui10.86%%u.6.86%%u7.19%%u.7.59%%u PBZKYLVAVIAPUB.&LI(ZZCOMPANYC-2Page1Q.F.VandersliceJ.O.BeamerElectricPlantinServiceatDecember311980(ThousandsofDollars)era.(a)Descrition(1)(2)(3)TrendedOri'CostOriginal17Average7-CP'*I1~A(4)7-AveraeIntangiblePlantSteamProductionPlantHydraulicProductionPlantOtherProductionPlantTraIlsGlissionPlantDistributionPlantGeneralPlantTotal1,075,07634,01633,033312,0691,025,642969422,5774232,112,0421,994,8351,865,683249,65181,121569,873233,76275,750546,459218,76770,581518,9581,869,0651,787,7241,694,6362141592010291881625,096,5564,840,2044,557,432645$645$645$645PPQ.Addendum(b)SteamProductionPlantTransmissionPlantDistributionPlantGeneralPlantTotalAddendumTotalPPK,12,483(965)1,10513,0652,590,48812,211.(965)680(5,145)6,78111,560(917)63748316,44910,847(875)601(4,507)6,0665,103,3374,846,6534563,498H~srshe(c)DistributionPlantGeneralPlantTotalHersheyTotal9,26918,30917,62516,823614839789745988319,14818,41417,568$2,600371$5,122485$4,865,067$4,581,066(a)ExhibitJOB7,Section2(b)ScheduleC-2,Page3(c)ExhibitJOB7,Section3 C-2Page2,G.F.VandersliceJ.O.BeamerPENNSYLVANIAHMB.6LIGHTCO'PANY(ThousandsofDollars)(2)(3)(4)TrendedOriCostReserveforreciationatDeceaber31,1980DescriDtionOriginalCostveragePriceLevel977-19791975-1979~A~AIntangiblePlant(a)SteamProductionPlant(b)314,816OtherProductionPlant(b)TramissionPlant(a)DistributionPlant(a)GeneralPlant(a)Total18,35765,052264,49721,794697415HydraulicProductionPlant(a)12,89905090842,590139,59447,567170,115688,35185,554795,694130,52944,422162,800658,03480,227744,125121,93841,407154,295623,15974,9071,97377118717061759,831PPa.Ada~(c)SteamProductionPlant299989489TrananissionPlantDistrSutionPlant(80)(425)(412)(392)(10)(9)GeneralPlant(378)(5305)4,975)(4,637)TotalAddendumTotalPP6L(170697,2455643)(5,303)(4s949)1,9681281,866,4031,754,882H~ezshe(d)DistributionPlantGeneralPlantTotalHersheyTotal2,7502,838700,0836,8476,5876,2901541441367,0016,7316,426$1,975,129$1,873,134$1,761,308(a)ExhibitJOB7,Section2(b)Ezhi:bitJOB6,Section3(c)ScheduleC-2,Page4(d)ExhibitJOB7;Section3 PENNSYLVANIA'KITER&'LIGHTCOMPANYAd(hmdumtoElectricPlantinServiceAt'December'1;1980(ThousandsofDollars)C-2Page3G.P,VandersliceJ.O.BeamerDescrition0)(2).(3)(4)TrendedOri1CostOriginal1979Average1977-19791975-1979Cost'PriceLevelAveraVe~AvereeSteamProductionPlantAdditions(a)Retireoents(b)Net@2,556~73$12,556~345)12,211$11,886$11,152~326~3051156010,847TransmissionPlantAdditions(a)Retirements(b)357357~1322~1,322344327~1,261)~(l202Net~965~965~917~(875DistributionPlantAdditions(a)Retirenents(b)1,253~1481253~(5731,1931,129(556)~528)1,105680637601GeneralPlantAdditions(a)Retirements(b)NetTotalAddendum1,013~57113,0651,013~61585,1456781950885(5781)~(5392~4831~45078644986066(a)ExhibitJOB7,Section8(b)ExhibitJOB7,Section9 PENNSYLVANIAPGHER6cLIGHTGMPANYAddendumtoReserveforDepreciationAtDecember'311980(ThousandsofDollars)C-2Page4.G.F.VandersliceJ.0.BeanerDescritionSteamProductionPlantAdditions(a)Retireaents(b)NetOriginalCost5352(53)299(2)'3)(4)TrendedOri1Cost1979Average3.977-19791975-1979PriceLevel'~AVexae'AVev'ae352q334q313~(254~240~224989489TransmissionPlantAdditions(a)Retirements(b)Net3~14~11)333(14)(13)(12)~11~10~9DistributionPlant~~~Additions(a)Retiremts(b)Net~95(80)151514(440)(427)(406)(425)~(412~(392GeneralPlantAdditions(a)Retireaents(b)NetTotalAddendum11~389~378)~$(170ll~5316)(5305~85;643)1110~4986~(4,647~4975~4637~(5303)~4,949)(a)Ezh&itJOB7,Section8(b)ExhibitJOB7,Section9 C-3G.F.VandersliceW.F.HechtPENNSYLVANIAPOMME&LIGHTGOMPANYElectricPlantHeldforFutureUseDecember311980ousan0DosProductionPlantLandforfuturegeneratingstations11205TransmissionPlantRightsofwayforproposedtransmissionlinesLandforproposedsubstationsitesTotalTransmissionPlant17.,452'71518167DistributionPlantRightsofwayforproposeddistributionlinesLandforproposedsubstationsitesOtherdistributionproper~TotalDistributionPlant5,8641,389243~846GeneralPlantLandforfuturebuildings2,526Total840394AmountsclaimedforElectricPlantHeldforFutureUserepresentinvestmentinlandandrightsofwayrequiredforfacilitieswhichmustbebuiltinfutureyearstoacconxmdatethegrowingneedsofcustozs.Thesesiteswereacquiredinadvanceoftheactualconstructiondatessincesiteswhichmeetsystemrequireaantaswellasbeingacceptablefromanenviron-mentalandotherecologicalstandpointsarebecomingmoredifficulttoobtainandmaynotbeavail'&lewhenthefacilitiesareneeded.TheConpany'stotalirryestoentinElectricPlantHeldforFutureUseatDecember31,1979~..$41,725,000.Theaboveclaimof$40,394,000representsthis$41,725,000lessthoseitemswhichhadananticipatedusein1980. C-4Q.F.VanderslicePENNSYLVA'K4.PS'cLIGHTCOMPANYConstructionPorkinProgressActuallyinServiceatDecember31,1980WeCcayanyisnotmakingaclaimforConstructionH'orkinProgressActuallyinServiceatDeceaher31,1980. C-5G.F.VandersliceW.F.HechtPENNSYLVANIA'PGNER6c'LIGKC'CCMPANYNonrevenueProducingConstructionWorkinProgressSoontobeinServiceAtDecember311980TheCon@anyisnotmakingaclaimfornon-revenuepro-ducingconstructionworkinprogresssoontobeinserviceforthetestyearendedDecember31,1980. PENNSYLVANIAP(MB.6cLICEGMPANYConstructionWorkinProgress-PollutionControlProjectsYearExidedDecember31,1980(ThousandsofDollars)C-6'age1,G.".F.'Vander'sliceW.F.HechtDescritionBrunnerIslandConstructnewashbasin(No.6)forthedisposalofashandprovidethenecessaryfacilitiestosluicetheashtotheashbasin.InstallnecessaryequipmenttoprovidepermanentsulfuricacidfeedsystemtotheIncidentalWasteTreatmentBasinasrequiredbytheNationalPollutantDischargeEliminationSystempermitforthebasin.Upgradeexistingflyashpipingandmodifycontrolstoallowashsystemtoreanvequantitiesofashproducedbyfuelpresentlyburned.Installacid/causticsodafeedsystem,pHcontrolandaonitor-equipment,andrelatedfacilitiesatAshBasinNo.4toelzariaatenon-complyingdischargeofplantwastewater.InstallapHcontrolfacilityonAshBasinNo.6consistingofacid/causticfeedsystem,pHnanitoringandcontrolsystem,pumphousebuilding,bodyandeyewashstationandfloatingwalkwayaccesstopHprobe.Installtwonewelectrostaticprecipitatorstooperateinserieswithand~treamoftheexistingprecipitatoronUnitNo.3.TotalBrunnerIsland$3,971(a)13262(a)189587'23700$28,641YartinsCreekUpgradeprecipitatoratUnitsNo.1and2byinstallingaprogrammablerappercontrolsystem,hopperheatersandhopperflyashhighlevelalarms.lol(a)Sun'~ProvideadditionalflyashstoragefacilitiestoconformtotheNationalPollutantDischargeEliminationSystemguidelinesandthePennsylvaniaDepartnentofEnvironmentalResourcesregula-tions.ERaiseAshDamNo.3tenfeettoallowforadditionalstorageofflyash.175InstallanewSOnunitoringsystemforUnitsNo.1and2.2ToM1Sunbury(a)SeeassociatedretireaentsonPage3.S366 PENNSYLVANIAPGNlREcLISTCCMPANY.C-6Page2G.F.VandersliceW.F.HechtConstructionWorkinProgress-PollutionControlProjectsYearEndedDecember31,1980(ThousandsofDollars)DescritionHoltwoodInstallasludgereanvalsystemfortheIncidentalWasteBasintoincreasestoragecapacityandwaterquality.Installabagfiltercollectorsystemto'eplacetheexistingscrubberforUnitNo.17.Relocateconstructionwarehouse/crewfacilityinordertoprovideasiteforanewbagfilterinstallation.5,269(a)470(a)TotalHoltwood85784Hontour~~~~~~~~InstallacoapleteflyashhandlingsystemforUnitsNo.1and2toimprovequalityofdischargewatertotheChillisquaqueCreek.$3,905ConstructanewAshBasinNo.2withcenterbarrierorseriesofbarrierstofacilitateefficientandequaldepositionofashandpyrites.Installnewheatersandadditionalairblowercapacitytoincreasethetemperatureandflowofairtotheprecipitatorinsulatorcozpartaents,andinsulatetheexistinginsulatorcompartoents.TotalDetourTotalPollutionControl1,41817905,50240394(a)SeeassociatedretirementsonPage3. 'PENNSYZVANIA'HMER&'LIQK"GDMPANYRetireaentsAssociatedwithConstructionWorkInProessPollution'Control'Proects(a)(ThousandsofDollars)312.0Account~0SteamProductionPlantMartinsCreekgl&jj2S.E.S.BoilerPlantEquipmentTrendedOrialCost1979Average1977-19791975-1979~0'1'110$9312.0312.0BrunnerIslandS.E.S.BoilerPlantEquipmentHoltwoodS.E.S.*BoilerPlantEquipment161,000231,759221,675211,567GeneralPlant390.6Structuresand.ImprovementsTotalRetirenentsLessCalculatedDepreciationNet1341,15543871711472,9401327161310762,7831253$153010032,6001,1701,430(a)ExhibitJOB7,Section3 C-7G.F.VanderslicePENNSYLVANIAPOWER'&LIGHTC3MPANYInvestmentinBituminousCoalReservesYearEndedDeceaher31'980'ThousandsofDollars)Thereasonforacquiringstrippablebituminouscoalreservesistosecurecontxoloverhighquality,lawsuURzrbituminouscoalreservesatacampetitiveprice.Insupplyingelectricity,PP&Lhasacontinuingandlongtermneedtosecuresourcesoffuelnecessarytooperateitsgeneratingplants,anstofwhicharedesignedtoburnbituminouscoal.Operatingthoseplantsissubjecttovariousenvironmentalprotectionmeasures,includinglimitationsonsulfuremissions.TheArcadiaandHolland/Mitchell/Colavecchicoalreservesarerelativelylawinsulfurcontent.Thequalityofthe'es'er'ves'ssuchthatneitherwashingorblendingwillberequired'oshipaproductthatmeetsPP&L'sspecificationswithregardtosulfur,fusionandashcontent.Accordingly,thesereservesshouldbecompetitivebothwithotherlawsulfurcoalandwiththealternativeofinstallingcleaningequipmentatgeneratingstationstomeetincreasinglymrerestrictivesufi~emissionlimitations.ArcadiaCoalReserves~~~~~~~~~~~~OnFebruary7,1980PP&Lsignedanagreementtoacquiretheestimated8milliontonsofrecoverablebituminouscoalreservesoftheArcadiaCcnrpany,Inc.ofIndianaCounty,Pennsylvania.TheacquisitianisscheduledtobeconpletedbySepteaher,1980subjecttoseveralconditions,however,includingapprovalbythePennsylvaniaPublicUtilityCamnissian.97,OOOHolland/K.tchell/ColavecchiOnMarch4,1980PP&Lexerciseditsoptiontoacquirethemineralrightsforabout1,666acresoftheHolland/Mitchell/Colavecchipropertiescantaixonganestimated1milliontonsbituminouscoalreserves.Thesecoalreservesareonly15milesfromtheArcadiaReservesdescribedabove.750TotalInvestmentinBituminousCoalReserves97,750 PENNSYLVANIAPOWER&LIGKCCOMPANYWorkingCapital,December'311980(ThousandsofDollars)C-8Page1'G.F.VandersliceOperationandMaintenanceExpense(Page.2)DeferredEnergyCosts-Recoverable(Page3)AveragePrepaynants(Page4)AccruedTaxesAdjustment(Page5)MinimumBankBalance(Page6)Total$37,32314,564',446(4,391)+51830 C-8Page2G.F.VanderslicePENNRLVAVIAP~6LIGHZCOMPANYWorkingCapitalRequiredforOperationandNaintenanceEzpensesDecenber31,1980(ThousandsofDollars)TheCanpanybillsitscustomerseverymonth.Onthisbasis,thereisaconsiderablespanofdaysbetweenthetimeelectricityisfurnishedtoacustomerandthetimethecustomerpaysforsuchelectricity'.InmanyinstancestheCompanymustpayitsbillsforpayroll,fuelandotheroperatingexpensespriortothetimeitisabletocollecttheamountduefortheserviceproducingthisexpense.Thus,theCompanyhasmcandneditsrecordstodeternnne,astothemajorcategoriesofexpense,theaveragespanofdayswhichezistsbetweenthetheeanezpenseisincurredandthetimeitmustbepaid.ScheduleC-8,Page2,ofEzhibitHistoricIsetsforththeindividualcomponentswhichresultinthe14.3daylagbetweenpaymentofezpensesandreceiptoftherelatedrevernu~employedinthedeterntinationofthe~rkingcapitalrequiredforOperationandMaintenanceExpensesfor'theyearendedDecember31,1980.LineNo.1ProFormaOperatingExpenses(a)2OperatingEzpensesPerDay(Line1-:366days)3AverageLaginDaysBetweenPaymentofOperatingExpensesandReceiptsofRevenue(b)4Requirementgine2xLine3)$955,3962,61014.3$37,323ReferenceProFormaOperatingExpensesD-l,Line2,Col.5$443,056ErergyCostRecoverablethroughEnergyClauseNetInterchangeDelivered-ClassifiedasRevenueforthisScheduleLessNonCashItemsDeferredFuelCostmajorForcedOutageReserveUncollectibleAccountsTotalD-4,Page1B-4,Page2B-4,Page2D-5,Page1B-4,Page480,358461,68522,2913,9003512$955,396(b)SeeExhibitHistoricI,ScheduleC-8,Page2 C-8Page3G.F.VanderslicePENNSYLVANIAP~6LIGHTCO'PANYDeferredEnergyCostsDeceaher31,1980(ThousandsofDollars)TheCompany'stariffincludesaneaergyclausewhichadjustspricesforelectricsex~eforvariationsinnetenergycosts.U'ndertheclause,energycostsincurredinaaanthinexcessofabaseaaountarereflectedincustomers'illsoverasubsequentsix-nxrnthperiod.Galsresultsinanef-fectivelagoffourardone-halfmonths.Inordertorecognizethislagbe-tweenthetimecostisexperiencedandwhenitiscollected,PPoLwithPUCauthorization,deferssuchcost-thatis,postponeschargingittoexpense-untiltheperiodwhenthecostisreflectedinrevenues.Thismethodofaccount-ingforenergycostrecoguzesthetimingdifferencebetweentheincurrenceofenergycostanditsrecoverythroughtheener~clausethusresultiaginabettermatchingofcostsandrevenuesbyaccountingperiods.SincetheCompanyinfactpaidfortheenergycostswhentheywereincurredandsinceitdeferscollectionofthecostforseveralnunths,t~eisaninvestmentofcashproperlyincludedascashworkingcapital.0~DeferredEner~Costs-RecoverableDeferredInccaeTaxes-RecoverableEnergyCostDeferredEnergyCost-NetofTaxesAanunt$30,134(a)15,570(b)$14,564(a)'Ihereisaneffectivelagof4-1/2axnthsofenergycostsrecoverablethroughtheenergyclause.Thedeterarinationofthenormalizedlevelofdeferredenergycostforthetestyeariscomputedasfollows:f~5Ž*$80,3580-4.Pg1)=$X,134(b)Effectivetaxrateof51.67/x$30,134=$15,570 C-8Page4~G.F.VandersliceJPENNSYLVANIAPOWER'6LISTCCMPANYComputationofAveragePrepayaentsExcludingTaxesYearEndedDecember31,1980ousanoDosTheCoapanydoesnotbudgetprepaymentsbymnths.Forthepurposeofthisschedule,itisassuagedthatthe13monthaveragebalancesforthetestyearendedDecember31,1980willbethesame'sthatexperiencedduringtheyearendedDeceaher31,1979.TotalInsntanoa.RentsVehicle~B~PostsDecember1978January1979February4,3844,1903,7823,789376220168$4,136$3,841$729173$5059AprilJuly3,7283,6283,4453.2533,0852,6503,4593,1402,8322,8072,4442,11459366503052111077633730727610363896180SeptemberOctoberN'ovemberDecemberTotalKnthlyAverage2,2613,3203,6261,8612,7093,178693241922682372043090279961173~ee79683446~38755251882,708829818196$20863505157$815S63 PP&LEXHIBITFUTURE1Revised8/6/80PENNSYLVANIAPONER6$LIGHTCCNPANYAccrualTaxAdjustmentDeceaber311980(ThousandsofDollars)C-8Rev3.sedPage5G.F.Vanderslice12-ar7nthAverage12/31/80FactorAdjustmentforAccruedTaxes1FederalIncmeTax2PennsylvaniaIncanTax3PennsylvaniaGrossReceiptsTax4PennsylvaniaCapitalStockTax5PermsylvaniaPublicUtilityRealityTax6TotalD-l,Line6,Col.5(a)(c)B-5$97,94928,114(8.8)2.78(8,620)75945,83015,74212.412.45,6831,95224,2799.92,404$211,914$2,179(a)PennslvaniaIncomeTax$18,681(D-l,line5,col.5)x10.5/6.977$28,114(b)PennslvaniaGrossReceitsTaxActualyearended12/31/80(B-5)AdjustmentduetoeliminationofHersheyrevenueAdjustmentduetoannualizedrevenue(D-16,pageAdjustnentdue'topmposedrates(D-17,page5,line2)Total653x45an.lls(c)PennslvaniaCapitalStockTaxActualyearended12/31/80(B-5)Adjustment(D-16,page1)Adjustnentduetopmposedrates(D-17,page5,line3)Totalat6mills$39,981(D-16,page1)(120)1)$1872466~26535959~45830$14,984(5,902)363$9,445M~Qs$15,742Note:The12rronthsaveragefactorshownaboverepresents,inthecaseofFederalandStateincometax,eheportionoftheincorntaxliabilitywhichisavailabletotheCarpanyforthepaymentofothercosts.Thissituation'xistssincerevenuesareavailablefromcustomerspriortopaymentdatesofthetax.ThefactorsfortheotherPennsylvaniataxesrepresenttheportionsofthosetaxliabilitieswhichrmstbeprovidedbytheCompanyduetopaymentoftheeaxesbeforetherevenuesareavailablefrancustoners.SeeExhibitHistoricI,ScheduleC-8forcomputationoffactor. PENNSYLVANIAHX~&LIGHTCOMPANYAccrualTaxAdjustmentDecenber311980(IhousandsofDollars)G.F.Vanderslice1FederalInconeTax;2PennsylvaniaInconeTax.3PennsylvaniaGrossReceiptsTax4PennsylvaniaCapitalStockTax5PennsylvaniaPublicUtilityRealityTax6TotalReferenceD-l,Line6,Col.5(a)(c)B-545,830=9.315,7429.3242796.8$211,91412-ncnthAverage12/31/88Factor$97,94928,114AdjustnentforAccruedTaxes$(11,656)(112)4,2621,46416518(43911(a)PennalvaniaIncoaeTax$18,681(D-l,line5,col.5)x10.5/6.977$28,114(b)PennlvaniaGrossReceiptsTaxActualyearended12/31/80(B-5)'djustaentduetoeliminationofHersheyrevenueAdjustmentduetoannualizedrevenue(D-16,pageAdjustmentduetoproposedrates(D-17,page5,line2)Total$2,653x45mills(c)PennslvaniaCanitalStockTaxActualyearended12/31/80(8-5)Adjustment(D-16,page1)Adjustmentduetoproposedrates(D-17,page5,line3)Totalat6mQls$39,981(D-16,page1)(120)1)$187~2466~26535959$45838$14,984(5,902)363$9.445$9,445x$15.742Note:'lhe12nnnthsaveragefactorshownaboverepresents,inthecaseofFederalandStateinccnatax,theportionoftheincometaxliabilitywhichisavailabletotheConpanyforthepaymentofothercosts.'Ihissituationexistssincerevenuesareavailablelcmcustarerspriortopaymentdatesofthetax.ThefactorsfortheotherPennsylvaniataxesrepresenttheportionsofthosetaxliabilitieswhichnestbeprovidedbytheCarpanyduetopaymentofthetaxesbeforetherevenuesareavailablefrancustonnrs.SeeExhibitHistoricI,ScheduLeC-8forcarputationoffactor. PPsLExhibitFuture1Revised8/ll/80C-8RevisedPage6G-F.VanderslicePENNSYLVANXAPOWER6LIGHTCOMPANYWorkingCapitalRequiredforMinimum(Compensating)BankBalancesYearEndedDecember31,1980(ThousandsofDollars)No.NameofBankLineofCreditRequiringMinimumBalances12/31/80(a)(2)PercentageofLineofCreditRequiredForMinimumBankBalances(b)(3)MinimumBalancesReceuized1LinesofCreditwith10Banks$53,5007.5%$4,0132Float(c)(3,500)Total$53,500$513(a)Xnconnectionwithlinesofcreditat.theabovebanks,theCompanyisrequiredtomaintainminimumbankbalances.Theselinesofcreditareexpectedtorequireaminimumbalanceat12/31/80of$4,013,000.(b)Arrangementswiththesebanksareexpectedtorequirethataverageminimumbankbalancesbemaintainedequalto7.5%ofthelineofcredit.(c)Checksissuedbutnotclearedbythebanks. G.F.VanderslicePENNSYLVANIAPOWER'6LIGHT'COHPANYWorkitngCapitalRequiredforMnimum(Compensating)BankBalancesYearEndedDecember31'980(ThousandsofDollars)No.NameofBank1.LinesofCreditwithllBanks2.Float(c)TotalLineofCreditRequiringKnimumBalances12/31/80(a)858,500858500(2)PercentageofLineofCreditRecurredFor.,KiaimumBankBalances(b)7.5%(3)%nizamBalancesquired04,388(3,500888(a)Inconnectionwithlinesofcreditattheabovebanks,theCoapanyisrequiredtomaintainadnizaznbankbalances.Theselinesofcreditareexpectedtorequireaarinixoumbalanceat12/31/80of$4,388,000.(b)Arrangementswiththesebanksareexpectedtorequirethataveragemininaxnbankbalancesbemaintainedequalto7,5%ofthelineofcredit.(c)Checksissuedbutnotclearedbythebanks. C-9Page1G.F.VanderslicePENNSYLVANIAPOWER6LIGHZCOMPANYFuelStockandMaterMsandOperatingSuppliesDeceaher311980(ThousandsofDollars)LineNo.AmountFuelStockCoalstockatSteamElectricStations(Page2)Oilstockatallstations(Page3)FuelStockExpense(B-1)TotalFuelStockMaterialsandOperatingSupplies(Page4)Total985,68362,355'189148,22720;036$168,263Amountsclaimedforfuelstockarebasedon13-anthaveragesofquantitiesonhandfortheyear1979valuedattheprojectedpricepertonatDecember31,1980.TheamountclaimedformaterialsandoperatingsuppliesisbasedonthebalanceatDecember31,1979.TheaverageaanuntclaimedisinlinewiththefuelstockstheCompanynestmrintainatitspowerplantstoinsurecontinuityofserviceandtheamountofotherinventoriesneededto'conductthebusiness. PB"KKVNGAPSKR&LICECCHPANYCoalinTensatAnthEndPerBooks1978Decanter1979JanuaryFebruary~chY4ayJulySeptemberOctoberNovecberDec4=berBnnnerIs14ndcontourBit4ndnousBituafnousHartinsCreekBitLu4hmus4,188,3234,092,3914,001,3814,101,9054,356,145110,338116,564106,118102,038113,427125,46894,712109,416773,242744,182622,796632,950839,302708,878671,640689,094733,013728,898748,067686,511645,4834,574,9231,017,5894,470,9271,017,5824,099,9984,017,2783,985,0134,150,7224,120,248661,449644,742.542,852108,686646,520594,852105,684102,85074,543490,426659,722659,651563,350878734873010474500664718S4nbBitunireusAnaciteetro155,7031,011,058133,802122,L181,023,253134,872148,1571,029,830131,257122,6871,071,637140,252110,5411,090,294139,445137,7431,073,644136,452141,9591,077,480133,823130,6791,098,268130,907119.5191,136,96212988197,5221,156,484128,32587,1291,169,500-126,84183,9131,140,827132,090956291129965128,200AnacitePetroKeystoneBit4n4hmush4mnghBit4ndnousSystcsRBEQIVQ1975110950116,771121,25411,742128,04611,885126,98847,00034;42924,16730,36093,1791,025,87187415101959390,6981,019,4761106191019476122,3701,019,476110,9771,015,11453,42015,078123,89414,000119,10810,150117,19876,76192,115115,683129,499137,304148,018134,121128,059104,441994,9568,14099,6461,010,712107,2011,001,48788,9371,026,79293,675,1,068,792110,4461,119,12889,61587,31799,21389,26883,4979,1327,80610,07518,68220963647621053451972996Tocal503226492330568628953135771715535991420920217261471,150,9361741751.359.6611.324.94914.313.869RnthlyAverageCoalStockinTons4,233,252710,235663,766104,440119,.'081,093,015132,78188,53413,398104,589101,9191,101,067PricePerTon-AveragePm)ectedInventoryPriceQ12-31.-80$34.1836.2435.49$34.4315.8320.47$14.74$17.4929.67$35.02$1.18TotalValue(int}gusands)856832427624055370741173022713103358'0O444 Fttttttty&IArt)2X6I)t)tft)tyettrdt~StectrlcdteckneCeunnHartInaCreakDOunvlFeeIdealdarrel~OuInt)antttyet1978Caonber1979JnenryFebruarySaytcederOctotertavwaeberOacceterLP1,902,072I.141,S21I.l)8.2622,192,NI2,321,3)61.967,1442.0$4.9991.951.d'52,01d,l)92.)fi0.9661.479,d)81.55l.$9142G~~gD5.742f11644,)D2)8,02S45,N2294.4704).74250.D1D1.50442,7D06.S145).67)u0,126274,22442,9ES2N.76040,404XII.46836,70)37.441101,0)699,14841,0714).IOIICS.)233)d,S604).98240,047290,70342.52040.0762)S,4744),29)46,37601>$54ud.dll294,8554).250O'1.24ai1$8,64612),0$2297,27042,97248,)tl278.$)I40.9234$,024Dd.))4I4NI)lit$97S)l54$S85)4$I470lyt24409451Ccetanttnvturbtan-Calkne33lIantaan426.0CON,OSS31.723)64.06303.597H~hll$,3)l~~dtnrtatIItaaSvaac~SaksHarttneCreak146,146)d,5650).595195.22S303.9$1u4.07592.1$$92,18$92.1N90,6259),7$492,1$$10).3192S),156111,704230,9884$.371420.CCO4)i'l)121,91$IIS.DS140,42S17),4)$172.396112,3940)iN1N.yll0$,9tl44.891419,00038,8)9441,0004l.64444),0540.2D444.0003),605400.0CO2).815405.00023,$9$4IO.COO)S.S84441.00043,0)9447.00040,382371.00041,0)03),2271$7,500N.064178.12$N,OD81.50001.'151d),SOO81.1$789.06101,151117.704IN,12$110,12$181,500lu.660N,C4)06.4590$.74390.625)11.7$99).15044.1D28,4191$1.2$093.92840,15837,110N5,62$41ASS)I.SC6Dl,2509).7S468,31079,6NU),7043N,4$43)S,ID81,50050,62$09.61491.044$$.9819),)79112,37491,802IN.750W0.57275.349109.)15)4,u2N,17946,$1691.06347,36391,74894.796N,)$)782,87)N,OBN.06392,017142,500156.2$0IN.$12290.DI82.dul).7014$.94501.500N.06)91,670IS6.2$09$.0)1ll.4$1D1.2501$).199DO,O)095.420170.)D86.54)$1.18890.003IS6.250)11.214)D.422ld),10990.COO84,6N89.d)4ISO.IO)181.1004l.50638,D941,299ISS.Q501.920)11,64001.0N151.FA8500')18$COO87.12$180,452191.1024249410375018)FAN,))6149.090$).12586815dd374IddnONl0762070)III$362,2/S.NI1.156.24$1.150.94I1.766.1412,100,981I.NS.)td9)7,)492)76704)970812HnthlyAverageOuStockIntbanctcy266,29942,45845.028ID,uoI.du.l)038.509426.$464).51434,3${1$9.255N.SSO775.29708.944$$.$)4N,)03)42.2)oSl.)N72,704182.0)o)06.990FrtceyerCelhn/darrelAverageInventoryFrtceocll/)I/OTotalValueuntlaannvda)~62~5~2)8)8d).1Ni).86$.86845865dlS865 C-9Page4,G.F.VandersIicePENNSYLVANIAPOWER'6'LIGRZ:KHPANYMaterials'and'ratixiS'ies(ThousandsofDollars)BalancesatDecember31,1980PlantMaterialsandOperatingSupplies(B-l,Page2)'19,787StoresEzpenseUndistributed(B-l,Page2)249Total'620036EarthlydetailfortheaboveitemsisnotavailablefortheyearendedDecenher31,1980.Forthepurposeofthisfil',theamuntclaimedrepresentsthebalanceatDecember31,1979inPennsylvaniaPower6LightCompanyandHersheyElectricCompanyAccount154-PlantMaterialsandOperatingSuppliesandAccount163-StoresEzpenseUndistributed.SeeEzhibitHistoricI,ScheduleC-9,Page4fordetail. C-10G.F.VanderslicePENNSYLVANIAPOMR'&LIGHTCCtPANYAccumulatedDeferredTaxesonIncog'ThousandsofDollars)'ineNo.1AcceleratedAmortizationLiberalizedDepreciationClasslifedepreciationsystemDeductionofcostsofreaovingretireddepreciablepropertyTotal5Lessdecreaseinprovisionfortheyear1980TotalFuelCost-TestPowerBalanceatDecember31,1980LessOneYearAm~izationCorrversiontoMonthlyBillingBalanceatDecember31,1980LessOneYearAmortizationReferenceB-l,Page4B-l,Page4B-l,Page4Line2+3D-18,Page2B-l,Page4D-18,Page1Line5B-l,Page4D-18,Page1Line10942,18716,12458,311$4,46455833,96157,59670673,90610TotalAccumulatedDeferredTaxesonIncoae872,530 PENNSYLVANIAHSER&LIGHTCOMPANYD-OPERATINGINCOMED-2D-4D-6D-7D-8D-9D-10OperatingIncoaeProFormaatPresentRatesandProposedRatesAdjustaentstoIncomeAdjustmentstoOperatingRevenuesAdjustmentstoEnergyCostsAdjustaenttoMajorForcedOutageInsuranceAdjustmentstoWagesAdjustrentstoEmnloyeeBenefitsAdjustmentforCoauritaentFeesAdjustmenttoRateCaseExpensesAaoritizationofFloodCostsD-llD-12D-16D-17D-18AdjustmentofRentExpenseforLeasedEquipmentAdjustaenttoOutsideServicesAdjustmenttoPensionFundManagementExpenses(notapplicabletotestyearendedDeceaber31,1980)AdjustmenttoResearchandDevelopaentEhmensesAdjustaenttoDepreciationAdjustmentstoTaxesOtherIhanIncoaeAdjustmenttoFederalandPennsylvaniaIncomeTaxesAdjustaenttoDeferredIncoaeTaxes LineNo.1OperatingRevenuesPENNSYLVANIAPGHER6LIQKCOMPANYOperatipgIncomeProFormaatPresentandProposedRatesYearEndedDecember311980(ThousandsofDollars)(1)(2)AsPerBooksAdjustmentsOfAccountsD-28903,541~8(108347(3)ProFormaatPresentRatesCol.1+2795194(4)RateIncreaseScheduleD-17,Pae5123,31(5)ProFormsatProposedRatesCol.3+4)8918,506OperatingExpenses2OperationandMaintenance3DepreciationProvisionforTaxes4TaxesOtherthanIncaneIncooRTaxes5Pennsylvania6FederalDeferredInc(mTaxes7Pennsylvania8FederalInvestmentTaxCredits9Deferral10Amortizationofdeferaents-Credit11TotalTaxes13TotalOperatingBg)enses14OperatingInde443056~49531)443056692785560492587855607863336,585(52,738)33,7562,82986,49418,68197,9498,40651,55510,27546,394(4,564)4,94214,83941,452(1,739)(7,360)4151,084(1,739)(7,360)(2,154)(8,444)16,587016,587016,587~2648)0~2648)0~2648)158223(6.2958)9526562790158055729443~10556262388162790686671~174098~2~85)~171313~60522~231,835Note:Forthepurposeofthisfiling,theportionofthosePennsylvaniataxescoveredbythetaxsurchargearenotincludedinthetaxesclaimedandthetaxsurchargerevenuesareeliminated.EnergycostsandPennsylvaniaGrossReceiptsTaxcoveredbytheenergyclausearenotincludedintheexpensesclaimedandtheenergyclauserevenuesareeliminated. D-2R.J.BerniniPENNSYLVANIA'PQNER'6LMKCOMPANYAdjustaentstoIncomeYearEnded'December311980(ThousandsofDollars)D-4D-5D-6D-7D-8D-9D-10D-llD-12D-13D-14ROperatingRevenueAdjustaenteratinandMaintenanceFpensesEnergyCostsMajorForcedOutageInsuranceWagesEmployeeBenefitsComnitmentFeesRateCaseEzpensesAmortizationofFloodCostsRentExpenseforLeasedEquipmentOutsideServicesPensionFundManagementEzpenseResearchandDevelopmentEzpensesTotal~$(108,367(57,767)1,8843,1531,0482733(160)320608(l,ooo)0(3so)(49S31D-16D-16D-16DereciationAnnualDepreciationProvisionforTaxesTaxesOtherthanIncoae:PennsylvaniaCapitalStockTaxPennsylvaniaGrossReceiptsTaxPennsylvaniaRealtyTaxTotal'6;927(5,902)(22,557(24'279~(52738D-17D-17D-18D-18IncomeTaxes.PennsylvaniaFederalDeferredIncomeTaxes:PennsylvaniaFederalTotalTaxesTotalOperatingF~ensesTotalAdjustments(4,564)4,942(2,154)~8444~(62958105562(2,785) DescritionSalesofElectrici(1)(2)ActualerencaeenceD~3,Pee2PBZSYLVANIAHÃKR&LIQKCOHPAhYAdjustnenttoOperatingRevenueYearEndedDecerber31.1980'IhousanoDollars(3)(4)(5)ProFormatPresentRatesAdjusumnts(6)lanationofAdustmentsPUCJurisdictionalCustards:PP&L-BateRevenue@3fLine31,Col.4+$735,426Line31,Col.4$744,426-Line39,Col.4$9,255Additionalrevenuesresultingfranannualizationofsales,inclusionofHersheybudgetedsalesforJan-uaryandFebruary,1980atPPQ.ratesandthein-clusionofrevenuesassociatedwithinterdepartmen-talsales.TaxSurchargeRevenue54,189Line31,Col.55TotalPPH.6Hershey-2monthsO'ine31,Col.8%&ic38I2,6770DeferredFuelExpcns<<Rider23,340Line31,Col.623,340EnergyClauseRevenue60,843Line31,Col.70(60,843)(54,189)(105,777)(2,677)Energycostscoveredbytheenergyclausearenotincludedintheexpenseclained,thusrequiringeliminationofenergyclauserevenues.Forthepurposeofthisfiling,theportionofthosePennsylvaniataxescoveredbythetaxsur-chargearenotincludedintaxesclaisedandthetaxsurchargerevenuesareeliminated.Forthepurposeofthisfiling,Hershey'sbudgetedrevenueforJanuaryandFebruary,1980areelisd;natedandtheapplicablesalesarerebilledatPP6LrateswhichareincludedintheadjustmentonLinel.8910llTotalPUCFERCJurisdictionalCustaners:RateRevenueFuelAdj.ClauseRevenueTotalFERCTotalOtherratRevenuesLatePaysxntCharge10,265Line44,Col.46210Line44,Col.716475Line44.Col.88929502,374Line32,Col.4~R-768oni10,372Line46,Col.4621016,582784,548bc3~2,37410454)1070107(108,347)Additionalrevenueduetoannualizaticnofsales.44UOther14TotalRevenue8217Line33,0oL48237~9035415795.194 hateSehe4aleI35676910Il'1213IL1$1617181921tt232526asNPOatsCS1CS3IP5M.ICSASst"lISITsIaSIISINgirlSlrj415CS5-ChkCSAaa(acaIca3a)a22ailatefalsestChargecaherElectrica>sea>~Teaalat>sell>asses33~sr>heraleetrleAgl.rortea.4FeraTICCAoaeallsallosIate~t.~IeCtertsatotttaaITotalll\312IrratC66gr-taheCOItNCtot&IartrrfateIaatAaaalttatloataletartegtstloaaltotalL$\'fCrso4totalSoles(Lah)as.orCosta>ere6,tt5,252,00099,85710>)IL7L29I)60)I1194031>506>OCO3.55L,SLS,OOO3.3tI.SN,OCO600,00032,l21,00078,6hL,L5L2,21$,00061$,000,0CO115,500,000fStgftf1961121159SL3437374'Shl8584OO>0007>007,0003,LOO>CCOIL5,OOO54719l,6)f,000150>510,0CO608,011>000I>702>000,000251,600,000139,100,000~4$t,l2L>000SCO.035rIIO2,203,$8835L>663,7td22,6L9,93$>ffd169,166>SCO378>733,800T8,800,0CO627,000,00010,2$3,561637>253>5611>00455023,28?>192>339eaeshatejtLL>6IL>Ift$18,01i,ltlL>SCL>1209,51L,STSS,I&2,175$,039,9L512,LOL'1,650221,23L557>07927,16L915,171201,0102,'2697$,879,87129,L97,1276$>399.553IM,SLO22,$00S.CLS>1$67,696,102358,65812>L20,23$2,720,1LT32>79299>000$7$,61221L,OCO15>092Srfth2$2,6008,960,7197.29$Lt,LI315,7681,112'26021,560391,L634352,$09S.NS,C62608,6T6L2,632,8$2T2,37L,COO$,217,COO$10,591,0CO1,6$8,6C67,L59,26595<950IIL>lt3N0,355T,ILL9>25L>830$681,932'755,274237SSL>SICL93202,613.3LTf>2119L22,180,000$10,265>289j107>03$$10,372>32L$765,613.561SSL.SI0.932~eposleoap>>rarer~lttC>grasasttoate4easesahatesror12loathetat>4oeteaher31>1$kNi>seatgotora.r.o.c.SoIes>ooooh>rerre4feel2?teaseI?orgyattests>at$6,569.3COSIT.IIi>9378L4095,178I>Old>'ISL3.720>SCO3,000>0191,285.6123,LTI,L92Sp9l862033,9LOStr3302>Ã9613,81d120,912S5$t,tat>2IL9.699,680.10,3701,63TSd,l76tli,61d6,0\54670,313315p19$I,l5L66,608,lLT1$t,06t,10$19$,09226,lt33>389,8L60>$50>129lOl,186If>6$7>SLO3>9@,tfh35.073d,l17,35910,15$>2LSIt,131>T2Ll,i03,92110>TOL>530L,SIIlf1>lT22>09T>TA66,830,6tdIlf,2&1190Q>01459$33>901>OLSTt>IOL>0$3195p150tf>311>62511,510,0163,157,285N>92540177>3353>N9Ift$6L,SSL157>$63636,$021,1th.'7$3264350115,610316>5702>72919,1229>27$396ILT12<65Ll10>T364659,2LO686,60t319,599119,117T31>fiftld,OOT19,603$,10$3$1,7056,l03,LLT5,0+1Ldh10,661>lft20,1l7155>9336h,tetl,511ISSI59IOS4090>7063>LIT>99510,670>&a>1,523,261,1,692,Ttf>$50tttI60$3.987331,6506,ttt',$0322>003,80f6L,0$7,5909>819r310$>0$0,730r797>$85L,ISS>6CS2,756,l518,229,000$11S,730,158382,LSI12>00082,3th.COO0,217,000$10,$91OCO$10,98$,l$1$39i,l$1$5L,SSI3IL,0952.30Ilit,C63818,7886,01L$56765502>010>9IS1,961>ILT0,6TL,6C6IIO,NOtl2,5ll1>205>IAO1363211>275>910010>TL6>513$4L94713$095,65L,322$87$,887,N9$120,616,352$54610>059$23>7142th$498$>OMl,22L,SASL>820,LI39rL66>8912,180,0008yPp'LSS479hrttt83>702>&5T,035,85h2>180,0CO$16,ltfSNjIt919,669223>ISIjILS>LSS2,6$L>320L4hth$6210Oll116,152$6,326,166$58.137,035816,698,l90033,068,12862,695,6th$912>352>tat$688>9$5>&l$123>312>166$23>TII,2&>~r10L16.8$ILllIl.C61$.30ll.9315.6516.5221.3$16.th16.00IO.S't16.09I)I:43203$27.0929.9120.531LTQ18.thlb.t0Id.dt16.1l16.11~1537416.1L16.1l1LAI5'59l30~316.11$24620>1565>0$9,0$2II,119,2626,889,5TS5,9$8>179ll>8192,06T257>N26N,8101>099>OILtr7209,0195$,S7821,015I,LSL~:eL&>,'ill46LS,TttL>dtl>0$9TL0.6LI&II,O>99>ft118,159656,6836,371013,$1L$65,L73,C91$6$>L73>092Dererre4~Oelgears>aSacrallttootaeat$65693CO$1'l>12L937$331>03l'l6$40IS,TSL3,TA9003>OCO>0191,286,6123>hffoh923>ttd620$3>SLO>3)06L3,48120,9125502>dlt,tl\9>699,6887,820,l8$3>3$3r9$79,06$,16$te,h'gtll,6106,0LS46T$,313315>INl,lfi7$>720.760174852,0LOIC0,721,681LIg107,92622$>SLT3.~;~d9>500>236LL6>SL617,$39,1613>832,398L0,657I,CLT7>3353r5591$t56L,dfh157>$6344r753263>390IL5,610316,570131,9tt813,'35021,635395,INT,l56,ldl2$>739>0567'LL.39111LTL$36S>923,$9612,610,0102>72919,1229>ttd'396ILTIt,gfil10,T36686,6lrt3l9,$99~002>~12,756,l516,229COO710>905,LSIIL3,063t&8,7886,01L$967>855SL>8$131L>09$0trSOI>550.10,LSL,3728It>899>20$$64010,059$4CC6,882.6LL$5>6&t>dtl11>261,8122,180,000$498$>066~,22L,SA866,210,01L116,152$26L>611$6326,166$19,35L,tfh19,129,683$23,7142SL$58.137,035$40L6>aft>I38reaserCerreattotalaeeeeaosee>a1$81681$.616LL,699,2539.172>32I19Tdt>93513,209,12lL,796,767I1,652,76L30,25$Ski~4310,107Lt,660t.tt&,621,l67>12L5>fra>21>dtl168>69869,2&>l,883k'II94183>98L3,73$,2$911,>>85,8011>65$,2161&2,8561>830,60013.TT13.01I3.0313.2113551$$119,7615Q10.55IL.5713.dl15.9219.8726.tl20.5629.15ld.dd16.9$10.0l16.8516.5917Alf16.113720.Sdt>LSI12>000394151j296>57743II>85$IL>KOIL.TSIl3313.22$4623>SNIl.ld$134218>$228ISS,LSS479L.$22IT.IOIL9516II82,65L,SSO0LI>hth8$133,9IL,326I\.6SI3L5670910111213li1$16I)192$263L35363730Llltl3lL AdjustmentstoRevenuesYearEndedDecember,1980D-3Page3A.J.BaldwinOnpage2ofScheduleD-3inColumns1through8downtoandincludingline34andlines41,42and43,aretheforecastedconditionsfortheyear1980.TheremaininglinesinColumns.1to8areadjustmentsfor'theannualizationof1980conditionsdetailedinresponsetoRegulationIII-D-8.Columns9through17showtheeffectoftheproposedratesonthe1980projectedconditions.RateRevenueTotalproposedbaseraterevenuesareshowninColumn9.Columns10and11showtheproposedincreasebyamountandpercent.'TheindividualrateeffectsascalculatedareshownattheresponsetoRegulationIV-C-3(a).TaxSurchargeTherateof7.57%wasappliedandistherateestimatedtobeapplicableiftheproposedrateincreasehadbeenineffect.DeferredFuelExpenseColumn13containsrevenuesunderthisriderchargedattherateof1.047millsperEwh.~CColumn14containstheestimated1980revenuesfromtheenergyclause.TotalRevenuesinColumn15arethetotalestimatedrevenuesfor1980assumingthebaserateincreasehadbeenineffectalongwiththerevisedTaxSurchargeandrelativelycurrentlevelsofDeferredFuel.ExpenseandEnergyClause.'Thelatterthreeitemsweredevelopedandshownhereinordertocreateanoveralllevelofannualrevenuesgenerallycoincidentwiththelevelslikelytoexistiftherateincreasewereinplace.Thisprovidesareasonablebasisuponwhichtocomputeoveralleffects,typicalbillcomparisonsandotherdataforuseincustomernotificationandadvicetopress,employeesandotherinterestedparties.Thetotaleffectbyrateclasses,bothamountandpercentisshowninColumns16and17. PENNSYLVANIAPOWER&LID'OMPANYD-4Page1W.R.ScheffleyR.J.BerniniAdjustmentToEnergyCostsYearEndedDecember31,1980(ThousandsofDollars)ForthepurposeofthisfilingtheenergyclauserevenuesfromPPUCjurisdictionalcustoaersisnotincludedintherevenueclaimedandtheenergycostrecoverableundertheenergyclauseiseliminatedbytheentryonline1ofthisschedule.xselxmxnaLineThedeteraanationoftheanuuntrecoverablethroughtheenergyclauseshownonpage2assuaesnolagintherecoveryofenergycostsincurredinthetestperiodthroughtheenergyclause.Consequently,thecreditfordeferredenergycostrecordedtoexpenseperthebudgetiselinrinatedonline3ofthisschedule.The"OtherPowerSupplyExpenses"perScheduleB-4Page2include'$2,530,000"forK'epurchaseofpowerfromMetropolitanEdisonCompanybyHersheyElectricConpanyforJanuaryandFebruary,1980.ThisistheperiodpriortotheaergerofHersheyElectricCompanyintoPennsylvaniaPower&LightCcarpanyasof1hrch1,1980.Forthepurposeofthisfiling,HersheyisassumdtohavebeenurgedasofJanuzy1,1980andthesalesforJanuaxyandFebruary.areassumdtobesuppliedfranthePP&Lsystemasreflectedinthedeterminationoftheadjustzamtonline2.Thispurchasedpowercostamountingto$2,530,000tedonline4ofthisschedule.No.DescritionReferenceEnergyCostRecoverablethroughEnergyClauseIncreaseinEnergyCost3DeferredEnergyCostOtherPowerSupplyExpenses-HersheyNetReductioninEnergyCostScheduleD-4,Page2ScheduleD-4,Page3ScheduleB-4,Page2ScheduleB-4,Page2$(80,358)2,59822523(25308(57,767) PENNSYLVA'.GAP(NER6LIGHTCM'AVED-4Page2W.R.ScheffleyR.J.BerniniEnergyCostRecoveraoleThroughEnergyClause,YearEndedDecember31,1980(ThousandsofDollars)'Ibisadjustmenteliminatestheenergycostsrecoverablethrou@theEnergyClause.SincethecalculationassumesnolaginrevenuerecoveryofenergycostsincuxredduringthetestperiodthecreditfordeferredenergycostrecordedtoexpenseperthebudgetiseliminatedonScheduleD-4,Page1,,Line3.LineVLo.DescritionFuelSteamPowerGenerationOtherPower(~erationInterchangeReceiptsDeliveriesScheduleScheduleB-4,Page1ScheduleB-4,Page2ScheduleB-4,Page2ScheduleB-4,Page2Aamnt$665,8708,82136,250(461,685)5NetEnergyExoense6249256910Sales-KLllionsofKHHPPUCJurisdictionalCustomersFEBCJurisdictionalCustoaersTotalInterdepartz~talCaarpanyUseTotalSalesScheduleD-3,Page2ScheduleD-3,Page2ScheduleD-3,Page222,295~622,92228823,01212NetEnergyCost-'Elis/IGK13BaseofEnergyClause14NetEnergyCostOverBaseLine5-.11Line12-Line1310.8327.2283.60415NetEnergyCostRecoverableThroughEnergyClauseLine14(Line6+9)~680358 D-4Page3W.R.ScheffleyR.J.BerniniPENNSYLVANIAPOWER6LIGHTCOMPANYEnergyCostApplicabletotheIncreaseinSales.ResultingfromtheInclusionofHersheyandAnnualizationofSalesYearEndedDecember31,1980(ThousandsofDollars)LineNo.ReferenceIncreaseinSales-MillionsofKWHD-3,Page,2,HersheySalesforJanuaryandFebruaryLine36'Col.3Aauunt53AnnualizationofSalesPPUCJurisdictionalCustomrsFERCJurisdictionalCustomersTotalD-3,Page2,Line'37,Col;3D-3,Page2,Line45,Col.330010363IncreaseinEnergyCostPPUCJurisdictionalCustomers(Line1+2)x7.228mills/1mb(a)92,551FERCJurisdictionalCustomersLine3x4.670mills/kwh(b)Total4782598(a)BaseofenergyclauseapplicabletoPPUCJurisdictionalCustaaars.(b)BaseoffueladjustmtclauseapplicabletoFERCJurisdictionalCustoms. PENNSYLVANIAPOND.&LIGHT'COiiPANYD-5Page1W.R.ScheffleyMajorForcedOutageInsuranceYearEndedDecenher'31,'1980ThousandsofDollars)LineHo.78910Annualaverageezperiencedoutage-%7days(Page2)Averageannualezposure-NHdays(Page3)Ezperiencedannualoutagein%(Line1-:Line2)EzposureinM'egawattsinJanuary1981Totaltestyearezposure-HHdays(5,770x365days)Projectedoutagedurixq~testyear-S4days(Line5xLine3)CostindollarsperMHday(Page4)Projectedoutagecostduringtestyear(Line7xLine6)Provisionperbooks-Account557(B-4,Page2)Increaseinprovision11,7992,004,580.59/5,7702,106,05012,4268313.86$3,9002,016$1,884Aself-insurancereserveisprovidedto~theincreasedlevelofenergycostswhichareezperiencedwhenanyoftheCompany'smajorgeneratingunitsareforcedoutofserviceduetodamagecausedbyaccidentorotherunforeseeninsurableoccurrences.Increasedenergycostsresultingfrompurchasingorgeneratingreplaceaentpowerathighercostsorlossofinterchangesalesarechargedtothereserve.Astocertainoftheany'slargegeneratingunits,costschargeabletothereservearelimitedto$12.5millionsinceoutsideinsuranceiscarriedtocovercostsinexcessofthatavaunt.ThereserveisestablishedonthebasisofhistoricalezperienceandhasbeenrecognizedinpriorratemakingproceduresbythePUC.Anycostschargedtothereservearenotincludableintheenergyclausepaidbycustomers.TheCompanyhadnogeneratingunitsoutofserviceduetomajordamagecausedbyaccidentorotherunforeseenoccurrencesduring1979andnosuchoccurrenceswerereflectedintheCanpany'sbudgetfor1980. PENNSYLVANIAHER&LIQKCOMPANYMajorForcedOutagesYears1975throu1979LineNo.YearStationandUnitSizeofUnit~Me<wattsCauseofOutaeOutofDaysOut'FreeXhntD~asServiceofService11975None21976None31977BrunnerIsland341978Nmtour25Kntour26BnenerIsland37BrunnerIsland3BrunnerIsland314mtour2101979None750750740740750HighGasContentinUnitTransforner2-BBoilerFeedPuapFireDamage2-BBoilerFeedPerpFireDamageReducedRatingLowPressureTuxbineBlade-GovernorEndofTurbineEarPressureTurbineBlade-GeneratorEndofTurbineVarPressureTurbineBladeTubeRuptureandPenthouseDamage3/30/774/09/77ll1/22/781/29/781/28/7872/09/78ll5/20/785/31/786/02/78146/14/78152/24/783/10/78143/ll/783/24/78137503757407407508,0305,2504,12510,3609,62010,36011,250TotalOutage1975-19795YearAverageAnnualOutage~58995~ll799

D-"5Page3W.'.R.ScheffleyPENNSYLVANIA'P(HER6LIGHTQ3HPANYInstalledCapacitySteamElectricGeneratingPlants1975-1980EndofYear197519761977197819791980Total5-yearAverageAnnualM'egawatts4,941.04,941.05,770.05,760.05,770.05770.032952.05492.05492Megawattsx365days2004580MWExposure D-5Page4W.,R.ScheffleyPENNSYLVANIAPSKR&LIGHTCGHPAVZNajorForcedOutageCalculationofCostPerN4DayBasedonCaoabilityatDecember31,1980(ThousandsofDollars)Annualcapacityfactor(page6)CapacityM(Page3)OneHourOutput-~SH(line1xline2)DailyOutput-1'line3x24hours)AveragesteamstationsfuelcostmillsperZZ(page5,l~3)Steamstationsfuelezpense(line4xline5)AverageReplacementCostK.llsperICvPrl(page5,line10)AverageDailyReplacementCost(line4xline7)Bdxacostofreplaceaent(line8-line6)Extracostin$per'Hday(line9-:line2)65.2%5,7703,'76290,28820.10$1,81540.1683,626$1,811$313.86 D-5Page5H.R.ScheffleyPESSYLVA'GAPGKR6LIQZCOiPA'.KMajorForcedOutageSteamStationFuelCostandReplaceaentCostYearEndedDec@aber31,1980(ThousandsofDollars)AverageeSteamStationFuelCostCostofFuelConsumedforSteamGeneration(B-4,Page1,Footnote(a))MQKGenerated(Page6)AverageSteamStationFuelCost-'ElisperIGK(line1-.line2)$665,87033,125,00020.10BelacementCostofPmerInterchangeDeliveries(B-4,Page2,Footnote(b))Receipts(B-4,Page2,Footnote(b))TotalDeliveries-M@KReceipts-~K%TotalReplacementCostofPower-iH.llsperMi(line6=lin9)$461,68536,2508497,93510,950,0001,450,00012,400,00040.16 PENNSYLVANIA'POWER'&'LI(ZTCOMPANYCapacityFactorYear'EndedDecea5er311980D-5Page6W.R.Scheffley(2)MillionsofEWHtaMonStation~CapabilityCapabilityYearlyHourlyCol.(1)x24Hrs.Actualx366DasGeneration(4)CapacityFactor%Col.(3)-:(2)BrunnerIslandMontourSunburyMartinsCreek1&2HoltwoodKeystoneConemaughTotalCoalMartinsCreek3&4Total1;4641,515(a)3893002101944,1451,640578512,86013,3073,4172,6351,845170436,40914,40650,81510,0559,7502,7251,7004931,0081094'26,825630033,12578.273.379.764.576.954.664.273.743.765.2(a)Includes15MRforUnitNo.11whichisanauxiliaryturbinegeneratordesignedforblackstartcapability.PP&Ldoesnotprovideformajorforcedoutageinsuranceonthisturbine'generatorbecauseofitsrelativelysmallsizeandusecharacteristics.

D-6R.J.BerniniPE2KSYLVANIAPOWER6cLICHZ'COMPANYAdjustmenttoWagesYearEn.dedDecember31,1980(ThousandsofDollars)LineNo.ElectricAveragebiweeklywagePereaployeePersonnelExpected-endofyear9077,76956Aanualizedpayroll(Line1xLine2x26.2payperiods)Less:1980payrollasbudgetedIncreaseintotalpayrollIncreaseinpayrolltoexpense(Line5x63/)$184,618L7961495,00'153 45bit200.10003PpsLExhiklhMJFut4fei07R.J.BerniniPage1of3PENNSYLVANIAPOWER6LIGHTCOMPANYResponsetoInterrogatoriesofPUCTrialStaffDatedJuly15,1980Q.RE-3ReferenceExhibitFuture1,SectionD-7.Supplythesupportingdataforthemajorincreasesinemployeebenefitsinnormalizedtestyearclaim.($000')BudgetNormalizedA.RE-3Acompariscnandexplanationoftheincreasesfrombudgettonormalizedtestyearisshownbelow:increase(Decrease)PensionsPPGLHershey'-GroupLifeInsuranceHospitalizationMajorMedicalDisabilityDentalLongevityAccidentalDeathsDismembermentHershey-2monthsTotal$17,3402,3625,58473290590061018723$28,643$18,022)57)2,8556,0447329241,128610192$30,564739493460192285(23)$1,921IndeterminingtheadjustmentshowninExhibitFuture1,ScheduleD-7the$30,564shownabovefor1980wasadjusteddownwardto$30,258(ScheduleD-7,Linell)toexcludethesteamheatportion.Asimilaradjustmentwasnotmadeforthebudgetedfigureof'$28,643shownonline12ofScheduleD-7.Thus,theadjustmentforemployeebenefitsshownonD-7isunderstatedby$181,000.Page3revisesScheduleD-7ofExhibitFuture1.TheincreaseinthepensionplancostwasduetotheincreasedCompanycontributionstotheretirementplanrequiredasaresultoftheimprovedpensionpaymentstoretireeswhoretiredbeforeJuly1,1979.Overtheyears,PPsLhasregardedthewelfareofretireestobeanappro-priatecorporateconcern.Periodically,activeemployeesreceiveimprovedretirementbenefitsdesignedtomaintaincompetitivepensionlevelsandtoestablishequitablerelationshipswithincreasesinthegeneralcostofliving.Retireesdonotautomaticallyparticipateinsuchgainsandithasalwaysbeenclearthatretireesfacemanyofthesameinflationarypressuresfacedbyactiveemployeeswithonemajordifference-theydosoonagenerallyfixedincome.ThisproblemhaslessenedtosomedegreeinrecentyearsbecauseincreasesinSocialSecuritypaymentsaretriggeredbyincreasesin

PENNSYLVANIAPOWER6LIGHTCOMPANYR.J.BerniniPage2of3ResponsetoInterrogatoriesofPUCTrialStaffDatedJul15,1980theConsumerPriceIndexbutthereisstillsubstantialerosionofpurchasingpower.TheCompanyhasattemptedtomitigatetheseinflationarypressuresthroughincreasesinpensionpaymenttoretirees.Thegrouplifeinsurancecontractcalledforthepaymentofpremiumonthefirstofamonth'butalsogivesa"graceperiod"of30daysbeforecancellation.Formanyyearswehaveconsistentlypaidnearoronthelastdayofthegraceperiod.Arrangementshavenowbeenmadeforthegraceperiodtobe90days.Thus,theJanuary1premiumwillnotbepaiduntiltheendofMarch;the.NovemberandDecember1980premium'swillnotbepaiduntil1981.Thebudgetreflectsonlytenmonthlypaymentsfor1980.Thenormalizedtestyearincludestwelvemonthsofpremiumpaymentsversustenmonthsinthebudget.Hospitalizationcostsareincreased,byBlueCross/BlueShield,everyAugust1st.ThebudgetincludesonelevelofcoststhroughJuly1980andanincreasedcostlevelforAugustthroughDecember1980.Thenormalizedtestyearincludeshospitalizationcostsatthehigherlevelforafulltwelvemonths.Thenormalizeddentalplancostistheamountthatwillactuallyberecordedasexpensein1980.Thebudgetedamountreflectsonlythecashpaymentstobemadedur'ing1980. R.J.BerniniPage3of3ExhibitFuture1'cheduleD-7(Revised7/29/80)PENNSYLVANIAPOWER6LIGHTCOMPANYAdjustmentstoEmployeeBenefitsYearEndedDecember31,1980(ThousandsofDollars)LineNo.AmountPension:PPGLHersheyGroupLifeInsuranceHospitalizationMajorMedicalDisability$18,022572,8556,044732924Dental(effective1/1/80)LongevityAccidentalDeathsDismemberment1,12861019210TotalEmployeeBenefitsperBudget$30,56428,64312IncreaseinEmployeeBenefits(Line10-Linell)$1,92113.IncreaseinEmployeeBenefits-Electr'ic(Line12x99%)1,90214IncreaseinEmployeeBenefitstoExpense(Line13x63%)1,1981516SupplementPensionCost8100%toExpenseIncreaseinEmployeeBenefits311,229 IA' PENNSYLVANIAPS!ER6LIGHTCRICKAdjustmentstoEmployeeBenefitsYearEndedDecember31,1980(LhousandsofDollars)LineNo.Pens~on.1PP6L2Hershey3GroupLLfeInsuranceHospitalization5iiajorW~dical6Disability7Dental(effective1/1/80)8Longevity9AccidentalDeath6Dismenberaent10TotalTotalEmployeeBenefitstoElectricI99/$18,022572,8556,0447329241,128610192830,564:$30,25812Less1980EmployeeBenefits.toEle'ctricperBudget28,64313IncreaseinEmployeeBenefits-ElectricLinell-Line1214IncreaseinEmployeeBenefitstoExpenseLine13,x63/15SupplementalPensionCostI100/toExpense16IncreaseinEaployeeBenefits$1,615$1,01731'$'1048

RevisedD.-SR.J.BerniniPPsLExhibitFuture1Revised8/ll/80PENNSYLVANIAPOWER6LIGHTCOMPANYRevolvingCreditAgreementsandLinesofCreditCompensatedwithFeesYearEndedDecember31,1980(ThousandsofDollars)NoNameofBank(1)RevolvingCreditAgreementsorLineofCreditRequiringFees12/31/80(a)(2)AmountofFeeRevolvingCreditAgreementwith,10U.S.banks$400,000$2,0002RevolvingCreditAgreementwith23Foreignbanks100,0005003MiscellaneousLinesofCreditwith19banks51,500258Total$551,500-$2,758(a)InconnectionwiththeRevolvingCreditAgreementsandlinesofcreditattheabovebanks,establishedduringMarch1980,theCompanyisrequiredtocompensatethebankswithfeesapproximately1/2of1%ontheamountofeachbank'sparticipation'ntheRevolvingCreditAgreementsortheamountofeachbank'slineofcredit.

PENNSYLVANIA*P%1ERBcLIGHZCOMPANYR.J.BeRevolvingCreditAgreementsandLinesofCreditCompensatedwithFeesYear'Ended'December'1,'980(ThousandsofDollars)No.2~3.NaaeofBankRevolvingCreditAgreementwith10U.S.banks.'RevolvingCreditAgreementwith23ForeignbanksMiscellaneousLinesofCreditwith20banksTotal(1)RevolvingCreditAgreementsorLineofCreditRequiringFees12/31/80(a)geo,.000100,00046300546500(2)AmountofFee82,0005002332733(a)InconnectionwiththeRevolvingCreditAgreemtsandlinesofcreditattheabovebanks,establishedduringMarch,1980theCompanyisrequiredtocom-pensatethebankswithfeesapproximating1/2of1%ontheaaauntofeachbank'sparticipationintheRevolvingCreditAgreementsortheaauuntofeachbank'slineofcredit. D-9R.J.BerniLniPENNSYLVANIAPOMME6cLIGHT'CCNPANYAdjustmenttoRateCaseExpensesYearEndedDecember'311980(ThousandsofDollars)IncludedintheexpensesforthetestyearendedDecember31,1980is$254,000forratecaseezpensesapplicabletothesepreceediagsthedetailofwhichisshownbelow.Section53.45oftheCcznnission'sRegulationsrequirethatnoticetothecustomerbeprovidedthxoughprintedpostcardsorletternoticemailedatleastsixtyone(61)dayspriortotheproposedeffectivedateofthetariff.OnMarch28,1980theComnissionapprovedPP&L'spetitionforwaiverofthisregulationandallowedPP&Ltonotifyallofitscustomersoftheproposedincreasewithabillinsert.Thiswouldresultinanestimated$102,000reductioninezpenses.The$254,000inratecaseezpensesdoesnotincludeezpensesassocia-tedwiththeoutsideertsforrateofreturnandotherpurposes.Thiswouldresultinanestimated$35,000increaseinexpenses.DescritionPostageLegalFeesEmployeeExpensesPrintingandOfficeSuppliesOtherTotalPerBooksDecreaseinExpensesDuetoUseofBillInsertIncreaseinExpense-OutsideExpertsTotalAdjustedRateCaseExpensesTwoYearAmortizationLess:RateCaseExpensesperBooksReductioninExpenseg.3010013101254(102)35$187$94254Qeo D-10R.J.BerniniLineNo..2PENNSYLVANIA'POWDER"6'L'IGHTCOMPANYAmortizationofFloodCostsYearEndedDecerrher311980(ThousandsofDollars)FloodexpensesforTropicalStormAgnes:PayrollMaterials6suppliesPurchasesVehicleUseRepairstoLockHavencombustionturbineInsuranceDeductiblesApplicableto:$1,8512693476BrunnerIslandStation7NontourStation8Other9TotalFloodCosts10Oneyearaaurtization($3,196-.10years)10013321093,1963320Amortizationovera10yearperiodofexpensesassociatedwithTropicalStormAgneswhichhitthePennsylvaniaPower6LightCompanyserviceareainJune1972asallowedperPennsylvaniaPublicUtilityComnissionOrderdatedAugust26,1976atR.I.D.221-testyearendedJuly31,1975. .D-11R.J.BerniniPENNSYLVANIAPS'LIGHTORPANYAd)ustmenttoRentExpensesforLeasedEquipmentYearEndedDecember311980thousandsofDollars)PP&Lleasesaportionofitsequipmentsuchaspassengercars,~,constructionequipaxmt,andofficeequipment,throughaLeasingAgreementwithPruLease,Inc.asubsidiaryofthePrudentialInsuranceCoapanyofAmerica'.Thenonthlyrentalfortheleasedequipnentconsf.stsofa"MonthlyRentConponent"<Ouchistheaaortizationthe"AcquisitionCost"oftheleasedequipamntplusanannotccnputedbyaultiplyingtheEstimatedMarketValue"oftheequipmentnultipliedbyapercentageequaltooneandeighttenthsofonepercentplustheratechargedtotheLessoron90daydealerplacedproad.s-sorynotesissuedbyLessoronthefifteenthdayoftheprecedingacnth.The"Estimated~tValue"oftheequipmentisequaltotheAcquisitionCost"lessthetotalaggregate"RnthlyRentCoaponents"paidwithrespecttosuchequipaent.Whenthe"EstimatedMarketValue"ofaunitofequipaenthasbeenreducedtozero,thear2nthlyrentfortheunitisthreedollarspernr2nth.InpreparingthebudgetitwasassuagedthatthecostofcoanercialpapertotheLessorwouldbe11/..Thead)ustmentbelownormalizestherentexpenseforleasedequipaenttoreflecttheactualcostofconnercialpaperincurredbytheLessorandotherminorchangestotheLeaseequipamt.1MonthlyRentCoaponentchargeexperiencedduringtheyearendedDeceaher31,19792EstimatedMarketValuebasedonaverageofMarketValueforyearendedDeceaher31,19793ActualratechargedforninthofApril,19804InterestcoaponentofrentalchargeLine2xLine35ChargeforequipaentfullyamortizedbasedontheyearendedDeceaher31,19796TotalestinmtedrentalforyearendedDecenher31,19807TotalforyearendedDeceaher31,1980perbudget8Increaseinrentforleasedequipment9Increaseinrentforleasede~xnmtexpense(Line8x47.4'/)$24,01019.8/$5,4904,75410,2900008~1282608 D-12R.J.BerniniPENNSYLVANIAHMER6cLI{ZTCOMPANYAdjustmenttoOutsideServicesYearEndedDecember311980(ThousandsofDollars)TnOctober1973,anagreementwasreachedbetweenPennsylvaniaPower6LightCompanyandGulfUnitedNuclearFuelsCorporation(GUNF),asubsidiaryofGulfOilCorporation,forthesaleofaquantityofuraniumandfabricatedfuelassemblies.Thequantityofuraniumwas3,186,000poundsofU0fordeliveryovertheperiod1980through1985.FabricatedfuelassedmesweretobesuppliedforeightreloadsoffuelfortheSusquehannaPlantwithanoptionforPPSiLtopurchasefabricatedfuelassembliesforanunlimitednumberofreloads.Durixg1974,GUNF'ssuccessorininterest,GeneralAtomicCom-pany,apartnershipofGulfOilCorporationandScallopNuclear,Inc.,refusedtogivePALassurancesthatitwouldsupplytheuraniumandfabricatedfuelassenhlies.PP&LfiledsuitfordamagesonNovember6,1974intheCourtofCoaannPleasofLehighCounty.OnSepteaher28,1979thePennsylvaniaSuperiorCourtenteredanorderdenyingarequestbythedefendantstohavethecasetriedinsomPennsylvaniacountyotherthanLehigh.ArequestbytheDefendants'ohavethisdecisionreviewedbythePennsylvaniaSupremeCourtwasrecentlydenied.TheDefendantshaveindicatedtheywillappealthisissuetotheUnitedStatesSupremeCourt.Unlesstheappealisallowed,itisanticipatedthetrialwillbeginthisfall.Onemilliondollarshasbeenbudgetedin1980forthesuitagainstGeneralAtomicCompany.TheCompanyhasrenuvedtheonemilliondollarsfromexpensesduetothenonrecurringnatureofthisitembutwouldexpecttoreduceanysettleaentreceivedinconnectionwiththissuitbytheaauuntofcoststotrythissuit.ReductioninOutsideServices81,000

D-13,R.J.BerniniPENNSYLVANIA'POKR'6'EIGRZ'COMPANYAdjustnenttoPensionFundManagementExpensesYear'EndedDecen5er'1;1980'ThisadjustmentisnotapplicabletothetestyearendedDeceaher31,1980. D-14R.J.BexniniPENNSYVIANIAPOWER6cLIGKGMPANYResearchandDevelopmentEzpensesYearEndedDecember31,1980(ThousandsofDollars)HontourWasteHeatGreenhouseProectInproducingelectricity,asteamelectricgeneratingstationrejectsalargequantityoflowlevelheatthroughitscoolingsystem.Bylocatingrexttoanelectricpower'plant,agreenhouseoperatorcouldusethisrejectheattowarmthe.greenhouseinplaceoffueloilscoaaonlyusedintheAppalachianRegions.PennsylvaniaPomr6LightCompanyandBryfogle's,Inc.havebeenworkingcloselyduringthepasttwoyearsinanefforttoinitiatethecon-structionofagreenhousecomplexheatedwith1m'emperaturerejectheatfromPP6L'sDetourSteamElectricStation.Bryfogle'sInc.isworlamgonthefinalgreenhousearrangement,andRutgersUniversityunderaseparateresearchcontractwithPPQ.isdesigningaunique,pipeembedded,concretefloorheatingsystemtomakeuseoftherejectheat.Theinitialphaseofconstructionwi11includea2.75-acre,alumi-num-framed,double-poly-coveredgreenhouserangewithservicefacilities.PPHwillprovidea16-inchsupplyandreturnpipelinebetweenthegreen-.houserangeandthecondensercoolingsystemsofbothDetourUnits.TheresearchanddevelopmentezpensesfortheyearendedDecember31,1980include$350,000applicabletothisproject.Becauseofthenatureofthisproject,PPHhasdecidedtocapitalizeratherthenezpensethefundscomnittedtothisproject.Thisadjustmenteliminatesthe$350,000fromresearchanddevelopaantezpenses.ReductioninResearchandDevelopnentExpenses~350

PENNSYI.VA'.GAPCMER6LIGHi.'OMPANYAdjustmenttoDepreciationYearEndedDecember31,1980thousandsofDollars)D-15R.J.BezzdniJ.O.BeaverPlantinServiceDepreciationLess.ClearingAdjustmentrelatingtocustomeradvancesforconstructionAoortizationofNegativeSalvageTotalDepreciationperBooks(B-2)Adjustment-IncreaseinExpense$83,134(a)210$82,9182,642$85,56078,633$6,927(a)PP6LCompanyExhibitJOB7,ExhibitJOB7,ExhibitJOB7,ExhibitJOB7,TotalPPMSection2,Page81Section8,Page181Section9,Page221Section9,Page244$82,086778(19)(28)82,817HersheyElectricCompanyExhibitJOB7,Section3,Page121Total317$83134 RevisedD-16Page1R.J.,BerniniPPGLExhibitFuture1Revised8/21/80PENNSYLVANIAPOWER6LIGHTCOMPANYAdjustmenttoTaxesOtherThanIncomeYearEndedDecember31,1980(ThousandsofDollars)PennslvaniaCapitalStockTaxAdjustmenttoreflectincreaseintaxablevalueduetoadditionalequitycapitalandeliminationoftheamountoftaxwhichiscoveredbysurchar'gerevenues.EstimatedtaxapplicabletoElectricDept.910mills(D-16,Page2,Line24)AmountofPennsylvaniaCapitalStockTaxcoveredbysurcharge($15,136x4/10mill)Less:Expenseperbooks(B-5,Line1)Adjustment$15,1366,0549,08214,984(5,902)PennsylvaniaGrossReceiptsTaxAdjustmenttoeliminatetheamountoftaxrecoveredbysurchargeandenergyclauserevenueandprovidesforgrossreceiptstaxonproformarevenueatpresentrates.GrossReceiptsTaxRecoverableThrough-BaseRates(RevisedScheduleD-16,Page3)GrossReceiptsTaxPerBooks(S,cheduleB-5,Line2)Adjustment$16,52239,981$(23,459)PennsylvaniaRealTaxAdjustmenttoeliminatePennsylvaniaRealtyTax'whichisentirelycoveredbysurchargerevenue(B-5,Line4)$(24,279)

R.J.AdjustmmttoTaxesOtherThanIncomeYearEnded'December311980usGI10sPlvaniaitalStockTaxAdjustaanttoreElectincreaseintaxablevalueduetoadditioIIalequitycapitalandeliminationoftheamountoftaxwhichiscoveredbysurchargerevenues.EstimatedtaxapplicabletoElectricDepartI10mills(D-16,Page2,Line24)AnnuntofPennsylvaniaCapitalStockTaxcaverIMbysurcharge($15,136x4/10mi.ll)Less:Expenseperbooks(B-5,Line1)Adjustmmt$15,1369,08214984~$~02PlvaniaGrossReceitsTaxAdjustzenttoeliminatetheaanuntoftaxrecoveredbysurchargeand~grclauserevenueandprovidesforgrossreceiptstaxonannualizedrevenues.AanuntperbooksrecoveredbyPP6Lenergyclause($60,843P.U.C.Portian(D-3,Page1,Line3,Col.1x45mills)AanuntperbooksrecoveredbyHersheyRevenue($2,677D-3,Page1,Line6,Col.1x45mills)Aanuntofgrossreceiptstaxperbooksrecoveredbysurcharge($35,794D-16,Page3x25/45mill)Narmalgmssreceiptsonannualizedrevenues($9,338(a)x20mills)NetadjustmentintaxeaIpense$(2,738)(120)(19,886)187~82255PlvaniaRealTaxAdjustmenttoeliImnatePennsylvaniaRealtyTaxwhichisentirelycaveredbysurchargerevenue(B-5,Line4)$(24,279)(a)PUCtariff-(D-3,Page1,Col.(5),Line1)HBCtariffs-(D-3,Page1,Col.(5),Line8)LessrevenueframCitizensElectricnotsubjecttoGrossReceiptsTax9,2551072489,338 i PENNSYLVANIAHER&LIQKCCNPANYPennsylvaniaCapitalStockTaxYearEndedDecenher311980(lhousandsofDollars)D-16Page2R.J.Bernini1978SettlenentbyPennsylvaniaDepartmentofRevenueQ7hstCurrent)13112,209xq1,150,000$1,121,581AverageEquity212/31/77312/31/784Total5Average6RatioofLine1toLine5$1,346,6391525743~2872382614361917F1.AdditionstoitalSince197878910ll1213141516171819202419791980PreferredStockIssuedPreferredStockRedeenedPreferenceStockRedeenedCamanStockCapitalStockExpenseRetainedEarningsPreferredStockIssuedPreferredStockRedeenedPreferenceStockIssuedPreferenceStockRedeenedCamnnStockCapitalStockExpenseRetainedEarningsTotalAdditionsPortionapplicable(Line6xLine20)TotalTaxat10mLllsElectric(Line23x99.Fl(a))$135,000(1,600)(4,000)81,563(792)50,30160,000(1,600)51,000(6,500)109,839(1,110)34286506387394982~151656315166(a)Actualyearended12/31/79 PPGLExhibitFuture1Revised8/21/80PENNSYLVANIAPOWER6LIGHTCOMPANYGrossReceiptsTaxOn,proFormaRevenueatPresentRatesYearEndedDecember31,1980(DollarsinThousands)LineNo.3DescriptionRateRevenueDeferredFuelExpenseRiderTotalFERCJurisdictionalLess:UGICitizensElectricTotal(Lines3thru5)LatePaymentChargeTotalGrossReceiptsTaxonProFormaRevenueatPresentRates(Lines1+2+6+7)(2)ExhibitFuture1ReferenceD-3,Page1,D-3,Page1,Line1Line2D-3Page2,Line43D-3,Page1,Line12D-3,Page1,Line10(3)Revenue$744,68123,34016,5822,1802,596ll,8062,374$782,201(4)ApplicableGRTRate(Mills)204520(5)GrossReceiptsTaxCol.(3)xCol.(4)$14,8941,050531$16,522,IP~~~~

R.J.BerniniPENNSYLVANIAPCMB.'6LIGHT'COMPANYGrossReceiptsTaxPerBooksSubjecttoSurchargeRecoveryYearEndedDecenher31,1980ThousanoDosTotalGrossReceiptsTaxLess.GrossReceiptsTaxRecoveredbyPUCEnergyClauseGrossReceiptsTaxRecoveredbyHersheyRevenueB-5D-16,Page1D-16,Page1Anuunt$39,981(2,738)(120)GrossReceiptsTaxRecoveredbyFERCFuelAdjustmentClause($6,210D-3,Page1,Line9,Col.1x45mills)GrossReceiptsTaxRecoveredthroughPALDeferredFuelExpenseRider($23,340D-3,Page1,Line2,Col.1x45mills)NetGrossReceiptsTaxSubjecttoSurchargeRecovery(279)~(1050$35,794

PENNSYLVANIAPCIIIZ&LIQITCCHPANYCoaputationofIncocnTax-ElectricYearEndedDccacber311980D-17Page1R.J.Bernfni10111213141516171819202122232425262728293031TotalOperatingExpensesOperatingIncoanLess:InterestExpenseNetInccanInccanTaxAd)uscnrntsFederalIncanTaxStateIncccnTaxDeferredIncxunTaxInvcstmcntTaxCredft~wfcnfor&)orForcedOutageTaxesCapitalizedPensfonsCapitalized~BookDepreciationTaxDepreciationRemvalCostsAcnrtfzatfcnofPropertyIassDeferredEnergyCostRecoverableFuelCostPORTATaxDeferredPerBooksBillingGangedtoIbnthlyBasisFloodCostAcnrtizacianAanrtizatfon-RARItansPreferredDividendsPaid-CreditNo.1OperatingRevenuesOperatingExpenses2OperationsandHaintenance3Depreciation4TaxesOtherThanInume5InccenTaxes-Federal6IncccnTaxes<<State7DeferredIncxcaTaxes-Net8'nvesnccntTaxCredft-Provisian9InvesancntTaxCredit-Aaurtizacfcn(IINusandsofDollars)(2)(3)AdustalentsPerBudgetAccocntRe903541108347D-3(4)PmForsnatPresentlllllGS795194492,58778,63386,49441,45214,839(49,531)6,927(52,738)4,942(4,564)D-2D-15D-16Line43Line38443,05685,56033,75646,39410,2751,49916,587729443807861055628045623881D-17Pe288.83141,45214,8391,499L3,9372,016(4,109)(6,413)78,633(96,603)(4,000)309(22,523)22,2914,942(4,564)(10,598)01,8840(276)6,9272,0620022,5230Line43Line38D-18,Page1D-17,Page4D-15D-17,Page3D-4B-446,39410,275(9,099)13,9373,900(4,109)(6,689)85,560(94,541)(4,000)309022,2915,2781,080(41)(5,278)D-17,Page432001,080320(41)(10,598)D-18,Page1(9,099)16,587(5)RateIncrease~D-u,reS122,82951,5558,40662,79051,5558,406(6)ProFornnacPaaosedRacesS918506443,05685,56036,58597,94918,681(9,099)16,587(2,6486866718883197,94918,681(9,099)13,9373,900(4,109)(6,689)85,560(94,541)(4,000)309022,2911,080320(41)(83834353637383940414243TaxableNetIncccaPa.IncoaeTaxDeductionsandCreditsTaxPreferenceIncoanPa.TaxableIncccaPa.Taxat10.57.(rounded)Pa.Taxat7.57.(6.977eff.rate)rocndedAdj.hvfsionforPossibleDeficienciesTocalPa.InearthTaxFederalTaxableInccaa(Line32-Line36)FederalTaxQ46Kless$19(rocnded)LessInvestmentTaxCreditAd].ProvisionforpossibleDeficienciesTotalFederalInccenTax140,1194314042%'4,745941483912537457,65316,58741427,1127,112(4.470)9411825,32803864942147,2314314727410,2751027513695662,98116,587120,4831204S38,4068,406112,07751,555851,555267,71443267757'18,68118,681249.033114,53616,58797949*NersheyElectricCclpanybudgetedataxablenetlossof$266,000fortmnanthsendedFebruary29,1980.SuchataxablelossfsnotrecognizedforPcnnsvivaniaincxnatmp~s.CorwecIuently,PennsvlvanfaincccntaxperbooksiscocputedonlyonPP&L'sbudgetedtaxablefncxcnof$140,428,000.

H21NSYLVANIAPO~6(LIGKC(MPAVZ~'djustmenttoInterestDeductionForIncomeTaxPurposesYearE'ndedDecenber311980(ThousandsofDollars)D-17Page2R.J.BerniniLineNo.1BateBase2Less:AccumulatedInvestmentTaxCredit3Batebaseapplicabletoannualizedinterestccmputation4Long-termdebtratio5Ratebaserepresentedbydebt6Brbeddedcostoflong-termdebt-%7Annualizedinterest8InterestforyearendedDecanber31,19809IncreaseinInterestDeductionReferenceC-1B-l,Page4Line1-Line2B-9Line3xLine4B-9Line5xLine6D-17,Page1Le12,Col.(1)Line7-Line8Anountg2;135,241139,451$1,.995,790',-47.3944,0099.41%88;83180,7868,045 AdjustmenttoDepreciationDeductionForIncomeTaxPurposesYearEndedDecember31;1980(ThousandsoDollarsD-17Page3R.J.Bernizo.LineNo.TaxDepreciationonyear-endbaseatDecember31,1980:4Applicabletopropertydepreciatedonastraight-linebasisusingguidelineliveswhereapplicableApplicabletopropertydepreciatedonadecliningbalancebasisusingguidelineliveswhereapplicableApplicabletopropertydepreciatedonadeclinizgbalancebasisemployingADRlivesTotalTaxDepreciationusedinaccruingincometaxesforyearendedDecember31,1980DecreaseinTaxDepreciation$2,799(a)17,40274,34094,5419660392,062(a)HersheyElectricCompanyTotal$2,497302'62799 D-17Page4R.J.Bernie.PENNSYLVANDPo~ea.aracerCmeANYOtherAdjustmentstoFederalandStateIncomeTaxesYearEndedDecember311980(ThousandsofDollars)LineNo.Decreasein~leincoaeduetothecapitalizedportionofpensioncosts:1PensionCosts263%toExpense3PortiontoCapital4ActualPensionsCapitalized5AdditionalTaxDeductionReferenceD-7,Lines1+2Line1x63%Line1-Line2Aanunt$18,079,113906,689Line3-Line42760-17,Page1,Line206413DecreaseintaxableincomeduetoeliminationofPURVAtax:Forthepurposeofthisfilingtheentireanountof$24,279forthePURVAtaxiseliminated(SeeD-16,Page1)asaretherelatedtaxadjustmmts.6PURVATaxD-17,Page1,Line2795,278

PPGLExhibitFuture1Revised8/21/80RevisedD-17Page5R.J.BerniniPENNSYLVANIAPOWER6LIGHTCOMPANYTaxesRelatedtoAdditionalRevenueFromProposedRateIncreaseDecember31,1980(ThousandsofDollars)LineNo1AdditionalRevenuefromProposedRateIncrease$123,312Less:PennsylvaniaGrossReceiptsTaxPUCJurisdictionalCustomers$120,616(D-3,Page2,Line40)x20mills2,412FERCJurisdictionalCustomers$2,696(D-3,Page2,Line46)x45mi;lls121PennsylvaniaCapitalStockTax(6millsxLine9)3632,8965TaxableIncomeforPennsylvaniaCorporateNetIncomeTax120,4166PennsylvaniaCorporateNetIncomeTax(6.977%(a)xLine5),7TaxableIncomeforFederalIncomeTax8FederalIncomeTax(46%xLine7)8,401112,01551,527w9OperatingIncome(Line7-Line8)$60,488(a)Basedontaxrateof7-1/2%appliedtopost-taxincome.

.R.J.BerniniPENNSYLVANIAPOWER6cLIGHTCOHPMYTaxesRelatedtoAdditionalRevenueFromProposedRateIncreaseDecember'11980'(ThousandsofDollars)LineNo.1AdditionalRevenuefromProposedRateIncreaseLess.$123,312PennsylvaniaGrossReceiptsTaxapplicabletoadditional'revenue(20millssLine1)$2,466PennsylvaniaCapitalStockTax(6millsxLine8)363TaxableIncomeforPennsylvaniaCorporateNetIncomeTax5PennsylvaniaCorporateNetInconeTax(6.977/(a)xLine4)6TaxableIncomforFederalIncomeTax7FederalIncoaeTax(46%xLine6)8OperatingInconegine6-Line7)2829120,483112,07.751,555960,522(a)Basedontaxrateof7-1/2%appliedtopost-taxincaae.

PENNSYLVANIAHNER&LIGHTCOMPANYAdjustmentstoDeferredIncaneTaxesYearKhdedDeceaher311980(ThousandsofDollars)1AcceleratedanurtizationofeaargencyfacilitiesDeferredPerBudetFederalStateTotal(620)$(67)$(687)FederalAdustnentsStateTotal$Pro-FonnalhderExistingAndsedRatesFederalStateTotal$(620)$(67)$(687)2Acceleratedaaertization-ofpollutioncontrolfacilities3Portionoftaxdeprecia-tionarisingfromshorteninglivesby20Kundertheclasslifedepreciationsystems(126)4,359(0)1,112(126)5,471(570)(145)(715)(126)3,789967(126)4,7564Costofrenovingretireddepreciableproperty5Testpmer1,096(203)2881,384(45)(248)1,096(203)(45)1,384(248)6Abnormallossonretire-mentofproperty-MoorCoalPlant7Recoverablefuelcosts8Recoverableenergycosts9PennsylvaniaPublicUtilityRealtyTax10ConversiontorranthlybillingllHajorforcedoutageinsurance12Total(69)(18)(87)(9,177).(2,341)(11,518)9,2722,36511,637(9,272)(2,365)(11,637)(2,173)(554)(2,727)2,173)5542,727(445)(113)(558)83021210427751989731084$415$1499$8444$2154$10598(69)(9,177)(445)1,605$7360(18)(87)(2,341)(11,518)(113)(558)4102015$1,739$9099F~fgp D-18Page2R.J.BerniniProvisionforDeferredIncaaeTaxes-AdjustmentsYearEndedDecember311980(ThousandsofDollars)Ad3ustmttoPxovxBionDueClassLifeDereciationADR:TaxdepreciationonpmpertydepreciatedonliberalizedbasisandADRlivesDepreciationonliberalizedbasiswithoutADRlives(1).(2)CalculationsFederalTax41.17%%u$74,34065,135(3)(4)StateTaxTotal10.5%%uAdditionaldepreciationduetoADRProvisionperbooks(D-18,Page1,Line3)Decreaseinprovisions$9205$3,7894359~(~570)967$4,75611125471~(14+5~$715NaorForcedOutae:Adjustedmajorforcedoutage(D-5,Page1,Line8)'onperbooks(D-1,Page1,Linell)Increaseinprovision$(1,605)(830)~$(775$(410)$(2,015)~2121~1042~$198~$973 TWONORTHNINTHSTREET,ALLENTOWN,PA.18101PHONE:(215)821-5151LEGALDEPARTMENTEDWARDM,NAGELtreev~esce~tGeeerarCotrrrsetaretSecretary8215323G,DCALIENDOCrtetCoeesctAepu'atoryA'raus821558yassn.a~tCc."serMURRAY'JlLKMAN821525SJANHUDDLE8215845A1reffreyaROBERTKFULTON8215325STEWARTJBERGER821.5321BRYANASNAPP821.4381HARRISM.ROSEN8215844AtterlreysDAVIDJDULICK8214101JOHNANTONUK8214452KATHRYNBSOLLEY821~4253PAULERUSSELI.8214254October10,1980Mr.NilliamP.Thierfelder,SecretaryPennsylvaniaPublicUtilityCommissionP.O.Box3265Harrisburg,Pennsylvania17120Re:PP6LTariffSulementNo.73(R-80031114)

DearMr,

Thierfelder:Thereareenclosedforfilingintheabovereferencedmattereight(8)copieseachofPP5LExhibitJFU-3,ExhibitFuture1AandExhibitFuture1B.Veyulyours,1Cs,~CC.wsHonorableMorrisMindlinDavidM.Barasch,EsquireAlbertJohnson,III,EsquireNilliamChesnutt,EsquireBernardA.Ryan,EsquireVincentButler,EsquireeG.D.Caliendotr4~~PENNSYLVANIAPOWER8LIGHTCOMPANY PPGLEXHIBITFUTURE1APENNSYLVANIAPOWER6LIGHTCOMPANYREVISIONSTOMEASURESOFVALUEANDOPERATINGINCOMEFORTHETESTYEARENDEDDECEMBER31,1980 PENNSYLVANIAPOWER&LIGHTCOMPANYSummaryofRevisionsToMeasuresOfValueAndOperatingIncomeForTheYe'aEndedDecember31,1980ItemEffectonOriginalCostMeasuresofValue(Thousandsof-ScheduleChangedDollars)ReasonForChange>>Increase(Decrease)WorkingCapitalAccruedTaxesAdjustmentMinimumBankBalanceTotalChangeinMeasuresofValueC8,Pg.1C-83Pg.5C-SePg.6Seebelowreasons.Toreflecttherevisionofthe12-MonthAverageFactors(Trans-criptpage256)andthetaxeffectof,changesto,operatingincomeassummarizedonRevisedD-2.Toreflectadecreaseinmini-mumbankbalancesresulting>>fromareductioninthelinesofcreditfrom$58,500,000perPP&LExhibitFuture1,Sch.C-Sto$53,500,000perTranscriptof8/12/80,page258,lines21thzu25andpage259,line1.$6,533(375)$6,158EffectonOnezatinIncomeEmployeeBenefitsCommitmentFeesTaxesOtherThanIncome-GrossReceiptsTyxIncomeTaxesPennsylvania)Federal)D-8D-16D-17Toproperlyexcludefromad-justmentanyeffectofsteamheatoperationsperPP&LExhibit200.10003andTrans-criptof8/26/80,page863,lines6thru9.,ToreflectanincreaseinCom-mitmentfeesresultingfromanincreaseinthelinesofcreditfrom$46,500,000perPP&L=ExhibitFuture1,Sch.D-S,line3,to$51,500,000pezTranscriptof8/12/80,page259,lines2thru8.ToproperlyreflectthatportionofGrossReceiptsTaxrecover-ablethroughbaseratesanad-ditionalreductionoftheGrossReceiptsfrom$22,557,000perPP&LExhibitFuture1,Sch.D-16,,to$23,459,000perTranscriptof8/26/80,page863,lines10thzu15isre~ized.Incometaxeffectoftheabovechangestooperatingexpensesandthenormalizationofin-terestresultingfromthechangestoratebaseandembeddedcostof'debt.$(181)(25)902(76)(463)(539)>>>>>>eeTOTALCHANGEZNOPERATINGINCOME>>*'$157<<<<~<<<<e...<<>><<>>ee>>~<<<<>>">>~i>>>>>>9<<~~~~9>>.>><<>>Ae~<<<<

PE(B)SYLVANIAPOWER8LIGHTCOHPAtPIHeasuresofValuoandRateofReturnAsofDecember31,1980~(ThousandsofDollars)(2)(4)(5)(6)RevisedTrendedoriginalCostRef.No~C-2C-2C-3C-4C-5C-6ElectricPlantElectricplantinserviceReserveNetAdditionsandDeductionsElectric'plant.heldforfutureuseConstructionworkinprogressactuallyinservicoNon-revenueproducingCHIPsoontobeinservice-netConstructionworkinprogress-pollutioncontrolprojectsRetirementsassociatedwithconstructionworkinprojects-pollutioncontrolprojectsInvestmentincoalreservesNetAdditionsandDeductionsDepreciatedElectricPlantoriginalFiling$29600,371700,0831,900,28840,39440,394(717)7,75087,8211908,109oriinalCost(Col2-Col1)$2,6008371700,0831,900028840,39440,394(717)7,75087,8211,988,1091979AveragePriceLevel$5,122,4851997591293'47,35G40,39440,394(1,613)7,75086,9253,234,2811977-1979AveragePriceLevel$4,865,0G71,873,1342,991,93340,39440,394(1,530)7,75087,0083,078,9411975-)979AveragePriceLevel$49581$0GG1,7G1,3082,819,75840,39440,394(1,430)7,75087,1082906,II66WorkingCapitalWorkingcapitalFuelstockandmaterialsandoperatingsuppliesTotalWorkingCapital51,83057,9886tl58160,263168263220,093226,2516,15857,988168,263226,25157,988168,263226,25157,988168,263226,251DeductionsC-10Accumulateddeferredtaxesonincome8-1CustomeradvancesforconstructionTotalDeductionsHeasuresofValue72,53043172,96172,53043172'61$2135,241~2141399~615872,53043172,961$338757172,53043172,9617253043172,961$3232231+3OGOIGGProformareturnsatpresentratesDollars(RevisedD-l,Col.3)$171,313$.171,470$171,470$171,470$171,470802%001%5.06%5.31%5.60%proformareturnsatproposedratesDollars(RevisedD-l,Col5)$231,83510.86%$231,95810.83%2318958$231,958$231,950685t7618'50RevisedA~~68CGgC3W.04$33O673ICI$$e3O3C3ClIn PENNSYLVANIAPOWER6LIGHTCOMPANYRevisedC-8.(10-8-80)G.F.VanderslicePage1WorkingCapitalDecember31,1980(ThousandsofDollars)OriginalFiling(2)Revised(3)AdjustmentOperationandMaintenanceExpense(Page2).$37,323$37,323DeferredEnergyCosts-Recoverable(Page3)AveragePrepayments(Page4)AccruedTaxesAdjustment(RevisedPage5)14,5643,446(4,391)14,5643,4462,1426,533MinimumBankBalance(RevisedPage6)888513(375)'OTAL$51,830$57,988$6,158,E44'~e')~,II),1"4"'PIC,'0,\~&w'-vW'0)*$1'0+4'>>4'0<<-t'84~ltd'\t8'"'K>0~0'~-0~0~"0*4't8'Vd(A*0$-III4I'0;4~t+$4/I,H'Wsglp+Q%5-'++1%3g*'P.'4'F8yg5'"c'l*l<<,II*I'tetW>>'07?', PENNSYLVANZAPOWER6LZGHTCOMPANYAccruedTaxAdjustmentDecember31,1980RevisedC-8(10-8-80)G.F.Vanderslic~'Page5LineNo.(ThousandsofDollars)Reference12/31/8012-MonthAverageFactorAdjustmentforAccruedTaxes4PennsylvaniaPennsylvaniaRealtyTaxTotalCapitalStockTaxPublicUtility1FederalZncomeTax2PennsylvaniaZncomeTax3PnnsylvaniaGzossReceiptsTaxRevisedD-l,Line6,Col.5(a)(b)(c)B-5$98,38428,22145,83015,74224,279$212,456(8.8)2.712.412.49.9$(8,658)7625,6821,9522,4042,142(a)PennsylvaniaZncomeTax$18,752(RevisedD-l,line5,col.5)x10.5/6.977=$28,221(b)PennslvaniaGrossReceiptsTax$9,25583120,6162,696$232,650$132,650x45mills=Actualyearended12/31/80'B-5)AdjustmentduetotheeliminationofHersheyrevenue(D-16,page1)AdjustmentduetoannualizedrevenuePUC(D-3,Page1,Col.5,Line1)FERC(D-3,Page1,Col.5,Line8)107LessCitizensElectric24FERCTotalAdjustmentduetoproposedratesPUC(D-3,Page2,Line40,Col.10)FERC(D-3,Page2,Line46,Col.10)TotalAnnualizationaProposedRateZncrease$39,981(120)5,969$45,830(c)PennsylvaniaCapitalStockTaxActualyearended12/31/80(B-5)Adjustment(RevisedD-16,page1)Adjustmentduetoproposedrates(RevisedD-17,page5,line4)Totalat6mills10mills6mills$14,984(5,902)363$9,445$15,742Note:The12monthsaveragefactorshownaboverepresents,-inthecaseofFederalandStateincometax,theportionoftheincometaxliabilitywhichisavailabletotheCompanyforthepaymentofothercosts.Thissituationexistssincerevenuesazeavailablefromcustomerspriortopayment.datesofthetax.ThefactorsfortheotherPennsylvaniataxesrepresenttheportionsofthosetaxliabilitieswhichmustbeprovidedbytheCompanyduetopaymentofthetaxesbeforetherevenues,areavailablefromcustomers.SeeExhibitHistoric1,RevisedScheduleC-8for..computationoffactor.- RevisedC-8(10-8-80)G.F.VanderslicePage6PENNSYLVANIAPOWER6LIGHTCOMPANYWorkingCapitalRequiredforMinimum(Compensating)BarikBalancesYearEndedDecember31,1980(ThousandsofDollars)No.NameofBankLineofCreditRecpxiringMinimumBalances12/31/80(a)(2)PercentageofLineofCredit.RequiredForMinimumBankBalances(b)(3)MinimumBalancesRerelizeB1LinesofCreditwith10Banks$53,500759.$4,0132-lost(c)(3,500)Total$53,500513(a)Inconnectionwithlinesofcreditattheabovebardcs,theCompanyisrecgxiredtomaintainminimumbankbalances.Theselines.ofcreditareexpectedtorequireaminimumbalanceat12/31/80of$4,013,000(b)Arrangementswiththesebanksareexpectedtorequirethataverageminimumbankbalancesbemaintainedequalto7.5%ofthelineofcredit.(c)Checksissuedbutnotclearedbythebanks

PENNSYLVANIAPOWER&LIGllTCONPANYOperatingIncomeproFormaatpresentandproposedRates'YearEndedDecember31,1980(ThousandsofDollars)LineNos1,OperatingRevenuesOperatingExpenses2OperationandHaintenance3DepreciationProvisionforTaxesTaxesOtherthanIncomeIncomeTaxespennsylvaniaFederalDofcrredIncomeTaxespennsylvaniaFederalInvostmentTaxCredits9Deferral10AmortizationofDeferments-Credit11TotalTaxes12TotalOperatingExpenses13OperatingIncomePerDudgetOriginal~923206903,541492,58778,63386,49414,83941945241518084168587(28G48)15'23729443~174098(2)AdjustmcntsRevisedD-2$(10'47)"(49,325)6,927(53,G40)(4,488)5,405(2,154)(8,444)0(63,321)(105,719)~26283(3)RevisedProFormaatPresentRates$795,194443'6285,5GO32,8S410,35146,857(10739)(783GO)16,587(2,648)94,902623,724~371470(4)RateIncreaso(RevisedD-17,page5)$123'1202,8968~40151,52700062,82462,824s6048S(5)RevisedproFormaatproposedRates$918,506443,26285,56035,75018,75298,384(1,739)(78360)16,587(2,G48)157,726G86,548$231,958NotesForthepurposeofthisfiling,theportionofthosePennsylvaniataxescoveredbythotaxsurchargearenotincludedinthetaxesclaimedandthctaxsurchargerevenuesareeliminated.EnergyCostsandpennsylvaniaGrossReceiptsTaxcoveredbythcenergyclausearonotincludedintheexpensesclaimedandthoenergyclauserevenuesareeliminated.A'Acso5-~557303633bt5nsgClP PENNSYLVANIAPOWER&LIGHTCOMPANYRevisedD-2(10-8<<80)R.J.BerniniPage1of2AdjustmentstoIncomeYearEndedDecember311980eratinRevenues(ThousandsofDollars)(1)Original~FX1in(2)AmountRevised(3)D-3OperatingRevenueAdjustmenteratin~andMaintenanceenses$(108,347)5(108,347)D-4EnergyCostsD-5IhjorForcedOutageInsuranceD-6WagesD-7EmployeeBenefits(Revised)D-8CommitmentFeesRevised)-9RateCaseExpenses-10AmortizationofFloodCostsD-11RentExpenseforLeasedEquipmentD-12OutsideServicesD-13PensionFundManagement&menseD-14ResearchandDevelopment~enses(57,767)1,8843,1531,04829733(160)320.608(1,000)0(350)(57,767)1,8843,1531,2292,758(160)320608(1,000)0(350)18125TotalDereciationD-15AnnualDepreciationProvisionforTaxesaxesertanIncome:D-16PennsylvaniaCapitalStockTax(49531)6927(5,902)(49,325)2066,927'(5,902)D-16PennsylvaniaGrossReceiptsTaxD-16PennsylvaniaRealtyTaxTotal(22,557)(24,279)(52,738)(23,459)(902)(24,279)(53,640)(902) II PENNSYLVANIAPOWER6LIGHTCOMPANYAdjustmentstoIncomeYearEndedDecember311980(ThousandsofDollars)RevisedD-2(10-8-80)R.J.BerniniPage2of2ReferenceforCol.2IncomeTaxes:D'-17Pennsylvania(Revised)D-17Federal(Revised)DeferredIncomeTaxes:D-18PennsylvaniaD-18FederalTotalTaxesTotalOperatingExpensesigzna1~Filin3(4,564)4,942(2,154)(8,444)(62,958)(105,562)(2)AmountRevised$(4,488)5,405E(2,154)(8,444)(63,321)(105,719)(3)Adustment463(363)(157)TotalAdjustments(2,785)$(2,628)5157 PENNSYLUANQAPINER6LIGhTCOMPANYRevisedD-7(10-8-80)R.Z.BerniniAdjustmentstoEmployeeBenefitsYearEndedDecember31,1980(ThousandsofDollars)LineNo.AmountPension:PPGLHersheyGroupLifeXnsuranceHospitalization$18,022572,8556,044hiajormedicalDisability732924Dental(effective1/1/80)1,128Longevity610AccidentalDeath6Dismemberment1921011EmployeeVb12Xncrease~.~.(LineTotalBenefitsperBudgetinEmployeeBenefits10-Line11)$30,56a28,643$1,921.XncreaseinEmployeeBenefits-Electric(Line12x99-)$1,902XncreaseinEmployeeBenefitstoExpense(Line13x63>)1,1981516~~'upplementPensionCost9100%EoExpenseIncreaseinEmployeeBenefits$1,229NOTE:ThisSchedulealsoappearsinPALExhibit200.10003.bm'Ibb'Wb'~' RevisedD-8(10-8-80)R.J.BerniniPENNSYLVANIAPOWER6LXGHTCOMPANYRevolvingCreditAgreementsandLinesofCreditCompensatedwithFeesYearEndedDecember31,1980(ThousandsofDollars)NoNameofBank(1)RevolvingCreditAgreementsorLineofCreditRecpxiringFees12/31/80(a).(2)AmountofFeeRevolvingCred'greementwith,10U.S.banks$400,000$2,0002RevolvingCrediAgreementwith23Foreignbanks100,0005003PiscellaneosLinesofCreditwith19banks51,500.258Total$551,500$2i758(a)XnconnectionwiththeRevolvingCreditAgreementsandlinesofcreditattheabovebanks,establishedduringHarch1980,theCompany'srequiredtocompensatethebankswithfeesapproximately1/2oflbont=heamountofeachbank'sparticipationintheRevolvingCreditAgreementsortheamountofeachbank'slineofcredit.

'RevisedD-16(10-8-80)~R.J.BerniniPage1PEIPilSYLVRNXhPO'iKR6LIGHTCO>1PANYAdjustmenttoTaxesOtherThanXncomeYearEndedDecember31,1980(ThousandsofDollars)PennslvaniaCapitalStockTax'Adjustmenttoreflectincreaseintaxablevalueduetoadditional'cpitycapitalandeliminationoftheamountoftaxwhichiscoveredbysurchargerevenues.EstimatedtaxapplicabletoElectricDept.910mills(D-16,Page2,Line24)AmountofPennsylvaniaCapitalStockTaxcoveredbysurcharge($15,136x4/10mill)Less:Expenseprbooks(B-5,Line1)'djustment15,1366,0549,08214,984'(5,902)PennsylvaniaGrossReceiptsTaxAdjustmenttoeliminatetheamount,oftaxrecoveredbysurchargeandenergyclauserevenueand'providesforgrossreceiptstaxonproformarevenueatpresentrates.GrossReceiptsTaxRecoverableThroughBaseRates(RevisedScheduleD-16,Page3)'rossReceiptsTaxPerBooks(ScheduleB-5,Line2)Adjustment16,52239,981$(23,459)PennsylvaniaRealtyTaxAdjustmenttoeliminatePennsylvaniaRealtyTax'whichisentirelycovere'dbysurchargerevenue(B<<5,Line4)$(24,279) PENNSYLVANIAPOWER6LIGllTCOllPANYGrossReceiptsTaxOnProFormaRevenueat.PresentRatesYearEndedDecember31,1980(DollarsinThousands)LineNo~356DescriptionRateRevenueDeferredFuelExpenseRiderTotalFERCgurisdictionalLess;UGXCitizensElectricTotal(Lines3thru5)LatePaymentChargeTotalGrossReceiptsTaxonProPosadaRevenueatpresentRates(Lines1+2+6+7}(2)Exhi.bitFuture1ReferenceD-3,Page1,Line1D-3,Page1,Line2D-3<Page1,Line10D-3iPage2,Line43D-3<Page1<Line12(3)Revenue'744,68123,34016,5822t1802,59611,8062,374$782t201(4)ApplicableGRTRate(Mills)204520(5)GrossReceiptsTaxCol.(3)xCol.(4)$14,8941i050531$16,522~~0~QlIVmsOLd600I". PIIINSYLVAIIIAPO>>OCHPAI>yCoaputatlonofIncElectricYearIJ>dcdDcc>x))bcr311980(11>ousandsofDollars)LineI>o,110ll1213OperatingRevenuesOperati>igExpcnscsOpcratlonsa>>dNa(ntcnanceDcprec(at(onTaxesOther'hanInc<<>>oInccacTaxes-FodcralInccaoTaxesStateDeferredIncoaeTaxos-NctInvcstaentTaxCreditProvisionInvcstacv>tTaxCreditAaortiratlonlotJlOperJ'tingExpensesoperatingIncoaoLoss,InterestExpense(letIncos)c(I)PcrBudgotOrlglna1~7)II$903(54(492,58778,63386>49441,45214,839I~499IG,SA7~2~648)~729443174>090~80786~93312(2)(49,531)6,927(52,738)4,942(4,564)(10,598)0D-2D-ISD16Llno42Line37D-IB,Pg.lD-l0I)05>G2)(2,785)8045110DID)D-lD17>107,2OriginalFIIIAacurtQIDD147)(5)Rof.(49,325)6>927(53,640)5,405(4,488)(10,598)0IGD5119)(2,G28)7651(10,285)RcvD2D-15RcvD-IGLlno42Line37D-18>IGI~IRev,DIRcvDIRcvD-17>Pg>2(4)AdUst>>cntsRevisedA>>ou>lt~llNI341)(6)ChangeAaount-$(902)4637G(157)157380545.8(7)Rcv(scdProForsaatprese'n'tRatesCol.~(I>CO~I.4~I95154443'G285>56032,8544G,AS710,351(9>099)IG,SA7~2Ci48)~623724171~470~8844383,027(8)RateIncrease(RevisedD17~Pa>>5~$)233122,A9651'278,401G2,824G0,480~60480(9)RevisedPfoFu>aaatPIol~isedRateeCol.(7)>CG>l(8)$918'06443>2>42AS,SC.O3575098,384IA,'752(9>099)16,587~(2Ci4A)~GAG54823),98M~80443143~5151415IG17IA19202122232425262728293031333536373839404142IncoacTaxAd)ustacnts>FederalIncoacTaxStateInca>cTaxDeferredIncoaeTaxInvestacntTaxCreditProvisionforAJ)orForcedOutage'TaxesCJpl'tallxcdPensionsC>pitallredBookDcpreciationTaxDcprcciatlonRcao>>JICostsA>>crt(sat)onofPropertyLossfwfcrredEnergyCostRccx>vcrahi>>FoolCostP(>XTATJXDcicfrcdperBoo'ksBillingchangotomonthlyBasisFloodCostA>>crtizat(onAaort)rat(on-RARIteasPrefcrrcdDividendsI'aidCreditTaxableI>ctIncoacPa.InccacTaxDeductionsCCredits>TaxPrcfcrcncoInccaoPa.TaxabloIncoaePaTJxat10St(rounded)(PaTaxat751(6977effIrate)roundedAd).Prov)alonforPose(biodeficlenclesTotalPa,InccaeTaxF<<leralTaxahloInccac(fino32-I,lno35)FederalTax46tlass$19(rounded)lasslnvcstaentTaxCreditAd).ProvisionforpossibleDcflcienclesTctalFederalIncc>>eTax41'52I~,839I~49913,9372,0I6(4,109)(6>413)78,633(96,G03)(4,000)309(22,523)22,2915>2781,080(41)(838)140,11943~140428~14,74594I~>839~12537457,G53IG~587386$4104524,942(4,5G4)(10,598)0I~8840(276)6>9272,OG20022,5230(5,278)0320007>1127332(4'70)~9~7(4>SO4)II6025,3280~306)$4>942Line42I.inc37D-IB,PgI0-17~Ig.4D-lsD-17~Pg3D48-4D-17~Pg,45,405(4~488)(10,598)01,8840(276)6,9272,0620022,5230(5,278)0320008,19G00)9G(4'94)~94)(4>488)125905,7910(386)5,4osLinc42Llno37D-18>Pg1D-17~Pg,4D-ISD17~Pg3D48-40-17~Pg,4463761,084~IOA476100084G3$4634G>A5710,351(9,099)13,9373,900(4,109)(G,G89)AS,SCO(94'41)(4,000)309022,29101,080320(41)(830)148~31543148>35810,351010,351137>96463'44IG>5870$46>85751,5278~401120,416~)204168>4018,401~112OIS51,527$51'2798,38418,752(9,099)13,9373>900(4>109)(G,fi89)AS>SGO(94~541)(4~000))09022,2910I>MO320(41)(AIR)268'3143~26877418,752018,752249,979114,971ICi>SA70$98>384~IlershcyEloctrlcCcapanybudgetodataxablenetlossof$266fort>>oaonthsendedFebruary29,1980.Such~taxablelossisnotrccolnixcdforp>x>nsylvan(aIncoactaxpurposes.Consc>tuent(y>pennsylvaniaInca>etaxperbooksiscoalwtodonlyonIpcL'sbudgotcdtaxableinccaoof$140,428.~~'>>vCÃo9-"VV RevisedD-17(10-8-80)R.J.BerniniPage2PENNSYLVANIAPOWER&LIGHTCOMPANYAdjustmenttoInterestDeductionForIncomeTaxPurposesYearEndedDecember311980(2)Amount(3)LineNo.1RateBase2Less:AccumulatedInvestmentTaxCreditReferenceforCol.2RevisedC-1>>B-l,Page4Original~Fi1in$2,135,241139451$2,141,399$6,1581394513Ratebaseapplicabletoannualizedinterestcomputation4Long-termdebtratioLine1-Line2B-91,995,79047.32,001,94847.36,1585RatebaserepresentedbydebtLine3xLine4944,009946,9212,9126Embeddedcostoflong-termdebt--";7Annualizedinterest8InterestforyearendedDecember31,1980~PP&LExhibit250.1001001Line5xLine6RevisedD-17Page1,Line12Col.(1)9.41%88,831807869.34%88,44380786(.07)3889IncreaseinInterestDeductionLine7-Line888,045$7,657$.388 ~'~RevisedD-17(10-8-80)R.J.BerniniPage5PENNSYLVANIAPO)'(ER6LXGHTCO'IPANY.TaxesRelatedtoAdditionalRevenueFromproposedRateXncreaseDecember31,1980',I(ThousandsofDollars)&~~'-;:..LineNo.1-AdditionalRevenuefromProposedRateXncrease$123,312P~~C&&'&2Less:'EPennsylvaniaGrossReceiptsTaxPUCJurisdictionalCustomers$120,616(D-3,page2,Line40)x20mil3s.FERCJurisdictionalCustomers$2,696(D-3,Page2,Line46)x45mi.'lls&2,412121&54pennsylvaniaCapitalStockTax(6millsxLine9)3632,896V5TaxableXncomeforpennsylvaniaCorporateNetIncomeTax120,416678pennsylvaniaCorporateNetXncomeTax(6.977$(a)xLine5).TaxableIncomeforFederalIncomeTax'FederalXncomeTax(46>xLine7)8~401112,01551,527'OperatingIncome(Line7-Line8)$60,488'&(a)Basedontaxrateof7-1/2~appliedtopost-ta&xincome.E .~ PPGLEXHIBITFUTURE1BPENNSYLVANIAPOWER6LIGHTCOMPANY,REVISIONSTOMEASURESOFVALUEANDOPERATINGINCOMEFORTHETESTYEARENDEDDECEMBER31,1980TherevisionscontainedinPPGLExhibitFuture1BrepresenttheCompany'sclaimsintheeventthattheinvestmentinStonyCreekisdisallowedandthereductionsinconsolidatedtaxesduetoaffiliatedtaxlossesareusedtoreduceincometaxexpenseforelectricoperations.Thetrialstaffhasmadetheseproposals.'4W79~'V~C~%ESWAN004"t~Q'0I+C~pl'Ftlat6'p1.e,~i,I.L;,'"~~+<-~ri~qadi.,>>*qt,t.P~z,r.*~ed~~.~'r(~';r"~~it'i,e4"V~<<~f"+Wt%~.ItW-<r~W~S'~'~".

PEViilSYLVAHZAPOWER&LIGHTCOMPANYItemEffectonOriginalCostMeasuresofValueSchedule~ChanadReasonForChangeSummaryOfRevisionsToMeasuresofValueandOperatingZncomeForTheYearEndedDecember31,1980Increase(Decrease)($000's)InvestmentinCoalReserves-GreeneHillC-1Theclaimistoincludeinpp&L'sratebasethe$64,197,000,whichwillbeinvestedat12/31/80byGreeneHillincoalpropertieslocatedinGreeneCounty,PAintheeventthatthereductionsincon-solidatedtaxesduetoaffiliatedtaxlossesareusedtoreduceincometaxexpenseforelectzicop-erations.Foradditionalinformation,seeState-mentZZ-BofG.P.Vandezslice,pages12thru14andExhibitGFV-2.$64,197URADCOpropertyC-l.TheclaimistoincludeinPp&L'sratebasethe$11,309,722whichiscurrentlyinvestedbyURADCOinthedevelopnentandexplorationofuraniumpropertiesinthestatesofUtahandWyomingintheeventthatthereductionsinconsolidatedtaxesduetoaffiliatedtaxlossesareusedtoreducein-cometaxexpenseforelectricoperations.Foradditionalinformation,seeStatementZZ-BofMr.G.F.Vanderslice,pages14thzu17andExhibitGPV-3~11,310WorkingCapitalAccruedTaxesAdjustmentC-S,pg.lC-S,pg.5Seebelowzeason.Tozeflectchangeinincometaxesduetothein-creaseinannualizedinteresttaxdeduction.'34IncreaseinMeasuresofValue$75,641Efecton0cratingIncomeStonyCreekAmortizationTheCompanytakesthepositionthatiftheStonyCreekprojectiseliminatedfromratebaseitsfilingshouldbeconsideredtobea~endedtoclaimamortizationofits$2,526,408investmentintheStonyCreekprojectovera5-yearperiod.commenc-ingwiththedatethepresentlyrequestedratein-creasebecomeseffective.Thiswouldamount,to$505,000annually.Foradditionalinformation,seeStatementZI-BofMr.G.P.Vanderslice,page9and~~ibitGFV-l.(505)OneidaAmortizationZfthestaff'srecommendationtoflow-throughtheincometaxrecoveriesrelategltotheOneidalossesisaccepted,PP&Lfeelsitis.onlyfairtoclaimamortizationofthe$27,579,000lossoverfiveyearsor$5,515,800annually.Foradditionalin-formation,seeStatementZZ-BofMr.G.F~Vander-slice,pages17thru19,andExhibitGFV-4.(5,516)IncomeTaxesaPennsylvania)Pederal)D-17ToreflectStonyCreekamortizationandchangeinthetaxdeductionforannualizedinterest.Annual-izedinterestchangesduetotheaboveclaimswhichincreasethemeasuresofvalueuponwhichtheannualizedinterestdeductionisbased.2681,646TotalIncomeTaxes4.914ecreaseinOperatingIncome$(4,107)4-,4whaaa~'l4~na~vw,44~~-.aa.4~4~~aa-n=~w',.snw*.44-.~ 4'I'k 9~I)4,~4'1PENNSYLVANIAELIGHTCOMPANYMeasuresofValueandRateofReturnAsofDecember31,1980(ThousandsofDollars)(2)(3)(4)(5)(6)RevisedTrendedOriinalCost9Ref.NoC2C-2C-3C-5C-5C-6C-6C7t*ElectricPlantElectricplantinserviceReserveAdditionsandDeductionsElectricplantheldforfutureuseConstructionworkinprogressactuallyinserviceNon-revenueproducingCWIPsoontobeinservice-netConstructionworkinprogress-pollutioncontrolprojectsRetirementsassociatedwithconstructionworkinprogress-pollutioncontrolprojectsInvestmentincoalreservesDRADCOpropertyNetAdditionsandDeductionsDepreciatedElectricPlantExhibitFuture1At"$2,600,371700,0831,900,28840,39440,394(717)7,75087,8211,988,109OriinalCostRevised$'2,600,3717000031,900,28840,39440,394(717)71,94711,310163,3282,063,616Adjustment(Col.2-Col.l)$64,197tt11,31075,50775,5071979AveragePriceLevel$5,122,485.1,975,1293,147,35640,39440,394(1,613)71,94711,310162,4323,309,7881977-1979AveragePriceLevel$4,865,0671,873,1342,99193340,39440,394(1,530)71,94711,310162,5153,154,4481975-1979AveragePriceLevel$4,581,0661,761,3082,819,75840,39440,394(1,430)71,94711,310162,6152,982,373I9'Rev,C-8C-9WorkingCapitalworkingcapital'uelstockandmaterialsSoperatingsuppliesTotalWorkingCapital57,98858,122168,263168,263226,251226,38513413458,122168,263226,38558,122168,263226,38558,122168,263226,385C10B-lDeductionsAccumulateddeferredtaxesonincomeCustomeradvancesforconstructionTotalDeductions72,53043172,96172,53043172,96172,53072,53072,53043143143172,96172,96172,961MeasuresofValue$20141,399$2,217,040$75,641$3,463,212$3,307,872$3,135,797ProformareturnsatpresentratesDollars(RevisedD-l,Col.3)8.01\7.55%$171,470$167,363$167,3634'3%$167,3635.06%$167,3635.34%ProformareturnsatproposedratesDollars(RevisedD-l,Col.5)$231,958$227,851$227,851$227,851$227,851*RevisedC-l,Col.2.G.F.VandersliceStatementNo.II-B10.83%1028'.58%6.89%7~277L~9Q494ov.QlIIto'FKO0I73~Ir

PENNSYLVANIAPOWER6LIGHTCOMPANYRevisedC-8(10-8-80)G.F.VanderslicePage1WorkingCapitalDecember31,1980(ThousandsofDollars)OperationandMaintenanceExpense(Page2)DeferredEnergyCosts-Recoverable(Page3)AveragePrepayments(Page4)AccruedTaxesAdjustment(RevisedPage5)MinimumBankBalance(RevisedPage6)ExhibitFuturelA*$37,32314,5643,4462,142513Revised$37,32314,5643,4462,276513(3)Adjustment134Total$57,988$58,122$134*C-8,Page1,Col.2.

PENNSYLVANIAPOWER6LIGHTCOMPANYAccruedTaxAdjustmentDecember31,1980(ThousandsofDollars)RevisedC-8(10-8-80)'-F.VanderslicePage5LineNo.Reference12-MonthAverage12/31/80-FactorAdjustment,forAccruedTaxes1FederalIncomeTaxRevisedD-l,Line6,Col.5$96,738(8.8)$(8,513)235PennsylvaniaIncomeTaxPennsylvaniaGrossReceiptsTaxPennsylvaniaCapitalStockTaxPennsylvaniaPublicUtilityRealtyTaxTotal(a)(b)(c)B-527,81745,83015,74224,279$210,4062.712.412.49.97515,6821,9522,404$2,276(a)PennsylvaniaIncomeTax$18,484(RevisedD-l,line5,col.5)x10.5/6.977=$27,817(b)836132,650$132,650x45millsPennslvaniaGrossReceiptsTaxActualyearended12/31/80(B-5)AdjustmentduetotheeliminationofHersheyrevenue(D-16,page1)Adjustmentduetoannualizedrevenue:PUC(D-3,Page1,Col.5,Line1)$9,255FERC(D-3,Page1,Col.S,Line8)107LessCitizensElectric24TotalFERCAdjustmentduetoproposedrates:PUC(D-3,Page2,Line40,Col.10)120,616FERC(D-3,Page2,Line46,Col.10)2,696Tot'alAnnualizationofProposedRateIncrease$39,981(120)5,969$45,830(c)PennsylvaniaCaitalStockTaxActualyearended12/31/80(B-5)Adjustment(RevisedD-16,Page1)Adjustmentduetoproposedrates(RevisedD-17,Page5,Line4)Totalat6mills944510mills6mills$14,984(5,902)363S9,445$15,742Note:The12monthsaveragefactorshownaboverepresents,inthecaseofFederalandStateincometax,theportionoftheincometaxliabilitywhichisavailabletotheCompanyforthepaymentofothercosts.Thissituationexistssincerevenuesareavailablefromcustomerspriortopaymentdatesofthetax.ThefactorsfortheotherPennsylvaniataxesrepresenttheportionsofthosetaxliabilitieswhichmustbeprovidedbytheCompanyduetopaymentofthetaxesbeforetherevenuesareavailablefromcustomers.SeeExhibitHistoric1,RevisedScheduleC-8forcomputationoffactor. PENNSYLVANIAPOWERbLIGHTCONPANYOperatingIncomeProFormaatPresentandProposedRatesYearEndedDecember31,1980(ThousandsofDollars)LincNo1OperatingRevenuesRevisedproFormaatpresentRates(A)3795,194Ad)ustmcntsRovisedD-2$0RevisedproFormaatPresentRatos$795,194RateIncrease(RevisedD-17,Page56123,312RevisedProFormaatProscdRates$918,50610llTotalTaxes12TotalOperatingExpenses13OperatingIncome,OperatingExpensesOperationandMaintenanceDepreciationprovisionforTaxesTaxesOtherThanIncomeIncomeTaxespennsylvaniaFederalDeferredIncomeTaxesPennsylvaniaFcdcra1.4InvestmentTaxCreditsDeferralAmortirationofDeferments-Credit443,26285,56032,85410,35146,857(1,739)(7,360)16,587~2,648794,902623,724$171,4706,0210-(268)(1,646)00(1,914)4,107$(4,107)449,28385,56032,85410,08345,211(1,739)(7,360)16,587(2,648)92,988627,831$167,36302,8968,40151,52700062,82462,824=$60,488449,28385,56035,75018,48496,738(1,739)(7,360)16,587(2,648)155,812690,655$227,851(A)PorExhibitFuturelA,ScheduleD-l,Col.3.Note:Forthepurposeofthisfiling,theportionofthosePennsylvaniataxescoveredbythetaxsurchargearenotincludedinthctaxesclaimedandthetaxsurchargerevenuesaroeliminated.EnergyCostsandPennsylvaniaGrossReceiptsTaxcoveredbytheenergyclausoarenotincludedintheexpensesclaimedandtheenergyclauserevenuesareeliminated.'A~CIIIIIdlCICIOmIIICIIP PENNSYLVANIAPOWER&LIGHTCOMPANYAdjustmentstoIncomeYearEndedDecember31,1980RevisedD-2(10-8-80)R.J.BerniniRef.(ThousandsofDollars)(1)ExhibitFuturelA,D-2,Col.2(2)AmountRevised(3)Ad'ustmentD-3OperatingR'evenuesOperatingRevenueAdjustment0cratingandMaintenanceExpenses$(108~347)$(108'47)$D-4D-5D-6"Rev.D-7Rev.D-8D-9D-10D-llD-12D-13D-14EnergyCostsMajorForcedOutageInsuranceWagesEmployeeBenefitsCommitmentFeesRateCaseExpensesAmortizationofFloodCostsRentExpenseforLeasedEquignentOutsideServicesPensionFundManagementExpenseResearchandDevelopmentExpensesStonyCreekAmortizationOneidaAmortizationTotal(57,767)1,8843,1531,2292,758(160)320608(1,000)0(350)00'49,325)(57,767)1,8843,1531,2292,758(160)320608(1,000)0(350)5055,516(43,304)5055,5166,021'-15Rev.D-16Rev.D-16Rev.D-16Rev.D-17Rev.D-17D-18D-18AnnualDepreciationProvisionforTaxesTaxesOtherThanIncome:PennsylvaniaCapitalStockTaxPennsylvaniaGrossReceiptsTaxPennsylvaniaRealtyTaxTotalIncomeTaxes:PennsylvaniaFederalDeferredIncomeTaxes:PennsylvaniaFederal6,927(5,902)(23,459)(24,279)(53,640)'4,488)5,405(2,154)(8,444)6,927(5,902)(23,459)(24,279)(53,640)(4,756)3,759(2,154)(8,444)(268)(1,646)TotalTaxesTotalOperatingExpensesTotalAdjustmentstoIncome(63,321)(105,719)(65,235)(101,612)(1,914)4,107$(2g628)$"(6~735)$(4g107)*G.F.VandersliceStatementNo.II-B.

PENNSYLVANIAPOWER6LIGHTCOMPANYSummaryAdjustmentsYearEndedDecember31,1980(ThousandsofDollars)DescriptionScheduleOperatingRevenueOperating~ExessesTaxes.OtherThanIncomeStateFederalIncomeTaxIncomeTax(a)EffectonIncomeStonyCreekAmortizationOneidaAmortizationD-2D-2$5055516(35)$(216)$(254)5516Sub-totalAnnualizedInterest-Deduction(b)Total6,021$6,021(35)(233)$(268)(216)(1,430)$(1,646)(5,770)1,663$(4,107)(a)EffectivePennsylvaniaStateIncomeTaxrateof6.977%.ThisexcludesthatportionofthepennsylvaniaStateIncomeTaxrateof10.5%whichiscoveredthroughthetaxsurcharge.(b)SeeD-17,Page2.war~0UIW(0Iromw500r RevisedD-17(10-8-80)R.J.BerniniPage2PENNSYLVANIAPOWER6LIGHTCOMPANYAdjustmenttoXnterestDeductionForIncomeTaxPurposesYearEndedDecember31,1980(ThousandsofDollars)LineNo.1RateBaseLess:AccumulatedZnvest-mentTaxCreditReferenceforCol.2RevisedC-1B-l,Page4ExhibitFuturelA,D-17,Col.2(2)AmountRevised139,451139,451$2'41g399$2J217'40(3)Adjustment$75i641RatebaseapplicabletoannualizedinterestcomputationLine1-Line22g001~9482g077/58975'414Long-termdebtratioB-947.347.3Ratebaserepresentedby,debtLine3xLine4946,921982,70035,779Embeddedcostoflong-termdebt-0PPaLExhibit250.10010019.34m9.34%7AnnualizedinterestInterestforyearendedDecember31,1980Line5xLine6RevisedD-17,Page1,Line12,Col.(1)88,44380,78691,78480,7863,3419IncreaseinInterestDeductionLine7-Line.8$7,657$10,998$3,34110DecreaseinPa.StateXncomeTaxLine9x.06977(a)$233llDecreaseinFederalXncomeTaxLine9-Line10x.46$1,430(a)EffectivePennsylvaniaStateXncomeTaxRate,excludingthatportionofthePennsylvaniaStateIncomeTaxRateof10.5%,recoveredthroughthetaxsurcharge. ~I'}}

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