ML17326A449

Annual Financial Rept 1978

ML17326A449
Person / Time
Site:	Cook
Issue date:	02/19/1979
From:	INDIANA MICHIGAN POWER CO., INDIANA MICHIGAN POWER CO. (FORMERLY INDIANA & MICHIG
To:
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ML17326A448	List: ML17326A447 ML17326A449
References
NUDOCS 8001040660
Download: ML17326A449 (28)

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ANNUALREPORT1978AMERICANELECTRICPONERSYSTEM TheCompany'sAnnualReport(Form10-K)totheSecuritiesandExchangeCommissionwillbeavailableonoraboutMarch31,1979toshareownersupontheirwrittenrequestandatnocost.Pleaseaddresssuchrequeststo:Mr.H.D.PostAssistantTreasurerAmericanElectricPowerServiceCorporation2BroadwayNewYork,N.Y.10004TransferAgentofCumulativePreferredStockMorganGuarantyTrustCompanyofiVewYork30WestBroadway,NewYork,N.Y.10007RegistrarofCumulativePreferredStockIrvingTrustCompany1WallStreet,NewYork,N.Y.10015 INDIANAMICHIGANELECTRICCOMPANY210ISpj%unAvenue,FortWayne,Indiana46801ContentsBackgroundoftheCompanyConsolidatedSummaryofOperations.Management'sCommentsonConsolidatedSummaryofAuditors'pinionConsolidatedStatementofIncomeConsolidatedBalanceSheetConsolidatedStatementofSourcesofFundsforPlantandPropertyAdditions.ConsolidatedStatementofRetainedEarningsNotestoConsolidatedFinancialStatementsOperatingStatisticsandBalanceSheetDataDirectorsandOEcersoftheCompany.PriceRangeofCumulativePreferredStock.4Operations.....6-7~~~910-11121314-2324-2526~~~~27 INDIANA&MICHI~<ELECTRICCOMPANY2101SpyRunAve~FortWayne,Indiana46801BackgroundoftheCompanyINDIANAScMtcHIGANELEGTRIcCoMPANY(theCompany)isasubsidiaryofAmericanElectricPowerCompany,Inc.(AEP)andisengagedinthegeneration,purchase,transmission,anddistribu-tionofelectricpower.TheCompanywas.organizedunderthelawsofIndianaonFebruary21,1925,andisalsoauthorizedtotransactbusinessinMichiganandWestVirginia.ItsprincipalexecutiveofficesareinFortWayne,Indiana.Indiana&MichiganPowerCompany,thegeneratingsubsidiaryoftheCompany,wasformedin1971toown,completetheconstructionof,andoperatetheDonaldC.CookNuclearPlant(theNuclearPlant).UnitNo.1oftheNuclearPlantwasplacedincommercialoperationonAugust23,1975.UnitNo.2wasplacedincommercialoperationonJuly1,1978.Thesubsidiarysellsalloftheplant'sgenerationtotheparentfordistributiontothelatter'scustomers.TheCompanyserves231communitiesandapproximately437,000customersina7,740-square-mileareaofnorthernandeasternIndianaandaportionofsouthwesternMichigan.Thisareahasanestimatedpopulationof1,566,000.Amongtheprincipalindustriesservedaremanufacturersofautomobiles,trucks,automotiveparts,aircraftparts,steel,ferrousandnonferrouscastings,farmmachinery,machinetools,electricmotors,electrictransformers,electricwireandcable,glass,textiles,rubberproducts,foodproductsandelectroniccomponents.Inaddition,theCompanysupplieswholesaleelectricpowertootherelectricutilities,municipalities,andcooperatives.TheCompany'sgeneratingplantsandimportantloadcentersareinterconnectedbyahigh-voltagetransmissionnetwork.ThisnetworkinturnisinterconnectedeitherdirectlyorindirectlywiththefollowingotherAEPSystemcompaniestoformasinglemajorintegratedpowersystem:AppalachianPowerCompany,KentuckyPowerCompany,KingsportPowerCompany,MichiganPowerCompany,OhioPowerCompany,andWheelingElectricCompany.TheCompanyisalsointerconnectedwiththefollowingotherutilities:CentralIllinoisPublicServiceCompany,TheCincinnatiGas8cElectricCompany,ConsumersPowerCompany,CommonwealthEdisonCom-pany,IllinoisPowerCompany,Indiana-KentuckyElectricCorporation(asubsidiaryofOhioValleyElectricCorporation),IndianapolisPowerScLightCompany,NorthernIndianaPublicServiceCompany,andPublicServiceCompanyofIndiana,Inc.

INDIANA&MIANELECTRICCOMPANYANGENERATINGSUBSIDIARYConsolidatedSummaryofOperationsOPERATINGREVENUES-ELECTRICYearEndedDecember31,19741978197719761975(InThousands)...$603,480$512,824$416,193$363,355$287,606OPERATINGEXPENSES:Operation:FuelforElectricGeneration............PurchasedandInterchangePower(Net)...Other.MaintenanceDepreciationTaxes,OtherThanIncomeTaxes..........FederalandStateIncomeTaxesTotalOperatingExpenses........OPERATINGINCOME1259277116@0860900132,72459984426,43223,06074,052144,83344,70628,45248)82423,40818,14970,127126,71240,25120,14047,85218,920(8,625)443,646382,424315,377159)834130,400100,81655,775121,19437,80017,07832,73414,0156,026284,62278,73355,216111,16127,95917,74724,85310,956(3,086)244,80642,80028,874(a)45,482(a)59,454(a)-1)0409521,53745,617188)848158,241130,408103,79196,64880,772(22,627)(19,651)70,82276,53470,82253,5288,151OTHERINCOMEANDDEDUCTIONS:AllowanceforFu'ndsUsedDuringConstructionAllowanceforOtherFundsUsedDuringCon-struction..................27,97426,889MiscellaneousNonoperatingIncomeLessDe-ductions.718135TotalOtherIncomeandDeductions29,01427,84129,59260,991INCOMEBEFOREINTERESTCHARGES124,350INTERESTCHARGES:TotalInterestCharges76,534AllowanceforBorrowedFundsUsedDuringConstruction(Credit)NetInterestCharges............74,02161,121CONSOLIDATEDINCOMEBEFORECUMULATIVEEFFEGTQFAccoUNTINGCHANGEs........114)82797,12053,874NON-RECURRINGCUMULATIVEEFFECTOFAC-coUNTINGCHANGEs(Netof$603,000Appli-cableTaxes)CoitsoLIDATEDNETINcoME................$114)827$97,120$53,874$53,528$41,554(a)NotreclassifiedintodebtandequitycomponentssinceallocationbasedonthenexistingcapitalstructurewouldnotnecessarilybecomparabletoallocationundertheFERCformulausedafter1976.

Management'sCommentsonConsolidatedSummaryofOperationsTheamountsshownintheConsolidatedSummaryofOperationsanddiscussedbelowreflectonlytheresultsofpastoperationsandarenotintendedasanyrepresentationastotheresultsofoperationsforanyfutureperiod.Referenceismadetotheconsolidatedfinancialstatements,relatednotes,andOperatingStatisticsandBalanceSheetDataforadditionalinfor-mationconcerningresultsofoperations.OperatingRevenues-ElectricElectricoperatingrevenuesincreasedby$96,631,000(23%)in1977over1976andby$90,656,000(18%)in1978over1977.Factorsassociatedwiththein-creasesandrelatedestimatedamountsareasfollows:CostofFuelConsumed..GenerationLevelandFuelMix.............OverallIncrease(Decrease)CostofFuelConsumed..GenerationLevelandFuelMix.............OverallIncrease........Increase(Decrcasc)1977vs.1976(InMillions)CoalOilNuclearTotal$5.1$4.1$2.4$11.6(2.8)1.0(5.9)(7.7)$2.3$5.1$(3.5)$3.91978vs.1977(InMillions)CoalOilNuclearTotal$23.7$4.4$3.3$31.4(2.2)5.716.319.8$21.5$10.1$19.6$51.2Increase(Dccreasc)1977vs.,19761978vs.1977(InMillions)BaseRatesandFuelCostAdjust-ments$109.3$53.8SalesVolume...................(21.2)51.1SalesMix8.2(14.2)OtherOperatingRevenues.......0.3OverallIncrease...$96.6$90.7Theincreaseinoperatingrevenuesin1977over1976wasprimarilyattributabletorateincreasesplacedineffectduring1976and1977andtotherecoveryofincreasedfuelcostspursuanttotheCompany'sfuel-adjustmentclauses.Growthinoperatingrevenuesdur-ing1977waslimitedduetoa17%%uodecreaseinkilowatt-hoursalesforresale.Theincreaseinoperatingreven-uesin.1978over1977reflecteda29%increaseinkilowatt-hoursalesforresale,therecoveryofincreasedfuelcosts,andrateincreasesplacedineffectduring1977and1978.Conservationmeasuresbysomecus-tomershavetendedtolimitthegrowthofoperatingrevenuesinboth1977and1978.OperatingExpensesFuelforelectricgenerationincreasedin1977over1976by$3,925,000(6%)andin1978over1977by$51,225,000(69%).Factorsrelatingtotheseincreasesandtherelatedestimatedamountsareshownbelow:Thecostoffossilfuelconsumedincreasedsignifi-cantlyin1977and1978.Theincreasein1977wasaffectedbytherehavingbeenarefundofapproximately$4,000,000totheCompanyinsettlementoflitigationwithasupplieroffueloil.(Suchamountwasrecordedasareductiontofuelforelectricgenerationfor1976andisreflectedintheincreaseshownaboveinthecostofoilin1977from1976.)Adecreaseinthequantityofnuclearfuelconsumedin1977wasrelatedtotheplannedoutageofUnitNo.1oftheNuclearPlantforrefueling.Theincreasein1978alsoreflectedtheplacingofUnitNo.2oftheNuclearPlantincom-mercialoperationduringJuly.Theutilizationoftherelativelymoreexpensivefueloil(toconservecoalsupplies)togenerateelectricityduringthecoalminers'trikewhichendedinMarch1978contributedtotheincreasein1978over1977.Thepurchasedandinterchangepowerincreaseof$18,121,000(14%)in1977anddecreaseof$28,525,000(20%)in1978primarilyreflecttheutilizationoftheNuclearPlantasdescribedabove.Otheroperationexpenseincreasedby$15,295,000(34%)in1978over1977mainlyduetohighercostsoflabor,materials,supplies,andservices,andwasalsoaffectedbytestgenerationpriorto,andincreasedgenerationdueto,placingofUnitNo.2oftheNuclearPlantintocommercialoperation.Theincreaseinmaintenanceexpensein1977over1976of$8,312,000(41%)wasassociatedwithcer-IIVDIAIVA4MlrlIVELECTRICCOMPANYAIVGEIVERATIBGSUBSIDlr!RYMANAGEMENT'SCOMMENTSONCONSOLIDATEDSUMMARYOFOPERATIONS(Concluded)tainincreasedmaintenanceactivityin1977whichhadpreviouslybeendeferredandwithhigher"laborcostandincreasedcostsofmaterials,supplies,andservicesasregardspowerproductionmaintenance.Maintenanceexpenseincreasedby$4,272,000(15%)in1978over1977largelybecauseofincreasingcostlevelsandincreasedpowerplant,transmissionanddistributionmaintenanceactivities.Theincreaseindepreciationexpensein1978over1977of$11,020,000(23%)waschieflyduetotheplacingofUnitNo.2oftheNuclearPlantandcertainenvironmentalprotectionfacilitiesattheCompany'sTannersCreekPlantincommercialoperation.Taxes,otherthanincometaxesincreasedby$4,488,000(24%)in1977.Thiswasduetoincreasesinutilityplantinserviceandthecompletionin1976oftheamortization(approximating$3,000,000forthatyear)ofcertaindeferredcreditsassociatedwithpropertytaxeswhichhadbeendeferredpursuanttoregulatoryauthorization.Theincreaseintaxes,otherthanincometaxesin1978over1977of$3,024,000(13%)waslargelyattributabletoincreasedIndianaPropertyTaxresultingfromgreaterassessedvaluationofproperty,increasedIndianaGrossIncomeTaxat-tributabletoincreasedapplicablerevenues,andtoMichiganSingleBusinessTaxpertainingtotheGen-eratingSubsidiary.InformationconcerningFederalincometaxes(in-cludingareconciliationofactualFederalincometaxestosuchtaxescomputedatstatutoryrates)isshowninNote3ofNotestoConsolidatedFinancialstatements.AllowanceforFundsUsedDuringConstructionTheallowanceforfundsusedduringconstruction(AFUDC),includingtheportionshownasacredittointerestcharges,increasedby$17,666,000(61%)in1977.Thisincreasewasrelatedtoanincreasedamountinvestedinconstruction(includingUnitNo.2oftheNuclearPlantandprecipitatorinstallationprojectsattwooftheCompany'splants)andtotheetfectofthe,GeneratingSubsidiary'scompoundingAFUDCbegin-ningin1977.InterestChargesIn1978,totalinterestchargesincreasedby$15,876,000(20%)over1977;thiswasrelatedtoad-ditionallong-termdebtoutstanding.'(

Auditors'pinionTotheShareownersandtheBoardofDirectorsofIndiana&MichiganElectricCompanyAVehaveexaminedthebalancesheetsofIndiana&MichiganElectricCompanyanditsgen-eratingsubsidiary,Indiana&MichiganPowerCompany,consolidated,asofDecember31,1978and1977andtherelatedstatementsofconsolidatedincome,retainedearnirigsandsourcesoffundsforplantandpropertyadditionsfortherespectiveyearsthenended.Ourexaminationsweremadeinaccordancewithgenerallyacceptedauditingstandardsand,accordingly,includedsuchtestsoftheaccountingrecordsandsuchotherauditingproceduresasweconsiderednecessaryinthecircumstances.AsdiscussedinparagraphsthreeandfiveofNote2ofNotestoConsolidatedFinancialState-ments,theCompanyiscollectingcertainwholesalerevenuessubjecttopossiblerefundandhasbeenincurringchargesforinterchangepowersubjecttorefundbyitsaffiliatedinterchangepowersuppliers.AninitialdecisionintheinterchangepowerproceedinginFebruary1978,could,ifsustained,resultinsubstantialrefundstotheCompany.Inaddition,theCompanyisinvolvedinantitrustmattersdiscussedinparagraphsthreeandfiveofNote10of¹testoConsolidatedFinancialStatements.Inouropinion,subjecttotheeffectonthefinancialstatementsidentifiedaboveofsuchadjust-ments,ifany,asmighthavebeenrequiredhadtheoutcomeoftherateandantitrustmattersreferredtointheprecedingparagraphbeenknown,suchfinancialstatementspresentfairlythefinancialpositionoftheabovecompanies,consolidated,asofDecember31,1978and1977andtheresultsoftheiroperationsandtheirsourcesoffundsforplantandpropertyadditionsfortheyearsthenended,inconformitywithgenerallyacceptedaccountingprinciplesappliedonaconsistentbasis.NewYork,NewYorkFebruary19,1979(March2,1979astoparagraphfiveofNote10ofNotestoConsolidatedFinancialStatements)

INDIANAdcMICHIGANTRICCOMPANYANDGENERATINGSUBSIDIARYConsolidatedStatementofIncomeOPERATINGREYENUEs-ELEGTRIc(Notes1and2)...........YearEndedDecember31,29781977(InThousands)$603,480$312,824OPERATINGEXPENSES:Operation:FuelforElectricGenerationPurchasedandInterchangePower(Net)(Notes2and9).0ther~~~~0\~~0~~~~~Maintenance(Note1)Depreciation(Note1)Taxes,OtherThanIncomeTaxes(Note9)StateIncomeTaxesFederalIncomeTaxes(Notes1and3)..TotalOperatingExpenses~OPERATINGINCOME125,277116,30860,00132,72459784426,432(378)23,438443,646159,83474,052144,83344,70628,45248,82423,40870417,445382,424130,400OTHERINcoMEANDDEDUcTIGNs(Notes1and3);AllowanceforOtherFundsUsedDuring,Construction......MiscellaneousNonoperatingIncomeLessDeductions......TotalOtherIncomeandDeductions............INCOMEBEFOREINTERESTCHARGES.INTERESTCHARGES:InterestonLong-termDebt.InterestonShort-termDebt.MiscellaneousInterestCharges(Note1)TotalInterestChargesAllowanceforBorrowedFundsUsedDuringConstruction(Credit)(Note1)...NetInterestChargesCONSOLIDATEDNETINCOME27,9741,04029101426,88995227,841188,848158,24189,3975,9641,28796,648(22,627)74,02173,1886,69788780,772(19,651)61,121$1147827$97,120SeeNotestoConsolidatedFinancialStatements.

ConsolidatedBalanceSheetASSETSANDOTHERDEBITSDecember31,19781977(InThousands)ELEGTRIcUTILITYPLANT(Note1):ProductionTransmissionDistributionGeneralandMiscellaneous(includesNuclearFuel).........ConstructionWorkinProgressTotalElectricUtilityPlantLessAccumulatedProvisionforDepreciation~.........,....ElectricUtilityPlant,LessProvision......~......OTHERPRQPERTYANDINVEsTMENTs(Notes1and4)$1@45,070421,644257,18668,209305,1362,397,245410,5201,986,725170,299$864,902401,562244,10340,965555,5002,107,032358,8261,748,206137,421CURRENTAssBTs:Cash(Note8)SpecialDepositsandWorkingFundsTemporaryCashInvestments(atcost,whichapproximatesmarket)AccountsReceivable:CustomersAssociatedCompaniesMtscellaneousAccumulatedProvisionforUncollectibleAccounts........MaterialsandSupplies(ataveragecostorless):ConstructionandOperationMaterialsandSupplies.FuelAccruedUtilityRevenuesPrepaymentsandOtherCurrentAssetsTotalCurrentAssets21,2646,75046,2777,5114,498(299)12,78316,11213,8113,467132,17454,73524,0658,49438,0529,3824,968(221)11,46817,32018,1494,322190,734DEFERREDDEBITS:UnamortizedDebtExpense(Note1)PropertyTaxesDeferredCollectionofFuelCosts(Note2)......OtherWorkinProgress.OtherDeferredDebits.~.....................TotalDeferredDebits3,1431,4221,5849,01045,60660,7652,1721,4501,6554,78036,52146,578Total.$2,349,963$2,122,939SeeNotestoConsolidatedFinancialStatements.10 INDIANA&MICHIGAiVELECCOMPANYANDGENERATINSUBSIDIARYLIABILITIESANDOTHERCREDITSCAPITALIZATION:December31,19781977(InThousands)CommonStock-iNoParValue(Note5):Authorized-2,500,000SharesOutstanding-1,400,000Shares.PremiumonCapitalStock(Note5)OtherPaid-inCapital(Note5)RetainedEarnings(Note6).TotalCommonShareowner'sEquity...........CumulativePreferredStock(Note7)Long-termDebt(lessportionduewithinoneyear)(Note8)TotalCapitalization(lesslong-termdebtduewithinoneyear).CURRENTLIABILITIES:Long-termDebtDuewithinOneYear(Note8)............Short-termDebt(Note8):NotesPayabletoBanks.CommercialPaperAccountsPayable:General.AssociatedCompaniesDividendsDeclared:CommonStockCumulativePreferredStockCustomerDepositsTaxesAccruedInterestAccruedOtherCurrentLiabilitiesTotalCurrentLiabilities.CoMMITMENTsANDCQNTINGENcIEs(iNote10)DEFERREDCREDITsANDOPERATINGREsERVEs:S56,5&4381470,228136,829664,022227,0001,043,0901,934,1127,53669,49055,45050,46015,30514,2524,7541,90920,00518,33816,439273,938S56,584381410,228104,566571,759187,000977,0621,735,82161,42149,65052)20019,65016,30611,3603,8541,73918,80419,04116,653270,678DeferredIncomeTaxes(iNote1)..DeferredInvestmentTaxCredits(NotesIand3)...........OtherDeferredCreditsandOperatingReserves.............TotalDeferredCreditsandOperatingReserves.....Total120,9218,50312,489141,913102,14310,7853,512116,440$2)349)963$2,122,939

'IConsolidatedStatementofSourcesofFundsforPlantandPropertyAdditionsYearEndedDecember31,19781977(InThousands)FUNDSFROMOPERATIONS:CohsolidatedNetIncomePrincipalNon-fundCharges(Credits)toIncome:Depreciation.ProvisionforDeferredIncomeTaxes(Net)............DeferredInvestmentTaxCredits(Net)AllowanceforOtherFundsUsedDuringConstruction....Other(Net).TotalFundsfromOperations.FUNDSFROMFINANCINGS:IssuancesandContributions:Long-termDebt.CumulativePreferredStockCapitalContributionsfromParentCompany............"Short-termDebt(Net)Total.Les~Retirements:Long-termDebt.Short-termDebt(Net)NetFundsfromFinancings.DIVIDENDSONCOMMONSTOCKDIVIDENDSONCUMULATIVEPREFERREDSTOCK..............SALEsoFPRoPERTYOTHERCHANGES(NET)DEGREAsE(INGREAsE)INWQRKINGCAPITAL(ExcludingShort-termDebtandLong-termDebtDueWithinOneYear)(a)~~.TotalPLANTANDPROPERTYADDITIONS:GrossAdditionstoUtilityPlant.GrossOtherAdditions.TotalGrossAdditions.AllowanceforOtherFundsUsedDuringConstruction......Total(a)Representedbydecrease(increase)asfollows:CashandCashItemsAccountsReceivableMaterialsandSupplies.AccountsPayableTaxesAccruedOther(Net)$114,82759,85318,7793,423(27,974)506169,414369,83938,48660,00023,090'491,415"357,877133,538(62,692)(18,357)42,416(13,675)92,615$343,259$340,20931,024371,233(27,974)$343,259$59,280(5,806)(107)29,809172018,238$92,615$97,12048,83713,5355,038(26,889)72137,713135,39138,12058,000231,51110,87346,163174,475(52,920)(14,041)97,311(4,523)(61,061)$276,954$272,43331,410303,843(26,889)$276,954$(30,020)(3,534)(5,851)(11,096)(1,087)(9,473)$(61,061)SeeNotestoConsolidatedFinancialStatements.12 liVDIAIVA&MICHIGAIVEW"RICCOMPAIVYAIVDGEIVERATTJVGSUIISIDIARYConsolidatedStatementofRetainedEarningsBalanceatBeginningofYearConsolidatedNetIncome.TotalDecember31,19781977(InThousands)$104,566$76,286114,82797,120219,393173,406Deductions:CashDividendsDeclared:CommonStockCumulativePreferredStock:4~/s%Series4.56%Series4.12%Series.7.08%Series7.76%Series.8.68%Series.12%Series.$2.15Series$2.25SeriesTotalCashDividendsDeclared...............CapitalStockExpenseTotalDeductionsBalanceatEndofYear(Note6).62,6924952731652,1242,7162,6043,6003,4402,94081,0491,51582i564$136,82952,9204952731652,1242,7162,6043,6002,06466,9611,87968,840$104,566SeeIVoiesioConsolidatedFinancialStasements.

NotestoConsolidatedFinancialStatements1.SignificantAccountingPolicies:ThecommonstockoftheCompanyiswhollyownedbyAmericanElectricPowerCompany,Inc.(AEP).Theconsolidatedfinancialstatementsincludetheac-countsoftheCompanyanditswhollyownedsubsidiaryIndiana&MichiganPowerCompany(theGeneratingSubsidiary).TheGeneratingSubsidiarywas.formedtoown,completeconstructionofandoperatetheDonaldC.CookNuclearPlant,thefirstunitofwhichhasbeenincommercialoperationsince1975andthesecondunitofwhichwasplacedincommercialoperationduringJuly1978.Significantintercompanyitemshavebeeneliminatedinconsolidation.Aminorinactivesubsidiaryhasnotbeenconsolidated.TheaccountingandratesoftheCompanyandtheGeneratingSubsidiaryaresubjectincertainrespectstotherequirementsofstateregulatorybodiesandincer-tainrespectstotherequirementsoftheFederalEnergyRegulatoryCommission(FERC).Theconsolidatedfinancialstatementshavebeenprepared,withfullres-ervationoflegalrights,onthebasisoftheaccountswhicharemaintainedforFERCpurposes.4.0%3.1%3.3%3.5%UtilityPlant,OtherPropertyandInvestmentsandDepreciationElectricutilityplantisstatedatoriginalcost.Gen-erally,theplantoftheCompanyandtheGeneratingSubsidiaryissubjecttofirstmortgageliens.Thecompaniescapitalize,asaconstructioncost,an.allowanceforfundsusedduringconstruction,anitemnotrepresentingcashincome,whichisdefinedintheapplicableregulatorysystemsofaccountsasthenetcostofborrowedfundsusedforconstructionpurposesandareasonablerateonotherfundswhensoused.TherespectivecompositeratesusedbytheCompanyandtheGeneratingSubsidiarywereincreasedto10.5%and10.2%,respectively,during1978(effectiveJanu-ary1)from8.5%usedbybothcompaniesin1977,(appliedbytheCompanyonanannualbasisandbytheGeneratingSubsidiaryonasemiannualcompoundbasis).Thecompaniesprovidefordepreciationonastraight-linebasisovertheestimatedusefullivesoftheproperty.Thecurrentprovisionsaredeterminedlargelywiththeuseoffunctionalcompositeratesasfollows:FunctionalCompositeClassofAnnual~PIOCllRateProduction:Steam-Nuclear.Steam-Fossil.firedTransmission...........Distribution.GeneralIncomeischargedwiththecostsoflabor,materials,supervision,andothercostsincurredinmaintainingtheproperties.Propertyaccountsarechargedwithcostsofbettermentsandmajorreplacementsofproperty,andtheaccumulatedprovisionsfordepreciationarechargedwithretirements,togetherwithremovalcostslesssalvage.Nonutilityproperty,otherpropertyinvestments,andotherinvestmentsaregenerallystatedatcost.'ncomeTaxe'sDeferredFederalincometaxes,reducedwhereap-plicablebyinvestmenttaxcredits,areprovidedbytheCompanyandtheGeneratingSubsidiarygenerallytotheextentthatsuchamountsareallowedforrate-makingpurposes.OnOctober1,1978,theCompanyanditsGeneratingSubsidiaryexpandeddeferredtaxaccountingtoadditionaltimingdifferencespursuanttoanorderofthePublicServiceCommissionofIndiana.TheCompanyandtheGeneratingSubsidiaryprac-ticedeferralaccountingfortheeffectoftaxreductionsresultingfromtheapplicationofinvestmenttaxcreditstoprovisionsforcurrentandcertaindeferredFederalincometaxes.Thedeferredinvestmenttaxcreditap-plicabletocurrentFederalincometaxespayableisamortizedover30years.PensionPlanTheCompanyandtheGeneratingSubsidiarypar-ticipatewithothercompaniesintheAEPSysteminatrusteedplantoprovidepensionsforallemployees,subjecttocertaineligibilityrequirements.Theplanwaspreviouslycontributoryonthepartofemployees,butasofJanuary1,1978,requiredemployeecontributionswereeliminatedastosubstantiallyallemployees.ThepensionplanconformstotheEmployeeRetirementIncomeSecurityActof1974(ERISA).PensioncostsfortheyearsendedDecember31,1978and1977wereapproximately$2,624,000and$2,170,000,respectively,representingthecostofcur-rentlyaccruingbenefits.TherewerenounfundedpriorservicecostsasofDecember31,1978.EffectiveJanu-ary1,1979,benefitsoftheplanweremodified.Thechangeresultedinunfundedpriorservicecostsofapproximately$1,970,000,whichwillbeamortizedover30years.Theplanmaybemodifiedorterminatedatanytime,subjecttolimitationsoflaboragreements.EmployeesSavingsPlanTheCompanyandtheGeneratingSubsidiarypar-ticipatewithotherAEPSystemcompaniesinatrusteedsavingsplanwhichbecameeffectiveJanuary1,1978andisavailabletoemployeeswhohavemeteligibilityrequirements.Thesavingsplanconformstotheappli-cableprovisionsofERISA.Eachemployercontributes If>tDIAt>tA>itM~GAt>tELECTRICCOMPANYA%VGEHERATlt>tGSVBSIDIARYtotheplananamountequalto50%ofitsemployee-participants'ontributionsupto6%oftheirregularcompensation.Benefitstoparticipatingemployeesarebasedsolelyuponamountscontributedtothepartici-pants'ccounts.Byitsnaturetheplanis<fullyfundedatalltimes.ThecostoftheplanfortheyearendedDecember31,1978totaled$607,000.OtherTheCompanyaccruesunbilledrevenuesforservicesrenderedsubsequenttothelastbillingcyclethroughmonth-end.miscellaneousnonoperatingincomefortheyearsendedDecember31,1978and1977includesgainsamountingto$261,000and$306,000,respectively,oncertainlong-termdebtreacquired.Debtdiscountorpremiumanddebtexpensearebeingamortizedoverthelivesoftherelateddebtissuesandtheamortizationthereofisincludedwithinmiscel-laneousinterestcharges.2.OperatingRevenuesandOperatingExpenses:TheCompanyhascollectedretailrevenuesunderfinalordersofthePublicServiceCommissionofIndi-anawhichbecameeffectiveinFebruary1977andSeptember1978.The1977orderhasbeenappealedtoacourtofappealsandcertainpartieshaveinitiatedproceedingslookingtowardanappealfromthe1978order.InSeptember1978,FERCorderedthattheCom-panyrefundapproximately$3,000,000toamunicipalcustomer.TheCompanyrecordedtherefundinthethirdquarterof1978.Theeffectofsuchrefundonpriorperiodswasnotmaterial.RevenuescollectedbytheCompanyfromwholesalerateincreasesplacedintoeffectsubjecttopossiblerefund(exclusiveoftheamountrefundedasdescribedabove)areestimatedasfollows:(InThousands)1978...............S24>9811977.27,968Priorto1977.50,368Total3103,317OnFebruary23,1978,anadministrativelawjudgeofFERCissuedaninitialdecisionorderingoneoftheafiiliatedinterchangepowersupplierstomakecertainrefunds,afterrecomputinginterchangechargesfortheperiodsubsequenttoJune1975onthebasisoftheinterconnectionagreementineffectpriortothatdate,butexcludingfromsuchcalculationsasmemberca-pacity,inthecaseoftheCompany,thecapacityownedbytheGeneratingSubsidiaryand,inthecaseofan-othermemberoftheSystem,thecapacityownedbyitsgeneratingsubsidiary.IfthechangeisfinallyorderedbyFERC,theCompanycouldbecomeentitledtore--fundsinasubstantialamount.Certainintervenorshaveurgedthatchangesbemadeintheinterconnectionagreement,whichwouldhavetheoppositeeffect,in-creasingtheamountspayablebytheCompany.'heAEPSystemsubsidiaries,includingtheCompany,havefiledabriefwhichurgesthattheactionoftheadmin-istrativelawjudgeberevisedsoastosustaintheorigi-nalamountscharged,'butcannotpredictthefinalout-comeoftheproceedingortheeffectthereofontheCompany.Operatingrevenuesderivedfromdomesticgovern-mentalentitiesrepresentapproximately8%and10%oftotaloperatingrevenuesfor1978and1977,respec-tively.Operatingrevenuesderivedfromacertainwholesalecustomerrepresentapproximately12%and7%oftotaloperatingrevenuesfor1978and1977,respectively.In1978theCompanyreceivedapprovalofthePublicServiceCommissionofIndianatocollect,overafive-yearperiodendingin1983,substantiallyallofitsdeferredfuelcosts.19781977Priorto1977Total(InThousands)$20,77716,4395,224$42,4403.FederalIncoineTaxes:ThedetailsofFederalincometaxesareasfollows:YearEndedDecember31,19781977SeeNote10forinformationwithrespecttoananti-trustdecisionenjoiningtheCompanyfromchargingcertainwholesalerates.CommencinginJune1975,operatingexpensesin-cludetheeffectofchangesinrateschargedforinter-changepowertransactionsbetweentheCompanyandothercompaniesintheAEPSystem.TheeffectofsuchchangeswastoincreasethechargestotheCom-pany,subjecttopossiblerefundbyitsinterchangepowersuppliers,bythefollowingestimatedamounts:S(1,128)13,5355,03817,445Charged(Credited)toOperating(InThousands)Expenses:CurrentFederalIncomeTaxes(Net)$1,357DeferredFederalIncomeTaxes(Net)18,658DeferredInvestmentTaxCreditsTotal....................23,438ChargedtoOtherIncomeandDeductions............936(a)537TotalFederalIncomeTaxesS24,374S17,982(a)Includesdeferredincometaxesof$121,000.15 NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS(Continued)TheconsolidatedeffectiveFederalincometaxrateswerelessthanthestatutoryratesfortheyears1978and1977.ThefollowingisareconciliationofthedifferencesbetweentheamountofFederalincometaxexpensereportedintheConsolidatedStatementofIncomeandtheamountofFederalincometaxescomputedbymultiplyingconsolidatednetincomebeforeFederalincometaxesbythestatutorytaxrate.ConsolidatedNetIncomeFederalIncomeTaxes.Pre-TaxBookIncome.FederalIncomeTaxonPrc-TaxBookIncomeatStatutoryRateof48%.Increase(Decrease)inFederalIncomeTaxesResultingfrom:ExcessofTaxoverBookDcprcciationAllowanceforFundsUsedDuringConstructionandItemsCapitalizedontheBooksbutDeductedforTaxPurposes.MineDevelopmentandExplorationExpenseProvisionforRevenueRefunds.AmortizationofPollutionControlFacilities.MiscellaneousItemsFederalIncomeTaxonCurrent-YearTaxableIncome(Separate-ReturnBasis)ReductionDuetoSystemConsolidation.MinimumTaxonPreferenceItemsCurrentlyPayableAdjustmentsofPrior-YearAccruals(Net)AdjustmentsforTaxLosses(a):FederalIncomeTaxesInvestmentTaxCreditCurrentFederalIncomeTaxes(Net).DeferredFederalIncomeTaxes(NetofAmortization)ResultingfromtheFollowingTimingDifferences:Depreciation(LiberalizedandAssetDepreciationRange)..~.UnbiliedRevenue.AcceleratedAmortizationofEmergencyFacilities(AmortizationofPrior-YearProvisions)........ProvisionforRevenueRefundsOtherInvestmcntTaxCreditApplicabletoDeferredFederalIncomeTaxesonCertainTimingDifferencesDeferredFederalIncomeTaxes(Net)DeferredInvestmentTaxCredits(Net).TotalFederalIncomeTaxes(19,691)(25,853)(4,680)(888)(4,080)10911,733(11,733)650650(276)(16,080)(24,005)(1,962)(2,912)(1,609)(5,633)3,048(3,048)1818(774)7,503(5,705)2,1726897(591)17,439(1,221)(1,848)2,1882,22118.7793,423(c)$24,37413,9313,315(1,882)2,2131,154(5,196)13,5355,038'17,982YearEndedDecember31,19781977(InThousands)$114,827$97,12024,37417,9828139,2018113,102866,816833,249(a)TheAEPSystemallocatesFederalincometaxescurrentlypayableinaccordancewithSECregulations,whichrequirethatthebenefitoftaxlossesbeallocatedtotheAEPSystemcompanieswithtaxableincome.Thebenefitsofthesetaxlosses,withoutaffectingtaxespayable,arereallocatedtotheAEPSystemcompaniesgivingrisetosuchlosses,asitisexpectedthattheselosseswouldbeusableinsubsequentyearstoreducetaxespayableofthelosscompanies.16 INDIANA4MlANELECTRICCOMPANYANDGENERATINGSUBSIDIARY(b)InaccordancewithanorderoftheSECunderthePublicUtilityHoldingCompanyActof1935,ataxlossoftheGeneratingSubsidiaryistobefirstappliedtoreducethetaxableincomeoftheCompanyandanyunusedamountistobeallocatedamongtheotherSystemcompaniesincludedintheconsolidatedFederalincometaxreturn,butwiththeprovisionthatanylossessoallocatedtootherSystemcompaniesshallbereallocatedtotheCompanyifusablebyitinsubsequentyears.Theeffectoftaxlossesallocatedtoothercompanieswouldbeincludedinthereallocationreferredtoin(a)above.(c)TheSystemconsolidatedFederalincometaxreturnfor1977,filedin1978,showedataxableincomewhichwaslessthanthatestimatedfortheyear-endaccrual.ThedecreasewasprincipallyattributabletoadditionalpercentagerepairallowancedeductionsoftheCompanyandaffiliatedcompaniesandminedevelopmentexpensedeductionsoftheCompanyclaimedovertheestimatedamountsutilizedinpre-paringthe1977year-endaccrual.Thesedifferenceshadnosignificanteffectontheamountofincometaxespayablefor1977becauseoftheeffectofinvestmenttaxcredits;however,.totalSystemFederalincometaxesfor1977wouldhavebeenreducedduetotherelatedreversalofdeferredinvestmenttaxcredits,Theincreaseinincome($3,194,000)resultingfromthesedifferencesinestimateswasrecordedbytheCompanyinthethirdquarterof1978.TheCompanyjoinsinthefiling.ofaconsolidatedFederalincometaxreturnwithitsaffiliatedcompaniesintheAEPSystem.UnusedSysteminvestmcnttaxcreditsatDecember31,1978aggregatedapproximately$201,000,000,ofwhichapproximately$21,300,000maybecarriedforward=through1981,$52,800,000through1982,$20,500,000through1983,$27,400,000through1984,and$79,000,000through1985.Oftheseamounts,approximately$26,000,000hadbeenappliedasareductionofdeferredincometaxespriortoDecember31,1978andwillnotbereflectedinnetincomewhenrealizedinfutureyearsexceptasaf-fectedbychangesindeferredincometaxes.TheSystemconsolidatedFederalincometaxre-turnsfortheyearspriorto1965havebeensettled.Thereturnsfortheyears1965through1969togetherwithcertainunrecordedrefundclaimsrelatingtotheyears1965,1966and1967arecurrentlybeingsettledonthebasisofanetrefundfortheperiod,theamountofwhichtheSystemcompaniesdeemimmaterial.Thereturnsfortheyears1970through1973havebeenreviewedbytheInternalRevenueServiceandaddi-tionaltaxesforthoseyearshavebeenproposed,someofwhichtheSystemcompanieshaveprotested.IntheopinionoftheSystemcompanies,adequateprovisionhasbeenmadeforsuchadditionaltaxes.4.OtherPropertyandInvestments:Thefollowingisananalysisofotherpropertyandinvestments:December31,19781977(InThousands)NonutilityPropertyandOtherPropertyInvestments:westernCoalLandsAcquiredasSourceofLow4ulfurFuel...OtherCoalPropertiesandFuel-HandlingFacilities..........Miscellaneous(Net)...........Subtotal................OhioValleyElectricCorporationSub-ordinatedNotes..................OtherInvestments..................TotalOtherPropertyandInvestments...............$149,713$120,7994,9463,6921549512674170,154"137,16556200145$170,299$137,4215.CommonStock,PremiumonCapitalStock,andOtherPaid-inCapitalsTherewerenocommonstocktransactionsandnotransactionsaffectingpremiumoncapitalstockduringtheyears1978and1977.TheCompanyreceivedfromitsparentcashcapitalcontributionsof$60,000,000in1978and$58,000,000in1977;suchcontributionswerecreditedtootherpaid-incapital.6.RetainedEarnings:Variousrestrictionsontheuseofretainedearningsforcashdividendsoncommonstockandotherpur--posesarecontainedinorresultfromcovenantsinmortgageindentures,debentureandbankloanagree-ments,charterprovisions,andordersofregulatoryauthorities.Approximately$48,500,000atDecember31,1978wassorestricted.17 NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS(Continued)7.CumulativePreferredStodcThefollowingisananalysisofcumulativepreferredstock:RedemptionCurrentRestrictedCallPrice(a).PriortoAmountDecember31.ParValueSharesOutstandingSeries19781977(InThousands)$12,000$12,0006,0006,0004,0004,00030,00030,00035,00035,00030,00030,00030,00030,00040,00040,00040,000$227,000$187,000dividends.Thcinvoluntaryliquidationpreference120,00060,00040,000300,000350,000300,000300,0001,600,0001,600,000orbeforeOctober1ofeachyear,beginninginofsuchseries.TheCompanyhastheright,onallsinkingfundprovisionshavebeenmet,no4Vs%'106.125$1004.56%102.0001004.12%102.7281007.08%106.4501007.76%107.3201008.68%107.44010012112.000(b)9/1/80100$2.1527.1505/1/8225$2.2527.2503/1/8325TotalCumulativePreferredStock(a)CallableattheoptionoftheCompany,atthepriceindicatedplusaccruedisparvalue.(b)Asinkingfundforthe12%seriesrequirestheCompanytoprovide,on1980,forthcpurchase,orredemptionat$100ashare,of15,000shareseachsinkingfunddate,toredeemanadditional15,000shares.Unlessdistributionmaybemadeonthecommonstock.In1976shareownersauthorizedtheissuanceofupto4,000,000sharesof$25parvaluecumulativepreferredstock(whichranksequallywiththe$100parvaluecumulativepreferredstock)andin1978increasedtheauthori-zationto7,200,000shares.In1977theCompanyissuedandsold1,600,000sharesofthe$2.15seriesandin1978theCompanyissuedandsold1,600,000sharesofthe$2.25series.AtDecember31,1978,authorizedsharesofcumulativepreferredstockwereasfollows:SharesParValue,Authorized$100...2.250,00025.7,200,000FirstMortgageBonds..............SinkingFundDebentures...........NotesPayabletoBanks,duc1980..InstallmentPurchaseContracts......OtherLong-termDebt.............Total(lessportionduewithinoneyear)$1,043,090$977,062Firstmortgagebondsoutstandingwereasfollows:December31,Due19781977(InThousands)1978(a)....................$-$30,0001978(b)....................-24,1731980....18,01518,0151982.........16,04616,0461982..........70,00070,0001983..........13,76213,7621983..............60,00060,0001984.....15,08215,0821984(c)(d)(e)...'............66,00070,5001985(e)....................13,50014,2501988......22,97422,9741988'.....1755717557199342,90242,902Series"6'o32%%3Vs%10Vs%3Ys%113Ys%10zs%10.%3ss%4%duo4%%S.Long-termDebt,Short-termDebt,LinesofCredit,andCompensatingBalances:Long-termdebtbymajorcategorywasoutstandingasfollows(lessportionduewithinone'year):December31.19781977(InThousands)$832,286$482,82624,08325,26082,000360,00099,84199,7504,8809,226SeriesDueDcccmber31.19781977(InThousands)$35,000$35,00050,00050,00040,00040,000255,000100,0007%19988Fs%20008Ys%20039'%003(c)9'A%%uo2008UnamortizedDebtDiscount-Net(552)(262)835,286539,9993,00057,173$832,286$482.826InJanuary1979,theCompanyissued$80,000,000of10N%firstmortgagebondsduein1987.TheLessPortiondueivithinOne.Year..Total(a)RetiredFebruary1,1978.(b)RetiredSeptember1,1978.(c)GuaranteedbyAmericanElectricPowerCompany,Inc.(d)ThesebondsareobligationsoftheGeneratingSubsidiary.Theunamortizeddiscountamountedto$189,000and$221.000atDecember31,1978and1977,respectively.(e)Sinkingfundpaymentsarerequiredasfollows:10%seriesdue1985-$750,000annuallyonMarch1.107/s%seriesdue1984-$2,250,000annuallyonDecem-ber1,through1983,withthenoncumulativeelectiontoredeemanadditional$2,250,000ineachyear.9'%eriesdue2003-$11,500,000annuallyonJune1,1980through1991and$13.500,000annuallyonJunc1,1992through2002withthenoncumulativeoptiontoredeemanadditionalamountineachofthespecifiedyearsfromaminimumof$100,000toamaximumequaltothescheduledrequirementforeachyear,butwithamaximumootionalredemption,astoallyearsintheaggregate,of$75,000,000.18 INDIANAckMlANELECTRICCohfPANYANDGENERATINGSUBSIDIARYInstallmentpurchasecontractsoftheCompanywereasfollows:December31,CityofLawrenceburg,Indiana:8ViÃoSeriesdue2006......7%Seriesdue2006........67ie%Seriesdue2006......CityofSullivan,Indiana:6ss%Seriesdue2006......UnamortizedDebtDiscount...Total19781977(InThousands)$25,00040,00012,000$25,00040,00012,00025,000(2,159)$99,84125,000(2,250)$99,750Underthetermsofcertaininstallmentpurchasecon-tracts,theCompanyisrequiredtopaypurchasepriceinstallmentsinamountssufficienttoenablethecitiestopayinterestonandtheprincipal(atstatedmaturi-tiesanduponmandatoryredemption)ofrelatedpol-lutioncontrolrevenuebondsissuedtofinancethecon-structionofpollutioncontrolfacilitiesattheCompany'sTannersCreekandBreedPlants.Otherlong-termdebtoftheCompanyoutstandingconsistedof:December31,19781977(InThousands)Coalrcscrveobligations-payableinequalannualinstallmentsthrough1980withinterestat8%..........Notespayable-due1978through1985,6%-7%OtherLessportionduewithinoneyear..Total'I$8,252$12,3779022629,4164,536$4,88093416213,4734,247$9,226GeneratingSubsidiaryhasadelayed-deliverycontracttosellanadditional$45,000,000ofitsfirstmortgagebonds,9th%Seriesdue2003,onMarch1,1979.Theindenturesrelatingtothefirstmortgagebonds'>'containimprovement,maintenanceandreplacementprovisionsrequiringthedepositofcashorbondswiththetrustee,orinlieuthereof,certificationofunfundedpropertyadditions.TheCompanyhaselectedto'useunfundedpropertyadditionstomeettheseprovisionsinthepast.SinkingfunddebenturesoftheCompanyoutstandingwereasfollows:December31,19781977(InThousands)5Vs%Due1986$12,076$12,491714%Due1998......11,94112,694UnamortizedDebtPremium...........6675Total$24,083$25,26019791980198119821983LaterYearsTotal(InThousands)$71536118,85915,032101,30489,035721.505$1,053,271AtDecember31,1978and1977,theprincipalamountsofdebenturesreacquiredinanticipationofsinkingfundrequirementswere$2,183,000and$1,815,000,respectively.Thecompaniesmaymakeadditionaldebentureorfirstmortgagebondsinkingfundpaymentsofupto$3,050,000annually($2,250,000relatingtoGeneratingSubsidiary).Theinterestrateonthelong-termnotespayableto.banks(anaverageof12.2%atDecember31,1978and8.4%atDecember31,1977)dependsontheprimecommercialrateplusafractionalpercentage.TheGeneratingSubsidiaryhasinformalarrangementswiththebankstomaintainaveragecompensatingbankbalancesequaltoapproximately15%ofcertainofthenotesoutstanding'on.anaveragebasisorsuchsmalleramountasthebanksconsiderappropriateinviewofotherbankingrelationshipsor,inlieuthereof,topayafeeonanydraw-downofthecompensatingbalancesbasedontheapproximateeffectiveinterestcostoftherelatednotes,assumingthefullcompensatingbalanceshadbeenmaintained;AtDecember31,1978and1977,thecompensatingbalancesunderthearrangementswereapproximately$9,800,000and$34,100,000,re-spectively.Theeffectiveinterestrate,representingtheactualinterestratesonthenotesoutstandingadjustedfortheeffectofthecompensatingbalancerequire-ments,averaged13.9%atDecember31,1978andwasapproximately9.6%atDecember31,1977.Short-termdebtandinterestratesthereonwereasfollows:19781977(DollarsinThousands)Weightedaverageinterestratesfordebtoutstandingatendofyear:NotesPayabletoBanks............CommercialPaper..................Maximumamountofdebtoutstandingatanymonthwndduringtheyear:NotesPayabletoBanks............CommercialPaper..................10.9%7.8%11.2%7.4%$69,490$87,400$55,450$76,042Consolidatedlong-termdebtoutstandingatDecem-ber31,1978isdueasfollows:PrincipalAmount19 NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS(Continued)TheCompanyhadunusedshort-termbanklinesofcreditofapproximately$144,000,000and$208,000,-000atDecember31,1978and1977,respectively,underwhichnotescouldbeissuedwithnomaturitymorethan270daysafterdateofissue.Theavailablelinesofcreditaresubjecttowithdrawalatthebanks'ption,and$135,000,000and$200,000,000,respec-tively,ofsuchlinesaresharedwithotherAEPSystemcompanies.Inaccordancewithinformalagreementswiththebanks,compensatingbalancesofupto10%or,incertaininstances,equivalentfeesarerequiredtontaintainthelinesofcredit,and,onanyamountsactuallyborrowed,generallyeitheradditionalcompen-satingbalancesofupto10%aremaintainedoradjust-mcntsininterestratesaremade.SubstantiallyallbankbalancesaremaintainedbytheCompanytocompensatethebanksforservicesandforbothusedandavailablelinesofcredit.9.SupplementalIncomeStatementInformationandRelated-PartyTransactions:ElectricoperatingrevenuesshownintheConsoli-datedStatementofIncomeincludesalesofenergytoAEPSystemcompaniesofapproximately$17,500,000and$14,500,000fortheyearsendedDecember31,1978and1977,respectively.OperatingexpensesshownintheConsolidatedState-mentofIncomeincludecertainitemsnotshownsepa-rately,asfollows:YearEndedDecember31,19781977(InThousands)$6,241$2,965PurchasedPower(a)...........InterchangePower(Net):AEPSystemElectricUtilities.OtherCompanies(b).........140,957911$144,83380,04330,024$116,30819781977(DollarsinThousands)Weightedaverageintcrcstrateofdebtoutstandingduringtheyear(a):NotesPayabletoBanks............94%6.6%CommercialPaper..................9.1%6.6%Average.amountofdebtoutstandingduringthcyear:NotesPayablctoBanks............$31,862'39,457CommercialPaper..................$36,211$58,716(a)Averageinterestratesaredeterminedbydividinginter-estexpensedfortheyearbyaveragemonth-enddebt.Taxes,OtherThanIncomeTaxes:RealandPersonalPropertyTaxes..StateGrossSales,ExciseandFran-chiseTaxes,andMiscellaneousStateandLocalTaxes..........SocialSecurityTaxes-FederalandStateYearEndedDecember31,19781977(InThousands)$14,617$13,6099,8421,973$26,4328,0781,721$23.40810.CommitmentsandContingencies:TheconstructionbudgetoftheCompanyandtheGeneratingSubsidiaryfortheyear1979isestimatedat$241,000,000and,inconnectiontherewith,com-mitmentshavebeenmade.TheCompanyparticipateswithitsparent,twoasso-ciatedutilitycompanies,severalunaffiliatedutilitycompanies,andOhioValleyElectricCorporation(OVEC)insupplyingtheU.S.DepartmentofEnergy(POE)withthepowerrequirementsofitsplantnearPortsmouth,Ohio.TheproceedsfromthesalesofpowerbyOVECaredesignedtobesufficientforOVECtomeetitsopeiatingexpensesandfixedcosts,includingamortizationoflong-termdebtcapital(bal-anceapproximately$43,300,000asofDecember31,1978),overaperiodendingin1982,andtoprovideforanannualreturnonitsequitycapital.TheCom-pany,asaparticipant,isentitledtoreceivefromOVEC,andisobligatedtopayfor,7.6%ofthepowernotrequiredbyDOE.Thepoweragreementterminates(a)IncludespowerpurchasedfromOVECofapproximately$1,558,000in1978and$476,000in1977.(b)IncludesinterchangepowersoldtoOVECofapproxi-mately$908,000in1978and$956,000in1977.Chargestoincomeforroyaltiesandadvertisingarelessthan1%ofgrossrevenuesineachcase.Salesandpurchasesofenergyandinterchangepowertransactionsareregulatedbythevariouscommissionshavingjurisdiction.AmericanElectricPowerServiceCorporationpro-videscertainservicestotheCompanyandtheaffiliatedcompaniesintheAEPSystem.Thecostsoftheser-vicesaredeterminedbytheservicecompanyonadirectwhargcbasistotheextentpracticableandonreasonablebasesofprorationforindirectcosts.Thechargesforservicesaremadeonacostbasisbutin-cludenocompensationfortheuseofequitycapital,allofwhichisfurnishedtotheservicecompanybyAEP.TheservicecompanyissubjecttotheregulationoftheSecuritiesandExchangeCommissionunderthePublicUtilityHoldingCompanyAct'of1935.20 INDIANA&,MlGAiVELECTRICCOAfPANYANDGENERATINGSUBSIDIARYin1979butDOEhasnotifiedOVECofitsdesiretonegotiateanextensionto1992.In1978,threecourtproceedingsbrought,inrecentyearsbycertainmunicipalitiesinIndianaandMichigan,,allwholesalecustomersoftheCompany,werecom-binedintoasingleconsolidatedcaseinaU.S.DistrictCourtandafourthactionwascommencedinthesamecourt.Atrialoftheconsolidatedcasewasheldand.inJanuary1979thecourtruledfortheplaintiffsthattheCompany,itsparent,andAmericanElectricPowerServiceCorporationhaveviolatedtheantitrustlaws,awardedthemunicipalitiesdamagesofapproximately$12,100,000whentrebled,placedlimitationsontheCompany'sputtingintoeffectorchargingwholesaleratestotheplaintiffsandenjoinedtheCompanyfromcertainpractices.ThefinancialstatementsatDecember31,1978donotincludeanyprovisionforsuchdam-ages.Thecompaniesareappealingthedecisionandprovisionsofthejudgmentawardingmonetarydam-ageshavebeenstayed.Inanotherproceeding,theCompanyisawaitingde-cisiononitsappealtoFERC,filedin1977,withre-specttoarulingbyanadministrativelawjudgeonacomplaintmadetothecommissionbythesamegroupofmunicipalities.Thatcomplaint,allegingthatthemunicipalelectricsystemshadbeenthreatenedwithterminationofwholesaleelectricservice,hadearlierbeenupheldbytheFERCjudge.InMarch1979,twoothermunicipalcustomersbroughtaseparateactionagainsttheCompany,itsparentandtheServiceCorporationallegingviolationsoftheantitrustlawsandseekingdamagesofatleast$7,000,000beforetreblingandotherremedies.Certainissuesinthecomplaintaresimilartothosetriedintheconsolidatedcasediscussedinthesecondprecedingparagraph.Aspreviouslyreported,theSecuritiesandExchangeCommission(SEC)hadcommencedaninvestigation,throughitsstaff,intocertainaspectsoftheAEPSys-tem'soperations,includingitspromotionofall-electrichousingduringthe1960'sandtheacquisitionandoperationofcertaincoalandtransportationproperties.TheSECstaffhadmaintainedthatcommissionau-thorizationshouldhavebeenobtainedforsomeofthetransactions.TheAEPSystemcompaniesdisagreedbutdidagreetoanegotiatedsettlementinordertoavoidlonglitigationwiththeSEC.Asaresult,theAEPSystemcompaniesagreedtoaconsentorderinaU.S.DistrictCourtinwhichtheyneitheradmittednordeniedtheallegations.Aspartoftheagreement,aspecialauditorwasappointedtoreviewintercompanychargesandcostsassociatedwiththeprogramsandtransactionsinvolvedintheinvestigation;theauditor'sreportwasfiledinDecember1978.TheAEPSystemcompaniesareengagedinacontinuingprogram'fortheorderlyandeconomicdivestmentofalimitedamountofrealestate,acquiredinconnectionwiththehousingandindustrialdevelopmentprograms,thatwassubjecttoquestion.ln1975,aninvestigationwascommencedundertheFederalPowerActconcerningthereasonablenessandprudenceofthecoal-purchasingpoliciesandpracticesofmembersoftheAEPSystem,themannerinwhichwholesalefuel-adjustmentclausesareimplementedbySystemmembers,andrelatedmatters.In1978theFERCstaffissuedapreliminaryreportwhichallegedoverchargesofapproximately$10,000,000onthepartoftheentireAEPSystem,ofwhichonlyarelativelysmallportionrelatestotheCompany'soperations.ThereportalsoquestionedcertainaspectsoftheAEPSystem'sfuelpositionsandpolicies.TheAEPSystemcompaniesarepreparingaresponsetotheseallegations.In1976acable-televisionorganizationfiledananti-trustsuitinaU.S.DistrictCourtallegingthattheCompany,withfivetelephonecompaniesnamedasco-conspirators,hadattemptedtomonopolizecom-municationsbyterminatingcontractsandincreasingchargesfortherentalofutilitypoles,andsoughtdam-ageswhichwhentrebledwouldaggregatemorethan$150,000,000.Inearly1979,thecourtenteredajudgmentdenyingdamagesandinjunctiverelief.Thecompaniesaresubjecttocertaindevelopinglawsandregulationswithrespecttoairandwaterquality,landuse,andotherenvironmentalmatters.IVhilethecompaniesareunabletopredicttheultimateeffectofsuchlawsandregulations,itispossiblethattheymayberequiredtopaypenaltiesforfailuretocomplyduringcertainperiodsorthatcompliancethere-withmayrequirethecompaniestoincursubstantialadditionalcoststomodifyorreplaceexistingandpro-posedequipmentandfacilities.OtherhighlycomplexlitigationrelatestotheDonaldC.CookNuclearPlant'sfuel-supplycontracts.Twocontractors,UnitedNuclearCorporationandGeneralAtomicCompany(GAC),arevariouslyobligatedtosupplyuraniumconcentratesandsixfabricatednuclear-fuelreloadstotheCompany.Eachcontractorclaims,amongotherthings,thatitisnotormaynotbeobli-gatedtomakedeliveriesofuraniumconcentratesorfab-ricatednuclear-fuelreloadsandthatitisentitledtoapricehigherthancontracted.TheCompanyreceivedthefirsttworeloadsandassureddeliveryoftheremain-ingfourreloadsthroughrights-reservedagreementswithGAC,whichwereincorporatedintoinjunctive21 NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS(Concluded)ordersofthecourt.Undertheagreements,pendingthecourt'sjudgmentandwithoutprejudicetotheultimaterightsoftheparties,thereloads,weretobesuppliedatahigherprovisionalcosttotheCompany.In1978,aU.S.DistrictCourtenteredjudgmentorderingGACtopaytheCompanydamagesofapproximately$16,000,000andtodelivertheremainingreloadsatthepricespecifiedinthecontract.GAChasappealedthejudgment.Astayofthemonetaryportionofthejudgmenthasbeengranted,butmotionstostaythespecific-performanceportionofthejudgmenthavebeendenied.Thecompaniesintendtoapplytoregulatorycom-missionstoprovide,throughfutureincreasedrates,forthecoststhatwillbeincurredtostorespentnuclearfuelandtodecommissiontheNuclearPlantattheendofitsservicelife.Thecompaniesplantoeffectmodifi-cationstoincreasethepresentspent-fuelstorageca-pacityoftheNuclearPlanttopermitnormaloperationsthroughtheearly1990's,atacostwhichisnotex-pectedtocauseamaterialincreaseintheconstructionbudget.ThecompaniesarealsostudyingalternativemethodsofdecommissioningtheNuclearPlantbutcannotreasonablyestimate,atthistime,thefuturecoststhatwillbeincurred.ThePrice-AndersonActlimitedthepublicliabilityofalicenseeofanuclearplantto$560,000,000forasinglenuclearincident,tobecoveredinpartbypri-vateinsurancewiththebalancetobecoveredbyagree-mentsofindemnitywiththeNuclearRegulatoryCom-mission.TheGeneratingSubsidiaryhaspurchasedprivateinsuranceinthemaximumavailableamountof$140,000,000.Intheeventofanuclearincidentin-volvinganycommercialnuclearfacilityin.thecountry,theGeneratingSubsidiary,togetherwithotherlicensees,couldbeindividuallyassessed$5,000,000perincidentforeachreactorowned(subjecttoamaximumof$10,000,000inanyyearforeachreactorownedintheeventofmorethanoneincident).ThePrice-Andersonindemnitieshavebeendecreasedbytheaggregateamountwhichisassessableagainstexistinglicenseesandwillcontinuetodecreaseasnewoperatingunitsarelicensed.TheGeneratingSubsidiaryhasprocuredpropertyinsuranceinthemaximumavailableamountof$220,-000,000fordamagetothenuclearplantfacilitiesandisaself-insurerforanypropertylossinexcessofthatamount.11.Leases:Thecompanies,aspartoftheiroperations,leaseproperty,plant,andequipmentunderleasesranginginlengthfrom2to35years.Mostoftheleasesrequirethecompaniestopayrelatedpropertytaxes,mainte-nancecosts,andothercostsofoperation.Thecom-paniesexpectthatinthenormalcourseofbusiness,leaseswillgenerallyberenewedorreplacedbyotherleases.Thegreatestpartoftherentalsisunderleaseshavingpurchaseoptionsorhavingrenewaloptionsforsubstantiallyalloftheeconomiclivesoftheproperties.Rentalsareanalyzedasfollows:YearEndedDecember31,19781977(InThousands)$60,000$32,000GrossRentalsLessRentalRecoveries(includingSublcascRentals)(a)............NctRentals(b)(a)Includesamountspaidfororcompanies.(b)Classifiedas:OperatingExpcnscs............ClearingandMiscellaneousAccounts(portionsofwhichachargedtoincome)1,000$59,0001,000$31,000reimbursedbyassociated$51,000$26,0008,0005,000$59,000$31,000Futureminimumleasepayments,byyearandintheaggregate,underthecompanies'apitalleasesandnoncancelableoperatingleasesconsistedofthefollow-ingatDecember31,1978:CapitalOperatingLcascs(a)Leases(InThousands)$6000$70006,0007,0006,0007,0006,0007,0005,0007,00074,00074,000$42,0001979.1980.1981.19821983.LaterYears.TotalFutureMinimumLeasePayments103,000$109,000LessEstimatedInterestElementIncludedThcrcin(b)..............61,000EstimatedPresentValueofFutureMinimumLeasePayments.........(a)Excludesleasesofnuclearfuel,allofwhicharccapitalleases.Nuclearfuelrentalscomprisethcunamortizedbalanceofthclessor'scost(approximately$99,000,000atDcccmbcr31,1978and$93,000,000atDcccmbcr31,1977),lesssalvage,value,ifany,tobepaidoverthcperiodofusageinproportiontoheatproduced,andcarryingchargesonthelessor'sunrccov-crcdcost.Itiscontemplatedthatportionsofthepresentlyleasedmaterialwillbereplenishedbyadditionalleasedmaterial.(b)Interestratesusedrangefrom4.9%to12.1%.~22 IIVDIA¹tdtlhflGAiVELECTRICCOhfPAIVYAIVDGEIVERATIIVGSUBSIDIARYNuclearFuelt978l977(InThnnnnndn)$143,000$132,000Coal-MiningandCoal-TransportationEquipmentRealEstateElectricDistributionSystemPropertyOtherGrossPropertiesunderCapitalLeasesLessAccumulatedProvisionforAmortizationNetPropertiesunderCapitalLeases..ObligationsunderCapitalLeases(a)..15,00013,00012,00011,000194,00058,000$136,000$141,00017,00013,00012,00010,000184,00053,000$131,000$136,000(a)Includinganestimated$37,000,000and$31,000,000,re-spectively,duewithinoneyear.Thefollowingisaproformaanalysisofleasedprop-ertiesundercapitalleasesandrelatedobligations,assumingthatsuchleaseswerecapitalized:,d'.d',gPDecember31,OperatingOperatingNetRevenuesIncomeIncome(InThousands)QuarterlyPeriodsEnded1978-Mar.31.................$145,106$41,553$32,196June30.................157,95840,18334,491(a)Sept.30.................152,21840,74922,739(b)Dec.31.................148,19837,34925,401(a)1977-Mar.31.................128,25831,82123,191June30.................118,07030,69822,871Sept.30.................133,01633,81225,817Dec.31.................133,48034,06925,241(a)IncludesincreasesinAFUDCofapproximately$1,567,000recordedinthcsecondquarterand$3,372,000recordedinthefourthquarterrelatingtochangesinAFUDCrates,appliedineachcaseeifecuveasofJanuary1,1978.(b)Includestheeffectofarevenuerefund(seeNote2),andachangeintaxestimate(secNote3).12.UnauditedQuarterlyFinancialInformationtThefollowingconsolidatedquarterlyfinancialin-formationisunauditedbut,intheopinionoftheCompany,includesalladjustments(consistingofonlynormalrecurringaccruals)necessaryforafairpres-entationoftheamountsshown:Hadcapitalleasesbeencapitalized,anyadditionalnetexpensewouldhavebeeninsignificant.Theproformadatadonotgiverecognitiontooffsettingad-justmentsinallowablerevenuesthatthecompaniesbelievewouldnormallybeexpectedtooccurthroughtheregulatoryrate-makingprocess,iftherelatedleaseshadbeencapitalized.Includedintheaboveanalysesoffutureminimumleasepaymentsandofpropertiesundercapitalleasesandrelatedobligationsarecertainleasesastowhichportionsoftherelatedrentalsarepaidfororreim-bursedbyassociatedcompaniesintheAEPSystembasedontheirusageoftheleasedproperty.TheCom-panycannotpredicttheextenttowhichorproportioninwhichtileassociatedcompanieswillutilizethepropertiesundersuchleasesinthefuture.13.UnauditedReplacement-CostInformation:Estimatedreplacement-costandrelatedamountspertainingtodepreciation,asofandfortheyearsendedDecember31,1978and1977,ofproductivecapacity(asrepresentedbypropertyinservice,ex-cludingnondepreciableitemssuchaslandandexclud-ingotheramountsforwhichreplacement-costdataarenotrequiredtobecomputed)areconsiderablygreaterthantherelatedoriginal~ostamountsreportedintheconsolidatedfinancialstatements.Aquantitativeanaly-sisofsuchunauditedreplacement-costinformationisincludedintheCompany's1978AnnualReport(Form10-K)totheSecuritiesandExchangeCommis-sion.Referenceismadeelsewherehereinforinforma-tionwithregardtoobtainingacopyoftheCompany'sForm10-Kfortheyear1978.23 OperatingStatisticsandBalanceSheetData19781977197619751974OPERATINGSTATISTICSELEGTRIcOPERATINGREYENUEs(Thousands):FromKilowatt-hourSales:Residential:WithoutElectricHeating............WithElectricHeating............'...TotalResidential...............Commercial.IndustrialSalesforResale:MunicipalitiesCooperativesOtherElectricUtilities..............TotalSalesforResale...........MiscellaneousTotalfromKilowatt-hourSales....OtherOperatingRevenues...............TotalElectricOperatingRevenues..150,69196,370121,346137,78192,312109,35744,09115,619103,51739,12117/732166,441163,227223,2946,0627,729508,7394,085599,4304,050$603,480$512,824$96,624$90,8335406746,948$71,88837,447109,33572,52780,23326,84110,491110,382147,7142,573412,3823,811$416,193$69,43833,493102,93169,17675,16722,5519,17875,887107,6164.650359,5403,815$363,355$53,26527,08080,34550,55463,31423,4937,54855,99487,0353,389284,6372,969$287,606SoURGEsANDSALEsoFENERGY(MillionsofKilowatt-hours):Sources:NetGenerated-Steam:FossilFuelNuclearFuel.NetGenerated-Hydroelectric..........NetGenerated-Other................SubtotalPurchasedNetInterchange.TotalSourcesLess:Losses,CompanyUse,Etc........NetSources.7,23110,101(a)7517>407301447522,1831,340208437,3174,7866812,1711827,92220,2751,27019,0057,7016,8097214,5822326,52321,3371,29020,04711,8023686,77818,9481,30517,6438,9026948,45118,0471,33516,7127,2558,8154,458(a)897314Sales:Residential:WithoutElectricHeating....WithElectricHeating~....TotalResidential.....CommercialIndustrial.SalesforResale:MunicipalitiesCooperativesOtherElectricUtilities....TotalSalesforResale.MiscellaneousTotalSales2,35216223,974249843191,58581474689,867185208432,4561,6054,0612,6714,4731,6427865,1957,62317719,0052,3841,5773,9612,5794,2091,5277546,8499,13016820,0472,3741,4513,8252,4643,8351,5226905,1527,36415517,6432,1811,4133,5942,1924,1341,847651"4,1666,66412816,712(a)Includes691millionkilowatt-hoursin1978and2,309millionkilowatt-hoursin1975astestgeneration.Thefuelcostassociatedwithsuchgenerationischargedtootheroperationexpense.24 IlVDIAJVA4MICHIGAIVELECTRICCOMPAIVYAIVDGElVERATIlVGSUBSIDIARY~'ESIDENTIALSERVICE-AVERAGES:AnnualKwhUseperCustomer-TotalWithElectricHeating....AnnualElectricBill-TotalWithElectricHeating....PriceperKwh(Cents)-TotalWithElectricHeating....AvERAGECosToFFUELCGNsUMED(a):CentsperMillionBtu:CoalFuelOil........NuclearOverall.CentsperKilowatt-hourGenerated:CoalFuelOilNuclearOverall.1978109.68229.6834.6571.161.112.40.38.7510,26022)067$389$7363.793.34197774.96168.8029.7259.12.731.88.33.6110,64122,830$361$6683.392.93197665.8976.72(b)26.3446.47(b).63.84(b).28.47(b)10,43923,200$288$5512.762.37197556.09190.4427.8365.56.542.11.30.5310,30522,153$277$5112.692.31197451.68.187.3869.51.491.85.6710,52523,239$234$4392.221.89NUMBERoFELEGTRIGCUsToMERs-Year-End:Residential:WithoutElectricHeating.............WithElectricHeating...............TotalResidential...............CommercialIndustrialSalesforResale:MunicipalitiesCooperativesOtherElectricUtilities...............TotalSalesforResale...........Miscellaneous,.TotalElectricCustomers.........315,47274900390,37242,1062,6892364201071,331436605313,08572,059385,14441,9072,5002361161001,304430,95523225958151897981,2591,280426,980422,996312,211310,95369,23766,812381,448377,76541,70341,4562,4522,418281,90464,233346,13737,5932,41623586871,167387,40,0BALANCE.SHEETDATA-Year-End(Millions)UtilityPlantAccumulatedProvisionforDepreciation.......NetUtilityPlant.TotalAssetsandOtherDebits...............CommonStock,PremiumonCapitalStock,andOtherPaid-inCapitalRetainedEarningsCumulativePreferredStock.Long-termDebt(c).$2,3974101,9872,3505271372271,051$2,1073591,7482,1234671051871,038$1,9333171,6161,91440976147914$1,7712751,496-1,76436780147895$1,6302491,3811,54531871117739(a)Excludeseffectofdeferredcollectionoffuelcosts.(b)Includeseffectofrefundreceivedfromsupplierof-fueloilresultingfromsettlementoflitigationconcerningpricing.Withoutsuchrefund,theaveragecostoffueloilfor1976wouldhavebeen173.27centspermillionBtuand1.91centsperkilowatt-hourgenerated,andtheoverallcostoffuelwouldhavebeen49.33centspermillionBtuand0.50centsperkilowatt-hourgenerated.(c)IncludingPortionDueWithinOn>>Year.25 INDIANA4MICHIGANELECTOMPANYDirectorsFRANKN.BIENW.A.BLACK(f)LAWRENCER.BRUNKERICHARDE.DISBROWJ.LEEFLANAGANE.W.HBRMANSBNG.E.LEMASTERSGERALDP.MALONEY(a)RICHARDC.MENGEJ.F.STARKJOHNTILLINGHAST(m)..W.S.WHITE,JR.RORERT0.WHITMAN(b)OfficersW.S.WHITE,JR.PresidentJ.F.STARK(g)ExecutiveVicePresidentW.A.BLACK(f)EzectttiveVicePresidentJ.F.STARK(h)SeniorVicePresident.,FRANKN.BIENVicePresidentRICHARDE.DISBROWVicePresidentJOHNE.DOLAN(I)VicePresidentA.JOSEFHDOWDVicePresidentGERALDP.MALONEY'VicePresidentRICHARDC.MENGEVicePresidentJoHNTILLINGHAsT(m)VicePresidentJOHNR.BURTONSecretaryRGBERTO.WHITMAN(c)-TreasurerPETERJ.DEMARIA(d)TreasurerH.D.ANDERSON,JR.AssistantSecretaryandAssistantTreasurerALLENH.STUHLMANNAssistantSecretaryandAssistantTreasurerJOHNF.DILORENZO,JR.AssistantSecretaryCEDRICL.MAST(j)AssistantSecretaryWARRENO.KBLTNER(k)AssistantSecretaryWILLIAME.OLSONAssistantSecretaryPETERJ.DEMARIA(c)AssistantTreasurerWILLIAMN.D'ONOFRIO(I)AssistantTreasurerGERALDR.KNORR(i)AssistantTreasurerTiteprincipaloccupationofeachoftheabovedirectorsandofficersofIndiana*MichiganElectricCompany,withtcnexceptions,isasanofficerofAmericanElectricPowerServiceCorporationofNcwYork,N.Y.Theexcep-tionsaretheMessrs.IIr.A.Black,LawrenceR.Brunke,J.LceFlanagan,E.IV.Hcrmanscn,IVarrcnO.Kcltncr,G.ELeMasters,I.F.Stark,RichardC.Menge,AllenH.Stuhlmann,andCedricLMastwhoseprincipaloccupationsareasofficersofIndiana&MichiganElectricCompany,asindicated.(a)ElectedApril25,1978(b)ResignedApril25,1978(c)ResignedApril27,1978(d)ElectedApril27,1978(c)ResignedApril27,1978(I)ElectedJulyI,1978(g)ResignedJulyI,1978(h)ElectedJuly1,1978(i)ElectedJulyI,1978(j)ResignedJanuary1,1979(k)ElectedJanuaryI,1979(1)ElectedMarchI,1979(m)ResignedMarch29,197926 INDIANA&MICHIGANELECTRICCOMPANYPriceRangeofCumulativePreferredStockByQuarters(I978andI977)1978-Quarters1977-QuartersCumulativePreferredStock1st2nd3rd4th1st2nd31'd4th($100ParValue)4Vs%SeriesDividendsPaidPerShareMarketPrice-$PerShare(OTC)Ask(high/low)Bid(high/low)4,56%SeriesDividendsPaidPerShareMarketPrice-SPerShare(OTC)Ask(high/low)Bid(high/low)4.12%SeriesDividendsPaidPerShareMarketPrice-SPerShare(OTC)Ask(high/low)Bid(high/low)7.08%SeriesDividendsPaidPerShareMarketPrice-$PerShare(NYSE)-High-Low7.76%SeriesDividendsPaidPerShareMarketPrice-$PerShare(NYSE)-High-Low8.68%SeriesDividendsPaidPerSharcMarketPrice-SPerShare(NYSE)-High-Low12%SeriesDividendsPaidPerShareMarketPrice-$PerShare(NYSE)-High-Low($25ParValue)$2.15Series'ividendsPaidPerShareMarketPrice-$PerShare(NYSE)-High-Low$2.25Series"DividendsPaidPerShareMarketPrice-SPerShare(NYSE)-High-Low40/4043'h/43Vt$1.14$1.14$1.14$1.14$1.14$1.14$1~14$1.1446/45$1.03$1.03.$1.03$1.03$1.03$1.03$1.03$1.0346/4645/4543/43$1.77$1.77$1.77$1.77$1.7745/4545/44$1.77$1.'77$1.7779th7476697/s77th69th77Vi64V48176th81s/s77Vs83'h7780th75$1.94$1.94$1.94$1.94$1.94$1.94$1.94$1.948580~/s84N75867/s7682748982ih89th84th9186%8984$2.17$2.17$2.17$2.17$2.17$2.17$2.17$2.179891ih9382987/s83th94th829994'9s/491101'h96997/s94$3.00$3.00$3.00$3.00$3.00$3.00$3.00$3.00116111ih113109113%108V4112%103123117120Fs117123V~118'21113V4S.5375$.5375$.537523%22%227/s20V423th21V4S.53751227/s19'.215S.5375$.537525s/42524Vs23V~S.7125~~~$.5625$.56252421'4'/s21%24i/s20Vs$1.03125$1.03125$1.03125$1.03125$1.03125$1.03125$1.03125$1.03125OTC-Over-the-CounterNYSE-NewYorkStockExchange'ssuedinMay1977~~Issuedin~ifarch1978"~Includespartialdividendforfirstquarter.Note-Theabovequotationsbidandaskedrepresentpricesbetweendealersanddonotrepresentactualtransactions.MarketquotationsprovidedbyNationalQuotationBureau,Inc.-Dashindicatesquotationnotavailable.27 SouthHavensecsorCCNLIIILIL"II0BattleCreekJackson0I,ai.eJllicltiganBentonHarbatrSt.Josephas4~INICIGANChicagoDONALDC.COOKBUCANBERRISNSPRI~NSTWINBRANCHA'PSaIINosealoteeaANLrvWClllTICECONIANT~l.0III~II~~~I~~00~~Tr-.-q~jttrr-rrr+rgrrrrrreIreer~-i)rrrrjJ'jyjr/ALigolerKencfalfvitt0bioButler~IHicksviliePlymouthsve4Ri<<ti,s>~LtolOrCCNAONwcneICSISCN5CLLt4OtNcesooseaceANANhaacsereCCNINNIV'L.Leocecworrwnsccvr~IIWrrItIyrrrrrrrrJi4A~FortWneiy+0rrrrrr~frsonroeviltet~~~%r-rr-rrerr~N-..~IInIol~lI-llatlooIOWcsCCNIANTLT4ceIutarsctraaeaeIANAINDIANALcasceBernererenvoiJjrgg~@Pr.00A~iioMortonOl+LeosctnhvcscarceTOINIAKiKOkomo0rrrrrrrrJAMontpeerit'IHI0ALofayetteVI,AIAWinchest~erA>LtnionCityonoroostcovtANTAaaAJJIJJJJJJJtjtictv'ganGty0~iti~LA4Otlttj~eesNWNINAtreacLLIWCECONIANTtl0GaryLaPorte4ss..'LLynnLehOtCCIVIALLLNOh~IINrsnerlccwrNNvvLthOtCacoroostcoerANITerritoryServedByINDIANA8MICHIGANELECTRICCOMPANYBREEDLrhOr~004rowltlICoerenrsreoawItectrtcrteetsQtrvcteorIvolItectatcrtoaats0QHydro.Itectrtcrlentl~rruasisaolCeovewoitlesservedI~IBBSlbs.000.VoltTronlrotsstonS44lV1000VAI000,000I>>IOILNIVoltoeeTroolrorlslNISlraelTroosaollsaenl4TNVoderCoostt.otAvthJeararrrrWJarrrrrreOrielCeaotvteles'roouoasslonl4>>slo01050SoeateatsTANNERSCREEKCcceeeoh(Le.lc)0IeJrrrrclawLILvvlcrKY.ooCNCteaettotslELECTlrCovtANTIICincinnatigf'~ct0jtittr~IIIAIL~erAsoceelslclertees~LleleclCeereeeraevtseeeeeetNTCI-2INDIANA&MICHIGANELECTRICCOMPANYANDGENERATINGSUBSIDIARY