ML18040B098

Annual Rept 1984. W/850321 Ltr

ML18040B098
Person / Time
Site:	Susquehanna
Issue date:	12/31/1984
From:	CAMPBELL R K, CURTIS N W PENNSYLVANIA POWER & LIGHT CO.
To:	DENTON H R Office of Nuclear Reactor Regulation
References
PLA-2437, NUDOCS 8503250232
Download: ML18040B098 (56)

Text

REGULATOINFORMATION DISTRIBUTION STEH(RIDS)ACCESSION NBRs8503250232 DOC~DATE80/12/31NOTARIZED

~NODOCKET'FACIL:50387Susquehanna SteamElectricStationsUn)t1EPennsylva 0500038750-388Susquehanna SteamElectricStationiUnit2<Pennsylva 05000388AUTH,NAME AUTHORAFFILIATION CAHPBELLiROK, Pennsylvania PowerLLightCo.CURTISiN,I>0500038705000388RECIPIENT IDCODE/NAME.

NRRLB2BCPERCHRCOPIESLTTRENCI100RECIPIENT IDCODE/NAME NRRLB2LA01COPIESLTTRENCL"11INTERN:REGFILEXTERNAL:

LPDRNOTES!040311223SPNRCPDR02j,].11TOTALNUMBEROFCOPIESREQUIRED:

LTTR11ENCL9 gg@Pennsylvania Power&LightCompanyTwoNorthNinthStreet~Allentown, PA18101~215/770.5151 NormanW.CurtisVicePresident-Engineering

&Construction-Nuclear 215/770-7501 MARsy~gsgMr.HaroldDenton,DirectorOfficeofNuclearReactorRegulation U.S.NuclearRegulatory Commission Washington, D.C.20555FILE841SUSQUEHANNA STEAMELECTRICSTATIONANNUALFINANCIAL REPORTER100450PLA-2437DocketNos.50-38750-388

DearMr.Denton:

Inaccordance with10CFR50.71(b),

attachedaretencopiesofthe1984annualreportforPennsylvania Power&LightCo.TheannualreportforAllegheny ElectricCooperative, Inc.,willbeforwarded whenitisissuedlaterthisyear.Verytrulyyours,N.W.CurtisVicePresident-Engineering

&Construction-Nuclear Attachments cc:Mr.R.H.Jacobs-USNRCMs.M.J.Campagnone

-USNRC

-NOTICE-THEATTACHEDFILESAREOFFICIALRECORDSOFTHEDIVISIONOFDOCUMENTCONTROL.THEYHAVEBEENCHARGEDTOYOUFORALIMITEDTIMEPERIODANDMUSTBERETURNEDTOTHERECORDSFACILITYBRANCH016.PLEASEDONOTSENDDOCUMENTS CHARGEDOUTTHROUGHTHEMAIL.REMOVALOFANYPAGE(S)FROMDOCUMENTFORREPRODUCTION MUSTBEREFERREDTOFILEPERSONNEL.

DEADLINERETURNDATEII~WSaaBbaaagIkLLLLLRECORDSFACILITYBRANCHP'QoSANFl5/28,PDOO'O'CiN%ANN@FRiMNMI"'3"!~I't,~

ppg8503250232 84i231PDRADQCK05000387IPDR 43COVERPP&L'sIlluminated 23-storycorporate headquarters standsasavisiblesymbolofPP8L'soptimismandcommitment toCentralEasternPennsylvania's brightfuture.Exceptforaperi-odduringWorldWarII,thebuildingwascontinuously illu-minatedfrom1929tothemid-1970swhenthelightswereturnedoutandremovedinre-sponsetotheenergycrisis.Withthecompany's Susque-hannanuclearunitsnowonline,therelighting ofthecom-pany'sGeneralOfficebuildingdemonstrates PP&L'sabilitytoservecustomers withadequategenerating capacitynowandinthefuture.Thesymbolicges-turealsoprovidesanexcellent exampleoftheefficient useofelectricity.

Thehigh-pressure sodiumandmetalhalidelight-ing,whichreplacedtheearlierquartzlights,usesaboutone-fifththeelectricity oftheoldsystem.Otherphotosinthisreportshowadditional applica-tionsofelectricity thattouchthelivesofeveryone.

CONTENTS'ighlights President's LetterYearinReviewFinancial ReviewFinancial Statements NotestoFinancial Statements SelectedFinancial andOperating DataCommonStockandDividendDataOfficersandDirectors 4'2284446I48SERVICEAREAPennsylvania Power&LightCo.,basedInAllentown, Pa.,pro-videselectricservicetomorethanamillionhomesandbusi-nessesthroughout a10,000-square-mlle areain29countiesofCentralEasternPennsylvania.

Principal citiesinthePP8Lser-viceareaareAllentown, Bethlehem, Harrisburg,

Hazleton, Lan-caster,Scranton, Willlamsport andWilkes-Barre.

Withanabun-dantsupplyofreliable, economical electricenergy,PP&L'sser-viceareaispoisedatthecoreofanindustrial andcommercial marketareawhere70millionpeoplelivewithina300-mlleradi-us.PleasecontactJosephR.Lesko,managerofEconomicDevelopment, toll.freeat(800)523-9854totalkaboutplantloca-tionopportunities intheheartland ofthisgreatNortheast marketing area.TOLEOOTORONTOALBANYBUFFALO1coBOSTONPITTSBURGH WASHINGTON, D.C.NEWYORKCITYI~PHILADELPHIA

/ATLANTICCITYCHARLESTON RICHMOND 19841983Customers (a)CommonShareowners (a)ElectricEnergySales,Kilowatt-hours

..Interchange PowerSales,Kilowatt-hours

.Electricity Generated, Kilowatt-hours

..1,039,381 1,026,144 162,903169,14224.5Billion23.1Billion15.4Billion16.4Billion37.9Billion37.7BillionOperating Revenues.

CapitalProvidedbyInvestors (a)..UtilityPlant(a)$1.6Billion$5.6Billion$1.2Billion$5.3BillionNetPlantinService$3.9BillionConstruction WorkinProgress...~.....$2.0BillionCommonStockData$3.8Billion$1.7BillionReturnonAverageCommonEquityEarningsPerShareDividends DeclaredPerShareMarketPricePerShare(a)........

~BookValuePerShare(a)..........

TimesInterestEarnedBeforeIncomeTaxes12.309o$3.12$2.48.....$25'/s.....$25.462.3512.29Fo$3.06$2.40$20'/e$25.122.29(b)(a)Atyear.end.

(b)Restatedtoreflectchangeinaccounting forcapitalleases.WherethePALIncomeDollarWentln19B43cEarningsRelnvested 14cNetCostofEnergy16cDividends 16cTaxes18cInterestV13cEmployees 7cDepreciation 13cMaterials,

Services, Rents,etc.IncomoIncludesrevenues, otherIncomeandthoallowance forfundsusedduringconstruction.

WhenSusquehanna Unit2wasputintocommercial operation inFebruaryof1985,itmarkedthesuccess-fulcompletion ofthelargestconstruction projectinthecompany's history.Italsomarkedanotherout-standingyearofprogressinmeetingthelong-term needsofourcustomers forreliableandeconomical electricservice.Inaddition, byconcluding thelargestfinancing programinthecompany's history,itmarkedasignificant stepforwardinoureffortstoearnafairreturnforourshareowners.

WithbothSusquehanna nuclearunitsnowincom-mercialoperation, thecompanyhasmetitsconstruc-tionneedsformajornewgenerating capacityforatleastthebalanceofthiscentury.Thisexceptionally strongcapacityposition, basedonanefficient mixofcoalandnucleargeneration, opensupimportant op-portunities tobroadenthescopeofenergyservicesofferedtoourcustomers andtostrengthen thefinan-cialpositionofthecompany.Thecombination ofPP&L'scompetitively pricedelectricpowerandrelatively smallfutureconstruc-tionprogramprovidesanenormouslong-term advantage formeetingthegrowthandeconomicde-velopment objectives ofthecommunities weserve.Recognizing thatthefinancial healthofthecompanyislinkedtotheprosperity ofourserviceareaeconomy,promoting economicdevelopment inCentralEasternPennsylvania continues tobethefocusofPP&L'smarketing programs.

Reliableandcompetitively pricedelectricpowerisavitaleconomicdevelopment resource.

Asnationaltrendsclearlyshow,energyefficiency andimprovedproductivity areincreasingly beingachievedinhomes,businesses andindustries throughtheuseofelectricity becauseofitsversatility andhighend-useefficiency.

ThestrengthofPP&L'sgenerating capacityandourrelatively smallfutureconstruction programalsoarefactorswhichsetPP&Lapartfrommostofthenation'selectricutilities.

Intheyearsahead,wewillemphasize theimportance ofthisstrongcompetitive positionasasupplierofelectricpowertoattractandholdjob-producing businesses inthecommunities weserve.Sales,EarningsandFinancing Aidedprincipally bytherecenteconomicrecovery, kilowatt-hour salesincreased by6.3percentin1984over1983.Thisannualsalesgrowth,PP&L'slargestineightyears,wasledbysignificant gainsinourelectrically heatedhomemarketandbyincreased salestocommercial andindustrial customers.

Thecompany's totalsalesincreasealsoreflected thebenefitofthefirstfullyearofsellingelectricenergyfromSusquehanna underourlong-term contractwiththeAtlanticCityElectricCo.Thecompanyalsohasacontractnowawaitingap-provalbytheNewJerseyBoardofPublicUtilities tosell945,000kilowatts ofelectricpowertotheJerseyCentralPower&LightCo.fromaproportionate shareofPP&L'stotalgenerating system.Thisagreement willsubstantially increasethelevelofPP&L'scon-tractualpowersalestootherutilitycompanies overthefourteen-year lifeoftheagreement.

Thecompany's contracttosellpowertoJerseyCentralisconsistent withthePennsylvania PublicUtilityCommission (PUC)rulinginour1983rateincreaserequest.Itwasdecidedinthatcasethat945,000kilowatts ofPP&L'stotalgenerating systemwassurpluscapacity.

Sellingtheelectricoutputfromthisportionofourtotalgenerating systemtoJerseyCentralwillenablethecompanytorecoverthereturnoninvestment disallowed inthe1983ratecase.Italsopermitted ustoreducetheraterequestnowpendingbeforethePUC.Therateincreasereceivedin1983helpedimprovethecompany's financial condition mostlybyreplac-ingaportionofthenon-cashallowance forfundsusedduringconstruction onSusquehanna Unit1withcustomerrevenues.

Thisincreaseinliquidity isreflected inPP&L'simprovedinterestcoveragewhichisimportant indetermining thecompany's creditstanding.

Thecompany's 1984earningsof$3.12persharewereup6centsfrom1983.Thisearningsimprove-mentwaslargelytheresultofincreased electricener-gysalesreflecting theeconomicrecoveryinourserviceareaandcolder-than-normal weather.Al-thoughthecompany's earningscontinued atareason-ablelevellastyear,the1985earningsoutlookislargelydependent oncontinuing toachievesalesgrowthandontheoutcomeoftherateincreasere-questweexpectwillbedecidedinAprilof1985.Withtheconstruction ofSusquehanna nowcom-plete,PP&L'sneedsforoutsidefinancing havebeensignificantly reducedfromthehighlevelsreachedinrecentyears.Andsincethecompany's relatively smallfutureconstruction programshouldbemetlargelybyinternalcashgeneration, wedonotexpecttobeissuingadditional sharesofcommonstockfortheforeseeable future.Operating Performance Thededicated andtalentedPP&Lpeoplewhooper-atethecompany's electricsystem,fromfuelsupplytocustomerservice,achievedoutstanding resultsagainin1984.Thefollowing summarizes theoperating ac-complishments ofspecialsignificance atthistimeforPP&L'scustomers andshareowners.

~Susquehanna NuclearUnitsSinceJuneof1983,whenSusquehanna Unit1wasplacedincommercial operation untilitwasshutdownforitsfirstrefueling outageinFebruaryof1985,Unit1generated 9.3billionkilowatt-hours, about21.5percentoftheelectricity PP&Lcustomers usedduringthat20-monthperiod.Inspiteofaone-timeoutagetoconnectplantsystemscommontobothnuclearunits,Susquehanna Unit1operatedatanaverageof65.7percentofitscapacityduring1984.Thisisanexcellent record,particularly foranuclearplantoperating initsfirstfuelcycle.

Theverysuccessful start-uptestingprogramwhichbroughtSusquehanna Unit2on-line,whileUnit1alsowasinitsfirstyear-and-a-half ofcom-mercialoperation, againdemonstrates the'commit-mentofPP&Lpeopletosuperiorperformance inallaspectsofournuclearoperations.

WithbothSus-.quehannanuclearunitsnowincommercial opera-tion,itisourgoalin1985toachieve,throughsafeandefficient operation, anaveragecapacityfactorof80percentforUnit1,excluding itsrefueling outage,andanaveragecapacityfactorof70percentforUnit2.~TotalPP&LGeneration Againlastyear,PP&L'spowerplantsmaintained amongthelowesttotaloutagerateswithinthe11-member Pennsylvania-New Jersey-Maryland powerpool.Thefactthattheseveryefficient gener-atingunitscouldonlybereplacedatseveraltimesoriginalcosts,emphasizes theimportance ofthecompany's aggressive programtoextendthelifeofourexistingpowerplants.Theoutstanding performance byallofPP&L'sgen-eratingunitsistheprincipal reasonthatthecom-pany'sratesforelectricservicecontinued tobebelowtheaveragechargedbothregionally andnationally.

HavingSusquehanna Unit1incommercial operation pthroughout 1984enabledthecompanytosellmorecoal-fired generation toneighboring utilities whileusinglower-cost nuclearfuelforPP&L'sserviceareai,customers.

Lastyear,thisdirectadvantage ofourstrongcapacitypositionandfavorable fuelmixresultedinenergysavingsofabout$171millionforPP&L'scustomers.

Theessential conditions whichmakethisanap-propriate marketing strategyforPP&Larethecom-pany'sexceptionally strongcoalandnucleargenerating capacityandourcompetitively pricedratesforelectricservice.Susquehanna Unit2RateFilingAbouttwo-thirds ofthe$330millionraterequestnowpendingbeforethePUCrelatestothenetcostofbringingthesecondSusquehanna unitintocom-mercialoperation.

Tomoderatetheimpactoncus-tomers,thecompanyhasrequested thatthisrateincreasebephasedinoveraperiodofseveralyears.WithbothSusquehanna unitsincommercial opera-tion,andwithnomajornewconstruction onthehorizon,weanticipate thatweareenteringaperiodofrelatively stableratesforelectricservice.Thiswillhelpustoachieveourkilowatt-hour salesgrowthob-jectivesandmoreeffectively promotetheeconomicdevelopment ofCentralEasternPennsylvania.

Aswesuccessfully concludethemostchallenging construction periodinthecompany's history,werecognize thatthededication ofouremployees andthesupportofourinvestors iswhatmadethissig-nificantachievement possible.

Itisthiswinningcombination thatcontinues togiveusconfidence thatwewillsuccessfully meetthechallenges ahead.Li--<<<<JP<<'<<<<Wv<<Marketing andEconomicDevelopment CustomerserviceistheunifyingpurposelinkingallofPP&L'smarketing andeconomicdevelop-mentprograms-becausetheoveralleffectoftheseinitiatives istoprovideopportunities toserveourcustomers atalowercostthanotherwise wouldbepossible.

Theobjective ofthecompany's mark-etingandeconomicdevelopment programsistofacilitate themosteffective operation ofthePP&Lsystembyachieving optimallevelsofkilowatt-hoursalesgrowthwhilemanagingrelatively lowergrowthinfuturepeakloads.Overthelongterm,limitinggrowthinpeakloadsbenefitscustomers byminimizing futureinvestment requirements.

Likewise, promoting electricity usagetoachieverevenuesthroughincreased saleswillbenefitcustomers byreducingfutureneedsforhigherrates.Byoffsetting theneedforrateincreases, revenuesderivedfromsalesenhancethecompany's marketing positionaswellasitsfinancial strength.

Achieving ourmarketing objectives alsoprovidesthehigherPevelofsalesrevenueswhicharenecessary topermitustomeetourlong-term objective ofholdingincreases inthepriceofPP&Lelectricserviceatorbelowthegeneralrateofinflation.

'II<<h<<IWW4fRespectfully submitted, RobertK.CampbellMarch1,1985 FDZCD0'00C7Q'E'0Q'87 Operations PP&L'snumberoneoperating priorityistoprovideitsemployees withthetools,equipment andtrainingnecessary toachieveafatality-free andsafeworkenvironment.

Withtheendof1984,PP&L's8,000-plus employees hadworkedfourconsecutive yearswithoutanon-the-job fatality.

Inthecompany's 64-yearhistory,therewereonlyfiveotherfatality-freeyears-noneofthemconsecutive.

Additionally, theincidence oflost-time accidents wasthelowestinthehistoryofthecompany,andwasareduction of27percentfrom1983.Considering thatmanyjobsinelectricutilities, bytheirnature,involvehazardous conditions, theseareparticularly gratifying achievements forthecompanyandthosewhomakeitwork.Electricinduction furnacesmeltscrapsteelatKoppersCo.'sSprout-Waldron Div.foundryinMuncy.There-sultingmoltenmetalIsshownatrightbeingpouredintoaladlebeforeitstransferintomoldstoformIn-dustrialmachinery parts.Electricenergyalsopowersoneoftheworld'smostmodernandlargeststructural steelrollingmills(A)atBethlehem SteelCorp.'sBeth-lehemplant.Thefacilitycanturnoutstructural shapesin250-footlengthsattherateofoneamin-ute.AtAlumaxAluminumCorp.'sLancaster plant,aluminumiscold-rolled from15,000-pound ingotsin-torolledsheets(B)afractionofaninchthickinanelectric-Intensive processcomputer-controlled fromtheconsoleshownatthebottomofthepage(C).EarningsEarningsfor1984were$3.12pershareofcommonstock,comparedto$3.06for1983.Theslightearningsimprovement canbeessentially attributed toincreased electricsales,whichwererelatedtoweatherandimprovedeconomicconditions.

DividendIncreases Thequarterly dividendonPP&L'scommonstockwasincreased 2centspershareto62centsbeginning withtheApril1,1984dividend.

Thedividendhadbeen60centssinceApril1,1983.RevenuesandSalesOperating revenuesincreased

$314millionto$1.56billionfor1984.Theincreasecamefromhighersales,whichreflected animprovedeconomyovertheseveralpreviousdepressed years,aswellasafullyear'seffectofthe$203millionincreaseinratesapprovedinAugust1983.PP&L'sresidential customers used3.9percentmoreelectricity in1984thaninthepreviousyear.Commercial andindustrial usageincreased by6.7percent,and6.5percentrespectively.

Overallenergysaleswereup6.3percent.Evenafteradjusting theresidential andcommercial customergainsforthecolder-than-normal temperatures inearly1984,asubstantial gaininusageisevident.Alloftheindustrial

increase, andaboutthree-quarters ofthecommer-cialincrease, isunrelated totheweatherandprovidesanindication ofbettereconomictimesinCentralEasternPennsylvania.

DemandReachesNewPeakAnearly-season hotspellledtoanewsummertime peakdemandbybothPP&Lcustomers andcustomers ofthePennsylvania-New Jersey-Maryland (PJM)Interconnection

-thepowerpoolinwhichthecompanyoperates.

ThenewsummerpeakforPP&Lwas4.19millionkilowatts recordedonJune11,1984.Thisbrokethepreviousrecordof4.03mil-lionkilowatts setinSeptember 1983.ThePJMpeakdemandof35.3millionkilowatts wasrecordedonJune13,1984.Theprevioushighwas34.7mil-lionkilowatts, registered inSeptember 1983.C eay4Ll'4417r9 r>gy01TfV~'0i',I1lti)fr,,U"(,UI,Jll~~g~Opgh9gQ~';4.,m<<<+I PP&L'sserviceareaboastsanumberofhigh-technol-ogycompanies.

Thetechnician atA.Johnson&Co.ofMorgantown (left),makesanadjustment tocon-trolsfora2,000-kilowatt electron-beam furnaceusedtomeltscraptitaniumintoingotsforreuse.Titaniumisastrong,lightweight metalwidelyusedinthede-fenseandaerospace industries.

Atechnician testsequipment (A),atAccu-Sort SystemsInc.ofTelford,thatutilizeslaser-beam technology toreaduniversal barcodesforcommercial inventory andparcelroutingcontrol.Components forcomputerdiskdrives(B)areassembled ataXebecInc.plantnearAllentown.

XebeclocatedintheLehighValleylargelyduetoser-vicesprovidedbytheBenFranklinNorthEastTierAdvancedTechnology Center(seepage16).Puresili-concrystalsare"grown"inahigh.temperature elec-tric-intensive process(C)atAT&T'sAllentown works.Thecrystalsareslicedintothinwaferstobecomememorychipsforthesemiconductor industry.

UnlikemostPJMcompanies, PP&Lisawinter-peaking utilitybecauseofitslargepercentage ofelectric-heat cus-tomers.ThepreviousPP&Lwinterpeakuserecordof5.21millionkilowatts, setinJanuary1982,wasshattered duringarecord-breaking coldspellinearly1985.Thenewwinterpeakis5.52millionkilowatts recordedonJan.21,1985,whentemper-aturesacrossPP&L'sserviceterritory dippedbelowzero.PoorerSaleNegotiated InAugust1983,aspartoftheratedecisionthatrecog-nizedSusquehanna Unit1inPP&L'sratebase,thePennsyl-vaniaPublicUtilityCommission (PUC)ruledthatPP&Lhad945,000kilowatts ofsurplusgenerating

capacity, andwouldnotbeallowedtoearnareturnon$287millionofitsnetinvestment ingenerating facilities representing thatsurplus.Afterseveralmonthsofdiscussions, PP&Lsignedanagreement inMarch1984whichmakes945,000kilowatts ofthecompany's generating capacityandrelatedoutputavail-abletoJerseyCentralPower&,LightCo.(JCP&L),aNewJerseyutility.Thisamountiscoveredbythecontractthroughtheendof1995,anddecreases annuallythereafter untiltheexpiration ofthecontractin1999.Undertheagreement, thecapacityandenergywouldnotcomefromanyoneplant,butinsteadrepresents aproportion-ateshareofeachgenerating unitonthePP&Lsystem.JCP&LwillpaythecostoftheportionofPP&Lgeneration beingmadeavailable

-including anappropriate returnoninvestment inthatgenerating capacity.

TheFederalEnergyRegulatory Commission (FERC)ac-ceptedtheagreement inMay1984.AsofearlyFebruary1985,thecontractwasstillpendingreviewbytheNewJerseyBoardofPublicUtilities.

~~Cogeneration AgreementPennsylvania's firstlarge-scale coal-cogeneration agree-mentwassignedinMay1984betweenPP&LandtheLockHaven,Pa.,millofHammermill PaperCo.Cogeneration isthesimultaneous generation ofbothelectricity andheatenergybyautilitycustomer.

Theagreement wasthefirstinthestateimplemented underthe1978PublicUtilityRegulatory PoliciesAct,whichrequiresutilities tobuyelectricpowerfromprivateenergydevelopers.

TheHammermill facilitywascompleted neartheendof1984.Itburnsbituminous coaltoproducesteamandelectricenergy.Undertheagreement PP&LwillbuyanyelectricenergyHammermill producesbeyonditsownneeds.Theelectricity ispurchased underPP&L'sSharedBenefitRateprogramestablished in1982toencourage cogeneration.

Overthetermoftheagreement, thepricePP&Lpaysforthisener-gyisexpectedtobebelowtheincremental costofenergyavailable elsewhere inthepowerpool.ThisprovidesacostbenefitwhichcanreducetheoverallcostofenergytoPP&Lcustomers.

Construction Expenditures Reflecting thewrap-upofconstruction atPP&L'sSus-quehannanuclearplant,construction budgetfiguresfor 1985and1986aredownsignificantly to$272millionand$274million,respectively.

Expenditures forthefollowing severalyearsareexpectedtostabilize atabout$275millionayear.Whileongoingmodifications during1985and1986atSusquehanna willrequireabout$105million,thebiggestportion-about$126million-willbespentonthecom-pany'sexistingnon-nuclear generating plants.Muchofthismoneywillbeusedforprojectswhicharepartofanextendedlifeprogram.Thisprogram,whichisakeycorporate goal,includeseffortstoextendgenerating plantlifeandtomaintainandimprovetheperformance ofexistingpowerplants.Theaimistoextendasfaraspossibleintothenextcentury,thetimewhenexpensive newgenerating unitswillberequired.

RateActivities Thecompanyhadpetitioned theFERCinNovember1983forabouta20percentaverageincreaseinratesfor15boroughsandoneinvestor-owned utilitywhichbuypowerfromPP&Landresellittotheirowncustomers.

Theincreasewastohavebeeneffective inJanuary1984.Theresalecustomers agreednottocontesttheincreaseandPP&Lagreedtodelayimplementation untilMarch1984.TheFERCacceptedthesettlement asnegotiated, whichwillincreasePP&L'sannualrevenuesbyabout$4million.Electricity touchespeople'slivesinmanywaysthataretakenforgranted.Oxygenformedicalpurposes, aswellasotherindustrial andcommercial gasesforweldingandamyriadofotherpurposesareproducedbyseparating theatmosphere atanAirProductsandChemicals, Inc.plantinLancaster.

Theelectric-inten-sivecryogenic distillation processrequirestempera-tures300OFandmorebelowzero.Inthephotototherighttheliquefied gasesarepumpedfromstoragetanksintoinsulated tanktrucks.Thesimplepushlpull valvesondetergents (A)aremolded,countedandpackedbytheheat,motionandprecisecontrolin-strumentation ofelectricity attheMackWayneClosuresDiv.oftheWestCo.InWilllamsport.

Hard-woodboardsdestinedforfurniture andothercon-sumerproductsatMeiserLumberCo.inMillerstown (B&C)werealignedbylaserbeamsforprecision cuttingandmilledbyconstant-speed sawscontrolled bytheprecision ofelectricity.

LikeanumberofothersawmillsInPP&L'sterritory, MelserLumberrecentlyswitchedfromdieselpowertoall-electric operation foreconomyanddependability.

Interrupti hieRatesInApril1984,PP&Lproposedaninterruptible serviceplanforlarge-power customers tohelpattractnewindustries tothecompany's servicearea,andtohelpmakesomelargeindustrial customers morecompetitive withthoseinotherstatesandcountries.

Theproposalwasdesignedtolowerenergycostsand,atthesametime,limitpeakloadgrowthonPP&L'ssystem.Slowingtherateofgrowthinpeakdemand-thetimeofhighestoverallenergyconsumption byPP&Lcustomers-canhelpthecompanydeferconstruction, andthecostsofnewgenerating plants,intothe21stcentury.Theinterruptible rates,whichwereapprovedbythePUCandimplemented onJuly1,1984,areavailable tolargeindustrial customers whoagreetotheinterruption oftheirelectricuseundercertainspecified conditions.

Thisallowsthecompanytoutilizeitsgenerating capaci-tyforresidential customers andotherswhohaveafirmcommitment forpower.Itcanalsopermitagreatervolumeofsalestothepowerpoolwhenthepowerismostcritically needed,andwhenthecompanycanrealizeahigherpriceforthesesales.Theamountreceivedfrompowerpoolsales,abovethecostofpowerproduction, ispassedontoPP&Lcustomers intheformoflowerenergycharges,thuslower-ingtheoverallcostofserviceinthecompany's servicearea.ARateIncreaseRequested Thecompany,onJuly27,1984,askedthePUCtoallowanannualincreaseinratesof$330million,orabout23percent,tobephasedinoverseveralyears.Abouttwo-thirds AnnualMeetingTheannualmeetingofshareowners willbeholdattheWilliamsport ScottishRiteAuditorium, 348MarketSt.,Williamsport, PA17701,onWednesday, April24,1985.Formalnoticeofthemeeting,togetherwithareservation cardformeetingattendance, willbemailedtoshareowners ofrecordMarch8,1985,onoraboutMarch19,1985.PP8t;LProfileEachyearthecompanypublishes thePP&LProfilecontaining morein-depthinformation aboutthecompanythanisavailable intheannualreport.TheProfileincludesa10-yearstatistical reviewanddiscussion ofsomeofthecriticalissuesfacingPPALnowandintheyearsahead.Ifyouwouldliketoreceivethe1974-1984 Profile,fillout,detachandmailthecardonthisflap.

I(i gJgr~II(Y(.I'IjIIfIjIIf<<f,fI<<ik>>h<<f<<II'b~cJg/,<<II gIlftj.fffL-.;Njlt~~lIff/fldfi/1r.I1+rfIt(1jtIIIIIILJtI'cILI'I/,'II~EIt.C;r<<gt'tQjjFl,fIIItIjf1'IF.Itt"iftr10 Electricity affectsthequalityoflife.AnAllentown realestatedeveloper ofhistoricproperties enjoysanat-homemoviewithavideocassetterecorder-oneofthemostpopularitemsintoday'sconsumerelec-tronicsmarket.AMlllersville University professor andhisfamily(A)enjoytheirjacuzzilgreenhouse areainthehometheydesignedandbuilt.Inadditiontoitsrecreational andtherapeutic

benefits, theJacuzziIspartofthewater-source heatpumpwhichwarmsthehomeinwinterandcoolsitInthesummer.Thegreen-houseprovidespassive-solar gainduringthewinterheatingseasonaspartofitsenergy-efficient design.ASelinsgrove architect/developer andhiswife(8)en-Joylate-night refreshments Intheirall-electric home,whichwasdesignedaroundtheversatility ofelectric-ItyInlighting, heating,cooling,cookinganddozensofotherapplications whichenhancetheirlifestyle.

oftheincreasewouldrecognize inbaseratesthecompany's investment in,andcostofoperating, Susquehanna Unit2.Theremaining thirdwouldrepresent recoveryofotherhighercostsofdoingbusinesssincetheAugust1983increase.

Tomoderatetheeffectsoftheincrease, thecompanyproposedthatthefullamountnotbecollected immediately, butratherbephasedinoverseveralyears.Onlyhalfoftherequest,or$165million,wouldbecollected intheyearstartingonApril26,1985.Thatamountrepresents aboutan11.5percentincrease.

Thesecond$165millionincrement wouldgointoeffectthefollowing year,beginning April26,1986.The$165millionthatwasnotcollected inthefirstyearwouldbedeferredwithoutinterestandrecovered inseveralsubsequent years.IftheplanisapprovedbythePUC,PP&LwouldbecomethefirstutilityinPennsylvania tovoluntarily providearatephase-in.

Aswithitspreviousrateincreaserequest,PP&Lfileda"net"request.The$330millionfigureisthenetof,ordifference between,thecompany's totalrevenueneedsof$466millionandenergycostsavingsof$136millionexpectedfromtheoperation ofSusquehanna Unit2.ThebottomlineforPP&Lcustomers wouldbethe$330millionincreaseinbaserates,plusaproportionate increaseinthePennsylvania taxsurcharge, amounting toapproximately

$18million.AHearingsHeldAsexpected, thePUCorderedfullpublichearingsontherequested rateincrease.

Atotalof19technical evidentiary hearingswereheldinHarrisburg, beginning inlateOctober1984andcontinuing throughDecember1984.Inaddition, publicinputhearingswerescheduled bythePUC,andheldineachofthecompany's sixoperating divisions togivecustomers anotheropportunity toexpresstheirviews.ThePUCisexpectedtoreachadecisionontherateincreaserequestbyApril26,1985.Weatherization ProgramInearlyDecember1984,inresponsetoaPUCorder,thecompanyaskedthecommission toapproveaproposalfora$2millionweatherization programaimedatassisting low-incomecustomers incuttingenergylossesfromtheirhomes.CalledWRAP(WinterReliefAssistance Program),

theplanisdirectedatlow-income PP&Lcustomers whouseelectricity forspaceheatingorwaterheating.Includedintheprogram's first-year goalsare:theweatherization andcaulkingof2,000ormorehomesoflow-income customers withelectricspaceheating;andaloanprogramforimprovements toabout2,000multi-family rentalunitsoccupiedbylow-income people.WRAPgrewoutofaPUCinvestigation intohowthecompany's ratestructure affectslow-income customers.

Afterconcluding theinvestigation inAugust,thecommission askedthecompanytobroadenitsexistingweatherization programtoincludethosecustomers.

ThePUClatersetaspendinglevelof$2millionayear,andthecompanyaskedthecommission toallowamonthly20centchargeperresidential customertofundtheprogram.

Theprogram,withmodifications, wasapprovedonJan.17,1985andwastobeputintoeffectMarch1,1985.Theoverallamountthatcustomers willpayfortheprogram,aswellasthemethodofcollection, willbepartoftheoverallrateincreasedecisioninApril1985.SecuritySalesThecompanyraised$538millioninthecapitalmarketsduring1984.Thesaleof$125millionoffirstmortgagebondsinAprilandanothersaleforthesameamountinNovemberraised$250millionforthecompany.Interestratesforthetwoofferings were13.50percentand12.75percent,respectively.

TheLehighCounty(Pa.)Industrial Development Authori-tyissued$153millionofitstaxexempt10.625percentrevenuebondsin1984tofinancepollution controlandsolidwastedisposalequipment atthecompany's Susquehanna plant.Theauthority bondsarebackedbyPP&Lfirstmortgagebondsissuedwithtermsidentical totherevenuebonds.InApril,$50millionofdepositary preference sharesweresoldinapublicoffering.

E~achdepositary preference sharerepresents one-quarter shareofthecompany's

$13.68prefer-encestock.Another$85millionwasraisedduring1984throughthedirectissueofcommonstockunderthecompany's dividendreinvestment plan.Withthecompletion ofSusquehanna andthedownturninfinancing requirements, thecompanywillnolongerhavetoissuenewcommonstock.Asaresult,beginning withtheJan.1,1985dividend, theplanwasamendedtoprovideforsharesofcommonstocktobeacquiredintheopenmarketwithnodiscountinthepurchaseprice.Becausethecommonstockisbeingacquiredintheopenmarket,dividends whicharereinvested during1985willnotqualifyforthe$750($1,500onajointreturn)exclusion providedbyfederaltaxlaws.Electricity providesmanyoptionstokeeppeoplecomfortable.

AyoungHazletonfamilychoseasupple-mentalelectricstoragesystemfortheirnewhome(right).TheirSESSfeaturesamodifiedheatpumpthatutilizesaninsulated 120-gallon waterstoragetankthatisheatedor"charged" duringoff-peakhourstoserveasasourceofstoredheatduringon-peakperiods.Specialoff-peakratesmakethisanat-tractiveresidential loadmanagement option.Acou-plestayingattheLackawanna HiltonHotel(A)inScrantonenjoystheconvenience ofanindividually controlled heatpumpunitIntheirroom.Theroomunitshavetheversatility whichallowsheatingroomsinsomepartsofthebuilding, whilecoolingothersonthesunnysideofthehotel-anadvantage fordaysofin-between weatherwhereall-heating orall-coolingsystemswouldleavesomeroomsuncomfort-able.AretiredwomanInthenewlycompleted Not-tlnghamVillageRetirement Center(B)cancontrolherowncomfortlevel.Eachapartment hasitsownunitallowingallresidents tosettheheatinglcoollng temperature thatsuitstheirindividual needs.Susquehanna Project1984wasanotheryearofmilestones forthecompany's Susquehanna nuclearplantnearBerwick,Pa.Theseactivities werecappedwhenUnit2wasplacedincommercial operation onFeb.12,1985.~Theyearbeganonahighnoteforthecompanywhenanevaluation bytheInstitute ofNuclearPowerOperations (INPO),releasedinearlyFtebruary, providedconfirmation thattheplantisbeingoperatedinasafemannerbyqualified personnel.

INPO,anindustry-sponsored organi-zation,conductsevaluations ofalloperating commercial nuclearplantsintheUnitedStates.TheINPOteamvisitedPP&LinSeptember 1983andexaminedtheSusque-hannaplantorganization andadministration, technical adequacyofthefacilityoperations, maintenance, techni-calsupport,personnel trainingandqualification, radio-logicalprotection, andchemistry monitoring.

~Mechanical andelectrical connections betweenUnit1andUnit2werecompleted inFtebruary allowingUnit1tobeplacedbackinserviceafteranll-weekoutage,andclearingthewayforUnit2tobegintestoperation.

B'4ii

~.pga1lj,pipHpl~@gll~g~~JfQt~Q7QJfli/i4<gCP-;Bi'gg"'I1~/VJi,~<3I-l/'<)'ly,W~';-.~,rp-/~It~el, rr~ciaII'.6,'/n~P;~

.Jq't.a1'1.'&i'~~e~~ltv~j@PIEtV14 Electriclightingservesmanypurposes.

UsingPP&L'sinnovative newoff-peakgreenhouse rate,J.L.DillonInc.,awholesale floristinDanville, canusesupple-mentalhigh-Intensity lighting(left)tostretchthegrowthperiodofItscropto24hoursaday.Thecom-mercialrosegrowerthuscanproducemoreflowersthanIfonlydaylightwereused.Thelightsalsohelpheatthegreenhouse.

Electriclightingaidscom-merce,byproviding asaferandcheeriernighttime environment (A)fordowntownshopperspatronizing storesalongAllentown's HamiltonMall.Inadditiontoallthelifestyle andcomfortamenities thatelectricity powersInsideanall-electric Hazletonhome(B),Italsoprovidessecurityandaccentlightingoutside.~TheNuclearRegulatory Commission (NRC)grantedanoperating licenseforUnit2onMarch23,andthefirstof764fuelassemblies wasloadedintothereactorfivedayslater.Fuelloadwentextremely wellandwascompleted April13,eightdaysaheadofschedule.

~AnNRC-observed drill,conducted inearlyApriltotestthecompany's emergency preparedness andresponsecapabili-ties,earnedthecompanyhighmarksfromthatregulatory body.~InMaythecompanycompleted negotiations topurchasenuclearfueloriginally intendedforuseinanOhionuclearplantthatwascancelled.

Thepurchasewillresultinasavingsofatleast$10millioncomparedtobuyingsimilarquantities ofnuclearfuelontheopenmarket.~AlsoinMay,thecompanyreceivedareportonanNRCreviewofSusquehanna plantoperations, conducted beforetheUnit2licensewasissued.Thereportcommended thewaythecompanyismanagingandoperating thefacility.

~Alicensegrantingthecompanypermission togradually takeUnit2uptofull-power operation wasissuedbytheNRConJune27,andonJuly3theunitproduceditsfirstkilowatt-hours ofelectrical energy.~Afteraseriesofmeticulous checksandteststoassuretheintegrity ofalltheplant'ssafetyandoperating systems,theunitreached100percentpoweronSept.28.~The1,230peopleofthecompany's NuclearDepartment alsopassedamilestone inmid-December

-anunprece-dentedcompanysafetyrecord'of 3millionemployee-hours withoutalost-time accident.

CoalSupplyInmid-December 1984,aftermorethan20yearsofpro-ducingbituminous coalforPP&Lpowerplants,LadyJaneCollieries ceasedunderground miningoperations afterallre-coverable coalreservesweredepleted.

LadyJaneisaPP&Lsubsidiary andhadprovidedthecompanywithabout250,000tonsofbituminous coalannually-ormorethan5milliontonsthroughout itsoperation.

Thecoal-cleaning plantandrelatedloadingfacilities attheLadyJanesitewillcontinuetobeusedtoprocesspurchased coalforPP&Lpowerplants.UnitTrainSystemThe5,000thunittraindeliveryofbituminous coaltothecompany's BrunnerIslandpowerplantnearHarrisburg, Pa.tookplaceinMay1984.PP&Lunittrains-whicheachtripcarry10,000to13,000tonsofcoalinmorethan100cars-havebeenoperating for20yearsandhavedelivered over100milliontonsofcoalin10,000tripstoPP&LpowerplantsSiltFeesPaidAfterseverallegalappeals,PP&LinlateDecemberpaidtheOfficeofSurfaceMiningintheDepartment oftheInteriormorethan$2millionincontested coallandreclamation feesandinterest.

Atissuewaswhetherthe1977FederalSurfaceMiningControlandReclamation Actappliestotheremovalofwastepilescontaining anthracite silt.Thecompany's positionwasthatremovalofthesiltisnotsurfaceminingofcoalandshouldnotbesubjecttothefee.Thefeesarepassedthroughtothecompanybysiltsup-pliers,andareacostoffuelwhichPP&Lcustomers musteventually bearonelectricbills.Anthracite silt-afinewasteproductthatresultsfromwashinganthracite

-isanapproximately equalmixtureofanthracite andnon-coalwastematerial.

Lowinsulfur,butalsolowinenergycontent,siltcanbeburnedonlywhenenrichedwithhigherqualitycoalorpetroleum coke.Thelow-costsiltisusedaspartofthefuelmixtureforgenerating unitsatthecompany's SunburyandHoltwoodpowerplants.Aretiredguestrelaxesinthesunroom(right)attheall-electric, energy-efficient Nottingham VillageRetire-mentCenter.Nottlngham Villageisanexampleofanewconceptinretirement communities.

Builtadjacenttoamodernnursingandconvalescent

facility, thecenterprovidesindividual apartments foritsguestswhocanalsousecommonliving,recreation anddin-ingareas,whichprovideasenseofcommunity.

Shouldtheybeneeded,doctors,nursesandadvancedhealthcareequipment areonlymomentsawayatthenursingfacility.

Electricity alsopowersmodern,high-techhealthcareequipment atSt.Joseph'sHospitalinHazleton.

Atechnician preparesapatient(A)fordiagnosis usingacomputedtomography (CT)scanner,whichcanxcayaverythinsliceofanatomy,providing athree-dimensional imageclearthroughthebody.Marketing/Economic Development Thecompany's strategyforthe'80sistomarketitsstrongcapacitysituation, anditsabundantsupplyofelectricenergy,inwaysthatwillprovideeconomicbenefitsforCentralEasternPennsylvania.

In1984,PP&Laggressively steppedupitsmarketing activities inanefforttopromotenewjobsandincreased production amongindustrial andcommercial firmsinthecompany's servicearea.Agoalofdeveloping anetincreaseof5,000newjobsfortheareawasmetandexceededas124neworexpanding firmsprovidedanetincreaseof5,316jobsinPP&L'sserviceterritory in1984.InFebruary1984,thePUCendorsedeconomicdevelop-mentinitiatives, including ratescheduleandtariffrulechanges,thatprovideincentives forexistingcustomers tore-maininPP&L'sserviceterritory andincreaseproduction, andfornewcustomers tolocatewithinthestate.Therateschedulechangescouldaffectnearly900industri-alandcommercial customers whousetime-of-day meteringandbilling.Customers whotakeadvantage ofthisoptionpaylowerelectricratesduringoff-peakhours,whenoverallelectricuseisless.Thefirstcustomertotakeadvantage oftheinterruptible rateincentive discussed earlier,wasanenergy-intensive airseparation plantinLancaster, Pa.Thisrateisparticularly attractive tocertaincustomers whichhaveaveryhighenergyuseintheirproduction facilities.

Aninnovative rateputintoeffectinlate1983helpedtomakethegreenhouse industryinCentralEasternPennsylva-niamorecompetitive during1984.Therateprovidesanoff-peakincentive forgreenhouse operators whousesupplemental lightingintheircrops'row-ingprocess.Theincentive ratewasofferedwiththeunder-standingthatthecompanywouldbeabletointerrupt thelightingloadwithonehour'snotice,iftheelectricity wasneededelsewhere duringperiodsofpeakuse.AIjfWBenFranklinPartnership Advancedtechnology hasthepotential tomakeapositivecontribution toPennsylvania's economicfuture.Thedevelop-mentandattraction ofhigh-technology industries, coupledwiththerevitalization oftraditional industries, canmean aIIIIIII('IU0IUU~Icr~I0-~IU~'-==--Iglf-,~,--~~cia~

~ll%',.~'1~'~Olin~ClllS~'anln~ty~~~Mll~~~KlllR&l1[1I~~'ERIK~>IIINKS<<i,I>I~UUIY1 reg5I'""<',5i<'.-5

~','Sphr5'5t5l5r5g55j,5,5f505i';i5455'rr555455I5l5518(j,5 Electricity helpspeoplehavefun.Besidesproviding high-intensity lightingtoenableskierstopursuetheirsportafterdark,electricity alsopowersthe1,500horsepower compressors necessary forthesnowmaking equipment atTanglwood SkiAreanearLakeWallenpaupack.

WithPPBL'soff-peakratein-centives, Tanglwood isoneofanumberofskiareasthatfounditeconomical toswitchtoall-electric oper-ationfromdiesel-powered compressors.

Youngandoldalikeenjoyoneofthethrill-rides (A)atDorneyParknearAllentown.

Theattractions inthe100-year-oldparkarepoweredbyelectricmotorswithacom-binedtotalofnearly900horsepower.

Overheadlight-ingprovides24-hour-a-day recreation opportunities attheAllentown Racquetball Club(B).Electricity alsomakespossiblethetherapeutic benefitsofsteamrooms,saunasandJacuzziwhlrlpools attheclub.A'$P'~Q,v'r~<f)emoreandbetterjobsforPennsylvanians.

Amajorsteptobringabouttheseimprovements wastakenin1982whentheCommonwealth ofPennsylvania instituted theBenFranklinPartnership Challenge GrantProgramforTechnological Innovation.

Thisledtotheestablishment offourlocallysupported consortiums andadvancedtechnology centersacrossPennsyl-vania.PP&Lisasupporting memberoftheNorthEastTierAdvancedTechnology CenteratLehighUniversity, Bethle-hem,Pa.Theconsortium, madeupofrepresentatives frombusinessandindustry, education, organized labor,economicdevelop-mentgroupsandfinancial institutions, hasestablished threeprimaryobjectives:

~Tohelpestablished industries implement newtechnolo-giestoimproveproductivity andprofitability.

~Todiversify theeconomicstructure oftheregionbyattracting bothlargeandsmalladvancedtechnology firms.~Toassiststartupfirms,or"incubator companies,"

throughitsvariedresources.

TheNorthEastTierAdvancedTechnology Centerhaschosenfourareasofconcentration:

~CAD/CAM(computer aideddesign/computer aidedmanufacturing).

~Researchprogramsinthepolymersciences, composite materials, andman-madesourcesoffiber,rubberandplasticsasviablealternatives foruseinautomobiles, air-planesandfurniture.

~Microelectronics, orsolid-state technology usingthesili-conchipasthebasisfordevicesincontrolsystems,com-puters,appliances andcommunication products.

~Biotechnology, whichexplorestheuseofmicroorganisms, plantandanimalcells,andenzymecatalysts, todevelopnewtechnologies toconverttheserawmaterials intonewproducts.

TheBenFranklinPartnership isalreadymakinganotice-ableimpactinPP&L'sservicearea,andasitsmomentumgrowsisexpectedtoprovidenewjobopportunities thatdidnotexistjustafewyearsago.nfl~~~PQ>jManagement ChangesRobertR.F<ortuneendedaPP&Lcareero'fnearly36yearswhenheretiredJuly1,1984,asexecutive vicepresident-F<inancial.

F<ortunejoinedPP&Lin1948,afterstartinghisfinancial careerasanaccountant withthepublicaccounting firmofHaskinsandSellsin1940.Hebecameassistant treasurer in1952andcomptroller in1954.Hewasnamedvicepresident-Financial in1966,andin1975hebecameexecutive vicepresident andadirectorofthecompany.Inanticipation ofhisretirement, hedidnotstandforre-election asadirectorattheAprilmeetingofshareowners.

Succeeding FortunewasCharlesE.Russoliwhobecameseniorvicepresident-F<inancial andamemberofthecom-pany'sCorporate Management Committee effective March1,1984.Hebecamechieffinancial officeruponF<ortune's retirement.

RussolijoinedPP&Lin1955asagraduatetrainee.AfterservingfortwoyearsintheU.S.ArmyhereturnedtoPP&Landheldvariousdataprocessing positions untilhispromotion tofinancial analystin1965.Hebecamemanager-Budgets in1969,manager-Financial PlanningandReporting in1971,vicepresident-Finance in1979,andvicepresident andtreasurer in1981.JohnP.Kierzkowski wasappointed vicepresident andtreasurer effective March1,1984.Kierzkowski joinedPP&Lin1971asmanager-F<inancial Researchandwasnamedassistant treasurer in1981.JohnR.Biggarwasnamedvicepresident-Finance onMarch1,1984.HejoinedPP&Lin1969asanattorneyintheLegalDepartment.

Hebecamemanager-Financing Servicesin1975andmanager-Finance in1979.Hehadbeenanassistant treasurer since1981.MerlinF.Hertzogbecameanexecutive vicepresident onMarch1,1984,toheadthecompany's newlycreatedCorporate ServicesDepartment.

Healsowaselectedadirectorofthecompanyattheboard'sFebruary1984meeting.Hertzogbecameexecutive vicepresident-Corporate Ser-vicesafternearly26yearswiththecompany.HejoinedPP&Lin1958asamathematician specializing inengineering andscientific programming intheF<inancial Department.

Heheldvariousdataprocessing positions untilhewasnamedmanager-Methods in1968.In1973,hewasnameddirector-Systems&ComputerServices, andin1978,hebecamevicepresident-Consumer

&Community Services.

HertzogwasnamedtoheadtheHumanResource&Development Department in1980andbecameseniorvicepresident-HR&D in1981.RobertS.Gomboswasnamedvicepresident-Human Re-source&Development intheCorporate ServicesDepartment effective March1,1984.GombosjoinedPP&Lin1965andwasahome-heating representative until1967whenhemovedtoAllentown asastaffassistant inE<mployee Relations.

Afterfouryearsinsystemsanalysis, hebecamealaborrelations analystin1972,thenlaboragreement administrator.

Hewasnamedassistant director-Union Relations in1974andassistant totheexecutive vicepresident-Financial in1977.Hebecamespecialassistant tothepresident-Susquehanna community representative inBerwickin1979andseniordirector-Industrial Relations in1981.ClairW.Nollwasnamedvicepresident-Procurement

&ComputerServicesintheCorporate ServicesDepartment effective March1,1984.NolljoinedPP&Lin1960asamethodsaccountant.

In1962headvancedtoassistant supervisor-Computer Centerandlaterservedasseniorprocedures analyst.Hewasnamedsupervisor-Business ComputerSystemsin1969andfouryearslaterhebecamemanager-Systems

&Programming.

Hewaspromotedtodirector-Systems

&ComputerServicesin1978.WilliamR.Whitewasappointed vicepresident-Power Production effective March1,1984.WhitejoinedPP&Lin1950asaresultsengineeratthecompany's formerStantonpowerplant,whereheadvancedthroughseveralpositions toassis-tantsuperintendent.

Hewastransferred toPP&L'sBrunnerIslandpowerplantassupervisqr ofoperation in1969.Ayearlaterhewaspromotedtoplantsuperintendent.

In1973hewastransferred toAllentown asmanager-Power Production.

Oneoftheapplications ofelectricity thatIsperhapsmosttakenforgrantedlsrefrigeration (right).Injustafewgenerations, peoplehavegonefromiceboxesandeverydaytripstothegrocerorbutcher,toreli-able,virtually trouble-free electricrefrigerators whichcanstorefreshfoodfordaysorweeks,andfrozenfoodformonths.Refrigeration hasliterally changedthewayoursocietyfunctions.

Frozenconvenience foods,suchasthechickenrondelets beingpackaged(A)atVictorF.Weaver,Inc.InNewHolland,oftenplayabigpartlnmealplanningforbusy,on-the-go familieswithoutthetimeforfrom-scratch mealprep-aration.Conversely, electricity powerstheefficienc-iessandwork-saving appliances thatallowfrom-scratchinstitutional foodpreparation (8)atMillers-villeUniversity inMlllersville.

Theuniversity iscon-vertingtoall-electric operation totakeadvantage oftheeconomies andreliability ofPP&Lelectricservice.k20 re~J'v<-jjrfhij19i'I.Z%g'L.I"'qr~,bl1/>iphji.I'L21II.hy ReviewoftheCompany's Financial Condition andResultsofOperations Thisreviewprovidesadiscussion oftheCompany's financial condition andresultsofoperations.

Ad-ditionalinformation onthesemattersissetforthinthefinancial statements, schedules andnotesonpages28-43andtheselectedfinancial andoperating dataonpages44and45.ResultsofOperations Earningspershareofcommonstockwere$3.12in1984,$3.06in1983and$3.35in1982.Theslightearningsimprovement in1984wasprimarily attribut.

abletoa6.3'ncrease inelectricenergysalesduringtheyear.Theincreased revenuesassociated withthehighersalessomewhatoffsettheeffectsofaninade-quaterateincreaseallowedbythePennsylvania PublicUtilityCommission (PUC)initsAugust1983ratedecision.

Thedeclineinearningspersharein1983comparedwith1982reflected apartialyear'seffectofthein-adequaterateincreaseandalsotheeffectsoftheeco-nomicrecession earlyin1983.1983RateDecisionInAugust1983,thePUCissuedafinalorderontheCompany's requesttoincreaseratestoreflecttheeffectofplacingSusquehanna Unit1incommercial operation andtherecoveryofotherincreased costs.ThePUCgrantedtheCompanyanincreaseinbaseraterevenuesofapproximately

$203million-some$90millionlessthantheamountrequested.

ThereturnallowedontheSusquehanna Unit1plantinvestment includedinratebasereplacedthepreviously recordednon-cashallowance forfundsusedduringconstruction.

Costssuchasemployeewages,materials andsuppliesandoutsideskilledlaborincurredtooperateandmaintaintheunitwereincludedinelectricratesestablished bythePUC.Theratedecision, however,didnotpermittheCompanytoearnareturnon$287millionofitsnetinvestment intotalgenerating facilities.

ThePUCdecidedthat945,000kilowatts oftheCompany's totalgenerating capacitywasexcessandthisreducedannualrevenuesbyabout$59million.Thisdisallow-ancehasadversely affectedearningsavailable forcommonshareowners.

However,theCompanyex-pectstorecoverthereturnoninvestment disallowed bythePUCwhenthesaleofcapacityandenergytoJerseyCentralPower&,LightCompany(JCP&L)commences.

Seepage23foradiscussion oftheJCP&Lagreement.

1984RateFilingInJuly1984,theCompanyfiledwiththePUCforanoverallincreaseinelectricratesofapproximately

$330million.Theincreasereflects$466millionrelatedtotheinvestment andoperating costsofSusquehanna Unit2plusotherincreased costsofdoingbusinesslessanestimated reduction ofabout$136millioninannualenergycostsassociated withtheoperation ofSusque-hannaUnit2.Tomoderatetheimpactoftheincrease, theCompanyhasproposedtobillcustomers onlyone-halfoftheamountrequested

($165million)inthefirst$3.60EarningsPerShare12MonthsEndedEachQuarterDollarsPerShareTimesInterestChargesEarned12MonthsEndedEachQuarterTimesEarned(PreTax)3.403.203.002.802.608081828384808182838422 yearthatnewratesareeffective.

Thefullamountoftherateincreasewouldbebilledinthesecondyearandrecovery, withoutinterest, oftheamountnotcollected fromcustomers inthefirstyearwouldbegininthethirdyear.Theissueofexcessgenerating capacityhasagainbeenraisedbycertainpartiesinthecurrentrateproceeding.

However,theCompanyisunabletopre-dictwhatactionthePUCmaytakewithrespecttothatissueortheCompany's proposedratephase-inplan.AdecisionbythePUContherateincreaserequestisexpectedbyApril26,1985.SaleofCapacityandEnergytoJCPdLLTheCompanyhasenteredintoanagreement toprovideJCP&Lcapacityandenergyfrom945,000kilowatts oftheCompany's generating facilities.

JCP&LwillpayanamountequaltotheCompany's costofservice,including areturnoninvestment inthegenerating facilities.

Theagreement willnotbecomeeffective untiltheNewJerseyBoardofPublicUtilities makesadetermination thattheagreement isinthepublicinterest.

Whentheagreement becomeseffective, theCom-panywouldexpecttorecoverfromJCP&Lthereturnoninvestment ingenerating facilities disallowed bythePUCinits1983rateorder.However,iftheagreement doesnotbecomeeffective beforethePUCreachesadecisionontheCompany's currentrateincreaserequest,theCompany's earningswouldbeadversely affectedbecausedepreciation andthecoststooperateandmaintainthefacilities includedintheJCP&Lagreement wouldnolongerberecovered inrateschargedcustomers.

198419831982ElectricBaserateincreases....

Recoveryoffuelandenergycosts........

Changeincustomerusage..............

SalestoAtlanticCityElectricCompany...

Other(principally taxsurcharge)......

Totalelectric....

$257.5$141.1$81.6(17.0)(153.9)1.731.115.2(3.6)13.318.528.1313.09.530.47.587.2Steamheat...Total.1.4$314.4(1.6)$28.8(0.9)$86.3ElectricSalesandOperating RevenuesElectricenergysaleswere6.3%%uohigherin1984than1983and3.4%higherin1983than1982.Theincreased salesresultfromimprovedeconomicconditions andextremely coldweatherduringthe1983-1984 winterseason.Ifnormalweatherconditions hadprevailed inboth1984and1983,energysalesin1984wouldhaveincreased 5.1%over1983.Whencomparedwith1983,residential salesfor1984wereup316millionkwhor3.9%%uo,commercial salesincreased 408millionkwhor6.7%andindustrial salesincreased 494millionkwhor6.5%%uo.TheCompanyalsosold148millionkwhmoreenergytoAtlanticCityElectricCompany(Atlantic) in1984pursuanttoanagreement wherebyAtlanticpurchases about6%ofthecapacityandenergyoftheSusquehanna units.Thechangesfromtheprioryearintotaloperating revenueswereattributable tothefollowing (millions ofdollars):

SourcesofEnergyIDisposition oiEnergy50BillionsoiKwh50BillionsofKwh4040302010108081828384OHydroandpurchased powerONucleargeneration OOilfiredgeneration OCoal.firedgeneration 08081828384OCompanyuse,linelossesandotherOInterchange powersales8Electricenergysalestocustomers 23 Baserateincreases forcustomers underthejurisdic-tionofthePUCwentintoeffectJanuary1982andAugust1983.Alargeincreaseinsalesofenergytootherutilities during1983resultedinlowerenergycosts.Thiscausedasubstantial reduction inrevenuesapplicable torecoveryofsuchcostsinthatyear.Salestoultimatecustomers accounted forapproxi-mately96%oftheCompany's revenuesfromelectricsalesoverthepastthreeyears.Suchrevenuesareunderthejurisdiction ofthePUC.Theremaining 4%ofrevenuesrelatetosalestoothersforresalewhichareregulated bytheFederalEnergyRegulatory Com-mission(FERC)asareinterchange powersales,whichareclassified asacredittooperating expenses.

NetCostofEnergyIntotal,thecostoffuelburnedin1984was6.2%lessthanin1983.Thedecreaseinfuelcostsreflectsprincipally lessoilconsumedbytheCompany's twooil-fired generating unitswhere1.5billionlesskwhwereproduced.

Thiswaspartially offsetbyhighercostsforcoalandnuclearfuel.Theenergyproducedbycoal-fired stationswasaboutthesamein1984asintheprioryear,butthecostofcoalconsumedwassomewhathigher.Atcoal-fired stationstheaveragecostoffuelperkwhgenerated increased by4.8%.Susquehanna Unit1producedelectricity throughout mostof1984whereasitoperatedonacommercial basisforonlyapartof1983.Theincreaseinnuclearfuelcostsin1984reflectstheincreased outputfromtheunit.In1984,thequantityofinterchange powersoldtootherutilities was1.0billionkwhlowerthantheall-timehighof16.4billionkwhachievedin1983.SalestotheCompany's owncustomers increased 1.4billionkwh,resulting inlessenergybeingavailable for~interchange sales.Susquehanna Unit1wasoutofserviceforabouttwomonthsinearly1984topermitatie-inofcommonfacilities withUnit2andforcertainrepairs.Asaresult,outputfromotherunitswasrequiredtomeetcustomers'nergy needsinsteadofbeingavailable forsalestootherutilities.

Inaddition, outputfromtheCompany's oil-fired steamstationwasdownfrom1983.Thisdecreasewasdueinparttoequipment problemsandalsotolessneedforenergyfromtheseunitsbyotherutilities.

WagesandBenefits, OtherOperating CostsandDepreciation Wagesandemployeebenefitsandotheroperating costsincreased inboth1984and1983duetoinflation andcostsrelatedtooperating Susquehanna Unit1.Increases indepreciation reflectadditions toplantinservice,including Susquehanna Unit1in1983.Theprovision fordepreciation, asapercentofaveragedepreciable

property, declinedfromapproximately 3.3%in1982to2.7%in1983andto2.5%in1984primarily duetotheuseofamodifiedsinkingfundmethodofdepreciation fortheSusquehanna plantinaccordance withrate-making treatment.

IncomeTaxesIn1982,1983and1984,theCompanyhadlossesforincometaxpurposes.

Thelargeamountofinterestexpenseincurredtofinanceconstruction expenditures andthedepreciation forincometaxpurposesofSusquehanna Unit1andUnit2weremajorfactors$1,500CapitalRequirements MillionsofDolls$1,500SourcesofCapitalMillionsofDolfis1,2001,200900900600300300828384"858687Aclual~Procreated

~WSusquehanna construction ClOtherconstruction andnuclearfuelDOther(principally retirement ofsecurities) 828384858687iActual-f-Projected~

C3Capitalleaseobligations OOutsidefinancing (salesofdebtand/orequitysecurities)

RInternalsources(principally fromopera.tlonsplusAFUDClessdividends) 24 causingthetaxlosses.AtDecember31,1984,theCompanyhadtaxlosscarryforwards ofapproxi-mately$100millionforbothfederalandstateincometaxpurposes.

TheCompany's construction expenditures haveenabledittoqualifyforsubstantial investment taxcredits.Attheendof1984,anestimated

$273millionofunusedinvestment andpayroll-based taxcreditswereavailable toreducefederalincometaxliabilities infutureyears.Foradditional information concerning incometaxes,seetheScheduleofTaxesonpage35andNote6toFinancial Statements.

CapitalExpenditure Requirements WhenSusquehanna Unit2wasplacedincommer-cialoperation onFebruary12,1985,itmarkedtheendofanextensive periodofgenerating plantconstruc-tionbytheCompany.Inthepast20years,theCompanyhasplacedintoserviceeightlargegenerat-ingunits(fourcoal,twooilandtwonuclear).

Inaddition, theCompanyparticipated intheconstruct-ionoffourjointlyownedcoal-fired unitsduringtheperiod.Completion ofthetwonuclear-fueled generat-ingunitsattheSusquehanna planthasdominated theCompany's construction programforthepastseveralyears.ThecostoftheCompany's 90%shareofthetwoSusquehanna unitsisexpectedtobeabout$3.7billion.Construction expenditures forthenextseveralyearsareexpectedtodecreasesubstantially fromthelevelsrecentlyexperienced sincenonewgenerating unitswillbeunderconstruction.

Theschedulebelowshowsactualconstruction andnuclearfuelexpenditures fortheyears1982-1984 andcurrentprojections fortheyears1985-1987.

Construc-tionexpenditures duringthethreeyears1982-1984 totaled$1.8billionandareexpectedtobeabout$0.8billionduringthethreeyears1985-1987, adeclineofapproximately

$1.0billionfromthepriorthreeyears.Allotoance forFundsUsedDuringConstruction (AFUDC)TheamountofAFUDCrecordedin1984waslessthanin1983,thefirstdecreasefollowing adecadeofsteadyincreases whichwereduetothegreaterlevelofconstruction workinprogressrelatedtothetwoSusquehanna units.TheSusquehanna unitsac-countedforabout$652millionofthetotal$667millionofAFUDCrecordedduringthethreeyears1982-1984.

AFUDCwilldecreasesubstantially in1985following completion ofSusquehanna Unit2.SeeNote7toFinancial Statements foradditional information con-cerningAFUDC.FinancingInordertofinanceitsconstruction program,theCompanyhashadfrequentsalesofdebtandequitysecurities overthepastseveralyears.Outsidefinancing totaled$1.8billionduringthethreeyears1982-1984.

Inadditiontosecurities sales,theCompanyincurred$441millionofobligations undercapitalleases(primarily nuclearfuel)duringthethreeyears1982-1984.

Detailsoftheamountofsecurities soldandotherinformation onsourcesandusesoffundsduring1982-1984 aresetforthintheStatement ofChangesinFinancial Positiononpage29.Construction andNuclearFuelExpenditures (Millions ofDollars)----Actual----198219831984----Projected

---198519861987Construction expenditures (a)Susquehanna plant...........

Transmission anddistribution facilities

.Environmental

.Other$25(b)$638$540$246$103$1151613155,1412742696755$341$32497914127265$3376284454387649422100103$749$52569193275874$832Nuclearfuel(c)Total.Allowance forfundsusedduringconstruction (whichisincludedintheaboveamounts)..............

$246$252$169$(33)(b)$9$10(a)Construction plansarerevisedfromtimetotimetoreflectchangesinconditions.

Actualconstruction costsmayvaryfromthoseprojected becauseofchangesinplans,costfluctuations, environmental regulations andotherfactors.(b)TheSusquehanna stationconstruction expenditures areestimated tobe$83millionin1985.Thoseexpenditures andAFUDChavebeenreducedbytheestimated taxreduction applicable toconstruction interestincludedinthetaxlosscarryforwards expectedtobeusedin1985.(c)Includesbothownedandleasednuclearfuel.

TheCompanypresently estimates thatoutsidefi-nancingduringthethreeyears1985-1987 willbeabout$300million,or$1.5billionlessthantheamountrequiredduringthepriorthreeyears.Fundsfromsecurities salesandfrominternalsourceswillbeusedtofinanceconstruction expenditures, repay$521mil-lionoflong-term debtobligations andmeet$172millionofpreferred andpreference stocksinkingfundrequirements.

Fundsgenerated frominternalsourcesareexpectedtoprovideabout80%oftotalfundsrequiredduringthethreeyears1985-1987 comparedwith26%duringthethreeyears1982-1984.

Tentative PlansforSecurities SalesTheCompanyintendstoissue$192millionofsecurities in1985,allintheformoflong-term debt.Theexactamount,natureandtimingofsalesofsecurities in1985andsubsequent yearswillbedeter-minedinthelightofmarketconditions andotherfactors,including thegrantingoftimelyandadequateraterelief.ImprovedPinancial Condition TheCompany's overallfinancial condition im-provedduring1984.Earningspershareofcommonstockincreased.

Thetimesinterestchargesearnedratio(pre-tax) continued theupwardtrendwhichbeganin1983.Thisratioincreased from2.05timesin1982to2.29timesin1983andwas2.35timesin1984.Attheendof1984,themarketpriceofthe'Company's commonstockwas98.7%ofbookvalue.Thisisthehighestmarket-to-book ratioexperienced bytheCom-panyinmanyyears.Fundsfromoperations alsocontinued afavorable trend.Asdetailedonpage29,fundsfromoperations in1984were$185millionhigherthanin1983.Financing flexibility alsoimproved.

Currently, therearenosignificant limitations undertheCom-pany'smortgageindenture orcharterontheamountofadditional debtsecurities thatcanbeissued.Lessthantwoyearsago,theearningscoveragetestofthemortgageindenture severelylimitedtheamountofadditional bondstheCompanycouldissue.During1984,a$100millionrevolving creditagree-mentwithagroupofforeignbankswasterminated.

TheCompanypresently hasbanklinesofcredittotaling$720millionandisassessing theappropriate leveloftheselinesinlightofthelowerfinancing requirements expectedduringthenextseveralyears.TheCompany's financial condition inthenearfuturewilldependtoalargedegreeonthereceiptofadequateratereliefinthecurrentproceeding beforethePUCandthetimelyapprovalbytheNewJerseyBoardofPublicUtilities oftheagieement toprovideJCP&LcapacityandenergyfromtheCompany's generating facilities.

ImpactsofInflation Certaineffectsofinflation ontheoperations oftheCompanyhavebeenestimated onthebasisprescribed bytheFinancial Accounting Standards BoardandaresetforthinNote16toFinancial Statements.

$6Construction WorkinProgressvs.NetPlantinServiceBillionsolDollars$30;BookValuePerShare<vs.MarketPricePerShare-YearEndDollarsPerShare25151082838485'6Actual~prclecred

-uQi3Construction workInprogressONetplantInservice*AfterSusquehanna Unit2inservice8081828384OBookvaluepershareOMarketpricepershare26 toevaluatetheCompany's internalaccounting con-trols,policiesandprocedures astoadequacy, applica-tionandcompliance.

DeloitteHaskins&Sells,independent certified publicaccountants, havebeenengagedtoexaminetheCompany's financial statements andtorenderanopinionastowhethersuchfinancial statements, considered intheirentirety, presentfairlytheCom-pany'sfinancial

position, operating resultsandchangesinfinancial

position, inconformity withgenerally acceptedaccounting principles.

Theirex-amination isconducted inaccordance withgenerally acceptedauditingstandards andincludessuchproce-duresbelievedbythemtobesufficient toprovidereasonable assurance thatthefinancial statements arenotmaterially misleading anddonotcontainmaterialerrors.TheCompanymaintains asystemofinternalaccounting controlsdesignedtoprovidereasonable, butnotabsolute, assurance thatassetsaresafe-guardedandthattransactions andeventsareex-ecutedinaccordance withmanagement's authoriza-tionandarerecordedproperlytopermitpreparation offinancial statements inaccordance withgenerally acceptedaccounting principles.

Theconceptofreason-ableassurance recognizes thatthecostofasystemofinternalaccounting controlsshouldnotexceedthebenefitsderivedandthatthereareinherentlimita-tionsintheeffectiveness ofanysystemofinternalaccounting controls.

Fundamental tothecontrolsystemistheselection andtrainingofqualified personnel, anorganizational structure thatprovidesappropriate segregation ofdutiesandtheutilization ofwrittenpoliciesandprocedures.

Inaddition, theCompanymaintains aninternalauditingprogramTheBoardofDirectors, actingthroughitsAuditCommittee, overseesmanagement's responsibilities inthepreparation ofthefinancial statements.

Inperforming thisfunction, theAuditCommittee, whichiscomposedofdirectors whoarenotemployees oftheCompany,meetsperiodically withmanagement, theinternalauditorsandtheindependent certified publicaccountants toreviewtheworkofeach.DeloitteHaskins&SellsandtheinternalauditorshavefreeaccesstotheAuditCommittee andtotheBoardofDirectors, withoutmanagement present,todiscussinternalaccounting control,auditingandfinancial reporting matters.IPt}Management's ReportontheFinancial Statements Themanagement ofPennsylvania Power&LightCompanyisresponsible forthepreparation, integri-tyandobjectivity ofthefinancial statements andothersectionsofthisannualreport.Thefinancial statements havebeenpreparedinconformity withgenerally acceptedaccounting principles andtheUniformSystemofAccountsprescribed bytheFederalEnergyRegulatory Commission.

Inprepar-ingthefinancial statements, management makesinformedestimates andjudgments oftheexpectedeffectsofeventsandtransactions baseduponcurrent-lyavailable factsandcircumstances.

Auditors'pinion OeloitteHaskias+Sells Certified PublicAccountants OneWorldTradeCenterNewYork,NewYork10048TotheShareowners andBoardofDirectors ofPennsylvania Power&LightCompany:WehaveexaminedthebalancesheetsofPennsylvania Power&LightCompanyasofDecember31,1984and1983andtherelatedstatements ofincome,earningsreinvested, andchangesinfinancial positionforeachofthethreeyearsintheperiodendedDecember31,1984.Ourexaminations weremadeinaccordance withgenerally acceptedauditingstandards and,accordingly, includedsuchtestsoftheaccounting recordsandsuchotherauditingprocedures asweconsidered necessary inthecircumstances.

Inouropinion,suchfinancial statements presentfairlythefinancial, positionoftheCompanyatDecember31,1984and1983andtheresultsofitsoperations andthechangesinitsfinancial positionforeachofthethreeyearsintheperiodendedDecember31,1984,inconformity withgenerally acceptedaccounting principles appliedonaconsistent basis,afterrestatement forthechange,withwhichweconcur,inthemethodofaccounting forleasesasdescribed inNote2ofthefinancial statements.

February4,198527 Statement OfInCOme(Thousands ofDollars)198419831982Operating Revenues(Note3)Operating ExpensesNetcostofenergyFuelPowerpurchases

.Interchange powersales720,670171,953(647,186) 768,583186,955(740,964) 633,69459,571(302,149)

$1,562,782

$1,248,397

$1,219,548 EVagesandemployeebenefitsOtheroperating costsDepreciation

.Incometaxes(Note6)Taxes,otherthanincomeDeferredSusquehanna energysavingsnetofoperating expenses(Note4)Operating IncomeOtherIncomeand(Deductions)

Allowance forequityfundsusedduringconstruction (Note7)DeferredSusquehanna capitalcosts(Note4).Incometaxcredits(Note6)Other-net..............................

IncomeBeforeInterestChargesInterestChargesLong.termdebt...................

ShorttermdebtandotherAllowance forborrowedfundsusedduringconstruction 245,437232,632219,002118,763185,784154,2061,155,824 406,95864,743(718)62,623(4,830)121,818528,776280,32833,740(104,195) 209,873214,574211,752166,839107,885112,055125,47019,892958,467289,930131,36229,93521,976(9,518)173,755463,685258,62929,231(120,186) 167,674391,116171,182142,78892,22287,489111,668996,465223,08390,29577,744(588)167,451390,534239,76928,007(156,128) 111,648NetIncome-BeforeDividends onPreferred andPreference Stock.Dividends onPreferred andPreference Stock.....EarningsApplicable toCommonStock.......

EarningsPerShareofCommonStock(a)...AverageNumberofSharesOutstanding (thousands) 318,90392,145$226,758$3.1272,767296,01185,838$210,173278,88668,314$210,57268,64262,809$3.06$3.35Dividends DeclaredPerShareofCommonStock....$248$2.40$2.32(a)Basedonaveragenumberofsharesoutstanding.

28Sccaccompanying Schedules andNotestoFinancial Statements.

Statement ofChangesinFinancial Position(Thousands ofDollars)'SourceofFundsFundsfromoperations NetincomeCharges(credits) toincomenotinvolving workingcapitalDepreciation Amortization ofpropertyundercapitalleases..Noncurrent deferredincometaxesandinvestment taxcredits-net................

DeferredSusquehanna costs-net............

Allowance forfundsusedduringconstruction

..OtherOutsidefinancing Commonstock.Preferred andpreference stock.Firstmortgagebonds.Securedtermnotes.Nuclearfueltrustnotes-netincrease...Short-term debt-netincrease(decrease)

.Noncurrent capitalleaseobligations

..........

Workingcapital(excluding debt)-decrease (a).1984$318,903118,76338,649125,038718(168,938) 2,502435,63584,20350,000403,250(85,200)452,25353,424$941,3121983$296,011107,88529,66978,178(10,043)(251,548) 694250,84681,415106,000175,00029,455391,870104,644176,767$924,1271982278,88692,2227,44220,404(246,423) 1,208153,739147,47584,000365,674300,00050,000(14,944)932,205220,42284,751$1,391,117 Application ofFun'dsConstruction expenditures Additions tonuclearfuel-owned andleased..Allowance forfundsusedduringconstruction

.Securities retiredPreferred andpreference stockFirstmortgagebonds.Securedtermnotes.Long-term bankloans-netdecrease..Nuclearfueltrustnotes-netdecrease.Reduction innoncurrent capitalleaseobligations

..Dividends onpreferred, preference andcommonstockWorkingcapital(excluding debt)-increase (a)....Other-net.$421,697103,518(168,938) 356,27726,80380,154100,000206,95747,492273,23639,76217,588$941,312$648,661100,157(251,548) 497,27012,80459,84250,000122,64639,515251,18213,514$924,127$757,87874,203~(246,423 585,6586,597178,000375,000559,59711,675216,6011756631,321,117 (a)Changesincomponents ofworkingcapital(excluding debt)CashAccountsreceivable

.Unbilledandrefundable

revenues, netofdeferredtaxes...Fuel(coalandoil)Accountspayableandaccruedtaxes.................

Capitalleaseobligations duewithinoneyear...........

Other-net

.Increase(Decrease)

$(299)1,917(4,680)70,771(32,277)(26,267)30,597$39,762$1917,889(130,805)

(29,992)(7,377)(5,999)(10,674)$(176,767)

$82760,894(63,869)(6,746)(20,636)(29,889)(25,432)$(84761)Seeaccompanying Schedules andNotestoFinancial Statements.

29 BalanCeSheetatDecember31(Thousands ofDollars)AssetsUtilityPlantPlantinservice-atoriginalcostElectricSteamheatLessaccumulated depreciation Construction workinprogress-atcostNuclearfuelinprocess-atcost.Leasedproperty-net ofamortization (Note2)1984$4,876,163 8,6614,884,824 1023,8643,860,960 2,020,839 47,475401,5276,330,801 1983$4,761,151 8,7044,769,855 922,5543,847,301 1,730,228 10,609369,3285,957,466 Investments Associated companies

-atequityReceivable fromlitigation settlement Nonutility propertyandother-atcostorless...17,71427,50011,41356,62716,61428,5008,41053,524CurrentAssetsCash.Accountsreceivable (lessreserve:1984,$5,486;1983,$5,020)Customers Interchange powersales.OtherUnbilledrevenuesFuel(coalandoil)-ataveragecost.Materials andsupplies-ataveragecost....................

Commonstockheldfordividendreinvestment program(Note8).Other6,454105,85746,4685,24152,064197,86121,22212,82050,718498,7056,753109,93439,5106,20556,744127,09021,40015,743383,379DeferredDebits24,650$6,910,783 24,140$6,418,509 30Seeaccompanying Schedules and¹testoFinancial Statements.

Capitalization CommonequityCommonstockCapitalstockexpenseEarningsreinvested.

Liabilities 1984$1,307,267 (16,805)606,5251,896,987 1983$1,223,064 (15,973)560,8581,767,949 Preferred andpreference stockWithsinkingfundrequirements Withoutsinkingfundrequirements.

Long-term debt738,027231,3752,528,531 5,394,920 714,830231,3752,307,073 5,021,227 CurrentLiabilities Commercial paperandothernotesLong-term debtduewithinoneyearCapitalleaseobligations duewithinoneyear(Note2)........Accountspayable.Taxesaccrued.InterestaccruedDividends payableDeferredincometaxes.EnergyrevenuestoberefundedOther.104,80075,97570,653117,05434,84969,50069,54625,48698,44137,037703,341190,00080,17644,38692,56327,06364,57864,4282777393,39632,815717,178DeferredCreditsandOtherNoncurrent Liabilities Deferredinvestment taxcredits.Deferredincometaxes.Capitalleaseobligations (Note2)Other.107,130336,617330,87437,901812,522111,038205,916324,94238,208680,104Commitments andContingent Liabilities (Note14)86,910,783

$6,418,509 Seeaccompanying Schedules andNotestoFinancial Statements.

ScheduleofCapitalStockatDecember31Preferred Stock-$100par,cumulative (a)4'/s%%uoSeries.................................

Preference Stock-nopar,cumulative (a).....CommonStock-nopar(a).Dividendreinvestment installments received.SharesAuthorized 629,93610,000,000 5,000,000 85,000,000 SharesOutstanding 1984530,1894,972,106 4,191,724 74,512,797 Outstanding Thousands ofDollars19841983$53,019497,211$53,019519,176$1,307,267

$1,222,393 671$1,307,267

$1,223,064

$550,230$572,195$419,172$374,010SinkingFundProvisions(c)

SharestobeRedeemedRedemption AnnuallyPeriodWithSinkingFundRequirements SeriesPreferred 7.40%7.50%7.75%8.00%8.00%,Second.............

8.25%8.75%9.24%10.75%(e).................

11.00%,Adjustable (e)(f)....11.00%(e).................

11.25%(e).................

14.00%%uo (e).................

Preference

$8.625(e).................

$11.00$11.60(i).$13.00$13.00,Second(i)..........

$13.68(i).$15.00(i).1985-2003 19851985-1988 1985-2002 1985-1989 1985-1989 1985-2004 1985-2005 1986-1990 1989-1993 19881989-1998 (g)16,000150,000120,00025,00020,000100,00030,000(d) 30,000(d) 53,000(d) 30,000260,00015,000(g)1986-1990 1985-2000 1989-2008 1985-1998 1989-2008 1990-2009 1988-2007 102,00025,000(d) 25,000(d) 12,500(d) 25,000(d) 25,000(d) 25,000(d)

DetailsofPreferred andPreference Stock(b)OptionalRedemption PricePerSharc1984$104.14103.33102.59112.00103.56103.68110.00115.00115.00125.00125.00125.00123.00None106.05(h) 114.00106.50114.00114.00120.00SharesOutstanding 1984304,000150,000480,000450,000100,000500,000600,000589,550265,000150,000260,000150,000340,000510,000377,702500,000154,022500,000500,000500,000$30,40015,00048,00045,00010,00050,00060,00058,95526,50015,00026,00015,00034,00051,00037,77050,00015,40250,00050,00050,000$738,027$32,00015,00060,00047,50010,00050,00060,00064,82126,50015,00026,00015,00034,00051,00040,82050,00017,18950,00050,000$714,830Outstanding Thousands ofDollars19841983WithoutSinkingF<undRequirements 4'/BoPreferred...............

SeriesPreferred 3.35%4.40%4.60%8.60%9.00%%uoPreference

$8.00.$8.40.$8.70.110.00103.50102.00103.00107.00107.00103.00104.00101.00530,18941,783228,77363,000222,37077,630350,000400,000400,000$53,0194,17822,8786,30022,2377,76335,00040,00040,000$231,375$53,0194,17822,8786,30022,2377,76335,00040,00040,000$231,37532Seeaccompanying

¹tcstoFinancial Statetnents.

Increases (Decreases) inCapitalStock(sharesandamountinthousands) 19841983SharesAmountSharesAmount1982SharesAmountCommonStockPublicoffering.

Dividendreinvestment plan......Employeestockownership plan...-SeriesPreferred Stock(j)7.40%.7.75%.8.00%.9.24%.11.00%%uo, Adjustable

..............

11.00%.11.25%14.00%Preference Stock(j)$11.00$11.60$13.00$13.00,Second$13.684,178$84,875(16)(1,600)(120)(12,000)(25)(2,500)(59)(5,866)(30)(3,050)(18)(1,787)50050,0003,874$81,843(16)(1,600)(25)(2,500)(29)(2,935)15015,00026026,00015015,000(33)(3,268)50050,000(25)(2,500)4,000$77,1243,97169,93043702(16)(1,600)(17)(1,667)34034,000(18)(1,771)(16)(1,559)50050,000(a)Eachshareofpreferred, preference andcommonstockentitlestheholdertoonevoteonanyquestionpresented toanysharcowners'eeting.

(b)Liquidation pricespcrshareofpreferred stock(payableinpreference overthepreference stock)andpreference stockareasfollows(plusineachcaseanyunpaiddividends):

Involuntary Voluntary ClassLiquidation Liquidation 49'%referred

$100$100SeriesPreferred

$100Redemption priceineffect.Preference

$100Redemption priceineffect,exceptforthe$8.625Serieswhichis$100.(c)Theaggregate amountofsinkingfundredemption require-mentsthrough1989are(thousands ofdollars):

1985,$48,897;1986,$61,850;1987,$61,850;1988,$86,950;1989,$58,450.(d)Oncertainsinkingfundredemption dates,theCompanymayredeemadditional sharesuptothenumberofsharesoftheseseriesrequiredtoberedeemedannually.

(e)Intheeventthereisalossofcertainfederalincometaxbenefitstocorporate holdersofthesestocks,theCompanywouldberequiredtomakeindemnity paymentstotheownersuponthesaleorredemption ofthestockstoprovideanagreeduponeffective yieldafterfederalincometaxes.TheCompanyestimates thatasofDecember31,1984itcouldberequiredtomakesuchindemnity paymentsinthefuturenotinexcessof$5.1million.(f)Effective AprilI,1988,thedividendrateissubjecttoaone-timeadjustment pursuanttoaformulabasedonthethencurrentprimerate.(g)The14.00%Preferred Stockhasasinkingfundprovision whichrequiresredemption ofthefollowing numberofsharesannuallyat$100pershare:October1,1986.1987, 85,000;1988.1989,51,000;1990,68,000.(h)The$11.00Preference Stockmaynotberefundedthroughcertainrefunding operations priortoJuly1,1985.(i)Ownership ofthe$11.60,$13.00,SecondSeries,$13.68and$15.00Preference Stocksisevidenced byDepositary Prefer.enceShares,eachrepresenting

'/4shareofPreference Stock.(j)Decreases inPreferred andPreference Stocksrepresent:

(i)theredemption ofstockpursuanttosinkingfundrequirements, or(ii)sharesreacquired throughmarketpurchases andsubse-quentlycancelled.

Thereacquired andcancelled sharesareusedtomeetsinkingfundrequirements.

Secaccompanying NotestoFinancial Stateinents.

33 SCheduleOfLOng-Term DebtatDecember31FirstMortgageBonds(a)15/o9~/s%%uo1ls/4%%uo.

15%97/s%%uo3'Ys%%uo15%16'/s%.14'/4'%%uo

.16'/s%%uo.

16'/s%.16'/s%.16'/s%.12'/s%%uo.

16'ls'%%uo

.16'/s%4/s%to16'/2%5s/s%to8'/s%7'!4%to9'/4%%uo.8'/4%to9s/4%.12s/4%to15'/s%%uo Pollution control5s/s%SeriesA.77/s%to8'/s%SeriesC.11'/4%to11'/s%SeriesD10s/s%%uo SeriesE.10'eriesF.MaturityDate(b)February1,1984June1,1984December15,1984February1,1985June1,1985August1,1985February1,1986August1,1986December12,1986August1,1987September 1,1987August1,1988September 1,1988February1,1989August1,1989September 1,19891990.1994 1995-1999 2000-2004 2005-2009 2010.2014 (c)(c)(c)March1,2014September 1,20141984$16,66533,32925,00016,67030,90050,00036,00010,40010,10010,40010,0007,00010,400479,300140,000345,000475,000450,00023,34020,00070,00037,750115,5001983$16,66533,32930,00016,66533,32925,00016,67030,90050,00036,00010,40010,10010,40010,0007,00010,400354,300140,000345,000475,000325,00023,50020,00070,000Outstanding Thousands ofDollarsOtherLong-Term DebtSecuredtermnotes(a)(d).Miscellaneous promissory notesUnamortized (discount) andpremium-net.LessamountduewithinoneyearMarch31,19911985-1989 2,422,754 200,0008092,623,563 (19,057)2,604,506 75,975$2,528,531 2,099,658 300,0007962,400,454 (13,205)2,387,249 80,176$2,307,073 (a)Substantially allutilityplantissubjecttothelienoftheCompany's firstmortgageandcertainutilityplantisalsosubjecttothelienofasecondmortgage.

(b)Aggregate long.termdebtmaturities through1989are(thousands ofdollars):

1985,$75,975;1986,$98,623;1987,$47,429;1988,$21,511;1989,$28,375.Maximumsinkingfundrequirements aggregate

$33.7millionthrough1989andmaybemetwithpropertyadditions orretirement ofbonds.(c)Pollution controlbondsmatureannuallynsfollows(thou.sandsofdollnrs):

(i)SeriesAonMay1,1985,$640;1986.2002,

$900;2003,$7,400(ii)SeriesConApril1,2000,$4,000;2006-2009,$2,000;2010,$8,000(iii)SeriesDonNovember1,2002,$15,000;2012,$55,000.(d)Variableinterestrate.Seeaccompanying

¹testoFinancial Statements.

5ScheduleOfTaxeS(Thousands ofDollars)IncomeTaxExpense(Note6)Includedinoperating expensesProvision

-FederalStateDeferred-FederalStateInvestment taxcredit,net-Federal...Includedinotherincomeanddeductions Provision (credit)-FederalStateTotalincometaxexpense-FederalStateDetailofdeferredtaxesinoperating expensesTaxdepreciation

.Testoperation ofgenerating unit..........

DeferredSusquehanna energysavingsnetofoperating expenses..............

Unbilledrevenues.Stateutilityrealtytax.....Other.1984$51,79011,24363,033123,8442,815126,659(3,908)$185,784$(51,370)(11,253)$(62,623)$120,3562805$123,161$120,232(2,780)(2,287)14,888(3,894)$126,6591983$15,8236,78722,61094,689(938)98,751(4,306)$112,055$(15,216)(6,760)$(21,976)$90,990~911$90,079$101,728(10,856)(11,411)11,2663,024$93,7511982$55,1099,76264,87155,351(591)54,760(32,142)$87,489$(67,981)(9,768)$(77,744)$10,337~592$9,745$58,024(3,373)2,213(2,104)$54,760Reconciliation ofFederalIncomeTaxExpenseIndicated federalincometaxonpre.taxincomeatstatutory taxrate(46%)Reduction dueto:AFUDC,lessunusedconstruction interestdeduction

..Taxandpensioncost.DeferredSusquehanna capitalcosts...............

Other.TotalincometaxexpenseEffective incometaxrate$203,35077,6565,719(331)(2,855)80.189$123,16127.9%$177,60165,0886,31413,7702,35087,522$90,07923.3%$132,770110,8276,8385,365123,025$9,7453.4%Taxes,OtherThanIncomeStategrossreceipts.StatecapitalstockStateutilityrealtySocialsecurityandother$66,71123,04448,31616,135$154,206$60,11220,07431,80313,481$125,470$56,51518,24326,59110,319$111,668Seeaccompanying NotestoFinancial Statements.

35 Statement OfEarningSReinVeSted (Thousands ofDollars)198419831982Balance,January1AddNetIncomeDeductCashdividends declaredPreferred stock-atrequiredannualrates..........

Preference stock-atrequiredannualrates.........

Commonstock-pershare:1984,$2.48;1983,$2.40;1982,$232Issuancecostofretiredpreferred andpreference stock.....

Balance,December31$560,858318,903879,76147,43744,708181,091273,236$606,525$516,162296,011812,17347,26838,570165,344133251,315$560,858$453,885278,886732,77138,73029,584148,2878216,609$516,162NotestoFinancial Statements 1.SummaryofAccounting PoliciesV"significant subsidiary" asthattermisdefinedbytheSecurities andExchangeCommission.

36Accounting RecordsAccounting recordsaremaintained inaccordance withtheUniformSystemofAccountsprescribed bytheFederalEnergyRegulatory Commission (F<ERC)andadoptedbythePennsylvania PublicUtilityCommission (PUC).Associated Companies Investments inunconsolidated subsidiaries (allwhollyowned)andinSafeHarborWaterPowerCorporation (ofwhichtheCompanyownsone-third oftheoutstanding capitalstockrepresenting one-halfofSafeHarbor'svotingsecurities) arerecordedusingtheequitymethodofaccounting.

Unconsoli-datedsubsidiaries operateintheUnitedStatesandareengagedincoalmining,holdingcoalreserves, oilpipelineoperations andrealestateinvestment.

TheCompanybelievesthatitsfinancial positionandresultsofoperations arebestreflected withoutconsolidation ofthesesubsidiaries sincetheyarenotengagedinthebusinessofgenerating ordistributing electricity.

Allunconsolidated subsidiaries con-sideredintheaggregate wouldnotconstitute aUtilityPlantandDepreciation Additions toutilityplantandreplacement ofunitsofpropertyarecapitalized atcost.Thecostofunitsofpropertyretiredorreplacedisremovedfromutilityplantaccountsandchargedtoaccumulated de-preciation.

Expenditures formaintenance andre-pairsofpropertyandthecostofreplacement ofitemsdetermined tobelessthanunitsofpropertyarechargedtooperating expenses.

Forfinancial reporting

purposes, depreciation iscomputedonastraight-line methodusingratesbasedontheestimated usefullivesofproperty, withtheexception oftheSusquehanna nuclearplantwhichisdepreciated onamodifiedsinkingfundmethod,whichmethodisalsousedforrate-making purposes.

Provisions fordepreciation, asapercentofaveragedepreciable

property, approximated 2.5%%uoin1984,2.7'n1983and3.3%%uoin1982.CostofDecommissioning NuclearPlantAnannualprovision fordecommissioning costsoftheSusquehanna nuclearplantequaltotheamount allowedforrate-making purposesischargedtooper-'tingexpense.Suchamounts,netofincometaxes,areinvestedinsecurities keptinasegregated ac-countwhichcanbeusedonlyforfuturedecommis-sioningcosts.Allowance forFundsUsedDuringConstruction (AFUDCJAsprovidedintheUniformSystemofAccounts, thecostoffundsusedtofinanceconstruction projectsiscapitalized aspartofconstruction cost.Thecom-ponentsofAFUDCshownontheStatement ofIncomeunderotherincomeanddeductions andinterestchargesarenon-cashitemsequaltothecostoffundscapitalized duringtheperiod.Theequityfundscomponent isreducedbytheincometaxsavingsrealizedduetothetaxdeductibility ofconstruction-related interest.

AFUDCservestooff-setontheStatement ofIncometheinterestchargesondebtanddividends onpreferred andpreference stockincurredtofinanceconstruction.

Inaddition, areturnoncommonequityusedtofinanceconstruc-tionisimputed.SeeNote7toFinancial Statements forinforma-tionconcerning alimitation ofthetaxreduction reflected inAFUDCduetotheCompany's taxlosses.catedtotheindividual companies basedontheirrespective taxableincomeorlossandinvestment taxcredits.Incometaxesapplicable totheCompanyareallo-catedtooperating expensesandotherincomeanddeductions ontheStatement ofIncome.Underotherincomeanddeductions, theincometaxcreditsrelateprincipally tothetaxreductions associated withtheinterestexpensewhichisoffsetbytheborrowedfundscomponent oftheallowance forfundsusedduringconstruction.

Deferredincometaxesarerecordedfortimingdifferences betweenbookandtaxableincometotheextenttheyarepermitted inratedeterminations byregulatory agencies.

Thetwoprincipal itemsforwhichdeferredtaxesarenotcurrently recordedare(i)certainpensioncostsandemployee-related taxescapitalized forbookpurposesbutdeductedcurrently forincometaxesand(ii)aportionoftaxdepreciation inexcessofbookdepreciation relatedtopropertyplacedinservicepriorto1980.Investment andpayroll-based taxcreditsresultinareduction offederalincometaxespayable.Suchtaxcredits,otherthancreditsresulting fromcontribu-tionstotheemployeestockownership plan,arede-ferredwhenutilizedandamortized overtheaveragelivesoftherelatedproperty.

SeeNote6toF<inancial Statements foradditional information concerning incometaxes.Capitalization ofLeasesEffective asofJanuary1,1984,certaincapitalleasedpropertyandrelatedobligations werere-corded.Leasedpropertyisrecordedatthepresentvalueoffutureleasepaymentsandisamortized inamannersuchthatthetotalofinterestontheleaseobligation andamortization oftheleasedpropertyequaltherentalexpenseallowedforrate-making purposes.

SeeNote2toFinancial Statements foradditional information concerning thisaccounting change.NuclearFuelTherentalcostofnuclearfuelischargedtoexpenseasthefuelisusedforelectricgeneration.

UndertheNuclearWastePolicyActof1982,theU.S.Department ofEnergy(DOE)isresponsible forthepermanent storageanddisposalofspentnuclearfuelremovedfromnuclearreactors.

TheCompanycur-rentlypaysDOE<afeeforfuturedisposalservicesandrecoverssuchcostsincustomerrates.RevenuesRevenuesarerecordedbasedontheamountofelectricity delivered tocustomers totheendofeachaccounting period.Thisincludesunbilledrevenuesrepresenting theamountcustomers willbebilledforelectricity delivered fromthetimemeterswerelastreadtotheendoftherespective accounting period.TheCompany's PUCtariffscontainanenergycostrateunderwhichcustomers arebilledanestimated amountforfuelandotherenergycosts.Anydiffer-encebetweentheactualandestimated amountforsuchcostsiscollected fromorrefundedtocustomers inasubsequent period.Revenuesapplicable toener-gycostratebillingsarerecordedatthelevelofactualenergycostsandthedifference isrecordedaspayabletoorreceivable fromcustomers.

IncomeTaxesTheCompanyanditssubsidiaries fileconsolidated federalincometaxreturns.Incometaxesareallo-Retirement PlanTheCompanyhasanoncontributory retirement plancoveringsubstantially allemployees.

Companycontributions totheplanincludecurrentservicecostsandallamountsrequiredtoamortizeunfundedpriorservicecostsoverperiodsofnotmorethan20years.2.LeaseAccounting ChangeIn1984,inaccordance withStatement ofFinancial Accounting Standards No.71"Accounting fortheEffectsofCertainTypesofRegulation,"

theCom-panycapitalized certainleasedpropertyandobliga-tionswhichhadnotpreviously beenrecognized inthefinancial statements.

TheBalanceSheetandStatement ofChangesinFinancial Positionforperiodspriorto1984havebeenrestatedtoreflectretroactive application ofthischange.Thechangehadnoeffectonoperating

revenues, netincomeorretainedearnings.

Detailsofpropertyundercapitalleasesareasfollows(thousands ofdollars):

Nuclearfuel.Vehiclesandmiscellaneous equipment

..............

Oilstoragetanks..........

Otherproperty............

December3119841983$396,071$330,39969,05825,0231716362,83025,02322671507,315440,923Lessaccumulated amortization

....105,78871,595Propertyundercapitalleases...

$401,527$369,328FutureminimumleasepaymentsforcapitalleasesatDecember31,1984(excluding nuclearfuel)wouldaggregate

$104.6million,including

$32.7millionofimputedinterest.

Duringthefiveyearsending1989,suchpaymentswoulddecreasefrom$18.5millionperyearto$8.2millionperyear.FuturenuclearfuelleasepaymentswillbebasedonthequantityofheatproducedbytheSusquehanna units.Asleasednu-clearfuelisamortized, theCompanynormallysellsandleasesbackadditional fuel,therebymaintaining theunamortized balanceofleasednuclearfuelatalevelslightlybelowthe$350millionmaximumamountleasableundercurrentarrangements.

Theunamortized balanceofnuclearfuelunderleaseatDecember31,1984was$329.6million.Interestoncapitalleaseobligations whichwasrecordedasoperating expensesontheStatement ofIncomewasasfollows(thousands ofdollars):

1984,$13,836;1983,$10,914;and1982,$7,266.Generally, capitalleasescontainrenewaloptionsandobligatetheCompanytopaymaintenance, insurance andotherrelatedcosts.TheCompanyalsohasenteredintovariousoperating leaseswhicharenotmaterialwithrespecttotheCompany's financial position.

3.RateMattersInaccordance withrateordersissuedbythePUC,electricbaseratesforultimatecustomers werein-creasedbyapproximately

$73millionannuallyinJanuary1982and$203millionannuallyinAugust1983.TheAugust1983increaseresultedfromtheCom-pany'sfilingwhichreflected, amongothercosts,theeffectofplacingSusquehanna Unit1inservice.ThePUC'sorderdidnotpermittheCompanytoearnareturnon$287millionofitsnetinvestment inallgenerating facilities.

Thisadjustment, whichre-ducedrequested revenuesbyabout$59million,resultedfromadecisionbythePUCthat945,000kilowatts oftheCompany's generating capacitywasexcess.TheCompanywaspermitted torecoveralldepreciation, operation, maintenance andfuelcostsassociated withitsgenerating facilities.

SeeNote5forinformation concerning anagreement tosell945,000kilowatts ofcapacitytoJerseyCentralPower&LightCompany.InJuly1984,theCompanyfiledwiththePUCforanoverallincreaseinelectricratesofapproximately

$330million.Theincreasereflects:

(i)$466millionrelatedtotheinvestment andoperating costsassoci-atedwithplacingSusquehanna Unit2inserviceplusotherincreased costsofproviding electricity; less(ii)anestimated reduction inannualenergycostsofabout$136millionassociated withtheoperation ofSusquehanna Unit2.Tomoderatetheimpactoftheincrease, theCompanyhasproposedtobillcustomers onlyone-halfoftheamountrequested

($165million)inthefirstyearthatthenewratesareeffective.

Thefullamountoftheincreasegrantedwouldbebilledinthesecondyear.Theportionoftheincreasenotcollected fromcustomers inthefirstyearwouldbebilled,withoutinterest, overaperiodofaboutthreeyearsstartinginthethirdyear.ThePUCsuspended theCompany's rateincreaserequestandhasheldpublichearingsonthematter.TheCompanyexpectsthatthePUCwillreachadecisionontheraterequestbyApril26,1985.IfthePUCdoesnotadoptafinalrateorderbythatdate,theratesfiledbytheCompanywouldgointoeffect,subjecttorefund.TheFE'RCpermitted annualincreases inratesforwholesale customers of$2millioneffective August1981,$3millioneffective July1982and$4millioneffective March1984.4.DeferralofCostsRelatedtoSusquehanna Generating UnitsInaccordance withanorderofthePUCtheCompanydeferredcertaincosts,netofenergysav-ings,associated withSusquehanna Unit1.Suchdeferreditems,whichaggregate

$20.7million,wereincurredoveratwoandone-halfmonthperiodextending fromthedateofcommercial operation oftheunituntiltherateincreasereflecting theunitwaseffective (August22,1983).TheCompanyexpectstoseekrecoveryofthedeferredcostsafterthePUCrendersitsdecisionontheCompany's currentraterequest.ThePUChasissuedanordersimilartothatissued previously forSusquehanna Unitlwhich(i)author-izesthedeferralofSusquehanna Unit2relatedcostsintheeventtheunitgoesintocommercial operation beforetheendofthefuturetestyearand(ii)providesthatintheeventUnit2goesintocommercial opera-tionaftertheendofthefuturetestyear,theportionofthenewratesreflecting theUnit2costswouldgointoeffectshortlyaftertheunitbeginscommercial operation.

5.CapacitySalesAgreement TheCompanyandJerseyCentralPower&LightCompany(JCP&L)haveenteredintoalong-term agreement underwhichcapacityandenergywillbeprovidedJCP&L.Underthetermsoftheagreement, JCP&Lwillbeentitledto945,000kilowatts oftheCompany's generating capability andrelatedenergythrough1995withtheamountthendeclining uni-formlyeachyearuntiltheexpiration ofthecontractattheendof1999.JCP&LwillpayanamountequaltotheCompany's costofservice,whichincludesa38 lreturnontheCompany's investment ingenerating

~facilities.

Theagreement alsopermitsJCP&Ltodefercertainpayments.

Atsuchtimeastheagree-mentbecomeseffective, theCompanywouldexpecttorecoverfromJCP&Lthe$59millionayearinreturnoninvestment disallowed bythePUCinitsAugust1983rateorder.Theagreement willnotbecomeeffective untiltheNewJerseyBoardofPublicUtilities makesadetermination thattheagreement isinthepublicinterest.

Thenewratesrequested intheCompany's currentproceeding beforethePUCdonotprovideforrecov-eryofthecostsofoperating, depreciation, orareturnontheinvestment inthefacilities coveredbytheagreement withJCP&L.Iftheagreement doesnotbecomeeffective beforethePUCreachesadecisionontherateincreaserequest,theCompany's earningswillbeadversely affectedtotheextentsuchamountsarenotrecovered.

AdecisionbythePUConthecurrentrateproceeding isexpectedbyApril26,1985.6.IncomeTaxesTheInternalRevenueService(IRS)hascompleted itsexamination oftheCompany's federalincometaxreturnsfortheyears1977to1980.Basedonadjust-mentsproposedbytheIRS,theCompanydoesnotexpectanymaterialchangeinitsincometaxliability fortheseyears.TheCompanyhastaxlosscarryforwards atDe-cember31,1984ofapproximately

$100millionforbothfederalandstateincometaxpurposes.

Thestatetaxlosscarryforward expiresintheyears1986and1987,andthefederalincometaxlosscarryforward expiresintheyears1997to1999.TheCompanyhasunusedinvestment andpayroll-basedtaxcreditsaggregating approximately

$273million($35millionapplicable totheemployeestockownership plan)atDecember31,1984whichmaybeusedtoreducefuturefederalincometaxliabilities.

Thecarryforward periodforthesecreditsexpiresintheyears1993to1999.TheCompanyhasnotrecordeddeferredincometaxesforcertaintimingdifferences inaccordance withPUCratetreatment.

Thecumulative netamountofsuchtimingdifferences forwhichdeferredin-cometaxeshavenotbeenrecordedapproximated

$659millionatDecember31,1984.TheCompanywouldexpecttorecoverthroughelectricratesthetaxesduewhensuchtimingdifferences reverse.construction interestthatcouldnotbeusedasadeduction was$0.8millionfor1984,$53.8millionfor1983and$6.7millionfor1982.TotheextenttheCompany's taxlossesareusedtooffsettaxableincomeinfutureyears,AF<UDCwillbereducedbyanamountequaltothetaxreduction applicable totheconstruction interestincludedinthecarryforwards utilized.

8.StockHeldforDividendReinvestment ProgramAtDecember31,1984,511,054sharesofCommonStockoftheCompanywereheldtemporarily fordistribution toparticipants undertheCompany's DividendReinvestment Program.Thestockwaspurchased ontheopenmarketandiscarriedatcost.9.CreditArrangements TheCompanymaintains linesofcreditaggregat.

ing$120millionwithvariousdomesticbanks.Thearrangements requirethemaintenance ofcompen-satingbalances(notmaterialin amount)orthepaymentofcommitment fees.Borrowings undertheselinesofcreditaregenerally foroneyearattheprimeinterestrateandmaybeprepaidatanytimewithoutpenalty.TheCompanyhasaloanagreement withagroupofdomesticbankspursuanttowhichthebankscommittolendtheCompanyupto$600milliononarevolving basiswithloanstomatureonFebruary27,1987.AttheoptionoftheCompany,theinterestrateonborrowings wouldbebasedontheprimerate,ratesapplicable tocertificates ofdepositorratesapplicable toE<urodollar deposits.

Atthetimeanyborrowing maturesonFebruary27,1987,theagree-mentpermitstheCompanytoborrowupto$600million,theprincipal amountofwhichwouldbere-payableinsemi-annual installments overthefollow-ingthreeyears.Theloanagreement ismaintained bythepaymentofcommitment fees.During1984,theCompanyborrowedandrepaid$222millionundertermsoftheloanagreement withdomesticbanks.AtDecember31,1984,therewerenoborrowings outstanding underanyoftheCompany's creditarrangements.

Commitment feesincurredtomaintaintheCom-pany'screditarrangements aggregated

$2.6millionin1984,$2.6millionin1983and$2.9millionin1982.7.Allowance forFundsUsedDuringConstruction (AFUDC)AF<UDCisrecordedonanafter-tax basiswiththeequitycomponent reducedbytheincometaxsavingsrealizedduetothetaxdeductibility ofconstruction-relatedinterest.

Since1982,theCompanyhashadtaxlossesdue,inpart,tothelargeamountofconstruction interestincurred.

Asaresult,thein-~cometaxreduction reflected inAFUDChasbeenlimitedtothetaxapplicable toconstruction interestdetermined tobeusableasataxdeduction.

Thecombinedfederalandstateincometaxeffectofthe10.Retirement PlanandOtherPostretirement BenefitsPensioncostsfor1984,1983and1982were$29.0million,$27.7millionand$23.8million,respectively.

Oftheseamounts,$18.0millionin1984,$16.0millionin1983and$12.4millionin1982werechargedtooperating

expenses, andthebalancewaschargedtoconstruction andotheraccounts.

Theactuarial presentvalueofaccumulated retire-mentplanbenefitsandnetassetsattheendoftheplan'srecentfiscalyearsareasfollows(thousands ofdollars):

39 Actuarial presentvalueofaccumulated planbenefits:

(a)Vested.Nonvested

...............

Netassetsavailable forbenefits.

June3019841983$191,28410,185$189,31310,501$201,469$199,814$272,323$257,315Underequityaccounting, theoperations ofassoci-atedcompanies resultedinafter-tax chargesagainsttheCompany's netincomeof$4.1millionin1984,$4.2millionin1983and$0.3millionin1982.SeeNote14toFinancial Statements forinforma-tionconcerning theCompany's guarantee ofcertainobligations ofassociated companies.

(a)Excludesaccumulated planbenefitswhicharetheobligation offourinsurance companies underinsurance contracts.

Theassumedratesofreturnusedindetermining theactuarial presentvalueofaccumulated planbenefitswere6.59ofortheJune30,1984valuation and6%%uofortheJune30,1983valuation.

Thechangeintheassumedrateofreturnto6.5%%uodecreased theactuarial presentvalueofaccumulated planbenefitsatJune30,1984by$13.5million.TheCompanyalsoprovidescertainhealthcareandlifeinsurance benefitsforretiredemployees.

Substantially alloftheCompany's employees maybecomeeligibleforthesebenefitsuponretirement, andthecostisgenerally recognized asexpensewhenpremiumsarepaid.Suchcostsforretiredemployees for1984,1983and1982wereapproximately

$2.3million,$2.2millionand$1.4million,respectively.

ll.JointOwnership ofGenerating PlantsAtDecember31,1984,theCompanyownedundivi-dedinterests inthreegenerating stationsasfollows(millions ofdollars):

Generating StationSusquehanna.........

Keystone........

Conemaugh

..........

PlantInvestment Ownership

$3,73390.00%3812.343511.39TheCompanyreceivesaportionofthetotalstationoutputequaltoitspercentage ownership.

TheState-mentofIncomereflectstheCompany's shareoffuelandotheroperating costsassociated withthesta-tions.Eachparticipant providesitsownfinancing.

12.Associated CompanyTransactions Theprincipal transactions withassociated com-paniesinvolvepurchases ofbituminous coalandthetransportation ofoilbypipelineforuseattheCompany's generating stations.

Purchases ofbitumi-nouscoalfromassociated companies, whichareatapricegenerally equaltotheentireoperating costsofthosecompanies, were(millions ofdollars):

1984,$270.5;1983,$263.8;and1982,$255.1.Oiltransporta-tioncharges,whicharebasedonaPUCapprovedtariff,were(millions ofdollars):

1984,$8.6;1983,$15.1;and1982,$8.2.13.ProposedSaleofSteamHeatPlantTheCompanyhassignedamemorandum ofunder-standingrelatedtothesaleofitssteamheatplantandassociated distribution systeminthecityofHarrisburg.

Revenuesfromsteamheatoperations accounted forlessthan1%ooftheCompany's operat-ingrevenuesin1984andtheinvestment insteamheatplant,netofaccumulated depreciation, was$4.3millionatDecember31,1984.Thesaleisnotexpectedtomaterially affecttheCompany's netincome.Anyagreements involving thesaleofthesteampropertyrequirefurthernegotiation andwouldbesubjecttotheapprovalofthePUC.14.Commitments andContingent Liabilities TheCompany's construction expenditures areesti-matedtoaggregate

$272millionin1985,$274millionin1986and$269millionin1987,including theallowance forfundsusedduringconstruction.

Seethesectionentitled"CapitalExpenditure Require-ments"onpage25foradditional information con-cerningtheCompany's plannedconstruction expenditures.

TheCompanyisamemberofcertaininsurance programswhichprovidecoverageforpropertydam'-agetomembers'uclear generating plants.Facilities attheSusquehanna plantareinsuredagainstproper-tydamagelossesupto$1.1billionundertheseprograms.

TheCompanyisalsoamemberofaninsurance programwhichprovidesinsurance cover-ageforthecostofreplacement powerduringpro-longedoutagesofnuclearunitscausedbycertainspecified conditions.

Underthepropertyandreplace-mentpowerinsurance

programs, theCompanycouldbeassessedretrospective premiumsintheeventtheinsurers'osses exceedtheirreserves.

ThemaximumamounttheCompanycouldbeassessedduringthecurrentpolicyyearisabout$21million.TheCompany's publicliability forclaimsresulting fromanuclearincidentiscurrently limitedto$620millionunderprovisions ofthePrice-Anderson Act(Act).TheCompanyisprotected againstthispo-tentialliability byacombination ofcommercial insurance andanindustryretrospective assessment program.Intheeventofanuclearincidentatanyofthefacilities ownedbyothersandcoveredbytheAct,theCompanycouldbeassessedupto$10millionperincident, butnotmorethan$20millioninacalendaryearintheeventmorethanoneincidentisexperienced.

AtDecember31,1984,theCompanyhadguaran-teedobligations ofothercompanies (principally subsidiary coalcompanies andasubsidiary pipelinecompany)totaling$270.0million.40 15.'Quarterly Financial Data(Unaudited)

QuarterEndedOperating RevenuesOperating NetIncomeIncomeThousands ofDollarsEarningsApplicable toCommonStockEarningsPerShareofCommonStock(a)1984March.JuneSeptember December$479,484351,310349,994381,994$119,96493,05599,13294,807$98,24466,00376,50978,147$76,05942,85153,04954,799$1.070.590.720.741983March.JuneSeptember December$305,088270,909285,151387,249$62,64355,9567337397,958$79,82369,33268,90277,954$60,05547,86846,52355,727$0.890.700.670.80(a)Basedontheaveragenumberofsharesoutstanding duringthequarter.16.Supplementary Information onChangingPrices(Unaudited)

Thefollowing supplementary information ontheeffectsofchangingpricesispresented inaccordance withtherequirements oftheFinancial Accounting Standards Board(FASB),anorganization thates-tablishes rulesforaccounting andfinancial report-ing.Customary financial reporting generally hasnotattempted tospecifically reflectinflation.

TheFASBrequiresthatcertainaspectsofinflation becomputedinaccordance withprescribed techniques andreportedonanexperimental basis.TheFASBrecognizes, andtheCompanycautionsusersofthisinformation, thatthereisnoconsensus onthegeneralpractical usefulness ofthissupple-mentaryinformation.

Therearealsounresolved imple-mentation problemsandconceptual differences regard-ingthemannerinwhichtheeffectsofchangingpricesshouldbemeasured.

For1984,theFASBrequiresdisclosure oftheeffectsofchangingpricesbyuseofcurrentcostinformation.

Inaperiodofinflation, pricesofmostgoodsandservicesincreasebutnotnecessarily allatthesametime.Thecurrentcostmethodshowstheimpactofinflation onacompanybymeasuring theestimated changeinpricesofthespecificgoodsandservicesusedbythatcompany.TheCompanyhaselectedtopresentthe"Supple-mentaryStatement ofIncome"data(shownonpage42)inaccordance withthepartialrestatement provi-sionoftheFASBrequirements.

Underthisprovision, utilityplant,netofaccumulated depreciation, nu-clearfuelexpenseanddepreciation expensearetheonlyitemsrestatedtoreflectspecificpricechanges(currentcost).Fossilfuelinventories andthecostofsuchfuelhavenotbeenrestatedfromtheirhistorical costbecausetheyarestatedclosetocurrentcostandtheexpenseisgenerally recovered withinarelatively shorttimethroughadjustment clauses.Revenues, incometaxesandexpensesotherthannuclearfuelanddepreciation arepresented attheamountsre-portedinthebasicfinancial statements.

Setforthunder"OtherImpactsofChangingPrices"arethefollowing:

1.Gainfromdeclineinpurchasing powerofnetamountsowed.Inflation alsoaffectsmonetaryassets,suchascashandreceivables, whichlosepurchasing powerduringinflationary periodssincetheseassetswillintimepurchasefewergoodsorservices.

Conversely, holdersofmonetaryliabili-tiesbenefitduringsuchperiodsbecauselesspurchasing powerwillberequiredtosatisfytheseobligations.

Monetaryliabilities includepreferred andpreference stockissueswithsink-ingfundrequirements, long-term debt,currentliabilities, capitalleaseobligations, deferredtaxesandtaxcreditsandotherdeferredcredits.TheCompanyisinanetmonetaryliability position.

2.Increaseinnetutilityplantduringtheyearduetopricechanges.Theincreaseinnetutilityplantisshownasaresultofbothspecificpricechanges(currentcost)andchangesinthegeneralpricelevelasmeas-uredbytheU.S.Government ConsumerPriceIndexforAllUrbanConsumers (CPI-U).

3.Adjustment ofnetutilityplanttonetrecoverable amount.Undertheratemaking prescribed byregula-torycommissions, onlythehistorical costofutilityplantisrecoverable inrevenueasdepreci-ation.Therefore, anyexcessbetweentheamountofutilityplantstatedintermsofcurrentcostF(afterdeducting theeffectsofgeneralinflation) andhistorical costmustbereducedtonetrecover-ableamount.Theamountofsuchexcessthataccruedasaresultofpricechangesinthecurrentyearisshownasanadjustment ofnetutilityplanttonetrecoverable amount.Supplementary Statement ofIncomefor1984(Thousands ofDollars)AsReportedinFinancial Statements (Historical Cost)AdjustedontheBasisofPriceChangesExperienced (CurrentCost)(a)Operating revenues.

Operating expensesFuelDepreciation (b)Other.Interestexpense.Otherincomeanddeductions

-netDividends onpreferred andpreference stockEarningsapplicable tocommonstockOtherImpactsofChangingPricesGainfromdeclineinpurchasing powerofnetamountsowed.....

IncreaseinnetutilityplantduringtheyearduetopricechangesAsaresultofspecificpricechangesexperienced (c).AsaresultofchangesingeneralpricelevelExcessofincreaseinspecificpricesoverincreaseingeneralpricelevel.Adjustment ofnetutilityplanttonetrecoverable amount-(reduction)

$1,562,782 720,670118,763316,3911,155,824 209,873(121,818) 92,1451,336,024

$226,758$1,562,782 728,309274,867316,3911,319,567 209,873(121,818) 92,1451,499,767

$63,015$158,217$472,388(393,076)

$79,312$(155,285)

(a)Statedinaverage1984dollars.(b)Thecurrentcostofutilityplantwasdetermined byapplyingconstruction costindicesmaintained bytheCompanytothehistorical cost.Theadjustedprovision fordepreciation wasdetermined byapplyingthefunctional classdepreciation accrualratestotherespective averageyear.endbalancesofdepreciable plantadjustedforspecificpricechanges.(c)AtDecember31,1984,thecurrentcostofactutilityplantwas$10.69billion,whilethehistorical costornetamountrecover-ablethroughdepreciation was$6.26billion.

Thefollowing schedulepresentsasummaryofreportedinfinancial statements orotherstatistical selecteddatacomparing itemsastheyarenormallysummaries toitemsadjustedforchangingprices.Supplementary Comparison ofSelectedData(Thousands ofDollars,ExceptPerShareAmounts)19841983198219811980$1,133,278 1,294,283

$1,219,548 1,312,353 8885,4511,116,142

$1,248,397 1,301,529

$1,562,782 1,562,782 226,75863,015170,80177,684120,38435,202210,17381,125210,57294,7573.063.353.172.641.181.511.440.773.120.87415,154(79,312)(115,272)

(287,657)

(69,108)(180,424)

(345,237)

(352,924) 4,154(155,285) 256,283331,989131,019121,3271,666,812 1,842,079 1,482,092 1,784,361 2,128,362 2,098,680 1,999,324 2,049,389 1,875,070 1,994,987 2.242.582.322.492.402.512.482.482.122.6717.1215.6218.9318.81272.4246.821.0022.34289.120.6221.14298.425.1224.77311.1(c)Nctassets(sharcowncrs'quity) forpurposesofthissupple-mentarydisclosure includescommonequityandthcpreferred andpreference stockswithoutsinking fundrequirements.

Thepreferred andprcfcrcnce stockswithsinkingfundrequire-mentshavebeenexcludedsincetheyweretreatedasmonetaryitems.Operating revenuesAsreported.

Average1984dollars(a)Earningsapplicable tocommonstock(b)Asreported.

Currentcostinaverage1984dollars........Earningspershareofcommonstock(b)Asreported.

Currentcostinaverage1984dollars........

Amountbywhichtheincreaseingeneralpricelevelofnetutilityplantisgreaterthanor(lessthan)theincreaseinspecificpricesofnetutilityplantAdjustment ofnetutilityplanttonetrecoverable amount-write.up(reduction) atcurrentcostinaverage1984dollars........Gainfromdeclineinpurchasing powerofnetamountsowed158,217Netassetsatyear-end(c)Asreported.

Currentcostinaverage1984dollars........

Cashdividends declaredpercommonshareAsreported.

Average1984dollars(a)Marketpricepercommonshareatyear-endAsreportedAverage1984dollars(a)Averageconsumerpriceindex(CPI-U)........

C(a)Adjustedtoaverage1984dollarsbyapplyingtheCPI-Uindextoitemsasnormallyreported.

(b)1981excludesanonrecurring creditrelatedtoanaccounting change.43 SelectedFinancial andOperating Data)(c)operty..IncomeItems-thousands Operating revenues.Operating incomeAllowance forfundsusedduringconstruction.

Netincome(a)Earningsapplicable tocommonstock(a).....BalanceSheetItems-thousands (b)NetutilityplantinserviceConstruction workinprogressTotalassets(c)Long-term debt...........................

Preferred andpreference stockWithsinkingfundrequirements...........

Withoutsinkingfundrequirements........

CommonequityShort-term debtTotalcapitalprovidedbyinvestors..........

Financial RatiosReturnonaveragecommonequity-/o(a)....Embeddedcostrates(b)Long-term debt-%.Preferred andpreference stock-9o.........

Timesinterestearnedbeforeincometaxes(aRatioofearningstofixedcharges-total enterprise basis(a)(d).Depreciation as%ofaveragedepreciable prCommonStockDataNumberofsharesoutstanding

-thousands Year-endAverage.Earningspershare(a)Dividends declaredpershare.Taxability ofdividendincome-9o(e)........Bookvaluepershare(b).Marketpricepershare(b).Dividendpayoutrate-%(a)Dividendyield-9o(e)(I)Priceearningsratio(a)(I).FuelCostDataCostperkwhgenerated

-centsCoal-fired steamstationsNuclearsteamstation(h).Oil-fired steamstationCombustion turbinesanddiesels(oil)......Average.CostoffossilfuelreceivedatsteamstationsCoal-pertonResidualoil-perbbl.Employees (b).1984$1,562,782 406,958168,938318,903226,758$3,860,960 2,020,839 6,910,783 2,604,506 738,027231,3751,896,987 104,8005,575,695 12.3011.129.942.352.062.574,51372,767$3.12$2.4863.29$25.46$25'/s8011.007.241.760.545.319.821.98$42.75$31.288,3861983$1,248,397 289,930251,548296,011210,173$3,847,301 1,730,228 6,418,509 2,387,249 714,830231,3751,767,949 190,0005,291,403 12.2910.989.662.292.042.770,33568,642$3.06$2.400$25.12$20'/s7910.487.481.680.665.2310.212.15$39.37$29.798,1601982$1,219,548 223,083246,423278,886210,572$2,112,169 2,923,841 5,829,138 2,323,318 621,634231,3751,643,695 160,5454,980,567 13.6010.819.412.051.813.366,46162,809$3.35$2.320$24.71$217011.955.791.775.6210.742.20$42.32$30.948,2081981$1,133,278 211,050193,861244,077183,182$2,054,039 2,312,292 5,097,550 2,165,381 544,231231,3751,435,437 175,4894,551,913 12.7410.808.931.911.783.258,44753,912$3.17$2.240$24.52$17'/s7213.345.301.645.7510.512.30$39.59$33.477,9991980$885,451168,659141,241179,759120,384$1,954,762 1,874,397 4,359,257 1,811,692 510,800231,3751,250,717 56,3243,860,908 10.3810.608.492.061.903.250,62745,598$2.64$2.120$24.68$15/s8212.016.681.404.557.891.96$33.78$26.447,702(a)1981netincomeandearningsapplicable tocommonstockincludeanonrecurring creditrelatedtoanaccounting change,whileindicated financial ratiosandcommonstockdataforthatyeararecomputedexcluding thenonrecurring creditfromearnings.

(b)Year.end.

(c)1980.1983 restatedtoreflectchangeinaccounting forcapitalleases.(d)Fixedchargesconsistofinterestonshort-andlong.termdebt,otherinterestcharges,interestoncapitalleaseobligations andtheestimated interestcomponent ofotherrentals.(e)Basedonholdingoneshareofcommonstockfortheentireyear.(f)Basedonaverageofmonth.end marketprices.(g)Thewinterpeaksshownwerereachedearlyinthesubsequent year.(h)TheCompany's firstnuclearunitwasplacedincommercial operation onJunc8,1983andthesecondunitonFebruary12,1985.44 SalesDataElectriccustomers (b)..Averageannualresidential kwhuse............

Electricenergysalesbilled-millionsofkwhResidential Commercial Industrial OtherSystemsales..............................

AtlanticCityElectric(Susquehanna Unit1)..Totalelectricenergysalesbilled...........

Sourcesofenergysold-millionsofkwhGenerated Coal-fired steamstations.Nuclearsteamstation(h).Oil-fired steamstationCombustion turbinesanddiesels(oil)..Hydroelectric stationsPowerpurchases Interchange powersalesCompanyuse,linelossesandother..Totalelectricenergysalesbilled.19841,039,381 9,2828,4546,5278,117104324,14135724,49826,6956,2954,1213274737,8903,765(15,377)(1,780)24,49819831,026,144 9,0518,1386,1197,62396822,84820923,05726,8854,5095,5814570037,7203,880(16,405)(2,138)23,05719821,013,623 9,0398,0455,9467,32498222,29722,29725,4772933,1861361229,5811,414(6,900)(1,798)22,29719811,006,570 9,1578,0885,8937,968I00522,95422,95424,8414,7053262230,200744(6,274)(1,716)22,9541980999,5259,2058,0565,7437,91078422,49322,49326,5965,6923353332,8541,415(9,798)(1,978)22,493ElectricRevenueDataByclassofservice-thousands Residential Commercial Industrial Otherenergysales.Systemsales.AtlanticCityElectric(Susquehanna Unit1)..Totalfromenergysalesbilled............

Unbilledrevenues, netOtheroperating revenuesTotalelectricoperating revenues.........

Averagepriceperkwhbilled-centsResidential Commercial Industrial Totalforultimatecustomers Totalforallcustomers

$591,922441,651411,53359,526$529,911386,617367,95047,275$503,557363,233347,72647,731$411,668292,984295,00639,484$349,714246,024245,51328,4801,504,632 31,8091,331,753 18,4941,262,247 1,039,142 869,7311,536,441 (9,725)29,9601,350,247 (119,539) 12,9721,262,247 (61,652)12,7081,039,142 76,88410,142869,73110,5957.006.775.076.306.276.516.324.835.915.866.266.114.755.745.665.094.973;704.594.534.344.283.103.903.87$1,556,676

$1,243,680

$1,213,303

$1,126,168

$880,326Generation DataGenerating capability-thousands ofkw(b).Winterpeakdemand-thousands ofkw(g)..Generation byfuelsource-%%uoCoalNuclear(h)Oil.Hydroelectric Steamstationavailability

-%Coal-fired Nuclear(h)Oil-fired

.Steamstationutilization

-%Coal-fired Nuclear(h)Oil.fired

.7,4845,51970.416.611.02.075.266.768.073.365.728.67,4944,86971.311.914.91.978.867.775.874.067.538.86,5464,48986.11.010.82.179.180.470.222.26,5465,20782.215.72.174.773.468.432.86,5464,94581.017.41.678.779.673.039.545 CommonStockPriceandDividendDataQuarterEnded1984MarchJuneSeptember

.December.HighLow$22/s$19'/422s/s19~/s23~/s2125'/s23Theprincipal tradingmarketfortheCompany's commonstockistheNewYorkStockExchange.

ThestockisalsolistedonthePhiladelphia StockEx-change.Thenumberofrecordholdersofcommonstockwas162,903asofDecember10,1984.ThehighandlowsalespricesoftheCompany's commonstockontheComposite TapeforthepasttwoyearsasreportedbyTheWallStreetJournalwereasfollows:TheCompanyhaspaidquarterly cashdividends onitscommonstockineveryyearsince1946.Thedividends paidpersharein1984and1983were$2.46and$2.38,respectively.

Themostrecentregularquarterly dividenddeclaredbytheCompanywas62centspershare(equivalent to$2.48perannum)paidJanuary1,1985.Futuredividends willbedependent uponfutureearnings, financial requirements andotherfactors.TheCompanyhasestimated that36.71%%uo ofits1984dividends paidoncommonstockwillnotbetaxableforfederalincometaxpurposesasdividendincome,butwillconstitute areturnofcapitalwhichreducesthetaxcostbasisofthesharesonwhichthedividends werepaid.1983MarchJuneSeptember

.December.$24'/z$207/s24'/s20'/~23'/s20'/s24'/s20 4VFiscalAgentsTRANSFERAGENTSFORPREFERRED, PREFERENCE ANDCOMMONSTOCKMorganGuarantyTrustCompanyofNewYork30WestBroadwayNewYork,NewYork10015Pennsylvania Power&LightCompanyTwoNorthNinthStreetAllentown, Pennsylvania 18101REGISTRARS FORPREFERRED, PREFERENCE ANDCOMMONSTOCKTheFirstNationalBankofAllentown HamiltonMallatSeventhAllentown, Pennsylvania 18101MorganGuarantyTrustCompanyofNewYork30WestBroadwayNewYork,NewYork10015DEPOSITARY FORDEPOSITARY PREFERENCE SHARESMorganGuarantyTrustCompanyofNewYork30WestBroadwayNewYork,NewYork10015DIVIDENDDISBURSING OFFICEANDDIVIDENDREINVESTMENT PLANAGENTVicePresident andTreasurer Pennsylvania Power&LightCompanyTwoNorthNinthStreetAllentown, Pennsylvania 18101-Securities ListedOnExchanges NEWYORKSTOCKEXCHANGE4'/2%Preferred Stock(Code:PPLPRB)4.409oSeriesPreferred Stock(Code:PPLPRA)8.609oSeriesPreferred Stock(Code:PPLPRG)9.24%SeriesPreferred Stock(Code:PPLPRM)Preference Stock,$8.00Series(Code:PPLPRJ)Preference Stock,$8.40Series(Code:PPLPRH)Preference Stock,$8.70Series(Code:PPLPRI)Preference Stock,$11.00Series(Code:PPLPRL)Preference Stock,$13.00Series(Code:PPLPRK)Depositary Preference Shares,$2.90Series(Code:PPLPRP)Depositary Preference Shares,$3.25Series(Code:PPLPRO)Depositary Preference Shares,$3.42Series(Code:PPLPRR)Depositary Preference Shares,$3.75Series(Code:PPLPRN)CommonStock(Code:PPL)PHILADELPHIA STOCKEXCHANGE4'/i9oPreferred Stock3.3590SeriesPreferred Stock4.4090SeriesPreferred Stock4.60%SeriesPreferred Stock8.60%SeriesPreferred Stock990SeriesPreferred Stock9.24%SeriesPreferred StockPreference Stock,$8.00SeriesPreference Stock,$840SeriesPreference Stock,$8.70SeriesPreference Stock,$11.00SeriesPreference Stock,$13.00SeriesDepositary Preference Shares,$2.90SeriesDepositary Preference Shares,$3.25SeriesDepositary Preference Shares,$3.42SeriesDepositary Preference Shares,$3.75SeriesCommonStock OfficersDirectors ROBERTK.CAMPBELL, President andChiefExecutive OfficerMERLINF<.HERTZOG,Executiue VicePresident.

Corporate ServicesJOHNT.KAUFFMAN, Executive VicePresident-Operations JACKR.CALHOUN,SeniorVicePresident-Nuclear LEONL.NONEMAKER, SeniorVicePresident.

DiuisionOperations CHARLESE.RUSSOLI,SeniorVicePresident.

Financial JOHNR.BIGGAR,VicePresident-Finance GENNAROD.CALIENDO, VicePresident andChiefCounsel.Regulatory AffairsNORMANW.CURTIS,VicePrcsident-Engineering

&Construction-Nuclear ROBERTS.GOMBOS,VicePresident-HumanResource&Development CHARLESJ.GREEN,VicePresident-Harrisburg DiuisionWILLIAMF<.HE'CHT,VicePresident.

SystemPowerBRUCED.KENYON,VicePresident-Nuclear Operations JOHNP.KIERZKOWSKI, VicePresident andTreasurer CARLR.MAIO,VicePresident LehighDiuisionGRAYSONE<.McNAIR,VicePresident-Marketing

&CustomerSeruicesEDWARDM.NAGEL,VicePresident, GeneralCounselandSecretary HERBERTD.NASHJR.,VicePresident-Central DiuisionCLAIRW.NOLL,VicePresident-Procuremcnt

&ComputerServicesJOHNE.ROTH,VicePresident.

NorthernDivisionJOHNH.SAEGER,VicePresident.

Susquehanna DiuisionEDWINH.SEIDLER,VicePresident-Engineerin g&Construction SystemPower&Engineering BRENTS.SHUNK,VicePresident-Lancaster DiuisionJEANA.SMOLICK,Assistant Secretary GEORGEF.VANDERSLICE, VicePresident andComptroller PAULINEL.VETOVITZ, Assistant Secretary WILLIAMR.WHITE,VicePresident-Power Production HELENJ.WOLFER,Assistant Secretary andAssistant Treasurer Corporate Managcmcnt Committee:

RobertK.Campbell, chairman; MerlinF.Hertzolt, JohnT.Kauffman, JackR.Calhoun,LeonL.None-maker,Charlesh.Russoli,andEdwardF.Rois,Director.

Corporate Plan-ning,servingasthecommittee's executive secretary.

CLIF<FORD L.ALEXANDER JR.,Washington, D.C.President, Alexander

&Associates Inc.Consultants tobusiness, government

&industryELIZABETH E.BAILEY,Pittsburgh Dean,GraduateSchoolofIndustrial Admii)istration, Carnegie.

MellonUniversity ROSWELLBRAYTONSR.,WoolrichPresident andChiefExecutiue Officer,1Voolrich 1VoolenMillsInc.Manufacturer ofgarmentsforoutdooractivities JEFFREYJ.BURDGE,CampHillChairmanoftheBoardandChiefExecutiue Officer,HarscoCorporation.

Manufacturer ofprocessed andfabricated metalsROBERTK.CAMPBELL, Allentown President andChiefExecutive OfficerEDGARL.DESSEN,HazletonPhysician.

Radiologist EDWARDDONLEY,Allentown ChairmanoftheBoardandChiefExecutiueOfficer,AirProductsandChemicals Inc.Manufacturer ofindustrial andcommercial gasesandchemicals MERLINF.HERTZOG,Allentown Exccutiue VicePresident Corporate ServicesFRANCESR.HESSELBEIN, NewYorkCityNationalExecutive

Director, GirlScoutsoftheU.S.A.HARRYA.JENSEN,Lancaster DirectorandformerChiefExecutive Officer,Armstrong 1VorldIndustries Inc.Manufacturer ofinterior furnishings and.specialty productsJOHNT.KAUFFMAN, Allentown ExccutiueVicePresident-Operations W.DEMINGLEWIS,Bethlehem President

Emeritus, LehighUniuersity HAROLDS.MOHLER,HersheyFormerChairmanoftheBoard,HersheyFoodsCorporation.

Diversified manufacturer offoodproductsRALPHW.RICHARDSON JR.,StateCollegeConsultant, agricultural andenuironmental sciencesNORMANROBERTSON, Pittsburgh SeniorVicePresident andChiefEconomist, MellonBank,N.A.DAVIDL.TRESSLER, ScrantonChairmanoftheBoardandChiefExecutive Officer,Northeastern BankofPennsyluania Executive Committee:

RobertK.Campbell, chairman; EdgarLDesscn,HarryA.Jensen,1V.DemingLewisandNormanRobertson.

AuditCommittee:

DavidLTrcssler, chairman; CliffordIAlexander Jr.Elizabeth E.Bailey,RoswellBraytonSr.,iiaroldS.Mohler,andRalphN<.Richardson Jr.Corporate Responsibility Committee:

EdgarLDessen,chairman; JeffreyJ.Burdge,FrancesR.Hesselbein, HaroldS.MohlerandDavidLTresslcr.Management Devclopmcnt andCompensation Comrnittce:

RoswellBraytonSr.chairman; CliffordLAlexander Jr.~Elizabeth E.Bailey,EdwardDonfey,1V.DemingLewisandNormanRobertson.

Nominating Committee:

Ralph1V.Richardson Jr.,chairman; JeffroyJ.Burdge,EdwardDonley,FrancesR.Hesselbcin andHarryA.Jensen.TheCompany's annualreportfiledwiththeSecurities andExchangeCommission onForm10-Kwillbeavailable mid-March.

Ashareowner mayobtainncopy,ntnocost,bywritingtoPennsylvania Power&LightCompany,TwoNorthNinthStreet,Allentown, Pn.18101,attention:

Mr.GeorgeI.Kline,Manager-Investor Services.

~.('-'Boa'rd o'fDirectors Alexander BaileyBraytonl.Burdge=,IRLSCQDessenDonleyHesselbein Jensen,'.'~YA>)

Pz.mLewisMohlerRichardson Robertson

(,(I,I)'/,(((((((Y,)'((j((74irTresslerCorporate Management Committee ReisNonemaker HertzogCampbellKauffmanCalhounRussoli

~g~Pennsylvania Power&LightCompanyTwoNorthNinthStreet~Allentown, PA18101~21517705151 AeBULKRATEU.S.POSTAGEPAIDAllentown.

Pa.PermitNo.104l86<<<<<<a<<<<<<atBI<<<<gjgPlglQogggggOOg

<<iElevenyearsandthreemonthsaftergroundwasbrokenatthesiteofPP&L'sSusquehan-nanuclearplantnearBerwick,Pa.,thesec-ondunitwasputintocommercial operation Feb.12,1985.Theachievement cappedape-riodduringwhichthousands ofpeoplegavemillionsofhoursofdedicated worktosuc-cessfully completethelargestconstruction projectInthecompany's history.Withtheout-putfromSusquehanna, andfromPP&L'sothergenerating plants,thecompanywillbeabletoprovideanabundantsupplyofreliable, economical electricpowerforCentralEasternPennsylvania wellintothenextcentury.<<)))<<)).LithoInU.