ML17334B092
| ML17334B092 | |
| Person / Time | |
|---|---|
| Site: | Cook  |
| Issue date: | 12/31/1986 |
| From: | ALEXICH M P INDIANA MICHIGAN POWER CO. (FORMERLY INDIANA & MICHIG |
| To: | MURLEY T E NRC OFFICE OF ADMINISTRATION & RESOURCES MANAGEMENT (ARM) |
| References | |
| AEP:NRC:0909C, AEP:NRC:909C, NUDOCS 8705270419 | |
| Download: ML17334B092 (38) | |
Text
REQULATO INFORMAl ION DISTRIBUTION TEN (RIDS)'r'CCESSION,NBR:
870527041 9 DOC.DAl E: Bb/1 2/31 NOTARIZED:
NO DOCKET N FAC Ik: 50-315 Donald C.Cook Nuclear Pover Planti Unit 1>Ind iana 0 050003f 5 50-31b Donald C.Cook Nuclear PoI.ier Planti Uriit 24 Ind iana Pr 05000316 AUTH.NAME AUTHOR AFFILIATICIN ALEX ICH>M.P.Indiana Lic Michigan Electric Co.REC IP.NAME RECIPIENT AFFILIATE ll~N MURLEY>T.E.Document Control BI anch (Document Control Des.")
SUBJECT:
"Indiana 5 Michigan Electric Coi Annual Rept 198b." W/870of8 1tr.DISTRIBUTION CODE: N004D COPIES RFCEIVED: LTR l ENCL 3 SIZE:Q TITLE: 50.71(b)Annual Financial Repor i.NOTES: REC IP I ENT ID CODE/NAME PD3-3 PD INTERNAL.AEOD/DOA NRR/PMAS/PTSB EXTERNAL: LPDR COPIES LTTR ENCL 1 1 1 1 1 1 1 RECIPIENT ID CODE/MANE WTCQINQTONi D AF/TPAB FI E 01 t":HC PDR COP IP~LTTR Fi'c.L 0 1 1 f 1 1 TOTAL NUMBER OF COPIES REQUIRED: LTTR 8 ENCL 7 I)~4 J II ,J (tQ p,y,, I'4 t I I, t 4"II 8 ly t",h INDIANA 8 NICHIGAN ELECTRIC CONPANY P,O, BOX 16631 COLUMBUS, OHIO 43216 Mav 18, 1987 AEP'NRC:0909C 10 CFR 50.71(b)6 140.21(e)Donald C.Cook Nuclear Plant Unit Nos.1 and 2 Docket Nos.50-315 and 50-316 License Nos.DPR-58 and DPR-74 FINANCIAL INFORMATION FOR INDIANA 6 MICHIGAN ELECTRIC COMPANY U.S.Nuclear Regulatory Commission Attn: Document Control Desk Washington, D.C.20555 Attn: T.E.Murley
Dear Mr.Murley:
Enclosure 1 contains the Indiana 6 Michigan Electric Company's (I&MECo)annual report for 1986.Enclosure 2 contains a copy of 16MECo's projected cash flow for 1987.These reports are submitted pursuant to 10 CFR 50.71(b)and 10 CFR 140.21(e).
This document has been prepared following Corporate procedures which incorporate a reasonable set of controls to insure its accuracy and completeness prior to signature by the undersigned.
Very truly yours, M.P.Al xich Vice President cm Enclosures cc: John E.Dolan (w/o enclosures)
W.G.Smith, Jr.-Bridgman (w/o enclosures)
R.C.Callen (w/o enclosures)
G.Charnoff (w/o enclosures)
G.Bruchmann (w/o enclosures)
NRC Resident Inspector-Bridgman A.B.Davis-Region III J po il
'Enclosure 2 to AEP:NR:0909C 1987 Internal Cash Plow Projection for Donald C.Cook Nuclear Plant, (Millions)
Actual 1986 Projected 1987 Net income after taxes Less dividends paid Retained earnings Adjustments:
Depreciation and amortization Deferred income taxes and investment tax credits AFUDC Total adjustments Internal cash flow Average quarterly cash flow Average cash balances and short-term investments Total 152.5 139.5 13.0 107.9 49.5 (52.0)105.4 118.4 29.6 49.0 78.6 152 136 16 117 10 (51)76 92 23 35 58%Ownership in all operating nuclear units: Unit 1 and Unit 2-100%Maximum Total Contingent Liability-$20.0 million (2 units)'
l r'4 A l 0 0 0 ANNUAL REPORT 1986 AMERICAN ELECTRIC POWER SYSTEM 8705270419 Qgos(Q'DR ADOCK 0 000315 I P DR/
Contents Background of the Company Selected Financial Data Management's Discussion and Analysis of Results of Operations and Financial Condition Auditors'pinion Consolidated Statements of Income Consolidated Balance Sheets 5-7 10-11 Consolidated Statements of Sources and Applications of Funds Consolidated Statements of Retained Earnings Notes to Consolidated Financial Statements Operating Statistics Directors and Officers of the Company Dividends and Price Ranges of Cumulative Preferred Stock 12 13 14-25 26-27 28 29 INDIANA&MICHIGAN ELECTRIC COMPANY One Summit Square, P.O.Box 60, Fort Wayne, Indiana 4680I Background of the Company INDtANA&MrcHroAN ELEcnuc CoMpANY (the Company), a subsidiary of American Electric Power Company, Inc.(AEP), is engaged in the generation, purchase, transmission and distribution of electric , power.The Company was organized under the laws of Indiana on February 21, 1925, and is also authorized to transact business in Michigan and West Virginia.Its principal executive offices are in Fort Wayne, Indiana.The Company has two wholly owned subsidiaries; they are Blackhawk Coal Company and Price River Coal Company, which were formerly engaged in coal-mining operations.
The Company serves approximately 457,000 customers in northern and eastern Indiana and a portion of southwestern Michigan.Among the principal industries served are transportation equipment, primary metals, fabricated metal products, electrical and electronic machinery, and rubber and plastic products.In addition, the Company supplies wholesale electric power to other electric utilities, municipalities and electric cooperatives.
The Company's generating plants and important load centers are interconnected by a high-voltage transmission network.This network in turn is interconnected either directly or indirectly with the following other AEP System companies to form a single integrated power system: AEP Generating Company, Appalachian Power Company, Columbus and Southern Ohio Electric Company, Kentucky Power Com-pany, Kingsport Power Company, Michigan Power Company, Ohio Power Company and Wheeling Electric Company.The Company is also interconnected with the following other utilities:
Central Illinois Public Service Company, The Cincinnati Gas&Electric Company, Commonwealth Edison Company, Consumers Power Company, Illinois Power Company, Indiana-Kentucky Electric Corporation (a sub-+sidiary of Ohio Valley Electric Corporation), Indianapolis Power&Light Company, Northern Indiana Public Service Company and Public Service Company of Indiana, Inc.
Selected Financial Data Year Ended December 31, 1986 1985 1984 (in thousands) 1983 1982$1,059,903 868,014 191,889 76,879 268,768 122,667 INCOME STATEMENTS DATA: OPERATING REvENUEs-ELEcrRIC..........
$1,069,359 TOTAL OFBRATINO EXFBNSBS...............
878 215 OPERATING INCOME 191,144 TOTAL OTHER INCOME AND DEDUCTIONS
......66 905 1NCOME EEFORB INIBRFBT CHAROBS.........2586049 NET INTEREST CHARGES 105 568 CoNsoLIDATED NET INcoME-before preferred stock dividend requirements
.....152,481 146,101 PREFERRED STOCK DIVIDEND REQUIREMENTS
..26 256 27,056 EAIININOS AFFLICABLE TO COMMON STOCK....$126 225$119,045$965,972 785,814$868,980 686,237$809,803 634,858 180,158 53,044 182,743 53,629 174,945 48,725 236,372 96,496 223,670 102,647 233,202 91,017 142,185 27,705 139,876 28,384 121,023 28,628$114,480$111,492$92,395 BALANCE SHEETS DATA: ELEcrRIc UTILITY PLANr ACCUMULATED PROVISIONS FOR DEPRECIATION, DEPLETION AND AMORTIZATION NET ELECIRIc UTILITY PLANT TGTAL AssErs 1986 1985 December 31, 1984 (in thousands) 2,784,257 2,940,338 3,669,867 3,559,078 2,878,042 3,463,874$3,783,973$3,878,707$3,715,005 999 716 938,369 836,963 1983$3,666,823 4760,889 2,905,934 3,343,963/1982$3,541,114 685,789 2,855,325 3,135,884 COMMON STOCK, PREMIUMS ON CAPITAL STOCK AND OTHER PAID-IN CAPrrAL.............
RETAINED EARNINGS CUMULATIVE PREFERRED STOCK: Nol'UBJEcf To MANDAToRY REDEMPrIQN SUBIEcr To MANDATQRY REDEMPrtoN (a)LONG-TERM DEBT (a)828,347 113,123 197,000 79,030 1,421,523 828,347 100,130 828,344 94,317 197,000 197,000 86,030 93,197 1,442,070, 1,347,623 (807,925 95,616 197,000 99,497 1,445,704 777,783 91,756 197,000 104,447 1,397,475 (a)Including portion due within one year.
INDIANA&MICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition The following are the more significant factors bearing on the financial condition of Indiana&Michigan Electric Company and its subsidiaries as reflected in the consoli-dated results of operations.
This discussion refers tq the consolidated financial statements that follow.RESULTS OF OPERATIONS
¹t Income Consolidated net income before preferred dividend re-quirements increased by 4.4%in 1986 and 2.8%in 1985.The 1986 increase resulted primarily from lower fixed charges for interest and increased miscellaneous nonoper-ating income less deductions due predominantly to a de-crease in certain costs associated with a subsidiary's Utah mining properties.
The proportion of allowances for funds used during con-struction (AFUDC)included in net income before preferred dividend requirements remained even with the previous year: 34.1%(27.2%net of income taxes)in 1986 and 33.3%'27.1%
net of income taxes)in 1985.This is in contrast to 82.1%(66.0%net of income taxes)in 1984.The decrease in the AFUDC percentage in 1985, compared with 1984, was largely the result of a decrease in construc-tion work in progress subject to such allowance due to the commercial operation of Rockport Plant Unit No.'(Rock-port 1)in late 1984.See.Note 1 of the Notes to Consolidated Financial Statements for a description of AFUDC.Another item affecting earnings was a deferred return recorded by the Company on its investment in Rockport Unit 1.The deferred return represented 28.5%of net in-come in 1986 and 41.3%in 1985.See Note 3 of the Notes to Consolidated Financial Statements.
Operating Revenues and Expenses Consolidated operating revenues increased slightly in 1986 over the previous year compared to a 9.7%increase in 1985.The increase in 1986 revenues was mostly due to additional rate relief and a small increase in sales of electric energy partially offset by reduced fuel cost recoveries.
In 1985, kilowatt-hour (kwh)sales decreased 10.5%primar-ily due to a drop in kwh sales to wholesale customers.
Operating revenues increased in 1985 even with this sales decline, primarily due to rate relief along with increased recovery of fuel costs.Revenues from retail customers (residential, commercial and industrial) were up 1.2%in 1986, after increasing by 18.4%in 1985.The increase in 1986 retail revenues was mainly because of additional rate relief coupled with a slight increase in energy sales partially offset by lower fuel cost recoveries.
The slight increase in 1986 energy sales included an increase in industrial and commercial sales of 2.1%and 1.3%, respectively, partially offset by a decrease of 1.5%in residential sales.The increase in energy sales to industrial customers, the fourth consecutive year of growth, reflected a continuation of a recovery in the in-dustrial sector of the Company's service territory.
The in-crease in 1985 revenues was due primarily to higher rates.Revenues from energy sales to other utilities remained virtually unchanged despite a 3.5%rise in kwh sales, and dropped 5.7%in 1985 on a 20.9%drop in kwh sales.Although kwh sales rose in 1986, revenues remained flat because of a lower average realization per kwh sold.Com-petition and price cutting in the wholesale market were directly responsible for the reduced realization per kwh.The decrease in 1985 kwh sales, caused primarily by lower sales to neighboring utilities, was partially offset by in-creased rates charged by the Company to its wholesale customers.
The highly competitive wholesale marketplace is expected to continue in the near future since a number of nonaffiliated midwestern utilities have capacity to sell.The Company has a long-term contract that expires on December 31, 1987 to provide 400,000 kilowatts of energy (200,000 kilowatts after February 1, 1987)to a nonaffil-iated utility.This contract contributed approximately 12%, 12%and 11%of the Company's total operating revenues and 37%, 37%and 32%of the Company's earnings ap-plicable to common stock before any pro-forma adjust-ments for the AEP System Interchange Power Pool (Pool)in 1986, 1985 and 1984, respectively.
If this contract did not exist the Company would'have been required to make payments in a lesser amount, or alternatively been entitled to certain receipts, due to the operation of the Pool.After these pro-forma adjustments, the contract contributed ap-proximately 18%, 17%and 24%of such earnings for such respective years The Company has reflected the reduction in revenues resulting from the February 1 reduction in the contract in its petition before the Public Service Commission of In-diana for a rate increase.The Company can give no as-surance that it will receive such relief or arrange other transactions and failure to receive such relief or arrange other transactions could have a material adverse effect on the Company's net income.Purchased and interchange power expense decreased 23.9%in 1986 following a 23.2%increase in 1985.The changes in 1986 and 1985 were mostly caused by the un-availability of the Donald C.Cook Nuclear Plant Unit No.1 (Cook I)during 1985, because of the 10-year an-niversary service outage required by the Nuclear Regula-tory Commission.
When Cook 1 was returned to service, the purchased and interchange power transactions were no longer needed to meet the Company's load requirements.
In addition, the purchase of an affiliated company's share of the generation of Rockport 1 further increased purchased and interchange power expense in 1985.Fuel expense, the single largest expense of the Com-pany, increased by 8.7%and 11.4%in 1986 and 1985, respectively.
In 1986 the consumption of fuel increased as a result of a higher generation level mostly the result of Cook 1 being returned to.service as explained above.In 1985 fuel expense increased due primarily to the commer-cial operation of Rockport 1 as well as an increase in other internal fossil generation.
This relatively more expensive fossil generation was used to help offset the decrease in nuclear generation available because of the Cook 1 outage discussed earlier.Future fuel expense will be affected by generation levels, supply-and-demand factors, contractual agreements between the coal industry and the United Mine Workers of America and the possibility of more stringent environmental restrictions on the burning of certain types of coal.Whether or not future increases in fuel costs will affect earnings adversely will depend on the Company's continued ability to recover such costs promptly in the face of efforts by some consumer groups and others to delay or reduce rate increases and to eliminate or reduce the extent of coverage of fuel-adjustment clauses.Maintenance expense had a small decrease in 1986 but increased 28.7%in 1985.The 1985 increase included the expense of the 10-year anniversary service outage of Cook 1, the commercial operation of Rockport 1, and the failure of step-up transformers at Rockport 1.Depreciation expense increased in both 1986 and 1985.The increase in 1985 was due mainly to the commercial operation of Rockport 1.The 1986 increase was due largely to the amortization of previously deferred Rockport 1 costs.Federal income taxes increased 31.4%in 1986 compared to a modest increase in 1985.The 1986 increase in Federal income taxes was due primarily to an increase in pre-tax book operating income and changes in certain book/tax timing differences, the tax effects of which are accounted for on a flow-through basis.Total interest charges decreased 8.9%in 1986 after a small decrease in 1985.The 1986 decrease resulted from the Company's replacement of high-interest bonds with bonds having lower interest rates.Egects of Inflation Inflation has had an effect on the Company's consoli-dated revenues, expenses and net income before preferred stock dividend requirements that is not readily evident in conventional financial statements.
Over the past thee years, consolidated revenues showed a slight increase on an historical basis;however, when adjusted for, the effects of inflation they remain relatively flat.Most of the Com-pany's assets are long-lived property, plant arid equipment acquired over a period of years.The depreciation of these assets charged to income is based on'historical cost and would be substantially greater when adjusted for the cost of replacing these resources at current cost.However, the rate-making process limits the Company to recovery of the historical cost of assets.If the income statement were ad-justed for inflation, net income would be substantially lower.The low rate of inflation over the past several years did not eliminate these effects but rather minimized the variation from year to year.
INDIANA&MICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES
-LIQUIDITY AND CAPITAL RESOURCES Construction and Financing Program The Company has a construction program to build, ac-quire, improve and replace plant, property and equipment used for the generation, transmission and distribution of electricity and for other utility services.Construction ex-penditures for the three-year period 1987-1989 are esti-mated at$748 million.If acid rain legislation similar to that currently proposed is enacted into law, the Company would be required to make substantial additional expend-itures.See"Environmental Matters" in Note 10 of the Notes to Consolidated Financial Statements for additional information.
The need for external funds to support the construction program is expected to increase.It is expected that ap-proximately'45%
of the Company's projected construction expenditures for 1987-1989 will be financed with internally generated funds.The additional amounts needed, in excess of other available funds, will have to be raised externally, as in the past, through sales of securities and with invest-ments in the Company's common equity by AEP.The Company generally issues short-term debt (com-mercial paper and bank loans)to provide interim financing of construction expenditures in excess of available inter-nally generated and"other funds.The Company then pe-riodically reduces short-term debt with the proceeds of sales of long-term debt securities and preferred stock and with investments in its common equity by AEP.The amounts of short-term debt that the Company may issue are limited by regulatory restrictions under the Public Utility Holding Company Act of 1935 and by restrictions in its charter and in certain debt instruments.
At December 31, 1986, the Company had received authorizations from the Securities and Exchange Commission to issue a total of approximately
$220 million of short-term debt, and had outstanding unused short-term lines of credit with banks of approximately
$269 million shared with other AEP Sys-, tem companies.
The lines of credit may be withdrawn at any time by the banks extending them, and in most cases the banks require the maintenance of compensating deposit balances or the payment of fees in lieu of deposits.The Company can issue additional long-term debt and preferred stock only if it complies with earnings-coverage requirements contained in its mortgage bond and debenture indentures and charter.These provisions do not prevent certain types of pollution-control revenue bond financings by public bodies on behalf of the Company, but the levels of coverage under them may affect the cost and marketa-bility of such bonds.At December 31, 1986, the long-term debt and preferred stock coverages of the Company were at least 2.80 and 1~80, respectively.
Cook Nuclear Plant The Cook Nuclear units are exhibiting indications of intergranular corrosion (IGC)in the steam generator tub-ing, a condition which has developed in other pressurized water reactors.This has led to a decision to operate Unit No.2 at 80%power and Unit No.1 at 90%power as a steam-generator'ife conservation measure.It is presently planned to replace the Unit No.2 steam generators in late 1988 or 1989, at an estimated cost of$160 million, to correct this condition.
The IGC problem in the Unit No.1 steam generators is occurring at a slower rate than in Unit No.2, but it is possible that the Unit No.1 steam gen-erators will also have.to be replaced eventually.
However, there are no present plans for such replacement.
When the Unit No.2 replacement program occurs, it will require an extended outage, estimated at 12 months.This is not ex-pected to have a materially adverse effect on the Compa-ny's operations or financial results.Tar Reform Act The Tax Reform Act of 1986, enacted October 22, 1986, provides for extensive revisions to Federal tax law.A major provision of the Act reduces the corporate income tax rate from 46%to 34%, effective July 1, 1987.As a result of this and other changes in the tax law, our regulatory com-missions are reviewing the Act's impact on rates to con-sumers in their jurisdictions.
While the Company is not able to quantify, at this time, the, overall effects on financial results for all of the Company's jurisdictions, the Company does not anticipate a material impact on net income as a result of these changes in the tax law.However, provisions in the Act relating to depreciation lives, repeal of the in-vestment tax credit and taxation of unbilled revenues will result in reduced internal cash flow.
Auditors'pinion Deleitte Heskiiis+Sells 155 fest Broad Street Cofumbus.Ohio 4321&3650 (614)221-1000 ITT Teterc 4995627 To the Shareowners and the Board of Directors of Indiana S Michigan Electric Company: We have examined the consolidated balance sheets of Indiana S Michigan Electric Company and its subsidiaries as of December 31, 1986 and 1985 and the related consolidated statements of income, retained earnings and sources and applications of funds for each of the three years in the period ended December 31, 1986.Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, such consolidated financial statements present fairly the financial position of the Company and its subsidiaries at December 31, 1986 and 1985 and the results of their operations and their sources and applications of funds for each of the three years in the period ended December 31, 1986, in conformity with generally accepted accounting principles applied on a consistent basis.February 24, 1987 INDIANA&MICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES Consolidated Statements of Income Year Ended December 31, OPERATING REVENUES-ELECIRIC OPERATING EXPENSES: Operation:
Fuel for Electric Generation Purchased and Interchange Power (net)Other Maintenance Depreciation and Amortization Taxes Other Than Federal Income Taxes Federal Income Taxes Total Operating Expenses OPERATING INCOME OTHER INcoME AND DEDUcrtoNs:
Allowance for Other Funds Used During Construction
.Deferred Return-Rockport Plant Miscellaneous Nonoperating Income Less Deductions
.Total Other Income and Deductions
........INCOME BEFORE INTEREST CHARGES INTEREST CHARGES: Interest on Long-term Debt.Interest on Short-term Debt.Miscellaneous Interest Charges.Total Interest Charges Allowance for Borrowed, Funds Used During Construction (credit)Net Interest Charges CoNsoLIDATED NET INcoME-before preferred stock dividend requirements PREFERRED STOCK DIVIDEND'REQUIREMENTS EARNINGS APPLICABLE TO COMMON STOCK 1986$1 069 359 233,241 1589684 1579500 80,171 101,456 519291 95 872 878 215 191 144 259397 43,438~1930)66 905 258 049 124,333 6,118 1 725 132,176 26 608 105 568 152,481 26 256$126 225 1985 (in thousands)
$1,059,903 214,545 208,501 151,658 81,089 92,895 46,339 72,987 868,014 191,889 26,214 60,378~9,713)76,879 268,768 134,117 9,119 1,909 145,145 22,478 122,667 146,101 27,056$119,045 1984$965,972 192,592 169,217 161,430 63,002 85,268 44,921 69,384 785,814 180,158 61,361 3,401~11,718)53,044 233,202 142,719 1,809 1,884 146,412 55,395 91,017 142,185 27,705$114,480 Scc IVotcs to Consolidatt d Financial Statcmcnts Consolidated Balance Sheets ASSETS December 31, 1986 1985 (in thousands)
ELEcTRlc UTILITY PmNr: Production Transmlsston Distribution General and Miscellaneous Construction Work in Progress.Total Electric Utility Plant Less Accumulated Provisions for Depreciation and Amortization Electric Utility Plant Less Provisions
$292399863 713,398 362,314 46,301 422 097 3,783,973 999 716 2 784 257$2,164,035 599,029 340,769 229,269 545,605 3,878,707 938,369 2,940,338 OTHER PRQPERTY AND INVEsTMENm 260 569 74,092 CURRENr Assam: Cash Special Deposits and Working Funds Temporary Cash Investments (at cost, which approximates market)Accounts Receivable:
Customers Associated Companies Miscellaneous Accumulated Provision for Uncollectible Accounts Materials and Supplies (at average cost or less): Fuel Construction and Operation Materials and Supplies Accrued Utility Revenues Prepayments and Other Current Assets Total Current Assets 3,062 41,891 89,129 5,360 10,7011 (609)58,463 20,947 49,000 9 727 287 671 4,503 52,281 4,972 88,743 5,611 7,117 (526)48,507 21,542 71,615 8,772 313,137 DEFERRED DEBITS: Unamortized Debt Expense Property Taxes Other Work in Progress.Deferred Nuclear Fuel Disposal Costs Deferred Depreciation and Return-Rockport Plant.Other Deferred Debits Total Deferred Debits Total 5,619 2,776 1,566 64,546 134,483 128 380 337 370 5,398 2,478 2,449 72,620 80,313 68,253 231,511$3 669 867$3,559,078 10 See bootes to Consolidated Financial Statements.
INDIANA&MICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES CAPITALIZATION AND LIABILITIES December 31, 1986 1985 (in thousands)
CAPITALIZATION:
Common Stock-No Par Value: Authorized
-2,500,000 Shares Outstanding
-1,400,000 Shares.Premiums on Capital Stock Other Paid-in Capital Retained Earnings.Total Common Shareowner's Equity...............
Cumulative Preferred Stock: Not Subject to Mandatory Redemption Subject to Mandatory Redemption (less sinking fund requirements due within one year)Long-term Debt (less portion due within one year)............
Total Capitalization (less amounts due within one year).~OTHER NONCURRENT LIABILITIES
$569584 381 771,382 113 123 941,470 197,000 75,030 1 410 023 2 623 523 59 520$56,584 381 771,382 100,130, 928,477 197,000 86,030 1,302,872 2,514,379 45,544 CIIRRENT LIABILITIES:
1 Cumulative Preferred Stock Sinking Fund Requirements Due Within One Year Long-term Debt Due Within One Year Short-term Debt: Notes Payable,.Commercial Paper Accounts Payable: General Associated Companies Dividends Declared on Cumulative Preferred Stock.....Customer Deposits'axes Accrued Interest Accrued Revenue Refunds Accrued.Other Current Liabilities Total Current Liabilities 4,000 11,500 11,325 38,600 34,420 25,009 6,414 3,662 53,472 329143 48 521 269 066 139,198 35,431 34,569 6,614 3,155 32,918 35,381 18,625 34,156 340,047 CoMMITMENTs AND CQNTINGENcIEs (Note 10)DEFERRED CREDITS: Deferred Income Taxes Deferred Investment Tax Credits Other Deferred Credits.Total Deferred Credits.Total 525,044 180,306 12 408 717 758 492,728 154,745 11,635 659,108$3 669 867$3,559,078 Consolidated Statements of Sources and Applications of Funds SOURCES OF FUNDS: Funds from Operations:
Consolidated Net Income-.Principal Non-fund Charges (Credits)to Income: Depreciation and Amortization Provision for Deferred Income Taxes (net)Deferred Investment Tax Credits (net)Amortization of Deferred Nuclear Fuel Disposal Costs Allowance for Other Funds Used During Construction
.......Deferred Return-Rockport Plant Other (net)Total Funds from Operations Funds from Contributions and Financings:
Contributions and Financings:
Capital Contributions from Parent Company...............
Long-term Debt Short-term Debt (net)Total Less Retirements of Cumulative Preferred Stock and Long-term Debt Net Funds from Contributions and Financings Sales of Property Decrease (increase) in Working Capital (a)Total Sources of Funds APPLICATIONS OF FUNDS: Plant and Property Additions:
Gross Addttions to Utility Plant Gross Other Additions Total Gross Additions Allowance for Other Funds Used During Construction
.........Net Plant and Property Additions.Dividends on Common Stock Dividends on Cumulative Preferred Stock Deferred Depreciation
-Rockport Plant...Other Changes (net)Total Applications of Funds (a)Excludes Cumulative Preferred Stock Sinking Fund Requirements Due Within One Year, Long-term Debt Due Within One Year and Short-term Debt and is represented by decrease (increase) as follows: Cash and Cash Items Accounts Receivable Materials and Supplies.Accrued Utility Revenues Accounts Payable Dividends Declared on Common Stock...............
Taxes Accrued Revenue Refunds Accrued Other (net).See¹tes to Consolidated Financial Statements.
1986 Year Ended December 31, 1985 1984 (in thousands)
$1529481$146,101$142,185 107,915 24,219 25,328 13,247 (25,397)(43,438)4 585 258 940 93,460 82,163 46,571 9,206 (26,214)(60,378)3,789 294,698 88,298 54,638 58,078 4,163 (61,361)(3,401)5,187 287,787 197,681 49 925 144,660~110,000)20,000 46,605 247,606 235 432 34,660 80,347 12 174~45,687 39 476 28 258 52,828 73,710 66,605 103,982.37,377 243,579~115,113$204,942 3 933 208,875 (25 397)183,478 113,232 26,256 12,765 3 117$222,625 105 222,730~26,2)4 196,516 113,232 27,056 16,652 22,093$297,232 122 297,354~6),361 235,993 115,779 27,705~601$338 848$375.549$378,876$16,803 (3,636)(9,361)22,615 (10,571)20,554 (18,625)10 479$28 258$81,479 5,497', 22,402 (26,236)(1,687)(2,660)6,096 (1,052)~10,129)$73,710$(129,986)15,638 882 3,171 (24,034)(14,956)11,854 19,579 2,739~$I)5,113)$338 848$375,549$378,876 12 INDIANA&MICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES Consolidated Statements of Retained Earnings Year Ended December 31, Balance at Beginning of Year Consolidated Net Income Total 1986$100,130 152 481 252 611 1985 (in thousands)
$94,317 146, 101 240,418 1984$95,616 142,185 237,801 Deductions:
Cash Dividends Declared: Common Stock Cumulative Preferred Stock: 4'/8%Series 4.56%Series 4.12%Series 7.08%Series 7.76%Series 8.68%Series 12%Series$2.15 Series$2.25 Series$2.75 Series$3.63 Series Total Deductions Balance at End of Year See iVotes to Consolidated Financial Statements.
1139232 495 273 165 2,124 2,716 2,604 1,918 3,440 3,600 3,113 5 808 139 488 5113 123 113,232 495 273 165 2,124 2,716 2,604 2,278 3,440 3,600 3,553 5,808 140,288$100,130 115,779 495 273 165 2,124 2,716 2,604 2,615 3,440 3,600 3,865 5,808 143,484$94,317 Notes to Consolidated Financial Statements 1.Significant Accounting Policies: The common stock of the Company is wholly owned by American Electric Power Company, Inc.(AEP).The accounting and'rates of the Company are subject in certain respects to the requirements of state regulatory bod-ies and in certain respects to the requirements of the Federal Energy Regulatory Commission (FERC).The consolidated financial statements include the ac-counts of the Company and two wholly owned subsidiaries previously engaged in coal-mining operations.
Significant intercompany items have been eliminated in consolidation.
The consolidated financial statements have been prepared on the basis of the accounts which are maintained for FERC purposes.Electric Utility Plant;Depreciation and Amortization; Other Property and Investments Electric utility plant is stated at original cost.Generally, the plant of the Company is subject to first mortgage liens.The Company capitalizes, as a construction cost, an al-lowance for funds used during construction (AFUDC), an item not representing cash income, which is defined in the applicable regulatory systems of accounts as the net cost of borrowed funds used for construction purposes and a reasonable rate on other funds when so used.The com-posite rates used by the Company after compounding on a semi-annual basis were 11.5%in 1986, 12.55%in 1985 and 12.5%in 1984.The Company provides for depreciation on a straight-line basis over the estimated useful lives of the property.The current provisions are determined largely with the use of functional composite rates as follows: Functional Composite Class of Annual~PlO fl Rates Production:
Steam-Nuc1ear 4.0%Steam-Fossil-fired
.3.7%Transmission 2.1%Distribution
'.6%General 2.9%Operating expenses are charged with the costs of labor, materials, supervision and other costs incurred in main-taining the properties.
Property accounts are charged with costs of betterments and major replacements of property, and the accumulated provisions for depreciation are charged with retireinents, together with removal costs less salvage.Other property and investments are generally stated at cost.Income Taxes Deferred Federal income taxes are provided to the extent that such amounts are reflected in revenue levels.The Com-pany normalizes the effect of tax reductions resulting from investment tax credits utilized in connection with current Federal income tax accruals consistent with rate-making policies.The Company's consolidated coal subsidiaries generally use the flow-through method of accounting for investment tax credits and practice deferred tax accounting for the effects of certain timing differences.
Pension Plans The companies participate with other companies in the AEP System in a non-contributory trusteed plan to provide pensions for all their employees, subject to certain eligi-bility requirements.
The companies recorded no pension cost for the years ended December 31, 1986 and 1985.Pension cost for the year ended December 31, 1984 was approximately
$2,713,000.
In 1985 the companies changed the actuarial cost method from the projected benefit method to the proj-ected unit credit method and changed the assumed invest-ment rate of return used in determining pension expense under the plan to 9%from 7%.The 1985 cost was reduced by approximately
$2,035,000 because of the change in assumed rate of return and by approximately
$678,000 because of the change in cost method.The actuarial changes made are believed to reflect more appropriate ac-tuarial assumptions and will position the plan to reflect forthcoming changes in accounting for pension costs sched-uled to take effect in 1987.Pension costs provide for the cost of currently accruing benefits and amortization of, and interest on, unfunded prior service costs amortized over periods of up to 30 years.Pension cost, if determined under the forthcoming accounting standards, would not be sig-nificantly different.
The companies make annual contri-butions to the plan equal to the amounts accrued for pension expense.In addition to providing pension benefits, the companies provide certain health care benefits for retired employees.
Substantially all of the companies'mployees may become eligible for these benefits if they have com-pleted 10 years of continuous service at retirement.
The cost of retiree health care benefits is recognized as expense when paid.In 1986, 1985 and 1984, these costs totaled$1,061,000,$780,000 and$852,000, respectively.
INDIANA&MICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES Actuarial present value of accumulated plan benefits: Vested Nonvested..........
Net assets available for benefits$75,124 8,233$83,357$128,726$67,421 7.945$75,366$108,534 The assumed rate of return used by the actuary in deter-mining the actuarial present value of accrued benefits was 8%at each valuation date.The Company is of the opinion that comparing the ac-tuarial value of accumulated plan benefits with net assets available for benefits, as in the above table, may tend to be misleading.
The plan-as required by the Employee Retirement Income Security Act of 1974 (ERISA)-is being funded on an ongoing basis on the assumption that it will be in existence for many years to come.However, the statement of actuarial value of accumulated plan ben-efits-as required by the Financial Accounting Standards Board-is essentially a hypothetical plan termination cal-culation not taking into account future salary and wage increases or future service.Additionally, it should be rec-ognized that net assets, which are at fair value, will fiuc-tuate from time to time, which may create erroneous impressions of the status of the long-term funding process.However, the 1987 pension accounting changes referred to above do provide for including the effect of future salary increases on accumulated plan benefits, in addition to changing the pension cost determination.
As such, the new standard would provide for a more appropriate ongoing basis of comparing accumulated plan benefits with assets.Other The'Company accrues unbilled revenues for electric service rendered subsequent to the last billing cycle through month-end.
Debt discount or premium and debt expenses are being amortized over the lives of the related debt issues and the amortization tliereof is included within miscellaneous interest charges.Operating revenues derived from a certain wholesale'ustomer represent approximately 12%of total operating revenues for 1986, 12%for 1985 and 11%for 1984.A comparison of the plan's accumulated benefits and net assets as of January 1, 1986, the date of the most recent actuarial study, is presented below: Janu 1, 1986 1985 (in thousands) 2.Mining Operations:
In May 1986, Blackhawk Coal Company (Blackhawk), a subsidiary formerly engaged in coal-mining operations, consummated an agreement to lease or sublease certain of its coal rights, land and related mining equipment and fa-cilities in Carbon County, Utah.In connection with the lease/sublease transaction, Blackhawk transferred
$107,000,000 of its investment from general and miscel-laneous electric utility plant to other property and invest-ments.The remainder of its investment in this property not recovered in the lease/sublease transaction, approximately
$50,000,000, is subject to recovery in the future from wholesale customers in accordance with a FERC settlement agreement and was transferred to other deferred debits.See Note 10.Blackhawk's remaining partially developed Carbon County, Utah coal rights not being recovered from whole-sale customers or through the above lease/sublease trans-action, with a net book value of approximately
$51,000,000, have been retained as an investment and transferred to other property and investments.
3.Rate Matters: The Company has been engaged in rate proceedings for the inclusion in rate base of construction costs of Unit 1 of the Rockport Plant (Rockport 1).Rockport 1 is a 1,300,000-kilowatt generating unit jointly owned by the Company and AEP Generating Company (AEGCo), also an AEP subsidiary.
The unit began commercial operation on December 10, 1984.The Company and AEGCo have expended$725,847,000 through December 1986 on the construction of a second unit at the Rockport Plant (Rock-port 2), which is expected to be completed in 1989 at an estimated cost of$1.3 to$1.4 billion.The Company is committed to purchase 70%of AEGCo's share of Rock-port 2 energy.The inclusion of Rockport 2 in rate base, the recovery of related purchased power and the timing of such are dependent on the outcome of future regulatory proceedings.
15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Public Service Commission of Indiana (PSCI)ap-proved a two-step rate increase with the first step effective in December 1984 and the second step effective one year later.The first step and the second step excluded from rate base$315,153,000 and$245,000,000, respectively, of construction costs associated with Rockport 1 but allowed the Company to accrue a deferred return based on a rate equal to its AFUDC rate and to defer annual depreciation expense on the amounts excluded from rate base.The second-step rate levels provide for amortization of the first-step deferred return and deferred depreciation to cost of service over a 30-year period.In May 1986, the Company petitioned the PSCI for a rate increase which included plac-ing in rate base the remainder of Rockport 1 and the am-ortization of the second-step'eferred return and deferred depreciation to cost of service over a 30-year period.The FERC issued orders in 1985, providing for a total increase of approximately
$47,216,000 in three steps.Step I of approximately
$17,446,000 was effective in October 1984;Step II of approximately
$17,534,000 was effective in December 1984;and Step III of approximately
$12,236,000 was effective in December 1985.The Step II and Step III rates excluded from rate base$170,724,000 and$132,721,000, respectively, of construction costs as-sociated with Rockport 1 but allowed the Company to ac-crue a deferred return based on a rate equal to its AFUDC rate and to defer annual depreciation expense on the amounts excluded from rate base.The Step III rate levels provide for amortization of the Step II deferred return and deferred depreciation to cost of service over a 30-year period.As a result of the above rate proceedings, the Company has recorded through December 31, 1986 and 1985 a net deferred return of$105,065,000 and$63,661,000, respec-tively, and net deferred depreciation of$29,418,000 and$16,652,000, respectively, on Rockport 1.The Company has received regulatory approvals in each of its jurisdictions to utilize a fuel-cost-levelization plan in connection with a certain long-term coal supply contract for Rockport 1.Under these plans, the difference between actual fuel costs and average fuel costs was deferred through June 1986 with monthly amortization to fuel ex-pense of Rockport 1 beginning in July 1986.At December 31, 1986, the Company had approximately
$33,585,000 deferred pursuant to these plans.In December 1986, the Financial Accounting Standards Board (FASB)issued Statement of Financial Accounting Standards No.90,"Regulated Enterprises
-Accounting for Abandonments and Disallowances of Plant Costs," which amended Statement No.71,"Accounting for the Effects of Certain Types of'Regulation," as it relates to the accounting for plant abandonments and partial rate dis-allowances, which presently does not affect the Company.The FASB continues to consider additional amendments to FASB 71 which, among other things, will address phase-in plans.In October 1986, the FERC approved an offer of settle-ment concerning wholesale rates that AEGCo may charge under its Unit Power Agreements with the Company and Kentucky Power Company (KEPCo).The Company Unit Power Agreement provides for the sale by AEGCo to the Company of 50%of the total output of the Rockport Plant.Pursuant to an agreement between the Company and KEPCo, AEGCo has entered into a unit power agreement with KEPCo to sell KEPCo 15%of the total output of Rockport Plant.As a result, the Company purchased 35%of the output of the Rockport Plant from AEGCo through December 31, 1986.The Company has also entered into an agreement with an unaffiliated utility which permits AEGCo to sell from January 1, 1987 through December 31, 1999 the 35%of the output of Rockport 1 which the Company is obligated to purchase from AEGCo.The FERC had permitted the Unit Power Agreements between affiliated companies to become effective subject to refund December 10, 1984.As a result of the FERC approval of the settlement offer, the Company received from AEGCo a refund of approximately
$4,700,000 in November 1986 which was credited to purchased and interchange power expense.KEPCo is involved in litigation at both the state and Federal levels related to its participation in the Unit Power Agreement with AEGCo.In the event that KEPCo does not pay for its future purchases under the Unit Power Agreement, the Company would be contractually obligated to make such payments and purchase the related energy.16 INDIANA&MICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES 4.Federal Income Taxes: The details of Federal income taxes as reported are as follows: 1986 Year Ended December 31.19&5 1984 (in thousands)
Charged (Credited) to Operating Expenses: Current (net)Deferred (net)Dcferrcd Investment Tax Credits (net)Total Y Ch ed Credited to Other Income and Deductions:
$44,340 26,208 25,324 95,872 ()Current (7,414)Dcferrcd (net)(1,989)Defcrrcd Investment Tax Credits (net)......
~...4 Total (9.399)Total Federal Income Taxes as Reported$86,473 The following is a reconciliation of the difference between the amount of Federal income taxes book income before Federal income taxes by the statutory tax rate, and the amount of Federal the Consolidated Statements of Income.$(55,991)82,407 46,571 72,987$(45,036)56,342 58,078 69,384 (7,706)(8,429)(244)(1,704)(7,950)(10,133)$65,037$59,251 computed by multiplying income taxes reported in Year Ended December 31, Consolidated Net Income Bcforc Preferred Stock Dividend Requirements
.Federal Income Taxes Pre-tax Book Income.Federal Income Taxes on Pre-Tax Book Income at Statutory Rate (46%)Increase (Decrease) in Federal Income Taxes Resulting From the Following Items on Which Deferred Taxes Arc Not Provided: Excess of Book Over Tax Depreciation Allowance for Funds Used During Construction and Miscellaneous Items Capitalized on the Books but Deducted for Tax Purposes Deferred Return-Rock port Plant Investment Tax Credits Not Deferred Amortization of Deferred Investment Tax Credits.Other Total Federal Income Taxes a's Reported Effective Federal Income Tax Rate 1986$152,481 86,473$238,954$109,919 6,242 (15,529)(9,228)751 (4,530)(1,152)$86,473 36.2%1985 (in thousands)
$146,101 65,037$211,138$97,123 4,930 (15,633)(14,929)(82)(4,786)(1.586)$65,037 30.8%1984$142,185 59.251$201,436$92,661 2,659 (31,437)(820)295 (2,233)(1,874)$59.251 29.4%17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following are the principal components of Federal income taxes as reported: Current: Federal Income Taxes Investment Tax Credits.Total Current Federal Income Taxes (net)Deferred: Depreciation (liberalized, ADR and ACRS).Allowance for Bonowcd Funds Used During Consuuction and Miscellaneous Items Capitalized Percentage Repair Al!owancc Year Ended Dcccmber 31.1986 1985 1984 (in thousands)
$68,308 (31,382)36;926$(11,824)(51,873)(a)
(63,697)$26,589 (80.054)(a)
(53.465)26,272 33,099 22,582 9,448 6,511 24,168 1,452 (329)14,420 (b)Nuclear Decommissioning Costs.(4,820)(4,820)(4,945)Unrecovcrcd and Lcvelized Fuel.(2,466)14,506 (415)Adjustments for Revenue Refunds 9,052 (9,052)Nuclear Fuel Lease Adjustments
.(638)9,530 (4,141)Spent Nuclear Fuel Fee (7,845)(3,175)(4,084)Unbilled Rcvcnue (4,247)6,804 1,219 Deferred Return-Rockport Plant 9,818 12,791 745 Other (5,031)(2,240)(5,897)Investment Tax Credits Applicable to Certain Deferred Income Taxes 2,276 434 20,038 Total Defened Federal Income Taxes (net)24,219 82,163 54,638 Total Deferred Investment Tax Credits (nct)25,328 46,571 58,078 Total Federal Income Taxes as Reported$86,473$65,037$59,251 (a)The Company was able to utilize investment tax credits in excess of the statutory limitation as a result of thc lack of available credits of other System companies with taxable income.(b)Based on Intcmal Revenue Service regulations issued in 1984, the Company elected percentage repair allowance on thc 1983 tax return and filed amended tax returns for 1981 and 1982.The deferred taxes provided in 1984 represent the cumulative effect of these elections as well as 1984 current year accruals.The companies join in the filing of a consolidated Federal income tax return with their affiliated companies in the AEP System.The allocation of the AEP System's consol-idated Federal income tax to the System companies is in accordance with SEC rules under the Public Utility Holding Company Act of 1935.These rules permit the allocation of the benefit of current tax losses to the System companies giving rise to such losses in determining taxes currently payable.The tax loss of the System parent company, Amer-ican Electric Power Company, Inc., is allocated to its sub-sidiaries with taxable income.With the exception of the loss of the parent company, the method of allocation ap-proximates a separate return result for each company in the consolidated group.Consolidated investment tax credits utilized are allocated to the System companies giving rise to them.At December 31, 1986, the companies'umulative net amount of income tax timing differences on which deferred taxes have not been provided totaled$493,000,000.
The System has reached a settlement with the Internal Revenue Service (IRS)for the majority of issues from the audit of the consolidated Federal income tax returns for the years 1974-1976.
Several issues regarding these returns are not covered by the settlement agreement and are subject to future disposition.
Returns for the years 1977-1982 have been reviewed by the IRS, and additional taxes for these years have been proposed, some of which the System com-panies have protested or will be protesting.
In the opinion of management, the final resolution of open matters will not have a material effect on the earnings of the Company.5.Common Stock, Premiums on Capital Stock and Other Paid-in Capital: The Company received from its parent cash capital con-tributions of$20,000,000 in 1984.In 1985 and 1984 a credit to other paid-in capital of$3,000 and$419,000, respectively, represented the excess of par value over cost of cumulative preferred stock reacquired by the Company to meet sinking fund requirements.
There were no other changes in any of the aforementioned accounts in 1986, 1985 or 1984.18 INDIANA&MICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES 6.Retained Earnings: Various restrictions on the use of retained earnings for cash dividends on common stock and other purposes are contained in or result from covenants in mortgage indentures, debenture and bank loan agreements, charter provisions, and orders of regulatory authorities.
Approximately
$45,900,000 at December 31, 1986, was so restricted.
7.Cumulative Preferred Stock: At December 31, 1986, authorized shares of cumulative preferred stock were as follows: Par Value Shares Authorized
$100 2,250,000 25 11,200,000 December 31, Shares O~uuaaadta 1986 (in thousa$12,000 6,000 4,000 30,000 35,000 30,000 40,000 40,000$197,000 1985 nds)$12,000 6,000 4,000 30,000 35,000 30,000 40,000 40,000$197,000 4'h%4.56%..4.12%..7.08%..7.76%'.8.68%..$2.15$106.125 102 102.728 102.91 103A4 105.27 26.61 26.69$100 100 100 100 100 100 25 25 120,000 60,000 40,000 300,000 350,000 300,000 1,600,000 1,600,000 The cumulative preferred stock is callable at the option of the Company at the price indicated plus accrued dividends.
The involuntary liquidation preference is par value.Unissued shares of the cumulative preferred stock'ay or may not possess mandatory redemption characteristics upon issuance.A.Cumulative Preferred Stock Not Subject To Mandatory Redemption:
Number of Shares Redeemed Amount Year Ended December 31.Series Call Price 1986 1985 1984 B.Cumulative Preferred Stock Subject to Mandatory Redemption:
Series (a)137,325 1,011,900 1,600,000 12%(b)$2.75 (c)$3.63 (d)Number of Shares Redeemed Amount Par Year Ended December 31, Shares December 31, Call drlua Valua l988 l988 l984~Outslandin 1986 1985 (in thousands)
$106$100 30,000 31,673 27,527$13,733$16,733 27.07 25 160,000 160,000 141,900 25,297 29,297 27.72 25 40.000 40,000 79,030 86,030 Less Sinking Fund Requirements Due Within One Year.4,000$75.030$86,030 (a)'Ihe sinking fund provisions of thc series subject to mandatory redemption aggregate$2,000,000 in 1987,$2,232,500 in 1988,$4,797,500 in 1989,$5,500,000 in 1990 and 1991.Unless all sinking fund provisions have been met;no distribution may be made on thc common stock.(b)A sinking fund for the 12%series requires the Company to provide, on or before October 1 of each year, for thc redemption of 15,000 shares of such series.This provision may be satisfied thmugh shares previously purchased or by redemption at$100 a share.The Company has the right, on each sinking fund date, to redeem an additional 15,000 shares.At December 31, 1986, thc Company had reacquired 27,675 shares in anticipation of future sinking fund requirements.(c)A cumulative sinking fund for the$2.75 series requires the Company to redeem 80,000 shares on or before October 1, of each year.The Company has the option to credit shares purchased or otherwise acquired in lieu of redeeming shares for thc sinking 1'und and has thc noncumulative option to double the number of shares to be redeemed in any year.At December 31, 1986, the Company had acquired 188,100 shares in anticipation of future sinking fund requirements.(d)Commencing with thc year 1987, a cumulative sinking fund for the$3.63 series requires thc Company to redeem 80,000 shares on or before January 1, of each year.'Ihe Company has the option to credit shares purchased or otherwisc acquired in lieu of redeeming shares for the sinking fund and has the noncumulative option to double thc number of shares to be redeemed in any year on and after January 1, 1987.19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8.Long-term Debt, Lines of Credit, and Compensating Balances: Long-term debt by major follows: First Mortgage Bonds.......
Sinking Fund Debentures Installment Purchase Contracts.'ther Long-term Debt (a)....Less Portion Due Within Onc Year Total category was outstanding as December 31, 1986 1985 (in thousands)
$1,008,248$1,026,400 8,357 16,911 307,289 307,068 97,629 91.691 1,421,523 1,442,070 11,500 139,198$1,410,023$1,302,872 (a)Nuclear Fuel Disposal Costs.See Note 10.First mortgage bonds outstanding were as follows: December 31, 1986 1985 (in thousands)
%Rate Du 10'/i I 3'/s I 4'/4 1 14'/~1 I is/s I 15'/s 1 16'/s 1 4i/s 1 7 1 8'/s 2 9'h 2 8'/s 2 9'/i 2 13s/i 2 9s/s 2 9s/4 2 Unamortize c 987-January I...988-February I..988-November 1.989-March I 990-June 1.....991-November 1.992-April 1 993-August 1...998-May 1 i....000-April 1 003-June I (a)003-December I 008-March 1 013-August 1...015-October 1 016-July 1 d Discount (net)....$22,974 17,557 80,000 38,800 97,000 42,902 35,000 50,000 219,500 40,000 100,000 67,200 100,000 100,000 (2,685)$80,000 22,974 17,557 120,000 80,000 39,600 99,000 42,902 35,000 50,000 231,000 40,000 100,000 70,000 (1,633)Less Portion Duc Within One Year Total 1,008,248 11,500 1,026,400 131,500$996,748$894.900 (a)Thc 9/i%series due 2003 requires sinking fund payments of$11,500,000 annually on June 1, through 1991 and$13,500,000 annually on June I, 1992 through 2002 with the noncumulative option to redeem an additional amount in each of thc specified years from a miniinum of$100,000 to a maximum equal to the scheduled requirement for each year, but with a maximum optional redemption, as to all years in the aggregate, of$75,000,000.
The indentures relating to the first mortgage bonds con-tain improvement, maintenance and replacement provi-sions requiring the deposit of cash or bonds with the trustee, or in lieu thereof, certification of unfunded property additions.
%Rate Due City of Lawrenceburg, Indiana: 8'/z 2006-July 1 7 2006-May 1.....67/s 2006-May I.....City of Rockport, Indiana: 9i/s 2005-Junc 1.....9i/4 2010-June 1.....9i/4 2014-August I...7iA (a)2014-August 1...(b)2014-August 1 City of Sullivan, Indiana: 7'/s 2004-May 1.....67/s 2006-May 1.....7'009-May 1.....Unamortized Discount Total 1986 1985 (in thousands)
$25,000 40,000 12,000 6,500 33,500 50,000~50,000 50,000 7,000 25,000 13,000 (4.711)$307,289$25,000 40,000 12,000 6,500 33,500 50,000 50,000 50,000 7,000 25,000 13,000 (4.932)$307,068 (a)Adjustable interest rate will change August 1, 1990 and every five years thereafter.(b)Variable interest rate is determined weekly.The average weighted interest was 5.3%for 1986 and 5.6%for 1985.Under the terms of certain installment purchase con-tracts, the Company is required to pay purchase price in-stallments in amounts sufficient to enable the cities to pay interest on and the principal (at stated maturities and upon mandatory redemption) of related pollution control revenue bonds issued to finance the construction of pollution control facilities at certain generating plants of the Company.On certain series the principal will be payable at stated ma-turities or on the demand of the owners at periodic-interest adjustment dates.Sinking fund debentures outstanding were as follows: December 31, 1986 1985 (in thousands)
$.-$7,698-8,357 9,210 3 8,357 16,911 Less Portion Due Within One Year...7,698 Total$8,357$9.213 At December 31, 1986 and 1985, the principal amounts of debentures reacquired in anticipation of sinking fund requirements were$2,443,000 and$3,692,000, respec-tively.In addition to the sinking fund requirements the Company may call additional debentures of up to$300,000 annually.Installment purchase contracts have been entered into by the Company in connection with the issuance of pollution control revenue bonds by governmental authorities as follows: December 31, 20 INDIANA&MICHIGAN ELECTRIC COMPAM'ND SUBSIDIARIES
- Certain series are supported by letters of credit from a bank which expire in 1990 and 1992.Portions of the proceeds of the installment purchase con-tracts are deposited with trustees and may be used only for specified construction expenditures.
Approximately
$35,743,000 and$43,566,000 of funds so deposited is included in.special deposits and working funds at Decem-ber 31, 1986 and 1985, respectively.
Long-term debt, excluding premium or discount, out-standing at December 31, 1986 is due as follows: (in thousands) 1987......................
$11,500 1988........
52,031 1989.....................
11,500 1990.....91,500 1991....................
50,300 Later Years....................
1,212,088 Total.$1,428.919 The Company had unused short-term bank lines of credit of approximately
$269,000,000 and$375,000,000 at December 31, 1986'and 1985, respectively, under which notes could be issued with no maturity more than 270 days.The available lines of credit are subject to withdrawal at the banks'ption, and$269,000,000 and$345,000,000 at December 31, 1986 and 1985, respectively, of such lines are shared with other AEP System companies.
In accord-ance with informal agreements with the banks, compen-sating balance deposits of up to 10%or equivalent fees are required to maintain the lines of credit and on any amounts actually borrowed, generally either additional compensat-ing balance deposits of up to 10%are maintained or ad-justments in interest rates are made.Substantially all bank balances are maintained by the Company to compensate the banks for services and for the Company's share of both used and available lines of credit.Purchased and Interchange Power (net): Purchased Power (a)....Interchange Power (net): AEP System Electric Utilities.........Other Companies Total...........
1986 1985 1984 (in thousands)
$166,179$145,518$106,755 10,720 (18,215)$158,684 78,718 (15,735)$208,501 76I271 (13.809)$169,217 Taxes Other'Ihan Federal Income Taxes:, Real and Personal Property Taxes State Gross Receipts Excise and Franchise Taxes and Miscellaneous State and Local Taxes.........State Income Taxes Social Security Taxes....Total$27,795$27,141$25,263 13,832 13,305 13,023 4,121 632 2,113 5,543 5,261 4,522$51,291$46,339$44,921 (a)Includes power purchased from Ohio Valley Electric Corporation (OVEC)of approximately
$39,378,000 in 1986,$6,733,000 in 1985 and$17,688,000 in 1984.Also includes power purchased from AEGCo of approximately
$122,023,000 in 1986,$119,952,000 in 1985 and$26,034,000 in 1984.Charges to operating expenses for royalties and for ad-vertising are less than 1%of gross revenues in each year.Sales and purchases of energy and interchange power transactions, are regulated by the various commissions hav-ing jurisdiction.
American Electric Power Service Corporation (AEPSC)provides certain services to the Company and the affiliated companies in the AEP System.The costs of the services are determined by the service company on a direct charge basis to the extent practicable and on reasonable bases of proration for indirect costs.The charges for services are made on a cost basis and include no compensation for the use of equity capital, all of which is furnished to the service company by AEP.The service company is subject to the regulation of the SEC under the Public Utility Holding Company Act of 1935.9.Supplementary Income Statement Information and Related-party Transactions:
Electric operating revenues shown in the Consolidated Statements of Income include sales of energy to AEP Sys-tem companies of approximately
$33,000,000,$32,000,000 and$27,000,000 for the years ended Decem-ber 31, 1986, 1985 and 1984, respectively.
Operating expenses shown in the Consolidated State-ments of Income include certain items not shown sepa-rately, as follows: Year Ended December 31, 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10.Commitments and Contingencies:
Construction The construction budget of the companies for the year 1987 is estimated at$243,000,000 and, in connection therewith, commitinents have been made.Ohio Valley Electric Corporation AEP and Columbus and Southern Ohio Electric Com-pany own 42.1%of Ohio Valley Electric Corporation (OVEC), which supplies the U.S.Department of Energy (DOE)with the power requirements of its gaseous diffusion plant near Portsmouth, Ohio.The proceeds from the sales of power by OVEC, aggregating
$332,000,000 in 1986, are designed to be sufficient for OVEC to meet its operating expenses and fixed costs, and to provide for a return on its equity capital.The Company, as a sponsoring company, is entitled to receive from OVEC, and is obligated to pay for, the power not required by DOE in proportion to its power participation ratio, which averaged 18.5%in 1986.The DOE power agreement terminates in 1992.Regulatory Matters In January 1985 a settlement agreement was reached stemming from a Federal Power Commission investigation begun in 1975 into the reasonableness and prudence of the coal-purchasing policies and practices of certain System companies.
The settlement agreement provides for a$21,931,000 refund ($18,084,000 by the Company)to cer-tain wholesale customers.
The agreement further provides the opportunity for the Company to recover from certain wholesale customers certain costs totaling$50,000,000 which when increased for related income taxes cannot ex-ceed$75,000,000 in revenues and can be recovered over a period not to exceed 12 years.The Company has re-covered$7,660,000 through December 1986.The status of the remainder of the investment in Utah coal mines is discussed in Note 2.In anticipation of the settlement agree-ment, the Company recorded in December 1984 provisions aggregating
$11,336,000, net of taxes, to reflect the refund terms of the settlement agreement.
Litigation The Company terminated a contract with Terre Haute Industries, Inc.(THI)on the grounds that THI was not meeting the schedule for the construction of an electro-static precipitator at the Breed Plant.THI instituted a suit for breach of contract against the Company in an Indiana circuit court claiming damages in an unspecified amount.THI also named the AEPSC as a defendant and requested damages from it for interference with THI's contract with the Company and for libel.The defendants denied THI's complaint and the Company counterclaimed for damages in the amount of$6,801,000 which the Company claims it suffered as a result of the delay in the construction work.Trial of this action was completed in December 1982.In an order dated January 9, 1984, the court awarded com-pensatory and punitive damages to THI in the amounts of$4,934,000 and$12,000,000, respectively, exclusive of interest.As a result of that judgment, the Company re-corded in 1983 a liability, including interest, on the Con-solidated Balance Sheet for the compensatory damages.The Company and the Service Corporation are appealing the court decision.Environmental Matters The companies are subject to regulation by Federal, state and local authorities
~with respect to air-and water-quality control and other environmental matters, and are subject to zoning and other regulation by local authorities.
Al-though the cumulative, long-term effect of changing environmental requirements upon the companies cannot be estimated at present, compliance with such requirements may make it necessary, at costs which may be substantial, to retrofit existing facilities with additional air-pollution-control equipment; to change fuel supplies to lower sulfur content coal;to construct cooling towers or some other closed-cycle cooling systems;to undertake new measures in connection with the storage, transportation and disposal of by-products and wastes;to curtail or cease operations
.at existing facilities, and to delay the commercial operation of, or make design changes with respect to, facilities under construction.
22 INDIANA&MICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES Legislative proposals are pending before the United States Congress that expressly seek to control acid depo-sition in the eastern portion of the United States.If any of these bills become law, significant reductions in the emis-sion of sulfur dioxide from various existing Company gen-erating plants would be required.These reductions would entail very substantial capital and operating costs that, in turn, could necessitate substantial rate increases by the Company.In addition, a number of states and environ-mental organizations have commenced proceedings under the Clean Air Act seeking substantial reductions in the emission of sulfur dioxide in certain midwestern states.Further, the U.S.Environmental Protection Agency is contemplating a number of significant policy changes in its rules governing sulfur dioxide emissions.
Adoption of any of the contemplated policy changes could require sub-stantial reductions in sulfur dioxide emissions from the Company's coal-fired generating plants.Transmission Agreement The Company participates with other AEP System com-panies in a Transmission Agreement.
This agreement pools certain AEP System companies'nvestments in extra-high-voltage lines and shares among the parties the costs of ownership in proportion to the parties'espective demand ratios.The equalization of costs among the parties will be phased-in over the period 1985-1989.
The agreement was permitted by the FERC to be implemented, effective Jan-uary 22, 1985, subject to refund.Pursuant to the terms of the agreement, the Company recorded credits of$10,672,000 and$5,338,000 for trans-mission services in other operation expense for the years.ended December.31, 1986 and 1985, respectively.
Nuclear Insurance The Price-Anderson Act limits the public liability of a licensee of a nuclear plant to$560,000,000 for a single nuclear incident.When the 80th nuclear power reactor in the United States went into operation on November 15, 1982, the Nuclear Regulatory Commission's indemnity ob-ligation was eliminated.
Now, as each new reactor is li-censed to operate, the$560,000,000 limit is increased by another$5,000,000.
The current level is$700,000,000.
The Company has insurance covering its two-unit Donald C.Cook Nuclear Plant in the maximum available amount of$160,000,000, and the balance of$540,000,000 is cov-ered by a mandatory program of deferred premiums that would be assessed, after a nuclear incident, against all owners of nuclear reactors.In the event of a nuclear in-cident, the Company could be assessed$5,000,000 per incident for each of its two nuclear generating units (subject to a maximum of$10,000,000 per reactor in any year in the event of more than one incident).
The Price-Anderson Act expires in 1987, and Congress has begun consideration of its renewal.If the Act is not renewed, the Cook Plant would continue to be subject to the program currently in existence.
If the Act is renewed, it is likely that the limits of public liability will be increased.
The Company also has property insurance for damage to the Cook Plant facilities in the amount of$1.23 billion.The primary layer of$500,000,000 is provided through nuclear insurance pools.The excess coverage above$500,000,000 is provided through insurance pools ($120,000,000) and Nuclear Electric Insurance Limited (NEIL).NEIL's excess property insurance program pro-vides$610,000,000 in coverage.The maximum assess-ment under this program could be$9,250,000 (seven and one-half times the annual premium on a 100%coverage basis).NEIL's extra-expense program provides insurance to cover extra costs of replacement power resulting from a prolonged accidental, outage of a nuclear unit.The Com-pany's policy insures against such increased costs up to approximately
$2,250,000 per week (starting 26 weeks after the outage)for one year and$1,125,000 per week for the second year, or 80%of those amounts per unit if both units are down for the same reason.The Company would be subject to a retrospective premium of up to$8,326,000 (five times annual premium)if NEIL's losses exceeded its accumulated funds.An incident at the Cook Plant could have a substantial adverse effect upon the Company.23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
Disposal of Spent Nuclear Fuel and Nuclear Decommissioning The Nuclear Waste Policy Act of 1982 establishes Federal responsibility for the permanent disposal of spent nuclear fuel.Disposal costs are paid by fees assessed against owners of nuclear plants and deposited into the Nuclear Waste Fund created by the Act.For the disposal of nuclear fuel consumed after April 6, 1983 by the Com-pany's Cook Nuclear Plant, the Company must pay to the fund a fee of one mill per kilowatthour, which the Company is currently recovering from its customers.
In June 1983, the Company entered into a contract with DOE for the disposal of spent nuclear fuel.Under terms of the contract the Company must pay to the U.S.Treasury a fee estimated at approximately
$71,964,000, exclusive of interest, for the disposal of nuclear fuel consumed prior to April 7, 1983.The Company has deferred this amount plus accrued~interest on its balance sheet pending recovery through the rate-making process.The Company has received regula-tory approval for the recovery of this amount and has begun to reduce the amount deferred as it is being recovered.
The Company has filed a petition with the PSCI which, among other things, requests an increase in the amounts being recovered for nuclear decommissioning costs asso-ciated with the Cook Plant.An independent consulting firm employed by the Company for the purposes of this pro-ceeding has estimated that the cost of decommissioning this plant could range from$284,000,000 to$321,000,000 in 1986 dollars.The Company is recovering from its cus-tomers nuclear decommissioning costs based on levels less than$284,000,000.
Funds recovered through the rate-making process for disposal of spent nuclear fuel consumed prior to April 7, 1983 and for nuclear decommissioning generally have been deposited in either external trust funds or internal special'unds for the future payment of such costs.11.Leases: December 31, 1986 1985 (in thousands)
Electric Utility Plant: Production
$2,714 General and Miscellaneous
...........
8.568 Total Electric Utility Plant.......'...
11,282 Less Accumulated Provision for Amortization
.2,982 1,861 Electric Utility Plant Less Provision....8,300 7,910 Other Property.421 38 Less Accumulated Provision for Amortization 217 13 Other Property Less Provision........
204 25 Net Properties under Capital Leases..$8.504$7,935 Obligations under Capital Leases (a)..$8,504$7,935 (a)Including an estimated$1,826,000 and$1,504,000 at December 31, 1986 and 1985, respectively, due within onc year.Payments made under capital leases entered into after December 31, 1982 include$1,013,000,$999,000 and$710,000 of amortization expense for the years ended De-cember 31, 1986, 1985 and 1984, respectively.
$1,998 7 773 9,771 The companies, as part of their operations, lease prop-.erty, plant and equipment under leases ranging in length from 1 to 35 years.Most of the leases require the companies to pay related property taxes, maintenance costs and other costs of operation.
The companies expect that in the normal course of business, leases will generally be renewed or replaced by other leases.The majority of the various rentals are included in leases having purchase options or renewal options for substantially all of the economic lives of the properties.
An accounting standard required the companies to cap-italize leases beginning in 1984 for all capital leases entered into after December 31, 1982 and all earlier leases begin-ning in 1987.This standard requires the companies to re-cord rental expense in a manner consistent with rate-making treatment, therefore there is no effect on the Con-solidated Statements of Income.The following is an analysis of properties under capital leases and related obligations entered into after December 31, 1982: 24 IIIDIAHA&MICHIGAN ELECTRIC COhfPANY AND SUBSIDIARIES Nuclear Fuel Coal-mining and Coal-transportation Equipment Other Transportation Equipment.....
Real Estate Electric Distribution System Property Gross Properties under Capital Leases.Less Accumulated Provision for Amortization Net Properties under Capital Leases 22,000 6,000 12,000 19,000 367,000 ,24,000 7,000 12,000 20,000 390,000 188,000 185,000$179,000$205,000$179,000$205,000 Obligations under Capital Leases (a)(a)Including an estimated$60,000,000 at December 31, 1986 and 1985, due within one year.Future minimum lease payments, by year and in the aggregate, of the companies'apital leases and noncan-celable operating leases consisted of the following at December 31, 1986: Capital Leases (a)(b)Operatlllg Leases 1987.1988 1989 1990 1991 Later Years Total Future Minimum Lease Payments.(in thousands)
$10,000$19,000 9,000 19,000 6,000 19,000 5,000 19,000 4,000 19,000 45,000 198,000 79,000~$293,000 Less Estimated Interest Element Included Therein Estimated Present Value of Future Minimum Lease Payments.....37,000$42,000 (a)Includes capital leases entered into prior to January I, 1983 assuming that such leases were capitalized.
'b)Minimum payments do not include leases of nuclear fuel.Nuclear fuel rentals comprise the unamortized balance of the lessor's cost (approx-imately$146,000,000) less salvage value, if any, to be paid in proportion to heat produced, and carrying charges on the lessor's unrecovered costs.It is contemplated that portions of the presently leased material will'be replenished by additional leased material.The following is a pro forma analysis of properties under capital leases and related obligations assuming that leases entered into prior to January 1, 1983 were capitalized:
December 31, 1986 1985 (in thousands)
$308,000$327,000 Gross Rentals Less Rental Recoveries (including sublease rentals)(a)........
Nct Rentals (b)1986$92,000 3,000$89,000 1985 (in thousands)
$73,000 3,000$70,000 1984$100,000 3,000$97,000 (a)Includes amounts paid for or reimbursed by associated companies.(b)Classified approximately as: Operating Expenses.......
Clearing and Miscellaneous Accounts (portions of which are charged to income).....
Total$81,000$63,000$90,000 8,000 7,000 7,000$89.000$70,000$97,000 Included in the above analysis of future minimum lease payments and of properties under capital leases and related obligations are certain leases as to which portions of the related rentals are paid for or reimbursed by associated companies in the AEP System based on their usage of the leased property.The companies cannot predict the extent to which or proportion in which the associated companies will utilize the properties under such leases in the future.12.Unaudited Quarterly Financial Information:
The following consolidated quarterly financial infor-mation is unaudited but, in the opinion of the Company, includes all adjustments (consisting of only normal recur-ring accruals)necessary for a fair presentation of the amounts shown: Quarterly Periods Ended Net Income~Operating Operating Revenues income (in Ihau sanck)1986 March 31...........
June 30............
September 30........December 31 1985 March 31...........
June 30............
September 30........December 31 iBefore preferred stock dividend$274,112 261,147 268,939 265,161 274,692 240,360 269,603 275,248 requirements.
$54,720 36,674 47,534 52,216 58,061 40,622 39,975 53,231$37,921 27,665 41,485 45,410 43,460 26,116 30,608 45,917 Rentals for all operating leases are classified approxi-mately as follows: Year Ended December 31, 25 Operating Statistics.
1986 1985 1984 1983 1982 ELEcrntc OFERATING REYENUEs (in thousands):
From Kilowatt-hour Sales: Retail: Residential:
Without Electric Heating.....~......With Electric Heating...............
Total Residential
...............
~.Commercial Industrial Miscellaneous Total Retail.Wholesale (sales for resale)..............
Total from Kilowatt-hour Sales....~Provision for Revenue Refunds~..........
Total Net of Provision for Revenue Refunds Other Operating Revenues.................
Total Electric Operating Revenues..$174,550 90 881 265,431 184,276 219,344 11 171 175,534 90,949 266,483 181,240 213,161 11,234$150,334 82,739 233,073 150,733 173,986 9,666$144,370 70,851 215,221 137,616 154,751 8,696$125,798 68,793 194,591 127,470 137,152 7,568 680,222 378 843 672,118 378,090 1,059,065 1,050,208 541~105 567,458 400,811 968,269~12,494)516,284 343,427 859,711 466,781 325,468 792,249 1,059,606 9 753 955,775 10,197 1,050,103 9,800 859,711 9,269 792,249 17,554$1 069 359$1,059,903$965,972$868,980$809,803 SQURcEs AND SALEs oF ENERGY (in millions of kilowatt-hours):
Sources: Net Generated-Steam: Fossil Fuel.Nuclear Fuel Net Generated-Hydroelectric Subtotal Purchased Net Interchange Total Sources Less: Losses, Company Use, Etc..........
Net Sources Sales: Retail: Residential:
Without Electric Heating..........
With Electric Heating...........
~~Total Residential
...............
Commercial Industrial Miscellaneous Total Retail.Wholesale (sales for resale)............
Total Sales 8,187 10,986 79 19,252 4,733~272)23,713~1645~22 068 2,536~1442 3,978 3,007 4,371 212 11,568~10 500~22 068 7,933 7,800 74 I5,807 3,065 4,319 23,191 1,542 21,649 2,557 1,481 4,038 2,968 4,282 216 11,504'0,145 21,649 7,071 12,913 68 20,052 4,905 748 25,705 1,508 24,197 2,534 1,561 4,095 2,870 4,201 209 11,375 12,822 24,197 5,684 12,301 55 18,040 4,881 573 23,494 1,441 22,053 2,596 1,458 4,054 2,807 3,941 204 11,006 11,047 22,053 4,587 12,349 77 17,013 2,154 3,775 22,942 1,243 21,699 2,472 1,540 4,012 2,803 3,701 197 10,713 10,986 21,699 26 INDIANA&MICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES OPERATING STATISTICS (Concluded)
AYERAGE CosT oF FUEL CQNsUMED (in cents): (a)Per Million Btu: Coal Nuclear Overall Per Kilowatt-hour Generated:
Coal Nuclear Overall 1986 185 74 118 1.82.83 1.25 1985 194 80 136 1.97.86 1.42 1984 189 65 103 1.83.70 1.08 1983 184 54 92 1.76.59.96 1982 190 50 85 1.85'.53.89 RESID~SERvlcE-AvERAGEs: 'nnual Kwh Use per Customer: Total With Electric Heating Annual Electric Bill: Total With Electric Heating Price per Kwh (in cents): Total With Electric Heating 9,813 179716$654.88$1,116.86 6.67 6.30 10,050 18,486 10,249 19,771 6.60 6.14 5.69 5.30$663.18$583.35$1,135.42$1,048.27 10,187 18,780$540.74$912.31 5.31 4.86 10,084 19,990$489.08$892.91 4.85 4.47 NUMBER OF ELECTRIC CUSTOMERS.'ear-End:
Retail: Residential:
Without Electric Heating............
With Electric Heating...............
Total Residential
...~~..~~........Commercial Industrial Miscellaneous Total Retail.Wholesale (sales for resale)..............
Total Electric Customers..........
325,623 82 324 407,947 43,689 3,882 I 846 457,364 106 457 470 322,922 80,734 403,656 43,017 3,701 1,852 452,226 104 452,330.321,286 79,823 401,109" 42,912 3,415 1,584 449,020 105 449,125 320,655 78,31'1 398,966 42,552 3,253 1,571 446,342 106 446,448 320,097 77,335 397,432 42,233 3,249 1,458 444,372 105 444,477 (a)Excludes effec of defened collection of fuel costs.27 Directors J.M.ALLIsoN (a)W.A.BLAcK RICHARD E.DISBROW JOHN E.DOLAN'ILLIAM N.D'ONOFRIO M.R.HARRELL E.W.HERMANSEN (b)GERALD P.MALONEY RICHARD C.MENGE C.W.Romeo (a)J.F.STARK (C)JOSEPH H.VIPPERMAN W.S.WHITE, JR.Officers W.S.WHITE, JR.Chairman of the Board and Chief Zrecutive OftI'cer W.A.BLAcK President and Chief Operating Offtcer J.F.STARK (c)Senior Vice President MILTON P.ALEXICH Vice President RICHARD E.DISBROW Vice President JOHN E.DOLAN Vice President WiLLIAM N.D'ONOFRIO Vice President A.JosEPH DowD'ice President RICHARD F.HERINO Vice President GERALD P.MALONEY Vice President RICHARD C.MENGE Vice President JOSEPH H.VIPPERMAN Vice President PETER J.DEMARIA Treasurer JOHN R.BURTON Secretary ELIO BAFILE Assistant Secretary and Assistant Treasurer JQHN F.DILoaamo, JR.Assistant Secretary WILLIAM C.HARVEY Assistant Secretary CARL J.Moos AssisTAm SEcRETARY JOHN B.SHINNOCK Assistant Secretary JoAN ST.JAMas Assistant Secretary LEQNARD V.AssAma Assistant Treasurer BRUCE M.BARBER Assistant Treasurer'AMas D.HUEBNER Assistant Treasurer GERALD R.KNORR Assistant Treasurer The principal occupation of each of the above directors and ogccrs of Indiana dt hfichigan Electric Company, with tcn exceptions, is as an employee of American Electric Power Service Corporation.
Thc cxccptions are J.M.Allison, Etio Bafile, 1V.A.Black, IVilliam N.D'OnoPio, M.R.Harrell, E.IV.Hermansen, Richard C.Mcnge, Carl J.Moos, C.1V.Roahrig and J.F.Stark whose principal occupations are as offtccrs or employees of Indiana*Michigan Electric Company.(a)Elected April 22, 1986 (b)Resigned February 28, 1986 (c)Resigned January 29, 1987 28 INDIANA chic MICHIGAN ELECTRIC COMPANY Dividends and Price Ranges of Cumulative Preferred Stock By Quarters (1986 and 1985)1986-uarters 1st 2nd 3rd 4th 1985-uatters 1st 2nd 3rd 4th ($100 Par Value)4t/e%Series Dividends Paid Per Share Market Price-$Per Share (MSE)-High-Low 4.56%Series Dividends Paid Per Share Market Price-$Per Share (OTC)Ask (high/low)
Bid (high/low) 4.12%Series Dividends Paid Per Share Market Price-$Per Share (OTC)Ask (high/low)
Bid (high/low) 7.08%Series Dividends Paid Per Share Market Price-$Per Share (NYSE)-High~-Low 7.76%Series Dividends Paid Per Share Market Price-$Per Share (NYSE)-High-Low 8.68%Series Dividends Paid Per Share Market Price-$Per Share (NYSE)-High-Low 12%Series Dividends Paid Per Share Market Price-$Per Share (NYSE)-High-Low ($25 Par Value)$2.15 Series Dividends Paid Per Sham Market Price-$Per Share (NYSE)-High-Low$2.25 Series Dividends Paid Per Share Market Price-$Per Share (NYSE)-High-Low$2.75 Series Dividends Paid Per Share Market Price-$Per Share (NYSE)-High-Low$3.63 Series Dividends Paid Per Share Market Price-$Per Share (NYSE)-High-Low 36'/e 34'/e 36'/e 35 44 35'le$1.14$1.14$1.14$1.14$1.14$1.14$1.14$1.14$1.03$1.03$1.03$1.03$1.03$1.03$1.03$1.03$1.77$1.77$1.77$1.77$1.77$1.77$1.77$1.77 76 65 80'/e 67s/4 80'A 70 88t/e 77 56'/e 50t/e 62 53'/2 62'le 57'/4 66 57s/e$1.94$1.94$1.94$1.94$1.94$1.94,$1.94$1.94 84 69t/4 89 75 87'/i 76 94'/e 83'/e 617/e 55'/e 68 59 68 63'le 71s/e 63'/4$2.17$2.17$2.17$2.17$2.17$2.17$2.17$2.17 93'/e 78'A 98'/e 85'/4 98t/e 88~/s 102'/z 92~/e 69t/e 63 75 64'/e 75 71s/e 80 72$3.00$3.00$3.00$3.00$3.00$3.00$3.00$3.00 106/e 101'/e 107 99'/e 106 IOOYi 106 102 101 97'le 106'/e 97'/e 105'/2 100 107 100$0.5375$0.5375$0.5375$0.5375$0.5375$0.5375$0.5375$0.5375 24'/e 19'le 25 21 24s/e 22t/e 25'/e 23s/e 17s/e 16'/z 19'/e 16'/e 19'/e 17s/e 20'/e 17s/e$0.5625$0.5625$0.5625$0.5625$0.5625$0.5625$0.5625$0.5625 24'/2 20'/e 25'/e 21s/e 25'/4 23t/e 26'/e 24s/e 18t/4 17 19s/4 17'/e 20s/e 18'A 207/e 18'/e$0.6875$0.6875$0.6875$0.6875$0.6875$0.6875$0.6875$0.6875 29 26 27~/2 25 28 27 27s/e 27s/e 25'/e 22'/e 25'le 24'/e 25'/z 24s/e 27 24s/4.$0.9075$0.9075$0.9075$0.9075$0.9075$0.9075$0.9075$0.9075 31t/e 28s/e 30'/e 28s/e 31s/e 28'/e 30t/i 27 28'/e 26'/e 30'/e 27s/e 30'/i 27s/e 31t/e 28$1.03125$1.03125$1.03125$1.03125$1.03125$1.03125$1.03125$1.03125 MSE-Midwest Stock Exchange OTC-Over.the-Counter NYSE-New York Stock Exchange'Note-The above bid and asked quotations represent prices between dealers and do not represent actual transactions.
Market quotations provided by National Quotation Bureau, Inc.Dash indicates quotation not available.
29 The Company's Annual Report (Form 10-K)to the Securities and Exchange Commission will be available on or about March 31, 1987 to shareowners upon written request and at no cost.Please address such requests to: Mr.G.C.Dean American Electric Power Service Corporation 1 Riverside Plaza Columbus, Ohio 43215 Transfer Agent and Registrar of Cumulative Preferred Stock Morgan Shareholder Services Trust Company 30 West Broadway, New York, N.Y.10007 30 PALISADES ICP)~KALAMAZOO Leke BENTON HARBOR RIVERSIDE ST, JOSEPH~HARTFORD CISCAOO To WHIon Corri~I (CE)CS Qo (MICglg()N HICKORY CREE DONALD C.COOK HEW CA SLE LAPORT'T.Tod Icbltan CHYLE I'NIPS)4+u I To Creen Acres I'abaoca (NIPS)(NIPS)I To Crtle (CE REYHOLOS A(HIPS)To Mohllc~No (HIPS)DEQUINE r., WESTWOOD (P 2 I)SCRRITN SPAIN OS NI LES HYORAMATIC
~THREE RIYERS COREY 8l(]CMII Q A,H Q~0 N OR'I EAST NIPS)To~10OIIT RD.KANKAKEE 4 E.Lira~J ALLEN<(OP)I To To SlerHn E.usra (Op)WAYN RACT To Hvnllhtlorr O.M, (PS I)T.WAYN (OP)I DECA)CRT To Wabash (Pdl)KOKOMO (Pdl)~OREENTOWN I I HUMMEL CREEK A)~M I ION DEER CREEK HART~ORANT I POR'ILANO JAY To MlrylvHI~1 I I I P I KENDALLYILLE I To Osa~lb)(NIPS)I ALBION To Locbwood RD.FORT WAYNE INDUSTRIAL I PARK ORISON PARK MIKINLEY OLUMSI OOODRICH INC(OLN O T S SO To Blaney b To Csyvda (PSI)ELWO DO MVLLIN XANDRIA DELAWARE MUNCIE MA ISBN HDDtl A,HA, PENDLETO Rvd To HoblesvlR~(PSI)SVNNYSIDE (IPCL)F'!I INDIANAPOLIS ESOTO~I WINCHESTER i FALL CREEK To NOVC~III~(PSI)OoMtlOo RICHMOND (IPCL)HANNA (I II CL)COLLEOE CORNER Oo~To Trahloh (COLE)To Casey~BREED (DIP 2)ySULLIYAN To P0 I~I I bfr f d (I PAL)To MI~rel For I (COCE)To Eall~M sp Bend r~~(codE)CINCINNATI TANNERS CREEK OEARSORN~r.(IKEC)st c~", CP EFFERSON~~IK E C I w~w~NTO Pierce (DYED)))KEMTUCK Y INDIANA&MICIIIGAN ELECTRIC COMPANY Q FOSML FUEL STEAM PLANTS Q NUCLEAR FUEL STEAM PLANTS g HYDRO PLANTS~pprp Cl CovvovwtALTW lellov CIP~CIVTAAL Illllrors PWLLC ItlvlCI C~COVSVVISI POWI1 Wla ILOLAVA slvrvCAT tLICTALC COAT v htvrors pawl 1 rpll Lvsvvspolls powle~Llcvr rvps VCATWI11 rvelsvs pestle Mlvlcl Op ovro powl1 Covp11v~IL pvstrc slsvrcc worsvl coll cwcervsrl oll~~Ltcrsrc Ovlaowo TALLIT tLlcr1rc cols, O PIVNCNPAL STATIONS Tdd KY UIIES vv Sad KY UNES~PRINCNPAL COMLRPRTIES Idd KY UNES~~OTHER COMPANIES FACILITIES ICALI Or Lrnas~I~I JANVARY Lady AMERICAN ELECTRIC POWER SERYICE CORPORATION I RIVERSIDE PLAZAL COLUMBUS OHIO I 2 te 7 l 4 2