ML17331A817

Annual Financial Rept 1980

ML17331A817
Person / Time
Site:	Cook
Issue date:	12/31/1980
From:	INDIANA MICHIGAN POWER CO. (FORMERLY INDIANA & MICHIG
To:
Shared Package
ML17331A816	List: ML17331A815 ML17331A817
References
NUDOCS 8109290617
Download: ML17331A817 (31)

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{{#Wiki_filter:ANNUAL REPORT 1980 AMERICAN ELECTRIC POVf ER SYSTEM 8109290617 810922 PDR ADOCK 05000315 I PDR IANA dc MICHIGAN ELECTRIC COM.Y 2I01 Spy Run Avenue, Fort IVayne, Indiana 46801 Contents Background of the Company.Selected Financial Data.Management's Discussion and Analysis of Financial Condition and Results of Operations .Auditors'pinion Consolidated Statements of Income Consolidated Balance Sheets.Consolidated Statements of Sources and Applications of Funds.Consolidated Statements of Retained Earnings Notes to Consolidated Financial Statements. Directors and Officers of the Company Operating Statistics...................................... Price Range of Cumulative Preferred Stock 6-7 10-11 12 13 13-26 27 28-29 30

Background

of the Company INDIANA k MtcHIQAN ELEGTRlc CohtpANY (the Company)is a subsidiary of American Electric Power Company, Inc.(AEP)and 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.On November 30, 1979, a subsidiary, Indiana 2 Michigan Power Company, which owned and operated the Donald C.Cook Nuclear Plant (the Nuclear Plant), was merged into the Company.In September 1980, the Company transferred, at net book value, its investment in certain coal mines and related mining assets located in Carbon County, Utah, to a newly-organized subsidiary, Blackhawk Coal Company.Price River Coal Company, a wholly owned subsidiary of the Company, is engaged in mining coal from land owned by Blackhawk which is being purchased by the Company.The Company serves 231 communities and 444,139 customers in a 7,700-square-mile area of northern and eastern Indiana and a portion of southwestern Michigan.This area has an estimated population of 1,453,000. Among the principal industries served are manufacturers of automobiles, trucks, automotive parts, manufactured homes, aircraft parts, steel, ferrous and nonferrous castings, farm machinery, machine tools, electric motors, electric transformers, electric wire and cable, glass, textiles, rubber products and electronic components. In addition, the Company supplies wholesale electric power to other electric utilities, municipalities and cooperatives. The Company's generating plants and important load centers are interconnected by a high-volt-age transmission network.This network in turn is interconnected either directly or indirectly with the following other AEP System companies to form a single major integrated power system: Appalachian Power Company, Columbus and Southern Ohio Electric Company, Kentucky Power Company, 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 8;Electric Company, Commonwealth Edison Company, Consumers Power Company, Illinois Power Company, Indiana-Kentucky Electric Corporation (a subsidiary of Ohio Valley Electric Corporation), Indianapolis Power 8: Light Company, Northern Indiana Public Service Company and Public Service Company of Indiana, Inc. INDIANA~ICHIGAN ELECTRIC COMPAN Y AND SUBSIDIARIES Selected Financial Data S0l 1980 Year Ended December 31, 1979 1978 (in thousands) 1977 1976 ISSI COME STATEMENTS DATA: OPERATING REVENUES-ELECTRIC.TOTAL OPERATING EXPENSES......OPERATING INCOME.TOTAL OTHER INCOhfE AND DEDUCTIONS ..INCohf E BEFORE 14NTEREST CHARGES iVET IiNTEREST CHARGES CGNsoLIDATED iVET INcoME-before preferred stock dividend requirements..... PREFERRED STOCK DIVIDEND REQUIREMENTS ..EARNINGS APPLICABLE TO COMMohf STOCK....5748,680 S689,066 5597,894 5506,669 S415,549 313,645 101,904 29,867 580,484 527,617 440,074 378,345 161,449 157,820 12S,324 168,196 29,750 28,346.29,042 30,541 198,737 187,570 74,300 156,670 131,771 190,491 61,241 76,541 91,4Q4 98,665 100,072 99,087 113,270 95,429 55,230 23,242-19,995 18,357 14,041 11,977$76,830$79,092$94,913$81,388$43,253 BALAiVCE SHEETS DATA: ELECTRIC UTILITY PI,ANT$3,117,381$2,657,93Q$2,397,245$2,107,032$1,933,305 ACCUhfULATED PROVISIONS FOR DEPRECIATIONs DEPLETION AND AMORTIZATION........... NET ELECTRIC UTILITY PLANT To TAI.AssETs AND OTHER DEBITs 561,773 475,643 410,520 2,555,608 2,182,287 1,986,725 2,826,172 2,616,996 2,360,813 358,826 316,916 1748,206 1,616,389 2,130,899 1,919,189 Coihf MON STOCK, PREhfIUMS ON CAPITAL STOCK AND OTHER PAID IN CAPITAL..... ~~~~.~~~RETAIiiIED EARNINGS CUhfULATIVE PREFERRED STOCK: NOT SUBJECT TO MANDATORY REDEMPTION .SUBJEGTTG MANDATQRY REDEMPTIGN(a) ..LGNG-TERhf DEBT (a)637,287 587,193 527,193 467,193 409,193 124,318 136,802 136,072 105,366 78,776 197,000 197,000 197,000 157,000 117,000 68,348 70,000 30,000 30,000 30,000 1,264,673 1,124,255 1,050,626 1,038,483 913,832 (a)Including portion due within one year. .~.:~Management's Discussion and Analysis of Financial Condition and Results of Operations The following are some of the more significant factors bearing on the financial condition of Indiana Ec Michigan Electric Company and its subsidiaries as reflected in the consolidated results of operations. This discussion refers to the consolidated financial statements appearing on the following pages.Operating Revenues and Expenses Consolidated operating revenues increased 15.2%in 1979 and 8.7%in 1980.Operating revenues have risen more steeply than energy sales because of higher retail and wholesale rates, which went into effect during such period, and higher fuel costs, a portion of which is passed on to customers through fuel adjustment charges.Revenues from retail customers (residential, commer-cial and industrial) rose by 7.4%in 1979 on a 2.1%in-crease in kilowatt-hour sales, and were down 1.6%in 1980, on a 3.0%decline in kilowatt-hour sales.The Company shared in the AEP System's ability to take advantage of its high generating availability, low operating costs and efficient transmission system to in-crease its opportunity sales to neighboring utilities. Wholesale revenues increased 29.5%in 1979 and 23.0%in 1980 on increases in kilowatt-hour sales of 19.0%and 12.4%, respectively. Wholesale sales to municipalities, electric cooperatives and other electric utilities are ex-pected to continue to be significant during the next few years as well.The gains in wholesale sales were responsible for in-creases in purchased and interchange power expenses (6.6%in 1979 and 5.7%in 1980).Because of AEP's~powerful interconnection and transmission capacity, during periods of peak demand which exceeded the AEP System's internal generating capacity, wholesale cus-tomers'equirements were able to be met by purchasing power from neighboring utilities for resale to others.Fuel expenses increased by 18.0%in 1980, as con-trasted with 16.3%in 1979, with the result that total operating expenses increased in line with operating rev-enues (10.0%in 1980 and 19.9%in 1979).Future fuel expenses may be affected by contract negotiations be-tween the coal industry and the United Mine Workers, increasing foreign purchases of United States coal, and the possibility of yet more stringent environmental re-strictions on burning certain types of coal.Whether or not continued increases in fuel costs will adversely affect earnings will depend on the Company's continued ability to recover those costs promptly in the face of efforts by consumer groups and others to delay or reduce rate in-creases and to eliminate or reduce the extent of coverage of fuel adjustment clauses.Construction and Financing Program Expenditures for the Company's construction pro-gram over the three-year period 1981-1983 are estimated to be approximately $1.1 billion.Substantial additional expenditures may be required if existing generating plants have to be further modified or require additional facilities to comply with possible future environmental quality standards. In recent years, the construction pro-gram has been affected by substantial increases in con-struction costs and difficulties in obtaining financing for the program due to high costs of capital.The construc-tion program is reviewed continuously and revised from time to time in response to revised projections of load growth and changes in the cost and availability of capital.In recent years, these reviews have resulted in extending construction schedules of a number of projects with the objective of reducing the level of annual construction ex-penditures. However, deferrals of construction projects may have an adverse effect on the quality of the Com-pany's service to its customers in the future, and any re-sulting reductions in current construction costs may, in the long run, be at least partially offset by cancellation charges and general inflationary trends.In addition, when the completion date of a project under construction is substantially delayed, it becomes more expensive, both because of the foregoing factors and because certain costs such as real property taxes, allowances for funds used during construction and other overheads continue to accrue until the facility is placed in commercial opera-tion.It is estimated that approximately 38%of the Company's projected construction expenditures for 1981-1983 will be financed with internally-generated funds.The additional amounts needed will have to be raised externally, as in the past, through sales of securi-ties and investments in the Company's common equity by AEP.The Company initially finances current construc-tion expenditures in excess of available internally-generated funds by issuing unsecured short-term debt (commercial paper and bank loans)and then periodically reduces short-term debt with the proceeds from sales of long-term debt securities and preferred stock and with investments in the Company's common equity by AEP.The amounts of short-term debt which the Company may issue are limited by regulatory restrictions under the Public Utility Holding Company Act of 1935 and by re-strictions in its charter and in certain debt instruments. At December 31, 1980, the Company had received au-thorizations from the Securities and Exchange Commis-sion to issue a total of approximately $200,000,000 of short-term debt.Note 8 of Notes to Consolidated Finan-INDIAN ICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES cial Statements contains information on the Company's short-term bank lines of credit and rev'olving credit agreements. Bank lines of credit may be withdrawn by the banks extending them at any time.ln order for the Company to issue additional long-term debt and preferred stock, it is necessary for it to comply with earnings coverage requirements contained in its mortgage bond and debenture indentures and in its charter.ln order to issue additional long-term debt (except to refund maturing long-term debt), the Com-pany must have pre-tax earnings equal to at least twice the annual interest charges on long-term debt, giving effect to the issuance of the new debt, for a period of 12 consecutive months within the 15 months immediately preceeding the date of the new issue.To issue additional preferred stock, the Company must have after-tax gross income at least equal to one and one-half times annual interest charges and preferred dividends, giving effect to the issuance of the new preferred stock, for the same period.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 cov-erage under them may affect the cost and marketability of such bonds.At December 31, 1980, the coverages of the Company under these provisions were at least 2.39 for long-term debt and 1.36 for preferred stock.ln view of these restrictions on the issuance of addi-tional debt securities and preferred stock, the Company believes that it will be possible to meet the capital require-ments of its construction program only if the Company receives rate increases over the next several years suffi-cient to maintain the earnings levels required to issue the necessary amounts of long-term debt and preferred stock and to provide an appropriate return on new equity investment. Net Income Consolidated net income before preferred dividend re-quirements decreased by 12.5oIo in 1979 and increased by I.OVO in 1980.These changes in net income were accom-panied by a decrease in the total proportion of allowance for funds used during construction (AFUDC)reflected in net income, from 44.7CIO in 1978 to 37.8'n 1979 and an increase to 50.2%in 1980, as a result of the commercial operation of the Cook Nuclear Plant Unit 2 in 1978 and the increasing investment in the Rockport Plant (now under construction) in 1980.AFUDC does not represent cash income.or a reduction in actual interest expense, but is an accounting convention required by regulatory sys-tems of accounts.The net cost of borrowed funds used for construction and a reasonable rate of return on other funds when so used is capitalized as a cost of construction projects with a concurrent credit to the Income State-ment.The amount capitalized is generally included in the plant investment base for setting rates and recovered through depreciation charges included in rates after the project is placed in commercial operation. Effects of Inflation The high rates of inflation in recent years have had a drastic effect on the Company's consolidated revenues, expenses and net income that is,not readily evident in conventional financial statements. For additional infor-mation on the effects of inflation, refer to Note 13 of the Notes to Consolidated Financial Statements, which pre-sents a consolidated statement of income for 1980, ad-justed for effects of changing prices, and a comparison of selected supplementary data for a two-year period, similarly adjusted. Auditors'pinion Deloitte HaSkinS-SeliS 155 East Broad Street Cotvmbus.Orrio 43215 (6 t 41 221~1000 Cable DEHANDS To the Shareowners and the Board of Directors of Indiana&Ni chigan Electric Company: Me have examined the consolidated balance sheets of Indiana&Hichigan Electric Company and its subsidiaries as of December 31, 1980 and 1979 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, 1980.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. As discussed in Note 2 of Notes to Consolidated Financial State-ments, (1)a court decision has reversed in part and remanded a 1978 Indiana retail rate order and, (2)the Company is collecting certain wholesale revenues subject to possible refund.In addi-tion, the Company is involved in the antitrust matters discussed in Note 10 of Notes to Consolidated Financial Statements. In our opinion, subject to the effect on the consolidated finan-cial statements identified above of such adjustments, if any, as might have been requi red had the outcome of the rate and antitrust matters referred to in the preceding paragraph been known, such consolidated financial statements present fairly the financial position of the Company and its subsidiaries at December 31, 1980 and 1979, 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, 1980, in conformity with generally accepted accounting princip'les applied on a consistent basis.February 24, 1981 IhfDIANA 4~CHIGAI)I ELECTRIC COMPAIII I'iVD SUBSIDIARIES Consolidated Statements of Income OPERATING REvENUEs-ELEGTRIc Year Ended December 31, 1979 1978 (in thousands) 5748,680 5689,066 5597,894 OPERATING EXPENSES: Operation: Fuel for Electric Generation... Purchased and Interchange Power (net).Other: 459Iaintenance........................... Depreciation, Depletion and Amortization Taxes Other Than Income Taxes State Income Taxes Federal Income Taxes.Total Operating Expenses.OPERATING INCOME OTHER INCOME AND DEDUCTIONS: Allowance for Other Funds Used During Construction ~..vliscellaneous Nonoperating Income Less Deductions.... Total Other lncomeand Deductions........... INCOME BEFORE INTEREST CHARGES INTEREST CHARGES: Interest on Long-term Debt.Interest on Short-term Debt.ivliscellaneous Interest Charges.TotallnterestCharges .Allowance for Borrowed Funds Used During Construction (credit)iVet Interest Charges 171,943 128,645 79,788 41,377 77,668 26,131 165 54,767 580,484 168,196 18,438 12,103 30,541 198,737 109)138 18,847 2,507 130)492 (31,827)98,665 145,743 121,706 70,184 37,624 74,099 27,176 1,529 49,556 527,617 161,449 17,365 11,677 29,042 190,491 96,127 13,787 1,567 111,481 (20,077)91,404 125,277 114,154 60,001 32,724 59,844 26,432 (378)22,020 440,074 I57,820 27,974 1,776 29,750 187,570 89,397 5,964 1,566 96,927 (22,627)74,300 CoNsoLIDATED iVET INcoME-before preferred stock dividend requirements PREFERRED SI'OCK DIVIDEND REQUIREMENTS EARNINGS APPLICABt E To COMMON STOCK 100,072 23,242 S 76,830 99,087 113,270 19,995 18,357 5 79,092 5 94,913 See lvo5es ro Consolidared Financial Slalemen5s. 9 Consolidated Balance Sheets ASSETS AND OTHER DEBITS December 31, 1980 1979 (in thousands) ELECTRIC UTILITY PLANT: Production. Transmission Distribution General and Miscellaneous (includes nuclear fuel and mining plant)Construction Work in Progress Total Electric Utility Plant Less Accumulated Provisions for Depreciation, Depletion and Amortization .Electric Utility Plant Less Provisions ................. $1,501,750 433,653 283.153 195,140 703,685 3,117,381 561,773 2,555,608$1,442,315 427,818 269,708 38,163 479,926 2,657,930 475,643 2, l82,287 OTHER PROPERTY AND INVESTMENTS .27,409 212,892 CURRENT ASSETS: Cash Special Deposits and Working Funds.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 UtilityRevenues Prepaymentsand Other Current Assets Total Current Assets 10,665 3,630 62,216 23,066 5,319 (371)65,586 19,510 11,796 4,795 206,212 4,598 3,990 56,928 20,576 3,773'381;49,284 17,309 20 104 2,093 178,274 DEFERRED DEBITS: Unamortized Debt Expense.Property Taxes.Deferred Collection of Fuel Costs.Other Work in Progress.Other Deferred Debits Total Deferred Debits Total 3,220 1,402 1,297 11,321 26,303 3,520 1,473 789 10,696 20,465 43,543 36,943$2,826,172$2,616,996 See Notes to Consolidated Financial S(atements. 10 INDIAN dc iMICHIGAN TRIC CObfPA/V Y rl IVD SUBSIDIARIES LIABILITIES AiVD OTHER CREDITS CAPITAUZATION: Common Stock-No Par Value: Authorized-2,500,000 Shares Outstanding -1,400,000 Shares Premiums on Capital Stock Other Paid-inCapital. Retained Earnings Total Common Shareowner's Equity.......... Cumulative Preferred Stock: Not Subject to iviandatory Redemption Subject to 5 landatory 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)$56,584 381 580,322 124,318 761)605 197,000$56,584 381 530,228 136,802 723,995 197,000 67,000 1,245,403 68,500 1,088,222 2.271,008 2,077,7 I 7 December 3l, 1980 1979 (in thousands) und Requirements CDRRENT LIABILITIEs: Cumulative Preferred Stock Sinking F Due Within One Year Long-term Debt Due Within One Year.Short-term Debt: Notes Payable to Banks.Commercial Paper.Accounts Payable: General Associated Companies.Dividends Declared: Common Stock...Cumulative Preferred Stock.Customer Deposits Taxes Accrued.Interest Accrued Revenue Refunds Accrued.Other Current Liabilities Total Current Liabilities. 1,348 19,270 104,550 41,975 41,701 13,052 11,500 5,805 2 202 23,804 27,467 20,026 24,136 336,836 l,500 36,033 93,490 55,805 45,559 16,127 30,130 5,732 2,0I8 20,134 21,480 16,470 20,195 364,673 COMEIITMENTs AND CGNTINGENcIEs (NQTE 10)DEFERRED CREDITs AND OPERATING REsERvEs: Deferred Income Taxes.Deferred Investment Tax Credits..Other Deferred Credits and Operating Reserves.........Total Deferred Credits and Operating Reserves..Total 191,884 17,950 8,494 218,328 156'47 10,712 7,447 I 74,606$2,826,172$2,6I6,996 Consolidated State's of Sources and Applications of Funds Year Ended December 31, SQURGEs QF FUNDs: Funds from Operations: Consolidated Net Income.Principal Non-fund Charges (Credits)to Income: Depreciation, Depletion and Amortization........... Provision for Deferred Income Taxes (net)............ Deferred Investment Tax Credits (net).Allowance for Other Funds Used During Construction .Other (net).Total Funds from Operations Funds from Financings and Contributions: Issuances and Contributions: Capital Contributions from Parent Company......... Cumulative Preferred Stock.Long-term Debt.Short-term Debt (net).Total Less Retirements of Cumulative Preferred Stock and Long-term Debt Net Funds from Financings and Contributions.... Sales of Property.Total Sources of Funds 1980$100,072 83,393 35,437 13,509 (1&,438)1,274 215,247 50,000 177,021 (2,770)224,251 38,149 186,102 50,673$452,022$99,087 77,746 35,844 10,714 (17,365)1,380 207,406$113,270 59,853 18,359 2,425 (27,974)506 166,439 60,000 38,708 164,069 24,355 287,132 90,692 196,440 57,898$461,744 60,000 38,486 369,839 23,090 491,415 357,877 133,538 42,416$342,393 1979 1978 (in thousands) APPLICATIONS OF FUNDS: Plant and Property Additions: Gross Additions 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.Other Changes (net)Increase (Decrease) in Working Capital (a)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 increase (decrease) as follows: Cash and Cash Items Accounts Receivable Materials and Supplies.Accrued Utility Revenues Accounts Payable Dividends Declared on Common Stock.............. Revenue Refunds Accrued Taxes Accrued Other (net).See lVores to Consolidated Financial Statements. $304,678 6,013 310,691 (18,438)292,253 89,320 23,242 11,117 36,090$452,022$5,707 9,334 18,503 (8,308)6,933 18,630 (3,556)(3,670)(7,483)$36,090$321,405 47,028 368,433 (17,365)351,068 77,070 19,995 1,953 11,65&$461,744$(19,426)12,059 37,698 6,293 4,079 (15,878)(3,679)(129)(9,359)$11,658$340,209 31,024 371,233 (27,974)343,259 62,692 18,357 13,675 (95,590)$342,393$(59,280)8,696 107 (4,338)(29,809)(2,892)(5,865)(1,201)(1,008)$(95,590) INDIANA MICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES Consolidated Statements of Retained Earnings 1980 Year Ended December 31,)979 t978 (in thousands) Balance at Beginning of Year: As Previously Reported Restatement(Note2) .As Restated Consolidated Net Income.Total.$137,876 (1,074)136,802 100,072 236,874$136,829 (757)136,072 99,087 235,159$104,566 800 105,366 173,270 278,636 Deductions: Cash Dividends Declared: Common Stock Cumulative Preferred Stock: 48/i%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 Total Cash Dividends Declared.Capital Stock Expense.Total Deductions... Balance at End of Year 89,320 495 273 165 2,124 2,716 2,604 39425 3,440 3,600 4,400 112,562 (6)112,556$124,318 77,070 495 273 165 2,124 2,716 2,604 3,600 3,440 3,600 978 97,065 1,292 98,357$136,802 62,692 495 273 165 2,124 2,716 2,604 3,600 3,440 2,940 81,049 7,373 82,366 SI36,072 See ltiotes to Consolidated Financial Statements. 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).A wholly owned subsidiary, Indiana 2 Michigan Power Company (the Generating Subsidiary) was merg-ed into the Company on November 30, 1979, at which time the Company assumed the obligations of the Gen-erating Subsidiary. The accounting and rates of the Company are subject in certain respects to the requirements of state regulatory bodies 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 subsidi-aries engaged in coal mining.Significant inter-company items have been eliminated in consolidation. The consoli-dated financial statements have been prepared on thebasis of the accounts which are maintained for FERC purposes.13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Electric Utility Plant;Other Property and Investments; Depreciation, Depletion and Amortization Electric utility plant is stated at original cost.Gener-ally, the plant of the Company is subject to first mor-tgage liens.The Company capitalizes, as a construction cost, an allowance for funds used during construction, 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 were 10.75%during 1980 and 1979, and 10.5%in 1978, (the Generating Sub-sidiary used 10.5%and 10.2%, during 1979 and 1978 ap-plied on a semi-annual compound basis).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 Property Rate Production: Steam.Nuclear, Steam-Fossil. fired Tr'ansmission. Distribution........,.. General 4.0 el'o 3.l eto 2.9oto 3.3ei'o 3.Seto Depreciation, depletion and amortization of coal-mining property are provided in amounts estimated to be sufficient to amortize the costs of the related assets, less any estimated salvage (which is not significant), over their useful lives and are calculated by use of the following methods: Description Method Mining Structures and Straight-line method (original lives Equipmem range from 2 to 30 years)Coal Interests and Mine Units-of-production method Developmem Costs (based on estimated recoverable tonnages;current rate averages Sl.05 per ton)Substantially all of the amount of the provisions for depreciation, depletion and amortization of coal-mining property is classified in the Consolidated Statements of Income as fuel for electric generation. Operating expenses are charged with the costs of labor, materials, supervision and other costs incurred in maintaining the properties. Property accounts are charged with costs of betterments and major replace-ments of property and the accumulated provisions for depreciation are charged with retirements, together with removal costs less salvage.Other property and investments are generally stated at cost.Income Taxes Deferred Federal income taxes, reduced where ap-plicable by investment tax credits, are provided by the Company generally to the extent that such amounts are allowed for rate-making purposes.On October 1, 197S, January 1, 1979 and May I, 1979, the Company expanded deferred tax accounting to additional book/tax timing differences pursuant to orders of the Public Service Com-mission of Indiana (PSCI), FERC and the Michigan Pub-lic Service Commission (MPSC), respectively. The Company normalizes the effect of tax reductions resulting from investment tax credits recognized in con-nection with accruals of current income taxes and provi-sions for certain deferred Federal income taxes, con-sistent with rate-making policies.The deferred invest-ment tax credits applicable to current Federal income taxes payable are amortized over 30 years.The consolidated coal subsidiaries use the"flov:-through" method of accounting for investment tax cl'edt ts.Pension Plans The companies participate with other companies in the AEP System in a non-contributory trusteed plan to pro-vide pensions for all their employees who are not partic-ipants in pension plans of the United Mine Workers of America (UMWA), subject to certain eli-gibility requirements. The pension plan conforms to the Employee Retirement Income Security Act of 1974 (ERISA).Pension costs for the years ended December 31, 1980, 1979 and 1978 were approximately $3,416,000,$3,117,000 and$2,624,000, respectively. These amounts cover the costs of currently accruing benefits and amortization of, and interest on, unfunded prior-service costs.The latter costs, approximately $1,943,000 at December 31, 1979, the date of the most recent actuarial study, are being amortized over 30 years.The plan may be modified or terminated at any time, subject to limitation of labor agreements. At December 31, 1979, the actuarial present value of accumulated vested benefits was$44,567,000 and the ac-turarial present value of accumulated nonvested benefits was$2,561,000. The market value of net assets available for benefits at December 31, 1979 was$66,615,000. The assumed rate of return used in determining the actuarial present value of accumulated benefits was 8%.Under a contract with the UMWA, a subsidiary is re-quired to make payments into two multi-employer pen-sion plans based on coal production and hours worked.The cost of the plans was approximately $1,690,000 in 1980.As of June 30, 1980, the Company's actuary esti-mates, based on information that is available, that the 14 INDIA MICHIGA>v ELECTRIC COMPANY Y AND SUBSIDIARIES Increase (Decrease) in: Operating Revenues................. Operating Expense: Purchased and Interchange Power(net) FederallncomeTax ............... Miscellaneous Interest Charges...... Miscellaneous Nonoperating Income...Consolidated Net Income.........,..Year Ended December 31.1979 1978 (in thousands) 5(2,077)5(5,586)(1,013)(252)520 1,015 5 (317)~(2,153)(1,418)278 736 5(1,557)subsidiaries'hare of the unfunded vested liabilities of the UM~VA pension plans approximates $9,200,000. Black Lung Benefits The subsidiaries engaged in coal-mining activities are liable under the Federal Coal Mine Health and Safety Act of 1969 (Act), as amended, to pay certain black lung bene-fits to eligible present and former employees. Effective January I, 1980, self-insurance accruals are being pro-vided sufficient to amortize the actuarially computed pre-sent and future liabilities for such benefits over the aver-age remaining life of the mines.The provision in 1980 was approximately $391,000.On December 28, 1979, a Black Lung Benefits Trust was established by the AEP System under Section 501(c)(21) of the Internal Revenue Code.At January 1, 1980 (the date of the latest actuarial valua-tion), the subsidiaries'nfunded actuarial value of medi-cal and liability benefits under the Act, as weil as com-parable state legislation, was approximately $12,000,000. Commencing in 1980, the companies began funding the actuarially determined liabilities, including a provision for the previously accrued but unfunded liabilities, at a level which currently approximates the recorded expense provisions. Other The Company accrues unbilled revenues for services rendered subsequent to the last billing cycle through month-end. iviiscellaneous nonoperating income for the years ended December 31, 1980, 1979 and 1978 includes gains amounting to S397,000, S147,000 and S261,000, respec-tively, on certain long-term debt reacquired. Debt discount or premium and debt expense are being amortized over the lives of the related debt issues and the amortization thereof is included within miscellaneous interest charges.2.Restatements, Operating Revenues and Operating Expenses: The 1979 and 1978 financial statements have been re-stated to refiect the effects of certain revenue refunds as ordered by federal and state regulatory commissions in 1980.The effects of such restatements are as follows: The Company has collected retail revenues under final orders of PSCI which became effective in February 1977 and September 1978.In November 1979, a Court of Ap-peals ruled that the 1977 increase granted by the PSCI ($41,800,000 on an annual basis)was excessive, said that the PSCI had over-estimated the Company's Federal in-come tax allowance, and ordered the case sent back to the PSCI for further hearings.The Company has appealed the ruling to the Supreme Court of Indiana.The Com-pany's petition to the Indiana Supreme Court for review of this decision was denied on April 29, 1980.Hearings were held before the PSCI on October 30, 1980.On Janu-ary 21, 1981, the PSCI issued an order requiring the Company to refund to its Indiana retail customers$9,315,000, including interest of$1,215,000. Prior periods have been restated to give effect to such refunds.On February 19, 1981, the Company filed its refund plan for the disposition of the$9,315,000 refund.The Com-pany indicated it is prepared to proceed with the refund plan, however, it requested a stay of the refund pending any appeal that may be made by another party to the pro-ceeding.Subsequently, the PSCI issued an order approv-ing the refund plan but denying the Company's request for a stay.In a separate proceeding before the Court of Appeals, certain petitioners have similarly challenged the tax provision allowed in the 1978 increase ($43,000,000 on an annual basis)granted by the PSCI.On February 5, 1981, the Court of Appeals of Indiana affirmed, in part, and reversed, in part, the PSCI decision, relating to the 1978 increase and remanded the matter to the PSCI for further proceedings with respect to certain issues, includ-ing the issue relating.to Federal income tax expense.Three commercial customers have filed a complaint with a Circuit Court in lvfichigan appealing an order of MPSC allowing the Company a$10,800,000 annual rate in-crease in 1979, seeking a summary judgment in connec-tion with the tax provision allowed in the rate increase.The Company is an intervening defendant in the proceed-ing.The Company cannot predict the outcome of these matters.wholesale-for-resale transactions are effected among the principal operating companies of the AEP System pursuant to a System interconnection agreement. In May 1975, the FPC permitted a modification to the intercon-nection agreement to be placed into effect as of June 2, 1975, subject to refund.The modification has the effect generally, of decreasing the expenses of those System companies which have a generating capability in excess.of their peak loads pius appropriate reserves, and of increasing the expenses of those participating companies which have negative capacity balances.In July 1979, FERC issued an opinion and order which generally ap-proved the 1975 modification, but ordered that the monthly capacity equalization factor applicable to settle-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ments among System companies under the interconnec-tion agreement be reduced from a basis of a 17.5efo annual carrying charge, to a 16.49efo annual carrying charge.In August 1979, AEP System companies filed a supplement to the modiTication causing the monthly carrying charge factor to be reduced in accordance with the FERC order.In November 1979, FERC accepted the supplement to the modification for filing and made it effective June 2, 1975.In September 1979, FERC issued an order denying an application for rehearing by AEP System companies and other parties to the proceeding, confirming its decision of July 1979, and providing that adjustments from the effective date of the modification to reflect the revised monthly carrying charge factor should be effected by credits to future billings rather than through cash refunds.In October 1979, AEP System companies filed with FERC a plan designed to effect the required adjustments through credits to future billings and in September 1980, FERC approved the compliance program.In October 1980, the Company and other AEP System companies party to the modification requested and, in December 1980, FERC authorized the Company and the other AEP System companies to restate their respective accounts to record as prior period adjustments the settlement of intrasystem transactions and related interest, net of related income tax effects.Action was commenced effective with December 1980 billings to complete the compliance program previously authorized by FERC.The amounts shown in the Consolidated State-ments of Income for the years 1979 and 1978 and the other financial data with respect to such periods included herein, reflect the prior period adjustments authorized by FERC.Revenues collected by the Company from other whole-sale and retail rate increases placed into effect subject to possible refund are estimated as follows: 1980.1979 1978.Prior to197S Total (in thousands) $16,923 18,988 10,151 19,320$65,3S2 See Note10 for information with respect to an antitrust decision enjoining the Company from charging certain wholesale rates.Operating revenues derived from a certain wholesale customer represent approximately 9', 10tro and 12'f total operating revenues for 1980, 1979 and 1978, respectively. ln 1978, the Company received approval of the PSCI to collect, over a five-year period ending in 1983, substan-tially all of its deferred fuel costs.3.Federal Income Taxes: The details of Federal income taxes are as follows: Year Ended December 31.Charged to Operating Expensete Current Federal Income Taxes(net). Deferred Federal Income Taxes (net).Deferred Investment Tax Credits(net) Total.Charged (Credited) to Other Income and Deductions: Current Federal Income Taxes (net)....DcferredFederal Income Taxes(net)... Total.Total Federal Income Taxes 1980$6,983 34,275 13.509 54,767 1,526 1,162 2,688$57.455 1979 (in thousands) $5,293 33,549 10,714 49,556 (1,297)2.295 99S$50.554 197S$l,357 18,238 2.425 22,020 815 121 936$22.956 INDIA MICHIGAN ELECTRIC COMPANY AND SUBSIDIARIES The companies'ffective Federal income tax rates were less than the statutory rates for the years 1980, 1979 and 1978.The following is a reconciliation of the differences between the amount of Federal income taxes computed by multiply-ing net income before Federal income, taxes, by the applicable statutory tax rate and the amount of Federal income tax expense reported in the Consolidated Statements of Income.Year Ended December 31, Consolidated Net Income-before preferred stock dividend requirements. Federal Income Taxes Prc-Tax Book Income 1980 S 100,072 57,455 5157,527 1979 (in thousands) 5 99,087 50,554 5149,641 1978 5113,2?0 22,956 5136.226 Federal Income Tax on Pre-Tax Book Income at Statutory Rate of 46oro in 1980 and 1979 and 48o'o in 1978 Increase (Decrease) in Federal income Taxes Resulting from: ExcessofTax over Book Depreciation ..Allowance for Funds Used During Construction and Miscellaneous Items Capitalized on the Books but Deducted for Tax Purposes (not shown below)(~tine Developmem and Exploration Expense.Unbilled Revenues Amortization of Pollution Co'ntrol Facilities ...................... Other..Federal Income Tax on Current-Year Taxable Income(separate-return basis)Adjustment Due to System Consolidation .Minimum Tax on Preference items Current-Year Investment Tax Credit.Currently Payable Adjustments of Prior-Year Accruals(net) Adjustments for Tax Losses (a): Federal Income Taxes Investment Tax Credit Current Federal Income Taxes (net).(16,794)(24,532)(211)3,793 (4,032)144 3Q,830 (10,394)(14,305)6,131 (210)8,625 (6,037)8,509 (22,149)(18,338)(2,487)(2,867)(4,030)(4.281)14,683 (8,380)(4,431)1,872 (683)10,447 (7,640)3.996 (19,691)(25,853)(4,680)2,054 (4,080)(1,405)11,733 (I l,?33)650 650 (276)7,503 (5.(05)2, ((2 5 72,462 5 68,835 5 65,388 Deferred Federal income Taxes (net of amortization) Resulting from the Following Timing Differences: Depreciation(liberalized and asset depreciation range).Amortization of Pollution Control Facilities Allowance for Borrowed Funds Used During Construction .Unbilled Revenues.Percentage Repair Allowance Accelerated Amortization at'mergency Facilities(amortization of prior.year provisions) .......... Other.Investment Tax Credit Applicable to Deferred Federal Income Taxes on Certain Timing Differences ..Deferred Federal Income Taxes (net).Deferred Investment Tax Credits(net) Total Federal Income Taxes 16,689 3,'?67 12,130 (3,822)5,005 (2,131)(1,432)5,231 35,437 13,509 S (7,4((20,513 3,719 7,918 2,590 1,894 (1,817)(121)1,148 35,844 10,714 5 5Q,554 17,439 573 1,148 (2,082)403 (1,848)(474)3,200 18,359 2,425 (b)5 22,956 (b)(a)The AEP System allocates Federal income taxes currently payable in accordance with Securities and Exchange Commission (SEC)regulations which require that the benetit of tax losses be allocated to the AEP System companies with taxable income.The benefits of these tax losses, without affecting taxes payable, are reallocated to the AEP System companies giving rise to such losses, as it is expected that these losses would be usable in subsequent years to reduce taxes payable of the loss companies through the application of the SEC allocation.(b)Federal income taxes for 1977 were approximately 53,194 000 less than originally estimated due to changes in repair allowance and mine develop-ment deductions. However, taxes payable were not significantly affected due to available investment tax credit offsets.The reduction was recorded in the third quarter of 1978 principally as a reduction of deferred investment tax credits.17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The companies join in the filing of a consolidated Federal income tax return with its affiliated companies in the AEP System.Unused System investment tax credits at December 31, 1980 aggregated approximately $267,000,000, of which approximately SI3,000,000 may be carried forward through 1984, S92,300,000 through 1985, S56,800,000 through 1986 and$104,900,000 through 1987.As required by the Internal Revenue Code, approximately $37,300,000 of these amounts, generated by Columbus and Southern Ohio Electric Company prior to its acquisition, must be utilized by it.Of the System investment tax credit carryforwards, approxi-mately$29,000,000 has been applied as a reduction of deferred income taxes prior to December 31, 1980 and will not be reflected in net income when realized in future years except as affected by changes in deferred income taxes.The System's consolidated Federal income tax returns for the years prior to 1970 have been settled.The returns for the years 1970 through 1973 have been reviewed by the Internal Revenue Service (IRS)and additional taxes for those years have been proposed, some of which the Sys-tem companies have protested. In the opinion of the Sys-tem companies, adequate provision has been made for such additional taxes.The IRS has also completed its review of the returns for the years 1974 through 1976.Although the IRS has proposed substantial disallow-ances, such disallowances, if sustained, would not result in a material assessment of additional taxes due to the availability of substantial investment tax credit carry-forwards.The System companies are protesting the bulk of the proposed disallowances. Based on the information available at this time, the effect of the proposed dis-allowances is not expected to be material to System earn-ings due predominantly to the availability of substantial'nvestment tax credit carryforwards and def'erred Federal income tax provisions relating to certain of the proposed disallowances, although the ultimate effect is not pres-ently determinable. 4.Other Property and Investments'. A portion of the Company's Western coal r'eserves were transferred to Blackhawk Coal Company (a wholly owned subsidiary) as of September I, 1980.The amount of the investment transferred to Blackhawk, included in other property and investments at December 31, 1979, was S185,373,000. 5.Common Stock, Premiums on Capital Stock and Other Paid-in Capital: The Company received from its parent cash capital contributions of$50,000,000 in 1980,$60,000,000 in 1979 and$60,000,000 in 1978.In 1980 a credit to other paid-in capital of$94,000 represented the excess of par value over cost of cumulative preferred stock reacquired by the Company to meet sinking fund requirements. There were no common stock transactions and no trans-actions affecting premiums on capital stock during the years 1980, 1979 and 1978.6.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. Approxi-mately$48,800,000 at December 31, 1980, was so restricted. 18 INDIAN dl IICHIGAN ELECTRIC COdMPANY AND SUBSIDIARIES 7, Cumulative Preferred Stock: At December 31, 1980, authorized shares of cuinulative preferred stock were as follows: Par Value Shares Authorised $100.2,250,000 25....,....,...11,200,000 in 1978 shareowners authorized an increase of$25 par value cumulative preferred stock to 7,200,000 shares and in 1980 additional authorization was received for an increase to 11,200,000 shares.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 may or may not possess mandatory redemption characteristics upon issuance.The Company issued and sold 1,600,000 shares of the$2.25 series in 1978;and 1,600,000 shares of the$2.75 series in 1979.Shares~Outaandin Current Call Price Par Value Series 4i//t<o 4.56o'o 4.12o/o 7.08oi'o 7.7R'o 8.68o/o$2.15$2.25$106.125 102 102.728 106.45 107.32 107.&27.15 27 25 5/I/82 3/I/83$100 100 100 100 100 100 25 120,000 60,000 40,000 300,000 350,000 300,000 1,600,000 1,600,000 A.Cumulative Preferred Stock Not Subject to Mandatory Redemption: Redemption Restricted Prior to Amount December 31, 1980 1979 (in thousands) S 12,000 S 12,000 6,COO 6,000 4.000 4,000 30,000 30,000 35,000 35,000 30,000 30,000 40.000 40,000 40.000 40.000 S 197.000$197.000 Par Value Current Call Price 12o/o(a)$2.75(b)$112 27.75 10/I/84$100 o5 Less Sinking Fund Requirements Due Within One Year.B.Cumulative Preferred Stock Subject To Mandatory Redemption: Redemption Restricted ~Seriesic Prior to Shares~Outanndin 283,480 1,600,000 Amount December 31.1980 (in$28,348%.000 68,348 1.348$67.000 1979 thousands) $30,000%.000 70,000 1.500$68.500 (a)A sinking fund for the I2o/o series requires the Company to provide, on or before October I of each year, beginning in 1980, for the purchase, or redemption at$100 a share.of IS,COO shares of such series.The Company has the right, on each sinking fund dare, to redeem an additional 15,000 shares.At December 31.1980 the Company had reacquired 1.520 shares in anticipation of sinking fund requirements. Unless all sinking fund provisions have been met, no distribution may be made on the common stock.(b)A cumuhtive sinking fund for the$2 75 series requires the Company to redeem 80 000 shares on each October I commencing on October I, 1984.The Company has the option to credit shares purchased or otherwise acquired in lieu of redeeming shares for the sinking fund and has th'e non-cumuhtive option to double the number of shares to be redeemed in any year on and after October I, 1984.(c)The minimum sinking fund provisions of the series subject to mandatory redemption aggregate Sl,500 000 in each of the years 1981~1982 and 1983, and$3.500,000 in 1984 and 1985.19 NOTES TO CONSOLIDATED FINANClAL STATEMENTS (Continued) 8.Long-term Debt, Lines of Credit and Compensating Balances: Long-term debt by major category was outstanding as follows (less portion due within one year): December 31, 1980 1979 (in thousands) First I)fortgage Bonds................. $1.044,369 S 924.464 Sinking Fund Debemures.............. 22,70523,66S Installmem Purchase Comracts......... 158,799 119.678 Other Long term Debt................ 19.$30 20.412 Total (less ponion due within one year)$1.245.403$1.088.222 First mortgage bonds outstanding were as follows: December 31.o'o Rate Due 1980 1979 (in thousands) 2i/.1980-June I.............,. 5-5 IS,015 38/4 1982-January I............ 16,046 16.046 IOYd 1982-June I..~............ 70,000 70,000 38/8 l983-September I.......... 139762 13,762 I I 1983-September I......,... 60,000 60,000 38/i 19S4-Onober I,........... 15,082 15,082 IOYi 1984-December)(c)(d)(e)...61,500 63,000 10 1985-March I (e)........... 12,000 12,750 108/4 1987-January I............ 80,000 S0,000 13Yi 1987-February I (a)......... 55,000 3 Yi 19BS-February I.........,. 22,974 22,974 4i/.19SS-Novembn I...,...... 17,557 17,557 118/8 1990-June I (b).......... 80,000 4'993-August I..........,..42,902 42,902'7 1998-May I............... 35,000 3$,000 8 Yi 2000-April l............... 50,000$0,000 9Yi 2003-June I (d)(e).......... 288,500 300,000 8 Yi 2003-December I........,..40,000 40,000 9)A 2008-March l...,,......... 100,000 100,000 Unnmorr)redo)eeoom)ner)........,... [).454)~859)1,058.869 956,229 Less Portion Due Within One year....... 14.500 31,765 Total.Sl.(M.369$924.464 (a)Issued by the Company in February 19SO.(b)Issued by the Compan>'n June 1980.(c)Guaranteed by American Electric Pov'er Company, inc.(d)On Novembn 30, 1979, the Company assumed the obligation of the Generating. Subsidiary to pay the principal of and interest on these bonds.which are secured by a first mortgage lien on the Nuclear Plant.(e)Sinking fund payments are required as follows: IO)ro series due 1985-$750,000 annually on March I.IOYioio series due 1984-$2,250,000 annually on December I, through 1983, v:ith the noncumu!ative election to redeem an addi-tional$2,250,000 in each year.98/oi'o series due 2003-$11,500,000 annually on June I~through)991 and$13,500,000 annually on June I, 1992 through 2002 with the noncumulative option to redeem an additional amount in each of the specified years from a minimum 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 contain improvement, maintenance and replacement provisions requiring the deposit of cash or bonds with the 5)/88ro Due 1986-June 1.......7 Vd oio Due 199S-hlay 1........Unamortized Premium........ Total.1980 1979 (in thousands) $11,266$11,898 11.390 11,'713 49 57$22.705$23.66S 1nstallment purchase contracts have been entered into by the Company in connection with the issuance of pollu-tion control revenue bonds by governmental authorities as follows: oro Rate Due City of Lawrenceburg, Indiana: S)/: 2006-July l................ 7 2006-hlayt................ 69/8 2006-May I,...,...,...,... City of Rockport, Indiana: 9)/i 2005-June I......,...,.... 98/4 2010-Junc l...,....,...... City of Sullivan, Indiana: 7 Vi 2004-May l................ 6 Yi 2006-May l................ 7)/8 2009-May 1,...,........... Unamortized Discount..............,.Total., Decembn 3l.1980 1979 (in thousands) S 25,000 40,000 12,000 6,500 33,$00 7,000 25,000 (3.201)$158.799 S 258000 40,000 12,000 7,000 25.000 13,000 (o 3o2)$119.678 Under the terms of certain installment purchase con-tracts, the Company is required to pay purchase price installments in amounts sufficient to enable the cities to pay interest on and the principal (at stated maturities and upon mandatory redemption) of related pollution con-trol revenue bonds issued to finance the construction of pollution control facilities at certain generating plants of the Company.Other long-term debt outstanding consisted of: December 31.1980 1979 (in thousands) Coal Resnve Obligations Payable in Equal Annual Installments Through 1985 with Interest at Soi'o.Notes Payable Due l981 Through 1985, 6oio.7 od'o.Other.Less Portion Due Within One Year Total.$23,688 612 24,300 4.770$19,530$23,926 644 110 24,680 4.268$20.412 trustee, or in lieu thereof, certification of unfunded property additions. The Company has elected to use un-funded property additions to meet these provisions in the past.Sinking fund debentures of the Company outstanding were as follows: December 31.20 IIVDIAIV'ICHIGAIV ELECTRIC COMPAtV Y AIv D SUBSIDIARIES Long-term debt of the Company, excluding premium or discount, outstanding at December 31, 1980 is due as follows: (in thousands) $19,270 I05)808 93,531 87,352 25,536 937.783$1.269.280 1981 1982 1983.1984.1985 Later Years At December 31, 1980 and 1979, the principal amounts of debentures reacquired in anticipation of sinking fund requirements were$1,944,000 and$1,789,000, respec-tively.The Company may make additional debenture or first mortgage bond sinking fund payments of up to$14,550,000 annually.At December 31, 1980, the Company had an un-used revolving line of credit with various banks of$100,000,000. The line of credit requires a commitment fee of Yi of 1%per annum of unused credit.The Company had unused short-term bank lines of credit of approximately $195,000,000 and$124,000,000 at December 31, 1980 and 1979, respectively, under which notes could be issued with no maturity more than 270 days after date of issue.The available lines of credit are subject to withdrawal at the banks'ption, and$181,000,000 and$104,000,000, respectively, of such lines are shared with other AEP System companies. In accordance with informal agreements with the banks, compensating balance deposits of up to 10%or, in cer-tain instances, equivalent fees are required to maintain the lines of credit and, on any amounts actually bor-rowed, generally either additional compensating balance deposits of up to 10%are maintained or adjustments in interest rates are made.Substantially all bank balances are maintained by the Company to compensate the banks for services and for both used and available lines of credit.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 System companies of approximately $17,400,000,$17,000,000 and$17,500,000 for the years ended December 31, 1980, 1979 and 1978, respectively. Operating expenses shown in the Consolidated Statements of Income include certain items not shown separately, as 1 ollows: Year Ended December 31.Purchased Power(a).Interchange Power (net): AEP System Electric Utilities. Other Companies (b)., Taxes Other Than Income Taxes: Real and Personal Property Taxes.State Gross Sales, Excise and Franchise Taxes and Xtiscelianeous State and Local Taxes.Social Security Taxes-Federal and State Fuel for Electric Generation includes charges relating to mining operations, as I'ollows:)Iaintenance Depreciation. Depletion and Amortization ....,.......,.... TaxesOther ThanFederal Income Taxes................... 1980 5 42,147 87,111 (613)5128.645 516,193 7,309 2.629$26.131$5,680 5,653 1.061 1979 (in thousands) $16,485 105,606~3))5121,706$15,230 9,501 2,445$27.176$3,787 3,643 686 1978 5 6,241 77,889 30.024$114.154 S14.617 9.842 1,973$26,432 (a)Includes power purchased from Ohio Valley Electric Corporation (OVEC)of approximately 515,S37,000 in 1980,$4,205,000 in 1979 and 51~558,000 in 1978.(b)Includes interchange power sold to OVEC of approximately $386,000 in 19SO, 51,367,000 in 1979 and$908,000 in 1978.21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Charges to operating expenses for royalties and for advertising are less than 1<io of gross revenues in each year.Sales and purchases of energy and interchange power transactions are regulated by the various commissions having jurisdiction. American Electric Power Service Corporation pro-vides 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 costbasis and include no compensation for the use of equity capital, all of which is furnished to theservice company by AEP.The service company is subject to the regulation of the SEC under the Public Utility Holding Company Act of 1935.10, Commitments and Contingencies: The construction budget of the companies for the year 1981 is estimated at$303,000,000 and, in connection therewith, commitments have been made.The Company participates with its parent, three associated utility companies, several unaffiliated utility companies, and OVEC in supplying the U.S.Depart-ment of Energy(DOE) with the power requirements of its plant near Portsmouth, Ohio.The proceeds from the sales of power by OVEC are designed to be sufficient for OVEC to meet its operating expenses and fixed costs, including amortization of long-term debt capital (balance approximately $4,000,000 as of December 31, 1980), over a period ending in1981 and the completion of the purchase of pollution control facilities (the unamortized cost of which aggregated approximately $163,000,000 at December 31, 1980)and to provide for an annual return on its equity capital.The Company, as a participant, is entitled to receive from OVEC, and is obli-gated to pay for 7.6'f the power not required by DOE.The power agreement terminates by its terms, in 1992.In 1978, three court proceedings brought in recent years by certain municipalities in Indiana and Michigan, all wholesale customers of the Company, were combined into a single consolidated case in the United States Dis-trict Court for the Northern District of Indiana and a fourth action was commenced in the same court.A trial of the consolidated case was held and in January 1979 the court ruled for the plaintiffs that the Company, its par-ent, and American Electric Power Service Corporation have violated, the antitrust laws, awarded the municipali-ties damages of approximately $12, 100,000 when trebled, placed limitations on the Company's putting into effect or charging wholesale rates to the plaintiffs and enjoined the Company from certain practices. The financial state-ments at December 31, 1980 and 1979 do not include any provision for such damages.The Company, AEP and American Electric Power Service Corporation have ap-pealed the decision to the United States Circuit Court for the Seventh Circuit which, on February 21, 1980 issued a decision which affirmed the decision of the District Court, but vacated the damage and injunctive provisions of its decision and remanded them to the District Court for additional proceedings. In March 1979, two other municipal customers brought a separate action against the Company, its parent and the Service Corporation al-leging violations of the antitrust laws and'seeking dam-ages of at least$7,000,000 before trebling and other rem-edies.Certain issues in the complaint are similar to those tried in the consolidated case.In another proceeding, the Company is awaiting a decision with respect to a ruling by an administrative law judge in 1977 on a complaint made to FERC by eleven municipalities. That complaint alleged that the munici-pal electric systems had been threatened with termination of wholesale electric service.The Company has filed a brief on exceptions with FERC.The Company cannot predict whether the initial decision will become the final decision of FERC without change or the effect thereof.Two contractors, United Nuclear Corporation and General Atomic Company (GAC), are variously obli-gated to supply uranium concentrates and six fabricated nuclear-fuel reloads to the Company.Each contractor claims, among other things, that it is not or may not be obligated to make deliveries of uranium concentrates or fabricated nuclear-fuel reloads and that it is entitled to a price higher than contracted. The Company received the first two reloads and assured delivery of the remaining four reloads through rights-reserved agreements with GAC, which were incorporated into injunctive orders of the court.Under the agreements, pending the court's judgment and without prejudice to the ultimate rights of the parties, the reloads were to be supplied at a higher provisional cost to the Company.In 1978, a U.S.District Court entered judgment ordering GAC to pay the Com-pany damages of approximately $16,000,000 and to deliver the remaining reloads at the price specified in the contract.GAC has appealed the judgment.A stay of the monetary portion of the judgment has been granted, but motions to stay the specific-performance portion of the judgment have been denied.22 lÃDIAIv MICHIGAN EI ECTRIC COhIPA/VY AiVD SUBSIDIARIES In 1978, a retail customer of the Company com-menced an action, individually and as representative of an alleged class, in the U.S.District.Court;.,alleging that the Company's lease of electric utility assets from the City of Fort Wayne is in violation of Federal antitrust laws.The complaint seeks to have the lease declared null and void, asks that the Company be restrained from charging excessive prices for the purchase of electric power, seeks treble damages in an unspecified amount in respect of allegedly excessive charges to residents of the City of Fort Wayne and seeks to restore the control of the electric utility assets in question to the City of Fort Wayne.In 51ay, June and July, 1979 the court granted in part and denied in part the Company's motion to dismiss or for summary judgment.The Court dismissed plain-tiffs'llegations concerning abuse of a legally acquired monopoly but ruled that plaintiffs could continue to as-sert other theories of violation of Federal antitrust laws and certified a class of residential customers who may maintain the action.In 1975, the Federal Power Commission issued an order instituting an investigation under the Federal Power Act concerning the reasonableness and prudence of the coal purchasing policies and practices of members of the System, the manner in which wholesale fuel adjust-ment clauses are implemented by System members, and related matters.A complainant and eight intervenors are also participating in the proceeding. In 1978, the FERC staff issued a preliminary report which alleged over-charges on the part of the entire System, and of which only a portion relates to the Company's operations. The report also questioned certain aspects of the System's fuel policies, including the AEP System's decision to expand its use of coal from mines owned by affiliates and its use of Western coal.In November 1979, the FERC staff sub-mitted its final recommendations to the administrative law judge.The final recommendations urge refunds of alleged overcharges, corrections of alleged improper coal accounting and pricing practices, disallowances of cer-tain fuel costs associated with Western coal acquisitions, revision of FERC regulations regarding affiliate fuel costs and establishment of hearing procedures to resolve certain of the issues and that a separate investigation be instituted concerning System administration of long-term fuel supply contracts. The System companies have submitted a written response supporting the decisions previously made by the System companies. On February 14, 1980, FERC issued an order directing the administra-tive law judge immediately to certify to FERC the entire record in the proceeding for review by the Commission and ordered that the procedural schedule be placed in abeyance, pending a further directive. The Company cannot assess the outcome or significance of this proceeding. The Company intends to apply to regulatory com-missions to provide, through future increased rates, for the costs that will be incurred to store spent nuclear fuel and to decommission the Nuclear Plant at the end of its service life.The Company plans to effect modifications to increase the present spent-fuel storage capacity of the Nuclear Plant to permit normal operations through the early 1990's, at an estimated cost of$6,000,000. The Company is also studying alternative methods of decom-missioning the Nuclear Plant but cannot reasonably estimate, at this time, the future costs that will be incurred.The Price-Anderson Act limits the public liability of a licensee of a nuclear plant to$560,000,000 for a single nuclear incident, to be covered in part by private insur-ance with the balance to be covered by agreements of indemnity with the Nuclear Regulatory Commission. The Company has purchased private insurance in the maximum available amount of$160,000,000. In the event of a nuclear incident involving any commercial nuclear facility in the country, the Company, together with other licensees, could be individually assessed$5,000,000 per incident for each reactor owned (subject to a maximum of$10,000,000 in any year in the event of more than one incident). The Price-Anderson indemni-ties have been decreased by the aggregate amount which is assessable against existing licensees and will continue to decrease as new operating units are licensed.The Company has procured property insurance in the maximum available amount of$300,000,000 for damage to the nuclear plant facilities and is a self-insurer for any property loss in excess of that amount The Company also has obtained membership in Nuclear Electric Insurance Limited (NEIL), which provides its members with insurance to cover extra costs of replace-ment power resulting from a prolonged accidental outage of a nuclear unit.The Company's policy insures against such increased costs up to$2,000,000 per week (starting 26 weeks after the outage)for one year and$1,000,000 per week for the second year, or SOvIo 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$8,200,000 per unit (five times the annual premium)if NEIL's losses exceed its accumulated funds.23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Il.Leases: The Company, as part of its operations, leases property, plant, and equipment under leases ranging in length from I to 35 years.Most of the leases require the Company to pay related property taxes, maintenance costs and other costs of operation. The Company expects that in the normal course of business, leases will generally be renewed or replaced by other leases.The majority of the various rentals is under leases having purchase options or renewal options for substan-tially all of the economic lives of the properties. Rentals are analyzed as follows: Gross Rentals Less Remal Recoveries(includingsublease rentals)(a). Yet Remals(b).'s Year Ended December 31.1980 1979 1978 (in thousands) S88,000$70,000 S60.000 3.000 2.000 1.000$85.000 S68,000$59.000 (a)Includes amounts paid for or reimbursed by associated companies.(b)Classified as: Operating Expenses~~e\~e~Clearing and Miscellaneous Accounts (portions of which are charged to income)...,...,........,..$82.000 3,000 S85.000$62,000 6,000$68.000 S51,000 8.000 S59.000 Future minimum lease payments, by period and in the aggregate, under the Company's capital leases and noncancelable operating leases consisted of the following at December 31, 1980: 1981..1982 1983.1984.1985.Later Years., Total Future hlinimum Lease Payments..Less Estimated Interest Element Included Therein (b)Estimated Present Value of Future Minimum Lease Payments.....,...,. Capital Operating~Leases la Leases (in thousands) $7,000 S 7,000 6,000 7,000 6.000 7,000 5,000 7,000 5,000 7,000 66.000 76.000 95,000$111.000 55.00Q$40.000 (a)Excludes leases of nuclear fuel, all of svhich are capital leases, Nuclear fuel remals comprise the unatnortized balance of thc lessor's cost (approximately $127,000,000 at December 31, 1980)less salvage value, if any, to be paid over the period of usage in proponion to heat produced.and carrying.charges on the lessor's unrecovered cost.It is comemplated that portions of the presently leased material will be replenished by additional leased material.(b)Interest rates used rang~from 4.9<io to I4.7~io.The following is a pro forma analysis of leased properties under capital leases and related obligations, assuming that such leases were capitalized: Decetnber 31.1980 1979 (in thousands) $214,000$169,000 14,000 15,QOO 13.000 13,000 13,000 12,000 11.000 11.000 265,000 2Ã,000 Nuclear Fuel Coal-transportation Equipment........Real Estate.Electric Distribution System Property.... Other TransportationEquipmem .......Gross Properties under Capital Leases...Less Accumulated Provision fot Amortization ..Net Properties under Capita)Leases.....Obligationsunder Capital Leases(a)..... 73.000$147.000$153.000 104.000$)61,000 S167.000 (a)Including an estimated$44,000,000 and S59,000,000, respec-tively, due within one'year.Had capital leases been capitalized, any additional net expense would have been insignificant. The above pro forma analysis does not give recognition to offsetting adjustments in allov able revenues that the Company believes would nor-mally be expected to occur through the regulatory rate-making process, if the related leases had been capitalized. 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 Company cannot predict the extent to which or proportion in which the associated companies will utilize the properties under such leases in the future.24 INDIANA IICHIGAN ELECTRIC COMPANY AND SUBSIDIA RIES 1980-Mar.31............... June30............... Sept.30............... Dec.31............... 1979-)Iar.31............... June30.........,..... Sept.30............... Dec.31............... 1978-Wlar.31............... June30............... Sept.30............. Dec.31............... 'Before preferred stock dividend 5205,464 163,476 187,216 192,5&~171,029 173,426 169,797 174,814 l45,106 157,958 152,218 142,612 requirements. 548,46I 33,113 4),953 45,669 47,683 33,280 41,828 38,658 41,787 40,416 40,983 34,634 532,946 17,353 23,188 26,585 30,808 19,950 26,205 22,124 32,614 34,909 23,157 22,590 13.Unaudited Information On Inflation and Changing Prices: The supplementary information in the statements 12.Unaudited Quarterly Financial Information: The following restated consolidated quarterly finan-cial information is unaudited but, in the opinion of the Company, includes all adjustments (consistirtg of only normal recurring accruals)necessary for a fair presenta-tion of the amounts shown: Quarterly Periods Operating Operating Net Ended Revenues Income Income'in thousands) below is presented in compliance with the requirements of the Financial Accounting Standards Board (FASB).The information is intended to disclose the effects of both general inflation and changing prices;however, the amounts should be considered approximations of such effects rather than precise measures since a number of subjective judgments and estimating techniques were employed in developing the information. Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power as measured by the average level of the 1980 Consumer Price Index for All Urban Consumers (CPI-U).Current cost amounts reflect the changes in specific prices of property, plant and equipment from the date such assets were acquired to the present, and differ from constant dollar amounts to the extent that specific prices have risen at a different rate than the general inflation rate as measured by the CPI-U.The current cost of prop-erty, plant and equipment represents the approximate cost of replacing such resources and includes utility plant in service, construction work in progress, land, land rights and other property and investments. Current cost amounts were determined primarily by applying appro-priate indexes from the Handy-Whitman Index of Public Utility Construction Costs.Year Ended December 31.1980 Consolidated Statement of Income Adjusted for Effects of Changing Prices As Stated in the Primary Financial Statements Adjusted for General Intlation (constant dollar)Adjusted for Changes in Specific Prices (current cost Operating Revenues Operating Expenses: Operation: Fuel for Electric Generation(a) .Purchased and Interchange Power(net) .Other Maintenance Depreciation, Depletion and Amortization(a)................... TaxesOther Than Federal Income Taxes.Federal Income Taxes Total Operating Expenses.Operating Income 0 ther Income and Deductions iV et Interest Charges Preferred Stock Dividend Requirements. Earnings Applicable to Common Stock (b).increase in Specific Prices (current cost)of Property, Plant and Equipment Held During the Year(c).................,. Reduction to iVet Recoverable Cost (d)Effect of increase in General Price Level.Excess of Increase in General Price Level over Increase in Specific Prices After Reduction to iVet Recoverable Cost....,............ Gain from Decline in Purchasing Power of iVet Amounts Owed (e)....iVet 5748.680 171,943 128.645 79.7S8 41,377 77.668 26,296 54,767 580.484 168,196 30,$41 (98.665)(23,242)5 76.830 (in thousands) 5749.000 174,000 129,000 80.000 41,000 1$4,000 26,000 55.000 659.000 90.000 31,000 (99,000)~23.m)5 (1.000)S(216,000) 181,000 5 (35,000)5749.000 174.000 129.000 80.000 41.000 157,000 26,000 55.NN 662.m 87,000 31,000 (99,000)~23.m~5(4.m 5 262,000 (532,000)(270,000)181.000 5 (S9.000)(Conrinuedj 25 ~0 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)(a)As prescribed by the FASB, the items in the Consolidated Statement of Income that have been adjusted are depreciation, depletion and amortization (including portions classified as fuel for electric generation). Depreciation, depletion and amortization charges were computed by applying current accrual rates to the various plant accounts (production, transmission, distribution, general and miscellaneous) after adjusting such accoums for the effects of changing prices.(b)Including the reduction to net recoverable cost, the loss from operations on a constam dollar basis and currem cost basis would have been$217,000,000 and$4,000,000, respectively.(c)At December 31, 1980, currem cost of property, plant and equipment, net of accumulated depreciation, depletion and amortization, was$4,705,000,000 while historical cost or net cost recoverable through depreciation, depletion and amortization was$2.556,000,000.(d)The reduction to net recoverable cost of property, plant and equipmem (as expressed in terms of inflation-adjusted cost)to historical cost recognizes that the rate-making process limits the Company to recovery of the historical cost of the subject assets.(e)To reflect properly the economics of rate regulation in the Consolidated Statement of Income Adjusted for Effects of Changing Prices, the reduction to net rqcoverable cost should be offset by the gain that results from the decline in purchasing power of the net amounts owed by the Company.During a period of inflation, holders of monetary assets such as cash and receivables suffer a loss of general purchasing power while holders of monetary liabilities, generally long-term debt, experience a gain (because debt will be repaid in dollars having less purchasing power).The Company's gain from the decline in purchasing power of its net amounts owed is primarily attributable to the substantial amount of debt and cumulative preferred stock subject to mandatory redemption which has been used to finance utility plam.Operating Revenues Historical Cost Iqformation Adjusted for General Iqflation Income (Loss)from Operations (excluding reduction to net recoverable cost).~Net Assets at Year-end at Net Recoverable Cost$(1,000)$27,000$915,000$988,000 Five-Year Comparison of Selected Supplementary Data Adjusted for Effects of Changing Prices (dollar amounts are expressed in terms of average 1980 dollars)Year Ended December 31, 1980 1979 1978 1977 (in thousands, except index data)S749,000$782,000$756,000$689,000 1976$601,000 Current Cost Iqformation Income (Loss)from Operations (excluding reduction to net recoverable cost).Excess of Increase in General Price Level over Increase in Specific Prices after Reduction to Net Recoverable Cost Net Assets at Year-end at Net Recoverable Cost.General Financial Data Gain I'rom Decline in Purchasing Power of Net Amounts Owed...Average Consumer Price Index General Iqformation on Mining Operations Proven and Probable Coal Reserves at End of Year (thousands of tons)(note)Tons of Coal Mined (thousands) Average Market Price(at currem-cost per ton).$(4,000)S11,000 S(270,000) $915,000$181,000 246.8 413,964 415,023 1,059 669$52.75$52.20$(217,000)$988,000$197,000 217.5 195.4 181.5 170.5 Note: Proven reserves-The estimated quantities of commercially recoverable reserves that, on the basis of geological, geophysical and engineering data, can be demonstrated with a reasonably high degree of certainty to be recoverable in the future from known mineral deposits by either primary or improved methods.Probable reserves-The estimated quantities of commercially recoverable reserves that are less well defined than proven reserves and that may be estimated or indicated to exist on the basis of geological, geophysical and engineering data.26 INDIAN MICHIGAN ELECTRIC COMPANY A tVD SUBSIDIARIES Directors FRANK N.BIEN W.A.BLACK LAWRENCE R.BRUNKE RICHARD E.DISBROW JOHN E.DOLAN E.W.HERi(ANSEN (a)G.E.LEivtASTERS GERALD P.ivlALONEY RICHARD C.MENGE C.W.ROAHRIG (b)J.F.STARK 4V.S.WHITE, JR.Officers W.S.1VHITE, JR.Chairlnan of the Board and Chief Executive Officer iV.A.BLACK President and Cltief Operating Officer J.F.STARK Senior Vice President FRANK iV.BIEN Vice President RICHARD E.DISBROW Vice President JOHN E.DOLAN Vice President A.JOSEPH DODD Vice President ROBERT S.HUNTER Vice President GERALD P.ivIALONEY Vice President RICHARD C.ivlENGE Vice President BEVERLY I.STEARS (C)Vice President PETER J.DEMARIA Treasurer JOHN R.BURTON Secretary BPVERLY I.STEARS (d)Assistant Secretary and Assistant Treasurer ALLEN H.STUHLS(ANN Assistant Secretary and Assistant Treasurer RICHARD P.BOURGERIE (C)Assistant Secretary JOHN F.DILORENZO, JR.Assistant Secretary CARL J.i~fOOS (f)Assistant Secretary WARREN O.KEITNER (e)Assistant Secretary iVILLIAM E.OLSON Assistant Secretary WILLIAM J.PROCHASKA (C)rlssistant Secretary LEONARD V.ASSANTE Assistant Treasttrer WILLIA)(N.D'ONOP RIG Assistant Treasurer GERALD R.KNORR Assistant Treasurer The principal occupation of each of the above directors and officers of Indiana 4 ,'Ltichigan Electric Compuny, with nine exceptions, is as an employee of American Electric Power Service Corporation. The exceptions are Alessrs.IV.A.Black, Lawrence R.Bnrnke, G.E.LeMasters, Richard C.Menge, Carl J..SIoos, C.IV.Roahrig, J, F.Stark, Beverlv I.Stears.and Allen H.stub(mann<<hose principal occupations are as officers or employ ees of Indiana re.Slichigan Electric Company.(n)Resigned April 22,!980 (b)Elec;ed April 22, l980 (c)Elected June I~l980 (d)Resigned June I, l980 (e)Resigned Septetnber I.I980 (t)Elected September I.1980 27 Operating Statistics 1980 1979 1978 1977 1976 ELEGTRIG OPERATING REvENUEs (in thousands): From Kilowatt-hour Sales: Residential: Without Electric Heating............... With Electric Heating Total Residential Commercial .Industrial Sales for Resale: Municipalities Cooperatives. Other Electric Utilities TotalSalesforResale .............. Miscellaneous .Total from Kilowatt-hour Sales...... Other Operating Revenues.Total Electric Operating Revenues.... $106,488 54,277 160,765 108,764 116,165 42,295 21,652 288,563 352,510 6,150 744,354 4,326$102,543 55,458 158,001 106,151 127,815 42,028 22,176 222,488 286,692 6,099 684,758 4,308$689,066 S 95,676 53.557 149,233 95,423 120,180 37,230 17,732 166,391 221,353 7,655 593,844 4,050$597,894 S 89,675 46,324 135,999 91,153 107,931 42,391 15,619 103,517 161,527 5,974 502,584 4,085$506,669 S 71,888 37,447 109,335 72,527 80,233 26,197 10,491 I'IO,atl2 147,070 2,573 411,738 3,811$415,549 SOURGEs 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.6,719 13,153 85 19,957 1,883 3,669 25,509 1,426 24,083 6,443 11,614 79 18,136 811 5,389 24,336 1,386 22,950 17,407 301 4,475 22,183 1,340 20,843 12,171 182 7,922 20,275 1,270 19,005 7,231 7,317 10,101(a)4,786 75 68 7,701 6,809 72 14,582 232 6,523 21,337 1,290 20,047 Sales: Residential: Without Electric Heating... With Electric Heating.Total Residential .Commercial Industrial .Sales for Resale: Municipalities Cooperatives. Other Electric Utilities.Total Sales for Resale..Miscellaneous Total Sales 2,493 1,549 4,042 2,716 3,932 1,541 803 10,854 13,198 195 24,083 2,389 1,619 4,008 2,629 4,380 1,534 819 9,386 11,739 194 22,950 2,352 1,622 3,974 2,498 4,319 1,585 814 7,468 9,867 185 20,843 2,456 1,605 4,061 2,671 4,473 1,642 786 5,195 7,623 19,005 2,384 1,577 3,961 2,579 4,209 1,527 754 6,849 9,130 168 20,047 ta)Includes 69l million kilowatt-hours as test generation. The fuel cost associated with such generation is charged to other operation expense. IIVDIAiVA IICHIGAIV ELECTRIC COMPAIV Y AiVD SUBSIDIARIES 1980 1979 1978 1977 1976 AYERAGE CosT oF FUEL CQNsUMED (a): Cents per i>lillion Btu: Coal.Fuel Oil iVuclear Overall Cents per Kilowatt-hour Generated: Coal.Fuel Oil Nuclear Overall 164.49 151.91-(c)220.42'8.44 37.82 84.95 76.25 1.59 1.52-(c)4.37.52.41.89.81 109.68 74.96 65.89 229.68 168.80 76.72(b)34.65 29.72 26.34 71.16 59.12 46.47(b)1.11.73.63 2 40 1.88.84(b).38.33.28.75.61.47(b)RESIDENTIAL SERVICE-AVERAGES: Annual Kwh Use per Customer: Total With Electric Heating......Annual Electric Bill: Total With Electric Heating......Price per Kwh (in cents): Total With Electric Heating......10,206 20,584 10)210 21,611$406$402$721$740 3.98 3.94 3.50 3.43 10,260 10,641 22,067 22,830 10,439 23,200 3.79 3.34 3.39 2.93 2.76 2.37$389$361$288$736$668$551 iVUMBER oF ELEGTRIc CUsToMERs-Year-End: Residential: 'ithout Electric Heating............. WithElectricHeating .Total Residential .Commercial .Industrial Sales for Resale: Municipalities....... Cooperatives Other Electric Utilities....'............ Total Sales for Resale............. Miscellaneous. Total Electric Customers.......... 321,432 75,618 319,477 75,606 315,472 74,900 313,085 312,211 72,059 69,237 23 65 17 23 65 15 23 23 23 64 61 59 20'6.15 105 103'07 100 97 1,424 1,373 1,331 1,304 1,280 444,139 441,870 436,605 430,955 426,980 397,050 395,083 390,372 385,144 381,448 42,758 42,563 42,106 41,907 41,703 2,802 2,748 2,689 2,500 2,452 (a)Excludes effect of deferred coilection of t'uel costs.(b)Includes effect of refund received from supplier of fuel oil resulting from seulemetu of litigation concerning pricing.Without such refund, the average cost of fuel oil for (976 would have been I73.37 cents per million Btu and I.9l cents per kilowau-hour generated, and the overall cost of fuel would have been 49.33 cents per million Btu and 0.50 cents per kilowatt-hour generated.(c)The Company's only fuel oil ttred plant was placed in deactivated reserve during November l979.29 INDIANA c(MICHIGAN ELECTRIC COMPAIv>'I Price Range of Cumulative Preferred Stock By Quaners (I980 and I979)Cumulative Preferred Stock 1st 1980-uarters 2nd 3rd 4th 1st 1979-uarters 2nd 3rd 4th ($100 Par Value)4t/io/o Series Dividends Paid Per Share Market Price-5 Per Share (OTC)Ask (high/low) Bid (high/low) 4.56~in Series Dividends Paid Per Share Market Price-5 Per Share (OTC)Ask (high/low) Bid (high/low) 4.12o/o Series Dividends Paid Per Share Market Price-5 Per Share (OTC)Ask (high/low) Bid (high/low) 7.08oIo Series Dividends Paid Per Share Market Price-5 Per Share (NYSE)-High-Low 7.76o/o Series Dividends Paid Per Share Market Price-5 Per Share (NYSE)-High-Low 8.68oIo Series Dividends Paid Per Share Market Price-5 Per Share (NYSE)-High-Low 12o/o Series Dividends Paid Per Share Market Price-5 Per Share (N YSE)-High-Low ($25 Par Value)S2.15 Series Dividends Paid Per Share Market Price-5 Per Share (NYSE)-High-Low$2.25 Series Dividends Paid Per Share Market Price-5 Per Share (NYSE)-High-Love$2.75 Series Dividends Paid Per Share Market Price-5 Per Share (NYSE)-High-Low OTC-Over-the-Counter NYSE-New York Stock Exchan Note-The above bid and asked Market quotations provided by N$1.14$1.14$1.14 51.14$1.14$1.14$1.14$1.14$1.03$1.03$1.03$1.03 51.03$1.03$1.03$1.03 38/38 40/40 51.77$1.77$1.77$1.77$1.77 S1.77$1.77$1.77 61 52 73 65 70 64'/i 51'/i 44 l/i 69t/i 61 59 48 58'/i 51 56/i 47$1.94$1.94$1.94 S1.94 S1.94 51.94$1.94$1.94 70ii 60 76 71 76'/i 67 77 i/i 72 64iA 55 64i/i 48 674 52 55 46>/i S2.17$2.17 52.17$2.17$2.17 S2.17 S2.17$2.17 82 t/i 78'/~86'/i 79Yi 82 79Ãi 78 67 Yi 64 55'l 74 65 72 59 70tl 60 53.00$3.00 53.00$3.00$3.00$3.00 S3.00 106 98i/i 100 83'/i l02 95 104 87 t/i 103 t/i 86/i 109 i/i 103 109'I 102 106t/i 103'/i 5.5375 5.5375 5.5375 5.5375 5.5375 5.5375 5.5375 5.5375 21'li 20'/i 19N 16 Yi 21'/i 19'/i 15 i/i 13'/i 18 14i/i 18i/i 14'/i 22'/19 17 t/i 13 i/i 5.5625 5.5625 5.5625 S.5625 5.5625$.5625 5.5625 5.5625 22 3/i 20'/17 14 18'6 20t/i 17 23 20Yi 22'/i 20t/i 19t/i 15 18'li 14'li 5.6875 5.6875 5.6875 5.6875 5.6875 26Yi 24 Yi 21 Yi 1S t/i 25 22i/i 23i/i 22 24 Yi 22 ge quotations represe atlonal Quotation nt prices between dealers and do not represent actual transactions. Bureau, Inc.-Dash indicates quotation not available. $1.03125 51.03125 S1.03125 S1.03125$1.03125$1.03125$1.03125 51.03125 30 ¹~.:.,~0 t{olor<<oioo j i'I 0 Sortie{;feei Jot{rior{0 0 Serrtore Icorbotf r I.ttiyrr St Jocetrtrj Ilii i{i~ten DONALD C.COOK II 40 j~OIttl(tt of~It S r'II0rt ft'tf r i TV(IN{r, iBRANC l Crt J M I C H I 6 4 N r'r Ottcopo L CR<<er I CP)'./By<<ro<<t r~I I~tr H I N D I A N A fi, k.I<<r/II/i~V I l l I If<<el<<4e"/" I Oi t I p S C Teferr<<II i~A g~Motto{i~;r I Stt trterrt pet~r<<r/gg~i'0/Oonloird i+tfert{C 4{rty+I I I H I 0 f I I So{oyetie oc k~writ{tet ttD victor{{'y o" r<<e<<r lY{c I l l H 1 I<<<<f I l k a~"Vl~ir~C~<<<<<<~~~r<<r~!-l:T.=',. 6~iso I!>SRTEO~rr i<<ir r~~I c i<<cc~re<<c i'L l~i'LW CC r<<<<r e<<t cc'4 I.I I I r'~e'f c'~tc{'t ce<<Pm~Oftoftttroti TANNTRS t:RTTK P+~~)t" r"<<,r~rf'<<C C ygg1114'0%%%%%%%%%laai%%iil )K E N T U C K~r'SW R N~t1 I lg ROCKPORT])INDIANA 8 MICHIGAN ELECTRIC COMPANY p lec.I<<<<<<cern Q rr<<ec I I I<<r<<co<<<<c 0 trio<<Iic<<<<t~~e~~~Cia<<eee<<t 1~~maem~~I~c~I<<<<w Ce<<>>.~k<<<<c Oo C~'~l~le Ic e INDIANA ck MICHIGAN ELECTRIC COMPANY The Company's Annual Report (Form 10-K)to the Securities and Exchange Commission will be available on or about March 31, 1981 to shareowners upon their written request and at no cost.Please address such requests to: Mr.H.D.Post Assistant Treasurer American Electric Power Service Corporation 180 East Broad Street Columbus, Ohio 43215 Transfer Agent and Registrar of Cumulative Preferred Stock Morgan Guaranty Trust Company of i>ew York30%Vest Broadway, New York, iV.Y.10007}}