UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from __________ to __________
Commission file number 0-337
WISCONSIN POWER AND LIGHT COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin 39-0714890
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
222 West Washington Avenue, Madison, Wisconsin 53703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (608) 252-3311
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Preferred Stock (Accumulation without Par Value)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.[ ]
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date.
Class Outstanding at January 31, 1995
Common Stock, $5 par value 13,236,601 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's 1995 Proxy Statement relating to its
1995 Annual Meeting of Shareowners (to be filed with the Commission under
Regulation 14A within 120 days after the end of the registrant's fiscal
year) are incorporated by reference into Part III hereof.
<PAGE>
WISCONSIN POWER AND LIGHT COMPANY
FORM 10-K
December 31, 1994
TABLE OF CONTENTS
Part I. Business............................................2
Properties..........................................14
Legal Proceedings...................................15
Executive Officers..................................16
Part II. Financial Information...............................18
Part III. Directors and Executive Officers
Information.....................................46
Part IV. Exhibits............................................47
Signatures...................................................50
Report of Independent Public Accountants on Schedules........51
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
On March 1, 1988, after obtaining shareowner and all the
necessary regulatory approvals, Wisconsin Power and Light Company (the
"Company" or "WPL") effected a corporate restructuring which included the
formation of a holding company, WPL Holdings, Inc. WPL Holdings, Inc. is
the parent company of WPL and its utility subsidiaries and of Heartland
Development Corporation, the parent corporation for nonregulated
businesses.
WPL, incorporated in Wisconsin on February 21, 1917 as the
Eastern Wisconsin Electric Company, is a public utility predominately
engaged in the transmission and distribution of electric energy and the
generation and bulk purchase of electric energy for sale. It also
transports, distributes and sells natural gas purchased from gas
suppliers. Nearly all of WPL's customers are located in south and central
Wisconsin. WPL operates in municipalities pursuant to permits of
indefinite duration which are regulated by Wisconsin law. WPL does not
derive a material portion of its revenues from any one customer.
WPL owns all of the outstanding capital stock of South Beloit
Water, Gas and Electric Company ("South Beloit"), a public utility
supplying electric, gas and water service, principally in Winnebago
County, Illinois, which was incorporated on July 23, 1908.
WPL also owns varying interests in several other subsidiaries
and investments which are not material to WPL's operations.
Regulation
WPL is subject to regulation by the Public Service Commission of
Wisconsin ("PSCW") as to retail utility rates and service, accounts,
issuance and use of proceeds of securities, certain additions and
extensions to facilities, and in other respects. South Beloit is subject
to regulation by the Illinois Commerce Commission ("ICC") for similar
items. The Federal Energy Regulatory Commission ("FERC") has jurisdiction
under the Federal Power Act over certain of the electric utility
facilities and operations, wholesale rates and accounting practices of WPL
and in certain other respects. Certain of WPL's natural gas facilities
and operations are subject to the jurisdiction of the FERC under the
Natural Gas Act. The Company is presently exempt from all provisions of
the Public Utility Holding Company Act of 1935, except provisions relating
to the acquisition of securities of other public utility companies.
The PSCW has recently opened a formal docket initiating and
inquiry into the future structure of the electric utility industry in
Wisconsin. The goals of Wisconsin utility regulation and the principles
to be used in choosing among alternative proposals have been identified.
WPL has submitted its preferred structure which, in summary form, calls
for open access to transmission and distribution systems and a competitive
power generation market place. It is not possible at this time to predict
the outcome of these proceedings.
With respect to environmental matters, the United States
Environmental Protection Agency administers certain federal statutes with
administrative responsibility with respect to others being delegated to the
Wisconsin Department of Natural Resources ("DNR"). In addition, the DNR
has jurisdiction over air and water quality standards associated with
fossil fuel fired electric generation and the level and flow of water,
safety and other matters pertaining to hydroelectric generation.
WPL is subject to the jurisdiction of the Nuclear Regulatory
Commission ("NRC") with respect to the Kewaunee Nuclear Power Plant
("Kewaunee") and to the jurisdiction of the United States Department of
Energy ("DOE") with respect to the disposal of nuclear fuel and other
radioactive wastes from Kewaunee.
Employees
At year-end 1994, WPL employed 2,391 persons, of whom 1,924 were
considered electric utility employees, 334 were considered gas utility
employees and 133 were considered other utility employees. WPL has a
three-year contract with members of the International Brotherhood of
Electrical Workers, Local 965, that is in effect until June 1, 1996. The
contract covers 1,647 of WPL's employees.
ELECTRIC OPERATIONS:
General
WPL provides electricity in a service territory of approximately
16,000 square miles in 35 counties in southern and central Wisconsin and
four counties in northern Illinois. As of December 31, 1994, WPL provided
retail electric service to approximately 371,000 customers in 663 cities,
villages and towns, and wholesale service to 27 municipal utilities, one
privately owned utility, three rural electric cooperatives and to the
Wisconsin Public Power, Inc. system, which provides retail service to nine
communities.
WPL owns 20,969 miles of electric transmission and distribution
lines and 362 substations located adjacent to the communities served.
WPL's electric sales are seasonal to some extent with the yearly
peak normally occurring in the summer months. WPL also experiences a
smaller winter peak in December or January.
Fuel
In 1994, approximately 80 percent of WPL's net kilowatthour
generation of electricity was fueled by coal and 17 percent by nuclear
fuel (provided by WPL's 41 percent ownership interest in Kewaunee). The
remaining electricity generated was produced by hydroelectric, oil-fired
and natural gas generation.
Coal
WPL anticipates that its average fuel costs will likely increase
in the future, due to cost escalation provisions in existing coal and
transportation contracts.
The estimated coal requirements of WPL's generating units
(including jointly-owned facilities) for the years 1995 through 2014 total
about 167 million tons. Present coal supply contracts and transportation
contracts (excluding extension options) cover approximately 14 percent and
21 percent, respectively, of this estimated requirement. WPL will seek
renewals of existing contracts or additional sources of supply and
negotiate new or additional transportation contracts to satisfy these
requirements and to comply with environmental regulations.
Nuclear
Kewaunee is jointly-owned by WPL (41%), Wisconsin Public Service
Corporation (41.2%) and Madison Gas & Electric Company (17.8%). Wisconsin
Public Service Corporation (WPSC) is the operating partner. The plant
began commercial operation in 1974.
WPSC, the plant operator, is a member of the INPO, an
organization of nuclear utilities which promotes excellence in all aspects
of nuclear plant operations. INPO manages the accreditation process for
industry training programs, which includes periodic accreditation of those
training programs by an independent organization, the NNAB. All ten
accredited training programs at Kewaunee are currently in good standing
with the NNAB.
The supply of nuclear fuel for the Kewaunee plant involves the
mining and milling of uranium ore to uranium concentrates, the conversion
of uranium concentrates to uranium hexafluoride, enrichment of the uranium
hexafluoride and fabrication of the enriched uranium into usable fuel
assemblies. After a region (approximately one-third of the nuclear fuel
assemblies in the reactor) of spent fuel is removed from the reactor, it
is placed in temporary storage for cooling in a spent fuel pool at the
plant site. Permanent storage is addressed below. Presently, there are
no operating facilities in the United States reprocessing commercial
nuclear fuel. A discussion of the nuclear fuel supply for Kewaunee, which
requires approximately 250,000 pounds of uranium concentrates per year
follows:
(a) Requirements for uranium are met through spot market
purchases of uranium. In general, a four-year supply of
uranium is maintained.
(b) Uranium hexafluoride, from inventory and from spot market
purchases, was used to satisfy converted material
requirements in 1994. Conversion services relating to
uranium hexafluoride will be purchased on the spot market
in the future.
(c) In 1994, enriched uranium was procured from COGEMA, Inc.
pursuant to a contract last amended in 1993. Enrichment
services were purchased from the DOE, under the terms of
the utility services contract. This contract is in effect
for the life of Kewaunee. The partnership is committed to
take 70 percent of its annual requirements in 1995, and in
alternate years thereafter, from the DOE.
(d) Fuel fabrication requirements through June 15, 1995 are
covered by contract. This contract contains an option to
allow extension of the contract through 1998. WPSC is
negotiating a contract for fuel fabrication extending
through 2001.
(e) Beyond the stated periods for Kewaunee, additional
contracts for uranium concentrates, conversion to uranium
hexafluoride, fabrication and spent fuel storage will have
to be procured. The prices for the foregoing are expected
to increase.
The National Energy Policy Act of 1992 provides that both the
Federal government and the nuclear utilities fund the decontamination and
decommissioning of the three federal gaseous diffusion plants in the
United States. This will require the owners of Kewaunee to pay
approximately $15 million in current dollars over a period of 15 years.
WPL's share amounts to an annual payment of approximately $410,000.
The steam generator tubes at the Kewaunee plant are susceptible
to corrosion characteristics, a condition that has been experienced
throughout the nuclear industry. Annual inspections are performed to
identify degraded tubes. Degraded tubes are either repaired by sleeving
or are removed from service plugging. The steam generators were designed
with approximately 15 percent heat transfer margin, meaning that full
power should be sustainable with the equivalent of 15 percent of the steam
generator tubes plugged. Tube plugging and the build-up of deposits on
the tubes affect the heat-transfer capability of the steam generators to
the point where eventually full power operation is not possible and there
is a gradual decrease in the capacity of the plant. As a result of this
process, Kewaunee's capacity could be reduced by as much as 20% by the
year 2013 when the current operating license expires. Currently, the
equivalent of approximately 12 percent of the tubes in the steam generator
are plugged. WPL and the joint-owners recently completed studies
evaluating the economics of replacing the two steam generators at
Kewaunee. The studies resulted in the conclusion that the most prudent
course of action is to continue operation of the existing steam
generators. WPL and the other joint-owners continue to evaluate
appropriate strategies, including replacement, as well as continued
operation of the steam generator without replacement. WPL and the joint-
owners also continue to fund the development of welded repair technology
for steam generator tubes. The plant is expected to be operated until at
least 2013. WPL and the joint-owners are also continuing to evaluate and
implement initiatives to improve the performance of Kewaunee which already
performs at above average levels for the industry. These initiatives
include conversion from a 12-month to an 18-month fuel cycle and numerous
other cost reduction measures. These initiatives have resulted in
reductions in Kewaunee operating and maintenance costs since 1991.
Physical decommissioning is expected to occur during the period
2014 to 2021 with additional expenditures being incurred during the period
2022 to 2050 related to the storage of spent nuclear fuel at the site.
Wisconsin utilities operating nuclear generating plants are required by
the PSCW to establish external trust funds to provide for the
decommissioning of such plants. The market value of the investments in
the funds established by WPL at December 31, 1994 totaled $51.8 million.
Additionally, in July 1994, the PSCW issued a generic order covering
utilities that have nuclear generation. This order standardizes the
escalation assumptions to be used in determining nuclear decommissioning
liabilities.
WPL's share of the decommissioning costs is estimated to be $159
million (in 1994 dollars, assuming the plant is operating through 2013)
based on a 1992 study, using the immediate dismantlement method of
decommissioning. The undiscounted amount of decommissioning costs
estimated to be expended between the years 2014 and 2050 is $1,016
million. After-tax earnings on the tax-qualified and nontax-qualified
decommissioning funds are assumed to be 6.1% and 5.1%, respectively. The
future escalation rate is assumed to be 6.5%.
Pursuant to the Nuclear Waste Policy Act of 1982, the DOE has
entered into a contract with WPL to accept, transport and dispose of spent
nuclear fuel beginning no later than January 31, 1998. It is likely that
the DOE will delay the acceptance of spent nuclear fuel beyond 1998. A
fee to offset the costs of the DOE's disposal for all spent fuel used
since April 7, 1983 has been assessed by the DOE at one mill per net
kilowatthour of electricity generated and sold by the Kewaunee nuclear
power plant. An additional one-time fee was paid for the disposal of
spent nuclear fuel used to generate electricity prior to April 7, 1983.
Spent fuel is currently stored at Kewaunee. The existing
capacity of the spent fuel storage facility will enable storage of the
projected quantities of spent fuel through April 2001. WPL is currently
evaluating options for the storage of additional quantities beyond 2001.
Several technologies are available. An investment of approximately $2.5
million in the early 2000's could provide additional storage sufficient to
meet spent fuel storage needs until the expiration of the current
operating license.
The Low-Level Radioactive Waste Policy Act of 1980 as amended in
1985 provides that states may enter into compacts to provide for regional
low-level waste disposal facilities. Wisconsin is a member of the Midwest
Interstate Low-Level Radioactive Waste Compact. The state of Ohio has
been selected as the host state for the Midwest Compact and is proceeding
with the preliminary phases of site selection. In June of 1994, the
Branwell, South Carolina disposal facility, which had been accepting
Kewaunee low level radioactive waste materials, discontinued taking waste
materials from outside its region. WPL expects to have sufficient storage
space of its own to satisfy low level radioactive waste disposal needs
until the Ohio facility accepts low level radioactive waste materials.
Recovery of Electric Fuel Costs
In 1994 WPL did not automatically pass changes in electric fuel
costs through to its Wisconsin retail electric customers. Instead, rates
were based on estimated per unit fuel costs established during rate
proceedings and were not subject to change by fuel cost fluctuations
unless actual costs were outside specified limits. If actual fuel costs
had varied from the estimated costs by more than +10 percent in a month or
by more than +3 percent for the test year to date, rates could have been
adjusted based on the results of a special fuel cost hearing. During
1994, fuel costs remained within the aforementioned parameters. See Note
1F in Notes to Consolidated Financial Statements included as part of Item
8 hereto.
WPL's wholesale rates and South Beloit's retail rates contain
fuel adjustment clauses pursuant to which rates are adjusted monthly to
reflect changes in the costs of fuel.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED ELECTRIC STATISTICS
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Area served (end of period):
Population--retail (estimated)(a).......... 822,000 818,000 807,000 799,000 777,000
Cities, villages and towns served--retail.. 607 609 611 611 604
Customers served (end of period):
Residential and farm....................... 322,924 316,870 310,702 304,825 302,942
Industrial................................. 776 714 727 679 635
Commercial................................. 43,793 42,884 42,287 41,190 40,358
Wholesale.................................. 31 32 30 31 31
Class A.................................... 11 7 9 10 10
Other...................................... 1,256 1,236 950 1,173 1,147
--------- --------- --------- --------- ---------
Total.................................... 368,791 361,743 354,705 347,908 345,123
========= ========= ========= ========= =========
Sales--kilowatt-hours (in thousands):
Residential and farm....................... 2,776,895 2,751,363 2,614,439 2,729,917 2,566,093
Industrial................................. 3,764,953 3,540,082 3,377,132 3,185,101 3,173,932
Commercial................................. 1,688,349 1,629,911 1,551,823 1,558,297 1,492,255
Wholesale.................................. 2,207,098 2,105,905 1,994,722 1,979,832 1,885,424
Class A.................................... 367,023 282,226 213,697 461,357 352,129
Other...................................... 54,217 51,073 55,230 54,376 55,101
--------- --------- --------- --------- ---------
Total.................................... 10,858,535 10,360,560 9,807,043 9,968,880 9,524,934
========= ========= ========= ========= =========
Electric operating revenues (in thousands):
Residential and farm....................... 194,242 184,176 171,887 179,751 170,875
Industrial................................. 140,487 132,903 128,467 124,212 124,972
Commercial................................. 101,382 95,977 91,707 92,628 89,618
Wholesale.................................. 76,056 69,757 67,326 68,154 65,983
Class A.................................... 10,344 9,198 10,159 14,677 9,784
Other...................................... 9,236 11,176 8,189 9,130 9,587
--------- --------- --------- --------- ---------
Total.................................... 531,747 503,187 477,735 488,552 470,819
========= ========= ========= ========= =========
Percent of generation by fuel type:
Coal....................................... 80.4% 80.3% 79.8% 81.1% 79.6%
Nuclear.................................... 16.8% 16.5% 17.4% 15.7% 17.6%
Hydroelectric.............................. 2.4% 2.9% 2.6% 2.6% 2.5%
Natural gas................................ 0.3% 0.2% 0.1% 0.5% 0.2%
Oil........................................ 0.1% 0.1% 0.1% 0.1% 0.1%
--------- --------- --------- --------- ---------
Total.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
========= ========= ========= ========= =========
System capacity--at time of system peak:
(kWh's)
Company plants (including jointly owned)... 2,193,000 2,019,000 1,934,000 1,932,000 1,936,000
Firm purchased (sold) power................ 40,000 83,000 110,000 70,000 (55,000)
--------- --------- --------- --------- ---------
Total.................................... 2,233,000 2,102,000 2,044,000 2,002,000 1,881,000
System peak demand......................... 2,002,000 1,971,000 1,971,000 1,863,000 1,798,000
--------- --------- --------- --------- ---------
Reserve margin at time of peak............. 231,000 131,000 73,000 139,000 83,000
========= ========= ========= ========= =========
Fuel cost per kilowatt-hour (cents).......... 1.410 1.349 1.365 1.392 1.419
Cost per million BTU (all fuels) (cents)..... 124.76 128.69 130.80 132.70 134.86
BTU per kilowatthour generated (heat rate)... 10,451 10,483 10,438 10,493 10,519
Average annual electric bill per
residential and farm customer.............. $607 $587 $558 $594 $573
Average annual kilowatt-hour use per
residential and farm customer.............. 8,662 8,772 8,492 9,015 8,603
<FN>
(a) The estimated population for towns served jointly with other electric utilities has been
based upon a ratio of 2.5 population per retail electric customer.
</TABLE>
GAS OPERATIONS:
General
As of December 31, 1994, WPL provided retail natural gas service
to approximately 141,000 customers in 239 cities, villages and towns in
22 counties in southern and central Wisconsin and one county in northern
Illinois.
WPL's gas sales follow a seasonal pattern. There is an annual
base load of gas used for heating, cooking, water heating and other
purposes, with a large peak occurring during the heating season.
In 1994, WPL continued to purchase significant volumes of lower
cost gas directly from producers and marketers and transported those
volumes over its two major pipeline supplier's systems. This replaced
higher cost gas historically purchased directly from the major pipeline
systems.
Gas Supplies
During 1993, both of the interstate pipelines which serve WPL,
ANR Pipeline and Northern Natural Pipeline, completed their transition to
providing unbundled services as mandated by the FERC in its Order 636. As
a result, WPL now contracts with these two parties for various unbundled
services such as firm and interruptible transportation, firm and
interruptible storage service and "no-notice" service. WPL and its gas
customers have benefited from enhanced access to competitively priced gas
supplies, and from more flexible transportation services. As part of this
restructuring, pipelines have sought and received authorization to recover
from their customers certain transition costs associated with
restructuring. WPL is passing these costs along to its retail gas
customers pursuant to provisions of its retail gas tariffs.
The gas industry, in general, was put to a severe test during
the first quarter of 1994 in the wake of the coldest weather on record.
On January 18, 1994, the temperature averaged -17F in Madison, Wisconsin
and did not rise above -7F. WPL set a record peak day load of 251,194
MMBTU. Overall throughput for January was 23% above forecast. Through
effective use of transportation, supply, and storage contracts and by
invoking tariff language allowing interruption and constraint of gas
supplies to WPL's large industrial and commercial customers, WPL was able
to maintain gas flows within the parameters imposed by its pipeline
contracts. By doing so, WPL avoided substantial penalty exposure from the
pipeline companies for unauthorized use of gas. WPL's large industrial
and commercial customers served under interruptible rates moved to
alternate fuel supplies during the periods of interruption and constraint.
These customers pay a discounted rate year round in exchange for WPL's
right to interrupt service to their facilities.
WPL's portfolio of natural gas contracts over the last several
years is as follows:
<TABLE>
<CAPTION>
ANR Pipeline
Contract year 1990-91 1991-92 1992-93 1993-94 1994-1995
<S> <C> <C> <C> <C> <C>
Maximum daily entitlement:
(000's Dt per day)
Contract demand 81.5 81.5 81.5 -- --
Firm transportation 25.9 25.9 25.9 79.0 79.0
Firm storage 40.1 40.1 40.1 85.5 85.5
------ ------ ------ ------ -------
Total 147.5 147.5 147.5 163.5 163.5
====== ====== ====== ====== =======
Maximum annual entitlement
(000's Dt) 11,680 11,680 N/A N/A N/A
<CAPTION>
Northern Natural Pipeline
Contract year 1990-91 1991-92 1992-93 1993-94 1994-1995
(a) (a) (a)
<S> <C> <C> <C> <C> <C>
Maximum daily entitlement:
(000's Dt per day)
Contract demand 19.9 16.9 -- -- --
Firm transportation 13.7 26.5 53.6 53.6 53.6
Firm storage - 2.2 1.5 8.5 8.5
"Unbundled" sales - - 16.9 1.4 1.4
------ ------ ------ ------ ------
Total 33.6 45.6 53.6 53.6 53.6
====== ====== ====== ====== ======
Maximum annual entitlement
(000's Dt) 5,815 N/A N/A N/A N/A
<FN>
(a) Total no longer equals sum of components. Currently, Northern Natural requires that WPL hold firm transportation equal
to its total peak-day requirements. Firm storage, "unbundled" sales from Northern Natural, and third party gas supply
(not shown) are all eligible gas sources to be moved to WPL's city gates via this firm transportation. Contract demand
services from Northern Natural have been eliminated.
</TABLE>
As the natural gas market continues to evolve, WPL continuously
evaluates products and services provided by pipelines and gas suppliers to
meet the changing needs of its firm and interruptible gas customers.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED GAS STATISTICS
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Area served (end of period):
Population -- retail (estimated)(a)...... 399,000 391,000 377,000 375,000 363,000
Cities, villages and towns served --
retail................................ 239 217 194 199 195
Customers served (end of period):
Residential.............................. 124,938 120,829 116,642 113,475 110,606
Commercial firm.......................... 15,082 14,644 14,209 13,848 13,384
Industrial firm.......................... 449 444 447 443 438
Interruptible............................ 272 261 262 215 211
Transportation........................... 135 85 109 46 59
------- ------- ------- ------- -------
Total................................ 140,876 136,263 131,669 128,027 124,698
======= ======= ======= ======= =======
Sales - Therms (in thousands) (b):
Residential.............................. 119,562 120,005 114,131 114,772 102,048
Commercial firm.......................... 70,702 69,389 66,272 67,015 59,123
Industrial firm.......................... 16,785 17,649 15,815 16,436 15,202
Interruptible............................ 24,809 27,872 25,497 26,025 35,434
Interdepartmental sales.................. 7,425 3,346 1,923 5,530 2,537
Transported gas.......................... 85,364 84,877 69,244 61,001 56,493
------- ------- ------- ------- -------
Total................................ 324,647 323,138 292,882 290,779 270,837
======= ======= ======= ======= =======
Gas operating revenues (in thousands):
Residential.............................. $71,555 $71,632 $63,699 $63,521 $59,793
Commercial firm.......................... 34,644 33,456 30,486 29,640 27,509
Industrial firm.......................... 7,273 7,292 6,668 6,767 6,542
Interruptible............................ 8,777 10,685 14,589 12,051 11,563
Interdepartmental sales and other........ 2,779 400 281 1,469 883
Transported gas.......................... 15,112 14,919 3,639 4,327 4,133
------- ------- ------- ------- -------
Total................................ $140,140 $138,384 $119,362 $117,775 $110,423
======= ======= ======= ======= =======
Average annual residential heating use --
therms................................... 1,022 1,052 1,029 1,069 978
Average annual gas bill per residential
heating customer......................... $613 $631 $573 $590 $572
<FN>
(a) The estimated population for towns served jointly with other gas utilities has been based upon a ratio of 2.5
population per retail gas customer.
(b) One therm equals 100,000 British Thermal Units and is a measure of the heat content of natural gas.
</TABLE>
Environmental Matters
WPL cannot precisely forecast the effect of future environmental
regulations by Federal, state and local authorities upon its generating,
transmission and other facilities, or its operations, but has taken steps
to anticipate the future while meeting the requirements of current
environmental regulations. The Clean Air Act Amendments of 1977 and
subsequent amendments to the Clean Air Act, as well as the new laws
affecting the handling and disposal of solid and hazardous wastes along
with clean air legislation passed in 1990 by Congress, could affect the
siting, construction and operating costs of both present and future
generating units.
Under the Federal Clean Water Act, National Pollutant Discharge
Elimination System permits for generating station discharge into water
ways are required to be obtained from the DNR to which the permit program
has been delegated. These permits must be periodically renewed. WPL has
obtained such permits for all of its generating stations or has filed
timely applications for renewals of such permits.
Air quality regulations promulgated by the DNR in accordance
with Federal standards impose statewide restrictions on the emission of
particulates, sulfur dioxide, nitrogen oxides and other air pollutants and
require permits from the DNR for the operation of emission sources. WPL
currently has the necessary permits to operate its fossil-fueled
generating facilities. With the passage of the new Federal Clean Air Act
Amendments, the state is required to include these provisions into their
permit requirements. WPL has submitted timely Title V permit applications
in compliance with schedules set forth by the regulators. The operating
permits, when issued, will consolidate all existing air permit conditions
and regulatory requirements into one permit for each facility. Permits may
be issued in late 1995 and 1996. Until such time, the facilities will
continue to operate under their existing permit conditions.
Pursuant to Section 144.386(2) of the Wisconsin Statutes, WPL
has submitted data and plans for 1995 sulfur dioxide emissions compliance.
Actual 1994 emissions were reported to the DNR. WPL is currently in
compliance with the state requirement. WPL will make any necessary
operational changes in fuel types and power plant dispatch to comply with
the system emissions limit of 1.2 pounds SO2 per million BTU.
WPL's compliance strategy for Wisconsin's sulfur dioxide law
(discussed above) and the Federal Clean Air Act Amendments required plant
upgrades at its generating facilities. The majority of these projects
were completed in 1993. WPL has installed continuous emission monitoring
systems at all of its coal fired boilers in compliance with federal
requirements. Monitoring for sulfur dioxide was also required by Title IV
of the Federal Clean Air Act at WPL's South Fond du Lac Combustion Turbine
Site. These requirements were also met. Additional monitoring systems
for nitrogen oxides will be required by January 1, 1996 at the combustion
turbine site. WPL will install these monitors in 1995. No significant
investments are anticipated at this time to meet the requirements of the
Federal Clean Air Act Amendments.
Pursuant to Section 311(j)(5) of the Clean Water Act, WPL has
submitted Facility Response Plans for the Rock River generating station
and the South Fond du Lac combustion turbine site. The plans address
pollution prevention and spill response activities for those facilities
with capacity to store in excess of one million gallons of oil.
WPL maintains licenses for all of its ash disposal facilities
and regularly reports to the DNR groundwater data and quantities of ash
landfilled or reused. The landfills are operated according to a plan of
operation approved by the DNR.
WPL's accumulated pollution abatement expenditures through
December 31, 1994, totalled approximately $133 million. The major
expenditures consist of about $60 million for the installation of
electrostatic precipitators for the purpose of reducing particulate
emissions from WPL's coal-fired generating stations and approximately $73
million for other pollution abatement equipment at the Columbia, Edge-
water, Kewaunee, Nelson Dewey, Rock River and Blackhawk plants.
Expenditures during 1994 totalled approximately $5.0 million. Estimated
future pollution abatement expenditures total $1.5 million through 1996.
WPL's estimated pollution abatement expenditures are subject to continuing
review and are revised from time to time due to escalation of construction
costs, changes in construction plans and changes in environmental
regulations.
See "Electric Operations - Fuel" for information concerning the
disposal of spent nuclear fuel and high level nuclear waste.
Manufactured Gas Plant Sites
Historically, WPL has owned 11 properties that have been
associated with the production of manufactured gas. Currently, WPL owns
five of these sites, three are owned by municipalities, and the remaining
three are owned by private companies. In 1989, WPL initiated
investigation of these manufactured gas plant sites. The DNR has been
involved in reviewing investigation plans and has received ongoing reports
regarding these investigations.
In 1992, and into the beginning of 1993, WPL continued its
investigations and studies. WPL confirmed that there was no contamination
at two of the sites and received a close out letter from the DNR related
to one of those sites and requested a close out letter for the other site.
Additionally, the investigation of historical records at a third site
indicated a minimal likelihood of any significant environmental impacts.
In February 1993, WPL completed cost estimates for the environmental
remediation of the eight remaining sites. The results of this analysis
indicate that during the next 34 years, WPL will expend approximately $81
million for feasibility studies, data collection, soil remediation
activities, groundwater research and groundwater remediation activities,
including construction of slurry containment walls and the installation of
groundwater pump and treatment facilities. This estimate was based on
various assumptions, and is subject to continuous review and revision by
management.
The cost estimate set forth above assumes 4 percent average
inflation over a 34 year period. The cost estimate also contemplates that
primarily groundwater pump and treatment activities will take place after
1998 through and including 2027. During this time, WPL estimates that it
will incur average annual costs of $2.0 million to complete the planned
groundwater remediation activities.
With respect to rate recovery of these costs, the PSCW has
approved a five year amortization of the unamortized balance of
environmental costs expended to date.
In addition, WPL is pursuing insurance recovery for the costs of
remediating these sites and is investigating to determine whether there
are other parties who may be responsible for some of the clean-up costs.
Through 1994, management has continued its oversight of the
issues related to the above manufactured gas plant sites without
significant revision to the above estimates and assumptions.
Based on the present regulatory record at the PSCW, management
believes that future costs of remediating these manufactured gas plant
sites will be recovered in rates.
ITEM 2. PROPERTIES
The following table gives information with respect to electric
generating facilities of WPL (including WPL's portion of those facilities
jointly-owned).
<TABLE>
<CAPTION>
1994 Summer
Capability
WPL Portion Ownership
Type/ in kilowatts Interest
Location Name Fuel (kw) in Facility
<S> <C> <C> <C> <C>
Steam
Beloit, WI Blackhawk Natural Gas 54,500 100%
Janesville, WI Rock River Coal 149,800 100%
Cassville, WI Nelson Dewey Coal 211,800 100%
Sheboygan, WI Edgewater #3 Coal 70,000 100%
Sheboygan, WI Edgewater #4 Coal 221,500 68.2%
Sheboygan, WI Edgewater #5 Coal 290,100 75%
Kewaunee, WI Kewaunee Nuclear 215,700 41%
Portage, WI Columbia Energy Coal 461,500 46.2%
Center
Hydro
Wisconsin Dells, WI Kilbourn Hydro 5,800 100%
Prairie du Sac, WI Prairie du Sac Hydro 14,200 100%
Wisconsin River Petenwell/ Hydro 6,100 33%
Power Co. Castle Rock
4 small units at
various locations Hydro 1,500 100%
Combustion Turbine
Janesville, WI Rock River Natural Gas
or Oil 130,300 100%
Fond du Lac, WI South Fond du Lac Natural Gas
Unit 2 and 3 or Oil 166,700 100%
Edgerton, WI Sheepskin Natural Gas
or Oil 37,500 100%
---------
Total 2,037,000
=========
</TABLE>
The maximum net hourly peak load on WPL's electric system was
2,002,000 kw and occurred on June 16, 1994. At the time of such peak
load, 2,386,000 kw were produced by generating facilities operated by WPL
(including other company shared jointly-owned facilities). WPL delivered
934,000 kw of power and received 540,000 kw of power from external
sources. During the year ended December 31, 1994, about 84.4 percent of
WPL's total kilowatthour requirements were generated by company-owned and
jointly-owned facilities and the remaining 15.6 percent was purchased.
Substantially all of WPL's facilities are subject to the lien of its first
mortgage bond indenture.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which the
company or any of its subsidiaries is a party or to which any of their
property is subject.
ENVIRONMENTAL MATTERS
The information required by Item 3 is included in this Form 10-K
in Note 11c to Notes to Consolidated Financial Statements, which
information is incorporated herein by reference.
RATE MATTERS
The information required by Item 3 is included in Items 6 & 7 of
this Form 10-K within the Management's Discussion and Analysis of
Financial Condition and Results of Operations narrative under the caption
"Rates and Regulatory Matters."
<TABLE>
RECENT RATE CASE PROCEEDINGS
<CAPTION>
Increase Ordered or
Increase (Decrease) Requested Negotiated Date
(Decrease) Ordered or % Return on % Return on Increase
Rate Case Type of Application Test Requested Negotiated Common Common (Decrease)
Designation Service(a) Date Year ($ Millions) ($ Millions) Equity Equity Effective
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WPL Retail (PSC)
6680-UR-103 e,g,w 02-29-88 1988-89 14.7 5.5 13.25 13.10 10-18-88
6680-UR-104 e,g,w 12-30-88 1989-90 17.4 5.3 13.10 13.00 11-12-89
6680-UR-105 e,g,w 12-29-89 1990-91 9.0 (10.8) 13.10 12.90 08-01-90
6680-UR-106 e,g,w 12-28-90 1991-92 18.7 (0.1) 13.25 12.90 08-01-91
6680-UR-107 e,g,w 12-30-91 1992-93 17.8 (0.9) 13.10 12.40 01-01-93
6680-UR-108 e,g,w 01-04-93 1993-94 24.5 17.7 12.60 11.60 10-01-93
6680-UR-109 e,g,w 02-01-94 1995 3.8 (11.6) 12.20 11.50 01-01-95
WPL Wholesale (FERC)
ER87-554 e 07-31-87 1987-88 (1.2) (.9) 13.00 (b) 01-01-88
ER93 e 05-28-93 1993-94 2.0 2.0 11.00 (b) 10-01-93
South Beloit (ICC)
85-0505 e,w 11-08-85 1985-86 1.4(c) .9 15.00 13.80 09-27-86
<FN>
(a) e-electric, g-gas, w-water.
(b) Return on equity was not specified in the negotiated settlement agreement.
(c) On 05-07-86, South Beloit Water, Gas and Electric Co. adjusted the increase requested downward to $1.1 million.
</TABLE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the fourth quarter of 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
Erroll B. Davis, Jr, 50, was elected President and Chief
Executive Officer, effective August 1, 1988 and has been a board member
since April 1984. He had been Executive Vice President since May 1984,
Vice President - Finance and Public Affairs since November 1982 and Vice
President - Finance since August 1978. Mr. Davis was elected President of
WPL Holdings, Inc. on January 17, 1990 and Chief Executive Officer of WPL
Holdings, Inc. effective July 1, 1990. He has served as a director of WPL
Holdings, Inc. since March 1988.
Edward M. Gleason, 54, was elected Vice President, Treasurer
and Corporate Secretary of WPL Holdings, Inc. effective October 3, 1993.
He previously served as Vice President-Finance and Treasurer of WPL since
May 1986. Mr. Gleason functions as the principal financial officer of WPL
Holdings, Inc.
A.J. (Nino) Amato, 43, was appointed Senior Vice President
effective October 3, 1993. He previously served as Vice President -
Marketing and Strategic Planning since December 1992, Vice president -
Marketing and Communications since January 1989 and Director of Electric
Marketing and Customer Service since October 1988. He had been President
of Forward Wisconsin, Inc. from 1987 to 1988.
Norman E. Boys, 50, was elected Vice President of Power
Production effective January 1, 1989. He previously served as the
Director of Power Production since October 1987 and Generating Station
Manager at the Edgewater Generating Station since August 1984.
William D. Harvey, 45, was appointed Senior Vice President
effective October 3, 1993. He previously served as Vice President-Natural
Gas and General Counsel since August 1992, Vice President-General Counsel
since October 1, 1990 and Vice President-Associate General Counsel since
July 1986. Prior to joining the Company, he was a member of the law firm
of Wheeler, Van Sickle, Anderson, Norman and Harvey.
Eliot G. Protsch, 41, was appointed Senior Vice President
effective October 3, 1993. He previously served as Vice President-
Customer Services and Sales since August 1992, Vice President and General
Manager-Energy Services since January 1989 and District Manager, Dane
County, since October 1986.
Daniel A. Doyle, 36, was appointed Vice President - Finance,
Controller and Treasurer effective December 25, 1994. He previously
served as Controller and Treasurer of WPL since October 3, 1993. Prior
to joining the Company, he was Controller of Central Vermont Public
Service Corporation since December 1988.
David E. Ellestad, 54, was appointed Vice President-Electrical
Engineering and Operations on August 1, 1992. He previously served as
Vice President-Engineering and Operations since 1988; Vice President of
Electrical Engineering and Procurement since January 1, 1986; Director of
Electrical Engineering & Procurement since May 1985 and Director of
Electrical Engineering since November 1979.
Thomas J. Handziak, 31, was elected Assistant Controller on
September 20, 1993. Prior to joining the Company, he was employed by
Arthur Andersen & Co. as an Audit Staff Assistant, Audit Senior and Audit
Manager with primary responsibilities of auditing and providing financial
consulting services to large publicly held corporations.
Thomas L. Hanson, 41, was elected Assistant Treasurer on May
17, 1989. He had been Financial Relations Supervisor in the Treasury
Department since October 1987.
Steven F. Price, 42, was appointed Assistant Corporate
Secretary on April 15, 1992. He had been Cash Management Supervisor since
December 1987. He was also appointed Assistant Corporate Secretary and
Assistant Treasurer of WPL Holdings, Inc. on April 15, 1992.
Joseph Shefchek, 38, was elected Assistant Vice President of
Environmental Affairs and Research effective December 25, 1994. He
previously served as Director of Environmental Affairs and Research since
June 1991. Before joining the Company, he held various environmental
engineering positions in private industry and government.
Barbara Swan, 43, was elected Vice President-General Counsel
effective December 25, 1994. She previously served as General Counsel
since 1993 and Associate General Counsel from 1987 to 1993.
Pamela J. Wegner, 47, was elected Vice President-Information
Services and Administration on October 13, 1994. Prior to joining the
Company, she was the Administrator of the Division of Finance and Program
Management in the Wisconsin Department of Administration since 1987. She
served as Administrator of the Division of Administrative Services in the
Wisconsin Department of Revenue from 1983 to 1987.
Kim K. Zuhlke, 41, was elected Vice President - Customer
Services and Sales effective October 3, 1993. He previously served as
Director of Marketing and Sales Services since 1991, Director of Market
Research, Planning and Development since February 1990, Director of
Customer Services since 1988 and District Manager at Beaver Dam since
April 1984.
NOTE: All ages are as of December 31, 1994. None of the executive
officers listed above is related to any director of the Board
or nominee for director of the Company.
Executive officers of the Company have no definite terms of
office and serve at the pleasure of the Board of Directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Effective with the formation of the holding company, all $5 par
value common stock of the Company was converted into common stock of WPL
Holdings, Inc. WPL Holdings is now the sole common shareowner of the
Company.
The Company's dividend payment for administrative allowance and
other costs throughout 1994 and 1993 totalled $0 and $1,000,000,
respectively, regular cash dividends paid per share of common stock during
1994 and 1993 to WPL Holdings, Inc. were .96 cents and .95 cents,
respectively, for each quarter.
ITEM 6 AND 7. SELECTED FINANCIAL DATA AND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
1994 1993 1992 1991 1990
(in millions)
<S> <C> <C> <C> <C> <C>
Operating revenues................... $ 674 $ 645 $ 601 $ 610 $ 585
Net income........................... $ 68 $ 60 $ 55 $ 64 $ 61
Total assets (at December 31)........ $1,585 $1,551 $1,414 $1,250 $1,213
Long-term debt, net (at December 31). $ 337 $ 336 $ 336 $ 291 $ 328
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
1994 COMPARED WITH 1993
OVERVIEW
Net income of Wisconsin Power and Light Company ("WPL" or the "Company")
increased to $68.2 million in 1994 compared with $60.2 million in 1993.
Net income for 1994 was significantly affected by two non-recurring items.
These items were the reversal of a coal contract penalty in the 1st
quarter and costs associated with early retirement and severance programs
which primarily occurred in the 4th quarter. Both of these items are
discussed in the "Other Events" section of Management's Discussion and
Analysis. The following breakout presents the recurring aspects of 1994's
operations.
1994 1993
(in millions)
Net Income, as reported $68.2 $60.2
Less: Increase in Net Income from
reversal of coal contract
penalty (5.3) ( - )
Add: Decrease in Net Income from
costs associated with early
retirement and severance
programs 8.2 1.1
----- -----
Net Income before the above
non-recurring items $71.9 $61.3
===== =====
The increase in the "Net income before the above non-recurring items"
primarily reflects an increase in operating earnings.
<TABLE>
Electric Operations
<CAPTION>
Revenues &
Costs Per
kWh's Sold, kWh Sold
Revenues % Generated % Generated Customers at
and Costs Change and Purchased Change & Purch. End of Year
1994 1993 1994 1993 1994 1993 1994 1993
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential
and farm $194,242 $184,176 5% 2,776,895 2,751,363 1% $.070 $.067 325,063 316,870
Industrial 140,487 132,903 6% 3,764,953 3,540,082 6% .037 .038 776 714
Commercial 101,382 95,977 6% 1,688,349 1,629,911 4% .060 .059 43,868 42,884
Wholesale and
Class A 86,400 78,955 9% 2,574,121 2,388,131 8% .034 .033 81 39
Other 9,236 11,176 -17% 54,518 51,073 7% .169 .219 1,477 1,236
-------- -------- ---- ---------- ---------- ---- ----- ----- ------- -------
Total 531,747 503,187 6% 10,858,836 10,360,560 5% $.049 $.049 371,265 361,743
========== ========== ==== ===== ===== ======= =======
Elec.
production fuels 123,469 123,919 0% 9,445,950 9,180,484 3% $.013 $.013
========== ========== ==== ===== =====
Purchased power 37,913 28,574 33% 1,780,451 1,481,993 20% $.021 $.019
-------- -------- ---- ========== ========== ==== ===== =====
Margin $370,365 $350,694 6%
======== ======== ====
</TABLE>
WPL's electric margin increased during 1994 compared to 1993. The primary
factor was a 3.8 percent retail rate increase effective October 1, 1993.
Strong economic conditions in the industrial and commercial customer
classes contributed higher sales and customer growth. A colder than
normal January and a very warm mid-September offset relatively mild summer
conditions in July and August making 1994 a relatively average year in
terms of impacts on sales volumes. Electric production fuel costs were
reasonably stable for 1994. The volume of purchased power increased as a
result of WPL's efforts to conserve coal inventories during a rail strike
in the 3rd quarter of 1994. See "Other Events" for details.
<TABLE>
Gas Operations
<CAPTION> Revenues &
Revenues % Therms Sold % Costs Per Therm Customers at
and Costs Change & Purchased Change Sold, & Purch. End of Year
1994 1993 1994 1993 1994 1993 1994 1993
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential $ 71,555 $ 71,632 0% 119,562 120,005 0% $.60 $.60 124,938 120,829
Firm 41,918 40,748 3% 87,487 87,038 1% .48 .47 15,531 15,088
Interruptible 8,777 10,685 -22% 24,809 27,872 -11% .35 .38 272 261
Transportation 15,112 14,205 5% 85,364 84,877 1% .18 .18 135 85
Other 213 -- -% -- -- -% -- -- 90 --
-------- -------- ----- -------- -------- ----- ---- ---- ------- -------
Total 137,575 137,270 1% 317,222 319,792 0% $.43 $.43 140,966 136,263
======== ======== ===== ==== ==== ======= =======
Purchased gas 86,586 90,505 -4% 293,547 285,531 4% $.29 $.32
-------- -------- ----- ======== ======== ===== ==== ====
Margin $ 50,989 $ 46,765 10%
======== ======== =====
</TABLE>
Gas margin increased in 1994 from 1993 primarily based on two factors: 1)
a 1.4 percent retail rate increase effective October 1, 1993 and, 2) an
increase in customers in the higher rate firm service which improved the
sales mix. The overall cost of purchased gas declined reflecting WPL's
effective use of opportunities on the gas spot market.
Other Operation
Other operation expense increased due to the early retirement and
severance programs discussed in the "Other Events" section.
Maintenance
Maintenance expense decreased between years due to variation in the timing
and extent of maintenance on its generating facilities between years.
Secondarily, a severe storm in the summer of 1993 increased 1993's
maintenance expense related to service restoration.
Depreciation and Amortization
Depreciation expense increased, principally reflecting increased property
additions and increased decommissioning costs.
Other Income and (Deductions)
Other income increased resulting from the reversal of a coal contract
penalty discussed later in the "Other Events" section.
Income Taxes
Income taxes increased between years primarily due to higher taxable
income.
1993 COMPARED WITH 1992
OVERVIEW
Net income of the Company increased to $60.2 million in 1993 compared with
$55.4 million in 1992. The principle factors leading to increased
earnings included warmer summer weather and lower electric fuel costs per
kWh which yielded higher electric margins. These increases were somewhat
offset by increased depreciation expense resulting from additional
investment in utility plant and property additions, a change in the mix of
gas sales from higher margin sales to lower margin sales, the increase in
the Federal corporate tax rate from 34 percent to 35 percent and a one-
time 4-cent-per-share charge associated with a voluntary separation
program for the executive management group.
<TABLE>
Electric Operations
<CAPTION>
Revenues &
Costs Per
kWh's Sold, kWh Sold
Revenues % Generated % Generated Customers at
and Costs Change and Purchased Change & Purch. End of Year
1993 1992 1993 1992 1993 1992 1993 1992
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential
and farm $184,176 $171,887 7% 2,751,363 2,614,439 5% $.067 $.066 316,870 310,702
Industrial 132,903 128,467 3% 3,540,082 3,377,132 5% .038 .038 714 727
Commercial 95,977 91,707 5% 1,629,911 1,551,823 5% .059 .059 42,884 42,287
Wholesale
and Class A 78,955 77,485 2% 2,388,131 2,208,419 8% .033 .035 39 39
Other 11,176 8,189 36% 51,073 55,230 -8% .219 .148 1,236 950
-------- -------- ---- ---------- --------- ---- ----- ----- ------- -------
Total 503,187 477,735 5% 10,360,560 9,807,043 6% $.049 $.049 361,743 354,705
========== ========= ==== ===== ===== ======= =======
Elec.
production fuels 123,919 123,440 .4% 9,186,134 9,041,317 2% $.014 $.014
========== ========= ==== ===== =====
Purchased power 28,574 24,427 17% 1,481,993 1,124,667 32% $.019 $.022
-------- -------- ---- ========== ========= ==== ===== =====
Margin $350,694 $329,868 6%
======== ======== ====
</TABLE>
Electric margin in dollars increased during 1993 compared with 1992 due to
increased demand for electricity brought on by warmer summer weather.
Residential customers, being the most weather sensitive, experienced the
most significant increases. Wisconsin's strong economy kept the
commercial and industrial classes growing steadily. These increases were
coupled with declining electric production fuel costs per kWh. The
decrease in electric production fuel cost per kWh was due to WPL's
aggressive pursuit of additional spot coal purchase opportunities as its
longer term contracts began to expire. Additionally, a highly competitive
rail transportation environment significantly reduced the cost of
transporting the coal. Also, lower cost purchased power became available
due to excess capacity in the bulk power market.
<TABLE>
Gas Operations
<CAPTION>
Revenues &
Revenues % Therms Sold % Costs Per Therm Customers at
and Costs Change & Purchased Change Sold, & Purch. End of Year
1993 1992 1993 1992 1993 1992 1993 1992
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential $ 71,632 $ 63,699 12% 120,005 114,131 5% $.60 $.56 120,829 116,642
Firm 40,748 37,154 10% 87,038 82,087 6% .47 .45 15,088 14,656
Interruptible 10,685 9,554 12% 27,872 25,497 9% .38 .37 261 262
Transportation 14,205 8,674 72% 84,877 69,244 23% .18 .13 85 109
Other -- 281 -% -- 1,923 -% -- .15 -- --
-------- -------- ---- -------- -------- ---- ---- ---- ------- -------
Total 137,270 119,362 16% 319,792 292,882 10% $.43 $.41 136,263 131,669
======== ======== ==== ==== ==== ======= =======
Purchased gas 90,505 77,112 18% 285,531 260,354 11% $.32 $.30
-------- -------- ----- ======== ======== ==== ==== ====
Margin $ 46,765 $ 42,250 11%
======== ======== =====
</TABLE>
Gas revenues for 1992 were affected by the recognition of a $4.9 million
before-tax refund to its natural gas customers resulting from an
adjustment in the calculation of the purchased gas adjustment clause.
Without the impact of this revenue adjustment, comparative gas margins
would have declined for 1993 compared with 1992.
The overall increases in gas revenues and purchased gas costs between
years resulted primarily from increased volumes procured on behalf of
transportation customers. This had the impact of decreasing margins as a
percentage of total revenues. A change in the mix of gas sales from
higher margin residential sales to lower margin sales also moved margins
downward. Offsetting this decline, Wisconsin's strong economy enabled
growth in the Commercial and Industrial classes, and there was also some
overall increase in the demand for natural gas due to colder weather.
Other Operation Expense
An increase in other operation expense resulted from higher WPL employee
benefit expense (see Notes to Consolidated Financial Statements, Note 7).
These increases were offset somewhat by decreases in conservation program
expenditures and decreases in fees associated with the sale of accounts
receivable due to a decline in interest rates. Additionally, cost
management efforts have helped control annual inflationary pressures on
general and administrative costs.
Depreciation and Amortization
Depreciation and amortization expense increased, principally reflecting
increased property additions and the commencement of deferred charge
amortizations approved in WPL's rate orders received in December 1992 and
October 1993. The most significant amortizations include the amortization
related to an acquisition adjustment which resulted from the purchase of
transmission facilities and the amortization of costs incurred related to
the remediation of former manufactured gas plant sites (see Notes to the
Consolidated Financial Statements, Note 11).
Allowance for Funds Used During Construction ("AFUDC")
Total AFUDC increased in 1993 compared with 1992, reflecting the greater
amounts of construction work in progress including the costs associated
with WPL's construction of two 86-megawatt combustion-turbine generators.
LIQUIDITY AND CAPITAL RESOURCES
Rates and Regulatory Matters
On December 9, 1994, the Public Service Commission of Wisconsin (PSCW)
issued rate order UR-109, effective for a two-year period beginning
January 1, 1995. The order included the following decisions on WPL's
retail rate application as filed on February 4, 1994: 1) electric
revenues will be decreased by approximately $12.3 million (2.8 percent)
annually, 2) natural gas revenues will be increased by approximately $.7
million (.5 percent) annually, 3) return on common equity will be 11.5
percent versus WPL's previously allowed return on equity of 11.6 percent.
Further, the PSCW approved certain incentive programs described below:
1. The electric fuel adjustment mechanism was eliminated. In its
absence, WPL will benefit from reductions in fuel cost. Conversely, WPL
will be exposed to increases in fuel costs.
2. The automatic purchased gas adjustment clause was also
eliminated. In the future, the fluctuations in the commodity cost of gas
above or below a prescribed commodity price index will serve to increase
or decrease WPL's margin on gas sales. Fixed demand costs are excluded
from the incentive program. Both benefits and exposures are subject to
ratepayer sharing provisions, which are capped at $1.1 million.
3. In order to promote air quality and reliability, there are SO2
emissions and service reliability incentive clauses. Positive incentive
available under these clauses is $1.5 million for the SO2 emissions and
$.5 million for the service reliability. WPL's earnings are also
negatively exposed for equal amounts. Since WPL is allowed to collect
all revenues under these programs in advance, up to $4.0 million annually
of pre-tax revenue may be collected subject to refund upon final
determination of performance under this program.
Industry Outlook
The PSCW has recently opened a formal docket initiating an inquiry into
the future structure of the electric utility industry in Wisconsin. The
goals of Wisconsin utility regulation and the principles to be used in
choosing among alternative proposals have been identified. WPL has
submitted its preferred structure which, in summary form, calls for open
access to transmission and distribution systems and a competitive power
generation market place. It is not possible at this time to predict the
outcome of these proceedings.
Financing and Capital Structure
The level of short-term borrowings fluctuates based on seasonal corporate
needs, the timing of long-term financing and capital market conditions.
WPL generally issues short-term debt to provide interim financing of
construction and capital expenditures in excess of available internally
generated funds. WPL periodically reduces its outstanding short-term debt
through the issuance of long-term debt and through equity contributions
from its parent, WPL Holdings, Inc. To maintain flexibility in its
capital structure and to take advantage of favorable short-term rates
WPL also uses proceeds from the sales of accounts receivable and unbilled
revenues to finance a portion of its long-term cash needs. The Company
also anticipates that short-term debt funds will continue to be available
at reasonable costs due to strong ratings by independent utility analysts
and rating services. Commercial paper has been rated A-1+ by Standard &
Poor's Corp. and P-1 by Moody's Investors Service.
Bank lines of credit of $70 million at December 31, 1994 are available to
support these borrowings.
The Company's capitalization at December 31, 1994, including the current
maturities of long-term debt, variable rate demand bonds and short-term
debt, consisted of 52 percent common equity, 6 percent preferred stock and
42 percent long-term debt. The common equity to total capitalization
ratio at December 31, 1994 increased to 52 percent from 51 percent at
December 31, 1993.
The retail rate order effective January 1, 1995, requires WPL to maintain
a utility common equity level of 51.93 percent of total utility
capitalization during the two-year test year ending December 31, 1996. In
addition, the PSCW ordered that it must approve the payment of dividends
by WPL that are in excess of the level forecasted for 1995 ($58.1
million), if such dividends would reduce WPL's average common equity ratio
below 51.93 percent.
Capital Requirements
WPL is a capital-intensive business and requires large investments in
long-lived assets. Therefore, the Company's most significant capital
requirements relate to construction expenditures. Estimated capital
requirements for the next five years are as follows:
<TABLE>
<CAPTION> Capital Requirements
1995 1996 1997 1998 1999
(in millions)
<S> <C> <C> <C> <C> <C>
Construction expenditures $131.2 $100.4 $132.2 $119.6 $130.6
Changes in working capital
and other (4.6) (5.5) 67.0 16.3 (3.8)
------ ------ ------ ------ ------
Construction and operating
capital $126.6 $ 94.9 $199.2 $135.9 $126.8
Manufactured gas plant site
remediation expenditures 2.0 9.2 10.5 9.6 .6
------ ------ ------ ------ ------
Total capital requirements $128.6 $104.1 $209.7 $145.5 $127.4
====== ====== ====== ====== ======
</TABLE>
Included in the construction expenditure estimates, in addition to the
recurring additions and improvements to the distribution and transmission
systems, are the following: 1) expenditures for managing and controlling
electric line losses and for the electric delivery system that will reduce
electric line losses and enhance WPL's interconnection capability with
other utilities; 2) expenditures related to environmental compliance
issues including the installation of additional emissions monitoring
equipment and coal handling equipment; 3) expenditures associated with the
construction of an 86-megawatt combustion-turbine generator expected to
become operational in 1996.
The Company's capital requirements may also be impacted by decisions
relating to the Kewaunee Nuclear Power Plant ("Kewaunee"). The steam
generator tubes at Kewaunee are susceptible to corrosion characteristics,
a condition that has been experienced throughout the nuclear industry.
Annual inspections are performed to identify degraded tubes. Degraded
tubes are either repaired by sleeving or are removed from service
plugging. The steam generators were designed with an approximately 15
percent heat transfer margin, meaning that full power should be
sustainable with the equivalent of 15 percent of the steam generator
tubes plugged. Tube plugging and the build-up of deposits on the tubes
affect the heat-transfer capability of the steam generators to the point
where eventually full-power operation is not possible and there is a
gradual decrease in the capacity of the plant. The plant's capacity could
be reduced by as much as 20% by the year 2013 when the current operating
license expires. Currently, the equivalent of approximately 12 percent of
the tubes in the steam generators are plugged. WPL and the joint-owners
recently completed studies evaluating the economics of replacing the two
steam generators at Kewaunee. The studies resulted in the conclusion that
the most prudent course of action is to continue operation of the existing
steam generators. WPL and the other joint-owners continue to evaluate
appropriate strategies, including replacement, as well as continued
operation of the steam generators without replacement. WPL and the
joint-owners also continue to fund the development of welded repair
technology for steam generator tubes. The plant is expected to be
operated until at least 2013. WPL and the joint-owners are also
continuing to evaluate and implement initiatives to improve the
performance of Kewaunee, which already performs at above average levels
for the industry. These initiatives include conversion from a 12-month
to an 18-month fuel cycle and numerous other cost reduction measures.
These initiatives have resulted in reductions in Kewaunee operating
and maintenance costs since 1991.
Capital Resources
One of the Company's objectives is to finance construction expenditures
through internally generated funds supplemented, when required, by outside
financing. With this objective in place, the Company has financed an
average of 79 percent of its construction expenditures during the last
five years from internal sources. However, during the next five years,
the Company expects this percentage to be reduced primarily due to the
continuation of major construction expenditures and the maturity of $64
million of WPL first mortgage bonds. External financing sources such as
the issuance of long-term debt, short-term borrowings and equity
contributions from its parent, WPL Holdings, Inc. will be used by the
Company to finance the remaining construction expenditure requirements for
this period. Expectations are that $65 million of long-term debt will
be issued over the next three years.
INFLATION
Under current rate-making methodologies prescribed by the various
commissions that regulate WPL, projected or forecasted operating costs,
including the impacts of inflation, are incorporated into WPL revenue
requirements. Accordingly, the impacts of inflation on WPL are currently
mitigated. Although rates will be held flat until at least 1997,
management expects that any impact of inflation will be mitigated by
customer growth and productivity improvements. Inflationary impacts on
the non-regulated businesses are not anticipated to be material to the
Company.
OTHER EVENTS
Coal Contract Penalty
In November 1989, the PSCW concluded that WPL did not properly administer
a coal contract, resulting in an assessment to compensate ratepayers for
excess fuel costs having been incurred. As a result, WPL recorded a
reserve in 1989 that had an after-tax affect of reducing 1989 net income
by $4.9 million. The PSCW decision was found to represent unlawful
retroactive rate-making by both the Dane County Circuit Court and the
Wisconsin Court of Appeals. The case was then appealed to the Wisconsin
Supreme Court.
In January, 1994, the Wisconsin Supreme Court affirmed the decisions of
the Dane County Circuit Court and Wisconsin Court of Appeals. In
management's opinion, all avenues for appeal have been exhausted. As a
result, WPL reversed the entire reserve and was also allowed to collect
interest on amounts of the penalty previously refunded to ratepayers. The
reversal of the reserve plus interest had an after-tax affect of
increasing net income in 1994 by $5.3 million.
Early Retirement and Severance Programs
Given the expectation of increasing competition, WPL has continued to
reengineer its processes to implement cost efficiencies in its operations.
In connection with these efforts, WPL offered voluntary early retirement
programs and voluntary severance programs to affected employees in 1994
and 1993. These programs primarily closed late in the fourth quarter of
1994 and 1993.
For 1994, in terms of cost, the early retirement programs totalled $9.8
million and the severance programs totalled $3.9 million for a grand total
of $13.7 million. For 1993, program costs totalled $1.8 million.
Coal Transporter's Strike
One of WPL's major coal transporters experienced a labor strike during the
third quarter of 1994. During the term of the strike (55 days), WPL's
ability to receive coal from its suppliers was impaired, which required
WPL to use some of its existing coal reserves and to purchase additional
power. On August 29, 1994, President Clinton, acting under the Railway
Labor Act, forced a temporary end (the "cooling off period") to the strike
by ordering the railroad union employees back to work and establishing a
three member Presidential Emergency Board to draft a recommended
settlement. Railroad management and the United Transportation Union have
subsequently settled on a contract. As of December 31, 1994, the existing
and anticipated financial impact on WPL's operating results was not
material.
Environmental
WPL cannot precisely forecast the effect of future environmental
regulations by federal, state and local authorities upon its generating,
transmission and other facilities, or its operations, but has taken steps
to anticipate the future while meeting the requirements of current
environmental regulations. The Clean Air Act Amendments of 1977 and
subsequent amendments to the Clean Air Act, as well as the new laws
affecting the handling and disposal of solid and hazardous wastes along
with the clean air legislation passed in 1990 by Congress, could affect
the siting, construction and operating costs of both present and future
generating units.
Under the Federal Clean Water Act, National Pollutant Discharge
Elimination System permits for generating station discharge into water
ways are required to be obtained from the Wisconsin Department of Natural
Resources (DNR). WPL has obtained such permits for all of its generating
stations or has filed timely applications for renewals.
Air quality regulations promulgated by the DNR in accordance with federal
standards impose statewide restrictions on the emission of particulates,
sulfur dioxide, nitrogen oxides and other air pollutants and require
permits from the DNR for the operation of emission sources. WPL currently
has the necessary permits to operate its fossil-fueled generating
facilities. However, beginning in 1994, new permits were required for all
major facilities in Wisconsin. WPL's Columbia Generating facility
submitted a permit application on May 1, 1994. The remaining facilities
will be addressed in early 1995.
WPL's compliance strategy for Wisconsin's 1993 sulfur dioxide law and the
Federal Clean Air Act Amendments required plant upgrades at its generating
facilities. The majority of these projects were completed in 1993 and
1994. WPL has installed continuous emissions monitoring systems at all of
its coal fired boilers. No additional costs for compliance with these
acid-rain-prevention requirements are anticipated at this time.
Also see Note 11c in the Notes to the Consolidated Financial Statements
for a discussion of WPL's manufactured gas plant sites.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wisconsin Power and Light Company:
We have audited the accompanying consolidated balance sheets and
statements of capitalization of Wisconsin Power and Light Company (a
Wisconsin corporation) and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of income, common shareowners'
investment and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Wisconsin
Power and Light Company and subsidiaries as of December 31, 1994 and 1993,
and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 1, 1995
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
Year Ended December 31,
1994 1993
(dollars in thousands)
<S> <C> <C>
Utility plant:
Plant in service --
Electric....................................... $1,611,351 $1,518,701
Gas............................................ 204,514 194,283
Water.......................................... 22,070 20,437
Common......................................... 123,255 106,803
---------- ----------
1,961,190 1,840,224
Dedicated decommissioning funds.................. 51,791 49,803
---------- ----------
2,012,981 1,890,027
Less-Accumulated provision for depreciation...... 808,853 763,027
---------- ----------
1,204,128 1,127,000
Construction work in progress.................... 42,731 75,732
Nuclear fuel, net................................ 19,396 18,000
---------- ----------
Total utility plant............................ 1,266,255 1,220,732
Other property and equipment,net................... 9,133 652
---------- ----------
Investments........................................ 12,228 12,537
---------- ----------
Current assets:
Cash and equivalents............................. 2,234 5,930
Net accounts receivable and unbilled revenue,
less allowance for doubtful accounts of $209
and $259,respectively.......................... 21,689 30,572
Accounts receivable from parent for income
taxes.......................................... -- 2,117
Coal, at average cost............................ 15,824 16,042
Materials and supplies, at average cost.......... 20,835 21,679
Gas in storage, at average cost.................. 7,975 8,754
Prepayments and other............................ 22,310 21,677
---------- ----------
Total current assets........................... 90,867 106,771
---------- ----------
Deferred charges:
Regulatory assets................................ 144,476 148,805
Other............................................ 62,165 61,160
---------- ----------
Total deferred charges......................... 206,641 209,965
---------- ----------
Total Assets................................. $1,585,124 $1,550,657
========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
<TABLE> WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
Year Ended December 31,
1994 1993
(dollars in thousands)
<S> <C> <C>
Capitalization:
Common shareowner's investment................. $544,506 $522,703
Preferred stock not mandatorily redeemable..... 59,963 59,963
First mortgage bonds, net...................... 336,538 336,477
---------- ----------
Total capitalization......................... 941,007 919,143
---------- ----------
Current liabilities:
Variable rate demand bonds..................... 56,975 56,975
Short-term debt................................ 50,500 59,000
Accounts payable and accruals.................. 67,518 72,430
Accrued payroll and vacation................... 12,624 12,092
Accrued taxes.................................. 7,299 804
Accrued interest............................... 7,669 7,695
Other.......................................... 12,456 16,431
---------- ----------
Total current liabilities.................... 215,041 225,427
---------- ----------
Other credits:
Accumulated deferred income taxes.............. 222,373 210,762
Accumulated deferred investment tax credits.... 40,758 42,684
Accrued environmental remediation costs........ 79,280 80,973
Deferred credits and other..................... 86,665 71,668
---------- ----------
429,076 406,087
---------- ----------
Contingencies (Notes 2 and 11)
Total Capitalization and Liabilities......... $1,585,124 $1,550,657
========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Year Ended December 31,
1994 1993 1992
(dollars in thousands)
<S> <C> <C> <C>
Operating revenues:
Electric...................................... $531,747 $503,187 $477,735
Gas........................................... 137,575 137,270 119,362
Water......................................... 4,133 3,927 3,722
-------- -------- --------
673,455 644,384 600,819
Operating expenses:
Electric production fuels...................... 123,469 123,919 123,440
Purchased power................................ 37,913 28,574 24,427
Purchased gas.................................. 86,586 90,505 77,112
Other operation................................ 148,361 139,075 128,992
Maintenance.................................... 41,227 44,763 45,081
Depreciation................................... 73,194 61,197 56,416
Taxes --
Current federal income....................... 26,727 25,063 21,641
Deferred income............................ 10,270 5,053 6,270
Investment tax credit (restored)........... (1,926) (1,967) (2,125)
Current state income ...................... 6,147 6,580 5,160
Other...................................... 27,100 26,145 26,170
-------- -------- --------
579,068 548,907 512,584
-------- -------- --------
Net operating income............................. 94,387 95,477 88,235
-------- -------- --------
Other income and (deductions):
Allowance for equity funds used during
construction................................. 3,009 2,977 2,351
Other,net.. .................................. 7,726 (2,188) 299
Current federal income tax..................... (1,480) (519) 274
Deferred income tax............................ (2,029) (419) 131
-------- -------- --------
7,226 (149) 3,055
-------- -------- --------
Income before interest expense................... 101,613 95,328 91,290
-------- -------- --------
Interest expense:
Interest on bonds.............................. 28,796 28,422 29,254
Allowance for borrowed funds used during
construction................................. (1,029) (1,053) (1,329)
Other.......................................... 2,352 3,854 4,146
-------- -------- --------
30,119 31,223 32,071
-------- -------- --------
Income before preferred dividends................ 71,494 64,105 59,219
Preferred stock dividends........................ 3,310 3,928 3,811
-------- -------- --------
Net income....................................... $68,184 $60,177 $55,408
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
1994 1993 1992
(dollars in thousands)
<S> <C> <C> <C>
Cash flows generated from (used for) operating
activities:
Income before preferred stock dividends...... $71,494 $64,105 $59,219
Adjustments to reconcile net income to net
cash generated from operating activities:
Depreciation............................. 73,194 61,197 56,416
Deferred income taxes and other.......... 10,270 5,053 6,139
Investment tax credit restored........... (1,926) (1,967) (2,125)
Amortization of nuclear fuel............. 6,707 7,049 7,961
Allowance for equity funds used during
construction........................... (3,009) (2,977) (2,351)
Other,net................................ 6,561 7,201 252
Changes in assets and liabilities:
Net accounts receivable and unbilled
revenue.................................. 16,335 4,124 (9,162)
Coal....................................... 218 2,943 2,666
Materials and supplies..................... 884 (6) 1,769
Gas in storage............................. 779 (4,463) 1,403
Prepayments and other...................... (634) (383) (1,895)
Accounts payable and accruals.............. (4,912) 640 6,901
Accrued taxes.............................. (3,775) (538) (1,680)
Other, net................................. 14,571 11,222 (9,029)
-------- -------- --------
Net cash generated from operating
activities............................. 186,757 153,200 116,484
Cash flows generated from (used for) financing
activities:
Common stock cash dividends.................. (55,911) (54,327) (51,166)
Issuance of first mortgage bonds............. -- -- 279,000
Issuance of variable rate demand bonds....... -- -- --
Issuance of preferred stock.................. -- 29,986 --
Redemption of preferred stock................ -- (29,986) --
Preferred stock issuance expense............. -- (1,083) --
Preferred stock dividends.................... (3,310) (3,928) (3,811)
Net change in short-term debt................ (8,500) 8,000 14,000
Current bond maturities and sinking fund
retirements................................ -- (100) (239,031)
Equity contribution from parent.............. 9,649 61,399 10,002
-------- -------- --------
Net cash (used for) generated from
financing activities................... (58,072) 9,961 8,994
-------- -------- --------
Cash flows generated from (used for) investing
activities:
Additions to utility plant, excluding AFUDC.. (123,959) (149,333) (123,321)
Allowance for borrowed funds used during
construction............................... (1,029) (1,053) (1,329)
Dedicated decommissioning funds.............. (1,988) (9,426) (3,737)
Other,net.................................... (5,405) 2,200 1,974
--------- -------- --------
Net cash used for investing activities..... (132,381) (157,612) (126,413)
Net (decrease) increase in cash and
equivalents................................... (3,696) 5,549 (935)
Cash and equivalents at beginning of year...... 5,930 381 1,316
-------- -------- --------
Cash and equivalents at end of year............ $2,234 $5,930 $381
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest on debt......................... $30,156 $32,246 $32,254
Income taxes............................. $29,642 $32,465 $31,766
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<CAPTION>
Year Ended December 31,
1994 1993
(dollars in thousands)
<S> <C> <C>
Common shareowner's investment:
Common stock, $5 par value, authorized - 18,000,000
shares; issued and outstanding - 13,236,601 shares.. $66,183 $66,183
Premium on capital stock.............................. 197,423 187,773
Capital surplus....................................... 1,747 1,747
Reinvested earnings................................... 279,153 267,000
-------- --------
Total common shareowner's investment................ 544,506 522,703
Preferred stock not mandatorily redeemable:
Cumulative, without par value, $100 stated value,
authorized 3,750,000 shares, maximum aggregate
stated value $150,000,000
4.50% series, 99,970 shares outstanding.......... 9,997 9,997
4.80% series, 74,912 shares outstanding.......... 7,491 7,491
4.96% series, 64,979 shares outstanding.......... 6,498 6,498
4.40% series, 29,957 shares outstanding.......... 2,996 2,996
4.76% series, 29,947 shares outstanding.......... 2,995 2,995
6.20% series, 150,000 shares outstanding.......... 15,000 15,000
Cumulative, without par value, $25 stated value,
6.50% series, 599,460 shares outstanding............ 14,986 14,986
-------- --------
Total preferred stock............................. 59,963 59,963
First mortgage bonds:
Series L, 6.25%, due 1998............................. 8,899 8,899
1984 Series A, variable rate, due 2014 (5.40% at
December 31, 1994).................................. 8,500 8,500
1988 Series A, variable rate, due 2015 (5.80% at
December 31, 1994).................................. 14,600 14,600
1990 Series V, 9.3%, due 2025......................... 50,000 50,000
1991 Series A, variable rate, due 2015 (5.95% at
December 31, 1994).................................. 16,000 16,000
1991 Series B, variable rate, due 2005 (5.95% at
December 31, 1994).................................. 16,000 16,000
1991 Series C, variable rate, due 2000 (5.95% at
December 31, 1994).................................. 1,000 1,000
1991 Series D, variable rate, due 2000 (5.95% at
December 31, 1994).................................. 875 875
Series W, 8.6%, due 2027.............................. 90,000 90,000
Series X, 7.75%, due 2004............................. 62,000 62,000
Series Y, 7.6%, due 2005.............................. 72,000 72,000
Series Z, 6.125%, due 1997............................ 55,000 55,000
-------- --------
394,874 394,874
Less --
Variable rate demand bonds............................ (56,975) (56,975)
Unamortized discount.................................. (1,361) (1,422)
-------- --------
Total first mortgage bonds, net..................... 336,538 336,477
-------- --------
TOTAL CAPITALIZATION.................................... $941,007 $919,143
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
<TABLE> WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF
COMMON SHAREOWNER'S INVESTMENT
<CAPTION>
Year Ended December 31,
1994 1993 1992
(dollars in thousands)
<S> <C> <C> <C>
Common stock:
Balance at beginning and end of year......... $66,183 $66,183 $66,183
Premium on capital stock:
Balance at beginning of year................. 187,774 126,374 116,372
Equity contribution from parent.............. 9,649 61,399 10,002
-------- -------- --------
Balance at end of year....................... 197,423 187,773 126,374
Capital surplus:
Balance at beginning and end of year......... 1,747 1,747 1,747
-------- -------- --------
Reinvested earnings:
Balance at beginning of year................. 267,000 262,233 257,991
Add - Income before preferred dividends.... 71,494 64,105 59,219
Deduct -
Cash dividends on preferred stock........ (3,310) (3,928) (3,811)
Cash dividends to parent on common stock. (55,911) (54,327) (51,166)
Preferred stock issuance expense......... -- (1,083) --
Other.................................... (120) -- --
-------- -------- --------
Balance at end of year....................... 279,153 267,000 262,233
Total Common Shareowner's Investment........... $544,506 $522,703 $456,537
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands except as
otherwise indicated)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND
REPORTING POLICIES:
a. Business and Consolidation:
Wisconsin Power and Light Company ("WPL" or the "Company") is a wholly-
owned subsidiary of WPL Holdings, Inc. ("WPLH").
WPL is a public utility predominantly engaged in the transmission and
distribution of electric energy and the generation and bulk purchase of
electric energy for sale. WPL also transports, distributes and sells
natural gas purchased from gas suppliers. Nearly all of WPL's retail
customers are located in south and central Wisconsin. WPL's principal
consolidated subsidiary is South Beloit Water, Gas and Electric Company.
Certain amounts from prior years have been reclassified to conform with
the current year presentation.
b. Regulation:
WPL's financial records are maintained in accordance with the uniform
system of accounts prescribed by its regulators. The Public Service
Commission of Wisconsin ("PSCW") and the Illinois Commerce Commission have
jurisdiction over retail rates, which represent approximately 83 percent
of electric revenues plus all gas revenues. The Federal Energy Regulatory
Commission ("FERC") has jurisdiction over wholesale electric rates
representing the balance of electric revenues. Statement of Financial
Accounting Standards ("SFAS") No. 71, "Accounting for the Effects of
Certain Types of Regulation" provides that rate-regulated public utilities
such as WPL record certain costs and credits allowed in the ratemaking
process in different periods than for unregulated entities. These are
deferred as regulatory assets or regulatory liabilities and are recognized
in the Consolidated Statements of Income at the time they are reflected in
rates.
c. Utility Plant and Other Property and Equipment:
Utility plant and other property and equipment are recorded at original
cost and cost, respectively. Utility plant costs include financing costs
that are capitalized through the PSCW-approved allowance for funds used
during construction ("AFUDC"). The AFUDC capitalization rates approximate
WPL's cost of capital. These capitalized costs are recovered in rates as
the cost of the utility plant is depreciated.
Normal repairs, maintenance and minor items of utility plant and other
property and equipment are expensed. Ordinary utility plant retirements,
including removal costs less salvage value, are charged to accumulated
depreciation upon removal from utility plant accounts, and no gain or loss
is recognized. Upon retirement or sale of other property and equipment,
the cost and related accumulated depreciation are removed from the
accounts and any gain or loss is included in other income and deductions.
d. Nuclear Fuel:
Nuclear fuel is recorded at its original cost and is amortized to expense
based upon the quantity of heat produced for the generation of
electricity. This accumulated amortization assumes spent nuclear fuel
will have no residual value. Estimated future disposal costs of such fuel
are expensed based on kilowatthours generated.
e. Revenue:
WPL accrues utility revenues for services provided but not yet billed.
f. Electric Production Fuels and Purchased Gas:
(1) Electric Production Fuels:
Through 1994, the PSCW retail electric rates provided a range
from which actual fuel costs could vary in relation to costs
forecasted and used in rates. If actual fuel costs fell outside
this range, a hearing could be held to determine if a rate
change was necessary, and a rate increase or decrease could
result.
Beginning with WPL's latest rate order UR-109, effective January
1, 1995, the automatic fuel adjustment clause was eliminated.
In its absence, WPL will benefit from reductions in fuel cost.
Conversely, WPL will be exposed to increases in fuel costs.
An automatic fuel adjustment clause for the FERC wholesale
portion of WPL's electric business operates to increase or
decrease monthly rates based on changes in fuel costs.
(2) Purchased Gas:
Through 1994, WPL's base gas cost recovery rates permitted the
recovery of or refund to all customers for any increases or
decreases in the cost of gas purchased from WPL's suppliers
through a monthly purchased gas adjustment clause.
Beginning with UR-109, the monthly purchased gas adjustment
clause was also eliminated. In the future, the fluctuations in
the commodity cost of gas above or below a prescribed commodity
price index will serve to increase or decrease WPL's margin on
gas sales. Fixed demand costs are excluded from the incentive
program. Both benefits and exposures are subject to ratepayer
sharing provisions, which are capped at $1.1 million.
g. Cash and Equivalents:
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The carrying
amount approximates fair value because of the short maturity of these
items.
h. Income Taxes:
Under the terms of an agreement with WPLH, the Company calculates its
federal tax provisions and makes payments to WPLH as if it were a separate
taxable entity. Beginning in 1993, WPL fully provides deferred income
taxes in accordance with SFAS No.109, "Accounting for Income Taxes," to
reflect tax effects of reporting book and tax items in different periods.
NOTE 2. PROPERTY:
a. Jointly-Owned Utility Plants:
WPL participates with other Wisconsin utilities in the construction and
operation of several jointly-owned utility generating plants. The chart
below represents WPL's proportionate share of such plants as reflected in
the Consolidated Balance Sheets at December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
---------------------------- -----------------------------
Plant Accumulated Plant Accumulated
Ownership Inservice Plant MW in Provision for in Provision for
Interest % Date Capacity Service Depreciation CWIP Service Depreciation CWIP
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coal:
Columbia Energy
Center 46.2 1975 & 1978 1,023 $159,650 $ 78,573 $1,484 $159,818 $ 76,602 $1,986
Edgewater Unit 4 68.2 1969 330 50,206 25,394 181 49,631 24,160 83
Edgewater Unit 5 75.0 1985 380 225,336 63,324 26 224,902 58,338 21
Nuclear:
Kewaunee Nuclear
Power Plant 41.0 1974 535 132,726 72,637 452 133,342 69,647 848
-------- -------- ------ -------- ------- ------
Total $567,918 $239,928 $2,143 $567,693 $228,747 $2,938
======= ======== ====== ======== ======== ======
</TABLE>
Each of the respective joint owners finances its portion of construction
costs. WPL's share of operation and maintenance expenses is included in
the Consolidated Statements of Income.
b. Capital Expenditures:
The Company's capital expenditures for 1995 are estimated to total $128.6
million. Substantial commitments have been incurred for such
expenditures.
NOTE 3. DEPRECIATION:
The Company uses the straight-line method of depreciation. For utility
plant, straight-line depreciation is computed on the average balance of
depreciable property at individual straight-line PSCW approved rates that
consider the estimated useful life and removal cost or salvage value as
follows:
Electric Gas Water Common
1994 3.2% 3.7% 2.5% 7.2%
1993 3.2% 3.7% 2.5% 7.3%
1992 3.2% 3.7% 2.6% 7.1%
NOTE 4. NUCLEAR OPERATIONS:
Depreciation expense related to the Kewaunee Nuclear Power Plant
("Kewaunee") includes a provision to accrue for the cost of
decommissioning over the life of the plant, which totalled $13.4 million,
$6.1 million and $3.9 million in 1994, 1993 and 1992, respectively.
Wisconsin utilities with ownership of nuclear generating plants are
required by the PSCW to establish and make annual contributions to
external trust funds to provide for plant decommissioning. Additionally,
in July 1994, the PSCW issued a generic order covering utilities that have
nuclear generation. This order standardizes the escalation assumptions to
be used in determining nuclear decommissioning liabilities.
WPL's share of the decommissioning costs is estimated to be $159 million
(in 1994 dollars, assuming the plant is operating through 2013) based on a
1992 study, using the immediate dismantlement method of decommissioning.
The undiscounted amount of decommissioning costs estimated to be expended
between the years 2014 and 2050 is $1.016 billion. After-tax earnings on
the tax-qualified and nontax-qualified decommissioning funds are assumed
to be 6.1 percent and 5.1 percent, respectively. The future escalation
rate is assumed to be 6.5 percent.
Decommissioning costs and a charge to offset earnings on the external
trusts are recorded as portions of depreciation expense and accumulated
provision for depreciation on the Statements of Consolidated Income and
the Consolidated Balance Sheets, respectively. As of December 31, 1994,
the total decommissioning costs included in the accumulated provision for
depreciation were approximately $62.8 million.
WPL has established external trusts to hold decommissioning funds, and the
PSCW has approved WPL's funding plan which provides for annual
contributions of current accruals over the remaining service lives of the
nuclear plants. The earnings on the external trusts accumulate in the
fund balance and in the accumulated provision for depreciation. Such
earnings on the external trust funds, which have been offset by a charge
to depreciation expense on the Statements of Consolidated Income, were
$2.7, $1.1 and $1.2 for the years ended December 31, 1994, 1993 and 1992,
respectively.
Under the Nuclear Waste Policy Act of 1982, the U.S. Department of Energy
("DOE") is responsible for the ultimate storage and disposal of spent
nuclear fuel removed from nuclear reactors. Interim storage space for
spent nuclear fuel is currently provided at the Kewaunee Nuclear Power
Plant. Currently there is on-site storage capacity for spent fuel through
the year 1999. Nuclear fuel, net, at December 31, consists of:
1994 1993
Original cost of nuclear fuel $155,190 $147,325
Less--Accumulated amortization 135,794 129,325
-------- --------
Nuclear fuel, net $ 19,396 $ 18,000
======== ========
The Price Anderson Act provides for the payment of funds for public
liability claims arising from a nuclear incident. Accordingly, in the
event of a nuclear incident, WPL, as a 41-percent owner of the Kewaunee
Nuclear Power Plant, is subject to an overall assessment of approximately
$32.5 million per incident for its ownership share of this reactor, not to
exceed $4.1 million payable in any given year.
Through its membership in Nuclear Electric Insurance Limited, WPL has
obtained property damage and decontamination insurance totalling $1.5
billion for loss from damage at the Kewaunee Nuclear Power Plant. In
addition, WPL maintains outage and replacement power insurance coverage
totalling $101.4 million in the event an outage exceeds 21 weeks.
NOTE 5. NET ACCOUNTS RECEIVABLE:
WPL has a contract with a financial organization to sell, with limited
recourse, certain accounts receivable and unbilled revenues. These
receivables include customer receivables resulting from sales to other
public utilities as well as from billings to the co-owners of the jointly-
owned electric generating plants that WPL operates. The contract allows
WPL to sell up to $150 million of receivables at any time. Expenses
related to the sale of receivables are paid to the financial organization
under this contract and include, along with various other fees, a monthly
discount charge on the outstanding balance of receivables sold that
approximated a 4.86 percent annual rate during 1994. These costs are
recovered in retail utility rates as an operating expense. All billing
and collection functions remain the responsibility of WPL. The contract
expires August 19, 1995, unless extended by mutual agreement.
As of December 31, 1994 and 1993, proceeds from the sale of accounts
receivable totalled $76.5 million and $74 million, respectively. During
1994, WPL sold an average of $82.3 million of accounts receivable per
month, compared with $75.9 million in 1993.
As a result of its diversified customer base and WPL's sale of
receivables, the Company does not have any significant concentrations of
credit risk in the December 31, 1994, net accounts receivable balance.
NOTE 6. REGULATORY ASSETS AND REGULATORY LIABILITIES:
Certain costs and credits are deferred and amortized in accordance with
authorized or expected rate-making treatment. As of December 31, 1994 and
1993, regulatory created assets include the following:
1994 1993
Environmental remediation costs $ 82,179 $ 82,380
Tax related (see Note 8) 43,736 47,787
Jurisdictional plant differences 7,173 6,533
Decontamination and decommissioning
costs of federal enrichment facilities 7,100 6,181
Other 4,288 5,924
-------- --------
$144,476 $148,805
======== ========
As of December 31, 1994 and 1993, regulatory created liabilities included
$6,738 and $6,618, respectively, for amounts due to customers related to
the sale of air emissions credits.
NOTE 7. EMPLOYEE BENEFIT PLANS:
a. Pension Plans:
WPL has non-contributory, defined benefit retirement plans covering
substantially all employees. The benefits are based upon years of service
and levels of compensation. WPL's funding policy is to contribute at
least the statutory minimum to a trust.
The projected unit credit actuarial cost method was used to compute net
pension costs and the accumulated and projected benefit obligations. The
discount rate used in determining those benefit obligations was 8.25, 7.25
and 8.00 percent for 1994, 1993 and 1992, respectively. The long-term
rate of return on assets used in determining those benefit obligations
9.00, 9.75, and 10.00 percent for 1994, 1993, and 1992, respectively.
The following table sets forth the funded status of the WPL plans and
amounts recognized in the Company's Consolidated Balance Sheets at
December 31, 1994 and 1993:
1994 1993
Accumulated benefit obligation--
Vested benefits $(134,829) $(135,303)
Non-vested benefits (3,295) (2,962)
--------- ----------
$(138,124) $(138,265)
--------- ----------
Projected benefit obligation $(154,283) $(164,271)
Plan assets at fair value, primarily
common stocks and fixed income
securities 178,095 183,881
--------- ----------
Plan assets in excess of projected
benefit obligation 23,812 19,610
Unrecognized net transition asset (19,376) (21,823)
Unrecognized prior service cost 5,679 7,691
Unrecognized net loss 14,737 20,650
--------- ----------
Pre-paid pension costs, included in
deferred charges and other $ 24,852 $ 26,128
========= ==========
The net pension (benefit) recognized in the Consolidated Statements of
Income for 1994, 1993 and 1992 included the following components:
1994 1993 1992
Service cost $ 5,123 $ 4,263 $ 3,912
Interest cost on projected benefit
obligation 12,051 11,614 10,615
Actual return on assets 1,016 (24,759) (12,143)
Amortization and deferral (17,795) 8,430 (5,317)
-------- -------- --------
Net pension (benefit) $ 395 $ (452) $ (2,933)
======== ======== ========
b. Postretirement Health Care and Life Insurance:
Effective January 1, 1993, the Company prospectively adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions".
SFAS No. 106 establishes standards of financial accounting and reporting
for the company's postretirement health care and life insurance benefits.
SFAS No. 106 requires the accrual of the expected cost of such benefits
during the employees' years of service based on actuarial methodologies
that closely parallel pension accounting requirements. WPL has elected
delayed recognition of the transition obligation and is amortizing the
discounted present value of the transition obligation to expense over 20
years. The cost of providing postretirement benefits, including the
transition obligation, is being recovered in retail rates under current
regulatory practices.
The following table sets forth the plans' funded status:
1994 1993
Accumulated postretirement benefit obligation--
Retirees $(29,273) $(27,358)
Fully eligible active plan participants (5,998) (5,429)
Other active plan participants (7,675) (9,980)
-------- --------
Accumulated benefit obligation (42,946) (42,767)
Plan assets at fair value 9,767 7,073
-------- --------
Accumulated benefit obligation
in excess of plan assets $(33,179) $(35,694)
Unrecognized transition obligation 26,474 29,638
Unrecognized loss (2,570) 2,025
-------- --------
Accrued postretirement benefits liability $ (9,275) $ (4,031)
======== ========
For 1994 and 1993, the annual net postretirement benefits costs recognized
in the Consolidated Statements of Income consist of the following
components:
1994 1993
Service cost $ 1,739 $ 1,463
Interest cost on projected benefit
obligation 3,135 3,151
Actual return on plan assets (253) (696)
Amortization of transition obligation 1,527 1,560
Amortization and deferral (381) (27)
------- -------
Net postretirement benefits cost $ 5,767 $ 5,451
======= =======
The postretirement benefits cost components for 1994 were calculated
assuming health care cost trend rates ranging from 11.5 percent for 1994
and decreasing to 5 percent by the year 2002. The health care cost trend
rate considers estimates of health care inflation, changes in utilization
or delivery, technological advances, and changes in the health status of
the plan participants. Increasing the health care cost trend rate by one
percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1994 by $2.5 million
and the aggregate of the service and interest cost components of the net
periodic postretirement benefit cost for the year by $.4 million.
The assumed discount rate used in determining the accumulated
postretirement obligation was 8.25 and 7.25 percent in 1994 and 1993,
respectively. The long-term rate of return on assets was 9.00 and 9.50
percent in 1994 and 1993, respectively. Plan assets are primarily
invested in common stock, bonds and fixed income securities. The
Company's funding policy is to contribute the tax-advantaged maximum to a
trust.
The costs for the postretirement health care and life insurance benefits,
based on an actuarial determination were $1.3 million in 1992.
c. Other Postemployment Benefits:
In November 1992, the Financial Accounting Standards Board issued No.
112, "Employers' Accounting for Postemployment Benefits". SFAS No. 112,
which was effective January 1, 1994, establishes standards of financial
accounting and reporting for the estimated cost of benefits provided by an
employer to former or inactive employees after employment but before
retirement. The effect of adopting SFAS No. 112 was not material.
NOTE 8. INCOME TAXES:
The following table reconciles the statutory federal income tax rate to
the effective income tax rate:
1994 1993 1992
Statutory federal income tax rate 35.0% 35.0% 34.0%
State income taxes, net of
federal benefit 5.6 6.1 6.0
Investment tax credits restored (1.7) (2.0) (2.4)
Amortization of excess deferred taxes (1.5) (1.5) (1.6)
Other differences, net 1.1 (1.9) (2.0)
---- ---- ----
Effective income tax rate 38.5% 35.7% 34.0%
==== ==== ====
In 1992, deferred taxes arising from utility plant timing differences, the
qualified nuclear decommissioning trust contribution, employee benefits
and other totalled $4,104, $709, $2,081, and ($755), respectively.
The temporary differences that resulted in accumulated deferred income tax
(assets) and liabilities as of December 31 are as follows:
1994 1993
Accelerated depreciation and other
plant related $186,565 $171,993
Excess deferred taxes 21,215 22,744
Unamortized investment tax credits (21,784) (22,812)
Allowance for equity funds used during
construction 14,384 13,518
Regulatory liability 17,553 19,179
Other 4,440 6,140
-------- --------
$222,373 $210,762
======== ========
Changes in WPL's deferred income taxes arising from the adoption of SFAS
No. 109 represent amounts recoverable or refundable through future rates
and have been recorded as net regulatory assets totalling approximately
$26 million and $29 million in 1994 and 1993, respectively, on the
Consolidated Balance Sheets. These net regulatory assets are being
recovered in rates over the estimated remaining useful lives of the assets
to which they pertain.
NOTE 9. SHORT-TERM DEBT AND LINES OF CREDIT:
The Company maintains bank lines of credit, most of which are at the bank
prime rates, to obtain short-term borrowing flexibility, including
pledging lines of credit as security for any commercial paper outstanding.
Amounts available under these lines of credit totalled $70 million as of
December 31, 1994. Information regarding short-term debt and lines of
credit is as follows:
1994 1993 1992
As of end of year--
Commercial paper outstanding $50,500 $49,000 $26,000
Notes payable outstanding $ -- $10,000 $25,000
Discount rates on commercial
paper 5.64%-6.12% 3.24%-3.40% 3.15%-3.90%
Interest rates on notes
payable -- % 3.34% 3.46%-3.62%
For the year ended--
Maximum month-end amount of
short-term debt $50,500 $59,000 $51,000
Average amount of short-term
debt (based on daily
outstanding balances) $25,374 $30,423 $22,160
Average interest rate on
short-term debt 5.89% 3.29% 3.63%
NOTE 10. CAPITALIZATION:
a. Common Shareowners' Investment:
A retail rate order effective January 1, 1995, requires WPL to maintain a
utility common equity level of 51.93 percent of total utility
capitalization during the test year January 1, 1995 to December 31, 1996.
In addition, the PSCW ordered that it must approve the payment of
dividends by WPL to WPLH that are in excess of the level forecasted in the
rate order ($58.1 million), if such dividends would reduce WPL's average
common equity ratio below 51.93 percent.
b. Preferred Stock:
On October 27, 1993, WPL issued two new series of preferred stock through
two separate public offerings. The 6.2 percent Series is non-redeemable
for ten years and the 6.5 percent Series is non-redeemable for five years.
The proceeds from the sale were used to retire 150,000 shares of 7.56
percent Series and 149,865 shares of 8.48 percent Series preferred stock.
c. Long-term Debt:
Substantially all of WPL's utility plant is secured by its first mortgage
bonds. Current maturities of long-term debt are as follows: $0 in 1995
and 1996, $55 million in 1997, $8.9 million in 1998 and $0 in 1999.
The Company has $130 million of notional principal under interest rate
swap contracts. The fair value of these contracts was not material as of
December 31, 1994.
The fair value of the Company's long-term debt based on quoted market
prices for similar issues at December 31, 1994 and 1993 was $386,520 and
$428,841, respectively.
NOTE 11. COMMITMENTS AND CONTINGENCIES:
a. Coal Contract Commitments:
To ensure an adequate supply of coal, WPL has entered into certain
long-term coal contracts. These contracts include a demand or take-or-pay
clause under which payments are required if contracted quantities are not
purchased. Purchase obligations on these coal and related rail contracts
total approximately $149 million through December 31, 2003. WPL's
management believes it will meet minimum coal and rail purchase
obligations under the contracts. Minimum purchase obligations on these
contracts over the next five years are estimated to be $25 million in 1995
and $26 million in 1996, 1997, 1998 and 1999.
b. Purchased Power and Gas:
Under firm purchase power and gas contracts, WPL is obligated as follows
(dollars in millions):
Purchased Power Purchased Gas
------------------- --------------------------
Purchase Purchase Decatherms
Obligation MW's Obligation (in millions)
1995 $ 8.3 1,920 $ 67 89
1996 8.1 1,830 67 90
1997 10.9 1,944 55 78
1998 15.6 2,505 45 66
1999 18.8 2,910 41 53
Thereafter 106.5 12,720 77 101
----- ------ ---- ---
$ 168.2 23,829 $352 477
====== ====== ==== ===
c. Manufactured Gas Plant Sites:
Historically, WPL has owned 11 properties that have been associated with
the production of manufactured gas. Currently, WPL owns five of these
sites, three are owned by municipalities, and the remaining three are
owned by private companies. In 1989, WPL initiated investigation of these
manufactured gas plant sites. The Wisconsin Department of Natural
Resources ("DNR") has been involved in reviewing investigation plans and
has received ongoing reports regarding these investigations.
In 1992, and into the beginning of 1993, WPL continued its investigations
and studies. WPL confirmed that there was no contamination at two of the
sites. WPL received a close-out letter from the DNR related to one of
those sites and requested a close-out letter for the other site.
Additionally, the investigation of historical records at a third site
indicated a minimal likelihood of any significant environmental impacts.
In February 1993, WPL completed cost estimates for the environmental
remediation of the eight remaining sites. The results of this analysis
indicate that during the next 35 years, WPL will expend approximately $81
million for feasibility studies, data collection, soil remediation
activities, groundwater research and groundwater remediation activities,
including construction of slurry containment walls and the installation of
groundwater pump and treatment facilities. This estimate was based on
various assumptions, and is subject to continuous review and revision by
management.
The cost estimate set forth above assumes 4 percent average inflation over
a 35 year period. The cost estimate also contemplates that primarily
groundwater pump and treatment activities will take place after 1998
through and including 2027. During this time, WPL estimates that it will
incur average annual costs of $2.0 million to complete the planned
groundwater remediation activities.
With respect to rate recovery of these costs, the PSCW has approved a five
year amortization of the unamortized balance of environmental costs
expended to date.
In addition, WPL is pursuing insurance recovery for the costs of
remediating these sites and is investigating to determine whether there
are other parties who may be responsible for some of the clean-up costs.
Through 1994, management has continued its oversight of the issues related
to the above manufactured gas plant sites without significant revision to
the above estimates and assumptions.
Based on the present regulatory record at the PSCW, management believes
that future costs of remediating these manufactured gas plant sites will
be recovered in rates.
NOTE 12. SEGMENT INFORMATION:
The following table sets forth certain information relating to the
Company's consolidated operations:
Year Ended December 31,
1994 1993 1992
Operation information:
Customer revenues--
Electric $ 531,747 $ 503,187 $ 477,735
Gas 137,575 137,270 119,362
Water 4,133 3,927 3,722
---------- ---------- ----------
Total operating revenues $ 673,455 $ 644,384 $ 600,819
========== ========== ==========
Operating income (loss)--
Electric $ 121,136 $ 118,785 $ 109,459
Gas 13,334 10,431 8,724
Water 1,134 990 998
Income taxes, current and
deferred (44,726) (35,667) (30,541)
Other income and (deductions),
net 10,735 789 2,650
Interest expense, net (30,119) (31,223) (32,071)
Preferred dividends (3,310) (3,928) (3,811)
---------- ---------- ----------
Net income $ 68,184 $ 60,177 $ 55,408
========== ========== ==========
Investment information:
Identifiable assets,
including allocated common
plant at December 31--
Electric $1,176,670 $1,170,010 $1,064,418
Gas 234,815 228,257 210,965
Water 18,791 17,703 14,464
Assets not allocated 154,848 134,687 123,803
---------- ---------- ----------
Total assets $1,585,124 $1,550,657 $1,413,650
========== ========== ==========
Other information:
Construction and nuclear fuel
expenditures--
Electric $ 103,420 $ 139,805 $ 113,252
Gas 20,319 18,876 13,974
Water 2,149 1,908 1,538
---------- ---------- ----------
Total construction and
nuclear fuel
expenditures $ 125,888 $ 160,589 $ 128,764
========== ========== ==========
Provision for depreciation
and amortization--
Electric $ 64,695 $ 53,398 $ 49,554
Gas 8,082 7,329 6,578
Water 417 470 284
---------- ---------- ----------
Total provision for
depreciation $ 73,194 $ 61,197 $ 56,416
========== ========== ==========
NOTE 13. CONSOLIDATED QUARTERLY FINANCIAL DATA
(Unaudited):
Seasonal factors significantly affect WPL and, therefore, the data
presented below should not be expected to be comparable between quarters
nor necessarily indicative of the results to be expected for an annual
period.
The amounts below were not audited by independent public accountants, but
reflect all adjustments necessary, in the opinion of the Company, for a
fair presentation of the data.
Operating Operating
Quarter Ended Revenues Income Net Income
1994: (in thousands)
March 31 $201,309 $31,684 $26,633
June 30 148,425 15,838 11,231
September 30 156,483 24,470 16,927
December 31 169,803 22,395 13,393
1993:
March 31 $182,023 $26,405 $17,740
June 30 141,049 16,936 8,237
September 30 144,440 21,045 13,096
December 31 177,986 31,091 21,104
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 relating to directors and
nominees for election as directors at the Company's 1995 Annual Meeting of
Shareowners is incorporated herein by reference to the information under
the caption "Election of Directors" in the Company's Proxy Statement for
its 1995 Annual Meeting of Shareowners (the "1995 Proxy Statement"). The
1995 Proxy Statement will be filed with the Securities and Exchange
Commission within 120 days after the end of the Company's fiscal year.
The information required by Item 10 relating to executive officers is
set forth in Part I of this Annual Report on Form 10-K. The information
required by Item 10 relating to delinquent filers is incorporated herein
by reference to the information under the caption "Compliance with Section
16(a) of the Securities Exchange Act of 1934" in the 1995 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by
reference to the information under the captions "Compensation of Executive
Officers" and "Compensation of Directors" (but not including the Report of
the Compensation and Personnel Committee on Executive Compensation) in the
1995 Proxy Statement. The 1995 Proxy Statement will be filed with the
Securities and Exchange Commission within 120 days after the end of the
Company's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by
reference to the information under the caption "Ownership of Voting
Securities" in the 1995 Proxy Statement. The 1995 Proxy Statement will be
filed with the Securities and Exchange Commission within 120 days after
the end of the Company's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) (1) Consolidated Financial Statements
Included in Part II of this report:
Report of Independent Public Accountants
Consolidated Statements of Income for the Years Ended
December 31, 1994, 1993 and 1992
Consolidated Balance Sheets, December 31, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Capitalization, December 31,
1994 and 1993
Consolidated Statements of Common Shareowners' Investment
Notes to Consolidated Financial Statements
(a) (2) Financial Statement Schedules
For each of the years ended December 31, 1994, 1993 and 1992
Schedule II. Valuation and Qualifying Accounts and
Reserves
All other schedules are omitted because they are not applicable
or not required, or because that required information is shown
either in the consolidated financial statements or in the notes
thereto.
(a) (3) Exhibits
The following Exhibits are filed herewith or incorporated herein
by reference. Documents indicated by an asterisk (*) are
incorporated herein by reference.
3A* Restated Articles of Incorporation (incorporated by
reference to Exhibit 3.1 to the Company's Quarterly Report
on Form 10Q for the quarter ended June 30, 1994)
3B By-Laws of the Company as revised to February 23, 1994
4A* Indenture of Mortgage or Deed of Trust dated August 1,
1941, between WPL and First Wisconsin Trust Company and
George B. Luhman, as Trustees, incorporated by reference
to Exhibit 7(a) in File No. 2-6409, and the indentures
supplemental thereto dated, respectively, January 1, 1948,
September 1, 1948, June 1, 1950, April 1, 1951, April 1,
1952, September 1, 1953, October 1, 1954, March 1, 1959,
May 1, 1962, August 1, 1968, June 1, 1969, October 1,
1970, July 1, 1971, April 1, 1974, December 1, 1975,
May 1, 1976, May 15, 1978, August 1, 1980, January 15,
1981, August 1, 1984, January 15, 1986, June 1, 1986,
August 1, 1988, December 1, 1990, September 1, 1991,
October 1, 1991, March 1, 1992, May 1, 1992, June 1, 1992
and July 1, 1992 (incorporated by reference to Second
Amended Exhibit 7(b) in File No. 2-7361; Amended Exhibit
7(c) incorporated by reference to File No. 2-7628;
Amended Exhibit 7.02 in File No. 2-8462; Amended Exhibit
7.02 in File No. 2-8882; Second Amendment Exhibit 4.03 in
File No. 2-9526; Amended Exhibit 4.03 in File No. 2-10406;
Amended Exhibit 2.02 in File No. 2-11130; Amended Exhibit
2.02 in File No. 2-14816; Amended Exhibit 2.02 in File
No. 2-20372; Amended Exhibit 2.02 in File No. 2-29738;
Amended Exhibit 2.02 in File No. 2-32947; Amended Exhibit
2.02 in File No. 2-38304; Amended Exhibit 2.02 in File
No. 2-40802; Amended Exhibit 2.02 in File No. 2-50308;
Exhibit 2.01(a) in File No. 2-57775; Amended Exhibit 2.02
in File No. 2-56036; Amended Exhibit 2.02 in File
No. 2-61439; Exhibit 4.02 in File No. 2-70534; Amended
Exhibit 4.03 File No. 2-70534; Exhibit 4.02 in File
No. 33-2579; Amended Exhibit 4.03 in File No. 33-2579;
Amended Exhibit 4.02 in File No. 33-4961; Exhibit 4B to
WPL's Form 10-K for the year ended December 31, 1988,
Exhibit 4.1 to WPL's Form 8-K dated December 10, 1990,
Amended Exhibit 4.26 in File No. 33-45726, Amended
Exhibit 4.27 in File No.33-45726, Exhibit 4.1 to WPL's
Form 8-K dated March 9, 1992, Exhibit 4.1 to WPL's
Form 8-K dated May 12, 1992, Exhibit 4.1 to WPL's Form 8-K
dated June 29, 1992 and Exhibit 4.1 to WPL's Form 8-K
dated July 20, 1992)
10A*# Executive Tenure Compensation Plan, as revised November
1992 (incorporated by reference to Exhibit 10A to the
Company's Form 10-K for the year ended December 31, 1992)
10B*# Form of Supplemental Retirement Plan, as revised November
1992 (incorporated by reference to Exhibit 10B to the
Company's Form 10-K for the year ended December 31, 1992)
10C*# Forms of Deferred Compensation Plans, as amended June,
1990 (incorporated by reference to Exhibit 10C to the
Company's Form 10-K for the year ended December 31, 1990)
10C.1*# Officer's Deferred Compensation Plan II, as adopted
September 1992 (incorporated by reference to Exhibit
10C.1 to the Company's Form 10-K for the year ended
December 31, 1992)
10C.2*# Officer's Deferred Compensation Plan III, as adopted
January 1993 (incorporated by reference to Exhibit 10C.2
to the Company's Form 10-K for the year ended December
31, 1992)
10D*# Pre-Retirement Survivor's Income Supplemental Plan, as
revised November 1992 (incorporated by reference to
Exhibit 10F to the Company's Form 10-K for the year ended
December 31, 1992)
10E*# Wisconsin Power and Light Company Management Incentive
Plan (incorporated by reference to Exhibit 10H to the
Company's Form 10-K for the year ended December 31, 1992)
10F# Deferred Compensation Plan for Directors, as amended
January 17, 1995
10G*# WPL Holdings, Inc. Long-Term Equity Incentive Plan
(incorporated by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1994)
10H*# Key Executive Employment and Severance Agreement by and
between WPL Holdings, Inc., and E.B. Davis, Jr.
(incorporated by reference to Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1994)
10I*# Form of Key Executive Employment and Severance Agreement
by and between WPL Holdings, Inc. and each of W.D. Harvey,
E.G. Protsch and A.J. Amato (incorporated by reference to
Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994)
10J*# Form of Key Executive Employment and Severance Agreement
by and between WPL Holdings, Inc. and each of E.M.
Gleason, B.J. Swan, D.A. Doyle, N.E. Boys, D.E. Ellestad,
P.J. Wegner and K.K. Zuhlke (incorporated by reference to
Exhibit 4.4 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994)
21 Subsidiaries of the company
99* 1995 Proxy Statement for the Annual Meeting of Shareowners
to be held May 17, 1995 [The Proxy Statement for the 1995
Annual Meeting of Shareowners will be filed with the
Securities and Exchange Commission under Regulation 14A
within 120 days after the end of the Company's fiscal year;
except to the extent incorporated by reference, the Proxy
Statement for the 1995 Annual Meeting of Shareowners shall
not be deemed to be filed with the Securities and Exchange
Commission as part of this Annual Report on Form 10-K]
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company
hereby agrees to furnish to the Securities and Exchange
Commission, upon request, any instrument defining the rights of
holders of unregistered long-term debt not filed as an exhibit
to this Form 10-K. No such instrument authorizes securities in
excess of 10 percent of the total assets of the Company.
# - A management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized on the 22nd of February 1995.
WISCONSIN POWER AND LIGHT COMPANY
By:/s/ Erroll B. Davis, Jr.
Erroll B. Davis, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities indicated on the 22nd day of
February 1995.
/s/ Erroll B. Davis, Jr. President, Chief Executive Officer
Erroll B. Davis, Jr. and Director (principal executive
officer)
/s/ Daniel A. Doyle Vice President-Finance, Controller
Daniel A. Doyle and Treasurer (principal financial
and accounting officer)
/s/ Les Aspin Director /s/ Milton E. Neshek Director
Les Aspin Milton E. Neshek
/s/ L. David Carley Director /s/ Henry C. Prange Director
L. David Carley Henry C. Prange
/s/ Rockne G. Flowers Director /s/ Judith D. Pyle Director
Rockne G. Flowers Judith D. Pyle
/s/ Donald R. Haldeman Director /s/ Henry F. Scheig Director
Donald R. Haldeman Henry F. Scheig
/s/ Katharine C. Lyall Director /s/ Carol T. Toussaint Director
Katharine C. Lyall Carol T. Toussaint
/s/ Arnold M. Nemirow Director
Arnold M. Nemirow
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To WISCONSIN POWER AND LIGHT COMPANY:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in the 1994 Form 10-K of
Wisconsin Power and Light Company and have issued our report thereon dated
February 1, 1995. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. Supplemental Schedule II is
the responsibility of the Company's management and are presented for
purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in the
audit of the basic consolidated financial statements and, in our opinion,
fairly states in all material respects the financial data required to be
set forth therein in relation to the basic consolidated financial
statements taken as a whole.
Milwaukee, Wisconsin, ARTHUR ANDERSEN LLP
February 1, 1995
<PAGE>
WISCONSIN POWER AND LIGHT COMPANY
INDEX TO FINANCIAL STATEMENT SCHEDULES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
FINANCIAL STATEMENT SCHEDULES:
II. Valuation and Qualifying Accounts and Reserves
NOTE: All other schedules are omitted because they are not
applicable or not required, or because that required
information is shown either in the financial statements or in
the notes thereto.
<PAGE>
<TABLE>
SCHEDULE II
WISCONSIN POWER AND LIGHT COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
($ In Thousands)
<CAPTION>
Additions
Balance at Charged to Balance a
beginning costs and end of
Description of period expenses Deductions period
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful accounts... $259 $150 $200 [1] $209
======= ====== ====== ======
Year ended December 31, 1993:
Allowance for doubtful accounts... $226 $114 $81 [1] $259
======= ====== ====== ======
Year ended December 31, 1992:
Allowance for doubtful accounts... $261 $90 $125 [1] $226
======= ====== ====== ======
<FN>
[1] Uncollectible accounts written off, net of recoveries.
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
3B By-Laws of as revised to February 23, 1994
10F Deferred Compensation Plan for Directors, as
amended January 17, 1995
21 Subsidiaries of the Company
27 Financial Data Schedule
BYLAWS OF
WISCONSIN POWER AND LIGHT COMPANY
Revised at February 23, 1994
ARTICLE I
SEAL
The corporate seal shall have inscribed thereon the name of the
corporation and the words "Corporate Seal, Wisconsin".
ARTICLE II
Stocks and Transfers
Section 1 - Each holder of fully paid stock shall be entitled to a
certificate or certificates of stock, stating the number of shares owned
by such shareowner and the designation of the Class and Series in which
issued. All stock certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary of the Company,
and be sealed with the corporate seal of the Company, which seal may be
facsimile, engraved or printed. If and when a Transfer Agent and/or a
Registrar shall have been appointed by the Board with respect to the
shares of any class of stock, or series thereof, of the Company, the
certificates representing such shares shall also be countersigned by such
Transfer Agent and/or countersigned and registered by such Registrar, as
the case may be. Certificates which have been countersigned by a Transfer
Agent and countersigned and registered by a Registrar, in both cases duly
appointed by the Board of Directors for such purpose, may bear the
signatures of the President or a Vice President and the Secretary or an
Assistant Secretary of the Company in facsimile, engraved or printed;
provided, that no certificate bearing the facsimile signatures of the
Officers of the Company shall be valid or effective for any purpose unless
and until it shall have been so countersigned and registered. In case any
such Officer who has signed any stock certificate, or whose facsimile
signature has been placed thereon, shall have ceased to be such Officer
before such certificate is issued, such certificate may be issued by the
Company with the same effect as if such Officer had not ceased to be such
at the date of its issue.
Section 2 - The stock of the Company shall be divided into such
Classes, with such relative rights and preferences, as shall be provided
by the Articles of Organization of the Company as the same may from time
to time be amended in accordance with the laws of Wisconsin.
Section 3 - Shares of stock shall be transferable only on the books
of the Company; and upon proper endorsement and surrender of the
outstanding certificates representing the same. Subject to such
conditions as the Board of Directors may, by Resolution, establish: (a)
If an outstanding certificate of stock shall be lost, destroyed or stolen,
the holder thereof may have a new certificate issued, upon producing
evidence satisfactory to the Officers of the Company, of such loss,
destruction or theft; and upon furnishing to the Company a bond of
indemnity, surety bond, or such other assurance as the Officers may
require. (b) Where any outstanding certificates of stock are deemed
abandoned by the holder thereof, pursuant to the unclaimed property or
escheatment laws of any state having jurisdiction thereof, the Officers of
the Company are authorized and directed to cause the transfer and delivery
of said certificates or to cause the issuance of replacement certificates,
to such person or persons as may be entitled thereto in accordance with
such escheatment laws.
Section 4 - Transfer books may be closed by order of the Board of
Directors for short periods, not exceeding forty days at any one time, for
any legal purpose, as the Board of Directors shall deem advisable.
ARTICLE III
Meetings of Shareowners
Section 1 - The Annual Meeting of the Shareowners shall be held on
the fourth Wednesday in May of each year (or if such day be a legal
holiday in Wisconsin, then upon the following day); or on such other day
of each year as the Board of Directors may determine. Each such meeting
shall be held at the hour of 10:00 o'clock A.M. at the office of the
Company in Madison, Wisconsin, unless the Board of Directors shall
otherwise order. The Annual Meeting shall be held for the purposes of
electing Directors, selecting the Company's independent auditors and of
transacting such other business as may properly come before the meeting.
Section 2 - Special Meetings of the shareowners may be called by the
Chairperson of the Board, the Chief Executive Officer; or by the Board of
Directors; or by the Secretary when requested by the owners of shares of
outstanding voting stock having in the aggregate a number of votes at
least equal to one-fifth of the aggregate number of votes possessed by all
such owners; or in such other manner as may be provided by statute.
Section 3 - Notice of the time and place of each Annual or Special
Meeting of Shareowners shall be sent by mail to the recorded address of
each shareowner not less than ten days before the date of the meeting,
except in cases where other special method of notice may be required by
statute, in which case the statutory method shall be followed. The notice
of a special meeting shall state the object of the meeting. Notice of any
meeting of the shareowners may be waived by any shareowners.
Section 4 - At all meetings of shareowners, the representation of
owners of that number of shares of stock entitled to vote at such meeting
having in the aggregate a number of votes at least equal to a majority of
the aggregate number of votes entitled to vote at such meeting shall be
necessary to constitute a quorum for the transaction of any business,
other than (a) adjourning from time to time until a quorum shall be
obtained, or (b) adjourning sine die, and for any such adjournment a
majority vote of whatever shares of stock shall be represented shall
be sufficient.
Section 5 - The Chairperson of the Board when he or she is the Chief
Executive Officer, and when he or she is not the Chief Executive Officer,
or in his or her absence or at his or her request the President, and in an
absence of both the Chairperson of the Board and the President, then a
Vice President, and if no Vice President be in attendance at the meeting,
then a Director selected by the Directors attending the meeting, or if no
selection is made, then the Director in attendance with the longest tenure
in such office, shall preside at each meeting of shareowners, and the
Secretary or an Assistant Secretary of the Company shall act as secretary
of each shareowner meeting.
Section 6 - Any shareowner having the right to vote at a meeting of
shareowners may exercise such right by voting in person or by proxy at
such meeting.
ARTICLE IV
Board of Directors
Section 1 - The number of Directors constituting the Board of
Directors shall be a minimum of nine (9) and a maximum of thirteen (13).
Whenever a vacancy(ies) occurs on the Board of Directors such that there
are less than nine (9) Directors remaining, the remaining Directors shall
constitute the Board of Directors until the vacancy(ies) are filled by a
vote of the majority of the Directors remaining in office, even if less
than a quorum, said vacancy(ies) to be filled as soon as reasonably
possible. When there are nine (9) or more Directors and a vacancy occurs,
including a vacancy created by an increase in the number of Directors, it
shall be filled or not filled at the discretion of the Board of Directors.
Section 2 - No person who has attained 70 years of age shall be
eligible for election or re-election to the Board of Directors. Any
Director who has attained 70 years of age shall resign from the Board of
Directors effective as of the next Annual Meeting of Shareowners. Except
for the Chief Executive Officer, any Officer or employee of the Company
serving as a Director who retires or resigns from his or her office or
employment with the Company shall simultaneously resign from the Board of
Directors. Any Director who is unavailable for reasonably regular
attendance at meetings of the Board shall resign as a Director.
Section 3 - The Board of Directors may hold regular or special
meetings in or outside the State of Wisconsin.
Section 4 - A regular meeting of the Board of Directors shall be held
within 30 days after the Annual Meeting of Shareowners in each year,
provided a quorum for such meeting can be obtained, and thereafter regular
meetings of the Board of Directors shall be held at such time and place
and in such manner as may be determined by the Board, at such hour as the
notice of meeting may provide.
Section 5 - Special meetings of the Board may be called at any time
by the Chairperson of the Board, or the Chief Executive Officer, or in the
absence of the Chairperson when Chief Executive Officer, by the President,
or by a Vice President when acting as Chief Executive Officer, or by any
two Directors, by mailing to each Director, not less than three days
before the time of such meeting, a written notice stating the time and
place and manner of holding such meeting.
Section 6 - (a) Any or all members of the Board of Directors, or any
committee thereof, may participate in a regular or special meeting by, or
to conduct the meeting through the use of any means of communication by
which any of the following occurs:
1) All participating directors may simultaneously hear each
other during the meeting.
2) All communication during the meeting is immediately
transmitted to each participating director, and each
participating director is able to immediately send
messages to all other participating directors.
(b) If a meeting is conducted by the means of communication
described herein, all participating directors shall be informed
that a meeting is taking place at which official business may be
transacted.
(c) A director participating in a meeting by means of such
communication is deemed to be present in person at the meeting.
Section 7 - Notice of any meeting of the Board may be waived by any
Director.
Section 8 - A majority of the Board of Directors shall constitute a
quorum for the transaction of business at any meeting of the Board, but a
fewer number may adjourn the meeting to some other day or sine die. The
person designated by Section 5 of Article III above shall preside at
meetings of the Board of Directors, and the Secretary or an Assistant
Secretary shall act as Secretary. The members of the Board who are
Officers or employees of the Company shall receive no separate fee for
serving as a Director of the Company. Other members of the Board shall be
paid such fees as the Board shall from time to time determine by
resolution.
ARTICLE V
Committees
Section 1 - The Board of Directors may, by resolution passed by a
majority of the whole Board, designate from their number an Executive
Committee of such number, not less than three, as the Board may fix from
time to time. The Executive Committee may make its own rules of procedure
and shall meet where and as provided by such rules, or by resolution of
the Board of Directors. A majority of the members of the Committee
shall constitute a quorum for the transaction of business. During the
intervals between the meetings of the Board of Directors, the Executive
Committee shall have all the powers of the Board in the management of the
business and affairs of the Company, including power to authorize the seal
of the Company to be affixed to all papers which may require it, and, by
majority vote of all its members, exercise any and all such powers in such
manner as such Committee shall deem best for the interests of the Company,
in all cases in which specific directions shall not have been given by the
Board of Directors.
Section 2 - The Executive Committee shall keep regular minutes of its
proceedings and report the same to the Board when required.
Section 3 - A Compensation and Personnel Committee is hereby
established. Said Committee shall consist of at least three (3) Directors
who are not and never have been officers, employees or legal counsel of
the Company. The Chairperson and the members of the Compensation and
Personnel Committee shall be elected by a majority vote of the members of
the Board of Directors at the Annual Board meeting following the Annual
Meeting of Shareowners, except that any vacancies on said Committee may be
filled at any time by action of the Board of Directors. The Committee
shall have the following powers and responsibilities:
1. Review and recommend to the Board new employee benefit plans
or changes, i.e. pension, life, hospital, disability, etc.
2. Review major provisions of any negotiated union contracts
prior to or during negotiations.
3. Review and approve any executive officer employment
contract.
4. Review human resource development programs.
5. Review management development programs.
6. Review the internal equity and external competitiveness of
all executive, management and salary pay grades.
7. Review and authorize salary adjustments for all management
payroll and non-executive officers' pay grades as a group.
All salary ranges and performance for executive officers
shall be reviewed individually by the Committee.
8. Review as a group overall adjustments for all non-management
payroll salary grades.
9. Review personnel budgets.
Said Committee shall meet at such times as it determines, but at least
twice each year, and shall meet at the request of the Chief Executive
Officer, President or any Committee member. Such meeting may be held on a
day separate from or the same as the regular monthly meeting of the Board
of Directors. Subsequent to each such Committee meeting, a report of the
actions taken by such Committee shall be made to the Board of Directors.
Section 4 - An Audit Committee is hereby established and shall
consist of at least three (3) members all of whom shall be outside members
of the Board of Directors. The Chairperson and the members of the
Committee shall be elected by a majority vote of the members of the Board
of Directors at the Annual Board Meeting following the Annual Meeting of
Shareowners, except that any vacancies on said Committee may be filled at
any time by action of the Board of Directors. Said Committee shall meet
at the call of any one of its members, but in no event shall it meet less
than once a year. Such meeting may be held on a day separate from or the
same as the regular monthly meeting of the Board of Directors. Subsequent
to each such Committee meeting, a report of the actions taken by such
Committee shall be made to the Board of Directors.
The functions of said Committee shall be to:
1. Recommend to the shareowners the independent auditors of the
Company.
2. Discuss with the independent auditors the scope of their audit.
3. Discuss with the independent auditors and the management the
Company's accounting principles, policies and practices and its
reporting policies and practices.
4. Discuss with the independent auditors the results of their audit.
5. Discuss with the independent auditors the adequacy of the
Company's or any of its subsidiaries accounting, financial and
operating controls.
6. Discuss with the Company's Director of Internal Audits the scope
and results of internal audits and initiate such accounting
principles, policies and practices, and reporting policies and
practices as it may deem necessary or proper.
7. Approve or disapprove annually, each defined group of non-audit
services performed by the independent auditors, which
consideration may occur before or after performance, giving due
regard to the possible effect of such performance upon the
independence of the independent auditors; and, if considered
prior to such performance, shall include a limitation upon the
magnitude of such services.
Section 5 - A Corporate Operations Review Committee is hereby
established. Such Committee shall consist of at least three members of
the Board of Directors. The Chairperson and the members of the Committee
shall be elected by a majority vote of the Board of Directors at the
Annual Board Meeting following the Annual Meeting of Shareowners, except
any vacancies on said Committee may be filled at any time by action of the
Board of Directors. Said Committee shall meet at least once annually at
such time and place as it determines, and at other times upon the call of
the Chairperson or any other member of the Committee. Such meeting may be
held on a day separate from or the same as the regular meeting of the
Board of Directors.
The functions of said Committee shall be to:
1. Review proposed operating and construction budgets, financing
plans and other significant project plans and make
recommendations to the Board of Directors.
2. Examine corporate operations and performance against established
budgets, plans and objectives.
3. Review corporate policies as required and make recommendations to
the Board of Directors concerning policy changes and the
establishment of new policies.
4. Periodically review selected operating issues and processes.
Section 6 - A Nominating Committee shall be established and shall
consist of at least three (3) members, all of whom shall be outside
members of the Board. The Chairperson and the members of the Committee
shall be elected by a majority vote of the members of the Board of
Directors at the Annual Board Meeting following the Annual Meeting of
Shareowners, except that any vacancies on said Committee may be filled at
any time by action of the Board of Directors. Said Committee shall meet at
the call of any one of its members, but in no event shall it meet less
than once a year for the express purpose of recommending nominees for
election to the Board at the Annual Meeting of Shareowners.
The function of this Committee shall be to recommend to the Board of
Directors nominations for election to the Board of Directors and to review
the appropriateness of continued membership on the Board of present Board
members.
Section 7 - A Special Finance Committee shall be established to act
on behalf of the board with respect to the issuance of securities by the
Company. The members of the Committee shall be the President and Chief
Executive Officer, the Chief Financial Officer, and the Vice President and
General Counsel. The Committee shall act only in accordance with such
specific instructions as the Board shall, by resolution, prescribe. The
Committee shall meet as it shall determine. The act of a majority of the
members shall be the act of the Committee.
Section 8 - An Environmental Affairs Committee is hereby established.
Such Committee shall consist of three to five members of the Board of
Directors. The Chairperson of the Committee shall be elected by a
majority vote of the Board of Directors at the Annual Board meeting
following the Annual Meeting of Shareowners, except a vacancy in said
position may be filled at any time by action of the Board of Directors.
The Chairperson, the Chief Executive Officer and the President of the
Company shall be ex officio members serving in an advisory capacity. Said
Committee shall meet at least once annually at such time and place as it
determines, and at other times upon the call of the Chairperson or any
other member of the Committee. Such meeting may be held on a day separate
from or the same as the regular monthly meeting of the Board of Directors.
The Committee shall report on its reviews, and, as appropriate, make
recommendations to the Board of Directors.
The responsibility of said Committee shall be to review environmental
policy and planning issues of interest to the Company, including matters
involving the Company before environmental regulatory agencies and
compliance with air, water, and waste regulations.
Section 9 - A majority of the members of a committee shall constitute
a quorum for the transaction of business at any meeting of a committee of
the Board, but a fewer number may adjourn the meeting to some other day or
sine die. Each committee shall arrange for the keeping of its
own minutes.
ARTICLE VI
Officers
Section 1 - There shall be elected by the Board of Directors at its
first regular meeting after the Annual Meeting of Shareowners in each
year, a Chief Executive Officer, who may be designated either Chairperson
of the Board or President or both. The Board may elect a Chairperson of
the Board who is not designated the Chief Executive Officer. At the same
meeting the Board shall elect the following principal Officers, namely, a
President, such number of Vice Presidents with such designations as the
Board of Directors at the time may decide upon, a Secretary, a Treasurer
and a Controller. Any two of such offices, except those of President and
Vice President, those of Chairperson of the Board and Secretary, and
except those of President and Secretary, may be held and the duties
thereof may be performed by one person. The Board of Directors in its
discretion may also elect for any year one or more Assistant Secretaries,
one or more Assistant Treasurers, one or more Assistant Controllers, and
such other Officers as may from time to time be provided for by the Board
of Directors. All Officers unless sooner removed shall hold their
respective offices until the first regular meeting of the Board of
Directors after the next succeeding Annual Meeting of Shareowners and
until their successors, willing to serve, shall have been elected, but any
Officer may be removed from office at any time at the pleasure of the
Board of Directors. All Officers shall be bonded in such form, in such
amounts, and with such sureties as determined by the Board of Directors.
Section 2 - Subject to the control of the Board of Directors the
Chief Executive Officer designated by the Board of Directors shall have
and be responsible for the general management and direction of the
business of the Company, shall establish the lines of authority and
supervision of the Officers and employees of the Company, shall have the
power to appoint and remove and discharge any and all agents and employees
of the Company not elected or appointed directly by the Board of
Directors, and shall assist the Board in the formulation of policies of
the Company. The Chairperson of the Board if the Chief Executive Officer
may delegate any part of his or her duties to the President, or to one or
more of the Vice Presidents of the Company.
Section 3 - The Chairperson of the Board if not designated as the
Chief Executive Officer of the Company shall assist the Board in the
formulation of policies and may make recommendations therefore.
Information as to the affairs of the Company in addition to that contained
in the regular reports shall be furnished to him or her on request. He or
she may make suggestions and recommendations to the Chief Executive
Officer regarding any matters relating to the affairs of the Company and
shall be available to the Chief Executive Officer for consultation and
advice.
Section 4 - The President when he or she is not designated as and
does not have the powers of the Chief Executive Officer shall have such
other powers and duties as usually devolve upon the President of a Company
and such other and further powers and duties as may from time to time be
prescribed by the Board of Directors or be delegated to him or her by the
Chairperson of the Board. In the absence or inability to act of the
Chairperson of the Board to act as Chief Executive Officer the powers and
duties of the Chief Executive Officer shall temporarily devolve upon the
President.
Section 5 - Each of the Vice Presidents shall have such powers and
duties as may be prescribed for him or her by the Board of Directors and
by the Chief Executive Officer.
Section 6 - The Secretary shall attend all meetings of the Board of
Directors, shall keep a true and faithful record thereof in proper books
to be provided for that purpose, and shall be responsible for the custody
and care of the corporate seal, corporate records and minute books of the
Company, and of all other books, documents and papers as in the practical
business operation of the Company shall naturally belong in the office or
custody of the Secretary, or shall be placed in his or her custody by the
Chief Executive Officer or by the Board of Directors.
He or she shall also act as Secretary of all shareowners' meetings,
and keep a record thereof. He or she shall, except as may be otherwise
required by statute or by these bylaws, sign, issue and publish all
notices required for meetings of shareowners and of the Board of
Directors. He or she shall be responsible for the custody of the stock
books of the Company and shall keep a suitable record of the addresses of
shareowners. He or she shall also be responsible for the collection,
custody and disbursement of the funds received for dividend reinvestment.
He or she shall sign stock certificates, bonds and mortgages, and all
other documents and papers to which his or her signature may be necessary
or appropriate, shall affix the seal of the corporation to all instruments
requiring the seal, and shall have such other powers and duties as are
commonly incidental to the office of Secretary, or as may be prescribed
for him or her by the Chief Executive Officer or by the Board of
Directors.
Section 7 - The Treasurer shall have charge of, and be responsible
for, the collection, receipt, custody and disbursement of the funds of the
Company, and shall deposit its funds in the name of the Company in such
banks, trust companies, or safety vaults as the Board of Directors may
direct, and shall keep a proper record of cash receipts and disbursements.
He or she may, in the absence of the Secretary and Assistant Secretaries
sign stock certificates. He or she shall be responsible for the custody
of such books, receipted vouchers and other books and papers as in the
practical business operation of the Company shall naturally belong in the
office or custody of the Treasurer, or shall be placed in his or her
custody by the Chief Executive Officer, or by the Board of Directors. He
or she shall sign checks, drafts, and other paper providing for the
payment of money by the Company for operating purposes in the usual course
of business, and shall have such other powers and duties as are commonly
incidental to the office of Treasurer, or as may be prescribed for him or
her by the Chief Executive Officer or by the Board of Directors.
Section 8 - The Controller shall be the principal accounting Officer
of the Company. He or she shall have general supervision over the books
of accounts of the Company. He or she shall examine the accounts of all
Officers and employees from time to time and as often as practicable, and
shall see that proper returns are made of all receipts from all sources.
All bills, properly made in detail and certified, shall be submitted to
him or her, and he or she shall audit and approve the same if found
satisfactory and correct, but he or she shall not approve any voucher
unless charges covered by the voucher have been previously approved
through work orders, requisition or otherwise by the head of the
department in which it originated, or unless he or she shall be otherwise
satisfied of its propriety and correctness. He or she shall have full
access to all minutes, contracts, correspondence and other papers and
records of the Company relating to its business matters, and shall be
responsible for the custody of such books and documents as shall naturally
belong in the custody of the Controller and as shall be placed in his or
her custody by the Chief Executive Officer or by the Board of Directors.
The Controller shall have such other powers and duties as are commonly
incidental to the office of Controller, or as may be prescribed for him or
her by the Chief Executive Officer or by the Board of Directors.
Section 9 - The Assistant Secretaries, Assistant Treasurers and
Assistant Controllers shall respectively assist the Secretary, Treasurer
and Controller of the Company in the performance of the respective duties
assigned to such principal Officer, and in assisting his or her principal
Officer each assistant Officer shall to that extent and for such purpose
have the same powers as his or her principal Officer. The powers and
duties of any such principal Officer shall temporarily devolve upon an
assistant Officer in case of the absence, disability, death, resignation
or removal from office of such principal Officer.
Section 10 - In the event of the untimely death or absence or
inability to act of the Chief Executive Officer, his or her powers and
duties shall devolve temporarily in the following manner: first to any
former Chief Executive Officer who is a member of the Board, next, to the
Board member with the longest tenure on the Board. Within sixty (60)
days, the temporary Chief Executive Officer shall notify the outside
members of the Board of the absence or inability to act of the Chief
Executive Officer and shall convene a meeting of the outside members of
the Board, who shall act as a Committee. The Committee shall determine
and evaluate all the facts pertinent to the Chief Executive Officer's
absence or inability to act, and then make such recommendations to the
Board of Directors as it deems appropriate under the circumstances. The
Board of Directors shall meet and act upon said recommendations within
thirty (30) days following the determinations of said Committee.
ARTICLE VII
Cash Management
Section 1 - Deposits - The funds of the Company shall be deposited to
its credit in such banks or trust companies ("depositories") as the
Treasurer and Vice President-Finance shall designate or in the manner
provided in Paragraph 5 of Section 2 of this Article. All deposits in any
depository shall be made initially to the general account of the Company
and not to any special account, fund or deposit. All special accounts,
funds or deposits shall be created and maintained solely by transfers of
funds from the general account.
Section 2 - Withdrawals and Check Signing -
1. Funds shall be withdrawn only by Company check or draft except:
a. to effect transfers of funds between Company accounts
maintained at one or more depositories;
b. as provided in paragraph 5 of this Section 2 and Section 3 of
this Article; or
c. as provided by resolution of the Board of Directors.
2. No debts shall be contracted except for current expenses unless
authorized by the Board of Directors or the Executive Committee,
and no invoices shall be paid by the Treasurer unless audited and
approved by the Controller or by a person or committee
specifically authorized by the Board of Directors or the
Executive Committee to audit and approve invoices for payment.
3. Checks, drafts and notes drawn on any account or deposit of the
Company (except those special purpose accounts specified in
paragraphs 5 and 6 of this Section and except drafts specified in
paragraph 7 of this Section) shall be valid instruments when
signed on behalf of the Company by the Vice President-Finance,
the Treasurer or an Assistant Treasurer. Instruments may be
signed by the facsimile signature of the Vice President-Finance
or the Treasurer.
4. For the purposes of this Section, a facsimile signature of any
Officer of the Company shall mean a stamp or perforation of that
Officer's signature. Each depository is authorized to honor
instruments signed in this manner provided the facsimile
resembles a specimen on file which has been certified by the
Secretary or other duly authorized Officer of the Company.
5. In addition to the provisions of Section 1 of this Article VII,
the Treasurer of the Company is authorized to establish petty
cash funds, on an imprest basis. Each such account shall be
designated as a "Cashier's Trust Account" and shall be separately
maintained and accounted for by the cashier or other employee
assigned such responsibility by the Treasurer.
a. Checks drawn on a Cashier's Trust Account may be signed and
countersigned on behalf of the Company by such employees as
the Treasurer or Vice President-Finance may from time to time
authorize and designate; provided, however, that no such
check shall be signed and countersigned by the same person.
b. No payment out of petty cash funds, whether by cash or check,
shall exceed $2,500 in the case of payments by district
offices, area offices or the Treasury Department, or $1,000
in the case of payments by generating stations.
6. Checks drawn on special accounts which the Company creates or
maintains for the payment of dividends may be signed by the
manual or facsimile signature of its Chief Executive Officer
or President and shall not require any countersignature.
7. Sight drafts may be drawn on the Treasury of the Company as
follows:
a. Any employee authorized by the treasurer of the Company may
draw such sight drafts in amounts not exceeding $10,000
payable to any one person in exchange for release of the
Company from claims for personal injury and/or property
damage.
b. Any employee or agent authorized by the treasurer of the
Company may draw such sight drafts in amounts not exceeding
$7,500 payable to any one person or in any transaction for
right-of-way easements, reimbursements for damages to land,
payments to bind agreements for purchases of real estate and
payments of document recording fees.
8. All bonds and notes issued under an indenture or mortgage shall
be executed on behalf of the Company by the manual or facsimile
signature of its Chief Executive Officer, President or a Vice
President and its Secretary or an Assistant Secretary, unless
otherwise provided by resolution of the Board of Directors.
Section 3 - Special Withdrawals - The President, any Vice President,
the Treasurer, or any Assistant Treasurer of the Company, or any person
authorized in writing by any of the foregoing Officers, is authorized to
direct any depository:
1. to charge amounts directly to the account of the Company without
the issuance of a check or draft of the Company, for the purpose
of paying principal of and interest on bonds and notes issued by
the Company, and
2. to accept and process data submitted via electronic means or by
wire transfer for purposes of receipt or disbursement of funds;
provided that such direction is in writing and describes the type of such
transactions permitted to be made by such depository.
ARTICLE VIII
Miscellaneous
Section 1 - All dividends shall be declared by a vote of the Board of
Directors.
Section 2 - The fiscal year of the Company shall close at the end of
December of each calendar year.
Section 3 - All or any shares of stock of any corporation owned by
this Company may be voted at any meeting of the shareowners of such
corporation by the Chief Executive Officer of this Company or such other
person as may be designated by the Chief Executive Officer for that
purpose, upon any question that may be presented at such meeting, and the
Chief Executive Officer or such other person may, on behalf of the
Company, waive any notice of the calling of such meeting required by any
statute or by-law and consent to the holding of any such meeting without
notice. The Chief Executive Officer or such other person as may be
designated by the Board of Directors to vote stock owned by this Company
shall have authority to give to any person a written proxy, in the name of
this Company and under its corporate seal, to vote at any meeting of the
shareowners of any corporation all or any shares of stock of such
corporation owned by this Company, upon any question that may be presented
at such meeting, with full power to waive any notice of the calling of
such meeting required by any statute or by-law and to consent to the
holding of any such meeting without notice.
ARTICLE IX
Amendment or Repeal of Bylaws
These bylaws may be altered, amended or repealed by the Board of
Directors at any regular or special meeting of the Board, or at any Annual
Meeting or Special Meeting of Shareowners by the affirmative vote of
owners of shares of outstanding voting stock of the Company having in the
aggregate a number of votes at least equal to a majority of the aggregate
number of votes possessed by all such owners (provided it shall have been
stated in the notice calling any such Special Meeting of Shareowners that
it is proposed at such meeting to alter, amend or rescind the bylaws), or
in such other manner as may be provided by law or in the Restated Articles
of Organization.
ARTICLE X
Indemnification and Liability of
Corporate Directors and Officers
Section 1 - Definitions Applicable to Article X - In this
Article X:
1. "Corporation" means Wisconsin Power and Light Company.
2. "Director or Officer" means any of the following:
a. A natural person who is or was a Director or Officer of the
Corporation.
b. A natural person who, while a Director or Officer of the
Corporation, is or was serving at the Corporation's request
as a Director, Officer, partner, trustee, member of any
governing or decision-making committee, employee or agent of
another corporation or foreign corporation, partnership,
joint venture, trust or other enterprise.
c. A natural person who, while a Director or Officer of the
Corporation, is or was serving an employee benefit plan
because his or her duties to the Corporation also impose
duties on, or otherwise involve services by, the person to
the plan or to participants in or beneficiaries of the plan.
d. Unless the context requires otherwise, the estate or personal
representative of a Director or Officer.
3. "Expenses" include fees, costs, charges, disbursements, attorney
fees and any other expenses incurred in connection with a
proceeding.
4. "Liability" includes the obligation to pay a judgment,
settlement, penalty, assessment, forfeiture or fine, including an
excise tax assessed with respect to an employee benefit plan, and
reasonable expenses.
5. "Party" includes a natural person who was or is, or who is
threatened to be made, a named defendant or respondent in a
proceeding.
6. "Proceeding" means any threatened, pending or completed civil,
criminal, administrative or investigative action, suit,
arbitration or other proceeding, whether formal or informal,
which involves foreign, federal, state or local law and which is
brought by or in the right of the Corporation or by any other
person.
Section 2 - Mandatory Indemnification -
1. The Corporation shall indemnify a Director or Officer, to the
extent he or she has been successful on the merits or
otherwise in the defense of a proceeding, for all reasonable
expenses incurred in the proceeding if the Director or
Officer was a party because he or she is a Director or
Officer of the Corporation.
2. a. In cases not included under sub. 1., the Corporation shall
indemnify a Director or Officer against liability incurred by
the Director or Officer in a proceeding to which the Director
or Officer was a party because he or she is a Director or
Officer of the Corporation, unless liability was incurred
because the Director or Officer breached or failed to perform
a duty he or she owes to the Corporation and the breach or
failure to perform constitutes any of the following:
1) A willful failure to deal fairly with the Corporation or
its shareholders in connection with a matter in which the
Director or Officer has a material conflict of interest.
2) A violation of criminal law, unless the Director or
Officer had reasonable cause to believe his or her
conduct was lawful or no reasonable cause to believe his
or her conduct was unlawful.
3) A transaction from which the Director or Officer derived
an improper personal profit.
4) Willful misconduct.
b. Determination of whether indemnification is required under
this subsection shall be made under Section 3.
c. The termination of a proceeding by judgment, order,
settlement or conviction, or upon a plea of no contest or an
equivalent plea, does not, by itself, create a presumption
that indemnification of the Director or Officer is not
required under this subsection.
3. A Director or Officer who seeks indemnification under this
section shall make a written request to the Corporation.
4. a. Indemnification under this Article X is not required to the
extent limited by the articles of incorporation under
Section 180.048, Wis. Stats.
b. Indemnification under this Article X is not required if the
Director or Officer has previously received indemnification
or allowance of expenses from any person, including the
Corporation, in connection with the same proceeding.
Section 3 - Determination of Right to Indemnification - Unless
otherwise provided by the articles of incorporation or bylaws or by
written agreement between the Director or Officer and the Corporation, the
Director or Officer seeks indemnification under Section 2, 2. shall select
one of the following means for determining his or her right to
indemnification:
1. By a majority vote of a quorum of the Board of Directors
consisting of Directors not at the time parties to the same or
related proceedings. If a quorum of disinterested Directors
cannot be obtained, by majority vote of a committee duly
appointed by the Board of Directors and consisting solely of 2 or
more Directors not at the time parties to the same or related
proceedings. Directors who are parties to the same or related
proceedings may participate in the designation of members of the
committee.
2. By independent legal counsel selected by a quorum of the Board of
Directors or its committee in the manner prescribed in 1., above,
if unable to obtain such a quorum or committee, by a majority
vote of the full Board of Directors, including Directors who are
parties to the same or related proceedings.
3. By a panel of three arbitrators consisting of one arbitrator
selected by those Directors entitled under 2., above, to select
independent legal counsel, one arbitrator selected by the
Director or Officer seeking indemnification and one arbitrator
selected by the two arbitrators previously selected.
4. By an affirmative vote of shares as provided in Section 180.28,
Wis. Stats., shares owned by, or voted under the control of,
persons who are at the time parties to the same or related
proceedings, whether as plaintiffs or defendants or in any other
capacity, may not be voted in making the determination.
5. By a court under Section 180.051, Wis. Stats., as created by 1987
Wisconsin Act 13.
6. By any other method provided for in any additional right to
indemnification permitted under Section 5, below.
Section 4 - Allowance of Expenses as Incurred - Upon written request
by a Director or Officer who is a party to a proceeding, the Corporation
may pay or reimburse his or her reasonable expenses as incurred if the
Director or Officer provides the Corporation with all of the following:
1. A written affirmation of his or her good faith belief that he or
she has not breached or failed to perform his or her duties to
the Corporation.
2. A written undertaking, executed personally or on his or her
behalf, to repay the allowance and/if required by the
Corporation, to pay reasonable interest on the allowance to the
extent that it is ultimately determined under Section 3, above,
that indemnification under Section 2, above, is not required and
that indemnification is not ordered by a court. The undertaking
under this subsection shall be an unlimited general obligation of
the Director or Officer and may be accepted without reference to
his or her ability to repay the allowance. The undertaking may
be secured or unsecured.
Section 5 - Additional Rights to Indemnification and Allowance of
Expenses
1. Except as provided in 2. below, Sections 2 and 4 above, do not
preclude any additional right to indemnification or allowance of
expenses that a Director or Officer may have under any of the
following:
a. The articles of incorporation or bylaws.
b. A written agreement between the Director or Officer and the
Corporation.
c. A resolution of the Board of Directors.
d. A resolution, after notice, adopted by a majority vote of all
the Corporation's voting shares then issued and outstanding.
2. Regardless of the existence of an additional right under
subsection 1., above, the Corporation may not indemnify a
Director or Officer, or permit a Director or Officer to retain
any allowance of expenses unless it is determined by or on behalf
of the Corporation that the Director or Officer did not breach or
fail to perform a duty he or she owes to the Corporation which
constitutes conduct under Section 2, 2. a. 1), 2), 3) or 4). A
Director or Officer who is a party to the same or related
proceeding for which indemnification or an allowance of expenses
is sought may not participate in a determination under this
subsection.
3. No provision of this Article X shall affect the Corporation's
power to pay or reimburse expenses incurred by a Director or
Officer in any of the following circumstances:
a. As a witness in a proceeding to which he or she is not a
party.
b. As a plaintiff or petitioner in a proceeding because he or
she is or was an employee, agent, Director or Officer of the
Corporation.
Section 6 - Insurance - The Corporation may purchase and maintain
insurance on behalf of an individual who is an employee, agent, Director
or Officer of the Corporation against liability asserted against or
incurred by the individual in his or her capacity as an employee, agent,
Director or Officer or arising from his or her status as an employee,
agent, Director or Officer, regardless of whether the Corporation is
required or authorized to indemnify or allow expenses to the individual
against the same liability under Sections 2, 3, 4 or 5 of this Article X.
Section 7 - Indemnification and Insurance Against Securities
Law Claims - Sections 1 through 6, inclusive, apply to the extent
applicable to any other proceeding, to any proceeding involving a federal
or state statute, rule or regulation regulating the offer, sale or
purchase of securities, securities brokers or dealers, or investment
companies or investment advisers.
Section 8 - Reliance by Directors or Officers -
1. Unless the Director or Officer has knowledge that makes reliance
unwarranted, a Director or Officer, in discharging his or her
duties to the Corporation, may rely on information, opinions,
reports or statements, any of which may be written or oral,
formal or informal, including financial statements and other
financial data, if prepared or presented by any of the following:
a. An Officer or employee of the Corporation whom the Director
or Officer believes in good faith to be reliable and
competent in the matters presented.
b. Legal counsel, public accountants or other persons as to
matters the Director or Officer believes in good faith are
within the person's professional or expert competence.
c. In the case of reliance by a Director, a committee of the
Board of Directors of which the Director is not a member if
the Director believes in good faith that the committee merits
confidence.
2. This section does not apply to a Director's reliance under
Section 180.40(3), Wis. Stats., as in effect on the date of
adoption hereof.
Section 9 - Consideration of Interests in Addition to Shareholders'
Interests - In discharging his or her duties to the Corporation and in
determining what he or she believes to be in the best interests of the
Corporation, a Director or Officer may, in addition to considering the
effects of any action on shareholders, consider the following:
1. The effects of the action on employees, suppliers and customers
of the Corporation.
2. The effects of the action on communities in which the Corporation
operates.
3. Any other factors the Director or Officer considers pertinent.
WPL HOLDINGS, INC.
WISCONSIN POWER AND LIGHT COMPANY
HEARTLAND DEVELOPMENT CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Adopted June 27, 1990
Amended January 17, 1995
<PAGE>
WPL HOLDINGS, INC.
WISCONSIN POWER AND LIGHT COMPANY
HEARTLAND DEVELOPMENT CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Section I - Definitions
The following definitions shall be applicable throughout the Deferred
Compensation Plan:
1.1 "Company" shall mean either WPL Holdings, Inc., Wisconsin Power and
Light Company, or Heartland Development Corporation.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Director Fees" shall mean any fees received during the Plan Year
for services rendered as a Director.
1.4 "Effective Date" shall mean June 27, 1990.
1.5 "Participant" shall mean any Director designated as eligible under
Section 3.1 who has elected, under the terms and conditions of the
Plan, to defer payments of all or allowable portions of Director
Fees.
1.6 "Participant Account" shall mean the participant's account
established pursuant to Section 4.1.
1.7 "Compensation and Personnel Committee" shall mean the Compensation
and Personnel Committee, or its equivalent, of the Board or its
designated appointee.
1.8 "Personal Representative" shall mean the person or persons who upon
the death, disability or incompetency of a Participant shall have
acquired, by will, by laws of decent and distribution or by other
legal proceedings, the right to the Participant's Account.
1.9 "Plan" shall mean this Deferred Compensation Plan.
1.10 "Plan Year" shall be the calendar year.
1.11 "Unforeseeable Emergency" means an unanticipated emergency that is
caused by an event beyond the control of the Participant or
beneficiary.
Section II - General
2.1 The purpose of this Deferred Compensation Plan is to provide
flexibility to members of the Company's Board of Directors, who are
not employees of the Company, in their receipt of Director Fees.
Section III - Eligibility and Selection of Participants
3.1 Participation in the Plan shall be limited to members of the Board
of Directors, except those Directors who are employees of the
Company.
Section IV - Election to Defer
4.1 An eligible Director may elect, under the terms and conditions of
the Plan, to defer all or an allowable portion specified under
Section 5.2 of Director Fees. Such election shall be made by
written notice in the manner specified by the Compensation and
Personnel Committee and shall be irrevocable when made except as
provided in Section 12.1.
4.2 Election to defer Director Fees shall be made prior to the first day
of each Plan Year.
4.3 In the first year in which a Participant becomes eligible to
participate in the Plan, the newly eligible Participant shall make
an election to defer compensation for services to be performed
subsequent to the election within 30 days after the date the
Participant becomes eligible.
Section V - Deferral Amount Selection
5.1 Participants of the Plan may elect to defer a percentage amount (if
any) of Director Fees.
5.2 If deferral is elected, any percentage deferral from 1% to 100%
shall be permitted.
Section VI - Intentionally Left Blank
Section VII - Manner and Timing of Distribution
7.1 Plan Participants may choose to receive payment of deferred amounts
and investment earnings by one of the alternative methods stated
hereunder:
(a) (i) one lump sum payment in any year between the current year
and the anticipated year of conclusion of membership on
the Board as specified by the Participant.
(ii) annual installments (not to exceed 10), the first of
which shall be paid commencing in the year so specified
by the Participant.
(b) Upon the anticipated conclusion of membership on the Board (or
one tax year thereafter) in either:
(i) one lump sum payment in the year so specified by the
Participant.
(ii) annual installments (not to exceed 10), the first of
which shall be paid commencing in the year so specified
by the Participant.
7.2 Plan Participants electing to receive payments of deferred amounts
and investment earnings in the manner specified in
paragraph 7.1(a)(i) and (ii) will receive the lump sum payment or
installment payment on the fourth Friday in January in the calendar
year so designated by the Participant.
7.3 Plan participants electing to receive payments of deferred amounts
and investment earnings in the manner specified in paragraph 7.1(b)
(i) and (ii) will receive payments as follows:
(a) One lump sum payment shall be paid either the fourth Friday
following the date of conclusion of membership on the Board or
on the fourth Friday of January following the year of
conclusion of membership on the Board as specified by the
Participant.
(b) Annual installments, the first of which shall be paid either on
the fourth Friday following the date of conclusion of
membership on the Board or the fourth Friday of January
following the year of conclusion of membership on the Board as
specified by the Participant. Installment payments for
subsequent years will be made on the fourth Friday in January
until all such installments have been paid.
7.4 Notwithstanding the provisions outlined in 7.1 - 7.3 above,
Participants who die or are involuntarily terminated as a member of
the Board shall receive a distribution equal to the value of their
account in a lump sum payment. Such distributions shall be made on
the fourth Friday of the month following the month in which the
Participant ceases to be a member of the Board.
Section VIII - Interest Credit to Participant Accounts
8.1 All deferred amounts credited to a Participant's Account shall be
credited interest on December 31 at a rate equivalent to the
A-Utility Bond yield (as reported in the Federal Reserve statistical
release H.15) using the average of the rates reported for the last
Friday of each month for the preceding twelve (12) calendar months.
Interest shall continue to be credited and compounded in this manner
until the final payment shall have been made from the Participant's
Account.
Partial year interest accruals for Participants who because of
financial hardship, termination or death during the Plan Year will
also be computed at a rate equivalent to the A-Utility Bond yield
(in the manner prescribed above) using the average rates from the
January 1 preceding the Participant's termination date through the
fourth Friday of the month preceding the Participant's termination
date. Interest payments will apply to amounts deferred up to the
date the plan distribution is made.
8.2 The interest credit rate determined in Section 8.1 will be applied
to the average Participant Account balance for that period.
Section IX - Rights of Participants and Forfeiture
9.1 Nothing contained in the Plan shall
(a) confer upon any Director the right to continue on the Board of
Directors, or
(b) require the Company to pay any Director Fees, except as
provided for herein, or
(c) confer upon any Director or other person any claim or right to
any distribution under the Plan except in accordance with its
terms.
9.2 No right or interest of any Participant in the Plan shall, prior to
actual payment or distribution to such Participant, be assignable or
transferable in whole or in part, either voluntarily or by operation
of law or otherwise, or be subject to payment of debts of any
Participant by execution, levy, garnishment, attachment, pledge,
bankruptcy of in any other manner.
9.3 If a Participant has elected to defer pursuant to Section 4.1 and
his or her services as a member of the Board are terminated
voluntarily or involuntarily, the Participant shall retain all
rights to the undistributed amounts credited to his or her
Participant Account.
9.4 The deferral amount and investment earnings of the plan is and shall
remain at all times subject to the claims of the general creditors
of the Company. As such, the Plan Participants have the status of
general unsecured creditors of the Company and this Plan constitutes
a mere promise by the Company to make benefit payments to
Participants in the future.
9.5 It is the intention of all parties involved that the arrangements be
unfunded for tax purposes and for purposes of title I of ERISA.
Section X - Death of Participant
10.1 Should a Participant die, the amount of such Participant's Account
shall be distributed to the Participant's Personal Representative.
Such distributions shall be made in a lump sum pursuant to
Sections 7.4, 8.1 and 8.2.
Section XI - Distribution in the Event of Financial Hardship
11.1 The Compensation and Personnel Committee may allow a partial or
total distribution of amounts in a Participant's Account upon the
Participant's request and a demonstration by the Participant of
financial hardship as a result of an Unforeseeable Emergency. The
amount of any such distribution shall be limited to the amount
deemed necessary by the Compensation and Personnel Committee to
alleviate or remedy the Participant's hardship. Such distributions
shall be made in a lump sum pursuant to Sections 8.1 and 8.2 on the
fourth Friday of the month following the month of committee
approval.
Section XII - Stopping Deferral
12.1 The Compensation and Personnel Committee may allow a Participant to
cease deferrals during the plan year on the Board meeting date
following the committee approval in response to an Unforeseeable
Emergency.
Section XIII - Distribution in the Event of Significant Change in Tax Law
13.1 Under the terms of the Deferred Compensation Plan for Directors, the
Compensation and Personnel Committee may allow payments to a
Participant before any payments would otherwise be due if the
Compensation and Personnel Committee determines, based on changes
in the Federal tax or revenue laws, a published ruling or similar
announcement issued by the Internal Revenue Service, a regulation
issued by the Secretary of the Treasury, a decision by a court of
competent jurisdiction involving a Participant or a beneficiary, or
a closing agreement made under section 7121 of the Internal Revenue
Code which has been approved by the Internal Revenue Service and
involves a Participant, that a Participant has or will recognize
income for Federal income tax purposes with respect to amounts that
are or will be payable under the Plan before such amounts are to be
paid.
Section XIV - Administration
14.1 The Compensation and Personnel Committee may from time to time
amend, suspend, terminate or reinstate any or all of the provisions
of the Plan as may seem necessary or advisable for the
administration of the Plan.
14.2 The Compensation and Personnel Committee shall, subject to express
provisions of the Plan, have power to construe the Plan, to
prescribe rules and regulations relating to the Plan and to make all
other determinations necessary or advisable for the administration
of the Plan. The Compensation and Personnel Committee may correct
any defect or supply any omission or reconcile any inconsistency in
the Plan in the manner and to the extent it shall deem expedient to
carry it into effect.
14.3 Manner of Election - The Compensation and Personnel Committee shall
ensure that all individuals entitled to make the election to defer
are provided an election form at least thirty (30) days before such
election must be made in accordance with Section 4.1 and received in
writing in order to be effective. This election form shall include
the following items, which must be completed in full in order to be
effective:
(a) The amount to be deferred, expressed as a percentage of
Director Fees to become payable during the calendar year in
question;
(b) The number of installments for the payment of the deferred
compensation; and
(c) The date of the first installment payment.
14.4 All expenses and costs incurred in connection with the
administration and operation of the Plan shall be borne by the
Company.
Section XV - Funding
15.1 Benefits under this Plan shall be paid from the general assets of
the Company. This Plan shall be administered as an unfunded plan
which is not intended to meet the qualification requirements of
Section 401 of the Internal Revenue Code.
<PAGE>
WPL HOLDINGS, INC.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
ELECTION OF DEFERMENT
In accordance with the provisions of the Deferred Compensation Plan, I
hereby elect to defer Director Fees earned by me for my services from
January 1, 19__ to December 31, 19__ as follows:
AMOUNT OF DEFERRAL
Amount of Deferral: _________________% (Percentage of Director Fees)
PAYMENT OPTIONS (Specify One)
(a) Payment in _____ (any year subsequent to the current year) according
to:
(i) lump sum payment
(ii) ____ annual installments (not to exceed 10)
(b) Upon the anticipated conclusion of my membership on the Board of
Directors (or one tax year thereafter) according to:
(i) lump sum payment in the year of anticipated conclusion of my
membership on the Board of Directors _____, or one tax year
thereafter_____ (check one).
(ii) ______ annual installments (not to exceed 10) the first of
which shall be paid commencing in the year of anticipated
conclusion of my membership on the Board of Directors ____, or
one tax year thereafter _____ (check one).
I hereby agree to be bound by the terms of the Plan, including any
amendment thereof, and recognize that the foregoing election is
irrevocable and may not be altered by me.
___________________________________
Signature of Director Date
Received on behalf of WPL Holdings, Inc.
By: _________________________________
Date: ______________________
Return to Corporate Secretary by December 31.
EXHIBIT 21
WISCONSIN POWER AND LIGHT AND SUBSIDIARIES
The material subsidiaries of WPL as of December 31, 1994, are as follows:
% of Voting
Stock Owned
Directly or
State of Indirectly by
Name of Subsidiary Incorp. WPL
1. South Beloit Water, Gas and
Electric Company Illinois 100%
2. REAC, Inc Wisconsin 100%
3. NUFUS Resources, Inc Wisconsin 100%
4. Wisconsin River Power Company Wisconsin 33-1/3%
5. Wisconsin Valley Improvement
Company Wisconsin 13%
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS CONTAINED IN THE FORM 10-K FILED BY WISCONSIN POWER AND LIGHT COMPANY
FOR THE YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,266,255
<OTHER-PROPERTY-AND-INVEST> 21,361
<TOTAL-CURRENT-ASSETS> 90,867
<TOTAL-DEFERRED-CHARGES> 206,641
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,585,124
<COMMON> 66,183
<CAPITAL-SURPLUS-PAID-IN> 199,170
<RETAINED-EARNINGS> 279,153
<TOTAL-COMMON-STOCKHOLDERS-EQ> 544,506
0
59,963
<LONG-TERM-DEBT-NET> 336,538
<SHORT-TERM-NOTES> 56,975
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 50,500
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 536,642
<TOT-CAPITALIZATION-AND-LIAB> 1,585,124
<GROSS-OPERATING-REVENUE> 673,455
<INCOME-TAX-EXPENSE> 44,727
<OTHER-OPERATING-EXPENSES> 148,361
<TOTAL-OPERATING-EXPENSES> 579,068
<OPERATING-INCOME-LOSS> 94,387
<OTHER-INCOME-NET> 7,226
<INCOME-BEFORE-INTEREST-EXPEN> 101,613
<TOTAL-INTEREST-EXPENSE> 30,119
<NET-INCOME> 71,494
3,310
<EARNINGS-AVAILABLE-FOR-COMM> 68,184
<COMMON-STOCK-DIVIDENDS> 55,911
<TOTAL-INTEREST-ON-BONDS> 30,156
<CASH-FLOW-OPERATIONS> 186,757
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>Earnings per share of common stock is not reflected because all of such shares
are held by WPL Holdings, Inc.
</FN>
</TABLE>
