<PAGE>
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--- ---
<TABLE>
<CAPTION>
COMMISSION
FILE REGISTRANT; STATE OF INCORPORATION; IRS EMPLOYER
NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
---------- ----------------------------------- ------------------
<C> <S> <C>
1-11375 UNICOM CORPORATION 36-3961038
(an Illinois corporation)
37th Floor, 10 South Dearborn Street
Post Office Box A-3005
Chicago, Illinois 60690-3005
312/394-7399
1-1839 COMMONWEALTH EDISON COMPANY 36-0938600
(an Illinois corporation)
37th Floor, 10 South Dearborn Street
Post Office Box 767
Chicago, Illinois 60690-0767
312/394-4321
</TABLE>
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes No X *
---- ---
Common Stock outstanding at October 31, 1994:
Unicom Corporation-- 214,189,572 shares
Commonwealth Edison Company-- 214,189,606 shares
*Unicom Corporation was formed in connection with the restructuring of
Commonwealth Edison Company into a holding company structure. Unicom
Corporation became subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, on August 30, 1994, when its Registration
Statement on Form 8-B was declared effective by the Securities and Exchange
Commission.
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<PAGE>
UNICOM CORPORATION
AND
COMMONWEALTH EDISON COMPANY
QUARTERLY REPORTS ON FORM 10-Q
TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994
This combined Form 10-Q is separately filed by Unicom Corporation and
Commonwealth Edison Company. Information contained herein relating to each
individual registrant is filed by such registrant on its own behalf.
Accordingly, except for its subsidiaries, Commonwealth Edison Company makes no
representation as to information relating to any other companies affiliated
with Unicom Corporation.
INDEX
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Definitions.............................................................. 3
PART I. FINANCIAL INFORMATION
Unicom Corporation and Subsidiary Companies:
Financial Statements--
Report of Independent Public Accountants............................. 4
Statements of Consolidated Income for the three months, nine months
and twelve months ended September 30, 1993 and 1994................. 5
Consolidated Balance Sheets--December 31, 1993 and September 30,
1994................................................................ 6-7
Statements of Consolidated Capitalization--December 31, 1993 and Sep-
tember 30, 1994..................................................... 8
Statements of Consolidated Retained Earnings for the three months,
nine months and twelve months ended September 30, 1993 and 1994..... 9
Statements of Consolidated Cash Flows for the three months, nine
months and twelve months ended September 30, 1993 and 1994.......... 10
Notes to Financial Statements........................................ 11-31
Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 32-43
Commonwealth Edison Company and Subsidiary Companies:
Financial Statements--
Report of Independent Public Accountants............................. 44
Statements of Consolidated Income for the three months, nine months
and twelve months ended September 30, 1993 and 1994................. 45
Consolidated Balance Sheets--December 31, 1993 and September 30,
1994................................................................ 46-47
Statements of Consolidated Capitalization--December 31, 1993 and Sep-
tember 30, 1994..................................................... 48
Statements of Consolidated Retained Earnings for the three months,
nine months and twelve months ended September 30, 1993 and 1994..... 49
Statements of Consolidated Premium on Common Stock and Other Paid-In
Capital for the three months, nine months and twelve months ended
September 30, 1993 and 1994......................................... 49
Statements of Consolidated Cash Flows for the three months, nine
months and twelve months ended September 30, 1993 and 1994.......... 50
Notes to Financial Statements........................................ 51-55
Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 56
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 57-62
Item 6. Exhibits and Reports on Form 8-K............................... 63
SIGNATURES............................................................... 64
</TABLE>
2
<PAGE>
DEFINITIONS
The following terms in the text of this report are defined as indicated:
<TABLE>
<CAPTION>
TERM MEANING
----------------------- ------------------------------------------------------
<C> <S>
AFUDC Allowance for funds used during construction
AMT Alternative minimum tax
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended
CFC Chlorofluorocarbon
Circuit Court Circuit Court of Cook County, Illinois
Clean Air Amendments Clean Air Act Amendments of 1990
ComEd Commonwealth Edison Company, which is a majority-owned
subsidiary of Unicom.
Congress U.S. Congress
Cotter Cotter Corporation, which is a wholly-owned subsidiary
of ComEd.
DOE U.S. Department of Energy
EMFs Electric and magnetic fields
FERC Federal Energy Regulatory Commission
Fuel Matters Settlement A settlement relating to the ICC fuel reconciliation
proceedings involving ComEd for the period from 1985
through 1988 and to future challenges by the settling
parties to the prudency of ComEd's western coal costs
for the period from 1989 through 1992.
ICC Illinois Commerce Commission
Illinois EPA Illinois Environmental Protection Agency
Indiana Company Commonwealth Edison Company of Indiana, Inc., which is
a wholly-owned subsidiary of ComEd.
IPCB Illinois Pollution Control Board
MGP Manufactured gas plant
NEIL Nuclear Electric Insurance Limited
NML Nuclear Mutual Limited
NPDES National Pollutant Discharge Elimination System
NPL National Priorities List
NRC Nuclear Regulatory Commission
PCBs Polychlorinated biphenyls
PRPs Potentially responsible parties under CERCLA
Rate Matters Settlement A settlement concerning the proceedings relating to
ComEd's 1985 and 1991 ICC rate orders (which orders
relate to, among other things, the recovery of costs
associated with ComEd's four most recently completed
nuclear generating units), the proceedings relating
to the reduction in the difference between ComEd's
summer and non-summer residential rates that was
effected in the summer of 1988, outstanding issues
relating to the appropriate interest rate and rate
design to be applied to a refund made by ComEd during
1990 relating to a December 1988 ICC rate order, and
matters related to a rider to ComEd's rates that it
was required to file as a result of the change in the
federal corporate tax rate made by the Tax Reform Act
of 1986.
Remand Order ICC rate order issued on January 6, 1993, as
subsequently modified
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
Unicom Unicom Corporation
Unicom Enterprises Unicom Enterprises Inc., which is a wholly-owned
subsidiary of Unicom.
Unicom Thermal Unicom Thermal Technologies Inc., which is a wholly-
owned subsidiary of Unicom Enterprises.
Units ComEd's nuclear generating units known as Byron Unit 2
and Braidwood Units 1 and 2
U.S. EPA U.S. Environmental Protection Agency
Westinghouse Westinghouse Electric Corporation
</TABLE>
3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Unicom Corporation:
We have audited the accompanying consolidated balance sheets and statements
of consolidated capitalization of Unicom Corporation (an Illinois corporation)
and subsidiary companies as of December 31, 1993 and September 30, 1994, and
the related statements of consolidated income, retained earnings and cash flows
for the three-month, nine-month and twelve-month periods ended September 30,
1993 and 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 Unicom Corporation and
subsidiary companies as of December 31, 1993 and September 30, 1994, and the
results of their operations and their cash flows for the three-month, nine-
month and twelve-month periods ended September 30, 1993 and 1994, in conformity
with generally accepted accounting principles.
As discussed in Notes 13 and 14, effective January 1, 1993, the Company
changed its method of accounting for postretirement health care benefits and
income taxes, respectively.
Arthur Andersen LLP
Chicago, Illinois
November 8, 1994
4
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (NOTE 1)
The following Statements of Consolidated Income for the three months, nine
months and twelve months ended September 30, 1993 and 1994 reflect the results
of past operations and are not intended as any representation as to results of
operations for any future period. Future operations will necessarily be
affected by various and diverse factors and developments, including changes in
electric rates, population, business activity, taxes, environmental control,
energy use, fuel supply, cost of labor, fuel and purchased power and other
matters, the nature and effect of which cannot now be determined.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
---------------------- ---------------------- ----------------------
1993 1994 1993 1994 1993 1994
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues
(Notes 2 and 3):
Operating revenues..... $1,979,738 $1,857,863 $5,036,916 $4,825,753 $6,500,070 $6,336,042
Provisions for revenue
refunds............... (107,290) (2,587) (250,536) (13,561) (250,555) (1,049,790)
---------- ---------- ---------- ---------- ---------- ----------
$1,872,448 $1,855,276 $4,786,380 $4,812,192 $6,249,515 $5,286,252
---------- ---------- ---------- ---------- ---------- ----------
Operating Expenses and
Taxes:
Fuel (Notes 1, 2, 10
and 19)............... $ 324,606 $ 288,990 $ 869,465 $ 814,974 $1,097,033 $1,116,444
Purchased power........ 859 11,633 8,757 56,466 18,920 60,011
Deferred
(under)/overrecovered
energy costs--net
(Note 1).............. (6,633) 9,508 (9,585) (11,451) (31,831) (3,624)
Operation.............. 360,267 359,333 1,066,011 1,152,358 1,449,923 1,544,034
Maintenance............ 128,372 122,481 429,239 458,125 594,879 610,600
Depreciation (Note 1).. 215,428 221,966 645,557 665,835 854,782 883,046
Recovery of regulatory
assets................ 765 3,818 2,296 11,635 3,128 14,574
Taxes (except income)
(Note 15)............. 201,327 210,892 573,984 599,251 760,368 727,180
Income taxes (Notes 1
and 14)--
Current--Federal..... 114,301 81,337 190,242 137,804 198,164 (72,366)
--State.............. 35,477 (846) 48,422 979 42,630 (55,067)
Deferred--Federal--
net................. 47,202 78,466 39,531 63,414 68,927 111,935
--State--net......... 1,538 36,010 10,073 47,634 26,859 72,314
Investment tax credits
deferred--net (Notes
1 and 14)............. (7,288) (7,195) (21,902) (21,620) (29,079) (29,142)
---------- ---------- ---------- ---------- ---------- ----------
$1,416,221 $1,416,393 $3,852,090 $3,975,404 $5,054,703 $4,979,939
---------- ---------- ---------- ---------- ---------- ----------
Operating Income........ $ 456,227 $ 438,883 $ 934,290 $ 836,788 $1,194,812 $ 306,313
---------- ---------- ---------- ---------- ---------- ----------
Other Income and
(Deductions):
Interest on long-term
debt.................. $ (160,909) $ (154,420) $ (495,070) $ (467,413) $ (661,253) $ (623,525)
Interest on notes
payable............... (85) (226) (247) (415) (328) (502)
Allowance for funds
used during
construction (Note
1)--
Borrowed funds....... 5,277 4,336 11,723 14,831 16,177 20,038
Equity funds......... 6,454 5,215 14,070 17,641 18,984 24,189
Income taxes
applicable to
nonoperating
activities (Notes 1
and 14)............... 11,959 3,050 18,124 23,620 17,904 35,409
Income tax reduction
for disallowed plant
costs................. 792 -- 792 -- 792 --
Deferred carrying
charges (Note 2)...... -- -- -- -- -- 438,183
Interest and other
costs for 1993
Settlements (Note 2).. -- (3,368) -- (21,261) -- (119,935)
Provision for
dividends on
preferred and
preference stocks of
Commonwealth Edison
Company............... (16,565) (16,966) (50,245) (47,994) (67,214) (63,801)
Miscellaneous--net..... (32,592) (12,843) (53,991) (79,455) (52,359) (82,823)
---------- ---------- ---------- ---------- ---------- ----------
$ (185,669) $ (175,222) $ (554,844) $ (560,446) $ (727,297) $ (372,767)
---------- ---------- ---------- ---------- ---------- ----------
Net Income (Loss) Before
Cumulative Effect of
Change in Accounting
for Income Taxes....... $ 270,558 $ 263,661 $ 379,446 $ 276,342 $ 467,515 $ (66,454)
Cumulative Effect of
Change in Accounting
for Income Taxes....... -- -- 9,738 -- 9,738 --
---------- ---------- ---------- ---------- ---------- ----------
Net Income (Loss)....... $ 270,558 $ 263,661 $ 389,184 $ 276,342 $ 477,253 $ (66,454)
========== ========== ========== ========== ========== ==========
Average Number of Common
Shares Outstanding..... 213,550 214,138 213,451 213,947 213,381 213,880
Earnings (Loss) per
Common Share Before
Cumulative Effect of
Change in Accounting
for Income Taxes....... $1.27 $1.23 $1.77 $1.29 $2.19 $(0.31)
Cumulative Effect of
Change in Accounting
for Income Taxes....... -- -- 0.05 -- 0.05 --
----- ----- ----- ----- ----- ------
Earnings (Loss) per
Common Share........... $1.27 $1.23 $1.82 $1.29 $2.24 $(0.31)
===== ===== ===== ===== ===== ======
Cash Dividends Declared
per Common Share....... $0.40 $0.40 $1.20 $1.20 $1.60 $ 1.60
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
5
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (NOTE 1)
<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30,
ASSETS 1993 1994
------ ------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Utility Plant (Notes 1, 3, 8, 16 and 18):
Plant and equipment, at original cost (includes
construction work in progress of $1,040 million
and $1,031 million, respectively)................. $25,581,003 $26,100,927
Less--Accumulated provision for depreciation....... 8,790,519 9,431,837
----------- -----------
$16,790,484 $16,669,090
Nuclear fuel, at amortized cost.................... 662,562 660,719
----------- -----------
$17,453,046 $17,329,809
----------- -----------
Investments and Other Property:
Nuclear decommissioning funds (Notes 1 and 11)..... $ 706,841 $ 855,350
Subsidiary companies (Notes 1 and 17).............. 122,332 117,564
Other, at cost (Note 17)........................... 72,379 29,648
----------- -----------
$ 901,552 $ 1,002,562
----------- -----------
Current Assets:
Cash............................................... $ 743 $ 3,934
Temporary cash investments (Note 11)............... 247,119 126,965
Other cash investments (Note 11)................... 641,575 13,188
Special deposits (Note 11)......................... 32,635 16,850
Receivables (Note 1)--
Customers........................................ 427,613 454,331
Taxes............................................ 186,687 51,724
Other............................................ 66,963 33,416
Provisions for uncollectible accounts............ (10,910) (11,006)
Coal and fuel oil, at average cost................. 111,752 104,791
Materials and supplies, at average cost............ 402,714 393,920
Deferred unrecovered energy costs (Note 1)......... 43,885 61,568
Deferred income taxes related to current assets and
liabilities (Note 14)--
Loss carryforward................................ 175,197 27,577
Other............................................ 166,102 112,941
Prepayments and other.............................. 42,190 32,978
----------- -----------
$ 2,534,265 $ 1,423,177
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets (Notes 1 and 14)................. $ 2,698,751 $ 2,628,135
Unrecovered energy costs (Note 1).................. 680,243 650,677
Other (Note 19).................................... 111,941 103,858
----------- -----------
$ 3,490,935 $ 3,382,670
----------- -----------
$24,379,798 $23,138,218
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
6
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (NOTE 1)
<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30,
CAPITALIZATION AND LIABILITIES 1993 1994
------------------------------ ------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity................................. $ 5,421,893 $ 5,451,872
Preferred and preference stocks of Commonwealth
Edison Company--
Without mandatory redemption requirements......... 441,445 508,220
Subject to mandatory redemption requirements...... 309,964 295,734
Long-term debt of subsidiary companies.............. 7,550,762 7,312,425
----------- -----------
$13,724,064 $13,568,251
----------- -----------
Current Liabilities:
Notes payable--bank loans (Note 9).................. $ 5,950 $ 7,150
Current portion of long-term debt, redeemable pref-
erence stock and capitalized lease obligations of
subsidiary companies (Note 11)..................... 630,260 737,955
Accounts payable.................................... 444,080 326,232
Accrued interest.................................... 186,825 158,800
Accrued taxes....................................... 132,362 133,268
Dividends payable................................... 101,047 102,657
Estimated revenue refunds and related interest (Note
2)................................................. 1,166,308 118,177
Customer deposits................................... 45,757 44,692
Other............................................... 143,519 84,151
----------- -----------
$ 2,856,108 $ 1,713,082
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes (Note 14)..................... $ 4,445,173 $ 4,313,609
Accumulated deferred investment tax credits (Notes 1
and 14)............................................ 746,508 724,889
Accrued spent nuclear fuel disposal fee and related
interest (Note 10)................................. 566,527 582,531
Obligations under capital leases of subsidiary com-
panies (Note 16)................................... 323,175 370,012
Regulatory liabilities (Notes 1, 14 and 19)......... 782,624 758,983
Other (Notes 1, 12 and 13).......................... 935,619 1,106,861
----------- -----------
$ 7,799,626 $ 7,856,885
----------- -----------
Commitments and Contingent Liabilities (Note 19)
$24,379,798 $23,138,218
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
7
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION (NOTE 1)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1993 1994
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Stock Equity (Notes 4 and 5):
Common stock, without par value--
Outstanding--213,751,147 shares and 214,185,572
shares, respectively............................ $ 4,876,535 $ 4,887,792
Preference stock expense of Commonwealth Edison
Company.......................................... (3,794) (4,030)
Retained earnings................................. 549,152 568,110
----------- -----------
$ 5,421,893 $ 5,451,872
----------- -----------
Preferred and Preference Stocks of Commonwealth
Edison Company--
Without Mandatory Redemption Requirements (Notes
4, 6 and 11):
Preference stock, cumulative, without par
value--
Outstanding--10,499,549 shares and 13,499,549
shares, respectively.......................... $ 432,320 $ 504,957
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--286,949 shares and 102,615 shares,
respectively.................................. 9,125 3,263
Prior preferred stock, cumulative, $100 par
value per share--
No shares outstanding.......................... -- --
----------- -----------
$ 441,445 $ 508,220
----------- -----------
Subject to Mandatory Redemption Requirements
(Notes 4, 7 and 11):
Preference stock, cumulative, without par
value--
Outstanding--3,290,290 shares and 3,148,920
shares, respectively.......................... $ 327,653 $ 313,535
Current redemption requirements for preference
stock included in current liabilities.......... (17,689) (17,801)
----------- -----------
$ 309,964 $ 295,734
----------- -----------
Long-Term Debt of Subsidiary Companies (Notes 8, 11
and 20):
First mortgage bonds:
Maturing through 1998--
6 1/8% due May 15, 1995....................... $ 103,000 $ 103,000
5 1/4% due April 1, 1996...................... 50,000 50,000
5 3/4% due November 1, 1996................... 50,000 50,000
5 3/4% due December 1, 1996................... 50,000 50,000
7% due February 1, 1997....................... 150,000 150,000
5 3/8% due April 1, 1997...................... 50,000 50,000
6 1/4% due October 1, 1997.................... 60,000 60,000
6 1/4% due February 1, 1998................... 50,000 50,000
6% due March 15, 1998......................... 130,000 130,000
6 3/4% due July 1, 1998....................... 50,000 50,000
6 3/8% due October 1, 1998.................... 75,000 75,000
Maturing 1999 through 2008--5.30% to 10 3/8%.... 2,204,600 2,230,500
Maturing 2009 through 2018--5.70% to 10 5/8%.... 956,000 996,000
Maturing 2019 through 2023--7 3/4% to 9 7/8%.... 2,020,000 2,020,000
----------- -----------
$ 5,998,600 $ 6,064,500
Sinking fund debentures, due 1999 through 2011--
2 3/4% to 7 5/8%................................. 120,185 112,643
Pollution control obligations, due 2004 through
2014--5 7/8% to 11 3/8%.......................... 353,200 287,200
Other long-term debt.............................. 1,598,625 1,470,536
Current maturities of long-term debt included in
current liabilities.............................. (446,724) (553,207)
Unamortized net debt discount and premium (Note
1)............................................... (73,124) (69,247)
----------- -----------
$ 7,550,762 $ 7,312,425
----------- -----------
$13,724,064 $13,568,251
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
8
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS (NOTE 1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
------------------- ------------------- -------------------
1993 1994 1993 1994 1993 1994
---------- -------- ---------- -------- ---------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period................ $ 793,449 $390,691 $ 847,186 $549,152 $ 844,737 $977,682
Add--Net income (loss). 270,558 263,661 389,184 276,342 477,253 (66,454)
---------- -------- ---------- -------- ---------- --------
$1,064,007 $654,352 $1,236,370 $825,494 $1,321,990 $911,228
---------- -------- ---------- -------- ---------- --------
Deduct--
Cash dividends
declared on common
stock.............. $ 85,429 $ 85,675 $ 256,182 $256,822 $ 341,505 $342,322
Loss on reacquired
preference stock of
Commonwealth Edison
Company and other.. 896 567 2,506 562 2,803 796
---------- -------- ---------- -------- ---------- --------
$ 86,325 $ 86,242 $ 258,688 $257,384 $ 344,308 $343,118
---------- -------- ---------- -------- ---------- --------
Balance at End of
Period................ $ 977,682 $568,110 $ 977,682 $568,110 $ 977,682 $568,110
========== ======== ========== ======== ========== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
9
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (NOTE 1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
-------------------- ---------------------- ------------------------
1993 1994 1993 1994 1993 1994
--------- --------- ---------- ---------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Cash Flow from Operating
Activities:
Net income (loss)...... $ 270,558 $ 263,661 $ 389,184 $ 276,342 $ 477,253 $ (66,454)
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization........ 229,914 234,127 681,564 697,809 902,700 927,380
Deferred income taxes
and investment tax
credits--net........ 30,984 109,556 13,716 72,662 53,977 143,270
Cumulative effect of
change in accounting
for income taxes.... -- -- (9,738) -- (9,738) --
Equity component of
allowance for funds
used during
construction........ (6,454) (5,215) (14,070) (17,641) (18,984) (24,189)
Provisions for
revenue refunds and
related interest.... 107,290 5,988 250,879 34,978 252,429 1,138,295
Revenue refunds and
related interest.... 12 (409,541) (3,617) (1,083,109) (156,091) (1,270,214)
Recovery/(deferral)
of regulatory
assets/deferred
carrying charges--
net................. 765 3,818 2,296 11,635 3,128 (423,609)
Provisions/(payments)
for liability for
early retirement and
separation costs--
net................. (44) 1,425 (1,998) 32,962 (14,184) 33,143
Net effect on cash
flows of changes in:
Receivables........ (82,895) (46,726) (179,580) 141,888 (138,716) 164,063
Coal and fuel oil.. 72,084 26,236 167,250 6,961 167,472 55,093
Materials and
supplies.......... 7,508 8,618 (4,571) 8,794 (1,318) 15,199
Accounts payable
adjusted for
nuclear fuel lease
principal payments
and early
retirement and
separation costs--
net............... 40,669 19,996 66,169 35,196 227,219 247,972
Accrued interest
and taxes......... 74,425 (68,963) 51,175 (27,119) 37,491 (117,528)
Other changes in
certain current
assets and
liabilities....... (2,220) (15,756) (6,875) (50,531) (24,258) (50,293)
Other--net........... 46,779 64,124 143,855 198,270 94,043 163,951
--------- --------- ---------- ---------- ----------- -----------
$ 789,375 $ 191,348 $1,545,639 $ 339,097 $ 1,852,423 $ 936,079
--------- --------- ---------- ---------- ----------- -----------
Cash Flow from Investing
Activities:
Construction
expenditures.......... $(198,613) $(179,348) $ (581,100) $ (562,934) $ (876,230) $ (824,425)
Nuclear fuel
expenditures.......... (38,226) (65,696) (190,975) (170,995) (245,756) (241,389)
Equity component of
allowance for funds
used during
construction.......... 6,454 5,215 14,070 17,641 18,984 24,189
Contributions to
nuclear
decommissioning
funds................. -- -- (96,229) (96,229) (132,550) (132,550)
Investment in
subsidiary companies.. -- -- -- -- (141) --
Other cash investments
and special deposits.. (27,463) 7,855 (29,933) 628,387 (43,620) 38,971
--------- --------- ---------- ---------- ----------- -----------
$(257,848) $(231,974) $ (884,167) $ (184,130) $(1,279,313) $(1,135,204)
--------- --------- ---------- ---------- ----------- -----------
Cash Flow from Financing
Activities:
Issuance of
securities--
Long-term debt........ $ 717,169 $ 87,699 $1,694,625 $ 364,813 $ 1,753,047 $ 597,485
Capital stock......... 1,253 72,703 75,889 77,734 82,403 82,431
Retirement and
redemption of
securities--
Long-term debt........ (830,201) (145,850) (1,889,378) (501,602) (2,004,161) (512,764)
Capital stock......... (27,000) (11,250) (60,936) (14,137) (96,756) (46,281)
Deposits and
securities held for
retirement and
redemption of
securities............ 119,843 (2) 209,377 3,192 268,474 35,546
Premium paid on early
redemption of long-
term debt............. (25,455) -- (78,395) (900) (78,395) (900)
Cash dividends paid on
common stock.......... (85,409) (85,628) (256,075) (256,647) (341,273) (342,076)
Proceeds from
sale/leaseback of
nuclear fuel.......... 41,077 39,443 162,724 207,463 242,495 248,994
Nuclear fuel lease
principal payments.... (70,719) (53,510) (189,360) (153,046) (257,313) (209,653)
Increase in short-term
borrowings............ 350 1,050 350 1,200 500 1,200
--------- --------- ---------- ---------- ----------- -----------
$(159,092) $ (95,345) $ (331,179) $ (271,930) $ (430,979) $ (146,018)
--------- --------- ---------- ---------- ----------- -----------
Increase (Decrease) in
Cash and Temporary Cash
Investments............ $ 372,435 $(135,971) $ 330,293 $ (116,963) $ 142,131 $ (345,143)
Cash and Temporary Cash
Investments at
Beginning of Period.... 103,607 266,870 145,749 247,862 333,911 476,042
--------- --------- ---------- ---------- ----------- -----------
Cash and Temporary Cash
Investments at End of
Period................. $ 476,042 $ 130,899 $ 476,042 $ 130,899 $ 476,042 $ 130,899
========= ========= ========== ========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
10
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Corporate Structure and Basis of Presentation. Unicom was incorporated in
January 1994, and became the parent corporation of ComEd and Unicom Enterprises
in a corporate restructuring that became effective on September 1, 1994.
Previously, Unicom Enterprises was a wholly-owned subsidiary of ComEd. The
restructuring was accounted for by the pooling-of-interests method. Under this
method, the assets, liabilities and ownership interests of each of the
companies are combined at their existing recorded amounts as of the
restructuring date, and the financial statements are presented herein as if the
restructuring took place as of the earliest period shown. In the restructuring,
each of the 214,185,572 outstanding shares of ComEd common stock, par value
$12.50 per share, were converted into one fully paid and non-assessable share
of Unicom common stock, without par value. ComEd, an electric utility, is the
principal subsidiary of Unicom. Unicom Enterprises is an unregulated subsidiary
engaged, through Unicom Thermal, in energy service activities. Unicom Thermal
will provide district cooling services to office and other buildings from
central locations in the city of Chicago. Unicom Thermal expects to begin
serving customers in the summer of 1995.
The consolidated financial statements include the accounts of Unicom, ComEd,
the Indiana Company and the consolidated accounts of Unicom Enterprises. All
significant intercompany transactions have been eliminated. ComEd's investments
in other subsidiary companies, which are not material in relation to ComEd's
financial position and results of operations, are accounted for in accordance
with the equity method of accounting. The preferred and preference stocks,
common stock purchase warrants, first mortgage bonds and other debt obligations
of ComEd and the Indiana Company were unchanged in the restructuring and remain
outstanding securities and obligations of ComEd and the Indiana Company.
Regulation. ComEd is subject to regulation as to accounting, service and
ratemaking policies and practices by the ICC and FERC. ComEd's accounting
policies and the accompanying consolidated financial statements conform to
generally accepted accounting principles applicable to rate-regulated
enterprises and reflect the effects of the ratemaking process. Such effects
concern mainly the time at which various items enter into the determination of
net income in order to follow the principle of matching costs and revenues.
Customer Receivables and Revenues. ComEd is engaged principally in the
production, purchase, transmission, distribution and sale of electricity to a
diverse base of residential, commercial and industrial customers. ComEd's
electric service territory has an area of approximately 11,540 square miles and
an estimated population of approximately 8.1 million as of December 31, 1993,
approximately 8.2 million as of December 31, 1992 and approximately 8.1 million
as of December 31, 1991. It includes the city of Chicago, an area of about 225
square miles with an estimated population of three million from which ComEd
derived approximately one-third of its ultimate consumer revenues in the twelve
months ended September 30, 1994. ComEd had approximately 3.3 million electric
customers at September 30, 1994.
Depreciation and Decommissioning. Depreciation is provided on the straight-
line basis by amortizing the cost of depreciable plant and equipment over
estimated composite service lives. A March 8, 1991 ICC rate order directs ComEd
to depreciate non-nuclear plant and equipment at annual rates developed for
each class of plant based on their composite service lives. The annual rate for
nuclear plant and equipment is 2.88% which excludes decommissioning costs.
Provisions for depreciation were at average annual rates of 3.14% and 3.15% for
the three months ended September 30, 1993 and 1994, respectively, 3.14% and
3.15% for the nine months ended September 30, 1993 and 1994, respectively, and
3.12% and 3.13% for the twelve months ended September 30, 1993 and 1994,
respectively, of
11
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
average depreciable utility plant and equipment. The provisions for chemical
cleaning are reflected in the Statements of Consolidated Income in maintenance
expense and in the Consolidated Balance Sheets in other noncurrent liabilities.
Nuclear plant decommissioning costs are accrued over the expected service
life of the related nuclear generating stations. The accrual is based on an
annual levelized cost of the unrecovered portion of estimated decommissioning
costs which are escalated for expected inflation to the expected time of
decommissioning and are net of expected earnings on the trust funds. See
"Decommissioning" under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," subcaption "Results of Operations," for a
discussion of questions raised by the staff of the SEC regarding the electric
utility industry method of accounting for decommissioning costs. Dismantling is
expected to occur relatively soon after the end of the useful life of each
related generating station. The accrual for decommissioning is based on the
prompt removal method authorized by the NRC guidelines. ComEd's twelve
operating units have estimated remaining service lives ranging from 13 to 34
years. ComEd's first nuclear unit, Dresden Unit 1, is retired and will be
dismantled upon the retirement of the remaining units at that station, which is
consistent with the regulatory treatment for the related decommissioning costs.
Based on ComEd's most recent study of decommissioning costs, including the
costs of decontamination, dismantling and site restoration, such costs are
estimated to aggregate $4.24 billion in current-year (1994) dollars. This
amount compares to the estimate for decommissioning costs of $2.45 billion, in
current-year (1994) dollars, reflected in ComEd's last rate order of March 8,
1991. The $4.24 billion estimate is based on plant location and cost
characteristics for ComEd's nuclear plants and reflects additional low-level
waste burial costs, higher labor costs due to reduced administrative radiation
dose limit requirements and higher costs resulting from an additional five-year
period in the decommissioning process to allow sufficient cooling of on-site
spent nuclear fuel before it is removed from the fuel pool.
On February 10, 1994, ComEd filed a rate increase request with the ICC. As
part of that request, ComEd proposed to increase its annual accrual of
decommissioning costs to approximately $170 million from the current level of
$127 million approved in the March 8, 1991 rate order. The assumptions used to
calculate the $43 million proposed increase in the annual accrual of
decommissioning costs (such as the decommissioning cost estimate of $4.06
billion, stated in 1993 dollars, after-tax earnings on the tax-qualified and
nontax-qualified decommissioning funds of 7.30% and 6.26%, respectively, as
well as a future escalation rate of 5.3% in decommissioning costs) reflect some
uncertainty. The rate filing is designed to provide greater assurance than
current rate levels that sufficient funds will be available in the external
decommissioning trusts for decommissioning expenditures when the nuclear plants
are retired. The current accrual of $127 million, coupled with accumulated
earnings on the trust fund assets, would provide approximately the same amount
of funds to pay estimated decommissioning costs if a 4.5% escalation rate is
assumed.
For the twelve operating nuclear units, decommissioning costs 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 September 30, 1994, the total decommissioning costs
included in the accumulated provision for depreciation were approximately $969
million. For ComEd's retired nuclear unit, Dresden Unit 1, the total estimated
liability at September 30, 1994 in current-year (1994) dollars of approximately
$233 million was recorded on the Consolidated Balance Sheets as a noncurrent
liability and the unrecovered portion of the liability of approximately $141
million was recorded as a regulatory asset.
12
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Illinois law requires ComEd to establish external trusts to hold
decommissioning funds, and the ICC has approved ComEd's funding plan which
provides for annual contributions of current accruals and ratable contributions
of past accruals over the remaining service lives of the nuclear plants. At
September 30, 1994, the past accruals that are required to be contributed to
the external trusts aggregate $206 million. The fair value of funds accumulated
in the external trusts at September 30, 1994 was approximately $855 million
which includes pre-tax unrealized appreciation of $23 million. 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 recorded as a component of depreciation expense on the Statements of
Consolidated Income, were $11,966,000 and $8,495,000 for the three months ended
September 30, 1993 and 1994, respectively, $31,857,000 and $28,825,000 for the
nine months ended September 30, 1993 and 1994, respectively, and $39,588,000
and $37,796,000 for the twelve months ended September 30, 1993 and 1994,
respectively.
Amortization of Nuclear Fuel. The cost of nuclear fuel is amortized to fuel
expense based on the quantity of heat produced using the unit of production
method. As authorized by the ICC, provisions for spent nuclear fuel disposal
costs have been recorded at a level required to recover the fee payable on
current nuclear-generated and sold electricity and the current interest accrual
on the one-time fee payable to the DOE for nuclear generation prior to April 7,
1983. The one-time fee and interest thereon have been recovered and the current
fee and current interest on the one-time fee are currently being recovered
through the fuel adjustment clause. See Note 10 for further information
concerning the disposal of spent nuclear fuel, the one-time fee and the current
interest accrual on the one-time fee. Nuclear fuel expenses, including leased
fuel costs and provisions for spent nuclear fuel disposal costs, for the three
months ended September 30, 1993 and 1994 were $109,724,000 and $101,534,000,
respectively, for the nine months ended September 30, 1993 and 1994 were
$298,752,000 and $267,693,000, respectively, and for the twelve months ended
September 30, 1993 and 1994 were $392,359,000 and $354,834,000, respectively.
Income Taxes. Deferred income taxes are provided for income and expense items
recognized for financial accounting purposes in periods that differ from those
for income tax purposes. Income taxes deferred in prior years are charged or
credited to income as the book/tax timing differences reverse. Prior years'
deferred investment tax credits are amortized through credits to income
generally over the lives of the related property. Income tax credits resulting
from interest charges applicable to nonoperating activities, principally
construction, are classified as other income.
For additional information relating to income taxes, including information
related to the adoption in January 1993 of SFAS No. 109, Accounting for Income
Taxes, which requires an asset and liability approach to accounting for income
taxes, see Note 14. In addition, see "Income Taxes" under the subcaption
"Results of Operations," in "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
AFUDC. In accordance with uniform systems of accounts prescribed by
regulatory authorities, ComEd capitalizes AFUDC, compounded semiannually, which
represents the estimated cost of funds used to finance its construction
program. The equity component of AFUDC is recorded on an after-tax basis and
the borrowed funds component of AFUDC is recorded on a pre-tax basis. The
average annual capitalization rates for the three months ended September 30,
1993 and 1994 were 9.97% and 9.84%, respectively, for the nine months ended
September 30, 1993 and 1994 were 10.09% and 9.84%, respectively, and for the
twelve months ended September 30, 1993 and 1994 were 10.13% and 9.86%,
respectively. AFUDC does not contribute to the current cash flow of Unicom or
ComEd. For additional information regarding AFUDC, see Note 14.
13
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Interest. Total interest costs incurred on debt, leases and other obligations
for the three months ended September 30, 1993 and 1994 were $176,070,000 and
$179,138,000, respectively, for the nine months ended September 30, 1993 and
1994 were $539,526,000 and $552,816,000, respectively, and for the twelve
months ended September 30, 1993 and 1994 were $715,508,000 and $791,942,000,
respectively.
Debt Discount, Premium and Expense. Discount, premium and expense on long-
term debt of subsidiary companies are being amortized over the lives of the
respective issues.
Loss on Reacquired Debt. Consistent with regulatory treatment, the net loss
from ComEd's reacquisition of first mortgage bonds, sinking fund debentures and
pollution control obligations prior to their scheduled maturity dates is
deferred and amortized over the lives of the long-term debt issued to finance
the reacquisition.
Deferred Unrecovered Energy Costs. The uniform fuel adjustment clause adopted
by the ICC provides for the recovery of changes in fossil and nuclear fuel
costs and the energy portion of purchased power costs as compared to the fuel
and purchased energy costs included in ComEd's base rates. As authorized by the
ICC, ComEd has recorded under or overrecoveries of allowable fuel and energy
costs which, under the clause, are recoverable or refundable in subsequent
months. Deferred unrecovered energy costs also include amounts to be recovered
through the fuel adjustment clause for assessments by the DOE to fund a portion
of the cost for the decontamination and decommissioning of three nuclear
enrichment facilities previously operated by the DOE. As of December 31, 1993
and September 30, 1994, an asset of approximately $202 million and $192
million, respectively, was recorded, of which the current portion of
approximately $15 million has been included in current assets on the
Consolidated Balance Sheets. As of December 31, 1993 and September 30, 1994, a
corresponding liability of approximately $177 million was recorded in other
noncurrent liabilities and approximately $29 million and $16 million,
respectively, was recorded in other current liabilities.
At December 31, 1993 and September 30, 1994, ComEd had unrecovered fuel costs
in the form of coal reserves of approximately $517 million and $504 million,
respectively. In prior years, ComEd's commitments for the purchase of coal
exceeded its requirements. Rather than take all the coal it was required to
take, ComEd agreed to purchase the coal in place in the form of coal reserves.
ComEd has been allowed to recover from its customers the costs of the coal
reserves through its fuel adjustment clause as the coal is used for the
generation of electricity. ComEd expects to recover the costs of the coal
reserves by the year 2007. However, ComEd is not earning a return on the
expenditures for coal reserves prior to the coal reserves being used for the
generation of electricity by including the coal reserves in rate base.
Unrecovered fuel costs expected to be recovered within one year amounting to
approximately $24 million and $31 million at December 31, 1993 and September
30, 1994, respectively, have been included on the Consolidated Balance Sheets
in current assets as deferred unrecovered energy costs. See Note 19 for
additional information concerning ComEd's coal commitments.
Regulatory Assets and Liabilities. Regulatory assets include the unamortized
portions of certain rate case and consultant costs associated with the prudency
audits of ComEd's Byron and Braidwood stations which the ICC allowed to be
deferred and amortized for ratemaking purposes, unamortized deferred
depreciation related to Byron Unit 1 which the ICC allowed to be deferred and
amortized over the remaining life of the unit, unamortized losses on ComEd's
reacquired debt, unamortized deferred carrying charges associated with the
Units, which the ICC allowed to be deferred and amortized for ratemaking
purposes, a regulatory asset for the unrecovered portion of nuclear
decommissioning costs for ComEd's Dresden Unit 1 and a regulatory asset related
to income taxes recorded in compliance with SFAS No.
14
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
109, which was adopted in January 1993. A regulatory liability related to
income taxes was also recorded in compliance with SFAS No. 109.
For additional information relating to deferred carrying charges, see
"Deferred Carrying Charges," under the subcaption "Results of Operations," in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Certain Investments. Effective January 1, 1994, SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, was adopted. SFAS No. 115
addresses the accounting and reporting for investments in equity securities
that have readily determinable fair values and for all investments in debt
securities. For additional information, see Note 11.
Reclassifications. Certain prior year amounts have been reclassified to
conform with current period presentation. These reclassifications had no effect
on net income.
Statements of Consolidated Cash Flows. For purposes of the Statements of
Consolidated Cash Flows, temporary cash investments, generally investments
maturing within three months at the time of purchase, are considered to be cash
equivalents. Supplemental information required by SFAS No. 95 for the three
months, nine months and twelve months ended September 30, 1993 and 1994 was as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
------------------- ----------------- -------------------
1993 1994 1993 1994 1993 1994
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Supplemental Cash Flow
Information:
Cash paid during the
period for:
Interest (net of
amount capitalized). $189,619 $174,323 $540,226 $494,358 $688,389 $631,814
Income taxes (net of
refunds)............ $ 200 $ 92,467 $107,262 $ 14,876 $178,835 $ 10,628
Supplemental Schedule of
Non-Cash Investing and
Financing Activities:
Capital lease obliga-
tions of subsidiary
companies incurred.... $ 41,077 $ 40,089 $171,586 $209,958 $251,554 $254,123
</TABLE>
(2) SETTLEMENTS RELATING TO CERTAIN RATE MATTERS. Under the Rate Matters
Settlement, effective as of November 4, 1993, ComEd reduced its rates by
approximately $339 million annually and commenced refunding approximately $1.26
billion (including revenue taxes), plus interest at five percent on the unpaid
balance, through temporarily reduced rates over an initial refund period
scheduled to end in November 1994 (to be followed by a reconciliation period of
no more than five months). ComEd had previously deferred the recognition of
revenues during 1993 as a result of developments in the proceedings related to
the 1991 ICC rate order, which resulted in a reduction to 1993 net income of
approximately $160 million or $0.75 per common share. The recording of the
effects of the Rate Matters Settlement in October 1993 reduced 1993 net income
by approximately $292 million or $1.37 per common share, in addition to the
approximately $160 million effect of the deferred recognition of revenues and
after the partially offsetting effect of recording approximately $269 million
or $1.26 per common share in deferred carrying charges, net of income taxes,
authorized in the Remand Order. The deferred recognition of revenues was
eliminated in October 1993 at the time the provisions for revenue refunds
related to the Rate Matters Settlement, which reflected those deferred
revenues, were recorded. Consistent with such treatment of the deferred
recognition of revenues in 1993, the financial statements presented herein for
the three months, nine months and twelve months ended September 30, 1993 and
the twelve months ended September 30, 1994 reflect the reclassification of the
deferred recognition of revenues from operating revenues to provisions for
revenue refunds.
15
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Under the Fuel Matters Settlement, effective as of December 2, 1993, ComEd
commenced paying approximately $108 million (including revenue taxes) to its
customers through temporarily reduced collections under its fuel adjustment
clause over a twelve-month period scheduled to end in November 1994. The
recording of the effects of the Fuel Matters Settlement in October 1993 reduced
1993 net income by approximately $62 million or $0.29 per common share.
As of September 30, 1994, the estimated revenue refunds and related interest
arising from the settlements remaining to be refunded was approximately $118
million.
(3) OTHER RATE MATTERS. On February 10, 1994, ComEd filed a request with the
ICC to increase electric operating revenues by approximately $460 million, or
7.9%, on an annual basis above the level of revenues approved in the Rate
Matters Settlement. This request principally reflects the inclusion of the
Units in ComEd's rate base as fully "used and useful," increased operation and
maintenance expenses over the level reflected in the Remand Order, increased
contributions to the external trust funds which ComEd is required to fund to
cover the eventual decommissioning of its nuclear power plants, and lower debt
and equity costs. The ICC has suspended the rates, appointed hearing examiners
and ordered an investigation. In September 1994, the ICC Staff issued an
initial brief in which they recommended that Byron Unit 2 and Braidwood Unit 1
be found fully "used and useful" and Braidwood Unit 2 be found approximately
69% "used and useful." In total, the Staff's brief recommended that ComEd
receive a $313.2 million increase in revenues, including a $53.7 million
increase in base rates along with a proposal to collect $169.9 million for
decommissioning costs and $89.6 million for municipal franchise compensation as
riders on customer bills. Illinois legislation, effective September 1994,
allows the ICC to authorize the use of riders to pass on to ratepayers
increases or decreases in decommissioning costs without filing a new rate case,
while maintaining its authority to monitor and approve charges that flow
through the rider. Under the Illinois Public Utilities Act, the ICC must decide
the case by early January 1995.
In the Remand Order, the rate determination was based upon, among other
things, findings by the ICC with respect to the extent to which the Units were
"used and useful" during the 1991 test year period of the rate order. With
respect to the "used and useful" issue, the ICC applied a needs and economic
benefits methodology, using a twenty percent reserve margin and forecasted peak
demand, and found Byron Unit 2 and Braidwood Units 1 and 2 to be 93%, 21% and
0%, respectively, "used and useful." ComEd has not recorded any disallowances
related to the "used and useful" issue. ComEd considers the "used and useful"
disallowance in the Remand Order to be temporary. The ICC concluded in the
Remand Order that the forecasts in the record in that proceeding indicated that
Braidwood Units 1 and 2 will be fully "used and useful" within the reasonably
foreseeable future.
(4) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK. At September 30,
1994, Unicom's authorized shares consisted of 400,000,000 shares of common
stock. The authorized shares of ComEd preferred and preference stocks at
September 30, 1994 were: preference stock--23,458,920 shares; $1.425
convertible preferred stock--102,615 shares; and prior preferred stock--850,000
shares. The preference and prior preferred stocks are issuable in series and
may be issued with or without mandatory redemption requirements. Holders of
shares at any time outstanding, regardless of class, are entitled to one vote
for each share held on each matter submitted to a vote at a meeting of
shareholders, with the right to cumulate votes in elections for the directors
of the corporation which issued the shares.
(5) COMMON STOCK. At September 30, 1994, shares of Unicom common stock were
reserved for the following purposes:
<TABLE>
<S> <C>
1993 Long-Term Incentive Plan................................... 4,000,000
Employee Stock Purchase Plan.................................... 1,267,658
Employee Savings and Investment Plan............................ 484,403
---------
5,752,061
=========
</TABLE>
16
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
During the three months, nine months and twelve months ended September 30,
1993 and 1994, common stock was issued as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS TWELVE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
-------------- --------------- ---------------
1993 1994 1993 1994 1993 1994
------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Shares of Common Stock Issued--
Employee Stock Purchase Plan... -- -- 138,648 154,710 363,393 284,656
Employee Savings and Investment
Plan.......................... 42,200 15,800 112,400 81,400 197,400 122,400
Conversion of $1.425 convert-
ible preferred stock.......... 7,779 91,935 16,368 185,041 16,368 191,048
Conversion of warrants......... 331 7,522 943 13,274 1,378 13,705
------ ------- ------- ------- ------- -------
50,310 115,257 268,359 434,425 578,539 611,809
====== ======= ======= ======= ======= =======
<CAPTION>
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Amount of Common Stock Issued... $1,510 $ 3,535 $ 7,312 $11,715 $13,842 $16,614
====== ======= ======= ======= ======= =======
</TABLE>
At December 31, 1993 and September 30, 1994, 128,699 and 84,722 ComEd common
stock purchase warrants, respectively, were outstanding. The warrants entitle
the holders to convert such warrants into common stock of ComEd at a conversion
rate of one share of common stock for three warrants. The amounts of warrants
converted into ComEd common stock were $13,000 and $306,000 for the three
months ended September 30, 1993 and 1994, respectively, $37,000 and $546,000
for the nine months ended September 30, 1993 and 1994, respectively, and
$53,000 and $562,000 for the twelve months ended September 30, 1993 and 1994,
respectively.
(6) COMED PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION
REQUIREMENTS. No shares of ComEd preferred or preference stocks without
mandatory redemption requirements were issued or redeemed by ComEd during the
twelve months ended September 30, 1993. During the twelve months ended
September 30, 1994, 3,000,000 shares of ComEd preference stock without
mandatory redemption requirements were issued and no shares of ComEd preferred
or preference stocks without mandatory redemption requirements were redeemed.
The series of ComEd preference stock without mandatory redemption requirements
outstanding at September 30, 1994 are summarized as follows:
<TABLE>
<CAPTION>
INVOLUNTARY
SHARES AGGREGATE REDEMPTION LIQUIDATION
SERIES OUTSTANDING STATED VALUE PRICE(A) PRICE(A)
------ ----------- ------------ ---------- -----------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C> <C>
$1.90 4,249,549 $106,239 $ 25.25 $25.00
$2.00 2,000,000 51,560 $ 26.04 $25.00
$1.96 2,000,000 52,440 $ 27.11 $25.00
$7.24 750,000 74,340 $101.00 $99.12
$8.40 750,000 74,175 $101.00 $98.90
$8.38 750,000 73,566 $100.16 $98.09
$2.425 3,000,000 72,637 $ 25.00 $25.00
---------- --------
13,499,549 $504,957
========== ========
</TABLE>
- - - --------
(a) Per share plus accrued and unpaid dividends, if any.
The outstanding shares of ComEd's $1.425 convertible preferred stock are
convertible at the option of the holders thereof, at any time, into common
stock of ComEd at the rate of 1.02 shares of common stock for each share of
convertible preferred stock, subject to future adjustment. The convertible
preferred stock may be redeemed by ComEd at $42 per share, plus accrued and
unpaid dividends, if any. The involuntary liquidation price of the $1.425
convertible preferred stock is $31.80 per share, plus accrued and unpaid
dividends, if any. The number of shares of convertible preferred stock
converted into ComEd common stock for the three months ended September 30, 1993
and 1994 was 7,630 shares and 92,860 shares, respectively, for the nine months
ended September 30, 1993 and 1994 was 16,052
17
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
shares and 184,334 shares, respectively, and for the twelve months ended
September 30, 1993 and 1994 was 16,052 shares and 190,224 shares, respectively.
(7) COMED PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS.
During the twelve months ended September 30, 1993, 700,000 shares of ComEd
preference stock subject to mandatory redemption requirements were issued.
During the twelve months ended September 30, 1994, no shares of ComEd
preference stock subject to mandatory redemption requirements were issued. The
series of ComEd preference stock subject to mandatory redemption requirements
outstanding at September 30, 1994 are summarized as follows:
<TABLE>
<CAPTION>
SHARES AGGREGATE
SERIES OUTSTANDING STATED VALUE OPTIONAL REDEMPTION PRICE(A)
-------------- ----------- ------------ -------------------------------------------------
(THOUSANDS
OF DOLLARS)
<C> <C> <C> <S>
$8.20 321,420 $ 32,142 $103 through October 31, 1997; and $101
thereafter
$8.40 Series B 390,000 38,737 $101
$8.85 337,500 33,750 $103 through July 31, 1998; and $101 thereafter
$9.25 750,000 75,000 $103 through July 31, 1999; and $101 thereafter
$9.00 650,000 64,431 Non-callable
$6.875 700,000 69,475 Non-callable
--------- --------
3,148,920 $313,535
========= ========
</TABLE>
- - - --------
(a) Per share plus accrued and unpaid dividends, if any.
The annual sinking fund requirements and sinking fund and involuntary
liquidation prices per share of the outstanding series of ComEd preference
stock subject to mandatory redemption requirements are summarized as follows:
<TABLE>
<CAPTION>
SINKING INVOLUNTARY
FUND LIQUIDATION
SERIES ANNUAL SINKING FUND REQUIREMENT PRICE(A) PRICE(A)
-------------- ----------------------------------- -------- -----------
<S> <C> <C> <C>
$8.20 35,715 shares $100 $100.00
$8.40 Series B 30,000 shares(b) $100 $ 99.326
$8.85 37,500 shares $100 $100.00
$9.25 75,000 shares $100 $100.00
$9.00 130,000 shares beginning in 1996(b) $100 $ 99.125
$6.875 (c) $100 $ 99.25
</TABLE>
- - - --------
(a) Per share plus accrued and unpaid dividends, if any.
(b) ComEd has a non-cumulative option to increase the annual sinking fund
payment on each sinking fund redemption date to retire an additional number
of shares, not in excess of the sinking fund requirement, at the applicable
redemption price.
(c) All shares are required to be redeemed on May 1, 2000.
Annual remaining sinking fund requirements through 1998 on ComEd preference
stock outstanding at September 30, 1994 will aggregate $3,572,000 in 1994,
$17,822,000 in 1995, $30,822,000 in 1996, $30,822,000 in 1997 and $30,822,000
in 1998. During the twelve months ended September 30, 1993 and 1994, 2,165,072
shares and 462,085 shares, respectively, of ComEd preference stock subject to
mandatory redemption requirements were reacquired to meet sinking fund
requirements.
Sinking fund requirements due within one year are included in current
liabilities.
On November 1, 1992, ComEd redeemed 300,000 shares of its $2.875 Series of
preference stock at the optional redemption price of $25 per share and 75,000
shares of its $11.70 Series of preference stock at the optional redemption
price of $100 per share, plus accrued and unpaid dividends.
On June 28, 1993, ComEd redeemed the remaining 170,810 shares of its $2.875
Series of preference stock and all 1,050,000 shares of its $2.375 Series of
preference stock, both at the optional redemption price of $25.25 per share,
plus accrued and unpaid dividends.
18
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
On November 1, 1993, ComEd redeemed the remaining 75,000 shares of its
$11.70 Series of preference stock (150,000 shares had been redeemed on August
1, 1993 at the optional redemption price of $105 per share, plus accrued and
unpaid dividends). Of the remaining 75,000 shares, 37,500 shares were redeemed
to meet the November 1, 1993 mandatory sinking fund requirement and 37,500
shares were redeemed as a permitted optional sinking fund payment, both at the
sinking fund redemption price of $100 per share, plus accrued and unpaid
dividends.
On November 1, 1993, ComEd redeemed all 210,000 shares of its $9.30 Series
of preference stock, of which 70,000 shares were redeemed at the optional
redemption price of $101.03 per share, plus accrued and unpaid dividends,
70,000 shares were redeemed to meet the November 1, 1993 mandatory sinking
fund requirement and 70,000 shares were redeemed as a permitted optional
sinking fund payment, the latter two at the sinking fund redemption price of
$100 per share, plus accrued and unpaid dividends.
(8) LONG-TERM DEBT OF SUBSIDIARY COMPANIES. Sinking fund requirements and
scheduled maturities remaining through 1998 for ComEd and the Indiana
Company's first mortgage bonds, sinking fund debentures and other long-term
debt outstanding at September 30, 1994, after deducting sinking fund
debentures reacquired for satisfaction of future sinking fund requirements,
are summarized as follows: 1994--$20,780,000; 1995--$493,886,000; 1996--
$231,444,000; 1997--$689,397,000; and 1998--$350,027,000.
Other ComEd long-term debt outstanding at September 30, 1994 is summarized
as follows:
<TABLE>
<CAPTION>
PRINCIPAL
DEBT SECURITY AMOUNT INTEREST RATE PROVISIONS
- - - ------------------------ ----------- ------------------------------------------------------------------
(THOUSANDS
OF DOLLARS)
<S> <C> <C>
Notes:
Medium Term Notes,
Series 1N due
various dates through
April 1, 1998 $ 82,500 Interest rates ranging from 9.27% to 10.48%
Medium Term Notes,
Series 2N due
various dates through
July 1, 1996 24,000 Interest rates ranging from 9.79% to 9.874%
Medium Term Notes,
Series 3N due
various dates through
October 15, 2004 332,250 Interest rates ranging from 8.80% to 9.20%
Medium Term Notes,
Series 4N due
various dates through
May 15, 1997 46,000 Interest rates ranging from 8.11% to 8.875%
Notes due July 15, 1995 100,000 Fixed interest rate of 5.50%
Notes due February 15,
1997 150,000 Fixed interest rate of 7.00%
Notes due July 15, 1997 100,000 Fixed interest rate of 6.50%
Notes due October 15,
2005 235,000 Fixed interest rate of 6.40%
----------
$1,069,750
----------
Long-Term Notes Payable
to Banks:
Note due January 9,
1995 $ 100,000 Prevailing interest rate of 5.375% at September 30, 1994
Notes due July 31, 1995 150,000 Prevailing interest rates averaging 5.65625% at September 30, 1994
Note due June 1, 1997 150,000 Prevailing interest rate of 5.50% at September 30, 1994
----------
$ 400,000
----------
Purchase Contract Obli-
gations:
Woodstock due January
2, 1997 $ 273 Fixed interest rate of 4.50%
Hinsdale due April 30,
2005 513 Fixed interest rate of 3.00%
----------
$ 786
----------
$1,470,536
==========
</TABLE>
Long-term debt maturing within one year and the principal amount of long-
term debt to be redeemed and identified in Note 20, have been included in
current liabilities.
19
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
ComEd's outstanding first mortgage bonds are secured by a lien on
substantially all property and franchises, other than expressly excepted
property, owned by ComEd.
(9) LINES OF CREDIT. ComEd had total bank lines of credit of approximately
$922 million and unused bank lines of credit of approximately $915 million at
September 30, 1994. Of that amount, $915 million (of which $175 million expires
on October 2, 1995, $72 million expires in equal quarterly installments
commencing on December 31, 1996 and ending on September 30, 1998 and $668
million expires in equal quarterly installments commencing on December 31, 1997
and ending on September 30, 1999) may be borrowed on secured or unsecured notes
of ComEd at various interest rates. The interest rate is set at the time of a
borrowing and is based on several floating rate bank indices plus a spread
which is dependent upon ComEd's credit ratings, or on a prime interest rate.
Amounts under the remaining lines of credit may be borrowed at prevailing prime
interest rates on unsecured notes of ComEd. Collateral, if required for the
borrowings, would consist of first mortgage bonds issued under and in
accordance with the provisions of ComEd's mortgage. ComEd is obligated to pay
commitment fees with respect to $915 million of such lines of credit.
(10) DISPOSAL OF SPENT NUCLEAR FUEL. Under the Nuclear Waste Policy Act of
1982, the DOE is responsible for the selection and development of repositories
for, and the disposal of, spent nuclear fuel and high-level radioactive waste.
ComEd, as required by that Act, has signed a contract with the DOE to provide
for the disposal of spent nuclear fuel and high-level radioactive waste from
ComEd's nuclear generating stations beginning not later than January 1998. The
contract with the DOE requires ComEd to pay the DOE a one-time fee applicable
to nuclear generation through April 6, 1983 of approximately $277 million, with
interest to date of payment, and a fee payable quarterly equal to one mill per
kilowatthour of nuclear-generated and sold electricity after April 6, 1983.
ComEd has elected to pay the one-time fee, with interest, just prior to the
first scheduled delivery of spent nuclear fuel to the DOE, which is scheduled
to occur not later than January 1998; however, this delivery schedule is
expected to be delayed significantly. The liability for the one-time fee and
the related interest is reflected in the Consolidated Balance Sheets.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS. The following methods and
assumptions were used to estimate the fair value of financial instruments
either held or issued and outstanding. The disclosure of such information does
not purport to be a market valuation of Unicom and subsidiary companies as a
whole. The impact of any realized or unrealized gains or losses related to such
financial instruments on the financial position or results of operations of
Unicom and subsidiary companies is primarily dependent on the treatment
authorized under future ComEd ratemaking proceedings.
20
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Investments. Securities included in nuclear decommissioning funds have been
classified and accounted for as "available for sale" securities. The estimated
fair value of the nuclear decommissioning funds, as determined by the Trustee,
is based on published market data. The net earnings of the nuclear
decommissioning funds, which are recorded as increases to the accumulated
provision for depreciation (only the realized portion prior to January 1,
1994), for the three months, nine months and twelve months ended September 30,
1993 and 1994 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
------------------- -------------------- --------------------
1993 1994 1993 1994 1993 1994
-------- --------- --------- --------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Gross proceeds from
sales of securities.... $ 84,955 $ 251,996 $ 328,459 $ 587,026 $ 380,832 $ 647,251
Less cost based on
specific
identification......... (80,032) (254,022) (319,064) (586,351) (370,463) (645,021)
-------- --------- --------- --------- --------- ---------
Realized gains (losses)
on sales of securities. $ 4,923 $ (2,026) $ 9,395 $ 675 $ 10,369 $ 2,230
Other realized fund
earnings net of
expenses............... 7,043 10,521 22,462 28,150 29,219 35,566
-------- --------- --------- --------- --------- ---------
Total realized net
earnings of the funds.. $ 11,966 $ 8,495 $ 31,857 $ 28,825 $ 39,588 $ 37,796
Unrealized gains
(losses)............... 14,783 9,926 34,049 (38,527) 38,285 (41,607)
-------- --------- --------- --------- --------- ---------
Total net earnings
(losses) of the funds. $ 26,749 $ 18,421 $ 65,906 $ (9,702) $ 77,873 $ (3,811)
======== ========= ========= ========= ========= =========
</TABLE>
Financial instruments included in investments and other property, subcaption
other, at a cost of approximately $4 million at December 31, 1993 and September
30, 1994, are not material in relation to other financial instruments of Unicom
and subsidiary companies; therefore, an estimate of the fair value of these
instruments has not been made.
Current Assets. Cash, temporary cash investments and other cash investments,
which include U.S. Government Obligations and other short-term marketable
securities, and special deposits, which primarily includes cash deposited for
the redemption, refund or discharge of debt securities, are stated at cost,
which approximates their fair value because of the short maturity of these
instruments. The securities included in these categories have been classified
as "available for sale" securities.
Capitalization. The estimated fair values of ComEd preferred and preference
stocks (without and subject to mandatory redemption requirements) and long-term
debt of subsidiary companies, including the current portions thereof, have been
obtained from an independent consultant. Estimated fair values exclude accrued
interest and preferred and preference stock dividends. Long-term notes payable
to banks in the amounts of $250 million and $400 million at December 31, 1993
and September 30, 1994, respectively, for which interest is paid at prevailing
rates, are included in the financial statements at cost, which approximates
their fair value. Purchase contract obligations included in long-term debt at a
cost of approximately $1 million at December 31, 1993 and September 30, 1994,
are not material in relation to other financial instruments of Unicom and
subsidiary companies; therefore, an estimate of the fair value of these
instruments has not been made.
Current Liabilities. The carrying value of notes payable, which consists of
bank loans maturing within one year, approximates their fair value because of
the short maturity of these instruments. See "Capitalization" above for a
discussion of the fair value of the current portion of long-term debt and
redeemable preference stock.
Other Noncurrent Liabilities. The carrying value of accrued spent nuclear
fuel disposal fee and related interest represents the settlement value as of
December 31, 1993 and September 30, 1994; therefore, the carrying value is
equal to the fair value.
21
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The estimated fair values of financial instruments other than those
instruments reflected in the financial statements at cost which approximates
fair value, as of January 1, 1994 and September 30, 1994, are as follows:
<TABLE>
<CAPTION>
JANUARY 1, 1994 SEPTEMBER 30, 1994
-------------------------------- ------------------------------------
UNREALIZED UNREALIZED
COST BASIS GAINS FAIR VALUE COST BASIS GAINS (LOSSES) FAIR VALUE
---------- ---------- ---------- ---------- -------------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Nuclear Decommissioning
Funds:
Short-term investments. $ 22,030 $ 4 $ 22,034 $ 25,748 $ 1 $ 25,749
U.S. Government and
Agency issues......... 25,113 14 25,127 83,993 (2,104) 81,889
Municipal bonds........ 598,559 49,851 648,410 474,469 5,737 480,206
Common stock........... 48,282 10,974 59,256 219,273 15,242 234,515
Other.................. 12,857 1,139 13,996 28,412 4,579 32,991
---------- -------- ---------- ---------- --------- ----------
Total................ $ 706,841 $ 61,982 $ 768,823 $ 831,895 $ 23,455 $ 855,350
========== ======== ========== ========== ========= ==========
<CAPTION>
JANUARY 1, 1994 SEPTEMBER 30, 1994
-------------------------------- ------------------------------------
CARRYING UNREALIZED CARRYING UNREALIZED
VALUE LOSSES FAIR VALUE VALUE (GAINS) FAIR VALUE
---------- ---------- ---------- ---------- -------------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Capitalization
(including current
portion):
Preferred and
Preference Stocks
(without and subject
to mandatory
redemption
requirements)......... $ 769,098 $ 7,015 $ 776,113 $ 821,756 $ (83,284) $ 738,472
Long-Term Debt......... $7,746,734 $412,241 $8,158,975 $7,465,019 $(331,723) $7,133,296
</TABLE>
At September 30, 1994, the debt securities held by the nuclear
decommissioning funds had the following maturities:
<TABLE>
<CAPTION>
COST BASIS FAIR VALUE
------------------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Within 1 year....................................... $ 25,748 $ 25,749
1 through 5 years................................... 60,119 60,165
5 through 10 years.................................. 207,301 211,311
Over 10 years....................................... 305,100 304,489
</TABLE>
(12) PENSION BENEFITS. ComEd and the Indiana Company have non-contributory
defined benefit pension plans which cover all regular employees. Benefits under
these plans reflect each employee's compensation, years of service and age at
retirement. Funding is based upon actuarially determined contributions that
take into account the amount deductible for income tax purposes and the minimum
contribution required under the Employee Retirement Income Security Act of
1974, as amended. Actuarial valuations were determined as of January 1, 1993
and 1994.
During 1992, ComEd and the Indiana Company implemented a workforce reduction
program designed to reduce the management workforce. This program included an
early retirement program and voluntary and involuntary separation plans. The
early retirement program resulted in the recognition during the second half of
1992 of an additional $26 million of pension cost and an increase to the
projected benefit obligation of that $26 million plus an additional $39 million
of unrecognized net loss. ComEd and the Indiana Company also recognized in 1992
a charge to expense of $11 million primarily related to the cost of the
separation plans. The total charge to income of $37 million in 1992 was
approximately $23 million after reflecting income tax effects.
During 1994, an early retirement program was implemented for ComEd and the
Indiana Company employees eligible to retire or who would become eligible to
retire after December 31, 1993 and before April 1, 1995. During the nine-month
period ended September 30, 1994, 658 employees from ComEd and the Indiana
Company accepted the program, resulting in the recognition of an additional $33
million of pension cost in the nine months ended September 30, 1994 and an
increase to the projected benefit obligation of that $33 million and an
additional $40 million of unrecognized net loss. The charge to income
22
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
after reflecting income tax effects was approximately $20 million for the nine
months and twelve months ended September 30, 1994. It is estimated that in
total approximately 700 employees will accept the early retirement program,
resulting in the recognition of a total of $35 million of pension cost and a
total increase to the projected benefit obligation of that $35 million and an
additional $42 million of unrecognized net loss.
The funded status of these plans at December 31, 1993 and September 30, 1994
was as follows:
<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30,
1993 1994
------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated pension plan
benefits:
Vested benefit obligation......................... $(1,984,000) $(2,154,000)
Nonvested benefit obligation...................... (460,000) (478,000)
----------- -----------
Accumulated benefit obligation.................... $(2,444,000) $(2,632,000)
Effect of projected future compensation levels.... (470,000) (473,000)
----------- -----------
Projected benefit obligation...................... $(2,914,000) $(3,105,000)
Fair value of plan assets, invested primarily in
equity index funds, other managed equity and fixed
income investments, U.S. Government, government-
sponsored corporation and agency securities and
listed corporate obligations...................... 2,742,000 2,593,000
----------- -----------
Plan assets less than projected benefit obligation. $ (172,000) $ (512,000)
Unrecognized prior service cost.................... 24,000 23,000
Unrecognized transition asset...................... (168,000) (159,000)
Unrecognized net loss.............................. 99,000 364,000
----------- -----------
Accrued pension liability......................... $ (217,000) $ (284,000)
=========== ===========
</TABLE>
At December 31, 1993 and September 30, 1994, the assumed discount rate was
7.5% and the assumed annual rate of increase in future compensation levels was
4.0%. These rates were used in determining the projected benefit obligations,
the accumulated benefit obligations and the vested benefit obligations.
Pension costs were determined under the rules prescribed by SFAS No. 87,
including the use of the projected unit credit actuarial cost method and the
following actuarial assumptions for periods during 1992, 1993 and 1994:
<TABLE>
<CAPTION>
1992 1993 1994
----- ----- -----
<S> <C> <C> <C>
Annual discount rate.......................................... 7.50% 7.50% 7.50%
Annual rate of increase in future compensation levels......... 4.00% 4.00% 4.00%
Annual long-term rate of return on plan assets................ 9.50% 9.50% 9.50%
</TABLE>
23
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The components of pension costs, portions of which were recorded as
components of construction costs, for the three months, nine months and twelve
months ended September 30, 1993 and 1994 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
--------------------- ---------------------- ----------------------
1993 1994 1993 1994 1993 1994
---------- ---------- ----------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Service cost............ $ 22,000 $ 23,000 $ 72,000 $ 73,000 $ 97,000 $ 97,000
Interest cost on pro-
jected benefit obliga-
tion................... 49,000 52,000 153,000 160,000 200,000 211,000
Actual (return) loss on
plan assets............ (92,000) (64,000) (274,000) 35,000 (350,000) (1,000)
Early retirement program
cost................... -- 1,000 -- 33,000 (5,000) 33,000
Net amortization and de-
ferral................. 30,000 (2,000) 87,000 (234,000) 101,000 (260,000)
-------- -------- --------- --------- --------- ---------
$ 9,000 $ 10,000 $ 38,000 $ 67,000 $ 43,000 $ 80,000
======== ======== ========= ========= ========= =========
</TABLE>
In addition, an employee savings and investment plan is available to all
regular employees who have completed three months of service. Each
participating employee may contribute up to 20% of such employee's base pay and
the participating companies match such contribution equal to 70% of up to the
first 5% of contributed base salary. The participating companies' contributions
for the three months ended September 30, 1993 and 1994 were $5,057,000 and
$6,110,000, respectively, for the nine months ended September 30, 1993 and 1994
were $15,982,000 and $17,503,000, respectively, and for the twelve months ended
September 30, 1993 and 1994 were $21,996,000 and $23,468,000, respectively.
(13) POSTRETIREMENT HEALTH CARE BENEFITS. ComEd and the Indiana Company
provide certain postretirement health care benefits for retirees and their
dependents and for the surviving dependents of eligible employees and retirees.
Substantially all of ComEd and the Indiana Company employees become eligible
for postretirement health care benefits when they reach retirement age while
working for ComEd and the Indiana Company. ComEd and the Indiana Company fund
the liability for postretirement health care benefits through a trust fund.
Funding is based upon actuarially determined contributions that take into
account the amount deductible for income tax purposes. Actuarial valuations
were determined as of January 1, 1993 and 1994.
For the years 1980 through 1992, the liability for postretirement health care
benefits and the related provisions for postretirement health care were
equivalent to actuarial normal costs attributed over participants' employment
periods from date of hire to the retirement date based on the aggregate cost
method. On January 1, 1993, SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, was adopted, which requires that
postretirement benefits be determined based on the projected unit credit
actuarial cost method and attributed over employment periods of plan
participants to the date of eligibility for postretirement benefits rather than
over the entire employment period. By adopting the new standard in January
1993, ComEd and the Indiana Company estimate that for the year ended December
31, 1993, postretirement costs increased $20 million, resulting in a decrease
in net income of $10 million or $0.05 per common share, net of income taxes and
the portion of the costs charged to construction. The ultimate effects on
income are dependent on the treatment authorized in future ComEd ratemaking
proceedings. Prior to the adoption of SFAS No. 106, postretirement health care
benefits were also accounted for on an accrual basis and accrual basis costs
have been reflected in rates in ComEd's ratemaking proceedings. The transition
obligation shown in the following schedule is being amortized over 20.6 years.
24
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The funded status of the plan at December 31, 1993 and September 30, 1994 was
as follows:
<TABLE>
<CAPTION>
DECEMBER SEPTEMBER
31, 30,
1993 1994
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated postretirement
health care obligation:
Retirees............................................ $ (434,000) $ (485,000)
Active fully eligible participants.................. (72,000) (77,000)
Other participants.................................. (591,000) (626,000)
----------- -----------
Accumulated benefit obligation...................... $(1,097,000) $(1,188,000)
Fair value of plan assets, invested primarily in S&P
500 common stocks, equity and fixed income mutual
funds, and U.S. Government and listed corporate
obligations......................................... 457,000 430,000
----------- -----------
Plan assets less than accumulated postretirement
health care obligation.............................. $ (640,000) $ (758,000)
Unrecognized transition obligation................... 559,000 538,000
Unrecognized net loss (gain)......................... (6,000) 45,000
----------- -----------
Accrued liability for postretirement health care..... $ (87,000) $ (175,000)
=========== ===========
</TABLE>
For 1993 and 1994, different health care cost trends are used for pre-
Medicare and post-Medicare expenses. Pre-Medicare trend rates are 14.5% for
1993 grading down in 0.5% annual increments to 5%. Post-Medicare trend rates
are 12% for 1993 grading down in 0.5% annual increments to 5%. The effect of a
1% increase in the assumed health care cost trend rates for each future year
would increase the accumulated postretirement health care obligation at January
1, 1994 by approximately $200 million and increase the aggregate of the service
and interest cost components of plan costs by approximately $7 million for the
three months ended September 30, 1994, $21 million for the nine months ended
September 30, 1994 and $28 million for the twelve months ended September 30,
1994. The annual discount rate used was 7.5% and the annual long-term rate of
return on plan assets was 9.5%, or 9.1% for 1993 periods and 9.04% for 1994
periods after including income tax effects.
The components of postretirement health care costs, portions of which were
recorded as components of construction costs, for the three months and nine
months ended September 30, 1993 and 1994, and the twelve months ended September
30, 1994 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
----------------- ------------------ -------------------
1993 1994 1993 1994 1994
------- -------- -------- -------- -------------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Service cost............ $10,000 $ 12,000 $ 34,000 $ 36,000 $ 47,000
Interest cost on
accumulated benefit
obligation............. 17,000 20,000 56,000 61,000 79,000
Actual loss (return) on
plan assets............ (9,000) (17,000) (36,000) 2,000 (4,000)
Amortization of
transition obligation.. 5,000 7,000 21,000 21,000 29,000
Other................... 1,000 7,000 12,000 (32,000) (34,000)
------- -------- -------- -------- --------
$24,000 $ 29,000 $ 87,000 $ 88,000 $117,000
======= ======== ======== ======== ========
</TABLE>
25
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(14) INCOME TAXES. The components of the net deferred income tax liability at
December 31, 1993 and September 30, 1994 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1993 1994
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized
depreciation, net of removal costs................ $3,095,855 $3,216,325
Overheads capitalized.............................. 286,287 269,618
Repair allowance................................... 210,302 198,883
Regulatory assets recoverable through future rates. 1,863,587 1,822,424
Deferred income tax assets:
Postretirement benefits............................ (134,590) (171,359)
Unbilled revenues.................................. (98,164) (97,089)
Loss carryforward.................................. (175,197) (27,577)
Alternative minimum tax............................ (137,328) (270,781)
Unamortized investment tax credits to be settled
through future rates.............................. (489,891) (475,730)
Other regulatory liabilities to be settled through
future rates...................................... (236,236) (234,300)
Other--net......................................... (80,751) (57,323)
---------- ----------
Net deferred income tax liability................... $4,103,874 $4,173,091
========== ==========
</TABLE>
The $69 million increase in the net deferred income tax liability from December
31, 1993 to September 30, 1994 is comprised of a $94 million net increase to
deferred income tax expense and a $25 million decrease in regulatory assets net
of regulatory liabilities pertaining to income taxes for the period.
The components of net income tax expense charged to continuing operations for
the three months, nine months and twelve months ended September 30, 1993 and
1994 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
-------------------- ------------------ ---------------------
1993 1994 1993 1994 1993 1994
--------- --------- -------- -------- --------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Operating income:
Current income taxes... $149,778 $ 80,491 $238,664 $138,783 $240,794 $(127,433)
Deferred income taxes.. 48,740 114,476 49,604 111,048 95,786 184,249
Investment tax credits
deferred--net......... (7,288) (7,195) (21,902) (21,620) (29,079) (29,142)
Other (income) and
deductions............. (11,744) 1,833 (17,939) (19,005) (17,400) (32,144)
--------- --------- -------- -------- --------- ----------
Net income taxes charged
to continuing
operations............. $179,486 $189,605 $248,427 $209,206 $290,101 $ (4,470)
========= ========= ======== ======== ========= ==========
</TABLE>
Provisions for current and deferred federal and state income taxes and
amortization of investment tax credits resulted in the following effective
income tax rates for the three months, nine months and twelve months ended
September 30, 1993 and 1994:
<TABLE>
<CAPTION>
TWELVE MONTHS
THREE MONTHS ENDED NINE MONTHS ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
-------------------- ------------------ ------------------
1993 1994 1993 1994 1993 1994
--------- --------- -------- -------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) before
cumulative effect of
change in accounting
for income taxes....... $270,558 $263,661 $379,446 $276,342 $467,515 $(66,454)
Net income taxes charged
to continuing
operations............. 179,486 189,605 248,427 209,206 290,101 (4,470)
Provision for dividends
on preferred and
preference stocks of
Commonwealth Edison
Company................ 16,565 16,966 50,245 47,994 67,214 63,801
--------- --------- -------- -------- -------- --------
Pre-tax income before
provision for dividends
on preferred and
preference stocks of
Commonwealth Edison
Company................ $466,609 $470,232 $678,118 $533,542 $824,830 $ (7,123)
========= ========= ======== ======== ======== ========
Effective income tax
rate................... 38.5% 40.3% 36.6% 39.2% 35.2% 62.8%
</TABLE>
26
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The principal differences between net income taxes charged to continuing
operations and the amounts computed at the federal statutory rate of 35% for
the three months and nine months ended September 30, 1993, 34.8% for the twelve
months ended September 30, 1993 and 35% for the three months, nine months and
twelve months ended September 30, 1994 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
-------------------- ------------------ --------------------
1993 1994 1993 1994 1993 1994
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes
computed at statutory
rate................... $163,313 $164,581 $237,341 $186,740 $287,041 $ (2,493)
Equity component of
AFUDC which was
excluded from taxable
income................. (2,259) (1,825) (4,925) (6,174) (6,606) (8,466)
Amortization of
investment tax credits. (7,331) (7,190) (21,913) (21,602) (26,592) (29,109)
State income taxes, net
of federal income
taxes.................. 22,442 22,670 35,300 28,399 42,184 6,236
Differences between book
and tax accounting
primarily for property
related deductions..... 583 7,553 (110) 16,068 (4,014) 22,137
Other--net.............. 2,738 3,816 2,734 5,775 (1,912) 7,225
--------- --------- -------- -------- --------- ---------
Net income taxes charged
to continuing
operations............. $179,486 $189,605 $248,427 $209,206 $290,101 $ (4,470)
========= ========= ======== ======== ========= =========
</TABLE>
Current federal income tax liabilities were recorded that include excess
amounts of AMT over the regular federal income tax, which amounts were also
recorded as decreases to deferred federal income taxes. The excess amounts of
AMT can be carried forward indefinitely as a credit against future years'
regular federal income tax liabilities. In 1993, a loss was recorded for income
tax purposes which may be carried forward through 2008. It is currently
expected that the loss carryforward will be utilized by the expiration date.
Effective January 1, 1993, SFAS No. 109 was adopted. SFAS No. 109 requires an
asset and liability approach to accounting for income taxes which replaces the
deferred method formerly used. Under the asset and liability approach, the
deferred income tax liability represents the income tax effect of temporary
differences between financial accounting and income tax bases of assets and
liabilities and is determined at the presently enacted income tax rates. The
SFAS No. 109 adjustments to ComEd's deferred income tax liability related to
utility operations represent income taxes recoverable or returnable through
future rates and have been recorded as regulatory assets and regulatory
liabilities on the Consolidated Balance Sheets. The cumulative effect of the
change in the method of accounting for income taxes resulted in an increase to
net income for the nine months and twelve months ended September 30, 1993 of
$9.7 million or $0.05 per common share, due primarily to the reduction of
deferred income taxes on nonregulated activities (primarily nonconsolidated
subsidiaries) accrued in prior years at income tax rates in excess of the
presently enacted income tax rates. The effect of the implementation entry on
regulated activities was to record regulatory assets of $1,546 million
primarily related to the equity component of AFUDC which was recorded on an
after-tax basis, the borrowed funds component of AFUDC which was previously
recorded net of tax and other temporary differences for which the related tax
effects were not previously recorded; regulatory liabilities of $577 million
primarily related to recognition of the deferred income tax effects of
unamortized investment tax credits and to the changes in prior years' income
tax rates; and a net increase to the deferred income tax liability of $969
million.
27
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(15) TAXES, EXCEPT INCOME TAXES. Provisions for taxes, except income taxes,
for the three months, nine months and twelve months ended September 30, 1993
and 1994 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
------------------- ----------------- -------------------
1993 1994 1993 1994 1993 1994
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Illinois public utility
revenue................ $ 59,151 $ 57,686 $163,323 $157,475 $ 213,191 $ 193,650
Illinois invested capi-
tal.................... 27,996 27,559 83,795 82,047 110,841 109,378
Municipal utility gross
receipts............... 38,605 42,743 99,203 111,237 130,077 119,267
Real estate............. 40,416 44,084 123,038 135,106 169,913 174,628
Municipal compensation.. 20,264 21,222 53,666 55,831 70,756 59,043
Other--net.............. 14,895 17,598 50,959 57,555 65,590 71,214
--------- --------- -------- -------- --------- ---------
$ 201,327 $ 210,892 $573,984 $599,251 $ 760,368 $ 727,180
========= ========= ======== ======== ========= =========
</TABLE>
(16) LEASE OBLIGATIONS OF SUBSIDIARY COMPANIES. On November 23, 1993, ComEd
consolidated its nuclear fuel lease arrangements into a new arrangement. Under
the new arrangement, ComEd may sell and lease back nuclear fuel from a lessor
who may borrow an aggregate of $700 million (consisting of $300 million of
commercial paper or bank borrowings and $400 million of intermediate term
notes) to finance the transactions. The commercial paper/bank borrowing portion
currently will expire on November 23, 1996, but ComEd plans to ask for an
extension of the expiration date. At September 30, 1994, ComEd's obligation to
the lessor for leased nuclear fuel amounted to $573 million. ComEd has agreed
to make lease payments which cover the amortization of the nuclear fuel used in
ComEd's reactors plus the lessor's related financing costs. ComEd has an
obligation for spent nuclear fuel disposal costs of leased nuclear fuel.
Future minimum rental payments, net of executory costs, at September 30, 1994
for capital leases are estimated to aggregate $606 million, including $71
million in 1994 (after deducting $179 million for the first nine months of
1994), $199 million in 1995, $134 million in 1996, $84 million in 1997, $47
million in 1998 and $71 million in 1999-2043. The estimated interest component
of such rental payments aggregates $70 million. The estimated portions of
obligations due within one year under capital leases are included in current
liabilities and approximated $166 million and $167 million at December 31, 1993
and September 30, 1994, respectively.
Future minimum rental payments at September 30, 1994 for operating leases are
estimated to aggregate $148 million, including $1 million in 1994, $9 million
in 1995, $9 million in 1996, $8 million in 1997, $8 million in 1998 and $113
million in 1999-2024.
(17) INVESTMENTS IN URANIUM-RELATED PROPERTIES. In May 1994, ComEd recorded a
reduction in the carrying value of its investments in uranium-related
properties after completing a review of various alternatives and reassessing
the long-term recoverability of those investments. The effects of the reduction
reduced net income by approximately $33.8 million or $0.16 per common share.
(18) JOINT PLANT OWNERSHIP. ComEd has a 75% undivided ownership interest in
the Quad-Cities nuclear generating station. Further, ComEd is responsible for
75% of all costs which are charged to appropriate investment, operation or
maintenance accounts and provides its own financing. At September 30, 1994, for
its share of ownership in the station, ComEd had an investment of $537 million
in production and transmission plant in service (before reduction of $168
million for the related accumulated provision for depreciation) and $72 million
in construction work in progress.
(19) COMMITMENTS, CONTINGENT LIABILITIES AND THE CONSTRUCTION PROGRAM.
Purchase commitments, principally related to construction and nuclear fuel,
approximated $1,257 million at
28
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
September 30, 1994, comprised of approximately $1,229 million for ComEd and the
Indiana Company and approximately $28 million for Unicom Thermal. In addition,
ComEd has substantial commitments for the purchase of coal under long-term
contracts. ComEd's coal costs are high compared to those of other utilities.
ComEd's western coal contracts and its rail contracts for delivery of the
western coal were renegotiated during 1992 effective as of January 1, 1993, to
provide, among other things, for significant reductions in the delivered price
of the coal over the duration of the contracts. However, the renegotiated
contracts provide for the purchase of certain coal at prices substantially
above currently prevailing market prices and ComEd has significant purchase
commitments under its contracts. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," subcaption "Liquidity and
Capital Resources," for additional information regarding ComEd's coal purchase
commitments.
ComEd is a member of NML, established to provide insurance coverage against
property damage to members' nuclear generating facilities. The members are
subject to a retrospective premium adjustment in the event losses exceed
accumulated reserve funds. Capital has been accumulated in the reserve funds of
NML to the extent that ComEd would not be liable for a retrospective premium
adjustment in the event of a single incident. However, ComEd could be subject
to a maximum assessment of approximately $57 million in any policy year, in the
event losses exceed accumulated reserve funds.
ComEd also is a member of NEIL, which provides insurance coverage against the
cost of replacement power obtained during certain prolonged accidental outages
of nuclear generating units and coverage for property losses in excess of $500
million occurring at nuclear stations. All companies insured with NEIL are
subject to retrospective premium adjustments if losses exceed accumulated
reserve funds. Capital has been accumulated in the reserve funds of NEIL to the
extent that ComEd would not be liable for a retrospective premium adjustment in
the event of a single incident under the replacement power coverage and the
property damage coverage. However, ComEd could be subject to maximum
assessments, in any policy year, of approximately $28 million and $88 million
in the event losses exceed accumulated reserve funds under the replacement
power and property damage coverages, respectively.
The NRC's indemnity for public liability coverage under the Price-Anderson
Act is supported by a mandatory industry-wide program under which owners of
nuclear generating facilities could be assessed in the event of nuclear
incidents. Based on the number of nuclear reactors with operating licenses,
ComEd would currently be subject to a maximum assessment of $991 million in the
event of an incident, limited to a maximum of $125 million in any calendar
year.
In addition, ComEd participates in the American Nuclear Insurers and Mutual
Atomic Energy Liability Underwriters Master Worker Program which provides
coverage for worker tort claims filed for bodily injury caused by the nuclear
energy hazard. The coverage applies to workers whose "nuclear related
employment" began after January 1, 1988. ComEd would currently be subject to a
maximum assessment of approximately $37 million in the event losses exceed
accumulated reserve funds.
Shareholder derivative lawsuits were filed on October 1, 1992 and on April
14, 1993 in the Circuit Court against current and former directors of ComEd
alleging that they breached their fiduciary duty and duty of care to ComEd in
connection with the management of the activities associated with the
construction of ComEd's four most recently completed nuclear generating units.
The lawsuits sought restitution to ComEd by the defendants for unquantified and
undefined losses and costs alleged to have been incurred by ComEd. Both
lawsuits were dismissed by the Circuit Court; however, appeals are pending
before the Illinois Appellate Court.
29
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
During 1989 and 1991, actions were brought in federal and state courts in
Colorado against ComEd and its subsidiary, Cotter, seeking unspecified damages
and injunctive relief based on allegations that Cotter has permitted
radioactive and other hazardous material to be released from its mill into
areas owned or occupied by the plaintiffs resulting in property damage and
potential adverse health effects. In February 1994, a federal jury returned
nominal dollar verdicts on eight bellwether plaintiffs' claims in these cases.
Plaintiffs have appealed those judgments. Although the remaining cases will
necessarily involve the resolution of numerous contested issues of fact and
law, Unicom's determination is that these actions will not have a material
impact on its financial position or results of operations.
ComEd is involved in administrative and legal proceedings concerning air
quality, water quality and other matters. The outcome of these proceedings may
require increases in future construction expenditures and operating expenses
and changes in operating procedures. ComEd and its subsidiaries are or are
likely to become parties to proceedings initiated by the U.S. EPA, state
agencies and/or other responsible parties under CERCLA with respect to a number
of sites, including MGP sites, or may voluntarily undertake to investigate and
remediate sites for which they may be liable under CERCLA.
ComEd generally did not operate MGPs as a corporate entity but did, however,
acquire MGP sites as part of the absorption of smaller utilities and as vacant
real estate on which ComEd facilities have been constructed. To date, ComEd has
identified 44 former MGP sites for which it may be liable for remediation.
ComEd presently estimates that its costs of former MGP site investigation and
remediation will aggregate from $25 million to $150 million in current-year
(1994) dollars. It is expected that the costs associated with investigation and
remediation of former MGP sites will be incurred over a period of approximately
20 to 30 years. Because ComEd is not able to determine the most probable
liability for such MGP costs, in accordance with accounting standards, a
reserve of approximately $25 million has been recorded as of December 31, 1993
and September 30, 1994, which reflects the low end of the range of ComEd's
estimate of the liability associated with former MGP sites. In addition, as of
December 31, 1993 and September 30, 1994, a reserve of $5 million and $8
million, respectively, has been recorded representing ComEd's estimate of the
liability associated with cleanup costs of remediation sites other than former
MGP sites. Unicom presently estimates that ComEd's costs of investigating and
remediating the former MGP and other remediation sites pursuant to CERCLA and
state environmental laws will not have a material impact on the financial
position or results of operations of Unicom and subsidiary companies. These
cost estimates are based on currently available information regarding the
responsible parties likely to share in the costs of responding to site
contamination, the extent of contamination at sites for which the investigation
has not yet been completed and the cleanup levels to which sites are expected
to have to be remediated.
The Clean Air Amendments require reductions in sulfur dioxide emissions from
ComEd's Kincaid station. The Clean Air Amendments also bar future utility
sulfur dioxide emissions except to the extent utilities hold allowances for
their emissions. Allowances which authorize their holder to emit sulfur dioxide
have been issued by the U.S. EPA based largely on historical levels of sulfur
dioxide emissions. These allowances are transferable and marketable. ComEd's
ability to increase generation in the future to meet expected increased demand
for electricity will depend in part on ComEd and the Indiana Company's ability
to acquire additional allowances or to reduce emissions below otherwise
allowable levels from their existing generating plants. In addition, the Clean
Air Amendments require studies to determine what controls, if any, should be
imposed on utilities to control air toxic emissions, including mercury. ComEd's
Clean Air Compliance Plan for Kincaid station was approved by the ICC on July
8, 1993. In late 1993, however, a federal court declared the Illinois law under
which the approval was received to be unconstitutional and compliance plans
prepared and approved in reliance on the law to be void. Under the Plan
approved by the ICC, ComEd would have been allowed to burn low sulfur Illinois
coal at Kincaid
30
<PAGE>
UNICOM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONCLUDED
station without the installation of pollution control equipment for the years
1995 through 1999, and to purchase any necessary emission allowances that are
expected to be available under the Clean Air Amendments during this period.
Also, under the Plan, ComEd expected to install pollution control equipment for
Kincaid station by the year 2000. When the final outcome of the federal
litigation is known, ComEd will determine whether any changes are required.
(20) SUBSEQUENT EVENTS. On October 5, 1994, ComEd closed the sale of $42.2
million principal amount of variable rate Pollution Control Revenue Refunding
Bonds issued through the Illinois Development Finance Authority and announced
the redemption on November 21, 1994 of all $42.2 million outstanding of the 11
3/8% Pollution Control Revenue Bonds, Series 1984, due October 15, 2014, issued
on its behalf through the Illinois Development Finance Authority.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On September 1, 1994, a corporate restructuring took place in which Unicom
became the parent holding company of ComEd and Unicom Enterprises, an
unregulated subsidiary engaged, through a subsidiary, in energy service
activities. The primary purpose of the restructuring was to permit Unicom
Enterprises to engage in energy service activities without the prior approval
of, or being regulated by, the ICC, in part to permit timely responses to
competitive activities which could adversely affect the ComEd utility business.
Notwithstanding the restructuring, ComEd will continue to represent
substantially all of the assets, revenues and net income of Unicom; and
Unicom's resources and results of operations will be largely dependent on, and
will reflect, those of ComEd. Unicom Enterprises' sole subsidiary, Unicom
Thermal, is a development stage company and is not expected to make a material
contribution to the revenues or results of operations of Unicom in the near
future. Consequently, the descriptions that follow focus on the utility
operations of ComEd, although information is provided with respect to the
unregulated operations of Unicom Enterprises.
LIQUIDITY AND CAPITAL RESOURCES
UTILITY OPERATIONS
------------------
Capital Budgets. ComEd and its electric utility subsidiary, the Indiana
Company, have a construction program for the three-year period 1994-96 which
consists principally of improvements to ComEd's and the Indiana Company's
existing nuclear and other electric production, transmission and distribution
facilities. It does not include funds (other than for planning) to add new
generating capacity to ComEd's system. The program, as approved by ComEd in
January 1994, calls for electric plant and equipment expenditures of
approximately $2,450 million (excluding nuclear fuel expenditures of
approximately $780 million). It is estimated that such construction
expenditures, with cost escalation computed at 4% annually, will be as follows:
<TABLE>
<CAPTION>
THREE-YEAR
1994 1995 1996 TOTAL
---- ---- ---- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Production......................................... $295 $310 $250 $ 855
Transmission and Distribution...................... 340 445 505 1,290
General............................................ 115 95 95 305
---- ---- ---- ------
Total.......................................... $750 $850 $850 $2,450
==== ==== ==== ======
</TABLE>
In October 1994, ComEd made a commitment to provide for the replacement of
the steam generators at Braidwood Unit 1 and Byron Unit 1, for service in the
years 1998 and 1999, respectively, at a total estimated cost of approximately
$470 million. The effect of this commitment on the three-year total for
construction expenditures shown above of $2,450 million would be an increase of
approximately $100 million. ComEd is currently in the process of preparing its
construction program for the years 1995-97 and will include the effect of this
commitment in that program. See "Part II. Other Information, Item 1. Legal
Proceedings," subcaption "Nuclear Matters," herein for additional information.
ComEd's forecasts of peak load indicate a need for additional resources to
meet demand, either through generating capacity or through equivalent purchased
power or demand-side management resources, in 1997 and each year thereafter
through the year 2000. The projected resource needs reflect the current
planning reserve margin recommendations of the Mid-America Interconnected
Network, the reliability council of which ComEd is a member. ComEd's forecasts
indicate that the need for additional resources during this period would exist
only during the summer months. ComEd does not expect to make expenditures for
additional capacity to the extent the need for capacity can be met through
cost-
32
<PAGE>
effective demand-side management resources, non-utility generation or other
power purchases. To assess the market potential to provide such cost-effective
resources, ComEd solicited proposals to supply it with cost-effective demand-
side management resources, non-utility generation resources and other-utility
power purchases sufficient to meet forecasted requirements through the year
2000. The responses to the solicitation suggest that adequate resources to meet
ComEd's needs could be obtained from those sources but ComEd has not yet
determined whether those sources represent the most economical alternative. If
ComEd were to build additional capacity to meet its needs, it would need to
make additional expenditures during the 1995-96 period.
ComEd has not budgeted for a number of projects, particularly at generating
stations, which could be required, but which ComEd does not expect to be
required during the budget period. In particular, ComEd has not budgeted for
the construction of scrubbers at its Kincaid station or for the replacement of
major amounts of piping at its boiling water reactor nuclear stations. See
"Regulation" below and "Part II. Other Information, Item 1. Legal Proceedings,"
subcaption "Nuclear Matters," herein for additional information.
Purchase commitments for ComEd and the Indiana Company, principally related
to construction and nuclear fuel, approximated $1,229 million at September 30,
1994. In addition, ComEd has substantial commitments for the purchase of coal
under long-term contracts as well as various short-term commitments as
indicated in the following table.
<TABLE>
<CAPTION>
CONTRACT PERIOD COMMITMENT(1)
-------- --------- -------------
<S> <C> <C>
Black Butte Coal Co. ............................. 1994-2007 $1,133
Decker Coal Co. .................................. 1994-2015 $ 834
Big Horn Coal Co. ................................ 1998 $ 21
Various short-term................................ 1994 $ 4
</TABLE>
--------
(1) Estimated costs in millions of dollars FOB mine. No estimate of
future escalation has been made.
For additional information concerning these coal contracts and ComEd's fuel
supply, see "Results of Operations" below and Notes 1 and 19 of Notes to
Financial Statements.
ComEd's construction program will be reviewed and modified as necessary to
adapt to changing economic conditions, rate levels and other relevant factors
including changing business and legal needs and requirements. ComEd cannot
anticipate all such possible needs and requirements. While regulatory needs in
particular are more likely, on balance, to require increases in construction
expenditures than decreases, ComEd's financial condition may require
compensating or greater reductions in other construction expenditures. See
"Part II. Other Information, Item 1. Legal Proceedings" for additional
information concerning the construction program.
Capital Resources. ComEd has forecast that internal sources will provide
approximately one-half of the funds required for ComEd's construction program
and other capital requirements, including nuclear fuel expenditures,
contributions to nuclear decommissioning trusts, sinking fund obligations and
refinancing of scheduled debt maturities (the annual sinking fund requirements
for ComEd preference stock and ComEd and the Indiana Company long-term debt are
summarized in Notes 7 and 8 of Notes to Financial Statements). The forecast
assumes the rate levels reflected in the Rate Matters Settlement, and reflects
the payments required to be made to customers under the Rate Matters Settlement
and the Fuel Matters Settlement.
The type and amount of external financing will depend on financial market
conditions and the needs and capital structure of ComEd at the time of such
financing. ComEd's new money financing requirements have increased in recent
years due to higher expenditures and lower operating cash flows resulting from
reduced revenues due to customer refunds and rate level adjustments ordered in
various proceedings related to the level of ComEd's rates and the effects of
the Rate Matters Settlement and the Fuel Matters Settlement. The balances of
cash and cash investments decreased by approximately $745 million from December
31, 1993 to September 30, 1994, primarily due to the effects of the
settlements. See "Financial Condition" below regarding ComEd's actions to
reduce operation and maintenance expenses. A portion
33
<PAGE>
of ComEd's financing is expected to be provided through the continued sale and
leaseback of nuclear fuel. ComEd has approximately $915 million of unused bank
lines of credit at September 30, 1994 which may be borrowed at various interest
rates and which may be secured or unsecured. The interest rate is set at the
time of a borrowing and is based on several floating rate bank indices plus a
spread which is dependent upon ComEd's credit ratings or on a prime interest
rate. Collateral, if required for the borrowings, would consist of first
mortgage bonds issued under and in accordance with the provisions of ComEd's
mortgage. See Note 9 of Notes to Financial Statements for information
concerning lines of credit. See the Statements of Consolidated Cash Flows for
the construction expenditures and cash flow from operating activities for the
three months, nine months and twelve months ended September 30, 1994.
During the first nine months of 1994, ComEd issued an aggregate of 236,110
shares of common stock for approximately $5,435,000 under its employee stock
plans; issued and sold 3,000,000 shares of $2.425 Cumulative Preference Stock;
sold and leased back an aggregate of approximately $207,463,000 of nuclear
fuel; issued $66,000,000 aggregate principal amount of first mortgage bonds in
connection with the refinancing of certain outstanding pollution control bonds;
and issued $300,000,000 of other long-term debt. ComEd entered into a loan
agreement dated as of October 5, 1994 with the Illinois Development Finance
Authority in order to refinance $42,200,000 of outstanding pollution control
bonds with lower cost, variable rate bonds.
As of November 8, 1994, ComEd has an effective "shelf" registration statement
with the SEC for the future sale of up to an additional $805 million of debt
securities and cumulative preference stock for general corporate purposes of
ComEd, including the discharge or refund of other outstanding securities.
Financial Condition. ComEd's financial condition will continue to depend on
its ability to generate revenues to cover its costs and to maintain adequate
debt and preferred and preference stock coverages and common stock equity
earnings. Although ComEd currently has a rate increase request pending before
the ICC, its management recognizes that competitive and regulatory
circumstances in Illinois may limit its ability to raise its rates.
Consequently, ComEd's financial condition will be affected by, and ComEd's
management is addressing, actions to maintain and increase sales, to control
operating and capital expenditures, and to anticipate competitive activities.
During the past several years, ComEd has instituted cost reduction plans
including various workforce reductions. ComEd reached agreement in August 1993
with its unions regarding certain cost reduction actions. The agreement
provided for a wage freeze until April 1, 1994, changes to reduce health care
plan cost, increased use of part-time employment and changes in holiday
provisions. The agreement also included a continuation of negotiations relative
to other issues. ComEd and union representatives reached agreement in February
1994 and announced an offer of a voluntary early retirement program. This
program is available to ComEd and the Indiana Company management, non-union and
union employees eligible to retire or who would become eligible to retire after
December 31, 1993 and before April 1, 1995. The period for most eligible
employees to elect to participate in the program expired on April 20, 1994. The
charge to income related to the program in the nine-month period ended
September 30, 1994 of approximately $20 million (net of income tax effects)
related to employees who accepted the program during the nine months ended
September 30, 1994. ComEd estimates that, in total, approximately $21 million
(net of income tax effects) will be charged to income as a result of the
program. See "Regulation" below and Note 12 of Notes to Financial Statements.
The current ratings of ComEd's securities by three principal securities
rating agencies are as follows:
<TABLE>
<CAPTION>
STANDARD DUFF &
MOODY'S & POOR'S PHELPS
------- -------- ------
<S> <C> <C> <C>
First mortgage and secured pollution control
bonds........................................... Baa2 BBB BBB
Publicly-held debentures and unsecured pollution
control obligations............................. Baa3 BBB- BBB-
Convertible preferred stock...................... baa3 BBB- BB+
Preference stock................................. baa3 BBB- BB+
Commercial paper................................. P-2 A-2 Duff 2
</TABLE>
34
<PAGE>
The foregoing ratings reflect downgradings during 1992 and in January 1993 as
a result of developments in the proceedings leading to, and the issuance of,
the Remand Order. On October 27, 1993, Standard & Poor's changed its "outlook"
on ComEd's ratings from stable to negative as part of its larger assessment of
the electric utility industry. In July 1994, Standard & Poor's affirmed its
ratings of ComEd's debt, with its ratings "outlook" remaining negative. In
December 1993, Moody's and Duff & Phelps affirmed their ratings of ComEd's
securities, and Moody's rating outlook on ComEd remained stable. See "Part II,
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters"
in ComEd's Annual Report on Form 10-K for the year ended December 31, 1993 (as
amended by the Form 10-K/A-1 filed on August 31, 1994), for additional
information regarding ComEd's securities ratings.
Business and Competition. The electric utility business has historically been
characterized by retail service monopolies in state or locally franchised
service territories. Investor-owned electric utilities have tended to be
vertically integrated with all aspects of their business subject to pervasive
regulation. Although customers have normally been free to supply their electric
power needs through self-generation, they have not had a choice of electric
suppliers and self-generation has not generally been economical.
The market in which electric utilities like ComEd operate has become more
competitive and many observers believe competition will intensify. Self-
generation can be economical for certain customers, depending on how and when
they use electricity and other customer-specific considerations. A number of
competitors are currently seeking to identify and do business with those
customers. In addition, suppliers of other forms of energy are increasingly
competing to supply energy needs which historically were supplied primarily or
exclusively by electricity.
The Energy Policy Act of 1992 will likely have a significant effect on
companies engaged in the generation, transmission, distribution, purchase and
sale of electricity. This Act, among other things, expands the authority of the
FERC to order electric utilities to transmit or "wheel" wholesale power for
others, and facilitates the creation of non-utility electric generating
companies. Although ComEd cannot now predict the full impact of this Act, it
will likely create and increase competition affecting ComEd.
ComEd is facing increased competition from several non-utility businesses
which seek to provide energy services to users of electricity, especially
larger customers such as industrial, commercial and wholesale customers. Such
suppliers include independent power producers and unregulated energy services
companies. In this regard, natural gas utilities operating in ComEd's service
area have established subsidiary ventures to provide heating, ventilating and
air conditioning services, attempting to attract ComEd's customers. Also,
several utilities in the United States have established unregulated energy
services subsidiaries which pursue business opportunities wherever they exist.
In addition, cogeneration and energy services companies have begun soliciting
ComEd's customers to provide alternatives to using ComEd's electricity. In
October 1993, the ICC granted ComEd the authority to negotiate special discount
contract rates with new or existing industrial customers for up to a total of
400 megawatts of added load, where the customers would not have chosen service
from ComEd for the increased load in the absence of the discount rates. In
addition, in June 1994, the ICC granted ComEd the authority to negotiate
special discount contract rates with up to 25 of its largest existing
customers, where such contracts would be necessary to retain the customers'
existing load on ComEd's system.
ComEd recently negotiated amendments to existing contracts with three of its
wholesale municipal customers, which extended the contracts for an additional
ten-year period past the 1997 expiration dates. ComEd was one of a number of
bidders for providing service to these customers. The contracts, which have
been filed with the FERC, will become effective upon FERC approval.
The ICC has formed a task force for the purpose of conducting a broad-based
and open examination of the expanding presence of market components within the
electric industry. Participants from more than forty organizations, including
representatives from the electric utility industry, are meeting to examine
three broad issues: effects of regulation, competition and future regulatory
and legislative changes. A
35
<PAGE>
report examining all sides of the issues is planned for release as early as
year-end to the ICC, the legislature and the Governor.
Capital Structure. The ratio of long-term debt to total capitalization has
decreased to 54.1% at September 30, 1994 from 55.0% at December 31, 1993. This
decrease is related primarily to the retirement and early redemption of long-
term debt, the increase in current maturities of long-term debt reclassified to
current liabilities and the issuance of cumulative preference stock.
UNREGULATED OPERATIONS
----------------------
Unicom Enterprises intends, through subsidiaries, to engage in energy-related
businesses which will not be subject to utility regulation by state or federal
agencies. As of September 30, 1994, Unicom Enterprises had only one subsidiary,
Unicom Thermal, which will provide district cooling services to office and
other buildings from central locations in the city of Chicago. District cooling
involves, in essence, the production of chilled water at a central location and
its circulation from such location to customers' buildings in a closed circuit
of piping. Such water is used to chill air in customers' air conditioning
systems without the use of CFCs. As a result of the Clean Air Amendments, the
manufacture and use of CFCs will be curtailed, commencing in 1996, thereby
creating an excellent marketing opportunity for non-CFC based systems, such as
district cooling. Unicom Thermal is currently a development stage enterprise
and, as such, has no customers and has generated no revenues. Unicom Thermal
expects to begin serving customers in the summer of 1995.
Capital Budgets. Unicom Thermal has forecasted capital expenditures for the
year 1994 of approximately $21 million and for the years 1995-97 of
approximately $90 million, primarily representing the construction costs of its
district cooling facilities and piping system. Construction of its first
district cooling facility is expected to be completed by May 1995 and is
expected to cost approximately $30 million. As of September 30, 1994, Unicom
Thermal's purchase commitments, principally related to construction, were
approximately $28 million.
Capital Resources. Unicom expects to obtain funds to invest in Unicom
Enterprises and its subsidiaries principally from dividends that it receives on
its ComEd common stock and from bank borrowings by Unicom Enterprises. While
the amount of dividends on ComEd common stock is expected to be greater than
the amount of dividends on Unicom common stock, the availability of such
dividends is dependent on ComEd's financial performance and cash position.
Other forms of financing by ComEd of Unicom or its other subsidiaries, such as
loans or additional equity investments (none of which is expected), would be
subject to the prior approval of the ICC.
Unicom Enterprises is in the process of arranging a $200 million credit
facility which would expire in 1997. The credit facility could be used by
Unicom Enterprises to finance investments in nonregulated energy-related
businesses and projects, including Unicom Thermal, and for general corporate
purposes. The credit facility would be guaranteed by Unicom and would include
certain covenants with respect to Unicom's and Unicom Enterprises' operations.
Interest rates for borrowings under the credit facility would be set at the
time of a borrowing and would be based on either a prime interest rate or a
floating rate bank index plus a spread which will vary with the credit rating
of ComEd's publicly rated first mortgage bonds.
REGULATION
ComEd and the Indiana Company are subject to state and federal regulation in
the conduct of their respective businesses, including the operations of Cotter.
Such regulation includes rates, securities issuance, nuclear operations,
environmental and other matters. Particularly in the cases of nuclear
operations and environmental matters, such regulation can and does affect
operational and capital expenditures.
36
<PAGE>
Rate Proceedings. ComEd's revenues, net income, cash flows and plant carrying
costs have been affected directly by various rate-related proceedings. During
the periods presented in the financial statements, ComEd was involved in a
number of proceedings concerning its rates. The uncertainties associated with
such proceedings and related issues, among other things, led to the Rate
Matters Settlement and the Fuel Matters Settlement (see Note 2 of Notes to
Financial Statements). The effects of the aforementioned rate proceedings and
settlements during the periods presented are discussed below under "Results of
Operations."
Pending Rate Proceeding. On February 10, 1994, ComEd filed a request with the
ICC to increase electric operating revenues by approximately $460 million, or
7.9%, on an annual basis above the level of revenues approved in the Rate
Matters Settlement. This request principally reflects the inclusion of the
Units in ComEd's rate base as fully "used and useful," increased operation and
maintenance expenses over the level reflected in the Remand Order, increased
contributions to the external trust funds which ComEd is required to fund to
cover the eventual decommissioning of its nuclear power plants, and lower debt
and equity costs. The ICC has suspended the rates, appointed hearing examiners
and ordered an investigation. In September 1994, the ICC Staff issued an
initial brief in which they recommended that Byron Unit 2 and Braidwood Unit 1
be found fully "used and useful" and Braidwood Unit 2 be found approximately
69% "used and useful." In total, the Staff's brief recommended that ComEd
receive a $313.2 million increase in revenues, including a $53.7 million
increase in base rates along with a proposal to collect $169.9 million for
decommissioning costs and $89.6 million for municipal franchise compensation as
riders on customer bills. Illinois legislation, effective September 1994,
allows the ICC to authorize the use of riders to pass on to ratepayers
increases or decreases in decommissioning costs without filing a new rate case,
while maintaining its authority to monitor and approve charges that flow
through the rider. Under the Illinois Public Utilities Act, the ICC must decide
the case by early January 1995.
In the Remand Order, the rate determination was based upon, among other
things, findings by the ICC with respect to the extent to which the Units were
"used and useful" during the 1991 test year period of the rate order. With
respect to the "used and useful" issue, the ICC applied a needs and economic
benefits methodology, using a twenty percent reserve margin and forecasted peak
demand, and found Byron Unit 2 and Braidwood Units 1 and 2 to be 93%, 21% and
0%, respectively, "used and useful." ComEd has not recorded any disallowances
related to the "used and useful" issue. ComEd considers the "used and useful"
disallowance in the Remand Order to be temporary. The ICC concluded in the
Remand Order that the forecasts in the record in that proceeding indicated that
Braidwood Units 1 and 2 will be fully "used and useful" within the reasonably
foreseeable future.
Nuclear Matters. During the past several years, the NRC has placed two of
ComEd's nuclear generating stations, Zion station and Dresden station, on its
list of plants to be monitored closely. Because of the age of the Zion, Dresden
and Quad-Cities stations, ComEd anticipates increased expenditures for
operation and maintenance expenses in order to improve reliability and to meet
NRC regulatory expectations. Accordingly, ComEd has restructured its management
of its nuclear stations and committed additional resources to the stations'
operations.
In February 1993, ComEd was notified by the NRC that ComEd's Zion station,
which was placed on the NRC's list of plants to be monitored closely in early
1991, was removed from that list. In June 1994, ComEd was notified by the NRC
that ComEd's Dresden station, which was placed on the NRC's list of plants to
be monitored closely in early 1992, would remain on that list. Also in June
1994, ComEd was notified by the NRC that ComEd's LaSalle County and Quad-Cities
stations, which were placed on the NRC's list of plants with adverse
performance trends in January 1994, would remain on that list. ComEd has been
informed that the NRC concerns about LaSalle County station include, among
other matters, deficient radiation worker practices. The NRC concerns with
Quad-Cities station include deficiencies in the condition of certain station
equipment and the effectiveness of the operators of the units in identifying
37
<PAGE>
and responding to certain operational problems, among other matters. ComEd has
provided written and verbal responses to the NRC and is diligently working to
resolve the concerns. ComEd anticipates continued increased expenditures in
connection with those stations. See "Part II. Other Information, Item 1. Legal
Proceedings," subcaption "Nuclear Matters," for additional information.
ComEd estimates that it will expend approximately $15 billion for
decommissioning costs primarily during the period from 2007 through 2032. Such
costs, which are estimated to aggregate approximately $4.24 billion in current-
year (1994) dollars, are expected to be funded by the external decommissioning
trust funds which ComEd established in compliance with Illinois law and into
which ComEd has been making annual contributions. See Note 1 of Notes to
Financial Statements under "Depreciation and Decommissioning" for additional
information regarding decommissioning costs.
Environmental Matters. The Clean Air Amendments require reductions in sulfur
dioxide emissions from ComEd's Kincaid station. The Clean Air Amendments also
bar future utility sulfur dioxide emissions except to the extent utilities hold
allowances for their emissions. Allowances which authorize their holder to emit
sulfur dioxide have been issued by the U.S. EPA based largely on historical
levels of sulfur dioxide emissions. These allowances are transferable and
marketable. ComEd's ability to increase generation in the future to meet
expected increased demand for electricity will depend in part on ComEd and the
Indiana Company's ability to acquire additional allowances or to reduce
emissions below otherwise allowable levels from their existing generating
plants. In addition, the Clean Air Amendments require studies to determine what
controls, if any, should be imposed on utilities to control air toxic
emissions, including mercury. ComEd's Clean Air Compliance Plan for Kincaid
station was approved by the ICC on July 8, 1993. In late 1993, however, a
federal court declared the Illinois law under which the approval was received
to be unconstitutional and compliance plans prepared and approved in reliance
on the law to be void. Under the Plan approved by the ICC, ComEd would have
been allowed to burn low sulfur Illinois coal at Kincaid station without the
installation of pollution control equipment for the years 1995 through 1999,
and to purchase any necessary emission allowances that are expected to be
available under the Clean Air Amendments during this period. Also, under the
Plan, ComEd expected to install pollution control equipment for Kincaid station
by the year 2000. When the final outcome of the federal litigation is known,
ComEd will determine whether any changes are required.
The Clean Air Amendments also require reductions in nitrogen oxide emissions
from ComEd and the Indiana Company's fossil fuel generating units. The Illinois
EPA has proposed rules with respect to such emissions which would require
modifications to certain of ComEd's boilers inside the Chicago ozone non-
attainment area. The proposed rules are currently under review. The Illinois
EPA is also considering nitrogen oxide emission reductions at ComEd generating
stations outside the Chicago ozone non-attainment area.
RESULTS OF OPERATIONS
Unicom's earnings (loss) per common share for the three months ended
September 30, 1994 were $1.23 compared to $1.27 for the three months ended
September 30, 1993, $1.29 for the nine months ended September 30, 1994 compared
to $1.82 for the nine months ended September 30, 1993, and $(0.31) for the
twelve months ended September 30, 1994 compared to $2.24 for the twelve months
ended September 30, 1993. Substantially all of the results of operations for
Unicom are the results of operations of ComEd. Unicom Enterprises' only
subsidiary, Unicom Thermal, is currently a development stage enterprise, and
for the period from July 30, 1993 (its date of inception) through September 30,
1993 and for the three months, nine months and twelve months ended September
30, 1994 incurred losses that are not material to the results of Unicom and
subsidiary companies as a whole. As such, the following section discusses the
results of operations of ComEd alone.
Net Income (Loss) on Common Stock. The decreases in ComEd's earnings in the
recent nine-month and twelve-month periods reflect higher operation and
maintenance expenses, which include a non-recurring after-tax charge for
additional pension costs related to an early retirement program of $20
38
<PAGE>
million (or $0.09 per common share). ComEd also recorded a reduction in the
carrying value of its investments in uranium-related properties which reduced
net income by $33.8 million (or $0.16 per common share) for the nine-month and
twelve-month periods ended September 30, 1994. The decrease in the recent nine-
month period was partially offset by higher revenues as a result of ComEd's
increased kilowatthour sales to ultimate consumers. Earnings in the recent
twelve-month period were significantly affected by the recording of the effects
of the Rate Matters Settlement and Fuel Matters Settlement, the net effects of
which reduced net income for the twelve months ended September 30, 1994 by
approximately $388 million or $1.82 per common share, in addition to the effect
of the deferred recognition of revenues which ComEd had recorded during the
recent twelve-month period (approximately $16 million or $0.08 per common
share), and after the partially offsetting effect of recording approximately
$261 million or $1.22 per common share in deferred carrying charges, net of
income taxes and amortization, as authorized in the Remand Order. This negative
effect was partially offset by higher revenues resulting from an increase in
ComEd's kilowatthour sales to ultimate consumers in the recent twelve-month
period. The prior nine-month and twelve-month periods reflect the favorable
cumulative effect ($9.7 million or $0.05 per common share) of the adoption of
SFAS No. 109, Accounting for Income Taxes, in January 1993.
See Note 2 of Notes to Financial Statements for information regarding a
reclassification of the deferred recognition of revenues from operating
revenues to provisions for revenue refunds for the three months, nine months
and twelve months ended September 30, 1993 and the twelve months ended
September 30, 1994.
Kilowatthour Sales. Kilowatthour sales to ultimate consumers for the three
months, nine months and twelve months ended September 30, 1994 increased 0.4%,
2.6% and 1.9%, respectively, compared to the three months, nine months and
twelve months ended September 30, 1993. The increases in the recent nine-month
and twelve-month periods reflect higher kilowatthour sales to all classes of
customers due primarily to warmer than normal summer weather and colder than
normal winter weather as compared to the same periods ended September 30, 1993.
The service territory economy also improved during 1994, which contributed to
the increase in kilowatthour sales. Kilowatthour sales including sales for
resale decreased 5.8%, 4.3% and 1.7% during the three-month, nine-month and
twelve-month periods ended September 30, 1994, respectively, compared to the
same periods ended September 30, 1993.
Operating Revenues. Operating revenues decreased slightly in the three months
ended September 30, 1994 compared to the prior three-month period in 1993.
Operating revenues increased in the nine months ended September 30, 1994
compared to the nine months ended September 30, 1993. The increase in the
recent nine-month period principally reflects the increased level of
kilowatthour sales to ultimate consumers described above. The prior nine-month
period reflected higher rate levels recognized prior to January 15, 1993, the
effective date on which ComEd began deferring recognition of revenues for
amounts over the $144 million rate increase level provided in the Remand Order.
Operating revenues decreased in the twelve months ended September 30, 1994 as
compared to the prior twelve-month period, principally reflecting the recording
of the effects of the Rate Matters Settlement and the Fuel Matters Settlement,
which reduced operating revenues by approximately $1,045 million in the recent
period. This reduction was partially offset by the effects of the previously
described higher kilowatthour sales to ultimate consumers. The decrease in
operating revenues for the recent twelve-month period was also partially offset
by the increase in ComEd's fuel costs recovered under the fuel adjustment
provision.
39
<PAGE>
Fuel Costs. Changes in fuel expense for the three months, nine months and
twelve months ended September 30, 1994 as compared to the same periods ended
September 30, 1993 primarily result from changes in the average cost of fuel
consumed, changes in the mix of fuel sources of electric energy generated and
changes in net generation of electric energy. Fuel mix is determined primarily
by system load, the costs of fuel consumed and the availability of nuclear
generating units. The cost of fuel consumed, net generation of electric energy
and fuel sources of kilowatthour generation were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
-------------------- ------------------ --------------------
1993 1994 1993 1994 1993 1994
--------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cost of fuel consumed (per million Btu):
Nuclear..................................... $0.50 $0.52 $0.51 $0.53 $0.51 $0.54
Coal........................................ $2.91 $2.33 $3.05 $2.35 $3.08 $2.40
Oil......................................... $3.08 $3.06 $3.08 $2.83 $3.10 $2.84
Natural gas................................. $2.64 $2.19 $2.79 $2.43 $2.83 $2.46
Average all fuels........................... $1.10 $1.05 $1.12 $1.11 $1.10 $1.15
Net generation of electric energy (millions of
kilowatthours)............................... 27,015 25,279 71,837 67,792 92,241 90,221
Fuel sources of kilowatthour generation:
Nuclear..................................... 76% 72% 77% 70% 79% 69%
Coal........................................ 22 25 21 26 20 27
Oil......................................... 1 1 1 1 -- 1
Natural gas................................. 1 2 1 3 1 3
--------- --------- -------- -------- --------- ---------
100% 100% 100% 100% 100% 100%
========= ========= ======== ======== ========= =========
</TABLE>
Under the Energy Policy Act of 1992, investor-owned electric utilities that
have purchased enrichment services from the DOE are being assessed amounts to
fund a portion of the cost for the decontamination and decommissioning of three
nuclear enrichment facilities previously operated by the DOE. ComEd's portion
of such assessments is estimated to be approximately $15 million per year (to
be adjusted annually for inflation). The Act provides that such assessments are
to be treated as a cost of fuel. See Note 1 of Notes to Financial Statements
for information related to the accounting for such costs.
Fuel Supply. Compared to other utilities, ComEd has relatively low average
fuel costs. This results from ComEd's reliance predominantly on lower cost
nuclear generation. ComEd's coal costs, however, are high compared to those of
other utilities. ComEd's western coal contracts and its rail contracts for
delivery of the western coal were renegotiated during 1992 effective as of
January 1, 1993, to provide, among other things, for significant reductions in
the delivered price of the coal over the duration of the contracts. However,
the renegotiated contracts provide for the purchase of certain coal at prices
substantially above currently prevailing market prices and ComEd has
significant purchase commitments under its contracts. In addition, as of
September 30, 1994, ComEd had unrecovered fuel costs in the form of coal
reserves of approximately $504 million. In prior years, ComEd's commitments for
the purchase of coal exceeded its requirements. Rather than take all the coal
it was required to take, ComEd agreed to purchase the coal in place in the form
of coal reserves. For additional information concerning ComEd's coal purchase
commitments, fuel reconciliation proceedings and coal reserves, see "Liquidity
and Capital Resources" above and Notes 1, 2 and 19 of Notes to Financial
Statements.
Purchased Power. Amounts of purchased power are primarily affected by system
load, the availability of ComEd and the Indiana Company's generating units and
the availability and cost of power from other utilities.
The number and average cost of kilowatthours purchased were as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS TWELVE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
--------------- --------------- ---------------
1993 1994 1993 1994 1993 1994
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Kilowatthours (millions)........ 49 315 457 1,937 990 2,124
Cost per kilowatthour........... 1.74c 3.69c 1.92c 2.91c 1.91c 2.83c
</TABLE>
Deferred Under or Overrecovered Energy Costs--Net. Operating expenses for the
three months, nine months and twelve months ended September 30, 1994 and 1993
reflect the net change in under or overrecovered allowable energy costs under
ComEd's fuel adjustment clause. See "Fuel Costs" and "Fuel Supply" above and
Note 1 of Notes to Financial Statements.
40
<PAGE>
Operation and Maintenance Expenses. Total operation and maintenance expenses
decreased 1.4% and increased 7.7% and 5.4% for the three months, nine months
and twelve months ended September 30, 1994, respectively, compared to the same
periods ended September 30, 1993. The decrease in the current three-month
period primarily reflects lower operation and maintenance expenses associated
with nuclear generating stations. The increase in the current nine-month period
primarily reflects higher operation and maintenance expenses associated with
fossil and nuclear generating stations, distribution facilities, pension costs
and certain administrative and general costs. The increase in the twelve months
ended September 30, 1994 reflects higher operation and maintenance expenses
associated with distribution facilities, the 1993 special pay incentive
program, pension costs and other employee benefits, including postretirement
health care benefits, and certain administrative and general costs partially
offset by lower expenses associated with fossil generating stations. The
effects of inflation are reflected in the increases and decreases discussed
below and have increased operation and maintenance costs for the three months,
nine months and twelve months ended September 30, 1994.
Operation and maintenance expenses associated with the nuclear generating
stations decreased $8 million for the current three months ended September 30,
1994 and increased $48 million for the nine months ended September 30, 1994
compared to the same periods ended September 30, 1993. The increase for the
current nine-month period is due, in part, to activities undertaken during
increased scheduled and non-scheduled outages and an increase in expenses
associated with stations which were placed on the NRC's list of plants with
adverse performance trends in January 1994. Future operation and maintenance
expenses associated with nuclear generating stations may be significantly
affected by regulatory, operational and other requirements. See "Nuclear
Matters" under "Regulation" above. Operation and maintenance expenses
associated with the fossil generating stations increased $10 million in the
recent nine months ended September 30, 1994 compared to the same period ended
September 30, 1993. The increase in the nine-month period reflects, in part,
activities undertaken during a greater number of scheduled overhauls. Operation
and maintenance expenses associated with the fossil generating stations
decreased $6 million for the twelve months ended September 30, 1994, compared
to the same period ended September 30, 1993. The decrease in the twelve-month
period reflects, in part, activities undertaken during a lesser number of
scheduled overhauls.
Operation and maintenance expenses associated with ComEd's distribution
system increased $5 million and $11 million in the nine months and twelve
months ended September 30, 1994, respectively, compared to the same periods
ended September 30, 1993. The increases in the recent periods reflect costs
related to a system safety and reliability improvement program. Expenses
associated with ComEd's distribution system may increase in future years due,
in part, to the effect of increased customer expectations regarding service
reliability.
The twelve-month period ended September 30, 1994 reflects a $36 million
special incentive plan cost (recorded in December 1993) for employees related
to a sharing of operation and maintenance savings below 1993 budgeted levels.
The costs of pension and other employee benefits, including postretirement
health care benefits, increased $35 million and $47 million in the nine months
and twelve months ended September 30, 1994, respectively, compared to the same
periods ended September 30, 1993. The increase in the current periods reflect
non-recurring costs of $33 million for the nine months and twelve months ended
September 30, 1994 related to employees who elected in the recent nine-month
period to take early retirements under a 1994 early retirement program. It is
estimated that, in total, the program will result in the recognition of
approximately $35 million of pension cost. Other employee benefits, including
postretirement health care benefits, increased $14 million for the twelve
months ended September 30, 1994, compared to the same period ended September
30, 1993. Included in this increase was a $4 million increase in medical costs
for active employees and a $4 million increase in postretirement health care
costs.
41
<PAGE>
Certain administrative and general costs increased $8 million for both the
nine months and twelve months ended September 30, 1994 compared to the same
periods ended September 30, 1993, primarily due to an increase in the provision
for injuries and damages.
For further information regarding the 1994 early retirement program, see
"Liquidity and Capital Resources," subcaption "Financial Condition" above.
Depreciation. Depreciation expense for the three months, nine months and
twelve months ended September 30, 1994 increased over the same periods a year
ago as a result of additions to plant in service. See Note 1 of Notes to
Financial Statements for information concerning depreciation rates and
decommissioning costs.
Interest on Debt. Changes in interest on long-term debt and notes payable for
the three months, nine months and twelve months ended September 30, 1994 as
compared to the same periods ended September 30, 1993 were due to changes in
average interest rates and in the amounts of long-term debt and notes payable
outstanding. Changes in interest on long-term debt also reflected new issues of
debt and the retirement and redemption of issues which were refinanced at
generally lower rates of interest. The average amounts of long-term debt and
notes payable outstanding and average interest rates thereon were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
--------------------- --------------------- ---------------------
1993 1994 1993 1994 1993 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Long-term debt outstand-
ing--
Average amount (mil-
lions)................ $8,043 $7,888 $8,135 $7,953 $8,099 $7,948
Average interest rate.. 8.00% 7.83% 8.11% 7.84% 8.16% 7.85%
Notes payable outstand-
ing--
Average amount (mil-
lions)................ $ 6 $ 15 $ 6 $ 9 $ 6 $ 8
Average interest rate.. 5.83% 5.94% 5.83% 6.09% 5.84% 6.05%
</TABLE>
Deferred Carrying Charges. In the Remand Order, the ICC provided that, for
ratemaking purposes, deferred carrying charges on the reasonable and "used and
useful" plant costs of the Units for the period April 1, 1989 until
approximately March 20, 1991, the date the Units were reflected in rates, could
be deferred and amortized. Approximately $438 million of such costs was
capitalized as a regulatory asset in October 1993 and resulted in an increase
to net income for the twelve months ended September 30, 1994 of approximately
$261 million or $1.22 per common share. Amortization of deferred carrying
charges for the three months, nine months and twelve months ended September 30,
1994 amounted to approximately $3 million, $10 million and $12 million,
respectively.
Income Taxes. In the third quarter of 1993, the President of the United
States signed into law a deficit-reduction plan that included, among other
things, an increase in the federal statutory corporate income tax rate from 34%
to 35%, effective January 1, 1993. The estimated effect of the higher rate
would be to increase costs by approximately $12 million per year. The recording
of the effects of the increased taxes began in the third quarter of 1993. In
addition to the effects on income discussed above, a net increase in the
deferred income tax liability was recorded in the third quarter of 1993 which
was primarily offset by regulatory assets net of regulatory liabilities,
reflecting the increase in taxes recoverable in rates to settle net income tax
liabilities recorded in prior years.
Further, the effects of the elimination of a scheduled reduction in a
component of the statutory Illinois income tax rate, which was to have declined
to 4.4% from 4.8% effective July 1, 1993, were recorded in the third quarter of
1993.
In 1993, a loss for income tax purposes was recorded. Income tax overpayments
resulting from such loss and other tax refunds, approximating $187 million and
$52 million at December 31, 1993 and September 30, 1994, respectively, are
included in the Consolidated Balance Sheets in receivables.
42
<PAGE>
See Note 14 of Notes to Financial Statements for information concerning the
accounting standard adopted in January 1993 which requires an asset and
liability approach for financial accounting and reporting for income taxes
rather than the deferred method.
Decommissioning. The staff of the SEC has questioned certain of the current
accounting practices of the electric utility industry, including ComEd,
regarding the recognition, measurement and classification of decommissioning
costs for nuclear generating stations in financial statements of electric
utilities. In response to these questions, the Financial Accounting Standards
Board has agreed to review the accounting for nuclear decommissioning costs. If
current electric utility industry accounting practices for such decommissioning
are changed: (1) annual provisions for decommissioning could increase; (2) the
estimated cost for decommissioning could be recorded as a liability rather than
as accumulated depreciation; and (3) trust fund income from the external
decommissioning trusts could be reported as investment income rather than as a
reduction to decommissioning expense. Unicom does not believe that such
changes, if required, would have an adverse effect on results of operations due
to ComEd's current and future ability to recover decommissioning costs through
rates.
Investments in Uranium-Related Properties. In May 1994, ComEd recorded a
reduction in the carrying value of its investments in uranium-related
properties after completing a review of various alternatives and reassessing
the long-term recoverability of those investments. The effects of the reduction
reduced net income by approximately $33.8 million or $0.16 per common share.
Other Items. The amounts of AFUDC reflect changes in the average levels of
investment subject to AFUDC and changes in the average annual rates as
discussed in Note 1 of Notes to Financial Statements. AFUDC does not contribute
to the current cash flow of Unicom or ComEd.
ComEd's ratios of earnings to fixed charges for the twelve months ended
December 31, 1993 and September 30, 1994 were 1.19 and 1.00, respectively.
ComEd's ratios of earnings to fixed charges and preferred and preference stock
dividend requirements for the twelve months ended December 31, 1993 and
September 30, 1994 were 1.03 and 0.87, respectively. For the twelve months
ended September 30, 1994, the ratios indicate that earnings were inadequate to
cover fixed charges and preferred and preference stock dividend requirements by
approximately $108 million.
Business corporations in general have been adversely affected by inflation
because amounts retained after the payment of all costs have been inadequate to
replace, at increased costs, the productive assets consumed. Electric utilities
in particular have been especially affected as a result of their capital
intensive nature and regulation which limits capital recovery and prescribes
installation or modification of facilities to comply with increasingly
stringent safety and environmental requirements. Because the regulatory process
limits the amount of depreciation expense included in ComEd's revenue allowance
to the original cost of utility plant investment, the resulting cash flows are
inadequate to provide for replacement of that investment in future years or
preserve the purchasing power of common equity capital previously invested.
43
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Commonwealth Edison Company:
We have audited the accompanying consolidated balance sheets and statements
of consolidated capitalization of Commonwealth Edison Company (an Illinois
corporation) and subsidiary companies as of December 31, 1993 and September 30,
1994, and the related statements of consolidated income, retained earnings,
premium on common stock and other paid-in capital, and cash flows for the
three-month, nine-month and twelve-month periods ended September 30, 1993 and
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 Commonwealth Edison Company
and subsidiary companies as of December 31, 1993 and September 30, 1994, and
the results of their operations and their cash flows for the three-month, nine-
month and twelve-month periods ended September 30, 1993 and 1994, in conformity
with generally accepted accounting principles.
As discussed in Notes 13 and 14, effective January 1, 1993, the Company
changed its method of accounting for postretirement health care benefits and
income taxes, respectively.
Arthur Andersen LLP
Chicago, Illinois
November 8, 1994
44
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME
The following Statements of Consolidated Income for the three months, nine
months and twelve months ended September 30, 1993 and 1994 reflect the results
of past operations and are not intended as any representation as to results of
operations for any future period. Future operations will necessarily be
affected by various and diverse factors and developments, including changes in
electric rates, population, business activity, taxes, environmental control,
energy use, fuel supply, cost of labor, fuel and purchased power and other
matters, the nature and effect of which cannot now be determined.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
---------------------- ---------------------- ----------------------
1993 1994 1993 1994 1993 1994
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Electric Operating Reve-
nues (Notes 2 and 3):
Operating revenues..... $1,979,738 $1,858,119 $5,036,916 $4,826,009 $6,500,070 $6,336,298
Provisions for revenue
refunds............... (107,290) (2,587) (250,536) (13,561) (250,555) (1,049,790)
---------- ---------- ---------- ---------- ---------- ----------
$1,872,448 $1,855,532 $4,786,380 $4,812,448 $6,249,515 $5,286,508
---------- ---------- ---------- ---------- ---------- ----------
Electric Operating Ex-
penses and Taxes:
Fuel (Notes 1, 2, 10
and 19)............... $ 324,606 $ 288,990 $ 869,465 $ 814,974 $1,097,033 $1,116,444
Purchased power........ 859 11,633 8,757 56,466 18,920 60,011
Deferred
(under)/overrecovered
energy costs--net
(Note 1).............. (6,633) 9,508 (9,585) (11,451) (31,831) (3,624)
Operation.............. 360,267 353,222 1,066,011 1,146,247 1,449,923 1,536,222
Maintenance............ 128,372 122,481 429,239 458,125 594,879 610,600
Depreciation (Note 1).. 215,428 221,938 645,557 665,807 854,782 883,016
Recovery of regulatory
assets................ 765 3,818 2,296 11,635 3,128 14,574
Taxes (except income)
(Note 15)............. 201,327 210,880 573,984 599,239 760,368 727,167
Income taxes (Notes 1
and 14)--
Current--Federal..... 114,301 82,725 190,242 139,192 198,164 (70,978)
--State.............. 35,477 (846) 48,422 979 42,630 (55,067)
Deferred--Federal--
net................. 47,202 79,230 39,531 64,178 68,927 113,278
--State--net......... 1,538 36,010 10,073 47,634 26,859 72,314
Investment tax credits
deferred--net (Notes
1 and 14)............. (7,288) (7,195) (21,902) (21,620) (29,079) (29,142)
---------- ---------- ---------- ---------- ---------- ----------
$1,416,221 $1,412,394 $3,852,090 $3,971,405 $5,054,703 $4,974,815
---------- ---------- ---------- ---------- ---------- ----------
Electric Operating In-
come................... $ 456,227 $ 443,138 $ 934,290 $ 841,043 $1,194,812 $ 311,693
---------- ---------- ---------- ---------- ---------- ----------
Other Income and (Deduc-
tions):
Interest on long-term
debt.................. $ (160,909) $ (154,420) $ (495,070) $ (467,413) $ (661,253) $ (623,525)
Interest on notes pay-
able.................. (85) (226) (247) (415) (328) (502)
Allowance for funds
used during construc-
tion (Note 1)--
Borrowed funds....... 5,277 4,336 11,723 14,831 16,177 20,038
Equity funds......... 6,454 5,215 14,070 17,641 18,984 24,189
Income taxes
applicable to
nonoperating
activities (Notes 1
and 14)............... 11,959 3,050 18,124 23,620 17,904 35,409
Income tax reduction
for disallowed plant
costs................. 792 -- 792 -- 792 --
Deferred carrying
charges (Note 2)...... -- -- -- -- -- 438,183
Interest and other
costs for 1993
Settlements (Note 2).. -- (3,368) -- (21,261) -- (119,935)
Miscellaneous--net..... (32,592) (14,117) (53,991) (80,729) (52,359) (85,222)
---------- ---------- ---------- ---------- ---------- ----------
$ (169,104) $ (159,530) $ (504,599) $ (513,726) $ (660,083) $ (311,365)
---------- ---------- ---------- ---------- ---------- ----------
Net Income Before
Cumulative Effect of
Change in Accounting
for Income Taxes....... $ 287,123 $ 283,608 $ 429,691 $ 327,317 $ 534,729 $ 328
Cumulative Effect of
Change in Accounting
for Income Taxes....... -- -- 9,738 -- 9,738 --
---------- ---------- ---------- ---------- ---------- ----------
Net Income.............. $ 287,123 $ 283,608 $ 439,429 $ 327,317 $ 544,467 $ 328
Provision for Dividends
on Preferred and
Preference Stocks...... 16,565 16,966 50,245 47,994 67,214 63,801
---------- ---------- ---------- ---------- ---------- ----------
Net Income (Loss) on
Common Stock........... $ 270,558 $ 266,642 $ 389,184 $ 279,323 $ 477,253 $ (63,473)
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
45
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30,
ASSETS 1993 1994
------ ------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Utility Plant (Notes 1, 3, 8, 16 and 18):
Plant and equipment, at original cost (includes
construction work in progress of $1,040 million
and $1,031 million, respectively)................. $25,581,003 $26,100,927
Less--Accumulated provision for depreciation....... 8,790,519 9,431,837
----------- -----------
$16,790,484 $16,669,090
Nuclear fuel, at amortized cost.................... 662,562 660,719
----------- -----------
$17,453,046 $17,329,809
----------- -----------
Investments:
Nuclear decommissioning funds (Notes 1 and 11)..... $ 706,841 $ 855,350
Subsidiary companies (Notes 1 and 17).............. 122,332 117,564
Other investments, at cost (Note 17)............... 72,379 19,101
----------- -----------
$ 901,552 $ 992,015
----------- -----------
Current Assets:
Cash............................................... $ 743 $ 459
Temporary cash investments (Note 11)............... 247,119 92,544
Other cash investments (Note 11)................... 641,575 13,188
Special deposits (Note 11)......................... 32,635 16,850
Receivables (Note 1)--
Customers........................................ 427,613 454,331
Taxes............................................ 186,687 51,724
Other............................................ 66,963 37,620
Provisions for uncollectible accounts............ (10,910) (11,006)
Coal and fuel oil, at average cost................. 111,752 104,791
Materials and supplies, at average cost............ 402,714 393,920
Deferred unrecovered energy costs (Note 1)......... 43,885 61,568
Deferred income taxes related to current assets and
liabilities (Note 14)--
Loss carryforward................................ 175,197 27,577
Other............................................ 166,102 112,941
Prepayments and other.............................. 42,190 32,968
----------- -----------
$ 2,534,265 $ 1,389,475
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets (Notes 1 and 14)................. $ 2,698,751 $ 2,628,135
Unrecovered energy costs (Note 1).................. 680,243 650,677
Other (Note 19).................................... 111,941 103,733
----------- -----------
$ 3,490,935 $ 3,382,545
----------- -----------
$24,379,798 $23,093,844
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
46
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30,
CAPITALIZATION AND LIABILITIES 1993 1994
------------------------------ ------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Capitalization (see accompanying statements):
Common stock equity................................. $ 5,421,893 $ 5,407,070
Preferred and preference stocks without mandatory
redemption requirements............................ 441,445 508,220
Preference stock subject to mandatory redemption re-
quirements......................................... 309,964 295,734
Long-term debt...................................... 7,550,762 7,312,425
----------- -----------
$13,724,064 $13,523,449
----------- -----------
Current Liabilities:
Notes payable--bank loans (Note 9).................. $ 5,950 $ 7,150
Current portion of long-term debt, redeemable pref-
erence stock and capitalized lease obligations
(Note 11).......................................... 630,260 737,745
Accounts payable.................................... 444,080 325,922
Accrued interest.................................... 186,825 158,800
Accrued taxes....................................... 132,362 134,656
Dividends payable................................... 101,047 102,657
Estimated revenue refunds and related interest (Note
2)................................................. 1,166,308 118,177
Customer deposits................................... 45,757 44,692
Other............................................... 143,519 84,151
----------- -----------
$ 2,856,108 $ 1,713,950
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes (Note 14)..................... $ 4,445,173 $ 4,314,952
Accumulated deferred investment tax credits (Notes 1
and 14)............................................ 746,508 724,889
Accrued spent nuclear fuel disposal fee and related
interest (Note 10)................................. 566,527 582,531
Obligations under capital leases (Note 16).......... 323,175 368,229
Regulatory liabilities (Notes 1, 14 and 19)......... 782,624 758,983
Other (Notes 1, 12 and 13).......................... 935,619 1,106,861
----------- -----------
$ 7,799,626 $ 7,856,445
----------- -----------
Commitments and Contingent Liabilities (Note 19)
$24,379,798 $23,093,844
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
47
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1993 1994
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Common Stock Equity (Notes 4 and 5):
Common stock, $12.50 par value per share--
Outstanding--213,751,147 shares and 214,188,395
shares, respectively............................ $ 2,671,889 $ 2,677,356
Premium on common stock and other paid-in capital. 2,217,110 2,222,902
Capital stock and warrant expense................. (16,258) (16,495)
Retained earnings................................. 549,152 523,307
----------- -----------
$ 5,421,893 $ 5,407,070
----------- -----------
Preferred and Preference Stocks Without Mandatory
Redemption Requirements (Notes 4, 6 and 11):
Preference stock, cumulative, without par value--
Outstanding--10,499,549 shares and 13,499,549
shares, respectively............................ $ 432,320 $ 504,957
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--286,949 shares and 102,615 shares,
respectively.................................... 9,125 3,263
Prior preferred stock, cumulative, $100 par value
per share--
No shares outstanding............................ -- --
----------- -----------
$ 441,445 $ 508,220
----------- -----------
Preference Stock Subject to Mandatory Redemption
Requirements (Notes 4, 7 and 11):
Preference stock, cumulative, without par value--
Outstanding--3,290,290 shares and 3,148,920
shares, respectively............................ $ 327,653 $ 313,535
Current redemption requirements for preference
stock included in current liabilities............ (17,689) (17,801)
----------- -----------
$ 309,964 $ 295,734
----------- -----------
Long-Term Debt (Notes 8, 11 and 20):
First mortgage bonds:
Maturing through 1998--
6 1/8% due May 15, 1995....................... $ 103,000 $ 103,000
5 1/4% due April 1, 1996...................... 50,000 50,000
5 3/4% due November 1, 1996................... 50,000 50,000
5 3/4% due December 1, 1996................... 50,000 50,000
7% due February 1, 1997....................... 150,000 150,000
5 3/8% due April 1, 1997...................... 50,000 50,000
6 1/4% due October 1, 1997.................... 60,000 60,000
6 1/4% due February 1, 1998................... 50,000 50,000
6% due March 15, 1998......................... 130,000 130,000
6 3/4% due July 1, 1998....................... 50,000 50,000
6 3/8% due October 1, 1998.................... 75,000 75,000
Maturing 1999 through 2008--5.30% to 10 3/8%.... 2,204,600 2,230,500
Maturing 2009 through 2018--5.70% to 10 5/8%.... 956,000 996,000
Maturing 2019 through 2023--7 3/4% to 9 7/8%.... 2,020,000 2,020,000
----------- -----------
$ 5,998,600 $ 6,064,500
Sinking fund debentures, due 1999 through 2011--
2 3/4% to 7 5/8%................................. 120,185 112,643
Pollution control obligations, due 2004 through
2014--5 7/8% to 11 3/8%.......................... 353,200 287,200
Other long-term debt.............................. 1,598,625 1,470,536
Current maturities of long-term debt included in
current liabilities.............................. (446,724) (553,207)
Unamortized net debt discount and premium (Note
1)............................................... (73,124) (69,247)
----------- -----------
$ 7,550,762 $ 7,312,425
----------- -----------
$13,724,064 $13,523,449
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
48
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
------------------- ------------------- -------------------
1993 1994 1993 1994 1993 1994
---------- -------- ---------- -------- ---------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period................. $ 793,449 $340,691 $ 847,186 $549,152 $ 844,737 $977,682
Add--Net income......... 287,123 283,608 439,429 327,317 544,467 328
---------- -------- ---------- -------- ---------- --------
$1,080,572 $624,299 $1,286,615 $876,469 $1,389,204 $978,010
---------- -------- ---------- -------- ---------- --------
Deduct--
Dividends declared
on--
Common stock........ $ 85,429 $ 83,459 $ 256,182 $304,605 $ 341,505 $390,106
Preferred and
preference stocks.. 16,329 17,477 50,142 48,474 66,780 64,019
Loss on reacquired
preference stock.... 1,132 56 2,609 83 3,237 578
---------- -------- ---------- -------- ---------- --------
$ 102,890 $100,992 $ 308,933 $353,162 $ 411,522 $454,703
---------- -------- ---------- -------- ---------- --------
Balance at End of
Period................. $ 977,682 $523,307 $ 977,682 $523,307 $ 977,682 $523,307
========== ======== ========== ======== ========== ========
</TABLE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED PREMIUM ON COMMON STOCK
AND OTHER PAID-IN CAPITAL
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
--------------------- --------------------- ---------------------
1993 1994 1993 1994 1993 1994
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of
Period................. $2,213,577 $2,221,060 $2,210,524 $2,217,110 $2,207,997 $2,214,444
Add--Premium on issuance
of common stock and
gain on reacquired
preference stock....... 867 1,842 3,920 5,792 6,447 8,458
---------- ---------- ---------- ---------- ---------- ----------
Balance at End of
Period................. $2,214,444 $2,222,902 $2,214,444 $2,222,902 $2,214,444 $2,222,902
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
49
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
-------------------- ---------------------- ------------------------
1993 1994 1993 1994 1993 1994
--------- --------- ---------- ---------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Cash Flow from Operating
Activities:
Net income............. $ 287,123 $ 283,608 $ 439,429 $ 327,317 $ 544,467 $ 328
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization........ 229,914 234,132 681,564 697,814 902,700 927,386
Deferred income taxes
and investment tax
credits--net........ 30,984 109,756 13,716 72,862 53,977 143,470
Cumulative effect of
change in accounting
for income taxes.... -- -- (9,738) -- (9,738) --
Equity component of
allowance for funds
used during
construction........ (6,454) (5,215) (14,070) (17,641) (18,984) (24,189)
Provisions for
revenue refunds and
related interest.... 107,290 5,988 250,879 34,978 252,429 1,138,295
Revenue refunds and
related interest.... 12 (409,541) (3,617) (1,083,109) (156,091) (1,270,214)
Recovery/(deferral)
of regulatory
assets/deferred
carrying charges--
net................. 765 3,818 2,296 11,635 3,128 (423,609)
Provisions/(payments)
for liability for
early retirement and
separation costs--
net................. (44) 1,425 (1,998) 32,962 (14,184) 33,143
Net effect on cash
flows of changes in:
Receivables........ (82,895) (50,930) (179,580) 137,684 (138,716) 159,859
Coal and fuel oil.. 72,084 26,236 167,250 6,961 167,472 55,093
Materials and
supplies.......... 7,508 8,618 (4,571) 8,794 (1,318) 15,199
Accounts payable
adjusted for
nuclear fuel lease
principal payments
and early
retirement and
separation costs--
net............... 40,669 19,686 66,169 34,886 227,219 247,662
Accrued interest
and taxes......... 74,425 (67,575) 51,175 (25,731) 37,491 (116,140)
Other changes in
certain current
assets and
liabilities....... (2,220) (15,746) (6,875) (50,521) (24,258) (50,283)
Other--net........... 46,913 64,043 144,062 198,252 94,909 164,454
--------- --------- ---------- ---------- ----------- -----------
$ 806,074 $ 208,303 $1,596,091 $ 387,143 $ 1,920,503 $ 1,000,454
--------- --------- ---------- ---------- ----------- -----------
Cash Flow from Investing
Activities:
Construction
expenditures.......... $(198,613) $(178,252) $ (581,100) $ (561,839) $ (876,230) $ (823,330)
Nuclear fuel
expenditures.......... (38,226) (65,696) (190,975) (170,995) (245,756) (241,389)
Equity component of
allowance for funds
used during
construction.......... 6,454 5,215 14,070 17,641 18,984 24,189
Contributions to
nuclear
decommissioning
funds................. -- -- (96,229) (96,229) (132,550) (132,550)
Investment in
subsidiary companies.. -- -- -- -- (141) --
Other cash investments
and special deposits.. (27,463) 7,855 (29,933) 628,387 (43,620) 38,971
--------- --------- ---------- ---------- ----------- -----------
$(257,848) $(230,878) $ (884,167) $ (183,035) $(1,279,313) $(1,134,109)
--------- --------- ---------- ---------- ----------- -----------
Cash Flow from Financing
Activities:
Issuance of
securities--
Long-term debt........ $ 717,169 $ 87,699 $1,694,625 $ 364,813 $ 1,753,047 $ 597,485
Capital stock......... 1,253 72,703 75,889 77,734 82,403 82,431
Retirement and
redemption of
securities--
Long-term debt........ (830,201) (145,850) (1,889,378) (501,602) (2,004,161) (512,764)
Capital stock......... (27,000) (11,250) (60,936) (14,137) (96,756) (46,281)
Deposits and
securities held for
retirement and
redemption of
securities............ 119,843 (2) 209,377 3,192 268,474 35,546
Premium paid on early
redemption of long-
term debt............. (25,455) -- (78,395) (900) (78,395) (900)
Cash dividends paid on
capital stock......... (102,108) (141,575) (306,527) (343,684) (409,353) (445,442)
Proceeds from
sale/leaseback of
nuclear fuel.......... 41,077 39,443 162,724 207,463 242,495 248,994
Nuclear fuel lease
principal payments.... (70,719) (53,510) (189,360) (153,046) (257,313) (209,653)
Increase in short-term
borrowings............ 350 1,050 350 1,200 500 1,200
--------- --------- ---------- ---------- ----------- -----------
$(175,791) $(151,292) $ (381,631) $ (358,967) $ (499,059) $ (249,384)
--------- --------- ---------- ---------- ----------- -----------
Increase (Decrease) in
Cash and Temporary Cash
Investments............ $ 372,435 $(173,867) $ 330,293 $ (154,859) $ 142,131 $ (383,039)
Cash and Temporary Cash
Investments at
Beginning of Period.... 103,607 266,870 145,749 247,862 333,911 476,042
--------- --------- ---------- ---------- ----------- -----------
Cash and Temporary Cash
Investments at End of
Period................. $ 476,042 $ 93,003 $ 476,042 $ 93,003 $ 476,042 $ 93,003
========= ========= ========== ========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
50
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
See Note 1 of Notes to Financial Statements of Unicom Corporation and
Subsidiary Companies for a discussion of significant accounting policies,
except for the following specific policies discussed below.
Holding Company Restructuring. Effective September 1, 1994, Unicom became the
parent corporation of ComEd and Unicom Enterprises in a corporate
restructuring. Previously, Unicom Enterprises was a wholly-owned subsidiary of
ComEd. The restructuring was accounted for by the pooling-of-interests method.
In the restructuring, each of the 214,185,572 outstanding shares of ComEd
common stock, par value $12.50 per share, were converted into one fully paid
and non-assessable share of Unicom common stock, without par value. In
addition, the outstanding shares of the common stock of CECo Merging
Corporation (a wholly-owned subsidiary of ComEd created to effect the
restructuring) were converted into the same number of shares of ComEd common
stock, par value $12.50 per share, outstanding immediately prior to the
restructuring.
Income Taxes. ComEd will be included in the consolidated federal and state
income tax returns filed by Unicom. Current and deferred income taxes of the
consolidated group are allocated to ComEd as if ComEd filed separate tax
returns. Deferred income taxes are provided for income and expense items
recognized for financial accounting purposes in periods that differ from those
for income tax purposes. Income taxes deferred in prior years are charged or
credited to income as the book/tax timing differences reverse. Prior years'
deferred investment tax credits are amortized through credits to income
generally over the lives of the related property. Income tax credits resulting
from interest charges applicable to nonoperating activities, principally
construction, are classified as other income.
For additional information relating to income taxes, including information
related to the adoption in January 1993 of SFAS No. 109, Accounting for Income
Taxes, which requires an asset and liability approach to accounting for income
taxes, see Note 14. In addition, see "Income Taxes" under the subcaption
"Results of Operations," in "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Interest. Total interest costs incurred on debt, leases and other obligations
for the three months ended September 30, 1993 and 1994 were $176,070,000 and
$179,125,000, respectively, for the nine months ended September 30, 1993 and
1994 were $539,526,000 and $552,802,000, respectively, and for the twelve
months ended September 30, 1993 and 1994 were $715,508,000 and $791,929,000,
respectively.
Statements of Consolidated Cash Flows. For purposes of the Statements of
Consolidated Cash Flows, temporary cash investments, generally investments
maturing within three months at the time of purchase, are considered to be cash
equivalents. Supplemental information required by SFAS No. 95 for the three
months, nine months and twelve months ended September 30, 1993 and 1994 was as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
------------------- ----------------- -------------------
1993 1994 1993 1994 1993 1994
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Supplemental Cash Flow
Information:
Cash paid during the
period for:
Interest (net of
amount capitalized). $189,619 $ 174,309 $540,226 $494,344 $688,389 $ 631,800
Income taxes (net of
refunds)............ $ 200 $ 92,467 $107,262 $ 14,876 $178,835 $ 10,628
Supplemental Schedule of
Non-Cash Investing and
Financing Activities:
Capital lease obliga-
tions incurred........ $ 41,077 $ 40,089 $171,586 $209,958 $251,554 $ 254,123
</TABLE>
51
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(2) SETTLEMENTS RELATING TO CERTAIN RATE MATTERS. See Note 2 of Notes to
Financial Statements of Unicom Corporation and Subsidiary Companies.
(3) OTHER RATE MATTERS. See Note 3 of Notes to Financial Statements of Unicom
Corporation and Subsidiary Companies.
(4) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK. At September 30,
1994, the authorized shares of ComEd capital stock were: common stock--
250,000,000 shares; preference stock--23,458,920 shares; $1.425 convertible
preferred stock--102,615 shares; and prior preferred stock-- 850,000 shares.
The preference and prior preferred stocks are issuable in series and may be
issued with or without mandatory redemption requirements. Holders of shares at
any time outstanding, regardless of class, are entitled to one vote for each
share held on each matter submitted to a vote at a meeting of shareholders,
with the right to cumulate votes in all elections for directors.
(5) COMMON STOCK. At September 30, 1994, shares of ComEd common stock were
reserved for the following purposes:
<TABLE>
<S> <C>
Conversion of $1.425 convertible preferred stock.................. 104,667
Conversion of warrants............................................ 28,240
-------
132,907
=======
</TABLE>
During the three months, nine months and twelve months ended September 30,
1993 and 1994, shares of ComEd common stock were issued as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
-------------- --------------- -------------------
1993 1994 1993 1994 1993 1994
------ ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Employee Stock Purchase
Plan....................... -- -- 138,648 154,710 363,393 284,656
Employee Savings and
Investment Plan............ 42,200 15,800 112,400 81,400 197,400 122,400
Conversion of $1.425
convertible preferred
stock...................... 7,779 94,611 16,368 187,717 16,368 193,724
Conversion of warrants...... 331 7,669 943 13,421 1,378 13,852
------ ------- ------- ------- --------- ---------
50,310 118,080 268,359 437,248 578,539 614,632
====== ======= ======= ======= ========= =========
</TABLE>
At December 31, 1993 and September 30, 1994, 128,699 and 84,722 ComEd common
stock purchase warrants, respectively, were outstanding. The warrants entitle
the holders to convert such warrants into common stock of ComEd at a conversion
rate of one share of common stock for three warrants.
(6) PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION
REQUIREMENTS. See Note 6 of Notes to Financial Statements of Unicom Corporation
and Subsidiary Companies.
(7) PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS. See Note 7
of Notes to Financial Statements of Unicom Corporation and Subsidiary
Companies.
(8) LONG-TERM DEBT. See Note 8 of Notes to Financial Statements of Unicom
Corporation and Subsidiary Companies.
(9) LINES OF CREDIT. See Note 9 of Notes to Financial Statements of Unicom
Corporation and Subsidiary Companies.
(10) DISPOSAL OF SPENT NUCLEAR FUEL. See Note 10 of Notes to Financial
Statements of Unicom Corporation and Subsidiary Companies.
52
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS. See Note 11 of Notes to Financial
Statements of Unicom Corporation and Subsidiary Companies.
(12) PENSION BENEFITS. See Note 12 of Notes to Financial Statements of Unicom
Corporation and Subsidiary Companies.
(13) POSTRETIREMENT HEALTH CARE BENEFITS. See Note 13 of Notes to Financial
Statements of Unicom Corporation and Subsidiary Companies.
(14) INCOME TAXES. The components of the net deferred income tax liability at
December 31, 1993 and September 30, 1994 were as follows:
<TABLE>
<CAPTION>
DECEMBER
31, SEPTEMBER 30,
1993 1994
---------- -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized
depreciation, net of removal costs................. $3,095,855 $3,216,325
Overheads capitalized............................... 286,287 269,618
Repair allowance.................................... 210,302 198,883
Regulatory assets recoverable through future rates.. 1,863,587 1,822,424
Deferred income tax assets:
Postretirement benefits............................. (134,590) (171,359)
Unbilled revenues................................... (98,164) (97,089)
Loss carryforward................................... (175,197) (27,577)
Alternative minimum tax............................. (137,328) (270,781)
Unamortized investment tax credits to be settled
through future rates............................... (489,891) (475,730)
Other regulatory liabilities to be settled through
future rates....................................... (236,236) (234,300)
Other--net.......................................... (80,751) (55,980)
---------- ----------
Net deferred income tax liability.................... $4,103,874 $4,174,434
========== ==========
</TABLE>
The $71 million increase in the net deferred income tax liability from December
31, 1993 to September 30, 1994 is comprised of a $96 million net increase to
deferred income tax expense and a $25 million decrease in regulatory assets net
of regulatory liabilities pertaining to income taxes for the period.
The components of net income tax expense charged to continuing operations for
the three months, nine months and twelve months ended September 30, 1993 and
1994 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
-------------------- ------------------ ---------------------
1993 1994 1993 1994 1993 1994
--------- --------- -------- -------- --------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Electric operating in-
come:
Current income taxes... $149,778 $ 81,879 $238,664 $140,171 $240,794 $(126,045)
Deferred income taxes.. 48,740 115,240 49,604 111,812 95,786 185,592
Investment tax credits
deferred--net......... (7,288) (7,195) (21,902) (21,620) (29,079) (29,142)
Other (income) and
deductions............. (11,744) 1,269 (17,939) (19,569) (17,400) (33,287)
--------- --------- -------- -------- --------- ----------
Net income taxes charged
to continuing
operations............. $179,486 $191,193 $248,427 $210,794 $290,101 $ (2,882)
========= ========= ======== ======== ========= ==========
</TABLE>
Provisions for current and deferred federal and state income taxes and
amortization of investment tax credits resulted in the following effective
income tax rates for the three months, nine months and twelve months ended
September 30, 1993 and 1994:
<TABLE>
<CAPTION>
TWELVE MONTHS
THREE MONTHS ENDED NINE MONTHS ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
-------------------- ------------------ -----------------
1993 1994 1993 1994 1993 1994
--------- --------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Pre-tax book income (in
thousands)............. $466,609 $474,801 $678,118 $538,111 $824,830 $(2,554)
Effective income tax
rate................... 38.5% 40.3% 36.6% 39.2% 35.2% 112.8%
</TABLE>
53
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The principal differences between net income taxes charged to continuing
operations and the amounts computed at the federal statutory rate of 35% for
the three months and nine months ended September 30, 1993, 34.8% for the twelve
months ended September 30, 1993 and 35% for the three months, nine months and
twelve months ended September 30, 1994 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
-------------------- ------------------ --------------------
1993 1994 1993 1994 1993 1994
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes
computed at statutory
rate................... $163,313 $166,180 $237,341 $188,339 $287,041 $ (894)
Equity component of
AFUDC which was
excluded from taxable
income................. (2,259) (1,825) (4,925) (6,174) (6,606) (8,466)
Amortization of
investment tax credits. (7,331) (7,190) (21,913) (21,602) (26,592) (29,109)
State income taxes, net
of federal income
taxes.................. 22,442 22,670 35,300 28,399 42,184 6,236
Differences between book
and tax accounting
primarily for property
related deductions..... 583 7,553 (110) 16,068 (4,014) 22,137
Other--net.............. 2,738 3,805 2,734 5,764 (1,912) 7,214
--------- --------- -------- -------- --------- ---------
Net income taxes charged
to continuing
operations............. $179,486 $191,193 $248,427 $210,794 $290,101 $ (2,882)
========= ========= ======== ======== ========= =========
</TABLE>
Current federal income tax liabilities were recorded that include excess
amounts of AMT over the regular federal income tax, which amounts were also
recorded as decreases to deferred federal income taxes. The excess amounts of
AMT can be carried forward indefinitely as a credit against future years'
regular federal income tax liabilities. In 1993, a loss was recorded for income
tax purposes which may be carried forward through 2008. It is currently
expected that the loss carryforward will be utilized by the expiration date.
SFAS No. 109 was adopted, effective January 1, 1993 which requires an asset
and liability approach to accounting for income taxes which replaces the
deferred method formerly used. Under the asset and liability approach, the
deferred income tax liability represents the income tax effect of temporary
differences between financial accounting and income tax bases of assets and
liabilities and is determined at the presently enacted income tax rates. The
SFAS No. 109 adjustments to ComEd's deferred income tax liability related to
utility operations represents income taxes recoverable or returnable through
future rates and have been recorded as regulatory assets and regulatory
liabilities on the Consolidated Balance Sheets. The cumulative effect of the
change in the method of accounting for income taxes resulted in an increase to
net income for the nine months and twelve months ended September 30, 1993 of
$9.7 million or $0.05 per common share, due primarily to the reduction of
deferred income taxes on nonregulated activities (primarily nonconsolidated
subsidiaries) accrued in prior years at income tax rates in excess of the
presently enacted income tax rates. The effect of the implementation entry on
regulated activities was to record regulatory assets of $1,546 million
primarily related to the equity component of AFUDC which was recorded on an
after-tax basis, the borrowed funds component of AFUDC which was previously
recorded net of tax and other temporary differences for which the related tax
effects were not previously recorded; regulatory liabilities of $577 million
primarily related to recognition of the deferred income tax effects of
unamortized investment tax credits and to the changes in prior years' income
tax rates; and a net increase to the deferred income tax liability of $969
million.
54
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONCLUDED
(15) TAXES, EXCEPT INCOME TAXES. Provisions for taxes, except income taxes,
for the three months, nine months and twelve months ended September 30, 1993
and 1994 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
------------------- ----------------- -------------------
1993 1994 1993 1994 1993 1994
--------- --------- -------- -------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Illinois public utility
revenue................ $ 59,151 $ 57,686 $163,323 $157,475 $ 213,191 $ 193,650
Illinois invested capi-
tal.................... 27,996 27,559 83,795 82,047 110,841 109,378
Municipal utility gross
receipts............... 38,605 42,743 99,203 111,237 130,077 119,267
Real estate............. 40,416 44,084 123,038 135,106 169,913 174,628
Municipal compensation.. 20,264 21,222 53,666 55,831 70,756 59,043
Other--net.............. 14,895 17,586 50,959 57,543 65,590 71,201
--------- --------- -------- -------- --------- ---------
$ 201,327 $ 210,880 $573,984 $599,239 $ 760,368 $ 727,167
========= ========= ======== ======== ========= =========
</TABLE>
(16) LEASE OBLIGATIONS. On November 23, 1993, ComEd consolidated its nuclear
fuel lease arrangements into a new arrangement. Under the new arrangement,
ComEd may sell and lease back nuclear fuel from a lessor who may borrow an
aggregate of $700 million (consisting of $300 million of commercial paper or
bank borrowings and $400 million of intermediate term notes) to finance the
transactions. The commercial paper/bank borrowing portion currently will expire
on November 23, 1996, but ComEd plans to ask for an extension of the expiration
date. At September 30, 1994, ComEd's obligation to the lessor for leased
nuclear fuel amounted to $573 million. ComEd has agreed to make lease payments
which cover the amortization of the nuclear fuel used in ComEd's reactors plus
the lessor's related financing costs. ComEd has an obligation for spent nuclear
fuel disposal costs of leased nuclear fuel.
Future minimum rental payments, net of executory costs, at September 30, 1994
for capital leases are estimated to aggregate $593 million, including $71
million in 1994 (after deducting $179 million for the first nine months of
1994), $199 million in 1995, $134 million in 1996, $83 million in 1997, $47
million in 1998 and $59 million in 1999-2002. The estimated interest component
of such rental payments aggregates $57 million. The estimated portions of
obligations due within one year under capital leases are included in current
liabilities and approximated $166 million and $167 million at December 31, 1993
and September 30, 1994, respectively.
Future minimum rental payments at September 30, 1994 for operating leases are
estimated to aggregate $148 million, including $1 million in 1994, $9 million
in 1995, $9 million in 1996, $8 million in 1997, $8 million in 1998 and $113
million in 1999-2024.
(17) INVESTMENTS IN URANIUM-RELATED PROPERTIES. See Note 17 of Notes to
Financial Statements of Unicom Corporation and Subsidiary Companies.
(18) JOINT PLANT OWNERSHIP. See Note 18 of Notes to Financial Statements of
Unicom Corporation and Subsidiary Companies.
(19) COMMITMENTS, CONTINGENT LIABILITIES AND THE CONSTRUCTION PROGRAM. See
Note 19 of Notes to Financial Statements of Unicom Corporation and Subsidiary
Companies.
(20) SUBSEQUENT EVENTS. See Note 20 of Notes to Financial Statements of
Unicom Corporation and Subsidiary Companies.
55
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES. See Unicom's "Management's Discussion and
Analysis of Financial Condition and Results of Operations," subcaptions
"Liquidity and Capital Resources--UTILITY OPERATIONS" and "Regulation," on
pages 32 to 36 and 36 to 38, respectively, which are incorporated herein by
this reference.
RESULTS OF OPERATIONS. See Unicom's "Management's Discussion and Analysis of
Financial Condition and Results of Operations," subcaption "Results of
Operations" (other than the first paragraph thereof), on pages 38 to 43, which
is incorporated herein by this reference.
56
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
ELECTRIC RATES. The following table summarizes rate increases granted in
ComEd's major rate proceedings before the ICC since January 1, 1985. Revenues
actually realized as a result of the rate increases may vary depending on
levels of kilowatthour sales to each class of customers.
<TABLE>
<CAPTION>
AUTHORIZED
---------------------------------------------------------
END OF
TWELVE-MONTH
ANNUAL AMOUNT PERCENT TEST PERIOD
REQUESTED (IN ANNUAL INCREASE CITED IN
MILLIONS) AND AMOUNT (IN OVER PREVIOUS FINAL RATE
DATE OF FILING EFFECTIVE DATE MILLIONS)(A) REVENUES(A) ORDER
- - - ----------------- ---------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
$583
November 29, 1984 October 29, 1985 $495(b) 11.0 December 1984
$1,415
August 21, 1987 January 1, 1989 $235(c) 4.5(c) December 1987
$1,231
April 12, 1990 March 20, 1991 $750(d) 14.0(d) December 1991
</TABLE>
- - - --------
(a) The amounts granted and the related percent increases are based on the
test periods cited in the rate orders and exclude add-on revenue taxes.
(b) Includes approximately $81 million of revenue included in rates effective
January 1, 1987 pursuant to a phase-in plan. The phase-in plan reflects
the recovery of the $81 million postponed portion of the increase and an
additional recovery ($56 million) of a full return on the postponed
portion over a two-year period.
(c) Represents the first step of a rate increase relating to the Units
authorized by a December 1988 rate order which was reversed by the
Illinois Supreme Court on December 21, 1989 and excludes a $56 million
decrease resulting from completion of the recovery period referred to in
note (b). This rate increase was rolled back, effective July 1, 1990.
(d) Represents the aggregate amount of the rate increase, which was to be
phased-in over a three-year period. As a result of subsequent proceedings
and the Rate Matters Settlement, only an increase of approximately $144
million in annual electric operating revenues remains effective. See Note
2 of Unicom and ComEd's Notes to Financial Statements.
CERTAIN REGULATORY MATTERS. Through its fuel adjustment clause, ComEd
recovers from its customers the cost of the fuel used to generate electricity
and of purchased power as compared to fuel costs included in base rates. The
amounts collected under the fuel adjustment clause are subject to review by
the ICC, which, under the Illinois Public Utilities Act, is required to hold
annual public hearings to reconcile the collected amounts with the actual cost
of fuel and power prudently purchased. In the event that the collected amounts
exceed such actual cost, then the ICC can order that the excess be refunded.
For additional information concerning ComEd's fuel reconciliation proceedings
and coal reserves, see Notes 1 and 2 of Unicom and ComEd's Notes to Financial
Statements.
Currently, the ICC is conducting a focused management audit of ComEd's fuel
procurement process, which began in December 1993 and is scheduled to be
completed in 1994.
LITIGATION. During 1989 and 1991, actions were brought in federal and state
courts in Colorado against ComEd and its subsidiary, Cotter, seeking
unspecified damages and injunctive relief based on allegations that Cotter has
permitted radioactive and other hazardous material to be released from its
mill into areas owned or occupied by the plaintiffs resulting in property
damage and potential adverse health effects. In February 1994, a federal jury
returned nominal dollar verdicts on eight bellwether plaintiffs' claims in
these cases. Plaintiffs have appealed those judgments. Although the remaining
cases will necessarily involve the resolution of numerous contested issues of
fact and law, Unicom and ComEd's determination is that these actions will not
have a material impact on Unicom's or ComEd's financial position or results of
operations.
In October 1990, ComEd filed a complaint in the Circuit Court against
Westinghouse and certain of its employees. The complaint alleges that the
defendants knowingly concealed information regarding the durability of the
metal used in the steam generators (a major component of the nuclear steam
supply systems) at the Zion, Byron and Braidwood stations. The complaint
further alleges that the defects in the steam generators will prevent the
plants from maintaining their full power output through their forty-year
design life without costly remanufacture or replacement of the steam
generators. Damages, including
57
<PAGE>
punitive damages, in an unspecified amount are claimed. Westinghouse has filed
a counterclaim against ComEd which seeks recovery of Westinghouse's costs of
defense and damages of approximately $13 million.
Shareholder derivative lawsuits were filed on October 1, 1992 and on April
14, 1993 in the Circuit Court against current and former directors of ComEd
alleging that they breached their fiduciary duty and duty of care to ComEd in
connection with the management of the activities associated with the
construction of ComEd's four most recently completed nuclear generating units.
The lawsuits sought restitution to ComEd by the defendants for unquantified
and undefined losses and costs alleged to have been incurred by ComEd. Both
lawsuits were dismissed by the Circuit Court; however, appeals are pending
before the Illinois Appellate Court.
A number of complaints have been filed by former employees with the Equal
Employment Opportunity Commission, and several lawsuits have been filed by
former employees in the U.S. District Court, alleging that the employees'
terminations (which occurred as part of ComEd's management workforce
reductions that were implemented in the second half of 1992) involved
discrimination on the basis of age, race, sex, national origin and/or
disabilities, in violation of applicable law. The complainants in these
various cases are seeking, among other things, awards of back pay and lost
benefits, reinstatement, pecuniary damages, and costs and attorneys' fees.
NUCLEAR MATTERS. Under the Nuclear Waste Policy Act of 1982, the DOE is
responsible for the selection and development of repositories for, and the
disposal of, spent nuclear fuel and high-level radioactive waste. ComEd, as
required by that Act, has signed a contract with the DOE to provide for the
disposal of spent nuclear fuel and high-level radioactive waste from ComEd's
nuclear generating stations beginning not later than January 1998. The
contract with the DOE requires ComEd to pay the DOE a one-time fee applicable
to nuclear generation through April 6, 1983 of approximately $277 million,
with interest to date of payment, and a fee payable quarterly equal to one
mill per kilowatthour of nuclear-generated and sold electricity after April 6,
1983. ComEd has elected to pay the one-time fee, with interest, just prior to
the first scheduled delivery of spent nuclear fuel to the DOE, which is
scheduled to occur not later than January 1998; however, this delivery
schedule is expected to be delayed significantly. The costs incurred by the
DOE for disposal activities will be paid out of fees charged to owners and
generators of spent nuclear fuel and high-level radioactive waste. ComEd has
primary responsibility for the interim storage of its spent nuclear fuel.
ComEd anticipates the possibility of serious difficulties in disposing of
high-level radioactive waste.
The federal Low-Level Radioactive Waste Policy Act of 1980 provides that
states may enter into compacts to provide for regional disposal facilities for
low-level radioactive waste, subject to approval by Congress of each such
compact. Under the 1985 amendments to that Act, a compact could restrict the
use of a region's disposal facilities after January 1, 1993 to waste generated
within the region. South Carolina, which belongs to a regional compact,
granted ComEd access to its waste disposal site for an 18-month period which
expired on June 30, 1994. There are no other commercial operating sites in the
United States for the disposal of low-level radioactive waste available to
ComEd. Illinois has entered into a compact with the state of Kentucky, which
has been approved by Congress. Neither Illinois nor Kentucky currently has an
operational site, and one is currently not expected to be operational until
after the year 2000. ComEd has temporary on-site storage capacity at its
nuclear generating stations for a limited amount of low-level radioactive
waste and is planning additional such capacity pending development of disposal
facilities by the state of Illinois. ComEd anticipates the possibility of
serious difficulties in disposing of low-level radioactive waste. The
continuing viability of commercial nuclear power is subject to resolution of
the issues of spent nuclear fuel storage and disposal of radioactive waste.
58
<PAGE>
In February 1993, ComEd was notified by the NRC that ComEd's Zion station,
which was placed on the NRC's list of plants to be monitored closely in early
1991, was removed from that list. In June 1994, ComEd was notified by the NRC
that ComEd's Dresden station, which was placed on the NRC's list of plants to
be monitored closely in early 1992, would remain on that list. Also in June
1994, ComEd was notified by the NRC that ComEd's LaSalle County and Quad-Cities
stations, which were placed on the NRC's list of plants with adverse
performance trends in January 1994, would remain on that list. ComEd has been
informed that the NRC concerns about LaSalle County station include, among
other matters, deficient radiation worker practices. The NRC concerns with
Quad-Cities station include deficiencies in the condition of certain station
equipment and the effectiveness of the operators of the units in identifying
and responding to certain operational problems, among other matters. ComEd has
provided written and verbal responses to the NRC and is diligently working to
resolve the concerns. ComEd anticipates continued increased expenditures in
connection with those stations. See "Nuclear Matters" under "Regulation" in
Unicom's "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for additional information.
In accordance with a commitment to the NRC, ComEd examined its operating
boiling water nuclear generating units in 1983 to determine the existence or
extent of inter-granular stress corrosion in certain of the large diameter
piping in those units. Inter-granular stress corrosion was discovered in the
Dresden and Quad-Cities units. ComEd replaced the stainless steel piping
susceptible to stress corrosion at Dresden Unit 3 and is taking alternative
remedial actions which are intended to minimize the need to replace such piping
at Dresden Unit 2, Quad-Cities Units 1 and 2 and LaSalle County Units 1 and 2.
If ComEd is required to replace all of such piping, the estimated construction
expenditures, in current-year (1994) dollars, would be approximately $620
million.
ComEd has studied the possibility of having to replace the steam generators
at its Zion station. The initial studies were completed in June 1991 and
additional follow-up studies are continuing. Based on the most recent findings
of these studies, it will not be necessary to replace the Zion steam generators
until at least the year 2005 and ComEd believes that the potential exists that
replacement will not be necessary during the original operating license life,
which expires in 2013. ComEd has also studied the replacement of the steam
generators at Byron Unit 1 and Braidwood Unit 1. The studies indicate that,
from a technical standpoint, the steam generators should be replaced and, from
an economic standpoint, the replacements should be performed at the earliest
possible time. The steam generator replacements are currently planned to be
completed in 1998 for Braidwood Unit 1 and in 1999 for Byron Unit 1. The
estimated replacement costs, including the costs of removal of the existing
steam generators, are approximately $235 million for each unit. Approximately
$3 million of preliminary engineering expenditures are included in the current
1994-96 construction program, which does not include the steam generator
replacement project. The effect of the project on the three-year construction
program would be an increase of approximately $100 million. See "Litigation"
herein concerning litigation by ComEd against Westinghouse concerning steam
generators.
During the year 1993, civil penalties were imposed on ComEd by the NRC on
seven occasions for violations of NRC regulations in amounts aggregating
$562,500. Since January 1, 1994, the NRC has imposed on ComEd seven civil
penalties in the amount of $767,500 for violations of NRC regulations. In
addition, there are several potentially enforceable issues currently
outstanding and under review by the NRC.
ENVIRONMENTAL MATTERS. Air quality regulations, promulgated by the IPCB as
well as the Indiana and Hammond Departments of Environmental Management in
accordance with federal standards, impose restrictions on the emission of
particulates, sulfur dioxide, nitrogen oxides and other air pollutants and
require permits from the respective state and local environmental protection
agencies for the operation of emission sources. Permits authorizing operation
of ComEd's fossil-fueled generating facilities subject to this requirement have
been obtained and, where such permits are due to expire, ComEd has, in a timely
manner, filed applications for renewal or requested extensions of the existing
permits.
59
<PAGE>
Under the Federal Clean Water Act, NPDES permits for discharges into
waterways are required to be obtained from the U.S. EPA or from the state
environmental agency to which the permit program has been delegated. Those
permits must be renewed periodically. ComEd and the Indiana Company either have
NPDES permits for all of their generating stations or have filed applications
for renewals of such permits under the current delegation of the program to the
Illinois EPA or the Indiana Department of Environmental Management. ComEd is
also subject to the jurisdiction of certain pollution control agencies of the
state of Iowa with respect to the discharge into the Mississippi River from the
Quad-Cities station. Reissued NPDES permits for several generating facilities
establish schedules by which the facilities must meet tighter discharge limits
when using certain biocides in condenser cooling water systems. ComEd has
embarked on a program to obtain compliance with the new permit requirements by
the April 1995 compliance date.
On August 10, 1990, the Sierra Club filed suit in the U.S. District Court
under Section 505 of the Federal Clean Water Act alleging violations of state
of Illinois water quality standards with respect to thermal effluents at
ComEd's Fisk, Crawford, Will County, Joliet and Dresden generating stations. In
July 1991, the Sierra Club and ComEd reached a settlement of this suit which
was approved by the Court on November 1, 1991. Under the settlement, ComEd has
agreed to perform an ecological study of the thermal effluents discharged from
the generating stations. Ultimately, this study, which is currently underway,
may determine whether the installation of closed cycle cooling facilities or
operational restrictions are necessary at one or more of these stations.
The Great Lakes Critical Programs Act of 1990 requires that, following the
issuance of guidance by the U.S. EPA, the states of Illinois and Indiana, among
others, adopt water quality standards, policies and procedures to assure
protection of the water quality of the Great Lakes. Water quality standards and
procedures that the states would be required to adopt under the current version
of the U.S. EPA's draft guidance ultimately could require that ComEd install
additional pollution control equipment or restrict operations at its facilities
that discharge, either directly or indirectly, into Lake Michigan. The U.S. EPA
is expected to issue final guidance in 1995.
The Clean Air Amendments require reductions in sulfur dioxide emissions from
ComEd's Kincaid station. The Clean Air Amendments also bar future utility
sulfur dioxide emissions except to the extent utilities hold allowances for
their emissions. Allowances which authorize their holder to emit sulfur dioxide
have been issued by the U.S. EPA based largely on historical levels of sulfur
dioxide emissions. These allowances are transferable and marketable. ComEd's
ability to increase generation in the future to meet expected increased demand
for electricity will depend in part on ComEd and the Indiana Company's ability
to acquire additional allowances or to reduce emissions below otherwise
allowable levels from their existing generating plants. In addition, the Clean
Air Amendments require studies to determine what controls, if any, should be
imposed on utilities to control air toxic emissions, including mercury. ComEd's
Clean Air Compliance Plan for Kincaid station was approved by the ICC on July
8, 1993. In late 1993, however, a federal court declared the Illinois law under
which the approval was received to be unconstitutional and compliance plans
prepared and approved in reliance on the law to be void. Under the Plan
approved by the ICC, ComEd would have been allowed to burn low sulfur Illinois
coal at Kincaid station without the installation of pollution control equipment
for the years 1995 through 1999, and to purchase any necessary emission
allowances that are expected to be available under the Clean Air Amendments
during this period. Also, under the Plan, ComEd expected to install pollution
control equipment for Kincaid station by the year 2000. When the final outcome
of the federal litigation is known, ComEd will determine whether any changes
are required.
The Clean Air Amendments also require reductions in nitrogen oxide emissions
from ComEd and the Indiana Company's fossil fuel generating units. The Illinois
EPA has proposed rules with respect to such emissions which would require
modifications to certain of ComEd's boilers inside the Chicago ozone non-
attainment area. The proposed rules are currently under review. The Illinois
EPA is also considering nitrogen oxide emission reductions at ComEd generating
stations outside the Chicago ozone non-attainment area.
60
<PAGE>
CERCLA provides for immediate response and removal actions coordinated by the
U.S. EPA to releases of hazardous substances into the environment and
authorizes the federal government either to clean up sites at which hazardous
substances have created actual or potential environmental hazards or to order
persons responsible for the situation to do so. Under CERCLA, generators and
transporters of hazardous substances, as well as past and present owners and
operators of hazardous waste sites, are made strictly, jointly and severally
liable for the cleanup costs of waste at sites, most of which are listed by the
U.S. EPA on the NPL. These responsible parties can be ordered to perform a
cleanup, can be sued for costs associated with a U.S. EPA directed cleanup, or
may voluntarily settle with the federal government concerning their liability
for cleanup costs, or may voluntarily begin a site investigation and site
remediation prior to listing on the NPL under state oversight. Various states,
including Illinois, have enacted statutes which contain provisions
substantially similar to CERCLA. ComEd and its subsidiaries are or are likely
to become parties to proceedings initiated by the U.S. EPA, state agencies
and/or other responsible parties under CERCLA with respect to a number of
sites, including MGP sites, or may voluntarily undertake to investigate and
remediate sites for which they may be liable under CERCLA.
MGPs manufactured gas in Illinois from approximately 1850 to 1950. ComEd
generally did not operate MGPs as a corporate entity but did, however, acquire
MGP sites as part of the absorption of smaller utilities. Approximately half of
these sites were transferred to Northern Illinois Gas Company as part of a
general conveyance in 1954. ComEd also acquired former MGP sites as vacant real
estate on which ComEd facilities have been constructed. To date, ComEd has
identified 44 former MGP sites for which it may be liable for remediation.
ComEd presently estimates that its costs of former MGP site investigation and
remediation will aggregate from $25 million to $150 million in current-year
(1994) dollars. It is expected that the costs associated with investigation and
remediation of former MGP sites will be incurred over a period of approximately
20 to 30 years. Because ComEd is not able to determine the most probable
liability for such MGP costs, in accordance with accounting standards, ComEd
has recorded a reserve as of December 31, 1993 and September 30, 1994 of
approximately $25 million, which reflects the low end of the range of its
estimate of the liability associated with former MGP sites. In addition, as of
December 31, 1993 and September 30, 1994, ComEd has recorded a reserve of $5
million and $8 million, respectively, representing its estimate of the
liability associated with cleanup costs of remediation sites other than former
MGP sites. Unicom and ComEd presently estimate that ComEd's costs of
investigating and remediating the former MGP and other remediation sites
pursuant to CERCLA and state environmental laws will not have a material impact
on the financial position or results of operations of Unicom or ComEd. These
cost estimates are based on currently available information regarding the
responsible parties likely to share in the costs of responding to site
contamination, the extent of contamination at sites for which the investigation
has not yet been completed and the cleanup levels to which sites are expected
to have to be remediated.
On July 17, 1991, the U.S. Government filed a complaint in U.S. District
Court alleging that ComEd and four other defendants are PRPs for remediation
costs associated with surface, soil and groundwater contamination alleged to
have occurred from the disposal by other persons of hazardous wastes at a site
located near ComEd's Byron station in Byron, Illinois. The U.S. Government
alleges that a portion of the site is owned by ComEd. The U.S. Government is
presently seeking reimbursement from the PRPs for past study and response costs
associated with the site of approximately $7 million. ComEd is currently
pursuing cost recovery from other PRPs that have been identified at this site.
On October 16, 1992, the U.S. EPA notified ComEd and four other companies,
including the site operator, that they were PRPs for the costs associated with
the investigation and removal of contaminated soil at the Elgin Salvage and
Supply site in Elgin, Illinois. On April 19, 1993, the U.S. EPA issued an order
under Section 106 of CERCLA to ComEd and the other parties to investigate and
remove the contamination from the site. ComEd sent substantial amounts of scrap
cable and other scrap metal to the site. The site investigation and remediation
is currently estimated to be approximately $6 to $8 million. The site operator
claims to be unable to fund more than a small share of the removal costs.
61
<PAGE>
Consequently, the other parties have agreed to an interim allocation of the
removal costs. The interim agreement allocates 55% of the removal costs to
ComEd. ComEd and the other PRPs have filed a cost recovery action against the
site operator and the site owners to require that they provide their share of
the remediation costs.
In the operation of its electric distribution system, ComEd has utilized
equipment containing PCBs. Such equipment included transformers located in
customer-owned buildings and in sidewalk vaults. Under regulations adopted by
the U.S. EPA, these transformers containing PCBs were required to be modified
(with non-PCB fluid) or be replaced. ComEd has completed the replacement of
over 2,000 PCB fluid transformers that were located in or near commercial
buildings and were subject to the federal regulations. The estimated cost to
ComEd of replacing or modifying these transformers and disposing of the PCB
fluid was approximately $120 million, which had been expended through the end
of 1993. Some of ComEd's electrical equipment containing PCBs was sent to scrap
and salvage facilities and, as a result, ComEd may be liable for penalties and
for the costs of cleanup of those facilities. An accident or spill involving
PCB oil-filled electrical equipment, resulting in exposure of persons or
property to PCBs or their by-products, could result in material liability
claims against ComEd.
In September 1990, the IPCB replaced existing landfill regulations with new,
more stringent design and performance standards. These regulations are expected
to increase the cost to ComEd for disposal of coal combustion by-products at
its Joliet station. At Joliet, an existing landfill utilized for disposal of
coal ash may require the installation by 1997 of engineered retrofits designed
to protect groundwater. ComEd intends to request exemptions from certain of the
new regulations from the IPCB. If its request is denied, then alternative
landfill siting, commercial disposal, or retrofitting of the existing facility
could result in significant increases in disposal expenditures.
The outcome of many of the regulatory proceedings referred to above, if not
favorable, could have a material adverse effect on Unicom and ComEd's future
business and operating results.
An unresolved issue is whether exposure to EMFs may result in adverse health
effects or damage to the environment. EMFs are produced by virtually all
devices carrying or utilizing electricity, including transmission and
distribution lines as well as home appliances. If regulations are adopted
related to EMFs, they could affect the construction and operation of electrical
equipment, including transmission and distribution lines and the cost of such
equipment. ComEd cannot predict the effect on the cost of such equipment or
operations if new regulations related to EMFs are adopted. In the absence of
such regulations, EMFs have nonetheless become an issue in siting facilities
and in other land use contexts. Litigation has been filed in a variety of
locations against a variety of defendants (including ComEd) alleging that the
presence or use of electrical equipment has had an adverse effect on the health
of persons. If plaintiffs are successful in litigation of this type and it
becomes widespread, the impact on ComEd and on the electric utility industry is
not predictable, but could be severe.
From time to time, Unicom and its subsidiaries are, or are claimed to be, in
violation of or in default under orders, statutes, rules or regulations
relating to environmental controls and other matters, compliance plans imposed
upon or agreed to by them or permits issued by various state and federal
agencies for the construction or operation of their facilities. Unicom and
ComEd do not believe, so far as they now foresee, that such violations or
defaults will have a material adverse effect on their future business and
operating results, except for events otherwise described in ComEd's Annual
Report on Form 10-K for the year ended December 31, 1993 (as amended by the
Form 10-K/A-1 filed on August 31, 1994) or in these Quarterly Reports on Form
10-Q for the quarterly period ended September 30, 1994, which could have such
an effect.
62
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ------------------------------------------------------------------
<C> <S>
(12) Statement computing Commonwealth Edison Company ratios of earnings
to fixed charges and ratios of earnings to fixed charges and
preferred and preference stock dividend requirements.
(23)-1 Consent of independent public accountants applicable to Unicom
Corporation.
(23)-2 Consent of independent public accountants applicable to
Commonwealth Edison Company.
(27)-1 Financial data schedule of Unicom Corporation.
(27)-2 Financial data schedule of Commonwealth Edison Company.
</TABLE>
(b) Reports on Form 8-K
None.
63
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the 8th day of November, 1994. The
signature for each undersigned company shall be deemed to relate only to
matters having reference to such company and its subsidiaries thereof.
Unicom Corporation
Registrant
Roger F. Kovack
By __________________________________
Roger F. Kovack
Comptroller
(Chief accounting officer and
officer duly authorized to sign on
behalf of the registrant)
Commonwealth Edison Company
Registrant
Roger F. Kovack
By __________________________________
Roger F. Kovack
Comptroller
(Chief accounting officer and
officer duly authorized to sign on
behalf of the registrant)
64
<PAGE>
EXHIBIT INDEX
-------------
Exhibits filed with or incorporated by reference in Form 10-Q for the quarterly
period ended September 30, 1994:
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
(12) Statement computing Commonwealth Edison Company
ratios of earnings to fixed charges and ratios of earnings
to fixed charges and preferred and preference stock
dividend requirements.
(23)-1 Consent of independent public accountants applicable to
Unicom Corporation.
(23)-2 Consent of independent public accountants applicable to
Commonwealth Edison Company.
(27)-1 Financial Data Schedule of Unicom Corporation.
(27)-2 Financial Data Schedule of Commonwealth Edison Company.
</TABLE>
<PAGE>
Exhibit (12)
Commonwealth Edison Company
Form 10-Q File No. 1-1839
Commonwealth Edison Company and Subsidiary Companies Consolidated
-----------------------------------------------------------------
Computation of Ratios of Earnings to Fixed Charges
and Ratios of Earnings to Fixed Charges and
Preferred and Preference Stock Dividend Requirements
----------------------------------------------------
(Thousands of Dollars)
<TABLE>
<CAPTION>
Twelve Months Ended
--------------------------------------
Line December 31, September 30,
No. 1993 1994
- - - ---- --------------------------------------
<S> <C> <C>
1 Net income $ 112,440 $ 328
------------ -------------
2 Net provisions for income taxes and investment tax credits deferred
3 charged to-
4 Operations $ 65,827 $ 30,405
5 Cumulative effect of change in accounting for income taxes (9,738) -
6 Other income (31,076) (33,287)
------------ -------------
7 $ 25,013 $ (2,882)
------------ -------------
8 Fixed charges-
9 Interest on debt $ 651,639 $ 624,149
10 Estimated interest component of nuclear fuel and
11 other lease payments, rentals and other interest 49,021 58,759
12 Amortization of debt discount, premium and expense 20,966 22,919
------------ -------------
13 $ 721,626 $ 705,827
------------ -------------
14 Preferred and preference stock dividend requirements-
15 Provisions for preferred and preference stock dividends $ 66,052 $ 63,801
16 Taxes on income required to meet provisions for
17 preferred and preference stock dividends 43,596 42,045
------------ -------------
18 $ 109,648 $ 105,846
------------ -------------
19 Fixed charges and preferred and preference stock
20 dividend requirements $ 831,274 $ 811,673
------------ -------------
21 Earned for fixed charges and preferred and preference stock
22 dividend requirements $ 859,079 $ 703,273
------------ -------------
23 Ratios of earnings to fixed charges (line 22 divided by line 13) 1.19 1.00
==== ====
24 Ratios of earnings to fixed charges and preferred and preference
25 stock dividend requirements (line 22 divided by line 20) 1.03 0.87
==== ====
</TABLE>
<PAGE>
Exhibit (23)-1
Unicom Corporation
Form 10-Q File No. 1-11375
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference of our report included in this Form 10-Q for the quarterly period
ended September 30, 1994, into Unicom Corporation's previously filed prospectus
dated March 18, 1994, constituting part of Form S-4 Registration Statement File
No. 33-52109, as amended (relating to Common Stock of Unicom Corporation), as
further amended by Post-Effective Amendment No. 1 on Form S-8 (relating to
Commonwealth Edison Company's Employee Savings and Investment Plan), and Post-
Effective Amendment No. 2 on Form S-8 (relating to Unicom Corporation's Employee
Stock Purchase Plan).
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 8, 1994
<PAGE>
Exhibit (23)-2
Commonwealth Edison Company
Form 10-Q File No. 1-1839
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference of our report included in this Form 10-Q for the quarterly period
ended September 30, 1994, into Commonwealth Edison Company's previously filed
prospectuses as follows: (1) prospectus dated August 21, 1986, constituting
part of Form S-3 Registration Statement File No. 33-6879, as amended (relating
to the Company's Debt Securities and Common Stock); and (2) prospectus dated
January 7, 1994, constituting part of Form S-3 Registration Statement File No.
33-51379 (relating to the Company's Debt Securities and Cumulative Preference
Stock). We also consent to the application of our report to the ratios of
earnings to fixed charges and the ratios of earnings to fixed charges and
preferred and preference stock dividend requirements for each of the twelve
months ended December 31, 1993 and September 30, 1994 appearing on page 43 of
this Form 10-Q.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 8, 1994
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND> This schedule contains Unicom Corporation's summary financial
information extracted from the consolidated balance sheet and statement of
consolidated capitalization as of September 30, 1994, and the related statements
of consolidated income, retained earnings and cash flows for the nine-month
period ended September 30, 1994 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000918040
<NAME> Unicom Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 17,329,809
<OTHER-PROPERTY-AND-INVEST> 1,002,562
<TOTAL-CURRENT-ASSETS> 1,423,177
<TOTAL-DEFERRED-CHARGES> 0<F1>
<OTHER-ASSETS> 3,382,670
<TOTAL-ASSETS> 23,138,218
<COMMON> 4,887,792
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 568,110
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5,451,872<F2>
295,734<F3>
508,220<F3>
<LONG-TERM-DEBT-NET> 7,312,425<F4><F5>
<SHORT-TERM-NOTES> 7,150
<LONG-TERM-NOTES-PAYABLE> 0<F5>
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 553,207<F4>
17,801<F3>
<CAPITAL-LEASE-OBLIGATIONS> 370,012
<LEASES-CURRENT> 166,947
<OTHER-ITEMS-CAPITAL-AND-LIAB> 8,454,850
<TOT-CAPITALIZATION-AND-LIAB> 23,138,218
<GROSS-OPERATING-REVENUE> 4,812,192<F6>
<INCOME-TAX-EXPENSE> 209,206<F7>
<OTHER-OPERATING-EXPENSES> 3,747,193
<TOTAL-OPERATING-EXPENSES> 3,975,404
<OPERATING-INCOME-LOSS> 836,788
<OTHER-INCOME-NET> (111,623)<F7><F8>
<INCOME-BEFORE-INTEREST-EXPEN> 744,170
<TOTAL-INTEREST-EXPENSE> 467,828
<NET-INCOME> 276,342
0<F8>
<EARNINGS-AVAILABLE-FOR-COMM> 276,342
<COMMON-STOCK-DIVIDENDS> 256,822
<TOTAL-INTEREST-ON-BONDS> 0<F9>
<CASH-FLOW-OPERATIONS> 339,097
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.29
<FN>
<F1> This item is not disclosed as a separate line item on Unicom Corporation's
consolidated balance sheet.
<F2> Includes a deduction of $4,030 thousand for preference stock expense of
subsidiary (Commonwealth Edison Company).
<F3> Preferred and preference stocks of subsidiary (Commonwealth Edison
Company).
<F4> Long-term debt of subsidiary (Commonwealth Edison Company).
<F5> $1,469,750 thousand of notes and long-term notes payable to banks is
included in LONG-TERM-DEBT-NET.
<F6> GROSS-OPERATING-REVENUE is shown net of provisions for revenue refunds of
$13,561 thousand.
<F7> A tax benefit of $19,005 thousand related to nonoperating activities is
included in INCOME-TAX-EXPENSE.
<F8> A $47,994 thousand provision for preferred and preference stock dividends
of subsidiary (Commonwealth Edison Company) is included in OTHER-INCOME-
NET.
<F9> Not required for quarterly reports.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND> This schedule contains Commonwealth Edison Company's summary financial
information extracted from the consolidated balance sheet and statement of
consolidated capitalization as of September 30, 1994 and the related statements
of consolidated income, retained earnings and cash flows for the nine-month
period ended September 30, 1994 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000022606
<NAME> Commonwealth Edison Company
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 17,329,809
<OTHER-PROPERTY-AND-INVEST> 992,015
<TOTAL-CURRENT-ASSETS> 1,389,475
<TOTAL-DEFERRED-CHARGES> 0<F1>
<OTHER-ASSETS> 3,382,545
<TOTAL-ASSETS> 23,093,844
<COMMON> 2,677,356
<CAPITAL-SURPLUS-PAID-IN> 2,206,407
<RETAINED-EARNINGS> 523,307
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5,407,070
295,734
508,220
<LONG-TERM-DEBT-NET> 7,312,425<F2>
<SHORT-TERM-NOTES> 7,150
<LONG-TERM-NOTES-PAYABLE> 0<F2>
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 553,207
17,801
<CAPITAL-LEASE-OBLIGATIONS> 368,229
<LEASES-CURRENT> 166,737
<OTHER-ITEMS-CAPITAL-AND-LIAB> 8,457,271
<TOT-CAPITALIZATION-AND-LIAB> 23,093,844
<GROSS-OPERATING-REVENUE> 4,812,448<F3>
<INCOME-TAX-EXPENSE> 210,794<F4>
<OTHER-OPERATING-EXPENSES> 3,741,042
<TOTAL-OPERATING-EXPENSES> 3,971,405
<OPERATING-INCOME-LOSS> 841,043
<OTHER-INCOME-NET> (65,467)<F4>
<INCOME-BEFORE-INTEREST-EXPEN> 795,145
<TOTAL-INTEREST-EXPENSE> 467,828
<NET-INCOME> 327,317
47,994
<EARNINGS-AVAILABLE-FOR-COMM> 279,323
<COMMON-STOCK-DIVIDENDS> 304,605
<TOTAL-INTEREST-ON-BONDS> 0<F5>
<CASH-FLOW-OPERATIONS> 387,143
<EPS-PRIMARY> 0<F6>
<EPS-DILUTED> 0<F6>
<FN>
<F1> This item is not disclosed as a separate line item on Commonwealth Edison
Company's consolidated balance sheet.
<F2> $1,469,750 thousand of notes and long-term notes payable to banks is
included in LONG-TERM-DEBT-NET.
<F3> GROSS-OPERATING-REVENUE is shown net of provisions for revenue refunds of
$13,561 thousand.
<F4> A tax benefit of $19,569 thousand related to nonoperating activities is
included in INCOME-TAX-EXPENSE.
<F5> Not required for quarterly reports.
<F6> Because Commonwealth Edison Company is a subsidiary of Unicom Corporation,
EPS information is not disclosed on the statement of consolidated income.
</FN>
</TABLE>
