<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of
the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
/ / Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
/X/ Definitive Information Statement
COMMONWEALTH EDISON COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
Commonwealth Edison Company
One First National Plaza
P.O. Box 767
Chicago, IL 60690-0767
[COMMONWEALTH EDISON LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1996
The regular annual meeting of shareholders of Commonwealth Edison Company
("ComEd") will be held in the Grand Ballroom of the Chicago Hilton and Towers,
720 South Michigan Avenue, Chicago, Illinois, on Wednesday, May 22, 1996, at
10:30 A.M., Chicago time, for the following purposes, which are described in the
accompanying Information Statement, and to transact such other business as may
properly be brought before the meeting:
Item A: To elect a Board of twelve Directors.
Item B: To consider and act upon approval of the appointment by the ComEd
Board of Directors of Arthur Andersen LLP, independent public
accountants, as Auditors for 1996.
Shareholders of record on the books of ComEd at 4:00 P.M., Chicago time, on
March 25, 1996, will be entitled to vote at the meeting.
DAVID A. SCHOLZ
SECRETARY
April 8, 1996
<PAGE>
[COMMONWEALTH EDISON LOGO]
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
April 8, 1996
This Information Statement is furnished in connection with the regular
annual meeting of shareholders of ComEd to be held on May 22, 1996.
A ticket is not required for attendance at the annual meeting; however,
confirmation of stock ownership will be made prior to admission to the meeting.
Effective September 1, 1994, ComEd became a subsidiary of Unicom Corporation
("Unicom") in a corporate restructuring. In the restructuring, each outstanding
share of ComEd's Common Stock was converted in a merger into one share of Unicom
common stock, without par value, and Unicom became the holder of all of the then
outstanding shares of the Common Stock of ComEd. The preferred and preference
stocks, common stock purchase warrants, first mortgage bonds and other debt
obligations of ComEd were unchanged in the restructuring and remain as ComEd's
outstanding securities and obligations.
As of March 25, 1996, ComEd had outstanding 214,195,814 shares of Common
Stock, par value $12.50 per share (of which Unicom beneficially owned
214,185,572 shares), 95,966 shares of $1.425 Convertible Preferred Stock,
without par value, and 16,434,539 shares of Cumulative Preference Stock, without
par value. UNICOM INTENDS TO VOTE ITS SHARES OF COMMON STOCK FOR THE ELECTION OF
THE NOMINEES NAMED IN THIS INFORMATION STATEMENT AND FOR APPROVAL OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS AUDITORS AND, CONSEQUENTLY, SUCH MATTERS
ARE EXPECTED TO BE APPROVED.
Unicom's 1995 Summary Annual Report was mailed to each shareholder of ComEd
on or about February 15, 1996. The audited financial statements of ComEd, along
with certain other financial information, are included in Appendix A to this
Information Statement. This Information Statement was first mailed to
shareholders on or about April 8, 1996.
<PAGE>
ITEM A. ELECTION OF DIRECTORS
NOMINEES
Twelve Directors are to be elected at the annual meeting to serve terms of
one year and until their respective successors have been elected. The nominees
for Director, all of whom are now serving as Directors of ComEd, are listed
below together with certain biographical information. Except as otherwise
indicated, each nominee for Director has been engaged in his or her present
principal occupation for at least the past five years.
<TABLE>
<S> <C>
JEAN ALLARD, age 71. Director since 1975. Of Counsel to the law firm of
Sonnenschein Nath & Rosenthal. President of the Metropolitan Planning
[PHOTO1] Council (a non-profit agency) from October 1991 to March 1996. Partner,
Sonnenschein Nath & Rosenthal prior to October 1991. Chair of Audit
Committee and member of Corporate Governance and Compensation, Finance
and Regulatory and Environmental Affairs Committees. Other
directorships: Castlerock Group, Inc. and Unicom Corporation.
EDWARD A. BRENNAN, age 62. Director since 1995. Retired. Chairman and
CEO of Sears, Roebuck and Co. (retail merchandiser) for more than five
[PHOTO2] years prior to August 1995. Member of Corporate Governance and
Compensation Committee. Other directorships: The Allstate Corporation,
Dean Witter, Discover & Co., AMR Corporation, Minnesota Mining and
Manufacturing Company and Unicom Corporation.
JAMES W. COMPTON, age 58. Director since 1989. President and Chief
Executive Officer of the Chicago Urban League (a non-profit agency).
[PHOTO3] Chairman of Finance Committee and member of Corporate Governance and
Compensation, Executive and Nominating Committees. Other directorship:
Unicom Corporation.
SUE L. GIN, age 54. Director since 1993. Founder, Owner, Chairman and
Chief Executive Officer of Flying Food Fare, Inc. (in-flight catering
[PHOTO4] company). Member of Audit, Corporate Governance and Compensation,
Executive and Finance Committees. Other directorship: Unicom
Corporation.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
DONALD P. JACOBS, age 68. Director since 1979. Dean of the J. L. Kellogg
Graduate School of Management, Northwestern University. Chairman of
[PHOTO5] Regulatory and Environmental Affairs Committee and member of Corporate
Governance and Compensation, Finance and Nominating Committees. Other
directorships: The First National Bank of Chicago, Hartmarx Corp.,
Security Capital Industrial Trust, Unicom Corporation, Unocal Corp. and
Whitman Corp.
EDGAR D. JANNOTTA, age 64. Director since 1994. Senior Principal of
William Blair & Company, L.L.C. (investment banking and brokerage
[PHOTO6] company) since January 1996. For more than five years prior thereto,
Managing Partner of William Blair & Company and Senior Partner during
1995. Chairman of Nominating Committee and member of Audit, Corporate
Governance and Compensation, and Finance Committees. Other
directorships: AAR Corp., AON Corporation, Bandag, Incorporated, Molex
Incorporated, Oil-Dri Corporation of America, Safety-Kleen Corp. and
Unicom Corporation.
GEORGE E. JOHNSON, age 68. Director since 1971. Founder and retired
Chairman, Johnson Products Company, Inc. (personal care products
[PHOTO7] company). Chairman of Indecorp, Inc. for more than five years prior to
December 1995. Member of Corporate Governance and Compensation,
Executive, Nominating and Regulatory and Environmental Affairs
Committees. Other directorships: Burrell Communications Group and Unicom
Corporation.
EDWARD A. MASON, age 71. Director since 1980. Retired. Vice President,
Research, of Amoco Corporation (oil and chemicals company) prior to July
[PHOTO8] 1989. Chairman of Nuclear Operations Committee and member of Audit,
Corporate Governance and Compensation, and Regulatory and Environmental
Affairs Committees. Other directorships: Symbollon Corporation and
Unicom Corporation.
LEO F. MULLIN, age 53. Director since 1995. Vice Chairman of ComEd since
December 1995. President and Chief Operating Officer of First Chicago
[PHOTO9] Corporation from November 1993 to July 1995. Chairman, President and
Chief Executive Officer of American National Bank and Trust Company of
Chicago from April 1991 to November 1993. Executive Vice President of
First Chicago Corporation prior to April 1991. Member of Executive
Committee. Other directorships: Pittway Corporation and Unicom
Corporation.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
JAMES J. O'CONNOR, age 59. Director since 1978. Chairman of ComEd.
Chairman of Executive Committee. Other directorships: Corning
[PHOTO10] Incorporated, First Chicago NBD Corporation, The First National Bank of
Chicago, Scotsman Industries, Inc., Tribune Company, UAL Corporation and
Unicom Corporation.
FRANK A. OLSON, age 63. Director since 1992. Chairman and Chief
Executive Officer of The Hertz Corporation (rental car company).
[PHOTO11] Chairman of Corporate Governance and Compensation Committee and member
of Audit, Nominating and Regulatory and Environmental Affairs
Committees. Other directorships: Becton, Dickinson and Company, Cooper
Industries, Foundation Health Corp. and Unicom Corporation.
SAMUEL K. SKINNER, age 57. Director since 1993. President of ComEd since
February 1993. General Chairman of the Republican National Committee
[PHOTO12] from August 1992 to January 1993. Chief of Staff to the President of the
United States from December 1991 to August 1992. Secretary of the United
States Department of Transportation from February 1989 to December 1991.
Member of Executive Committee. Other directorships: ANTEC Corporation,
The Broken Hill Proprietary Company Limited, LTV Corporation and Unicom
Corporation.
</TABLE>
ADDITIONAL INFORMATION CONCERNING BOARD OF DIRECTORS
COMPENSATION OF DIRECTORS--Directors who are not employees of Unicom, ComEd,
or any of their subsidiaries receive an annual retainer of $20,000, a fee of
$1,000 for each Board and Committee meeting attended and an additional annual
retainer of $2,500 for chairing a Committee of the Board. Any non-employee
Director who is also a member of the Nuclear Operations Committee receives an
additional annual retainer of $5,000. Following each annual meeting of
shareholders, non-employee Directors receive a grant of 300 shares of Unicom
common stock under a plan to increase the proprietary interest of non-employee
Directors. In the event that Directors also serve as directors of Unicom, or as
chairs of corresponding committees of Unicom, the aggregate retainers paid to
such Directors in respect of such service to Unicom and ComEd do not exceed the
foregoing amounts. Directors who are full-time employees of Unicom, ComEd, or
any of their subsidiaries receive no fees for service on the Board of Directors.
Directors' fees may be deferred. Directors who have never been an officer or an
employee of Unicom, ComEd, or any of their subsidiaries, and who have attained
at least age 65 and completed the required period of Board service (3 to 5 years
as applicable, including service as a director of Unicom), are eligible for
retirement benefits upon retirement. Such benefits are paid to the retired
Director or a surviving spouse for a period equal to such Director's years of
service (including service as a director of Unicom) in an amount per year equal
to the annual retainer for Board members as in effect at the time of payment.
4
<PAGE>
On March 14, 1996, the Board of Directors of Unicom adopted, subject to
approval by Unicom's shareholders at their annual meeting on May 22, 1996, the
Unicom Corporation 1996 Directors' Fee Plan, which would provide for the payment
of the Unicom portion of the directors' retainer fees in shares of Unicom common
stock and would allow directors to elect to receive the ComEd portion of their
retainer fees and the directors' meeting and committee attendance fees in shares
of Unicom common stock. The election with respect to the ComEd portion of the
retainer fees will convert to an automatic payment at such time as ComEd
receives approval from the Illinois Commerce Commission ("ICC") to compensate
its directors with shares of Unicom common stock. (ComEd has filed a petition
with the ICC seeking such authority and expects to receive such authorization in
the second half of 1996.)
AUDIT COMMITTEE--The Audit Committee consists of five Directors who are not
employees of Unicom, ComEd, or any of their subsidiaries. Members serve
three-year staggered terms. It is the responsibility of the Audit Committee to
review, with ComEd's independent Auditors, ComEd's financial statements and the
scope and results of such Auditors' examinations, to monitor the internal
accounting controls and practices of ComEd, to review the financial statements
set forth in Appendix A and to recommend the appointment, subject to shareholder
approval, of independent Auditors. The Committee met two times during 1995.
Members of the Committee are Jean Allard (Chair), Sue L. Gin, Edgar D. Jannotta,
Edward A. Mason and Frank A. Olson.
CORPORATE GOVERNANCE AND COMPENSATION COMMITTEE--The Corporate Governance
and Compensation Committee consists of all Directors who are not and have never
been employees of Unicom, ComEd, or any of their subsidiaries. Members serve
one-year terms. The Committee reviews management and executive compensation
programs and corporate governance matters and administers awards under the
Deferred Compensation Plan. The Committee met three times during 1995. Members
of the Committee are Frank A. Olson (Chairman), Jean Allard, Edward A. Brennan,
James W. Compton, Sue L. Gin, Donald P. Jacobs, Edgar D. Jannotta, George E.
Johnson and Edward A. Mason.
EXECUTIVE COMMITTEE--The Executive Committee consists of six Directors.
Members serve one-year terms. The remaining Directors constitute alternates to
serve temporarily, in rotation, in place of any member unable to serve. The
Committee has and may exercise all the authority of the Board of Directors when
the Board is not in session, subject to limitations set forth in the By-Laws.
The Committee met two times during 1995. Members of the Committee are James J.
O'Connor (Chairman), James W. Compton, Sue L. Gin, George E. Johnson, Leo F.
Mullin and Samuel K. Skinner.
FINANCE COMMITTEE--The Finance Committee consists of five Directors. Members
serve one-year terms. The Committee reviews the scope and results of ComEd's and
its subsidiaries' financing program. The Committee met two times during 1995.
Members of the Committee are James W. Compton (Chairman), Jean Allard, Sue L.
Gin, Donald P. Jacobs and Edgar D. Jannotta.
NOMINATING COMMITTEE--The Nominating Committee consists of five Directors
who are not employees of Unicom, ComEd, or any of their subsidiaries. Members
serve one-year terms. The Committee reviews the qualifications of potential
candidates and proposes nominees for Director to the Board. The Committee will
consider nominees recommended by shareholders if such recommendations are
submitted in writing, accompanied by a description of the proposed nominee's
qualifications and other relevant biographical information and evidence of the
consent of the proposed nominee. The recommendations should be addressed to the
Nominating Committee, in care of the Secretary of ComEd. Nominations also may be
presented by shareholders at the annual meeting of shareholders. The Committee
met one time during 1995. Members of the Committee are Edgar D. Jannotta
(Chairman), James W. Compton, Donald P. Jacobs, George E. Johnson and Frank A.
Olson.
5
<PAGE>
NUCLEAR OPERATIONS COMMITTEE--The Nuclear Operations Committee consists of
one Director. A member serves a one-year term. The Committee reviews ComEd's
nuclear operations. The Committee met seven times during 1995. The member of the
Committee is Edward A. Mason (Chairman).
REGULATORY AND ENVIRONMENTAL AFFAIRS COMMITTEE--The Regulatory and
Environmental Affairs Committee consists of five Directors. Members serve
one-year terms. The Committee reviews ComEd's relationships with economic and
environmental regulatory agencies and reviews matters involving ComEd before
such agencies. The Committee met two times during 1995. Members of the Committee
are Donald P. Jacobs (Chairman), Jean Allard, George E. Johnson, Edward A. Mason
and Frank A. Olson.
ATTENDANCE AT MEETINGS--During 1995, there were nine meetings of the Board
of Directors. The average attendance of all incumbent Directors, expressed as a
percent of the aggregate total of Board and Board Committee meetings in 1995,
was 97%. Each incumbent Director attended at least 87% of the meetings of the
Board and Board Committees of which the Director was a member.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 1, 1996, Unicom beneficially owned 214,185,572 shares of ComEd
Common Stock, representing more than 99.99% of the total ComEd Common Stock
outstanding, and there was no other person known to ComEd to be the beneficial
owner of more than five percent of any class of ComEd voting securities. The
following table lists the beneficial ownership, as of March 1, 1996, of Unicom
common stock by each of the Directors, each of the executive officers named in
the Summary Compensation Table on page 8 and ComEd's Directors and executive
officers as a group. Except as otherwise noted below, no executive officers or
directors of ComEd beneficially own voting securities of ComEd.
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL
OWNERSHIP OF
UNICOM COMMON PERCENT OF
NAME STOCK CLASS
- --------------------------------------------------------------------------------------- --------------- -----------
<S> <C> <C>
Jean Allard............................................................................ 1,482 *
Edward A. Brennan...................................................................... 1,307 *
James W. Compton....................................................................... 1,681 *
Sue L. Gin............................................................................. 4,542 *
Donald P. Jacobs....................................................................... 2,725 *
Edgar D. Jannotta...................................................................... 1,400 *
George E. Johnson...................................................................... 1,522 *
Edward A. Mason........................................................................ 1,911 *
Leo F. Mullin.......................................................................... 15,143 *
James J. O'Connor...................................................................... 27,796(1)(2) *
Frank A. Olson......................................................................... 1,400 *
Samuel K. Skinner...................................................................... 26,017 *
Thomas J. Maiman....................................................................... 6,146(2) *
Pamela B. Strobel...................................................................... 3,445(2) *
Michael J. Wallace..................................................................... 8,178(2)(3) *
Directors and executive officers as a group (33 persons)............................... 177,354(2)(4) *
</TABLE>
- ---------
* Less than one percent
6
<PAGE>
(1) Includes 1,568 shares owned by family members.
(2) Does not include shares of Unicom common stock that would have been received
by an officer under certain awards made pursuant to the Unicom Corporation
Long-Term Incentive Plan but for an election by such officer to defer
receipt of such shares. All such deferred shares were issued to a trust, of
which The First National Bank of Chicago is Trustee. The Trustee has sole
voting rights with respect to such deferred shares. Dividends paid thereon
are either reinvested in Unicom common stock and held by such Trustee or are
paid to the officer making the deferral. As of March 1, 1996, the total
number of shares deferred by officers was 79,281. Deferrals by Messrs.
O'Connor, Maiman, Wallace and Ms. Strobel totalled 31,243, 6,719, 3,914 and
3,297 shares, respectively.
(3) Includes 100 shares jointly owned with a family member and 377 shares held
in custodial accounts for family members.
(4) Includes 1,847 shares owned by spouses; 377 shares held in custodial
accounts for family members; 1,314 shares jointly owned by spouse and
in-law; 1,568 shares owned by family members; and 1,753 shares jointly owned
with family members. Such persons also beneficially own 49 shares of ComEd
Preference Stock, representing less than one percent of such class.
Section 16(a) of the Securities Exchange Act of 1934 requires ComEd's
officers and directors and persons who own more than ten percent of a registered
class of ComEd equity securities ("Reporting Person") to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Reporting Persons are required by Securities and Exchange Commission regulations
to furnish ComEd with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of such forms received by it and
written representations from certain Reporting Persons, ComEd believes that
during fiscal 1995 its Reporting Persons complied with all filing requirements
applicable to them, except for Edgar D. Jannotta. Mr. Jannotta, who was elected
to the Board of Directors of ComEd and of Unicom on December 8, 1994,
inadvertently omitted to file a Form 3 with respect to his ComEd directorship.
He did make a timely filing with respect to his Unicom directorship, and he
filed a Form 3 with respect to his ComEd directorship in October, 1995. The
Company is not aware of any transactions in shares of stock that were not timely
reported.
ITEM B. APPROVAL OF AUDITORS
Subject to approval of the shareholders, the Board of Directors of ComEd has
appointed Arthur Andersen LLP, independent public accountants, as Auditors to
examine the annual and quarterly consolidated financial statements of ComEd and
its subsidiary companies for 1996. The shareholders will be asked at the annual
meeting to approve such appointment. The firm of Arthur Andersen LLP has audited
the accounts of Unicom since its inception in 1994, and ComEd since 1932. A
representative of Arthur Andersen LLP will be present at the meeting to make a
statement if such representative so desires, and to respond to shareholders'
questions.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information relating to the
compensation during the past three calendar years of those persons who were, at
December 31, 1995, the Chief Executive Officer and the other four most highly
compensated executive officers of Unicom or ComEd.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- -------------- ALL OTHER
NAME AND PRINCIPAL SALARY BONUS OTHER ANNUAL LTIP PAYOUTS COMPENSATION(1)
POSITION YEAR $ $ $ $ $
- ------------------------------- --------- --------- --------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
James J. O'Connor 1995 826,926 826,926 0 452,296 98,102
Chairman (Chief 1994 773,536 485,106 0 0 93,120
Executive Officer) 1993 668,126 215,137 0 0 80,976
ComEd and Unicom
Samuel K. Skinner(2) 1995 580,000 580,000 0 324,297 105,828
President 1994 543,748 602,338 0 0 87,969
ComEd and Unicom 1993 442,885 157,780 0 0 101,455
Thomas J. Maiman 1995 279,055 128,445 0 126,633 20,265
Senior Vice President 1994 267,516 155,862 0 0 19,609
ComEd 1993 196,555 42,200 78 0 17,633
Michael J. Wallace 1995 277,440 93,021 0 122,271 13,469
Senior Vice President 1994 269,689 123,803 0 0 12,919
ComEd 1993 190,209 30,178 44 0 10,395
Pamela B. Strobel(3) 1995 238,000 96,563 0 75,892 17,146
Vice President and 1994 212,344 91,541 0 0 10,887
General Counsel 1993 103,154 78,980 0 0 7,851
ComEd
</TABLE>
- ---------
(1) Amounts shown include matching contributions made by ComEd pursuant to the
ComEd Employee Savings and Investment Plan ("ESIP"), incremental interest
earned on deferred compensation which is in excess of 120% of the
corresponding Federal long-term rate, matching contributions made by ComEd
pursuant to the ComEd Excess Benefits Savings Plan and premiums and
administrative service fees paid by ComEd on behalf of the named individuals
under various group life insurance plans. For the year 1995, contributions
made to the ESIP amounted to $5,654, $3,426, $5,487, $6,650 and $3,372 on
behalf of Messrs. O'Connor, Skinner, Maiman, Wallace and Ms. Strobel,
respectively. The amounts of incremental interest earned during 1995 on
deferred compensation totaled $2,223 and $37 on behalf of Messrs. O'Connor
and Wallace, respectively. Contributions made to the ComEd Excess Benefits
Savings Plan during 1995 totaled $19,533, $24,948, $3,750, $2,705 and $7,192
on behalf of Messrs. O'Connor, Skinner, Maiman, Wallace and Ms. Strobel,
respectively. Premiums and administrative service fees paid during 1995 for
Split Dollar Life, Accidental Death and Travel Accident insurance policies
for Messrs. O'Connor, Skinner, Maiman, Wallace and Ms. Strobel,
respectively, are as follows: $70,323, $355 and $14; $77,191, $249 and $14;
$10,894, $120 and $14; $3,944, $119 and $14; $6,467, $102 and $13. ComEd is
entitled to recover the premiums and administrative service fees from any
amounts paid by the insurer on such Split Dollar Life policies and has
retained a collateral interest on each policy to the extent of the premiums
and administrative service fees paid with respect to such policy.
(2) Mr. Skinner became employed by ComEd in February 1993.
(3) Ms. Strobel became employed by ComEd in June 1993.
8
<PAGE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
NUMBERS OR OTHER NON-STOCK PRICE-BASED PLANS
OF SHARES, PERIOD UNTIL -------------------------------------
UNITS OR MATURATION THRESHOLD TARGET MAXIMUM
NAME OTHER RIGHTS(1) OR PAYOUT NUMBER NUMBER NUMBER
- -------------------------------------------- --------------- ------------- ----------- ----------- -----------
(NUMBER OF PERFORMANCE UNITS)
<S> <C> <C> <C> <C> <C>
James J. O'Connor........................... 12,899.64 3 years (2) 6,449.82 12,899.64 25,799.28
Chief Executive Officer
Samuel K. Skinner........................... 8,992.37 3 years (2) 4,496.19 8,992.37 17,984.74
Thomas J. Maiman............................ 3,634.25 3 years (2) 1,817.13 3,634.25 7,268.50
Michael J. Wallace.......................... 3,767.21 3 years (2) 1,883.61 3,767.21 7,534.42
Pamela B. Strobel........................... 2,402.75 3 years (2) 1,201.37 2,402.75 4,805.50
</TABLE>
- ---------
(1) Long-Term Performance Unit Awards were initiated during 1994 to executive
and group level employees under the Unicom Corporation Long-Term Incentive
Plan. Under the Awards, the number of units awarded to a participant is
determined by dividing a portion of base salary (including income from
current compensation units under Unicom's and ComEd's Deferred Compensation
Unit Plans) (such portion being 50% each for Mr. O'Connor and Mr. Skinner,
40% each for Mr. Maiman and Mr. Wallace and 30% for Ms. Strobel) by $32.75.
Payouts are based on the cumulative total shareholder return on Unicom
common stock (assuming reinvestment of dividends) relative to that of other
companies constituting the Dow Jones Utility Stock Index over a three-year
performance period ending December 31, 1998. The dollar value of a payout is
determined by multiplying the number of units applicable to the level of
performance achieved by the average closing price of Unicom common stock as
reported in the WALL STREET JOURNAL as New York Stock Exchange Composite
Transactions during the calendar quarter ending on the last day of the
performance period. Payments are to be made half in cash and half in the
form of unrestricted Unicom common stock. Effective with awards payable in
1996, a participant may elect to defer receipt of up to 100% of the total
award (net of applicable taxes) under the Unicom Corporation Stock Bonus
Deferral Plan. Notwithstanding the foregoing, no payouts are earned or made
if Unicom fails to maintain regular quarterly cash dividends of at least
40 CENTS per share during the performance period. In addition, no payouts are
earned or made if the relative cumulative total shareholder return on Unicom
common stock is lower than the 25th percentile; and the highest level of
payout is reached when such relative return equals or exceeds the 90th
percentile.
(2) Three-year period ending December 31, 1998.
9
<PAGE>
SERVICE ANNUITY SYSTEM PLAN
The following table sets forth the annual retirement benefits payable under
ComEd's Service Annuity System Plan (including payments under the unfunded
equalization benefit plan) to employees who retire at age 65 at stated levels of
compensation and years of service at retirement (in 1996).
<TABLE>
<CAPTION>
PENSION PLAN TABLE
- -------------------------------------------------------------------------------
HIGHEST
4-YEAR ANNUAL NORMAL RETIREMENT BENEFITS AFTER SPECIFIED YEARS OF SERVICE*
AVERAGE -------------------------------------------------------------------
EARNINGS 15 20 25 30 35 40
- ---------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 36,653 $ 47,189 $ 57,085 $ 66,501 $ 75,559 $ 84,350
200,000 73,306 94,379 114,169 133,002 151,118 168,700
300,000 109,959 141,568 171,254 199,502 226,677 253,050
400,000 146,612 188,757 228,338 266,003 302,236 337,400
500,000 183,265 235,947 285,423 332,504 377,796 421,750
600,000 219,919 283,136 342,508 399,005 453,355 506,100
700,000 256,572 330,325 399,592 465,506 528,914 590,449
800,000 293,225 377,515 456,677 532,007 604,473 674,799
900,000 329,878 424,704 513,761 598,507 680,032 759,149
1,000,000 366,531 471,893 570,846 665,008 755,591 843,499
1,100,000 403,184 519,083 627,930 731,509 831,150 927,849
1,200,000 439,837 566,272 685,015 798,010 906,709 1,012,199
1,300,000 476,490 613,462 742,100 864,511 982,268 1,096,549
1,400,000 513,143 660,651 799,184 931,011 1,057,827 1,180,899
1,500,000 549,796 707,840 856,269 997,512 1,133,387 1,265,249
1,600,000 586,450 755,030 913,353 1,064,013 1,208,946 1,349,599
1,700,000 623,103 802,219 970,438 1,130,514 1,284,505 1,433,949
</TABLE>
- ---------
*An employee may elect a marital annuity for a surviving spouse which would
reduce the employee's normal retirement benefits. The amounts shown reflect
certain assumptions as to total earnings, but do not reflect the reduction
for Social Security benefits described below.
SERVICE ANNUITY SYSTEM PLAN--ComEd maintains a non-contributory Service
Annuity System Plan for all regular employees of ComEd. The Plan provides
benefits upon retirement at age 65 which are based upon years of service and
percentages of the employee's highest consecutive four-year average annual base
pay and the variable compensation portion (annual bonus) of the employee's
incentive pay. An employee with at least 10 years of service may retire prior to
attaining age 65 (but not prior to age 50) and will receive reduced benefits if
retirement is prior to age 60. A non-executive employee may work beyond age 65
with additional benefits accruing for earnings and service after age 65.
Contributions to the Plan by ComEd are based upon actuarial determinations 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. Beginning with the year 1994, compensation used in the computation
of annual retirement benefits under the Plan is substantially equivalent to the
amount set forth in the Salary column plus the Bonus column of the Summary
Compensation Table. The compensation used in the computation of annual
retirement benefits under the Plan is limited by the Internal Revenue Code as of
January 1, 1995 to $245,000 for any one employee and as of January 1, 1996 to
$150,000 (adjusted for increases in cost of living) for any one employee. Any
reduction in the annual retirement benefits payable to management employees
under the Plan as a result of any limitations imposed by the Internal Revenue
Code is restored by an unfunded equalization benefit plan maintained by ComEd.
Thus, annual retirement benefits, as set forth in the Pension Plan Table above,
are based on the amounts shown in the Salary and Bonus columns of the Summary
10
<PAGE>
Compensation Table, without limitation as a result of the application of the
provisions of the Internal Revenue Code. Credited years of service under the
Plan for the persons named in the Summary Compensation Table are as follows:
James J. O'Connor, 32 years; Samuel K. Skinner, 3 years; Thomas J. Maiman, 30
years; Michael J. Wallace, 21 years; and Pamela B. Strobel, 3 years.
EMPLOYMENT AGREEMENTS
ComEd has an agreement with Samuel K. Skinner providing for an initial base
salary of $490,000 per annum and an unfunded supplemental retirement benefit.
The supplemental retirement benefit does not vest until the completion of five
years of employment and, consequently, no benefit is presently available. The
formula underlying the supplemental retirement benefit provides a benefit,
together with any benefits payable under the Service Annuity System Plan and a
social security supplement, equal to one-third of Mr. Skinner's highest annual
earnings during the preceding five years, after five years of service, and
increasing ratably annually to one-half of such annual earnings after ten years.
The agreement also provides for a severance payment equal to two years of base
salary, payable over three years, and a three-year continuation of health and
life insurance benefits in the event that Mr. Skinner's employment is terminated
by ComEd for reasons other than death, fraud or willful misconduct. The
severance payment is subject to reduction to the extent that Mr. Skinner
receives compensation from another full-time employer during the payment period.
ComEd entered into an employment agreement with Leo F. Mullin, pursuant to
which he became Vice-Chairman of Unicom and ComEd on December 1, 1995. The
agreement provides that ComEd will pay Mr. Mullin an initial base salary of
$577,000 per annum. In addition, Mr. Mullin received a bonus upon commencement
of his duties of $275,000. The agreement provides that he will receive bonuses
on the same basis as any annual bonus paid to the Chairman or the President of
the Company, or both, as determined by the Board of Directors. For calendar year
1996, Mr. Mullin is guaranteed a bonus of at least 50% of his base salary. Mr.
Mullin was also awarded performance units making him eligible for payments under
the Unicom Corporation Long-Term Incentive Plan. Mr. Mullin's agreement also
provides for an unfunded supplemental retirement benefit pursuant to which Mr.
Mullin will receive the annual retirement benefit that would have been payable
under the Service Annuity System Plan if Mr. Mullin were to retire at age 60
with 20 years of service plus one additional year for each year of actual
employment. No such benefit is payable until Mr. Mullin has completed five years
of service, unless ComEd terminates his employment for reasons other than death,
fraud or willful misconduct or Mr. Mullin terminates his employment as a result
of certain adverse actions taken by ComEd. The agreement further provides for a
severance payment equal to two years of Mr. Mullin's then-current base salary
and most recent annual bonus, payable over three years, and a three-year
continuation of health and life insurance benefits in the event that Mr.
Mullin's employment is terminated by ComEd for reasons other than death, fraud
or willful misconduct or in the event that Mr. Mullin terminates his employment
because ComEd has reduced or failed to pay his salary or takes certain other
actions. The severance payment is subject to reduction in the event that Mr.
Mullin accepts other full-time employment during the payment period.
CORPORATE GOVERNANCE AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of Unicom was
established in September, 1994 as a result of the corporate reorganization
pursuant to which Unicom became the parent holding company of ComEd. In July
1995, the Committee's duties were expanded and it became the Corporate
Governance and Compensation Committee. The individuals who have been and are
members of the Board of Directors of ComEd are also members of the Unicom Board.
Therefore, the members of the Corporate Governance and Compensation Committees
of ComEd and of Unicom are the same individuals, constituting all of the
Directors of each corporation who are not and never have been employees of
Unicom, ComEd, or any of the subsidiaries of either. References in the following
report to the "Committee" are
11
<PAGE>
references to the ComEd Corporate Governance and Compensation Committee, the
Unicom Corporate Governance and Compensation Committee, or both. The Corporate
Governance and Compensation Committees of both Boards jointly have furnished the
following report on executive compensation:
INTRODUCTION. It is the policy of the Committee to compensate executive
officers based on their responsibilities, their achievement of annual goals and
the Company's annual and long-term performance. The Committee believes that
compensation paid should be appropriate in relation to the financial performance
of the Company and should be sufficient to enable the Company to attract and
retain individuals possessing the talents required for the Company's long-term
successful performance. The Committee also believes that the incentive
compensation performance goals for executive management should be based on
factors over which management has significant control and which are important to
the Company's long-term success.
In 1995, there were three major components of compensation applicable to the
executive officers of Unicom and ComEd: (i) cash salary, (ii) current
compensation unit income, and (iii) incentive compensation awards under the
Unicom Corporation Long-Term Incentive Plan (the "Incentive Plan"). Cash salary
and current compensation unit income constitute "base salary" for purposes of
this report.
BASE SALARY RANGES. The process of determining the officers' base salary
begins with establishing a salary range for each officer level. To establish the
salary ranges for 1995, salary data for various executive positions at
twenty-two of the largest companies in the electric utility industry were
reviewed from the 1994 Edison Electric Institute's Executive Compensation Survey
along with data for various positions among companies in the utility industry
and in industry generally. These data were used as a beginning reference point
on grounds that the basic duties and responsibilities associated with executive
officer positions in the other utility and non-utility companies are somewhat
similar to those in the Company. Judgment was applied to reflect differences in
the organizational structure and responsibilities of executive officers of the
Company, in the size and complexity of the Company's operations, and in the
regulatory environment and competitive challenges faced by the Company. After
considering these various factors, the Committee approved, in December 1994,
salary ranges for 1995 the midpoint of which averaged about 8.3% above 1994
levels.
With respect to comparisons with other companies, it should be noted that
because of differences between Unicom and ComEd and others in the group of
twenty-two large utilities that participated in the 1994 Edison Electric
Institute Executive Compensation Survey and because that group does not
constitute a recognized group for purposes of indexing the financial performance
of the industry, the group is not used in the performance comparisons shown on
page 16. The Dow Jones Utility Stock Index, a well-known and widely-followed
utility index comprising a broad array of utility companies (including Unicom
and nine of the other large utilities in the Edison Electric Institute Survey),
is used for those comparisons. A comparison to the companies composing this
Index is also used for measuring performance for purposes of one of the
incentive awards discussed below.
INDIVIDUAL BASE SALARY DETERMINATIONS. After salary ranges are established,
the base salary of each officer is set within the applicable range based on a
largely subjective assessment of the particular responsibilities and performance
of such officer. The length of service and level of experience of each officer
in his or her area of responsibility are also considered.
With respect to each officer other than the Chairman, the Chairman makes
recommendations regarding cash salary and current compensation units. The
recommendations are considered and discussed by the Committee in a private
meeting with the Chairman. The Chairman's performance and compensation are
considered and determined by the Committee without the Chairman present.
CASH SALARY. In December 1994, the Committee approved increases in cash
salary for the executive officers averaging 6.9% of base salary. Percentage
increases for individual executive officers varied around this average and were
structured, in part, to help bring the base salary of individual officers closer
to industry
12
<PAGE>
levels, and to reflect the performance and contributions of the individual
officers. These cash salary increases for 1995 were designed to recognize
improved financial performance in 1994, and the foundations that had been laid
for further improvement in 1995.
CURRENT COMPENSATION UNIT AWARDS. Current compensation units can be awarded
by the Committee pursuant to the Unicom Corporation Deferred Compensation Unit
Plan. Current compensation units are awarded as a supplement to cash salary
increases, based largely on subjective judgment as opposed to quantifiable
performance measures, to recognize the special contributions of individual
management personnel. Under the Plan, a holder of current compensation units is
entitled to current income equal to the dividend on one share of Unicom common
stock for each unit held. Such income is paid on a quarterly basis,
simultaneously with the payment of dividends, for the duration of employment,
and continues after employment ends for unit holders who retire or for unit
holders who resign to take advantage of a voluntary severance offer from the
Company.
In September 1995, the Committee awarded compensation units to executive
officers and other management personnel. The awards for 1995 were granted in
recognition of the improved financial performance of the Company that began in
1994 and continued into 1995. The units awarded produced, on an annual basis, an
average increase of 2.4% in base salary for executive officers at the current
dividend level. Again, the awards for individual executive officers varied
depending on the Chairman's and Committee's assessment of the contributions of
the individual officers.
INCENTIVE COMPENSATION AWARDS. The third component of executive
compensation for 1995 was incentive compensation paid pursuant to awards under
the Incentive Plan.
A 1995 Variable Compensation Award for Management Employees was established
to provide payments based upon the achievement of certain corporate and business
unit goals. The payments were also contingent on maintaining quarterly cash
dividends of at least 40 CENTS per share, and limiting operation and maintenance
expenses and capital expenditures to specified levels. Half of the potential
payout was related to achievement of corporate goals and the other half was
related to the achievement of business unit goals. The potential payouts as a
percentage of base salary varied with different levels of management
responsibility and also according to level of achievement of the goals. The
varying payouts were established on the basis of subjective judgment with
respect to the appropriate level of incentive and award, considering degree of
difficulty of the goals and degree of responsibility of the different officers,
executives and managers for achievement of the goals. This Award did not apply
to Messrs. O'Connor and Skinner for whom separate awards, discussed later, were
granted.
For purposes of the 1995 Variable Compensation Award, corporate goals were
established with respect to ComEd earnings per share, and also with respect to
the amount by which ComEd operation and maintenance expenses were below budget.
For purposes of measuring achievement of the 1995 goals, the Committee provided
for the exclusion of charges related to a 1995 severance and early retirement
program on grounds that the related benefits will be realized primarily in
future years, and also the exclusion of certain other items on grounds that it
would not be appropriate to allow such items to affect the measure of
performance. Reflecting these adjustments, the earnings per share goals ranged
from $2.55 at the threshold level of performance for payments under the Award to
$2.69 at the distinguished level, and the operation and maintenance expense
goals ranged from $2,031 million at the threshold level to $1,953 million at the
distinguished level. Also reflecting the adjustments noted above for the
purposes of the Award, actual ComEd earnings per share were $3.28 and operation
and maintenance expenses were $2,021.2 million.
Similar Awards were granted to Mr. O'Connor and Mr. Skinner for the year
1995, except that payment was dependent entirely upon achievement of earnings
per share goals for Unicom. As in the 1995 Variable
13
<PAGE>
Compensation Award for Management Employees, payments were contingent on
maintaining the 40 CENTS per share quarterly cash dividend and limiting
operation and maintenance expenses and capital expenditures to specified levels.
The earnings per share goals were set at $2.55 at the threshold level and $2.69
at the distinguished level, and earnings were adjusted in the same manner as for
the 1995 Variable Compensation Award discussed above. The level of Unicom
earnings achieved, as adjusted for purposes of these Awards, was $3.25 per
share.
Long-Term Performance Unit Awards were initiated in 1994 to provide
compensation to executive officers and other senior managers based on the total
return performance of Unicom common stock relative to that of the other
companies constituting the Dow Jones Utility Stock Index over three-year
performance periods. The Committee intends to make such awards each year, thus
establishing moving three-year performance periods for the years ahead. To phase
in this program, an award for a two-year performance period (1994 and 1995) was
granted.
Payments on performance unit awards, as a percentage of base salary, vary
for the different levels of executive officers, with higher percentages
applicable to higher level officers. Again, the varying payouts were established
on the basis of subjective judgment with respect to the appropriate level of
incentive and award, considering degree of difficulty of the goals and degree of
responsibility for achievement of the goals.
For the two-year performance period covering 1994 and 1995, Unicom common
stock performance was at the 91st percentile among the stocks constituting the
Dow Jones Utility Stock Index. Resulting payments are included under the
"Long-Term Compensation" column in the Summary Compensation Table.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. With regard to the
compensation of the Chairman and Chief Executive Officer, the Committee's
assessment of his personal performance, based upon a non-qualifiable evaluation
of his leadership, achievements and contributions to the Company, continues to
be very favorable. Under Mr. O'Connor's leadership, the Company's financial
performance in 1994 improved significantly over 1993. In 1994, operation and
maintenance expenses, for example, were held below 1992 levels for the second
consecutive year, and earnings per share rose to $1.66, as compared with $0.22
in 1993. In view of this assessment and these achievements, the Committee, in
December 1994, recommended and the Board approved a cash salary increase from
$635,000 in 1994 to $700,000 for 1995. In September 1995, the Committee awarded
the Chairman 15,000 current compensation units in recognition of continued
improvement in the financial performance of the Company. The Chairman's total
base salary in 1995 was $826,926 ($700,000 cash salary plus $126,926 in current
compensation unit income.)
The Chairman's compensation for 1995 pursuant to the separate incentive
compensation Award made to him under the Incentive Plan was $826,926 with
$248,078 payable in cash and $578,848 payable in Unicom common stock. He elected
deferral of payment of the stock pursuant to the Unicom Corporation Stock Bonus
Deferral Plan which was adopted in 1995. In addition, the Chairman received
compensation for 1995 pursuant to the 1994 Long-Term Performance Unit Award
equal to $452,296. He elected to have the entire amount payable in common stock
and elected deferral of the payment pursuant to the Unicom Corporation Stock
Bonus Deferral Plan.
The Chairman's total compensation (cash salary, compensation unit income,
and compensation earned pursuant to the Awards under the Incentive Plan) was
$2,106,148 for 1995. The Committee believes, based on available information on
compensation of chief executive officers in utility and non-utility industries,
that both the absolute and relative levels of compensation for 1995 were fully
appropriate considering the size and complexity of the Company's operations, and
also considering the Committee's
14
<PAGE>
very favorable assessment of the Chairman's leadership in achieving
substantially improved financial performance in 1995. Earnings per share rose to
$2.98 in 1995 from $1.66 in 1994, and the improved performance resulted in an
overall 43% total return to shareholders in 1995 (assuming reinvestment of
dividends) and an overall $1.8 billion increase in the market value of
shareholders' equity in 1995.
INTERNAL REVENUE CODE SECTION 162(M) CONSIDERATIONS. Section 162(m) of the
Internal Revenue Code provides that executive compensation in excess of $1
million will not be deductible for purposes of corporate income taxes unless it
is performance-based compensation and is paid pursuant to a plan meeting certain
requirements of the Code. The Committee intends to continue increased reliance
on performance-based compensation programs. Such programs will be designed to
fulfill, in the best possible manner, future corporate business objectives. To
the extent consistent with this goal, the Committee currently anticipates that
such programs will also be designed to satisfy the requirements of Section
162(m) with respect to the deductibility of compensation paid. The Committee
believes that executive compensation actually paid in respect of 1995 was
deductible.
Corporate Governance and Compensation
Committee
<TABLE>
<S> <C> <C>
Jean Allard Edgar D. Jannotta
Edward A. Brennan George E. Johnson
James W. Compton Edward A. Mason
Sue L. Gin Frank A. Olson
Donald P. Jacobs
</TABLE>
15
<PAGE>
SHAREHOLDER RETURN PERFORMANCE
Set forth below is a line graph comparing the quarterly percentage change in
the cumulative total shareholder return on Unicom common stock ("UCM") against
the cumulative total return of the S&P 500 Composite Stock Index and the Dow
Jones Utility Stock Index for the five-year period ending December 31, 1995.
CUMULATIVE PERFORMANCE SINCE JANUARY 1, 1991
ASSUMING REINVESTMENT OF DIVIDENDS
(JANUARY 1, 1991 = $100)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
UCM COMMON STK* DJ UTIL S&P COMPOSITE
<S> <C> <C> <C>
d 100 100 100
m 115.468 105.246 114.472
j 108.136 97.109 114.222
s 123.103 106.674 120.325
d 123.866 115.089 130.336
m 107.557 106.423 127.058
j 87.078 111.045 129.478
s 75.979 117.729 133.558
d 78.553 119.71 140.251
m 95.953 132.589 146.358
j 97.324 136.23 147.051
s 106.969 140.871 150.837
d 100.454 131.194 154.325
m 91.168 114.172 148.522
j 84.001 104.964 149.158
s 83.632 109.414 156.447
d 91.713 111.41 156.42
m 92.286 117.16 171.603
j 105.012 128.199 187.93
s 120.887 138.001 202.82
d 132.477 147.255 214.991
</TABLE>
*Performance shown for Unicom common stock on and after September 1, 1994 and
for ComEd Common Stock prior to that date.
VOTING
Shareholders of record on the books of ComEd at 4:00 p.m., Chicago time, on
March 25, 1996 will be entitled to vote at the annual meeting. As of March 25,
1996, there were outstanding 214,195,814 shares of Common Stock, par value
$12.50 per share (of which Unicom beneficially owned 214,185,572 shares), 95,966
shares of $1.425 Convertible Preferred Stock, without par value, and 16,434,539
shares of Cumulative Preference Stock, without par value. Each share entitles
the holder to one vote on each matter submitted to a vote at the meeting, except
that in the election of Directors each shareholder has the right to vote the
number of shares owned by such shareholder for as many persons as there are
Directors to be
16
<PAGE>
elected, or to cumulate such votes and give one candidate as many votes as shall
equal the number of Directors to be elected multiplied by the number of such
shares or to distribute such cumulative votes in any proportion among any number
of candidates. The holders of a majority of the outstanding shares entitled to
vote on a particular matter and represented in person or by proxy will
constitute a quorum for the consideration of such matter at the meeting.
The twelve persons receiving the greatest number of votes shall be elected
as Directors. Abstaining for a Director nominee will not prevent such Director
nominee from being elected. The affirmative vote of a majority of the shares of
stock represented at the meeting and entitled to vote on the matter is required
for approval of the appointment of the Auditors. Abstaining with respect to this
matter will have the legal effect of voting against such matter. UNICOM INTENDS
TO VOTE ITS SHARES OF COMMON STOCK FOR THE ELECTION OF THE NOMINEES NAMED IN
THIS INFORMATION STATEMENT AND FOR APPROVAL OF THE APPOINTMENT OF ARTHUR
ANDERSEN LLP AS AUDITORS AND, CONSEQUENTLY, SUCH MATTERS ARE EXPECTED TO BE
APPROVED.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any shareholder proposal intended to be presented at the 1997 annual meeting
of ComEd's shareholders must be received at the principal executive offices of
ComEd by February 7, 1997, in order to be considered for inclusion in ComEd's
Information Statement relating to that meeting. Any such proposal should be
directed to the Secretary of ComEd located on the 37th Floor, First National
Bank Building, 10 South Dearborn Street, Chicago, Illinois. If mailed, it should
be sent to Secretary, Commonwealth Edison Company, 10 South Dearborn Street,
Post Office Box 767, Chicago, IL 60690-0767.
OTHER MATTERS
As of the date of this Information Statement, management knows of no matters
to be brought before the annual meeting other than the matters referred to in
this Information Statement.
By the order of the Board of Directors.
DAVID A. SCHOLZ
Secretary
April 8, 1996
A COPY OF COMED'S ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND EXCHANGE
COMMISSION MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO DAVID A. SCHOLZ,
SECRETARY, COMMONWEALTH EDISON COMPANY, 10 SOUTH DEARBORN STREET, POST OFFICE
BOX 767, CHICAGO, ILLINOIS 60690-0767.
17
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
18
<PAGE>
APPENDIX A
COMMONWEALTH EDISON COMPANY
AND SUBSIDIARY COMPANIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
INDEX
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Definitions............................................................................................... A-2
Summary of Selected Consolidated Financial Data........................................................... A-3
Price Range and Cash Dividends Paid Per Share of Common Stock............................................. A-3
1995 Consolidated Revenues and Sales...................................................................... A-3
Management's Discussion and Analysis of Financial Condition and Results of Operations
(prepared as of January 26, 1996)....................................................................... A-4
Report of Independent Public Accountants.................................................................. A-15
Consolidated Financial Statements--
Statements of Consolidated Income for the years 1995, 1994 and 1993................................... A-16
Consolidated Balance Sheets--December 31, 1995 and 1994............................................... A-17
Statements of Consolidated Capitalization--December 31, 1995 and 1994................................. A-19
Statements of Consolidated Retained Earnings for the years 1995, 1994 and 1993........................ A-20
Statements of Consolidated Premium on Common Stock and Other Paid-In Capital for the
years 1995, 1994 and 1993.......................................................................... A-20
Statements of Consolidated Cash Flows for the years 1995, 1994 and 1993............................... A-21
Notes to Financial Statements......................................................................... A-22
Subsequent Events......................................................................................... A-42
</TABLE>
REFERENCE IS MADE TO "SUBSEQUENT EVENTS" FOR CERTAIN RECENT INFORMATION THAT
SHOULD BE READ AND CONSIDERED IN CONNECTION WITH THE OTHER INFORMATION CONTAINED
IN THIS APPENDIX A.
A-1
<PAGE>
DEFINITIONS
The following terms are used in this document with the following meanings:
TERM MEANING
- ------------------------ -----------------------------------------------------
AFUDC Allowance for funds used during construction
AMT Alternative minimum tax
CERCLA Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended
Circuit Court Circuit Court of Cook County, Illinois
ComEd Commonwealth Edison Company
Cotter Cotter Corporation, which is a wholly-owned
subsidiary of ComEd.
DOE U.S. Department of Energy
FASB Financial Accounting Standards Board
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 prudence of ComEd's western
coal costs for the period from 1989 through 1992.
ICC Illinois Commerce Commission
Indiana Company Commonwealth Edison Company of Indiana, Inc., which
is a wholly-owned subsidiary of ComEd.
MAIN Mid-America Interconnected Network
MGP Manufactured gas plant
NEIL Nuclear Electric Insurance Limited
NML Nuclear Mutual Limited
NOPR Notice of Proposed Rulemaking issued by the FERC
NRC Nuclear Regulatory Commission
Rate Matters Settlement A settlement concerning the proceedings relating to
ComEd's 1985 and 1991 ICC rate orders (which orders
related to, among other things, the recovery of
costs associated with ComEd's four most recently
completed nuclear generating units), the
proceedings related 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 related to the
appropriate interest rate and rate design to be
applied to a refund made by ComEd during 1990
related to a 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 income tax rate made by the Tax
Reform Act of 1986.
Rate Order ICC rate order issued on January 9, 1995, as
subsequently modified
Remand Order ICC rate order issued in January 1993, as
subsequently modified
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
Trust ComEd Financing I, which is a wholly-owned subsidiary
trust of ComEd.
Unicom Unicom Corporation
Unicom Enterprises Unicom Enterprises Inc., which is a wholly-owned
subsidiary of Unicom.
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
A-2
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(MILLIONS OF DOLLARS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Electric operating revenues. . . . . . . . . . . . . . . . . . . . . $ 6,910 $ 6,278 $ 5,260 $ 6,026 $ 6,276
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 717(1) $ 424 $ 112(3) $ 514 $ 95
Earnings per common share. . . . . . . . . . . . . . . . . . . . . . $ 3.02(1) $ 1.68 $ 0.22(3) $ 2.08 $ 0.08
Cash dividends declared per common share . . . . . . . . . . . . . . $ 1.60 $ 1.60(2) $ 1.60 $ 2.30 $ 3.00
Total assets (at end of year). . . . . . . . . . . . . . . . . . . . $ 23,119 $ 23,076 $ 24,380 $ 20,993 $ 17,365
Long-term obligations at end of year excluding current portion:
Long-term debt, preference stock and preferred securities
subject to mandatory redemption requirements . . . . . . . . . $ 6,950 $ 7,745 $ 7,861 $ 7,913 $ 7,081
Accrued spent nuclear fuel disposal fee and related interest . . $ 624 $ 590 $ 567 $ 549 $ 530
Capital lease obligations. . . . . . . . . . . . . . . . . . . . $ 374 $ 431 $ 321 $ 347 $ 396
Other long-term obligations. . . . . . . . . . . . . . . . . . . $ 1,819 $ 1,754 $ 1,718 $ 666 $ 341
</TABLE>
- ---------------
(1) Includes an extraordinary loss related to the early redemption of long-term
debt of $20 million or $0.09 per common share.
(2) Excludes a special dividend (consisting of $40 million cash and the common
stock of Unicom Enterprises Inc.) effected on September 1, 1994 in
connection with the holding company corporate restructuring.
(3) Includes the cumulative effect of change in accounting for income taxes of
$10 million or $0.05 per common share.
PRICE RANGE* AND CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
1995 (BY QUARTERS) 1994 (BY QUARTERS)
-------------------------------------------- ----------------------------------------
FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price range:
High. . . . . . . . . . . . . -- -- -- -- -- -- 26 28 3/4
Low . . . . . . . . . . . . . -- -- -- -- -- -- 22 25 1/8
Cash dividends paid. . . . . . . . 40 Cents 40 Cents 40 Cents 40 Cents 40 Cents 40 Cents** 40 Cents 40 Cents
</TABLE>
* As reported as NYSE Composite Transactions.
** Excludes a special dividend (consisting of $40 million cash and the common
stock of Unicom Enterprises Inc.) effected on September 1, 1994 in
connection with the holding company corporate restructuring.
- ---------------
Prior to the corporate restructuring on September 1, 1994, ComEd's common
stock was traded on the New York, Chicago and Pacific stock exchanges, with the
ticker symbol CWE. See Note 1 of Notes to Financial Statements for additional
information.
1995 CONSOLIDATED REVENUES AND SALES
<TABLE>
<CAPTION>
ELECTRIC
OPERATING INCREASE KILOWATTHOUR INCREASE/ INCREASE/
REVENUES OVER SALES (DECREASE) (DECREASE)
(THOUSANDS) 1994 (MILLIONS) OVER 1994 CUSTOMERS OVER 1994
----------- --------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Residential. . . . . . . . . . . . . . . . . $ 2,621,038 15.3% 23,303 9.0 % 3,079,381 1.1 %
Small commercial and industrial. . . . . . . 2,073,998 8.2% 25,313 4.1 % 288,848 0.7 %
Large commercial and industrial. . . . . . . 1,425,784 3.2% 23,777 1.4 % 1,539 0.7 %
Public authorities . . . . . . . . . . . . . 487,142 7.7% 7,158 4.0 % 12,039 (0.2)%
Electric railroads . . . . . . . . . . . . . 26,894 2.7% 390 (2.0)% 2 -
----------- ----------- ----------
Ultimate consumers . . . . . . . . . . . . . $ 6,634,856 9.7% 79,941 4.6 % 3,381,809 1.0 %
Sales for resale . . . . . . . . . . . . . . 207,256 11,412 24
Other revenues . . . . . . . . . . . . . . . 67,674 -- --
----------- ----------- ----------
Total . . . . . . . . . . . . . . . . . $ 6,909,786 10.1% 91,353 7.3 % 3,381,833 1.0 %
----------- ----------- ----------
----------- ------------ ----------
</TABLE>
A-3
<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 purpose of the restructuring was, in part, 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 ComEd's utility business and
in part to permit Unicom to take advantage of unregulated business
opportunities.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL BUDGETS. ComEd and its electric utility subsidiary, the Indiana
Company, have a construction program for the three-year period 1996-98 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 Unicom and
ComEd in December 1995, calls for electric plant and equipment expenditures of
approximately $2,695 million (excluding nuclear fuel expenditures of
approximately $885 million). It is estimated that such construction
expenditures, with cost escalation computed at 3.5% annually, will be as
follows:
<TABLE>
<CAPTION>
1996 1997 1998 TOTAL
----- ----- ----- -------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Production. . . . . . . . . . . . $ 405 $ 390 $ 380 $ 1,175
Transmission and Distribution . . 390 405 410 1,205
General . . . . . . . . . . . . . 110 110 95 315
----- ----- ----- -------
Total. . . . . . . . . . . . $ 905 $ 905 $ 885 $ 2,695
----- ----- ----- -------
----- ----- ----- -------
</TABLE>
The construction program includes the replacement of the steam generators
at ComEd's Braidwood Unit 1 and Byron Unit 1 nuclear generating units, for
service in the years 1998 and 1999, respectively, at a total estimated cost of
approximately $470 million. Approximately $290 million of this estimated cost is
included in the construction expenditures shown above. ComEd is studying the
possibility of accelerating the replacement of the steam generators which could
increase the construction expenditures shown above.
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 1998 and each year thereafter
through the year 2000. The projected resource needs reflect the current planning
reserve margin recommendations of MAIN, 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-effective demand-side management resources,
non-utility generation or other power purchases. Based on current market
information, ComEd believes that adequate resources, including cost-effective
demand-side management resources, non-utility generation resources and other-
utility power purchases, could be obtained sufficient to meet forecasted
requirements through the year 2000.
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, financial constraints may require compensating or
greater reductions in other construction expenditures. See "Regulation" below
for additional information.
A-4
<PAGE>
Purchase commitments for ComEd and the Indiana Company, principally related
to construction and nuclear fuel, approximated $1,137 million at December 31,
1995. In addition, ComEd has substantial commitments for the purchase of coal as
indicated in the following table.
<TABLE>
<CAPTION>
CONTRACT PERIOD COMMITMENT (1)
------------------- --------- --------------
<S> <C> <C>
Black Butte Coal Co.. . . . . . . 1996-2007 $ 1,011
Decker Coal Co. . . . . . . . . . 1996-2015 $ 713
Big Horn Coal Co. . . . . . . . . 1998 $ 22
Other commitments . . . . . . . . 1996 $ 3
</TABLE>
- ---------------
(1) Estimated costs in millions of dollars FOB mine. No estimate of future
cost 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 21 of Notes to
Financial Statements.
CAPITAL RESOURCES. ComEd has forecast that internal sources will provide
more than three-fourths of the funds required for ComEd's construction program
and other capital requirements, including nuclear fuel expenditures,
contributions to nuclear decommissioning funds, sinking fund obligations and
refinancing of scheduled debt maturities (the annual sinking fund requirements
and scheduled maturities for preference stock and long-term debt are summarized
in Notes 7 and 9, respectively, of Notes to Financial Statements). The forecast
assumes the rate levels reflected in the Rate Order remain in effect.
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. A portion of ComEd's financing is expected to be provided through the
continued sale and leaseback of nuclear fuel through ComEd's existing nuclear
fuel lease facility. See Note 18 of Notes to Financial Statements for more
information concerning ComEd's nuclear fuel lease facility. ComEd has
approximately $915 million of unused bank lines of credit at December 31, 1995
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 10 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 years 1995, 1994 and 1993.
During 1995, ComEd sold and leased back approximately $193 million of
nuclear fuel through its existing nuclear fuel lease facility. The Trust also
issued $200 million of company-obligated mandatorily redeemable preferred
securities, the proceeds of which were used to purchase ComEd's subordinated
deferrable interest notes due September 30, 2035. The proceeds of such notes
were used by ComEd to refund short-term debt incurred to meet current maturities
of ComEd debt.
As of January 26, 1996, 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. ComEd has no significant revenues other than from the sale of
electricity. In December 1995, ComEd announced a cap on base electric rates at
current levels. 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. See "Business and Competition" and "Regulation" below.
During the past several years, ComEd has instituted cost reduction plans
including various workforce reductions. Such efforts included an offer of
voluntary early retirement which was made to ComEd and the Indiana Company
management, non-union and union employees eligible to retire or who
A-5
<PAGE>
became eligible to retire after December 31, 1993 and before April 1, 1995. Such
program resulted in a charge to income of approximately $20.5 million (after
reflecting income tax effects), substantially all of which was recorded during
1994. ComEd is continuing to examine methods of reducing the size of its
workforce, including special severance offers. On October 30, 1995, ComEd
declared an impasse in the collective bargaining agreement negotiations with its
principal union and has implemented virtually all of the terms of its last
offered proposal prior to the impasse. Those terms include, among other things,
a wage increase retroactive to April 1, 1995 and a voluntary separation offer
for employees who accepted and left ComEd's employ by year-end 1995. The union
has filed an unfair labor practice charge with respect to ComEd's action with
the National Labor Relations Board. The voluntary separation offer, combined
with separation plans offered to selected groups of non-union employees,
resulted in a charge to income of approximately $59 million (after reflecting
income tax effects) or $0.27 per common share for the year 1995. This charge to
income occurred primarily in the fourth quarter of 1995 when most of the
acceptances of the offers occurred. ComEd expects to recover the costs of these
plans within two years as a result of reduced personnel.
ComEd has also examined, and is continuing to examine, the possibility of
disposing of one or more of its fossil generating stations to a third party or
parties and entering into a long-term power purchase arrangement. In connection
with such examination, ComEd has solicited and received binding proposals with
respect to such a transaction involving its State Line and Kincaid generating
stations; and it is negotiating with possible purchasers with respect to such
transactions. As presently structured, such transactions would involve a sale of
the generating station assets at a price approximating their book value and a
fifteen-year power purchase arrangement. Any such transactions would be subject
to the negotiation of definitive agreements and regulatory approvals and are not
expected to have a material impact on ComEd's consolidated financial position or
results of operations.
ComEd's securities and other securities guaranteed by ComEd are currently
rated by three principal securities rating agencies 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- BBB-
Preference stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . baa3 BBB- BBB-
Company-obligated mandatorily redeemable preferred securities of the Trust. . . . . . baa3 BBB- BBB-
Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P-2 A-2 D-2
</TABLE>
As of January 1996, Standard & Poor's rating outlook on ComEd remained
stable. As of October 1995, Moody's rating outlook on ComEd also remained
stable. In August 1995, Duff & Phelps upgraded its rating of ComEd's preferred
and preference stock from BB+ to BBB- and reaffirmed that its rating outlook on
ComEd remained stable.
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 place in which electric utilities like ComEd operate has become
more competitive as a result of technological and regulatory changes, 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. Also, a
number of electric utilities (including utilities bordering ComEd's service
area) have
A-6
<PAGE>
announced plans to combine, or have combined, to achieve certain size and
operating efficiencies in response to expected changes in the market place.
Finally, both the state and federal regulatory framework under which ComEd and
other electric utilities have operated are under review. In recent years, there
has been increasing debate at the state and federal levels regarding the
structure and regulation of the electric utility industry. In particular, these
discussions have focused on whether certain aspects of the industry, such as
generation, could be more efficiently provided under a more competitive scheme.
A central feature of the current debate over deregulation and changed
regulation in the electric utility industry is the extent to which electric
utilities will be permitted to recover so-called "stranded" or "strandable"
costs incurred to fulfill their duty to serve all of the electricity needs
within their service territories. These costs would be stranded to the extent
that market-based rates would be insufficient to allow for full recovery of the
investments.
ComEd cannot estimate its strandable investment with any degree of accuracy
at this time because of the number of variables involved. ComEd, however, is
taking steps, such as aggressive cost-cutting measures and accelerated
depreciation, to minimize its potential exposure. The regulatory and legislative
initiatives that ComEd has proposed, described below, contemplate a full
recovery of ComEd's costs to meet its duty to serve.
The Energy Policy Act of 1992 has had 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. In March
1995, the FERC issued a NOPR seeking comments on proposals intended to encourage
a more competitive wholesale electric power market. The NOPR addresses both open
access transmission and stranded cost issues. ComEd is unable to predict the
structure and effect of any rule that the FERC may ultimately adopt based upon
the NOPR.
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 outside of the utilities'
regular service areas. 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. The Illinois Appellate Court reversed the
latter ICC decision, ruling that state law prohibited the confidential aspects
of the contracts. ComEd has petitioned the Illinois Supreme Court to review the
reversal. ComEd has also sought and received ICC approval for the eleven
contracts at special discount rates which it negotiated prior to the Illinois
Appellate Court's decision.
In 1994, the ICC 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 utility industry. Participants from more than 40 organizations,
including representatives from the electric utility industry (including ComEd),
met to examine three broad issues: effects of regulation, competition and future
regulatory and legislative changes. In May 1995, the task force issued its
report sharing the views of the participants on the issues.
A-7
<PAGE>
Legislation has been passed in Illinois to review the need for changes in
the regulatory framework under which Illinois electric utilities operate. The
Joint Committee on Electric Utility Regulatory Reform was created pursuant to
House/Senate Joint Resolution 21 to develop any legislative reform proposals it
finds necessary. A final legislative proposal is to be delivered by November 8,
1996. ComEd is participating as a member of the Technical Advisory Group. A bill
allowing utilities to submit plans for alternative regulation, such as price
caps or incentive regulation, has been signed by the Governor of Illinois. On
December 11, 1995, ComEd announced a series of customer initiatives as part of
its larger ongoing effort to address the need to give all customer classes the
opportunity to benefit from increased competition in the electric utility
business, while retaining the benefits (such as reliability) of current
regulation and ensuring utilities' cost recovery for commitments made under the
obligation to serve customers. The initiatives include (i) a five-year cap on
base electric rates at current levels, (ii) certain energy monitoring and
management programs designed to monitor and control energy usage, particularly
during certain peak periods, (iii) single statement, or unified, billing for
certain multi-site customers, (iv) certain incentives for manufacturing
customers looking to expand operations or to locate in northern Illinois and (v)
market pricing options for up to ten percent of certain large industrial
customers' existing electric energy requirements and all of their incremental
requirements. ComEd anticipates the initiatives will be fully implemented in
1997 and will reduce its revenues by approximately $42 million annually
(including the effects of previously implemented initiatives and before income
tax effects) primarily through changes in energy utilization and increase its
costs by at least $30 million annually (before income tax effects) through the
acceleration of depreciation charges on its nuclear generating units. ComEd
expects to file a request for ICC approval of the accelerated depreciation
initiatives in the near future. Management expects the financial impact of these
initiatives will be substantially offset by ComEd's cost reduction efforts and
expected growth in its business. ComEd also continues to consider the
possibility of additional accelerated depreciation options.
Under ComEd's initiatives, the five-year base rate cap at current levels
became effective in December 1995 and will extend until January 1, 2001. The
rate cap does not affect ComEd's fuel cost or nuclear decommissioning cost
recovery provisions. ComEd's fuel cost variances will continue to be collected
through its fuel adjustment clause, and such collections will continue to be
subject to annual reconciliation proceedings before the ICC. Nuclear
decommissioning cost variances will continue to be collected under a rider that
was approved in the Rate Order, and such rider is intended to allow annual
adjustments in decommissioning cost recoveries from ratepayers as changes in
cost estimates occur. See "Depreciation and Decommissioning" in Note 1 of Notes
to Financial Statements for additional information regarding the decommissioning
costs rider.
On December 13, 1995, ComEd announced a proposal to amend certain
provisions of the Illinois Public Utilities Act. The proposal would, among other
things, allow Illinois utilities to launch five-year experimental "direct
access" programs, whereby certain customers would have the opportunity to obtain
some of their electric energy requirements from their chosen supplier. If the
proposal is adopted as legislation, such "direct access" programs could begin as
early as 1998; and under the legislation, ComEd announced it would offer such a
program for new or expanded load of three megawatts or greater in its northern
Illinois service territory. Under ComEd's proposal, if such "direct access"
proves workable, and the ICC finds it to be in the public interest, the ICC
could order it as an option for all electricity consumers in Illinois starting
in 2003. Other Illinois utilities have also initiated both legislative and
regulatory proposals. Both Illinois Power Company and Central Illinois Light
Company have filed proposed retail wheeling experiments with the ICC. These
experiments are currently the subject of hearings. ComEd cannot predict whether,
or in what form, these proposals may be approved. See "Regulation" and
"Regulatory Assets and Liabilities" in Note 1 of Notes to Financial Statements.
CAPITAL STRUCTURE. The ratio of long-term debt to total capitalization has
decreased to 49.3% at December 31, 1995 from 54.6% at December 31, 1994. This
decrease is related primarily to the retirement and early redemption of long-
term debt.
A-8
<PAGE>
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.
RATE PROCEEDINGS. ComEd's revenues, net income, cash flows and plant
carrying costs have been affected directly by various rate-related proceedings.
During 1993, 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
in late 1993 (see Note 2 of Notes to Financial Statements). The effects of such
settlements during 1993 and 1994 are discussed below under "Results of
Operations."
On January 9, 1995, the ICC issued its Rate Order in the proceedings
relating to ComEd's February 1994 rate increase request. The Rate Order
provides, among other things, for (i) an increase in ComEd's total revenues of
approximately $301.8 million (excluding add-on revenue taxes) or 5.2%, on an
annual basis, including a $303.2 million increase in base rates, (ii) the
collection of municipal franchise costs as an adder to base rates until May 1,
1995, when ComEd began collecting such costs prospectively on an individual
municipality basis through a rider, and (iii) the use of a rider, with annual
review proceedings, to pass on to ratepayers increases or decreases in estimated
costs associated with the decommissioning of ComEd's nuclear generating units.
See "Depreciation and Decommissioning" in Note 1 of Notes to Financial
Statements for information related to the level of decommissioning cost
collections allowed in the Rate Order and subsequent rider proceedings. The ICC
also determined that the Units were 100% "used and useful" and that the
previously determined reasonable costs of such Units, as depreciated, should be
included in full in ComEd's rate base. The rates provided in the Rate Order
became effective on January 14, 1995; however, they are being collected subject
to refund as a result of subsequent judicial action. As of December 31, 1995,
electric operating revenues of approximately $319 million (excluding revenue
taxes) are subject to refund. Intervenors and ComEd have filed appeals of the
Rate Order with the Illinois Appellate Court.
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. Although Zion station (which was placed
on the list in early 1991) was removed from that list in February 1993, Dresden
station (which was placed on the list in early 1992) remains on the list. In
June 1995, the NRC reported that over the past year performance at Dresden was
cyclical; that plant material condition needed to be improved at Dresden and
that a more effective work management system was needed to deal with the
corrective maintenance backlog. In January 1996, the NRC noted improvement but
indicated that certain of the same concerns continue to exist. The NRC also
stated that the effectiveness of the recent improvement efforts must be
sustained. In January 1994, ComEd was notified by the NRC that ComEd's LaSalle
County and Quad-Cities stations were placed on the list of plants with adverse
performance trends. ComEd was informed that the NRC concerns about LaSalle
County station included, among other matters, deficient radiation worker
practices, and that concerns with Quad-Cities station included, among other
matters, 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. In February and June 1995, the NRC concluded that
LaSalle County and Quad-Cities, respectively, had arrested the adverse trends in
most areas and "normal" designation has been reestablished.
Because of the age of Zion, Dresden and Quad-Cities stations, ComEd
anticipates continued expenditures in order to improve reliability and to meet
NRC regulatory expectations. Beginning in late 1992, ComEd restructured its
management of its nuclear operations division and since that time has committed
additional resources to the stations' operations. In addition, generating
station availability and
A-9
<PAGE>
performance during a year may be issues in fuel reconciliation proceedings in
assessing the prudence of fuel and power purchases during such year. Final ICC
orders have been issued in fuel reconciliation proceedings for years prior to
1994; however, certain intervenors have appealed the ICC order in the 1989 fuel
reconciliation proceedings on issues relating to nuclear station performance.
ComEd estimates that it will expend approximately $15 billion, excluding
any contingency allowance, for decommissioning costs primarily during the period
from 2007 through 2032. Such costs, which are estimated to aggregate $3.7
billion in current-year (1996) dollars, are expected to be funded by external
decommissioning trusts which ComEd established in compliance with Illinois law
and into which ComEd has been making annual contributions. Future
decommissioning cost estimates may be significantly affected by the adoption of
or changes to NRC regulations as well as changes in the assumptions used in
making such estimates. See Note 1 of Notes to Financial Statements under
"Depreciation and Decommissioning" for additional information regarding
decommissioning costs.
ENVIRONMENTAL MATTERS. 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. See Note 21 of Notes
to Financial Statements for information regarding certain effects of CERCLA on
ComEd.
RESULTS OF OPERATIONS
NET INCOME ON COMMON STOCK. The 1995 results reflect higher revenues
primarily as a result of higher kilowatthour sales and the higher rate levels
which became effective in January 1995 under the Rate Order. The higher
kilowatthour sales reflect the unusually hot summer weather in 1995. The 1995
results were also affected by higher operation and maintenance expenses, which
reflect an after-tax charge of $59 million or $0.27 per common share for a
voluntary separation offer for union employees who accepted and left ComEd's
employ by year-end 1995 combined with separation plans offered to selected
groups of non-union employees. ComEd also recorded an after-tax charge of $20
million or $0.09 per common share related to the early redemption of $645
million of long-term debt.
The 1994 results reflect higher revenues as a result of the favorable
comparison to 1993 in which the effects of the Rate Matters Settlement and the
Fuel Matters Settlement were recorded. The 1994 results also reflect ComEd's
increased kilowatthour sales to ultimate consumers. The effects of these items
were partially offset by higher operation and maintenance expenses, which
include an after-tax charge of $20 million or $0.09 per common share for
additional pension costs related to an early retirement offer made to certain
employees during 1994. ComEd also recorded a reduction in the carrying value of
its investments in uranium-related properties in 1994, which reduced net income
by $34 million or $0.16 per common share.
The 1993 results were significantly affected by the recording of the
effects of the Rate Matters Settlement and the Fuel Matters Settlement, which
reduced 1993 net income by approximately $354 million or $1.66 per common share,
in addition to the effect of the deferred recognition of revenues which ComEd
had recorded during 1993 (approximately $160 million or $0.75 per common share),
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, as authorized in the Remand Order. The 1993 earnings also reflect a one-
time favorable cumulative effect of $10 million or $0.05 per common share as a
result of the adoption of SFAS No. 109, Accounting for Income Taxes. The effect
of the non-recurring items was partially offset by a higher level of
kilowatthour sales and lower operation and maintenance expenses. Excluding non-
recurring items, earnings in 1993 would have been $1.83 per common share.
KILOWATTHOUR SALES. Kilowatthour sales to ultimate consumers increased 4.6%
in 1995, 2.8% in 1994 and 4.6% in 1993 as a result of increased sales to all
classes of customers, except railroads, which decreased during each year,
reflecting progressively warmer summers (particularly in 1995) and, in
A-10
<PAGE>
1994, colder winter weather than in 1993. The service territory economy also
improved during 1994, which contributed to the increase in kilowatthour sales.
Kilowatthour sales including sales for resale increased 7.3% in 1995, decreased
3.0% in 1994 and increased 16.0% in 1993.
ELECTRIC OPERATING REVENUES. Operating revenues increased $632 million in
1995 principally reflecting the higher kilowatthour sales described above and
higher rate levels under the Rate Order. Operating revenues increased $1,017
million in 1994 principally reflecting the favorable comparison to 1993 in which
the effects of the Rate Matters Settlement and the Fuel Matters Settlement were
recorded and the increased level of kilowatthour sales to ultimate consumers
described above. The increase was partially offset by a decrease in energy costs
recovered under the fuel adjustment clause in ComEd's rates.
Operating revenues decreased $766 million in 1993 principally reflecting
the recording of the effects of the Rate Matters Settlement and the Fuel Matters
Settlement, which reduced 1993 operating revenues by $1,282 million. This
reduction was partially offset by a higher level of kilowatthour sales and an
increase in energy costs recovered under the fuel adjustment clause in ComEd's
rates. See "Net Income on Common Stock" above and Note 2 of Notes to Financial
Statements for additional information.
FUEL COSTS. Changes in fuel expense for 1995, 1994 and 1993 primarily
resulted 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>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Cost of fuel consumed (per million Btu):
Nuclear. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.52 $0.53 $0.52
Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2.43 $2.31 $2.89
Oil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3.06 $2.89 $3.03
Natural gas. . . . . . . . . . . . . . . . . . . . . . . . . . . $1.85 $2.27 $2.70
Average all fuels. . . . . . . . . . . . . . . . . . . . . . . . $1.05 $1.08 $1.15
Net generation of electric energy (millions of kilowatthours) . . . . 96,608 90,243 94,266
Fuel sources of kilowatthour generation:. . . . . . . . . . . . . . .
Nuclear. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73% 71% 75%
Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 25 23
Oil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 1 1
Natural gas. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 1
------ ------ ------
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
uranium enrichment facilities owned and 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) to 2007. The Act provides that such
assessments are to be treated as a cost of fuel. See Note 1 of Notes to
Financial Statements under "Deferred Unrecovered Energy Costs" for information
related to the accounting for such costs.
FUEL SUPPLY. Compared to other utilities, ComEd has relatively low average
fuel costs as a result of its 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 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 December 31, 1995,
ComEd had unrecovered fuel costs in the form of coal reserves of approximately
$448 million. In prior years, ComEd's commitments for the purchase of coal
exceeded its requirements.
A-11
<PAGE>
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 21 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>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Kilowatthours (millions). . . . . . . . 2,475 2,071 644
Cost per kilowatthour . . . . . . . . . 2.60 Cents 2.86 Cents 1.91 Cents
</TABLE>
DEFERRED UNDER OR OVERRECOVERED ENERGY COSTS--NET. Operating expenses for
the years 1995, 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 under
"Deferred Unrecovered Energy Costs."
OPERATION AND MAINTENANCE EXPENSES. Operation and maintenance expenses
increased 4% during 1995, increased 2% during 1994 and decreased 4% during 1993.
The increase in 1995 primarily reflects increased expenses for costs related to
voluntary employee separation plans, nuclear and fossil generating stations,
customer-related activities and incentive compensation programs, partially
offset by lower expenses associated with transmission and distribution
facilities, certain administrative and general costs and pensions and other
employee benefits, including postretirement health care benefits. The increase
in 1994 primarily reflects increased expenses associated with pensions and other
employee benefits, incentive compensation programs, nuclear and fossil
generating stations, and certain administrative and general costs, partially
offset by lower expenses associated with transmission and distribution
facilities. The decrease in 1993 primarily reflects decreased expenses
associated with nuclear and fossil generating stations, pension benefits and
customer-related activities, a decrease in the number of employees and lower
research costs, partially offset by higher costs of postretirement health care
benefits and the cost related to the 1993 special incentive plan for employees.
Wage increases, the effects of which are reflected in the increases and
decreases discussed below, have increased operation and maintenance expenses
during 1995 and 1994. Wages in 1993 were not increased over 1992 levels.
Operation and maintenance expenses in 1995 and 1994 include approximately $16
million and $20 million, respectively, for wage increases. The effects of
inflation have increased operation and maintenance expenses during the years and
are also reflected in the increases and decreases discussed below.
Operation and maintenance expenses for pensions and other employee
benefits, including postretirement health care benefits, decreased $40 million
in 1995, increased $30 million in 1994 and decreased $2 million in 1993. The
1995 decrease reflects a decrease of $40 million in the provision for
postretirement health care costs, partially offset by a $25 million increase for
the portion of the costs of the voluntary employee separation plans related to
postretirement health care benefits and an increase of $9 million for certain
other employee benefits. The 1994 increase includes a $34 million increase in
pension costs related to an early retirement program offered in 1994. See
"Liquidity and Capital Resources," subcaption "Financial Condition," for
additional information regarding the employee separation plans offered in 1995
and the 1994 early retirement program. The 1993 decrease reflects a decrease in
pension benefits of $16 million which was partially offset by an increase in
postretirement health care benefits of $14 million. The increase in
postretirement health care benefits in 1993 reflects $17 million as a result of
adopting SFAS No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions.
A-12
<PAGE>
Operation and maintenance expenses in 1995 also reflect $72 million for the
portion of the costs of the voluntary employee separation plans not related to
the postretirement health care benefits described above. See "Liquidity and
Capital Resources," subcaption "Financial Condition," above for information
regarding the employee separation plans offered in 1995.
Operation and maintenance expenses associated with the nuclear generating
stations tend to be affected by the number of outages (both scheduled and non-
scheduled) of the units, during which a greater number of activities related to
inspection, maintenance and improvement are scheduled and carried out. Such
expenses increased $32 million in 1995, increased $9 million in 1994 and
decreased $74 million in 1993. The increase in 1995 is primarily due to
increased expenses related to the plant improvement efforts at Dresden and Zion
stations. The increase in 1994 is due to activities undertaken during increased
scheduled and non-scheduled outages. The decrease in 1993 includes the effects
of ComEd's cost reduction efforts, including re-engineering and process
improvements, eliminating unnecessary work and increasing the efficiency at
which the remaining work was performed. 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 also tend to be affected by the number of outages in the same manner as
nuclear generating stations. Such expenses increased $8 million in 1995,
increased $4 million in 1994 and decreased $13 million in 1993. The increase in
1995 reflects the costs for the increase in scope of scheduled overhauls
partially offset by the net effect of a reduction of personnel. The increase in
1994 reflects, in part, activities undertaken during a greater number of
scheduled overhauls. The decrease in 1993 includes the effects of ComEd's cost
reduction efforts. Research costs also decreased $10 million in 1993 due to the
cost reduction efforts.
Operation and maintenance expenses associated with ComEd's transmission and
distribution system decreased $3 million and $18 million in 1995 and 1994,
respectively. The decreases in 1995 and 1994 reflect the effects of cost
containment efforts. Costs of customer-related activities, including customer
assistance and energy sales services, increased $10 million in 1995 and
decreased $13 million in 1993.
Operation and maintenance expenses reflect $65 million, $50 million and $36
million for employee incentive compensation plan costs related to the
achievement of certain financial performance, cost containment and operating
performance goals in 1995, 1994 and 1993, respectively.
Certain administrative and general costs decreased $16 million in 1995 and
increased $12 million in 1994. The decrease in 1995 was due to a variety of
reasons including a decrease in expenses related to insurance, injuries and
damages and the provision for vacation pay liability. The increase in 1994 was
primarily due to increased provisions for injuries and damages and obsolete
materials.
DEPRECIATION. Depreciation expense increased in 1995, 1994 and 1993 as a
result of additions to plant in service. See "Depreciation and Decommissioning"
in Note 1 of Notes to Financial Statements for additional information. ComEd
also intends to seek authorization from the ICC to accelerate the depreciation
charges on its nuclear generating units. See "Business and Competition" under
"Liquidity and Capital Resources."
INTEREST ON DEBT. Changes in interest on long-term debt and notes payable
for the years 1995, 1994 and 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, the retirement and
early redemption of debt, and the retirement and redemption of issues which were
A-13
<PAGE>
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>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Long-term debt outstanding:
Average amount (millions). . . . . . $ 7,528 $ 7,934 $ 8,105
Average interest rate. . . . . . . . 7.78% 7.83% 8.03%
Notes payable outstanding:
Average amount (millions). . . . . . $ 51 $ 9 $ 6
Average interest rate. . . . . . . . 6.40% 6.48% 5.83%
</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 under the Remand Order that 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 year 1993 of approximately $269
million or $1.26 per common share. Amortization of deferred carrying charges was
$13 million in 1995 and 1994 and was $2 million in 1993.
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 FASB is reviewing the accounting
for nuclear decommissioning costs. If current electric utility industry
accounting practices for such decommissioning costs are changed, annual
provisions for decommissioning could increase and the estimated cost for
decommissioning could be recorded as a liability rather than as accumulated
depreciation. ComEd does not believe that such changes, if required, would have
an adverse effect on results of operations due to its 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 1994
net income by $34 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 capitalization
rates as discussed in Note 1 of Notes to Financial Statements. AFUDC does not
contribute to the current cash flow of ComEd.
The ratios of earnings to fixed charges for the years 1995, 1994 and 1993
were 2.79, 1.99 and 1.19, respectively. The ratios of earnings to fixed charges
and preferred and preference stock dividend requirements for the years 1995,
1994 and 1993 were 2.39, 1.73 and 1.03, respectively.
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.
A-14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of 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, 1995 and 1994, and the
related statements of consolidated income, retained earnings, premium on common
stock and other paid-in capital and cash flows for each of the three years in
the period ended December 31, 1995. 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, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 26, 1996
A-15
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME
The following Statements of Consolidated Income for the years 1995, 1994
and 1993 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, competition, 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>
1995 1994 1993
------------- ------------- -------------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
ELECTRIC OPERATING REVENUES:
Operating revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,909,786 $ 6,293,430 $ 6,547,205
Provisions for revenue refunds. . . . . . . . . . . . . . . . . . . . . . . -- (15,909) (1,286,765)
------------- ------------- -------------
$ 6,909,786 $ 6,277,521 $ 5,260,440
------------- ------------- -------------
ELECTRIC OPERATING EXPENSES AND TAXES:
Fuel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,089,841 $ 1,049,853 $ 1,170,935
Purchased power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,378 59,123 12,303
Deferred (under)/overrecovered energy costs--net. . . . . . . . . . . . . . (2,732) 1,940 (1,757)
Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,597,964 1,525,258 1,455,986
Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566,749 561,320 581,714
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 897,305 887,432 862,766
Recovery of regulatory assets . . . . . . . . . . . . . . . . . . . . . . . 15,272 15,453 5,235
Taxes (except income) . . . . . . . . . . . . . . . . . . . . . . . . . . . 832,026 787,796 701,913
Income taxes--
Current --Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . 257,083 158,301 (19,930)
--State. . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,138 1,913 (7,623)
Deferred --Federal--net . . . . . . . . . . . . . . . . . . . . . . . . 172,403 104,290 88,631
--State--net . . . . . . . . . . . . . . . . . . . . . . . . . 15,605 65,017 34,752
Investment tax credits deferred--net. . . . . . . . . . . . . . . . . . . . (28,710) (28,757) (29,424)
------------- ------------- -------------
$ 5,564,322 $ 5,188,939 $ 4,855,501
------------- ------------- -------------
ELECTRIC OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,345,464 $ 1,088,582 $ 404,939
------------- ------------- -------------
OTHER INCOME AND (DEDUCTIONS):
Interest on long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . $ (585,806) $ (621,225) $ (651,181)
Interest on notes payable . . . . . . . . . . . . . . . . . . . . . . . . . (3,280) (557) (334)
Allowance for funds used during construction--
Borrowed funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,137 18,912 16,930
Equity funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,129 22,628 20,618
Income taxes applicable to nonoperating activities. . . . . . . . . . . . . 5,085 27,074 30,705
Deferred carrying charges . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 438,183
Interest and other costs for 1993 Settlements . . . . . . . . . . . . . . . (61) (21,464) (98,674)
Provision for dividends on company-obligated mandatorily redeemable
preferred securities of subsidiary trust. . . . . . . . . . . . . . . . . (4,428) -- --
Miscellaneous--net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44,064) (90,004) (58,484)
------------- ------------- -------------
$ (608,288) $ (664,636) $ (302,237)
------------- ------------- -------------
NET INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . $ 737,176 $ 423,946 $ 102,702
EXTRAORDINARY LOSS RELATED TO EARLY REDEMPTION OF LONG-TERM DEBT,
LESS APPLICABLE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . (20,022) -- --
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES . . . . . . . . . . . -- -- 9,738
------------- ------------- -------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 717,154 $ 423,946 $ 112,440
PROVISION FOR DIVIDENDS ON PREFERRED AND PREFERENCE STOCKS . . . . . . . . . . . 69,961 64,927 66,052
------------- ------------- -------------
NET INCOME ON COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 647,193 $ 359,019 $ 46,388
------------- ------------- -------------
------------- ------------- -------------
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING. . . . . . . . . . . . . . . . . . . 214,193 214,008 213,508
EARNINGS PER COMMON SHARE BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES. . . . . . . . . . . . . . . . $ 3.11 $ 1.68 $ 0.17
EXTRAORDINARY LOSS RELATED TO EARLY REDEMPTION OF LONG-TERM DEBT,
LESS APPLICABLE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . (0.09) -- --
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES . . . . . . . . . . . -- -- 0.05
------------- ------------- -------------
EARNINGS PER COMMON SHARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.02 $ 1.68 $ 0.22
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the above
statements.
A-16
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
ASSETS 1995 1994
------ ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
UTILITY PLANT:
Plant and equipment, at original cost (includes construction work in
progress of $1,105 million and $1,043 million, respectively). . . . . . . $27,052,778 $26,257,665
Less--Accumulated provision for depreciation. . . . . . . . . . . . . . . . 10,565,093 9,623,756
----------- -----------
$16,487,685 $16,633,909
Nuclear fuel, at amortized cost . . . . . . . . . . . . . . . . . . . . . . 734,667 689,424
----------- -----------
$17,222,352 $17,323,333
----------- -----------
INVESTMENTS:
Nuclear decommissioning funds . . . . . . . . . . . . . . . . . . . . . . . $ 1,237,527 $ 880,944
Subsidiary companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,657 118,051
Other investments, at cost. . . . . . . . . . . . . . . . . . . . . . . . . 20,478 18,613
----------- -----------
$ 1,371,662 $ 1,017,608
----------- -----------
CURRENT ASSETS:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 972 $ 84
Temporary cash investments. . . . . . . . . . . . . . . . . . . . . . . . . 14,138 53,566
Other cash investments. . . . . . . . . . . . . . . . . . . . . . . . . . . -- 19,588
Special deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,546 29,603
Receivables--
Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579,861 463,385
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,536 36,083
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,824 68,434
Provisions for uncollectible accounts . . . . . . . . . . . . . . . . . (11,828) (10,720)
Coal and fuel oil, at average cost. . . . . . . . . . . . . . . . . . . . . 129,176 108,872
Materials and supplies, at average cost . . . . . . . . . . . . . . . . . . 333,539 384,612
Deferred unrecovered energy costs . . . . . . . . . . . . . . . . . . . . . 46,028 48,697
Deferred income taxes related to current assets and liabilities--
Loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 10,090
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,931 110,267
Prepayments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,661 56,449
----------- -----------
$ 1,406,384 $ 1,379,010
----------- -----------
DEFERRED CHARGES AND OTHER NONCURRENT ASSETS:
Regulatory assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,467,386 $ 2,604,270
Unrecovered energy costs. . . . . . . . . . . . . . . . . . . . . . . . . . 588,152 643,438
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,124 108,308
----------- -----------
$ 3,118,662 $ 3,356,016
----------- -----------
$23,119,060 $23,075,967
----------- -----------
----------- -----------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the above
statements.
A-17
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
CAPITALIZATION AND LIABILITIES 1995 1994
------------------------------ ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
CAPITALIZATION (see accompanying statements):
Common stock equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,706,130 $ 5,401,423
Preferred and preference stocks without mandatory redemption
requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508,034 508,147
Preference stock subject to mandatory redemption requirements . . . . . . . 261,475 292,163
Company-obligated mandatorily redeemable preferred securities of
subsidiary trust* . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 --
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,488,434 7,453,206
----------- -----------
$13,164,073 $13,654,939
----------- -----------
CURRENT LIABILITIES:
Notes payable--
Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 261,000 $ --
Bank loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,150 7,150
Current portion of long-term debt, redeemable preference stock and
capitalized lease obligations . . . . . . . . . . . . . . . . . . . . . . 433,299 560,335
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614,283 351,370
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,284 182,745
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,965 209,269
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,192 102,585
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,521 44,514
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,841 85,845
----------- -----------
$ 1,942,535 $ 1,543,813
----------- -----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES:
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,506,704 $ 4,383,876
Accumulated deferred investment tax credits . . . . . . . . . . . . . . . . 689,041 717,752
Accrued spent nuclear fuel disposal fee and related interest. . . . . . . . 624,191 589,757
Obligations under capital leases. . . . . . . . . . . . . . . . . . . . . . 373,697 431,402
Regulatory liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 601,002 699,426
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,217,817 1,055,002
----------- -----------
$ 8,012,452 $ 7,877,215
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 21)
$23,119,060 $23,075,967
----------- -----------
----------- -----------
</TABLE>
* As described in Note 8 of Notes to Financial Statements, the sole asset
of ComEd Financing I, a subsidiary trust of ComEd, is $206.2 million principal
amount of ComEd's 8.48% subordinated deferrable interest notes due September 30,
2035.
The accompanying Notes to Financial Statements are an integral part of the above
statements.
A-18
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1995 1994
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
COMMON STOCK EQUITY:
Common stock, $12.50 par value per share--
Outstanding--214,194,950 shares and 214,191,021 shares,
respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,677,437 $ 2,677,387
Premium on common stock and other paid-in capital . . . . . . . . . . . . . 2,223,004 2,222,941
Capital stock and warrant expense . . . . . . . . . . . . . . . . . . . . . (16,159) (16,240)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821,848 517,335
----------- -----------
$ 5,706,130 $ 5,401,423
----------- -----------
PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION
REQUIREMENTS:
Preference stock, cumulative, without par value--
Outstanding--13,499,549 shares. . . . . . . . . . . . . . . . . . . . . . $ 504,957 $ 504,957
$1.425 convertible preferred stock, cumulative, without par value--
Outstanding--96,753 shares and 100,323 shares, respectively . . . . . . . 3,077 3,190
Prior preferred stock, cumulative, $100 par value per share--
No shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
----------- -----------
$ 508,034 $ 508,147
----------- -----------
PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS:
Preference stock, cumulative, without par value--
Outstanding--2,934,990 shares and 3,113,205 shares, respectively. . . . . $ 292,163 $ 309,964
Current redemption requirements for preference stock included in
current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,688) (17,801)
----------- -----------
$ 261,475 $ 292,163
----------- -----------
COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
OF SUBSIDIARY TRUST:
Outstanding--8,000,000 and none, respectively . . . . . . . . . . . . . . . $ 200,000 $ --
----------- -----------
LONG-TERM DEBT:
First mortgage bonds:
Maturing 1995 through 2000--5 1/4% to 9 3/8%. . . . . . . . . . . . . . $ 1,170,000 $ 1,273,000
Maturing 2001 through 2010--5.30% to 8 3/8% . . . . . . . . . . . . . . 1,465,400 1,765,500
Maturing 2011 through 2020--5.85% to 9 7/8% . . . . . . . . . . . . . . 1,266,000 1,591,000
Maturing 2021 through 2023--7 3/4% to 9 1/8%. . . . . . . . . . . . . . 1,385,000 1,385,000
----------- -----------
$ 5,286,400 $ 6,014,500
Sinking fund debentures, due 1999 through 2011--2 3/4% to 7 5/8%. . . . . . 110,505 112,593
Pollution control obligations, due 2004 through 2014--4.434% to 9 1/8%. . . 317,200 337,200
Other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,064,318 1,451,449
Current maturities of long-term debt included in current liabilities. . . . (234,893) (395,554)
Unamortized net debt discount and premium . . . . . . . . . . . . . . . . . (55,096) (66,982)
----------- -----------
$ 6,488,434 $ 7,453,206
----------- -----------
$13,164,073 $13,654,939
----------- -----------
----------- -----------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the above
statements.
A-19
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . $ 517,335 $ 549,152 $ 847,186
ADD--Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 717,154 423,946 112,440
----------- ----------- -----------
$ 1,234,489 $ 973,098 $ 959,626
----------- ----------- -----------
DEDUCT--
Dividends declared on--
Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 342,710 $ 390,281 $ 341,683
Preferred and preference stocks . . . . . . . . . . . . . . . . . . . . 66,855 65,381 65,688
Other capital stock transactions--net . . . . . . . . . . . . . . . . . . . 3,076 101 3,103
----------- ----------- -----------
$ 412,641 $ 455,763 $ 410,474
----------- ----------- -----------
BALANCE AT END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 821,848 $ 517,335 $ 549,152
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED PREMIUM ON COMMON STOCK
AND OTHER PAID-IN CAPITAL
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,222,941 $ 2,217,110 $ 2,210,524
ADD--Premium on issuance of common stock . . . . . . . . . . . . . . . . . . . . 63 5,831 6,586
----------- ----------- -----------
BALANCE AT END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,223,004 $ 2,222,941 $ 2,217,110
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the above
statements.
A-20
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 717,154 $ 423,946 $ 112,440
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 948,683 929,325 911,136
Deferred income taxes and investment tax credits--net . . . . . . . . . 158,296 127,186 85,079
Extraordinary loss related to early redemption of long-term debt. . . . 33,158 -- --
Cumulative effect of change in accounting for income taxes. . . . . . . -- -- (9,738)
Equity component of allowance for funds used during construction. . . . (13,129) (22,628) (20,618)
Provisions for revenue refunds and related interest . . . . . . . . . . (231) 37,548 1,354,197
Revenue refunds and related interest. . . . . . . . . . . . . . . . . . 15,135 (1,221,650) (190,723)
Recovery/(deferral) of regulatory assets/deferred
carrying charges--net . . . . . . . . . . . . . . . . . . . . . . . . 15,272 15,453 (432,948)
Provisions/(payments) for liability for early retirement
and separation costs--net . . . . . . . . . . . . . . . . . . . . . . 60,713 33,580 (1,816)
Net effect on cash flows of changes in:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . (169,211) 114,935 (159,169)
Coal and fuel oil . . . . . . . . . . . . . . . . . . . . . . . . . (20,304) 2,880 215,382
Materials and supplies. . . . . . . . . . . . . . . . . . . . . . . 51,073 18,102 1,834
Accounts payable adjusted for nuclear fuel lease principal payments
and early retirement and separation costs--net. . . . . . . . . . 465,475 118,190 277,733
Accrued interest and taxes. . . . . . . . . . . . . . . . . . . . . (5,765) 72,827 (39,234)
Other changes in certain current assets and liabilities . . . . . . 26,555 (52,862) (6,637)
Other--net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,411 124,241 108,924
----------- ----------- -----------
$ 2,424,285 $ 721,073 $ 2,205,842
----------- ----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Construction expenditures . . . . . . . . . . . . . . . . . . . . . . . . . $ (899,366) $ (720,602) $ (841,525)
Nuclear fuel expenditures . . . . . . . . . . . . . . . . . . . . . . . . . (289,118) (257,264) (261,370)
Equity component of allowance for funds used during construction. . . . . . 13,129 22,628 20,618
Contributions to nuclear decommissioning funds. . . . . . . . . . . . . . . (132,653) (132,550) (132,550)
Investment in subsidiary companies. . . . . . . . . . . . . . . . . . . . . (8) (49) --
Other investments and special deposits. . . . . . . . . . . . . . . . . . . 19,588 621,987 (619,349)
----------- ----------- -----------
$(1,288,428) $ (465,850) $(1,834,176)
----------- ----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of securities--
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 546,289 $ 1,927,296
Preferred securities of subsidiary trust. . . . . . . . . . . . . . . . 200,000 -- --
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 77,970 80,585
Retirement and redemption of securities--
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,137,272) (703,930) (1,900,540)
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,822) (17,709) (93,081)
Deposits and securities held for retirement and redemption of securities. . 106 3,191 241,731
Premium paid on early redemption of long-term debt. . . . . . . . . . . . . (25,823) (4,564) (78,395)
Cash dividends paid on capital stock. . . . . . . . . . . . . . . . . . . . (409,957) (446,342) (408,285)
Proceeds from sale/leaseback of nuclear fuel. . . . . . . . . . . . . . . . 193,215 306,649 204,254
Nuclear fuel lease principal payments . . . . . . . . . . . . . . . . . . . (237,845) (209,689) (245,968)
Increase in short-term borrowings . . . . . . . . . . . . . . . . . . . . . 261,000 1,200 350
----------- ----------- -----------
$(1,174,397) $ (446,935) $ (272,053)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS . . . . . . . . . . . $ (38,540) $ (191,712) $ 99,613
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF YEAR . . . . . . . . . . . . 53,650 245,362 145,749
----------- ----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR . . . . . . . . . . . . . . . $ 15,110 $ 53,650 $ 245,362
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the above
statements.
A-21
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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, was 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. The preferred and
preference stocks, common stock purchase warrants, first mortgage bonds and
other debt obligations of ComEd were unchanged in the restructuring and remain
as ComEd's outstanding securities and obligations.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of ComEd, the Indiana Company and ComEd Financing I. 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.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
REGULATION. ComEd is subject to regulation as to accounting 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 in accordance with SFAS No. 71, Accounting for
the Effects of Certain Types of Regulation. 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.
REGULATORY ASSETS AND LIABILITIES. Regulatory assets are incurred costs
which have been deferred and are amortized for ratemaking and accounting
purposes. Regulatory liabilities represent amounts to be settled with customers
through future rates. Regulatory assets and liabilities reflected on the
Consolidated Balance Sheets at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1995 1994
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Regulatory assets:
Deferred income taxes (1). . . . . . . . . . . . . . . . . . . . . $ 1,689,832 $ 1,791,395
Deferred carrying charges (2). . . . . . . . . . . . . . . . . . . 409,923 422,966
Nuclear decommissioning costs--Dresden Unit 1 (3). . . . . . . . . 138,058 141,405
Unamortized loss on reacquired debt (4). . . . . . . . . . . . . . 160,440 176,128
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,133 72,376
----------- -----------
$ 2,467,386 $ 2,604,270
----------- -----------
----------- -----------
Regulatory liabilities:
Deferred income taxes (1). . . . . . . . . . . . . . . . . . . . . $ 601,002 $ 650,813
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 48,613
----------- -----------
$ 601,002 $ 699,426
----------- -----------
----------- -----------
</TABLE>
- ---------------
(1) Recorded in compliance with SFAS No. 109.
(2) Amortized over the remaining lives of the Units.
(3) Amortized over the remaining life of Dresden station. See "Depreciation and
Decommissioning" below for additional information.
(4) Amortized over the remaining lives of the long-term debt issued to finance
the reacquisition. See "Loss on Reacquired Debt" below for additional
information.
A-22
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For additional information related 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." See
also "Deferred Unrecovered Energy Costs" below regarding the fuel adjustment
clause, the DOE assessment and coal reserves.
If a portion of ComEd's operations was no longer subject to the provisions
of SFAS No. 71 as a result of a change in regulation or the effects of
competition, ComEd would be required to write off the related regulatory assets
and liabilities. In addition, ComEd would be required to determine any
impairment to other assets and write down such assets to their fair value.
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which will be adopted on January 1, 1996,
establishes accounting standards for the impairment of long-lived assets. The
SFAS also requires that regulatory assets which are no longer probable of
recovery through future revenue be charged to earnings. SFAS No. 121 is not
expected to have an impact on ComEd's financial position or results of
operations upon adoption.
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 eight million as of December 31, 1995,
1994 and 1993. It includes the city of Chicago, an area of about 225 square
miles with an estimated population of approximately three million from which
ComEd derived approximately one-third of its ultimate consumer revenues in 1995.
ComEd had approximately 3.4 million electric customers at December 31, 1995.
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. Non-nuclear plant and equipment is
depreciated at annual rates developed for each class of plant based on their
composite service lives. Provisions for depreciation were at average annual
rates of 3.14%, 3.13% and 3.12% of average depreciable utility plant and
equipment for the years 1995, 1994 and 1993, respectively. The annual rate for
nuclear plant and equipment is 2.88%, which excludes separately collected
decommissioning costs. See Note 3 for additional information concerning ComEd's
announcement of customer initiatives which include the acceleration of
depreciation charges on nuclear generating units.
Nuclear plant decommissioning costs are accrued over the expected service
lives of the related nuclear generating units. 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 and a FASB review
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 NRC guidelines. ComEd's
twelve operating units have estimated remaining service lives ranging from 10 to
32 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, decommissioning costs, including the
cost of decontamination and dismantling, are estimated to aggregate $3.7 billion
in current-year (1996) dollars excluding
A-23
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
a contingency allowance. ComEd estimates that it will expend approximately $15
billion, excluding any contingency allowance, for decommissioning costs
primarily during the period from 2007 through 2032. Such costs are expected to
be funded by the external decommissioning trusts which ComEd established in
compliance with Illinois law and into which ComEd has been making annual
contributions. Future decommissioning cost estimates may be significantly
affected by the adoption of or changes to NRC regulations as well as changes in
the assumptions used in making such estimates.
On January 9, 1995, the ICC issued its Rate Order in the proceedings
relating to ComEd's February 1994 rate increase request. In the Rate Order, the
ICC determined that ComEd's annual nuclear plant decommissioning cost
collections from its ratepayers should be reduced from the $127 million
previously authorized in the 1991 ICC rate order to $112.7 million. The $112.7
million annual collection amount primarily resulted from the ICC's decision to
exclude from ComEd's costs subject to collection a contingency allowance.
Contingency allowances used in decommissioning cost estimates provide for
currently unspecifiable costs that are likely to occur after decommissioning
begins and generally range from 20% to 25% of the currently specifiable costs.
However, the Rate Order established a rider which will allow annual adjustments
to decommissioning cost collections outside of the context of a traditional rate
proceeding. Such rider is intended to allow adjustments in decommissioning cost
recoveries from ratepayers as changes in cost estimates occur. On February 28,
1995, ComEd submitted its initial rider filing to the ICC to increase its annual
collections to $113.5 million, primarily reflecting additional expenditures at
Dresden Unit 1, its retired nuclear unit. The ICC approved the rider filing on
April 19, 1995.
As a result of the decommissioning rider filing, beginning May 2, 1995, the
effective date of the order related to the rider filing, ComEd began collecting
and accruing $113.5 million annually for decommissioning costs. The assumptions
used to calculate the $113.5 million decommissioning cost accrual include: the
decommissioning cost estimate of $3.7 billion in current-year (1996) dollars,
after-tax earnings on the tax-qualified and nontax-qualified decommissioning
funds of 7.30% and 6.26%, respectively, as well as an escalation rate for future
decommissioning costs of 5.3%. The annual accrual of $113.5 million provided
over the lives of the nuclear plants, coupled with the expected fund earnings
and amounts previously recovered in rates, is expected to aggregate
approximately $15 billion.
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 December 31, 1995, the total decommissioning costs included
in the accumulated provision for depreciation were $1,301 million. For ComEd's
retired nuclear unit, Dresden Unit 1, the total estimated liability at December
31, 1995 in current-year (1996) dollars of $257 million was recorded on the
Consolidated Balance Sheets as a noncurrent liability and the unrecovered
portion of the liability of approximately $138 million was recorded as a
regulatory asset.
Under Illinois law, decommissioning cost collections are required to be
deposited into external trusts; and, consequently, such collections do not add
to the cash flows available for general corporate purposes. 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 December 31, 1995, the past accruals that are required to
be contributed to the external trusts aggregate $182 million. The fair value of
funds accumulated in the external trusts at December 31, 1995 was approximately
$1,238 million which includes pre-tax unrealized appreciation of $165 million.
The earnings on the external trusts accumulate in the fund balance and in the
accumulated provision for depreciation.
A-24
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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 11 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 years
1995, 1994 and 1993 were $390.7 million, $358.0 million and $385.9 million,
respectively.
INCOME TAXES. ComEd is 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.
AFUDC. In accordance with the 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 years 1995, 1994 and 1993 were 9.52%, 9.85% and
10.05%, respectively. AFUDC does not contribute to the current cash flow of
ComEd.
INTEREST. Total interest costs incurred on debt, leases and other
obligations for the years 1995, 1994 and 1993 were $692.9 million, $729.5
million and $778.6 million, respectively.
DEBT DISCOUNT, PREMIUM AND EXPENSE. Discount, premium and expense on long-
term debt are being amortized over the lives of the respective issues.
LOSS ON REACQUIRED DEBT. Consistent with regulatory treatment, the net loss
from reacquisition in connection with refinancing 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 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 uranium enrichment
facilities owned and previously operated by the DOE. As of December 31, 1995 and
1994, an asset related to the assessments of approximately $179 million and $191
million, respectively, was recorded, of which the current portion of
approximately $15 million was included in current assets on the Consolidated
Balance Sheets. As of December 31, 1995 and 1994, a corresponding liability of
approximately $152 million and $165 million, respectively, was recorded in other
noncurrent liabilities and approximately $15 million was recorded in other
current liabilities.
A-25
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
At December 31, 1995 and 1994, ComEd had unrecovered fuel costs in the form
of coal reserves of approximately $448 million and $498 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; however, ComEd is not earning a return on the expenditures for coal
reserves. Such fuel costs expected to be recovered within one year amounting to
approximately $24 million and $31 million at December 31, 1995 and 1994,
respectively, have been included on the Consolidated Balance Sheets in current
assets as deferred unrecovered energy costs. ComEd expects to fully recover the
costs of the coal reserves by the year 2007. See Note 21 for additional
information concerning ComEd's coal commitments.
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 cash flow information for the years 1995, 1994 and
1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized). . . . . . . . . . . . . . . . . . $ 604,202 $ 645,424 $ 677,669
Income taxes (net of refunds) . . . . . . . . . . . . . . . . . . . . . $ 368,842 $ (4,923) $ 103,014
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital lease obligations incurred. . . . . . . . . . . . . . . . . . . . . $ 198,577 $ 309,716 $ 213,758
</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 refunded
approximately $1.26 billion (including revenue taxes), plus interest at five
percent on the unpaid balance, through temporarily reduced rates over a refund
period which ended in November 1994 (followed by a reconciliation period of five
months). ComEd had previously deferred the recognition of revenues during 1993
as a result of developments in the proceedings related to a 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.
Under the Fuel Matters Settlement, effective as of December 2, 1993, ComEd
paid approximately $108 million (including revenue taxes) to its customers
through temporarily reduced collections under its fuel adjustment clause over a
twelve-month period which ended 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.
A-26
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(3) OTHER RATE MATTERS
On January 9, 1995, the ICC issued its Rate Order in the proceedings
relating to ComEd's February 1994 rate increase request. The Rate Order
provides, among other things, for (i) an increase in ComEd's total revenues of
approximately $301.8 million (excluding add-on revenue taxes) or 5.2%, on an
annual basis, including a $303.2 million increase in base rates, (ii) the
collection of municipal franchise costs as an adder to base rates until May 1,
1995, when ComEd began collecting such costs prospectively on an individual
municipality basis through a rider, and (iii) the use of a rider, with annual
review proceedings, to pass on to ratepayers increases or decreases in estimated
costs associated with the decommissioning of ComEd's nuclear generating units.
See Note 1 under "Depreciation and Decommissioning" for information related to
the level of decommissioning cost collections allowed in the Rate Order and
subsequent rider proceedings. The ICC also determined that the Units were 100%
"used and useful" and that the previously determined reasonable costs of such
Units, as depreciated, should be included in full in ComEd's rate base. The
rates provided in the Rate Order became effective on January 14, 1995; however,
they are being collected subject to refund as a result of subsequent judicial
action. As of December 31, 1995, electric operating revenues of approximately
$319 million (excluding revenue taxes) are subject to refund. Intervenors and
ComEd have filed appeals of the Rate Order with the Illinois Appellate Court.
On December 11, 1995, ComEd announced a series of customer initiatives as
part of its larger ongoing effort to address the need to give all customer
classes the opportunity to benefit from increased competition in the electric
utility business, while retaining the benefits (such as reliability) of current
regulation and ensuring utilities' cost recovery for commitments made under the
obligation to serve customers. The initiatives include a five-year cap on base
electric rates at current levels and various customer service and incentive
pricing programs designed to allow customers more choice and control over the
services they seek and the prices they pay. These initiatives are in addition to
previously implemented special discount contract rate programs for new or
existing industrial customers. ComEd anticipates the initiatives will be fully
implemented in 1997 and will reduce its revenues by approximately $42 million
annually (including the effects of previously implemented initiatives and before
income tax effects) primarily through changes in energy utilization and increase
its costs by at least $30 million annually (before income tax effects) through
the acceleration of depreciation charges on its nuclear generating units. ComEd
expects to file a request for ICC approval of the accelerated depreciation
initiatives in the near future. Management expects the financial impact of these
initiatives will be substantially offset by ComEd's cost reduction efforts and
expected growth in its business. ComEd also continues to consider the
possibility of additional accelerated depreciation options.
Under ComEd's initiatives, the five-year base rate cap at current levels
became effective in December 1995 and will extend until January 1, 2001. The
rate cap does not affect ComEd's fuel cost or nuclear decommissioning cost
recovery provisions. ComEd's fuel cost variances will continue to be collected
through its fuel adjustment clause, and such collections will continue to be
subject to annual reconciliation proceedings before the ICC. Likewise, nuclear
decommissioning costs will continue to be collected as described in Note 1 under
"Depreciation and Decommissioning."
(4) AUTHORIZED SHARES AND VOTING RIGHTS OF CAPITAL STOCK
At December 31, 1995, the authorized shares of ComEd capital stock were:
common stock--250,000,000 shares; preference stock--23,244,990 shares; $1.425
convertible preferred stock--96,753 shares; and prior preferred stock--850,000
shares. The preference and prior preferred stocks are
A-27
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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 December 31, 1995, shares of common stock were reserved for the
following purposes:
<TABLE>
<CAPTION>
<S> <C>
Conversion of $1.425 convertible preferred stock. . . . . . . . . 98,688
Conversion of warrants. . . . . . . . . . . . . . . . . . . . . . 27,580
-------
126,268
-------
-------
</TABLE>
Common stock for the years 1995, 1994 and 1993 was issued as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Employee Stock Purchase Plan. . . . . . . . . -- 154,710 268,594
Employee Savings and Investment Plan. . . . . -- 81,400 153,400
Conversion of $1.425 convertible
preferred stock. . . . . . . . . . . . . . . 3,630 190,050 22,375
Conversion of warrants. . . . . . . . . . . . 299 13,714 1,374
------- ------- -------
3,929 439,874 445,743
------- ------- -------
------- ------- -------
</TABLE>
At December 31, 1995 and 1994, 82,742 and 83,751 common stock purchase
warrants, respectively, were outstanding. The warrants entitle the holders to
convert such warrants into common stock at a conversion rate of one share of
common stock for three warrants.
(6) PREFERRED AND PREFERENCE STOCKS WITHOUT MANDATORY REDEMPTION REQUIREMENTS
No shares of preferred or preference stocks without mandatory redemption
requirements were issued or redeemed during 1995 or 1993. During 1994, 3,000,000
shares of preference stock without mandatory redemption requirements were issued
and no shares of preferred or preference stocks without mandatory redemption
requirements were redeemed. The series of preference stock without mandatory
redemption requirements outstanding at December 31, 1995 are summarized as
follows:
<TABLE>
<CAPTION>
INVOLUNTARY
SHARES AGGREGATE REDEMPTION LIQUIDATION
SERIES OUTSTANDING STATED VALUE PRICE(1) PRICE(1)
------ ----------- ------------ ---------- -----------
(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>
------------
(1) Per share plus accrued and unpaid dividends, if any.
The outstanding shares of $1.425 convertible preferred stock are
convertible at the option of the holders thereof, at any time, into common stock
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
A-28
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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.
(7) PREFERENCE STOCK SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS
During 1995 and 1994, no shares of preference stock subject to mandatory
redemption requirements were issued. During 1993, 700,000 shares of preference
stock subject to mandatory redemption requirements were issued. The series of
preference stock subject to mandatory redemption requirements outstanding at
December 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
SHARES AGGREGATE
SERIES OUTSTANDING STATED VALUE OPTIONAL REDEMPTION PRICE(1)
- -------------- ----------- ------------ --------------------------------------------------
(THOUSANDS
OF DOLLARS)
<S> <C> <C> <C>
$8.20 249,990 $ 24,999 $103 through October 31, 1997; and $101 thereafter
$8.40 Series B 360,000 35,758 $101
$8.85 300,000 30,000 $103 through July 31, 1998; and $101 thereafter
$9.25 675,000 67,500 $103 through July 31, 1999; and $101 thereafter
$9.00 650,000 64,431 Non-callable
$6.875 700,000 69,475 Non-callable
--------- --------
2,934,990 $292,163
--------- --------
--------- --------
</TABLE>
- ---------------
(1) 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 preference stock
subject to mandatory redemption requirements are summarized as follows:
<TABLE>
<CAPTION>
SINKING
ANNUAL SINKING FUND FUND INVOLUNTARY
SERIES REQUIREMENT PRICE(1) LIQUIDATION PRICE(1)
-------------- ------------------- -------- --------------------
<S> <C> <C> <C>
$8.20 35,715 shares $ 100 $100.00
$8.40 Series B 30,000 shares(2) $ 100 $ 99.326
$8.85 37,500 shares $ 100 $100.00
$9.25 75,000 shares $ 100 $100.00
$9.00 130,000 shares(2) $ 100 $ 99.125
$6.875 (3) $ 100 $ 99.25
</TABLE>
---------------
(1) Per share plus accrued and unpaid dividends, if any.
(2) 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.
(3) All shares are required to be redeemed on May 1, 2000.
Annual remaining sinking fund requirements through 2000 on preference stock
outstanding at December 31, 1995 will aggregate $30,822,000 in each of 1996,
1997, 1998 and 1999, and $100,822,000 in 2000. During 1995, 1994 and 1993,
178,215 shares, 177,085 shares and 1,835,155 shares, respectively, of 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 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.
A-29
<PAGE>
COMMONWEALTH EDISON COMPANY 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) COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF COMED
FINANCING I
In September 1995, ComEd Financing I (Trust), a wholly-owned subsidiary
trust of ComEd, issued 8,000,000 of its 8.48% company-obligated mandatorily
redeemable preferred securities. The sole asset of the Trust is $206.2 million
principal amount of ComEd's 8.48% subordinated deferrable interest notes due
September 30, 2035. There is a full and unconditional guarantee by ComEd of the
Trust's obligations under the securities issued by the Trust. However, ComEd's
obligations are subordinate and junior in right of payment to certain other
indebtedness of ComEd. ComEd has the right to defer payments of interest on the
subordinated deferrable interest notes by extending the interest payment period,
at any time, for up to 20 consecutive quarters. If interest payments on the
subordinated deferrable interest notes are so deferred, distributions on the
preferred securities will also be deferred. During any deferral, distributions
will continue to accrue with interest thereon. In addition, during any such
deferral, ComEd may not declare or pay any dividend or other distribution on, or
redeem or purchase, any of its capital stock.
The subordinated deferrable interest notes are redeemable by ComEd (in
whole or in part) from time to time, on or after September 30, 2000, or at any
time in the event of certain income tax circumstances. If the subordinated
deferrable interest notes are redeemed, the Trust must redeem preferred
securities having an aggregate liquidation amount equal to the aggregate
principal amount of the subordinated deferrable interest notes so redeemed. In
the event of the dissolution, winding up or termination of the Trust, the
holders of the preferred securities will be entitled to receive, for each
preferred security, a liquidation amount of $25 plus accrued and unpaid
distributions thereon (including interest thereon) to the date of payment,
unless in connection with the dissolution, the subordinated deferrable interest
notes are distributed to the holders of the preferred securities.
(9) LONG-TERM DEBT
Sinking fund requirements and scheduled maturities remaining through 2000
for first mortgage bonds, sinking fund debentures and other long-term debt
outstanding at December 31, 1995, after deducting sinking fund debentures
reacquired for satisfaction of future sinking fund requirements, are summarized
as follows: 1996--$234,893,000; 1997--$689,168,000; 1998--$350,017,000; 1999--
$152,445,000; and 2000--$464,446,000.
A-30
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
At December 31, 1995, outstanding first mortgage bonds maturing through
2000 were as follows:
<TABLE>
<CAPTION>
SERIES PRINCIPAL AMOUNT
---------------------------------- ----------------------
(THOUSANDS OF DOLLARS)
<S> <C>
5 1/4% due April 1, 1996 . . . . . . . . . . $ 50,000
5 3/4% due November 1, 1996. . . . . . . . . 50,000
5 3/4% due December 1, 1996. . . . . . . . . 50,000
7% due February 1, 1997. . . . . . . . . . . 150,000
5 3/8% due April 1, 1997 . . . . . . . . . . 50,000
6 1/4% due October 1, 1997 . . . . . . . . . 60,000
6 1/4% due February 1, 1998. . . . . . . . . 50,000
6% due March 15, 1998. . . . . . . . . . . . 130,000
6 3/4% due July 1, 1998. . . . . . . . . . . 50,000
6 3/8% due October 1, 1998 . . . . . . . . . 75,000
9 3/8% due February 15, 2000 . . . . . . . . 125,000
6 1/2% due April 15, 2000. . . . . . . . . . 230,000
6 3/8% due July 15, 2000 . . . . . . . . . . 100,000
-----------
$ 1,170,000
-----------
-----------
</TABLE>
Other long-term debt outstanding at December 31, 1995 is summarized as
follows:
<TABLE>
<CAPTION>
PRINCIPAL
DEBT SECURITY AMOUNT INTEREST RATE
- ---------------------------------- ----------- -------------------------------------------------------
(THOUSANDS
OF DOLLARS)
<S> <C> <C>
Notes:
Medium Term Notes, Series 1N
Due various dates through
April 1, 1998 $ 50,500 Interest rates ranging from 9.40% to 9.65%
Medium Term Note, Series 2N
due July 1, 1996 10,000 Interest rate of 9.85%
Medium Term Notes, Series 3N
due various dates through
October 15, 2004 322,250 Interest rates ranging from 8.92% 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 February 15, 1997 150,000 Interest rate of 7.00%
Notes due July 15, 1997 100,000 Interest rate of 6.50%
Notes due October 15, 2005 235,000 Interest rate of 6.40%
----------
$ 913,750
----------
Long-Term Note Payable to Bank:
Note due June 1, 1997 $ 150,000 Prevailing interest rate of 6.375% at December 31, 1995
----------
Purchase Contract Obligations:
Woodstock due January 2, 1997 $ 95 Interest rate of 4.50%
Hinsdale due April 30, 2005 473 Interest rate of 3.00%
----------
$ 568
----------
$1,064,318
----------
----------
</TABLE>
Long-term debt maturing within one year has been included in current
liabilities.
The outstanding first mortgage bonds are secured by a lien on substantially
all property and franchises, other than expressly excepted property, owned by
ComEd.
ComEd recorded an extraordinary loss of $33 million in the fourth quarter
of 1995 related to the early redemption of $645 million of long-term debt which
reduced net income by $20 million (after reflecting income tax effects of $13
million) or $0.09 per common share.
A-31
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(10) 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 December 31, 1995.
Of that amount, $915 million (of which $175 million expires on September 30,
1996, $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.
(11) 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; however, this delivery schedule is
expected to be delayed significantly. 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. As provided for under the contract, ComEd
has elected to pay the one-time fee, with interest, just prior to the first
delivery of spent nuclear fuel to the DOE. The liability for the one-time fee
and the related interest is reflected in the Consolidated Balance Sheets.
(12) 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 ComEd 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 ComEd and subsidiary companies is primarily dependent
on the treatment authorized under future ratemaking proceedings.
INVESTMENTS. Securities included in the 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 and based on published market data, as of December 31, 1995 and 1994 was
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------------------------- ----------------------------------------
UNREALIZED
UNREALIZED GAINS
COST BASIS GAINS FAIR VALUE COST BASIS (LOSSES) FAIR VALUE
----------- ---------- ------------ ---------- ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Short-term investments . . . . . . . . . $ 40,575 $ 283 $ 40,858 $ 65,203 $ 106 $ 65,309
U.S. Government and Agency issues. . . . 156,745 17,636 174,381 94,450 (562) 93,888
Municipal bonds. . . . . . . . . . . . . 496,707 34,970 531,677 478,074 (7,301) 470,773
Common stock . . . . . . . . . . . . . . 348,866 107,280 456,146 220,395 9,069 229,464
Other. . . . . . . . . . . . . . . . . . 29,757 4,708 34,465 18,788 2,722 21,510
----------- --------- ----------- --------- -------- ---------
$ 1,072,650 $ 164,877 $ 1,237,527 $ 876,910 $ 4,034 $ 880,944
----------- --------- ----------- --------- -------- ---------
----------- --------- ----------- --------- -------- ---------
</TABLE>
A-32
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
At December 31, 1995, 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 . . . . . . . . . . . . . $ 40,575 $ 40,858
1 through 5 years . . . . . . . . . . . 73,996 76,978
5 through 10 years. . . . . . . . . . . 229,132 247,521
Over 10 years . . . . . . . . . . . . . 366,667 398,510
</TABLE>
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 years 1995, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ---------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Gross proceeds from sales of securities. . . . . . . . . $ 2,598,889 $ 811,368 $ 388,684
Less cost based on specific identification . . . . . . . (2,581,714) (811,997) (377,734)
------------ ---------- ----------
Realized gains (losses) on sales of securities . . . . . $ 17,175 $ (629) $ 10,950
Other realized fund earnings net of expenses . . . . . . 46,294 38,148 29,878
------------ ---------- ----------
Total realized net earnings of the funds . . . . . . . . $ 63,469 $ 37,519 $ 40,828
Unrealized gains (losses). . . . . . . . . . . . . . . . 160,843 (57,948) 30,969
------------ ---------- ----------
Total net earnings (losses) of the funds . . . . . . . . $ 224,312 $ (20,429) $ 71,797
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
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 preferred and preference
stocks, company-obligated mandatorily redeemable preferred securities of the
Trust and long-term debt were obtained from an independent consultant. The
estimated fair values, which include the current portions of redeemable
preference stock and long-term debt but exclude accrued interest and dividends,
as of December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------------------------- -----------------------------------------
CARRYING UNREALIZED CARRYING UNREALIZED
VALUE LOSSES FAIR VALUE VALUE (GAINS) FAIR VALUE
----------- --------- ----------- ----------- ---------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Preferred and preference stocks. . . . . . $ 800,197 $ 14,769 $ 814,966 $ 818,111 $ (64,443) $ 753,668
Company-obligated mandatorily redeemable
preferred securities of the Trust. . . . $ 200,000 $ 6,000 $ 206,000 $ -- $ -- $ --
Long-term debt . . . . . . . . . . . . . . $ 6,572,853 $ 470,175 $ 7,043,028 $ 7,448,236 $ (450,429) $ 6,997,807
</TABLE>
Long-term notes payable to banks, which are not included in the above
table, amounted to $150 million and $400 million at December 31, 1995 and 1994,
respectively. Such notes, for which interest is paid at prevailing rates, are
included in the consolidated financial statements at cost, which approximates
their fair value.
CURRENT LIABILITIES. The carrying value of notes payable, which consists of
commercial paper and bank loans maturing within one year, approximates the 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.
A-33
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
OTHER NONCURRENT LIABILITIES. The carrying value of accrued spent nuclear
fuel disposal fee and related interest represents the settlement value as of
December 31, 1995 and 1994; therefore, the carrying value is equal to the fair
value.
(13) 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. During 1995,
these plans were amended to more closely base retirement benefits on final pay.
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, 1995 and 1994.
During 1994, the companies implemented an early retirement program for
employees eligible to retire or who would become eligible to retire after
December 31, 1993 and before April 1, 1995. A total of 679 employees accepted
the program, resulting in the recognition of approximately $34 million of
additional pension cost and an additional increase to the projected benefit
obligation of that $34 million and $41 million of unrecognized net loss. The
charge to income was approximately $20.5 million after reflecting income tax
effects as a result of the program.
The funded status of these plans at December 31, 1995 and 1994 was as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
1995 1994
---------------------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated pension plan benefits:. . . . . . . . . . . . . . . . . . .
Vested benefit obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(2,839,000) $(2,105,000)
Nonvested benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (251,000) (359,000)
----------- -----------
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(3,090,000) $(2,464,000)
Effect of projected future compensation levels . . . . . . . . . . . . . . . . . . . . . . . . (304,000) (485,000)
----------- -----------
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(3,394,000) $(2,949,000)
Fair value of plan assets, invested primarily in U.S. Government, government-sponsored corpora-
tion and agency securities, fixed income funds, registered investment companies, equity index
funds and other equity funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,060,000 2,547,000
----------- -----------
Plan assets less than projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . $ (334,000) $ (402,000)
Unrecognized prior service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (73,000) 22,000
Unrecognized transition asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (142,000) (155,000)
Unrecognized net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204,000 239,000
----------- -----------
Accrued pension liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (345,000) $ (296,000)
----------- -----------
----------- -----------
</TABLE>
The assumed discount rates were 7.5% and 8.0% at December 31, 1995 and
1994, respectively, 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 the years 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Annual discount rate . . . . . . . . . . . . . . . . . . 8.00% 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 . . . . . 9.75% 9.50% 9.50%
</TABLE>
A-34
<PAGE>
COMMONWEALTH EDISON COMPANY 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 years 1995, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost . . . . . . . . . . . . . . . . . . $ 87,000 $ 97,000 $ 96,000
Interest cost on projected benefit obligation. . 225,000 213,000 204,000
Actual loss (return) on plan assets. . . . . . . (681,000) 37,000 (310,000)
Early retirement program cost. . . . . . . . . . -- 34,000 --
Net amortization and deferral. . . . . . . . . . 418,000 (302,000) 61,000
--------- -------- --------
$ 49,000 $ 79,000 $ 51,000
--------- -------- --------
--------- -------- --------
</TABLE>
In addition, an employee savings and investment plan is available to
certain eligible employees of ComEd, Cotter and the Indiana Company. During the
fourth quarter of 1995, the employee savings and investment plan was amended for
employees of ComEd, Cotter and the management employees of the Indiana Company.
Each participating employee affected by the amendments may contribute up to 20%
of such employee's base pay and the participating companies match such
contribution equal to 100% of up to the first 2% of contributed base salary, 70%
of the second 3% of contributed base salary and 25% of the last 1% of
contributed base salary. During 1995, 1994 and 1993, the participating companies
contributed $24,645,000, $22,750,000 and $21,948,000, respectively.
(14) 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. The employees become eligible for
postretirement health care benefits when they reach age 55 with 10 years of
service. The liability for postretirement health care benefits is funded through
trust funds based upon actuarially determined contributions that take into
account the amount deductible for income tax purposes. The postretirement health
care plan for ComEd and the Indiana Company was amended, effective April 1,
1995. Prior to that date, the postretirement health care plan was fully funded
by the companies. With respect to employees who retire on or after April 1,
1995, the plan is contributory, funded jointly by the companies and the
participating employees. Actuarial valuations were determined as of January 1,
1995 and 1994.
Postretirement health care costs in 1995 included $25 million related to a
voluntary separation offer for union employees who accepted and left ComEd's
employ by year-end 1995 combined with separation plans offered to selected
groups of non-union employees.
The funded status of the plan at December 31, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1995 1994
---------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of accumulated postretirement health care obligation:. . . . . . . . .
Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (457,000) $ (467,000)
Active fully eligible participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,000) (34,000)
Other participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (418,000) (581,000)
---------- -----------
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (900,000) $(1,082,000)
Fair value of plan assets, invested primarily in S&P 500 common stocks and U.S. Government,
government agency, municipal and listed corporate obligations. . . . . . . . . . . . . . . . 603,000 503,000
---------- -----------
Plan assets less than accumulated postretirement health care obligation. . . . . . . . . . . . $ (297,000) $ (579,000)
Unrecognized transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374,000 531,000
Unrecognized net gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (285,000) (70,000)
---------- -----------
Accrued liability for postretirement health care . . . . . . . . . . . . . . . . . . . . . . . $ (208,000) $ (118,000)
---------- -----------
---------- -----------
</TABLE>
A-35
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Different health care cost trends are used for pre-Medicare and post-
Medicare expenses. Pre-Medicare trend rates were 14% for 1994 and 13.5% for the
first three months of 1995, grading down in 0.5% annual increments to 5%. Post-
Medicare trend rates were 11.5% for 1994 and 11% for the first three months of
1995, grading down in 0.5% annual increments to 5%. For the last nine months of
1995, pre-Medicare trend rates were 10%, grading down in 0.5% annual increments
to 5%. Post-Medicare trend rates were 8% for the last nine months of 1995,
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, 1995 by
approximately $161 million and increase the aggregate of the service and
interest cost components of plan costs by approximately $20 million for the year
1995. The assumed discount rates were 7.5% and 8.0% at December 31, 1995 and
1994, respectively. The annual long-term rate of return on plan assets was 9.32%
and 9.04% for the years 1995 and 1994, respectively, after including income tax
effects.
The components of postretirement health care costs, portions of which were
recorded as components of construction costs, for the years 1995, 1994 and 1993
were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost. . . . . . . . . . . . . . . . . . .$ 31,000 $ 47,000 $ 45,000
Interest cost on accumulated benefit obligation . 69,000 81,000 74,000
Actual loss (return) on plan assets . . . . . . .(137,000) 9,000 (41,000)
Amortization of transition obligation . . . . . . 23,000 29,000 29,000
Severance plan cost . . . . . . . . . . . . . . . 25,000 -- --
Other . . . . . . . . . . . . . . . . . . . . . . 83,000 (49,000) 9,000
-------- -------- -------
$ 94,000 $117,000 $116,000
-------- -------- -------
-------- -------- -------
</TABLE>
(15) SEPARATION PLAN COSTS
Operation and maintenance expenses included $97 million for the year 1995
related to a voluntary separation offer for union employees who accepted and
left ComEd's employ by year-end 1995 combined with separation plans offered to
selected groups of non-union employees. These employee separation plans reduced
net income by $59 million or $0.27 per common share for the year 1995.
(16) INCOME TAXES
The components of the net deferred income tax liability at December 31,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1995 1994
---------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred income tax liabilities:
Accelerated cost recovery and liberalized depreciation, net of removal costs . . . . . . . $ 3,379,987 $3,266,930
Overheads capitalized. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252,910 266,159
Repair allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219,585 210,655
Regulatory assets recoverable through future rates . . . . . . . . . . . . . . . . . . . . 1,689,832 1,791,395
Deferred income tax assets:
Postretirement benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (235,353) (177,991)
Unbilled revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (116,274) (90,396)
Loss carryforward. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (10,090)
Alternative minimum tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (145,019) (283,331)
Unamortized investment tax credits to be settled through future rates. . . . . . . . . . . (452,210) (471,058)
Other regulatory liabilities to be settled through future rates. . . . . . . . . . . . . . (148,792) (179,755)
Other--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,893) (58,999)
----------- -----------
Net deferred income tax liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,398,773 $ 4,263,519
----------- -----------
----------- -----------
</TABLE>
A-36
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
The $135 million increase in the net deferred income tax liability from December
31, 1994 to December 31, 1995 is comprised of $187 million of deferred income
tax expense and a $52 million decrease in regulatory assets net of regulatory
liabilities pertaining to income taxes for the year. The amount of regulatory
assets included in deferred income tax liabilities primarily relates to the
equity component of AFUDC which is recorded on an after-tax basis, the borrowed
funds component of AFUDC which was previously recorded net of tax and other
temporary differences for which the related tax effects were not previously
recorded. The amount of other regulatory liabilities included in deferred income
tax assets primarily relates to deferred income taxes provided at rates in
excess of the current statutory rate.
The components of net income tax expense charged to continuing operations
for the years 1995, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Electric operating income:
Current income taxes . . . . . . . . . . . . .$ 344,221 $ 160,214 $ (27,553)
Deferred income taxes. . . . . . . . . . . . . 188,008 169,307 123,383
Investment tax credits deferred--net . . . . . (28,710) (28,757) (29,424)
Other (income) and deductions. . . . . . . . . . . (7,685) (23,062) (31,655)
--------- --------- --------
Net income taxes charged to continuing operations.$ 495,834 $ 277,702 $ 34,751
--------- --------- --------
--------- --------- --------
</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 years 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
----------- --------- ---------
<S> <C> <C> <C>
Pre-tax book income (thousands) . . . . $ 1,233,010 $ 701,648 $ 137,453
Effective income tax rate . . . . . . . 40.2% 39.6% 25.3%
</TABLE>
The principal differences between net income taxes charged to continuing
operations and the amounts computed at the federal statutory rate of 35% for the
years 1995, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Federal income taxes computed at statutory rate. . . . . . . . . . . . . . . . . . . . .$ 431,554 $ 245,577 $ 48,109
Equity component of AFUDC which was excluded from taxable income . . . . . . . . . . . . (4,595) (7,920) (7,216)
Amortization of investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . . (28,710) (28,810) (29,421)
State income taxes, net of federal income taxes. . . . . . . . . . . . . . . . . . . . . 65,972 40,140 13,138
Differences between book and tax accounting, primarily property-related deductions . . . 27,534 26,505 2,063
Other--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,079 2,210 8,078
--------- --------- ---------
Net income taxes charged to continuing operations. . . . . . . . . . . . . . . . . . . .$ 495,834 $ 277,702 $ 34,751
--------- --------- ---------
--------- --------- ---------
</TABLE>
Current federal income tax liabilities which were recorded prior to 1995
included 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 were carried forward and a portion was applied as a credit
against the 1995 regular federal income tax liability. The excess amounts of AMT
can be carried forward indefinitely as a credit against future years' regular
federal income tax liabilities.
A-37
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(17) TAXES, EXCEPT INCOME TAXES
Provisions for taxes, except income taxes, for the years 1995, 1994 and
1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Illinois public utility revenue. . . . . $ 229,546 $ 211,263 $ 199,498
Illinois invested capital. . . . . . . . 106,830 109,373 111,126
Municipal utility gross receipts . . . . 167,758 145,011 107,232
Real estate. . . . . . . . . . . . . . . 175,747 180,221 162,560
Municipal compensation . . . . . . . . . 78,602 72,647 56,878
Other--net . . . . . . . . . . . . . . . 73,543 69,281 64,619
--------- --------- ---------
$ 832,026 $ 787,796 $ 701,913
--------- --------- ---------
--------- --------- ---------
</TABLE>
(18) LEASE OBLIGATIONS
Under its nuclear fuel lease 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. With respect to
the commercial paper/bank borrowing portion, $20 million will expire on November
23, 1996, $10 million will expire on November 23, 1997 and $270 million will
expire on November 23, 1998. ComEd has asked for an extension of the expiration
dates. At December 31, 1995, ComEd's obligation to the lessor for leased nuclear
fuel amounted to approximately $577 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 December 31,
1995 for capital leases are estimated to aggregate $647 million, including $231
million in 1996, $171 million in 1997, $112 million in 1998, $67 million in
1999, $37 million in 2000 and $29 million in 2001-2004. The estimated interest
component of such rental payments aggregates $72 million. The estimated portions
of obligations due within one year under capital leases are included in current
liabilities and approximated $168 million and $147 million at December 31, 1995
and 1994, respectively.
Future minimum rental payments at December 31, 1995 for operating leases
are estimated to aggregate $141 million, including $9 million in 1996, $9
million in 1997, $9 million in 1998, $9 million in 1999, $8 million in 2000 and
$97 million in 2001-2024.
(19) 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 1994 net income by $34 million or $0.16 per
common share.
(20) 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 December 31, 1995, for its share of ownership in
the station, ComEd had an investment of $558 million in production and
transmission
A-38
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
plant in service (before reduction of $185 million for the related accumulated
provision for depreciation) and $75 million in construction work in progress.
(21) COMMITMENTS AND CONTINGENT LIABILITIES
Purchase commitments, principally related to construction and nuclear fuel,
approximated $1,137 million at December 31, 1995. In addition, ComEd has
substantial commitments for the purchase of coal. 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 provide for the purchase of
certain coal at prices substantially above currently prevailing market prices.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations," subcaption "Liquidity and Capital Resources," for additional
information regarding ComEd's 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 $27 million and $108 million
in the event losses exceed accumulated reserve funds under the replacement power
and property damage coverages, respectively.
Under certain circumstances, member companies are eligible to continue to
receive distributions from accumulated reserve funds, if declared by NML or
NEIL, after insurance coverage has terminated on a nuclear generating station.
ComEd expects that any such post-coverage distributions would begin about the
time a station is decommissioned and continue for an undetermined period.
ComEd's twelve operating nuclear units have estimated remaining service lives
ranging from 10 to 32 years. Considering the circumstances related to the
declaration of such distributions and the extended period over which such
distributions may be declared, ComEd does not expect that any such distributions
would have a material impact on its financial position or results of operations.
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.
A-39
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
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 $36 million in the event losses exceed
accumulated reserve funds.
Shareholder derivative lawsuits were filed in 1992 and 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 and
that dismissal was affirmed by the Illinois Appellate Court. One of the
plaintiffs has filed a petition for leave to appeal in the Illinois Supreme
Court.
During 1989 and 1991, actions were brought in federal and state courts in
Colorado against ComEd and 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, ComEd'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 (1996) 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 was recorded as of December 31, 1995 and
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, 1995
and 1994, a reserve of $8 million was recorded representing ComEd's estimate of
the liability associated with cleanup costs of remediation sites other than
former MGP sites. ComEd presently estimates that its 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 its financial
position or results of operations. 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.
A-40
<PAGE>
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(22) QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NET AVERAGE EARNINGS
INCOME NUMBER OF (LOSS)
ELECTRIC ELECTRIC NET (LOSS) ON COMMON PER
OPERATING OPERATING INCOME COMMON SHARES COMMON
THREE MONTHS ENDED REVENUES INCOME (LOSS) STOCK OUTSTANDING SHARE
- ------------------ ----------- --------- --------- --------- ----------- -------
(THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
March 31, 1994 . . . . . . . $ 1,524,750 $ 213,458 $ 51,565 $ 36,020 213,780 $ 0.17
June 30, 1994. . . . . . . . $ 1,432,166 $ 185,297 $ (7,856) $ (23,339) 213,923 $ (0.11)
September 30, 1994 . . . . . $ 1,855,532 $ 442,288 $ 283,608 $ 266,642 214,138 $ 1.25
December 31, 1994. . . . . . $ 1,465,073 $ 247,539 $ 96,629 $ 79,696 214,190 $ 0.37
. . . . . . . . . . . . . .
March 31, 1995 . . . . . . . $ 1,578,136 $ 262,149 $ 107,046 $ 90,138 214,191 $ 0.42
June 30, 1995. . . . . . . . $ 1,559,535 $ 278,230 $ 127,377 $ 110,512 214,192 $ 0.52
September 30, 1995 . . . . . $ 2,190,879 $ 583,819 $ 426,351 $ 409,677 214,193 $ 1.91
December 31, 1995. . . . . . $ 1,581,236 $ 221,266 $ 56,380 $ 36,866 214,195 $ 0.17
</TABLE>
A-41
<PAGE>
SUBSEQUENT EVENTS
NUCLEAR PROGRAM. On March 14, 1996, the Board of Directors of Commonwealth
Edison Company ("ComEd") authorized a program of additional expenditures for its
nuclear operations. Among other things, the Board authorized an acceleration of
the planned replacement of steam generators at ComEd's Byron 1 and Braidwood 1
nuclear units. The planned schedule acceleration is not currently expected to
change the estimated $470 million total cost of the steam generator
replacements, although it will shift certain expenditures scheduled for beyond
1998 into earlier years.
The program consists of various operating, maintenance and capital
expenditure items, and overall includes and $89 million increase in ComEd's
three-year construction budget. Nuclear operating and maintenance expenses are
anticipated to be approximately $70 million higher than budgeted, or $50 million
higher in 1996 than in 1995. The program further contemplates that ComEd's
nuclear operation and maintenance expenditures will be at a similarly increased
level for 1997.
The Board determined that it would be prudent to accelerate certain capital
projects previously scheduled for later years and to implement an intensive
program to make various maintenance and operating improvements in a shorter
period of time than was originally planned. Though safety was not and is not an
issue, management reported that an accelerated expenditure program was
desirable. While a portion of the capital budget increase represents work that
was previously unbudgeted, a majority is work that was originally scheduled to
be performed in later years. The Board's decisions were based upon a
consideration of ComEd's improved financial position and resources as a result
of its increased sales and profits during 1995 due to the unusually warm weather
experienced in Northern Illinois during the summer of 1995, the effects of its
most recently granted rate increase (which became effective in January 1995) and
cost control initiatives undertaken by management. The Board believes that the
increased expenditures which it has authorized can be undertaken without
materially affecting ComEd's objective of reducing its long-term debt.
The foregoing paragraphs include forward-looking statements with respect to
the future levels of capital and operation and maintenance expenditure which are
necessarily based upon assumptions regarding estimated costs and availability of
materials and services as well as contingencies. Unforeseen events or conditions
may require changes in the scope of work with consequent changes in the timing
and level of the projected expenditures. In addition, changes in laws and
regulations, or their interpretation and enforcement, can affect the scope of
certain projects, the manner in which they are undertaken and the costs
associated therewith. While ComEd gives consideration to such factors in
developing its budgets, such consideration cannot predict the course of future
events or anticipate the interaction of multiple factors beyond management's
control upon project timing and cost. Consequently, actual results could differ
materially from those described. For additional information regarding ComEd's
results of operations, its operation and maintenance expenses, its cost
reduction efforts and its capital expenditure program, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
this Appendix A.
LABOR AGREEMENT. On February 20, 1996, ComEd announced that it had reached
agreement with Local 15 of the International Brotherhood of Electrical Workers
("IBEW") with respect to the terms of a new collective bargaining agreement. The
IBEW is ComEd's principal union and represents approximately half of ComEd's
employees. Subject to ratification by the union membership, the new agreement
provides, among other things, for a term expiring on September 30, 1997, a
retroactive wage increase to April 1, 1995 (substantially all of which had been
accrued on the Company's books as of December 31, 1995), a further wage increase
of approximately 2.7% effective on April 1, 1996 and an incentive pay
arrangement dependent upon the achievement of certain corporate and individual
goals. The agreement reflects the previously implemented voluntary separation
offer that was made for employees who accepted and left
A-42
<PAGE>
ComEd's employ by year-end 1995. For additional information regarding the
effects of the previously implemented voluntary separation offer, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," subcaption "Liquidity and Capital Resources," in this Appendix A.
OTHER INFORMATION. See Unicom Corporation's and ComEd's Annual Reports on
Form 10-K for the year ended December 31, 1995, for additional information
regarding events affecting their businesses since the preparation of the
financial statements contained in this Appendix.
A-43
