<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
--------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- -----------
Commission file number 1-1405
Delmarva Power & Light Company
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware and Virginia 51-0084283
--------------------------- ---------------------
(States of incorporation) (I.R.S. Employer
Identification No.)
800 King Street, P.O. Box 231, Wilmington, Delaware 19899
--------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 302-429-3359
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1996
----------------------------- ----------------------------
Common Stock, $2.25 par value 60,697,635 Shares
<PAGE>
DELMARVA POWER & LIGHT COMPANY
------------------------------
Table of Contents
-----------------
Page No.
--------
Part I. Financial Information:
Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995................................... 2-3
Consolidated Statements of Income for the three and
six months ended June 30, 1996 and 1995................. 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995..................... 5
Notes to Consolidated Financial Statements.............. 6-11
Selected Financial and Operating Data................... 12
Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 13-19
Part II. Other Information and Signature........................... 20-26
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
DELMARVA POWER & LIGHT COMPANY
------------------------------
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
-----------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ----------
ASSETS
------
<S> <C> <C>
UTILITY PLANT, AT ORIGINAL COST:
Electric...................................... $2,985,098 $2,942,969
Gas........................................... 215,200 208,245
Common........................................ 131,234 130,949
---------- ----------
3,331,532 3,282,163
Less: Accumulated depreciation............... 1,240,034 1,189,269
---------- ----------
Net utility plant in service.................. 2,091,498 2,092,894
Construction work-in-progress................. 110,156 105,588
Leased nuclear fuel, at amortized cost........ 30,217 31,661
---------- ----------
2,231,871 2,230,143
---------- ----------
INVESTMENTS AND NONUTILITY PROPERTY:
Investment in leveraged leases................ 47,294 48,367
Funds held by trustee......................... 34,443 36,275
Other investments and nonutility property, net 54,185 54,781
---------- ----------
135,922 139,423
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents..................... 38,129 28,951
Accounts receivable:
Customers................................. 112,854 116,606
Other..................................... 23,236 14,630
Deferred energy costs......................... 15,188 --
Inventories, at average cost:
Fuel (coal, oil, and gas)................. 27,923 30,076
Materials and supplies.................... 35,973 36,823
Prepayments................................... 4,970 12,969
Deferred income taxes, net.................... -- 5,400
---------- ----------
258,273 245,455
---------- ----------
DEFERRED CHARGES AND OTHER ASSETS:
Prepaid pension cost.......................... 24,199 16,899
Unamortized debt expense...................... 11,892 12,256
Deferred debt refinancing costs............... 22,669 23,972
Deferred recoverable income taxes............. 144,406 151,250
Other......................................... 53,160 47,287
---------- ----------
256,326 251,664
---------- ----------
TOTAL ASSETS $2,882,392 $2,866,685
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-2-
<PAGE>
DELMARVA POWER & LIGHT COMPANY
------------------------------
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
-----------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ----------
CAPITALIZATION AND LIABILITIES
------------------------------
<S> <C> <C>
CAPITALIZATION:
Common stock, $2.25 par value; 90,000,000
shares authorized; shares issued: 1996--
60,763,085, 1995--60,760,685.............. $136,717 $136,713
Additional paid-in capital.................... 506,509 506,328
Retained earnings............................. 287,824 281,862
---------- ----------
931,050 924,903
Treasury shares, at cost: 1996--65,450,
1995--1,320............................... (1,397) (30)
Unearned compensation......................... (1,011) (1,433)
---------- ----------
Total common stockholders' equity......... 928,642 923,440
Preferred stock............................... 168,085 168,085
Long-term debt................................ 853,269 853,904
---------- ----------
1,949,996 1,945,429
---------- ----------
CURRENT LIABILITIES:
Short-term debt............................... 93,843 63,154
Long-term debt due within one year............ 1,522 1,485
Variable rate demand bonds.................... 86,500 86,500
Accounts payable.............................. 59,783 64,056
Taxes accrued................................. -- 4,802
Interest accrued.............................. 16,643 16,355
Dividends declared............................ 23,314 23,426
Current capital lease obligation.............. 12,583 12,604
Deferred energy costs......................... -- 222
Deferred income taxes, net.................... 3,303 --
Other......................................... 27,357 33,595
---------- ----------
324,848 306,199
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes, net.................... 514,773 519,597
Deferred investment tax credits............... 43,781 45,061
Long-term capital lease obligation............ 19,234 20,768
Other......................................... 29,760 29,631
---------- ----------
607,548 615,057
---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $2,882,392 $2,866,685
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-3-
<PAGE>
DELMARVA POWER & LIGHT COMPANY
------------------------------
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
(Unaudited)
-----------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric.............................................. $227,972 $192,359 $474,911 $407,768
Gas................................................... 22,621 20,869 68,312 63,060
-------- -------- -------- --------
250,593 213,228 543,223 470,828
-------- -------- -------- --------
OPERATING EXPENSES
Electric fuel and purchased energy.................... 72,106 56,807 153,825 130,688
Gas purchased......................................... 12,821 12,679 36,564 35,766
Purchased electric capacity........................... 7,432 2,027 16,953 2,737
Operation and maintenance............................. 64,083 59,065 127,732 111,993
Depreciation.......................................... 30,941 27,358 60,574 54,241
Taxes other than income taxes......................... 10,037 8,832 21,126 18,899
Income taxes.......................................... 14,650 12,282 37,366 34,074
-------- -------- -------- --------
212,070 179,050 454,140 388,398
-------- -------- -------- --------
OPERATING INCOME....................................... 38,523 34,178 89,083 82,430
-------- -------- -------- --------
OTHER INCOME
Nonutility Subsidiaries
Revenues and gains................................... 14,806 13,025 28,113 25,456
Expenses including interest and income taxes......... (14,208) (12,435) (25,462) (22,967)
-------- -------- -------- --------
Net earnings of nonutility subsidiaries.......... 598 590 2,651 2,489
Allowance for equity funds used during
construction........................................ 256 187 481 371
Other income, net of income taxes..................... (227) 262 (309) 648
-------- -------- -------- --------
627 1,039 2,823 3,508
-------- -------- -------- --------
INCOME BEFORE UTILITY INTEREST CHARGES................. 39,150 35,217 91,906 85,938
-------- -------- -------- --------
UTILITY INTEREST CHARGES
Interest expense...................................... 17,513 16,318 35,732 32,172
Allowance for borrowed funds used during
construction........................................ (688) (545) (1,294) (1,086)
-------- -------- -------- --------
16,825 15,773 34,438 31,086
-------- -------- -------- --------
NET INCOME............................................. 22,325 19,444 57,468 54,852
DIVIDENDS ON PREFERRED STOCK........................... 2,423 2,482 4,863 5,001
-------- -------- -------- --------
EARNINGS APPLICABLE TO COMMON STOCK.................... $19,902 $16,962 $52,605 $49,851
======== ======== ======== ========
COMMON STOCK
Average shares outstanding (000)...................... 60,703 60,109 60,731 59,923
Earnings per average share............................ $0.33 $0.28 $0.87 $0.83
Dividends declared per share.......................... $0.38 1/2 $0.38 1/2 $0.77 $0.77
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-4-
<PAGE>
DELMARVA POWER & LIGHT COMPANY
------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
-----------
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $57,468 $54,852
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization......................... 63,467 59,256
Allowance for equity funds used during construction... (481) (371)
Investment tax credit adjustments, net................ (1,280) (1,317)
Deferred income taxes, net............................ 10,724 (3,170)
Net change in :
Accounts receivable................................. (4,854) 11,873
Inventories......................................... 3,003 12,659
Accounts payable.................................... (4,273) (12,694)
Other current assets & liabilities*................. (20,252) 19,350
Other, net............................................ (4,512) (2,330)
-------- --------
Net cash provided by operating activities..................... 99,010 138,108
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures, excluding allowance for funds
used during construction................................ (61,191) (55,433)
Allowance for borrowed funds used during construction..... (1,294) (1,086)
Acquisition of COPCO, net of cash acquired................ -- (148,837)
Investment in subsidiary projects and operations.......... (1,656) (1,025)
Decrease in bond proceeds held in trust funds............. 5,118 4,971
Deposits to nuclear decommissioning trust funds........... (2,119) (1,493)
Other, net................................................ (3,134) 1,618
-------- --------
Net cash used by investing activities......................... (64,276) (201,285)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends: Common........................................ (46,669) (45,870)
Preferred..................................... (4,950) (4,800)
Issuance of common stock.................................. 50 12,624
Purchase of common stock.................................. (1,055) (1,253)
Issuance of long-term debt................................ -- 125,800
Retirement of long-term debt.............................. (621) (566)
Principal portion of capital lease payments............... (2,893) (5,015)
Net change in term loan................................... -- (20,226)
Net change in short-term debt ............................ 30,689 12,201
Cost of issuances......................................... (107) (1,148)
-------- --------
Net cash provided/(used) by financing activities.............. (25,556) 71,747
-------- --------
Net change in cash and cash equivalents....................... 9,178 8,570
Cash and cash equivalents at beginning of period.............. 28,951 25,029
-------- --------
Cash and cash equivalents at end of period.................... $38,129 $33,599
======== ========
</TABLE>
*Other than debt classified as current and current deferred income taxes.
See accompanying Notes to Consolidated Financial Statements.
-5-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. INTERIM FINANCIAL STATEMENTS
----------------------------
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. The statements reflect all adjustments
necessary in the opinion of the Company for a fair presentation of interim
results. They should be read in conjunction with the Company's 1995 Annual
Report to Stockholders, the Company's Report on Form 10-Q for the first
quarter of 1996, and Part II of this Report on Form 10-Q for additional
relevant information.
2. PURCHASE OF CONOWINGO POWER COMPANY
-----------------------------------
As previously disclosed in Note 4 to the Consolidated Financial Statements
of the Company's 1995 Annual Report to Stockholders, on June 19, 1995, the
Company acquired Conowingo Power Company (COPCO), which was merged into the
Company and now is being operated as the Conowingo District. Operating
results of the Conowingo District after June 19, 1995, are included in the
Company's Consolidated Statements of Income.
3. PENDING MERGER WITH ATLANTIC ENERGY, INC.
-----------------------------------------
As previously reported in detail in the Company's Report on Form 8-K dated
August 9, 1996, and filed August 14, 1996, the Company, Atlantic Energy,
Inc., a New Jersey corporation headquartered in Egg Harbor Township, New
Jersey (AE), DS, Inc., a Delaware corporation which has been newly formed
to accomplish this transaction (Newco), and DS Sub, Inc., a newly-formed
Delaware corporation, and a wholly-owned subsidiary of Newco (Sub), have
entered into an Agreement and Plan of Merger, dated as of August 9, 1996
(the Merger Agreement), which provides for a business combination of the
Company and AE as peer firms in a merger of equals (the Transaction). The
outstanding stock of Newco is owned 50% by the Company and 50% by AE.
As a result of the Transaction, Newco will become the holding company of
the combined enterprise and will be registered under the Public Utility
Holding Company Act of 1935, as amended. The name of Newco will be
changed as agreed upon by the Boards of Directors of the Company and AE.
Newco will be the parent company of both the Company and Atlantic City
Electric Company, which currently is AE's regulated utility subsidiary.
The Transaction, which was approved unanimously by the Boards of Directors
of the Company and AE on August 9, 1996, is expected to close shortly
after all of the conditions to the consummation of the Transaction,
including obtaining applicable regulatory approvals, are met or waived.
The regulatory approval process is expected to take approximately 12 to
18 months.
-6-
<PAGE>
4. SALEM NUCLEAR GENERATING STATION
--------------------------------
The Company owns 7.41% of Salem Nuclear Generating Station (Salem), which
consists of two pressurized water nuclear reactors (PWR) and is operated by
Public Service Electric & Gas Company (PSE&G). As of June 30, 1996, the
Company's net investment in plant in service for Salem was approximately
$56 million for Unit 1 and $60 million for Unit 2, including common plant
allocated between the two units. Each unit represents approximately 2% of
the Company's total assets and approximately 3% of the Company's installed
electric generating capacity.
Salem Units 1 and 2 were removed from operation by PSE&G on May 16, 1995,
and June 7, 1995, respectively, due to operational problems and maintenance
concerns. Their return dates are subject to completion of the requirements
of their respective restart plans to the satisfaction of PSE&G and the
Nuclear Regulatory Commission (NRC), which encompasses a substantial review
and improvement of personnel, process, and equipment issues.
With respect to Unit 1, PSE&G informed the Company in early 1996 that
inspections of the steam generators using a new testing technology
indicated degradation in a significant number of tubes. After evaluating
several options, in May 1996 the Salem co-owners signed an agreement to
purchase the steam generators from the owner of the unfinished Seabrook
Unit 2 nuclear power plant in New Hampshire for installation in Salem Unit
1. By using these steam generators, PSE&G expects to return Unit 1 to
service in mid-1997. The Company's share of the cost of the steam
generators, including installation, will range from approximately $11
million to $13 million and will be capitalized.
With respect to Unit 2, PSE&G also informed the Company in early 1996 that
inspections of the steam generators using the new testing technology
confirmed that the condition of the generators is within current repair
limits. On July 22, 1996, PSE&G announced that although substantial
progress has been made in upgrading Unit 2's 46 major systems, some of
the originally scheduled work, along with additional work that had since
been identified, remained to be completed and that the outage at Unit 2
would continue well into the fourth quarter of 1996. PSE&G believes that
the change to the Unit 2 schedule is not expected to impact the restart of
Unit 1.
In 1995, the Company incurred higher than expected operation and
maintenance costs at Salem of approximately $5 million, which were expensed
as incurred. Based on PSE&G's current estimates, the Company estimates
that its share of additional operation and maintenance costs associated
with the outage in 1996 will range from $7 million to $10 million.
-7-
<PAGE>
The Company incurs replacement power costs while the units are out of
service of approximately $750,000 per month, per unit. Such amounts vary,
however, depending on the cost and availability of other Company-owned
generation and the cost of purchased energy. Replacement power costs
typically are not incurred for routine refueling and maintenance outages,
and the recovery of replacement power costs is subject to approval by the
regulatory commissions having jurisdiction over the Company. From the
inception of the Salem unit outages through June 30, 1996, approximately
one-half of the current estimated replacement power costs of $14 million
has been expensed and the remaining portion has been deferred on the
Company's Consolidated Balance Sheet in expectation of future recovery.
Beginning in mid-June 1996, the Company considers Unit 1 to be in a
separate outage for replacement of its steam generators, which is a generic
issue affecting many nuclear power plants. Based on the regulatory
treatment of generic nuclear plant issues by the commissions having
jurisdiction over the Company and the regulatory treatment of the
replacement of steam generators at other nuclear plants by other
commissions, the Company does not consider Unit 1 to be incurring
replacement power costs after mid-June 1996.
The actual costs to be incurred by the Company may vary from the foregoing
estimates, since the periods during which the Salem units will be out of
service, the extent of the maintenance that will be required, and the costs
of replacement power and the extent of its recovery may be different from
those currently anticipated.
In May 1996, the Company filed an application with the Virginia State
Corporation Commission (VSCC) for increased fuel rates effective July 1996.
In June 1996, the Company filed an application with the Maryland Public
Service Commission (MPSC) for increased fuel rates effective August 1996.
In both filings, the Company proposed that one-half of the replacement
power costs associated with the Salem outage be permitted on an interim
basis until a full review of the outage is made at a future time. The VSCC
and MPSC approved the Company's filings, with rates subject to refund.
During the third quarter of 1996, the Company plans to file a proposal with
the Delaware Public Service Commission (DPSC) to address the recovery of
replacement power costs.
-8-
<PAGE>
On February 27, 1996, the co-owners of Salem, including the Company, filed
a complaint in the United States District Court for the District of New
Jersey against Westinghouse Electric Corporation (Westinghouse), the
designer and manufacturer of the Salem steam generators. The complaint,
which seeks to recover from Westinghouse the costs associated with and
resulting from the cracks discovered in Salem's steam generators and with
replacing such steam generators, alleges violations of federal and New
Jersey Racketeer Influenced and Corrupt Organizations Acts, fraud,
negligent misrepresentation, and breach of contract. The Salem co-owners
contend that the recently-discovered degradation of the steam generators
will prevent the steam generators from operating for a design life of 40
years. The lawsuit asserts that the Salem steam generators ultimately will
require replacement and these costs should be borne by Westinghouse and not
the customers and shareholders of the Salem co-owners. Westinghouse filed
an answer and a $2.5 million counterclaim for unpaid work on April 30,
1996. On June 17, 1996, the Court ordered the parties to mediate their
claims rather than proceeding to litigation, taking the position that
Westinghouse's involvement in steam generator lawsuits throughout the
country, involving substantially similar issues as are involved in the
Salem litigation, should enable the parties to resolve their dispute
efficiently in mediation. This mediation would be non-binding on the
parties and its purpose would be to enable the mediator to evaluate the
parties' respective positions and to facilitate the parties' settlement
discussions. If mediation fails to result in settlement, the parties will
proceed to litigation. The Company cannot predict the outcome of this
lawsuit.
On March 5, 1996, the Company and PECO Energy Company (PECO) filed a
complaint in the United States District Court for the Eastern District of
Pennsylvania against Public Service Enterprise Group, Inc. (Enterprise) and
PSE&G. The lawsuit alleges that the defendants failed to heed numerous
citations, warnings, notices of violations, and fines by the NRC as well as
repeated warnings from the Institute of Nuclear Power Operations about
performance, safety, and management problems at Salem and to take
appropriate corrective action. The suit contends that as a result of these
actions and omissions, the Salem units were forced to shut down in 1995.
The suit asks for compensatory damages for breach of contract, negligence,
and punitive damages, in amounts to be specified. The Company cannot
predict the outcome of this lawsuit. A similar complaint has been filed
against Enterprise and PSE&G in the Superior Court of New Jersey by the
remaining co-owner, Atlantic City Electric Company.
5. CONTINGENCIES
-------------
Nuclear Insurance
- -----------------
In the event of an incident at any commercial nuclear power plant in the
United States, the Company could be assessed for a portion of any third-
party claims associated with the incident. Under the provisions of the
Price Anderson Act, if third-party claims relating to such an incident
exceed $200 million (the amount of primary insurance), the Company could
be assessed up to $23.7 million for third-party claims. In addition,
Congress could impose a revenue-raising measure on the nuclear power
industry to pay such claims.
-9-
<PAGE>
The co-owners of the Peach Bottom Atomic Power Station (Peach Bottom) and
Salem maintain property insurance coverage in the aggregate amount of
$2.8 billion for each unit for loss or damage to the units, including
coverage for decontamination expense and premature decommissioning. The
Company is self-insured, to the extent of its ownership interest, for its
share of property losses in excess of insurance coverage. Under the
terms of the various insurance agreements, the Company could be assessed
up to $5.4 million in any policy year for losses incurred at nuclear
plants insured by the insurance companies.
The Company is a member of an industry mutual insurance company, which
provides replacement power cost coverage in the event of a major
accidental outage at a nuclear power plant. The premium for this
coverage is subject to retrospective assessment for adverse loss
experience. The Company's present maximum share of any assessment is
$1.4 million per year.
The property damage and replacement power policies discussed above do not
cover the operational problems and maintenance concerns, including the
steam generator degradation, which caused PSE&G to remove Salem Units 1
and 2 from operation and to keep the units shut down.
Environmental Matters
- ---------------------
As previously disclosed under "Hazardous Substances" on page I-19 of the
Company's 1995 Annual Report on Form 10-K, the disposal of
Company-generated hazardous substances can result in costs to clean up
facilities found to be contaminated due to past disposal practices. The
Company is currently a potentially responsible party at three federal
superfund sites and is alleged to be a third-party contributor at three
other federal superfund sites. The Company also has two former coal
gasification sites in Delaware and one former coal gasification site in
Maryland which are state superfund sites. The Company is currently
participating with the States of Delaware and Maryland in evaluating
these sites to assess the extent of contamination and risk to the
environment. As of June 30, 1996, the Company had accrued a liability of
$2 million representing its estimate of site study and cleanup costs for
all of its federal and state superfund sites.
Power Outage
- ------------
Refer to Part II, Item 1, "Power Outage," of this Form 10-Q for a
discussion of a May 14, 1996, power outage.
Other
- -----
The Company is involved in certain other legal and administrative
proceedings before various courts and governmental agencies concerning
rates, fuel contracts, tax filings, and other matters. The Company
expects that the ultimate disposition of these proceedings will not have
a material effect on the Company's financial position or results of
operations.
-10-
<PAGE>
6. SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
(Dollars in Thousands) 1996 1995
-------- --------
<S> <C> <C>
Cash paid for
Interest, net of amounts
capitalized $32,923 $29,363
Income taxes, net of refunds $33,181 $41,472
</TABLE>
7. NONUTILITY SUBSIDIARIES
-----------------------
The following presents condensed financial information of the Company's
nonregulated wholly-owned subsidiaries: Delmarva Capital Investments, Inc.;
Delmarva Energy Company; and Delmarva Industries, Inc. A subsidiary that
leases real estate to the Company's utility business, Delmarva Services
Company, is excluded from these statements since its income is derived from
intercompany transactions which are eliminated in consolidation.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
(Dollars in Thousands) 1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues and gains
Landfill and waste hauling $4,520 $3,593 $7,733 $6,775
Operating services 5,511 7,414 10,225 13,179
Real estate 4,258 245 6,074 471
Leveraged leases 167 1,422 317 1,516
Other revenue 350 351 3,764 3,515
------- ------- ------- -------
14,806 13,025 28,113 25,456
------- ------- ------- -------
Cost and expenses
Operating expenses 13,679 12,012 23,754 21,423
Interest expense, net 281 71 450 145
Income taxes 248 352 1,258 1,399
------- ------- ------- -------
14,208 12,435 25,462 22,967
------- ------- ------- -------
Net income $ 598 $ 590 $ 2,651 $ 2,489
======= ======= ======= =======
Earnings per share of common
stock attributed to subsidiaries $0.01 $0.01 $0.04 $0.04
</TABLE>
-11-
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
-------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
3 Months Ended 6 Months Ended
June 30 June 30
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ELECTRIC REVENUES
- -----------------
Residential $79,893 $65,320 $189,196 $149,911
Commercial 66,854 59,947 135,327 118,748
Industrial 38,104 36,847 76,427 72,911
Resale 14,474 10,572 33,737 26,670
Other Sales Revenues (1) 7,787 5,767 2,045 3,942
---------- ---------- ---------- ----------
Sales Revenues 207,112 178,453 436,732 372,182
Interchange Deliveries 17,540 10,929 31,335 29,802
Miscellaneous Revenues 3,320 2,977 6,844 5,784
---------- ---------- ---------- ----------
Total Electric Revenues $227,972 $192,359 $474,911 $407,768
========== ========== ========== ==========
ELECTRIC SALES
(1000 kWh)
- --------------
Residential 878,581 710,698 2,238,408 1,750,702
Commercial 930,745 832,249 1,938,606 1,709,908
Industrial 810,128 801,694 1,624,391 1,602,739
Resale 263,583 215,755 665,762 535,997
Other sales (2) 50,679 30,272 (49,527) (16,915)
---------- ---------- ---------- ----------
Total Electric Sales 2,933,716 2,590,668 6,417,640 5,582,431
========== ========== ========== ==========
GAS REVENUES
- ------------
Firm Sales (1) $20,172 $18,121 $65,396 $58,761
Non-firm Sales, Gas Transportation,
and Miscellaneous Revenues 2,449 2,748 2,916 4,299
---------- ---------- ---------- ----------
Total Gas Revenues $22,621 $20,869 $68,312 $63,060
========== ========== ========== ==========
GAS SALES AND GAS TRANSPORTED
(1000 mcf)
- -----------------------------
Firm Sales (2) 2,909 2,820 10,886 9,725
Non-firm Sales and Gas Transported 1,532 1,370 2,161 2,403
---------- ---------- ---------- ----------
Total 4,441 4,190 13,047 12,128
========== ========== ========== ==========
<CAPTION>
June 30, 1996 December 31, 1995
------------------------- -------------------------
$ % $ %
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CAPITALIZATION
- --------------
Variable Rate Demand Bonds (3) $86,500 4.2 $86,500 4.3
Long-Term Debt 853,269 41.9 853,904 42.0
Preferred Stock 168,085 8.3 168,085 8.3
Common Stockholders' Equity 928,642 45.6 923,440 45.4
---------- ---------- ---------- ----------
Total $2,036,496 100.0 $2,031,929 100.0
========== ========== ========== ==========
</TABLE>
(1) Includes unbilled revenues.
(2) Includes unbilled sales.
(3) The Company intends to use the bonds as a source of long-term financing
as discussed in Note 12 to the Consolidated Financial Statements of the
1995 Annual Report.
-12-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
EARNINGS SUMMARY
- ----------------
The earnings per average share of common stock attributed to the core
utility business and nonutility subsidiaries are shown below.
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
---------------- ------------------
6/30/96 6/30/95 6/30/96 6/30/95
------- ------- ------- -------
<S> <C> <C> <C> <C>
Core Utility $0.32 $0.27 $0.83 $0.79
Nonutility Subsidiaries 0.01 0.01 0.04 0.04
------- ------- ------- -------
$0.33 $0.28 $0.87 $0.83
======= ======= ======= =======
</TABLE>
Earnings per share increased by $0.05 and $0.04 for the three- and six-
month periods ended June 30, 1996, respectively, compared to the same
periods last year. The increases in both periods reflected higher revenues
due to the effect of favorable weather offset to a great extent by higher
expenses associated with the outage at Salem. The higher Salem expenses
reduced earnings for the three- and six-month periods by $0.03 and $0.12,
respectively. Refer to Note 4 to the Consolidated Financial Statements for
additional information concerning the Salem outage.
Operating results from the Conowingo District, which began in June 1995,
had a minimal impact on earnings, as expected.
STRATEGIC PLANS FOR COMPETITION
- -------------------------------
Wholesale (Resale) Business
- ---------------------------
In March 1996, Old Dominion Electric Cooperative (ODEC), the Company's
largest resale customer, issued a request for proposals that could
eventually replace ODEC's capacity and energy agreements with its current
suppliers, including a partial requirements agreement with the Company. On
July 1, 1996, the Company submitted its proposal to ODEC to provide all of
the load currently supplied by the Company. ODEC is expected to make a
decision in this matter in the fourth quarter of this year.
The Company has extended termination notice provisions with ODEC which
provide the Company with the opportunity to manage the financial impact of
any reduction in ODEC's load. The extended notice provisions require ODEC
to provide the Company with two years' notice for up to a 30% load
reduction and five years' notice for load reductions greater than 30%. To
date, ODEC has not given notice of its intent to terminate any portion of
service provided by the Company. Should any portion of the Company's
service to ODEC be reduced under the notice provisions, the Company's
revenues would not be impacted until late 1998 or 1999.
-13-
<PAGE>
In 1995, total revenues from ODEC represented 3.8% of the Company's total
sales revenues, and non-fuel (base rate) revenues from ODEC were
approximately $24 million. Should any portion of the Company's service to
ODEC be reduced, the decrease in non-fuel revenues would be partially
offset by transmission wheeling revenues and the avoidance of costs
associated with short-term capacity purchases which are expected to be made
in the future to supply a portion of ODEC's load.
Retail Business
- ---------------
In March and April 1996, the MPSC and DPSC, respectively, accepted the
Company's proposal to establish a forum to address changes in the
regulation of the electric utility industry. The Company's objective is to
work together with the Commissions and other interested parties in order to
develop a blueprint to move toward increased customer choice; i.e., the
ability of all retail customers to gain direct access to market-priced
electricity from the suppliers of their choice. The forum process will
address issues such as retail wheeling, stranded investment, rate redesign,
and alternative forms of regulation, such as performance-based regulation.
Forum participants are to submit reports to the DPSC and MPSC by December
31, 1996, describing the significant issues raised by allowing customer
choice and providing proposed solutions to those issues.
In June 1996, the Company sponsored a conference in which utility experts
addressed restructuring issues from a variety of perspectives. The
conference was attended by participants of both the Delaware and Maryland
forums. Meetings with forum participants in Delaware and Maryland are
ongoing.
ELECTRIC REVENUES AND SALES
- ---------------------------
Details of the changes in the various components of electric revenues are
shown below:
<TABLE>
<CAPTION>
Increase in Electric Revenues
From Comparable Period in Prior Year
--------------------------------------
(Dollars in Millions)
Three Six
Months Months
------ ------
<S> <C> <C>
Non-fuel (Base Rate) Revenues
Retail Sales Volume $19.2 $45.7
Resale Sales Volume 2.1 2.8
Fuel Revenues 7.4 16.0
Interchange Delivery Revenues 6.6 1.5
Other Operating Revenues 0.3 1.1
------ ------
Total $35.6 $67.1
====== ======
</TABLE>
-14-
<PAGE>
Non-fuel revenues from retail sales volume increased $19.2 million for the
three-month period and $45.7 million for the six-month period due to
increases in retail kilowatt-hour (kWh) sales of 12.4% and 14.0%,
respectively, which resulted largely from Conowingo District sales
beginning June 19, 1995. Excluding the Conowingo District, retail sales
increased 5.2% and 6.0% for the three- and six-month periods, respectively,
mainly due to the effect of favorable weather. Customer growth also
contributed to increased retail sales as the economy in the Company's
service territory remained strong. For the three-month period, excluding
the Conowingo District, billed sales to residential and commercial
customers increased 12.2% and 5.9%, respectively, while industrial sales
decreased 4.3%. For the six-month period, excluding the Conowingo
District, billed sales to residential and commercial customers increased
15.1% and 6.9%, respectively, while industrial sales decreased 3.7%. For
the three- and six-month periods, the decreases in industrial sales,
excluding the Conowingo District, were due to the temporary curtailment in
production by several large customers.
Non-fuel revenues from resale sales volume increased $2.1 million for the
three-month period and $2.8 million for the six-month period due to
increases in resale sales of 22.2% and 24.2%, respectively, resulting from
favorable weather and the Company providing its Delaware municipal
customers with a portion of their load that had been supplied by sources
other than the Company. Changes in resale sales have less of an impact on
non-fuel revenues than changes in retail sales, since average resale non-
fuel rates are significantly lower than average retail non-fuel rates.
Electric fuel costs billed to customers, or fuel revenues, generally do not
affect net income, since the expense recognized as fuel costs is adjusted
to match the fuel revenues. The amount of under- or over-recovered fuel
costs is deferred until it is subsequently recovered from or returned to
utility customers. Fuel revenues increased $7.4 million and $16.0 million
for the three- and six-month periods, respectively, primarily due to higher
sales.
Interchange delivery revenues are reflected in the calculation of rates
charged to customers under fuel adjustment clauses and, thus, generally do
not affect net income. Interchange delivery revenues benefit customers by
reducing the effective cost of fuel billed to customers. Interchange
delivery revenues increased $6.6 million for the three-month period
primarily due to higher billing rates to the Pennsylvania-New Jersey-
Maryland Interconnection Association (PJM Interconnection).
GAS REVENUES, SALES, AND TRANSPORTATION
- ---------------------------------------
Total gas revenues increased $5.3 million for the six-month period because
of a $3.7 million increase in non-fuel revenues and a $1.6 million increase
in fuel revenues. Non-fuel and fuel revenues increased primarily due to a
12.0% increase in firm gas sales as a result of colder winter weather.
-15-
<PAGE>
ELECTRIC FUEL AND PURCHASED ENERGY EXPENSES
- -------------------------------------------
The components of the changes in electric fuel and purchased energy
expenses are shown in the table below:
<TABLE>
<CAPTION>
Increase (Decrease) in Electric Fuel and
Purchased Energy From Comparable Period in Prior Year
-----------------------------------------------------
(Dollars in Millions)
Three Six
Months Months
------ ------
<S> <C> <C>
Higher Average Cost of Electric
Fuel and Purchased Energy $14.5 $38.4
Increased kWh Output 8.9 12.4
Deferral of Fuel Costs (8.1) (27.7)
------ ------
Total $15.3 $23.1
====== ======
</TABLE>
For the three- and six-month periods, expenses increased $14.5 million and
$38.4 million, respectively, due to a higher average cost per kWh of
output, which primarily was due to higher gas and oil commodity prices and
the increased use of higher-priced purchased energy as a result of higher
demand coupled with the reduced availability or unavailability of certain
of the Company's generating units, including the Salem units.
Expenses increased $8.9 million and $12.4 million for the three- and six-
month periods, respectively, due to increased kWh output, which resulted
primarily from stronger sales demand.
Expenses decreased $8.1 million and $27.7 million for the three- and six-
month periods, respectively, due to variances in fuel costs deferred and
subsequently amortized under the Company's fuel adjustment clauses.
The kWh output required to serve load within the Company's service
territory is substantially equivalent to total output less interchange
deliveries. For the six months ended June 30, 1996, the Company's output
for load within its service territory was provided by 35% coal generation,
28% net purchased power, 27% oil and gas generation, and 10% nuclear
generation.
PURCHASED ELECTRIC CAPACITY
- ---------------------------
Purchased electric capacity increased $5.4 million and $14.2 million for
the three- and six-month periods, respectively, due to costs incurred
under a long-term contract with PECO, which was entered into concurrently
with the Company's purchase of COPCO.
-16-
<PAGE>
OPERATION, MAINTENANCE, AND DEPRECIATION EXPENSES
- -------------------------------------------------
Operation and maintenance expense increased $5.0 million for the three-
month period as a result of the following factors: $2.3 million related
to the Salem outage; $1.2 million related to the Conowingo District; and
$1.5 million of other costs.
Operation and maintenance expense increased $15.7 million for the six-month
period as a result of the following factors: $6.3 million related to the
Salem outage; $2.7 million related to the Conowingo District; and $6.7
million of other costs, which included higher maintenance costs at power
plants, other than Salem, associated primarily with the timing of plant
maintenance outages between periods. Total maintenance costs at these
plants for all of 1996 are expected to be in line with 1995 amounts.
Depreciation expense increased $3.6 million and $6.3 million for the three-
and six-month periods, respectively, primarily due to higher utility plant
balances including that of the Conowingo District.
UTILITY FINANCING COSTS--INTEREST EXPENSE
- -----------------------------------------
Interest expense increased $1.2 million and $3.6 million for the three-
and six-month periods, respectively, primarily due to the issuance of
long-term debt to acquire COPCO. For the three- and six-month periods,
increased interest expense from higher average short-term debt balances
was offset by decreased interest expense on deferred energy costs.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash provided by operating activities decreased $39.1 million for the
six months ended June 30, 1996, compared to the same period last year,
primarily due to the under-recovery of electric fuel and purchased energy
costs in the current six-month period, the over-recovery of electric fuel
and purchased energy costs in the prior six-month period, and changes in
accounts receivable balances. The under-recovery of electric fuel and
purchased energy costs in the current six-month period resulted from an
increase in these costs, including Salem replacement power costs, which
were not recovered from customers through existing fuel rates. Increased
fuel rates, subject to refund, went into effect in the Company's resale,
Virginia, and Maryland jurisdictions in May 1996, July 1996, and August
1996, respectively. Electric fuel rates in the Company's Delaware
jurisdiction are not expected to be increased until after the Company
files a proposal with the DPSC to address the recovery of Salem
replacement power costs. The Company plans to file its proposal with the
DPSC during the third quarter of 1996. For the current six-month period,
the Company used increased short-term borrowings to meet cash
requirements.
-17-
<PAGE>
For the six months ended June 30, 1996, utility construction expenditures
were $61 million compared to $55 million for the same period last year.
Internally generated funds (net cash provided by operating activities less
common and preferred dividends) provided 77% of the cash required for
construction for the current six-month period compared to 158% for the
prior six-month period.
During the third quarter of 1996, a wholly-owned trust of the Company
plans to issue up to $70 million of mandatorily redeemable preferred
securities. On a consolidated basis, the proceeds from the issuance will
be used to redeem or retire a portion of the Company's outstanding
preferred stock. This transaction will lower the after-tax cost of the
Company's total capital and is not expected to affect the Company's credit
rating.
RATIO OF EARNINGS TO FIXED CHARGES
- ----------------------------------
The Company's ratios of earnings to fixed charges under the Securities and
Exchange Commission (SEC) Method are shown below:
<TABLE>
<CAPTION>
12 Months
Ended Year Ended December 31,
June 30, ---------------------------------------------
1996 1995 1994 1993 1992 1991
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges
(SEC Method)....................... 3.47 3.54 3.49 3.47 3.03 2.58
Ratio of Earnings to Fixed Charges
(SEC Method) as Adjusted........... 3.74 2.78
</TABLE>
Adjusted ratios exclude the following pre-tax amounts: for 1994, a $17.5
million early retirement charge and, for 1992, an $18.5 million gain from
the Company's share of the settlement of a lawsuit against PECO in
connection with the shutdown of Peach Bottom.
Under the SEC Method, earnings, including Allowance for Funds Used During
Construction (AFUDC), have been computed by adding income taxes and fixed
charges to net income. Fixed charges include gross interest expense and
the estimated interest component of rentals. Net income and income taxes
related to the cumulative effect of a change in accounting for unbilled
revenues recorded in 1991 are excluded from the computation of these
ratios.
-18-
<PAGE>
NONUTILITY SUBSIDIARIES
- -----------------------
Information on the Company's nonutility subsidiaries, in addition to the
following discussion, can be found in Note 7 to the Consolidated Financial
Statements.
Earnings per share of nonutility subsidiaries were $0.04 for the six-month
periods ended June 30, 1996 and 1995. For the current six-month period,
earnings were derived primarily from the recovery of previously written-off
joint venture assets. For the prior six-month period, earnings were
derived primarily from the recovery of previously written-off joint venture
assets and the receipt of an additional payment related to the sale of a
leveraged lease interest in a previous year.
-19-
<PAGE>
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
- -------------------------
Power Outage
- ------------
As previously reported in Part II of the Company's Report on Form 10-Q for
the first quarter of 1996, at approximately 10:00 a.m. on May 14, 1996, the
Company experienced an equipment problem at a major interconnection
substation serving the Delmarva peninsula. As a result, electric service
was lost to approximately 300,000 customers, including customers served by
resale customers of the Company, in the southern part of Delaware and the
eastern shore of Maryland and Virginia. Electric service was restored
throughout the day with restoration of power completed by approximately
5:30 p.m. on May 14, 1996. Due to the outage, the Company has received
numerous claims. As of June 30, 1996, the Company had accrued a liability
for outage-related claims of $1 million--the amount for which the Company
is self-insured. The Company has insurance coverage for total claims
exceeding $1 million.
Salem Nuclear Generating Station
- --------------------------------
Refer to Note 4 to the Consolidated Financial Statements for an update on
the complaints filed by the Company against PSE&G and Westinghouse related
to Salem.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
At its Annual Meeting held on May 30, 1996, the Company submitted for a
vote of security holders an amendment to the Company's Restated Certificate
and Articles of Incorporation removing the limits on the Company's
unsecured indebtedness. Prior to such amendment, the Company was
restricted in the amount of unsecured indebtedness it could issue or
assume, to 20% of the aggregate of its secured debt, preferred stock and
common shareholder equity. If approved by the affirmative vote of a
majority of the holders of the Common Stock entitled to vote and a majority
of the total voting power of the Preferred Stock and Preferred Stock--$25
Par (voting as a single class), the amendment would remove this 20%
unsecured debt limitation. This proposal was approved by the Company's
security holders, as follows: out of 60,754,568 shares of Common Stock
outstanding on the record date for the Annual Meeting, 39,151,942 shares
were voted FOR the proposal, 3,545,168 shares were voted AGAINST the
proposal, 1,213,083 shares were voted to ABSTAIN, and 16,844,375 shares did
not vote; out of 1,680,850 total votes available for the Preferred Stock
and Preferred Stock--$25 Par (each share of which is allowed 1/4 vote and,
thus, 1,600,000 outstanding shares were counted as 400,000 votes) on the
record date for the Annual Meeting, 873,000 votes were cast FOR the
proposal, 257,343 votes were cast AGAINST the proposal, 41,621 votes were
cast to ABSTAIN, and 508,886 available votes were not cast.
-20-
<PAGE>
The Company also submitted for a vote of the holders of its Common Stock at
such Annual Meeting an amendment and extension of the Company's Long-Term
Incentive Plan. This Plan, originally approved by the holders of the
Company's Common Stock in 1987, had a ten-year period and provided for the
issuance of up to 750,000 shares of Common Stock under the Plan. The
amendment and extension extended the term of the Plan for an additional ten
years and provided for the issuance of up to 1.5 million additional shares
of Common Stock thereunder. The amendments to the Plan, for the most part,
removed some of the specific conditions for the awards under the Plan and
gave more discretion to the Company's Compensation Committee of the Board
of Directors. The affirmative vote of the holders of a majority of the
shares of the Common Stock entitled to vote was required for the adoption
of this proposal. This proposal was approved by the holders of the Common
Stock, as follows: out of 60,754,568 shares outstanding on the record date
for the Annual Meeting, 45,398,194 shares were voted FOR the proposal,
4,548,693 were voted AGAINST the proposal, 1,053,856 were voted to ABSTAIN,
and 9,753,825 shares did not vote.
Item 5. Other Information
- -------------------------
Pending Merger with Atlantic Energy, Inc.
- -----------------------------------------
Refer to Note 3 to the Consolidated Financial Statements for information
regarding an Agreement and Plan of Merger with Atlantic Energy, Inc.
Salem Nuclear Generating Station
- --------------------------------
Refer to Note 4 to the Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations
for an update on matters concerning the current Salem outage.
Spent Nuclear Fuel Disposal
- ---------------------------
The following is an update to matters disclosed in the Company's 1995
Annual Report on Form 10-K under "Fuel Supply for Electric Generation--
Nuclear." In a decision issued July 23, 1996, the Court of Appeals for the
District of Columbia Circuit found that the United States Department of
Energy (DOE) is obligated to begin accepting spent nuclear fuel for
disposal no later than January 31, 1998. The Company cannot predict when
or if the DOE will accept nuclear fuel as no repository or other storage
facility currently exists or is under construction.
-21-
<PAGE>
PJM Interconnection Filing with FERC
- ------------------------------------
The following is an update to matters disclosed in the Company's 1995
Annual Report on Form 10-K under "Electric Operations -- Power Pool." On
July 24, 1996, seven PJM Interconnection member companies, including the
Company, filed a detailed plan with the Federal Energy Regulatory
Commission (FERC) to restructure the PJM Interconnection in compliance with
FERC Order No. 888, which is intended to promote wholesale competition by
requiring utilities to provide open access to their transmission systems.
The companies plan to implement the restructured power pool by the end of
1996 if approved by the FERC. The plan includes the following key
elements:
- - Pool-wide transmission tariffs providing comparable, open-access service
for all wholesale transactions throughout the PJM Interconnection;
- - A regional pool energy market using price-based dispatch that is open to
all eligible wholesale buyers and sellers of power;
- - Establishment of an Independent System Operator (ISO) to provide daily
management and administration of pool operations, the energy market, and
the regional transmission network; and
- - Development of an enhanced pool-wide planning function consistent with
Mid-Atlantic Area Coordination principles, criteria and procedures,
which provides for review and evaluation of plans for generation and
transmission facilities and other matters relevant to the reliability of
the bulk electric supply systems in the Mid-Atlantic area.
The Company cannot predict what action the FERC will take regarding this
filing.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
Exhibits
- --------
Exhibit 2, Agreement and Plan of Merger dated as of August 9, 1996, by and
among the Company, Atlantic Energy, Inc., DS, Inc., and DS Sub, Inc.
(filed with Form 8-K on August 14, 1996, and incorporated herein by
reference pursuant to Rules 12b-23 and 12b-32).
Exhibit 12, Computation of Ratio of Earnings to Fixed Charges.
Exhibit 27, Financial Data Schedule.
Reports on Form 8-K
- -------------------
A Report on Form 8-K dated May 29, 1996, updating matters related to Salem
Units 1 and 2 previously reported, was filed with the Commission.
A Report on Form 8-K dated July 23, 1996, updating matters related to
Salem Units 1 and 2 previously reported, was filed with the Commission.
A Report on Form 8-K dated August 9, 1996, providing information regarding
an Agreement and Plan of Merger with Atlantic Energy, Inc., was filed with
the Commission on August 14, 1996.
-22-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Delmarva Power & Light Company
------------------------------
(Registrant)
Date: August 14, 1996 /s/ B. S. Graham
--------------- --------------------------------------
B. S. Graham, Senior Vice President,
Treasurer, and Chief Financial Officer
-23-
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Number
------- ------
Computation of ratio of earnings to fixed charges 12 25
Financial Data Schedule 27 26
-24-
<PAGE>
Exhibit 12
Delmarva Power & Light Company
Ratio of Earnings to Fixed Charges
----------------------------------
(Dollars in Thousands)
----------------------
<TABLE>
<CAPTION>
12 Months
Ended Year Ended December 31,
June 30, ------------------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income (1) $120,106 $117,488 $108,310 $111,076 $98,526 $80,506
-------- -------- -------- -------- -------- --------
Income taxes (1) 78,396 75,540 67,613 67,102 54,834 43,249
-------- -------- -------- -------- -------- --------
Fixed charges:
Interest on long-term
debt including
amortization of
discount, premium
and expense 68,927 65,572 61,128 62,651 66,976 68,133
Other interest 11,335 10,353 9,336 9,245 8,449 10,192
-------- -------- -------- -------- -------- --------
Total fixed charges 80,262 75,925 70,464 71,896 75,425 78,325
-------- -------- -------- -------- -------- --------
Nonutility capitalized
interest (307) (304) (256) (246) (231) (143)
-------- -------- -------- -------- -------- --------
Earnings before income
taxes and fixed
charges $278,457 $268,649 $246,131 $249,828 $228,554 $201,937
======== ======== ======== ======== ======== ========
Ratio of earnings to
fixed charges 3.47 3.54 3.49 3.47 3.03 2.58
</TABLE>
For purposes of computing the ratio, earnings are net income plus income taxes
and fixed charges, less nonutility capitalized interest. Fixed charges consist
of interest on long- and short-term debt, amortization of debt discount,
premium, and expense, plus the interest factor associated with the Company's
major leases, and one-third of the remaining annual rentals.
(1) Net income and income taxes related to the cumulative effect of a change
in accounting for unbilled revenues recorded in 1991 are excluded from
the computation of this ratio.
-25-
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME
FROM THE COMPANY'S 2ND QUARTER 1996 FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,231,871
<OTHER-PROPERTY-AND-INVEST> 135,922
<TOTAL-CURRENT-ASSETS> 258,273
<TOTAL-DEFERRED-CHARGES> 256,326
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,882,392
<COMMON> 136,717
<CAPITAL-SURPLUS-PAID-IN> 504,101
<RETAINED-EARNINGS> 287,824
<TOTAL-COMMON-STOCKHOLDERS-EQ> 928,642
0
168,085
<LONG-TERM-DEBT-NET> 853,269
<SHORT-TERM-NOTES> 93,843
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,522
0
<CAPITAL-LEASE-OBLIGATIONS> 19,234
<LEASES-CURRENT> 12,583
<OTHER-ITEMS-CAPITAL-AND-LIAB> 805,214
<TOT-CAPITALIZATION-AND-LIAB> 2,882,392
<GROSS-OPERATING-REVENUE> 543,223
<INCOME-TAX-EXPENSE> 37,366
<OTHER-OPERATING-EXPENSES> 416,774
<TOTAL-OPERATING-EXPENSES> 454,140
<OPERATING-INCOME-LOSS> 89,083
<OTHER-INCOME-NET> 2,823
<INCOME-BEFORE-INTEREST-EXPEN> 91,906
<TOTAL-INTEREST-EXPENSE> 34,438
<NET-INCOME> 57,468
4,863
<EARNINGS-AVAILABLE-FOR-COMM> 52,605
<COMMON-STOCK-DIVIDENDS> 46,644
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 99,010
<EPS-PRIMARY> $0.87
<EPS-DILUTED> $0.87
</TABLE>
