SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended September 30, 1994
DUKE POWER COMPANY
422 South Church Street
Charlotte, North Carolina 28242-0001
704-594-0887
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1994 Commission File Number 1-4928
DUKE POWER COMPANY
(Exact name of registrant as specified in its charter)
North Carolina 56-0205520
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
422 South Church Street,
Charlotte, N.C. 28242-0001
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 704-594-0887
No Change
(Former name, former address and former fiscal year, if changed since last
report)
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.
Number of shares of Common Stock, without par value, outstanding at
September 30, 1994.................................... 204,859,339 shares
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DUKE POWER COMPANY
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income for the Three and Nine Months
Ended September 30, 1994 and 1993....................................................... 1
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1994 and 1993............................................................. 2
Consolidated Balance Sheets - September 30, 1994 and December 31, 1993..................... 3-4
Consolidated Statements of Capitalization - September 30, 1994 and
December 31, 1993....................................................................... 5
Notes to Consolidated Financial Statements................................................. 6-9
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................... 10-11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders................................ 12
Item 6. Exhibits and Reports on Form 8-K................................................... 12
SIGNATURES................................................................................... 13
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
DUKE POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
ELECTRIC REVENUES (Notes 1 and 2)............................... $1,215,808 $1,289,994 $3,302,959 $3,284,995
ELECTRIC EXPENSES
Operation
Fuel used in electric generation (Note 2).................. 198,198 233,152 550,274 562,953
Net interchange and purchased power (Note 6)............... 144,944 146,880 420,783 408,746
Wages, benefits and materials.............................. 172,367 179,742 545,611 513,615
Maintenance of plant facilities............................... 106,666 100,339 302,766 285,616
Depreciation and amortization................................. 113,321 126,224 341,016 379,342
General taxes................................................. 61,654 61,488 182,007 174,055
Income taxes.................................................. 146,176 158,758 323,889 319,624
Total electric expenses.................................. 943,326 1,006,583 2,666,346 2,643,951
Electric operating income............................. 272,482 283,411 636,613 641,044
OTHER INCOME
Allowance for equity funds used during
construction............................................... 7,181 2,884 19,062 11,437
Other, net ................................................... 34,335 25,550 98,281 59,440
Income taxes-other, net....................................... (10,584) (6,668) (36,100) (20,357)
Income taxes-credit........................................... 4,419 3,506 13,361 12,217
Total other income....................................... 35,351 25,272 94,604 62,737
Income before interest deductions..................... 307,833 308,683 731,217 703,781
INTEREST DEDUCTIONS
Interest on long-term debt.................................... 64,383 64,827 187,754 195,485
Other interest ............................................... 3,037 3,864 7,508 9,750
Allowance for borrowed funds used during
construction (credit)...................................... (3,328) (1,417) (9,405) (7,017)
Total interest deductions................................ 64,092 67,274 185,857 198,218
NET INCOME...................................................... 243,741 241,409 545,360 505,563
Dividends on preferred and preference stocks.................. 12,472 12,551 37,179 39,479
EARNINGS FOR COMMON STOCK....................................... $ 231,269 $ 228,858 $ 508,181 $ 466,084
COMMON STOCK DATA
Average shares outstanding (thousands)........................ 204,859 204,859 204,859 204,859
Earnings per share............................................ $ 1.13 $ 1.12 $ 2.48 $ 2.28
Dividends per share........................................... $ 0.49 $ 0.47 $ 1.43 $ 1.37
</TABLE>
See notes to consolidated financial statements.
1
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DUKE POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................................................... $ 545,360 $ 505,563
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash items
Depreciation and amortization.................................................. 463,952 500,127
Deferred income taxes and investment tax credit, net of amortization........... 108,957 37,363
Allowance for equity funds used during construction............................ (19,062) (11,437)
Purchased capacity levelization (Notes 6 and 7)................................ (140,968) (2,661)
Other, net (Note 8) ........................................................... (51,688) 8,034
(Increase) Decrease in
Accounts receivable......................................................... 10,942 (73,928)
Inventory................................................................... (19,753) 54,894
Prepayments................................................................. 876 505
Increase (Decrease) in
Accounts payable............................................................ (96,603) (122,410)
Taxes accrued............................................................... 17,711 85,028
Interest accrued and other liabilities...................................... (14,994) 13,334
Total adjustments.............................................................. 259,370 488,849
Net cash provided by operating activities................................... 804,730 994,412
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures........................................................... (494,938) (364,690)
Funding for decommissioning......................................................... (39,393) (39,393)
Investment in nuclear fuel.......................................................... (67,674) (71,505)
Investment in joint ventures (Note 8)............................................... (312) (29,955)
Net change in investment securities (Note 1)........................................ (16,500) (25,102)
Net cash provided by (used in) investing activities......................... (618,817) (530,645)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of
First and refunding mortgage bonds............................................... 144,390 1,395,682
Pollution-control bonds.......................................................... - 76,265
Preferred stock.................................................................. - 156,983
Payments for the redemption of
First and refunding mortgage bonds............................................... (81) (1,399,291)
Pollution-control bonds.......................................................... - (79,310)
Preferred stock.................................................................. (1,500) (162,183)
Short-term notes payable, net (Note 3)........................................... (18,000) (126,000)
Dividends paid...................................................................... (330,550) (318,980)
Other (Note 8)...................................................................... 14,233 (3,641)
Net cash provided by (used in) financing activities......................... (191,508) (460,475)
Net increase (decrease) in cash..................................................... (5,595) 3,292
Cash at beginning of period......................................................... 15,576 9,293
Cash at end of period............................................................... $ 9,981 $ 12,585
</TABLE>
See notes to consolidated financial statements.
2
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DUKE POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1994 1993
<S> <C> <C>
ASSETS
Electric Plant - at original cost
Electric plant in service............................................................ $12,926,162 $12,573,012
Less accumulated depreciation and amortization....................................... 4,656,801 4,431,460
Electric plant in service, net.................................................... 8,269,361 8,141,552
Nuclear fuel ........................................................................ 733,197 705,994
Less accumulated amortization ....................................................... 427,228 405,910
Nuclear fuel, net................................................................. 305,969 300,084
Construction work in progress (including nuclear fuel in process: 1994 - $71,486;
1993 - $113,904) ................................................................. 471,700 482,473
Total electric plant, net......................................................... 9,047,030 8,924,109
Other Property and Investments
Other property - at cost (less accumulated depreciation: 1994 - $96,613;
1993 - $90,191) .................................................................. 359,903 311,241
Investments in joint ventures ....................................................... 101,924 101,612
Other investments, at cost or less................................................... 70,951 90,301
Nuclear decommissioning trust funds ................................................. 160,530 118,456
Pre-funded pension cost.............................................................. 50,000 50,000
Total other property and investments.............................................. 743,308 671,610
Current Assets
Cash (Note 3)........................................................................ 9,981 15,576
Short-term investments............................................................... 156,500 120,651
Receivables (less allowance for losses: 1994 - $6,642; 1993 - $6,392)(Note 1)........ 579,521 531,592
Inventory - at average cost
Coal.............................................................................. 69,586 69,155
Other............................................................................. 219,056 199,733
Prepayments.......................................................................... 11,186 12,062
Total current assets.............................................................. 1,045,830 948,769
Deferred Debits
Purchased capacity costs (Notes 6 & 7)................................................ 913,244 768,099
Debt expense, primarily refinancing costs, being amortized over terms of
related debt....................................................................... 189,190 197,963
Regulatory asset related to income taxes............................................. 487,067 486,440
Regulatory asset related to DOE assessment fee (Note 2)............................. 110,989 116,731
Other................................................................................ 81,150 79,386
Total deferred debits............................................................. 1,781,640 1,648,619
Total assets........................................................................... $12,617,808 $12,193,107
</TABLE>
See notes to consolidated financial statements.
3
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DUKE POWER COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1994 1993
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
(See Consolidated Statements of Capitalization)
Common stock equity........................................................... $ 4,552,192 $ 4,337,734
Preferred and preference stocks without sinking fund requirements (Note 4).... 500,000 500,000
Preferred stocks with sinking fund requirements (Note 5)...................... 279,500 281,000
Long-term debt ............................................................... 3,406,808 3,285,397
Total capitalization....................................................... 8,738,500 8,404,131
Current Liabilities
Accounts payable.............................................................. 357,148 337,391
Taxes accrued................................................................. 100,535 82,824
Interest accrued.............................................................. 64,084 68,868
Other (Note 7)................................................................ 95,914 211,207
Total...................................................................... 617,681 700,290
Notes payable (Note 3)........................................................ - 18,000
Current maturities of long-term debt and preferred stocks .................... 132,293 91,898
Total current liabilities.................................................. 749,974 810,188
Accumulated Deferred Income Taxes............................................... 2,325,708 2,207,708
Deferred Credits and Other Liabilities
Investment tax credit......................................................... 274,067 282,505
DOE assessment fee (Note 2).................................................... 110,989 116,731
Nuclear decommissioning costs externally funded .............................. 160,530 118,456
Other ........................................................................ 258,040 253,388
Total deferred credits and other liabilities............................... 803,626 771,080
Total capitalization and liabilities....................................... $12,617,808 $12,193,107
</TABLE>
See notes to consolidated financial statements.
4
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DUKE POWER COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1994 1993
<S> <C> <C>
Common Stock Equity
Common stock, no par, 300,000,000 shares authorized; 204,859,339
shares outstanding for 1994 and 1993......................................... $1,926,909 $1,926,909
Retained earnings............................................................... 2,625,283 2,410,825
Total common stock equity.................................................... 4,552,192 4,337,734
Preferred and Preference Stocks Without Sinking Fund Requirements (Note 4)........ 500,000 500,000
Preferred Stocks With Sinking Fund Requirements (Note 5).......................... 279,500 281,000
Long-Term Debt
Parent company long-term debt.................................................. 3,302,270 3,199,032
Subsidiary long-term debt...................................................... 104,538 86,365
Total consolidated long-term debt........................................... 3,406,808 3,285,397
Total capitalization...................................................... $8,738,500 $8,404,131
</TABLE>
See notes to consolidated financial statements.
5
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DUKE POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Revenues are recorded as service is rendered to customers.
"Receivables" on the Consolidated Balance Sheets include $150,726,000 and
$175,726,000 as of September 30, 1994 and December 31, 1993, respectively,
for service that has been rendered but not yet billed to customers.
In accordance with generally accepted accounting principles, the
financial statements include the accounts of Duke Power Company and its
subsidiaries. Intercompany accounts and transactions have been eliminated.
For purposes of the Consolidated Statements of Cash Flows, the
Company's investments in highly liquid debt instruments with an original
maturity of three months or less are included in cash flows from investing
activities and thus are not considered cash equivalents. Total income
taxes paid for the quarter ended September 30 were $91,150,000 and
$59,850,000 for 1994 and 1993, respectively. For the nine months ending
September 30, 1994 and 1993, income taxes paid were $259,620,000 and
$264,277,000, respectively.
The Company implemented Statement of Financial Accounting Standards
No. 109 (SFAS 109), "Accounting for Income Taxes," effective January 1,
1993.
2. The North Carolina Utilities Commission (NCUC) and The Public
Service Commission of South Carolina (PSCSC) must approve rates for retail
sales within their respective states. The Federal Energy Regulatory
Commission (FERC) must approve the Company's rates for sales to wholesale
customers. Sales to the other joint owners of the Catawba Nuclear Station,
which represent a substantial majority of the Company's wholesale revenues,
are set through contractual agreements. (See Note 6.)
The North Carolina Supreme Court on April 22, 1992, remanded for the
second time the Company's 1986 rate order to the NCUC. In this ruling the
Court held that the record from the 1986 proceedings failed to support the
rate of return of 13.2 percent on common equity authorized by the NCUC
after the initial decision of the Court remanding the 1986 rate order. The
NCUC issued a final order dated October 26, 1992, authorizing a 12.8
percent return on common equity for the period October 31, 1986 through
November 11, 1991, that resulted in a refund to North Carolina retail
customers in 1992 of approximately $95 million, including interest.
During 1991, the Company filed in both the North Carolina and the
South Carolina retail jurisdictions its only requests for general rate
increases since 1986. The rate increase requested by the Company in North
Carolina was 9.22 percent; a 4.15 percent increase was granted resulting in
$100.1 million in additional annual revenues. In South Carolina, a rate
increase of 7.29 percent was requested; a 3.0 percent increase was granted
resulting in $30.2 million in additional annual revenues. These increases
were requested primarily to recover costs associated with the Bad Creek
Hydroelectric Station.
In 1991, the Company filed a request with the FERC seeking a 7.47
percent rate increase for its wholesale customers, who represent
approximately 2 percent of the Company's total revenues. A negotiated
settlement between the Company and the wholesale customers was approved by
the FERC on March 31, 1992. The approved agreement, effective April 1,
1992, provided for a 3.3 percent rate increase, resulting in $2.1 million
in additional annual revenues.
The Company has a bulk power sales agreement with Carolina Power &
Light Company (CP&L) to provide CP&L 400 megawatts of capacity as well as
associated energy when needed for a six-year period which began July 1,
1993. Electric rates in all regulatory jurisdictions were reduced by
adjustment riders to reflect capacity revenues received from this CP&L bulk
power sales agreement.
Fuel costs are reviewed semiannually in the wholesale and South
Carolina retail jurisdictions, with provisions for changing such costs in
base rates. In the North Carolina retail jurisdiction, a review of fuel
costs in rates is required annually and during general rate case
proceedings.
6
<PAGE>
All jurisdictions allow the Company to adjust rates for past over- or
under-recovery of fuel costs. Therefore, the Company reflects in revenues
the difference between actual fuel costs incurred and fuel costs recovered
through rates. The North Carolina legislature ratified a bill in July 1987
assuring the legality of such adjustments in rates. In 1991, the statute
was extended through June 30, 1997.
A provision in the Energy Policy Act of 1992 established a fund for
the decontamination and decommissioning of the Department of Energy's
uranium enrichment plants. Licensees are subject to an annual assessment
for 15 years based on their pro rata share of past enrichment services.
The annual assessment is recorded as fuel expense. As of September 30,
1994, the Company has paid $9,032,000 in 1994 and $17,370,000 cumulatively
related to its ownership interest in nuclear plants. At September 30,
1994, the Company has reflected the remaining liability and regulatory
asset of $110,989,000 in the Consolidated Balance Sheets.
3. At September 30, 1994, the Company had a three-year revolving
credit facility of $355,000,000 with 15 commercial banks. At December 31,
1993, the Company had two three-year revolving credit facilities of
$300,000,000 and $130,000,000, with 17 and 5 commercial banks,
respectively. The $130,000,000 credit facility was terminated in August
1994. In addition, the Company had $24,980,000 in annually-renewable lines
of credit at September 30, 1994 and December 31, 1993. All such facilities
are on a fee or compensating-balance basis. No short-term debt resulting
from these credit facilities was outstanding as of September 30, 1994 and
December 31, 1993.
As of September 30, 1994 and December 31, 1993, the Company had
$40,000,000 in pollution control revenue bonds backed by an unused,
two-year revolving credit facility of $40,000,000. The Company had
$130,000,000 in constantly outstanding commercial paper backed by the
unused three-year revolving credit facilities at September 30, 1994 and
December 31, 1993. All such facilities are on a fee basis. Both the
$40,000,000 in pollution control bonds and the $130,000,000 in commercial
paper are included in long-term debt.
Cash balances maintained at the banks on deposit were $7,549,000 as of
September 30, 1994, and $12,988,000 as of December 31, 1993. Cash balances
and fees compensate banks for their services, even though the Company has
no formal compensating-balance arrangements. To compensate certain banks
for credit facilities, the Company maintained balances of $49,000 as of
September 30, 1994 and December 31, 1993. The Company retains the right of
withdrawal with respect to the funds used for compensating-balance
arrangements.
A summary of short-term borrowing is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1994 DECEMBER 31,1993
<S> <C> <C>
Amount outstanding at end of period - average rate of 3.27%
at December 31, 1993...................................................... $ - $ 18,000
Maximum amount outstanding during the period............................... $130,000 $ 178,000
Average amount outstanding during the period............................... $ 19,436 $ 35,187
Weighted average interest rate for the period - computed on a daily basis.. 3.83% 3.17%
</TABLE>
4. At September 30, 1994, and December 31, 1993, 12,500,000 shares of
Preferred Stock ($100 par value), 10,000,000 shares of Preferred Stock A
($25 par value) and 1,500,000 shares of Preference Stock ($100 par value)
were authorized with or without sinking fund requirements. Preferred and
Preference Stocks without sinking fund requirements at September 30, 1994
and December 31, 1993 were as follows:
<TABLE>
<CAPTION>
YEAR SHARES SEPTEMBER 30 DECEMBER 31
RATE/SERIES ISSUED OUTSTANDING 1994 1993
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
4.50% C............................................... 1964 350,000 $ 35,000 $ 35,000
5.72% D............................................... 1966 350,000 35,000 35,000
6.72% E............................................... 1968 350,000 35,000 35,000
7.85% S............................................... 1992 600,000 60,000 60,000
7.00% W............................................... 1993 500,000 50,000 50,000
7.04% Y............................................... 1993 600,000 60,000 60,000
7.72% (Preferred Stock A)............................. 1992 1,600,000 40,000 40,000
6.375%(Preferred Stock A)............................. 1993 2,400,000 60,000 60,000
Adjustable Rate A..................................... 1986 500,000 50,000 50,000
Auction Series A...................................... 1990 750,000 75,000 75,000
Total............................................... $500,000 $500,000
</TABLE>
7
<PAGE>
5. At September 30, 1994 and December 31, 1993, 12,500,000 shares of
Preferred Stock ($100 par value), 10,000,000 shares of Preferred Stock A
($25 par value) and 1,500,000 shares of Preference Stock ($100 par value)
were authorized with or without sinking fund requirements. Preferred and
Preference Stocks with sinking fund requirements at September 30, 1994 and
December 31, 1993 were as follows:
<TABLE>
<CAPTION>
YEAR SHARES SEPTEMBER 30 DECEMBER 31
RATE/SERIES ISSUED OUTSTANDING 1994 1993
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
5.95% B(Preferred Stock A)..................... 1992 800,000 $ 20,000 $ 20,000
6.10% C(Preferred Stock A)..................... 1992 800,000 20,000 20,000
6.20% D(Preferred Stock A)..................... 1992 800,000 20,000 20,000
7.12% Q........................................ 1987 470,000 47,000 -
7.12% Q........................................ 1987 485,000 - 48,500
7.50% R........................................ 1992 850,000 85,000 85,000
6.20% T........................................ 1992 130,000 13,000 13,000
6.30% U........................................ 1992 130,000 13,000 13,000
6.40% V........................................ 1992 130,000 13,000 13,000
6.75% X........................................ 1993 500,000 50,000 50,000
Less: Current sinking fund requirements
7.12% Q........................................ (1,500) (1,500)
Total............................................... $279,500 $281,000
</TABLE>
6. The Company has sold interests in both units of the Catawba
Nuclear Station to the North Carolina Municipal Power Agency Number 1
(NCMPA), the North Carolina Electric Membership Corporation (NCEMC), the
Piedmont Municipal Power Agency (PMPA), and the Saluda River Electric
Cooperative, Inc. (Saluda River), collectively referred to as the Other
Catawba Joint Owners. The Company retains a 12.5 percent ownership interest
in the Catawba Nuclear Station. In connection with the joint ownership, the
Company has entered into contractual agreements with the Other Catawba
Joint Owners to purchase declining percentages of the generating capacity
and energy from the plant. These agreements were effective beginning with
the commercial operation of each unit. Unit 1 and Unit 2 began commercial
operation in June 1985 and in August 1986, respectively. Such agreements
were established for 15 years for NCMPA and PMPA and 10 years for NCEMC and
Saluda River.
Effective in its November 1991 rate order, the North Carolina
Utilities Commission (NCUC) reaffirmed the Company's recovery, on a
levelized basis, of the capital costs and fixed operating and maintenance
costs of capacity purchased from the Other Catawba Joint Owners. The NCUC
rate order changed the levelized basis to a 15-year period ending 2001 for
all of the Other Catawba Joint Owners compared to the previous 15-year
levelization period for NCMPA and PMPA and 10-year levelization period for
NCEMC and Saluda River. The Public Service Commission of South Carolina
(PSCSC), in its November 1991 rate order, reaffirmed the Company's recovery
on a levelized basis of the capital costs of capacity purchased from the
Other Catawba Joint Owners. The PSCSC rate order retained the levelized
basis of a 7 1/2-year period for PMPA and NCMPA; for NCEMC and Saluda River
the new levelized basis reflects the projected purchased capacity payments
for the twelve-month period ended October 1992. The Federal Energy
Regulatory Commission granted the Company recovery on a levelized basis of
the capital costs and fixed operating and maintenance costs of capacity
purchased from the Other Catawba Joint Owners over their contractual
purchased power buyback periods. As currently provided in rates in all
jurisdictions, the Company recovers the costs of purchased energy and a
portion of purchased capacity. The portion of costs not currently
recovered through rates is being accumulated, and the Company is recording
a carrying charge on the accumulated balance. The Company recovers the
accumulated balance including the carrying charge when the capacity
payments drop below the levelized revenues. In the North Carolina and
wholesale jurisdictions, purchased capacity payments continue to exceed
levelized revenues. In the South Carolina jurisdiction, cumulative
levelized revenues have exceeded purchased capacity payments.
Jurisdictional levelizations are intended to recover total costs, including
allowed returns, and are subject to adjustments, including final true-ups.
For the nine months ended September 30, 1994 and 1993, the Company
recorded purchased capacity and energy costs from the Other Catawba Joint
Owners of $587,010,000 and $319,463,000, respectively. (See Note 7.) These
amounts, adjusted for the cost of capacity purchased not reflected in
current rates, are included in "Net interchange and purchased power" in the
Consolidated Statements of Income. As of September 30, 1994 and December
31, 1993, $913,244,000 and $768,099,000, respectively, associated with the
costs of capacity purchased, but not reflected in current rates had been
accumulated in the Consolidated Balance
8
<PAGE>
Sheets as "Purchased capacity costs." Accumulated deferred income taxes
associated with "Purchased capacity costs" were $353,481,000 and
$254,789,000 as of September 30, 1994 and December 31, 1993, respectively.
7. The Other Catawba Joint Owners and the Company were involved in
various proceedings related to the Catawba joint ownership contractual
agreements. The basic contention in each proceeding was that certain
calculations affecting bills under these agreements should be performed
differently. These items are covered by the agreements between the Company
and the Other Catawba Joint Owners which have been previously approved by
the Company's retail regulatory commissions. (See Note 6.)
The Company and two of the four joint owners entered into a settlement
agreement during 1993 which resolved all issues in contention in such
proceedings between the Company and these owners. Such settlement agreement
was approved by the Company's retail regulatory commissions. The Company
recorded a liability as an increase to Other current liabilities on its
Consolidated Balance Sheets of approximately $105 million in December 1993
to reflect this settlement. The liability was subsequently paid in May
1994. As the Company expects the costs associated with this settlement
will be recovered as part of the purchased capacity levelization, the
Company has included approximately $105 million as an increase to Purchased
capacity costs on its Consolidated Balance Sheets. Therefore, the Company
believes the ultimate resolution of these matters should not have a
material adverse effect on the results of operations or financial position
of the Company.
The Company and the two remaining joint owners, who are not parties to
the above settlement, reached a similar settlement agreement in April 1994
which was later approved by the regulators and resolved all issues in
contention in such proceedings between the Company and these owners. The
Company recorded a liability as an increase to Other current liabilities on
its Consolidated Balance Sheets of approximately $109 million in June 1994
to reflect this settlement. The liability was paid in October 1994. As the
Company expects the costs associated with this settlement will be recovered
as part of the purchased capacity levelization, the Company has included
approximately $109 million as an increase to Purchased capacity costs on
its Consolidated Balance Sheets. Therefore, the Company believes the
ultimate resolution of these matters should not have a material adverse
effect on the results of operations or financial position of the Company.
Since 1992, the Company has settled a number of claims related to
exposure of employees to asbestos. Such settlements have neither materially
affected the Company's results of operations in the years of settlement,
nor its financial position. The Company has been approached by additional
such claimants and currently is assessing the appropriate disposition of
these claims, and the possibility of claims beyond those already presented
to the Company.
The Company is also involved in legal, tax and regulatory proceedings
before various courts, regulatory commissions and governmental agencies
regarding matters arising in the ordinary course of business, some of which
involve substantial amounts. Management is of the opinion that the final
disposition of these proceedings will not have a material adverse effect on
the results of operations or the financial position of the Company.
8. In the Consolidated Statements of Cash Flows, certain prior year
information has been reclassified to conform with current classifications.
9. These are quarterly financial statements and the amounts reported
in the Consolidated Statements of Income for the periods herein are not
necessarily indicative of amounts expected for the respective years. These
amounts may be affected by factors such as the temperature variations
between seasons of the year, timing of scheduled and unscheduled
maintenance of certain electric generating units, and the Company's policy
of accruing estimates for certain other expenses ratably over twelve months
until final amounts are determined.
10. In the opinion of the Company, the accompanying financial
statements contain all adjustments necessary to present fairly the
financial position of Duke Power Company as of the respective dates shown
and the results of its operations for the respective periods then ended.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During the period January 1, 1994 through September 30, 1994,
additions to utility property (including nuclear fuel) of $537.4 million
and retirements of $168.3 million resulted in a net increase in gross plant
of $369.1 million.
The Company began construction of the Lincoln Combustion Turbine
Station (Lincoln Station) in March 1993. The Lincoln Station will help the
Company meet capacity needs during times of peak demand for electricity.
Current plans call for 12 units to begin commercial operation in 1995, with
the remaining 4 units to come on line the following year. The estimated
total cost of the project is approximately $500 million.
The Company normally experiences seasonal peak loads in the summer and
winter which are relatively in balance. On July 29, 1993, the Company
experienced its summer peak load of 15,720 MW during unusually hot weather.
A new all-time peak load of 16,070 MW occurred on January 19, 1994 during
extremely cold weather. The Company's peak load includes the load of the
Other Catawba Joint Owners.
Fixed charges coverage for the twelve months ended September 30, 1994,
using the SEC method, was 5.03 times. Internal cash generation for the
twelve months ended September 30, 1994 was 83 percent. Exclusive of
refinancing activities, 87% of the Company's capital needs were met by cash
generated from normal operations.
The Company is involved in legal, tax and regulatory proceedings
before various courts, regulatory commissions and governmental agencies
regarding matters arising in the ordinary course of business, some of which
involve substantial amounts. Management is of the opinion that the final
disposition of these proceedings will not have a material adverse effect on
the results of operations or the financial position of the Company.
The Other Catawba Joint Owners and the Company were involved in
various proceedings related to the Catawba joint ownership contractual
agreements. The basic contention in each proceeding was that certain
calculations affecting bills under these agreements should be performed
differently. These items are covered by the agreements between the Company
and the Other Catawba Joint Owners which have been previously approved by
the Company's retail regulatory commissions. (See Note 6.)
The Company and two of the four joint owners entered into a settlement
agreement during 1993 which resolved all issues in contention in such
proceedings between the Company and these owners. Such settlement agreement
was approved by the Company's retail regulatory commissions. The Company
recorded a liability as an increase to Other current liabilities on its
Consolidated Balance Sheets of approximately $105 million in December 1993
to reflect this settlement. The liability was subsequently paid in May
1994. As the Company expects the costs associated with this settlement
will be recovered as part of the purchased capacity levelization, the
Company has included approximately $105 million as an increase to Purchased
capacity costs on its Consolidated Balance Sheets. Therefore, the Company
believes the ultimate resolution of these matters should not have a
material adverse effect on the results of operations or financial position
of the Company.
The Company and the two remaining joint owners, who are not parties to
the above settlement, reached a similar settlement agreement in April 1994
which was later approved by the regulators and resolved all issues in
contention in such proceedings between the Company and these owners. The
Company recorded a liability as an increase to Other current liabilities on
its Consolidated Balance Sheets of approximately $109 million in June 1994
to reflect this settlement. The liability was paid in October 1994. As the
Company expects the costs associated with this settlement will be recovered
as part of the purchased capacity levelization, the Company has included
approximately $109 million as an increase to Purchased capacity costs on
its Consolidated Balance Sheets. Therefore, the Company believes the
10
<PAGE>
ultimate resolution of these matters should not have a material adverse
effect on the results of operations or financial position of the Company.
Since 1992, the Company has settled a number of claims related to
exposure of employees to asbestos. Such settlements have neither materially
affected the Company's results of operations in the years of settlement,
nor its financial position. The Company has been approached by additional
such claimants and currently is assessing the appropriate disposition of
these claims, and the possibility of claims beyond those already presented
to the Company.
The order of replacement of steam generators at the McGuire and
Catawba Nuclear Stations has been modified because of a delay in the
delivery of certain components. The new schedule is as follows: Catawba
Unit 1 - 1996, McGuire Unit 1 - 1997, McGuire Unit 2 - 1997. The revised
schedule is subject to change based on operational and project
circumstances.
On October 14, 1994, 1,914 employees represented by the
International Brotherhood of Electrical Workers (IBEW) were offered
participation in an Enhanced Voluntary Separation (EVS) program. The
opportunity to elect separation ends on November 30, 1994 and termination
must occur by February 28, 1995.
RESULTS OF OPERATIONS
Earnings per share for the third quarter and year-to-date 1994 were
$1.13 and $2.48, respectively, up 1.0% and 8.8% compared to the same
periods in 1993.
Revenues for third quarter 1994 decreased $74.2 million over third
quarter 1993. This decrease was primarily due to an 8.2% decrease in
residential sales resulting from mild summer weather. Revenues for the
year-to-date 1994 were up $18.0 million compared to the same period in
1993. Contributing to the increase were continuing economic growth of the
service territory and off-system sales.
Fuel expense decreased $35.0 million for the third quarter 1994
compared to the same period 1993. This decrease was primarily due to
higher levels of nuclear generation and reduced requirements resulting from
lower sales. Fuel expense decreased $12.7 million for year-to-date 1994
compared to the same period 1993. This decrease was due to a decrease in
the price of coal and higher levels of nuclear generation offset by an
increase in production resulting from higher sales.
Operating and maintenance expenses decreased $1.0 million for the
third quarter 1994 over the same period in 1993. Operating and maintenance
expense increased $49.1 million for year-to-date September 1994. This
6.1% increase was primarily due to a one-time charge associated with the
cost of the EVS program announced March 15. Employees, not represented by
the IBEW, electing to terminate under this program had to make their
decisions between March 31 and June 30 and terminate by August 31, 1994.
Approximately 1200 employees, or 7% of the Company's workforce, accepted
the EVS option. Total cost of the program was $47 million and was
primarily recorded as an operating expense in the second quarter. Payment
was complete as of September 30, 1994.
Depreciation and amortization expenses decreased for the third quarter
and year-to-date 1994 compared to third quarter and year-to-date 1993.
This decrease was primarily due to the lower amortization of property
losses in 1994, which was partially offset by an increase in investment in
distribution property.
Allowance for funds used during construction (AFUDC) increased $6.2
million and $10.0 million for the third quarter and year-to-date September
1994, respectively, compared to the same period 1993. These increases are
primarily a result of increased investment in the Lincoln Combustion
Turbine project.
Other, net on the Consolidated Statements of Income increased $8.8
million and $38.8 million for the third quarter and year-to-date 1994,
respectively, compared to the same periods in 1993. The third quarter and
year-to-date increases were primarily due to one-time gains from
transactions related to the Company's subsidiaries.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security
holders of the Company during the third quarter of 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
(27) Financial Data Schedule (included in electronic
filing only)
(B) Reports on Form 8-K
The Company filed no 8-K reports during the third quarter
of 1994.
12
<PAGE>
SIGNATURES
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.
DUKE POWER COMPANY
<TABLE>
<S> <C>
Date: November 4, 1994 _______________Richard J. Osborne_________________
Richard J. Osborne
Senior Vice President and Chief Financial Officer
Date: November 4, 1994 _________________Jeffrey L. Boyer________________
Jeffrey L. Boyer
Controller
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED STATEMENTS OF CASH
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<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> QTR-3 9-MOS
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