<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required] for the fiscal year ended December 31, 1993
or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period from
_______ to _______
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
- ----------- ----------------------------------- -----------------
1-956 DUQUESNE LIGHT COMPANY 25-0451600
(A Pennsylvania Corporation)
One Oxford Centre
301 Grant Street
Pittsburgh, Pennsylvania 15279
Telephone (412) 393-6000
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
DQE is the holder of all shares of outstanding common stock ($1 par value) of
Duquesne Light Company consisting of 10 shares as of February 23, 1994.
[X] Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
<PAGE>
[CONFORMED]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required] for the fiscal year ended December 31, 1993
or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period from
_______ to _______
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
- ----------- ---------------------------------- -----------------
1-956 DUQUESNE LIGHT COMPANY 25-0451600
(A Pennsylvania Corporation)
One Oxford Centre
301 Grant Street
Pittsburgh, Pennsylvania 15279
Telephone (412) 393-6000
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
DQE is the holder of all shares of outstanding common stock ($1 par value) of
Duquesne Light Company consisting of 10 shares as of February 23, 1994.
[X] Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
<PAGE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Registrant Title of each class on which registered
-------------- ---------------------------- ----------------------
<S> <C> <C>
Duquesne Light Preferred Stock (par value $50) New York Stock Exchange
Company
</TABLE>
<TABLE>
<CAPTION>
Involuntary
Series Liquidation Value
------ -----------------
<S> <C>
4% $50 per share
3.75% $50 per share
4.15% $50 per share
4.20% $50 per share
4.10% $50 per share
$2.10 $50 per share
$7.20 $100 per share
</TABLE>
Sinking Fund Debentures, due March 1, 2010 (5%) New York Stock Exchange
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
Part of Form 10-K
Into Which Document
Description Is Incorporated
------------------------------------ -------------------
<S> <C>
DQE Annual Report to Shareholders Parts I and II
for the year ended December 31, 1993
Proxy Statement for DQE Annual Part III
Meeting of Shareholders to be held on
April 20, 1994
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
PART I
<S> <C>
ITEM 1. BUSINESS 1
General 1
Service Territory 1
Regulation 1
Seasonality 1
Results of Operations 2
Power Sales 2
Other Income and Deductions 4
Financial Condition 4
Financing 4
Short-Term Borrowings 5
Interest Charges 5
Sales of Accounts Receivable 5
Nuclear Fuel Leasing 6
ESOP 6
Transmission Access 6
Construction 6
Rate Matters 7
1987 Rate Case 7
Energy Cost Rate Adjustment Clause (ECR) 7
Deferred Rate Synchronization Costs 7
Demand Side Management 8
Joint Interests in Generating Units 8
Employees 9
Electric Operations 9
Fossil Fuel 9
Nuclear Fuel 10
Nuclear Decommissioning 11
Environmental Matters 11
Outlook 13
Competition 13
Property Held for Future Use 14
Retirement Plan Measurement Assumptions 15
Other 15
Executive Officers of the Registrant 16
ITEM 2. PROPERTIES 17
ITEM 3. LEGAL PROCEEDINGS 18
Westinghouse Lawsuit 18
General Electric Settlement 18
Rate-Related and Environmental Litigation 18
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S
COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 19
ITEM 6. SELECTED FINANCIAL DATA 19
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 19
ITEM 8. CONSOLIDATED FINANCIAL
STATEMENTS AND SUPPLEMENTARY
DATA 19
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL
DISCLOSURE 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT 19
ITEM 11. EXECUTIVE COMPENSATION 20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT 20
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS 20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON
FORM 8-K 20
SCHEDULE V 34
SCHEDULE VI 37
SCHEDULE VIII 40
SCHEDULE X 41
SIGNATURES 42
INDEPENDENT AUDITORS' REPORT 43
FINANCIAL STATEMENTS 44 to 66
SELECTED FINANCIAL DATA 67
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS.
General
- --------------------------------------------------------------------------------
Duquesne Light Company (Duquesne) is a wholly owned subsidiary of DQE, an
energy services holding company formed in 1989. Duquesne is engaged in the
production, transmission, distribution and sale of electric energy. Duquesne was
formed under the laws of Pennsylvania by the consolidation and merger in 1912 of
three constituent companies.
Service Territory
Duquesne provides electric service to customers in Allegheny County,
including the City of Pittsburgh, and Beaver County. This represents a service
territory of approximately 800 square miles. The population of the area served
by Duquesne, based on 1990 census data, is approximately 1,510,000, of whom
370,000 reside in the City of Pittsburgh. In addition to serving approximately
579,000 customers within this service area, Duquesne also sells electricity to
other utilities beyond its service territory.
Regulation
Duquesne's utility operations are subject to regulation by the Pennsylvania
Public Utility Commission (PUC). Duquesne is also subject to regulation by the
Federal Energy Regulatory Commission (FERC) under the Federal Power Act in
respect of rates for interstate sales, transmission of electric power,
accounting and other matters. This regulation is designed to provide for the
recovery of operating costs and investment and the opportunity to earn a fair
return on funds invested in the utility business. The regulatory process imposes
a time lag during which increases in operating expenses, capital costs or
construction costs may not be recovered. Duquesne is also subject to regulation
by the Nuclear Regulatory Commission (NRC) under the Atomic Energy Act of 1954,
as amended, with respect to the operation of its jointly owned nuclear power
plants, Beaver Valley Unit 1, Beaver Valley Unit 2 and Perry Unit 1.
Seasonality
Sales of electricity to ultimate customers by Duquesne tend to increase
during the warmer summer and cooler winter seasons because of greater customer
use of electricity for cooling and heating.
[GRAPH FOR QTRLY KWH SALES APPEARS HERE]
1
<PAGE>
Results of Operations
- --------------------------------------------------------------------------------
[GRAPH FOR 1993 ENERGY SALES BY CLASS OF CUSTOMERS APPEARS HERE]
Power Sales
In 1993, sales to Duquesne's 20 largest customers accounted for 14.5
percent of customer revenues. Sales to USX Corporation, Duquesne's largest
customer, accounted for 3.7 percent of total 1993 customer revenues. Kilowatt-
hour (KWH) sales to ultimate customers in 1993 increased 2.4 percent in
comparison with KWH sales to ultimate customers in 1992. Above normal
temperatures in the summers of 1993 and 1991 were responsible for increased KWH
sales to residential and commercial customers in those years. Mild summer and
winter temperatures had the opposite effect on residential and commercial sales
in 1992.
Power sales to other utilities in 1993, 1992 and 1991 were 2,820,920 KWH,
4,059,989 KWH and 2,978,662 KWH, respectively. Sales to other utilities in 1993
declined from the record level in 1992 because higher system demand and more
planned and forced generating station outages in 1993 reduced Duquesne's
generating capacity available for off-system sales. The increase from 1991 to
1992 in these short-term sales to other utilities resulted from greater
availability of transmission and generating capacity, increased demand by other
utilities for energy and Duquesne's marketing efforts. The profits from these
sales were passed through the Energy Cost Rate Adjustment Clause (ECR) to
benefit Duquesne's customers. See discussion on page 7.
Customer operating revenues result from Duquesne's sales of electricity to
ultimate customers and are based on rates authorized by the PUC. These rates are
designed to recover Duquesne's operating expenses and investment in utility
assets and to provide a return on the investment. Current and deferred customer
revenues resulted from a $232 million rate increase granted in early 1988. The
PUC required Duquesne to phase in this increase during a six-year period. The
phase-in plan provided that, with no impact on total reported customer revenues,
rates would increase by approximately $85 million in April of each year from
1988 through 1991, remain constant in 1992 and 1993, and decrease by
approximately $85 million in April 1994. The phase-in plan also provided for
recovery of deferred revenues and carrying costs on such deferred revenues. The
rate increase has been recognized in operating revenues since March 1988. A
regulatory asset has been established for that portion of revenues yet to be
collected from customers, and carrying charges on this deferred asset have been
recognized as a component of other income in the Statement of Consolidated
Income. Duquesne expects the remaining deferred asset balance at December 31,
1993 of $28.6 million to be recovered by April 1994, the end of the phase-in
period.
Short-term sales to other utilities are made at market rates and are
recorded in other operating revenues in the Statement of Consolidated Income.
Revenues from sales to other utilities were $50.7 million, $72.4 million and
$58.9 million in 1993, 1992 and 1991, respectively. Factors influencing record
1992 revenues correspond to those affecting KWH power sales to other utilities
(above).
2
<PAGE>
Yearly fluctuations in fuel and purchased power expense result from changes
in the cost of fuel, the mix between coal and nuclear generation, the total KWHs
generated and the effects of deferred energy costs. In 1993, the impact of the
ECR on deferred energy costs decreased fuel expense, in comparison to that for
1992. Also contributing to the 16.7 percent decline in fuel expense was a 6
percent decrease in generation that was primarily due to more scheduled and
forced generating plant outages in 1993. Fuel expense for 1992 was greater than
that for 1991 because of increased generation of electricity attributable to
record sales to other utilities. The greater fuel expense in 1992, however, was
partially offset by lower coal and nuclear fuel costs per KWH. In 1994, nuclear
fuel costs per KWH generated are expected to continue to decline, and coal costs
per KWH generated are expected to remain near the 1993 level.
Other operating expenses were 6.5 percent higher in 1993 than in 1992. In
1993, Duquesne finalized plans to sublease the majority of its office space at
corporate headquarters; relocation of its principal business offices is
anticipated in 1994. A charge of approximately $13 million was recorded as an
operating expense to reflect the shortfall in anticipated sublease revenues from
the rental payments related to space leased through January 2003, the date the
leasing arrangements expire. Included in 1991 operating expenses was an increase
of $11.9 million in the allowance for uncollectible accounts receivable caused
by the deterioration of Duquesne's past due customer accounts and increased
collection costs.
Maintenance expense incurred for scheduled refueling outages at Duquesne's
nuclear units is deferred and amortized over the period between scheduled
outages. During 1993, amortization of deferred nuclear refueling outage expense
increased approximately $3.5 million over the 1992 level. Contributing further
to the increase in maintenance expense in 1993 was Duquesne's change, as of
January 1, 1993, in its method of accounting for maintenance costs during major
fossil station outages. Prior to 1993, maintenance costs incurred for scheduled
major outages at fossil stations were charged to expense as the costs were
incurred. Under the new accounting policy, Duquesne accrues, over the period
between outages, anticipated expenses for scheduled major fossil station
outages. (Maintenance costs incurred for non-major scheduled outages and for
forced outages continue to be charged to expense as the costs are incurred.)
This new method was adopted to match more accurately the maintenance costs with
the revenue produced during the periods between scheduled major fossil outages.
Depreciation and amortization expense increased in 1993 by comparison with
that for 1992 and 1991. The increase was primarily a result of an increase in
depreciable property.
Taxes other than income taxes decreased in 1993 primarily as a result of a
favorable resolution of property tax assessments retroactive to 1987. Also in
1993, Duquesne recorded, on the basis of this revised assessment, the expected
refunds of these overpayments in prior years. By comparison with those for 1991,
taxes other than income taxes decreased in 1992 as the result of favorable
resolution of capital stock tax, gross receipts tax and sales tax matters.
Income taxes increased in 1993 as a result of an increase in taxable income
and a 1 percent increase in the corporate federal income tax rate.
[GRAPH OF NET CASH FLOW FROM OPERATIONS APPEARS HERE]
* Graph excludes working capital and other-net changes.
3
<PAGE>
Other Income and Deductions
Other income decreased in 1993, in comparison with that for 1992, as a
result of a decrease of approximately $13 million in carrying charges on
deferred revenues. During 1993, the deferred revenue balance upon which carrying
charges are earned declined in comparison with that for 1992 and since April
1993, Duquesne has not recorded additional carrying charges on deferred
revenues. (See the discussion of the phase-in plan under the section on Power
Sales on page 2.)
Income taxes related to other income decreased $15 million in 1993, in
comparison with those for 1992, because of a favorable settlement (related to
Duquesne's 1988 tax return and the consolidated 1989 tax return) with the United
States Internal Revenue Service. The remaining decrease in 1993 was caused by
lower non-operating income.
Other income for 1992 increased, in comparison with that for 1991,
primarily as the result of an increase of $3.5 million in interest income and a
decrease of $3.7 million in fees related to Duquesne's sale of receivables.
Other income for 1991 included a $5.3 million regulatory accounting
reclassification that decreased other income, reduced depreciation expense and
had no impact on net income.
Financial Condition
- --------------------------------------------------------------------------------
Financing
Duquesne plans to meet its current obligations and debt maturities through
1998 with funds generated from operations and through new financings. At
December 31, 1993, Duquesne was in compliance with all of its debt covenants.
Duquesne continues to reduce capital costs by refinancing, repurchasing and
retiring securities. Since the end of 1987, annual interest expense on long-term
debt has been reduced by $55.3 million through the repurchase and refinancing of
high cost debt. Preferred and preference dividend costs have been reduced $10.6
million through the repurchase or redemption of preferred and preference stock.
During 1993, Duquesne issued $695 million of first collateral trust bonds with
maturities ranging from the year 1996 through the year 2025 and with an average
interest rate of 6.58 percent. The proceeds of these sales, together with other
funds, were used to redeem $713.7 million of first mortgage bonds with an
average interest rate of 8.16 percent.
Specifically, on June 15, 1993, a shelf registration for the periodic sale
of up to $300 million of First Collateral Trust Bonds became effective. Duquesne
issued bonds totaling $200 million under this shelf registration and, in
conjunction with the issuance of $495 million of First Collateral Trust Bonds
under 1992 shelf registrations, redeemed the remaining balances of the following
first mortgage bonds outstanding: $99.0 million of 9.00% First Mortgage Bonds,
Series due February 1, 2017; $98.0 million of 9.50% First Mortgage Bonds, Series
due December 1, 2016; $96.4 million of 8.375% First Mortgage Bonds, Series due
April 1, 2007; $49.0 million of 9.50% First Mortgage Bonds, Series due March 1,
2005; $43.6 million of 8.625% First Mortgage Bonds, Series due April 1, 2004;
$35.0 million of 7.75% First Mortgage Bonds, Series due July 1, 2003; $32.7
million of 7.25% First Mortgage Bonds, Series due January 1, 2003; $28.5 million
of 7.50% First Mortgage Bonds, Series due June 1, 2002; $26.5 million of 7.50%
First Mortgage Bonds, Series due December 1, 2001; $34.7 million of 7.875% First
Mortgage Bonds, Series due March 1, 2001; $29.7 million of 8.75% First Mortgage
Bonds, Series due March 1, 2000; $28.6 million of 7.75% First Mortgage Bonds,
Series due July 1, 1999; $30.0 million of 7.00% First Mortgage Bonds, Series due
January 1, 1999; $34.6 million of 6.375% First Mortgage Bonds, Series due
February 1, 1998; $24.6 million of 5.25% First Mortgage Bonds, Series due
February 1, 1997; and $22.8 million of 5.125% First Mortgage Bonds, Series due
February 1, 1996.
In June 1993, Duquesne participated in the issuance of $25 million of
Beaver County Industrial Development Authority Pollution Control Revenue Bonds.
In August 1993, Duquesne participated in the issuance of $20.5 million of Ohio
Air Quality Development Authority Pollution Control Revenue Refunding Bonds to
refund a like amount of pollution control obligations.
4
<PAGE>
On January 14, 1994, Duquesne redeemed all of its outstanding shares of
$2.10 preference stock and $7.50 preference stock for approximately $38 million.
Short-Term Borrowings
Duquesne has extendible revolving credit agreements with a group of banks
totaling $225 million. The current expiration date of this credit arrangement is
September 30, 1994. Interest rates can, in accordance with the option selected
at the time of each borrowing, be based on prime, federal funds, Eurodollar or
CD rates. Commitment fees are based on the unborrowed amount of the commitments.
There were no short-term borrowings during 1992. During 1993 and 1991, the
maximum short-term bank and commercial paper borrowings outstanding were $27
million and $66 million; the average daily short-term borrowings outstanding
were $1.6 million and $11.0 million; and the weighted average daily interest
rates applied to such borrowings were 3.42 percent and 6.36 percent,
respectively. At December 31, 1993, short-term borrowings were $11.0 million.
There were no short-term borrowing balances outstanding at December 31, 1992 or
1991.
Interest Charges
Duquesne achieved reductions in interest charges in 1993 and 1992 through
refinancing first mortgage bonds and through obtaining lower average short-term
rates on certain tax exempt pollution control notes. Duquesne also retired $24.2
million of preferred and preference stock during 1992. Interest expense and
dividends on preferred and preference stock declined to $121 million in 1993
from $135 million in 1992 and $145 million in 1991. Interest expense and
dividends on preferred and preference stock are expected to decline in 1994 by
approximately $9 million from the 1993 level.
[GRAPH OF INTEREST EXPENSE OF PREF. & PREF. DIVS. APPEARS HERE]
Sale of Accounts Receivable
In 1989, Duquesne and an unaffiliated corporation entered into an agreement
that entitled Duquesne to sell and the corporation to purchase, on an ongoing
basis, up to $100 million of accounts receivable. At December 31, 1993, Duquesne
had sold $9 million of receivables. The accounts receivable sales agreement,
which expires in June 1994, is one of many sources of funds available to
Duquesne. Duquesne is currently evaluating whether to seek an extension or a
replacement of the agreement.
5
<PAGE>
Nuclear Fuel Leasing
Duquesne finances its acquisitions of nuclear fuel through a leasing
arrangement under which it may finance up to $75 million of nuclear fuel. As of
December 31, 1993, the amount of nuclear fuel financed by Duquesne under this
arrangement totaled approximately $65 million. Duquesne plans to continue
leasing nuclear fuel to fulfill its requirements at least through 1995, the
remaining term of the related leasing arrangement.
ESOP
As discussed in Notes C and I to Duquesne's consolidated financial
statements, effective January 1, 1992, Duquesne established an Employee Stock
Ownership Plan (ESOP) through which it will match up to $.50 (depending on
whether certain incentive targets are met) of every $1.00 an employee
contributes to the 401(k) Retirement Savings Plan for Management Employees up to
a maximum of six percent of their eligible salary. Duquesne's matching
contributions are invested in Duquesne Preference Stock which can be exchanged
for DQE Common Stock. Duquesne may purchase shares of DQE Common Stock from DQE
or on the open market to satisfy the exchange feature of the Preference Stock.
Transmission Access
- --------------------------------------------------------------------------------
During the fourth quarter of 1993, Duquesne recognized a charge to other
income of approximately $15.2 million for its investment in the abandoned
General Public Utilities (GPU) transmission line project. On December 8, 1993,
the New Jersey Board of Regulatory Commissioners (BRC) denied a request by GPU's
subsidiary Jersey Central Power and Light Company for approval of long-term
power purchase* and operating agreements that were originally signed in 1990 by
GPU and Duquesne and further amended in 1993. The BRC rejected an administrative
law judge's recommended decision that the project be approved and, within hours
of the BRC decision, GPU terminated its participation in the project. In view of
GPU's decision, Duquesne also terminated its participation in the project and
the Pennsylvania PUC transmission line siting proceeding.
In March of 1994, Duquesne submitted, pursuant to the Federal Power Act, a
"Good Faith" request for transmission service with the Allegheny Power System
(APS) and Pennsylvania-New Jersey-Maryland Interconnection Association (PJM).
The request is based on 20-year firm service with flexible delivery points for
300 megawatts of transfer capability over the transmission network that extends
from Western Pennsylvania to the East Coast. In this request Duquesne has
identified a $50 million investment that would enhance and stabilize this
transmission system. APS and PJM have sixty days from the receipt of this
request to formally respond.
* For discussion of Duquesne's investment in the cold-reserved units, see
Property Held for Future Use in Note J of Duquesne's consolidated financial
statements.
Construction
- --------------------------------------------------------------------------------
During 1993, Duquesne spent approximately $100 million for construction to
improve and expand its production, transmission and distribution systems.
Duquesne estimates that it will spend approximately $110 million for
construction in 1994. Construction expenditures are estimated to be $70 million
in 1995 and $80 million in 1996. These amounts exclude AFC, nuclear fuel and
expenditures for possible early replacement of steam generators at the Beaver
Valley Power Station. (See Note K to Duquesne's consolidated financial
statements.) Duquesne currently has no plans for construction of new base load
generating plants.
Duquesne anticipates that funds for planned capital expenditures in the
next several years will be provided primarily from cash becoming available from
operations and, to a lesser degree, from additional financings. Interim
financing has been and will continue to be provided through bank borrowings and
sales of commercial paper. Substantially all funds needed for 1994 capital
expenditures are expected to be generated internally.
6
<PAGE>
See "Nuclear Fuel" on page 10 for a discussion of Duquesne's commitments
with respect to the cost of nuclear fuel as of December 31, 1993, and for each
of the years 1994 through 1998.
Rate Matters
- --------------------------------------------------------------------------------
Electric rates charged by Duquesne to its customers are regulated by the
PUC. Electric rates charged to the Borough of Pitcairn and to other electric
utilities are regulated by the FERC. These rates are designed to recover
Duquesne's operating expenses, investment in utility assets, and a return on
those investments. Sales to other utilities are made at market rates. See Note J
to Duquesne's consolidated financial statements for additional discussion of
rate-related matters.
1987 Rate Case
In March 1988, the PUC adopted a rate order that increased Duquesne's
annual revenues by $232 million phased-in from April 1988 through April 1994.
Deficiencies which resulted from the phase-in plan in current revenues from
customers have been included in the consolidated income statement as deferred
revenues. Deferred revenues have been recorded on the balance sheet as a
deferred asset for future recovery. As customers were billed for deficiencies
related to prior periods, this deferred asset was reduced. As designed, the
phase-in plan provided for carrying charges (at the after-tax AFC rate) on
revenues deferred for future recovery. Duquesne has not recorded additional
carrying charges on the deferred revenue balance since April 1993. Duquesne had
recovered previously deferred revenues and carrying charges of $285.9 million as
of December 31, 1993. Phase-in plan deferrals of $28.6 million remained
unrecovered as of that date. Duquesne expects to recover this remaining
unrecovered balance.
At this time, Duquesne has no pending base rate case and no immediate plans
to file a base rate case.
Energy Cost Rate Adjustment Clause (ECR)
Duquesne defers fuel and other energy costs for recovery in subsequent
years through the ECR. The deferrals reflect the difference between the amount
that Duquesne is currently collecting from customers and its actual fuel costs.
The PUC reviews Duquesne's fuel costs annually, for the fiscal year April
through March, against the previously projected fuel costs and adjusts the ECR
for over- or under-recoveries and for two PUC-established coal cost caps. The
ECR is based on projected unit costs, is recalculated each year, and is subject
to PUC review. The adjustment includes a credit to Duquesne's customers for
profits from short-term power sales to other utilities, as well as an adjustment
for any over- or under-collections from customers that may have occurred in
prior years. The 1993 ECR reduced customer costs from 1992 levels and has
continued to reduce revenues through the first quarter of 1994 by a greater
amount than in the prior year. From April 1994 through March 1995, the ECR is
expected to reduce revenues by a lesser amount than in the prior year. This ECR
treatment is intended to have no impact on net income.
Deferred Rate Synchronization Costs
In 1987, the PUC approved Duquesne's petition to defer initial operating
and other costs of Perry Unit 1 and Beaver Valley Unit 2. Duquesne deferred the
costs incurred from November 17, 1987, when the units went into commercial
operation, until March 25, 1988 when a rate order was issued. In its order, the
PUC postponed ruling on whether these costs would be recoverable from
ratepayers. At December 31, 1993, these costs totaled $51.1 million, net of
deferred fuel savings related to the two units. Duquesne is not earning a return
on the deferred costs. Duquesne believes that these costs are recoverable. In
1990, another Pennsylvania utility was permitted recovery, with no return on the
unamortized balance, of similar costs over a 10-year period.
7
<PAGE>
Demand-Side Management
In March of 1994, Duquesne filed with the PUC an updated Demand-Side
Management Plan (DSM) designed to encourage customer energy conservation and
load management. Duquesne's proposed DSM programs include compact fluorescent
lighting, load management, cool storage systems, emergency generation networks
and long-term interruptible rates. The Pennsylvania Industrial Energy Coalition
filed an appeal in Commonwealth Court of Pennsylvania on December 31, 1993,
requesting reversal of the PUC order of December 13, 1993 which originated
electric utility DMS programs in Pennsylvania and allows utilities to recover
prudently incurred DSM program costs through rates. Implementation of Duquesne's
DSM plan awaits PUC approval and disposition of this appeal.
Joint Interests in Generating Units
- --------------------------------------------------------------------------------
Duquesne has various contracts with The Potomac Edison Company, Monongahela
Power Company, Ohio Edison Company, Pennsylvania Power Company, The Cleveland
Electric Illuminating Company (CEI) and The Toledo Edison Company including
provisions for coordinated maintenance responsibilities, limited and qualified
mutual back-up in the event of outages and certain capacity and energy
transactions.
Duquesne has an interest in the following nuclear plants jointly with the
following companies:
<TABLE>
<CAPTION>
Beaver Valley
-------------------- Perry
Unit 1 Unit 2 (1) Unit 1
------ ------ ------
<S> <C> <C> <C>
Duquesne * 47.50% * 13.74% 13.74%
Ohio Edison Company 35.00% 41.88% 30.00%
Pennsylvania Power Company 17.50% -0- 5.24%
Cleveland Electric Illuminating Company -0- 24.47% * 31.11%
Toledo Edison Company -0- 19.91% 19.91%
</TABLE>
*Denotes Operator
(1) In 1987, Duquesne sold its 13.74 percent interest in Beaver Valley Unit 2;
the sale was exclusive of transmission and common facilities. The total sales
price of $537.9 million was the appraised value of Duquesne's interest in the
property. Duquesne subsequently leased back its interest in the unit for a term
of 29.5 years. The lease provides for semiannual payments and is accounted for
as an operating lease. Duquesne is responsible under the terms of the lease for
all costs of its interest in the unit. See Note E to Duquesne's consolidated
financial statements.
Duquesne owns the following fossil plants jointly with the following
companies:
<TABLE>
<CAPTION>
Bruce Mansfield
Sammis ------------------------------ Eastlake Ft. Martin
Unit 7 Unit 1 Unit 2 Unit 3 Unit 5 Unit 1
------ ------ ------ ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Duquesne 31.20% 29.30% 8.00% 13.74% 31.20% 50.00%
Ohio Edison Company * 48.00% 60.00% 39.30% 35.60% -0- -0-
Pennsylvania Power Company 20.80% * 4.20% * 6.80% * 6.28% -0- -0-
Cleveland Electric Illuminating
Company -0- 6.50% 28.60% 24.47% * 68.80% -0-
Toledo Edison Company -0- -0- 17.30% 19.91% -0- -0-
Potomac Edison Company -0- -0- -0- -0- -0- 25.00%
Monongahela Power Company -0- -0- -0- -0- -0- * 25.00%
</TABLE>
*Denotes Operator
8
<PAGE>
Under the agreements governing the operation of these jointly owned
generating units, the day-to-day operating authority is assigned to a specific
company. CEI has such authority for Perry Unit 1 and Eastlake Unit 5, Ohio
Edison Company has authority for Sammis Unit 7, Pennsylvania Power Company has
authority for Bruce Mansfield Units 1, 2 and 3 and Monongahela Power Company
operates Ft. Martin Unit 1. Duquesne monitors activities in connection with all
of these units. Duquesne has day-to-day operating authority for Beaver Valley
Units 1 and 2. All the companies with a joint interest in these units are kept
fully informed of developments at these generating units.
Employees
- --------------------------------------------------------------------------------
At December 31, 1993, Duquesne had 4,042 employees, including 1,285
employees at the Duquesne-operated Beaver Valley Power Station. The
International Brotherhood of Electrical Workers represents 2,481 of Duquesne's
employees. The current contract runs through September 1994.
Electric Operations
- --------------------------------------------------------------------------------
Approximately 78% of the electric energy generated by Duquesne's system
during 1993 was produced by its coal-fired generating capacity and approximately
22% by its nuclear generating capacity. Duquesne normally experiences its peak
loads in the summer. The customer system peak for 1993 of 2,499 megawatts
occurred on August 31, 1993.
Duquesne's fossil plants operated at 83% availability in 1993 and 80% in
1992. Duquesne's nuclear plants operated at 63% availability in 1993 compared to
90% in 1992. The timing of scheduled maintenance and refueling outages, as well
as the duration of forced outages, affect availability of power plants.
In 1986, the PUC approved Duquesne's request to remove the Phillips and
most of the Brunot Island (BI) power stations from service and place them in
cold reserve. At that time, Duquesne's net investment in the cold-reserved
stations was $106 million. In connection with a proposed long-term power sale,
Duquesne invested in the cold-reserved plants an additional $24 million in
preservation, condition assessment and plant improvements. Duquesne's net
investment in the plants at December 31, 1993 is approximately $130 million. For
further discussion of Duquesne's investment in the cold-reserved units, see
Property Held for Future Use in "Outlook" and Note J of Duquesne's consolidated
financial statements.
The North American Electric Reliability Council, of which Duquesne is a
member, uses capacity margin to report generating capability as compared to
demand. Capacity margin is expressed as capacity less demand divided by
capacity. Although Duquesne also uses criteria other than capacity margin for
determining the need for installation of additional generating capability,
Duquesne's capacity margin in 1993 was 10.7% based on installed non-cold-
reserved generating capacity and internal peak load, including 93 megawatts of
interruptible load. Duquesne has ties with regional utilities which provide the
capability to import in excess of 4,000 megawatts of capacity to supplement
Duquesne's generation, as required. Peak generation on June 28, 1993 was 2,621
megawatts, which included 483 megawatts of off-system sales.
Additional information relating to Duquesne's electric operations is set
forth on page 42 of DQE's Annual Report to Shareholders for the year ended
December 31, 1993. The information is incorporated here by reference.
Fossil Fuel
- --------------------------------------------------------------------------------
Duquesne believes that sufficient coal for its coal-fired generating units
will be available from various sources to satisfy its requirements for the
foreseeable future. During 1993, approximately 2.4 million tons of coal were
consumed at Duquesne's two wholly owned coal-fired stations - Cheswick and
Elrama.
Duquesne owns Warwick Mine, an underground mine located on the Monongahela
River approximately 83 river miles from Pittsburgh. Warwick Mine has been
excluded from rate base since 1981. Duquesne temporarily idled the mine in June
1988 due to excess coal inventories. In 1990, Duquesne restarted the mine by an
agreement under which an unaffiliated company operates the mine until March 2000
and
9
<PAGE>
sells the coal produced. Production began in late 1990. The mine reached a full
production rate in early 1991. Warwick Mine coal reserves include both high and
low sulfur coal; the sulfur content averages in the mid-range at 1.7 percent -
1.9 percent. More than 90 percent of the coal mined at Warwick Mine currently is
used by Duquesne, although Duquesne is not precluded from selling this coal on
the open market. Duquesne receives a royalty on sales of coal to the open
market. The Warwick Mine currently supplies less than one-fifth of the coal used
in the production of electricity at the plants owned or jointly owned by
Duquesne. Duquesne estimates that, at December 31, 1993, its economically
recoverable coal reserves at Warwick Mine were 11.5 million tons. Costs at
Warwick Mine and Duquesne's investment in the mine are expected to be recovered
through the cost of coal in the ECR. Recovery is subject to the system-wide coal
cost standard. Duquesne also has an opportunity to earn a return on its
investment in the mine through the cost of coal during the period of the system-
wide coal cost standard, including extensions. At December 31, 1993, Duquesne's
net investment in the mine was $24.5 million. The estimated current liability,
including final site reclamation, mine water treatment and certain labor
liabilities for mine closing is $33.0 million and Duquesne has collected
approximately $8.9 million toward these costs. For further discussion of
Duquesne's investment in Warwick Mine costs, see Note J of Duquesne's
consolidated financial statements.
During 1993, 65% of Duquesne's coal supplies were provided by contracts,
with the remainder satisfied through purchases on the spot market. Duquesne had
four long-term contracts in effect at December 31, 1993, which, in combination
with spot market purchases, are expected to furnish an adequate future coal
supply. Duquesne does not anticipate any difficulty in replacing or renewing
these contracts as they expire in future years ranging from 1995 through 2002.
At December 31, 1993, Duquesne's wholly owned and jointly owned generating units
had on hand an average coal supply of 45 days.
The PUC has established two market price coal cost standards. One applies
only to coal delivered at the Mansfield plant. The other, the system-wide coal
cost standard, applies to coal delivered to the remainder of Duquesne's system.
Both standards are updated monthly to reflect prevailing market prices of
similar coalduring the month. The PUC has directed Duquesne to defer recovery of
the delivered cost of coal over generally prevailing market prices for similar
coal. Through the ECR, however, the PUC does allow deferred amounts to be
recovered from customers when the delivered costs of coal fall below prevailing
market prices. The unrecovered cost of Mansfield coal was $7.4 million and the
unrecovered cost of the remainder of the system-wide coal was $8.8 million at
December 31, 1993. Duquesne estimates that all deferred coal costs will be
recovered. Duquesne's average cost per ton of coal consumed during the past
three years at generating units which it operates or in which it has an
ownership interest was as follows: 1993-$40.08; 1992-$40.44; and 1991-$42.49.
See Note J to Duquesne's consolidated financial statements for a discussion of
the coal cost standards. The cost of coal, which falls within the market price
limitations discussed in Note J of Duquesne's consolidated financial statements,
is recovered from Duquesne's customers through the ECR discussed previously in
"Rate Matters" on page 7.
Nuclear Fuel
- --------------------------------------------------------------------------------
The cycle of production and utilization of nuclear fuel consists of (1)
mining and milling of uranium ore and processing the ore into uranium
concentrates, (2) conversion of uranium concentrates to uranium hexafluoride,
(3) enrichment of the uranium hexafluoride, (4) fabrication of fuel assemblies,
(5) utilization of the nuclear fuel in the generating station reactor and (6)
storing and reprocessing or disposal of spent fuel.
Adequate supplies of uranium and conversion services are under contract for
Duquesne's requirements for its jointly owned nuclear units through 1997.
Enrichment services are supplied under a 1984 United States Enrichment
Corporation Utility Services Contract entered into for a period of 30 years by
the companies for their joint interests in Perry Unit 1 and Beaver Valley Units
1 and 2. Under the terms of this contract Duquesne is committed to 100% of its
enrichment needs through 1998. Fuel fabrication contracts are in place to supply
reload requirements for the next three cycles for Beaver Valley Unit 1, the next
three cycles for Beaver Valley Unit 2 and the next twenty-one cycles of Perry
Unit 1. Duquesne will be required to make arrangements for uranium supply and
related services as existing commitments expire.
For joint interests in generating units (See page 8.), each company is
responsible for financing its proportionate share of the costs of nuclear fuel
for each nuclear unit in which it has an ownership interest. Duquesne has
entered into a lease arrangement for the acquisition of nuclear fuel pursuant to
which
10
<PAGE>
Duquesne is permitted to finance up to $75 million. As of December 31, 1993, the
cost of Duquesne's nuclear fuel financed was $65 million. Duquesne's nuclear
fuel costs, which are amortized to reflect fuel consumed, are charged to fuel
expense and are recovered through rates. Duquesne estimates that, over the next
three years, the amortization of nuclear fuel consumed will exceed the
expenditures for new fuel by approximately $18 million. The actual nuclear fuel
costs to be financed and amortized during the period 1994 through 1996 will be
influenced by such factors as changes in interest rates, lengths of the
respective fuel cycles and changes in nuclear material cost and services, the
prices and availability of which are not known at this time. Such costs may also
be influenced by other events not presently foreseen.
Duquesne's nuclear fuel costs related to Beaver Valley Unit 1, Beaver
Valley Unit 2 and Perry Unit 1 under the lease arrangement are charged to fuel
expense based on the quantity of energy generated. Nuclear fuel costs for these
units averaged .918 cents per KWH in 1993, inclusive of charges associated with
spent fuel. Duquesne is recovering from its customers the costs associated with
the ultimate disposal of spent fuel. All three units presently operate on an
18-month refueling cycle with the scheduled refueling dates established as
follows: Beaver Valley Unit 1, October 1994; Beaver Valley Unit 2, March 1995
and Perry Unit 1, February 1994.
Nuclear Decommissioning
- --------------------------------------------------------------------------------
The PUC ruled that recovery of the decommissioning costs for Beaver Valley
Unit 1 could begin December 24, 1977 and that recovery for Beaver Valley Unit 2
and Perry Unit 1 could begin March 25, 1988. Duquesne expects to decommission
each nuclear plant at the end of its life, a date that currently coincides with
the expiration of each plant's operating license. (See Note L to Duquesne's
consolidated financial statements.) The total estimated decommissioning costs,
including removal and decontamination costs, being recovered in rates are $70
million for Beaver Valley Unit 1, $20 million for Beaver Valley Unit 2, and $38
million for Perry Unit 1. These amounts were based upon the most recent studies
available at the time of Duquesne's last rate case.
Since the time of Duquesne's last rate case, site specific studies have
been performed to update the estimated decommissioning costs, in current
dollars, for each of its nuclear generating units. In 1992, Duquesne's share of
the estimated decommissioning costs for Beaver Valley Unit 2 was revised to $35
million. Duquesne's share of decommissioning costs, which is based on
preliminary site specific studies to be finalized early in 1994, is estimated to
increase to $134 million for Beaver Valley Unit 1 and to $71 million for Perry.
(See Note L to Duquesne's consolidated financial statements for additional NRC
licensing information.)
During 1994, it is Duquesne's intention to increase the annual contribution
to its decommissioning trusts by $2 million to bring the total annual funding to
approximately $4 million per year. Duquesne plans to continue making periodic
reevaluations of estimated decommissioning costs, to provide additional funding
from time to time, and to seek regulatory approval for recognition of these
increased funding levels.
Duquesne records decommissioning costs under the category of depreciation
expense and accrues a liability, equal to that amount, for nuclear
decommissioning expense. Such nuclear decommissioning funds are deposited in
external, segregated trust accounts. Trust fund earnings increase the fund
balance and the recorded liability. The aggregate trust fund balances at the end
of 1993 totaled $18.1 million. On the Company's consolidated balance sheet, the
decommissioning trusts have been reflected in other property and investments,
and the related liability has been recorded as other deferred credits.
Environmental Matters
- --------------------------------------------------------------------------------
The Comprehensive Environmental Response, Compensation and Liability Act of
1980 (Superfund) and the Superfund Amendments and Reauthorization Act of 1986
established a variety of informational and environmental action programs. The
Environmental Protection Agency (EPA) has informed Duquesne of its involvement
or potential involvement in three hazardous waste sites. If Duquesne is
ultimately determined to be a responsible party with respect to these sites, it
could be liable for all or a portion of the cleanup costs. However, in each
case, other solvent, potentially responsible parties that may bear all or part
of any liability are also
11
<PAGE>
involved. In addition, Duquesne believes that available defenses, along with
other factors (including overall limited involvement and low estimated
remediation costs for one site) will limit any potential liability that Duquesne
may have for cleanup costs. Duquesne believes that it is adequately reserved for
all known liabilities and costs and, accordingly, that these matters will not
have a materially adverse effect on its financial position or results of
operations.
In 1990, Congress approved amendments to the Clean Air Act. Among other
innovations, this legislation established the Emission Allowance Trading System.
An "emission allowance" permits fuel emission of one ton of sulphur dioxide
(SO\\2\\) for one year. These allowances are issued by the EPA to fossil-fired
stations with generating capability of more than 25 megawatts that were in
existence as of the passage of the 1990 amendments. Allowances are part of a
market-based approach to SO\\2\\ reduction. Emission allowances can also be
obtained through purchases on the open market or directly from other sources.
Excess allowances may be banked for future use or sold on the open market to
other parties for their use in offsetting emissions.
The legislation requires significant reductions of SO\\2\\ and oxides of
nitrogen (NO\\X\\) by 1995 and additional reductions by the year 2000. Duquesne
continues to work with the operators of its jointly owned stations to
implement cost-effective compliance strategies to meet these requirements.
Duquesne's plans for meeting the 1995 SO\\2\\ compliance requirements include
increasing the use of scrubbed capacity, switching to fuel with a lower sulfur
content and purchasing emission allowances. NO\\X\\ reductions under Title IV
are required by 1995 at only the Cheswick station; work to achieve the
reductions was completed in 1993. The ozone attainment provisions of Title I
of the Clean Air Act Amendments will require NO\\X\\ reductions by 1995 at
Duquesne's Elrama plant and at the jointly owned Mansfield plant. Duquesne
plans to achieve such reductions with low NO\\X\\ burner technology. Duquesne
has currently 1,187 megawatts of scrubbed capacity, including 300 megawatts at
the currently cold-reserved Phillips plant, as well as 570 megawatts of
capacity that meets the 1995 standards of the Clean Air Act amendments through
the use of low sulfur coal. The estimated capital costs to achieve 1995
compliance standards are approximately $30 million, of which approximately $15
million has already been spent. Through the year 2000, Duquesne is planning a
combination of compliance methods that include fuel switching; increased use
of, and improvements in, scrubbed capacity; flue gas conditioning; low NO\\X\\
burner technology; and the purchase of emission allowances. Duquesne currently
estimates that additional capital costs to comply with environmental
requirements from 1995 through the year 2000 will be approximately $20
million. This estimate is subject to the finalization of federal and state
regulations.
Duquesne is closely monitoring other potential air quality programs and air
emission control requirements that could be imposed in the future. These areas
include additional NO\\X\\ control requirements that could be imposed on
fossil fuel plants by the Ozone Transport Commission, more stringent ambient
air quality and emission standards for SO\\2\\ and particulates, or carbon
dioxide (CO\\2\\) control measures. As these potential programs are in various
stages of discussion and consideration, it is impossible to make reasonable
estimates of the potential costs and impacts of these programs at this time.
In July 1992, the Pennsylvania Department of Environmental Resources (DER)
issued Residual Waste Management Regulations governing the generation and
management of non-hazardous waste. Duquesne is currently conducting tests and
developing compliance strategies. Capital compliance costs are estimated, on the
basis of information currently available, at $10 million through 1995. The
expected additional capital cost of compliance from 1995 through 2000 is
approximately $25 million; this estimate is subject to the results of ground
water assessments and DER final approval of compliance plans.
Duquesne operates the scrubbed Elrama plant and converts the scrubber
slurry to a fixated pozolonic material. This material is placed at an off-site
disposal area having approximately six years of remaining capacity.
Additionally, Duquesne owns 17 percent of the scrubbed Mansfield plant, which is
operated by Pennsylvania Power. This plant pumps a similar slurry to an off-site
impoundment where the slurry is treated by using a Calcilox fixation process.
The site has at least 14 years of remaining capacity. Both plants have limited
temporary on-site storage for flue gas desulfurization material and no permanent
on-site disposal capacity. While there is no imminent shortage of disposal
capacity, Duquesne continues to monitor this situation and to plan for future
disposal. The siting of future disposal facilities will be facilitated by the
1993 EPA determination that coal combustion waste products are not hazardous
waste and are therefore exempt from the Hazardous Waste Regulations. The second
phase of EPA's determination will consider the co-management of coal combustion
wastes with other low volume fossil fuel combustion waste streams.
12
<PAGE>
Under the Nuclear Waste Policy Act of 1982, which establishes a policy for
handling and disposing of spent nuclear fuel and requires the establishment of a
final repository to accept spent fuel, contracts for jointly owned nuclear
plants have been entered into with the Department of Energy (DOE) for permanent
disposal of spent nuclear fuel and high-level radioactive waste. The DOE has
indicated that the repository will not be available for acceptance of spent fuel
before 2010. Existing on-site spent fuel storage capacities at Beaver Valley 1,
Beaver Valley 2 and Perry Unit 1 are expected to be sufficient until 1996, 2010,
and 2009, respectively. Duquesne is currently increasing the storage capacity at
Beaver Valley 1 by equipping the spent fuel pool with high density fuel storage
racks. Duquesne anticipates that such action will increase the spent fuel
storage capacity at Beaver Valley 1 to provide for sufficient storage through
2014.
In October 1992, the President signed into law the National Energy Policy
Act of 1992 (energy act). The energy act addresses a wide range of energy
issues, including several matters affecting bulk power competition in the
electric utility industry. See discussion in "Outlook" below. The energy act
requires utilities (including Duquesne) that have purchased uranium enrichment
services from the DOE to collectively contribute as much as $150 million
annually (adjusted for inflation) up to a total of $2.25 billion for
decommissioning and decontamination of DOE enrichment facilities. Assessments
are based on the amount of uranium a utility had processed for enrichment prior
to enactment of the energy act and are to be paid by such utilities over a
15-year period. The energy act states that the assessments shall be deemed a
necessary and reasonable current cost of fuel and shall be fully recoverable in
rates in all jurisdictions in the same manner as the utility's other fuel costs.
Duquesne believes these assessments will be fully recoverable through rates.
Duquesne's total estimated liability for contributions is $12.5 million.
The Low-Level Waste Policy Act of 1980 (LLWPA) mandated that the
responsibility for the disposal of low-level radioactive waste rests with the
individual states. Most states, including Pennsylvania and Ohio, have formed
regional compacts to comply with the LLWPA by providing permanent disposal sites
for radioactive waste generated within each compact. However, plans for these
disposal sites have not progressed as anticipated in the LLWPA and it is not
certain when the regional sites will be available for disposal of waste.
Radioactive waste from Duquesne's jointly owned nuclear plants is currently
shipped to a disposal facility in South Carolina. This facility has announced
that it will not accept any additional waste from outside the Southeast Compact
after June 30, 1994. The co-owners have constructed on-site waste storage
facilities at the Beaver Valley Power Station and the Perry Power Plant for
interim storage of the plants' low-level radioactive waste. The Beaver Valley
on-site facility is expected to be sufficient to meet site storage requirements
until regional disposal facilities become available. The Perry on-site facility
is expected to be sufficient to meet site storage requirements for a period of
five years.
The Company believes that it is adequately reserved for all known
environmental liabilities and costs. Accordingly, the Company believes that the
ultimate outcome of these environmental matters will not have a material adverse
effect on its financial position or the results of its operations.
Outlook
- --------------------------------------------------------------------------------
Competition
Regulatory developments in the industry are placing increasing competitive
pressures on electric public utilities. Duquesne, like the industry in general,
is continuing to assess the impact of these competitive forces on its future
operations.
The National Energy Policy Act of 1992 (energy act) was designed, among
other things, to foster competition. Among other provisions, the energy act
amends the Public Utility Holding Company Act of 1935 (1935 act) and the Federal
Power Act. Amendments to the 1935 act create a new class of independent power
producers known as Exempt Wholesale Generators (EWGs), which are exempt from the
corporate structure regulations of the 1935 act. EWGs, which may include
independent power producers as well as affiliates of electric utilities, do not
require Securities and Exchange Commission approval or regulation. At the
current time, Duquesne has not made, and has no plans to make, any investment in
EWGs.
13
<PAGE>
Amendments to the Federal Power Act create the potential for utilities and
other power producers to gain increased access to transmission systems of other
utilities to facilitate sales to other utilities. The amendments would permit
the FERC to order utilities to transmit power over their lines for use by other
suppliers and to enlarge or construct additional transmission capacity to
provide these services. The FERC may not, however, issue any order that would
unreasonably impair the continuing reliability of affected electric systems.
Finally, the legislation allows brokers and marketers, without owning or
operating any generation or transmission facilities, to enter into the business
of buying and selling electric capacity and energy.
The energy efficiency title of the energy act requires states to consider
adopting integrated resource planning, which allows utility investments in
conservation and other demand-side management techniques to be at least as
profitable as supply investments. The energy act also establishes new efficiency
standards in industrial and commercial equipment and lighting and requires
states to establish commercial and residential building codes with energy
efficiency standards. Additionally, the energy act requires utilities to
consider energy efficiency programs in their integrated resource planning. The
effects on Duquesne of these standards and requirements cannot be determined at
this time.
The energy act encourages increased use of alternative transportation fuels
by federal, state, city and power provider fleets. The energy act also provides
funding for development of electric vehicles and associated infrastructures. The
effects on Duquesne cannot be determined at this time.
The nuclear-related provisions of the energy act generally encourage
further development of the nuclear power industry through a variety of measures,
including the consolidation of construction and operating license steps into one
proceeding. The impact of these provisions on Duquesne is not expected to be
material.
These new regulations also permit industrial and large commercial customers
to own and operate facilities to generate their own electric energy requirements
and, if such facilities are qualifying facilities, to require the displaced
electric utility to purchase the output of such facilities. Customers may also
have the option of substituting fuels, such as the use of natural gas, oil or
wood for heating and/or cooling purposes rather than electric energy or of
relocating their facilities to a lower cost environment.
In addition, increased competition may also result from the 1990 Amendments
to the Clean Air Act. Such amendments exempt from SO2 and NOX control
requirements existing units with less than 25 megawatts of generating capacity
and new or existing co-generation units supplying less than one-third of their
electric output and less than 25 megawatts for commercial sale.
Property Held for Future Use
In 1986, the PUC approved Duquesne's request to remove the Phillips and
most of the Brunot Island power stations from service and place them in cold
reserve. Duquesne's capitalized costs and net investment in the plants at
December 31, 1993 totaled $130 million. (See Note L to Duquesne's consolidated
financial statements.)
Duquesne expects to recover its net investment in these plants through
future sales. Phillips and BI represent licensed, certified, clean sources of
electricity that will be necessary to meet expanding opportunities in the power
markets. Duquesne believes that anticipated growth in peak load demand for
electricity within its service territory will require additional peaking
generation. Duquesne looks to BI to meet this need. The Phillips Power Plant is
an important component in meeting market opportunities to supply long-term bulk
power. Recent legislation may permit wider transmission access to these long-
term bulk power markets. In summary, Duquesne believes its investment in these
cold-reserved plants will be necessary in order to meet future business needs.
If business opportunities do not develop as expected, Duquesne will consider the
sale of these assets. In the event that market demand, transmission access or
rate recovery do not support the utilization or sale of the plants, Duquesne may
have to write off part or all of their costs.
14
<PAGE>
Retirement Plan Measurement Assumptions
Duquesne reduced the discount rate used to determine the projected benefit
obligation on Duquesne's retirement plans at December 31, 1993 to 7 percent. The
assumed change in future compensation levels was also decreased by 0.5 percent
to reflect current market and economic conditions.
The effect of these changes on Duquesne's retirement plan obligations is
reflected in the amounts shown in Note I to Duquesne's consolidated financial
statements. The resulting increase in related expenses for subsequent years is
not expected to be material.
Other
Duquesne's utility operations are subject to regulation by the PUC and the
FERC. This regulation is designed to provide for the recovery of operating costs
and investment and the opportunity to earn a fair return on funds invested in
the utility business. The regulatory process imposes a time lag during which
increases in operating expenses, capital costs or construction costs may not be
recovered.
---------------------------
15
<PAGE>
Information relating to the business of Duquesne and additional information
relating to Duquesne is set forth on pages 9 to 44 of DQE's Annual Report to
Shareholders for the year ended December 31, 1993. The information is
incorporated here by reference.
Executive Officers of the Registrant
- --------------------------------------------------------------------------------
Set forth below are the names, ages as of March 1, 1994, positions and
brief accounts of the business experience during the past five years of the
executive officers of Duquesne.
<TABLE>
<CAPTION>
Name Age Office
- ---------------------- --- -------------------------------------------------
<S> <C> <C>
Wesley W. von Schack 49 Chairman of the Board since September 1987 and
President and Chief Executive Officer since
January 1986.
David D. Marshall (a) 41 Executive Vice President since February 1992.
Gary L. Schwass (b) 48 Chief Financial Officer since July 1989 and Vice
President - Finance since May 1988.
Roger D. Beck 57 Vice President - Marketing and Customer Services
since August 1986.
Gary R. Brandenberger 56 Vice President - Power Supply since August 1986.
William J. DeLeo (c) 43 Vice President - Corporate Performance and
Information Services since January 1991.
Dianna L. Green (d) 47 Vice President - Administrative Services since
August 1988.
John D. Sieber (e) 54 Vice President - Nuclear since March 1988.
James D. Mitchell (f) 42 Treasurer since July 1989.
Raymond H. Panza (g) 43 Controller and Principal Accounting Officer since
July 1990.
</TABLE>
(a) Mr. Marshall was Assistant to the President from October 1990 to January
1992 and Vice President - Corporate Development from August 1987 to January
1992.
(b) Mr. Schwass was Vice President and Treasurer from September 1987 to April
1988.
(c) Mr. DeLeo was Vice President - Corporate Planning and Management Information
Services from April 1989 to December 1990. He also served as General Manager,
Planning, Budgeting and Business Development from November 1987 to March 1989.
(d) Ms. Green was General Manager, Human Resources Unit from May 1988 to August
1988. She served Xerox Corporation as Vice President - Personnel of the
Information Products Division from May 1985 to April 1988.
(e) Mr. Sieber was Vice President - Nuclear Operations from August 1986 to March
1988.
(f) Mr. Mitchell was Assistant Treasurer from October 1988 to June 1989. He
served US West Information Systems, Inc. as Executive Director from August 1985
to September 1988.
(g) Mr. Panza served as Assistant Controller of Squibb Corporation from May 1989
to July 1990. He served RKO General, a GenCorp company, from May 1985 to May
1989 in various positions including Vice President - Controller and Assistant
Controller.
16
<PAGE>
ITEM 2. PROPERTIES.
Duquesne's properties consist of electric generating stations, transmission
and distribution facilities and supplemental properties and appurtenances,
comprising as a whole an integrated electric utility system, located
substantially in Allegheny and Beaver counties in southwestern Pennsylvania.
Duquesne owns all or a portion of the following generating units except
Beaver Valley 2, which is leased.
<TABLE>
<CAPTION>
Duquesne's
Share of Net
Demonstrated Net Plant Output
Capability Year Ended
December 31, 1993 December 31, 1993
Name and Location Type (Megawatts) (Megawatt-hours)
----------------- ---- ------------------ -----------------
<S> <C> <C> <C>
Cheswick Coal 570 3,238,308
Springdale, Pa.
Fort Martin No. 1 (1) Coal 276 1,834,484
Maidsville, W.Va.
Elrama Coal 487 2,531,720
Elrama, Pa.
Sammis No. 7 (1) Coal 187 1,175,234
Stratton, Ohio
Eastlake No. 5 (1) Coal 186 1,043,863
Eastlake, Ohio
Beaver Valley No. 1 (1) Nuclear 385 2,077,722
Shippingport, Pa.
Beaver Valley No. 2 (1) Nuclear 113 730,789
Shippingport, Pa.
Perry No. 1 (1) Nuclear 164 547,375
North Perry, Ohio
Bruce Mansfield No. 1 (1) Coal 228 1,075,002
Shippingport, Pa.
Bruce Mansfield No. 2 (1) Coal 62 230,670
Shippingport, Pa.
Bruce Mansfield No. 3 (1) Coal 110 465,116
Shippingport, Pa.
Brunot Island Oil 66 (5,812)
Brunot Island, Pa. ----- ----------
Total 2,834 14,944,471
==========
Cold-reserved units:
Brunot Island Oil 240
Phillips Coal 300
-----
Total 3,374
=====
</TABLE>
(1) Amounts represent Duquesne's share of the unit which is owned by Duquesne in
common with one or more other electric utilities (or, in the case of Beaver
Valley Unit 2, leased by Duquesne).
Duquesne owns 24 transmission substations (including interests in common in
the step-up transformers at Fort Martin No. 1; Sammis No. 7; Eastlake No. 5;
Bruce Mansfield No. 1; Beaver Valley Unit 1; Beaver Valley Unit 2; Perry Unit 1;
Bruce Mansfield No. 2; and Bruce Mansfield No. 3) and 563 distribution
substations. Duquesne has 714 circuit-miles of transmission lines, comprised of
345,000, 138,000 and 69,000 volt lines. Street lighting and distribution
circuits of 23,000 volts and less include approximately 50,000 miles of lines
and cable.
17
<PAGE>
Duquesne owns the Warwick Mine, including 4,849 acres owned in fee of
unmined coal lands and mining rights, located on the Monongahela River in Greene
County, Pennsylvania, approximately 83 river miles from Pittsburgh. See Item 1.
"Fossil Fuel" on page 10.
Substantially all of Duquesne's properties are subject to a first mortgage
lien of the Trust Indenture dated as of August 1, 1947 securing Duquesne's first
mortgage bonds. In May 1992, Duquesne began issuing secured debt under a new
First Collateral Trust Indenture. This new indenture will ultimately replace
Duquesne's First Mortgage Bond Indenture.
ITEM 3. LEGAL PROCEEDINGS.
Westinghouse Lawsuit
- --------------------------------------------------------------------------------
Beaver Valley Units 1 and 2 are jointly owned/leased generating units (See
Item 1. Business.). In 1991, the co-owners of Beaver Valley Units 1 and 2 filed
suit against Westinghouse Electric Corporation (Westinghouse) in the United
States District Court for the Western District of Pennsylvania. The suit alleges
that six steam generators supplied by Westinghouse for the two units contain
serious defects -- in particular defects causing tube corrosion and cracking.
Duquesne is seeking monetary and corrective relief. Steam generator maintenance
costs have increased as a result of these defects and are likely to continue
increasing. The condition of the steam generators is being monitored closely. If
the corrosion and cracking continue, replacement of the steam generators could
be required prior to the ends of their 40-year design lives. Duquesne is
continuing to conduct a corrective maintenance program and to explore longer
term options, including replacement of the steam generators. While Duquesne has
no current plans to replace the steam generators and has not yet completed a
detailed, site-specific study, replacement cost per unit is estimated to be
between $100 million and $150 million. (Other utilities with similar units have
replaced steam generators at costs in this range.) Duquesne cannot predict the
outcome of this matter; however, Duquesne does not believe that resolution will
have a materially adverse effect on Duquesne's financial position or results of
operations. Duquesne's percentage interests (ownership and leasehold) in Beaver
Valley Unit 1 and in Beaver Valley Unit 2 are 47.5 percent and 13.74 percent,
respectively. The remainder of Beaver Valley Unit 1 is owned by Ohio Edison
Company and by Pennsylvania Power Company. The remaining interest in
Beaver Valley Unit 2 is held by Ohio Edison Company, The Cleveland Electric
Illuminating Company and The Toledo Edison Company. Duquesne operates both units
on behalf of the joint owners.
General Electric Settlement
- --------------------------------------------------------------------------------
In January 1994, Duquesne Light Company, The Cleveland Electric
Illuminating Company, Ohio Edison Company, Pennsylvania Power Company and The
Toledo Edison Company reached a settlement in connection with a 1991 lawsuit
filed in the United States District Court in Cleveland against General Electric
Company (GE) regarding the Perry Plant. These co-owners jointly constructed
Perry Unit 1, a nuclear power plant on the southern shore of Lake Erie in Ohio
for which GE supplied the nuclear steam supply systems and other goods and
services. The out-of-court settlement disposed of a complaint filed by the co-
owners of Perry Unit 1 which included claims of breach of contract, warranty,
and duties of good faith and fair dealing, as well as constructive fraud,
negligence, misrepresentation and various RICO violations in connection with
delays and cost increases relating to the construction of Perry Unit 1. The
settlement provides for cash payments to the Perry owners and discounts on their
future purchases from GE. This settlement will not materially affect Duquesne's
results of operations in future years.
Rate-Related and Environmental Litigation
- --------------------------------------------------------------------------------
Proceedings involving Duquesne's rates are reported in Item 1. "Rate
Matters". Proceedings involving environmental matters are reported in Item 1.
"Environmental Matters".
18
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
Effective July 7, 1989, Duquesne Light Company became a wholly owned
subsidiary of DQE, the holding company formed as part of a shareholder-approved
restructuring. As a result of the restructuring, DQE common stock replaced all
outstanding shares of Duquesne Light Company common stock, except for ten shares
which DQE holds. As such, this item is not applicable to Duquesne Light Company
because all its common equity is held solely by DQE. During 1993, Duquesne
declared quarterly dividends on its common stock totaling $144 million for the
year.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for Duquesne Light Company for each year of the
six-year period ended December 31, 1993 are set forth on page 67. The financial
data is incorporated here by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's discussion and analysis of financial condition and results of
operations are set forth in Item 1. BUSINESS and on pages 10 through 17 of the
DQE Annual Report to Shareholders for the year ended December 31, 1993. The
discussion and analysis are incorporated here by reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Balance Sheet of Duquesne Light Company and its Subsidiary
as of December 31, 1993 and 1992, and the related Statements of Consolidated
Income, Retained Earnings and Cash Flows for each of the three years in the
period ended December 31, 1993 together with the Independent Auditors' Report
dated January 25, 1994 are set forth here on pages 43 to 66. The financial
statements and report are incorporated here by reference. Quarterly financial
information is included on page 66 in Note M to Duquesne's consolidated
financial statements and is incorporated here by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to the Directors of Duquesne Light Company is set
forth under the captions "Proposal No. 1 - Election of Directors", "Nominees for
Director" and "Standing Directors" in the DQE definitive Proxy Statement, filed
with the Securities and Exchange Commission in connection with its annual
meeting of shareholders to be held on April 20, 1994. The Proxy Statement is
incorporated here by reference. All Directors of DQE are also Directors of
Duquesne Light Company. Information relating to the executive officers of the
Registrant is set forth in Part I of this Report under the caption "Executive
Officers of the Registrant".
19
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
The information relating to executive compensation is set forth in Exhibit
28.1, filed as part of this Report. The information is incorporated here by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
DQE is the beneficial owner and holder of all shares of outstanding Common
Stock, $1 par value, of Duquesne Light, consisting of 10 shares as of February
23, 1994. Information relating to the ownership of equity securities of DQE and
Duquesne Light by directors and executive officers of Duquesne Light is set
forth in Exhibit 28.1, filed as part of this Report. The information is
incorporated here by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) The following financial statements are included on pages 43 to 66.
Independent Auditors' Report.
Statement of Consolidated Income for the Three Years Ended December
31, 1993.
Consolidated Balance Sheet, December 31, 1993 and 1992.
Statement of Consolidated Cash Flows for the Three Years Ended
December 31, 1993.
Statement of Consolidated Retained Earnings for the Three Years
Ended December 31, 1993.
Notes to Consolidated Financial Statements.
(a)(2) The following financial statement schedules and the related
Independent Auditors' Report (See page 43.) are filed here as a part of this
Report:
Schedules for the Three Years Ended December 31, 1993:
V - Property, Plant and Equipment.
VI - Accumulated Depreciation, Depletion and Amortization of Property,
Plant and Equipment.
VIII - Valuation and Qualifying Accounts.
X - Supplementary Income Statement Information.
The remaining schedules are omitted because of the absence of the
conditions under which they are required or because the information called for
is shown in the financial statements or notes to the financial statements.
20
<PAGE>
(a)(3) Exhibits relating to Duquesne Light Company filed as a part of this
Report are set forth in the Duquesne Light Company Exhibit List on pages 22 to
33, incorporated here by reference. Documents other than those designated as
being filed here are incorporated here by reference. Documents incorporated by
reference to a DQE Annual Report on Form 10-K, a Quarterly Report on Form 10-Q
or a Current Report on Form 8-K are at Securities and Exchange Commission File
No. 1-956.
(b) On December 8, 1993 a Form 8-K was filed with respect to Duquesne Light
Company regarding a long-term power sales contract with General Public
Utilities.
(c) Executive Compensation Plans and Arrangements
<TABLE>
<S> <C>
Deferred Compensation Plan for the Directors Exhibit 10.1 to the Form 10-K
of Duquesne Light Company, as amended to date. Annual Report of DQE for the
year ended December 31, 1992.
Incentive Compensation Program for Certain Exhibit 10.2 to the Form 10-K
Executive Officers of Duquesne Light Company, Annual Report of DQE for the
as amended to date. year ended December 31, 1992.
Description of Duquesne Light Company Pension Exhibit 10.3 to the Form 10-K
Service Supplement Program. Annual Report of DQE for the
year ended December 31, 1992.
Duquesne Light Company Outside Directors' Exhibit 10.59 to the Form 10-K
Retirement Plan, as amended to date. Annual Report of Duquesne
Light Company for the year
ended December 31, 1990.
Employment Agreement dated as of December 15, Exhibit 10.5 to the Form 10-K
1992 between DQE, Duquesne Light Company and Annual Report of DQE for the
Wesley W. von Schack. year ended December 31, 1992.
Duquesne Light/DQE Charitable Giving Program. Exhibit 10.6 to the Form 10-K
Annual Report of DQE for the
year ended December 31, 1992.
</TABLE>
DUQUESNE LIGHT COMPANY EXHIBITS
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------------------------------------------- ----------------------------
<C> <S> <C>
3.1 Restated Articles of Duquesne Light Company, as Exhibit 3.1 to the Form 10-K
amended through December 19, 1991 and as currently Annual Report of Duquesne
in effect. Light Company for the year
ended December 31, 1991.
3.2 By-Laws of Duquesne Light Company, as amended Exhibit 3.2 to the Form 10-K
through December 19, 1991 and as currently in effect. Annual Report of Duquesne
Light Company for the year
ended December 31, 1991.
4.1 Trust Indenture dated as of August 1, 1947, securing Exhibit 4.3 to Registration
Duquesne Light Company's First Mortgage Bonds. Statement (Form S-1)
No. 2-11326.
4.2 Supplemental Trust Indentures supplementing the
Trust Indenture -
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------------------------------------------- ----------------------------
<C> <S> <C>
First through Tenth and an amendment to the Fifth. Exhibits 4.4 through 4.13 to
Registration Statement (Form
S-1) No. 2-11326.
Eleventh. Exhibit 4.3 to Registration
Statement (Form S-1)
No. 2-12309.
Twelfth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirteenth. Exhibit 4.5 to Registration
Statement (Form S-1)
No. 2-13360.
Fourteenth and Fifteenth. Exhibits 4.6 and 4.7 to Registration
Statement (Form S-1) No. 2-13596.
Sixteenth. Exhibit 4.8 to Registration
Statement (Form S-1)
No. 2-14704.
Seventeenth and Eighteenth. Exhibits 4.4 and 4.5 to Registration
Statement (Form S-1) No. 2-16033.
Nineteenth through Twenty-Third. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Twenty-Fourth. Exhibit 2.2 to Registration
Statement (Form S-9)
No. 2-24412.
Twenty-Fifth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Twenty-Sixth. Exhibit 2.2 to Registration
Statement (Form S-9)
No. 2-25887.
Twenty-Seventh. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Twenty-Eighth. Exhibit 2.2 to Registration
Statement (Form S-9)
No. 2-28042.
Twenty-Ninth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------------------------------------------- ----------------------------
<C> <S> <C>
Thirtieth. Exhibit 2.2 to Registration
Statement (Form S-9)
No. 2-30927.
Thirty-First and Thirty-Second. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirty-Third. Exhibit 2.4 to Registration
Statement (Form S-7)
No. 2-36333.
Thirty-Fourth and Thirty-Fifth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirty-Sixth. Exhibit 2.4 to Registration
Statement (Form S-7)
No. 2-39375.
Thirty-Seventh. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirty-Eighth. Exhibit 2.4 to Registration
Statement (Form S-7)
No. 2-42154.
Thirty-Ninth through Forty-Fifth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Forty-Sixth. Exhibit 2.3 to Registration
Statement (Form S-7)
No. 2-52874.
Forty-Seventh through Forty-Ninth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Fiftieth. Exhibit 2.3 to Registration
Statement (Form S-7)
No. 2-58483.
Fifty-First through Fifty-Third. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Fifty-Fourth and Fifty-Fifth. Exhibit 2.2 to Registration
Statement (Form S-16)
No. 2-66258.
Fifty-Sixth. Exhibit 2.2 to Registration
Statement (Form S-16)
No. 2-68959.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------------------------------------------- ----------------------------
<C> <S> <C>
Fifty-Seventh. Exhibit 4.1 to Registration
Statement (Form S-16)
No. 2-72522.
Fifty-Eighth and Fifty-Ninth. Exhibit 4.1 to Registration
Statement (Form S-16)
No. 2-76768.
Sixtieth and Sixty-First. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 2-82139.
Sixty-Second and Sixty-Third. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 2-87452.
Sixty-Fourth. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 2-89719.
Sixty-Fifth through Sixty-Ninth. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-1509.
Seventieth through Seventy-Seventh. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-32026.
Seventy-Eighth through Eightieth. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-46990.
Eighty-First. Exhibit 4.2 to Registration
Statement (Form S-3)
No. 33-46990.
Eighty-Second. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-52782.
Eighty-Third and Eighty-Fourth. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-63602.
Eighty-Fifth through Eighty-Eighth. Filed here.
4.3 Indenture dated March 1, 1960, relating to Duquesne Exhibit 4.3 to the Form 10-K
Light Company's 5% Sinking Fund Debentures. Annual Report of DQE for the
year ended December 31, 1989.
4.4 Indenture dated as of November 1, 1989 relating to the Exhibit 4.4 to the Form 10-K
issuance of Duquesne Light Company's unsecured Annual Report of DQE for the
notes. year ended December 31, 1989.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------------------------------------------- ----------------------------
<C> <S> <C>
4.5 Indenture of Mortgage and Deed of Trust dated as of Exhibit 4.3 to Registration
April 1, 1992, securing Duquesne Light Company's Statement (Form S-3)
First Collateral Trust Bonds. No. 33-52782.
4.6 Supplemental Indentures supplementing the said
Indenture of Mortgage and Deed of Trust -
Supplemental Indenture No. 1. Exhibit 4.4 to Registration
Statement (Form S-3)
No. 33-52782.
Supplemental Indenture No. 2 through Supplemental Exhibit 4.4 to Registration
Indenture No. 4. Statement (Form S-3)
No. 33-63602.
Supplemental Indenture No. 5 through Supplemental Filed here.
Indenture No. 7.
Agreements relating to the Jointly Owned Generating Units:
10.1 Administration Agreement dated as of September 14, Exhibit 5.8 to Registration
1967. Statement (Form S-7)
No. 2-43106.
10.2 Transmission Facilities Agreement dated as of September Exhibit 5.9 to Registration
14, 1967. Statement (Form S-7)
No. 2-43106.
10.3 Operating Agreement dated as of September 21, 1972 Exhibit 5.1 to Registration
for Eastlake Unit No. 5. Statement (Form S-7)
No. 2-48164.
10.4 Memorandum of Agreement dated as of July 1, 1982 re Exhibit 10.14 to the Form 10-K
reallocation of rights and liabilities of the companies Annual Report of Duquesne
under uranium supply contracts. Light Company for the year
ended December 31, 1987.
10.5 Operating Agreement dated August 5, 1982 as of Exhibit 10.17 to the Form 10-K
September 1, 1971 for Sammis Unit No. 7. Annual Report of Duquesne
Light Company for the year ended
December 31, 1988.
10.6 Memorandum of Understanding dated as of March 31, Exhibit 10.19 to the Form 10-K
1985 re implementation of company-by-company Annual Report of DQE for the
management of uranium inventory and delivery. year ended December 31, 1989.
10.7 Restated Operating Agreement for Beaver Valley Unit Exhibit 10.23 to the Form 10-K
Nos. 1 and 2 dated September 15, 1987. Annual Report of Duquesne
Light Company for the year
ended December 31, 1987.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------------------------------------------- ----------------------------
<C> <S> <C>
10.8 Operating Agreement for Perry Unit No. 1 dated Exhibit 10.24 to the Form 10-K
March 10, 1987. Annual Report of Duquesne
Light Company for the year
ended December 31, 1987.
10.9 Operating Agreement for Bruce Mansfield Units Nos. 1, Exhibit 10.25 to the Form 10-K
2 and 3 dated September 15, 1987 as of June 1, 1976. Annual Report of Duquesne
Light Company for the year
ended December 31, 1987.
10.10 Basic Operating Agreement, as amended January 1, Filed here.
1993.
10.11 Amendment No. 1 dated December 23, 1993 to Filed here.
Transmission Facilities Agreement (as of January 1,
1993).
10.12 Microwave Sharing Agreement (as amended Filed here.
January 1, 1993) dated December 23, 1993.
10.13 Agreement (as of September 1, 1980) dated Filed here.
December 23, 1993 for termination or construction
of certain agreements.
10.14 Fort Martin Construction and Operating Agreement Filed here.
dated April 30, 1965.
10.15 Fort Martin Transmission Agreement dated Filed here.
March 15, 1967.
10.16 Amendment of January 1, 1988 to Fort Martin Filed here.
Transmission Agreement.
Agreements relating to the Sale and Leaseback
of Beaver Valley Unit No. 2:
10.17 Order of the Pennsylvania Public Utility Commission Exhibit 28.2 to the Form 10-Q
dated September 25, 1987 regarding the application Quarterly Report of Duquesne
of the Duquesne Light Company under Section 1102(a)(3) Light Company for the quarter
of the Public Utility Code for approval in connection ended September 30, 1987.
with the sale and leaseback of its interest in Beaver
Valley Unit No. 2.
10.18 Order of the Pennsylvania Public Utility Commission Exhibit 10.28 to the Form 10-K
dated October 15, 1992 regarding the Securities Annual Report of Duquesne
Certificate of Duquesne Light Company for the Light Company for the year
assumption of contingent obligations under ended December 31, 1992.
financing agreements in connection with the
refunding of Collateralized Lease Bonds.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------------------------------------------- ----------------------------
<C> <S> <C>
x10.19 Facility Lease dated as of September 15, 1987 between Exhibit (4)(c) to Registration
The First National Bank of Boston, as Owner Trustee Statement (Form S-3)
under a Trust Agreement dated as of September 15, 1987 No. 33-18144.
with the limited partnership Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
y10.20 Facility Lease dated as of September 15, 1987 between Exhibit (4)(d) to Registration
The First National Bank of Boston, as Owner Trustee Statement (Form S-3)
under a Trust Agreement dated as of September 15, No. 33-18144.
1987, with the corporate Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
x10.21 Amendment No. 1 dated as of December 1, 1987 to Exhibit 10.30 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, ended December 31, 1987.
1987 with the limited partnership Owner Participant
named therein, Lessor, and Duquesne Light Company,
Lessee.
y10.22 Amendment No. 1 dated as of December 1, 1987 to Exhibit 10.31 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, ended December 31, 1987.
1987 with the corporate Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
x10.23 Amendment No. 2 dated as of November 15, 1992 to Exhibit 10.33 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, ended December 31, 1992.
1987 with the limited partnership Owner Participant
named therein, Lessor, and Duquesne Light Company,
Lessee.
y10.24 Amendment No. 2 dated as of November 15, 1992 to Exhibit 10.34 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, ended December 31, 1992.
1987 with the corporate Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
x10.25 Participation Agreement dated as of September 15, Exhibit (28)(a) to Registration
1987 among the limited partnership Owner Statement (Form S-3)
Participant named therein, the Original Loan No. 33-18144.
Participants listed in Schedule 1 thereto, as Original
Loan Participants, DQU Funding Corporation, as Funding
Corporation, The First National Bank of Boston, as Owner
Trustee, Irving Trust Company, as Indenture Trustee and
Duquesne Light Company, as Lessee.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------------------------------------------- ----------------------------
<C> <S> <C>
y10.26 Participation Agreement dated as of September 15, Exhibit (28)(b) to Registration
1987 among the corporate Owner Participant named Statement (Form S-3)
therein, the Original Loan Participants listed in No. 33-18144.
Schedule 1 thereto, as Original Loan Participants, DQU
Funding Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving
Trust Company, as Indenture Trustee and Duquesne
Light Company, as Lessee.
x10.27 Amendment No. 1 dated as of December 1, 1987 to Exhibit 10.34 to the Form 10-K
Participation Agreement dated as of September 15, Annual Report of Duquesne
1987 among the limited partnership Owner Participant Light Company for the year
named therein, the Original Loan Participants listed ended December 31, 1987.
therein, as Original Loan Participants, DQU
Funding Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving
Trust Company, as Indenture Trustee and Duquesne
Light Company, as Lessee.
y10.28 Amendment No. 1 dated as of December 1, 1987 to Exhibit 10.35 to the Form 10-K
Participation Agreement dated as of September 15, Annual Report of Duquesne
1987 among the corporate Owner Participant named Light Company for the year
therein, the Original Loan Participants listed therein, ended December 31, 1987.
as Original Loan Participants, DQU Funding
Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving
Trust Company, as Indenture Trustee and Duquesne
Light Company, as Lessee.
x10.29 Amendment No. 2 dated as of March 1, 1988 to Exhibit (28)(c)(3) to
Participation Agreement dated as of September 15, Registration Statement
1987 among the limited partnership Owner Participant (Form S-3) No. 33-54648.
named therein, the Original Loan Participants listed
therein, as Original Loan Participants, DQU
Funding Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving
Trust Company, as Indenture Trustee and Duquesne
Light Company, as Lessee.
y10.30 Amendment No. 2 dated as of March 1, 1988 to Exhibit (28)(c)(4) to
Participation Agreement dated as of September 15, Registration Statement
1987 among the corporate Owner Participant named (Form S-3) No. 33-54648.
therein, the Original Loan Participants listed therein,
as Original Loan Participants, DQU Funding
Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, Irving
Trust Company, as Indenture Trustee and Duquesne
Light Company, as Lessee.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------------------------------------------- ----------------------------
<C> <S> <C>
x10.31 Amendment No. 3 dated as of November 15, 1992 to Exhibit 10.41 to the Form 10-K
Participation Agreement dated as of September 15, Annual Report of Duquesne
1987 among the limited partnership Owner Participant Light Company for the year
named therein, the Original Loan Participants listed ended December 31, 1992.
therein, as Original Loan Participants, DQU Funding
Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, The Bank
of New York, as Indenture Trustee and Duquesne Light
Company, as Lessee.
y10.32 Amendment No. 3 dated as of November 15, 1992 to Exhibit 10.42 to the Form 10-K
Participation Agreement dated as of September 15, Annual Report of Duquesne
1987 among the corporate Owner Participant named Light Company for the year
therein, the Original Loan Participants listed therein, ended December 31, 1992.
as Original Loan Participants, DQU Funding
Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, The Bank
of New York, as Indenture Trustee and Duquesne Light
Company, as Lessee.
z10.33 Ground Lease and Easement Agreement dated as of Exhibit (28)(e) to Registration
September 15, 1987 between Duquesne Light Company, Statement (Form S-3)
Ground Lessor and Grantor, and The First National Bank No. 33-18144.
of Boston, as Owner Trustee under a Trust Agreement
dated as of September 15, 1987 with the limited
partnership Owner Participant named therein, Tenant
and Grantee.
z10.34 Assignment, Assumption and Further Agreement dated as Exhibit (28)(f) to Registration
of September 15, 1987 among The First National Bank of Statement (Form S-3)
Boston, as Owner Trustee under a Trust Agreement dated No. 33-18144.
as of September 15, 1987 with the limited partnership
Owner Participant named therein, The Cleveland Electric
Illuminating Company, Duquesne Light Company, Ohio
Edison Company, Pennsylvania Power Company and The
Toledo Edison Company.
z10.35 Additional Support Agreement dated as of September 15, Exhibit (28)(g) to Registration
1987 between The First National Bank of Boston, as Statement (Form S-3)
Owner Trustee under a Trust Agreement dated as of No. 33-18144.
September 15, 1987 with the limited partnership Owner
Participant named therein, and Duquesne Light Company.
z10.36 Indenture, Bill of Sale, Instrument of Transfer and Exhibit (28)(h) to Registration
Severance Agreement dated as of October 2, 1987 Statement (Form S-3)
between Duquesne Light Company, Seller, and The No. 33-18144.
First National Bank of Boston, as Owner Trustee under
a Trust Agreement dated as of September 15, 1987 with
the limited partnership Owner Participant named
therein, Buyer.
z10.37 Tax Indemnification Agreement dated as of September 15, Exhibit 28.1 to the Form 8-K
1987 between the Owner Participant named therein and Current Report of Duquesne
Duquesne Light Company, as Lessee. Light Company dated November 20, 1987.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------------------------------------------- ----------------------------
<C> <S> <C>
z10.38 Amendment No. 1 dated as of November 15, 1992 to Exhibit 10.48 to the Form 10-K
Tax Indemnification Agreement dated as of September 15, Annual Report of Duquesne
1987 between the Owner Participant named therein and Light Company for the year
Duquesne Light Company, as Lessee. ended December 31, 1992.
z10.39 Extension Letter dated December 8, 1992 from Exhibit 10.49 to the Form 10-K
Duquesne, each Owner Participant, The First National Annual Report of Duquesne
Bank of Boston, the Lease Indenture Trustee, DQU II Light Company for the year
Funding Corporation and DQU II Funding Corporation ended December 31, 1992.
addressed to the New Collateral Trust Trustee
extending their respective representations and
warranties and covenants set forth in each of the
Participation Agreements.
x10.40 Trust Indenture, Mortgage, Security Agreement and Exhibit (4)(g) to Registration
Assignment of Facility Lease dated as of September 15, Statement (Form S-3)
1987 between The First National Bank of Boston, as No. 33-18144.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the limited partnership Owner
Participant named therein, and Irving Trust Company,
as Indenture Trustee.
y10.41 Trust Indenture, Mortgage, Security Agreement and Exhibit (4)(h) to Registration
Assignment of Facility Lease dated as of September 15, Statement (Form S-3)
1987 between The First National Bank of Boston, as No. 33-18144.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the corporate Owner
Participant named therein, and Irving Trust Company,
as Indenture Trustee.
x10.42 Supplemental Indenture No. 1 dated as of December 1, Exhibit 10.45 to the Form 10-K
1987 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne
and Assignment of Facility Lease dated as of September Light Company for the year
15, 1987 between The First National Bank of Boston, as ended December 31, 1987.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the limited partnership Owner
Participant named therein, and Irving Trust Company, as
Indenture Trustee.
y10.43 Supplemental Indenture No. 1 dated as of December 1, Exhibit 10.46 to the Form 10-K
1987 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne
and Assignment of Facility Lease dated as of September Light Company for the year
15, 1987 between The First National Bank of Boston, ended December 31, 1987.
as Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the corporate Owner
Participant named therein, and Irving Trust Company,
as Indenture Trustee.
x10.44 Supplemental Indenture No. 2 dated as of November 15, Exhibit 10.54 to the Form 10-K
1992 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne
and Assignment of Facility Lease dated as of September Light Company for the year
15, 1987 between The First National Bank of Boston, as ended December 31, 1992.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the limited partnership Owner
Participant named therein, and The Bank of New York,
as Indenture Trustee.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------------------------------------------- ----------------------------
<C> <S> <C>
y10.45 Supplemental Indenture No. 2 dated as of November 15, Exhibit 10.55 to the Form 10-K
1992 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne
and Assignment of Facility Lease dated as of September Light Company for the year
15, 1987 between The First National Bank of Boston, as ended December 31, 1992.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the corporate Owner
Participant named therein, and The Bank of New York,
as Indenture Trustee.
10.46 Reimbursement Agreement dated as of July 15, 1992 Exhibit 10.56 to the Form 10-K
among Duquesne Light Company, Swiss Bank Annual Report of Duquesne
Corporation, New York Branch, as LOC Bank, Union Light Company for the year
Bank, as Administrating Bank, Swiss Bank ended December 31, 1992.
Corporation, New York Branch, as Administrating Bank
and The Participating Banks Named Therein.
10.47 Supplemental Reimbursement Agreement dated as of Exhibit 10.57 to the Form 10-K
July 15, 1992 among Duquesne Light Company, Swiss Bank Annual Report of Duquesne
Corporation, New York Branch, as LOC Bank, Union Light Company for the year
Bank, as Administrating Bank, Swiss Bank ended December 31, 1992.
Corporation, New York Branch, as Administrating Bank
and The Participating Banks Named Therein.
10.48 Collateral Trust Indenture dated as of November 15, Exhibit 10.58 to the Form 10-K
1992 among DQU II Funding Corporation, Duquesne Annual Report of Duquesne
Light Company and The Bank of New York, as Trustee. Light Company for the year
ended December 31, 1992.
10.49 First Supplemental Indenture dated as of November 15, Exhibit 10.59 to the Form 10-K
1992 to Collateral Trust Indenture dated as of Annual Report of Duquesne
November 15, 1992 among DQU II Funding Corporation, Light Company for the year
Duquesne Light Company and The Bank of New York, as ended December 31, 1992.
Trustee.
x10.50 Refinancing Agreement dated as of November 15, 1992 Exhibit 10.60 to the Form 10-K
among the limited partnership Owner Participant Annual Report of Duquesne
named therein, as Owner Participant, DQU Funding Light Company for the year
Corporation, as Funding Corporation, DQU II Funding ended December 31, 1992.
Corporation, as New Funding Corporation, The First
National Bank of Boston, as Owner Trustee, The Bank
of New York, as Indenture Trustee, The Bank of New
York, as Collateral Trust Trustee, The Bank of New York,
as New Collateral Trust Trustee, and Duquesne Light
Company, as Lessee.
y10.51 Refinancing Agreement dated as of November 15, 1992 Exhibit 10.61 to the Form 10-K
among the corporate Owner Participant named Annual Report of Duquesne
therein, as Owner Participant, DQU Funding Light Company for the year
Corporation, as Funding Corporation, DQU II Funding ended December 31, 1992.
Corporation, as New Funding Corporation, The First
National Bank of Boston, as Owner Trustee, The Bank
of New York, as Indenture Trustee, The Bank of New
York, as Collateral Trust Trustee, The Bank of New
York, as New Collateral Trust Trustee, and Duquesne
Light Company, as Lessee.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ----------------------------------------------- ----------------------------
<C> <S> <C>
x10.52 Addendum dated December 8, 1992 to Refinancing Exhibit 10.62 to the Form 10-K
Agreement dated as of November 15, 1992 among the Annual Report of Duquesne
limited partnership Owner Participant named Light Company for the year
therein, as Owner Participant, DQU Funding ended December 31, 1992.
Corporation, as Funding Corporation, DQU II Funding
Corporation, as New Funding Corporation, The First
National Bank of Boston, as Owner Trustee, The Bank
of New York, as Indenture Trustee, The Bank of New
York, as Collateral Trust Trustee, The Bank of New
York, as New Collateral Trust Trustee, and Duquesne
Light Company, as Lessee.
y10.53 Addendum dated December 8, 1992 to Refinancing Exhibit 10.63 to the Form 10-K
Agreement dated as of November 15, 1992 among the Annual Report of Duquesne
corporate Owner Participant named therein, as Light Company for the year
Owner Participant, DQU Funding Corporation, as ended December 31, 1992.
Funding Corporation, DQU II Funding Corporation,
as New Funding Corporation, The First National Bank
of Boston, as Owner Trustee, The Bank of New York,
as Indenture Trustee, The Bank of New York, as
Collateral Trust Trustee, The Bank of New York, as New
Collateral Trust Trustee, and Duquesne Light Company,
as Lessee.
Other Agreements:
*10.54 Deferred Compensation Plan for the Directors of Exhibit 10.1 to the Form 10-K
Duquesne Light Company, as amended to date. Annual Report of DQE for the
year ended December 31, 1992.
*10.55 Incentive Compensation Program for Certain Executive Exhibit 10.2 to the Form 10-K
Officers of Duquesne Light Company, as amended to Annual Report of DQE for the
date. year ended December 31, 1992
*10.56 Description of Duquesne Light Company Pension Exhibit 10.3 to the Form 10-K
Service Supplement Program. Annual Report of DQE for the
year ended December 31, 1992
*10.57 Duquesne Light Company Outside Directors' Exhibit 10.59 to the Form 10-K
Retirement Plan, as amended to date. Annual Report of Duquesne
Light Company for the year
ended December 31, 1990.
*10.58 Employment Agreement dated as of December 15, Exhibit 10.5 to the Form 10-K
1992 between DQE, Duquesne Light Company and Annual Report of DQE for the
Wesley W. von Schack. year ended December 31, 1992
*10.59 Duquesne Light/DQE Charitable Giving Program. Exhibit 10.6 to the Form 10-K
Annual Report of DQE for the
year ended December 31, 1992
12.1 Calculation of Ratio of Earnings to Fixed Charges. Filed here.
</TABLE>
32
<PAGE>
<TABLE>
<C> <S> <C>
22.1 Subsidiaries of registrant:
Duquesne has no significant subsidiaries.
23.1 Independent Auditors' Consent. Filed here.
28.1 Executive Compensation of Duquesne Light Company Filed here.
Executive Officers for 1993 and Security Ownership
of Duquesne Light Company Directors and
Executive Officers as of February 23, 1994.
28.2 DQE Annual Report to Shareholders for year ended Filed here.
December 31, 1993. The Report, except those portions
specifically incorporated by reference here, is
furnished for the information of the Securities and
Exchange Commission and is not to be deemed "filed" for
any purpose under the Securities Exchange Act of 1934
or otherwise.
</TABLE>
- ----
x An additional document, substantially identical in all material
respects to this Exhibit, has been entered into relating to one additional
limited partnership Owner Participant. Although the additional document
may differ in some respects (such as name of the Owner Participant,
dollar amounts and percentages), there are no material details in
which the document differs from this Exhibit.
y Additional documents, substantially identical in all material
respects to this Exhibit, have been entered into relating to four
additional corporate Owner Participants. Although the additional
documents may differ in some respects (such as names of the Owner
Participants, dollar amounts and percentages), there are no material
details in which the documents differ from this Exhibit.
z Additional documents, substantially identical in all material
respects to this Exhibit, have been entered into relating to six
additional Owner Participants. Although the additional documents
may differ in some respects (such as name of the Owner Participant,
dollar amounts and percentages), there are no material details in
which the documents differ from this Exhibit.
* This document is required to be filed as an exhibit to this form
under Item 14(c).
Copies of the exhibits listed above will be furnished, upon request,
to holders or beneficial owners of any class of the Company's stock
as of February 23, 1994, subject to payment in advance of the cost
of reproducing the exhibits requested.
33
<PAGE>
SCHEDULE V
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1993
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- -------
Other
Balance at Changes Balance
Beginning Additions Add at End
Classification of Year at Cost Retirements (Deduct)(A) of Year
-------------- ---------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Property, Plant and Equipment:
Electric Plant In Service (B):
Intangible Plant $ 39,100 $ 3,132 $ 77 $ $ 42,155
Production Plant 2,227,746 42,103 4,495 73,415 2,338,769
Transmission Plant 290,822 3,874 306 12,941 307,331
Distribution Plant 1,033,930 42,281 5,319 63,911 1,134,803
General Plant:
Coal Properties 72,499 72,499
Other 195,943 11,072 2,505 (9) 204,501
------- ------ -------- -------- ----------
Total Electric Plant in
Service 3,860,040 102,462 12,702 150,258 4,100,058
Construction Work in
Progress 67,435 (7,658) (C) 59,777
Held under Capital Leases 212,172 11,811 46,183 177,800
Held for Future Use 216,893 484 35 (479) 216,863
--------- -------- -------- -------- ----------
Total Property, Plant and
Equipment $4,356,540 $107,099 $ 58,920 $149,779 $4,554,498
---------- -------- -------- -------- ----------
Other Property -
Nonutility Property $ 2,888 $ $ $ $ 2,888
---------- -------- -------- -------- ----------
</TABLE>
- ----
Notes: (A) Reclassifications and adjustments including $150 million as a
result of the January 1, 1993 adoption of SFAS No. 109.
(B) Duquesne provides for depreciation of electric plant, including
plant-related intangibles, on a straight-line basis.
Amortization of other intangibles is on a straight-line basis
over a five-year period. At December 31, 1993 depreciation was
computed on the basis of the following annual rates expressed as
a percentage of original cost: production plant - 2.48% to
5.01%, transmission plant - 1.35% to 3.70%, distribution
plant - 1.10% to 4.81% and general plant - 1.82% to 4.82%.
Amortization of capital leases is based on nuclear fuel burned
and rental payments made. Nonutility property is depreciated
under the Modified Accelerated Cost Recovery System (MACRS) for
various classes of property as defined in section 168 of the
Internal Revenue Code.
(C) Represents net change in construction work in progress.
34
<PAGE>
SCHEDULE V
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1992
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- -------
Other
Balance at Changes Balance
Beginning Additions Add at End
Classification of Year at Cost Retirements (Deduct)(A) of Year
-------------- ---------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Property, Plant and Equipment:
Electric Plant In Service (B):
Intangible Plant $ 1,175 $19,408 $ 6 $ 18,523 $ 39,100
Production Plant 2,222,652 30,281 6,791 (18,396) 2,227,746
Transmission Plant 274,543 17,060 652 (129) 290,822
Distribution Plant 987,857 52,792 6,708 (11) 1,033,930
General Plant:
Coal Properties 72,499 72,499
Other 182,083 16,870 3,011 1 195,943
------- ------ --------- -------- ----------
Total Electric Plant in
Service 3,740,809 136,411 17,168 (12) 3,860,040
Construction Work in
Progress 91,140 (23,705) (C) 67,435
Held under Capital Leases 220,106 17,089 25,132 109 212,172
Held for Future Use 216,343 658 103 (5) 216,893
--------- ------- --------- -------- ----------
Total Property, Plant and
Equipment $4,268,398 $130,453 $ 42,403 $ 92 $4,356,540
---------- -------- -------- -------- ----------
Other Property -
Nonutility Property $ 2,888 $ $ $ $ 2,888
---------- -------- -------- -------- ----------
</TABLE>
- ----
Notes: (A) Reclassifications and adjustments.
(B) Duquesne provides for depreciation of electric plant,
including plant-related intangibles, on a straight-line basis.
Amortization of other intangibles is on a straight-line basis
over a five-year period. At December 31, 1992 depreciation was
computed on the basis of the following annual rates expressed
as a percentage of original cost: production plant - 2.48%
to 5.01%, transmission plant - 1.35% to 3.70%, distribution
plant - 1.10% to 4.81% and general plant - 1.82% to 4.82%.
Amortization of capital leases is based on nuclear
fuel burned and rental payments made.
(C) Represents net change in construction work in progress.
35
<PAGE>
SCHEDULE V
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1991
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Other
Balance at Changes Balance
Beginning Additions Add at End
Classification of Year at Cost Retirements (Deduct)(A) of Year
-------------- ---------- ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Property, Plant and Equipment:
Electric Plant In Service (B):
Intangible Plant $ 948 $ 579 $ $(352) $ 1,175
Production Plant 2,202,903 30,692 10,873 (70) 2,222,652
Transmission Plant 271,482 3,437 376 274,543
Distribution Plant 940,641 52,199 4,984 1 987,857
General Plant:
Coal Properties 72,502 (3) 72,499
Other 171,346 12,281 2,485 941 182,083
---------- -------- ------- ----- ----------
Total Electric Plant in
Service 3,659,822 99,188 18,718 517 3,740,809
Construction Work in
Progress 64,172 26,968 (C) 91,140
Held under Capital Leases 235,791 22,028 37,713 220,106
Held for Future Use 216,246 798 255 (446) 216,343
---------- -------- ------- ----- ----------
Total Property, Plant and
Equipment $4,176,031 $148,982 $56,686 $ 71 $4,268,398
---------- -------- ------- ----- ----------
Other Property -
Nonutility Property $ 2,875 $ 13 $ 2,888
---------- -------- ------- ----- ----------
</TABLE>
- ----
Notes: (A) Reclassifications and adjustments.
(B) Duquesne provides for depreciation on a straight-line basis.
At December 31, 1991 depreciation was computed on the basis of
the following annual rates expressed as a percentage of
original cost: production plant - 2.48% to 5.01%,
transmission plant - 1.35% to 3.70%, distribution plant -
1.10% to 4.81% and general plant - 1.82% to 4.82%.
Amortization of capital leases is based on nuclear fuel
burned and rental payments made.
(C) Represents net change in construction work in progress.
36
<PAGE>
SCHEDULE VI
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1993
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
Balance at Charged to Other Balance
Beginning Costs and Changes Add at End
Description of Year Expenses (A) Retirements (Deduct) of Year
----------- ---------- ------------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Accumulated Depreciation -
Electric Plant, Exclusive of
Coal Properties:
Intangible Plant $ 2,859 $ 3,761 $ 77 $ $ 6,543
Production Plant 766,793 68,687 4,457 2,056 833,079
Transmission Plant 92,411 6,655 285 365 99,146
Distribution Plant 286,802 29,538 7,763 1,805 310,382
General Plant 58,798 7,891 2,646 64,043
Retirement Work in Progress (12,715) (2,137) (14,852)
Other 3,535 (1,060) 2,475
---------- -------- -------- -------- ----------
Total 1,198,483 114,395 15,228 3,166 1,300,816
---------- -------- -------- -------- ----------
Accumulated Amortization -
Capital Leases 101,860 28,749 45,892 84,717
---------- -------- -------- -------- ----------
Accumulated Depreciation and
Depletion - Coal Properties:
Depreciation 24,029 5,781 29,810
Depletion 10,190 836 11,026
---------- -------- -------- -------- ----------
Total 34,219 6,617 40,836
---------- -------- -------- -------- ----------
Accumulated Amortization of
Limited-term Electric
Investments 6,284 4,273 (1,194) 9,363
---------- -------- -------- -------- ----------
Total $1,340,846 $154,034 $ 61,120 $ 1,972 $1,435,732
---------- -------- -------- -------- ----------
Accumulated Depreciation -
Nonutility Property $ 587 $ 40 $ 627
---------- -------- -------- -------- ----------
</TABLE>
- ----
Notes: (A) Amounts shown in column C do not agree with depreciation and
amortization shown in the Statement of Consolidated Income due to
inclusion on this schedule of fuel amortization. The amounts are
included in fuel expense on the Statement of Consolidated Income.
37
<PAGE>
SCHEDULE VI
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1992
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
Balance at Charged to Other Balance
Beginning Costs and Changes Add at End
Description of Year Expenses (A) Retirements (Deduct) of Year
----------- ---------- ------------ ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Accumulated Depreciation -
Electric Plant, Exclusive of Coal
Properties:
Intangible Plant $ $ $ $ 2,859 $ 2,859
Production Plant 709,708 68,199 8,534 (2,580) 766,793
Transmission Plant 86,789 6,310 674 (14) 92,411
Distribution Plant 269,647 28,321 11,166 286,802
General Plant 54,585 6,499 2,286 58,798
Retirement Work in Progress (8,729) (3,986) (12,715)
Other 4,597 $(1,062) 3,535
--------- -------- --------- -------- -----------
Total 1,116,597 105,343 22,660 (797) 1,198,483
--------- -------- --------- -------- -----------
Accumulated Amortization -
Capital Leases 84,003 42,989 25,132 101,860
--------- -------- --------- -------- -----------
Accumulated Depreciation and
Depletion - Coal Properties:
Depreciation 18,198 5,831 24,029
Depletion 9,355 835 10,190
--------- -------- --------- -------- -----------
Total 27,553 6,666 34,219
--------- -------- --------- -------- -----------
Accumulated Amortization of
Limited-term Electric
Investments 5,130 1,419 (265) 6,284
---------- -------- -------- ------- ----------
Total $1,233,283 $156,417 $ 47,792 $(1,062) $1,340,846
---------- -------- -------- ------- ----------
Accumulated Depreciation -
Nonutility Property $ 549 $ 38 $ 587
---------- -------- -------- ------- ----------
</TABLE>
- ----
Notes: (A) Amounts shown in column C do not agree with depreciation and
amortization shown in the Statement of Consolidated Income due to
inclusion on this schedule of fuel amortization. The
amounts are included in fuel expense on the Statement of
Consolidated Income.
38
<PAGE>
SCHEDULE VI
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Year Ended December 31, 1991
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
Balance at Charged to Other Balance
Beginning Costs and Changes Add at End
Description of Year Expenses (A) Retirements (Deduct) of Year
----------- ---------- ------------ ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Accumulated Depreciation -
Electric Plant, Exclusive of Coal
Properties:
Production Plant $ 654,016 $ 67,662 $11,970 $ $ 709,708
Transmission Plant 81,019 6,114 344 86,789
Distribution Plant 251,284 27,158 8,795 269,647
General Plant 51,580 6,017 3,012 54,585
Retirement Work in Progress (7,286) (1,443) (8,729)
Other 4,597 4,597
---------- -------- ------- ------- ----------
Total 1,030,613 105,508 24,121 4,597 1,116,597
---------- -------- ------- ------- ----------
Accumulated Amortization -
Capital Leases 80,000 39,108 35,105 84,003
---------- -------- ------- ------- ----------
Accumulated Depreciation and
Depletion - Coal Properties:
Depreciation 12,398 5,800 18,198
Depletion 8,520 835 9,355
---------- -------- ------- ------- ----------
Total 20,918 6,635 27,553
---------- -------- ------- ------- ----------
Accumulated Amortization of
Limited-term Electric
Investments 3,938 1,419 227 5,130
---------- -------- ------- ------- ----------
Total $1,135,469 $152,670 $59,453 $ 4,597 $1,233,283
---------- -------- ------- ------- ----------
Accumulated Depreciation -
Nonutility Property $ 517 $ 32 $ 549
---------- -------- ------- ------- ----------
</TABLE>
Notes: (A) Amounts shown in column C do not agree to depreciation and
amortization shown in the Statement of Consolidated Income due
to inclusion on this schedule of nuclear fuel amortization. Such
amounts are included in fuel expense on the Statement of
Consolidated Income.
39
<PAGE>
SCHEDULE VIII
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1993, 1992 and 1991
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- ---------
Additions
Balance --------------------------
at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Year Expenses Accounts Deductions of Year
----------- --------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Reserve Deducted from the Asset
to which it applies:
Allowance for uncollectible accounts $7,707 17,093 2,925 (A) 14,443 (B) $13,282
------ ------ ----- ------ -------
Year Ended December 31, 1992
Reserve Deducted from the Asset
to which it applies:
Allowance for uncollectible accounts $30,898 10,900 2,101 (A) 36,192(B) $ 7,707
------- ------ ----- ------ -------
Year Ended December 31, 1991
Reserve Deducted from the Asset
to which it applies:
Allowance for uncollectible accounts $16,805 24,045 1,674 (A) 11,626(B) $30,898
------- ------ ----- ------ -------
</TABLE>
- ---
Notes: (A) Recovery of accounts previously written off.
(B) Accounts receivable written off.
40
<PAGE>
SCHEDULE X
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the Years Ended December 31, 1993, 1992 and 1991
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B
-------- --------
Charged to Costs and Expenses
--------------------------------
Description 1993 1992 1991
----------- ---- ---- ----
<S> <C> <C> <C>
Maintenance $80,292 (A) $79,397 $83,985
Amortization of extraordinary property losses 15,501 16,444 16,444
Taxes other than payroll and income taxes:
Gross receipts 34,650 34,498 37,870
Property 14,284 (B) 31,120 34,489
Capital Stock 12,132 9,051 12,014
</TABLE>
- ---
Under the system of accounting followed by Duquesne, a portion of maintenance
expenses and of taxes other than payroll and income taxes represents amounts
charged to coal inventories. The inventory accounts are relieved and operation
expense charged as the coal is used.
(A) Duquesne changed, as of January 1, 1993, its method of accounting for
maintenance costs during scheduled major fossil station outages. Prior
to that time, maintenance costs incurred for scheduled major outages at
fossil stations were charged to expense as these costs were incurred.
Under the new accounting policy, Duquesne accrues, over the periods
between outages, anticipated expenses for scheduled major fossil
station outages. (Maintenance costs incurred for non-major scheduled
outages and for forced outages will continue to be charged to expense
as such costs are incurred.) This new method was adopted to match more
accurately the maintenance costs and the revenue produced during the
periods between scheduled major fossil station outages. The cumulative
effect of $5.4 million (net of income taxes of $3.9 million) of the
change on prior years is reflected on the Statement of Consolidated
Income as "Accounting for maintenance costs - net".
(B) The 1993 decrease reflects a favorable resolution of property tax
assessments. In 1993, Duquesne recorded on the basis of this revised
assessment, the expected refunds of these overpayments related to prior
years.
41
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
DUQUESNE LIGHT COMPANY
(Registrant)
Date: March 22, 1994 By: /s/ Wesley W. von Schack
-------------------------------------
(Signature)
Wesley W. von Schack
Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Wesley W. von Schack Chairman of the Board, President, March 22, 1994
------------------------- Chief Executive Officer and
Wesley W. von Schack Director
/s/ Gary L. Schwass Vice President - Finance and March 22, 1994
------------------------- Chief Financial Officer
Gary L. Schwass
/s/ Raymond H. Panza Controller and Principal March 22, 1994
------------------------- Accounting Officer
Raymond H. Panza
/s/ John M. Arthur Director March 22, 1994
-------------------------
John M. Arthur
/s/ Daniel Berg Director March 22, 1994
-------------------------
Daniel Berg
/s/ Doreen E. Boyce Director March 22, 1994
-------------------------
Doreen E. Boyce
/s/ Robert P. Bozzone Director March 22, 1994
-------------------------
Robert P. Bozzone
/s/ Sigo Falk Director March 22, 1994
-------------------------
Sigo Falk
Director March 22, 1994
-------------------------
W. H. Knoell
/s/ G. Christian Lantzsch Director March 22, 1994
-------------------------
G. Christian Lantzsch
/s/ Robert Mehrabian Director March 22, 1994
-------------------------
Robert Mehrabian
/s/ Thomas J. Murrin Director March 22, 1994
-------------------------
Thomas J. Murrin
/s/ Robert B. Pease Director March 22, 1994
-------------------------
Robert B. Pease
/s/ Eric W. Springer Director March 22, 1994
-------------------------
Eric W. Springer
42
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Directors and Stockholder of Duquesne Light Company:
We have audited the accompanying consolidated balance sheets of Duquesne Light
Company and its subsidiary as of December 31, 1993 and 1992, and the related
consolidated statements of income, retained earnings, and cash flows for each of
the three years in the period ended December 31, 1993. Our audits also included
the financial statement schedules listed in Item 14. These financial statements
and financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Duquesne Light Company and its
subsidiary as of December 31, 1993 and 1992, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1993 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
As discussed in Note A to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes
to conform with Statement of Financial Accounting Standards No. 109, and the
Company changed its method of accounting for maintenance costs during scheduled
major fossil station outages.
/s/ Deloitte & Touche
Pittsburgh, Pennsylvania
January 25, 1994
43
<PAGE>
Glossary of Terms
Following are explanations of certain financial and operating terms used in our
report and unique in our core business.
Allowance for Funds Used During Construction (AFC)
- --------------------------------------------------
AFC is an amount recorded on the books of a utility during the period of
construction of plant. The amount represents the estimated cost of both debt
and equity used to finance the construction.
Construction Work In Progress (CWIP)
- ------------------------------------
This amount represents utility plant in the process of construction but not
yet placed in service. The amount is shown on the consolidated balance sheet
as a component of property, plant and equipment.
Deferred Energy Costs
- ---------------------
In conjunction with the Energy Cost Rate Adjustment Clause, Duquesne Light
Company records deferred energy costs to offset differences between actual
energy costs and the level of energy costs currently recovered from customers.
Energy Cost Rate Adjustment Clause (ECR)
- ----------------------------------------
Duquesne Light Company recovers through the ECR, to the extent that such
amounts are not included in base rates, the cost of nuclear fuel, fossil fuel
and purchased power costs and passes to its customers the profits from short-
term power sales to other utilities.
Federal Energy Regulatory Commission (FERC)
- -------------------------------------------
FERC is an independent five-member commission within the U.S. Department of
Energy. Among its many responsibilities, FERC sets rates and charges for the
wholesale transportation and sale of natural gas and electricity, and the
licensing of hydroelectric power projects.
Kilowatt (KW)
- -------------
A kilowatt is a unit of power or capacity. A kilowatt hour (KWH) is a unit of
energy or kilowatts times the length of time the kilowatts are used. For
example, a 100-watt bulb has a demand of .1 KW and, if burned continuously,
will consume 1 KWH in ten hours. One thousand KWs is a megawatt (MEGAWATT).
One thousand KWHs is a megawatt hour (MWH).
Nuclear Decommissioning Costs
- -----------------------------
Decommissioning costs are expenses to be incurred in connection with the
entombment, decontamination, dismantlement, removal and disposal of the
structures, systems and components of a nuclear power plant that has
permanently ceased the production of electric energy.
Peak Load
- ---------
Peak load is the amount of electricity required during periods of highest
demand. Peak periods fluctuate by season and generally occur in the morning
hours in winter and in late afternoon during the summer.
Pennsylvania Public Utility Commission (PUC)
- --------------------------------------------
The Pennsylvania governmental body that regulates all utilities (electric,
gas, telephone, water, etc.) is made up of five members (one a chairman)
appointed by the governor.
Regulatory Asset
- ----------------
Costs that Duquesne Light Company would otherwise have charged to expense are
capitalized or deferred because these costs are currently being recovered or
because it is probable that the PUC will allow recovery of these costs through
rates.
44
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
STATEMENT OF CONSOLIDATED INCOME Year Ended December 31,
- -------------------------------- -----------------------
1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues:
Customers:
Current $1,175,578 $1,181,242 $1,181,514
Deferred (Note J) (100,315) (98,201) (78,344)
Other 85,713 104,348 96,480
- --------------------------------------------------------------------------------
Total Operating Revenues 1,160,976 1,187,389 1,199,650
- --------------------------------------------------------------------------------
Operating Expenses:
Fuel 206,896 255,866 237,855
Purchased power 14,032 9,474 12,900
Other operating 297,510 279,228 289,178
Maintenance 80,292 79,146 83,773
Depreciation and amortization 140,500 127,924 119,264
Taxes other than income taxes 72,160 85,368 95,067
Income taxes (Note F) 103,700 96,253 95,941
- --------------------------------------------------------------------------------
Total Operating Expenses 915,090 933,259 933,978
- --------------------------------------------------------------------------------
Operating Income 245,886 254,130 265,672
- --------------------------------------------------------------------------------
Other Income and (Deductions):
Allowance for equity funds used during
construction 869 2,598 1,855
Long-term power sale write-off (Note J) (15,225) -- --
Carrying charges on deferred revenues 1,801 15,145 21,514
Income taxes (Note F) 19,033 (11,746) (5,132)
Other-net 3,693 13,205 (9,379)
- --------------------------------------------------------------------------------
Total Other Income and (Deductions) 10,171 19,202 8,858
- --------------------------------------------------------------------------------
Income Before Interest Charges 256,057 273,332 274,530
- --------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 108,479 123,402 131,499
Other interest 3,517 2,458 2,316
Allowance for borrowed funds used during
construction (726) (2,296) (2,418)
- --------------------------------------------------------------------------------
Total Interest Charges 111,270 123,564 131,397
- --------------------------------------------------------------------------------
Income Before Cumulative Effect on Prior
Years of Changes in Accounting
Principles 144,787 149,768 143,133
Adoption of SFAS 109 - Income Taxes
(Notes A and F) 8,000 -- --
Accounting for maintenance costs -- net
(Note A) (5,425) -- --
- --------------------------------------------------------------------------------
Net Income 147,362 149,768 143,133
Dividends on Preferred and Preference
Stock 9,188 9,411 10,801
- --------------------------------------------------------------------------------
Earnings for Common Stock $138,174 $140,357 $132,332
================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
45
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
CONSOLIDATED BALANCE SHEET Year Ended December 31,
- -------------------------- -----------------------
ASSETS 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Property, Plant and Equipment:
Electric plant in service (Note A) $4,100,058 $3,860,040
Construction work in progress 59,777 67,435
Property held under capital leases (Note E) 177,800 212,172
Property held for future use (Note J) 216,863 216,893
- --------------------------------------------------------------------------------
Total 4,554,498 4,356,540
Less accumulated depreciation and amortization (1,435,732) (1,340,846)
- --------------------------------------------------------------------------------
Property, Plant and Equipment--Net 3,118,766 3,015,694
- --------------------------------------------------------------------------------
Other Property and Investments (at cost):
Investment in DQE Common Stock 29,998 30,000
Other property and investments 31,062 21,307
Current Assets:
Cash and temporary cash investments (at cost
which approximates market) -- 6,156
Receivables (Note D):
Electric customer accounts receivable 107,342 109,692
Tax receivables 18,857 2,403
Other receivables 35,842 23,700
Less: Allowance for uncollectible accounts (13,282) (7,707)
- --------------------------------------------------------------------------------
Receivables less allowance for uncollectible
accounts 148,759 128,088
Less: Receivables sold (9,000) (76,000)
- --------------------------------------------------------------------------------
Total Receivables 139,759 52,088
- --------------------------------------------------------------------------------
Materials and supplies (generally at average cost):
Coal 26,793 39,297
Operating and construction 64,885 66,016
Other current assets 8,130 11,766
- --------------------------------------------------------------------------------
Total Current Assets 239,567 175,323
- --------------------------------------------------------------------------------
Other Assets:
Extraordinary property loss (Note B) 35,781 46,447
Unamortized loss on reacquired debt (Note C) 95,266 70,324
Beaver Valley Unit 2 sale/leaseback premium (Note E) 34,903 36,371
Deferred rate synchronization costs (Note J) 51,149 51,149
Phase-in plan deferrals (Note E) 28,621 127,996
Uncollected deferred income taxes (Note A) 569,555 --
Deferred debits 162,798 152,844
- --------------------------------------------------------------------------------
Total Other Assets 978,073 485,131
- --------------------------------------------------------------------------------
Total Assets $4,397,466 $3,727,455
================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
46
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
CONSOLIDATED BALANCE SHEET As of December 31,
- -------------------------- ------------------
CAPITALIZATION AND LIABILITIES 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Capitalization (Note C):
Common stock (authorized -- 90,000,000 shares,
issued -- 10 shares) $ -- $ --
Capital surplus 805,755 806,867
Retained earnings 294,916 300,742
- --------------------------------------------------------------------------------
Total common stockholder's equity 1,100,671 1,107,609
- --------------------------------------------------------------------------------
Non-redeemable preferred and preference stock 121,906 121,906
Redeemable preferred and preference stock 8,392 8,579
Non-redeemable preference stock, Plan Series A 29,956 29,995
- --------------------------------------------------------------------------------
Total preferred and preference stock before
deferred ESOP benefit (involuntary liquidation
values of $160,117 and $160,342 exceed par by
$81,585 and $81,808, respectively) 160,254 160,480
Deferred employee stock ownership plan (ESOP) benefit (27,126) (28,471)
- --------------------------------------------------------------------------------
Total preferred and preference stock (Note C) 133,128 132,009
- --------------------------------------------------------------------------------
Senior secured debt (excluding Pollution Control
Notes) 999,400 1,018,098
Other long-term debt 422,524 398,915
Unamortized debt discount and premium-net (5,219) (4,012)
- --------------------------------------------------------------------------------
Total long-term debt (Note C) 1,416,705 1,413,001
- --------------------------------------------------------------------------------
Total Capitalization 2,650,504 2,652,619
- --------------------------------------------------------------------------------
Obligations Under Capital Leases (Note E) 55,733 71,876
- --------------------------------------------------------------------------------
Current Liabilities:
Notes payable 10,991 --
Current maturities and sinking fund requirements
(Notes C and E) 45,741 46,054
Accounts payable 112,401 118,423
Accrued taxes 49,345 48,191
Accrued interest 14,185 28,258
Dividends declared 36,436 35,109
Deferred energy costs (Note A) 10,108 18,893
- --------------------------------------------------------------------------------
Total Current Liabilities 279,207 294,928
- --------------------------------------------------------------------------------
Other Noncurrent Liabilities:
Investment tax credits unamortized 129,574 135,580
Accumulated deferred income taxes (Note A) 1,145,782 470,716
Deferred credits (Note A) 136,666 101,736
- --------------------------------------------------------------------------------
Total Other Noncurrent Liabilities 1,412,022 708,032
- --------------------------------------------------------------------------------
Commitments and Contingencies (Notes B through L)
- --------------------------------------------------------------------------------
Total Capitalization and Liabilities $4,397,466 $3,727,455
================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
47
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
STATEMENT OF CONSOLIDATED CASH FLOWS Year Ended December 31,
- ------------------------------------ -----------------------
1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 147,362 $ 149,768 $ 143,133
Principal non-cash charges (credits) to net
income:
Depreciation and amortization 140,500 127,924 119,264
Capital lease and other amortization 32,428 49,001 56,437
Deferred income taxes and investment tax
credits -- net (34,795) (10,896) (18,974)
Allowance for equity funds used during
construction (869) (2,598) (1,855)
Phase-in plan revenues and related carrying
charges 99,375 83,056) 56,830)
Changes in working capital other than cash
(Note H) (96,799) 55,193) (41,651)
Other -- net 19,505 7,166) 36,691)
- --------------------------------------------------------------------------------
Net Cash Provided from Operating Activities 306,707 458,614) 349,875)
- --------------------------------------------------------------------------------
Cash Flows Used By Investing Activities:
Construction expenditures (100,628) (112,409) (125,358)
Purchase of DQE common stock -- (18,476) (11,524)
Allowance for borrowed funds used during
construction (726) (2,296) (2,418)
Other -- net (12,317) (7,877) (6,905)
- --------------------------------------------------------------------------------
Net Cash Used by Investing Activities (113,671) (141,058) (146,205)
- --------------------------------------------------------------------------------
Cash Flows Used In Financing Activities:
Sale of bonds 740,500 312,925 50,000
Increase in notes payable 10,990 -- --
Dividends on capital stock (154,204) (151,404) (143,801)
Reductions of long-term obligations:
Preferred and preference stock (187) (24,158) (38,505)
Long-term debt (735,048) (394,951) (58,782)
Other obligations (27,751) (43,686) (42,997)
Premium on reacquired debt (31,702) (18,127) (2,947)
Contribution from parent company -- 45,000 30,000
Beaver Valley Unit 2 sale/leaseback premium -- (36,371) --
Other -- net (1,790) (3,797) 963
- --------------------------------------------------------------------------------
Net Cash Used In Financing Activities (199,192) (314,569) (206,069)
- --------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary
cash investments (6,156) 2,987 (2,399)
Cash and temporary cash investments at
beginning of year 6,156 3,169 5,568
- --------------------------------------------------------------------------------
Cash and temporary cash investments at end of
year $ -- $ 6,156 $ 3,169
================================================================================
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Cash paid during the year for:
<S> <C> <C> <C>
Interest (net of amount capitalized) $124,692 $126,014 $136,147
- --------------------------------------------------------------------------------
Income taxes $133,303 $112,859 $ 86,201
- --------------------------------------------------------------------------------
Non-cash investing and financing activities:
Capital lease obligations recorded $ 11,811 $ 17,089 $ 22,028
ESOP preference stock issued $ -- $ -- $ 30,000
================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
48
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
STATEMENT OF CONSOLIDATED RETAINED EARNINGS Year Ended December 31,
- ------------------------------------------- -----------------------
1991 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $300,742 $301,385 $302,053
Net Income for the Year 147,362 149,768 143,133
- --------------------------------------------------------------------------------
Total 448,104 451,153 445,186
- --------------------------------------------------------------------------------
Cash dividends declared:
Preferred stock 4,740 4,906 5,456
Preference stock (net of tax benefit of ESOP
dividend) 4,448 4,505 5,345
Common stock 144,000 141,000 133,000
- --------------------------------------------------------------------------------
Total Cash Dividends Declared 153,188 150,411 143,801
- --------------------------------------------------------------------------------
Balance, December 31 $294,916 $300,742 $301,385
================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF ACCOUNTING POLICIES
Consolidation and Reclassifications
- --------------------------------------------------------------------------------
The consolidated financial statements include the accounts of Duquesne Light
Company (Duquesne) and its wholly owned subsidiary. All material intercompany
balances and transactions have been eliminated in the preparation of the
consolidated financial statements.
Basis of Accounting
- --------------------------------------------------------------------------------
The consolidated financial statements reflect the rate-making practices of
Duquesne and contain regulatory assets and liabilities as deferred charges and
credits in accordance with Statement of Financial Accounting Standards Number
71, Accounting for the Effects of Certain Types of Regulation (SFAS No. 71).
Duquesne's accounting practices conform to the Uniform System of Accounts
prescribed by the Federal Energy Regulatory Commission (FERC) and the
requirements of the Pennsylvania Public Utility Commission (PUC). The Company is
also subject to the accounting and reporting requirements of the Securities and
Exchange Commission (SEC).
Property, Plant and Equipment
- --------------------------------------------------------------------------------
The asset values of properties are stated at original construction cost, which
includes related payroll taxes, pensions, and other fringe benefits, as well as
administrative and general costs. Also included in original construction cost is
an allowance for funds used during construction (AFC), which represents the
estimated cost of debt and equity funds used to finance construction. The amount
of AFC that is capitalized will vary according to changes in the cost of capital
and in the level of construction work in progress (CWIP). On a current basis,
Duquesne does not realize cash from the allowance for funds used during
construction. Duquesne does realize cash, during the service life of the plant,
through increased revenues reflecting a higher rate base (upon which a return is
earned) and increased depreciation. The AFC rates applied to CWIP were 9.6
percent in 1993, 10.3 percent in 1992, and 9.6 percent in 1991.
Additions to, and replacements of, property units are charged to plant accounts.
Maintenance, repairs and replacement of minor items of property are recorded as
expenses when they are incurred. The costs of properties that are retired (plus
removal costs and less any salvage value) are charged to the accumulated
provision for depreciation.
Substantially all of Duquesne's properties are subject to a first mortgage lien,
and substantially all of Duquesne's electric properties are subject to junior
liens.
Depreciation
- --------------------------------------------------------------------------------
Depreciation of property, plant and equipment, including plant-related
intangibles, is recorded on a straight-line basis over the estimated useful
lives of properties. Amortization of other intangibles is recorded on a
straight-line basis over a five-year period. Depreciation and amortization of
other properties are calculated on various bases.
Nuclear Decommissioning
- --------------------------------------------------------------------------------
The PUC ruled that recovery of the decommissioning costs for Beaver Valley Unit
1 could begin in 1977 and that recovery for Beaver Valley Unit 2 and Perry Unit
1 could begin in 1988. Duquesne expects to decommission each nuclear plant at
the end of its life, a date that currently coincides with the expiration of each
plant's operating license. (See Note L.) The total estimated decommissioning
costs, including removal and decontamination costs, being recovered in rates are
$70 million for Beaver Valley Unit 1, $20 million for Beaver Valley Unit 2, and
$38 million for Perry Unit 1. These amounts were based upon the most recent
studies available at the time of Duquesne's last rate case.
Since the time of Duquesne's last rate case, site specific studies have been
performed to update the estimated decommissioning costs, in current dollars, for
each of its nuclear generating units. In 1992, Duquesne's share of the estimated
decommissioning costs for Beaver Valley Unit 2 was revised to $35 million.
Duquesne's share of decommissioning costs, which is based on preliminary site
specific studies to be finalized early in 1994, is estimated to increase to $134
million for Beaver Valley Unit 1 and to $71 million for Perry.
50
<PAGE>
During 1994, it is Duquesne's intention to increase the annual contribution to
its decommissioning trusts by $2 million to bring the total annual funding to
approximately $4 million per year. Duquesne plans to continue making periodic
reevaluations of estimated decommissioning costs, to provide additional funding
from time to time, and to seek regulatory approval for recognition of these
increased funding levels.
Duquesne records decommissioning costs under the category of depreciation
expense and accrues a liability, equal to that amount, for nuclear
decommissioning expense. Such nuclear decommissioning funds are deposited in
external, segregated trust accounts. Trust fund earnings increase the fund
balance and the recorded liability. The aggregate trust fund balances at the end
of 1993 totaled $18.1 million. On Duquesne's consolidated balance sheet, the
decommissioning trusts have been reflected in other property and investments,
and the related liability has been recorded as other deferred credits.
Maintenance
- --------------------------------------------------------------------------------
Maintenance expense incurred for scheduled refueling outages at Duquesne's
nuclear units is deferred and amortized over the period between scheduled
outages. Duquesne changed, as of January 1, 1993, its method of accounting for
maintenance costs during scheduled major fossil station outages. Prior to that
time, maintenance costs incurred for scheduled major outages at fossil stations
were charged to expense as these costs were incurred. Under the new accounting
policy, Duquesne accrues, over the periods between outages, anticipated expenses
for scheduled major fossil station outages. (Maintenance costs incurred for non-
major scheduled outages and for forced outages will continue to be charged to
expense as such costs are incurred.) This new method was adopted to match more
accurately the maintenance costs and the revenue produced during the periods
between scheduled major fossil station outages.
The cumulative effect (approximately $5.4 million, net of income taxes of
approximately $3.9 million) of the change on prior years was included in income
in 1993. The effect of the change in 1993 was to reduce income, before the
cumulative effect of changes in accounting principle, by approximately $2.4
million or $.05 per share and to reduce net income, after the cumulative effect
of changes in accounting principle, by approximately $7.8 million or $.15 per
share.
Revenues
- --------------------------------------------------------------------------------
Meters are read monthly and customers are billed on the same basis. Revenues are
recorded in the accounting periods for which they are billed. Deferred revenues
are associated with Duquesne's 1987 rate case. (See Note J.)
Income Taxes
- --------------------------------------------------------------------------------
On January 1, 1993, Duquesne adopted Statement of Financial Accounting Standards
Number 109 (SFAS No. 109). Implementation of SFAS No. 109 involved a change in
accounting principle. The cumulative $8 million effect on prior years was
reported in 1993 as an increase in net income.
SFAS No. 109 requires that the liability method be used in computing deferred
taxes on all differences between book and tax bases of assets. These book tax
differences occur when events and transactions recognized for financial
reporting purposes are not recognized in the same period for tax purposes. As a
utility, Duquesne recognizes uncollected deferred income taxes for these
deferred tax liabilities that are expected to be recovered from customers
through rates. The adoption of SFAS No. 109 on January 1, 1993 resulted in a
$700 million increase in deferred tax liabilities and the recognition of $550
million in net regulatory assets. Prior to the adoption of SFAS No. 109,
Duquesne recorded certain costs in electric plant in service net of taxes.
Because SFAS No. 109 eliminates this "net of tax" accounting, the adoption of
SFAS No. 109 also resulted in an increase in plant assets of $150 million.
When applied to reduce Duquesne's income tax liability, investment tax credits
related to utility property generally were deferred. Such credits are
subsequently reflected, over the lives of the related assets, as reductions to
tax expense.
51
<PAGE>
Energy Cost Rate Adjustment Clause (ECR)
- --------------------------------------------------------------------------------
Through the ECR, Duquesne recovers (to the extent that such amounts are not
included in base rates) nuclear fuel, fossil fuel and purchased power expenses
and, also through the ECR, passes to its customers the profits from short-term
power sales to other utilities. Nuclear fuel expense is recorded on the basis of
the quantity of electric energy generated and includes such costs as the fee,
imposed by the United States Department of Energy (DOE), for future disposal and
ultimate storage and disposition of spent nuclear fuel. Fossil fuel expense
includes the costs of coal and fuel oil used in the generation of electricity.
Duquesne defers fuel and other energy expenses for recovery through the ECR in
subsequent years. The deferrals reflect the difference between the amount that
Duquesne is currently collecting from customers and its actual fuel costs. The
Pennsylvania Public Utility Commission (PUC) annually reviews Duquesne's fuel
costs for the fiscal year April through March, compares them to previously
projected fuel costs and adjusts the ECR for over- or under-recoveries and for
two PUC-established coal cost standards. (See Note J.)
Over- or under-recoveries from customers are recorded in the Consolidated
Balance Sheet of Duquesne as payable to, or receivable from, customers. At
December 31, 1993 and 1992, $10.1 million and $18.9 million were payable to
customers and shown as deferred energy costs.
Cash Flows
- --------------------------------------------------------------------------------
For the purpose of the statement of cash flows, Duquesne considers all highly
liquid investments maturing in three or fewer months to be cash equivalents.
Reclassifications
- --------------------------------------------------------------------------------
The 1992 and 1991 financial statements have been reclassified to conform with
accounting presentations adopted during 1993.
B. EXTRAORDINARY PROPERTY LOSS
In 1984, Duquesne, Ohio Edison Company, The Cleveland Electric Illuminating
Company, Pennsylvania Power Company and The Toledo Edison Company agreed to
minimize construction work and cash expenditures on Perry Unit 2 until several
alternatives, including resumption of construction or cancellation of the unit,
were evaluated. Duquesne abandoned its interest in the unit in 1986 and
subsequently disposed of its interest in 1992.
In 1987, the PUC approved recovery, over a 10-year period, of Duquesne's
original $155 million investment in Perry Unit 2. Duquesne is not earning a
return on the as yet unrecovered portion (approximately $39.4 million at
December 31, 1993) of its investment in the unit.
C. CAPITALIZATION
Common Stock and Capital Surplus
- --------------------------------------------------------------------------------
In July 1989, Duquesne became a wholly owned subsidiary of DQE, the holding
company formed as part of a shareholder-approved restructuring. As a result of
the restructuring, DQE common stock replaced all outstanding shares of Duquesne
common stock, except for ten shares which DQE holds.
DQE or its predecessor, Duquesne, has continuously paid dividends on common
stock since 1953. Dividends may be paid on DQE common stock to the extent
permitted by law and as declared by its board of directors. However, in
Duquesne's Restated Articles of incorporation, provisions relating to preferred
and preference stock may restrict the payment of Duquesne's common dividends. No
dividends or distributions may be made on Duquesne's common stock if Duquesne
has not paid dividends or sinking fund obligations on its preferred or
preference stock. Further, the aggregate amount of Duquesne's common stock
dividend payments or distributions may not exceed certain percentages of net
income if the ratio of common stockholders' equity to total capitalization is
less than specified percentages. As all of Duquesne's common stock is owned by
DQE, to the extent that Duquesne cannot pay common dividends, DQE may not be
able to pay dividends to its common stockholders. No part of the retained
earnings of Duquesne was restricted at December 31, 1993.
52
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Capital Surplus (Amounts in Thousands of Shares)
Year Ended December 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Surplus $ -- $ -- $ --
Premium on common stock 807,593 808,707 764,687
Capital stock expense (1,838) (1,840) (1,968)
- --------------------------------------------------------------------------------
Total Capital Surplus $805,755 $806,867 $762,719
================================================================================
</TABLE>
Preferred and Preference Stock
- --------------------------------------------------------------------------------
Holders of Duquesne's preferred stock are entitled to cumulative quarterly
dividends. If four quarterly dividends on any series of preferred stock are in
arrears, holders of the preferred stock are entitled to elect a majority of
Duquesne's board of directors until all dividends have been paid. At December
31, 1993, Duquesne had made all preferred stock dividend payments.
Holders of Duquesne's preference stock are entitled to receive cumulative
quarterly dividends if dividends on all series of preferred stock are paid. If
six quarterly dividends on any series of preference stock are in arrears,
holders of the preference stock are entitled to elect two of Duquesne's
directors until all dividends have been paid. At December 31, 1993, Duquesne had
made all dividend payments.
Outstanding preferred and preference stock is generally callable, on notice of
not less than 30 days, at stated prices (See table on page 55.) plus accrued
dividends. On January 14, 1994, Duquesne called for redemption of all of its
outstanding shares of $2.10 and $7.50 preference stock. None of the remaining
preferred or preference stock issues has mandatory purchase requirements.
In December 1991, Duquesne established an Employee Stock Ownership Plan (ESOP)
to provide matching contributions for a 401(k) Retirement Savings Plan for
Management Employees. (See Note I.) Duquesne issued and sold 845,070 shares of
redeemable preference stock, plan series A to the trustee of the ESOP. As
consideration for the stock, Duquesne received a note valued at $30 million from
the trustee. The preference stock has an annual dividend rate of $2.80 per
share, and each share of the preference stock is exchangeable for one share of
DQE common stock. At December 31, 1993, $27.1 million of preference stock issued
in connection with the establishment of the ESOP had been offset, for financial
statement purposes, by the recognition of a deferred ESOP benefit. Dividends on
the preference stock and cash contributions from Duquesne will be used to repay
the ESOP note. During 1993, Duquesne made cash contributions of approximately
$2.1 million, the difference between the ESOP debt service and the amount of
dividends on ESOP shares (approximately $2.3 million). As shares of preference
stock are allocated to the accounts of participants in the ESOP, Duquesne
recognizes compensation expense, and the amount of the deferred compensation
benefit is amortized. In 1993, Duquesne recognized $1.7 million of compensation
expense related to the 401(k) plan.
53
<PAGE>
Preferred and Preference Stock of Duquesne Light Company at December 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Shares and Amounts in Thousands)
------------------------------------------------------------
1993 1992 1991
Call Price ------------------------------------------------------------
Per Share Shares Amount Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Preferred Stock Series: (a)
3.75% (b) (c) $ 51.00 148 $ 7,407 148 $ 7,407 148 $ 7,407
4.00% (b) (c) 51.50 550 27,486 550 27,486 550 27,486
4.10% (b) (c) 51.75 120 6,012 120 6,012 120 6,012
4.15% (b) (c) 51.73 132 6,643 132 6,643 132 6,643
4.20% (b) (c) 51.71 100 5,021 100 5,021 100 5,021
$2.10 (b) (c) 51.84 159 8,039 159 8,039 159 8,039
$7.20 (c) (d) 101.00 319 31,915 319 31,915 319 31,915
$8.375 (d) (e) -- -- -- -- -- 80 7,945
- ---------------------------------------------------------------------------------------------------------------------
Total Preferred Stock 1,528 92,523 1,528 92,523 1,608 100,468
- ---------------------------------------------------------------------------------------------------------------------
Preference Stock Series: (f)
$2.100 (c) (g) (h) 25.00 1,175 29,383 1,175 29,383 1,175 29,383
$7.500 (d) (e) (h) 101.00 84 8,392 86 8,579 87 8,692
$9.125 (d) (e) -- -- -- -- -- 161 16,100
Plan Series A (c) (i) 37.74 844 29,956 845 29,995 845 30,000
- ---------------------------------------------------------------------------------------------------------------------
Total Preference Stock 2,103 67,731 2,106 67,957 2,268 84,175
- ---------------------------------------------------------------------------------------------------------------------
Purchase and sinking fund requirements -- -- (17,300)
Deferred ESOP benefit (27,126) (28,471) (30,000)
- ---------------------------------------------------------------------------------------------------------------------
Total Preferred and Preference Stock 3,631 $133,128 3,634 $132,009 3,876 $137,343
=====================================================================================================================
</TABLE>
(a) Preferred stock: 4,000,000 authorized shares; $50 par value; cumulative
(b) $50 per share involuntary liquidation value
(c) Non-redeemable
(d) $100 per share involuntary liquidation value
(e) Redeemable
(f) Preference stock: 8,000,000 authorized shares; $1 par value; cumulative
(g) $25 per share involuntary liquidation value
(h) Redeemed January 14, 1994
(i) $35.50 per share involuntary liquidation value
Long-Term Debt
- --------------------------------------------------------------------------------
At December 31, 1993, Duquesne had $1.433 billion of outstanding debt
securities; these consisted of $960 million of first collateral trust bonds, $49
million of first mortgage bonds, $418 million of pollution control notes and $6
million of debentures.
During 1992, Duquesne began issuing secured debt under a new first collateral
trust indenture. This indenture will ultimately replace Duquesne's 1947 first
mortgage bond indenture.
First collateral trust bonds totaling $695 million and $265 million, and having
weighted average interest rates of 6.58 percent and 8.04 percent, were issued in
1993 and 1992.
Since 1985, Duquesne has reacquired $1.561 billion of first mortgage bonds. The
difference between the purchase prices and the net carrying amounts of these
bonds has been included in the consolidated balance sheet as unamortized loss on
reacquired debt. At December 31, 1993, the balance of unamortized loss on
reacquired debt was $95.3 million.
54
<PAGE>
<TABLE>
<CAPTION>
Long-Term Debt at December 31
- --------------------------------------------------------------------------------
Senior Secured Debt at December 31, Principal Outstanding
(Amounts In Thousands of Dollars)
-------------------------------------
Interest Rate (a) Maturity 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
First Collateral Trust Bonds:
4.75% 5-15-96 $ 50,000 $ --
6.08% 11-15-97 50,000 50,000
6.15% 2-12-98 35,000 --
5.85% 6-01-98 35,000 --
6.55% 11-15-98 5,000 5,000
5.90% 7-01-99 75,000 --
6.45% 3-01-00 45,000 --
6.10% 5-10-00 55,000 --
6.65% 4-01-03 45,000 --
6.70% 5-15-03 55,000 --
6.625% 6-15-04 100,000 --
8.75% 5-15-22 100,000 100,000
8.20% 11-15-22 10,000 10,000
7.625% 4-15-23 100,000 --
8.375% 5-15-24 100,000 100,000
7.55% 6-15-25 100,000 --
Less current maturities and sinking fund
requirements (b) (9,600) --
- --------------------------------------------------------------------------------
Total First Collateral Trust Bonds 950,400 265,000
- --------------------------------------------------------------------------------
First Mortgage Bonds:
8.25% 6-1-95 49,500 50,000
5.125% 2-1-96 -- 22,800
5.25% 2-1-97 -- 24,600
6.375% 2-1-98 -- 34,700
7.00% 1-1-99 -- 30,000
7.75% 7-1-99 -- 28,647
8.75% 3-1-00 -- 29,700
7.875% 3-1-01 -- 34,650
7.50% 12-1-01 -- 26,461
7.50% 6-1-02 -- 28,470
7.25% 1-1-03 -- 32,670
7.75% 7-1-03 -- 35,000
8.625% 4-1-04 -- 43,650
9.50% 3-1-05 -- 49,000
8.375% 4-1-07 -- 96,400
9.50% 12-1-16 -- 98,000
9.00% 2-1-17 -- 99,000
Less current maturities and sinking fund
requirements (500) (10,650)
- --------------------------------------------------------------------------------
Total First Mortgage Bonds 49,000 753,098
- --------------------------------------------------------------------------------
Total Senior Secured Debt 999,400 1,018,098
- --------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
Other Long-Term Debt at December 31 Principal Outstanding
(Amounts In Thousands of Dollars)
----------------------------------
Interest Rate (a) Maturity Series 1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pollution Control Notes:
(c) (d) 9-1-11 1992 Allegheny County Series A 47,925 47,925
(c) 12-1-13 1990 Allegheny County Series A 50,000 50,000
5.739% 6-1-03 1973 Beaver County Series A 9,500 9,800
(c) 8-1-09 1990 Beaver County Series B 18,000 18,000
6.90% 9-1-11 1976 Beaver County Series C 15,000 15,000
11.625% 12-1-14 1984 Beaver County Series B 51,000 51,000
(c) 8-1-20 1990 Beaver County Series A 13,700 13,700
(c) 8-1-25 1990 Beaver County Series C 44,250 44,250
(c) (d) 9-1-30 1993 Beaver County Series A 25,000 --
10.50% 10-1-13 1983 Ohio Development Authority -- 20,500
11.125% (d) 2-1-15 1985 Ohio Development Authority 38,610 38,610
(c) 9-1-18 1988 Ohio Development Authority 71,000 71,000
6.65% (e) 10-1-23 1989 Ohio Development Authority 13,500 13,500
(c) (d) 10-1-27 1993 Ohio Development Authority 20,500 --
Less current maturities and sinking fund
requirements (1,719) (690)
- ----------------------------------------------------------------------------------------------
Total Pollution Control Notes 416,266 392,595
- ----------------------------------------------------------------------------------------------
5% sinking fund debentures due March 1, 2010 (f) 6,042 6,042
- ----------------------------------------------------------------------------------------------
Miscellaneous 216 278
- ----------------------------------------------------------------------------------------------
Less unamortized debt discount and premium--net (5,219) (4,012)
- ----------------------------------------------------------------------------------------------
Total Long-Term Debt $1,416,705 $1,413,001
==============================================================================================
</TABLE>
(a) These interest rates are the average coupon rate for multiple issuances with
the same maturity dates.
(b) Sinking fund requirement relates to the first mortgage bonds held by the
trustee as collateral for the publicly-held collateral trust bonds. The
outstanding collateral trust bonds do not have a sinking fund requirement.
(c) Certain of the pollution control notes have adjustable interest rate periods
currently ranging from 1 to 360 days. On 30 days' to 90 days' notice prior
to any interest reset date, Duquesne can change the subsequent interest
rate period on the notes to a different interest rate period ranging from
1 day to the final maturity of the bonds.
(d) Issued in the form of first mortgage bonds or first collateral trust bonds
(e) Fixed rate through first five years, thereafter becoming variable rates as
in footnote c
(f) As of January 1994, the sinking fund requirement for 1995 had been met and
the requirement for 1996 had been partially satisfied.
At December 31, 1993 and 1992, Duquesne was in compliance with all of its debt
covenants.
At December 31, 1993, sinking fund requirements and maturities of long-term debt
outstanding for the next five years were: $11.8 million and $.1 million in 1994;
$11.4 million and $49.6 million in 1995; $11.2 million and $50.1 million in
1996; $10.8 million and $50.0 million in 1997; and $10.1 million and $75.0
million in 1998.
Sinking fund requirements relate primarily to the first mortgage bonds and may
be satisfied by cash or the certification of property additions equal to 166-2/3
percent of the bonds required to be redeemed. During 1993, annual sinking fund
requirements of $.5 million were satisfied by cash and $4.8 million by
certification of property additions.
Total interest costs incurred were $118.1 million in 1993, $133.9 million in
1992 and $147.2 million in 1991. Of these amounts, which included AFC, $2.0
million in 1993, $4.7 million in 1992 and $9.3 million in 1991 were capitalized.
Debt discount or premium and related issuance expenses are amortized over the
lives of the applicable issues.
56
<PAGE>
In 1992, Duquesne was involved in the issuance of $419.0 million of
collateralized lease bonds, which were originally issued by an unaffiliated
corporation for the purpose of partially financing the lease of Beaver Valley
Unit 2. Duquesne is also associated with a letter of credit securing the
lessors' $188 million equity interest in the unit and certain tax benefits. If
certain specified events occur, the letter of credit could be drawn down by the
owners, the leases could terminate and the bonds would become direct obligations
of Duquesne.
The pollution control notes arise from the sale of bonds by public authorities
for the purposes of financing construction of pollution control facilities at
Duquesne's plants or refunding previously issued bonds.
Duquesne is obligated to pay the principal and interest on the bonds. For
certain of the pollution control notes, there is an annual commitment fee for an
irrevocable letter of credit. Under certain circumstances, the letter of credit
is available for the payment of interest on, or redemption of, a portion of the
notes. In June 1993, $25 million of pollution control notes were issued; the
proceeds were used to reimburse Duquesne for pollution control expenditures
related to the Beaver Valley plant. In August 1993, pollution control notes
totaling $20.5 million were refinanced at lower interest rates.
At December 31, 1993, the fair value of Duquesne's long-term debt and redeemable
preference stock approximated the carrying value. The fair value of Duquesne's
long-term debt and redeemable preference stock was estimated on the basis of (a)
quoted market prices for the same or similar issues or (b) current rates offered
to Duquesne for debt of the same remaining maturities.
At December 31, 1993, the fair market value of Duquesne's investment in DQE
common stock was $34.0 million.
D. RECEIVABLES
An arrangement between Duquesne and an unaffiliated corporation entitles
Duquesne to sell, and the corporation to purchase, up to $100 million of
Duquesne's accounts receivable. At December 31, 1993 and 1992, Duquesne had sold
$7.1 million and $66.3 million of electric customer accounts receivable and $1.9
million and $9.7 million of receivables under contracts from co-owners of
jointly owned generating facilities, respectively, to the unaffiliated
corporation. The sales agreement includes a limited recourse obligation under
which Duquesne could be required to repurchase certain of the receivables. The
maximum amount of Duquesne's contingent liability was $2.8 million at December
31, 1993.
E. LEASES
Duquesne leases nuclear fuel, a portion of a nuclear generating plant, office
buildings, computer equipment and other property and equipment.
<TABLE>
<CAPTION>
(Amounts in Thousands of Dollars)
Capital Leases at December 31 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C>
Nuclear fuel $136,755 $ 169,837
Electric plant 41,045 42,335
- ------------------------------------------------------------------------------
Total 177,800 212,172
Less accumulated amortization (84,717) (101,860)
- ------------------------------------------------------------------------------
Property Held Under Capital Leases -- Net (a) $ 93,083 $ 110,312
==============================================================================
</TABLE>
(a) Includes $3,492 in 1993 and $3,782 in 1992 of capital leases with associated
obligations retired
In 1987, Duquesne sold its 13.74 percent interest in Beaver Valley Unit 2; the
sale was exclusive of transmission and common facilities. The total sales price
of $537.9 million was the appraised value of Duquesne's interest in the
property. Duquesne subsequently leased back its interest in the unit for a term
of 29.5 years. The lease provides for semiannual payments and is accounted for
as an operating lease. Duquesne is responsible under the terms of the lease for
all costs of its interest in the unit. In December 1992, Duquesne participated
in the refinancing of collateralized lease bonds originally issued in 1987 for
the purpose of partially financing the lease of Beaver Valley Unit 2. In
accordance with the Beaver Valley Unit 2 lease agreement, Duquesne paid the
premiums of approximately $36.4 million as a supplemental rent payment to the
lessors. This amount was deferred and is being amortized over the remaining
lease term.Leased nuclear fuel is amortized as the fuel is burned. The
amortization of all other
57
<PAGE>
leased property is based on rental payments made. Payments for capital and
operating leases are charged to operating expenses on the statement of
consolidated income.
<TABLE>
<CAPTION>
(Amounts in Thousands of Dollars)
Summary of Rental Payments 1993 1992 1991
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Operating leases $57,398 $ 64,986 $ 65,414
Amortization of capital leases 28,758 43,119 39,323
Interest on capital leases 5,382 7,880 10,057
- ----------------------------------------------------------------------
Total Rental Payments $91,538 $115,985 $114,794
======================================================================
</TABLE>
Future minimum lease payments for capital leases are related principally to the
estimated use of nuclear fuel financed through leasing arrangements and building
leases. Minimum payments for operating leases are related principally to Beaver
Valley Unit 2 and the corporate headquarters.
<TABLE>
<CAPTION>
Future Minimum Lease Payments (Amounts in Thousands of Dollars)
Year Ended December 31, Operating Leases Capital Leases
- --------------------------------------------------------------------------------
<S> <C> <C>
1994 $ 53,467 $ 39,500
1995 51,970 24,987
1996 51,949 13,811
1997 51,836 8,041
1998 51,711 4,749
1999 and thereafter 976,176 28,278
- --------------------------------------------------------------------------------
Total Minimum Lease Payments $1,237,109 119,366
- --------------------------------------------------------------------------------
Less amount representing interest (29,775)
- --------------------------------------------------------------------------------
Present value of minimum lease payments for
capital leases $ 89,591
================================================================================
</TABLE>
Future payments due to Duquesne, as of December 31, 1993, under subleases of its
corporate headquarters space are approximately $1.7 million in 1994, $3.4
million in 1995 and $24.9 million thereafter.
E. INCOME TAXES
Since DQE's formation in 1989, Duquesne has filed consolidated federal income
tax returns with its parent and other companies in the affiliated group.
Duquesne's federal income tax returns have been audited by the Internal Revenue
Service and closed for the tax years through 1989.
Returns filed for the tax years 1990 to date remain subject to IRS review.
Duquesne does not believe that final settlement of the federal tax returns for
these years will have a materially adverse effect on its financial position or
results of operations. The effects of the 1993 adoption of SFAS No. 109 are
discussed in Note A. Implementation of the standard involved a change in
accounting principle. The cumulative effect of $8 million on prior years was
reported in 1993 as an increase in net income. The SFAS No. 109 impact to 1993
income before cumulative effect of changes in accounting principle is
immaterial.
At December 31, 1993, the accumulated deferred income taxes of Duquesne totaled
$1.146 billion. As discussed in Note A, this includes the deferred tax liability
for the book and tax bases differences associated with (i) electric plant in
service of $855 million; (ii) uncollected deferred income taxes of $199 million;
and (iii) unamortized loss on reacquired debt of $40.9 million. Duquesne also
nets against this liability balance the deferred tax assets associated with (i)
investment tax credits unamortized of $45.3 million and (ii) the gain on the
sale and leaseback of Beaver Valley Unit 2 of $67.1 million. Duquesne expects to
realize these deferred tax assets.
58
<PAGE>
<TABLE>
<CAPTION>
(Amounts in Thousands of Dollars)
Total Income Tax Expense 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Included in operating expenses:
Currently payable: Federal $100,521 $ 80,850 $ 84,862
State 37,718 27,797 31,980
Deferred -- net: Federal (20,133) (3,208) (4,823)
State (9,007) (3,750) (10,750)
Investment tax credits deferred -- net (5,399) (5,436) (5,328)
- --------------------------------------------------------------------------------
Total Included in Operating Expenses 103,700 96,253 95,941
- --------------------------------------------------------------------------------
Included in other income and
deductions:
Currently payable: Federal (17,557) 7,265 2,131
State (1,220) 2,983 1,074
Deferred: Federal 251 1,654 1,943
State 100 377 443
Investment tax credits (607) (533) (459)
- --------------------------------------------------------------------------------
Total Included in Other Income and
Deductions (19,033) 11,746 5,132
- --------------------------------------------------------------------------------
Total Income Tax Expense $ 84,667 $107,999 $101,073
================================================================================
</TABLE>
Total income taxes differ from the amount computed by applying the statutory
federal income tax rate to income before income taxes, preferred and preference
dividends of subsidiary and before the cumulative effect of changes in
accounting principle.
<TABLE>
<CAPTION>
(Amounts in Thousands of Dollars)
Income Tax Expense Reconciliation 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed federal income tax at statutory rate $ 80,309 $ 87,641 $ 83,030
Increase (decrease) in taxes resulting from:
Tax audit settlement (15,000) -- --
Excess of book over tax depreciation 7,162 3,830 5,333
State income taxes, net of federal income
tax benefit 17,934 18,089 15,013
Amortization of deferred investment tax
credits (6,006) (5,969) (5,787)
Other -- net 268 4,408 3,484
- --------------------------------------------------------------------------------
Total Income Tax Expense $ 84,667 $107,999 $101,073
================================================================================
</TABLE>
<TABLE>
<CAPTION>
(Amounts in Thousands of Dollars)
Sources of Deferred Tax Expense 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sources of income taxes deferred and the
related tax effects were:
Excess of tax depreciation $ 16,651 $ 16,611 $ 20,957
Deferred revenues recorded/(recovered) for
book purposes (37,576) (30,702) (21,240)
Allowance for uncollectible accounts (2,890) 9,760 (5,930)
Fuel costs 4,829 (10,820) 1,047
Loss on early retirement of debt 9,798 20,999 (166)
Other-net (19,601) (10,775) (7,855)
- --------------------------------------------------------------------------------
Total Deferred Income Tax Expense (Benefit) $(28,789) $ (4,927) $(13,187)
================================================================================
</TABLE>
G. SHORT-TERM BORROWING AND RELATED CREDIT AGREEMENTS
Duquesne has extendible revolving credit agreements with banks totaling $225
million. Expiration dates vary during 1994. Interest rates can, in accordance
with the option selected at the time of each borrowing, be based on prime,
federal funds, Eurodollar or CD rates. Commitment fees are based on the
unborrowed amount of the commitments.
59
<PAGE>
There were no short-term borrowings during 1992. During 1993 and 1991, the
maximum short-term bank and commercial paper borrowings outstanding were $27
million and $66 million; the average daily short-term borrowings outstanding
were $1.6 million and $11.0 million; and the weighted average daily interest
rates applied to such borrowings were 3.42 percent and 6.36 percent,
respectively. At December 31, 1993, short-term borrowings were $11.0 million.
There were no short-term borrowings at December 31, 1992 or 1991.
H. CHANGES IN WORKING CAPITAL OTHER THAN CASH
<TABLE>
<CAPTION>
(Amounts in Thousands of Dollars)
Changes in Working Capital Other Than Cash 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Accounts receivable $(87,671) $64,571 $(55,001)
Materials and supplies 13,635 (4,151) (3,122)
Other current assets 3,636 7,131 (8,050)
Accounts payable (6,022) (8,573) (465)
Other current liabilities (20,377) (3,785) 24,987
- --------------------------------------------------------------------------------
Total $(96,799) $55,193 $(41,651)
================================================================================
</TABLE>
I. EMPLOYEE BENEFITS
Retirement Plans
- --------------------------------------------------------------------------------
Duquesne maintains retirement plans to provide pensions for all full-time
employees. Upon retirement, an employee receives a monthly pension based on his
or her length of service and compensation. The cost of funding the pension plan
is determined by the unit credit actuarial cost method. Duquesne's policy is to
record this cost as an expense and to fund the pension plans by an amount that
is at least equal to the minimum funding requirements of the Employee Retirement
Income Security Act (ERISA) but not to exceed the maximum tax deductible amount
for the year. Pension costs charged to expense or construction were $9.8 million
for 1993, $11.4 million for 1992 and $11.2 million for 1991.
<TABLE>
<CAPTION>
(Amounts in Thousands of Dollars)
Funded Status of the Retirement Plans and Amounts
At December 31,
Recognized on the Consolidated Balance Sheet
of Duquesne 1993 1992 1991
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of benefits rendered
to date:
Vested benefits $321,249 $287,360 $279,917
Non-vested benefits 16,826 16,252 14,294
- ------------------------------------------------------------------------------------------
Accumulated benefit obligations based on
compensation to date 338,075 303,612 294,211
Additional benefits based on estimated future
salary levels 74,718 77,017 64,919
- ------------------------------------------------------------------------------------------
Projected benefit obligation 412,793 380,629 359,130
Fair market value of plan assets 434,384 411,440 392,027
- ------------------------------------------------------------------------------------------
Projected benefit obligation under plan assets $ 21,591 $ 30,811 $ 32,897
==========================================================================================
Unrecognized net gain $ 80,411 $ 81,971 $ 86,695
Unrecognized prior service cost (21,449) (20,848) (22,317)
Unrecognized net transition liability (19,289) (21,102) (22,913)
Net pension liability per balance sheet (18,082) (9,210) (8,568)
- ------------------------------------------------------------------------------------------
Total $ 21,591 $ 30,811 $ 32,897
==========================================================================================
Assumed rate of return on plan assets 8.00% 8.00% 7.50%
- ------------------------------------------------------------------------------------------
Discount rate used to determine projected benefit
obligation 7.00% 7.50% 7.50%
- ------------------------------------------------------------------------------------------
Assumed change in compensation levels 5.25% 5.75% 5.75%
- ------------------------------------------------------------------------------------------
</TABLE>
Pension assets consist primarily of common stocks, United States obligations and
corporate debt securities.
60
<PAGE>
<TABLE>
<CAPTION>
(Amounts in Thousands of Dollars)
Components of Net Pension Cost 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost (Benefits earned during the year) $ 11,657 $ 11,397 $ 9,911
Interest on projected benefit obligation 27,423 26,390 24,705
Return on plan assets (41,725) (26,736) (80,716)
Net amortization and deferrals 12,454 325 57,319
- --------------------------------------------------------------------------------
Net Pension Cost $ 9,809 $ 11,376 $ 11,219
================================================================================
</TABLE>
Retirement Savings Plan and Other Benefit Options
- --------------------------------------------------------------------------------
Duquesne sponsors separate 401(k) retirement plans for its union-represented
employees and its management employees. The 401(k) Retirement Savings Plan for
Management Employees provides that Duquesne will match employee contributions to
a 401(k) account up to a maximum of 6 percent of his or her eligible salary.
Duquesne's match consists of a $.25 base match and an additional $.25 incentive
match, if targets approved by it's board of directors are met. The 1993
incentive target was met. Duquesne is funding its matching contributions with
contributions to an ESOP established in December 1991. (See Note C.)
Duquesne's shareholders have approved a long-term incentive plan through which
Duquesne may grant management employees options to purchase, during the years
1987 through 2003, up to a total of five million shares of DQE common stock at
prices equal to the fair market value of such stock on the dates the options
were granted. At December 31, 1993, approximately 2.9 million of these shares
were available for future grants.
As of December 31, 1993, 1992 and 1991, respectively, active grants totaled
1,174,000; 823,000; and 1,263,000 shares. Exercise prices of these options
ranged from $12.3125 to $34.1875 at December 31, 1993 and from $12.3125 to
$28.75 at December 31, 1992 and 1991. Expiration dates of these grants ranged
from 1997 to 2003 at December 31, 1993; from 1997 to 2002 at December 31, 1992;
and from 1997 to 2001 at December 31, 1991. As of December 31, 1993, 1992 and
1991, respectively, stock appreciation rights (SARs) had been granted in
connection with 778,000; 612,000; and 822,000 of the options outstanding. During
1993, 103,000 SARs were exercised; 8,500 options were exercised at prices
ranging from $12.3125 to $28.375; and 52,000 options lapsed. During 1992,
108,000 SARs were exercised; 50,000 options were exercised at prices ranging
from $12.3125 to $26.375; and 59,000 options lapsed. During 1991, 229,000 SARs
were exercised; 11,000 options were exercised at $12.3125; and 48,000 options
lapsed. Of the active grants at December 31, 1993, 1992 and 1991, respectively,
549,000; 211,000; and 526,000 were not exercisable.
Other Postretirement Benefits
- --------------------------------------------------------------------------------
In addition to pension benefits, Duquesne provides certain health care benefits
and life insurance for some retired employees. Substantially all of Duquesne's
full-time employees may, upon attaining the age of 55 and meeting certain
service requirements, become eligible for the same benefits available to retired
employees. Participating retirees make contributions, which are adjusted
annually, to the health care plan. The life insurance plan is non-contributory.
Company-provided health care benefits terminate when covered individuals become
eligible for Medicare benefits or reach age 65, whichever comes first. Duquesne
funds actual expenditures for obligations under the plans on a "pay-as-you-go
basis." Duquesne has the right to modify or terminate the plans.
As of January 1, 1993, Duquesne adopted Statement of Financial Accounting
Standards Number 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions, which requires the actuarially determined costs of the
aforementioned postretirement benefits to be accrued over the period from the
date of hire until the date the employee becomes fully eligible for benefits.
Duquesne has adopted the new standard prospectively and has elected to amortize
the transition liability over 20 years.
61
<PAGE>
In prior years, Duquesne recognized the cost of providing postretirement
benefits by expensing the contributions as they were made. Costs recognized
under this method in 1992 approximated $1.2 million. The new accrual method
increased the cost recognized for providing postretirement benefits to
approximately $6.0 million.
<TABLE>
<CAPTION>
(Amounts in Thousands of Dollars)
Components of Postretirement Cost 1993
- --------------------------------------------------------------------------------
<S> <C>
Service cost (Benefits earned during the period) $1,779
Interest cost on accumulated benefit obligation 2,497
Amortization of the transition obligation over twenty years 1,700
- --------------------------------------------------------------------------------
Total Postretirement Cost $5,976
================================================================================
</TABLE>
The accumulated postretirement benefit obligation comprises the present value of
the estimated future benefits payable to current retirees and a pro rata portion
of estimated benefits payable to active employees after retirement.
Funded Status of Postretirement Plan and Amounts Recognized on the Consolidated
Balance Sheet of Duquesne at December 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Amounts in Thousands of Dollars)
- --------------------------------------------------------------------------------
<S> <C>
Actuarial present value of benefits:
Retirees $ 4,830
Fully eligible active plan participants 3,482
Other active plan participants 24,170
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation 32,482
Fair market value of plan assets 0
- --------------------------------------------------------------------------------
Accumulated benefit obligation in excess of plan assets $(32,482)
================================================================================
Unrecognized net loss $ (122)
Unrecognized prior service cost 4,383
Unrecognized net transition liability (32,296)
Postretirement liability per balance sheet (4,447)
- --------------------------------------------------------------------------------
Total $(32,482)
================================================================================
</TABLE>
For measurement purposes, a 10.5 percent increase in the cost of covered health
care benefits was assumed as of January 1, 1993. This rate is assumed to
decrease to 5.5 percent by 1999 and remain at that level thereafter. The health
care cost trend rate assumption has a significant effect on the amounts
reported. A 1 percent increase in the health care cost trend rate would increase
the accumulated postretirement benefit obligation by $4.0 million at January 1,
1994 and the net annual cost by $0.6 million for the year. The weighted average
discount rate used in determining the accumulated postretirement benefit
obligation was 7 percent.
J. RATE MATTERS
1987 Rate Case
- --------------------------------------------------------------------------------
In March 1988, the PUC adopted a rate order that increased Duquesne's annual
revenues by $232 million to be phased in from April 1, 1988 through April 1,
1994. Deficiencies which resulted from the phase-in plan in current revenues
from customers have been included in the consolidated income statement as
deferred revenues. Deferred revenues have been recorded on the balance sheet as
a deferred asset for future recovery. As customers were billed for deficiencies
related to prior periods, this deferred asset was reduced. As designed, the
phase-in plan provided for carrying charges (at the after-tax AFC rate) on
revenues deferred for future recovery. Since April 1993, Duquesne has not
recorded additional carrying charges on the deferred revenue balance. As of
December 31, 1993, Duquesne had recovered previously deferred revenues and
carrying charges of $285.9 million. Phase-in plan deferrals of $28.6 million
62
<PAGE>
remained unrecovered as of that date. Duquesne expects to recover this remaining
unrecovered balance by the end of the phase-in period.
At this time, Duquesne has no pending base rate case and has no immediate plans
to file a base rate case.
Deferred Rate Synchronization Costs
- --------------------------------------------------------------------------------
In 1987, the PUC approved Duquesne's petition to defer initial operating and
other costs of Perry Unit 1 and Beaver Valley Unit 2. Duquesne deferred the
costs incurred from November 17, 1987, when the units went into commercial
operation, until March 25, 1988 when a rate order was issued. In its order, the
PUC deferred ruling on whether these costs would be recoverable from ratepayers.
At December 31, 1993, these costs totaled $51.1 million, net of deferred fuel
savings related to the two units. Duquesne is not earning a return on the
deferred costs. Duquesne believes that these deferred costs are recoverable. In
1990, another Pennsylvania utility was permitted recovery, with no return on the
unamortized balance, of similar costs over a 10-year period.
Deferred Energy Costs
- --------------------------------------------------------------------------------
Duquesne defers fuel and other energy costs for recovery in subsequent years
through the ECR. The deferrals reflect the difference between the amount that
Duquesne is currently collecting from customers and its actual fuel costs. The
PUC reviews Duquesne's fuel costs annually, for the fiscal year April through
March, against the previously projected fuel costs and adjusts the ECR for over-
or under-recoveries and for two PUC-established coal cost caps.
The PUC has established market price coal cost standards for all Pennsylvania
utilities that have interests in mines that supply coal to their generating
stations. Duquesne is subject to two such standards. One applies only to coal
delivered at the Mansfield plant. The other, the system-wide coal cost standard,
applies to coal delivered to the remainder of Duquesne's system. Both standards
are updated monthly to reflect prevailing market prices for similar coal. The
PUC has directed Duquesne to defer recovery of the delivered cost of coal to the
extent that such cost exceeds generally prevailing market prices, as determined
by the PUC, for similar coal. The PUC allows deferred amounts to be recovered
from customers when the delivered costs of coal fall below such PUC-determined
prevailing market prices.
In 1990, the PUC approved a joint petition for settlement that clarified certain
aspects of the system-wide coal cost standard and gave Duquesne options to
extend the standard through March 2000. In December 1991, Duquesne exercised the
first of two options that extended the standard through March 1996. The
unrecovered cost of coal used at Mansfield amounted to $7.4 million and the
unrecovered cost of coal used throughout the system amounted to $8.8 million at
December 31, 1993. Duquesne believes that all deferred coal costs will be
recovered.
Warwick Mine Costs
- --------------------------------------------------------------------------------
The 1990 joint petition for settlement (See preceding section on deferred energy
costs.) also recognized costs at Duquesne's Warwick Mine, which had been on
standby since 1988, and allowed for recovery of such costs, including the costs
of ultimately closing the mine. In 1990, Duquesne entered into an agreement
under which an unaffiliated company will operate the mine until March 2000 and
sell the coal produced. Production began in late 1990. The mine reached a full
production rate in early 1991. The Warwick Mine coal reserves include both high
and low sulfur coal; the sulfur content averages in the mid-range at 1.7 percent
- -- 1.9 percent sulfur content. More than 90 percent of the coal mined at Warwick
currently is used by Duquesne. Duquesne receives a royalty on sales of coal in
the open market. The Warwick Mine currently supplies less than one-fifth of the
coal used in the production of electricity at the plants owned or co-owned by
Duquesne.
Costs at the Warwick Mine and Duquesne's investment in the mine are expected to
be recovered through the ECR. Recovery is subject to the system-wide coal cost
standard. Duquesne also has an opportunity to earn, through the ECR, a return on
its investment in the mine during the period, including extensions, of the
system-wide coal cost standard. At December 31, 1993, Duquesne's net investment
in the mine was $24.5 million. The estimated current liability for mine closing
(including final site reclamation, mine water treatment and certain labor
liabilities) is $33.0 million and Duquesne has collected approximately $8.9
million toward these costs.
63
<PAGE>
Property Held for Future Use
- --------------------------------------------------------------------------------
In 1986, the PUC approved Duquesne's request to remove the Phillips and most of
the Brunot Island (BI) power stations from service and place them in cold
reserve. Duquesne's capitalized costs and net investment in the plants at
December 31, 1993 totaled $130 million. (See Note L.)
On December 8, 1993, the New Jersey Board of Regulatory Commissioners (BRC)
denied a request by General Public Utilities' (GPU) subsidiary Jersey Central
Power and Light Company for approval of the long-term power purchase and
operating agreements, originally signed in 1990, between GPU and Duquesne and
further amended earlier in 1993. The BRC rejected an administrative law judge's
recommended decision that the project be approved and, within hours of the BRC
decision, GPU terminated its participation in the project. In view of GPU's
decision not to proceed, Duquesne terminated its participation in the project
and in the PUC transmission line siting proceeding. During the fourth quarter of
1993, Duquesne recognized a charge of approximately $15.2 million for its
investment in this abandoned GPU transmission line project.
Duquesne expects to recover its net investment in these plants through future
sales. Phillips and BI represent licensed, certified, clean sources of
electricity that will be necessary to meet expanding opportunities in the power
markets. Duquesne believes that anticipated growth in peak load demand for
electricity within its service territory will require additional peaking
generation. Duquesne looks to BI to meet this need. The Phillips Power Plant is
an important component in meeting market opportunities to supply long term bulk
power. Recent legislation may permit wider transmission access to these long-
term bulk power markets. In summary, Duquesne believes its investment in these
cold-reserved plants will be necessary in order to meet future business needs.
If business opportunities do not develop as expected, Duquesne will consider the
sale of these assets. In the event that market demand, transmission access or
rate recovery do not support the utilization or sale of the plants, Duquesne may
have to write off part or all of their costs.
K. COMMITMENTS AND CONTINGENCIES
Construction
- --------------------------------------------------------------------------------
Duquesne estimates that it will spend approximately $110 million on construction
during 1994. Construction expenditures are estimated to be $70 million in 1995
and $80 million in 1996. These amounts exclude AFC, nuclear fuel and
expenditures for possible early replacement of steam generators at the Beaver
Valley Station.
Westinghouse Lawsuit
- --------------------------------------------------------------------------------
In 1991, the co-owners of Beaver Valley Units 1 and 2 filed suit against
Westinghouse Electric Corporation (Westinghouse) in the United States District
Court for the Western District of Pennsylvania. The suit alleges that six steam
generators supplied by Westinghouse for the two units contain serious defects --
in particular defects causing tube corrosion and cracking. Duquesne is seeking
monetary and corrective relief. Steam generator maintenance costs have increased
as a result of these defects and are likely to continue increasing. The
condition of the steam generators is being monitored closely. If the corrosion
and cracking continue, replacement of the steam generators could be required
prior to the ends of their 40-year design lives. Duquesne is continuing to
conduct a corrective maintenance program and to explore longer term options,
including replacement of the steam generators. While Duquesne has no current
plans to replace the steam generators and has not yet completed a detailed,
site-specific study, replacement cost per unit is estimated to be between $100
million and $150 million. (Other utilities with similar units have replaced
steam generators at costs in this range.) Duquesne cannot predict the outcome of
this matter; however, Duquesne does not believe that resolution will have a
materially adverse effect on it's financial position or results of operations.
Duquesne's percentage interests (ownership and leasehold) in Beaver Valley Unit
1 and in Beaver Valley Unit 2 are 47.5 percent and 13.74 percent, respectively.
The remainder of Beaver Valley Unit 1 is owned by Ohio Edison Company and
Pennsylvania Power Company. The remaining interest in Beaver Valley Unit 2 is
owned by Ohio Edison Company, Cleveland Electric Illuminating Company and Toledo
Edison Company. Duquesne operates both units on behalf of these co-owners.
64
<PAGE>
Nuclear Insurance
- --------------------------------------------------------------------------------
Co-owners of the Beaver Valley Power Station maintain the maximum available
nuclear insurance for the $5.9 billion total investment in Beaver Valley Units 1
and 2. The insurance program provides $2.7 billion for property damage,
decommissioning, and decontamination liabilities. Similar property insurance is
held by the joint owners of the Perry Plant for their $5.4 billion total
investment in Perry Unit 1. Duquesne would be responsible for its share of any
damages in excess of insurance coverage. In addition, if the property damage
reserves of Nuclear Electric Insurance Limited (NEIL), an industry mutual, are
inadequate to cover claims arising from an incident at any United States nuclear
site covered by that insurer, Duquesne could be assessed retrospective premiums
of as much as $6.5 million for up to seven years.
The Price-Anderson Amendments to the Atomic Energy Act limit public liability
from a single incident at a nuclear plant to $9.4 billion. Duquesne has
purchased $200 million of insurance, the maximum amount available, which
provides the first level of financial protection. Additional protection of $8.8
billion would be provided by an assessment of up to $75.5 million per incident
on each nuclear unit in the United States. Duquesne's maximum total assessment,
$56.6 million, which is based upon its ownership interests in nuclear generating
stations, would be limited to a maximum of $7.5 million per incident per year. A
further surcharge of 5 percent could be levied if the total amount of public
claims exceeded the funds provided under the assessment program. Additionally, a
premium tax of 3 percent would be charged on the assessment and surcharge.
Finally, the United States Congress could impose other revenue-raising measures
on the nuclear industry if funds prove insufficient to pay claims.
Duquesne carries extra expense insurance; coverage includes the incremental cost
of any replacement power purchased (in addition to costs that would have been
incurred had the units been operating) and other incidental expense after the
occurrence of certain types of accidents at it's nuclear units. The amounts of
the coverage are 100 percent of the estimated extra expense per week during the
52-week period starting 21 weeks after an accident and 67 percent of such
estimate per week for the following 104 weeks. The amount and duration of actual
extra expense could substantially exceed insurance coverage.
Guarantees
- --------------------------------------------------------------------------------
Duquesne and the other co-owners have guaranteed certain debt and lease
obligations related to a coal supply contract for the Bruce Mansfield plant. At
December 31, 1993, Duquesne's share of these guarantees was $35.2 million. The
prices paid for the coal by the companies under this contract are expected to be
sufficient to meet debt and lease obligations to be satisfied in the year 2000.
(See Note J.) The minimum future payments to be made by Duquesne solely in
relation to these obligations are $6.9 million in 1994, $6.6 million in 1995,
$6.3 million in 1996, $5.9 million in 1997, $5.6 million in 1998, $5.3 million
in 1999 and $4.1 million in 2000. Duquesne's total payments for coal purchased
under the contract were $26.5 million in 1993, $25.2 million in 1992 and $32.6
million in 1991.
Residual Waste Management Regulations
- --------------------------------------------------------------------------------
In July 1992, the Pennsylvania Department of Environmental Resources (DER)
issued residual waste management regulations governing the generation and
management of non-hazardous waste. Duquesne is currently conducting tests and
developing compliance strategies for these regulations. Capital compliance costs
are estimated, on the basis of currently available information, at $10 million
through 1995. Through the year 2000, the expected additional capital cost of
compliance, which is subject to the results of ground water assessments and DER
final approval of compliance plans, is approximately $25 million.
Other
- --------------------------------------------------------------------------------
Duquesne is involved in various other legal proceedings and environmental
matters. Duquesne believes that such proceedings and matters, in total, will
not have a materially adverse effect on its financial position or results of
operations.
65
<PAGE>
L. GENERATING UNITS
In addition to its wholly owned generating units, Duquesne, together with other
electric utilities, has an ownership or leasehold interest in certain jointly
owned units. Duquesne is required to pay its share of the construction and
operating costs of the units. Duquesne's share of the operating expenses of the
units is included in the Statement of Consolidated Income.
<TABLE>
<CAPTION>
Generating Units at December 31, 1993
- --------------------------------------------------------------------------------
Net
Percentage Utility Fuel
Unit Interest Megawatts Plant Source
(Millions of Dollars)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cheswick 100.0 570 $ 124.4 Coal
Elrama (a) 100.0 487 91.7 Coal
Ft. Martin 1 50.0 276 39.2 Coal
Eastlake 5 31.2 186 46.9 Coal
Sammis 7 31.2 187 54.7 Coal
Bruce Mansfield 1 (a) 29.3 228 65.3 Coal
Bruce Mansfield 2 (a) 8.0 62 17.5 Coal
Bruce Mansfield 3 (a) 13.74 110 51.0 Coal
Beaver Valley 1 (b) 47.5 385 262.3 Nuclear
Beaver Valley 2 (c)(d) 13.74 113 15.5 Nuclear
Beaver Valley Common
Facilities 169.5
Perry 1 (e) 13.74 164 608.7 Nuclear
Brunot Island 100.0 66 7.4 Fuel Oil
- --------------------------------------------------------------------------------
Total 2,834 1,554.1
Cold-reserved units:
Brunot Island 100.0 240 44.5 Fuel Oil
Phillips (a) 100.0 300 78.0 Coal
- --------------------------------------------------------------------------------
Total Generating Units 3,374 $1,676.6
================================================================================
</TABLE>
(a) The unit is equipped with flue gas desulfurization equipment.
(b) The NRC has granted a license to operate through January 2016.
(c) On October 2, 1987 Duquesne sold its 13.74 percent interest in Beaver
Valley Unit 2; the sale was exclusive of transmission and common
facilities. Amounts shown represent facilities not sold and subsequent
leasehold improvements.
(d) The NRC has granted a license to operate through May 2027.
(e) The NRC has granted a license to operate through March 2026.
M. QUARTELY FINANCIAL INFORMATION (UNAUDITED)
Summary of Selected Quarterly Financial Data (thousands of dollars, except per
share amounts)
- --------------------------------------------------------------------------------
[The quarterly data reflect seasonal weather variations in Duquesne's service
territory.]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993 (a) First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues $283,845 $274,311 $324,577 $278,243
Operating Income 58,537 60,618 66,339 60,392
Income Before Cumulative Effect
on Prior Years of Changes in
Accounting Principles 32,788 34,570 48,478 28,951
Net Income 35,363 34,570 48,478 28,951
- --------------------------------------------------------------------------------
1992
- --------------------------------------------------------------------------------
Operating Revenues (b) $298,178 $290,149 $314,515 $284,547
Operating Income (b) 62,810 59,200 74,600 57,520
Net Income 36,171 32,769 47,996 32,832
================================================================================
</TABLE>
(a) Fourth quarter 1993 results included the effects of a $15.2 million charge
for the write-off of Duquesne's investment in abandoned transmission line
project (See Note J.) and a $14.6 million reduction of taxes other than
income as a result of a favorable resolution of tax assessments.
(b) Restated to conform with presentations adopted during 1993.
66
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Thousands of Dollars 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT ITEMS
Total operating revenues $1,160,976 $1,187,389 $1,199,650 $1,131,005 $1,118,583 $1,060,817
Operating income $ 245,886 $ 254,130 $ 265,672 $ 266,402 $ 269,506 $ 244,342
Net income $ 147,362 $ 149,768 $ 143,133 $ 135,456 $ 129,437 $ 137,422
Earnings for common stock $ 138,174 $ 140,357 $ 132,332 $ 121,410 $ 112,644 $ 118,566
- ------------------------------------------------------------------------------------------------------------------
BALANCE SHEET ITEMS
Property, plant and equipment-net $3,118,766 $3,015,694 $3,035,115 $3,040,562 $3,053,978 $3,065,922
Total assets $4,397,466 $3,727,455 $3,811,989 $3,803,676 $3,822,656 $3,799,334
- ------------------------------------------------------------------------------------------------------------------
Capitalization:
Common stockholder's equity $1,100,671 $1,107,609 $1,064,104 $1,035,059 $1,033,826 $1,070,575
Non-redeemable preferred and
preference stock 124,736 123,430 121,906 151,346 154,030 154,073
Redeemable preferred and preference
stock 8,392 8,579 15,437 37,747 65,961 90,743
Long-term debt 1,416,705 1,413,001 1,420,726 1,501,295 1,540,329 1,550,231
- ------------------------------------------------------------------------------------------------------------------
Total capitalization $2,650,504 $2,652,619 $2,622,173 $2,725,447 $2,794,146 $2,865,622
==================================================================================================================
</TABLE>
67
<PAGE>
GRAPHICS APPENDIX LIST
_______________________________________________________________________________
PAGE WHERE
GRAPHIC DESCRIPTION OF GRAPHIC OR CROSS-REFERENCE
APPEARS
_______________________________________________________________________________
1 Title of Graphics:
Quarterly Kilowatt-Hour Sales
This bar graph shows the four quarterly
kilowatt-hour sales for three years.
Quarter
________
1 2 3 4
1991 2911 2853 3256 2842
1992 2936 2732 3036 2865
1993 2994 2762 3279 2816
2 Title of Graphics:
1993 Energy Sales by Class of Customers
Subtitle in parenthesis:
(Excluding Sales to Other Utilities)
Two pie charts showing the percentage of residential,
commercial and industrial customers.
All Electric
DLCO Utilities
____ ____________
Commercial 47.0% 33.1%
Residential 27.3% 32.9%
Industrial 25.7% 34.0%
A footnote under the DLCO pie chart:
Total Sales to Ultimate Customers-11,851,000 mwh
A footnote under the All Electric Utilities pie chart:
Source: Edison Electric Institute
3 Title of Graphics:
Net Cash Flow From Operations*
This bar graph shows a five year comparison
from 1989 through 1993.
1989 220
1990 276
1991 355
1992 395
1993 384
There is a footnote designated by an
asterisk at the bottom of the graph.
*Graph excludes working capital and
other-net changes.
5 Title of Graphics:
Interest Expense and Preferred and
Preference Dividends
This bar graph shows a five year
comparison from 1989 through 1993
1989 168
1990 160
1991 145
1992 135
1993 121
<PAGE>
DUQUESNE LIGHT COMPANY EXHIBITS
INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- --------- ----------------------------------------------- ----------------------------
<S> <C> <C>
3.1 Restated Articles of Duquesne Light Company, as Exhibit 3.1 to the Form 10-K
amended through December 19, 1991 and as Annual Report of Duquesne
currently in effect. Light Company for the year
ended December 31, 1991.
3.2 By-Laws of Duquesne Light Company, as amended Exhibit 3.2 to the Form 10-K
through December 19, 1991 and as currently in Annual Report of Duquesne
effect. Light Company for the year
ended December 31, 1991.
4.1 Trust Indenture dated as of August 1, 1947, Exhibit 4.3 to Registration
securing Duquesne Light Company's First Statement (Form S-1)
Mortgage Bonds. No. 2-11326.
4.2 Supplemental Trust Indentures supplementing
the Trust Indenture -
4.2 Supplemental Trust Indentures supplementing
the Trust Indenture -
First through Tenth and an amendment to the Exhibits 4.4 through 4.13 to
Fifth. Registration Statement (Form
S-1) No. 2-11326.
Eleventh. Exhibit 4.3 to Registration
Statement (Form S-1)
No. 2-12309.
Twelfth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirteenth. Exhibit 4.5 to Registration
Statement (Form S-1)
No. 2-13360.
Fourteenth and Fifteenth. Exhibits 4.6 and 4.7 to
Registration Statement
(Form S-1) No. 2-13596.
Sixteenth. Exhibit 4.8 to Registration
Statement (Form S-1)
No. 2-14704.
Seventeenth and Eighteenth. Exhibits 4.4 and 4.5 to
Registration Statement
(Form S-1) No. 2-16033.
Nineteenth through Twenty-Third. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Twenty-Fourth. Exhibit 2.2 to Registration
Statement (Form S-9)
No. 2-24412.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- --------- ----------------------------------------------- ----------------------------
<S> <C> <C>
Twenty-Fifth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Twenty-Sixth. Exhibit 2.2 to Registration
Statement (Form S-9)
No. 2-25887.
Twenty-Seventh. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Twenty-Eighth. Exhibit 2.2 to Registration
Statement (Form S-9)
No. 2-28042.
Twenty-Ninth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirtieth. Exhibit 2.2 to Registration
Statement (Form S-9)
No. 2-30927.
Thirty-First and Thirty-Second. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirty-Third. Exhibit 2.4 to Registration
Statement (Form S-7)
No. 2-36333.
Thirty-Fourth and Thirty-Fifth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirty-Sixth. Exhibit 2.4 to Registration
Statement (Form S-7)
No. 2-39375.
Thirty-Seventh. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirty-Eighth. Exhibit 2.4 to Registration
Statement (Form S-7)
No. 2-42154.
Thirty-Ninth through Forty-Fifth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Forty-Sixth. Exhibit 2.3 to Registration
Statement (Form S-7)
No. 2-52874.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- --------- ----------------------------------------------- ----------------------------
<S> <C> <C>
Forty-Seventh through Forty-Ninth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Fiftieth. Exhibit 2.3 to Registration
Statement (Form S-7)
No. 2-58483.
Fifty-First through Fifty-Third. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Fifty-Fourth and Fifty-Fifth. Exhibit 2.2 to Registration
Statement (Form S-16)
No. 2-66258.
Fifty-Sixth Exhibit 2.2 to Registration
Statement (Form S-16)
No. 2-68959.
Fifty-Seventh. Exhibit 4.1 to Registration
Statement (Form S-16)
No. 2-72522.
Fifty-Eighth and Fifty-Ninth. Exhibit 4.1 to Registration
Statement (Form S-16)
No. 2-76768.
Sixtieth and Sixty-First. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 2-82139.
Sixty-Second and Sixty-Third. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 2-87452.
Sixty-Fourth. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 2-89719.
Sixty-Fifth through Sixty-Ninth. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-1509.
Seventieth through Seventy-Seventh. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-32026.
Seventy-Eighth through Eightieth. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-46990.
Eighty-First. Exhibit 4.2 to Registration
Statement (Form S-3)
No. 33-46990.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- --------- ----------------------------------------------- ----------------------------
<S> <C> <C>
Eighty-Second. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-52782.
Eighty-Third and Eighty-Fourth. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-63602.
Eighty-Fifth through Eighty-Eighth. Filed here.
4.3 Indenture dated March 1, 1960, relating to Exhibit 4.3 to the Form 10-K
Duquesne Light Company's 5% Sinking Fund Annual Report of DQE for the
Debentures. year ended December 31, 1989.
4.4 Indenture dated as of November 1, 1989 Exhibit 4.4 to the Form 10-K
relating to the issuance of Duquesne Light Annual Report of DQE for the
Company's unsecured notes. year ended December 31, 1989.
4.5 Indenture of Mortgage and Deed of Trust dated Exhibit 4.3 to Registration
as of April 1, 1992, securing Duquesne Light Statement (Form S-3)
Company's First Collateral Trust Bonds. No. 33-52782.
4.6 Supplemental Indentures supplementing the said
Indenture of Mortgage and Deed of Trust -
Supplemental Indenture No. 1. Exhibit 4.4 to Registration
Statement (Form S-3)
No. 33-52782.
Supplemental Indenture No. 2 through Exhibit 4.4 to Registration
Supplemental Indenture No. 4. Statement (Form S-3)
No. 33-63602.
Supplemental Indenture No. 5 through Filed here.
Supplemental Indenture No. 7.
<CAPTION>
Agreements relating to Jointly Owned Generating Units:
<S> <C> <C>
10.1 Administration Agreement dated as of September Exhibit 5.8 to Registration
14, 1967. Statement (Form S-7)
No. 2-43106.
10.2 Transmission Facilities Agreement dated as of Exhibit 5.9 to Registration
September 14, 1967. Statement (Form S-7)
No. 2-43106.
10.3 Operating Agreement dated as of September 21, Exhibit 5.1 to Registration
1976 for Eastlake Unit No. 5. Statement (Form S-7)
No. 2-48164.
10.4 Memorandum of Agreement dated as of July 1, Exhibit 10.14 to the Form 10-K
1982 re reallocation of rights and liabilities Annual Report of Duquesne
of the companies under uranium supply Light Company for the year
contracts. ended December 31, 1987.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- -------- ----------------------------------------------- ----------------------------
<S> <C> <C>
10.5 Operating Agreement dated August 5, 1982 as Exhibit 10.17 to the Form 10-K
of September 1, 1971 for Sammis Unit No. 7. Annual Report of Duquesne
Light Company for the year
ended December 31, 1988.
10.6 Memorandum of Understanding dated as of Exhibit 10.19 to the Form 10-K
March 31, 1985 re implementation of company- Annual Report of DQE for the
by-company management of uranium inventory year ended December 31, 1989.
and delivery.
10.7 Restated Operating Agreement for Beaver Valley Exhibit 10.23 to the Form 10-K
Unit Nos. 1 and 2 dated September 15, 1987. Annual Report of Duquesne
Light Company for the year
ended December 31, 1987.
10.8 Operating Agreement for Perry Unit No. 1 Exhibit 10.24 to the Form 10-K
dated March 10, 1987. Annual Report of Duquesne
Light Company for the year
ended December 31, 1987.
10.9 Operating Agreement for Bruce Mansfield Exhibit 10.25 to the Form 10-K
Units Nos. 1, 2 and 3 dated September 15, Annual Report of Duquesne
1987 as of June 1, 1976. Light Company for the year
ended December 31, 1987.
10.10 Basic Operating Agreement, as amended Filed here.
January 1, 1993.
10.11 Amendment No. 1 dated December 23, 1993 to Filed here.
Transmission Facilities Agreement (as of
January 1, 1993).
10.12 Microwave Sharing Agreement (as amended Filed here.
January 1, 1993) dated December 23, 1993.
10.13 Agreement (as of September 1, 1980) dated Filed here.
December 23, 1993 for termination or
construction of certain agreements.
10.14 Fort Martin Construction and Operating Filed here.
Agreement dated April 30, 1965.
10.15 Fort Martin Transmission Agreement dated Filed here.
March 15, 1967.
10.16 Amendment of January 1, 1988 to Fort Martin Filed here.
Transmission Agreement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Agreements relating to the Sale and Leaseback
of Beaver Valley Unit No. 2:
Exhibit
No. Description Method of Filing
- -------- ----------------------------------------------- ----------------------------
<S> <C> <C>
10.17 Order of the Pennsylvania Public Utility Exhibit 28.2 to the Form 10-Q
Commission dated September 25, 1987 regarding Quarterly Report of Duquesne
the application of the Duquesne Light Company Light Company for the quarter
under Section 1102(a)(3) of the Public Utility ended September 30, 1987.
Code for approval in connection with the sale
and leaseback of its interest in Beaver Valley
Unit No. 2.
10.18 Order of the Pennsylvania Public Utility Exhibit 10.28 to the Form 10-K
Commission dated October 15, 1992 regarding Annual Report of Duquesne
the Securities Certificate of Duquesne Light Light Company for the year
Company for the assumption of contingent ended September 30, 1987.
obligations under financing agreements in
connection with the refunding of Collateralized
Lease Bonds.
x10.19 Facility Lease dated as of September 15, 1987 Exhibit (4)(c) to Registration
between The First National Bank of Boston, as Statement (Form S-3)
Owner Trustee under a Trust Agreement dated as No. 33-18144.
of September 15, 1987 with the limited
partnership Owner Participant named therein,
Lessor, and Duquesne Light Company, Lessee.
x10.20 Facility Lease dated as of September 15, 1987 Exhibit (4)(d) to Registration
between The First National Bank of Boston, as Statement (Form S-3)
Owner Trustee under a Trust Agreement dated as No. 33-18144.
of September 15, 1987, with the corporate
Owner Participant named therein, Lessor, and
Duquesne Light Company, Lessee.
x10.21 Amendment No. 1 dated as of December 1, 1987 Exhibit 10.30 to the Form 10-K
to Facility Lease dated as of September 15, Annual Report of Duquesne
1987 between the First National Bank of Light Company for the year
Boston, as Owner Trustee under a Trust ended December 31, 1987.
Agreement dated as of September 15, 1987 with
the limited partnership Owner Participant
named therein, Lessor, and Duquesne Light
Company, Lessee.
y10.22 Amendment No. 1 dated as of December 1, 1987 Exhibit 10.31 to the Form 10-K
to Facility Lease dated as of September 15, Annual Report of Duquesne
1987 between the First National Bank of Light Company for the year
Boston, as Owner Trustee under a Trust ended December 31, 1987.
Agreement dated as of September 15, 1987 with
the corporate Owner Participant named therein,
Lessor, and Duquesne Light Company, Lessee.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- --------- --------------------------------------------- ------------------------------
<S> <C> <C>
x10.23 Amendment No. 2 dated as of November 15, 1992 Exhibit 10.33 to the Form 10-K
to Facility Lease dated as of September 15, Annual Report of Duquesne
1987 between the First National Bank of Light Company for the year
Boston, as Owner Trustee under a Trust ended December 31, 1992.
Agreement dated as of September 15, 1987 with
the limited partnership Owner Participant
named therein, Lessor, and Duquesne Light
Company, Lessee.
y10.24 Amendment No. 2 dated as of November 15, 1992 Exhibit 10.34 to the Form 10-K
to Facility Lease dated as of September 15, Annual Report of Duquesne
1987 between the First National Bank of Light Company for the year
Boston, as Owner Trustee under a Trust ended December 31, 1992.
Agreement dated as of September 15, 1987 with
the corporate Owner Participant named therein,
Lessor, and Duquesne Light Company, Lessee.
x10.25 Participation Agreement dated as of September Exhibit (28)(a) to
15, 1987 among the limited partnership Owner Registration Statement
Participant named therein, the Original Loan (Form S-3) No. 33-18144.
Participants listed in Schedule 1 thereto, as
Original Loan Participants, DQU Funding
Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee,
Irving Trust Company, as Indenture Trustee and
Duquesne Light Company, as Lessee.
y10.26 Participation Agreement dated as of September Exhibit (28)(b) to
15, 1987 among the corporate Owner Registration Statement
Participant named therein, the Original Loan (Form S-3) No. 33-18144.
Participants listed in Schedule 1 thereto, as
Original Loan Participants, DQU Funding
Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee,
Irving Trust Company, as Indenture Trustee and
Duquesne Light Company, as Lessee.
x10.27 Amendment No. 1 dated as of December 1, 1987 Exhibit 10.34 to the Form 10-K
to Participation Agreement dated as of Annual Report of Duquesne
September 15, 1987 among the limited Light Company for the year
partnership Owner Participant named therein, ended December 31, 1987.
the Original Loan Participants listed therein,
as Original Loan Participants, DQU Funding
Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee,
Irving Trust Company, as Indenture Trustee and
Duquesne Light Company, as Lessee.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- -------- ----------------------------------------------- ----------------------------
<S> <C> <C>
y10.28 Amendment No. 1 dated as of December 1, 1987 Exhibit 10.35 to the Form 10-K
to Participation Agreement dated as of Annual Report of Duquesne
September 15, 1987 among the corporate Light Company for the year
Owner Participant named therein, the ended December 31, 1987.
Original Loan Participants listed therein,
as Original Loan Participants, DQU Funding
Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee,
Irving Trust Company, as Indenture Trustee and
Duquesne Light Company, as Lessee.
x10.29 Amendment No. 2 dated as of March 1, 1988 to Exhibit (28)(c)(3) to
Participation Agreement dated as of September Registration Statement
15, 1987 among the limited partnership Owner (Form S-3) No. 33-54648.
Participant named therein, the Original Loan
Participants listed therein, as Original Loan
Participants, DQU Funding Corporation, as
Funding Corporation, The First National Bank of
Boston, as Owner Trustee, Irving Trust Company,
as Indenture Trustee and Duquesne Light Company,
as Lessee.
y10.30 Amendment No. 2 dated as of March 1, 1988 to Exhibit (28)(c)(4) to
Participation Agreement dated as of Registration Statement
September 15, 1987 among the corporate (Form S-3) No. 33-54648.
Owner Participant named therein, the
Original Loan Participants listed therein,
as Original Loan Participants, DQU Funding
Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee,
Irving Trust Company, as Indenture Trustee and
Duquesne Light Company, as Lessee.
x10.31 Amendment No. 3 dated as of November 15, 1992 Exhibit 10.41 to the Form 10-K
to Participation Agreement dated as of Annual Report of Duquesne
September 15, 1987 among the limited Light Company for the year
partnership Owner Participant named therein, ended December 31, 1992.
the Original Loan Participants listed therein,
as Original Loan Participants, DQU Funding
Corporation, as Funding Corporation, The First
National Bank of Boston, as Owner Trustee, The
Bank of New York, as Indenture Trustee and
Duquesne Light Company, as Lessee.
y10.32 Amendment No. 3 dated as of November 15, 1992 Exhibit 10.42 to the Form 10-K
to Participation Agreement dated as of Annual Report of Duquesne
September 15, 1987 among the corporate Owner Light Company for the year
Participant named therein, the Original Loan ended December 31, 1992.
Participants listed therein, as Original Loan
Participants, DQU Funding Corporation, as
Funding Corporation, The First National Bank of
Boston, as Owner Trustee, The Bank of New York,
as Indenture Trustee and Duquesne Light Company,
as Lessee.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- --------- ----------------------------------------------- ----------------------------
<S> <C> <C>
z10.33 Ground Lease and Easement Agreement dated as of Exhibit (28)(e) to
September 15, 1987 between Duquesne Light Registration Statement
Company, Ground Lessor and Grantor, and The (Form S-3) No. 33-18144.
First National Bank of Boston, as Owner Trustee
under a Trust Agreement dated as of September
15, 1987 with the limited partnership Owner
Participant named therein, Tenant and Grantee.
z10.34 Assignment, Assumption and Further Agreement Exhibit (28)(f) to
dated as of September 15, 1987 among The First Registration Statement
National Bank of Boston, as Owner Trustee (Form S-3) No. 33-18144.
under a Trust Agreement dated as of September
15, 1987 with the limited partnership Owner
Participant named therein, The Cleveland
Electric Illuminating Company, Duquesne Light
Company, Ohio Edison Company, Pennsylvania
Power Company and The Toledo Edison Company.
z10.35 Additional Support Agreement dated as of Exhibit (28)(g) to
September 15, 1987 between The First National Registration Statement
Bank of Boston, as Owner Trustee under a (Form S-3) No. 33-18144.
Trust Agreement dated as of September 15,
1987 with the limited partnership Owner
Participant named therein, and Duquesne Light
Company.
z10.36 Indenture, Bill of Sale, Instrument of Exhibit (28)(h) to
Transfer and Severance Agreement dated as of Registration Statement
October 2, 1987 between Duquesne Light (Form S-3) No. 33-18144.
Company, Seller, and The First National Bank
of Boston, as Owner Trustee under a Trust
Agreement dated as of September 15, 1987
with the limited partnership Owner Participant
named therein, Buyer.
z10.37 Tax Indemnification Agreement dated as of Exhibit 28.1 to the Form 8-K
September 15, 1987 between the Owner Current Report of Duquesne
Participant named therein and Duquesne Light Company dated
Light Company, as Lessee. November 20, 1987.
z10.38 Amendment No. 1 dated as of November 15, Exhibit 10.48 to the Form 10-K
1992 to Tax Indemnification Agreement dated Annual Report of Duquesne
as of September 15, 1987 between the Owner Light Company for the year
Participant named therein and Duquesne ended December 31, 1992.
Light Company, as Lessee.
z10.39 Extension Letter dated December 8, 1992 from Exhibit 10.49 to the Form 10-K
Duquesne, each Owner Participant, The First Annual Report of Duquesne
National Bank of Boston, the Lease Indenture Light Company for the year
Trustee, DQU II Funding Corporation and DQU II ended December 31, 1992.
Funding Corporation addressed to the New
Collateral Trust Trustee extending their
respective representations and warranties
and covenants set forth in each of the
Participation Agreements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- -------- ----------------------------------------------- ----------------------------
<S> <C> <C>
x10.40 Trust Indenture, Mortgage, Security Agreement Exhibit (4)(g) to Registration
and Assignment of Facility Lease dated as of Statement (Form S-3)
September 15, 1987 between The First National No. 33-18144.
Bank of Boston, as Owner Trustee under a Trust
Agreement dated as of September 15, 1987 with
the limited partnership of Owner Participant
named therein, and Irving Trust Company, as
Indenture Trustee.
y10.41 Trust Indenture, Mortgage, Security Agreement Exhibit (4)(h) to Registration
and Assignment of Facility Lease dated as of Statement (Form S-3)
September 15, 1987 between The First National No. 33-18144.
Bank of Boston, as Owner Trustee under a Trust
Agreement dated as of September 15, 1987 with
the corporate Owner Participant named therein,
and Irving Trust Company, as Indenture Trustee.
x10.42 Supplemental Indenture No. 1 dated as of Exhibit 10.45 to the Form 10-K
December 1, 1987 to Trust Indenture, Mortgage Annual Report of Duquesne
Security Agreement and Assignment of Facility Light Company Company for the
Lease dated as of September 15, 1987 between year ended December 31, 1987.
The First National Bank of Boston, as Owner
Trustee under a Trust Agreement dated as of
September 15, 1987 with the limited partnership
of Owner Participant named therein, and Irving
Trust Company, as Indenture Trustee.
y10.43 Supplemental Indenture No. 1 dated as of Exhibit 10.46 to the Form 10-K
December 1, 1987 to Trust Indenture, Mortgage, Annual Report of Duquesne
Security Agreement and Assignment of Facility Light Company Company for the
Lease dated as of September 15, 1987 between year ended December 31, 1987.
The First National Bank of Boston, as Owner
Trustee under a Trust Agreement dated as of
September 15, 1987 with the corporate Owner
Participant named therein, and Irving Trust
Company, as Indenture Trustee.
x10.44 Supplemental Indenture No. 2 dated as of Exhibit 10.54 to the Form 10-K
November 15, 1992 to Trust Indenture, Mortgage, Annual Report of Duquesne
Security Agreement and Assignment of Facility Light Company Company for the
Lease dated as of September 15, 1987 between year ended December 31, 1992.
The First National Bank of Boston, as Owner
Trustee under a Trust Agreement dated as of
September 15, 1987 with the limited partnership
Owner Participant named therein, and The Bank of
New York, as Indenture Trustee.
x10.45 Supplemental Indenture No. 2 dated as of Exhibit 10.55 to the Form 10-K
November 15, 1992 to Trust Indenture, Mortgage, Annual Report of Duquesne
Security Agreement and Assignment of Facility Light Company Company for the
Lease dated as of September 15, 1987 between year ended December 31, 1992.
The First National Bank of Boston, as Owner
Trustee under a Trust Agreement dated as of
September 15, 1987 with the corporate Owner
Participant named therein, and The Bank of
New York, as Indenture Trustee.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- --------- ----------------------------------------------- ----------------------------
<S> <C> <C>
10.46 Reimbursement Agreement dated as of July 15, Exhibit 10.56 to the Form 10-K
1992 among Duquesne Light Company, Swiss Bank Annual Report of Duquesne
Corporation, New York Branch, as LOC Bank, Light Company Company for the
Union Bank, as Administrating Bank, Swiss Bank year ended December 31, 1992.
Corporation, New York Branch, as Administrating
Bank and The Participating Banks Named Therein.
10.47 Supplemental Reimbursement Agreement dated as of Exhibit 10.57 to the Form 10-K
July 15, 1992 among Duquesne Light Company, Annual Report of Duquesne
Swiss Bank Corporation, New York Branch, as Light Company Company for the
LOC Bank, Union Bank, as Administrating Bank, year ended December 31, 1992.
Swiss Bank Corporation, New York Branch, as
Administrating Bank and The Participating Banks
Named Therein.
10.48 Collateral Trust Indenture dated as of Exhibit 10.58 to the Form 10-K
November 15, 1992 among DQU II Funding Annual Report of Duquesne
Corporation, Duquesne Light Company and The Light Company Company for the
Bank of New York, as Trustee. year ended December 31, 1992.
10.49 First Supplemental Indenture dated as of Exhibit 10.59 to the Form 10-K
November 15, 1992 to Collateral Trust Annual Report of Duquesne
Indenture dated as of November 15, 1992 Light Company Company for the
among DQU II Funding Corporation, Duquesne year ended December 31, 1992.
Light Company and The Bank of New York, as
Trustee.
x10.50 Refinancing Agreement dated as of November 15, Exhibit 10.60 to the Form 10-K
1992 among the limited partnership Owner Annual Report of Duquesne
Participant named therein, as Owner Participant, Light Company Company for the
DQU Funding Corporation, as Funding Corporation, year ended December 31, 1992.
DQU II Funding Corporation, as New Funding
Corporation, The First National Bank of Boston,
as Owner Trustee, The Bank of New York, as
Indenture Trustee, The Bank of New York, as
Collateral Trust Trustee, The Bank of New York,
as New Collateral Trust Trustee, and Duquesne
Light Company, as Lessee.
y10.51 Refinancing Agreement dated as of November 15, Exhibit 10.61 to the Form 10-K
1992 among the corporate Owner Participant Annual Report of Duquesne
named therein, as Owner Participant, DQU Light Company Company for the
Funding Corporation, as Funding Corporation, year ended December 31, 1992.
DQU II Funding Corporation, as New Funding
Corporation, The First National Bank of Boston,
as Owner Trustee, The Bank of New York, as
Indenture Trustee, The Bank of New York, as
Collateral Trust Trustee, The Bank of New York,
as New Collateral Trust Trustee, and Duquesne
Light Company, as Lessee.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- -------- ------------------------------------------------ ----------------------------
<S> <C> <C>
x10.52 Addendum dated December 8, 1992 to Refinancing Exhibit 10.62 to the Form 10-K
Agreement dated as of November 15, 1992 among Annual Report of Duquesne
the limited partnership Owner Participant named Light Company Company for the
therein, as Owner Participant, DQU Funding year ended December 31, 1992.
Corporation, as Funding Corporation, DQU II
Funding Corporation, as New Funding Corporation,
The First National Bank of Boston, as Owner
Trustee, The Bank of New York, as Indenture
Trustee, The Bank of New York, as Collateral
Trust Trustee, The Bank of New York, as New
Collateral Trust Trustee, and Duquesne Light
Company, as Lessee.
y10.53 Addendum dated December 8, 1992 to Refinancing Exhibit 10.63 to the Form 10-K
Agreement dated as of November 15, 1992 among Annual Report of Duquesne
the corporate Owner Participant named therein, Light Company Company for the
as Owner Participant, DQU Funding Corporation, year ended December 31, 1992.
as Funding Corporation, DQU II Funding
Corporation, as New Funding Corporation, The
First National Bank of Boston, as Owner
Trustee, The Bank of New York, as Indenture
Trustee, The Bank of New York, as Collateral
Trust Trustee, The Bank of New York, as New
Collateral Trust Trustee, and Duquesne Light
Company, as Lessee.
<CAPTION>
Other Agreements:
<S> <C> <C>
*10.54 Deferred Compensation Plan for the Directors of Exhibit 10.1 to the Form 10-K
Duquesne Light Company, as amended to date. Annual Report of DQE for the
year ended December 31, 1992.
*10.55 Incentive Compensation Plan for Certain Exhibit 10.2 to the Form 10-K
Executive Officers of Duquesne Light Company, Annual Report of DQE for the
as amended to date. year ended December 31, 1992.
*10.56 Description of Duquesne Light Company Pension Exhibit 10.3 to the Form 10-K
Service Supplement Program. Annual Report of DQE for the
year ended December 31, 1992.
*10.57 Duquesne Light Company Outside Directors' Exhibit 10.59 to the Form 10-K
Retirement Plan, as amended to date. Annual Report of DQE for the
year ended December 31, 1990.
*10.58 Employment Agreement dated as of December 15, Exhibit 10.5 to the Form 10-K
1992 between DQE, Duquesne Light Company and Annual Report of DQE for the
Wesley W. von Schack. year ended December 31, 1992.
*10.59 Duquesne Light/DQE Charitable Giving Program. Exhibit 10.6 to the Form 10-K
Annual Report of DQE for the
year ended December 31, 1992.
12.1 Calculation of Ratio of Earnings to Fixed Filed here.
Charges.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description Method of Filing
- -------- ----------------------------------------------- ----------------------------
<S> <C> <C>
22.1 Subsidiaries of registrant:
Duquesne has no significant subsidiaries.
23.1 Independent Auditors' Consent. Filed here.
28.1 Executive Compensation of Duquesne Light Company Filed here.
Executive Officers for 1993 and Security
Ownership of Duquesne Light Company Directors
and Executive Officers as of February 23, 1994.
28.2 DQE Annual Report to Shareholders for the year Filed here.
ended December 31, 1993. The Report, except
for those portions specifically incorporated
by reference here, is furnished for the
information of the Securities and Exchange
Commission and is not to be deemed "filed" for
any purpose under the Securities Exchange Act
of 1934 or otherwise.
</TABLE>
- -----
x An additional document, substantially identical in all material respects to
this Exhibit, has been entered into relating to one additional limited
partnership Owner Participant. Although the additional document may differ
in some respects (such as name of the owner participant, dollar amounts and
percentages), there are no material details in which the document differs
from this Exhibit.
y Additional documents, substantially identical in all material respects to
this Exhibit, have been entered into relating to four additional corporate
Owner Participants. Although the additional documents may differ in some
respects (such as names of the Owner Participants, dollar amounts and
percentages), there are no material details in which the documents differ
from this Exhibit.
z Additional documents, substantially identical in all material respects to
this Exhibit, have been entered into relating to six additional Owner
Participants. Although the additional documents may differ in some respects
(such as name of the Owner Participant, dollar amounts and percentages),
there are no material details in which the documents differ from this
Exhibit.
* This document is required to be filed as an exhibit to this form under Item
14(c).
Copies of the exhibits listed above will be furnished, upon request, to
holders or beneficial owners of any class of the Company's stock as of February
23, 1994, subject to payment in advance of the cost of reproducing the exhibits
requested.
<PAGE>
EXHIBIT 4.2
CONFORMED COPY
================================================================================
EIGHTY-FIFTH
SUPPLEMENTAL TRUST INDENTURE
between
DUQUESNE LIGHT COMPANY
(a Pennsylvania corporation)
and
MELLON BANK, N.A., Trustee
---------
Dated as of June 1, 1993
---------
Supplemental to
Trust Indenture dated as of August 1, 1947
---------
Providing for $300,000,000
First Mortgage Bonds, Collateral Series E
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties.................................................................... 1
Recitals................................................................... 1
Form of First Mortgage Bond, Collateral Series E........................... 1
Granting Clauses........................................................... 4
<CAPTION>
ARTICLE I.
Form and Execution of First Mortgage Bonds,
Collateral Series E
Section 1.01 -- Terms of bonds............................................. 6
Section 1.02 -- Redemption of bonds........................................ 6
Section 1.03 -- Redemption of bonds for Sinking Fund....................... 6
Section 1.04 -- 1992 Mortgage; Credit against payment obligation........... 6
Section 1.05 -- Transfer of bonds; restriction on transfer................. 7
Section 1.06 -- Interchangeability of bonds................................ 7
Section 1.07 -- No charge for transfer or exchange of bonds, except taxes
and governmental charges................................... 7
Section 1.08 -- Reservation of numbers for purposes of redemption.......... 7
<CAPTION>
ARTICLE Il.
Miscellaneous
Section 2.01 -- Fixing of record date...................................... 8
Section 2.02 -- Recitals not made by Trustee; no representations made by
Trustee.................................................... 8
Section 2.03 -- Construction in connection with and as part of the
Indenture.................................................. 8
Section 2.04 -- (a) Trust Indenture Act requirements control............... 8
(b) Severability of provisions............................. 8
Section 2.05 -- Successors and assigns..................................... 8
-i-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 2.06 -- Provision for execution in counterparts; Table of Contents
and descriptive headings of Articles not to affect meaning. 8
Section 2.07 -- Appointment of attorneys-in-fact........................... 9
Execution.................................................................. 9
Acknowledgments............................................................ 10
Certificate of Precise Residence........................................... 11
</TABLE>
-ii-
<PAGE>
EIGHTY-FIFTH
SUPPLEMENTAL TRUST INDENTURE
Dated as of the first day of June, 1993, although executed and delivered on
the date of the latest acknowledgment at the end hereof, made by and between
DUQUESNE LIGHT COMPANY, a corporation organized and existing under and by virtue
of the laws of the Commonwealth of Pennsylvania, having its principal office in
the City of Pittsburgh in said Commonwealth of Pennsylvania (hereinafter called
the "Company"), party of the first part, and MELLON BANK, N.A., successor by
merger to Mellon National Bank and Trust Company, a national banking
association, having its principal corporate trust office in the City of
Pittsburgh in the Commonwealth of Pennsylvania, as Trustee (hereinafter
sometimes called the "Trustee"), party of the second part.
Whereas, the Company has heretofore executed and delivered to Mellon Bank,
N.A., as Trustee, a certain Trust Indenture (hereinafter called the "Original
Indenture") dated as of August 1, 1947 securing its First Mortgage Bonds and at
various times since the execution of the Original Indenture has executed and
delivered to Mellon Bank, N.A., as Trustee, eighty-four supplemental trust
indentures and an amendment to one thereof, all for the purposes recited therein
and as permitted by the Original Indenture; and
Whereas, for convenience of reference the Original Indenture and all
indentures supplemental thereto heretofore or hereafter executed, including this
Eighty-Fifth Supplemental Trust Indenture, are sometimes hereinafter
collectively called the "Indenture"; and
Whereas, the Company has caused the Original Indenture and the aforesaid
eighty-four supplemental trust indentures to be recorded and filed, and has
caused financing statements and continuation statements under the Uniform
Commercial Code to be filed, all in such manner and in such places as are
required by law to make effective and maintain the lien intended to be created
by the Indenture; and
Whereas, there have been issued under the Original Indenture and certain of
the indentures supplemental thereto heretofore executed forty-three series of
First Mortgage Bonds, of which $1,249,933,000 aggregate principal amount was
outstanding as of the date hereof; and
Whereas, the Company desires to provide for the issuance from time to time
under the Indenture of a new series of bonds secured thereby in an aggregate
principal amount not to exceed $300,000,000 to be designated as "First Mortgage
Bonds, Collateral Series E", said new series to be hereinafter sometimes called
the "Forty-Fourth Series," the bonds of said series to be issued as registered
bonds without coupons in the denominations of $1,000 and any integral multiple
of $1,000 that the Company may execute and deliver, and the bonds of said series
to be substantially in the form and of the tenor following, to wit:
[FORM OF BOND OF THE FORTY-FOURTH SERIES]
This Bond is not transferable except to a successor trustee under the
Indenture of Mortgage and Deed of Trust, dated as of April 1, 1992, as
supplemented, between Duquesne Light Company and Mellon Bank, N.A., trustee.
<PAGE>
DUQUESNE LIGHT COMPANY
(Incorporated under the laws of the
Commonwealth of Pennsylvania)
FIRST MORTGAGE BOND, COLLATERAL SERIES E
No. $
ORIGINAL ISSUE DATE: STATED MATURITY DATE:
DUQUESNE LIGHT COMPANY, a corporation organized and existing under and by
virtue of the laws of the Commonwealth of Pennsylvania (hereinafter called the
"Company"), for value received, hereby promises to pay to ____________ or
registered assigns the sum of _________________ Dollars in lawful money of the
United States of America on the Stated Maturity Date specified above. This bond
shall not bear interest except that, if the Company should default in the
payment of the principal hereof, this bond shall bear interest at the rate of
five percent per annum until the Company's obligation with respect to the
payment of such principal shall be discharged as provided in the Indenture
hereinafter mentioned. Principal of and interest, if any, on this bond shall be
payable upon presentation hereof at the office or agency of the Company in
Pittsburgh, Pennsylvania or at such other office or agency as may be designated
for such purpose by the Company from time to time.
Any payment by the Company under its Indenture of Mortgage and Deed of
Trust, dated as of April 1, 1992, as supplemented (the "1992 Mortgage"), to
Mellon Bank, N.A., as trustee, of the principal of or interest, if any, on
securities which shall have been authenticated and delivered under the 1992
Mortgage on the basis of the issuance and delivery to such trustee of this bond
(other than by the application of the proceeds of a payment in respect of this
bond) shall, to the extent thereof, be deemed to satisfy and discharge the
obligation of the Company, if any, to make a payment of principal of or interest
on this bond, as the case may be, which is then due.
This bond is one of a duly authorized issue of bonds of the Company, known
as its First Mortgage Bonds, unlimited in aggregate principal amount, of the
series and designation indicated above, which issue of bonds consists, or may
consist, of several series of varying denominations, dates and tenors, all
issued and to be issued under and equally secured (except insofar as a sinking
fund, or similar fund, established in accordance with the provisions of the
Indenture may afford additional security for the bonds of any specific series)
by a Trust Indenture dated as of August 1, 1947 executed by the Company to
Mellon Bank, N.A., formerly Mellon National Bank and Trust Company (herein
called the "Trustee"), as Trustee, as heretofore supplemented and amended (said
Trust Indenture as supplemented and amended being herein called the
"Indenture"), to which Indenture reference is hereby made for a description of
the property mortgaged and pledged, the nature and extent of the security, the
rights of the holders of the bonds as to such security, and the terms and
conditions upon which the bonds may be issued under the Indenture and are
secured. The principal hereof may be declared or may become due on the
conditions, in the manner and at the time set forth in the Indenture, upon the
happening of a completed default as provided in the Indenture. The Indenture
provides that such declaration may in certain events be waived by the holders of
a majority in principal amount of the bonds outstanding.
With the consent of the Company and to the extent permitted by and as
provided in the Indenture, the rights and obligations of the Company and/or of
the holders of the bonds and/or the terms and
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<PAGE>
provisions of the Indenture and/or of any instruments supplemental thereto may
be modified or altered by the affirmative vote of the holders of at least
seventy percent in principal amount of the bonds then outstanding under the
Indenture and any instruments supplemental thereto (excluding bonds disqualified
from voting by reason of the interest of the Company or of certain related
persons therein as provided in the Indenture), and by the affirmative vote of at
least seventy percent in principal amount of the bonds of any series entitled to
vote then outstanding under the Indenture and any instruments supplemental
thereto (excluding bonds disqualified from voting as aforesaid) and affected by
such modification or alteration, in case one or more but less than all of the
series of bonds then outstanding are so affected; provided that no such
modification or alteration shall permit the extension of the maturity of the
principal of this bond or the reduction in the rate of interest hereon or any
other modification in the terms of payment of such principal or interest or the
taking of certain other action as more fully set forth in the Indenture, without
the consent of the holder hereof.
The Company, the Trustee and any paying agent may deem and treat the person
in whose name this bond is registered as the absolute owner hereof for the
purpose of receiving payment of or on account of the principal hereof and
interest hereon and for all other purposes and shall not be affected by any
notice to the contrary.
In the manner and with the effect provided in the Indenture, this bond may,
in whole at any time, or in part from time to time prior to maturity, be
redeemed by the Company with funds derived from any source by payment at the
office or agency of the Company in Pittsburgh, Pennsylvania or at such other
office or agency of the Company as shall be designated from time to time, at a
redemption price equal to 100% of the principal amount of this bond to be
redeemed.
This bond is entitled to the benefits of, and is subject to call for
redemption for, the Sinking Fund, upon the notice, in the manner, and with the
effect provided in the Indenture by payment of the principal amount hereof.
This bond shall initially be issued in the name of Mellon Bank, N.A.,
trustee under the 1992 Mortgage, and is not transferable except to any successor
trustee under the 1992 Mortgage. Any such transfer shall be made as prescribed
in the Indenture by the registered holder hereof in person, or by his duly
authorized attorney, at the office or agency of the Company in Pittsburgh,
Pennsylvania or at such other office or agency of the Company as shall be
designated from time to time, upon surrender and cancellation of this bond, and
thereupon a new bond or bonds of the same series and of authorized denominations
for a like aggregate principal amount, and having the same Original Issue Date
and Stated Maturity Date, will be issued to the transferee in exchange herefor
as provided in the Indenture. Bonds of this series are interchangeable as to
denominations in the manner and upon the conditions prescribed in the Indenture.
No charge shall be made to any holder of any bond of this series for any
transfer or exchange of bonds except for any tax or taxes or other governmental
charge required to be paid in connection therewith.
No recourse shall be had for the payment of principal of or interest, if
any, on this bond, or any part thereof, or of any claim based hereon or in
respect hereof or of the Indenture, against any incorporator or any past,
present or future stockholder, officer or director of the Company or of any
predecessor or successor corporation, either directly or through the Company, or
through any such predecessor or successor corporation, or through any receiver
or a trustee in bankruptcy, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released, as more fully provided in
the Indenture.
-3-
<PAGE>
This bond shall not be valid or become obligatory for any purpose unless
and until Mellon Bank, N.A., as Trustee under the Indenture, or its successor
thereunder, shall have signed the certificate of authentication endorsed hereon.
In Witness Whereof, DUQUESNE LIGHT COMPANY has caused this bond to be
signed in its name with the facsimile signature of its Chairman of the Board,
President and Chief Executive Officer, and its corporate seal, or a facsimile
thereof, to be hereto affixed and attested with the facsimile signature of its
Secretary.
Dated _______________
DUQUESNE LIGHT COMPANY
[Seal] By ___________________
Attest:
___________________
Secretary
[END OF FORM OF BOND]
Whereas, Sections 8.09 and 20.03 of the Original Indenture provide in
substance that the Company and the Trustee may enter into indentures
supplemental thereto for the purpose, among others, of making subject to the
lien of the Original Indenture property acquired subsequent to the execution and
delivery thereof and for any other purpose not inconsistent with the terms of
the Indenture; and
Whereas, Sections 2.01, 4.01 and 20.03 of the Original Indenture provide in
substance that the Company and the Trustee may enter into indentures
supplemental thereto for the purposes, among others, of creating and setting
forth the particulars of any new series of bonds and of providing the terms and
conditions of the issue of the bonds of any series not expressly provided for in
the Original Indenture; and
Whereas, the execution and delivery of this Eighty-Fifth Supplemental Trust
Indenture have been duly authorized by a resolution adopted by the Board of
Directors of the Company; and
Whereas, all things necessary to make said $300,000,000 aggregate principal
amount of said bonds of the Forty-Fourth Series, when duly executed by the
Company and authenticated and delivered by the Trustee (or a duly appointed
authenticating agent) and issued, the valid, binding and legal obligations of
the Company entitled to the benefits and security of the Indenture and to make
this Eighty-Fifth Supplemental Trust Indenture a valid, binding and legal
instrument in accordance with its terms have been done and performed, and the
issue of said Bonds, as herein provided, has been in all respects duly
authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
Duquesne Light Company, intending to be legally bound hereby, in
consideration of the premises and of One Dollar to it duly paid by the Trustee
at or before the issuance and delivery of these presents,
-4-
<PAGE>
the receipt whereof is hereby acknowledged, and of the purchase and acceptance
from time to time of said bonds of the Forty-Fourth Series by the holders
thereof, and in order to declare the conditions and terms upon and subject to
which the bonds of said series are to be issued and secured, and in order to
create the bonds of said series and further to secure the payment of the
principal of, and premium, if any, and interest on all bonds of the Company at
any time outstanding under the Indenture according to their tenor and effect and
the performance of and compliance with the covenants and conditions in the
Indenture contained, has executed and delivered this Eighty-Fifth Supplemental
Trust Indenture and hereby grants, bargains, sells, warrants, releases, conveys,
assigns, transfers, mortgages, pledges, sets over and confirms unto Mellon Bank,
N.A., as Trustee under the Indenture, and to its respective successors in said
trust, forever, all property, real, personal and mixed, now owned or hereafter
acquired or to be acquired by the Company and wheresoever situated (except as
excepted from the lien of the Indenture by the provisions thereof), subject to
the rights reserved by the Company in and by various provisions of the
Indenture, including (without in anywise limiting or impairing by the
enumeration of the same the scope and intent of the foregoing or of any general
description contained in the Indenture) all lands, rights of way, roads, all
powerhouses, buildings and other structures, and all offices, buildings and the
contents thereof; all machinery, engines, boilers, dynamos, electrical
machinery, regulators, meters, transformers, generators, motors, electrical and
mechanical appliances, conduits, cables, water or other pipes, pole and
transmission lines, poles, wires, cross-arms, insulators, substations and
superstructures, generating, distributing and transmitting equipment, tools,
implements, apparatus and supplies and coal in place and interests in coal;
whether appertaining to any existing or future system of the Company or
otherwise and including all other property now used or provided for use or
hereafter acquired for use, in the construction, repair, maintenance and
operation of such systems, both those now owned and those which may hereafter be
acquired by the Company; all municipal or other grants, rights, permits,
consents, franchises, privileges, easements, licenses, ordinances, rights of
way, liberties and immunities of the Company, howsoever conferred or acquired
and whether now owned or hereafter acquired; and all leases, leaseholds, power
contracts, street lighting contracts and other rights with respect to the
construction, maintenance, repair and operation of any systems now owned or
hereafter acquired by the Company, and any additions thereto or extensions
thereof;
Together with all and singular the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the aforesaid property or
any part thereof, with the reversion and reversions, remainder and remainders,
tolls, rents and revenues, issues, income, product and profits thereof and all
the estate, right, title, interest and claim whatsoever, at law as well as in
equity, which the Company now has or may hereafter acquire in and to the
aforesaid property and every part and parcel thereof except as excepted or
excluded from the lien of the Indenture;
There Being Hereby Excepted from the lien of the Indenture, whether now
owned or hereafter acquired by the Company, anything herein contained to the
contrary notwithstanding, all those certain items of property of the classes
specifically excepted from the lien of the Original Indenture by the terms
thereof;
To Have and To Hold all properties, real, personal and mixed, mortgaged,
pledged or conveyed by the Company as aforesaid, or intended so to be, unto the
Trustee and its successors and assigns, FOREVER; subject, however, to
permissible encumbrances, as defined in the Original Indenture, and to all the
other terms, conditions, covenants, uses, trusts and defeasances incorporated in
the Indenture.
The parties hereto shall have, possess and enjoy the same rights, powers,
duties and privileges as affecting the property hereby conveyed as they have
under the Original Indenture insofar as the same
-5-
<PAGE>
may be applicable hereto, with the same force and effect as though the terms,
conditions, and defeasances of the Original Indenture had been embodied herein.
It Is Hereby Covenanted, Declared and Agreed by the Company and the
Trustee, and its successors in the trust under the Indenture, for the benefit of
those who hold or shall hold the bonds, or any of them, issued or to be issued
thereunder, as follows:
ARTICLE I
Form and Execution of First Mortgage Bonds, Collateral Series E
Section 1.01. There is hereby created, for issuance under the Indenture
and to be secured thereby, a series of bonds, designated "First Mortgage Bonds,
Collateral Series E," each of which shall bear the descriptive title "First
Mortgage Bond, Collateral Series E," and the form thereof shall be substantially
of the tenor and purport hereinbefore recited. The bonds of the Forty-Fourth
Series shall be issued from time to time in an aggregate principal amount not to
exceed $300,000,000 and shall be issued as registered bonds without coupons in
denominations of $1,000 and integral multiples thereof. The bonds of the Forty-
Fourth Series shall not bear interest except as provided in Article XIII of the
Original Indenture. Each bond of the Forty-Fourth Series shall (a) be issued in
such principal amount, (b) mature on such date not less than nine months nor
more than forty years from its Original Issue Date (as hereinafter defined), and
(c) have such other terms and conditions, all as shall be specified by the
Company in an officers' certificate delivered to the Trustee relating to such
bond and referring to this Eighty-Fifth Supplemental Trust Indenture (such
officers' certificate being hereinafter sometimes called the "Issuance
Certificate") and substantially in the form of bond of the Forty-Fourth Series
hereinbefore recited. The principal of and interest, if any, on each bond of
the Forty-Fourth Series shall be payable at the office or agency of the Company
in Pittsburgh, Pennsylvania or at such other office or agency of the Company as
shall be designated from time to time, in lawful money of the United States of
America.
Each bond of the Forty-Fourth Series shall be dated as of its Original
Issue Date. The term "Original Issue Date" as used in this Section 1.01 shall
mean, with respect to any bonds of said series of identical stated maturity and
other terms and conditions, the date of the first authentication and delivery
hereunder of such bonds.
Section 1.02. Each bond of the Forty-Fourth Series shall be redeemable at
the option of the Company in whole at any time, or in part from time to time,
prior to maturity, at a redemption price equal to 100.00% of the principal
amount thereof to be redeemed, by payment at the office or agency of the Company
in Pittsburgh, Pennsylvania, or at such other office or agency of the Company as
shall be designated from time to time. Any such redemption shall be made upon
not less than 30 days' previous notice to be given in the manner provided in
Section 10.02 of the Original Indenture.
Section 1.03. The bonds of the Forty-Fourth Series shall be redeemable on
October 1 of each year commencing one year after the date of issuance of the
first bonds of said series for the Sinking Fund for bonds of said series
provided for in Article XII of the Original Indenture, upon not less than 30
days' previous notice of redemption to be given in the manner provided in
Section 10.02 of the Original Indenture, at the principal amount thereof.
Section 1.04. The bonds of the Forty-Fourth Series shall be issued and
delivered to Mellon Bank, N.A., as trustee under the Indenture of Mortgage and
Deed of Trust, dated as of April 1, 1992, as supplemented (the "1992 Mortgage"),
of the Company to such trustee (the "1992 Mortgage Trustee"), as the basis for
the authentication and delivery under the 1992 Mortgage of a series of
securities. As
-6-
<PAGE>
provided in the 1992 Mortgage, the bonds of the Forty-Fourth Series will be
registered in the name of the 1992 Mortgage Trustee or its nominee and will be
owned and held by the 1992 Mortgage Trustee, subject to the provisions of the
1992 Mortgage, for the benefit of the holders of all securities from time to
time outstanding under the 1992 Mortgage, and the Company shall have no interest
therein.
Any payment by the Company under the 1992 Mortgage of the principal of or
interest, if any, on the securities which shall have been authenticated and
delivered under the 1992 Mortgage on the basis of the issuance and delivery to
the 1992 Mortgage Trustee of bonds of the Forty-Fourth Series (other than by the
application of the proceeds of a payment in respect of such bonds) shall, to the
extent thereof, be deemed to satisfy and discharge the obligation of the
Company, if any, to make a payment of principal of or interest on such bonds, as
the case may be, which is then due.
The Trustee may conclusively presume that the obligation of the Company to
pay the principal of the bonds of the Forty-Fourth Series as the same shall
become due and payable shall have been fully satisfied and discharged unless and
until it shall have received a written notice from the 1992 Mortgage Trustee,
signed by an authorized officer thereof, stating that the principal of specified
bonds of the Forty-Fourth Series has become due and payable and has not been
fully paid, and specifying the amount of funds required to make such payment.
Section 1.05. The bonds of the Forty-Fourth Series shall not be
transferable, except to any successor trustee under said 1992 Mortgage. Any
such transfer shall be made by the registered holder thereof, in person or by a
duly authorized attorney, at the office or agency of the Company in Pittsburgh,
Pennsylvania, or at such other office or agency of the Company as shall be
designated from time to time, upon surrender and cancellation of such bonds, and
thereupon a new bond or bonds of said series and of authorized denominations for
a like aggregate principal amount and having the same Original Issue Date,
Stated Maturity Date and other terms and conditions will be issued to the
transferee in exchange therefor. New bonds issued upon any such transfer shall
be so dated and shall carry such rights to any interest accrued and unpaid that
neither gain nor loss in interest shall result from such transfer.
Section 1.06. The registered holder of any bond or bonds of the Forty-
Fourth Series at his option may surrender the same at the office or agency of
the Company in Pittsburgh, Pennsylvania, or at such other office or agency of
the Company as shall be designated from time to time, for cancellation in
exchange for another or other bonds of the said series of authorized
denominations, but of the same aggregate principal amount and having the same
Original Issue Date, Stated Maturity Date and other terms and conditions and
being so dated and carrying such rights to any interest accrued and unpaid that
neither gain nor loss in interest shall result from such exchange. Thereupon,
the Company shall execute and deliver to the Trustee, and the Trustee shall
authenticate and deliver such other bond or bonds to such registered holder
either at its office or at said office or agency of the Company.
Section 1.07. No charge shall be made to any registered holder of any bond
of the Forty-Fourth Series for any exchange or transfer of bonds of said series
except that in case of any exchange or transfer the Company may make a charge
therefor sufficient to reimburse it for any tax or taxes or other governmental
charge required to be paid in connection therewith.
Section 1.08. For the purpose only of complying with the Original
Indenture (particularly Sections 10.02 and 12.02(b) thereof) in connection with
the redemption of bonds of the Forty-Fourth Series, for each $1,000 principal
amount of bonds authenticated and delivered hereunder there shall be assigned a
number in such manner and at such time as the Trustee may deem appropriate.
Portions of the principal amount less than the entire principal amount of a bond
of the Forty-Fourth Series of a denomination larger than $1,000 may be redeemed
only in integral multiples of $1,000.
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<PAGE>
ARTICLE II
Miscellaneous
Section 2.01. The holders of the bonds of the Forty-Fourth Series shall be
deemed to have consented and agreed that the Company may, but shall not be
obligated to, fix a record date for the purpose of determining the holders of
the bonds of the Forty-Fourth Series entitled to consent to any amendment or
supplement to the Indenture or the waiver of any provision thereof or any act to
be performed thereunder. If a record date is fixed, those persons who were
holders at such record date (or their duly designated proxies), and only those
persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
Section 2.02. The recitals of fact herein and in the bonds (except the
Trustee's Certificate) shall be taken as statements of the Company and shall not
be construed as made or warranted by the Trustee. The Trustee makes no
representations as to the value of any of the property subjected to the lien of
the Indenture, or any part thereof, or as to the title of the Company thereto,
or as to the security afforded thereby and hereby, or as to the validity of this
Eighty-Fifth Supplemental Trust Indenture or of the bonds of the Forty-Fourth
Series (except the Trustee's Certificate), and the Trustee shall incur no
responsibility in respect of such matters.
Section 2.03. This Eighty-Fifth Supplemental Trust Indenture shall be
construed in connection with and as part of the Indenture.
Section 2.04. (a) If any provision of this Eighty-Fifth Supplemental
Trust Indenture limits, qualifies, or conflicts with another provision of the
Indenture required to be included in indentures qualified under the Trust
Indenture Act of 1939 (as in force at the date of this Eighty-Fifth Supplemental
Trust Indenture) by any of the provisions of Sections 310 to 317, inclusive, of
said Act, such required provision shall control.
(b) In case any one or more of the provisions contained in this Eighty-
Fifth Supplemental Trust Indenture or in the bonds issued hereunder should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected, impaired, prejudiced or disturbed thereby.
Section 2.05. Whenever in this Eighty-Fifth Supplemental Trust Indenture
either of the parties hereto is named or referred to, this shall be deemed to
include the successors or assigns of such party, and all the covenants and
agreements in this Eighty-Fifth Supplemental Trust Indenture contained by or on
behalf of the Company or by or on behalf of the Trustee shall bind and inure to
the benefit of the respective successors and assigns of such parties, whether so
expressed or not.
Section 2.06. This Eighty-Fifth Supplemental Trust Indenture may be
simultaneously executed in several counterparts, and all said counterparts
executed and delivered, each as an original, shall constitute but one and the
same instrument.
The Table of Contents and the descriptive headings of the several Articles
of this Eighty-Fifth Supplemental Trust Indenture were formulated, used and
inserted herein for convenience only and shall not be deemed to affect the
meaning or construction of any of the provisions hereof.
-8-
<PAGE>
Section 2.07. Duquesne Light Company does hereby constitute and appoint
Diane S. Eismont to be its attorney for it and in its name and as and for its
corporate deed to acknowledge this Eighty-Fifth Supplemental Trust Indenture
before any person having authority by law to take such acknowledgment.
Mellon Bank, N.A. does hereby constitute and appoint D.M. Babich to be its
attorney-in-fact for it and in its name and as and for its corporate deed to
acknowledge this Eighty-Fifth Supplemental Trust Indenture before any person
having authority by law to take such acknowledgment.
In Witness Whereof, the party of the first part has caused its corporate
name to be subscribed and this Eighty-Fifth Supplemental Trust Indenture to be
signed by its Chairman of the Board, President and Chief Executive Officer or a
Vice President, and its corporate seal to be hereunto affixed and attested by
its Secretary or an Assistant Secretary, for and on its behalf, and the party of
the second part, to evidence its acceptance of the trust hereby created, has
caused its corporate name to be subscribed, and this Eighty-Fifth Supplemental
Trust Indenture to be signed by its President, a Vice President or an Assistant
Vice President and its corporate seal to be hereunto affixed and attested by its
authorized officer, for and in its behalf, all done as of the first day of June,
1993.
DUQUESNE LIGHT COMPANY
[Seal] By: /s/ Gary L. Schwass
--------------------------------------
Vice President-Finance
and Chief Financial Officer
Attest:
/s/ Diane S. Eismont
- -----------------------------
Secretary
MELLON BANK, N.A.
[Seal] By: /s/ J.H. McAnulty
--------------------------------------
Vice President
Attest:
/s/ D.M. Babich
- -----------------------------
Authorized Officer
-9-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On this 7th day of June, 1993 before me, the subscriber, a notary public in
and for said Commonwealth and County, personally appeared Diane S. Eismont, the
attorney-in-fact named in the foregoing Eighty-Fifth Supplemental Trust
Indenture, and by virtue and in pursuance of the authority therein conferred
upon her acknowledged the said Eighty-Fifth Supplemental Trust Indenture to be
the act and deed of the said Duquesne Light Company and that she desired the
same to be recorded as such.
Witness my hand and notarial seal the day and year aforesaid.
/s/ Joanne E. Kirin
---------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On this 7th day of June, 1993 before me, the subscriber, a notary public in
and for said Commonwealth and County, personally appeared D.M. Babich, the
attorney-in-fact named in the foregoing Eighty-Fifth Supplemental Trust
Indenture, and by virtue and in pursuance of the authority therein conferred
upon him acknowledged the said Eighty-Fifth Supplemental Trust Indenture to be
the act and deed of the said Mellon Bank, N.A., and that he desired the same to
be recorded as such.
Witness my hand and notarial seal the day and year aforesaid.
/s/ Judith Ann Hyde
---------------------------------
Notary Public
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<PAGE>
CERTIFICATE OF PRECISE RESIDENCE
I hereby certify that the precise residence of Mellon Bank, N.A. is One
Mellon Bank Center, Second Ward, Pittsburgh, Allegheny County, Pennsylvania.
/s/ D.M. Babich
------------------------------------------
Authorized Signatory of Mellon Bank, N.A.
June 7, 1993
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<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded June 9, 1993
Mortgage Book Volume 13181, page 219
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded June 9, 1993
Mortgage Book Volume 1264, page 643
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded June 8, 1993
Mortgage Book Volume 115, page 214
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded June 8, 1993
Mortgage Book Volume 2007, page 467
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded June 8, 1993
Mortgage Book Volume 3138, page 616
Belmont County, Ohio
Office of Recorder
Received June 8, 1993
Recorded June 9, 1993
Mortgage Book Volume 602, page 832
Columbiana County, Ohio
Officer of Recorder
Recorded June 9, 1993
Mortgage Book Volume 378, page 217
Jefferson County, Ohio
Officer of Recorder
Received June 8, 1993
Recorded June 9, 1993
Mortgage Book Volume 102, page 257
<PAGE>
Lake County, Ohio
Officer of Recorder
Recorded June 9, 1993
Mortgage Book Volume 864, page 677
Monroe County, Ohio
Officer of Recorder
Received June 8, 1993
Recorded June 9, 1993
Mortgage Book Volume 132, page 876
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded June 9, 1993
Deed of Trust Book 304, page 337
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded June 8, 1993
Deed of Trust Book 710, page 341
<PAGE>
EXHIBIT 4.2
CONFORMED COPY
================================================================================
EIGHTY-SIXTH
SUPPLEMENTAL TRUST INDENTURE
between
DUQUESNE LIGHT COMPANY
(a Pennsylvania corporation)
and
MELLON BANK, N.A., Trustee
-----------
Dated as of June 1, 1993
-----------
Supplemental to
Trust Indenture dated as of August 1, 1947
-----------
Providing for $25,000,000
First Mortgage Bonds, Pollution Control Collateral Series F
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties.................................................................... 1
Recitals................................................................... 1
Form of First Mortgage Bond, Pollution Control Collateral Series F......... 2
Granting Clauses........................................................... 5
<CAPTION>
ARTICLE I.
Form and Execution of First Mortgage Bonds,
Pollution Control Collateral Series F
Section 1.01 -- Terms of bonds............................................. 6
Section 1.02 -- Redemption of bonds........................................ 6
Section 1.03 -- Redemption of bonds for Sinking Fund....................... 7
Section 1.04 -- Mandatory Redemption....................................... 7
Section 1.05 -- 1992 Mortgage; Credit against payment obligation........... 7
Section 1.06 -- Transfer of bonds; restriction on transfer................. 7
Section 1.07 -- Interchangeability of bonds................................ 8
Section 1.08 -- No charge for transfer or exchange of bonds, except taxes
and governmental charges................................... 8
Section 1.09 -- Reservation of numbers for purposes of redemption.......... 8
<CAPTION>
ARTICLE II.
Miscellaneous
<C> <S> <C>
Section 2.01 -- Fixing of record date...................................... 8
Section 2.02 -- Recitals not made by Trustee; no representations made by
Trustee.................................................... 8
Section 2.03 -- Construction in connection with and as part of the
Indenture.................................................. 8
Section 2.04 -- (a) Trust Indenture Act requirements control............... 8
(b) Severability of provisions............................. 9
Section 2.05 -- Successors and assigns..................................... 9
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
Section 2.06 -- Provision for execution in counterparts; Table of
Contents and descriptive headings of Articles not
to affect meaning......................................... 9
Section 2.07 -- Appointment of attorneys-in-fact............................ 9
Execution................................................................... 10
Acknowledgments............................................................. 11
Certificate of Precise Residence............................................ 12
</TABLE>
<PAGE>
EIGHTY-SIXTH
SUPPLEMENTAL TRUST INDENTURE
Dated as of the first day of June, 1993, although executed and delivered on
the date of the latest acknowledgment at the end hereof, made by and between
DUQUESNE LIGHT COMPANY, a corporation organized and existing under and by virtue
of the laws of the Commonwealth of Pennsylvania, having its principal office in
the City of Pittsburgh in said Commonwealth of Pennsylvania (hereinafter called
the "Company"), party of the first part, and MELLON BANK, N.A., successor by
merger to Mellon National Bank and Trust Company, a national banking
association, having its principal corporate trust office in the City of
Pittsburgh in the Commonwealth of Pennsylvania, as Trustee (hereinafter
sometimes called the "Trustee"), party of the second part.
Whereas, the Company has heretofore executed and delivered to Mellon Bank,
N.A., as Trustee, a certain Trust Indenture (hereinafter called the "Original
Indenture") dated as of August 1, 1947 securing its First Mortgage Bonds; and
Whereas, the Original Indenture has been recorded in the Recorders' Offices
of the various counties of Pennsylvania as follows:
In Allegheny County in Mortgage Book Vol. 2897, page 4;
In Beaver County in Mortgage Book Vol. 430, page 1;
In Greene County in Mortgage Book Vol. 125, page 1;
In Washington County in Mortgage Book Vol. 332, page 1; and
In Westmoreland County in Mortgage Book Vol. 692, page 2;
has been filed in the Prothonotary's Office in each of said Counties; and has
also been recorded in the Office of the Clerk of County Commission of Monongalia
County, West Virginia, in Deed of Trust Book Vol. 321, page 327, the Office of
the Clerk of County Commission of Hancock County, West Virginia, in Deed of
Trust Book Vol. 176, page 1, the Recorder's Office of Belmont County, Ohio, in
Mortgage Book Vol. 437, page 109, the Recorder's Office of Columbiana County,
Ohio, in Mortgage Book Vol. 1542, page 25, the Recorder's Office of Jefferson
County, Ohio, in Mortgage Book Vol. 405, page 1, the Recorder's Office of Lake
County, Ohio, in Mortgage Book Vol. 821, page 1, and the Recorder's Office of
Monroe County, Ohio, in Mortgage Book Vol. 89, page 1; and
Whereas, since the execution of the Original Indenture, the Company has
executed and delivered to Mellon Bank, N.A., as Trustee, eighty-five
supplemental trust indentures and an amendment to one thereof, all for the
purposes recited therein and as permitted by the Original Indenture; and
Whereas, for convenience of reference the Original Indenture and all
indentures supplemental thereto heretofore or hereafter executed, including this
Eighty-Sixth Supplemental Trust Indenture, are sometimes hereinafter
collectively called the "Indenture"; and
Whereas, the Company has caused the Original Indenture and the aforesaid
eighty-five supplemental trust indentures to be recorded and filed, and has
caused financing statements and continuation statements under the Uniform
Commercial Code to be filed, all in such manner and in such places as are
required by law to make effective and maintain the lien intended to be created
by the Indenture; and
<PAGE>
Whereas, there have been issued under the Original Indenture and certain of
the indentures supplemental thereto heretofore executed forty-four series of
First Mortgage Bonds, of which $1,249,933,000 aggregate principal amount was
outstanding as of the date hereof; and
Whereas, the Company desires to provide for the issuance under the
Indenture of a new series of bonds secured thereby in an aggregate principal
amount not to exceed $25,000,000 to be designated as "First Mortgage Bonds,
Pollution Control Collateral Series F", said new series to be hereinafter
sometimes called the "Forty-Fifth Series," the bonds of said series to be issued
as registered bonds without coupons in the denominations of $1,000 and any
integral multiple of $1,000 that the Company may execute and deliver, and the
bonds of said series to be substantially in the form and of the tenor following,
to wit:
[FORM OF BOND OF THE FORTY-FIFTH SERIES]
This Bond is not transferable except to a successor trustee under the
Indenture of Mortgage and Deed of Trust, dated as of April 1, 1992, as
supplemented, between Duquesne Light Company and Mellon Bank, N.A., trustee.
DUQUESNE LIGHT COMPANY
(Incorporated under the laws of the
Commonwealth of Pennsylvania)
FIRST MORTGAGE BOND, POLLUTION CONTROL COLLATERAL SERIES F
No. $
ORIGINAL ISSUE DATE: STATED MATURITY DATE:
DUQUESNE LIGHT COMPANY, a corporation organized and existing under and by
virtue of the laws of the Commonwealth of Pennsylvania (hereinafter called the
"Company"), for value received, hereby promises to pay to ____________ or
registered assigns the sum of _________________ Dollars in lawful money of the
United States of America on the Stated Maturity Date specified above. This bond
shall not bear interest except that, if the Company should default in the
payment of the principal hereof, this bond shall bear interest at the rate of
five percent per annum until the Company's obligation with respect to the
payment of such principal shall be discharged as provided in the Indenture
hereinafter mentioned. Principal of and interest, if any, on this bond shall be
payable upon presentation hereof at the office or agency of the Company in
Pittsburgh, Pennsylvania or at such other office or agency as may be designated
for such purpose by the Company from time to time.
Any payment by the Company under its Indenture of Mortgage and Deed of
Trust, dated as of April 1, 1992, as supplemented (the "1992 Mortgage"), to
Mellon Bank, N.A., as trustee, of the principal of or interest, if any, on
securities which shall have been authenticated and delivered under the 1992
Mortgage on the basis of the issuance and delivery to such trustee of this bond
(other than by the application of the proceeds of a payment in respect of this
bond) shall, to the extent thereof, be deemed to satisfy and discharge the
obligation of the Company, if any, to make a payment of principal of or interest
on this bond, as the case may be, which is then due.
-2-
<PAGE>
This bond is one of a duly authorized issue of bonds of the Company, known
as its First Mortgage Bonds, unlimited in aggregate principal amount, of the
series and designation indicated above, which issue of bonds consists, or may
consist, of several series of varying denominations, dates and tenors, all
issued and to be issued under and equally secured (except insofar as a sinking
fund, or similar fund, established in accordance with the provisions of the
Indenture may afford additional security for the bonds of any specific series)
by a Trust Indenture dated as of August 1, 1947 executed by the Company to
Mellon Bank, N.A., formerly Mellon National Bank and Trust Company (herein
called the "Trustee"), as Trustee, as heretofore supplemented and amended (said
Trust Indenture as supplemented and amended being herein called the
"Indenture"), to which Indenture reference is hereby made for a description of
the property mortgaged and pledged, the nature and extent of the security, the
rights of the holders of the bonds as to such security, and the terms and
conditions upon which the bonds may be issued under the Indenture and are
secured. The principal hereof may be declared or may become due on the
conditions, in the manner and at the time set forth in the Indenture, upon the
happening of a completed default as provided in the Indenture. The Indenture
provides that such declaration may in certain events be waived by the holders of
a majority in principal amount of the bonds outstanding.
With the consent of the Company and to the extent permitted by and as
provided in the Indenture, the rights and obligations of the Company and/or of
the holders of the bonds and/or the terms and provisions of the Indenture and/or
of any instruments supplemental thereto may be modified or altered by the
affirmative vote of the holders of at least seventy percent in principal amount
of the bonds then outstanding under the Indenture and any instruments
supplemental thereto (excluding bonds disqualified from voting by reason of the
interest of the Company or of certain related persons therein as provided in the
Indenture), and by the affirmative vote of at least seventy percent in principal
amount of the bonds of any series entitled to vote then outstanding under the
Indenture and any instruments supplemental thereto (excluding bonds disqualified
from voting as aforesaid) and affected by such modification or alteration, in
case one or more but less than all of the series of bonds then outstanding are
so affected; provided that no such modification or alteration shall permit the
extension of the maturity of the principal of this bond or the reduction in the
rate of interest hereon or any other modification in the terms of payment of
such principal or interest or the taking of certain other action as more fully
set forth in the Indenture, without the consent of the holder hereof.
The Company, the Trustee and any paying agent may deem and treat the person
in whose name this bond is registered as the absolute owner hereof for the
purpose of receiving payment of or on account of the principal hereof and
interest hereon and for all other purposes and shall not be affected by any
notice to the contrary.
In the manner and with the effect provided in the Indenture, this bond may,
in whole at any time, or in part from time to time prior to maturity, be
redeemed by the Company with funds derived from any source by payment at the
office or agency of the Company in Pittsburgh, Pennsylvania or at such other
office or agency of the Company as shall be designated from time to time, at a
redemption price equal to 100% of the principal amount of this bond to be
redeemed.
This bond is entitled to the benefits of, and is subject to call for
redemption for, the Sinking Fund, upon the notice, in the manner, and with the
effect provided in the Indenture by payment of the principal amount hereof.
All bonds of this series shall be redeemed, at a redemption price equal to
100% of the principal amount thereof, if, and at such time as, the securities
which shall have been authenticated and delivered under the 1992 Mortgage on the
basis of the issuance and delivery to the trustee thereunder of the bonds
-3-
<PAGE>
of this series shall have become subject to mandatory redemption. The holder of
this bond, by its acceptance hereof, consents and agrees that no notice of such
redemption shall be required to be given.
This bond shall initially be issued in the name of Mellon Bank, N.A.,
trustee under the 1992 Mortgage, and is not transferable except to any successor
trustee under the 1992 Mortgage. Any such transfer shall be made as prescribed
in the Indenture by the registered holder hereof in person, or by such holder's
duly authorized attorney, at the office or agency of the Company in Pittsburgh,
Pennsylvania or at such other office or agency of the Company as shall be
designated from time to time, upon surrender and cancellation of this bond, and
thereupon a new bond or bonds of the same series and of authorized denominations
for a like aggregate principal amount, and having the same Original Issue Date
and Stated Maturity Date, will be issued to the transferee in exchange herefor
as provided in the Indenture. Bonds of this series are interchangeable as to
denominations in the manner and upon the conditions prescribed in the Indenture.
No charge shall be made to any holder of any bond of this series for any
transfer or exchange of bonds except for any tax or taxes or other governmental
charge required to be paid in connection therewith.
No recourse shall be had for the payment of principal of or interest, if
any, on this bond, or any part thereof, or of any claim based hereon or in
respect hereof or of the Indenture, against any incorporator or any past,
present or future stockholder, officer or director of the Company or of any
predecessor or successor corporation, either directly or through the Company, or
through any such predecessor or successor corporation, or through any receiver
or a trustee in bankruptcy, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released, as more fully provided in
the Indenture.
This bond shall not be valid or become obligatory for any purpose unless
and until Mellon Bank, N.A., as Trustee under the Indenture, or its successor
thereunder, shall have signed the certificate of authentication endorsed hereon.
In Witness Whereof, DUQUESNE LIGHT COMPANY has caused this bond to be
signed in its name with the facsimile signature of its Chairman of the Board,
President and Chief Executive Officer, and its corporate seal, or a facsimile
thereof, to be hereto affixed and attested with the facsimile signature of its
Secretary.
Dated
-----------------------
DUQUESNE LIGHT COMPANY
[Seal] By
---------------------------
Attest:
- ----------------------------
Secretary
[END OF FORM OF BOND]
-4-
<PAGE>
Whereas, Sections 2.01, 4.01 and 20.03 of the Original Indenture provide in
substance that the Company and the Trustee may enter into indentures
supplemental thereto for the purposes, among others, of creating and setting
forth the particulars of any new series of bonds and of providing the terms and
conditions of the issue of the bonds of any series not expressly provided for in
the Original Indenture; and
Whereas, the execution and delivery of this Eighty-Sixth Supplemental Trust
Indenture have been duly authorized by a resolution adopted by the Board of
Directors of the Company; and
Whereas, all things necessary to make said $25,000,000 aggregate principal
amount of said bonds of the Forty-Fifth Series, when duly executed by the
Company and authenticated and delivered by the Trustee (or a duly appointed
authenticating agent) and issued, the valid, binding and legal obligations of
the Company entitled to the benefits and security of the Indenture and to make
this Eighty-Sixth Supplemental Trust Indenture a valid, binding and legal
instrument in accordance with its terms have been done and performed, and the
issue of said Bonds, as herein provided, has been in all respects duly
authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
Duquesne Light Company, intending to be legally bound hereby, in
consideration of the premises and of One Dollar to it duly paid by the Trustee
at or before the issuance and delivery of these presents, the receipt whereof is
hereby acknowledged, and of the purchase and acceptance from time to time of
said bonds of the Forty-Fifth Series by the holders thereof, and in order to
declare the conditions and terms upon and subject to which the bonds of said
series are to be issued and secured, and in order to create the bonds of said
series and further to secure the payment of the principal of, and premium, if
any, and interest on all bonds of the Company at any time outstanding under the
Indenture according to their tenor and effect and the performance of and
compliance with the covenants and conditions in the Indenture contained, has
executed and delivered this Eighty-Sixth Supplemental Trust Indenture and hereby
grants, bargains, sells, warrants, releases, conveys, assigns, transfers,
mortgages, pledges, sets over and confirms unto Mellon Bank, N.A., as Trustee
under the Indenture, and to its respective successors in said trust, forever,
all property, real, personal and mixed, now owned or hereafter acquired or to be
acquired by the Company and wheresoever situated (except as excepted from the
lien of the Indenture by the provisions thereof), subject to the rights reserved
by the Company in and by various provisions of the Indenture, including (without
in anywise limiting or impairing by the enumeration of the same the scope and
intent of the foregoing or of any general description contained in the
Indenture) all lands, rights of way, roads, all powerhouses, buildings and other
structures, and all offices, buildings and the contents thereof; all machinery,
engines, boilers, dynamos, electrical machinery, regulators, meters,
transformers, generators, motors, electrical and mechanical appliances,
conduits, cables, water or other pipes, pole and transmission lines, poles,
wires, cross-arms, insulators, substations and superstructures, generating,
distributing and transmitting equipment, tools, implements, apparatus and
supplies and coal in place and interests in coal; whether appertaining to any
existing or future system of the Company or otherwise and including all other
property now used or provided for use or hereafter acquired for use, in the
construction, repair, maintenance and operation of such systems, both those now
owned and those which may hereafter be acquired by the Company; all municipal or
other grants, rights, permits, consents, franchises, privileges, easements,
licenses, ordinances, rights of way, liberties and immunities of the Company,
howsoever conferred or acquired and whether now owned or hereafter acquired; and
all leases, leaseholds, power contracts, street lighting contracts and other
rights with respect to the construction, maintenance, repair and operation of
any systems now owned or hereafter acquired by the Company, and any additions
thereto or extensions thereof;
-5-
<PAGE>
Together with all and singular the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the aforesaid property or
any part thereof, with the reversion and reversions, remainder and remainders,
tolls, rents and revenues, issues, income, product and profits thereof and all
the estate, right, title, interest and claim whatsoever, at law as well as in
equity, which the Company now has or may hereafter acquire in and to the
aforesaid property and every part and parcel thereof except as excepted or
excluded from the lien of the Indenture;
There Being Hereby Excepted from the lien of the Indenture, whether now
owned or hereafter acquired by the Company, anything herein contained to the
contrary notwithstanding, all those certain items of property of the classes
specifically excepted from the lien of the Original Indenture by the terms
thereof;
To Have and To Hold all properties, real, personal and mixed, mortgaged,
pledged or conveyed by the Company as aforesaid, or intended so to be, unto the
Trustee and its successors and assigns, FOREVER; subject, however, to
permissible encumbrances, as defined in the Original Indenture, and to all the
other terms, conditions, covenants, uses, trusts and defeasances incorporated in
the Indenture.
The parties hereto shall have, possess and enjoy the same rights, powers,
duties and privileges as affecting the property hereby conveyed as they have
under the Original Indenture insofar as the same may be applicable hereto, with
the same force and effect as though the terms, conditions, and defeasances of
the Original Indenture had been embodied herein.
It Is Hereby Covenanted, Declared and Agreed by the Company and the
Trustee, and its successors in the trust under the Indenture, for the benefit of
those who hold or shall hold the bonds, or any of them, issued or to be issued
thereunder, as follows:
ARTICLE I
Form and Execution of First Mortgage Bonds, Pollution
Control Collateral Series F
Section 1.01. There is hereby created, for issuance under the Indenture
and to be secured thereby, a series of bonds, designated "First Mortgage Bonds,
Pollution Control Collateral Series F." Each bond of such series shall bear the
descriptive title "First Mortgage Bond, Pollution Control Collateral Series F,"
and the form thereof shall be substantially of the tenor and purport
hereinbefore recited. The bonds of the Forty-Fifth Series shall be issued from
time to time in an aggregate principal amount of $25,000,000, excluding any
bonds of the Forty-Fifth Series which may be authenticated in exchange for or in
lieu of or in substitution for or on transfer of other bonds of such series
pursuant to the provisions of the Indenture, and shall be issued as registered
bonds without coupons in denominations of $1,000 and integral multiples thereof.
The bonds of the Forty-Fifth Series shall mature on September 1, 2030 and shall
not bear interest except as provided in Article XIII of the Original Indenture.
The principal of and interest, if any, on each bond of the Forty-Fifth Series
shall be payable at the office or agency of the Company in Pittsburgh,
Pennsylvania or at such other office or agency of the Company as shall be
designated from time to time, in lawful money of the United States of America.
Each bond of the Forty-Fifth Series shall be dated as of its Original Issue
Date. The term "Original Issue Date" as used in this Section 1.01 shall mean
the date of the first authentication and delivery hereunder of such bonds.
-6-
<PAGE>
Section 1.02. Each bond of the Forty-Fifth Series shall be redeemable at
the option of the Company in whole at any time, or in part from time to time,
prior to maturity, at a redemption price equal to 100.00% of the principal
amount thereof to be redeemed, by payment at the office or agency of the Company
in Pittsburgh, Pennsylvania, or at such other office or agency of the Company as
shall be designated from time to time. Any such redemption shall be made upon
not less than 30 days' previous notice to be given in the manner provided in
Section 10.02 of the Original Indenture.
Section 1.03. The bonds of the Forty-Fifth Series shall be redeemable on
October 1 of each year commencing one year after the date of issuance of the
first bonds of said series for the Sinking Fund for bonds of said series
provided for in Article XII of the Original Indenture, upon not less than 30
days' previous notice of redemption to be given in the manner provided in
Section 10.02 of the Original Indenture, at the principal amount thereof.
Section 1.04. All bonds of the Forty-Fifth Series shall be redeemed, at a
redemption price equal to 100% of the principal amount thereof, if, and at such
time as, the securities which shall have been authenticated and delivered under
the 1992 Mortgage (as hereinafter defined) on the basis of the issuance and
delivery to the 1992 Mortgage Trustee (as hereinafter defined) of the bonds of
the Forty-Fifth Series shall have become subject to mandatory redemption. No
notice of such redemption shall be required to be given.
Section 1.05. The bonds of the Forty-Fifth Series shall be issued and
delivered to Mellon Bank, N.A., as trustee under the Indenture of Mortgage and
Deed of Trust, dated as of April 1, 1992, as supplemented (the "1992 Mortgage"),
of the Company to such trustee (the "1992 Mortgage Trustee"), as the basis for
the authentication and delivery under the 1992 Mortgage of a series of
securities. As provided in the 1992 Mortgage, the bonds of the Forty-Fifth
Series will be registered in the name of the 1992 Mortgage Trustee or its
nominee and will be owned and held by the 1992 Mortgage Trustee, subject to the
provisions of the 1992 Mortgage, for the benefit of the holders of all
securities from time to time outstanding under the 1992 Mortgage, and the
Company shall have no interest therein.
Any payment by the Company under the 1992 Mortgage of the principal of or
interest, if any, on the securities which shall have been authenticated and
delivered under the 1992 Mortgage on the basis of the issuance and delivery to
the 1992 Mortgage Trustee of bonds of the Forty-Fifth Series (other than by the
application of the proceeds of a payment in respect of such bonds) shall, to the
extent thereof, be deemed to satisfy and discharge the obligation of the
Company, if any, to make a payment of principal of or interest on such bonds, as
the case may be, which is then due.
The Trustee may conclusively presume that the obligation of the Company to
pay the principal of the bonds of the Forty-Fifth Series as the same shall
become due and payable shall have been fully satisfied and discharged unless and
until it shall have received a written notice from the 1992 Mortgage Trustee,
signed by an authorized officer thereof, stating that the principal of specified
bonds of the Forty-Fifth Series has become due and payable and has not been
fully paid, and specifying the amount of funds required to make such payment.
Section 1.06. The bonds of the Forty-Fifth Series shall not be
transferable, except to any successor trustee under said 1992 Mortgage. Any
such transfer shall be made by the registered holder thereof, in person or by a
duly authorized attorney, at the office or agency of the Company in Pittsburgh,
Pennsylvania, or at such other office or agency of the Company as shall be
designated from time to time, upon surrender and cancellation of such bonds, and
thereupon a new bond or bonds of said series and of authorized denominations for
a like aggregate principal amount and having the same Original Issue Date,
Stated Maturity Date and other terms and conditions will be issued to the
transferee in exchange
-7-
<PAGE>
therefor. New bonds issued upon any such transfer shall be so dated and shall
carry such rights to any interest accrued and unpaid that neither gain nor loss
in interest shall result from such transfer.
Section 1.07. The registered holder of any bond or bonds of the Forty-
Fifth Series at his option may surrender the same at the office or agency of the
Company in Pittsburgh, Pennsylvania, or at such other office or agency of the
Company as shall be designated from time to time, for cancellation in exchange
for another or other bonds of the said series of authorized denominations, but
of the same aggregate principal amount and having the same Original Issue Date,
Stated Maturity Date and other terms and conditions and being so dated and
carrying such rights to any interest accrued and unpaid that neither gain nor
loss in interest shall result from such exchange. Thereupon, the Company shall
execute and deliver to the Trustee, and the Trustee shall authenticate and
deliver such other bond or bonds to such registered holder either at its office
or at said office or agency of the Company.
Section 1.08. No charge shall be made to any registered holder of any bond
of the Forty-Fifth Series for any exchange or transfer of bonds of said series
except that in case of any exchange or transfer the Company may make a charge
therefor sufficient to reimburse it for any tax or taxes or other governmental
charge required to be paid in connection therewith.
Section 1.09. For the purpose only of complying with the Original
Indenture (particularly Sections 10.02 and 12.02(b) thereof) in connection with
the redemption of bonds of the Forty-Fifth Series, for each $1,000 principal
amount of bonds authenticated and delivered hereunder there shall be assigned a
number in such manner and at such time as the Trustee may deem appropriate.
Portions of the principal amount less than the entire principal amount of a bond
of the Forty-Fifth Series of a denomination larger than $1,000 may be redeemed
only in integral multiples of $1,000.
ARTICLE II
Miscellaneous
Section 2.01. The holders of the bonds of the Forty-Fifth Series shall be
deemed to have consented and agreed that the Company may, but shall not be
obligated to, fix a record date for the purpose of determining the holders of
the bonds of the Forty-Fifth Series entitled to consent to any amendment or
supplement to the Indenture or the waiver of any provision thereof or any act to
be performed thereunder. If a record date is fixed, those persons who were
holders at such record date (or their duly designated proxies), and only those
persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
Section 2.02. The recitals of fact herein and in the bonds (except the
Trustee's Certificate) shall be taken as statements of the Company and shall not
be construed as made or warranted by the Trustee. The Trustee makes no
representations as to the value of any of the property subjected to the lien of
the Indenture, or any part thereof, or as to the title of the Company thereto,
or as to the security afforded thereby and hereby, or as to the validity of this
Eighty-Sixth Supplemental Trust Indenture or of the bonds of the Forty-Fifth
Series (except the Trustee's Certificate), and the Trustee shall incur no
responsibility in respect of such matters.
Section 2.03. This Eighty-Sixth Supplemental Trust Indenture shall be
construed in connection with and as part of the Indenture.
-8-
<PAGE>
Section 2.04. (a) If any provision of this Eighty-Sixth Supplemental
Trust Indenture limits, qualifies, or conflicts with another provision of the
Indenture required to be included in indentures qualified under the Trust
Indenture Act of 1939 (as in force at the date of this Eighty-Sixth Supplemental
Trust Indenture) by any of the provisions of Sections 310 to 317, inclusive, of
said Act, such required provision shall control.
(b) In case any one or more of the provisions contained in this Eighty-
Sixth Supplemental Trust Indenture or in the bonds issued hereunder should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected, impaired, prejudiced or disturbed thereby.
Section 2.05. Whenever in this Eighty-Sixth Supplemental Trust Indenture
either of the parties hereto is named or referred to, this shall be deemed to
include the successors or assigns of such party, and all the covenants and
agreements in this Eighty-Sixth Supplemental Trust Indenture contained by or on
behalf of the Company or by or on behalf of the Trustee shall bind and inure to
the benefit of the respective successors and assigns of such parties, whether so
expressed or not.
Section 2.06. This Eighty-Sixth Supplemental Trust Indenture may be
simultaneously executed in several counterparts, and all said counterparts
executed and delivered, each as an original, shall constitute but one and the
same instrument.
The Table of Contents and the descriptive headings of the several Articles
of this Eighty-Sixth Supplemental Trust Indenture were formulated, used and
inserted herein for convenience only and shall not be deemed to affect the
meaning or construction of any of the provisions hereof.
Section 2.07. Duquesne Light Company does hereby constitute and appoint
Diane S. Eismont to be its attorney for it and in its name and as and for its
corporate deed to acknowledge this Eighty-Sixth Supplemental Trust Indenture
before any person having authority by law to take such acknowledgment.
Mellon Bank, N.A. does hereby constitute and appoint D.M. Babich to be its
attorney-in-fact for it and in its name and as and for its corporate deed to
acknowledge this Eighty-Sixth Supplemental Trust Indenture before any person
having authority by law to take such acknowledgment.
-9-
<PAGE>
In Witness Whereof, the party of the first part has caused its corporate
name to be subscribed and this Eighty-Sixth Supplemental Trust Indenture to be
signed by its Chairman of the Board, President and Chief Executive Officer or a
Vice President, and its corporate seal to be hereunto affixed and attested by
its Secretary or an Assistant Secretary, for and on its behalf, and the party of
the second part, to evidence its acceptance of the trust hereby created, has
caused its corporate name to be subscribed, and this Eighty-Sixth Supplemental
Trust Indenture to be signed by its President, a Vice President or an Assistant
Vice President and its corporate seal to be hereunto affixed and attested by its
authorized officer, for and in its behalf, all done as of the first day of June,
1993.
DUQUESNE LIGHT COMPANY
[Seal] By: /s/ Gary L. Schwass
---------------------------
Vice President-Finance
and Chief Financial Officer
Attest:
/s/ Diane S. Eismont
- -------------------------------
Secretary
MELLON BANK, N.A.
[Seal] By: /s/ J.H. McAnulty
------------------------------
Vice President
Attest:
/s/ D.M. Babich
- -------------------------------
Authorized Officer
-10-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On this 23rd day of June, 1993 before me, the subscriber, a notary public
in and for said Commonwealth and County, personally appeared Diane S. Eismont,
the attorney-in-fact named in the foregoing Eighty-Sixth Supplemental Trust
Indenture, and by virtue and in pursuance of the authority therein conferred
upon her acknowledged the said Eighty-Sixth Supplemental Trust Indenture to be
the act and deed of the said Duquesne Light Company and that she desired the
same to be recorded as such.
Witness my hand and notarial seal the day and year aforesaid.
/s/ Joanne E. Kirin
------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On this 23rd day of June, 1993 before me, the subscriber, a notary public
in and for said Commonwealth and County, personally appeared D.M. Babich, the
attorney-in-fact named in the foregoing Eighty-Sixth Supplemental Trust
Indenture, and by virtue and in pursuance of the authority therein conferred
upon him acknowledged the said Eighty-Sixth Supplemental Trust Indenture to be
the act and deed of the said Mellon Bank, N.A., and that he desired the same to
be recorded as such.
Witness my hand and notarial seal the day and year aforesaid.
/s/ Nancy A. Fletcher
------------------------
Notary Public
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<PAGE>
CERTIFICATE OF PRECISE RESIDENCE
I hereby certify that the precise residence of Mellon Bank, N.A. is One
Mellon Bank Center, Second Ward, Pittsburgh, Allegheny County, Pennsylvania.
/s/ D.M. Babich
----------------------------------------
Authorized Signatory of Mellon Bank, N.A.
June 23, 1993
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<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded June 23, 1993
Mortgage Book Volume 13225, page 203
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded June 25, 1993
Mortgage Book Volume 1267, page 566
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded June 24, 1993
Mortgage Book Volume 115, page 1104
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded June 24, 1993
Mortgage Book Volume 2014, page 103
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded June 24, 1993
Mortgage Book Volume 3151, page 608
Belmont County, Ohio
Office of Recorder
Received June 24, 1993
Recorded June 25, 1993
Mortgage Book Volume 603, page 776
Columbiana County, Ohio
Officer of Recorder
Recorded June 25, 1993
Mortgage Book Volume 380, page 833
Jefferson County, Ohio
Officer of Recorder
Received June 24, 1993
Recorded June 25, 1993
Mortgage Book Volume 104, page 1
<PAGE>
Lake County, Ohio
Officer of Recorder
Recorded June 25, 1993
Mortgage Book Volume 871, page 970
Monroe County, Ohio
Officer of Recorder
Received June 24, 1993
Recorded June 24, 1993
Mortgage Book Volume 133, page 123
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded June 25, 1993
Deed of Trust Book 305, page 654
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded June 24, 1993
Deed of Trust Book 712, page 666
<PAGE>
EXHIBIT 4.2
CONFORMED COPY
================================================================================
EIGHTY-SEVENTH
SUPPLEMENTAL TRUST INDENTURE
between
DUQUESNE LIGHT COMPANY
(a Pennsylvania corporation)
and
MELLON BANK, N.A., Trustee
-----------
Dated as of August 1, 1993
-----------
Supplemental to
Trust Indenture dated as of August 1, 1947
-----------
Providing for $20,500,000
First Mortgage Bonds, Pollution Control Collateral Series G
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Parties............................................................. 1
Recitals............................................................ 1
Form of First Mortgage Bond, Pollution Control Collateral Series G.. 2
Granting Clauses.................................................... 5
<CAPTION>
ARTICLE I.
FORM AND EXECUTION OF FIRST MORTGAGE BONDS,
POLLUTION CONTROL COLLATERAL SERIES G
<C> <S> <C>
Section 1.01 - Terms of bonds....................................... 6
Section 1.02 - Redemption of bonds.................................. 7
Section 1.03 - Redemption of bonds for Sinking Fund................. 7
Section 1.04 - Mandatory Redemption................................. 7
Section 1.05 - 1992 Mortgage; Credit against payment obligation..... 7
Section 1.06 - Transfer of bonds; restriction on transfer........... 8
Section 1.07 - Interchangeability of bonds.......................... 8
Section 1.08 - No charge for transfer or exchange of bonds,
except taxes and governmental charges................ 8
Section 1.09 - Reservation of numbers for purposes of redemption.... 8
<CAPTION>
ARTICLE II.
MISCELLANEOUS
<C> <S> <C>
Section 2.01 - Fixing of record date................................ 8
Section 2.02 - Recitals not made by Trustee;
no representations made by Trustee................... 9
Section 2.03 - Construction in connection with and as part of the
Indenture............................................ 9
Section 2.04 - (a) Trust Indenture Act requirements control......... 9
(b) Severability of provisions....................... 9
</TABLE>
-i-
<PAGE>
<TABLE>
<C> <S> <C>
Section 2.05 - Successors and assigns............................... 9
Section 2.06 - Provision for execution in counterparts; Table of
Contents and descriptive headings of Articles not
to affect meaning.................................... 9
Section 2.07 - Appointment of attorneys-in-fact..................... 9
Execution........................................................... 10
Acknowledgments..................................................... 11
Certificate of Precise Residence.................................... 12
</TABLE>
-ii-
<PAGE>
EIGHTY-SEVENTH
SUPPLEMENTAL TRUST INDENTURE
DATED as of the first day of August, 1993, although executed and delivered
on the date of the latest acknowledgment at the end hereof, made by and between
DUQUESNE LIGHT COMPANY, a corporation organized and existing under and by virtue
of the laws of the Commonwealth of Pennsylvania, having its principal office in
the City of Pittsburgh in said Commonwealth of Pennsylvania (hereinafter called
the "Company"), party of the first part, and MELLON BANK, N.A., successor by
merger to Mellon National Bank and Trust Company, a national banking
association, having its principal corporate trust office in the City of
Pittsburgh in the Commonwealth of Pennsylvania, as Trustee (hereinafter
sometimes called the "Trustee"), party of the second part.
WHEREAS, the Company has heretofore executed and delivered to Mellon Bank,
N.A., as Trustee, a certain Trust Indenture (hereinafter called the "Original
Indenture") dated as of August 1, 1947 securing its First Mortgage Bonds; and
WHEREAS, the Original Indenture has been recorded in the Recorders' Offices
of the various counties of Pennsylvania as follows:
In Allegheny County in Mortgage Book Vol. 2897, page 4;
In Beaver County in Mortgage Book Vol. 430, page 1;
In Greene County in Mortgage Book Vol. 125, page 1;
In Washington County in Mortgage Book Vol. 332, page 1; and
In Westmoreland County in Mortgage Book Vol. 692, page 2;
has been filed in the Prothonotary's Office in each of said Counties; and has
also been recorded in the Office of the Clerk of County Commission of Monongalia
County, West Virginia, in Deed of Trust Book Vol. 321, page 327, the Office of
the Clerk of County Commission of Hancock County, West Virginia, in Deed of
Trust Book Vol. 176, page 1, the Recorder's Office of Belmont County, Ohio, in
Mortgage Book Vol. 437, page 109, the Recorder's Office of Columbiana County,
Ohio, in Mortgage Book Vol. 1542, page 25, the Recorder's Office of Jefferson
County, Ohio, in Mortgage Book Vol. 405, page 1, the Recorder's Office of Lake
County, Ohio, in Mortgage Book Vol. 821, page 1, and the Recorder's Office of
Monroe County, Ohio, in Mortgage Book Vol. 89, page 1; and
WHEREAS, since the execution of the Original Indenture, the Company has
executed and delivered to Mellon Bank, N.A., as Trustee, eighty-six supplemental
trust indentures and an amendment to one thereof, all for the purposes recited
therein and as permitted by the Original Indenture; and
WHEREAS, for convenience of reference the Original Indenture and all
indentures supplemental thereto heretofore or hereafter executed, including this
Eighty-Seventh Supplemental Trust Indenture, are sometimes hereinafter
collectively called the "Indenture"; and
WHEREAS, the Company has caused the Original Indenture and the aforesaid
eighty-six supplemental trust indentures to be recorded and filed, and has
caused financing statements and continuation statements under the Uniform
Commercial Code to be filed, all in such manner and in such places as are
required by law to make effective and maintain the lien intended to be created
by the Indenture; and
-1-
<PAGE>
WHEREAS, there have been issued under the Original Indenture and certain of
the indentures supplemental thereto heretofore executed forty-five series of
First Mortgage Bonds, of which $1,291,236,000 aggregate principal amount was
outstanding as of the date hereof; and
WHEREAS, the Company desires to provide for the issuance under the
Indenture of a new series of bonds secured thereby in an aggregate principal
amount not to exceed $20,500,000 to be designated as "First Mortgage Bonds,
Pollution Control Collateral Series G", said new series to be hereinafter
sometimes called the "Forty-Sixth Series," the bonds of said series to be issued
as registered bonds without coupons in the denominations of $1,000 and any
integral multiple of $1,000 that the Company may execute and deliver, and the
bonds of said series to be substantially in the form and of the tenor following,
to wit:
[FORM OF BOND OF THE FORTY-SIXTH SERIES]
This Bond is not transferable except to a successor trustee under the
Indenture of Mortgage and Deed of Trust, dated as of April 1, 1992, as
supplemented, between Duquesne Light Company and Mellon Bank, N.A., trustee.
DUQUESNE LIGHT COMPANY
(Incorporated under the laws of the
Commonwealth of Pennsylvania)
FIRST MORTGAGE BOND, POLLUTION CONTROL COLLATERAL SERIES G
No. $
ORIGINAL ISSUE DATE: STATED MATURITY DATE:
DUQUESNE LIGHT COMPANY, a corporation organized and existing under and by
virtue of the laws of the Commonwealth of Pennsylvania (hereinafter called the
"Company"), for value received, hereby promises to pay to _______________ or
registered assigns the sum of ______________________ Dollars in lawful money of
the United States of America on the Stated Maturity Date specified above. This
bond shall not bear interest except that, if the Company should default in the
payment of the principal hereof, this bond shall bear interest at the rate of
five percent per annum until the Company's obligation with respect to the
payment of such principal shall be discharged as provided in the Indenture
hereinafter mentioned. Principal of and interest, if any, on this bond shall be
payable upon presentation hereof at the office or agency of the Company in
Pittsburgh, Pennsylvania or at such other office or agency as may be designated
for such purpose by the Company from time to time.
Any payment by the Company under its Indenture of Mortgage and Deed of
Trust, dated as of April 1, 1992, as supplemented (the "1992 Mortgage"), to
Mellon Bank, N. A., as trustee, of the principal of or interest, if any, on
securities which shall have been authenticated and delivered under the 1992
Mortgage on the basis of the issuance and delivery to such trustee of this bond
(other than by the application of the proceeds of a payment in respect of this
bond) shall, to the extent thereof, be deemed to satisfy and discharge the
obligation of the Company, if any, to make a payment of principal of or interest
on this bond, as the case may be, which is then due.
-2-
<PAGE>
This bond is one of a duly authorized issue of bonds of the Company, known
as its First Mortgage Bonds, unlimited in aggregate principal amount, of the
series and designation indicated above, which issue of bonds consists, or may
consist, of several series of varying denominations, dates and tenors, all
issued and to be issued under and equally secured (except insofar as a sinking
fund, or similar fund, established in accordance with the provisions of the
Indenture may afford additional security for the bonds of any specific series)
by a Trust Indenture dated as of August 1, 1947 executed by the Company to
Mellon Bank, N.A., formerly Mellon National Bank and Trust Company (herein
called the "Trustee"), as Trustee, as heretofore supplemented and amended (said
Trust Indenture as supplemented and amended being herein called the
"Indenture"), to which Indenture reference is hereby made for a description of
the property mortgaged and pledged, the nature and extent of the security, the
rights of the holders of the bonds as to such security, and the terms and
conditions upon which the bonds may be issued under the Indenture and are
secured. The principal hereof may be declared or may become due on the
conditions, in the manner and at the time set forth in the Indenture, upon the
happening of a completed default as provided in the Indenture. The Indenture
provides that such declaration may in certain events be waived by the holders of
a majority in principal amount of the bonds outstanding.
With the consent of the Company and to the extent permitted by and as
provided in the Indenture, the rights and obligations of the Company and/or of
the holders of the bonds and/or the terms and provisions of the Indenture and/or
of any instruments supplemental thereto may be modified or altered by the
affirmative vote of the holders of at least seventy percent in principal amount
of the bonds then outstanding under the Indenture and any instruments
supplemental thereto (excluding bonds disqualified from voting by reason of the
interest of the Company or of certain related persons therein as provided in the
Indenture), and by the affirmative vote of at least seventy percent in principal
amount of the bonds of any series entitled to vote then outstanding under the
Indenture and any instruments supplemental thereto (excluding bonds disqualified
from voting as aforesaid) and affected by such modification or alteration, in
case one or more but less than all of the series of bonds then outstanding are
so affected; provided that no such modification or alteration shall permit the
extension of the maturity of the principal of this bond or the reduction in the
rate of interest hereon or any other modification in the terms of payment of
such principal or interest or the taking of certain other action as more fully
set forth in the Indenture, without the consent of the holder hereof.
The Company, the Trustee and any paying agent may deem and treat the person
in whose name this bond is registered as the absolute owner hereof for the
purpose of receiving payment of or on account of the principal hereof and
interest hereon and for all other purposes and shall not be affected by any
notice to the contrary.
In the manner and with the effect provided in the Indenture, this bond may,
in whole at any time, or in part from time to time prior to maturity, be
redeemed by the Company with funds derived from any source by payment at the
office or agency of the Company in Pittsburgh, Pennsylvania or at such other
office or agency of the Company as shall be designated from time to time, at a
redemption price equal to 100% of the principal amount of this bond to be
redeemed.
This bond is entitled to the benefits of, and is subject to call for
redemption for, the Sinking Fund, upon the notice, in the manner, and with the
effect provided in the Indenture by payment of the principal amount hereof.
All bonds of this series shall be redeemed, at a redemption price equal to
100% of the principal amount thereof, if, and at such time as, the securities
which shall have been authenticated and delivered under the 1992 Mortgage on the
basis of the issuance and delivery to the trustee thereunder of the bonds
-3-
<PAGE>
of this series shall have become subject to mandatory redemption. The holder of
this bond, by its acceptance hereof, consents and agrees that no notice of such
redemption shall be required to be given.
This bond shall initially be issued in the name of Mellon Bank, N.A.,
trustee under the 1992 Mortgage, and is not transferable except to any successor
trustee under the 1992 Mortgage. Any such transfer shall be made as prescribed
in the Indenture by the registered holder hereof in person, or by such holder's
duly authorized attorney, at the office or agency of the Company in Pittsburgh,
Pennsylvania or at such other office or agency of the Company as shall be
designated from time to time, upon surrender and cancellation of this bond, and
thereupon a new bond or bonds of the same series and of authorized denominations
for a like aggregate principal amount, and having the same Original Issue Date
and Stated Maturity Date, will be issued to the transferee in exchange herefor
as provided in the Indenture. Bonds of this series are interchangeable as to
denominations in the manner and upon the conditions prescribed in the Indenture.
No charge shall be made to any holder of any bond of this series for any
transfer or exchange of bonds except for any tax or taxes or other governmental
charge required to be paid in connection therewith.
No recourse shall be had for the payment of principal of or interest, if
any, on this bond, or any part thereof, or of any claim based hereon or in
respect hereof or of the Indenture, against any incorporator or any past,
present or future stockholder, officer or director of the Company or of any
predecessor or successor corporation, either directly or through the Company, or
through any such predecessor or successor corporation, or through any receiver
or a trustee in bankruptcy, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released, as more fully provided in
the Indenture.
This bond shall not be valid or become obligatory for any purpose unless
and until Mellon Bank, N.A., as Trustee under the Indenture, or its successor
thereunder, shall have signed the certificate of authentication endorsed hereon.
IN WITNESS WHEREOF, DUQUESNE LIGHT COMPANY has caused this bond to be
signed in its name with the facsimile signature of its Chairman of the Board,
President and Chief Executive Officer, and its corporate seal, or a facsimile
thereof, to be hereto affixed and attested with the facsimile signature of its
Secretary.
Dated
--------------------
DUQUESNE LIGHT COMPANY
[Seal] By
-------------------------------
Attest:
- ---------------------------------
Secretary
[END OF FORM OF BOND]
WHEREAS, Sections 2.01, 4.01 and 20.03 of the Original Indenture provide in
substance that the Company and the Trustee may enter into indentures
supplemental thereto for the purposes, among
-4-
<PAGE>
others, of creating and setting forth the particulars of any new series of bonds
and of providing the terms and conditions of the issue of the bonds of any
series not expressly provided for in the Original Indenture; and
WHEREAS, the execution and delivery of this Eighty-Seventh Supplemental
Trust Indenture have been duly authorized by a resolution adopted by the Board
of Directors of the Company; and
WHEREAS, all things necessary to make said $20,500,000 aggregate principal
amount of said bonds of the Forty-Sixth Series, when duly executed by the
Company and authenticated and delivered by the Trustee (or a duly appointed
authenticating agent) and issued, the valid, binding and legal obligations of
the Company entitled to the benefits and security of the Indenture and to make
this Eighty-Seventh Supplemental Trust Indenture a valid, binding and legal
instrument in accordance with its terms have been done and performed, and the
issue of said Bonds, as herein provided, has been in all respects duly
authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
Duquesne Light Company, intending to be legally bound hereby, in
consideration of the premises and of One Dollar to it duly paid by the Trustee
at or before the issuance and delivery of these presents, the receipt whereof is
hereby acknowledged, and of the purchase and acceptance from time to time of
said bonds of the Forty-Sixth Series by the holders thereof, and in order to
declare the conditions and terms upon and subject to which the bonds of said
series are to be issued and secured, and in order to create the bonds of said
series and further to secure the payment of the principal of, and premium, if
any, and interest on all bonds of the Company at any time outstanding under the
Indenture according to their tenor and effect and the performance of and
compliance with the covenants and conditions in the Indenture contained, has
executed and delivered this Eighty-Seventh Supplemental Trust Indenture and
hereby grants, bargains, sells, warrants, releases, conveys, assigns, transfers,
mortgages, pledges, sets over and confirms unto Mellon Bank, N.A., as Trustee
under the Indenture, and to its respective successors in said trust, forever,
all property, real, personal and mixed, now owned or hereafter acquired or to be
acquired by the Company and wheresoever situated (except as excepted from the
lien of the Indenture by the provisions thereof), subject to the rights reserved
by the Company in and by various provisions of the Indenture, including (without
in anywise limiting or impairing by the enumeration of the same the scope and
intent of the foregoing or of any general description contained in the
Indenture) all lands, rights of way, roads, all powerhouses, buildings and other
structures, and all offices, buildings and the contents thereof; all machinery,
engines, boilers, dynamos, electrical machinery, regulators, meters,
transformers, generators, motors, electrical and mechanical appliances,
conduits, cables, water or other pipes, pole and transmission lines, poles,
wires, cross-arms, insulators, substations and superstructures, generating,
distributing and transmitting equipment, tools, implements, apparatus and
supplies and coal in place and interests in coal; whether appertaining to any
existing or future system of the Company or otherwise and including all other
property now used or provided for use or hereafter acquired for use, in the
construction, repair, maintenance and operation of such systems, both those now
owned and those which may hereafter be acquired by the Company; all municipal or
other grants, rights, permits, consents, franchises, privileges, easements,
licenses, ordinances, rights of way, liberties and immunities of the Company,
howsoever conferred or acquired and whether now owned or hereafter acquired; and
all leases, leaseholds, power contracts, street lighting contracts and other
rights with respect to the construction, maintenance, repair and operation of
any systems now owned or hereafter acquired by the Company, and any additions
thereto or extensions thereof; certain parts or parcels of such property being
more specifically described as follows:
-5-
<PAGE>
All the following described property situate in the County of Allegheny and
Commonwealth of Pennsylvania, the deed herein recited being recorded in the
Recorder's Office of said County, and reference being made thereto for a
more particular description of said property, viz:
All that certain lot or piece of ground situate partly in the
Township of North Fayette and partly in the Township of Findlay.
Conveyed to Duquesne Light Company by: Miriam G. Lewis, widow, Deed
dated July 24, 1992, Deed Book Volume 8794, page 633; Donald B. Lewis
et ux, Deed dated July 22, 1992, Deed Book Volume 8794, page 638;
Loren L. Lewis, et ux, Deed dated July 20, 1992, Deed Book Volume
8794, page 643; and Mellon Bank, N.A., Executor of the Estate of
Gordon E. Williams, deceased, Deed dated August 10, 1992, Deed Book
Volume 8794, page 649. (Transmission Line).
TOGETHER WITH all and singular the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the aforesaid property or
any part thereof, with the reversion and reversions, remainder and remainders,
tolls, rents and revenues, issues, income, product and profits thereof and all
the estate, right, title, interest and claim whatsoever, at law as well as in
equity, which the Company now has or may hereafter acquire in and to the
aforesaid property and every part and parcel thereof except as excepted or
excluded from the lien of the Indenture;
THERE BEING HEREBY EXCEPTED from the lien of the Indenture, whether now
owned or hereafter acquired by the Company, anything herein contained to the
contrary notwithstanding, all those certain items of property of the classes
specifically excepted from the lien of the Original Indenture by the terms
thereof;
TO HAVE AND TO HOLD all properties, real, personal and mixed, mortgaged,
pledged or conveyed by the Company as aforesaid, or intended so to be, unto the
Trustee and its successors and assigns, FOREVER; subject, however, to
permissible encumbrances, as defined in the Original Indenture, and to all the
other terms, conditions, covenants, uses, trusts and defeasances incorporated in
the Indenture.
The parties hereto shall have, possess and enjoy the same rights, powers,
duties and privileges as affecting the property hereby conveyed as they have
under the Original Indenture insofar as the same may be applicable hereto, with
the same force and effect as though the terms, conditions, and defeasances of
the Original Indenture had been embodied herein.
IT IS HEREBY COVENANTED, DECLARED AND AGREED by the Company and the
Trustee, and its successors in the trust under the Indenture, for the benefit of
those who hold or shall hold the bonds, or any of them, issued or to be issued
thereunder, as follows:
ARTICLE I
FORM AND EXECUTION OF FIRST MORTGAGE BONDS,
POLLUTION CONTROL COLLATERAL SERIES G
SECTION 1.01. There is hereby created, for issuance under the Indenture
and to be secured thereby, a series of bonds, designated "First Mortgage Bonds,
Pollution Control Collateral Series G." Each bond of such series shall bear the
descriptive title "First Mortgage Bond, Pollution Control
-6-
<PAGE>
Collateral Series G," and the form thereof shall be substantially of the tenor
and purport hereinbefore recited. The bonds of the Forty-Sixth Series shall be
issued from time to time in an aggregate principal amount of $20,500,000,
excluding any bonds of the Forty-Sixth Series which may be authenticated in
exchange for or in lieu of or in substitution for or on transfer of other bonds
of such series pursuant to the provisions of the Indenture, and shall be issued
as registered bonds without coupons in denominations of $1,000 and integral
multiples thereof. The bonds of the Forty-Sixth Series shall mature on
October 1, 2027 and shall not bear interest except as provided in Article XIII
of the Original Indenture. The principal of and interest, if any, on each bond
of the Forty-Sixth Series shall be payable at the office or agency of the
Company in Pittsburgh, Pennsylvania or at such other office or agency of the
Company as shall be designated from time to time, in lawful money of the United
States of America.
Each bond of the Forty-Sixth Series shall be dated as of its Original Issue
Date. The term "Original Issue Date" as used in this Section 1.01 shall mean
the date of the first authentication and delivery hereunder of such bonds.
SECTION 1.02. Each bond of the Forty-Sixth Series shall be redeemable at
the option of the Company in whole at any time, or in part from time to time,
prior to maturity, at a redemption price equal to 100.00% of the principal
amount thereof to be redeemed, by payment at the office or agency of the Company
in Pittsburgh, Pennsylvania, or at such other office or agency of the Company as
shall be designated from time to time. Any such redemption shall be made upon
not less than 30 days' previous notice to be given in the manner provided in
Section 10.02 of the Original Indenture.
SECTION 1.03. The bonds of the Forty-Sixth Series shall be redeemable on
October 1 of each year commencing one year after the date of issuance of the
first bonds of said series for the Sinking Fund for bonds of said series
provided for in Article XII of the Original Indenture, upon not less than 30
days' previous notice of redemption to be given in the manner provided in
Section 10.02 of the Original Indenture, at the principal amount thereof.
SECTION 1.04. All bonds of the Forty-Sixth Series shall be redeemed, at a
redemption price equal to 100% of the principal amount thereof, if, and at such
time as, the securities which shall have been authenticated and delivered under
the 1992 Mortgage (as hereinafter defined) on the basis of the issuance and
delivery to the 1992 Mortgage Trustee (as hereinafter defined) of the bonds of
the Forty-Sixth Series shall have become subject to mandatory redemption. No
notice of such redemption shall be required to be given.
SECTION 1.05. The bonds of the Forty-Sixth Series shall be issued and
delivered to Mellon Bank, N.A., as trustee under the Indenture of Mortgage and
Deed of Trust, dated as of April 1, 1992, as supplemented (the "1992 Mortgage"),
of the Company to such trustee (the "1992 Mortgage Trustee"), as the basis for
the authentication and delivery under the 1992 Mortgage of a series of
securities. As provided in the 1992 Mortgage, the bonds of the Forty-Sixth
Series will be registered in the name of the 1992 Mortgage Trustee or its
nominee and will be owned and held by the 1992 Mortgage Trustee, subject to the
provisions of the 1992 Mortgage, for the benefit of the holders of all
securities from time to time outstanding under the 1992 Mortgage, and the
Company shall have no interest therein.
Any payment by the Company under the 1992 Mortgage of the principal of or
interest, if any, on the securities which shall have been authenticated and
delivered under the 1992 Mortgage on the basis of the issuance and delivery to
the 1992 Mortgage Trustee of bonds of the Forty-Sixth Series (other than by the
application of the proceeds of a payment in respect of such bonds) shall, to the
extent thereof, be deemed to satisfy and discharge the obligation of the
Company, if any, to make a payment of principal of or interest on such bonds, as
the case may be, which is then due.
-7-
<PAGE>
The Trustee may conclusively presume that the obligation of the Company to
pay the principal of the bonds of the Forty-Sixth Series as the same shall
become due and payable shall have been fully satisfied and discharged unless and
until it shall have received a written notice from the 1992 Mortgage Trustee,
signed by an authorized officer thereof, stating that the principal of specified
bonds of the Forty-Sixth Series has become due and payable and has not been
fully paid, and specifying the amount of funds required to make such payment.
SECTION 1.06. The bonds of the Forty-Sixth Series shall not be
transferable, except to any successor trustee under said 1992 Mortgage. Any
such transfer shall be made by the registered holder thereof, in person or by a
duly authorized attorney, at the office or agency of the Company in Pittsburgh,
Pennsylvania, or at such other office or agency of the Company as shall be
designated from time to time, upon surrender and cancellation of such bonds, and
thereupon a new bond or bonds of said series and of authorized denominations for
a like aggregate principal amount and having the same Original Issue Date,
Stated Maturity Date and other terms and conditions will be issued to the
transferee in exchange therefor. New bonds issued upon any such transfer shall
be so dated and shall carry such rights to any interest accrued and unpaid that
neither gain nor loss in interest shall result from such transfer.
SECTION 1.07. The registered holder of any bond or bonds of the Forty-
Sixth Series at his option may surrender the same at the office or agency of the
Company in Pittsburgh, Pennsylvania, or at such other office or agency of the
Company as shall be designated from time to time, for cancellation in exchange
for another or other bonds of the said series of authorized denominations, but
of the same aggregate principal amount and having the same Original Issue Date,
Stated Maturity Date and other terms and conditions and being so dated and
carrying such rights to any interest accrued and unpaid that neither gain nor
loss in interest shall result from such exchange. Thereupon, the Company shall
execute and deliver to the Trustee, and the Trustee shall authenticate and
deliver such other bond or bonds to such registered holder either at its office
or at said office or agency of the Company.
SECTION 1.08. No charge shall be made to any registered holder of any bond
of the Forty-Sixth Series for any exchange or transfer of bonds of said series
except that in case of any exchange or transfer the Company may make a charge
therefor sufficient to reimburse it for any tax or taxes or other governmental
charge required to be paid in connection therewith.
SECTION 1.09. For the purpose only of complying with the Original
Indenture (particularly Sections 10.02 and 12.02(b) thereof) in connection with
the redemption of bonds of the Forty-Sixth Series, for each $1,000 principal
amount of bonds authenticated and delivered hereunder there shall be assigned a
number in such manner and at such time as the Trustee may deem appropriate.
Portions of the principal amount less than the entire principal amount of a bond
of the Forty-Sixth Series of a denomination larger than $1,000 may be redeemed
only in integral multiples of $1,000.
ARTICLE II
MISCELLANEOUS
SECTION 2.01. The holders of the bonds of the Forty-Sixth Series shall be
deemed to have consented and agreed that the Company may, but shall not be
obligated to, fix a record date for the purpose of determining the holders of
the bonds of the Forty-Sixth Series entitled to consent to any amendment or
supplement to the Indenture or the waiver of any provision thereof or any act to
be performed thereunder. If a record date is fixed, those persons who were
holders at such record date (or their duly designated proxies), and only those
persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue
-8-
<PAGE>
to be holders after such record date. No such consent shall be valid or
effective for more than 90 days after such record date.
SECTION 2.02. The recitals of fact herein and in the bonds (except the
Trustee's Certificate) shall be taken as statements of the Company and shall not
be construed as made or warranted by the Trustee. The Trustee makes no
representations as to the value of any of the property subjected to the lien of
the Indenture, or any part thereof, or as to the title of the Company thereto,
or as to the security afforded thereby and hereby, or as to the validity of this
Eighty-Seventh Supplemental Trust Indenture or of the bonds of the Forty-Sixth
Series (except the Trustee's Certificate), and the Trustee shall incur no
responsibility in respect of such matters.
SECTION 2.03. This Eighty-Seventh Supplemental Trust Indenture shall be
construed in connection with and as part of the Indenture.
SECTION 2.04. (a) If any provision of this Eighty-Seventh Supplemental
Trust Indenture limits, qualifies, or conflicts with another provision of the
Indenture required to be included in indentures qualified under the Trust
Indenture Act of 1939 (as in force at the date of this Eighty-Seventh
Supplemental Trust Indenture) by any of the provisions of Sections 310 to 317,
inclusive, of said Act, such required provision shall control.
(b) In case any one or more of the provisions contained in this Eighty-
Seventh Supplemental Trust Indenture or in the bonds issued hereunder should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected, impaired, prejudiced or disturbed thereby.
SECTION 2.05. Whenever in this Eighty-Seventh Supplemental Trust Indenture
either of the parties hereto is named or referred to, this shall be deemed to
include the successors or assigns of such party, and all the covenants and
agreements in this Eighty-Seventh Supplemental Trust Indenture contained by or
on behalf of the Company or by or on behalf of the Trustee shall bind and inure
to the benefit of the respective successors and assigns of such parties, whether
so expressed or not.
SECTION 2.06. This Eighty-Seventh Supplemental Trust Indenture may be
simultaneously executed in several counterparts, and all said counterparts
executed and delivered, each as an original, shall constitute but one and the
same instrument.
The Table of Contents and the descriptive headings of the several Articles
of this Eighty-Seventh Supplemental Trust Indenture were formulated, used and
inserted herein for convenience only and shall not be deemed to affect the
meaning or construction of any of the provisions hereof.
SECTION 2.07. Duquesne Light Company does hereby constitute and appoint
Joan S. Senchyshyn to be its attorney-in-fact for it and in its name and as and
for its corporate deed to acknowledge this Eighty-Seventh Supplemental Trust
Indenture before any person having authority by law to take such acknowledgment.
Mellon Bank, N.A. does hereby constitute and appoint D.M. Babich to be its
attorney-in-fact for it and in its name and as and for its corporate deed to
acknowledge this Eighty-Seventh Supplemental Trust Indenture before any person
having authority by law to take such acknowledgment.
In Witness Whereof, the party of the first part has caused its corporate
name to be subscribed and this Eighty-Seventh Supplemental Trust Indenture to be
signed by its Chairman of the Board, President
-9-
<PAGE>
and Chief Executive Officer or a Vice President, and its corporate seal to be
hereunto affixed and attested by its Secretary or an Assistant Secretary, for
and on its behalf, and the party of the second part, to evidence its acceptance
of the trust hereby created, has caused its corporate name to be subscribed, and
this Eighty-Seventh Supplemental Trust Indenture to be signed by its President,
a Vice President or an Assistant Vice President and its corporate seal to be
hereunto affixed and attested by its authorized officer, for and in its behalf,
all done as of the first day of August, 1993.
DUQUESNE LIGHT COMPANY
[Seal] By:/s/ Gary L. Schwass
--------------------------------
Vice President-Finance
and Chief Financial Officer
Attest:
/s/ Joan S. Senchyshyn
- --------------------------------
Assistant Secretary
MELLON BANK, N.A.
[Seal] By:/s/ J.H. McAnulty
----------------------------------
Vice President
Attest:
/s/ D.M. Babich
- --------------------------------
Authorized Officer
-10-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On this 23rd day of August, 1993 before me, the subscriber, a notary public
in and for said Commonwealth and County, personally appeared Joan S. Senchyshyn,
the attorney-in-fact named in the foregoing Eighty-Seventh Supplemental Trust
Indenture, and by virtue and in pursuance of the authority therein conferred
upon her acknowledged the said Eighty-Seventh Supplemental Trust Indenture to be
the act and deed of the said Duquesne Light Company and that she desired the
same to be recorded as such.
WITNESS my hand and notarial seal the day and year aforesaid.
/s/ Joanne E. Kirin
-------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On this 24th day of August, 1993 before me, the subscriber, a notary public
in and for said Commonwealth and County, personally appeared D.M. Babich, the
attorney-in-fact named in the foregoing Eighty-Seventh Supplemental Trust
Indenture, and by virtue and in pursuance of the authority therein conferred
upon him acknowledged the said Eighty-Seventh Supplemental Trust Indenture to be
the act and deed of the said Mellon Bank, N.A., and that he desired the same to
be recorded as such.
WITNESS my hand and notarial seal the day and year aforesaid.
/s/ Lorraine L. Henderson
----------------------------
Notary Public
-11-
<PAGE>
CERTIFICATE OF PRECISE RESIDENCE
I hereby certify that the precise residence of Mellon Bank, N.A. is One
Mellon Bank Center, Second Ward, Pittsburgh, Allegheny County, Pennsylvania.
/s/ D.M. Babich
------------------------------------
Authorized Signatory of Mellon Bank, N. A.
August 24, 1993
-12-
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded: August 24, 1993
Mortgage Book Volume 13406, page 12
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded: August 24, 1993
Mortgage Book Volume 1277, page 454
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded: August 25, 1993
Mortgage Book Volume 118, page 844
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded: August 26, 1993
Mortgage Book Volume 2037, page 203
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded: August 25, 1993
Mortgage Book Volume 3197, page 532
Belmont County, Ohio
Office of Recorder
Received: August 25, 1993
Recorded: August 26, 1993
Mortgage Book Volume 606, page 682
Columbiana County, Ohio
Office of Recorder
Recorded: August 26, 1993
Mortgage Book Volume 390, page 695
Jefferson County, Ohio
Office of Recorder
Received: August 25, 1993
Recorded: August 26, 1993
Mortgage Book Volume 110, page 10
-13-
<PAGE>
Lake County, Ohio
Office of Recorder
Recorded: August 26, 1993
Mortgage Book Volume 898, page 111
Monroe County, Ohio
Office of Recorder
Received: August 25, 1993
Recorded: August 25, 1993
Mortgage Book Volume 133, page 698
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded: August 26, 1993
Deed of Trust Book 307, page 126
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded: August 25, 1993
Deed of Trust Book 719, page 348
-14-
<PAGE>
EXHIBIT 4.2
CONFORMED COPY
================================================================================
EIGHTY-EIGHTH
SUPPLEMENTAL TRUST INDENTURE
between
DUQUESNE LIGHT COMPANY
(a Pennsylvania corporation)
and
MELLON BANK, N.A., Trustee
-------------------
Dated September 23, 1993
-------------------
Subjecting additional property to the lien of the
Trust Indenture dated as of August 1, 1947
================================================================================
<PAGE>
EIGHTY-EIGHTH
SUPPLEMENTAL TRUST INDENTURE
Made this 23rd day of September, 1993, by and between DUQUESNE LIGHT
COMPANY, a corporation organized and existing under and by virtue of the laws of
the Commonwealth of Pennsylvania, having its principal office in the City of
Pittsburgh in said Commonwealth of Pennsylvania (hereinafter sometimes called
the "Company"), party of the first part,
A
N
D
MELLON BANK, N.A., successor by merger to Mellon National Bank and Trust
Company, a national banking association, having its principal corporate trust
office in the City of Pittsburgh in the Commonwealth of Pennsylvania, as Trustee
(hereinafter sometimes called the "Trustee"), party of the second part.
WHEREAS, the Company has heretofore executed and delivered to Mellon Bank,
N.A., as Trustee, a certain Trust Indenture (hereinafter called the "Original
Indenture") dated as of August 1, 1947 securing its First Mortgage Bonds; and
WHEREAS, the Original Indenture has been recorded in the Recorders' Offices
of the various counties of Pennsylvania as follows:
In Allegheny County in Mortgage Book Vol. 2897, page 4;
In Beaver County in Mortgage Book Vol. 430, page 1;
In Greene County in Mortgage Book Vol. 125, page 1;
In Washington County in Mortgage Book Vol. 332, page 1; and
In Westmoreland County in Mortgage Book Vol. 692, page 2;
has been filed in the Prothonotary's Office in each of said Counties; and has
also been recorded in the Office of the Clerk of County Commission of Monongalia
County, West Virginia, in Deed of Trust Book Vol. 321, page 327, the Office of
the Clerk of County Commission of Hancock County, West Virginia, in Deed of
Trust Book Vol. 176, page 1, the Recorder's Office of Belmont County, Ohio, in
Mortgage Book Vol. 437, page 109, the Recorder's Office of Columbiana County,
Ohio, in Mortgage Book Vol. 1542, page 25, the Recorder's Office of Jefferson
County, Ohio, in Mortgage Book Vol. 405, page 1, the Recorder's Office of Lake
County, Ohio, in Mortgage Book Vol. 821, page 1, and the Recorder's Office of
Monroe County, Ohio, in Mortgage Book Vol. 89, page 1; and
WHEREAS, in and by Sections 8.09 and 20.03 of the said Trust Indenture,
provision is made for the giving by the said Company of supplemental indentures
supplemental to the said recited Trust Indenture for certain purposes,
including, inter alia, to make subject to the lien of the Trust Indenture
property acquired subsequent to the date thereof; and
- 1 -
<PAGE>
WHEREAS, the Company has acquired certain additional properties which it
desires to subject to the lien of said Trust Indenture by an Eighty-Eighth
Supplemental Trust Indenture;
NOW, THEREFORE, THIS EIGHTY-EIGHTH SUPPLEMENTAL TRUST INDENTURE WITNESSETH
that Duquesne Light Company, in consideration of the premises and of the
purchase and acceptance of bonds issued under the provisions of the Trust
Indenture given by the Company to Mellon National Bank and Trust Company (now
Mellon Bank, N.A.), Trustee, dated as of August 1, 1947, by the holders thereof,
and of One Dollar ($1.00) to it paid by the Trustee at or before the sealing and
delivery of this Eighty-Eighth Supplemental Trust Indenture, and in order to
secure the payment both of the principal of and interest on all bonds of the
Company at any time outstanding under said Trust Indenture according to their
tenor and effect, and the performance of and compliance with the covenants and
conditions in said Trust Indenture contained, grants, bargains, sells, warrants,
releases, conveys, assigns, transfers, mortgages, pledges, sets over and
confirms unto Mellon Bank, N.A., as Trustee under the said Trust Indenture, and
to its respective successors in said trust forever, all property, real, personal
and mixed, now owned or hereafter acquired or to be acquired by the Company and
wheresoever situated (except as excepted from the lien of the Trust Indenture
and this Eighty-Eighth Supplemental Trust Indenture by the provisions thereof
and hereof), subject to the rights reserved by the Company in and by various
provisions of said Trust Indenture and this Eighty-Eighth Supplemental Trust
Indenture, including (without in any wise limiting or impairing by the
enumeration of the same the scope and intent of the foregoing or of any general
description contained in this Eighty-Eighth Supplemental Trust Indenture) all
lands, rights of way, roads, all powerhouses, buildings and other structures,
and all offices, buildings and contents thereof; all machinery, engines,
boilers, dynamos, electrical machinery, regulators, meters, transformers,
generators, motors, electrical and mechanical appliances, conduits, cables,
water or other pipes, pole and transmission lines, poles, wires, crossarms,
insulators, substations and superstructures, generating, distributing and
transmitting equipment, tools, implements, apparatus and supplies, and coal in
place and interests in coal; whether appertaining to any existing or future
system of the Company or otherwise and including all other property now used or
provided for use or hereafter acquired for use, in the construction, repair,
maintenance and operation of such systems, both those now owned and those which
may hereafter be acquired by the Company; all municipal or other grants, rights,
permits, consents, franchises, privileges, easements, licenses, ordinances,
rights of way, liberties and immunities of the Company, howsoever conferred or
acquired and whether now owned or hereafter acquired; and all leases,
leaseholds, power contracts, street lighting contracts and other rights with
respect to the construction, maintenance, repair and operation of any systems
now owned or hereafter acquired by the Company, and any additions thereto or
extensions thereof.
- 2 -
<PAGE>
TOGETHER with all and singular the tenements, hereditaments and
appurtenances belonging or in any wise appertaining to the aforesaid property or
any part thereof, with the reversion and reversions, remainder and remainders,
tolls, rents and revenues, issues, income, product and profits thereof, and all
the estate, right, title, interest and claim whatsoever, at law as well as in
equity, which the Company now has or may hereafter acquire in and to the
aforesaid property and franchises and every part and parcel thereof except as
hereinafter excepted or excluded from the lien hereof, and of the above recited
Trust Indenture.
There are hereby excepted from the lien of this Eighty-Eighth Supplemental
Trust Indenture, whether now owned or hereafter acquired by the Company,
anything herein contained to the contrary notwithstanding, all those certain
items of property of the classes specifically excepted from the lien of the
above recited Trust Indenture by the terms thereof.
TO HAVE AND TO HOLD ALL said properties, real, personal and mixed,
mortgaged, pledged or conveyed by the Company as aforesaid, or intended so to
be, unto the Trustee and its successors and assigns, FOREVER; subject, however,
to permissible encumbrances, as defined in the above recited Trust Indenture,
and to all of the other terms, conditions, covenants, uses, trusts and
defeasances incorporated in the said recited Trust Indenture dated as of August
1, 1947.
The parties hereto shall have, possess and enjoy the same rights, powers,
duties and privileges as affecting the property hereby conveyed as they have
under said recited Trust Indenture insofar as the same may be applicable hereto,
with the same force and effect as though the terms, conditions, covenants and
defeasances of said recited Trust Indenture had been embodied herein.
This Eighty-Eighth Supplemental Trust Indenture is duly executed and
delivered in accordance with resolutions of the Board of Directors of the
Company adopted at a meeting held on August 31, 1993.
- 3 -
<PAGE>
IN WITNESS WHEREOF, the party of the first part has caused its corporate
name to be subscribed and this Eighty-Eighth Supplemental Trust Indenture to be
signed by its Chairman of the Board, President and Chief Executive Officer or a
Vice President, and its corporate seal to be hereunto affixed and attested by
its Secretary or an Assistant Secretary, for and in its behalf, and the party of
the second part, to evidence its acceptance of the additional trust hereby
created, has caused its corporate name to be subscribed and this Eighty-Eighth
Supplemental Trust Indenture to be signed by its Vice President or an Assistant
Vice President, and its corporate seal to be hereunto affixed and attested by
its Authorized Officer, for and in its behalf, all done as of the day and year
first above written.
DUQUESNE LIGHT COMPANY
[Seal] By: /s/ Gary L. Schwass
-------------------------------
Vice President-Finance
and Chief Financial Officer
Attest:
/s/ Diane S. Eismont
- ------------------------------
Secretary
MELLON BANK, N.A.
[Seal] By: /s/ M. J. Richards
-------------------------------
Assistant Vice President
Attest:
/s/ D. M. Babich
- ------------------------------
Authorized Officer
- 4 -
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On this 23rd day of September, 1993 before me, the subscriber, a notary
public in and for said Commonwealth and County, personally appeared Gary L.
Schwass, who acknowledged himself to be Vice President-Finance and Chief
Financial Officer of Duquesne Light Company, a corporation, and that he as such
Vice President-Finance and Chief Financial Officer, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as Vice President-Finance and Chief
Financial Officer.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
/s/ Joanne E. Kirin
------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On this 23rd day of September, 1993 before me, the subscriber, a notary
public in and for said Commonwealth and County, personally appeared M.J.
Richards, who acknowledged herself to be Assistant Vice President of Mellon
Bank, N.A., a national banking association, and that she as such Assistant Vice
President, being authorized to do so, executed the foregoing instrument for the
purposes therein contained by signing the name of the corporation by herself as
Assistant Vice President.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
/s/ Lorraine L. Henderson
------------------------------
Notary Public
- 5 -
<PAGE>
CERTIFICATE OF PRECISE RESIDENCE
I hereby certify that the precise residence of Mellon Bank, N.A. is One
Mellon Bank Center, Second Ward, Pittsburgh, Allegheny County, Pennsylvania.
/s/ D. M. Babich
-----------------------------------------
Authorized Signatory of Mellon Bank, N.A.
September 23, 1993
- 6 -
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded September 27, 1993
Mortgage Book Volume 13497, page 457
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded September 27, 1993
Mortgage Book Volume 1282, page 879
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded September 24, 1993
Mortgage Book Volume 120, page 54
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded September 24, 1993
Mortgage Book Volume 2552, page 67
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded September 24, 1993
Mortgage Book Volume 3220, page 30
Belmont County, Ohio
Office of Recorder
Received September 24, 1993
Recorded September 27, 1993
Mortgage Book Volume 608, page 23
Columbiana County, Ohio
Officer of Recorder
Recorded September 27, 1993
Mortgage Book Volume 395, page 295
Jefferson County, Ohio
Office of Recorder
Received September 24, 1993
Recorded September 27, 1993
Mortgage Book Volume 112, page 710
Lake County, Ohio
Office of Recorder
Recorded September 27, 1993
Mortgage Book Volume 910, page 1178
- 7 -
<PAGE>
Monroe County, Ohio
Office of Recorder
Received September 24, 1993
Recorded September 24, 1993
Mortgage Book Volume 133, page 927
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded September 27, 1993
Deed of Trust Book 308, page 276
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded September 24, 1993
Deed of Trust Book 722, page 241
- 8 -
<PAGE>
EXHIBIT 4.6
CONFORMED COPY
==============================================================================
DUQUESNE LIGHT COMPANY
TO
MELLON BANK, N.A.
Trustee
_____________________
Supplemental Indenture No. 5
Dated as of June 1, 1993
Supplemental to the Indenture of Mortgage
and Deed of Trust dated as of April 1, 1992
Establishing a series of Securities
designated First Collateral Trust Bonds,
Series E, limited in aggregate principal amount
to $300,000,000 and amending Section 901 of the
Original Indenture pursuant to Section 1401(j) thereof
==============================================================================
<PAGE>
SUPPLEMENTAL INDENTURE No. 5, dated as of June 1, 1993, between DUQUESNE
LIGHT COMPANY, a corporation duly organized and existing under the laws of the
Commonwealth of Pennsylvania (hereinafter sometimes called the "Company"), and
MELLON BANK, N.A., a national banking association organized and existing under
the laws of the United States of America, trustee (hereinafter sometimes called
the "Trustee"), under the Indenture of Mortgage and Deed of Trust, dated as of
April 1, 1992 (hereinafter called the "Original Indenture"), this Supplemental
Indenture No. 5 being supplemental thereto. The Original Indenture and any and
all indentures and instruments supplemental thereto are hereinafter sometimes
collectively called the "Mortgage."
Recitals of the Company
The Original Indenture was authorized, executed and delivered by the
Company to provide for the issuance from time to time of its Securities (such
term and all other capitalized terms used herein without definition having the
meanings assigned to them in the Original Indenture), to be issued in one or
more series as contemplated therein, and to provide security for the payment of
the principal of and premium, if any, and interest, if any, on the Securities.
The Company has heretofore executed and delivered to Mellon Bank, N.A., as
Trustee, Supplemental Indentures for the purposes recited therein and for the
purpose of creating series of Securities as set forth in Schedule A hereto.
The Company desires to establish a series of Securities to be designated
"First Collateral Trust Bonds, Series E" to be limited in aggregate principal
amount (except as contemplated in Section 301(b) of the Original Indenture) to
$300,000,000, such series of Securities to be hereinafter sometimes called
"Series No. 4", and to amend Section 901 of the Original Indenture pursuant to
Section 1401(j) thereof.
The Company has duly authorized the execution and delivery of this
Supplemental Indenture No. 5 to establish the Securities of Series No. 4 and to
amend Section 901 of the Original Indenture and has duly authorized the issuance
of such Securities; and all acts necessary to make this Supplemental Indenture
No. 5 a valid agreement of the Company, and to make the Securities of Series No.
4 valid obligations of the Company, have been performed.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 5 WITNESSETH, that, in
consideration of the premises and of the purchase of the Securities by the
Holders thereof, and in order to secure the payment of the principal of and
premium, if any, and interest, if any, on all Securities from time to time
Outstanding and the performance of the covenants contained therein and in the
Mortgage and to declare the terms and conditions on which such Securities are
secured, the Company hereby grants, bargains, sells, releases, conveys, assigns,
transfers, mortgages, pledges, sets over and confirms to the Trustee, and grants
to the Trustee a security interest in, the following:
Granting Clause First
All right, title and interest of the Company in and to property
(other than Excepted Property), real, personal and mixed and wherever
situated, in any case used or to be used in or in connection with the
generation, purchase, transmission, distribution or sale by the
Company of electric energy (whether or not such use is the sole use of
such property), including without limitation (a) all lands, easements,
servitudes, licenses, permits, rights of way and other rights and
interests in or relating to real property or the occupancy or use of
the same; (b) all plants, generators, turbines, engines, boilers, fuel
handling and transportation facilities, air and water pollution
control and sewage and
<PAGE>
solid waste disposal facilities and other machinery and facilities for the
generation of electric energy; (c) all switchyards, lines, towers,
substations, transformers and other machinery and facilities for the
transmission of electric energy; (d) all lines, poles, conduits,
conductors, meters, regulators and other machinery and facilities for the
distribution of electric energy; (e) all buildings, offices, warehouses and
other structures; and (f) all pipes, cables, insulators, ducts, tools,
computers and other data processing and/or storage equipment and other
equipment, apparatus and facilities and all other property, of whatever
kind and nature, ancillary to or otherwise used or to be used in
conjunction with any or all of the foregoing or otherwise, directly or
indirectly, in furtherance of the generation, purchase, transmission,
distribution or sale by the Company of electric energy;
Granting Clause Second
Subject to the applicable exceptions permitted by Section 810, Section
1303 and Section 1305 of the Original Indenture, all property (other than
Excepted Property) of the kind and nature described in Granting Clause
First which may be hereafter acquired by the Company, it being the
intention of the Company that all such property acquired by the Company
after the date of the execution and delivery of this Supplemental Indenture
No. 5 shall be as fully embraced within and subjected to the Lien hereof as
if such property were owned by the Company as of the date of the execution
and delivery of this Supplemental Indenture No. 5;
Granting Clause Fourth
All other property of whatever kind and nature subjected or intended
to be subjected to the Lien of the Mortgage by any of the terms and
provisions thereof;
Excepted Property
Expressly excepting and excluding, however, from the Lien and
operation of the Mortgage all Excepted Property of the Company, whether now
owned or hereafter acquired;
TO HAVE AND TO HOLD all such property, real, personal and mixed, unto the
Trustee forever;
SUBJECT, HOWEVER, to Permitted Liens and to Liens which have been granted
by the Company to other Persons prior to the date of the execution and delivery
of the Original Indenture (including, but not limited to, the Lien of the DLC
1947 Mortgage), and subject also, as to any property acquired by the Company
after the date of execution and delivery of the Original Indenture, to vendors'
Liens, purchase money mortgages and other Liens thereon at the time of the
acquisition thereof (including, but not limited to, the Lien of any Class "A"
Mortgage), it being understood that with respect to any of such property which
was at the date of execution and delivery of the Original Indenture or
thereafter became or hereafter becomes subject to the Lien of any Class "A"
Mortgage, the Lien of the Mortgage shall at all times be junior and subordinate
to the Lien of such Class "A" Mortgage;
-2-
<PAGE>
IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the Holders from time to time of all Outstanding Securities without
any priority of any such Security over any other such Security;
PROVIDED, HOWEVER, that if, after the right, title and interest of the
Trustee in and to the Mortgaged Property shall have ceased, terminated and
become void in accordance with Article Nine of the Original Indenture, the
principal of and premium, if any, and interest, if any, on the Securities shall
have been paid to the Holders thereof, or shall have been paid to the Company
pursuant to Section 603 of the Original Indenture, then and in that case the
Mortgage and the estate and rights thereby granted shall cease, terminate and be
void, and the Trustee shall cancel and discharge the Mortgage and execute and
deliver to the Company such instruments as the Company shall require to evidence
the discharge thereof; otherwise the Mortgage shall be and remain in full force
and effect; and
THE PARTIES HEREBY FURTHER COVENANT AND AGREE as follows:
ARTICLE ONE
Fourth Series of Securities
There is hereby created a series of Securities designated "First Collateral
Trust Bonds, Series E" and limited in aggregate principal amount (except as
contemplated in Section 301(b) of the Original Indenture) to $300,000,000. The
form and terms of the Securities of Series No. 4 shall be established in an
Officer's Certificate.
ARTICLE TWO
Amendment of Original Indenture
Section 901 of the Original Indenture is hereby amended by:
(1) deleting the word "and" from the end of clause (x) in the first
paragraph thereof;
(2) deleting the period at the end of clause (y) in the first
paragraph thereof and adding at the end of clause (y) "; and";
(3) adding a new clause (z) at the end of the first paragraph thereof
reading as follows:
(z) an Officer's Certificate stating the Company's intention
that, upon delivery of such Officer's Certificate, its indebtedness in
respect of such Securities or portions thereof will have been
satisfied.
; and
(4) deleting the second paragraph thereof and substituting therefor a
new second paragraph reading as follows:
Upon receipt by the Trustee of money or Eligible
Obligations, or both, in accordance with this Section,
together with the documents required by clauses (x), (y) and
(z) above, the Trustee shall, upon Company Request,
acknowledge in writing that such Securities or portions
thereof are deemed to have been paid
-3-
<PAGE>
for all purposes of this Indenture and that the entire indebtedness of
the Company in respect thereof is deemed to have been satisfied and
discharged. In the event that all of the conditions set forth in the
preceding paragraph shall have been satisfied in respect of any
Securities or portions thereof except that, for any reason, the
Officer's Certificate specified in clause (z) shall not have been
delivered to the Trustee, such Securities or portions thereof shall
not be deemed to have been paid as contemplated in such paragraph, but
the Holders of such Securities or portions thereof shall nevertheless
be no longer entitled to the benefit of the covenants of the Company
under Article Six (except the covenants contained in Sections 601(a),
602 and 603) or any other covenants made in respect of such Securities
or portions thereof as contemplated by Section 301.
ARTICLE THREE
Miscellaneous Provisions
This Supplemental Indenture No. 5 is a supplement to the Mortgage. As
supplemented by this Supplemental Indenture No. 5, the Mortgage is in all
respects ratified, approved and confirmed, and the Mortgage and this
Supplemental Indenture No. 5 shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 5 to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
DUQUESNE LIGHT COMPANY
[Seal] By: /s/ Gary L. Schwass
------------------------------------
Vice President-Finance
and Chief Financial Officer
Attest:
/s/ Diane S. Eismont
- --------------------------------
Secretary
MELLON BANK, N.A., Trustee
By: /s/ J.H. McAnulty
------------------------------------
[Seal] Vice President
Attest:
/s/ D.M. Babich
---------------------------------
Authorized Officer
-4-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 7th day of June, 1993, before me personally came Gary L.
Schwass, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President-Finance and Chief Financial Officer of Duquesne Light
Company, the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
/s/ Joanne E. Kirin
---------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 7th day of June, 1993, before me personally came J. H.
McAnulty, to me known, who, being by me duly sworn, did depose and say that he
is a Vice President of Mellon Bank, N.A., the national banking association
described in and which executed the foregoing instrument; that he knows the seal
of said national banking association; that the seal affixed to said instrument
is the seal of said national banking association; that it was so affixed by
authority of the Board of Directors of said national banking association, and
that he signed his name thereto by like authority.
/s/ Nancy A. Fletcher
---------------------------------
Notary Public
-5-
<PAGE>
CERTIFICATE OF PRECISE RESIDENCE
I hereby certify that the precise residence of Mellon Bank, N.A., is
One Mellon Bank Center, Second Ward, Pittsburgh, Allegheny County, Pennsylvania.
/s/ D.M. Babich
----------------------------------------
Authorized Signatory of Mellon Bank, N.A.
June 7, 1993
-6-
<PAGE>
Schedule A
<TABLE>
<CAPTION>
Principal Amount
Supplemental Securities of Series Authorized Issued/1/ Outstanding/1/
Indenture No. Dated as of Series No. Designation ------------ ------------ --------------
- --------------- ---------------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
1 April 1, 1992 1 Secured Medium- $400,000,000 $400,000,000 $400,000,000
Term Notes,
Series B
2 October 1, 1992 2 First Collateral $400,000,000 $220,000,000 $220,000,000
Trust Bonds,
Series C
3 December 1, 1992 3 First Collateral $ 47,925,000 $ 47,925,000 $ 47,925,000
Trust Bonds,
Pollution Control
Series D
4 March 30, 1993 None None None None None
</TABLE>
- -----------------------------
/1/ As of June 1, 1993.
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded June 9, 1993
Mortgage Book Volume 13181, page 194
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded June 9, 1993
Mortgage Book Volume 1264, page 657
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded June 8, 1993
Mortgage Book Volume 115, page 206
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded June 8, 1993
Mortgage Book Volume 2007, page 481
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded June 8, 1993
Mortgage Book Volume 3138, page 608
Belmont County, Ohio
Office of Recorder
Received June 8, 1993
Recorded June 9, 1993
Mortgage Book Volume 602, page 846
Columbiana County, Ohio
Office of Recorder
Recorded June 9, 1993
Mortgage Book Volume 378, page 231
Jefferson County, Ohio
Office of Recorder
Received June 8, 1993
Recorded June 9, 1993
Mortgage Book Volume 102, page 271
Lake County, Ohio
Office of Recorder
Recorded June 9, 1993
Mortgage Book Volume 864, page 691
<PAGE>
Monroe County, Ohio
Office of Recorder
Received June 8, 1993
Recorded June 8, 1993
Mortgage Book Volume 132, page 868
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded June 9, 1993
Deed of Trust Book 304, page 351
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded June 8, 1993
Deed of Trust Book 710, page 333
<PAGE>
EXHIBIT 4.6
CONFORMED COPY
================================================================================
DUQUESNE LIGHT COMPANY
TO
MELLON BANK, N.A.
Trustee
---------------------
Supplemental Indenture No. 6
Dated as of June 1, 1993
Supplemental to the Indenture of Mortgage
and Deed of Trust dated as of April 1, 1992
Establishing a series of Securities designated
First Collateral Trust Bonds, Pollution Control Series F,
limited in aggregate principal amount to $25,000,000
================================================================================
<PAGE>
SUPPLEMENTAL INDENTURE No. 6, dated as of June 1, 1993, between DUQUESNE
LIGHT COMPANY, a corporation duly organized and existing under the laws of the
Commonwealth of Pennsylvania (hereinafter sometimes called the "Company"), and
MELLON BANK, N.A., a national banking association organized and existing under
the laws of the United States of America, trustee (hereinafter sometimes called
the "Trustee"), under the Indenture of Mortgage and Deed of Trust, dated as of
April 1, 1992 (hereinafter called the "Original Indenture"), this Supplemental
Indenture No. 6 being supplemental thereto. The Original Indenture and any and
all indentures and instruments supplemental thereto are hereinafter sometimes
collectively called the "Mortgage."
Recitals of the Company
The Original Indenture was authorized, executed and delivered by the
Company to provide for the issuance from time to time of its Securities (such
term and all other capitalized terms used herein without definition having the
meanings assigned to them in the Original Indenture), to be issued in one or
more series as contemplated therein, and to provide security for the payment of
the principal of and premium, if any, and interest, if any, on the Securities.
The Original Indenture has been recorded in the Recorders' Offices of
the various counties of Pennsylvania as follows:
In Allegheny County in Mortgage Book Vol. 12068, page 8;
In Beaver County in Mortgage Book Vol. 1208, page 520;
In Greene County in Mortgage Book Vol. 100, page 174;
In Washington County in Mortgage Book Vol. 1873, page 1;
In Westmoreland County in Mortgage Book Vol. 2862, page 221;
and has also been recorded in the Office of the Clerk of County Commission of
Monongalia County, West Virginia, in Deed of Trust Book Vol. 672, page 129, the
Office of the Clerk of County Commission of Hancock County, West Virginia, in
Deed of Trust Book Vol. 293, page 46, the Recorder's Office of Belmont County,
Ohio, in Mortgage Book Vol. 586, page 273, the Recorder's Office of Columbiana
County, Ohio, in Mortgage Book Vol. 318, page 289, the Recorder's Office of
Jefferson County, Ohio, in Mortgage Book Vol. 65, page 675, the Recorder's
Office of Lake County, Ohio, in Mortgage Book Vol. 711, page 217, and the
Recorder's Office of Monroe County, Ohio, in Mortgage Book Vol. 129, page 301.
The Company has heretofore executed and delivered to Mellon Bank, N.A., as
Trustee, Supplemental Indentures for the purposes recited therein and for the
purpose of creating series of Securities as set forth in Schedule A hereto.
The Company desires to establish a series of Securities to be designated
"First Collateral Trust Bonds, Pollution Control Series F" to be limited in
aggregate principal amount (except as contemplated in Section 301(b) of the
Original Indenture) to $25,000,000, such series of Securities to be hereinafter
sometimes called "Series No. 5."
The Company has duly authorized the execution and delivery of this
Supplemental Indenture No. 6 to establish the Securities of Series No. 5 and has
duly authorized the issuance of such Securities; and all acts necessary to make
this Supplemental Indenture No. 6 a valid agreement of the Company, and to make
the Securities of Series No. 5 valid obligations of the Company, have been
performed.
<PAGE>
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 6 WITNESSETH, that, in
consideration of the premises and of the purchase of the Securities by the
Holders thereof, and in order to secure the payment of the principal of and
premium, if any, and interest, if any, on all Securities from time to time
Outstanding and the performance of the covenants contained therein and in the
Mortgage and to declare the terms and conditions on which such Securities are
secured, the Company hereby grants, bargains, sells, releases, conveys, assigns,
transfers, mortgages, pledges, sets over and confirms to the Trustee, and grants
to the Trustee a security interest in, the following:
Granting Clause First
All right, title and interest of the Company in and to
property (other than Excepted Property), real, personal and mixed
and wherever situated, in any case used or to be used in or in
connection with the generation, purchase, transmission,
distribution or sale by the Company of electric energy (whether
or not such use is the sole use of such property), including
without limitation (a) all lands, easements, servitudes,
licenses, permits, rights of way and other rights and interests
in or relating to real property or the occupancy or use of the
same; (b) all plants, generators, turbines, engines, boilers,
fuel handling and transportation facilities, air and water
pollution control and sewage and solid waste disposal facilities
and other machinery and facilities for the generation of electric
energy; (c) all switchyards, lines, towers, substations,
transformers and other machinery and facilities for the
transmission of electric energy; (d) all lines, poles, conduits,
conductors, meters, regulators and other machinery and facilities
for the distribution of electric energy; (e) all buildings,
offices, warehouses and other structures; and (f) all pipes,
cables, insulators, ducts, tools, computers and other data
processing and/or storage equipment and other equipment,
apparatus and facilities and all other property, of whatever kind
and nature, ancillary to or otherwise used or to be used in
conjunction with any or all of the foregoing or otherwise,
directly or indirectly, in furtherance of the generation,
purchase, transmission, distribution or sale by the Company of
electric energy;
Granting Clause Second
Subject to the applicable exceptions permitted by Section
810, Section 1303 and Section 1305 of the Original Indenture, all
property (other than Excepted Property) of the kind and nature
described in Granting Clause First which may be hereafter
acquired by the Company, it being the intention of the Company
that all such property acquired by the Company after the date of
the execution and delivery of this Supplemental Indenture No. 6
shall be as fully embraced within and subjected to the Lien
hereof as if such property were owned by the Company as of the
date of the execution and delivery of this Supplemental Indenture
No. 6;
Granting Clause Fourth
All other property of whatever kind and nature subjected or
intended to be subjected to the Lien of the Mortgage by any of the
terms and provisions thereof;
-2-
<PAGE>
Excepted Property
Expressly excepting and excluding, however, from the Lien and
operation of the Mortgage all Excepted Property of the Company,
whether now owned or hereafter acquired;
TO HAVE AND TO HOLD all such property, real, personal and mixed, unto the
Trustee forever;
SUBJECT, HOWEVER, to Permitted Liens and to Liens which have been granted
by the Company to other Persons prior to the date of the execution and delivery
of the Original Indenture (including, but not limited to, the Lien of the DLC
1947 Mortgage), and subject also, as to any property acquired by the Company
after the date of execution and delivery of the Original Indenture, to vendors'
Liens, purchase money mortgages and other Liens thereon at the time of the
acquisition thereof (including, but not limited to, the Lien of any Class "A"
Mortgage), it being understood that with respect to any of such property which
was at the date of execution and delivery of the Original Indenture or
thereafter became or hereafter becomes subject to the Lien of any Class "A"
Mortgage, the Lien of the Mortgage shall at all times be junior and subordinate
to the Lien of such Class "A" Mortgage;
IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the Holders from time to time of all Outstanding Securities without
any priority of any such Security over any other such Security;
PROVIDED, HOWEVER, that if, after the right, title and interest of the
Trustee in and to the Mortgaged Property shall have ceased, terminated and
become void in accordance with Article Nine of the Original Indenture, the
principal of and premium, if any, and interest, if any, on the Securities shall
have been paid to the Holders thereof, or shall have been paid to the Company
pursuant to Section 603 of the Original Indenture, then and in that case the
Mortgage and the estate and rights thereby granted shall cease, terminate and be
void, and the Trustee shall cancel and discharge the Mortgage and execute and
deliver to the Company such instruments as the Company shall require to evidence
the discharge thereof; otherwise the Mortgage shall be and remain in full force
and effect; and
THE PARTIES HEREBY FURTHER COVENANT AND AGREE as follows:
ARTICLE ONE
Fifth Series of Securities
There is hereby created a series of Securities designated "First Collateral
Trust Bonds, Pollution Control Series F" and limited in aggregate principal
amount (except as contemplated in Section 301(b) of the Original Indenture) to
$25,000,000. The form and terms of the Securities of Series No. 5 shall be
established in an Officer's Certificate.
ARTICLE TWO
Miscellaneous Provisions
This Supplemental Indenture No. 6 is a supplement to the Mortgage. As
supplemented by this Supplemental Indenture No. 6, the Mortgage is in all
respects ratified, approved and confirmed, and the Mortgage and this
Supplemental Indenture No. 6 shall together constitute one and the same
instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 6 to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
DUQUESNE LIGHT COMPANY
[Seal] By: /s/ Gary L. Schwass
-----------------------------------
Vice President-Finance
and Chief Financial Officer
Attest:
/s/ Diane S. Eismont
- --------------------------------
Secretary
MELLON BANK, N.A., Trustee
By: /s/ J.H. McAnulty
-----------------------------------
[Seal] Vice President
Attest:
/s/ D.M. Babich
- --------------------------------
Authorized Officer
-4-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 23rd day of June, 1993, before me personally came Gary L.
Schwass, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President-Finance and Chief Financial Officer of Duquesne Light
Company, the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
/s/ Joanne E. Kirin
---------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 23rd day of June, 1993, before me personally came J. H.
McAnulty, to me known, who, being by me duly sworn, did depose and say that he
is a Vice President of Mellon Bank, N.A., the national banking association
described in and which executed the foregoing instrument; that he knows the seal
of said national banking association; that the seal affixed to said instrument
is the seal of said national banking association; that it was so affixed by
authority of the Board of Directors of said national banking association, and
that he signed his name thereto by like authority.
/s/ Kristine M. Baker
---------------------------------
Notary Public
-5-
<PAGE>
CERTIFICATE OF PRECISE RESIDENCE
I hereby certify that the precise residence of Mellon Bank, N.A., is
One Mellon Bank Center, Second Ward, Pittsburgh, Allegheny County, Pennsylvania.
/s/ D.M. Babich
------------------------------------------
Authorized Signatory of Mellon Bank, N.A.
June 23, 1993
-6-
<PAGE>
Schedule A
<TABLE>
<CAPTION>
Principal Amount
Supplemental Securities of Series
Indenture No. Dated as of Series No. Designation Authorized Issued/1/ Outstanding/1/
- --------------- ----------- ---------- ----------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 April 1, 1992 1 Secured Medium- $400,000,000 $400,000,000 $400,000,000
Term Notes,
Series B
2 October 1, 1992 2 First Collateral $400,000,000 $220,000,000 $220,000,000
Trust Bonds,
Series C
3 December 1, 1992 3 First Collateral $ 47,925,000 $ 47,925,000 $ 47,925,000
Trust Bonds,
Pollution Control
Series D
4 March 30, 1993 None None None None None
5 June 1, 1993 4 First Collateral $300,000,000 None None
Trust Bonds,
Series E
</TABLE>
- -----------------------------------
/1/ As of June 1, 1993.
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded June 23, 1993
Mortgage Book Volume 13225, page 174
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded June 25, 1993
Mortgage Book Volume 1267, page 558
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded June 24, 1993
Mortgage Book Volume 115, page 1119
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded June 24, 1993
Mortgage Book Volume 2014, page 95
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded June 24, 1993
Mortgage Book Volume 3151, page 600
Belmont County, Ohio
Office of Recorder
Received June 24, 1993
Recorded June 25, 1993
Mortgage Book Volume 603, page 791
Columbiana County, Ohio
Office of Recorder
Recorded June 25, 1993
Mortgage Book Volume 380, page 848
Jefferson County, Ohio
Office of Recorder
Received June 24, 1993
Recorded June 25, 1993
Mortgage Book Volume 103, page 987
Lake County, Ohio
Office of Recorder
Recorded June 25, 1993
Mortgage Book Volume 871, page 985
<PAGE>
Monroe County, Ohio
Office of Recorder
Received June 24,1993
Recorded June 24, 1993
Mortgage Book Volume 133, page 115
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded June 25, 1993
Deed of Trust Book 305, page 69
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded June 24, 1993
Deed of Trust Book 712, page 658
<PAGE>
EXHIBIT 4.6
CONFORMED COPY
================================================================================
DUQUESNE LIGHT COMPANY
TO
MELLON BANK, N.A.
Trustee
-------------------
Supplemental Indenture No. 7
Dated as of August 1, 1993
Supplemental to the Indenture of Mortgage
and Deed of Trust dated as of April 1, 1992
Establishing a series of Securities designated
First Collateral Trust Bonds, Pollution Control Series G,
limited in aggregate principal amount to $20,500,000
================================================================================
<PAGE>
SUPPLEMENTAL INDENTURE No. 7, dated as of August 1, 1993, between DUQUESNE
LIGHT COMPANY, a corporation duly organized and existing under the laws of the
Commonwealth of Pennsylvania (hereinafter sometimes called the "Company"), and
MELLON BANK, N.A., a national banking association organized and existing under
the laws of the United States of America, trustee (hereinafter sometimes called
the "Trustee"), under the Indenture of Mortgage and Deed of Trust, dated as of
April 1, 1992 (hereinafter called the "Original Indenture"), this Supplemental
Indenture No. 7 being supplemental thereto. The Original Indenture and any and
all indentures and instruments supplemental thereto are hereinafter sometimes
collectively called the "Mortgage."
Recitals of the Company
The Original Indenture was authorized, executed and delivered by the
Company to provide for the issuance from time to time of its Securities (such
term and all other capitalized terms used herein without definition having the
meanings assigned to them in the Original Indenture), to be issued in one or
more series as contemplated therein, and to provide security for the payment of
the principal of and premium, if any, and interest, if any, on the Securities.
The Original Indenture has been recorded in the Recorders' Offices of the
various counties of Pennsylvania as follows:
In Allegheny County in Mortgage Book Vol. 12068, page 8;
In Beaver County in Mortgage Book Vol. 1208, page 520;
In Greene County in Mortgage Book Vol. 100, page 174;
In Washington County in Mortgage Book Vol. 1873, page 1;
In Westmoreland County in Mortgage Book Vol. 2862; page 221;
and has also been recorded in the Office of the Clerk of County Commission of
Monongalia County, West Virginia, in Deed of Trust Book Vol. 672, page 129, the
Office of the Clerk of County Commission of Hancock County, West Virginia, in
Deed of Trust Book Vol. 293, page 46, the Recorder's Office of Belmont County,
Ohio, in Mortgage Book Vol. 586, page 273, the Recorder's Office of Columbiana
County, Ohio, in Mortgage Book. Vol. 318, page 289, the Recorder's Office of
Jefferson County, Ohio, in Mortgage Book Vol. 65, page 675, the Recorder's
Office of Lake County, Ohio, in Mortgage Book Vol. 711, page 217, and the
Recorder's Office of Monroe County, Ohio, in Mortgage Book Vol. 129, page 301.
The Company has heretofore executed and delivered to Mellon Bank, N.A., as
Trustee, Supplemental Indentures for the purposes recited therein and for the
purpose of creating series of Securities as set forth in Schedule A hereto.
The Company desires to establish a series of Securities to be designated
"First Collateral Trust Bonds, Pollution Control Series G" to be limited in
aggregate principal amount (except as contemplated in Section 301(b) of the
Original Indenture) to $20,500,000, such series of Securities to be hereinafter
sometimes called "Series No. 6."
The Company has duly authorized the execution and delivery of this
Supplemental Indenture No. 7 to establish the Securities of Series No. 6 and has
duly authorized the issuance of such Securities; and
<PAGE>
all acts necessary to make this Supplemental Indenture No. 7 a valid agreement
of the Company, and to make the Securities of Series No. 6 valid obligations of
the Company, have been performed.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 7 WITNESSETH, that, in
consideration of the premises and of the purchase of the Securities by the
Holders thereof, and in order to secure the payment of the principal of and
premium, if any, and interest, if any, on all Securities from time to time
Outstanding and the performance of the covenants contained therein and in the
Mortgage and to declare the terms and conditions on which such Securities are
secured, the Company hereby grants, bargains, sells, releases, conveys, assigns,
transfers, mortgages, pledges, sets over and confirms to the Trustee, and grants
to the Trustee a security interest in, the following:
Granting Clause First
All right, title and interest of the Company in and to property (other
than Excepted Property), real, personal and mixed and wherever situated, in
any case used or to be used in or in connection with the generation,
purchase, transmission, distribution or sale by the Company of electric
energy (whether or not such use is the sole use of such property),
including without limitation (a) all land and interests in land described
in Schedule B hereto; (b) all lands, easements, servitudes, licenses,
permits, rights of way and other rights and interests in or relating to
real property or the occupancy or use of the same; (c) all plants,
generators, turbines, engines, boilers, fuel handling and transportation
facilities, air and water pollution control and sewage and solid waste
disposal facilities and other machinery and facilities for the generation
of electric energy; (d) all switchyards, lines, towers, substations,
transformers and other machinery and facilities for the transmission of
electric energy; (e) all lines, poles, conduits, conductors, meters,
regulators and other machinery and facilities for the distribution of
electric energy; (f) all buildings, offices, warehouses and other
structures; and (g) all pipes, cables, insulators, ducts, tools, computers
and other data processing and/or storage equipment and other equipment,
apparatus and facilities and all other property, of whatever kind and
nature, ancillary to or otherwise used or to be used in conjunction with
any or all of the foregoing or otherwise, directly or indirectly, in
furtherance of the generation, purchase, transmission, distribution or sale
by the Company of electric energy;
Granting Clause Second
Subject to the applicable exceptions permitted by Section 810, Section
1303 and Section 1305 of the Original Indenture, all property (other than
Excepted Property) of the kind and nature described in Granting Clause
First which may be hereafter acquired by the Company, it being the
intention of the Company that all such property acquired by the Company
after the date of the execution and delivery of this Supplemental Indenture
No. 7 shall be as fully embraced within and subjected to the Lien hereof as
if such property were owned by the Company as of the date of the execution
and delivery of this Supplemental Indenture No. 7;
Granting Clause Fourth
All other property of whatever kind and nature subjected or intended
to be subjected to the Lien of the Mortgage by any of the terms and
provisions thereof;
-2-
<PAGE>
Excepted Property
Expressly excepting and excluding, however, from the Lien and
operation of the Mortgage all Excepted Property of the Company, whether now
owned or hereafter acquired;
TO HAVE AND TO HOLD all such property, real, personal and mixed, unto the
Trustee forever;
SUBJECT, HOWEVER, to Permitted Liens and to Liens which have been granted
by the Company to other Persons prior to the date of the execution and delivery
of the Original Indenture (including, but not limited to, the Lien of the DLC
1947 Mortgage), and subject also, as to any property acquired by the Company
after the date of execution and delivery of the Original Indenture, to vendors'
Liens, purchase money mortgages and other Liens thereon at the time of the
acquisition thereof (including, but not limited to, the Lien of any Class "A"
Mortgage), it being understood that with respect to any of such property which
was at the date of execution and delivery of the Original Indenture or
thereafter became or hereafter becomes subject to the Lien of any Class "A"
Mortgage, the Lien of the Mortgage shall at all times be junior and subordinate
to the Lien of such Class "A" Mortgage;
IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the Holders from time to time of all Outstanding Securities without
any priority of any such Security over any other such Security;
PROVIDED, HOWEVER, that if, after the right, title and interest of the
Trustee in and to the Mortgaged Property shall have ceased, terminated and
become void in accordance with Article Nine of the Original Indenture, the
principal of and premium, if any, and interest, if any, on the Securities shall
have been paid to the Holders thereof, or shall have been paid to the Company
pursuant to Section 603 of the Original Indenture, then and in that case the
Mortgage and the estate and rights thereby granted shall cease, terminate and be
void, and the Trustee shall cancel and discharge the Mortgage and execute and
deliver to the Company such instruments as the Company shall require to evidence
the discharge thereof; otherwise the Mortgage shall be and remain in full force
and effect; and
THE PARTIES HEREBY FURTHER COVENANT AND AGREE as follows:
ARTICLE ONE
Sixth Series of Securities
There is hereby created a series of Securities designated "First Collateral
Trust Bonds, Pollution Control Series G" and limited in aggregate principal
amount (except as contemplated in Section 301(b) of the Original Indenture) to
$20,500,000. The form and terms of the Securities of Series No. 6 shall be
established in an Officer's Certificate.
-3-
<PAGE>
ARTICLE TWO
Miscellaneous Provisions
This Supplemental Indenture No. 7 is a supplement to the Mortgage. As
supplemented by this Supplemental Indenture No. 7, the Mortgage is in all
respects ratified, approved and confirmed, and the Mortgage and this
Supplemental Indenture No. 7 shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 7 to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
DUQUESNE LIGHT COMPANY
[Seal] By:/s/ Gary L. Schwass
--------------------------------------
Vice President-Finance
and Chief Financial Officer
Attest:
/s/ Joan S. Senchyshyn
- --------------------------------
Assistant Secretary
MELLON BANK, N.A., Trustee
By:/s/ J.H. McAnulty
--------------------------------------
[Seal] Vice President
Attest:
/s/ D.M. Babich
- --------------------------------
Authorized Officer
-4-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) SS.:
COUNTY OF ALLEGHENY )
On the 23rd day of August, 1993, before me personally came Gary L.
Schwass, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President-Finance and Chief Financial Officer of Duquesne Light
Company, the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
/s/ Joanne E. Kirin
----------------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) SS.:
COUNTY OF ALLEGHENY )
On the 24th day of August, 1993, before me personally came J. H.
McAnulty, to me known, who, being by me duly sworn, did depose and say that he
is a Vice President of Mellon Bank, N.A., the national banking association
described in and which executed the foregoing instrument; that he knows the seal
of said national banking association; that the seal affixed to said instrument
is the seal of said national banking association; that it was so affixed by
authority of the Board of Directors of said national banking association, and
that he signed his name thereto by like authority.
/s/ Lorraine L. Henderson
----------------------------------------
Notary Public
-5-
<PAGE>
CERTIFICATE OF PRECISE RESIDENCE
I hereby certify that the precise residence of Mellon Bank, N.A., is
One Mellon Bank Center, Second Ward, Pittsburgh, Allegheny County, Pennsylvania.
/s/ D.M. Babich
--------------------------------
Authorized Signatory of Mellon Bank, N.A.
August 24, 1993
-6-
<PAGE>
Schedule A
<TABLE>
<CAPTION>
Principal Amount
Supplemental Securities of Series
Indenture No. Dated as of Series No. Designation Authorized Issued/1/ Outstanding/1/
- --------------- ---------------- ------------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
1 April 1, 1992 1 Secured $400,000,000 $400,000,000 $400,000,000
Medium-
Term Notes,
Series B
2 October 1, 1992 2 First $400,000,000 $360,000,000 $360,000,000
Collateral
Trust Bonds,
Series C
3 December 1, 1992 3 First $ 47,925,000 $ 47,925,000 $ 47,925,000
Collateral
Trust Bonds,
Pollution
Control
Series D
4 March 30, 1993 None None None None None
5 June 1, 1993 4 First $300,000,000 $200,000,000 $200,000,000
Collateral
Trust Bonds,
Series E
6 June 1, 1993 5 First $ 25,000,000 $ 25,000,000 $ 25,000,000
Collateral
Trust Bonds,
Pollution
Control
Series F
</TABLE>
- -----------------------------
/1/ As of August 1, 1993.
-7-
<PAGE>
SCHEDULE B
All the following described property situate in the County of
Allegheny and Commonwealth of Pennsylvania, the deed herein recited being
recorded in the Recorder's Office of said County, and reference being made
thereto for a more particular description of said property, viz:
All that certain lot or piece of ground situate partly in the
Township of North Fayette and partly in the Township of Findlay.
Conveyed to Duquesne Light Company by: Miriam G. Lewis, widow, Deed
dated July 24, 1992, Deed Book Volume 8794, page 633; Donald B. Lewis
et ux, Deed dated July 22, 1992, Deed Book Volume 8794, page 638;
Loren L. Lewis, et ux, Deed dated July 20, 1992, Deed Book Volume
8794, page 643; and Mellon Bank, N.A., Executor of the Estate of
Gordon E. Williams, deceased, Deed dated August 10, 1992, Deed Book
Volume 8794, page 649. (Transmission Line).
-8-
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded: August 24, 1993
Mortgage Book Volume 13405, page 609
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded: August 24, 1993
Mortgage Book Volume 1277, page 445
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded: August 25, 1993
Mortgage Book Volume 118, page 835
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded: August 25, 1993
Mortgage Book Volume 2037, page 194
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded: August 25, 1993
Mortgage Book Volume 3197, page 511
Belmont County, Ohio
Office of Recorder
Received: August 25, 1993
Recorded: August 26, 1993
Mortgage Book Volume 606, page 697
Columbiana County, Ohio
Office of Recorder
Recorded: August 26, 1993
Mortgage Book Volume 390, page 710
Jefferson County, Ohio
Office of Recorder
Received: August 25, 1993
Recorded: August 26, 1993
Mortgage Book Volume 110, page 1
-9-
<PAGE>
Lake County, Ohio
Office of Recorder
Recorded: August 26, 1993
Mortgage Book Volume 898, page 126
Monroe County, Ohio
Office of Recorder
Received: August 25, 1993
Recorded: August 25, 1993
Mortgage Book Volume 133, page 689
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded: August 26, 1993
Deed of Trust Book 307, page 141
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded: August 25, 1993
Deed of Trust Book 719, page 363
-10-
<PAGE>
EXHIBIT 10.10
CAPCO BASIC OPERATING AGREEMENT
As Amended January 1, 1993
* * *
The Cleveland Electric Illuminating Company
Duquesne Light Company
Ohio Edison Company
Pennsylvania Power Company
The Toledo Edison Company
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Article 1 -- Purpose of Agreement 2
Article 2 -- Definitions 2
Article 3 -- Operating Committee 6
Article 4 -- Operating Conditions 8
4.01 Parallel Operation 8
4.02 Frequency 9
4.03 Megavars 9
4.04 Unscheduled Energy 9
4.05 Transmission Operation 10
4.06 Coordinated Maintenance 10
4.07 Unit Availability 11
4.08 Utilization of CAPCO Units 12
Article 5 -- Coordinated Maintenance and CAPCO
Back-Up Power 12
5.01 Coordinated Maintenance 12
5.02 CAPCO Back-Up Power 12
5.03 Scheduling CAPCO Back-Up Power 13
5.04 Obligation to Provide CAPCO
Back-Up Power 14
5.05 Proportional Supply of CAPCO
Back-Up Power 15
Article 6 -- Communications 15
Article 7 -- Services 16
Article 8 -- Executive Committee 18
Article 9 -- Ohio Edison System 19
Article 10 -- Interconnection Metering 19
Article 11 -- Records 21
Article 12 -- Statements, Billings, Settlements
and Payments 21
Article 13 -- Government Approvals 24
Article 14 -- Notices 25
</TABLE>
<PAGE>
TABLE OF CONTENTS
(Cont'd)
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Article 15 -- Non-Waiver 26
Article 16 -- Arbitration 26
Article 17 -- Assignment 30
Article 18 -- Governing Law 30
Article 19 -- Other Agreements 30
Article 20 -- Term of Agreement 31
Article 21 -- Separate Identities 32
Article 22 -- Force Majeure 33
Article 23 -- Liability 33
</TABLE>
<PAGE>
CAPCO BASIC OPERATING AGREEMENT
(As Amended January 1, 1993)
This Agreement, effective as of the 1st day of January, 1993, by and
among The Cleveland Electric Illuminating Company, an Ohio corporation
("CEI"); Duquesne Light Company, a Pennsylvania corporation ("DL"); Ohio
Edison Company, an Ohio corporation; Pennsylvania Power Company, a
Pennsylvania corporation and a wholly-owned subsidiary of Ohio Edison Company
which company and its said subsidiary, except as otherwise provided herein,
are considered as a single Party for the purposes of this Agreement and
referred to as ("OE"); and The Toledo Edison Company, an Ohio corporation
("TE"); each of which is sometimes referred to as a Party, or Owner, and
collectively as the Parties, Owners or CAPCO,
W I T N E S S E T H :
0.01 The Parties own electric utility systems located in Western
Pennsylvania, Northern and Central Ohio, and are engaged in the generation,
transmission and distribution of electric power.
0.02 The systems of the Parties are interconnected directly or
indirectly and are operated in synchronism.
<PAGE>
ARTICLE I
---------
Purpose of Agreement
--------------------
1.01 It is the purpose of this Agreement to provide for the coordinated
operation of the systems of the Parties, so as to (1) provide for the
utilization by each of the Parties of facilities heretofore provided for by the
Parties; (2) provide a degree of mutual support; (3) provide for capacity and
energy transactions by and among the Parties; (4) permit coordination of the
operation of the systems of the Parties; and (5) achieve an equitable sharing of
the responsibilities, risks and expenses and of the resulting benefits of
coordinated operation of the systems of the Parties.
ARTICLE 2
---------
Definitions
-----------
The definitions in this Article shall apply to this Agreement and to the
Schedules hereto, unless otherwise expressly provided in such Schedules.
2.01 Actual Capacity of a Party shall mean the sum of the Net
---------------
Demonstrated Capability of its ownership shares in CAPCO Units, plus its
Individual Capacity (in all cases to the extent then in commercial operation)
adjusted in all cases for seasonal factors existing at the time pursuant to
the document entitled,
- 2 -
<PAGE>
"CAPCO Group Common Method of Rating Generating Equipment," dated October 17,
1969, as amended from time to time, plus such Party's individual purchases less
such Party's individual sales (but shall exclude power scheduled to be received
by a Party to provide for deliveries to cooperative or municipal systems or
other Parties or non-CAPCO parties' systems).
2.02 CAPCO Unit shall mean any one of the following listed Units: W. H.
----------
Sammis Generating Station Unit No. 7, Bruce Mansfield Unit No. 1, Bruce
Mansfield Unit No. 2, Bruce Mansfield Unit No. 3, Davis-Besse Nuclear Power
Station Unit No. 1, Beaver Valley Power Station Unit No. 1, Beaver Valley Power
Station Unit No. 2, Eastlake Generating Station Unit No. 5, Perry Nuclear Power
Plant Unit No. 1 and Perry Nuclear Power Plant Unit No. 2.
2.03 Coordinated Maintenance Schedule means the schedule established
--------------------------------
under the direction of the Operating Committee pursuant to Section 5.01.
2.04 Individual Capacity of a Party as of any date is the sum of the
-------------------
following:
(a) The Net Demonstrated Capabilities of the generating units or
portions thereof owned or leased by such Party in commercial operation and not
placed in cold reserve, but exclusive of ownership of CAPCO Units.
- 3 -
<PAGE>
(b) The equivalent Net Demonstrated Capability of such Party's
portion of the Ohio Valley Electric Corporation ("OVEC") capacity.
2.05 Interruptible Load of a Party is the total of megawatthours
------------------
delivered during any clock hour to its retail customers or to municipal or
cooperative systems which the Party, in its sole discretion, is privileged to
curtail or completely interrupt in accordance with a rate schedule or
contractual arrangement with such customer or customers.
2.06 Load of a Party during any clock hour is the total during any such
----
clock hour (eliminating on an agreed basis any distortion arising out of
deliveries between systems where material) of megawatthours (a) delivered by
the Party to its retail customers and its municipal systems, but excluding
that portion of municipal system Load which is purchased from other Parties or
systems, (b) used by the Party on its own system, exclusive of use for station
auxiliary power, and (c) lost and unaccounted for on the system of the Party;
but shall exclude Interruptible Load.
2.07 Minimum Operating Reserve of a Party, unless otherwise determined
-------------------------
by the Operating Committee, shall mean a spinning reserve of not less than 3%
of the projected daily Peak Load of such Party.
- 4 -
<PAGE>
2.08 Net Demonstrated Capability of a generating unit as of any time
---------------------------
means that most recently determined pursuant to the methods and principles set
forth in the document entitled, "CAPCO Group Common Method of Rating
Generating Equipment," dated October 17, 1969, as amended from time to time.
2.09 Operating Capacity of a Party during a particular day shall mean
------------------
that portion of a Party's Actual Capacity to the extent actually in operation
or expected to be in operation.
2.10 Operating Reserve of a Party means that component of Operating
-----------------
Capacity which is unloaded, plus Quick Start Capacity and Interruptible Load
to the extent they can be so included in accordance with rules and procedures
established by the Operating Committee.
2.11 Peak Load of a Party for any period of time is the maximum Load of
---------
the Party for any clock hour of the period.
2.12 Power shall include electric capacity and energy expressed in
-----
megawatts and megawatthours.
2.13 Quick Start Capacity means generating capacity which can be started,
--------------------
synchronized to the system and loaded within a time period as specified by the
Operating Committee.
- 5 -
<PAGE>
ARTICLE 3
---------
Operating Committee
-------------------
3.01 The Operating Committee shall be that established pursuant to the
CAPCO Administration Agreement dated as of September 14, 1967, as the same may
be amended from time to time.
3.02 Each Party shall make available to the Operating Committee all
data and information reasonably required to enable it to perform its duties.
3.03 The Operating Committee shall be responsible for establishing,
maintaining and revising as necessary the Coordinated Maintenance Schedule.
3.04 The Operating Committee shall be responsible for the establishment
and administration of rules and procedures to coordinate the operation of the
systems of the Parties to effectuate the purpose of this Agreement. Without
limiting the generality of the foregoing, the Operating Committee shall
establish rules and procedures for:
(a) The determination of billing costs and other factors used for
scheduling and billing of transactions hereunder;
- 6 -
<PAGE>
(b) The determination of the increase or decrease of electrical
losses incurred as the result of transactions hereunder;
(c) The establishment and periodic revision of the Coordinated
Maintenance Schedule which shall be reviewed at least annually;
(d) The determination of the Minimum Operating Reserve for each
Party;
(e) The scheduling of CAPCO Back-Up Power as provided in
Article 5; and
(f) Accumulating and recording load, capacity and other operating
data needed to evaluate performance under the various CAPCO agreements.
3.05 The Operating Committee shall conduct studies of the coordinated
operation of the systems of the Parties for the purposes of this Agreement, and
make recommendations with respect thereto, including recommendations with
respect to the development and coordination of an adequate communication system.
The Operating Committee is authorized to create task forces for particular
studies and to appoint the members thereof who need not be members of the
Operating Committee. Subject to
- 7 -
<PAGE>
such limitations as may be imposed by the Executive Committee, the Operating
Committee is authorized on behalf of the parties to hire consultants and
computer time and to incur other expenses in the making of any of its studies.
ARTICLE 4
---------
Operating Conditions
--------------------
4.01 Each party shall operate its system continuously in parallel with
each other Party with which it is interconnected. Unless otherwise mutually
agreed which agreement shall not be unreasonably withheld, all existing
interconnections between the systems of the Parties operating at nominal
voltages of 138,000 volts and above shall normally be operated closed. Each
Party shall maintain and operate its system so as to minimize the likelihood
and effect of disturbances on its system which might impair the service on the
system of any other Party. Each Party shall be the sole judge whether service
on its system is being impaired by conditions on the system of another Party
and may itself take, or request such other Party to take, appropriate
corrective action to restore normal operating conditions as soon as reasonably
practicable.
Power which is supplied by one Party to another Party through
interconnections normally operated open or through a
- 8 -
<PAGE>
temporary interconnection point shall be compensated for by the other Party
delivering to the first Party through other interconnections equivalent Power
adjusted for losses. It is the intent of the Parties that, whenever feasible,
such compensation shall be made simultaneously with the delivery of Power
through such interconnections.
4.02 Each Party shall use its best efforts to operate its system so as
to aid in maintaining the frequency on the systems of the Parties at a nominal
60 Hz within the limits for normal operating deviations as established from
time to time by the Operating Committee.
4.03 Each Party shall, to the extent practicable, operate its system so
as to avoid the creation of objectionable operating conditions on the system
of another Party due to the transfer of megavars. Subject to the foregoing,
the Operating Committee shall (a) establish operating procedures for the
coordination of megavar supply associated with flows of Power pursuant to this
Agreement, and (b) determine the circumstances under which a Party shall
compensate another for supplying megavars in connection with flows of Power
pursuant to this Agreement and recommend the amount of such compensation.
4.04 Each Party shall exercise reasonable care to minimize, to the extent
practicable, unscheduled deliveries or
- 9 -
<PAGE>
receipts of electric energy. The Parties recognize, however, that despite
their best efforts such unscheduled deliveries or receipts of electric energy
may occur. Electric energy delivered or received in such event shall be
settled for by return of equivalent energy. It shall be returned at times when
the load conditions of the returning Party are equivalent to the load
conditions of such Party at the time the energy for which it is returned was
received, unless otherwise agreed.
4.05 The Parties recognize that in the day-to-day operation of their
systems the transmission facilities of any Party may, as a natural result of
the physical and electrical characteristics of the interconnected network of
transmission lines of which the transmission lines of the Parties are a part,
carry Power from one portion of the system of one of the Parties to another
portion of that Party's system, or carry Power intended to be transmitted to
or from the system of one of the Parties from or to the system of another
Party or other systems. The Parties will use their best efforts to resolve
promptly any operating problems thereby created, including but not limited to
curtailing or interrupting Interruptible Load and Economy Power transactions
with other Parties and/or other systems.
4.06 Each Party shall, to the fullest extent practicable:
- 10 -
<PAGE>
(a) Maintain generating units in accordance with the Coordinated
Maintenance Schedule.
(b) Coordinate with the other Parties the scheduled outages of
transmission facilities operating at nominal voltages of 138,000 volts or above.
(c) Return generation and transmission facilities to service in
good operating condition with reasonable promptness.
(d) Advise the other Parties as to its maintenance practices and
policies and any changes therein, and cooperate in attempts to accelerate or
defer maintenance of generation and transmission facilities in emergency
situations.
4.07 Each Party shall be the sole judge as to whether, due to physical
conditions beyond its reasonable control, a generating unit operated by such
Party is unavailable for operation or unavailable for continued operation or
must be derated or temporarily removed from service; provided, however, that
unavailability for operation or continued operation, or derating, for reasons of
limitations of fuel supply for a CAPCO unit, shall be determined in accordance
with rules and procedures established by the Operating Committee.
- 11 -
<PAGE>
4.08 Each Party shall be entitled to the full utilization, with respect
to capacity and energy, when a CAPCO Unit is available and based on and in
proportion to the actual day-by-day operating capacity, of (a) its ownership
share of capacity in that Unit, plus (b) its entitlement to receive capacity
from another Party's ownership share in such Unit, and minus (c) its
obligation to provide capacity from such Unit. Scheduling of such capacity and
energy entitlements shall be adjusted appropriately for transmission line
losses.
ARTICLE 5
---------
Coordinated Maintenance and CAPCO Back-Up Power
-----------------------------------------------
5.01 The Parties shall coordinate the outages for maintenance of all
CAPCO Units and such other units of the Parties as are identified by the
Operating Committee and for such purpose the Coordinated Maintenance Schedule
shall be developed and maintained in accordance with rules and procedures
established pursuant to Section 3.04.
5.02 In order to provide back-up for CAPCO Unit outages, each Party shall
have an entitlement to receive or an obligation to provide operating capacity
and associated energy in the form of CAPCO Back-Up Power. CAPCO Back-Up Power
shall be calculated as specified in the next paragraph in this Section and shall
be compensated for as specified in Schedule A of this
- 12 -
<PAGE>
Agreement; provided, however, such CAPCO Back-Up Power shall not be available
for any nuclear CAPCO Unit during those periods in which such CAPCO Unit is
out of service for the reasons set forth in Schedule I.
In the event of the forced or scheduled outage of any CAPCO Unit in
commercial operation (except those Units in cold reserve), each Party agrees
to provide or shall have the right to receive, as the case may be, CAPCO Back-
Up Power in an amount equal to the difference between such Party's ownership
share in the CAPCO Unit out of service, expressed in megawatts, and a value
determined by multiplying the Net Demonstrated Capability of the CAPCO Unit
out of service by the ratio of such Party's ownership share of the Net
Demonstrated Capability of all of the CAPCO Units in commercial operation to
the total Net Demonstrated Capability of all of the CAPCO Units in commercial
operation.
Each Party shall use its best efforts to operate its system so as to
provide the amounts of Minimum Operating Reserve determined consistent with
the rules and procedures established pursuant to Section 3.04.
5.03 Pursuant to rules and procedures established by the Operating
Committee, CAPCO Back-Up Power for the next succeeding day shall be arranged
on a net basis, initially at
- 13 -
<PAGE>
1200 hours on the preceding day or such other time mutually agreed upon by the
Operating Committee, and shall be scheduled as requested by the receiving
Party. The receiving Party shall have the right to receive all or any part of
such Party's net entitlement to CAPCO Back-Up Power.
5.04 Each Party is obligated to provide CAPCO Back-Up Power after
supplying its Load and meeting its Minimum Operating Reserve, except when the
delivery of such Power would, in the judgment of the supplying Party, have to
be interrupted or reduced to preserve the integrity of or to prevent or limit
any instability on the supplying Party's system. If a Party having an
obligation to supply does not have sufficient capacity available on its own
system to meet the obligation, it is obligated to purchase capacity and
associated energy if available to provide CAPCO Back-Up Power.
For each day that a Party is unable to fulfill all or any part of its
obligation to provide CAPCO Back-Up Power because it is supplying Power other
than CAPCO Back-Up Power to another Party or to a non-CAPCO party, except
pursuant to obligations imposed by governmental authorities, agreements referred
to in Article 19, and any additional agreements excepted by the Parties, such
Party shall pay an amount equal to twice the maximum daily demand charge for the
CAPCO Back-Up Power not provided by such Party to the other Parties to be
- 14 -
<PAGE>
shared in proportion to the entitlements which were not fulfilled. In the event
any Party is unable to provide CAPCO Back-Up Power in any substantial amount
over an extended period and reserves substantial CAPCO Back-Up Power from
others, the parties shall develop corrective measures such as, but not limited
to, increasing the demand charge rate.
5.05 CAPCO Back-Up Power will be made available in proportion to Party
entitlements from supplying Parties in proportion to their obligations, and will
be made available from the least-cost available Power. In the event that a
receiving Party or Parties reserve less than its or their entitlement of CAPCO
Back-Up Power, the remaining CAPCO Back-Up Power will be made available from the
supplying Parties in proportion to their obligations to the other receiving
Parties in proportion to their entitlements from such least-cost available
Power. CAPCO Back-Up Power obligations not reserved by the receiving Parties
shall be deemed released to the supplying Parties.
ARTICLE 6
---------
Communications
--------------
6.01 The Parties will establish communication facilities as may be
required to provide voice communication, telemetering, automatic generation
control, monitoring, tie-line control, and other functions as may be
determined from time to
- 15 -
<PAGE>
time by the Operating Committee, or as required by other agreements among the
Parties. Such communication facilities will consist of existing communication
links owned or leased by the Parties as well as communication links to be
built or leased by the Parties. It is understood that extensive use of
microwave links will be made pursuant to the CAPCO Microwave Sharing
Agreement, as amended January 1, 1993 and as it may be amended from time to
time, although carrier current and wire communication facilities will be used
as deemed appropriate by the Operating Committee. Communication links other
than microwave will be provided, operated and paid for as determined by the
Operating Committee following as closely as possible the principles
established in said sharing Agreement.
ARTICLE 7
---------
Services
--------
7.01 The specific services and transactions among the Parties pursuant to
this Agreement shall be in conformance with the terms and conditions of this
Agreement and as set forth in Schedules arranged from time to time among the
Parties.
The following Schedules are agreed to and hereby made a part of this
Agreement:
Schedule A - CAPCO Back-Up Power
Schedule B - Short Term Power
- 16 -
<PAGE>
Schedule C - Non-Displacement Power
Schedule D - Economy Power
Schedule E - Unit Power
Schedule F - Out-of-Pocket Cost
Schedule G - Emergency Power
Schedule H - Transmission of Non-CAPCO Power
Schedule I - Replacement Power
The Parties may, from time to time, agree on modifications to or
additional Schedules, and upon execution thereof the Parties any such
modification or addition shall become a part of this Agreement.
7.02 Energy transactions (other than those arising under Schedule E)
shall be scheduled as if there were zero transmission losses. A Party
receiving such energy from another Party (whether such Party is acting as a
supplying or transmitting Party arising under Schedule D of this Agreement)
shall be charged with any increase in transmission losses and/or shall receive
credit for any decrease in transmission losses associated with the
transmission of the energy through the systems of Parties other than that of
the supplying Party. Transmission losses will be accounted for by separate
calculation in a manner prescribed by the Operating Committee. Loss imbalances
shall be repaid through loss-payback schedules arranged among the Parties.
- 17 -
<PAGE>
7.03 If any transaction results in material interference with the
facilities or operation of the system of any other Party, the Parties to the
transaction promptly shall take appropriate actions which may include, among
other things, modification of the transaction to eliminate such interference
and provide compensation to the Party affected for increased operating costs
or damage to facilities.
ARTICLE 8
---------
Executive Committee
-------------------
8.01 The Executive Committee shall be that established pursuant to the
CAPCO Administration Agreement, dated as of September 14, 1967, as the same
may be amended from time to time.
8.02 The Executive Committee shall have the duties and powers conferred
on it by this Agreement, including the making of any decision or determination
necessary under any provision of this Agreement and not expressly specified to
be decided or determined by any other person or persons.
- 18 -
<PAGE>
ARTICLE 9
---------
Ohio Edison System
------------------
9.01 Ohio Edison Company and Pennsylvania Power Company shall be
considered to be separate Parties under this Agreement whenever and to the
extent that separate corporate action is required of such Companies in order
to accomplish the purpose of this Agreement, but their liability and
responsibility for the performance of any obligation of OE hereunder to the
other Parties shall be joint and several. The allocation between Ohio Edison
Company and Pennsylvania Power Company of their collective obligations
hereunder as OE shall be the sole responsibility of said Companies, but they
undertake that they will, during the period that they shall be obligated under
this Agreement, have in force one or more arrangements for the allocation of
the whole of such collective obligations and will, upon the request of any of
the other Parties hereto, furnish the requesting Party or Parties satisfactory
evidence of the existence of their then effective arrangements relating to
such allocation.
ARTICLE 10
----------
Interconnection Metering
------------------------
10.01 Electricity flowing across an interconnection shall be measured by
suitable metering equipment at metering
- 19 -
<PAGE>
points agreed upon by the Parties to the interconnection. The equipment at
such metering points shall be provided, owned and maintained as agreed by the
affected Parties.
10.02 Measurements of electric energy for the purpose of effecting
settlements shall be made by standard types of electric meters installed and
maintained by the owners at the metering points. The timing devices of all
meters having such devices shall be maintained in time snychronism as closely as
practicable. The meters shall be sealed and the seals shall be broken only upon
occasions when the meters are to be tested or adjusted.
10.03 The aforesaid standard metering equipment shall be tested by the
owners at suitable intervals and its accuracy of registration maintained in
accordance with good practice. On request of any affected Party, a special
test may be made at the expense of the Party requesting such special test.
Representatives of all affected parties shall be afforded opportunity to be
present at all routine or special tests and upon occasions when any readings,
for purposes of settlements, are taken from meters not bearing an automatic
record. For the purpose of checking the records of the metering equipment
installed by a Party as provided above, the other affected party shall have
the right to install check metering equipment at its own expense at the
metering points referred to in Section 10.01.
- 20 -
<PAGE>
10.04 If any test of metering equipment shall disclose an inaccuracy
greater than 2%, the accounts among the affected Parties for service
theretofore delivered shall, unless otherwise agreed by the affected Parties,
be adjusted to correct for the inaccuracy disclosed over the shorter of the
following two periods: (1) from 30 days prior to the receipt of written
request of the test until the meter is corrected; or (2) for the period that
such inaccuracy may be determined to have existed. Should the metering
equipment at any time fail to register under load conditions, or registers
during times of zero flow, the electric energy delivered shall be determined
from the best available data.
ARTICLE 11
----------
Records
-------
11.01 Each party shall keep such records as may be reasonably required
by the Executive Committee or the Operating Committee, and shall furnish to
such committees such records, reports and other information as they may
reasonably require.
ARTICLE 12
----------
Statements, Billings, Settlements and Payments
----------------------------------------------
12.01 As promptly as practicable within 10 days after the end of each
calendar month, the Parties shall prepare and
- 21 -
<PAGE>
furnish to every other Party a statement showing the debits and credits to
each Party for Power transactions hereunder during such month and, to the
extent appropriate, offset or reduce said transactions to a net basis. From
the Party balances so determined, each billing Party shall prepare and send to
each other Party, as appropriate, a billing statement for all transactions
which occurred during the month and involve payment of money. The billing
Party shall take all reasonable measures to ensure that billing statements are
mailed or otherwise transmitted on the billing statement date. Billing
statements may be rendered on an estimated basis subject to corrective
adjustments in subsequent statements. Other than as required by law or
regulatory action or by billing adjustments must be made for power purchases
from non-CAPCO companies, corrective adjustments for power purchases as
defined in Schedules A, B, C, D, G, H and I must be made within one (1) year
of the rendering of the initial billing statement and corrective adjustments
for all other CAPCO billings must be made within four (4) years of the
rendering of the initial billing statement.
12.02 Billing statements rendered pursuant to Section 12.01 shall be
due and payable in good funds the fifteenth calendar day after the billing
statement date of any such statement except that, if the 15th calendar day is
not a business day, the amount billed will be payable the next business day.
Good funds shall consist of checks received at
- 22 -
<PAGE>
least one business day prior to the due date and wire transfers received by noon
on the due date. Interest on unpaid billing statement amounts will be
compounded monthly and prorated for any partial month based on a 365-day year,
and will accrue at a rate equal to Chase Manhattan Bank's prime rate on the
first day of the then current calendar quarter plus two percentage points for a
period of up to one year and for any period thereafter at the higher of this
rate or a rate equal to the billing Party's cost of capital which shall consist
of the weighted average of the billing Party's long-term debt cost and preferred
stock cost rates determined for issues outstanding on December 31 of the prior
year and a common equity cost rate to be effective January 1 of each year equal
to the average return on common equity for at least 50 major electric utilities
with positive returns on common equity as reported in the prior year's December
issue of the C.A. Turner Utility Reports or as reported in the prior year's
latest issue of another report mutually agreed to by the Parties. The weighting
for this calculation shall be the billing Party's capital structure at December
31 of the prior year, consisting solely of long-term debt, preferred stock and
common equity, as reported in such party's FERC Form 1 or in another mutually
agreed upon source. Billing adjustments which represent amounts to be refunded
by the billing Party shall accrue interest as noted above, but billing
adjustments payable to the billing Party for additional amounts shall not accrue
interest. Notwithstanding the foregoing, any billing
- 23 -
<PAGE>
statement shall not be due and payable to the extent that (1) any non-CAPCO
party system fails to compensate a Party for amounts owed hereunder in which
event such Party shall exercise its best efforts to collect such compensation
from such non-CAPCO party system and will not compromise or settle any claim for
such compensation without prior consent of all other affected parties, or (2)
any non-CAPCO party system's payment date is later that the fifteen days stated
above in which case such billing statement shall be due and payable on the same
date as that of the non-CAPCO party system's payment date. To the extent that
any non-CAPCO party system compensates a party in an amount less than the amount
the non-CAPCO party system owes the Parties under the Party's billing statement
for amounts owed hereunder, each party shall be entitled to be first compensated
for Out-of-Pocket Costs associated with the transaction hereunder and so much of
the balance as will result in a sharing of the remainder among the Parties in
proportion to the amounts owed to such Parties for their respective unpaid
charges.
ARTICLE 13
----------
Government Approvals
--------------------
13.01 The obligations of each of the Parties hereunder are subject to the
obtaining of any requisite orders, approvals, permits, certificates or licenses
from any government authorities having jurisdiction.
- 24 -
<PAGE>
13.02 This Agreement is made subject to the jurisdiction of any
government authority or authorities having jurisdiction in the premises.
Nothing contained in this Agreement or any Schedule of this Agreement shall be
construed as affecting in any way the right of any Party to unilaterally make
application to the Federal Energy Regulatory Commission for a change in rates
under the Federal Power Act and pursuant to the Commission's Rules and
Regulations promulgated thereunder.
ARTICLE 14
----------
Notices
-------
14.01 Notices or requests, when required under this Agreement to be in
writing, shall be delivered in person or mailed to the addressee at such Party's
general office. Other notices or requests required under this Agreement may be
given orally and, if required by the other Party, shall thereafter be confirmed
in writing within three working days. Copies of notices or requests,
confirmations of oral notices or requests, and information as to oral notices or
requests shall be provided to the Office in accordance with procedures
established by the Operating Committee.
- 25 -
<PAGE>
ARTICLE 15
----------
Non-Waiver
----------
15.01 Any waiver at any time by any Party of its rights with respect to
any matter arising in connection with this Agreement shall not be deemed a
waiver with respect to any subsequent similar matter. Any delay, short of the
statutory period of limitation, in asserting or enforcing any right under this
Agreement, shall not be deemed a waiver of such right, except as provided in
Sections 12.01 and 12.02 and in Section 16.01.
ARTICLE 16
----------
Arbitration
-----------
16.01 Any controversy or claim arising out of this Agreement, including
the refusal by any Party to perform the whole or any part hereof, shall, upon
demand of any Party aggrieved, be settled by an Arbitration Board, which shall
consist of three nonrepresentative members and such additional representative
members as hereinafter provided in this Section. No person shall be eligible
for appointment as a nonrepresentative member of the Arbitration Board who is
an officer, employee, shareholder of, or otherwise interested in, any Party or
any affiliate thereof or in the matter sought to be arbitrated.
- 26 -
<PAGE>
Unless otherwise agreed, no demand for arbitration shall be made more
than one year after the Parties have reached an impasse as to the controversy
or claim involved. The Party or Parties demanding arbitration shall serve
written notice upon the other Party or Parties to the controversy, setting
forth in detail the matter or matters with respect to which arbitration is
demanded, and shall serve copies of such notice upon any other Parties hereto.
Within a period of 10 days from the date of receipt of the aforesaid written
notice, each Party to the controversy shall appoint a representative to serve
as a member of the Arbitration Board; and, within a period of 30 days from
such date of receipt of such written notice, such representative members shall
unanimously agree upon the persons who shall serve as the three
nonrepresentative members of the Arbitration Board.
If the representative members are not so appointed within the specified
30-day period, or if the representative members shall fail to unanimously
agree under the appointment of any or all of the three nonrepresentative
members of the Arbitration Board within the specified 30-day period, any Party
to the controversy may, upon written notice to the other Parties to the
controversy, request the American Arbitration Association to submit to the
Parties to the controversy a list from its panels of arbitrators of the names
of at least seven persons from which the nonrepresentative member or members
who have not been so appointed shall be selected in accordance with the
Commercial Arbitration Rules of such Association.
- 27 -
<PAGE>
If any Party to the controversy shall fail to appoint its representative
member within the specified 10-day period, such Party shall be deemed to have
waived its right to appoint such representative member and the Arbitration Board
shall consist of the three nonrepresentative members and such representative
members, if any, as shall have been appointed in accordance with the provisions
of this Section 16.01.
The arbitration proceedings shall be conducted at a place, to be
designated by the Arbitration Board, within the service area of one of the
Parties to the controversy. The Arbitration Board shall afford adequate
opportunity to each Party to the controversy to present information with
respect to the controversy or claim submitted to arbitration and may request
further information from any such Party. Except as provided in the preceding
sentence, the Parties to the controversy may, by mutual agreement, specify the
rules which are to govern any proceeding before the Arbitration Board and
limit the matters to be considered by the Arbitration Board, in which event
the Arbitration Board shall be governed by the terms and conditions of such
agreement. To the extent of the absence of any such agreement specifying the
rules which are to govern any proceeding, the then current applicable rules of
the American Arbitration Association for the conduct of commercial arbitration
shall govern the proceedings.
- 28 -
<PAGE>
The arbitration shall be limited to the matter or matters specified in the
initial notice demanding arbitration and the award of the Board shall not affect
or change any provision of this Agreement or any other transaction between the
Parties.
Procedural matters pertaining to the conduct of the arbitration and the
award of the Arbitration Board shall be determined by a majority of the
nonrepresentative members thereof; provided, however, that the representative
members shall have full right and authority to participate in all meetings and
deliberations of the Arbitration Board leading to the award. The findings and
award of the Arbitration Board, so made upon a determination of a majority of
the nonrepresentative members thereof, shall be final and conclusive with
respect to the controversy or claim submitted for arbitration and shall be
binding upon the Parties to the controversy except as otherwise provided by
law. Such award of the Arbitration Board shall specify the manner and extent
of the division of the costs of the arbitration proceedings among the Parties
to the controversy. Judgment upon the award may be entered in any court, State
or Federal, having jurisdiction.
- 29 -
<PAGE>
ARTICLE 17
----------
Assignment
----------
17.01 No Party may, without the prior written consent of the others,
assign this Agreement, except as the same may be assigned (a) voluntarily or
otherwise under its first mortgage, or (b) to a successor to all or
substantially all of the assets of the Party by way of merger, consolidation,
sale or otherwise, where the successor assumes and becomes liable for all the
obligations of the Party hereunder.
ARTICLE 18
----------
Governing Law
-------------
18.01 This Agreement is made under and shall be governed by the laws of
the State of Ohio insofar as applicable.
ARTICLE 19
----------
Other Agreements
----------------
19.01 During the term of this Agreement, its terms, conditions and
Schedules shall be applicable to transactions among the Parties. This
Agreement is not to be interpreted as conflicting or interfering with the
performance of any agreement including modifications or amendments thereto
between any Party and any system not a Party to this Agreement, effective
prior to August 31, 1980.
- 30 -
<PAGE>
The Parties hereto shall be free to enter into any new agreements with
other Parties or with other systems which do not impair operations under this
Agreement or the ability of a Party to perform its obligations under this
Agreement.
The following agreements identified by FERC rate schedule numbers shown
for each listed company are hereby terminated:
<TABLE>
<CAPTION>
Company FERC Rate Schedule Number(s)
------- ----------------------------
<S> <C>
The Cleveland Electric Illuminating Company 25
Duquesne Light Company 21
Ohio Edison Company 157
Pennsylvania Power Company 44
The Toledo Edison Company 35
</TABLE>
ARTICLE 20
----------
Term of Agreement
-----------------
20.01 Except as provided in Section 20.03, this Agreement shall continue
in effect until such time as all CAPCO Units are retired.
20.02 Any Party may withdraw from this Agreement by giving one year's
advance notice in writing to the members of
- 31 -
<PAGE>
the Executive Committee of the other Parties, provided that in the event of such
withdrawal, the provisions of this Agreement relating to coordinated maintenance
of CAPCO Units, CAPCO Back-Up Power, and CAPCO Replacement Power shall continue
in effect until such time as all CAPCO Units are retired.
20.03 Notwithstanding the retirement of all CAPCO Units under
Section 20.01 and the withdrawal of any Party under Section 20.02, this
Agreement shall continue in effect for those Parties who do not withdraw from
this Agreement.
ARTICLE 21
----------
Separate Identities
-------------------
21.01 The duties, obligations and liabilities of the Parties are
intended to be several and not joint or collective, and nothing herein
contained shall ever be construed to create an association, joint venture,
trust or partnership or to impose a trust or partnership duty, obligation or
liability on or with regard to any Party. Each Party shall be individually
responsible for its own obligations as herein provided. No Party shall be
under the control of or shall be deemed to control another Party by virtue of
this Agreement. No Party shall have a right or power to bind another without
its or their express written consent, except as expressly provided in this
Agreement.
- 32 -
<PAGE>
ARTICLE 22
----------
Force Majeure
-------------
22.01 No Party shall be considered to be in default in the performance
of any of the obligations hereunder if failure of performance shall be due to
uncontrollable forces. The term "uncontrollable forces" shall mean any cause
beyond the control of the Party affected, including but not limited to the
failure of facilities, flood, earthquake, storm, fire, lightning, epidemic,
war, riot, civil disturbance, labor dispute, sabotage, restraint by Court
order or public authority or inability to obtain necessary licenses or
permits. Nothing herein shall be construed so as to require a Party to settle
any strike or labor dispute in which it may be involved. Any Party which is
unable to fulfill any obligations by reason of uncontrollable forces shall
exercise due diligence to remove such inability with all reasonable dispatch.
ARTICLE 23
----------
Liability
---------
23.01 All claims arising out of any bodily injury, death or damages to
property or business of third persons (other than customers, as such, of any of
the Parties) arising because of operations under this Agreement caused or
sustained on the system of a Party (the Defending Party) shall be defended or in
- 33 -
<PAGE>
its discretion settled by such Party. In the event any action on any such claim
is brought against any other Party, such other Party shall promptly notify the
Defending Party in writing, and the Defending Party shall be entitled to and
shall take over and direct the defense and disposition of the case. Any amounts
paid by way of settlement or in satisfaction of any judgment and all expenses
associated with such defense or settlement shall be the responsibility of the
Defending Party. The provisions of this Section do not apply to claims of the
employees of any Party under any workers' compensation law, for which the
employing Party shall be responsible.
23.02 Each Party hereby waives any and all claims it may have against any
other Party arising from negligence or other fault of another Party in
connection with operations under this Agreement, except as otherwise provided in
Section 7.03.
- 34 -
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers this 23rd day of December, 1993.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By: /s/ Terrence G. Linnert
-----------------------------
Title: Vice President
--------------------------
DUQUESNE LIGHT COMPANY
By: /s/ G. R. Brandenberger
-----------------------------
Title: Vice President
--------------------------
OHIO EDISON COMPANY
By: /s/ Arthur R. Garfield
-----------------------------
Title: Vice President
--------------------------
PENNSYLVANIA POWER COMPANY
By: /s/ J. R. Edgerly
-----------------------------
Title: Vice President
--------------------------
THE TOLEDO EDISON COMPANY
By: /s/ Terrence G. Linnert
-----------------------------
Title: Vice President
--------------------------
- 35 -
<PAGE>
EXHIBIT 10.11
AMENDMENT NO. 1 TO
------------------
CAPCO TRANSMISSION FACILITIES AGREEMENT
---------------------------------------
THIS AGREEMENT, effective as of the 1st day of January 1, 1993, by and among
The Cleveland Electric Illuminating Company, an Ohio corporation ("CEI");
Duquesne Light Company, a Pennsylvania corporation ("DL"); Ohio Edison Company,
an Ohio corporation; Pennsylvania Power Company, a Pennsylvania corporation
("PP") and a wholly-owned subsidiary of Ohio Edison Company which Company and
its said subsidiary, except as otherwise provided herein, are considered as a
single Party for the purposes of this Agreement and referred to as ("OE"); and
The Toledo Edison Company, an Ohio corporation ("TE"), each of which is
sometimes referred to as a Party, and collectively as the Parties.
W I T N E S S E T H:
WHEREAS, the Parties entered into the CAPCO Transmission Facilities Agreement
as of September 14, 1967 (herein referred to as the "Agreement"); and
WHEREAS, the Parties entered into an Agreement on January 7, 1993, and
approved an Addendum to the CAPCO Accounting and Procedure Manual to supersede
applicable sections of the manual on a prospective basis as of January 1, 1993
(said Agreement
<PAGE>
being herein referred to as the "Addendum to CAPCO Accounting and Procedure
Manual" or "Addendum"); and
WHEREAS, the provisions of the Addendum to the CAPCO Accounting and Procedure
Manual are intended to supersede any provisions of the Agreement which conflict
with or are inconsistent with the Addendum, so that such conflicts and
inconsistencies shall be removed by appropriate written amendments to the
Agreement or by other appropriate action; and
WHEREAS, the Parties desire to further amend the Agreement as hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein set forth, the Parties agree as follows:
1. Section 7.02 of the Agreement is amended to read as follows:
The Party owning a CAPCO Line or portion thereof shall bill each
other Party monthly for such other Party's Investment Responsibility
with respect thereto. The invoice date shall be established as soon as
possible after the close of each calendar month, and the owning Party
shall prepare and make all reasonable efforts to transmit invoices on
or before the invoice
- 2 -
<PAGE>
date to each other Party for such other Party's Investment
Responsibility. The amount billed will be payable in good funds the
15th calendar day after the invoice date except that, if the 15th
calendar day is not a business day, the amount billed will be payable
the next business day. Good funds shall consist of checks received at
least one business day prior to the due date and wire transfers
received by noon on the due date. Interest on unpaid invoice amounts
will be compounded monthly and prorated for any partial month based on
a 365-day year, and will accrue at a rate equal to Chase Manhattan
Bank's prime rate on the first day of the then current calendar
quarter plus two percentage points for a period of up to one year and
for any period thereafter at the higher of this rate or a rate equal
to the billing Party's cost of capital which shall consist of the
weighted average of the billing Party's long-term debt cost and
preferred stock cost rates determined for issues outstanding on
December 31 of the prior year and a common equity cost rate to be
effective January 1 of each year equal to the average return on common
equity for at least 50 major electric utilities with positive returns
on common equity as reported in the prior year's December issue of the
C.A. Turner Utility Reports or as reported in the prior year's latest
issue of another report mutually agreed to by the Parties. The
weighting for
- 3 -
<PAGE>
this calculation shall be the billing Party's capital structure at
December 31 of the prior year, consisting solely of long-term debt,
preferred stock and common equity, as reported in its FERC Form 1 or
in another mutually agreed upon source. Invoices may not be changed or
adjusted after four years from the invoice date, and invoice amounts
to be refunded by the billing Party shall accrue interest as noted
above, but invoice amounts payable to the billing Party for additional
amounts shall not accrue interest.
To the extent practicable all charges payable or receivable under
this Agreement shall be offset and reduced to a net basis in order to
provide a minimum practicable number of payments among the Parties.
Such statements may be tendered on an estimated basis subject to
corrective adjustments in subsequent statements.
2. Section 17.01 of the Agreement is amended to read as follows:
Any waiver at any time by any Party of its rights with respect to
any matter arising in connection with this Agreement shall not be
deemed a waiver with respect to any subsequent similar matter. Any
delay, short of the statutory period of limitation, in
- 4 -
<PAGE>
asserting or enforcing any right under this Agreement, shall not be
deemed a waiver of such right, except as provided in Section 7.02 and
Section 14.01.
3. Exhibit B - Computation of Investment Responsibility of the Agreement is
amended to read as attached:
4. Except as herein above amended, all of the terms and conditions of the
Agreement shall remain in full force and effect.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers this 23rd day of December, 1993.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By /s/ Terrence G. Linnert
------------------------------------
Title Vice President
---------------------------------
DUQUESNE LIGHT COMPANY
By /s/ G. R. Brandenberger
------------------------------------
Title Vice President
---------------------------------
OHIO EDISON COMPANY
By /s/ Arthur R. Garfield
------------------------------------
Title Vice President
---------------------------------
PENNSYLVANIA POWER COMPANY
By /s/ J. R. Edgerly
------------------------------------
Title _________________________________
THE TOLEDO EDISON COMPANY
By /s/ Terrence G. Linnert
-----------------------------------
Title Vice President
--------------------------------
- 6 -
<PAGE>
EXHIBIT 10.12
CAPCO MICROWAVE SHARING AGREEMENT
---------------------------------
(As Amended January 1, 1993)
THIS AGREEMENT, effective as of January 1, 1993, by and among The Cleveland
Electric Illuminating Company, an Ohio corporation ("CEI"), Duquesne Light
Company, a Pennsylvania corporation ("DL"), Ohio Edison Company, an Ohio
corporation ("OE"), Pennsylvania Power Company, a Pennsylvania corporation
("PP)", and The Toledo Edison Company, an Ohio corporation ("TE"), each of which
is herein referred to as a Party and collectively as the Parties, or as the
CAPCO Group.
WITNESSETH:
WHEREAS, the Parties hereto have constructed and agreed to construct
generating units owned by them as tenants in common ("CAPCO Generating Units"),
and are engaged in the generation, transmission and distribution of electricity
to the public in western Pennsylvania and in northern and Central Ohio, through
electric systems which are interconnected directly or indirectly and are
operated in synchronism; and
WHEREAS, the Parties hereto have entered and proposed to enter into various
agreements for planning, construction and interconnected operation of their
facilities in order to achieve the benefits to be effected through coordination
in the operation and development of their respective generation and transmission
systems; and
WHEREAS, each of the Parties hereto is eligible to be
<PAGE>
licensed by the Federal Communications Commission ("FCC") to operate microwave
stations in the Power Radio Service, under Code of Federal Regulations, Title
47, Chapter 1, Part 94; and
WHEREAS, each of the Parties hereto is licensed by the FCC to operate one or
more microwave stations generally identified on the map annexed hereto as
"Exhibit A" forming an interconnected microwave system, the use of which is to
be shared by the Parties hereto, on a non-profit basis, in order to better
coordinate the operation of their interconnected electric systems; and
WHEREAS, the Parties desire to define the methods and procedures for the
equitable sharing of certain costs of said interconnected microwave system
hereinafter called the "CAPCO Microwave System" ("CMS"); and
WHEREAS, the parties hereto desire to also define their rights and
obligations relating to the construction, maintenance and use of the CMS.
NOW THEREFORE, in consideration of the mutual agreements herein set forth,
the Parties hereto agree as follows:
A. Definitions - The terms used herein shall have the following meanings:
-----------
1. "CAPCO Accounting and Finance Committee" is one of the Standing
Committees provided for in the CAPCO Administration Agreement, dated November
1, 1971, and is responsible for establishing methods, procedures and practices
to be used in determining and assigning Costs, Investment Responsibility Base
and Adjusted Investment Basis, Fixed Charges, and monthly
- 2 -
<PAGE>
operation and expense factors related to facilities installed by the CAPCO Group
including the CMS.
2. "CAPCO Microwave Facilities" designated as such by the CAPCO
Operating Committee pursuant to this Agreement are generally defined in the
CAPCO Accounting Procedure 05-24 dated May 13, 1977, and as subsequently
revised, and CAPCO Accounting Procedure 05-25 dated May 18, 1976, and as
subsequently revised (but shall not include terminal facilities such as load
control, computer and other similar facilities).
3. The "CAPCO Microwave System" ("CMS") is that interconnected
microwave system to be provided pursuant to this Agreement.
4. "CAPCO Operating Committee" is one of the Standing Committees
provided for in the CAPCO Administration Agreement, dated November 1, 1971,
and is responsible for establishing and maintaining rules and procedures for
the coordinated operations of the CAPCO Group including operation of the CMS.
5. "Channel (Standard)" is a full duplex, 0 to 4 kHz bandwidth path
suitable for the transmission of audio-controlled electric waves from one
Station to another. A channel wider than 4 kHz will be divided by 4 kHz to
determine the equivalent number of channels. Any fractional channel, or
fractional use of a channel, shall be considered a full Channel for accounting
purposes.
6. "Cost" of a Station means the total of all costs incurred by the
construction Party associated with the acquisition of sites and construction
of the Station and cost of
- 3 -
<PAGE>
material and supplies required to be maintained for the operation and
maintenance of such Station, including direct, additive or loading, and
allocable costs, and interest during construction, as enumerated in CAPCO
Accounting Procedure 19-01 dated August 2, 1976, and as subsequently revised.
7. "Fixed Charges" associated with a Station means an amount
determined in accordance with attached Exhibit C. Fixed charge rates are
determined annually for the year of investment and shall follow attached
Exhibit C.
8. "Investment Responsibility" means the obligation to bear Fixed
Charges, insurance charges, taxes and Operating Expense associated with a
Station determined in accordance with attached Exhibit C.
9. "Load" of a Party during any clock hour is the total during any
such clock hour (eliminating on an agreed basis any distortion arising out of
deliveries between systems where material) of kilowatthours (a) delivered by
the Party to its retail customers or to municipal systems, (b) used by the
Party on its own system, exclusive of use for station auxiliary power, and (c)
lost and unaccounted for on the system of the Party; but shall exclude
Interruptible Load.
10. "Multiplex Equipment" is defined as the electronic equipment
required to derive one or more Channels from a broadband radio frequency
baseband.
11. "Operating Expense" of a Station means an amount determined in
accordance with attached Exhibit C.
12. "Peak Load" is the maximum Load of a Party for any
- 4 -
<PAGE>
clock hour of the period.
13. "Station" means all microwave facilities at a given geographic
location which is a part of the CAPCO Microwave System. A Station may contain
one or several paths to other stations. All transmitters and receivers at the
same Station (within 1 second longitude and 1 second latitude) are considered to
be one Station.
B. Parties' Rights and Obligations in the CAPCO Microwave System
-------------------------------------------------------------
1. With regard to communications among the Parties which are provided
by microwave, each Party shall, either by installation of new facilities or by
the designation as such of existing facilities, subject to determinations as
provided in the subparagraphs of this paragraph, provide, operate, maintain and
control at Stations within its service area the necessary CAPCO microwave
facilities (which facilities may be further identified by reference to call
signs and other authorizations issued to the Party by the FCC), to supply
Channels as follows:
a. Those Channels determined by the CAPCO Operating Committee
to be required to provide such functions as data transmission (which may
include such functions as analog and digital telemetry and equipment status),
voice communication, and facsimile transmission between the System Dispatching
Offices of such Parties.
b. Those Channels determined by the operating owner of each
CAPCO Generating Unit to be required to provide such functions as telemetry,
load control and voice
- 5 -
<PAGE>
communication between the plant site and the System Dispatching Office and other
supporting locations of the operating owner of such CAPCO Generating Unit.
c. Those Channels, requested by a non-operating Party of a
CAPCO Generating Unit having an entitlement out of such Unit and desiring to
monitor the Unit and/or integrate its control of its entitlement directly with
its other sources of generation, to permit such Party to communicate with the
operating Owner's System Dispatching Office.
d. Those Channels, with respect to each transmission line of
the CAPCO Group ("CAPCO Line") determined by the owner or owners of such Line
to be necessary for the operation, control and protection of the Line.
e. Other Channels mutually agreed to by all Parties.
2. The Stations included as part of the CMS are shown diagrammatically
on Exhibit A and are listed on Exhibit B. New stations may be added or existing
stations may be deleted upon agreement by the Operating Committee. Review and
update of Exhibits A and B shall be made every two (2) years by CAPCO
Communications Working Group. Revised Exhibits A and B, upon issuance by the
Operating Committee, will be included as part of this agreement.
3. Consistent with all applicable regulations of the FCC and with such
rules as may be promulgated by the CAPCO Operating Committee (which shall be
consistent with any such regulations), each Party shall construct, operate and
maintain
- 6 -
<PAGE>
those facilities which are a part of the CAPCO Microwave System for
which it is licensed by the FCC in such a manner as to maintain the integrity
and reliability of the entire CMS.
4. The CAPCO Microwave Facilities supplied pursuant to this Agreement
shall be provided, operated and maintained in accordance with sound engineering
practices and principles, and in a manner designed to achieve maximum practical
coordination of the CMS. The Parties shall coordinate the design and
construction of their respective portions of the CMS, and they shall coordinate
CAPCO traffic within supergroups 3, 4 and 5 (unless otherwise mutually agreed
to), and also within supergroups 6 and 7 for the Star-Massillon (OE) portion.
5. Each Party shall have full and exclusive responsibility for the
control, operation and maintenance of those microwave stations with respect to
which it is licensed by the FCC and nothing herein contained shall be
interpreted as limiting or otherwise interfering with any Party's duties and
responsibilities under the Rules and Regulations of the FCC.
6. Any Party may use for individual purposes or CAPCO purposes any
unused capacity in CAPCO Microwave Facilities, up to the ultimate capacity of
such facilities. In the event of simultaneous demands for individual use and
CAPCO use of unused capacity, the demand for CAPCO use shall have priority. In
the event of simultaneous demands for individual uses of unused capacity, the
owner of the facility shall determine the priority to be observed.
- 7 -
<PAGE>
7. Any microwave facilities required for the purposes of Paragraph B-1
which are located at Stations outside the service areas of the Parties shall be
provided, operation, maintained and controlled by the Party to whose microwave
system such facilities are most closely related and the cost of such microwave
facilities will be treated the same as those in Paragraph B-1.
8. Nothing in this Agreement shall be construed to require
installation of any particular microwave facilities.
C. Procedures for Determining Investment Responsibility and Procedures for
-----------------------------------------------------------------------
Billing
-------
1. The procedure for determining the microwave Station investment
responsibility portion which is to be allocated among the Parties are set forth
in attached Exhibit C.
2. Each Party's allocation percentage of Investment Responsibility for
CAPCO Microwave Facilities provided in accordance with paragraphs B-1-a, B-1-b,
B-1-c, B-1-d and B-1-e shall be determined in the manner set forth in accordance
with attached Exhibit C.
3. Investment Responsibility for a Station shall not commence earlier
than October 1, 1977.
4. The Party owning a Station shall bill each other Party annually for
such other Party's Investment Responsibility with respect thereto. Bills shall
be forwarded as promptly as practicable on June 15 of each year and shall be due
and payable in good funds the fifteenth calendar day after the date of any such
statement except that, if the 15th calendar day is not a
- 8 -
<PAGE>
business day, the amount billed will be payable the next business day. Good
funds shall consist of checks received at least one business day prior to the
due date and wire transfers received by noon on the due date. Interest on
unpaid invoice amounts will be compounded monthly and prorated for any partial
month based on a 365-day year, and will accrue at a rate equal to Chase
Manhattan Bank's prime rate on the first day of the then current calendar
quarter plus two percentage points for a period of up to one year and for any
period thereafter at the higher of this rate or a rate equal to the billing
Party's cost of capital which shall consist of the weighted average of the
billing Party's long-term debt cost and preferred stock cost rates determined
for issues outstanding on December 31 of the prior year and a common equity
cost rate to be effective January 1 of each year equal to the average return
on common equity for at least 50 major electric utilities with positive
returns on common equity as reported in the prior year's December issue of the
C.A. Turner Utility Reports or as reported in the prior year's latest issue of
another report mutually agreed to by the Parties. The weighting for this
calculation shall be the billing Party's capital structure at December 31 of
the prior year, consisting solely of long-term debt, preferred stock and
common equity, as reported in such Party's FERC Form 1 or in another mutually
agreed upon source. Invoices may not be changed or adjusted after four years
from the invoice date, and invoice amounts to be refunded by the billing Party
shall accrue interest as noted above, but invoice amounts payable to the
- 9 -
<PAGE>
billing Party for additional amounts shall not accrue interest. To the extent
practicable all charges payable or receivable under this Agreement shall be
offset and reduced to a net basis in order to provide a minimum practicable
number of payments among the Parties. Such statements may be rendered on an
estimated basis subject to corrective adjustments in subsequent statements as
noted above.
5. Each Party shall keep such records as may be reasonably required by
the CAPCO Operating Committee, and shall furnish to the CAPCO Operating
Committee such records, reports and other information as the CAPCO Operating
Committee may reasonably request.
D. General
-------
1. Any waiver at any time by any Party of its rights with respect to
any matter arising in connection with this Agreement shall not be deemed a
waiver with respect to any subsequent similar matter. Any delay, other than one
which occurs under Paragraph C.4 above short of the statutory period of
limitation, in asserting or enforcing any right under this Agreement, shall not
be deemed a waiver of such right.
2. No Party may, without the prior written consent of the others,
assign this Agreement, except as the same may be assigned (a) voluntarily or
otherwise under its first mortgage, or (b) to a successor to all or
substantially all of the assets of the Party by way of merger, consolidation,
sale or otherwise, where the successor assumes and becomes liable for all the
obligations of the Party hereunder.
- 10 -
<PAGE>
3. This Agreement is made under and shall be governed by the laws of
the State of Ohio insofar as applicable.
4. The duties, obligations and liabilities of the Parties are intended
to be several and not joint or collective, and nothing herein contained shall
ever be construed to create an association, joint venture, trust or partnership
or to impose a trust or partnership duty, obligation or liability on or with
regard to any Party. Each Party shall be individually responsible for its own
obligations as herein provided. No Party shall be under the control of or shall
be deemed to control another Party by virtue of this Agreement. No Party shall
have a right of power to bind another without its or their express written
consent except as expressly provided in this Agreement.
5. No Party shall be considered to be in default in the performance of
any of the obligations hereunder if failure of performance shall be due to
uncontrollable forces. The term "uncontrollable forces" shall mean any cause
beyond the control of the Party affected, including but not limited to the
failure of facilities, flood, earthquake, storm, fire, lightning, epidemic, war,
riot, civil disturbance, labor dispute, sabotage, restraint by Court order or
public authority, or inability to obtain necessary licenses or permits. Nothing
herein shall be construed so as to require a party to settle any strike or labor
dispute in which it may be involved. Any Party which is unable to fulfill any
obligations by reason of uncontrollable forces
- 11 -
<PAGE>
shall exercise due diligence to remove such inability with all reasonable
dispatch.
6. All claims arising out of any bodily injury, death or damages to
property or business of third persons arising because of operations under this
Agreement caused or sustained on the system of a Party (the Defending Party)
shall be defended or in its discretion settled by such Party. In the event any
such claim is brought against any other Party, such other Party shall promptly
notify the Defending Party in writing, and the Defending Party shall be entitled
to and shall take over and direct the defense and disposition of the case. Any
amounts paid by way of settlement or in satisfaction of any judgment and all
expenses associated with such defense or settlement shall be the responsibility
of the Defending Party. The provisions of this paragraph do not apply to claims
of the employees of any Party under any workmen's compensation law, for which
the employing Party shall be responsible.
Each Party hereby waives any and all claims it may have against any
other Party arising from negligence and other fault of another Party in
connection with operations under this Agreement.
7. The Parties hereto shall be free to enter into any new microwave
sharing agreements with others, which agreements do not impair obligations under
this Agreement or the ability of a Party to perform its obligations under this
Agreement.
8. The obligations of each of the Parties hereunder are subject to the
obtaining of any requisite orders, approvals,
- 12 -
<PAGE>
permits, certificates or licenses from any governmental authorities having
jurisdiction.
E. Modification and Duration
-------------------------
1. This Agreement shall continue in effect from the date hereof until
terminated by the mutual agreement of all who are then Parties hereto.
2. Notice of withdrawal from the arrangement provided for in the CAPCO
Basic Operating Agreement, as amended September 1, 1980, and as subsequently
amended, shall be deemed to be notice of withdrawal from this Agreement. Such
withdrawal from this Agreement shall be effective on the cessation of all rights
and obligations of the withdrawing party provided that the withdrawing Party
shall be relieved of any duty under this Agreement to incur any obligation or to
participate in planning or other activities of the CAPCO Group with respect to
any CAPCO Microwave Facilities determined upon subsequent to such notice of
withdrawal.
- 13 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers this 23rd day of December, 1993.
CLEVELAND ELECTRIC ILLUMINATING COMPANY
By /s/ Terrence G. Linnert
------------------------------------
Title Vice President
---------------------------------
DUQUESNE LIGHT COMPANY
By /s/ G. R. Brandenberger
------------------------------------
Title Vice President
---------------------------------
OHIO EDISON COMPANY
By /s/ Arthur R. Garfield
------------------------------------
Title Vice President
---------------------------------
PENNSYLVANIA POWER COMPANY
By /s/ J. R. Edgerly
------------------------------------
Title Vice President
---------------------------------
TOLEDO EDISON COMPANY
By /s/ Terrence G. Linnert
-----------------------------------
Title Vice President
--------------------------------
- 14 -
<PAGE>
EXHIBIT 10.13
AGREEMENT FOR THE TERMINATION OR CONSTRUCTION
OF CERTAIN AGREEMENTS BY AND AMONG
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
DUQUESNE LIGHT COMPANY, OHIO EDISON COMPANY,
PENNSYLVANIA POWER COMPANY AND THE TOLEDO EDISON COMPANY
--------------------------------------------------------
THIS AGREEMENT, effective as of the 1st day of September 1980, by and
among The Cleveland Electric Illuminating Company, an Ohio corporation;
Duquesne Light Company, a Pennsylvania corporation; Ohio Edison Company, an
Ohio corporation, and its wholly-owned subsidiary, Pennsylvania Power Company,
a Pennsylvania corporation, which two companies are considered as a single
party for purposes of this Agreement; and The Toledo Edison Company, an Ohio
corporation, all of which are referred to collectively as the Parties or the
CAPCO Group.
WITNESSETH:
WHEREAS, each of the Parties is desirous of terminating or construing,
effective as of September 1, 1980, certain agreements by and among the Parties.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein set forth, the Parties agree as follows:
1. The CAPCO Memorandum of Understanding dated September 14, 1967, the
Agreement of Chief Executives dated July 6, 1973, and the Memorandum of
Agreement with an effective date of
<PAGE>
March 1, 1977, and captioned "Purchase and Sale Agreements Under Schedules E and
H of the CAPCO Basic Operating Agreement for the period March 1, 1977 through
December 31, 1977 and for 1978, and Tentative Purchase and Sale Agreements for
1979 and Beyond" are terminated and have no further force or effect.
2. The CAPCO Transmission Facilities Agreement with an effective date
of September 14, 1967 (hereinafter referred to as the "Transmission Facilities
Agreement") is to be construed so as to allow all of the services and
transactions contemplated by the CAPCO Basic Operating Agreement as amended
September 1, 1980 and as subsequently amended (hereinafter referred to as the
"Basic Operating Agreement"), to be performed, accomplished or effected, as
the case may be, under said Transmission Facilities Agreement.
3. This Agreement and the Basic Operating Agreement supersede any
and all other agreements by and among the Parties involving the CAPCO Group
which are not terminated in Paragraph 1, above, to the extent such other
agreements conflict or are inconsistent therewith. All such conflicts or
inconsistencies shall be removed by appropriate written amendments to these
other agreements or by other appropriate action.
4. The Parties hereby reaffirm and agree to implement the pool
restructuring principles heretofore described in the minutes of the meetings of
the CAPCO Executive Committee on and
- 2 -
<PAGE>
after November 1, 1979, and shall use their best efforts to prepare and execute
as soon as reasonably possible any and all written amendments to agreements by
and among the Parties involving the CAPCO Group and to take other appropriate
action required by this Agreement, the Basic Operating Agreement, and the
aforesaid minutes of the Executive Committee.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers this 23rd day of December, 1993.
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By /s/ Terrence G. Linnert
------------------------------------
Title Vice President
---------------------------------
DUQUESNE LIGHT COMPANY
By /s/ G. R. Brandenberger
------------------------------------
Title Vice President
---------------------------------
OHIO EDISON
By /s/ Arthur R. Garfield
------------------------------------
Title Vice President
---------------------------------
PENNSYLVANIA POWER COMPANY
By /s/ J. R. Edgerly
------------------------------------
Title Vice President
---------------------------------
THE TOLEDO EDISON COMPANY
By /s/ Terrence G. Linnert
-----------------------------------
Title Vice President
--------------------------------
- 3 -
<PAGE>
EXHIBIT 10.14
FORT MARTIN CONSTRUCTION AND OPERATING AGREEMENT, dated April 30, 1965,
among DUQUESNE LIGHT COMPANY, a Pennsylvania corporation ("Duquesne"),
MONONGAHELA POWER COMPANY, a West Virginia corporation ("Monongahela"), and THE
POTOMAC EDISON COMPANY, a Maryland corporation ("Potomac").
1. Station.
Duquesne, Monongahela and Potomac (the "Companies") hereby provide for
the construction and operation of the first unit of approximately 500,000 kw
name plate capacity (the "First Unit") of a steam electric generating station in
Monongahela County, West Virginia, to be owned by the Companies as tenants in
common with undivided ownership interests of Duquesne one-half, Monongahela one-
quarter and Potomac one-quarter (their respective "Ownership Shares"), all as
contemplated in the deed dated April 30, 1965 (the "Deed") from Monongahela to
Duquesne and Potomac. The provisions of this Agreement are intended, as
contemplated in the Deed, to establish as among the Companies more detailed
provisions and procedures for carrying out provisions of the Deed.
2. Construction.
Construction of the First Unit shall be carries out by the Companies
under the general supervision and direction of a Construction Committee, which
shall be the Allegheny Power System Fort Martin Construction Committee.
Duquesne will have a representative on such Committee.
<PAGE>
The Companies intend to use their best efforts toward the end that the
construction of the First Unit will be completed, and full-scale operation
commenced, on or before May 1, 1967.
The Companies shall, with reasonable expedition, enter into contracts
(which may be purchase order contracts) providing for (a) the purchase of
materials, equipment and services for, and construction of, the First Unit and
(b) insurance to insure all work under construction against risks usually
insured against for such work. Each such contract shall provide, among other
things, that the performance of the contract shall be for the account of, and
the charges therefor shall be billed to, and paid by the Companies in proportion
to their respective Ownership Shares and that the invoices for such billing
(Contractor's Invoice or Invoices) shall be submitted in the names of the
Companies. Each of the Companies shall execute and deliver on its own behalf
the contracts providing for the purchase of the following: Steam generator,
turbine-generator, main transformers, equipment erection, piping installation,
electrical installation, structural steel, substructure, superstructure, piping
and equipment insulation, condenser, fly ash collectors, large pumps, and
consulting engineering work. For their convenience the Companies may authorize
an individual or individuals to execute and deliver on behalf of the Companies
all other contracts to be entered into pursuant to this Section.
Books of account and records containing details of the items of cost
applicable to the construction of the First Unit
- 2 -
<PAGE>
shall be kept under the supervision of the Construction Committee and shall be
open to examination at any time by any Company or its representatives.
The Construction Committee shall cause the Companies to be furnished
with counterparts of such books of account and records as they may request. The
basic books of account and records shall be turned over to and maintained by the
Operating Company referred to in Section 3.
3. Operation and Maintenance.
The First Unit shall be operated and maintained in accordance with good
utility operating practice.
The Companies shall establish an Operating Committee for the purpose of
establishing policies for the operation and maintenance of the First Unit. The
Companies shall be represented on the Operating Committee in proportion to their
Ownership Shares. The Operating Committee shall meet at the call of any member.
The First Unit will be operated and maintained by one of the Companies
(the "Operating Company") in accordance with policies to be established by the
Operating Committee. Until otherwise agreed by all the Companies, Monongahela
shall be the Operating Company. The Operating Company shall not be liable in
respect of operation or maintenance except for its gross negligence or willful
misconduct. The Operating Company shall keep books of account and records
containing details of the items of cost applicable to the operation and
maintenance of the First Unit. Such books of account and records shall be open
to
- 3 -
<PAGE>
examination at any time by any Company or its representatives. The Operating
Company shall furnish the Companies with counterparts of such books of account
and records as they may request.
4. Renewals, Replacements, Additions and Retirements.
Renewals and replacements necessary for the operation of the First Unit
shall be made as required by good utility operating practice. Other renewals
and replacements and any additions to the First Unit may be made only by
agreement of all the Companies. Retirements, sales and other dispositions of
First Unit property shall be effected only in a manner consistent with the
Companies' respective mortgage indentures, if any. Renewals, replacements,
additions, and retirements (and related dispositions and sales) shall be
effected by the Operating Company subject to the policies established by the
Operating Committee.
5. Title to Property.
Title to all property (including Common Facilities as defined in the
Deed) acquired or constructed in connection with the First Unit (including
without limitation property acquired for use or consumption in connection with
its construction, operation and maintenance) shall be in the Companies as
tenants in common in proportion to their Ownership Shares, subject in the case
of Common Facilities to any sales pursuant to subpara- graph 5 of the Deed.
Construction, acquisitions and purchases shall be made in such manner that title
shall vest in accordance with the foregoing.
- 4 -
<PAGE>
6. Power and Energy.
Subject to Section 9, each Company shall at all times have full
ownership of and available to it at the First Unit the portion of the generating
capability of the First Unit and the energy associated therewith, corresponding
to its Ownership Share.
Each Company shall keep the Operating Company informed as to the amount
of power it requires to be generated for it.
Subject to its capability and to necessary or unavoidable outages, the
First Unit shall be operated so as to produce an output equal to the sum of the
power requirements of the Companies therefrom.
7. Expenditures.
All expenditures in respect of the First Unit shall be accounted for in
accordance with the Uniform System of Accounts prescribed by the Federal Power
Commission for Public Utilities and Licensees (Class A and B Electric Utilities)
as in effect on the date of this Agreement.
All expenditures (including without limitation all expenditures for
administration, labor, payroll taxes, employee benefits, maintenance, materials,
research and development, supplies and services), except those in respect of
Common Facilities as defined in the Deed, for the construction, operation and
maintenance (excluding fuel) of the First Unit and for renewals, replacements,
additions and retirements in respect thereof shall be shared by the Companies in
proportion to their Ownership Shares. All such expenditures in respect of
Common
- 5 -
<PAGE>
Facilities shall be shared by the Companies in proportion to each
Company's Ownership Share (after reduction by a fraction equal to any fraction
of such Company's ownership interest in Common Facilities sold pursuant to the
provisions of the Deed). All expenditures in respect of the First Unit properly
chargeable to Account 501 (Fuel) of such Uniform System of Accounts for any
period shall be shared by the Companies pro rata according to the total
kilowatthours of energy respectively taken by them from the First Unit during
such period.
Interest charges on borrowed funds, income taxes, and property, business
and occupation and like taxes, of each Company shall be borne entirely by such
Company; and such items, as well as depreciation, amortization, and interest
charged to construction, shall not be deemed expenditures for purposes of this
Section.
8. Joint Account.
The Companies shall maintain one or more joint accounts (collectively,
the "Joint Account") in a bank or banks agreed upon by them, the title of each
such account to include Duquesne (50%), Monongahela (25%) and Potomac (25%).
All expenditures referred to in the second paragraph of Section 7 shall be paid
out of the Joint Account.
From time to time the Construction Committee or the Operating Company
may request the Companies to advance to the Joint Account such amount as is then
needed for cash working capital. Within ten days thereafter the Companies, pro
rata
- 6 -
<PAGE>
according to their respective Ownership Shares, shall deposit in the Joint
Account the amount specified in such request.
As promptly as practicable after the end of each month, the Construction
Committee or the Operating Company shall send to each of the Companies a
statement in reasonable detail of all expenditures for such month and the amount
of each Company's share thereof. Within ten days after its receipt of such
statement, each Company shall deposit its share in the Joint Account.
The Construction Committee or Operating Company shall cause to be drawn
against the Joint Account, and to be delivered, checks or drafts in the names of
the Companies in payment of expenditures. Funds shall be disbursed from the
Joint Account in accordance with sound accounting and disbursement procedures.
All persons authorized to handle or disburse funds from the Joint Account shall
be bonded in favor of Duquesne, Monongahela and Potomac, as their respective
interests may appear, for not less than $500,000.
9. Default.
During any period that a Company is in default in whole or in part in
making the most recent deposit in the Joint Account then required under this
Agreement, (a) such Company shall be entitled to no energy from the First Unit
during such period (but shall be obligated to pay any damages to the non-
defaulting Companies resulting from the default) and (b) the non-defaulting
Companies shall be entitled to all of the energy from the First Unit in
proportion to their Ownership Shares. No
- 7 -
<PAGE>
such default shall affect any Company's ownership interest, or any Company's
obligations under Sections 7 and 8.
10. Arbitration.
The Companies hereby declare their intention and agree that any
controversy arising out of or relating to this Agreement or the Deed, or the
breach of either thereof, shall be settled by arbitration in accordance with the
Rules of the American Arbitration Association and that judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.
11. Term of Agreement.
This Agreement shall continue in full force and effect for a period of
forty-two years from the date hereof and for such longer period as the Companies
shall by mutual agreement continue to operate the First Unit. Termination of
this Agreement shall not terminate the provisions of Section 10.
12. Amendment.
This Agreement may be amended from time to time or canceled at any time,
by an instrument or instruments in writing signed by all of the Companies (or
their successors or assigns).
13. Successors and Assigns.
This Agreement shall inure to the benefit of and bind the successors and
assigns of the parties hereto, but it may be
- 8 -
<PAGE>
assigned in whole or in part only in connection with transfer to the assign of
a corresponding ownership interest in the First Unit.
IN WITNESS WHEREOF each of the parties has caused this Agreement to be
duly executed.
DUQUESNE LIGHT COMPANY
By /s/ Philip A. Fleger
--------------------------
Chairman of the Board
and President
MONONGAHELA POWER COMPANY
By /s/ John A. Freeman
--------------------------
Vice President
THE POTOMAC EDISON COMPANY
By /s/ Charles D. Lyon
--------------------------
President
- 9 -
<PAGE>
EXHIBIT 10.15
TRANSMISSION AGREEMENT, dated March 15, 1967, among DUQUESNE LIGHT
COMPANY, a Pennsylvania corporation ("Duquesne"), MONONGAHELA POWER COMPANY, an
Ohio corporation ("Monongahela") and WEST PENN POWER COMPANY, a Pennsylvania
corporation ("West Penn"),
W I T N E S S E T H :
1. Preamble.
The systems of Monongahela and West Penn are part of the integrated
electric utility system of Allegheny Power System, Inc. and its subsidiaries,
and they and Duquesne's system are interconnected directly or indirectly and
will be further interconnected through the facilities provided for in this
Agreement.
Duquesne, Monongahela, and The Potomac Edison Company are providing for
the construction and operation of the first unit of approximately 540,000 kw
capacity (the "First Unit") of a steam electric generating station in Monongalia
County, West Virginia, to be owned by them as tenants in common. The station is
known as the Fort Martin Generating Station.
Duquesne has no transmission lines from the location of the Fort Martin
Generating Station and wishes to arrange for the transmission into its system of
its share of the energy produced by the First Unit, and Monongahela and West
Penn are willing to provide the necessary transmission.
<PAGE>
2. Transmission Service.
Monongahela and West Penn agree to transmit or cause to be transmitted
Duquesne's share of the power and energy from the First Unit to the Elrama-
Mitchell interconnection and/or to the systems of other electric utilities now
directly interconnected with Duquesne or to such other point or points as may
from time to time be agreed upon by the parties; such power and energy to be
delivered at 138,000 volts or at such other voltages as may be acceptable to the
parties.
3. Facilities.
A. Monongahela and West Penn shall each provide, operate, and maintain,
or cause to be provided, operated and maintained, the facilities referred to in
the Schedules hereto shown opposite its name below.
Monongahela Schedules I and II
West Penn Schedules III and IV
West Penn will, at its own expense, reconductor its 138 kv transmission
line between Yukon and Shepler Hill, Pennsylvania.
Installation of the facilities referred to in the above Schedules, other
than the 500 kv line circuit breakers referred to in Schedule IV, shall be
completed by the date of first commercial operation of the First Unit or as soon
thereafter as possible. Installation of said circuit breakers shall be made
when required, as determined by West Penn.
- 2 -
<PAGE>
B. Monongahela and West Penn shall each provide, operate, and maintain,
or cause to be provided, operated, and maintained, such other facilities,
(including replacements and relocations of, and additions to, the facilities
provided or caused to be provided by it under Subsection A of this Section) as
may be required on its system to meet its obligations under Section 2, such
other facilities being hereinafter collectively called the "Other Facilities".
C. For the purposes of this Agreement there shall be maintained a set of
records, hereinafter called the "Special Accounts", corresponding to the
following accounts of the Uniform System of Accounts prescribed by the Federal
Power Commission for Public Utilities and Licensees (Class A and B Electric
Utilities) as in effect on the date of this Agreement (the "Uniform System"):
Account 350 - Land and Land Rights
Account 351 - Clearing of Land and Land Rights
Account 352 - Structures and Improvements
Account 353 - Substation Equipment
Account 354 - Towers and Fixtures
Account 356 - Overhead Conductors and Devices
Account 359 - Roads and Trails
Account 397 - Telemetering, Control and
Communication Equipment
The original cost of each facility provided or caused to be provided
hereunder shall, as of the date of its
- 3 -
<PAGE>
installation, be separately identified, classified in accordance with the
aforesaid accounts of the Uniform System, and recorded in the Special Accounts
corresponding thereto.
Upon the retirement of any facility whose original cost is recorded in a
Special Account corresponding to Account 350 or 351 of the Uniform System, such
cost shall be deducted from such Account. Upon retirement of any facility whose
original cost is recorded in any other Special Account, there shall be deducted
from the Special Account in which its original cost is recorded only the
original cost of materials, if any, that constitutes a part thereof and that are
still used or useful. The excess, if any, of any cash received by reason of
damage to, or relocation or salvage of, any such other facility over the cost of
removal thereof shall be credited in equal amounts to the payments to be made
thereafter and prior to May 1, 2009 with respect to such facility under
Section 4.
D. Any party on whose property the facilities of another party are to be
located will permit the construction, reconstruction, maintenance, operation or
removal thereof by such other party and will provide freedom of access for such
other party for such purposes.
4. Payments.
For the first calendar month following the date of the first commercial
operation of the First Unit and each succeeding calendar month during the term
of this Agreement, Duquesne shall, subject to Section 10, make the following
payments:
- 4 -
<PAGE>
a. To Monongahela with respect to the facilities referred to in
Schedule I an amount equal to 0.50 of the sum of
(1) the product of (a) each amount carried for such facilities
in a Special Account at the end of the preceding month and
(b) the Factor set forth in Schedule V hereto opposite the
Special Account in which such amount is carried; and
(2) the Operating and Maintenance Expense incurred by
Monongahela in respect of such facilities during such
calendar month;
B. To Monongahela with respect to the facilities referred to in Schedule
II an amount equal to 0.1588 of the sum of
(1) the product of (a) each amount carried for such facilities
in a Special Account at the end of the preceding month and
(b) the Factor set forth in Schedule V hereto opposite the
Special Account in which such amount is carried; and
(2) the Operating and Maintenance Expense incurred by
Monongahela in respect of such facilities during such
calendar month;
- 5 -
<PAGE>
C. To West Penn with respect to the facilities referred to in Schedule
III an amount equal to the sum of
(1) the product of (a) each amount carried for such facilities
in a Special Account at the end of the preceding month and
(b) the Factor set forth in Schedule V hereto opposite the
Special Account in which such amount is carried; and
(2) the Operating and Maintenance Expense incurred by West Penn
in respect of such facilities during such calendar month;
D. To West Penn with respect to the facilities referred to in Schedule
IV an amount equal to 0.1588 of the sum of
(1) the product of (a) each amount carried for such facilities
in a Special Account at the end of the preceding month and
(b) the Factor set forth in Schedule V hereto opposite the
Special Account in which such amount is carried; and
(2) the Operating and Maintenance Expense incurred by West Penn
in respect of such facilities during such calendar month;
E. To Monongahela and West Penn with respect to Other Facilities such
amount as shall be agreed upon by
- 6 -
<PAGE>
the parties as comparable to the other payments provided for in
this Section or, if they are unable to agree, as shall be
determined by arbitration under Section 9 to be so comparable;
provided, however, that if at the end of 12 months after the date of its first
commercial operation the capability of the First Unit shall be determined to be
other than 540 mw (net unit capability - winter rating) the decimal in
Subsections B and D of this Section shall be changed, as of the end of such 12
months, to the 4 place decimal obtained by dividing 1700 (being the mw
capability of the facilities provided for in Schedules II and IV) into one-half
of the mw capability of the First Unit.
Operating and Maintenance Expense incurred in respect of any facilities
means all expenses with respect thereto arising from the operation and
maintenance (as distinguished from construction) of such facilities recordable
in Operation and Maintenance Expense Accounts or Income Accounts of the Uniform
System. Interest charges on borrowed funds, return on equity investment, income
taxes, deferment or amortization of investment tax credit, Pennsylvania capital
stock tax, depreciation or amortization of investment in plant, cost of removal,
and terminal salvage (all of which are reflected in the Factors set forth in
Schedule V) and expenditures recordable in Electric Plant Accounts of the
Uniform System, shall not be deemed Operating and Maintenance Expense. Cash
received by reason of damage to facilities that are not retired as a result
- 7 -
<PAGE>
thereof shall be credited to appropriate Maintenance Expense Accounts.
Schedule V hereto will be revised whenever necessary to reflect in the
Factors therein changes in taxes or tax rates or the imposition of new taxes
after the date hereof.
As soon as practicable after the end of each month, Monongahela and West
Penn shall each submit to Duquesne a statement in reasonable detail showing the
amount payable by Duquesne to it hereunder for such month, and Duquesne shall
pay each such amount within 10 days after receipt of the statement with respect
to it.
Monongahela and West Penn shall keep books of account and records in
reasonable detail in respect to the items of cost applicable to the capital
investment, operation, and maintenance of the facilities recorded in the Special
Accounts. Such books of account and records shall be open to examination at any
reasonable time by Duquesne. Monongahela and West Penn shall furnish Duquesne
with single counterparts of such books of account and records as Duquesne shall
request.
5. Metering.
Arrangements with respect to location, type and ownership of metering
facilities required for purposes of this Agreement shall be made from time to
time as agreed upon by the parties. Metering facilities provided hereunder
shall be tested by the owners thereof at suitable intervals and their accuracy
- 8 -
<PAGE>
maintained in accordance with good utility operating practice. Representatives
of all parties shall be afforded an opportunity to be present at all tests.
6. Indemnity.
Each party will indemnify and save harmless each other party from all
claims, liability, and expense arising out of any bodily injury, death, or
damage to property (other than those caused by such other party or its
employees, agents, or servants) occurring in or about facilities owned by it and
used for the purposes of this Agreement, including liability to employees,
agents, or servants of the indemnifying party, except that each party shall be
responsible for all claims of its own employees, agents, and servants under any
workmen's compensation or similar law.
7. General.
No party shall be considered to be in default in respect of any obligation
hereunder if prevented from fulfilling such obligation by reason of any cause
beyond its reasonable control, including, without limitation, strikes and labor
disputes.
No party shall be liable for the failure of any other party to perform any
of its obligations hereunder.
No provision of this Agreement shall be changed unilaterally by any party.
- 9 -
<PAGE>
8. Regulatory Approvals.
This Agreement is made subject to the jurisdiction of any governmental
authority or authorities having jurisdiction in the premises.
9. Arbitration.
The parties hereby declare their intention and agree that any controversy
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration in accordance with the Rules of the American Arbitration
Association and that judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
10. Term.
Unless earlier terminated as hereinafter provided, this Agreement shall
continue in effect until May 1, 2009, and for such longer period as Duquesne
shall own an undivided interest in the First Unit.
Duquesne may, by prior written notice to Monongahela and West Penn,
terminate its obligations under Section 4C on the last day of any calendar month
after it completes the disposition of its entire interest in the First Unit upon
payment to West Penn of the then depreciated original cost to West Penn of the
facilities referred to in Schedule III that are no longer used or useful to West
Penn. Upon such payment West
- 10 -
<PAGE>
Penn shall transfer to Duquesne title to such of said facilities as Duquesne
shall request.
Duquesne may, by prior written notice to Monongahela and West Penn,
terminate its obligations under Sections 4A, 4B and 4D on the last day of any
calendar month during which it completes the sale of its entire interest in the
First Unit to a subsidiary or subsidiaries of Allegheny Power System, Inc.
Upon termination of Duquesne's obligations under Section 4C, 4A, 4B and
4D, this Agreement shall terminate in its entirety.
11. Successors and Assigns.
This Agreement shall inure to the benefit of and bind the successors and
assigns of the parties.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed.
DUQUESNE LIGHT COMPANY
By /s/ Philip A. Fleger
-----------------------
Chairman of the Board
and President
MONONGAHELA POWER COMPANY
signature illegible
By /s/ no name specified
-----------------------
Vice President
WEST PENN POWER COMPANY
signature illegible
By /s/ no name specified
-----------------------
Vice President
- 11 -
<PAGE>
Schedule I
A 500 kv generator circuit breaker and associated facilities located at
the Fort Martin switching station installed for the control of the First Unit.
Approximately 3,000 feet of 500 kv transmission line between the First
Unit and the Fort Martin switching station.
Cable and duct system between the First Unit and the Fort Martin
switching station.
Schedule II
Two 500 kv line circuit breakers and associated facilities located at
the Fort Martin switching station installed for the control of the Fort Martin-
Kammer and Fort Martin-Yukon transmission lines.
Schedule III
Telemetering and control equipment required by Duquesne and installed at
West Penn's Charleroi Systems Operations Building and Mitchell Power Station.
Communication circuits required by Duquesne between West Penn's
Charleroi Systems Operations Building and Mitchell Power Station.
One 350 Mva, 500-138 kv transformer located at West Penn's Yukon
Substation.
One 500 kv circuit breaker and associated equipment located at West
Penn's Yukon Substation.
One 138 kv circuit breaker and associated equipment located at West
Penn's Yukon Substation.
Schedule IV
Fort Martin-Yukon 500 kv transmission line.
West Penn's portion of the Yukon-Keystone 500 kv transmission line.
West Penn's portion of the Fort Martin-Kammer transmission line.
When required, two 500 kv line circuit breakers located at West Penn's
Yukon Substation.
<PAGE>
Schedule V
----------
<TABLE>
<CAPTION>
Special Account
Corresponding to
Uniform System
Account No: Factor*
- ---------------- ------
<S> <C>
350 0.009303
351 0.009303
352 if M is less than 601, the difference between 0.009869
and the product of 0.00001507 and M; if M is more
than 600, 0.0.
353 if M is less than 421, the difference between .010743
and the product of 0.00001930 and M; if M is more
than 420, 0.000930.
354 if M is less than 721, the difference between 0.009428
and the product of 0.00001256 and M; if M is more
than 720, 0.0.
356 if M is less than 481, the difference between 0.010720
and the product of 0.00001884 and M; if M is more
than 480, 0.0.
359 If M is less than 541, the difference between 0.012917
and the product of 0.00001723 and M; if M is more
than 540, 0.0.
397 if M is less than 301, the difference between 0.013206
less the product of 0.00003013 and M; if M is more
than 300, 0.0.
</TABLE>
* The symbol "M" means the number of months for which payments have previously
been made with respect to the facility as to which the Factor is being used.
<PAGE>
EXHIBIT 10.16
AMENDMENT OF JANUARY 1, 1988
TO TRANSMISSION AGREEMENT
EFFECTIVE JULY 17, 1967
----------------------------
This Amendment, effective as of the 1st day of January 1988, is made by
and between West Penn Power Company, Monongahela Power Company, and Duquesne
Light Company, collectively "the Parties" hereinafter,
WITNESSETH:
WHEREAS, the Parties entered into a Transmission Agreement, dated March
15, 1967, effective July 17, 1967; and
WHEREAS, Schedule V of that Agreement requires revision as a result of
the Tax Reform Act of 1986 and other tax changes;
NOW, THEREFORE, the Parties agree that Schedule V of the aforesaid
Transmission Agreement is revised effective January 1, 1988, as shown on the
page attached hereto marked "Schedule V - Revised Effective January 1, 1988."
This Amendment shall inure to the benefit of and be binding upon the
successors and assigns of the Parties. Except as herein modified and amended,
the aforesaid Transmission Agreement shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Amendment to be
executed by their duly authorized officers.
WEST PENN POWER COMPANY
signature illegible
BY /s/ no name specified
-------------------------
President
-------------------------
(Title)
MONONGAHELA POWER COMPANY
BY /s/ Robert R. Winter
-------------------------
Vice President
-------------------------
(Title)
DUQUESNE LIGHT COMPANY
BY /s/ G. R. Brandenberger
-------------------------
V.P. Power Supply Gp.
-------------------------
(Title)
- 2 -
<PAGE>
EXHIBIT 12.1
Duquesne Light Company and Subsidiary
Calculation of Ratio of Earnings to Fixed Charges
(Thousands of Dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest on long-term debt $102,938 $119,179 $127,606 $135,850 $140,623
Other interest 3,517 2,464 2,339 6,148 12,332
Amortization of debt
discount, premium and
expense-net 5,541 4,223 3,892 4,039 4,010
Portion of lease payments
representing an
interest factor 45,925 60,721 64,189 64,586 64,854
-------- -------- -------- -------- --------
Total Fixed Charges $157,921 $186,587 $198,026 $210,623 $221,819
-------- -------- -------- -------- --------
EARNINGS:
Income from continuing
operations $144,787 $149,768 $143,133 $135,456 $129,437
Income taxes 84,667 107,999 101,073 84,478 75,151
Fixed charges as above 157,921 186,587 198,026 210,623 221,819
-------- -------- -------- -------- --------
Total Earnings $387,375 $444,354 $442,232 $430,557 $426,407
-------- -------- -------- -------- --------
RATIO OF EARNINGS TO FIXED
CHARGES 2.45 2.38 2.23 2.04 1.92
---- ---- ---- ---- ----
</TABLE>
Duquesne's share of the fixed charges of an unaffiliated coal supplier, which
amounted to approximately $4.0 million for the year ended December 31, 1993, has
been excluded from the ratio.
<PAGE>
DUQUESNE LIGHT COMPANY EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-52782 and 33-63602 of Duquesne Light Company on Form S-3 of our report dated
January 25, 1994, appearing in the Annual Report on Form 10-K of Duquesne Light
Company for the year ended December 31, 1993.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Pittsburgh, Pennsylvania
March 22, 1994
<PAGE>
EXHIBIT 28.1
EXECUTIVE COMPENSATION OF CERTAIN
DUQUESNE LIGHT COMPANY EXECUTIVE
OFFICERS FOR 1993 AND SECURITY OWNERSHIP
OF DUQUESNE LIGHT COMPANY DIRECTORS
AND EXECUTIVE OFFICERS AS OF FEBRUARY 23, 1994
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
This Compensation Committee Report summarizes the 1993 components of executive
officer compensation and, with respect to certain components of compensation,
1992 performance. All components of executive officer compensation for 1993
were approved by the Board of Directors based on the recommendations of the
Compensation Committee, which is composed entirely of non-employee directors.
COMPENSATION PHILOSOPHY
The primary objective of the Compensation Committee is to ensure that Duquesne
Light Company's (Duquesne) executive compensation programs and strategies are
designed and administered to attract, retain and motivate the executive talent
required to achieve Duquesne's overall mission of creating and enhancing value
for its shareholders, customers and employees, as well as for the community in
which it operates.
The Compensation Committee's actions are governed by a long-standing
philosophy of developing and administering executive compensation programs that
encourage a high level of operational excellence and financial performance to
maximize shareholder value and customer satisfaction.
The Committee also strives to simultaneously foster community participation
and support, quality leadership initiatives and innovative methodologies to
effectively manage Duquesne's human resources and capital assets.
Throughout the development and administration of Duquesne's strategic
compensation plans, the Committee has adhered to a results-based approach by
linking a significant percentage of total compensation to meeting performance
objectives. The three variable components of executive compensation
(adjustments to base salary, cash incentives and stock options) are based on
performance.
The Committee has purposely placed an emphasis on the "at risk" elements of
compensation for Duquesne's executives. Duquesne's awards under these incentive
programs are tied to corporate and individual performance. The accomplishment
of goals and objectives is at the center of the Committee's decision to make
awards under these incentive programs. The Committee exercises a degree of
discretion in administering these incentive plans which the Committee believes
encourages the executives to continually focus on building long-term shareholder
value.
An independent outside consultant with significant industry expertise has
determined that a greater percentage of Duquesne's executive officers' total
compensation is variable and placed at risk, when benchmarked against a
comparative industry panel of electric utility companies of similar operating
revenue size.
COMPENSATION PLAN COMPONENTS
The three components of Duquesne's executive compensation program are base
salary, annual cash and stock-option incentives and long-term incentive-based
stock options. All stock options are granted under the Long-Term Incentive Plan
and are performance based.
Annually, toward mid-year, the Committee reviews and determines base salary
levels, annual incentive compensation, and long-term incentive performance-based
stock option vesting, with vesting decisions intended to encourage long-term
results that increase shareholder value.
Executive officers may or may not earn, on the basis of performance, cash in
the form of adjustments to base salary and annual cash incentives of from 0% -
40% of base salary. Executive officers also have
1
<PAGE>
the opportunity to earn annual incentive stock options under the Long-Term
Incentive Plan as described under the caption "Annual Incentives." Finally,
they have the opportunity to also earn Long-Term Incentive Plan performance-
based stock options under a three-year grant made in 1991, with a 0% - 30%
vesting opportunity in the first year, a 0% - 60% vesting opportunity in the
second year and a 0% - 100% vesting opportunity in the third year.
Following shareholder approval of amendments to the Long-Term Incentive Plan
to provide for stock-for-stock (reload) options, the Committee took action in
April 1993 to grant reload options to the executive officers. The reload
options granted by the Committee attached to all outstanding options granted to
the executive officers after 1987. The Committee believes that the grant of
reload options is consistent with Duquesne's overall compensation policy of more
closely aligning the interests of its executive officers with those of the
shareholders since reload options encourage officers to convert their options to
shares earlier. As a result of the operation of reload options, an officer, who
exercises underlying options to which the reload options are attached, has the
opportunity to convert the reload options to shares without forfeiting the
underlying options' potential for future appreciation.
BASE SALARY. The base salaries of executive officers are competitively
benchmarked against a comparative industry panel of electric utility companies
of similar operating revenue size in major metropolitan areas possessing, in
most cases, both fossil and nuclear power management and operating
responsibilities. The Committee's goal is to target base salaries at the
average of the comparative industry panel.
In addition to the industry panel comparison, the Committee considered 1992
results in the areas of customer service levels, cost-effective management and
operational performance including, for example, generating plant performance and
system reliability, in determining whether a base salary increase would be
granted to the executive officers in 1993. The named executive officers, other
than Mr. von Schack, received increases in base salary in 1993.
ANNUAL INCENTIVES. The executive officers have the opportunity to earn annual
cash and stock option incentive awards by meeting short-term operating and
financial goals.
Individual objectives are established for each executive officer in
consultation with the CEO and approved by the Compensation Committee. The
Committee reviews the specific results for each executive officer and the
corporate performance with the Board of Directors toward mid-year of the
following year. The Board of Directors, upon the recommendation of the
Compensation Committee, approves the amount of annual incentive awards granted
to each executive officer based on the achievement of corporate and individual
objectives.
Annual incentive awards are granted only if a pre-determined corporate
financial performance threshold is met. The threshold recommended by the
Compensation Committee and approved by the Board of Directors for 1992 was that
DQE's earnings per share must equal or exceed a specified percentage of the 1991
common stock dividend. This goal was met in 1992.
Each executive officer must also meet his or her individual objectives.
Specific objectives established in 1992 and considered by the Committee toward
mid-year 1993 in determining the annual incentive compensation awards earned by
the executive officers for 1992 supported one or more of five corporate
objectives, including maximizing long-term shareholder value, providing quality
service and superior customer satisfaction, cost-effective management of assets,
maintaining excellent operational performance and providing leadership in the
community. Assessment of operational performance was based upon such measures
as generating plant availability and system reliability, for example.
The weighting for each specific objective varies but, in the aggregate, does
not exceed 40% of base salary for Mr. von Schack and 30% of base salary for all
other executive officers. Annual cash incentive awards for executives range
from 0-40% of base salary depending upon the degree to which performance
objectives are met. See the Summary Compensation Table for the annual cash
compensation awards earned by Mr. von Schack and the other executive officers
for 1992.
The number of incentive stock options awarded annually under the Long-Term
Incentive Plan to executive officers is determined by multiplying their cash
incentives by a performance multiplier of 2 to 10 and then dividing the product
by the price per share of DQE Common Stock. The size of the multiplier is based
on the amount of increase in earnings per share. The Committee awarded annual
incentive options in the amount of 42,685 to Mr. von Schack, 13,276 to Mr.
Marshall, 14,276 to Mr. Schwass, 10,355 to Mr.
2
<PAGE>
Sieber and 11,396 to Ms. Green. Additional options were not earned because not
all of the established performance objectives were achieved (see footnote (4) to
the Summary Compensation Table).
An executive must wait one year before being able to exercise the first 33% of
the stock-option award. An additional 33% is exercisable after two years and
the final increment after three years.
LONG-TERM INCENTIVES. Long-Term Incentive Plan performance-based stock
options were granted to executive officers under the provisions of a 1991 three-
year plan, currently ending in mid-1994, recommended by the Compensation
Committee and approved by the Board of Directors.
Three-year strategies were developed by each executive officer and annual
milestones designed to enhance the general well-being of Duquesne were
established for each executive officer by the CEO and approved by the
Compensation Committee. Through a performance-based vesting schedule, each
executive officer has the opportunity to earn a percentage of the three-year
grant annually. Mr. von Schack has the opportunity to earn up to 40,000 options
and the other named officers as a group could earn up to 39,000. The
Compensation Committee reviews the performance results and determines the amount
of the award with the approval of the Board of Directors. No more than 30% of
the options can vest in the first year and no more than 60% can vest in the
first two years. The long-term strategies are designed to support the long-term
corporate objectives of maximizing shareholder value, providing quality service
and superior customer satisfaction, cost-effective assets management,
maintaining excellent operational performance and providing leadership in the
community.
With respect to the 1993 vesting for the Long-Term Incentive Plan based on
achievement of their long-term strategies, Messrs. von Schack, Marshall,
Schwass, Sieber and Ms. Green received 30% vesting. The grant relative to these
vested stock options was disclosed in the applicable stock option grant table
included in the DQE Proxy Statement for the 1993 Annual Meeting. Final vesting
results will be determined in mid-1994.
CEO PERFORMANCE AND COMPENSATION RATIONALE
As with all executive officers, the Committee reviews the CEO's prior year's
performance when evaluating whether or not a prospective performance increase is
recommended with respect to his base salary and whether awards are made under
the annual cash and stock-option incentive programs and for the long-term
incentive performance-based stock option vesting.
The CEO's performance is evaluated on the basis of the overall performance of
Duquesne, the performance of the other members of his management team and, as
discussed in more detail below, his leadership in developing and implementing
operating and strategic plans to further Duquesne's long-term corporate
objectives. Within the parameters of the specific compensation programs
previously discussed, the Committee has the flexibility to exercise a degree of
discretion in evaluating the CEO's total performance.
The Committee believes that emphasis should be placed on the variable
compensation portion (i.e., incentive cash and stock options) of the CEO's total
compensation (see previous discussion on pages 1 through 3). Both the Committee
and the Board believe that this strengthens the relationship between corporate
performance and ultimate total compensation for the CEO, thus maximizing
shareholder value. The Committee, in focusing on the at-risk compensation
aspect of Mr. von Schack's total compensation, made no adjustment to his base
salary in 1992 or 1993. His current base salary level is below the average of
the comparative industry panel referred to on page 2.
Under the leadership of Mr. von Schack, the management team continued to
achieve good results during 1993 with respect to Duquesne's long-term corporate
objectives. In 1993 DQE and Duquesne continued to demonstrate a solid track
record of financial and operational performance. Earnings per share increased
five cents, despite a one-time charge of sixteen cents as a result of the
termination of the GPU transmission line project. DQE's common stock has had a
total return which consistently exceeded both the Standard & Poor's 500 and S&P
Electric Companies returns over the same period. A full report on DQE's
financial performance can be found in the 1993 Annual Report to Stockholders.
These results are consistent with DQE's shareholder objective to "achieve
measurable and meaningful increases in the value of our shareholders'
investment."
In fulfillment of Duquesne's customer service objective to "deliver quality
service and provide superior customer satisfaction..." customers having
interaction with Duquesne Light during 1993 rated their service experience
significantly higher than the national average for electric utilities, according
to an independent
3
<PAGE>
monthly survey. In fact, Duquesne Light customers experience the highest level
of service availability of all electric utilities in the state according to a
study conducted by a national consulting firm. That study demonstrated that
Duquesne Light's service availability consistently rates in the top 25% of the
utilities nationwide. These studies confirm the results of Duquesne's internal
benchmarked performance measures which showed that in 1993 the levels of service
reliability exceeded the corporate goals. Also, despite record snowfalls in
March 1993 and January 1994, Duquesne Light customers experienced extremely high
levels of reliable service. For the second year in a row, Duquesne received
Pennsylvania's "Governor's Energy Award" for its enhanced low-income customer
program focusing on reducing base-load usage and related electric costs. This
program subsequently became Pennsylvania's entry in the U.S. Department of
Energy's national awards contest for 1994. These results, as well as our
continuing environmental accomplishments which are discussed below, also meet
our operations objective "to be recognized for excellence in operating
performance and environmental protection."
As a result of policies consistently directed by Mr. von Schack over the
years, Duquesne continues to be widely recognized as an environmental leader.
Examples of environmental accomplishments in 1993 include developing an
environmental strategic plan and an environmental charter, installing innovative
low NOx burners, creating and participating in various environmental stewardship
programs, including those related to education, recycling and land management,
and developing a comprehensive environmental training program for all Duquesne
employees. Other recent examples include having the first generating plant in
the nation to reduce emissions by using natural gas to co-fire a coal-fueled
boiler, establishing a wildlife habitat, being the first investor-owned utility
to purchase emission allowance credits under the Clean Air Act amendments and
being acknowledged for its "foresight and leadership" by the Environmental
Protection Agency for participation in a program to reduce sulfur dioxide
emissions. Duquesne received special commendations from American Forests, the
nation's oldest non-profit forestry organization, and from Allegheny County and
the Pennsylvania legislature for various environmental stewardship programs.
Duquesne remains fully committed to being an environmentally clean utility and
an innovative and forward thinking environmental leader into the future.
Throughout 1993, Duquesne maintained compliance with all environmental
regulations.
Mr. von Schack also has taken a strong leadership role in community affairs,
including active participation on boards and committees of various organizations
which focus resources on the most pressing community problems and which serve to
improve the quality of life for people who live and work in Duquesne's service
territory. These activities and those in the environmental area relate directly
to DQE's community objective to "be a community leader in improving the quality
of life in our service territory." The objective recognizes that "our future
success is clearly linked to the economic health and vitality of the region we
serve."
We, the members of the Compensation Committee of the Board of Directors, are
confident that our existing compensation philosophy has been effective in
attracting and retaining the management talent necessary to ensure a desirable
and consistent performance for shareholders and customers alike.
G. Christian Lantzsch, Chairman
Doreen E. Boyce
Robert P. Bozzone
Sigo Falk
4
<PAGE>
COMPENSATION
The following Summary Compensation Table sets forth certain information as to
cash and noncash compensation earned and either paid to or accrued for the
benefit of the Chairman of the Board, President and Chief Executive Officer and
the four highest paid executive officers of Duquesne Light for services during
the periods indicated. Messrs. von Schack, Schwass and Marshall are executive
officers of DQE and Duquesne Light. The titles listed are those held for
Duquesne Light, but the amounts shown are for services in all capacities to DQE
and certain affiliates, including Duquesne Light. Mr. Sieber and Ms. Green are
executive officers of Duquesne Light only, and the amounts shown are for
services in those capacities.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- -----------------------------------
Awards Payouts
-------------------------- -------
Other Securities All
Annual Restricted Underlying Other
Compen- Stock Performance LTIP Compen-
Name and Salary Bonus sation Award(s) Options/SARs Payouts sation
Principal Position Year ($)(1) ($)(2) ($)(3) ($) (#)(1,4) ($) ($)(3)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W.W. von Schack 1993 440,000 0 355,847 0 59,860 0 4,497
COB, President 1992 440,000 224,733 45,020 0 55,120 0 4,364
and CEO 1991 426,666 142,430 0 0 166,278 0 0
G.L. Schwass 1993 185,000 0 39,395 0 26,091 0 4,497
Vice President - 1992 172,500 51,750 9,878 0 17,845 0 4,364
Finance and CFO 1991 160,000 48,000 0 0 48,641 0 0
D.D. Marshall 1993 185,000 0 26,687 0 21,203 0 4,497
Executive Vice 1992 175,000 48,125 6,098 0 27,974 0 4,364
President 1991 160,000 44,000 0 0 43,641 0 0
J.D. Sieber 1993 170,700 0 0 0 14,817 0 4,254
Vice President - 1992 163,200 37,536 0 0 16,883 0 4,068
Nuclear 1991 153,333 29,135 0 0 42,864 0 0
D.L. Green 1993 160,500 0 34,480 0 13,931 0 4,497
Vice President - 1992 153,000 41,311 0 0 15,828 0 4,364
Administrative Svcs. 1991 138,655 36,050 0 0 36,141 0 0
</TABLE>
(1) The amount of compensation set forth in columns (c) and (g) was paid or
awarded in the year indicated based on the prior year's performance.
Compensation determinations are made toward mid-year of the year shown.
(2) No incentive compensation is shown for 1993 as the annual review of
corporate and individual performance for 1993, which will determine such
compensation, has not occurred. The amount of any such compensation is
determined toward mid-year of each year based upon the prior year's
performance and either paid or deferred (via an eligible participant's
prior election) in the following year. The amounts shown for 1991 and 1992
are the awards earned in those years but established and paid or deferred
in the subsequent years.
(3) In accordance with the transitional provisions applicable to the revised
rules on compensation disclosure adopted by the SEC, amounts of Other
Annual Compensation and All Other Compensation are excluded for 1991.
Amounts of Other Annual Compensation are connected to the funding of past
service obligations for non-qualified pension benefits earned prior to
1993. Duquesne Light decided it was desirable, due to tax law changes and
to ERISA requirements, to complete the funding of past service obligations
in 1993. Amounts of All Other Compensation shown are Duquesne Light match
contributions during 1992 and 1993 under the Duquesne Light Company 401(k)
Retirement Savings Plan for Management Employees.
(4) Includes total number of stock options awarded during the fiscal year, with
or without tandem SARs, as applicable, and stock for stock (reload) options
on option exercises, whether vested or not. See table titled Option/SAR
Grants in Last Fiscal Year. The stock options are subject to vesting
(exercisability) based on Duquesne Light and individual performance and
achievement of specified goals and objectives. Of the original amount of
1991 stock options granted, Messrs. von Schack, Marshall, Sieber and Ms.
Green have lost 10,965; 1,554; 6,549 and 2,141 stock options, respectively.
Of the original amount of 1992 stock options granted, Messrs. von Schack,
Schwass, Marshall, Sieber and Ms. Green have lost 12,435; 3,569; 4,698;
6,528 and 4,432 stock options, respectively.
5
<PAGE>
SUPPLEMENTAL TABLES
The following tables provide information with respect to options to purchase
DQE Common Stock and tandem stock appreciation rights in 1993 under the Plan.
Option grants in 1993 to executives were structured to align their
compensation with the creation of value for common stockholders. For example,
should DQE stock rise 50% in value over the ten year option term (from $34.5625
per share to $51.84 per share), shareholder value would increase an estimated
$932,929,435, while the value of the grants to the individuals listed below
would increase an estimated .22% ($2,059,570) of the total gain realized by all
shareholders.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
% of Total
Number of Options/
Securities SARs
Underlying Granted to Exercise Grant
Options/ Employees or Base Date
SARS in Fiscal Price Expiration Present
Name Granted (#) Year ($/Sh)(3) Date Value $(4)
(a) (b) (c) (d) (e) (f)
- -------------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C>
W. W. von Schack 50,922(1) 27.7% 34.5625 4/22/03 235,260*
8,938(2) 4.8% 34.625 7/31/98 26,188*
G. L. Schwass 16,058(1) 8.7% 34.5625 4/22/03 74,188*
1,028(2) .5% 34.625 7/31/98 3,012*
9,005(2) 4.9% 33.6875 7/31/98 23,863*
D. D. Marshall 16,058(1) 8.7% 34.5625 4/22/03 74,188*
5,145(2) 2.8% 34.1875 7/31/98 14,097*
J. D. Sieber 14,817(1) 8.0% 34.5625 4/22/03 68,455*
D. L. Green 13,931(1) 7.5% 34.5625 4/22/03 64,361*
</TABLE>
* The actual value, if any, an executive may realize will depend on the
difference between the actual stock price and the exercise price on the
date the option is exercised. There is no assurance that the value
ultimately realized by an executive, if any, will be at or near the value
estimated.
(1) The stock options with tandem stock appreciation rights granted during 1993
are not presently exercisable. The Compensation Committee will determine
the number of stock option/stock appreciation rights that will vest in 1994
based on 1993 performance. Once the number is determined, the executive
must wait one year before being able to exercise 1/3 of the award. An
additional 1/3 is exercisable after two years and the final increment is
exercisable after three years. Vesting will be accelerated on the
occurrence of a change in control as provided in the Plan. These grants
included tandem stock appreciation rights. These grants did not include
dividend equivalent accounts.
(2) These represent stock for stock (reload) options received upon exercise of
stock options by the applicable officer electing to use previously-owned
DQE stock to exercise the options under the terms of the Plan. These reload
options included dividend equivalent accounts.
(3) Such exercise price, which was the fair market value on the date of grant,
may be payable in cash or previously owned shares of DQE Common Stock. The
price of the options or stock for stock (reload) options is the fair market
value of DQE Common Stock on the date such options were granted.
(4) The grant date present value shown in column (f) gives the theoretical
value of the options listed in column (b) on the grant dates using the
Black-Scholes option pricing model, modified to account for the payment of
dividends. The theoretical value of the options expiring on 4/22/2003
($34.5625 strike) and 7/31/98 ($34.6250, $33.6875, and $34.1875 strikes)
were calculated assuming an option life of 10, 5.2, 4.6, and 4.6 years
respectively; a periodic risk-free rate of return equal to the yield of the
U.S. Treasury note having a similar maturity date as the option expiration
date, as reported on the grant date (5.85%, 5.07%, 4.97%, and 4.95%
respectively); a quarterly dividend of $0.40 with an expected growth rate
of 4.5% per year; and an expected stock price volatility over the same
length of time as the option life, as reported on the grant date (19.10%,
12.98%, 13.04% and 13.04% per month, respectively). No adjustments to the
grant date present values have been made with respect to exercise
restrictions, cancellation, or early exercise.
6
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Value of
Securities Unexercised
Underlying in-the-Money
Number of Options/SARs at Options/SARs at
Securities Fiscal Year-End (#)(6) Year-End ($)(5)(6)
Underlying Value ---------------------- ------------------
Options/SARs Realized Exercisable/ Exercisable/
Name Exercised (#) ($)(4) Unexercisable Unexercisable
(a) (b) (c) (d) (e)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. W. von Schack 20,210(1) 390,305 112,166/87,915 1,130,941/652,733
16,712(2) 181,743
G. L. Schwass 12,676(1) 235,100 24,675/38,199 266,048/223,734
8,705(3) 82,238
D. D. Marshall 10,174(3) 101,513 27,980/32,050 322,896/200,357
6,520(1) 123,065
J. D. Sieber 0 0 44,489/19,756 634,742/144,160
D. L. Green 0 0 35,537/22,663 469,971/166,548
- ---------------------
</TABLE>
(1) Stock option exercised for stock by tendering shares of previously-owned
DQE Common Stock.
(2) Stock appreciation rights exercised for cash.
(3) Stock appreciation rights exercised for stock.
(4) Represents the difference between the exercise price of the options or
SARs and the fair market value of DQE Common Stock on the date of
exercise.
(5) Represents the difference between the exercise price of the options and
the fair market value of DQE Common Stock at 12/31/93.
(6) The values set forth do not include options/SARs previously granted
(including those granted in 1993) but not yet earned. The number to be
earned will be based on individual performance and could range from zero
to the numbers (values) listed below for the five named executives,
respectively: 90,922 ($327,500); 28,058 ($98,250); 31,558 ($106,906);
24,817($81,875); and 21,931 ($65,500). These values may be earned by the
executive over future periods from one to three years as established with
each option grant.
RETIREMENT PLAN
The following table illustrates the estimated annual benefits payable upon
retirement at age 65 to management employees in the specified earnings
classifications and years of service shown:
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Years of Service at Normal Retirement on January 1, 1994
Highest Consecutive --------------------------------------------------------
Five-Year Average
Compensation 15 20 25 30
- -------------------
--------------------------------------------------------
<S> <C> <C> <C> <C>
$175,000 $ 44,648 $ 59,531 $ 74,413 $ 85,616
$200,000 $ 51,398 $ 68,531 $ 85,663 $ 98,516
$225,000 $ 58,148 $ 77,531 $ 96,913 $111,416
$250,000 $ 64,898 $ 86,531 $108,163 $124,316
$300,000 $ 78,398 $104,531 $130,663 $150,116
$400,000 $105,398 $140,531 $175,663 $201,716
$500,000 $132,398 $176,531 $220,663 $253,316
$600,000 $159,398 $212,531 $265,663 $304,916
$700,000 $186,398 $248,531 $310,663 $356,516
</TABLE>
Compensation utilized for pension formula purposes includes salary and bonus
reported in columns
7
<PAGE>
(c) and (d) of the Summary Compensation Table. An employee who has at least
five years of service has a vested interest in the retirement plan. Benefits
are received by an employee upon retirement, which may be as early as age 55.
Benefits are reduced by reason of retirement prior to age 60 or by reason of the
operation of certain options under which benefits are payable to survivors upon
the death of the employee. Retirement benefits are not subject to any offset or
other reduction based on the amount of any other benefits, including Social
Security.
A Pension Service Supplement Program covering selected senior executives was
established to provide one additional service year for each full year of active
service, subject to certain vesting requirements, and to recognize compensation
in excess of any applicable ceiling on compensation earned by the executive.
The executive officers named in the Summary Compensation Table had the following
years of credited service and five-year average compensation with Duquesne Light
(including additional service credits and compensation recognized under the
Pension Service Supplement Program) as of January 1, 1994: Mr. von Schack -- 26
years, current five-year average compensation $524,986; Mr. Schwass -- 16 years,
current five-year average compensation $195,049; Mr. Marshall -- 17 years,
current five-year average compensation $187,259; Mr. Sieber -- 32 years, current
five-year average compensation $173,950; Ms. Green -- 12 years, current five-
year average compensation $167,305.
EMPLOYMENT AGREEMENT
In 1992, Mr. von Schack entered into a four-year employment agreement with DQE
and Duquesne Light, subject to automatic one-year renewals unless prior written
notice of termination is given by Mr. von Schack or DQE. The agreement
provides, among other things, for Mr. von Schack to serve as a director and
Chairman of the Board, President and Chief Executive Officer of DQE and Duquesne
Light, at an annual base salary of at least $440,000 subject to periodic review,
and for his participation in executive compensation and other employee benefit
plans of DQE and Duquesne Light.
If Mr. von Schack is discharged other than for cause or resigns for good
reason, then, in addition to any amounts earned but not paid as of the date of
termination, he would receive in a cash lump sum the balance of his base salary
for the remaining term of the agreement, a bonus amount in respect of the
remaining term of the agreement calculated at a rate equivalent to his prior
year's bonus and the actuarial equivalent of the additional pension he would
have accrued had his service for pension purposes continued until the expiration
of the agreement. In addition, Mr. von Schack would be entitled to immediate
vesting (or the redemption in cash) of all of his stock-based awards from DQE or
Duquesne Light. The agreement also provides for continued payment of base
salary and bonus amounts for the remaining term of the agreement if Mr. von
Schack's employment is terminated due to death or disability. In the event that
any payments, whether under the employment agreement or otherwise, would subject
Mr. von Schack to federal excise tax or interest or penalties with respect to
such excise tax, he will be entitled to be made whole for the payment of any
such taxes, interest or penalties.
BENEFICIAL OWNERSHIP OF STOCK
The following list shows all equity securities of DQE (Common Stock only) and
its principal subsidiary, Duquesne Light (Preferred and Preference Stock only),
beneficially owned by all directors and executive officers of Duquesne Light as
a group (21 persons) as of February 23, 1994, including shares owned by officers
and directors jointly with other persons:
<TABLE>
<CAPTION>
Shares Shares
Beneficially Outstanding
Title of Class Owned February 23, 1994
- -------------- ------------ -----------------
<S> <C> <C>
Common Stock............ 77,502 54,066,636
Preference Stock........ 2,245 843,831
Preferred Stock......... 50 1,528,569
</TABLE>
The directors and executive officers as a group did not own beneficially in
excess of 1% of any class of equity securities of DQE or Duquesne Light as of
February 23, 1994.
The amounts shown do not include 240,963 shares of DQE Common Stock which all
executive officers of Duquesne Light as a group have the right to acquire within
60 days of February 23, 1994 through the exercise of stock options granted under
the Long-Term Incentive Plan.
8
<PAGE>
The following list shows all equity securities of DQE and Duquesne Light
beneficially owned, directly or indirectly, by each director and by each
executive officer named in the Summary Compensation Table as of February 23,
1994:
<TABLE>
<CAPTION>
Shares of Nature of
Director's Name Common Stock Ownership(1)
- --------------- ------------ ------------
<S> <C> <C>
John M. Arthur (2).................. 4,540 VP, IP
15,625 JOINT,SVP,SIP
Daniel Berg......................... 390 VP,IP
1,100 JOINT,SVP,SIP
Doreen E. Boyce..................... 850 VP,IP
Robert P. Bozzone................... 500 VP,IP
Sigo Falk........................... 1,244 VP,IP
1,000 (3) SVP,SIP
William H. Knoell................... 1,000 VP,IP
690 (4) SVP,SIP
G. Christian Lantzsch............... 1,065 JOINT,SVP,SIP
Robert Mehrabian.................... 1,000 (5) SVP,SIP
Thomas J. Murrin.................... 500 JOINT,SVP,SIP
Robert B. Pease..................... 717 VP,IP
102 JOINT,SVP,SIP
Eric W. Springer.................... 1,357 VP,IP
Wesley W. von Schack................ 22,980 (6) VP,IP
<CAPTION>
Shares of Nature of
Officer's Name Common Stock(6) Ownership(1)
- -------------- --------------- ------------
<S> <C> <C>
Gary L. Schwass..................... 6,052 VP,IP
David D. Marshall................... 4,434 JOINT,SVP,SIP
John D. Sieber...................... 2,655 JOINT,SVP,SIP
Dianna L. Green..................... 1,264 VP,IP
</TABLE>
(1) The term "Joint" means owned jointly with the person's spouse. The
initials "VP" and "IP" mean sole voting power and sole investment power,
respectively, and the initials "SVP" and "SIP" mean shared voting power
and shared investment power, respectively.
(2) The amount shown as owned by Mr. Arthur does not include 17,400 shares of
Common Stock which he has the right to acquire within 60 days of February
23, 1994 through the exercise of stock options granted under the Plan. Mr.
Arthur also owns 50 shares of Preferred Stock of Duquesne Light.
(3) These shares are held by a trust in which Mr. Falk is an income
beneficiary but not a trustee.
(4) These shares are held by a trust in which Mr. Knoell is a trustee and the
income beneficiary.
(5) These shares are held by a Keogh trust in which Dr. Mehrabian is the sole
trustee; he and his spouse are the beneficiaries.
(6) The amounts shown as owned by Messrs. von Schack, Schwass, Marshall,
Sieber and Ms. Green do not include shares of Common Stock which they have
the right to acquire within 60 days of February 23, 1994 through the
exercise of stock options granted under the Plan in the following amounts:
87,376; 24,675; 27,980; 44,489; and 35,537, respectively. These officers
also own 259; 259; 259; 243; and 259 shares, respectively, of Preference
Stock of Duquesne Light.
9
<PAGE>
EXHIBIT 28.2
Energy
for
Change
[LOGO OF DQE APPEARS HERE]
1 9 9 3 A n n u a l R e p o r t
t o S h a r e h o l d e r s
[PHOTO APPEARS HERE]
<PAGE>
DQE FINANCIAL AND OPERATING HIGHLIGHTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Change Change
From From
1993 1992 1992 1991 1991
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Peak Load 2,499 MW 8.3% 2,308 MW -3.9% 2,402 MW
Duquesne Customer Sales (millions) 11,851 KWH 2.4% 11,569 KWH -2.5% 11,861 KWH
Operating Revenues (billions) $1.196 0.2% $1.194 -0.8% $1.204
Net Income (millions) $144.0 1.8% $141.5 5.9% $133.6
Year-End Shares Outstanding (millions) 53.0 -- 53.0 0.2% 52.9
Return on Average Common Equity 12.0% -3.2% 12.4% 1.6% 12.2%
Long-Term Debt (billions) $1.417 0.3% $1.413 -0.6% $1.421
Interest--Long-Term Debt (millions) $108.5 -12.1% $123.4 -6.2% $131.5
Preferred and Preference Dividends
of Subsidiary (millions) $9.2 -2.1% $9.4 -13.0% $10.8
Net Operating Cash Flow (millions)(A) $383.1 -3.4% $396.6 14.9% $345.3
Capital Expenditures-Utility (millions) $100.6 -10.5% $112.4 -10.4% $125.4
=======================================================================================================
</TABLE>
MW - a megawatt is a measure of electric use at a point in time.
KWH - a kilowatt hour is a kilowatt of electric usage over a period of hours.
(A) - Excludes working capital and other - net changes.
<TABLE>
<CAPTION>
CONTENTS
ON THE COVER
Like the common light bulb, the electric utility industry is changing.
Competition is increasing, as are options to help businesses work smarter,
cleaner and more cost-effectively through use of electrotechnologies. In 1993,
DQE people again demonstrated they have energy to adapt to change in their
industry and to meet the changing needs of their customers.
<S> <C>
CHAIRMAN'S MESSAGE 2
Wesley W. von Schack discusses a year of change and challenge, and outlines our
competitive position and strategies for the future.
ENERGY FOR CHANGE 4
To compete successfully in the new energy marketplace, we must work even harder
to increase customer satisfaction, improve efficiency and reduce costs, without
compromising our environmental commitment.
GLOSSARY OF TERMS 9
MANAGEMENT'S DISCUSSION 10
REPORT OF MANAGEMENT 17
REPORTS OF INDEPENDENT ACCOUNTANTS AND AUDIT COMMITTEE 18
FINANCIAL STATEMENTS 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 23
SELECTED FINANCIAL AND OPERATING DATA 41
BOARD OF DIRECTORS 43
OFFICERS 44
SHAREHOLDER REFERENCE GUIDE Inside Back Cover
</TABLE>
<PAGE>
DQE EARNINGS
PER SHARE
[GRAPH APPEARS HERE]
DQE ANNUALIZED
DIVIDENDS PER SHARE
[GRAPH APPEARS HERE]
1993 RESULTS
. Earnings per share were $2.72, an increase of 1.9% over 1992 and our seventh
consecutive yearly increase.
. Sales to Duquesne's customers were up 2.4% in 1993. The company had a system
peak demand of ?2499 megawatts, our second highest ever.
. Residential sales grew 5.3% and commercial sales grew 2.5%, while industrial
sales remained at 1992 levels.
DQE is an energy services holding company nationally and regionally recognized
for excellence, quality, integrity and value.
Duquesne Light Company, whose origin dates to 1880, is the principal
subsidiary of DQE. Duquesne Light is engaged in the production, transmission,
distribution and sale of electric energy. Its service territory is
approximately 800 square miles in southwestern Pennsylvania, with a population
of 1.5 million. In addition to serving almost 580,000 customers in Allegheny
and Beaver counties, the company sells electricity to other utilities.
DQE's other subsidiaries include Duquesne Enterprises and Montauk.
Duquesne Enterprises owns Allegheny Development Corporation and Property
Ventures, Ltd., and has substantial equity interests in Chester Environmental,
Inc. and International Power Machines. These companies are involved in
initiatives related to the core business, including energy services,
environmental services, power quality equipment, and real estate investment.
Montauk makes both short and long term investments for the enterprise,and
provides a source of capital for these other subsidiaries.
COMMON STOCK TRENDS
<TABLE>
<CAPTION>
Five-Year
Compound
Growth
1993 1992 1991 1990 1989 1988 Rate
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings per share $2.72 $2.67 $2.50 $2.24 $2.03 $1.86 7.9%
Dividends Paid Per Share $1.60 $1.52 $1.44 $1.36 $1.28 $1.20 5.9%
Book Value at Year-End $23.21 $22.12 $21.00 $20.07 $19.27 $18.51 4.6%
Market Price Per Share
High $37 $32 3/8 $31 $25 1/4 $23 7/8 $18 7/8 14.4%
Low $31 3/8 $26 7/8 $23 5/8 $20 3/8 $17 3/8 $11 3/4 21.7%
Year-End $34 1/2 $32 1/4 $30 5/8 $24 7/8 $23 7/8 $18 3/4 13.0%
</TABLE>
1
<PAGE>
To Our
Shareholders
Wesley W. von Schack at the scenic Montour hiking and biking trail, one of
the company's many environmental partnerships (see page 8).
[PHOTO APPEARS HERE]
Throughout 1993, our DQE team kept its focus on three basic objectives:
delivering a fair return to our shareholders; providing top quality service to
our customers; and preparing for emerging changes in the electric utility
industry. Our results continue to be good on all three fronts.
Net income for 1993 increased $2.5 million over that for 1992, and earnings
per share rose from $2.67 in 1992 to $2.72. Since year end 1988, DQE's
earnings per share have increased 46 percent. In November, the annual dividend
was increased by 5 percent, to $1.68.
DQE possesses an abundance of energy resources that hold long term
promise and opportunity as the market for power grows. A recent industry
forecast projects annual growth of 2 percent in electric demand through 2010.
To meet such demand, more than 210 gigawatts of additional generation will be
required. Less than 20 percent of this additional capacity currently is under
construction.
DQE has a total of 3,374 megawatts of environmentally clean generating
capacity, of which only 2,834 megawatts currently are in service. This
generation provides what we believe is an important long term competitive
advantage and a benefit to our customers. For example, during the deep freeze
of January 1994 when rolling blackouts disrupted the lives and businesses of
millions of people in eastern and central Pennsylvania, New Jersey, Maryland,
Delaware, Virginia and the District of Columbia, Duquesne Light fortunately
did not have to institute voltage reductions or rolling blackouts.
It was, therefore, ironic that our planned sale, to be initiated in January
1994, of 500 megawatts to General Public Utilities (GPU) did not take place.
In December 1993, GPU abruptly cancelled its three-year-old agreement to
purchase bulk power from Duquesne Light and to construct a jointly owned high
voltage transmission line. Termination of the project resulted in a charge to
DQE earnings of $15 million (16 cents per share).
As reported to you in last year's annual report, we expect much change in
our industry because of the National Energy Policy Act of 1992. This
legislation gives federal regulators broad power to mandate the transfer of
wholesale bulk power over the nation's high voltage transmission systems. The
net result will be increased competition in the electric utility industry.
Electric companies now have one foot in competition and one foot in
regulation. Dealing with this dichotomy requires flexible and capable
management. Our management team has demonstrated the ability to focus on
building a market and customer driven company while at the same time remaining
responsive to the requirements and obligations of state regulation. During the
last eight years, you have been kept apprised of the excellent progress we've
been able to make in positioning our company for the changes ahead.
One strategy continuously evident in all aspects of our business is to be
prepared for the market based realities that
2
<PAGE>
"OUR FUNDAMENTAL STRATEGY IS TO BE RECOGNIZED
FOR EXCELLENCE IN OUR OPERATIONS AND TO PROVIDE A HIGH
LEVEL OF CUSTOMER SATISFACTION."
the industry is experiencing. We are focused on constantly improving
performance to lower the cost of production, and our least cost planning and
innovative pricing policies reflect our commitment to deliver a competitive
product to our customers. In fact, through our continued efforts, we are
positioned to reduce average retail rates by approximately 8 percent, as of
April 1994.
Also, the marginal cost for us to produce a kilowatt-hour of electricity is
competitive. This low cost of production enabled us to sell more than 19
percent of our output to other electric utilities in the bulk power market in
1993.
Our fundamental strategy is to be recognized for excellence in our
operations and to provide a high level of customer satisfaction. Independent
surveys and our own internal measurements indicate that customers are highly
satisfied with the way we treat them and the quality of service. Our system
reliability is among the top 25 percent in the nation. Duquesne Light
customers experience fewer minutes of power interruptions each year than the
customers of any other utility in Pennsylvania. Our customers are getting good
value.
This commitment to customers was put to the test in 1993 when the
"Blizzard of the Century" blanketed the eastern United States. A state-of-the-
art automated distribution system pinpointed weather related damage to
electrical equipment and allowed our operators to switch service circuits by
computer so that customers affected by the blizzard were restored to service
in quick order.
Environmental leadership remains a strong component of our overall
strategy, and we are proud of maintaining the highest standards in this area
of public interest.
All of our wholly owned fossil fuel units currently emit sulfur dioxide
(SO2) at a lower rate than federal standards for the year 2000. In 1993, we
completed installation of low nitrogen oxide (NOX) burners at our Cheswick
station. We will need to invest only $35 million more to meet Phase I and
Phase II SO2 and NOX Clean Air Act of 1990 requirements. Environmental
leadership represents good value for shareholders. Utility companies that have
not invested in the environmental quality of their operations over the years
will see production costs increase as they catch up with our nation's new
environmental standards.
For reasons that are both natural and man-made, the electric utility
business will continue to be challenging. Our people are up to meeting these
challenges. We are grateful for their leadership and contributions, and to
you, our shareholders, for your continued confidence in DQE.
On behalf of the Board of Directors,
/s/ Wesley W. von Schack
Wesley W. von Schack
Chairman of the Board
and Chief Executive Officer
February 15, 1994
3
<PAGE>
Energy for Change
With passage of the National Energy Policy Act(NEPA)in 1992, we have no
doubt that change--and increasing competition--will be constants in our
industry. We know that to compete successfully in the new energy marketplace,
we must concentrate on providing high levels of customer satisfaction,
improving our performance, and reducing costs. Our longstanding corporate
objectives, highlighted on the following pages, focus our people's energies on
five key areas: shareholders, customers, employees, operations, and community.
As we work to meet these all-important objectives, we continue to demonstrate
that we have "energy for change."
Objective:
Manage company
resources to maximize
return on Investment.
CUSTOMER SATISFACTION
Our goal is to deliver customer value through a combination of top
quality service and helping our customers increase their efficiency and reduce
their overall operating costs.
Independent statistics show that Duquesne Light customers annually
experience fewer minutes of power interruptions than the customers of any
other utility in Pennsylvania. Thanks to advanced technology and good
old-fashioned commitment to quality service, we were able to limit the effect
on customers of extreme weather conditions in 1993 and early 1994, including
two major winter blizzards; extended periods of hot, humid summer weather; and
record-low winter temperatures.
When storms damage electric lines or equipment, our automated
distribution system senses the trouble, identifies the problem area, and
allows us to use remote control to reroute electricity almost instantly to all
customers on the circuit except those in the immediate vicinity. And for
those customers, some very determined troubleshooters are on the scene quickly
to restore service--usually within an hour.
We strive to provide all of our customers with a high degree of service.
Reliability tops the list. We also want to ensure that any interaction, from
meter reading to billing to repair of storm-damaged electric circuits, is
fast, reliable and accurate.
Monthly opinion surveys give our people high ratings for the way they
handle customer concerns. That approval rating is significantly better than
the national average, according to a national firm specializing in customer
satisfaction measurements.
4
<PAGE>
[PHOTO APPEARS HERE]
Duquesne Light's electric service is the most reliable in Pennsylvania. That is
especially important when you consider the integral role of electricity in
improving personal lifestyles and business efficiency.
Objective:
Deliver quality service and provide superior customer satisfaction in a way
that differentiates us within the energy services marketplace.
We're increasing the satisfaction of mid- and large-sized commercial and
industrial customers by introducing them to electrotechnologies that can
improve the efficiency of their businesses while reducing their impact on the
environment.
For example, in 1993 we worked closely with hospitals and individual
dental and medical practices to introduce electrotechnologies that safely
sterilize infectious medical waste. The U.S. Environmental Protection Agency
estimates that American hospitals each year generate more than 375,000 tons of
soiled bandages and other materials that can cause disease. Through use of
these electrotechnologies, such material can be disinfected on-site. It then
can be buried in standard landfills, eliminating higher-priced special
handling. The
KNOWING OUR CUSTOMERS
Duquesne Light's service territory is relatively compact--approximately
800 square miles. Yet the company's almost 580,000 customers hold a wide range
of attitudes and preferences concerning their use of electricity and their
relationship with the provider of that important service. By monitoring and
analyzing that information, we are finding new and better ways to serve our
customers.
We've studied various customer surveys and reviewed a wide range of
typical interactions with customers, as well as usage patterns and payment
histories. Analysis of this research has enabled us to break down the
company's service territory into six specific demographic regions--each with
its own particular characteristics. This enables us to target programs and
services to customers who can best benefit from them.
We recently initiated a whole-house surge protection program for
customers who want added protection from lightning and voltage surges for
their computers, VCRs, stereos and other sensitive electric equipment. Our
analysis helps pinpoint areas where this customer service will be most
valuable. We use information from the analysis in a number of ways, from
scheduling tree trimming most effectively to placement of cooperative heat
pump advertising with local heating contractors.
Another key target audience is the more than 50,000 customers who move
into new residences each year. Within three days of their arrival, one of our
representatives delivers a welcome package that includes information about our
services and coupons to local attractions and other money-saving offers. We
also survey these new customers to learn how we can better serve them. For
example, we know that many will be making decisions about adding or upgrading
cooling and heating equipment. Response to the welcome program has been very
favorable. This good first impression provides a solid customer satisfaction
foundation to build on.
All of our customer satisfaction activities recognize that as
competition increases, the importance of each interaction with each of our
customers increases.
5
<PAGE>
Objective:
Be a reliable, low-cost
producer of electric energy
and be recognized for
excellence in our operat-
ing performance.
process not only reduces disposal costs, but also eliminates any potential
future liability for untreated infectious waste.
Application of another innovative electrotechnology will help a local
university reduce its air-conditioning costs as well as help level the overall
customer peak demand on our system during periods of high temperatures and
humidity. Thermal storage technology will be showcased at Carnegie Mellon
University's new research facility, currently under construction at a
Pittsburgh-area advanced technology business park located on the site of a
former steel mill. Ice-making to supply air-conditioning will occur during
off-peak hours. The ice then will be stored for use as needed. This will enable
us to achieve more efficient use of our generating capacity. It's another
example of the "win-win" solutions we are developing with our customers.
PERFORMANCE IMPROVEMENT
Previous annual reports have detailed our strong focus on cost control
and performance improvement. Thanks to the initiative and commitment of our
people, we continue to find ways to take costs out of our core business
without sacrificing customer satisfaction, quality performance, safety, or our
environmental commitment. By taking a fresh look at all facets of the way we
do business, we are discovering additional measures to improve efficiency,
including re-engineering work processes, taking advantage of new technologies,
and eliminating less important activities.
Clearly defined performance and budget goals are at the heart of efforts
to improve operations performance. We've also benefitted from changes relating
to crew size, scheduling and increased work force flexibility. New analytical
technology is helping reduce utility pole replacement costs. "Just-in-time"
tree-trimming around power lines is improving productivity and system
reliability. A new, state-of-the-art customer information and billing system
increases our ability to store a wide range of information that helps us
provide a quick, comprehensive response when customers call.
Benchmarking is a valuable source of information to improve operations
performance, implement process improvements, and reduce costs. We benchmark
against the best companies in the industry and leaders outside the industry.
In addition to measuring performance, benchmarking provides opportunities to
adapt to our operations best practices observed at other companies.
We want to be recognized as a low-cost producer of electric energy and
known for excellence in operating performance. Clean, abundant, reasonably
priced electricity will be a key competitive advantage as the market responds
to NEPA. DQE already is a major supplier of reliable energy to markets outside
southwestern Pennsylvania. Sales to other utilities totaled 2.8 billion
kilowatt-hours in 1993.
RECYCLABLE REPORT
The annual report you are reading now is an example of both our
environmental and our cost-reduction commitments. Printed on recycled paper,
it also is completely recyclable and was produced at a cost approximately 30
percent less than last year's report, and approximately 40 percent less than
the 1991 report.
6
<PAGE>
Our people recognize that their actions on and off the job affect the world
around them. We're proud of our environmental performance--from maintaining
clean power plants, to educating youth, to improving the habitat for wildlife.
Objective:
Recognize the value of the individual, encourage increased responsibility and
accountability, and provide equal opportunity for personal growth and
development.
more than 19 percent of our total sales. That underscores the importance of
the wholesale market and our ability to provide it with competitively priced
power.
ENVIRONMENTAL STEWARDSHIP
Through the years, we have earned a reputation as an environmental leader
within our industry. Opinion surveys show that environmental quality is a
paramount concern to utility customers. Our commitment also provides a
competitive advantage as other utilities begin to make investments necessary
to comply with new environmental regulations.
We pioneered use of wet scrubber systems to help control power plant
emissions. Our Pennsylvania coal-fired generating units are among the
cleanest in the United States. We pioneered industrial use of fly ash in
highway construction. Our Beaver Valley Power Station is an industry leader in
minimizing the volume of low-level radioactive waste.
In 1993, we formalized our long-standing commitment by developing an
environmental strategic plan, adopting a corporate environmental charter, and
establishing an environmental stewardship program.
In a move we believe is unique to our industry, we have initiated an
environmental training program for all Duquesne Light employees--not just those
involved in power production and distribution. We want all of our people to be
environmentally conscious, competent and responsible, both on and off the job.
Our approach to environmental protection goes beyond simply complying with
environmental laws and regulations. We take pride in carrying our commitment
into the communities we serve.
Education is a cornerstone of our stewardship activities. A wide variety
of programs is helping area youths increase their environmental awareness. For
example, a cooperative program with the Western Pennsylvania Conservancy, a
regional conservation group, helps elementary through high school students
increase their understanding of the environment and their roles in it.
Another very successful program enables grade school students to learn
about and plant trees descended from those with historic importance. We
received a special commendation from American Forests, the nation's oldest
non-profit forestry organization, for the results of this program.
In a cooperative program with Allegheny County, our people helped collect
approximately 170 tons of old appliances and a wide range of scrap metal--from
hot water tanks and auto parts to metal sinks and paint cans. The material
will be recycled for use as feedstock for new steel and metal products. We
received commendations from the county and the Pennsylvania Legislature for
our participation.
On the job, our people recycled more than 70 tons of paper in 1993, along
with scrap metal from various company operations, oil from transformers, and
<PAGE>
Objective: Be a community leader in improving the quality of life in our
service territory by being recognized as a premier economic development
organization and by enhancing the overall value of the human and natural
resources of the region.
wooden pallets. We also increased the use of environmentally compatible
paints, non-hazardous solvents and parts cleaners, and are working with
vendors to accept return of boxes, pallets and other packaging/shipping
materials.
Our Brunot Island Wildlife Habitat enhancement project continues to
demonstrate the ability of our power facilities to coexist with nature. Our
participation in a "rails-to-trails" project along a transmission line
right-of-way provides another example of this facet of our environmental
commitment. We recently energized a new 7.3 mile power line near the new
Pittsburgh International Airport. The line runs along an old railroad
right-of-way that was developed as a segment of a hiking and biking trail. We
worked closely with the Montour Trail Council to ensure our line blended in
with the picturesque setting. The right-of-way was constructed using selective
tree trimming and state-of-the-art erosion and sedimentation control. The 110
poles that carry the line along the right-of-way are made of a steel that will
oxidize to an earthy brown over time. Through this cooperative effort, local
residents can enjoy a new recreational facility and better electric service at
the same time.
We expect the community partnership aspect of our environmental charter
to gain additional momentum with the inaugural Three Rivers Environmental
Awards in 1994. The goal of the awards, cosponsored by Duquesne Light and the
Pennsylvania Environmental Council, is to honor organizations and individuals
that have demonstrated a commitment to environmental excellence, leadership
and accomplishment in business, education, community, government,
communication, or design and development. We hope to encourage the community
to emulate the achievements of the successful nominees, thereby promoting
innovative environmental efforts and further enhancing the quality of life.
Another community outreach initiative planned for 1994 will help small
and mid-sized businesses learn more about environmental regulations related to
their businesses. With the Southwestern Pennsylvania Industrial Resource
Center, we are cosponsoring the first of a series of seminars this spring that
will link these important customers with regulatory and legal experts who can
help them develop cost-effective strategies to meet their environmental
obligations.
- --------------------------------------------------------------------------------
CHESTER ENVIRONMENTAL ACQUISITION
- --------------------------------------------------------------------------------
In 1993, our Duquesne Enterprises subsidiary acquired a controlling
interest in Chester Environmental, Inc., an engineering and consulting company
that specializes in environmental matters.
We made this investment because Chester's experience and expertise relate
closely to our core business. We believe the strong demand for environmental
services will continue to grow in response to new regulations. Investment in
Chester provides an opportunity to extend our environmental leadership.
Chester provides water quality, residual solid waste and air quality
consulting and analytical laboratory services to industrial and government
clients around the world. Two major contracts were signed in 1993 with steel
companies in Taiwan and India.
8
<PAGE>
GLOSSARY OF TERMS
Following are explanations of certain financial and operating terms used in our
report and unique in our core business.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFC)
- --------------------------------------------------------------------------------
AFC is an amount recorded on the books of a utility during the period of
construction of plant. The amount represents the estimated cost of both debt and
equity used to finance the construction.
CENTRAL AREA POWER COORDINATION GROUP (CAPCO)
- --------------------------------------------------------------------------------
These companies (Duquesne Light Company, Ohio Edison Company, Pennsylvania Power
Company, The Cleveland Electric Illuminating Company and The Toledo Edison
Company) joined together as CAPCO in 1967 to jointly develop power generation
and transmission facilities.
CONSTRUCTION WORK IN PROGRESS (CWIP)
- --------------------------------------------------------------------------------
This amount represents utility plant in the process of construction but not yet
placed in service. The amount is shown on the consolidated balance sheet as a
component of property, plant and equipment.
DEFERRED ENERGY COSTS
- --------------------------------------------------------------------------------
In conjunction with the Energy Cost Rate Adjustment Clause, Duquesne Light
Company records deferred energy costs to offset differences between actual
energy costs and the level of energy costs currently recovered from customers.
ENERGY COST RATE ADJUSTMENT CLAUSE (ECR)
- --------------------------------------------------------------------------------
Duquesne Light Company recovers through the ECR, to the extent that such amounts
are not included in base rates, the cost of nuclear fuel, fossil fuel and
purchased power costs and passes to its customers the profits from short-term
power sales to other utilities.
FEDERAL ENERGY REGULATORY COMMISSION (FERC)
- --------------------------------------------------------------------------------
FERC is an independent five-member commission within the U.S. Department of
Energy. Among its many responsibilities, FERC sets rates and charges for the
wholesale transportation and sale of natural gas and electricity, and the
licensing of hydroelectric power projects.
KILOWATT (KW)
- --------------------------------------------------------------------------------
A kilowatt is a unit of power or capacity. A kilowatt hour (KWH) is a unit of
energy or kilowatts times the length of time the kilowatts are used. For
example, a 100-watt bulb has a demand of .1 KW and, if burned continuously, will
consume 1 KWH in ten hours. One thousand KWs is a megawatt (MW). One thousand
KWHs is a megawatt hour (MWH).
NUCLEAR DECOMMISSIONING COSTS
- --------------------------------------------------------------------------------
Decommissioning costs are expenses to be incurred in connection with the
entombment, decontamination, dismantlement, removal and disposal of the
structures, systems and components of a nuclear power plant that has permanently
ceased the production of electric energy.
PEAK LOAD
- --------------------------------------------------------------------------------
Peak load is the amount of electricity required during periods of highest
demand. Peak periods fluctuate by season and generally occur in the morning
hours in winter and in late afternoon during the summer.
PENNSYLVANIA PUBLIC UTILITY COMMISSION (PUC)
- --------------------------------------------------------------------------------
The Pennsylvania governmental body that regulates all utilities (electric, gas,
telephone, water, etc.) is made up of five members (one a chairman) appointed by
the governor.
REGULATORY ASSET
- --------------------------------------------------------------------------------
Costs that Duquesne Light Company would otherwise have charged to expense are
capitalized or deferred because these costs are currently being recovered or
because it is probable that the PUC will allow recovery of these costs through
rates.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CORPORATE STRUCTURE
DQE (the Company) is an energy services holding company. Its principal
subsidiary, Duquesne Light Company (Duquesne), is an electric utility engaged in
the production, transmission, distribution and sale of electric energy. During
1993, Duquesne's operations accounted for most of DQE's total assets, revenues
and income.
While electric utility activities will continue to comprise most of DQE's
business, the Company has taken important steps to develop its other
subsidiaries: Duquesne Enterprises (DE) and Montauk. DE is involved in
initiatives related to the core business; these include providing all the energy
services for the Pittsburgh International Airport, providing environmental
consulting and engineering services, and investing in real estate. Montauk makes
both short- and long-term investments for the Company, and provides a source of
capital for these other subsidiaries.
RESULTS OF OPERATIONS
OPERATING REVENUES
- --------------------------------------------------------------------------------
Customer operating revenues result from Duquesne's sales of electricity to
ultimate customers and are based on rates authorized by the Pennsylvania Public
Utility Commission (PUC). These rates are designed to recover Duquesne's
operating expenses and investment in utility assets and to provide a return on
the investment. Current and deferred customer revenues resulted from a $232
million rate increase granted in early 1988. The PUC required Duquesne to phase
in this increase during a six-year period. The phase-in plan provided that, with
no impact on total reported customer revenues, rates would increase by
approximately $85 million in April of each year from 1988 through 1991, remain
constant in 1992 and 1993, and decrease by approximately $85 million in April
1994. The phase-in plan also provided for recovery of deferred revenues and
carrying costs on such deferred revenues. The rate increase has been recognized
in operating revenues since March 1988. A regulatory asset has been established
for that portion of revenues yet to be collected from customers, and carrying
charges on this deferred asset have been recognized as a component of other
income in the Statement of Consolidated Income of DQE. Duquesne expects the
remaining balance of this deferred asset to be recovered by April 1994, the end
of the phase-in period.
Short-term sales to other utilities are made at market rates and are included,
along with Duquesne's non-KWH revenues and revenues of DQE's other subsidiaries,
in other operating revenues in the Statement of Consolidated Income of DQE.
<TABLE>
<CAPTION>
COMPONENTS OF THE CHANGE IN OPERATING REVENUES FROM THE PRIOR YEAR
- ----------------------------------------------------------------------------------------------
1993 1992 1991
<S> <C> <C> <C>
(Amounts in Millions of Dollars)
- ----------------------------------------------------------------------------------------------
Customer Operating Revenues:
Revenues from sales of electricity to ultimate
customers $ 26.9 $(37.3) $21.6
Energy Cost Rate Adjustment Clause (ECR) revenues (27.0) 4.8 15.1
State tax adjustment surcharge revenues (7.7) 12.0 11.1
- ----------------------------------------------------------------------------------------------
Total Customer Operating Revenues (7.8) (20.5) 47.8
- ----------------------------------------------------------------------------------------------
Other Operating Revenues:
Revenues from other utilities (21.8) 13.5 13.8
Other revenues 31.0 (2.6) 9.1
- ----------------------------------------------------------------------------------------------
Total Other Operating Revenues 9.2 10.9 22.9
- ----------------------------------------------------------------------------------------------
Total $ 1.4 $ (9.6) $70.7
==============================================================================================
</TABLE>
Revenues from sales of electricity to ultimate customers were favorably impacted
in 1993 and 1991 by warmer than normal summer temperatures. Mild summer weather
in 1992 had the opposite effect on residential and commercial customer sales.
ECR revenues are Duquesne's recovery of fuel and other energy costs not
otherwise recovered from customers through base rates. The ECR is based on
projected unit costs, is recalculated each year, and is subject to PUC review.
This revenue adjustment includes a credit to
DUQUESNE CUSTOMER SALES
1993 VS. 1992
(Millions of KWH)
[BAR GRAPH APPEARS HERE]
10
<PAGE>
Duquesne's customers for profits from short-term power sales to other utilities,
as well as an adjustment for any over- or under-collections from customers that
may have occurred in prior years. The 1993 ECR reduced customer costs from 1992
levels and will continue to reduce revenues through the first quarter of 1994 by
a greater amount than in the prior year. From April 1994 through March 1995, the
ECR is expected to reduce revenues by a lesser amount than in the prior year.
This ECR treatment is intended to have no impact on net income.
State tax adjustment surcharge revenues result from the August 1991 tax
increases enacted by the Pennsylvania legislature. Most of these increases were
retroactive to January 1, 1991. The PUC allowed Duquesne to recover these
increases in tax expense by applying, as of August 24, 1991, an adjustment to
customers' bills. Because of the timing of the increase and the rates applied,
Duquesne recovered more state tax adjustment surcharge revenues in 1992 than in
1993 or 1991. This tax recovery is expected, as of April 1994, to become part of
base rates. This tax recovery treatment is intended to have no impact on net
income.
Revenues from other utilities declined in 1993, from the record level of 1992,
because higher system demand and more planned and forced generating station
outages in 1993 decreased Duquesne's capacity available for off-system sales.
The increase, from 1991 to 1992, in these short-term sales to other utilities
resulted from greater availability of transmission and generating capacity,
increased demand by other utilities for energy and Duquesne's marketing efforts.
Other revenues include revenues of DE and Montauk, as well as Duquesne's rental
income and billings to other companies in the CAPCO group. Revenues of DE
increased approximately $23 million in 1993; the increase was partially due to
the acquisition of a controlling interest in Chester Environmental, Inc. (See
Note A to the consolidated financial statements.) and higher sales to the
Pittsburgh International Airport. Primarily as a result of increased leasing
activities and other tax advantaged investments, Montauk revenues increased
approximately $8 million.
OPERATING EXPENSES
- --------------------------------------------------------------------------------
Yearly fluctuations in fuel and purchased power expense result from changes in
the cost of fuel, the mix between coal and nuclear generation, the total KWHs
generated and the effects of deferred energy costs. In 1993, the impact of the
ECR on deferred energy costs decreased fuel expense, in comparison to that for
1992. Also contributing to the decline in fuel expense was a 6 percent decrease
in generation that was primarily due to more planned and forced generating plant
outages in 1993. Fuel expense for 1992 was greater than that for 1991 because of
increased generation of electricity for sale to other utilities; however, the
greater fuel expense was partially offset in 1992 by lower coal and nuclear fuel
costs per KWH. In 1994, nuclear fuel costs are expected to continue to decline,
and coal costs are expected to remain near the 1993 level.
Other operating expenses were higher in 1993 than 1992. In 1993, Duquesne
finalized plans to sublease the majority of its office space at corporate
headquarters; relocation of its principal business offices is anticipated in
1994. A charge of approximately $13 million was recorded as an operating expense
to reflect the shortfall in anticipated sublease revenues from the rental
payments related to space leased through January 2003, the date the leasing
arrangements expire. Additionally, operating expenses at DE increased
approximately $17 million in 1993 as a reflection of the acquisition of a
controlling interest in Chester Environmental, Inc. (See Note A to the
consolidated financial statements.) Included in 1991 operating expenses was an
increase, caused by the deterioration of Duquesne's past due customer accounts
and increased collection costs, of $11.9 million in the allowance for
uncollectible accounts receivable.
Maintenance expense incurred for scheduled refueling outages at Duquesne's
nuclear units is deferred and amortized over the period between scheduled
outages. During 1993, amortization of deferred nuclear refueling outage expense
increased approximately $3.5 million over the 1992 level. Also increasing
maintenance expense in 1993 was Duquesne's change, as of January 1, 1993, in its
method of accounting for maintenance costs during major fossil station outages.
Prior to 1993, maintenance costs incurred for scheduled major outages at fossil
stations were
DUQUESNE CUSTOMER REVENUES
(Millions of Dollars)
[BAR GRAPH APPEARS HERE]
DUQUESNE OTHER OPERATING AND MAINTENANCE EXPENSE
[BAR GRAPH APPEARS HERE]
11
<PAGE>
charged to expense as the costs were incurred. Under the new accounting policy,
Duquesne accrues, over the period between outages, anticipated expenses for
scheduled major fossil station outages. (Maintenance costs incurred for non-
major scheduled outages and for forced outages continue to be charged to expense
as the costs are incurred.) This new method was adopted to match more accurately
the maintenance costs with the revenue produced during the periods between
scheduled major fossil outages.
Depreciation and amortization expense increased in 1993 by comparison with that
for 1992 and 1991. The increase was primarily a result of an increase in
depreciable property.
Taxes other than income taxes decreased in 1993, primarily as a result of a
favorable resolution of property tax assessments. In 1993, Duquesne recorded, on
the basis of this revised assessment, the expected refunds of these overpayments
in prior years. By comparison with those for 1991, taxes other than income taxes
decreased in 1992 as the result of favorable resolution of capital stock tax,
gross receipts tax and sales tax matters.
Income taxes increased in 1993 as a result of an increase in taxable income and
a 1 percent increase in the corporate federal income tax rate.
OTHER INCOME AND DEDUCTIONS
- --------------------------------------------------------------------------------
During the fourth quarter of 1993, Duquesne recognized a charge to other income
of approximately $15.2 million for its investment in the abandoned General
Public Utilities (GPU) transmission line project. On December 8, 1993, the New
Jersey Board of Regulatory Commissioners (BRC) denied a request by GPU's
subsidiary Jersey Central Power and Light Company for approval of long-term
power purchase and operating agreements that were originally signed in 1990 by
GPU and Duquesne and further amended in 1993. The BRC rejected an administrative
law judge's recommended decision that the project be approved and, within hours
of the BRC decision, GPU terminated its participation in the project. In view of
GPU's decision, Duquesne also terminated its participation in the project and
the PUC transmission line siting proceeding.
Other income also decreased in 1993, in comparison with that for 1992, as a
result of a decrease of approximately $13 million in carrying charges on
deferred revenues. During 1993, the deferred revenue balance upon which carrying
charges are earned declined in comparison with that for 1992 and since April
1993, Duquesne has not recorded additional carrying charges on deferred
revenues. (See the discussion of the phase-in plan under the section on
operating revenues.)
Income taxes related to other income decreased $15 million in 1993, in
comparison with those for 1992, because of a favorable settlement (related to
Duquesne's 1988 tax return and the consolidated 1989 tax return) with the United
States Internal Revenue Service. The remaining decrease in 1993 was caused by
lower non-operating income.
Other income for 1992 increased, in comparison with that for 1991, primarily as
the result of an increase of $3.5 million in interest income and a decrease of
$3.7 million in fees related to Duquesne's sale of receivables. Other income for
1991 included a $5.3 million regulatory accounting reclassification that
decreased other income, reduced depreciation expense and had no impact on net
income.
INTEREST AND OTHER CHARGES
- --------------------------------------------------------------------------------
Duquesne achieved reductions in interest and other charges in 1993 and 1992
through refinancing first mortgage bonds and through obtaining lower average
short-term rates on certain tax exempt pollution control notes. Duquesne also
retired $24.2 million of preferred and preference stock during 1992. Interest
expense and dividends on preferred and preference stock declined to $121 million
in 1993 from $135 million in 1992 and $145 million in 1991. Interest expense and
preferred stock dividends are expected to decline in 1994 by approximately $9
million from the 1993 level.
DQE INTEREST EXPENSE AND OTHER CHARGES
(Millions of Dollars)
[BAR GRAPH APPEARS HERE]
12
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
CONSTRUCTION
- --------------------------------------------------------------------------------
During 1993, Duquesne spent approximately $100 million for construction.
Duquesne expended these amounts to improve and expand its production,
transmission and distribution systems. Duquesne estimates that it will spend
approximately $110 million for construction in 1994. Construction expenditures
are estimated to be $70 million in 1995 and $80 million in 1996. These amounts
exclude AFC, nuclear fuel and expenditures for possible early replacement of
steam generators at the Beaver Valley Power Station. (See Note K to the
consolidated financial statements.) Duquesne currently has no plans for
construction of new base load generating plants and expects that funds generated
from operations will continue to be sufficient to finance a large part of its
capital needs.
INVESTING
- --------------------------------------------------------------------------------
Through DE and Montauk, DQE's investments are focused in four principal areas:
energy, environmental services, leasing and tax-advantaged investments. After
achieving a modest profit of $.02 per DQE share in 1992, these subsidiaries
contributed $.13 per share to the Company's 1993 earnings. During 1993, the
level of investing activities increased in comparison with that for 1992. On
August 17, 1993, DE acquired a controlling interest in Chester Environmental,
Inc. for approximately $12 million. Chester provides total environmental
consulting and engineering services to a wide range of clients. During 1993, DE
also made real estate investments totaling approximately $22 million. Previous
DE investments included Allegheny Development Corporation (which provides all
energy services for the Pittsburgh International Airport) and International
Power Machines (which manufactures products and systems designed to provide non-
interruptible electric power). During 1993, Montauk invested approximately $44
million in leases and other tax-advantaged investments. The lease rentals in
these transactions are guaranteed by the lessee's parents or affiliates.
FINANCING
- --------------------------------------------------------------------------------
The Company plans to meet its current obligations and debt maturities through
1998 with funds generated from operations and through new financings. At
December 31, 1993, the Company was in compliance with all of its debt covenants.
Duquesne continues to reduce capital costs by refinancing and retiring
securities. During 1993, Duquesne issued $695 million of first collateral trust
bonds with maturities ranging from the year 1996 through the year 2025 and with
an average interest rate of 6.58 percent. The proceeds of these sales were used
to redeem $713.7 million of first mortgage bonds with an average interest rate
of 8.16 percent.
In June 1993, Duquesne participated in the issuance of $25 million of Beaver
County Industrial Development Authority Pollution Control Revenue Bonds. In
August 1993, Duquesne participated in the issuance of $20.5 million of Ohio Air
Quality Development Authority Pollution Control Revenue Refunding Bonds to
refund a like amount of pollution control obligations.
In August 1993, Montauk entered into a revolving credit agreement with a group
of banks. Under this agreement, Montauk can borrow, on a revolving basis, up to
$50 million for working capital and other general corporate purposes. If the
agreement is not extended at the end of its 364-day commitment period, Montauk
can convert any outstanding borrowings into a two-year, amortizing term loan. At
December 31, 1993, Montauk had borrowed $25 million under this agreement.
On January 14, 1994, Duquesne redeemed all of its outstanding shares of $2.10
preference stock and $7.50 preference stock for approximately $38 million.
In 1992, Duquesne refinanced $312.9 million and retired $82.1 million of long-
term debt.
Duquesne established, as of January 1, 1992, an Employee Stock Ownership Plan
(ESOP) to fund a match of a portion of employee contributions for a 401(k) plan.
Duquesne may purchase shares of DQE common stock from DQE or on the open market
to satisfy the exchange feature of its Preference Stock, Plan Series A. The
Company expects the ESOP to have minimal dilutive impact on earnings per share.
DQE NET CASH FLOW FROM OPERATIONS
(Millions of Dollars)
[BAR GRAPH APPEARS HERE]
DQE RATIO OF EARNINGS TO FIXED CHARGES
[BAR GRAPH APPEARS HERE]
13
<PAGE>
SALE OF ACCOUNTS RECEIVABLE
- --------------------------------------------------------------------------------
In 1989, Duquesne and an unaffiliated corporation entered into an agreement that
entitled Duquesne to sell and the corporation to purchase, on an ongoing basis,
up to $100 million of accounts receivable. At December 31, 1993, Duquesne had
sold $9 million of receivables. The accounts receivable sales agreement, which
expires in June 1994, is one of many sources of funds available to Duquesne.
Duquesne is currently evaluating whether to seek an extension of the agreement.
NUCLEAR FUEL LEASING
- --------------------------------------------------------------------------------
Duquesne finances its acquisitions of nuclear fuel through a leasing arrangement
under which it may finance up to $75 million of nuclear fuel. As of December 31,
1993, the amount of nuclear fuel financed by Duquesne under this arrangement
totaled approximately $65 million. Duquesne plans to continue leasing nuclear
fuel to fulfill its requirements at least through 1995, the remaining term of
the current leasing arrangement.
DIVIDENDS
- --------------------------------------------------------------------------------
The Company or its predecessor, Duquesne, has continuously paid dividends on
common stock since 1953. The quarterly dividends paid have increased by an
average annual rate of 5.9 percent over the past five years, even though the
Company has maintained a more conservative payout ratio than the industry in
general. The Company expects that funds generated from operations will continue
to be sufficient to meet sinking fund and long-term debt maturities and to pay
dividends. The Company's need for funds and the availability of those generated
from operations will be affected by the level of economic activity in Duquesne's
service area and by legislation, rate-related proceedings, competition and
environmental and other matters experienced by the Company and the electric
utility industry generally.
Dividends may be paid on DQE common stock to the extent permitted by law and as
declared by the board of directors. However, in Duquesne's Restated Articles of
incorporation, provisions relating to preferred and preference stock may
restrict the payment of Duquesne's common dividends. No dividends or
distributions may be made on Duquesne's common stock if Duquesne has not paid
dividends or sinking fund obligations on its preferred or preference stock.
Further, the aggregate amount of Duquesne's common stock dividend payments or
distributions may not exceed certain percentages of net income if the ratio of
common stockholders' equity to total capitalization is less than specified
percentages. As all of Duquesne's common stock is owned by DQE, to the extent
that Duquesne cannot pay common dividends, DQE may not be able to pay dividends
to its common shareholders. No part of the retained earnings of DQE or any of
its subsidiaries was restricted at December 31, 1993.
OUTLOOK
COMPETITION
- --------------------------------------------------------------------------------
Duquesne, like the electric utility industry in general, faces increasing
competition. The Company is continuing to assess the impact of these competitive
forces on its future operations. The National Energy Policy Act of 1992 (energy
act) was designed, among other things, to foster competition. Among other
provisions, the energy act amends the Public Utility Holding Company Act of 1935
(1935 act) and the Federal Power Act. Amendments to the 1935 act create a new
class of independent power producers known as Exempt Wholesale Generators
(EWGs), which are exempt from the corporate structure regulations of the 1935
act. EWGs, which may include independent power producers as well as affiliates
of electric utilities, do not require Securities and Exchange Commission
approval or regulation. At the current time, the Company has not made any
investment, and has no plans to make any investment, in EWGs. Amendments to the
Federal Power Act create the potential for utilities and other power producers
to gain increased access to transmission systems of other utilities to
facilitate sales to other utilities. The amendments would permit the Federal
Energy Regulatory Commission (FERC) to order utilities to transmit power over
their lines for use by other suppliers and to enlarge or construct additional
transmission capacity to provide these services. The FERC may not, however,
issue any order that would unreasonably impair the continuing reliability of
affected electric systems. Finally, brokers and marketers, without owning or
operating any generation or transmission facilities, have also entered into the
business of buying and selling electric capacity and energy.
DQE NET INCOME
(Millions of Dollars)
[BAR GRAPH APPEARS HERE]
14
<PAGE>
Industrial and large commercial customers may have the ability to own and
operate facilities to generate their own electric energy requirements and, if
such facilities are qualifying facilities, to require the displaced electric
utility to purchase the output of such facilities. Customers may also have the
option of substituting fuels, such as the use of natural gas, oil or wood for
heating and/or cooling purposes rather than electric energy or of relocating
their facilities to a lower cost environment.
In addition, increased competition may also result from the 1990 Amendments to
the Clean Air Act. Such amendments exempt from sulfur dioxide (SO2) and oxides
of nitrogen (NOX) control requirements existing units with less than 25 MWs of
generating capability, and new or existing co-generation units supplying less
than one-third of their electric output and less than 25 MWs for commercial
sale.
GENERATING UNITS HELD FOR FUTURE USE
- --------------------------------------------------------------------------------
In 1986, the PUC approved Duquesne's request to remove the Phillips and most of
the Brunot Island (BI) power stations from service and place them in cold
reserve. Duquesne's capitalized costs and net investment in the plants at
December 31, 1993 totaled $130 million. (See Note L to the consolidated
financial statements.)
Duquesne expects to recover its net investment in these plants through future
sales. Phillips and BI represent licensed, certified, clean sources of
electricity that will be necessary to meet expanding opportunities in the power
markets. Duquesne believes that anticipated growth in peak load demand for
electricity within its service territory will require additional peaking
generation. Duquesne looks to BI to meet this need. The Phillips Power Plant is
an important component in meeting market opportunities to supply long term bulk
power. Recent legislation may permit wider transmission access to these long
term bulk power markets. In summary, Duquesne believes its investment in these
cold-reserved plants will be necessary in order to meet future business needs.
If business opportunities do not develop as expected, Duquesne will consider the
sale of these assets. In the event that market demand, transmission access or
rate recovery do not support the utilization or sale of the plants, Duquesne may
have to write off part or all of their costs.
ENVIRONMENTAL MATTERS
- --------------------------------------------------------------------------------
The Comprehensive Environmental Response, Compensation and Liability Act of 1980
(Superfund) and the Superfund Amendments and Reauthorization Act of 1986
established a variety of informational and environmental action programs. The
Environmental Protection Agency (EPA) has informed Duquesne of its involvement
or potential involvement in three hazardous waste sites. If Duquesne is
ultimately determined to be a responsible party with respect to these sites, it
could be liable for all or a portion of the cleanup costs. However, in each
case, other solvent, potentially responsible parties that may bear all or part
of any liability are also involved. In addition, Duquesne believes that
available defenses, along with other factors (including overall limited
involvement and low estimated remediation costs for one site) will limit any
potential liability that Duquesne may have for cleanup costs. Duquesne believes
that it is adequately reserved for all known liabilities and costs and,
accordingly, that these matters will not have a materially adverse effect on its
financial position or results of operations.
In 1990, Congress approved amendments to the Clean Air Act. Among other
innovations, this legislation established the Emission Allowance Trading System.
Emission allowances are permits to emit one ton of SO2 for one year. These
allowances are issued by the EPA to fossil-fired stations with generating
capability of more than 25 megawatts that were in existence as of the passage of
the 1990 amendments. Allowances are part of a market-based approach to SO2
reduction. Emission allowances can also be obtained through purchases on the
open market or directly from other sources. Excess allowances may be banked for
future use or sold on the open market to other parties for their use in
offsetting emissions.
The legislation requires significant reductions of SO2 and NOX by 1995 and
additional reductions by the year 2000. Duquesne continues to work with the
operators of its jointly owned
15
<PAGE>
stations to implement cost-effective compliance strategies to meet these
requirements. Duquesne's plans for meeting the 1995 SO2 compliance
requirements include increasing the use of scrubbed capacity, switching to fuel
with a lower sulfur content and purchasing emission allowances. NOX reductions
under Title IV are required by 1995 at only the Cheswick station; work to
achieve the reductions was completed in 1993. The ozone attainment provisions of
Title I of the Clean Air Act Amendments will require NOX reductions by 1995 at
Duquesne's Elrama plant and at the jointly owned Mansfield plant. Duquesne plans
to achieve such reductions with low NOX burner technology. The estimated
capital costs to achieve 1995 compliance standards are approximately $30
million, of which approximately $15 million has already been spent. Through the
year 2000, Duquesne is planning a combination of compliance methods that include
fuel switching; increased use of, and improvements in, scrubbed capacity; flue
gas conditioning; low NOX burner technology; and the purchase of emission
allowances. The Company currently estimates that additional capital costs to
comply with environmental requirements from 1995 through the year 2000 will be
approximately $20 million. This estimate is subject to the finalization of
federal and state regulations.
Duquesne is closely monitoring other potential air quality programs and air
emission control requirements that could be imposed in the future. These areas
include additional NOX control requirements that could be imposed on fossil
fuel plants by the Ozone Transport Commission, more stringent ambient air
quality and emission standards for SO2 and particulates, or CO2 control
measures. As these potential programs are in various stages of discussion and
consideration, it is impossible to make reasonable estimates of the potential
costs and impacts of these programs at this time.
In July 1992, the Pennsylvania Department of Environmental Resources (DER)
issued Residual Waste Management Regulations governing the generation and
management of non-hazardous waste. Duquesne is currently conducting tests and
developing compliance strategies. Capital compliance costs are estimated, on the
basis of information currently available, at $10 million through 1995. The
expected additional capital cost of compliance from 1995 through 2000 is
approximately $25 million; this estimate is subject to the results of ground
water assessments and DER final approval of compliance plans.
Duquesne operates the scrubbed Elrama plant and converts the scrubber slurry to
a fixated pozolonic material. This material is placed at an off-site disposal
area having approximately six years of remaining capacity. Additionally,
Duquesne owns 17 percent of the scrubbed Mansfield plant, which is operated by
Pennsylvania Power. This plant pumps a similar slurry to an off-site impoundment
where the slurry is treated by using a Calcilox fixation process. The site has
at least 14 years of remaining capacity. Both plants have limited temporary on-
site storage for flue gas desulfurization material and no permanent on-site
disposal capacity. While there is no imminent shortage of disposal capacity,
Duquesne continues to monitor this situation and to plan for future disposal.
The siting of future disposal facilities will be facilitated by the 1993 EPA
determination that coal combustion waste products are not hazardous waste and
are therefore exempt from the Hazardous Waste Regulations.
Under the Nuclear Waste Policy Act of 1982, which establishes a policy for
handling and disposing of spent nuclear fuel and requires the establishment of a
final repository to accept spent fuel, the CAPCO companies have entered into
contracts with the Department of Energy (DOE)for permanent disposal of spent
nuclear fuel and high-level radioactive waste. The DOE has indicated that the
repository will not be available for acceptance of spent fuel before 2010.
Existing on-site spent fuel storage capacities at Beaver Valley 1, Beaver Valley
2 and Perry are expected to be sufficient until 1996, 2010, and 2009,
respectively. Duquesne is currently increasing the storage capacity at Beaver
Valley 1 by equipping the spent fuel pool with high density fuel storage racks.
Duquesne anticipates that such action will increase the spent fuel storage
capacity at Beaver Valley 1 to provide for sufficient storage through 2014.
16
<PAGE>
OTHER SUBSIDIARY OPERATIONS
- --------------------------------------------------------------------------------
The continued growth of DE and Montauk is expected to play an increasing role in
DQE's overall corporate strategy and future earnings.
RETIREMENT PLAN MEASUREMENT ASSUMPTIONS
- --------------------------------------------------------------------------------
The Company reduced the discount rate used to determine the projected benefit
obligation on the Company's retirement plans at December 31, 1993, to 7 percent.
The assumed change in future compensation levels was also decreased by 0.5
percent to reflect current market and economic conditions.
The effects of these changes on the Company's retirement plan obligations are
reflected in the amounts shown in Note I to the consolidated financial
statements. The resulting increase in related expenses for subsequent years is
not expected to be material.
GENERAL ELECTRIC SETTLEMENT
- --------------------------------------------------------------------------------
In January 1994, the CAPCO companies reached a settlement in connection with a
1991 lawsuit against General Electric Company (GE) regarding the Perry Plant.
The settlement provides for cash payments to the CAPCO companies and discounts
on future purchases from GE. This settlement will not materially affect the
Company's results of operations in future years.
OTHER
- --------------------------------------------------------------------------------
Duquesne's utility operations are subject to regulation by the PUC and the FERC.
This regulation is designed to provide for the recovery of operating costs and
investment and the opportunity to earn a fair return on funds invested in the
utility business. The regulatory process imposes a time lag during which
increases in operating expenses, capital costs or construction costs may not be
recovered.
- --------------------------------------------------------------------------------
COMPANY REPORT ON FINANCIAL STATEMENTS
The Company is responsible for the financial information and representations
contained in the financial statements and other sections of this annual report.
The Company believes that the consolidated financial statements have been
prepared in conformity with generally accepted accounting principles that are
appropriate in the circumstances to reflect, in all material respects, the
substance of events and transactions that should be included in the statements
and that the other information in the annual report is consistent with those
statements. In preparing the financial statements, the Company makes informed
judgments and estimates based on currently available information about the
effects of certain events and transactions. The Company maintains a system of
internal accounting control designed to provide reasonable assurance that the
Company's assets are safeguarded and that transactions are executed and recorded
in accordance with established procedures. There are limits inherent in any
system of internal control and such limits are based on recognition that the
cost of such a system should not exceed the benefits derived. The system of
internal accounting control is supported by written policies and guidelines and
is supplemented by a staff of internal auditors. The Company believes that the
internal accounting control system provides reasonable assurance that its assets
are safeguarded and the financial information is reliable.
/s/ Wesley W. von Schack /s/ Gary L. Schwass
Wesley W. von Schack Gary L. Schwass
Chairman of the Board, President Vice President and
and Chief Executive Officer Treasurer
17
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE DIRECTORS AND STOCKHOLDERS OF DQE:
We have audited the accompanying consolidated balance sheets of DQE and its
subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of income, common stockholders' equity, and cash flows for each of
the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of DQE and its subsidiaries as of
December 31, 1993 and 1992, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1993 in
conformity with generally accepted accounting principles.
As discussed in Note A to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes
to conform with Statement of Financial Accounting Standards No. 109, and the
Company changed its method of accounting for maintenance costs during scheduled
major fossil station outages.
/s/ Deloitte & Touche
Deloitte & Touche
Pittsburgh, Pennsylvania
January 25, 1994
- --------------------------------------------------------------------------------
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF DQE
The Audit Committee, composed entirely of non-employee directors, meets
regularly with the independent public accountants and the internal auditors to
discuss results of their audit work, their evaluation of the adequacy of the
internal accounting controls and the quality of financial reporting.
In fulfilling its responsibilities in 1993, the Audit Committee recommended to
the Board of Directors, the selection, subject to shareholder approval, of the
Company's independent public accountants. The Audit Committee reviewed the
overall scope and details of the independent public accountants' and internal
auditors' respective audit plans and reviewed and approved the independent
public accountants' general audit fees and non-audit services.
Audit Committee meetings are designed to facilitate open communications with
internal auditors and independent public accountants. To ensure auditor
independence, both the independent public accountants and the internal auditors
have full and free access to the Audit Committee.
The Audit Committee of the Board of Directors of DQE
18
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED INCOME
- --------------------------------------------------------------------------------
(Thousands of Dollars,
Except Per Share Amounts)
--------------------------------------
Year Ended December 31,
--------------------------------------
1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Customers:
Current $1,175,024 $1,180,707 $1,181,332
Deferred (Note J) (100,315) (98,201) (78,344)
Other 120,851 111,698 100,846
- --------------------------------------------------------------------------------
TOTAL OPERATING REVENUES 1,195,560 1,194,204 1,203,834
- --------------------------------------------------------------------------------
OPERATING EXPENSES
Fuel and purchased power 220,928 265,340 250,755
Other operating 319,071 282,953 291,253
Maintenance 80,292 79,146 83,773
Depreciation and amortization 142,657 127,924 119,264
Taxes other than income taxes 73,126 85,733 95,175
Income taxes (Note F) 106,286 97,193 96,690
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 942,360 938,289 936,910
- --------------------------------------------------------------------------------
OPERATING INCOME 253,200 255,915 266,924
- --------------------------------------------------------------------------------
OTHER INCOME AND (DEDUCTIONS)
Allowance for equity funds used during
construction 869 2,598 1,855
Long-term power sale write-off (Note J) (15,225) -- --
Carrying charges on deferred revenues 1,801 15,145 21,514
Income taxes (Note F) 19,033 (11,747) (5,132)
Other -- net 2,187 12,582 (9,398)
- --------------------------------------------------------------------------------
TOTAL OTHER INCOME 8,665 18,578 8,839
- --------------------------------------------------------------------------------
INCOME BEFORE INTEREST AND OTHER CHARGES 261,865 274,493 275,763
- --------------------------------------------------------------------------------
INTEREST AND OTHER CHARGES
Interest on long-term debt 108,479 123,402 131,499
Other interest 3,517 2,458 2,316
Allowance for borrowed funds used
during construction (726) (2,296) (2,418)
Preferred and preference stock
dividends of subsidiary 9,188 9,411 10,801
- --------------------------------------------------------------------------------
TOTAL INTEREST AND OTHER CHARGES 120,458 132,975 142,198
- --------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT ON
PRIOR YEARS OF CHANGES IN ACCOUNTING
PRINCIPLES 141,407 141,518 133,565
Adoption of SFAS 109 - Income Taxes
(Notes A and F) 8,000 -- --
Accounting for maintenance costs - net
(Note A) (5,425) -- --
- --------------------------------------------------------------------------------
NET INCOME
Net Income $ 143,982 $ 141,518 $ 133,565
================================================================================
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (000) 52,979 52,913 53,391
================================================================================
EARNINGS PER SHARE
Earnings Per Share of Common Stock:
Income Before Cumulative Effect on
Prior Years of Changes in Accounting
Principles $2.67 $2.67 $2.50
Adoption of SFAS 109 - Income Taxes
(Notes A and F) .15 -- --
Accounting for maintenance costs - net
(Note A) (.10) -- --
- --------------------------------------------------------------------------------
Earnings Per Share of Common Stock $2.72 $2.67 $2.50
================================================================================
DIVIDENDS DECLARED
Dividends Declared Per Share of Common
Stock $1.62 $1.54 $1.46
================================================================================
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
(Thousands of Dollars)
----------------------------
As of December 31,
----------------------------
1993 1992
<S> <C> <C>
- --------------------------------------------------------------------------------
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
Electric plant in service (Note A) $ 4,100,058 $ 3,860,040
Construction work in progress 59,777 67,435
Property held under capital leases (Note E) 177,800 212,172
Property held for future use (Note J) 216,863 216,893
- --------------------------------------------------------------------------------
TOTAL 4,554,498 4,356,540
Less accumulated depreciation and amortization (1,435,732) (1,340,846)
- --------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT -- NET 3,118,766 3,015,694
- --------------------------------------------------------------------------------
OTHER PROPERTY AND INVESTMENTS (at cost) 124,082 43,462
- --------------------------------------------------------------------------------
CURRENT ASSETS:
Cash and temporary cash investments
(at cost which approximates market) 32,234 37,782
- --------------------------------------------------------------------------------
Receivables (Note D):
Electric customer accounts receivable 107,342 109,692
CAPCO receivables 22,937 17,915
Tax receivables 18,857 2,403
Other receivables 43,919 5,785
Less: Allowance for uncollectible accounts (13,282) (7,707)
- --------------------------------------------------------------------------------
Receivables less allowance for uncollectible
accounts 179,773 128,088
Less: Receivables sold (9,000) (76,000)
- --------------------------------------------------------------------------------
TOTAL RECEIVABLES 170,773 52,088
- --------------------------------------------------------------------------------
Materials and supplies (at average cost):
Coal 26,793 39,297
Operating and construction 64,885 66,016
- --------------------------------------------------------------------------------
TOTAL MATERIALS AND SUPPLIES 91,678 105,313
- --------------------------------------------------------------------------------
Other current assets 9,719 11,791
- --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 304,404 206,974
- --------------------------------------------------------------------------------
OTHER ASSETS:
Extraordinary property loss (Note B) 35,781 46,447
Unamortized loss on reacquired debt (Note C) 95,266 70,324
Beaver Valley Unit 2 sale/leaseback premium (Note E) 34,903 36,371
Deferred rate synchronization costs (Note J) 51,149 51,149
Phase-in plan deferrals (Note J) 28,621 127,996
Investment in leveraged leases (Note E) 48,102 32,140
Uncollected deferred income taxes (Note A) 569,555 --
Deferred debits 163,412 157,141
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS 1,026,789 521,568
- --------------------------------------------------------------------------------
TOTAL ASSETS $ 4,574,041 $ 3,787,698
================================================================================
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Thousands of Dollars)
-------------------------
As of December 31,
-------------------------
1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (Note C):
Common stock (authorized -- 125,000,000 shares,
issued -- 73,119,436 shares) $ 73,119 $ 73,119
Capital surplus 928,140 927,925
Retained earnings 554,604 496,711
Less treasury stock (at cost) (20,107,209 and
20,169,349 shares, respectively) (325,280) (326,295)
- --------------------------------------------------------------------------------
Total common stockholders' equity 1,230,583 1,171,460
- --------------------------------------------------------------------------------
Non-redeemable preferred and preference stock 121,906 121,906
Redeemable preferred and preference stock 8,392 8,579
Non-redeemable preference stock, Plan Series A 29,956 29,995
- --------------------------------------------------------------------------------
Total preferred and preference stock before
deferred ESOP benefit (involuntary liquidation
values of $160,117 and $160,342 exceed
par by $81,585 and $81,808, respectively) 160,254 160,480
Deferred employee stock ownership plan (ESOP) benefit (27,126) (28,471)
- --------------------------------------------------------------------------------
Total preferred and preference stock (Note C) 133,128 132,009
- --------------------------------------------------------------------------------
Senior secured debt (excluding Pollution Control
Notes) 999,400 1,018,098
Other long-term debt 422,817 398,915
Unamortized debt discount and premium -- net (5,219) (4,012)
- --------------------------------------------------------------------------------
Total long-term debt 1,416,998 1,413,001
- --------------------------------------------------------------------------------
TOTAL CAPITALIZATION 2,780,709 2,716,470
- --------------------------------------------------------------------------------
OBLIGATIONS UNDER CAPITAL LEASES (Note E) 55,733 71,876
- --------------------------------------------------------------------------------
CURRENT LIABILITIES:
Notes payable 36,267 --
Current maturities and sinking fund requirements
(Notes C and E) 45,741 46,054
Accounts payable 117,191 119,828
Accrued taxes 45,887 42,311
Deferred energy costs (Note A) 10,108 18,893
Accrued interest 14,419 28,258
Dividends declared 26,699 26,445
- --------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 296,312 281,789
- --------------------------------------------------------------------------------
OTHER NONCURRENT LIABILITIES:
Investment tax credits unamortized 129,574 135,580
Accumulated deferred income taxes (Note A) 1,169,148 480,248
Deferred credits (Note A) 142,565 101,735
- --------------------------------------------------------------------------------
TOTAL OTHER NONCURRENT LIABILITIES 1,441,287 717,563
- --------------------------------------------------------------------------------
Commitments and Contingencies (Notes B through L)
- --------------------------------------------------------------------------------
TOTAL CAPITALIZATION AND LIABILITIES $4,574,041 $3,787,698
================================================================================
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED CASH FLOWS
- --------------------------------------------------------------------------------
(Thousands of Dollars)
---------------------------------
Year Ended December 31,
---------------------------------
1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 143,982 $ 141,518 $ 133,565
Principal non-cash charges (credits) to net
income:
Depreciation and amortization per income
statement 142,657 127,924 119,264
Capital lease and other amortization 30,271 49,001 56,437
Deferred income taxes and investment tax
credits -- net (32,305) (2,318) (18,974)
Allowance for equity funds used during
construction (869) (2,598) (1,855)
Deferred revenues and carrying charges
recovered 99,375 83,056 56,830
Changes in working capital other than cash
(Note H) (111,677) 48,670 (43,050)
Other -- net 29,421 (1,958) 32,559
- --------------------------------------------------------------------------------
NET CASH PROVIDED FROM OPERATING
ACTIVITIES 300,855 443,295 334,776
- --------------------------------------------------------------------------------
CASH FLOWS USED BY INVESTING ACTIVITIES
Construction expenditures -- utility (100,628) (112,409) (125,358)
Repurchase of common stock -- -- (23,703)
Allowance for borrowed funds used during
construction (726) (2,296) (2,418)
Investments (85,324) (19,598) (16,042)
Payment for purchase of Chester
Environmental, Inc., net of
cash acquired (11,886) -- --
Other -- net (4,452) (7,877) (6,905)
- --------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (203,016) (142,180) (174,426)
- --------------------------------------------------------------------------------
CASH FLOWS USED IN FINANCING ACTIVITIES
Sale of bonds 740,500 312,925 50,000
Increase in notes payable 36,267 -- --
Dividends on common stock (86,089) (81,491) (78,040)
Reductions of long-term obligations:
Preferred and preference stock (187) (24,158) (38,505)
Long-term debt (735,048) (394,951) (58,782)
Other obligations (27,751) (43,686) (42,997)
Beaver Valley Unit 2 sale/leaseback premium
(Note E) -- (36,371) --
Premium on reacquired debt (31,702) (18,127) (2,947)
Other -- net 623 (2,719) (2,410)
- --------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (103,387) (288,578) (173,681)
- --------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary
cash investments (5,548) 12,537 (13,331)
Cash and temporary cash investments at
beginning of year 37,782 25,245 38,576
- --------------------------------------------------------------------------------
Cash and temporary cash investments at end of
year $ 32,234 $ 37,782 $ 25,245
===============================================================================
<CAPTION>
SUPPLEMENTAL CASH FLOW INFORMATION
<S> <C> <C> <C>
CASH PAID DURING THE YEAR
Interest (net of amount capitalized) $ 125,304 $ 126,014 $ 136,147
- --------------------------------------------------------------------------------
Income taxes $ 133,303 $ 112,859 $ 86,201
- --------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES
Capital lease obligations recorded (Note E) $ 11,811 $ 17,089 $ 22,028
ESOP preference stock issued $ -- $ -- $ 30,000
================================================================================
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CONSOLIDATED COMMON STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
(Thousands of Dollars)
---------------------------------------------------
1993 1992 1991 1990
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK
Common stock par value ($1
per share) $ 73,119 $ 73,119 $ 73,119 $ 73,119
Capital stock expense
and other (change) 215 (437) (49) 368
CAPITAL SURPLUS
Balance at end of year 928,140 927,925 928,362 928,411
Net income 143,982 141,518 133,565 121,672
Dividends declared (86,089) (81,491) (78,040) (74,972)
RETAINED EARNINGS
Balance at end of year 554,604 496,711 436,684 381,159
Stock reissued
(repurchased) -- net 1,015 749 (23,496) (34,117)
TREASURY STOCK
Balance at end of year (325,280) (326,295) (327,044) (303,548)
Total Common Stockholders'
Equity $1,230,583 $1,171,460 $1,111,121 $1,079,141
================================================================================
</TABLE>
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF ACCOUNTING POLICIES
CONSOLIDATION
- --------------------------------------------------------------------------------
The consolidated financial statements include the accounts of DQE (the Company)
and its subsidiaries. All material intercompany balances and transactions have
been eliminated in the preparation of the Consolidated Financial Statements of
DQE.
On August 17, 1993, DE acquired a controlling interest in Chester Environmental,
Inc. (Chester) for approximately $12 million. The acquisition was accounted for
under the purchase method of accounting and Chester's results of operations have
been included in the Company's consolidated financial statements since that
date.
BASIS OF ACCOUNTING
- --------------------------------------------------------------------------------
The consolidated financial statements reflect the rate-making practices of
Duquesne Light Company (Duquesne) and, as a result, contain regulatory assets
and liabilities as deferred charges and credits in accordance with Statement of
Financial Accounting Standards Number 71, Accounting for the Effects of Certain
Types of Regulation (SFAS No. 71). Duquesne's accounting practices conform to
the Uniform System of Accounts prescribed by the Federal Energy Regulatory
Commission (FERC)and the requirements of the Pennsylvania Public Utility
Commission (PUC). The Company is also subject to the accounting and reporting
requirements of the Securities and Exchange Commission (SEC).
PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------------------------------------------------
The asset values of properties are stated at original construction cost, which
includes related payroll taxes, pensions, and other fringe benefits, as well as
administrative and general costs. Also included in original construction cost is
an allowance for funds used during construction (AFC), which represents the
estimated cost of debt and equity funds used to finance construction. The amount
of AFC that is capitalized will vary according to changes in the cost of capital
and in the level of construction work in progress (CWIP). On a current basis,
Duquesne does not realize cash from the allowance for funds used during
construction. Duquesne does realize cash, during the service life of the plant,
through increased revenues reflecting a higher rate base (upon which a return is
earned) and increased depreciation. The AFC rates applied to CWIP were 9.6
percent in 1993, 10.3 percent in 1992, and 9.6 percent in 1991.
Additions to, and replacements of, property units are charged to plant accounts.
Maintenance, repairs and replacement of minor items of property are recorded as
expenses when they are incurred. The costs of properties that are retired (plus
removal costs and less any salvage value) are charged to the accumulated
provision for depreciation.
Substantially all of Duquesne's properties are subject to a first mortgage lien,
and substantially all of Duquesne's electric properties are subject to junior
liens.
23
<PAGE>
DEPRECIATION
- --------------------------------------------------------------------------------
Depreciation of property, plant and equipment, including plant-related
intangibles, is recorded on a straight-line basis over the estimated useful
lives of properties. Amortization of other intangibles is recorded on a
straight-line basis over a five-year period. Depreciation and amortization of
other properties are calculated on various bases.
NUCLEAR DECOMMISSIONING
- --------------------------------------------------------------------------------
The PUC ruled that recovery of the decommissioning costs for Beaver Valley Unit
1 could begin in 1977 and that recovery for Beaver Valley Unit 2 and Perry Unit
1 could begin in 1988. Duquesne expects to decommission each nuclear plant at
the end of its life, a date that currently coincides with the expiration of each
plant's operating license. (See Note L.) The total estimated decommissioning
costs, including removal and decontamination costs, being recovered in rates are
$70 million for Beaver Valley Unit 1, $20 million for Beaver Valley Unit 2, and
$38 million for Perry Unit 1. These amounts were based upon the most recent
studies available at the time of Duquesne's last rate case.
Since the time of Duquesne's last rate case, site specific studies have been
performed to update the estimated decommissioning costs, in current dollars, for
each of its nuclear generating units. In 1992, Duquesne's share of the estimated
decommissioning costs for Beaver Valley Unit 2 was revised to $35 million.
Duquesne's share of decommissioning costs, which is based on preliminary site
specific studies to be finalized early in 1994, is estimated to increase to $134
million for Beaver Valley Unit 1 and to $71 million for Perry.
During 1994, it is Duquesne's intention to increase the annual contribution to
its decommissioning trusts by $2 million to bring the total annual funding to
approximately $4 million per year. Duquesne plans to continue making periodic
reevaluations of estimated decommissioning costs, to provide additional funding
from time to time, and to seek regulatory approval for recognition of these
increased funding levels.
Duquesne records decommissioning costs under the category of depreciation
expense and accrues a liability, equal to that amount, for nuclear
decommissioning expense. Such nuclear decommissioning funds are deposited in
external, segregated trust accounts. Trust fund earnings increase the fund
balance and the recorded liability. The aggregate trust fund balances at the end
of 1993 totaled $18.1 million. On the Company's consolidated balance sheet, the
decommissioning trusts have been reflected in other property and investments,
and the related liability has been recorded as other deferred credits.
MAINTENANCE
- --------------------------------------------------------------------------------
Maintenance expense incurred for scheduled refueling outages at Duquesne's
nuclear units is deferred and amortized over the period between scheduled
outages. Duquesne changed, as of January 1, 1993, its method of accounting for
maintenance costs during scheduled major fossil station outages. Prior to that
time, maintenance costs incurred for scheduled major outages at fossil stations
were charged to expense as these costs were incurred. Under the new accounting
policy, Duquesne accrues, over the periods between outages, anticipated expenses
for scheduled major fossil station outages. (Maintenance costs incurred for non-
major scheduled outages and for forced outages will continue to be charged to
expense as such costs are incurred.) This new method was adopted to match more
accurately the maintenance costs and the revenue produced during the periods
between scheduled major fossil station outages.
The cumulative effect (approximately $5.4 million, net of income taxes of
approximately $3.9 million) of the change on prior years was included in income
in 1993. The effect of the change in 1993 was to reduce income, before the
cumulative effect of changes in accounting principles, by approximately $2.4
million or $.05 per share and to reduce net income, after the cumulative effect
of changes in accounting principles, by approximately $7.8 million or $.15 per
share.
REVENUES
- --------------------------------------------------------------------------------
Meters are read monthly and customers are billed on the same basis. Revenues are
recorded in the accounting periods for which they are billed. Deferred revenues
are associated with the Company's 1987 rate case. (See Note J.)
24
<PAGE>
INCOME TAXES
- --------------------------------------------------------------------------------
On January 1, 1993, the Company adopted Statement of Financial Accounting
Standards Number 109 (SFAS No. 109). Implementation of SFAS No. 109 involved a
change in accounting principles. The cumulative $8 million effect on prior years
was reported in 1993 as an increase in net income.
SFAS No. 109 requires that the liability method be used in computing deferred
taxes on all differences between book and tax bases of assets. These book tax
differences occur when events and transactions recognized for financial
reporting purposes are not recognized in the same period for tax purposes. As a
utility, Duquesne recognizes uncollected deferred income taxes for these
deferred tax liabilities that are expected to be recovered from customers
through rates. The adoption of SFAS No. 109 on January 1, 1993, resulted in a
$700 million increase in deferred tax liabilities and the recognition of $550
million in net regulatory assets. Prior to the adoption of SFAS No. 109,
Duquesne recorded certain costs in electric plant in service net of taxes.
Because SFAS No. 109 eliminates this "net of tax" accounting, the adoption of
SFAS No. 109 also resulted in an increase in plant assets of $150 million.
When applied to reduce the Company's income tax liability, investment tax
credits related to utility property generally were deferred. Such credits are
subsequently reflected, over the lives of the related assets, as reductions to
tax expense.
ENERGY COST RATE ADJUSTMENT CLAUSE (ECR)
- --------------------------------------------------------------------------------
Through the ECR, Duquesne recovers (to the extent that such amounts are not
included in base rates) nuclear fuel, fossil fuel and purchased power expenses
and, also through the ECR, passes to its customers the profits from short-term
power sales to other utilities. Nuclear fuel expense is recorded on the basis of
the quantity of electric energy generated and includes such costs as the fee,
imposed by the United States Department of Energy (DOE), for future disposal and
ultimate storage and disposition of spent nuclear fuel. Fossil fuel expense
includes the costs of coal and fuel oil used in the generation of electricity.
Duquesne defers fuel and other energy expenses for recovery through the ECR in
subsequent years. The deferrals reflect the difference between the amount that
Duquesne is currently collecting from customers and its actual fuel costs. The
Pennsylvania Public Utility Commission (PUC) annually reviews Duquesne's fuel
costs for the fiscal year April through March, compares them to previously
projected fuel costs and adjusts the ECR for over- or under-recoveries and for
two PUC-established coal cost standards. (See Note J.)
Over- or under-recoveries from customers are recorded in the Consolidated
Balance Sheet of DQE as payable to, or receivable from, customers. At December
31, 1993 and 1992, $10.1 million and $18.9 million were payable to customers and
shown as deferred energy costs.
CASH FLOWS
- --------------------------------------------------------------------------------
For the purpose of the statement of cash flows, the Company considers all highly
liquid investments maturing in three or fewer months to be cash equivalents.
RECLASSIFICATIONS
- --------------------------------------------------------------------------------
The 1992 and 1991 financial statements have been reclassified to conform with
accounting presentations adopted during 1993.
B. EXTRAORDINARY PROPERTY LOSS
In 1984, companies comprising the CAPCO group agreed to minimize construction
work and cash expenditures on Perry Unit 2 until several alternatives, including
resumption of construction or cancellation of the unit, were evaluated. Duquesne
abandoned its interest in the unit in 1986 and subsequently disposed of its
interest in 1992.
In 1987, the PUC approved recovery, over a 10-year period, of Duquesne's
original $155 million investment in Perry Unit 2. Duquesne is not earning a
return on the as yet unrecovered portion (approximately $39.4 million at
December 31, 1993) of its investment in the unit.
25
<PAGE>
C. CAPITALIZATION
COMMON STOCK
- --------------------------------------------------------------------------------
The Company or its predecessor, Duquesne, has continuously paid dividends on
common stock since 1953. The quarterly dividend declared in the fourth quarter
of 1993 was increased to $.42 per share. This annualized dividend of $1.68 per
share was increased from $1.60 per share in 1992. The annualized dividend per
share was $1.52 in 1991 and $1.44 in 1990.
Dividends may be paid on DQE common stock to the extent permitted by law and as
declared by the board of directors. However, in Duquesne's Restated Articles of
incorporation, provisions relating to preferred and preference stock may
restrict the payment of Duquesne's common dividends. No dividends or
distributions may be made on Duquesne's common stock if Duquesne has not paid
dividends or sinking fund obligations on its preferred or preference stock.
Further, the aggregate amount of Duquesne's common stock dividend payments or
distributions may not exceed certain percentages of net income if the ratio of
common stockholders' equity to total capitalization is less than specified
percentages. As all of Duquesne's common stock is owned by DQE, to the extent
that Duquesne cannot pay common dividends, DQE may not be able to pay dividends
to its common stockholders. No part of the retained earnings of DQE or any of
its subsidiaries was restricted at December 31, 1993.
<TABLE>
<CAPTION>
CHANGES IN THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
- --------------------------------------------------------------------------------
1993 1992 1991
(Amounts in Thousands of Shares)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding as of January 1 52,950 52,905 53,759
Reissuance from treasury stock 62 45 17
Repurchase of common stock -- -- (871)
- --------------------------------------------------------------------------------
OUTSTANDING AS OF DECEMBER 31 53,012 52,950 52,905
================================================================================
</TABLE>
PREFERRED AND PREFERENCE STOCK
- --------------------------------------------------------------------------------
Holders of Duquesne's preferred stock are entitled to cumulative quarterly
dividends. If four quarterly dividends on any series of preferred stock are in
arrears, holders of the preferred stock are entitled to elect a majority of
Duquesne's board of directors until all dividends have been paid. At December
31, 1993, Duquesne had made all preferred stock dividend payments.
Holders of Duquesne's preference stock are entitled to receive cumulative
quarterly dividends if dividends on all series of preferred stock are paid. If
six quarterly dividends on any series of preference stock are in arrears,
holders of the preference stock are entitled to elect two of Duquesne's
directors until all dividends have been paid. At December 31, 1993, Duquesne had
made all dividend payments.
Outstanding preferred and preference stock is generally callable, on notice of
not less than 30 days, at stated prices (See table on page 27.) plus accrued
dividends. On January 14, 1994, Duquesne called for redemption of all of its
outstanding shares of $2.10 and $7.50 preference stock. None of the remaining
preferred or preference stock issues has mandatory purchase requirements.
In December 1991, the Company established an Employee Stock Ownership Plan
(ESOP) to provide matching contributions for a 401(k) Retirement Savings Plan
for Management Employees. (See Note I.) Duquesne issued and sold 845,070 shares
of redeemable preference stock, plan series A to the trustee of the ESOP. As
consideration for the stock, Duquesne received a note valued at $30 million from
the trustee. The preference stock has an annual dividend rate of $2.80 per
share, and each share of the preference stock is exchangeable for one share of
DQE common stock. At December 31, 1993, $27.1 million of preference stock issued
in connection with the establishment of the ESOP had been offset, for financial
statement purposes, by the recognition of a deferred ESOP benefit. Dividends on
the preference stock and cash contributions from Duquesne will be used to repay
the ESOP note. During 1993, Duquesne made cash
26
<PAGE>
contributions of approximately $2.1 million, the difference between the ESOP
debt service and the amount of dividends on ESOP shares (approximately $2.3
million). As shares of preference stock are allocated to the accounts of
participants in the ESOP, the Company recognizes compensation expense, and the
amount of the deferred compensation benefit is amortized. In 1993, the Company
recognized $1.7 million of compensation expense related to the 401(k) plan.
<TABLE>
<CAPTION>
PREFERRED AND PREFERENCE STOCK OF DUQUESNE LIGHT COMPANY AT DECEMBER 31
- --------------------------------------------------------------------------------------------------------------
(Shares and Amounts in Thousands)
------------------------------------------------------------
1993 1992 1991
Call Price ------------------ ------------------ --------------------
Per Share Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK SERIES: (a)
3.75% (b) (c) $ 51.00 148 $ 7,407 148 $ 7,407 148 $ 7,407
4.00% (b) (c) 51.50 550 27,486 550 27,486 550 27,486
4.10% (b) (c) 51.75 120 6,012 120 6,012 120 6,012
4.15% (b) (c) 51.73 132 6,643 132 6,643 132 6,643
4.20% (b) (c) 51.71 100 5,021 100 5,021 100 5,021
$2.10 (b) (c) 51.84 159 8,039 159 8,039 159 8,039
$7.20 (c) (d) 101.00 319 31,915 319 31,915 319 31,915
$8.375 (d) (e) -- -- -- -- -- 80 7,945
- --------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK 1,528 92,523 1,528 92,523 1,608 100,468
- --------------------------------------------------------------------------------------------------------------
PREFERENCE STOCK SERIES: (f)
$2.100 (c) (g) (h) 25.00 1,175 29,383 1,175 29,383 1,175 29,383
$7.500 (d) (e) (h) 101.00 84 8,392 86 8,579 87 8,692
$9.125 (d) (e) -- -- -- -- -- 161 16,100
Plan Series A (c) (i) 37.74 844 29,956 845 29,995 845 30,000
- --------------------------------------------------------------------------------------------------------------
TOTAL PREFERENCE STOCK 2,103 67,731 2,106 67,957 2,268 84,175
- --------------------------------------------------------------------------------------------------------------
Purchase and sinking fund requirements -- -- (17,300)
Deferred ESOP benefit (27,126) (28,471) (30,000)
- --------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED AND PREFERENCE STOCK 3,631 $133,128 3,634 $132,009 3,876 $137,343
==============================================================================================================
</TABLE>
(a) Preferred stock: 4,000,000 authorized shares; $50 par value; cumulative.
(b) $50 per share involuntary liquidation value
(c) Non-redeemable
(d) $100 per share involuntary liquidation value
(e) Redeemable
(f) Preference stock: 8,000,000 authorized shares; $1 par value; cumulative
(g) $25 per share involuntary liquidation value
(h) Redeemed January 14, 1994
(i) $35.50 per share involuntary liquidation value
LONG-TERM DEBT
- --------------------------------------------------------------------------------
At December 31, 1993, Duquesne had $1.433 billion of outstanding debt
securities; these consisted of $960 million of first collateral trust bonds, $49
million of first mortgage bonds, $418 million of pollution control notes and $6
million of debentures.
During 1992, Duquesne began issuing secured debt under a new first collateral
trust indenture. This indenture will ultimately replace Duquesne's 1947 first
mortgage bond indenture.
First collateral trust bonds totaling $695 million and $265 million, and having
average interest rates of 6.58 percent and 8.04 percent, were issued in 1993 and
1992.
Since 1985, the Company has reacquired $1.561 billion of first mortgage bonds.
The difference between the purchase prices and the net carrying amounts of these
bonds has been included in the consolidated balance sheet as unamortized loss on
reacquired debt. At December 31, 1993, the balance of unamortized loss on
reacquired debt was $95.3 million.
27
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM DEBT AT DECEMBER 31
SENIOR SECURED DEBT
- ----------------------------------------------------------------------------------
Principal Outstanding
(Amounts In Thousands of Dollars)
---------------------------------
Interest Rate (a) Maturity 1993 1992
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
First Collateral Trust Bonds:
4.75% 5-15-96 $ 50,000 $ --
6.08% 11-15-97 50,000 50,000
6.15% 2-12-98 35,000 --
5.85% 6-01-98 35,000 --
6.55% 11-15-98 5,000 5,000
5.90% 7-01-99 75,000 --
6.45% 3-01-00 45,000 --
6.10% 5-10-00 55,000 --
6.65% 4-01-03 45,000 --
6.70% 5-15-03 55,000 --
6.625% 6-15-04 100,000 --
8.75% 5-15-22 100,000 100,000
8.20% 11-15-22 10,000 10,000
7.625% 4-15-23 100,000 --
8.375% 5-15-24 100,000 100,000
7.55% 6-15-25 100,000 --
Less current maturities and sinking fund
requirements (b) (9,600) --
- ----------------------------------------------------------------------------------
TOTAL FIRST COLLATERAL TRUST BONDS 950,400 265,000
- ----------------------------------------------------------------------------------
First Mortgage Bonds:
8.25% 6-1-95 49,500 50,000
5.125% 2-1-96 -- 22,800
5.25% 2-1-97 -- 24,600
6.375% 2-1-98 -- 34,700
7.00% 1-1-99 -- 30,000
7.75% 7-1-99 -- 28,647
8.75% 3-1-00 -- 29,700
7.875% 3-1-01 -- 34,650
7.50% 12-1-01 -- 26,461
7.50% 6-1-02 -- 28,470
7.25% 1-1-03 -- 32,670
7.75% 7-1-03 -- 35,000
8.625% 4-1-04 -- 43,650
9.50% 3-1-05 -- 49,000
8.375% 4-1-07 -- 96,400
9.50% 12-1-16 -- 98,000
9.00% 2-1-17 -- 99,000
Less current maturities and sinking fund
requirements (500) (10,650)
- ----------------------------------------------------------------------------------
TOTAL FIRST MORTGAGE BONDS 49,000 753,098
- ----------------------------------------------------------------------------------
TOTAL SENIOR SECURED DEBT 999,400 1,018,098
- ----------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM DEBT AT DECEMBER 31
OTHER LONG-TERM DEBT
- ---------------------------------------------------------------------------------------------------------
Principal Outstanding
(Amounts In Thousands of Dollars)
---------------------------------
Interest Rate (a) Maturity Series 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pollution Control Notes:
(c) (d) 9-1-11 1992 Allegheny County Series A 47,925 47,925
(c) 12-1-13 1990 Allegheny County Series A 50,000 50,000
5.739% 6-1-03 1973 Beaver County Series A 9,500 9,800
(c) 8-1-09 1990 Beaver County Series B 18,000 18,000
6.90% 9-1-11 1976 Beaver County Series C 15,000 15,000
11.625% 12-1-14 1984 Beaver County Series B 51,000 51,000
(c) 8-1-20 1990 Beaver County Series A 13,700 13,700
(c) 8-1-25 1990 Beaver County Series C 44,250 44,250
(c) (d) 9-1-30 1993 Beaver County Series A 25,000 --
10.50% 10-1-13 1983 Ohio Development Authority -- 20,500
11.125% (d) 2-1-15 1985 Ohio Development Authority 38,610 38,610
(c) 9-1-18 1988 Ohio Development Authority 71,000 71,000
6.65% (e) 10-1-23 1989 Ohio Development Authority 13,500 13,500
(c) (d) 10-1-27 1993 Ohio Development Authority 20,500 --
Less current maturities and sinking fund requirements (1,719) (690)
- ---------------------------------------------------------------------------------------------------------
TOTAL POLLUTION CONTROL NOTES 416,266 392,595
- ---------------------------------------------------------------------------------------------------------
5% sinking fund debentures due March 1, 2010 (f) 6,042 6,042
- ---------------------------------------------------------------------------------------------------------
Miscellaneous 509 278
- ---------------------------------------------------------------------------------------------------------
Less unamortized debt discount and premium -- net (5,219) (4,012)
- ---------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM DEBT $1,416,998 $1,413,001
=========================================================================================================
</TABLE>
(a) These interest rates are the average coupon rate for multiple issuances
with the same maturity dates.
(b) Sinking fund requirement relates to the first mortgage bonds held by the
trustee as collateral for the publicly-held collateral trust bonds. The
outstanding collateral trust bonds do not have a sinking fund requirement.
(c) Certain of the pollution control notes have adjustable interest rate
periods currently ranging from 1 to 360 days. On 30 days' to 90 days'
notice prior to any interest reset date, the Company can change the
subsequent interest rate period on the notes to a different interest rate
period ranging from 1 day to the final maturity of the bonds.
(d) Issued in the form of first mortgage bonds or first collateral trust bonds.
(e) Fixed rate through first five years, thereafter becoming variable rates as
in footnote c.
(f) As of January 1994, the sinking fund requirement for 1995 had been met and
the requirement for 1996 had been partially satisfied.
At December 31, 1993 and 1992, the Company was in compliance with all of its
debt covenants.
At December 31, 1993, sinking fund requirements and maturities of long-term debt
outstanding for the next five years were: $11.8 million and $.1 million in 1994;
$11.4 million and $49.6 million in 1995; $11.2 million and $50.1 million in
1996; $10.8 million and $50.0 million in 1997; and $10.1 million and $75.0
million in 1998.
Sinking fund requirements relate primarily to the first mortgage bonds and may
be satisfied by cash or the certification of property additions equal to 166 2/3
percent of the bonds required to be redeemed. During 1993, annual sinking fund
requirements of $.5 million were satisfied by cash and $4.8 million by
certification of property additions.
Total interest costs incurred were $118.1 million in 1993, $133.9 million in
1992 and $147.2 million in 1991. Of these amounts, which included AFC, $2.0
million in 1993, $4.7 million in 1992 and $9.3 million in 1991 were capitalized.
Debt discount or premium and related issuance expenses are amortized over the
lives of the applicable issues.
29
<PAGE>
In 1992, Duquesne was involved in the issuance of $419.0 million of
collateralized lease bonds, which were originally issued by an unaffiliated
corporation for the purpose of partially financing the lease of Beaver Valley
Unit 2. Duquesne is also associated with a letter of credit securing the
lessors' $188 million equity interest in the unit and certain tax benefits. If
certain specified events occur, the letter of credit could be drawn down by the
owners, the leases could terminate and the bonds would become direct obligations
of Duquesne.
The pollution control notes arise from the sale of bonds by public authorities
for the purposes of financing construction of pollution control facilities at
Duquesne's plants or refunding previously issued bonds.
Duquesne is obligated to pay the principal and interest on the bonds. For
certain of the pollution control notes, there is an annual commitment fee for an
irrevocable letter of credit. Under certain circumstances, the letter of credit
is available for the payment of interest on, or redemption of, a portion of the
notes. In June 1993, $25 million of pollution control notes were issued; the
proceeds were used to reimburse Duquesne for pollution control expenditures
related to the Beaver Valley plant. In August 1993, pollution control notes
totaling $20.5 million were refinanced at lower interest rates.
At December 31, 1993, the fair value of the Company's long-term debt and
redeemable preference stock approximated the carrying value. The fair value of
the Company's long-term debt and redeemable preference stock was estimated on
the basis of (a) quoted market prices for the same or similar issues or (b)
current rates offered to the Company for debt of the same remaining maturities.
D. RECEIVABLES
An arrangement between Duquesne and an unaffiliated corporation entitles
Duquesne to sell, and the corporation to purchase, up to $100 million of
Duquesne's accounts receivable. At December 31, 1993 and 1992, Duquesne had sold
$7.1 million and $66.3 million of electric customer accounts receivable and $1.9
million and $9.7 million of CAPCO receivables, respectively, to the unaffiliated
corporation. The sales agreement includes a limited recourse obligation under
which Duquesne could be required to repurchase certain of the receivables. The
maximum amount of Duquesne's contingent liability was $2.8 million at December
31, 1993.
Other receivables in the Consolidated Balance Sheet of DQE include receivables
of DQE's other subsidiaries. These receivables amounted to $31.8 million and
$1.0 million at December 31, 1993 and 1992, respectively.
E. LEASES
Duquesne leases nuclear fuel, a portion of a nuclear generating plant, office
buildings, computer equipment and other property and equipment.
<TABLE>
<CAPTION>
CAPITAL LEASES AT DECEMBER 31
- --------------------------------------------------------------------------------
1993 1992
(Amounts in Thousands
of Dollars)
- --------------------------------------------------------------------------------
<S> <C> <C>
Nuclear fuel $136,755 $ 169,837
Electric plant 41,045 42,335
- --------------------------------------------------------------------------------
TOTAL 177,800 212,172
Less accumulated amortization (84,717) (101,860)
- --------------------------------------------------------------------------------
PROPERTY HELD UNDER CAPITAL LEASES -- NET (A) $ 93,083 $ 110,312
================================================================================
</TABLE>
(a) Includes $3,492 in 1993 and $3,782 in 1992 of capital leases with associated
obligations retired.
In 1987, Duquesne sold its 13.74 percent interest in Beaver Valley Unit 2; the
sale was exclusive of transmission and common facilities. The total sales price
of $537.9 million was the appraised value of Duquesne's interest in the
property. Duquesne subsequently leased back its interest in the unit for a term
of 29.5 years. The lease provides for semiannual payments and is accounted for
as an operating lease. Duquesne is responsible under the terms of the lease for
all costs of its interest in the unit. In December 1992, Duquesne participated
in the refinancing of
30
<PAGE>
collateralized lease bonds originally issued in 1987 for the purpose of
partially financing the lease of Beaver Valley Unit 2. In accordance with the
Beaver Valley Unit 2 lease agreement, Duquesne paid the premiums of
approximately $36.4 million as a supplemental rent payment to the lessors. This
amount was deferred and is being amortized over the remaining lease term. At
December 31, 1993, the balance was approximately $34.9 million.
Leased nuclear fuel is amortized as the fuel is burned. The amortization of all
other leased property is based on rental payments made. Payments for capital and
operating leases are charged to operating expenses on the statement of
consolidated income.
<TABLE>
<CAPTION>
SUMMARY OF RENTAL PAYMENTS
- --------------------------------------------------------------------------------
1993 1992 1991
(Amounts in Thousands of Dollars)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating leases $57,398 $ 64,986 $ 65,414
Amortization of capital leases 28,758 43,119 39,323
Interest on capital leases 5,382 7,880 10,057
- --------------------------------------------------------------------------------
TOTAL RENTAL PAYMENTS $91,538 $115,985 $114,794
================================================================================
</TABLE>
Future minimum lease payments for capital leases are related principally to the
estimated use of nuclear fuel financed through leasing arrangements and building
leases. Minimum payments for operating leases are related principally to Beaver
Valley Unit 2 and the corporate headquarters.
<TABLE>
<CAPTION>
FUTURE MINIMUM LEASE PAYMENTS
- --------------------------------------------------------------------------------
Operating Leases Capital Leases
Year Ended December 31, (Amounts in Thousands of Dollars)
- --------------------------------------------------------------------------------
<S> <C> <C>
1994 $ 53,467 $ 39,500
1995 51,970 24,987
1996 51,949 13,811
1997 51,836 8,041
1998 51,711 4,749
1999 and thereafter 976,176 28,278
- --------------------------------------------------------------------------------
TOTAL MINIMUM LEASE PAYMENTS $1,237,109 119,366
- --------------------------------------------------------------------------------
Less amount representing interest (29,775)
- --------------------------------------------------------------------------------
Present value of minimum lease payments
for capital leases $ 89,591
================================================================================
</TABLE>
Future payments due to the Company, as of December 31, 1993, under subleases of
its corporate headquarters space are approximately $1.7 million in 1994, $3.4
million in 1995 and $24.9 million thereafter.
The Company, through its Montauk subsidiary, is the lessor in five leveraged
lease arrangements involving manufacturing equipment, mining equipment, rail
equipment and natural gas processing equipment. These leases expire in various
years beginning 2001 through 2012. The residual value of the equipment, which
belongs to the Company after the leases expire, is estimated to approximate 14
percent of the original cost. The Company's aggregate equity investment
represents 22 percent of the aggregate original cost of the property and is
secured by guarantees of each lessee's parent or affiliate. The remaining 78
percent was financed by non-recourse debt provided by lenders who have been
granted, as their sole remedy in the event of default by the lessees, an
assignment of rentals due under the leases and a security interest in the leased
property. This debt amounted to $143.5 million at December 31, 1993.
31
<PAGE>
<TABLE>
<CAPTION>
NET INVESTMENT IN LEVERAGED LEASES AT DECEMBER 31
- --------------------------------------------------------------------------------
1993 1992
(Amounts in Thousands
of Dollars)
- --------------------------------------------------------------------------------
<S> <C> <C>
Rentals receivable (net of principal and interest on the
non-recourse debt) $ 52,016 $ 34,322
Estimated residual value of leased assets 26,470 15,951
Less: Unearned income (30,384) (18,133)
- --------------------------------------------------------------------------------
Investment in leveraged leases 48,102 32,140
Less: Deferred taxes arising from leveraged leases (22,845) (8,910)
- --------------------------------------------------------------------------------
NET INVESTMENT IN LEVERAGED LEASES $ 25,257 $ 23,230
================================================================================
</TABLE>
In 1993, the Company's pre-tax and after-tax income from leveraged leasing in
1993 was $5.1 million and $3.2 million, respectively.
F. INCOME TAXES
The annual federal corporate income tax returns have been audited by the United
States Internal Revenue Service (IRS) for the tax years through 1989. Returns
filed for the tax years 1990 to date remain subject to IRS review. The Company
does not believe that final settlement of the federal tax returns for these
years will have a materially adverse effect on its financial position or results
of operations. The effects of the 1993 adoption of SFAS No. 109 are discussed in
Note A. Implementation of the standard involved a change in accounting
principles. The cumulative effect of $8 million on prior years was reported in
1993 as an increase in net income. The SFAS No. 109 impact to 1993 income before
cumulative effect of changes in accounting principles is immaterial.
At December 31, 1993, the accumulated deferred income taxes of the Company
totaled $1.169 billion. As discussed in Note A, this includes the deferred tax
liability for the book and tax bases differences associated with (i) electric
plant in service of $855 million; (ii) uncollected deferred income taxes of $199
million; and (iii) unamortized loss on reacquired debt of $40.9 million. The
Company also nets against this liability balance the deferred tax assets
associated with (i) investment tax credits unamortized of $45.3 million and (ii)
the gain on the sale and leaseback of Beaver Valley Unit 2 of $67.1 million. The
Company expects to realize these deferred tax assets.
<TABLE>
<CAPTION>
TOTAL INCOME TAX EXPENSE
- --------------------------------------------------------------------------------------------------
1993 1992 1991
(Amounts in Thousands of Dollars)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Included in operating expenses:
Currently payable: Federal $100,360 $ 73,135 $ 85,511
State 37,975 27,875 32,080
Deferred -- net: Federal (17,643) 5,369 (4,823)
State (9,007) (3,750) (10,750)
Investment tax credits deferred -- net (5,399) (5,436) (5,328)
- --------------------------------------------------------------------------------------------------
TOTAL INCLUDED IN OPERATING EXPENSES 106,286 97,193 96,690
- --------------------------------------------------------------------------------------------------
Included in other income and deductions:
Currently payable: Federal (17,557) 7,265 2,131
State (1,220) 2,983 1,074
Deferred: Federal 251 1,654 1,943
State 100 377 443
Investment tax credits (607) (532) (459)
- --------------------------------------------------------------------------------------------------
TOTAL INCLUDED IN OTHER INCOME
AND DEDUCTIONS (19,033) 11,747 5,132
- --------------------------------------------------------------------------------------------------
TOTAL INCOME TAX EXPENSE $ 87,253 $108,940 $101,822
==================================================================================================
</TABLE>
32
<PAGE>
Total income taxes differ from the amount computed by applying the statutory
federal income tax rate to income before income taxes, preferred and preference
dividends of subsidiary and before the cumulative effect of changes in
accounting principles.
<TABLE>
<CAPTION>
INCOME TAX EXPENSE RECONCILIATION
- --------------------------------------------------------------------------------
1993 1992 1991
(Amounts in Thousands of Dollars)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed federal income tax at statutory rate $ 83,247 $ 88,355 $ 83,704
Increase (decrease) in taxes resulting from:
Tax audit settlement (15,000) -- --
Excess of book over tax depreciation 7,162 3,830 5,333
State income taxes, net of federal income
tax benefit 18,101 18,140 15,079
Amortization of deferred investment tax
credits (6,006) (5,969) (5,787)
Other -- net (251) 4,584 3,493
- --------------------------------------------------------------------------------
TOTAL INCOME TAX EXPENSE $ 87,253 $108,940 $101,822
================================================================================
<CAPTION>
SOURCES OF DEFERRED TAX EXPENSE
- --------------------------------------------------------------------------------
1993 1992 1991
(Amounts in Thousands of Dollars)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sources of income taxes deferred and the
related tax effects were:
Excess of tax depreciation $ 19,141 $ 25,188 $ 20,957
Deferred revenues recorded/(recovered) for
book purposes (37,576) (30,702) (21,240)
Allowance for uncollectible accounts (2,890) 9,760 (5,930)
Fuel costs 4,829 (10,820) 1,047
Loss on early retirement of debt 9,798 20,999 (166)
Other -- net (19,601) (10,775) (7,855)
- --------------------------------------------------------------------------------
Total Deferred Income
Tax Expense (Benefit) $(26,299) $ 3,650 $(13,187)
================================================================================
</TABLE>
G. SHORT-TERM BORROWING AND REVOLVING CREDIT ARRANGEMENTS
The Company, through its subsidiaries, has, with banks, extendable revolving
credit agreements totaling $278.5 million. Expiration dates vary during 1994.
Interest rates can, in accordance with the option selected at the time of each
borrowing, be based on prime, federal funds, Eurodollar or CD rates. Commitment
fees are based on the unborrowed amount of the commitments.
There were no short-term borrowings during 1992. During 1993 and 1991, the
maximum short-term bank and commercial paper borrowings outstanding were $36
million and $66 million; the average daily short-term borrowings outstanding
were $9.9 million and $11.0 million; and the weighted average daily interest
rates applied to such borrowings were 3.91 percent and 6.36 percent,
respectively. At December 31, 1993, short-term borrowings were $36 million.
There were no short-term borrowings at December 31, 1992 or 1991.
H. CHANGES IN WORKING CAPITAL OTHER THAN CASH
<TABLE>
<CAPTION>
CHANGES IN WORKING CAPITAL OTHER THAN CASH, NET OF EFFECTS FROM PURCHASE OF
CHESTER ENVIRONMENTAL, INC.
- --------------------------------------------------------------------------------
1993 1992 1991
(Amounts in Thousands of Dollars)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Accounts receivable $(103,188) $64,088 $(53,829)
Materials and supplies 13,635 (4,151) (3,122)
Other current assets 4,631 7,140 (8,084)
Accounts payable (7,961) (8,818) (827)
Other current liabilities (18,794) (9,589) 22,812
- --------------------------------------------------------------------------------
TOTAL $(111,677) $48,670 $(43,050)
================================================================================
</TABLE>
33
<PAGE>
I. EMPLOYEE BENEFITS
RETIREMENT PLANS
- --------------------------------------------------------------------------------
The Company maintains retirement plans to provide pensions for all full-time
employees. Upon retirement, an employee receives a monthly pension based on his
or her length of service and compensation. The cost of funding the pension plan
is determined by the unit credit actuarial cost method. The Company's policy is
to record this cost as an expense and to fund the pension plans by an amount
that is at least equal to the minimum funding requirements of the Employee
Retirement Income Security Act (ERISA) but not to exceed the maximum tax
deductible amount for the year. Pension costs charged to expense or construction
were $9.8 million for 1993, $11.4 million for 1992 and $11.2 million for 1991.
<TABLE>
<CAPTION>
FUNDED STATUS OF THE RETIREMENT PLANS AND AMOUNTS RECOGNIZED ON THE CONSOLIDATED
BALANCE SHEET OF DQE AT DECEMBER 31
- --------------------------------------------------------------------------------
1993 1992 1991
(Amounts in Thousands of Dollars)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of benefits rendered
to date:
Vested benefits $321,249 $287,360 $279,917
Non-vested benefits 16,826 16,252 14,294
- --------------------------------------------------------------------------------
Accumulated benefit obligations based on
compensation to date 338,075 303,612 294,211
Additional benefits based on estimated future
salary levels 74,718 77,017 64,919
- --------------------------------------------------------------------------------
Projected benefit obligation 412,793 380,629 359,130
Fair market value of plan assets 434,384 411,440 392,027
- --------------------------------------------------------------------------------
Projected benefit obligation under plan assets $ 21,591 $ 30,811 $ 32,897
================================================================================
Unrecognized net gain $ 80,411 $ 81,971 $ 86,695
Unrecognized prior service cost (21,449) (20,848) (22,317)
Unrecognized net transition liability (19,289) (21,102) (22,913)
Net pension liability per balance sheet (18,082) (9,210) (8,568)
- --------------------------------------------------------------------------------
TOTAL $ 21,591 $ 30,811 $ 32,897
================================================================================
Assumed rate of return on plan assets 8.00% 8.00% 7.50%
- --------------------------------------------------------------------------------
Discount rate used to determine projected
benefit obligation 7.00% 7.50% 7.50%
- --------------------------------------------------------------------------------
Assumed change in compensation levels 5.25% 5.75% 5.75%
- --------------------------------------------------------------------------------
</TABLE>
Pension assets consist primarily of common stocks, United States obligations and
corporate debt securities.
<TABLE>
<CAPTION>
COMPONENTS OF NET PENSION COST
- --------------------------------------------------------------------------------
1993 1992 1991
(Amounts in Thousands of Dollars)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost (Benefits earned during the year) $ 11,657 $ 11,397 $ 9,911
Interest on projected benefit obligation 27,423 26,390 24,705
Return on plan assets (41,725) (26,736) (80,716)
Net amortization and deferrals 12,454 325 57,319
- --------------------------------------------------------------------------------
NET PENSION COST $ 9,809 $ 11,376 $ 11,219
================================================================================
</TABLE>
RETIREMENT SAVINGS PLAN AND OTHER BENEFIT OPTIONS
- --------------------------------------------------------------------------------
The Company sponsors separate 401(k) retirement plans for its union-represented
employees and its management employees. The 401(k) Retirement Savings Plan for
Management Employees provides that the Company will match employee contributions
to a 401(k)
34
<PAGE>
account up to a maximum of 6 percent of his or her eligible salary. The Company
match consists of a $.25 base match and an additional $.25 incentive match, if
targets approved by the Company's board of directors are met. The 1993 incentive
target was met. The Company is funding its matching contributions with
contributions to an ESOP established in December 1991. (See Note C.)
DQE shareholders have approved a long-term incentive plan through which the
Company may grant management employees options to purchase, during the years
1987 through 2003, up to a total of five million shares of DQE common stock at
prices equal to the fair market value of such stock on the dates the options
were granted. At December 31, 1993, approximately 2.9 million of these shares
were available for future grants.
As of December 31, 1993, 1992 and 1991, respectively, active grants totaled
1,204,000; 848,000; and 1,278,000 shares. Exercise prices of these options
ranged from $12.3125 to $34.1875 at December 31, 1993 and from $12.3125 to
$28.75 at December 31, 1992 and 1991. Expiration dates of these grants ranged
from 1997 to 2003 at December 31, 1993; from 1997 to 2002 at December 31, 1992;
and from 1997 to 2001 at December 31, 1991. As of December 31, 1993, 1992 and
1991, respectively, stock appreciation rights (SARs) had been granted in
connection with 800,000; 623,000; and 822,000 of the options outstanding. During
1993, 103,000 SARs were exercised; 16,000 options were exercised at prices
ranging from $12.3125 to $28.375; and 52,000 options lapsed. During 1992,
108,000 SARs were exercised; 50,000 options were exercised at prices ranging
from $12.3125 to $26.375; and 59,000 options lapsed. During 1991, 229,000 SARs
were exercised; 11,000 options were exercised at $12.3125; and 48,000 options
lapsed. Of the active grants at December 31, 1993, 1992 and 1991, respectively,
578,000; 232,000; and 541,000 were not exercisable.
OTHER POSTRETIREMENT BENEFITS
- --------------------------------------------------------------------------------
In addition to pension benefits, the Company provides certain health care
benefits and life insurance for some retired employees. Substantially all of the
Company's full-time employees may, upon attaining the age of 55 and meeting
certain service requirements, become eligible for the same benefits available to
retired employees. Participating retirees make contributions, which are adjusted
annually, to the health care plan. The life insurance plan is non-contributory.
Company-provided health care benefits terminate when covered individuals become
eligible for Medicare benefits or reach age 65, whichever comes first. The
Company funds actual expenditures for obligations under the plans on a "pay-as-
you-go basis." The Company has the right to modify or terminate the plans.
As of January 1, 1993, the Company adopted Statement of Financial Accounting
Standards Number 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions, which requires the actuarially determined costs of the
aforementioned postretirement benefits to be accrued over the period from the
date of hire until the date the employee becomes fully eligible for benefits.
The Company has adopted the new standard prospectively and has elected to
amortize the transition liability over 20 years.
In prior years, the Company recognized the cost of providing postretirement
benefits by expensing the contributions as they were made. Costs recognized
under this method in 1992 approximated $1.2 million. The new accrual method
increased the cost recognized for providing postretirement benefits to
approximately $6.0 million.
<TABLE>
<CAPTION>
COMPONENTS OF POSTRETIREMENT COST
- --------------------------------------------------------------------------------
<S> <C>
1993
(Amounts in Thousands
of Dollars)
- --------------------------------------------------------------------------------
Service cost (Benefits earned during the period) $1,779
Interest cost on accumulated benefit obligation 2,497
Amortization of the transition obligation over twenty years 1,700
- --------------------------------------------------------------------------------
TOTAL POSTRETIREMENT COST $5,976
================================================================================
</TABLE>
35
<PAGE>
The accumulated postretirement benefit obligation comprises the present value of
the estimated future benefits payable to current retirees and a pro rata portion
of estimated benefits payable to active employees after retirement.
<TABLE>
<CAPTION>
FUNDED STATUS OF POSTRETIREMENT PLAN AND AMOUNTS RECOGNIZED ON THE CONSOLIDATED
BALANCE SHEET OF DQE AT DECEMBER 31, 1993
- --------------------------------------------------------------------------------
(Amounts in Thousands of Dollars)
<S> <C>
Actuarial present value of benefits:
Retirees $ 4,830
Fully eligible active plan participants 3,482
Other active plan participants 24,170
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation 32,482
Fair market value of plan assets 0
- --------------------------------------------------------------------------------
Accumulated benefit obligation in excess of plan assets $(32,482)
================================================================================
Unrecognized net loss $ (122)
Unrecognized prior service cost 4,383
Unrecognized net transition liability (32,296)
Postretirement liability per balance sheet (4,447)
- --------------------------------------------------------------------------------
TOTAL $(32,482)
================================================================================
</TABLE>
For measurement purposes, a 10.5 percent increase in the cost of covered health
care benefits was assumed as of January 1, 1993. This rate is assumed to
decrease to 5.5 percent by 1999 and remain at that level thereafter. The health
care cost trend rate assumption has a significant effect on the amounts
reported. A 1 percent increase in the health care cost trend rate would increase
the accumulated postretirement benefit obligation by $4.0 million at January 1,
1994, and the net annual cost by $.6 million for the year. The weighted average
discount rate used in determining the accumulated postretirement benefit
obligation was 7 percent.
J. RATE MATTERS
1987 RATE CASE
- --------------------------------------------------------------------------------
In March 1988, the PUC adopted a rate order that increased Duquesne's annual
revenues by $232 million. This increase is being phased in from April 1, 1988
through April 1, 1994. Deficiencies which resulted from the phase-in plan in
current revenues from customers have been included in the consolidated income
statement as deferred revenues. Deferred revenues have been recorded on the
balance sheet as a deferred asset for future recovery. As customers are billed
for deficiencies related to prior periods, this deferred asset is reduced. As
designed, the phase-in plan provides for carrying charges (at the after-tax AFC
rate) on revenues deferred for future recovery. Since April 1993, Duquesne has
not recorded additional carrying charges on the deferred revenue balance.
Duquesne had recovered previously deferred revenues and carrying charges of
$285.9 million as of December 31, 1993. Phase-in plan deferrals of $28.6 million
remained unrecovered as of that date. Duquesne expects to recover this remaining
unrecovered balance by the end of the phase-in period.
At this time, Duquesne has no pending base rate case and has no immediate plans
to file a base rate case.
DEFERRED RATE SYNCHRONIZATION COSTS
- --------------------------------------------------------------------------------
In 1987, the PUC approved Duquesne's petition to defer initial operating and
other costs of Perry Unit 1 and Beaver Valley Unit 2. Duquesne deferred the
costs incurred from November 17, when the units went into commercial operation,
until March 25, 1988 when a rate order was issued. In its order, the PUC
deferred ruling on whether these costs would be recoverable from ratepayers. At
December 31, 1993, these costs totaled $51.1 million, net of deferred fuel
savings related to the two units. Duquesne is not earning a return on the
deferred costs.
36
<PAGE>
Duquesne believes that these deferred costs are recoverable. In 1990, another
Pennsylvania utility was permitted recovery, with no return on the unamortized
balance, of similar costs over a 10-year period.
DEFERRED ENERGY COSTS
- --------------------------------------------------------------------------------
Duquesne defers fuel and other energy costs for recovery in subsequent years
through the ECR. The deferrals reflect the difference between the amount that
Duquesne is currently collecting from customers and its actual fuel costs. The
PUC reviews Duquesne's fuel costs annually, for the fiscal year April through
March, against the previously projected fuel costs and adjusts the ECR for over-
or under-recoveries and for two PUC-established coal cost caps.
The PUC has established market price coal cost standards for all Pennsylvania
utilities that have interests in mines that supply coal to their generating
stations. Duquesne is subject to two such standards. One applies only to coal
delivered at the Mansfield plant. The other, the system-wide coal cost standard,
applies to coal delivered to the remainder of Duquesne's system. Both standards
are updated monthly to reflect prevailing market prices for similar coal. The
PUC has directed Duquesne to defer recovery of the delivered cost of coal to the
extent that such cost exceeds generally prevailing market prices, as determined
by the PUC, for similar coal. The PUC allows deferred amounts to be recovered
from customers when the delivered costs of coal fall below such PUC-determined
prevailing market prices.
In 1990, the PUC approved a joint petition for settlement that clarified certain
aspects of the system-wide coal cost standard and gave Duquesne options to
extend the standard through March 2000. In December 1991, Duquesne exercised the
first of two options that extended the standard through March 1996. The
unrecovered cost of coal used at Mansfield amounted to $7.4 million and the
unrecovered cost of coal used throughout the system amounted to $8.8 million at
December 31, 1993. Duquesne believes that all deferred coal costs will be
recovered.
WARWICK MINE COSTS
- --------------------------------------------------------------------------------
The 1990 joint petition for settlement (See preceeding section on deferred
energy costs.) also recognized costs at Duquesne's Warwick Mine, which had been
on standby since 1988, and allowed for recovery of such costs, including the
costs of ultimately closing the mine. In 1990, Duquesne entered into an
agreement under which an unaffiliated company will operate the mine until March
2000 and sell the coal produced. Production began in late 1990. The mine reached
a full production rate in early 1991. The Warwick Mine coal reserves include
both high and low sulfur coal; the sulfur content averages in the mid-range at
1.7 percent - 1.9 percent sulfur content. More than 90 percent of the coal mined
at Warwick currently is used by Duquesne. Duquesne receives a royalty on sales
of coal in the open market. The Warwick Mine currently supplies less than one-
fifth of the coal used in the production of electricity at the plants operated
by Duquesne and those owned by CAPCO.
Costs at the Warwick Mine and Duquesne's investment in the mine are expected to
be recovered through the ECR. Recovery is subject to the system-wide coal cost
standard. Duquesne also has an opportunity to earn, through the ECR, a return on
its investment in the mine during the period, including extensions, of the
system-wide coal cost standard. At December 31, 1993, Duquesne's net investment
in the mine was $24.5 million. The estimated current liability for mine closing
(including final site reclamation, mine water treatment and certain labor
liabilities) is $33.0 million and Duquesne has collected approximately $8.9
million toward these costs.
PROPERTY HELD FOR FUTURE USE
- --------------------------------------------------------------------------------
In 1986, the PUC approved Duquesne's request to remove the Phillips and most of
the Brunot Island (BI) power stations from service and place them in cold
reserve. Duquesne's capitalized costs and net investment in the plants at
December 31, 1993 totaled $130 million. (See Note L.)
On December 8, 1993, the New Jersey Board of Regulatory Commissioners (BRC)
denied a request by General Public Utilities' (GPU) subsidiary Jersey Central
Power and Light Company for approval of the long-term power purchase and
operating agreements, originally signed in
37
<PAGE>
1990, between GPU and Duquesne and further amended earlier in 1993. The BRC
rejected an administrative law judge's recommended decision that the project be
approved and, within hours of the BRC decision, GPU terminated its participation
in the project. In view of GPU's decision not to proceed, Duquesne terminated
its participation in the project and in the PUC transmission line siting
proceeding. During the fourth quarter of 1993, Duquesne recognized a charge of
approximately $15.2 million for its investment in this abandoned GPU
transmission line project.
Duquesne expects to recover its net investment in these plants through future
sales. Phillips and BI represent licensed, certified, clean sources of
electricity that will be necessary to meet expanding opportunities in the power
markets. Duquesne believes that anticipated growth in peak load demand for
electricity within its service territory will require additional peaking
generation. Duquesne looks to BI to meet this need. The Phillips Power Plant is
an important component in meeting market opportunities to supply long term bulk
power. Recent legislation may permit wider transmission access to these long
term bulk power markets. In summary, Duquesne believes its investment in these
cold-reserved plants will be necessary in order to meet future business needs.
If business opportunities do not develop as expected, Duquesne will consider the
sale of these assets. In the event that market demand, transmission access or
rate recovery do not support the utilization or sale of the plants, Duquesne may
have to write off part or all of their costs.
K. COMMITMENTS AND CONTINGENCIES
CONSTRUCTION
- --------------------------------------------------------------------------------
Duquesne estimates that it will spend approximately $110 million on construction
during 1994. Construction expenditures are estimated to be $70 million in 1995
and $80 million in 1996. These amounts exclude AFC, nuclear fuel and
expenditures for possible early replacement of steam generators at the Beaver
Valley Station.
WESTINGHOUSE LAWSUIT
- --------------------------------------------------------------------------------
The CAPCO companies are owners of various portions of Beaver Valley Units 1 and
2. In 1991, the CAPCO companies filed suit against Westinghouse Electric
Corporation (Westinghouse) in the United States District Court for the Western
District of Pennsylvania. The suit alleges that six steam generators supplied by
Westinghouse for the two units contain serious defects - in particular defects
causing tube corrosion and cracking. The Company is seeking monetary and
corrective relief. Steam generator maintenance costs have increased as a result
of these defects and are likely to continue increasing. The condition of the
steam generators is being monitored closely. If the corrosion and cracking
continue, replacement of the steam generators could be required prior to the
ends of their 40-year design lives. The Company is continuing to conduct a
corrective maintenance program and to explore longer term options, including
replacement of the steam generators. While the Company has no current plans to
replace the steam generators and has not yet completed a detailed, site-specific
study, replacement cost per unit is estimated to be between $100 million and
$150 million. (Other utilities with similar units have replaced steam generators
at costs in this range.) The Company cannot predict the outcome of this matter;
however, the Company does not believe that resolution will have a materially
adverse effect on the Company's financial position or results of operations. The
Company's percentage interests (ownership and leasehold) in Beaver Valley Unit 1
and in Beaver Valley Unit 2 are 47.5 percent and 13.74 percent, respectively.
The remainder is held by the other CAPCO companies. Duquesne operates both units
on behalf of the CAPCO companies.
NUCLEAR INSURANCE
- --------------------------------------------------------------------------------
The CAPCO companies maintain the maximum available nuclear insurance for the
$5.9 billion total investment in Beaver Valley Units 1 and 2. The insurance
program provides $2.7 billion for property damage, decommissioning, and
decontamination liabilities. The CAPCO companies have similar property insurance
for the $5.4 billion total investment in Perry Unit 1.
38
<PAGE>
Duquesne would be responsible for its share of any damages in excess of
insurance coverage. In addition, if the property damage reserves of Nuclear
Electric Insurance Limited (NEIL), an industry mutual, are inadequate to cover
claims arising from an incident at any United States nuclear site covered by
that insurer, Duquesne could be assessed retrospective premiums of as much as
$6.5 million for up to seven years.
The Price-Anderson Amendments to the Atomic Energy Act limit public liability
from a single incident at a nuclear plant to $9.4 billion. Duquesne has
purchased $200 million of insurance, the maximum amount available, which
provides the first level of financial protection. Additional protection of $8.8
billion would be provided by an assessment of up to $75.5 million per incident
on each nuclear unit in the United States. Duquesne's maximum total assessment,
$56.6 million, which is based upon its ownership interests in nuclear generating
stations, would be limited to a maximum of $7.5 million per incident per year. A
further surcharge of 5 percent could be levied if the total amount of public
claims exceeded the funds provided under the assessment program. Additionally, a
premium tax of 3 percent would be charged on the assessment and surcharge.
Finally, the United States Congress could impose other revenue-raising measures
on the nuclear industry if funds prove insufficient to pay claims.
Duquesne carries extra expense insurance; coverage includes the incremental cost
of any replacement power purchased (in addition to costs that would have been
incurred had the units been operating) and other incidental expense after the
occurrence of certain types of accidents at the Company's nuclear units. The
amounts of the coverage are 100 percent of the estimated extra expense per week
during the 52-week period starting 21 weeks after an accident and 67 percent of
such estimate per week for the following 104 weeks. The amount and duration of
actual extra expense could substantially exceed insurance coverage.
GUARANTEES
- --------------------------------------------------------------------------------
Duquesne and the other CAPCO companies have guaranteed certain debt and lease
obligations related to a coal supply contract for the Bruce Mansfield plant. At
December 31, 1993, Duquesne's share of these guarantees was $35.2 million. The
prices paid for the coal by the CAPCO companies under this contract are expected
to be sufficient to meet debt and lease obligations to be satisfied in the year
2000. (See Note J.) The minimum future payments to be made by Duquesne solely in
relation to these obligations are $6.9 million in 1994, $6.6 million in 1995,
$6.3 million in 1996, $5.9 million in 1997, $5.6 million in 1998, $5.3 million
in 1999 and $4.1 million in 2000. Duquesne's total payments for coal purchased
under the contract were $26.5 million in 1993, $25.2 million in 1992 and $32.6
million in 1991.
RESIDUAL WASTE MANAGEMENT REGULATIONS
- --------------------------------------------------------------------------------
In July 1992, the Pennsylvania Department of Environmental Resources (DER)
issued residual waste management regulations governing the generation and
management of non-hazardous waste. Duquesne is currently conducting tests and
developing compliance strategies for these regulations. Capital compliance costs
are estimated, on the basis of currently available information, at $10 million
through 1995. Through the year 2000, the expected additional capital cost of
compliance, which is subject to the results of ground water assessments and DER
final approval of compliance plans, is approximately $25 million.
OTHER
- --------------------------------------------------------------------------------
The Company is involved in various other legal proceedings and environmental
matters. The Company believes that such proceedings and matters, in total, will
not have a materially adverse effect on its financial position or results of
operations.
L. GENERATING UNITS
In addition to its wholly owned generating units, Duquesne, together with other
electric utilities, has an ownership or leasehold interest in certain jointly
owned units. Duquesne is required to pay its share of the construction and
operating costs of the units. Duquesne's share of the operating expenses of the
units is included in the statement of consolidated income.
39
<PAGE>
<TABLE>
<CAPTION>
GENERATING UNITS AT DECEMBER 31, 1993
- --------------------------------------------------------------------------------
Net
Percentage Utility Fuel
Unit Interest Megawatts Plant Source
(Millions of Dollars)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cheswick 100.0 570 $ 124.4 Coal
Elrama (a) 100.0 487 91.7 Coal
Ft. Martin 1 50.0 276 39.2 Coal
Eastlake 5 31.2 186 46.9 Coal
Sammis 7 31.2 187 54.7 Coal
Bruce Mansfield 1 (a) 29.3 228 65.3 Coal
Bruce Mansfield 2 (a) 8.0 62 17.5 Coal
Bruce Mansfield 3 (a) 13.74 110 51.0 Coal
Beaver Valley 1 (b) 47.5 385 262.3 Nuclear
Beaver Valley 2 (c)(d) 13.74 113 15.5 Nuclear
Beaver Valley Common
Facilities 169.5
Perry 1 (e) 13.74 164 608.7 Nuclear
Brunot Island 100.0 66 7.4 Fuel Oil
- --------------------------------------------------------------------------------
TOTAL 2,834 1,554.1
Cold-reserved units:
Brunot Island 100.0 240 44.5 Fuel Oil
Phillips (a) 100.0 300 78.0 Coal
- --------------------------------------------------------------------------------
TOTAL GENERATING UNITS 3,374 $1,676.6
================================================================================
</TABLE>
(a) The unit is equipped with flue gas desulfurization equipment.
(b) The NRC has granted a license to operate through January 2016.
(c) On October 2, 1987 Duquesne sold its 13.74 percent interest in Beaver
Valley Unit 2; the sale was exclusive of transmission and common
facilities. Amounts shown represent facilities not sold and subsequent
leasehold improvements.
(d) The NRC has granted a license to operate through May 2027.
(e) The NRC has granted a license to operate through March 2026.
M. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
SUMMARY OF SELECTED QUARTERLY FINANCIAL DATA (THOUSANDS OF DOLLARS, EXCEPT PER
SHARE AMOUNTS)
- --------------------------------------------------------------------------------
[The quarterly data reflect seasonal weather variations in Duquesne's service
territory.]
- --------------------------------------------------------------------------------
1993 (a) First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues $286,743 $278,731 $336,488 $293,598
Operating Income 60,450 61,762 68,616 62,372
Income Before Cumulative
Effect on Prior Years of
Changes in Accounting
Principles 31,839 33,017 48,294 28,257
Net Income 34,414 33,017 48,294 28,257
Earnings Per Share .65 .62 .91 .54
Stock price:
High 36 3/8 36 37 36 7/8
Low 31 3/8 32 3/4 34 5/8 32
- --------------------------------------------------------------------------------
1992
- --------------------------------------------------------------------------------
Operating Revenues (b) $299,596 $291,803 $316,613 $286,192
Operating Income (b) 63,131 59,396 74,941 58,447
Net Income 33,863 30,488 45,877 31,290
Earnings Per Share .64 .58 .86 .59
Stock price:
High 30 5/8 30 1/2 32 32 3/8
Low 26 7/8 27 1/4 29 3/4 30 5/8
================================================================================
</TABLE>
(a) Fourth quarter 1993 results included the effects of a $15.2 million charge
for the write-off of Duquesne's investment in abandoned transmission line
project (See Note J.) and a $14.6 million reduction of taxes other than
income as a result of a favorable resolution of tax assessments.
(b) Restated to conform with presentations adopted during 1993.
40
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------------------------------------------
Amounts in Thousands of Dollars 1993 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT ITEMS
OPERATING REVENUES:
Current revenues from customers $1,175,024 $1,180,707 $1,181,332 $1,044,314 $ 947,121 $ 867,141
Deferred customer revenues (100,315) (98,201) (78,344) 10,784 96,287 117,544
Other revenues 120,851 111,698 100,846 78,010 75,875 76,132
- --------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUES 1,195,560 1,194,204 1,203,834 1,133,108 1,119,283 1,060,817
OPERATING EXPENSES:
Fuel and purchased power 220,928 265,340 250,755 219,511 215,043 228,172
Other operating &
maintenance expenses 399,363 362,099 375,026 366,349 356,120 341,942
Depreciation and amortization 142,657 127,924 119,264 122,251 119,376 111,023
Income and other taxes 179,412 182,926 191,865 157,819 158,865 135,338
- --------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 253,200 255,915 266,924 267,178 269,879 244,342
Other Income, excluding AFC 7,796 15,980 6,984 11,275 8,050 47,723
Total AFC (debt and equity) 1,595 4,894 4,273 2,934 2,872 3,027
Less Interest and Other Charges 121,184 135,271 144,616 159,715 167,799 176,526
Cumulative Effect on Prior Years of
Changes in Accounting Principles 2,575 -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
NET INCOME $ 143,982 $ 141,518 $ 133,565 $ 121,672 $ 113,002 $ 118,566
====================================================================================================================
EARNINGS PER SHARE $ 2.72 $ 2.67 $ 2.50 $ 2.24 $ 2.03 $ 1.86
====================================================================================================================
SELECTED BALANCE SHEET ITEMS
Property, plant & equipment -- net $3,118,766 $3,015,694 $3,035,115 $3,040,562 $3,055,039 $3,065,922
Total assets $4,574,041 $3,787,698 $3,860,681 $3,843,205 $3,841,495 $3,799,334
CAPITALIZATION:
Common stockholders' equity $1,230,583 $1,171,460 $1,111,121 $1,079,141 $1,066,190 $1,070,575
Preferred and preference stock 133,128 132,009 137,343 189,093 219,991 244,816
Long-term debt 1,416,998 1,413,001 1,420,726 1,501,295 1,540,329 1,550,231
- --------------------------------------------------------------------------------------------------------------------
TOTAL CAPITALIZATION $2,780,709 $2,716,470 $2,669,190 $2,769,529 $2,826,510 $2,865,622
====================================================================================================================
CAPITALIZATION RATIOS
Common stockholders' equity 44.2% 43.1% 41.6% 39.0% 37.7% 37.4%
Preferred and preference stock 4.8% 4.9% 5.2% 6.8% 7.8% 8.5%
Long-term debt 51.0% 52.0% 53.2% 54.2% 54.5% 54.1%
- --------------------------------------------------------------------------------------------------------------------
TOTAL CAPITALIZATION 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====================================================================================================================
RATIO OF EARNINGS TO FIXED
CHARGES (PRE-TAX) 2.33 2.22 2.09 1.89 1.78 1.72
====================================================================================================================
SELECTED COMMON STOCK INFORMATION
SHARES OUTSTANDING (IN THOUSANDS):
Year-end 53,012 52,950 52,905 53,759 55,340 57,831
Average 52,979 52,913 53,391 54,432 55,790 63,748
Dividends declared (In thousands) $ 86,089 $ 81,491 $ 78,040 $ 74,972 $ 72,397 $ 77,571
Dividends paid per share $ 1.60 $ 1.52 $ 1.44 $ 1.36 $ 1.28 $ 1.20
Dividend payout ratio 58.8% 56.9% 57.6% 60.7% 63.1% 64.5%
Price earnings ratio at year-end 12.7 12.1 12.3 11.1 11.8 10.1
Dividend yield at year-end 4.6% 5.0% 5.0% 5.8% 5.7% 6.8%
Return on average common equity 12.0% 12.4% 12.2% 11.3% 10.6% 10.4%
====================================================================================================================
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
SELECTED OPERATING DATA
- -----------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SALES OF ELECTRICITY:
Average annual residential
kilowatt-hour use 6,201 5,901 6,331 5,953 6,060 6,168
- -----------------------------------------------------------------------------------------------------
Electric energy sales billed
(millions of KWH):
Residential 3,231 3,069 3,285 3,078 3,119 3,156
Commercial 5,490 5,358 5,450 5,236 5,145 5,055
Industrial 3,046 3,059 3,042 3,296 3,221 3,302
Miscellaneous 84 83 84 84 84 91
- -----------------------------------------------------------------------------------------------------
TOTAL SALES TO CUSTOMERS 11,851 11,569 11,861 11,694 11,569 11,604
- -----------------------------------------------------------------------------------------------------
Sales to other utilities 2,821 4,060 2,979 1,830 2,100 2,716
- -----------------------------------------------------------------------------------------------------
TOTAL SALES 14,672 15,629 14,840 13,524 13,669 14,320
=====================================================================================================
PERCENTAGE CHANGE IN ENERGY SALES:
Residential 5.3 (6.6) 6.7 (1.3) (1.2) 3.0
Commercial 2.5 (1.7) 4.1 1.8 1.8 3.2
Industrial (0.4) 0.6 (7.7) 2.3 (2.5) 13.2
Miscellaneous 1.2 (1.2) -- -- (7.7) (7.1)
- -----------------------------------------------------------------------------------------------------
Total Sales to Customers 2.4 (2.5) 1.4 1.1 (0.3) 5.7
- -----------------------------------------------------------------------------------------------------
Sales to other utilities (30.5) 36.3 62.8 (12.9) (22.7) 12.0
- -----------------------------------------------------------------------------------------------------
TOTAL SALES (6.1) 5.3 9.7 (1.1) (4.5) 6.8
=====================================================================================================
ENERGY SUPPLY AND PRODUCTION DATA:
Energy supply (millions of KWH):
Net generation -- system plants
(net of Company use and losses) 14,056 15,074 14,220 13,266 13,455 14,144
Purchased and net inadvertent power 616 555 620 258 214 176
- -----------------------------------------------------------------------------------------------------
TOTAL ENERGY SUPPLY 14,672 15,629 14,840 13,524 13,669 14,320
=====================================================================================================
Generating capability (MWs) 2,834 2,834 2,835 2,835 2,835 2,836
Peak load (MWs) 2,499 2,308 2,402 2,379 2,381 2,372
Cost of fuel per million BTU 143.65c 140.15c 153.70c 149.62c 143.87c 145.74c
BTU per kilowatt-hour generated 10,437 10,370 10,414 10,444 10,411 10,304
Average production cost
per kilowatt-hour 2.71c 2.54c 2.80c 2.61c 2.73c 2.58c
- -----------------------------------------------------------------------------------------------------
NUMBER OF CUSTOMERS -- END OF YEAR:
Residential 522,353 521,152 520,016 518,322 516,801 513,760
Commercial 52,910 52,839 52,617 52,330 51,950 51,456
Industrial 1,995 1,987 2,004 2,026 2,023 2,017
Other 1,866 1,833 1,891 1,847 1,818 1,828
- -----------------------------------------------------------------------------------------------------
TOTAL CUSTOMERS 579,124 577,811 576,528 574,525 572,592 569,061
=====================================================================================================
</TABLE>
42
<PAGE>
DQE BOARD
OF DIRECTORS
(All terms 3 years)
DQE/Duquesne Light
Committees:
1. Audit
2. Compensation
3. Finance
4. Nominating
Duquesne Light
Committees:
5. Employment and
Community Relations
6. Nuclear Review
JOHN M. ARTHUR 71. Term expires 1995 (5,6). Retired Chairman, Duquesne Light.
Directorships include Mine Safety Appliances Company (worker and plant
protection equipment and systems) and Chambers Development Company, Inc.
(waste management operations).
DANIEL BERG 64. Term expires 1994 (1,6). Institute Professor. Rensselaer
Polytechnic Institute. Directorships include Hy-Tech Machine, Inc. (specialty
parts), Joachim Machinery Co., Inc. (distributor of machine tools), and
Chester Environmental, Inc. (environmental engineering).
DOREEN P. BOYCE 59. Term expires 1995 (2,5). President of the Buhl Foundation
(support of educational and community programs). Directorships include
Microbac Laboratories, Inc. and Dollar Bank, Federal Savings Bank. Trustee of
Franklin & Marshall College.
ROBERT P. BOZZONI 60.Term expires 1994 (1,2). President and Chief Executive
Officer of Allegheny Ludlum Corporation (specialty metals production).
Directorships include Allegheny Ludlum Corporation; Chairman, Pittsburgh
branch of the Federal Reserve Bank of Cleveland.
SIGO FALK 59. Term expires 1996 (2,3,4). Management of personal investments.
Chairman of Maurice Falk Medical Fund and trustee of Chatham College.
WILLIAM H. KNOEHL 69. Term expires 1994 (3,4,6). Retired Chairman and Chief
Executive Officer of Cyclops Industries, Inc. (basic and specialty steels and
fabricated steel products; industrial and commercial construction).
Directorships include Cabot Oil and Gas Corporation, Life trustee of Carnegie
Mellon University.
G. CHRISTIAN LANTZSCK 69. Term expires 1995 (2,3). Retired Vice Chairman and
Treasurer, Mellon Bank Corporation (bank holding company); retired Vice
Chairman and Chief Financial Officer, Mellon Bank, N.A. (commercial banking
and trust services). Directorships include Koger Equity, Inc. (real estate
investment trust).
ROBERT MEHRABIAN 52. Term expires 1995 (1,5). President, Carnegie Mellon
University; Dean, College of Engineering, University of California at Santa
Barbara, 1983-90. Directorships include PPG Industries, Inc. (producer of
glass, chemicals, coatings and resins), Mellon Bank Corporation and Mellon
Bank, N.A.
THOMAS J MURHIN 64.Term expires 1994 (3,6). Dean, A.J. Palumbo School of
Business Administration, Duquesne University; former Deputy Secretary of U.S.
Dept. of Commerce; former President, Westinghouse Electric Corporation Energy
and Advanced Technology Group. Directorships include Motorola, Inc.
(manufacturer of electrical equipment and components). Member of the private
sector Council on Competitiveness and the NASA Advisory Council.
ROBERT B. PFASI 68. Term expires 1996 (1,5). Senior Vice President, National
Development Corporation (real estate); Executive Director, Allegheny
Conference on Community Development, 1968-91. Directorships include Blue Cross
of Western Pennsylvania, the Port Authority of Allegheny County, and the
Regional Industrial Development Corporation of Southwestern Pennsylvania.
ERIC W. SPRINGER 64. Term expires 1996 (1,4). Partner of Horty, Springer and
Mattern, P.C. (attorneys-at-law). Directorships include Presbyterian
University Hospital. President of the Allegheny County Bar Association.
WESLEY W. VON SCHACK 49. Term expires 1996 (3,4,5,6). Chairman, President and
Chief Executive Officer of DQE and Duquesne Light. Directorships include
Mellon Bank Corporation, RMI Titanium Co. (producer of titanium metal
products), the Pittsburgh branch of the Federal Reserve Bank of Cleveland, the
Regional Industrial Development Corporation of Southwestern Pennsylvania, the
Pennsylvania Business Roundtable, and the Pittsburgh Cultural Trust.
43
<PAGE>
DQE OFFICERS
WESLEY W. VON SCHACK 49. DQE Chairman of the Board, President and Chief
Executive Officer; Duquesne Light Chairman of the Board since 1987, President
and Chief Executive Officer since 1986, and Chief Financial Officer from 1984
through 1986. Previously Senior Vice President--Finance and Administrative
Services for Central Vermont Public Service Corporation. Also served in
executive positions with American Electric Power Company and Appalachian Power
Company.
DAVID D. MARSHALL 41. DQE Vice President; Duquesne Light Executive Vice
President since 1992, previously Assistant to the President (1990) and Vice
President, Corporate Development (1987). Joined Duquesne Light in 1985 as
General Manager, Planning, Budgeting and Rates; previously was Assistant Vice
President of Finance for Central Vermont Public Service Corporation.
FREDERICK S. POTTER 48. DQE Vice President since 1991; previously a senior
banker with Bear, Stearns & Co., Inc.; a vice president for Planmetrics, Inc.;
and an investment banker with Merrill Lynch & Co., Inc.
GARY L. SCHWASS 48. DQE Vice President and Treasurer; Duquesne Light Chief
Financial Officer since 1989; Vice President, Finance (1988); and Vice
President and Treasurer (1987). Joined Duquesne Light in 1985 as Treasurer;
previously served in a variety of senior management positions for Consumers
Power Company, including Executive Director of Financial Planning and
Projects.
<TABLE>
<S> <C> <C>
DIANE S. EISMONT, 49 JAMES D. MITCHELL, 42 JOAN S. SENCHSHYN, 55
Secretary Assistant Treasurer Assistant Secretary
RAYMOND H. PANZA, 43 MORGAN K. O'BRIEN, 33
Controller Assistant Controller
</TABLE>
- --------------------------------------------------------------------------------
DUQUESNE LIGHT COMPANY
<TABLE>
<S> <C> <C>
WESLEY W. VON SCHACK, 49 WILLIAM J. DELEO, 43 JAMES D. MITCHELL, 42
Chairman of the Board, Vice President, Corporate Treasurer
President and Performance and
Chief Executive Officer Information Services RAYMOND H. PANZA, 43
Controller
DAVID D. MARSHALL, 41 DIANNA L. GREEN, 47
Executive Vice President Vice President, DONALD J. CLAYTON, 39
Administrative Services Assistant Treasurer
GARY L. SCHWASS, 48
Vice President, Finance JOHN D. SIEBER, 54 WILLIAM F. FIELDS, 43
and Chief Financial Officer Vice President, Nuclear Assistant Treasurer
ROGER D. BECK, 57 EDWYNA G. ANDERSON, 64 MORGAN K. O'BRIEN, 33
Vice President, Marketing General Counsel Assistant Controller
and Customer Service
DIANE S. EISMONT, 49 JOAN S. SENCHYSHYN, 55
GARY R. BRANDENBERGER, 56 Secretary Assistant Secretary
Vice President, Power Supply
</TABLE>
- --------------------------------------------------------------------------------
DUQUESNE ENTERPRISES
<TABLE>
<S> <C> <C>
FREDERICK S. POTTER, 48 THOMAS A. HURKMANS, 28 H. DONALD MORINE, 56
President Vice President President, Allegheny
Development Corporation
ANTHONY J. VILLIOTTI, 47 and Property Ventures,
Vice President Ltd.
Treasurer and Controller
JOHN L. WEINHOLD, 57
Vice President,
Property Ventures, Ltd.
</TABLE>
- --------------------------------------------------------------------------------
MONTAUK
<TABLE>
<S> <C>
GARY L. SCHWASS, 48 DONALD J. CLAYTON, 39
President Vice President
JAMES D. MITCHELL, 42 LYDIA E. YORK, 34
Vice President and Controller
Treasurer
</TABLE>
44
<PAGE>
Shareholder Reference Guide
Common Stock
- --------------------------------------------------------------------------------
Trading Symbol: DQE
Stock Exchanges Listed and Traded:
New York, Philadelphia, Chicago
Number of Common Shareholders of Record at Year End: 81,343
Annual Meeting
- --------------------------------------------------------------------------------
Shareholders are cordially invited to attend our Annual Meeting of
Shareholders at 11 a.m. (local time), April 20, 1994, at the Pittsburgh
Theological Seminary, 616 N. Highland Ave., Pittsburgh, PA 15206.
Dividends
- --------------------------------------------------------------------------------
The Board of Directors historically has declared quarterly dividends payable
on the first business day of January, April, July and October. The record
dates for 1994 are expected to be March 7, June 10, September 9 and December 9.
Direct Deposit of Dividends
- --------------------------------------------------------------------------------
Your DQE quarterly dividend payments can be deposited automatically into a
personal checking or savings account. Through this free service, your dividend
income is available for use on the payment date. Standing in bank lines is
eliminated, as well as the fear of misplacing or losing your check. Call us
toll free for more information.
Tax Status of Common Stock Dividends
- --------------------------------------------------------------------------------
The company estimates that all of the common stock dividends paid in 1993 are
taxable as dividend income. This estimate is subject to audit by the Internal
Revenue Service.
Form 10-K
- --------------------------------------------------------------------------------
If you hold or are a beneficial owner of our stock as of February 23, 1994, the
record date for the 1994 Annual Meeting, we will send you, free upon request,
a copy of DQE's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission for 1993. All requests must be made in writing to:
Secretary
DQE
Box 68
Pittsburgh, PA 15230-0068
Shareholder Services/Assistance
- --------------------------------------------------------------------------------
Shareholder inquiries relating to dividends, missing stock certificates,
dividend reinvestment, direct deposit, direct debit, change of address
notification, and other account information should include your account number
and be directed to:
Shareholder Relations Department
DQE
Box 68
Pittsburgh, PA 15230-0068
Shareholders also can call between 7:30 a.m. and 4:30 p.m., Eastern time,
Monday through Friday. Please have your account number handy.
Pittsburgh area: 393-6167
Toll free outside Pittsburgh area:
1-800-247-0400
FAX: 412-393-6087
Questions relating to re-registering stock, including shares held in the
Dividend Reinvestment and Stock Purchase Plan, can be answered by our
Shareholder Relations Department. To actually transfer stock certificates,
contact our transfer agent:
Bank of Boston
Transfer Processing
150 Royall Street 45-01-05
Canton, MA 02021
617-575-2900
Duplicate Mailings
- --------------------------------------------------------------------------------
If you hold multiple accounts, you may be receiving duplicate mailings of
annual and quarterly reports. Help us eliminate this unnecessary expense by
calling our toll free number. Elimination of these duplicate mailings will not
affect separate delivery of dividend checks and proxy materials to each
account.
Financial Community Inquiries
- --------------------------------------------------------------------------------
Analysts, investment managers, and brokers should direct their inquiries to
412-393-4133. Written inquiries should be sent to:
Investor Relations Department
DQE
Box 68
Pittsburgh, PA 15230-0068
FAX: 412-393-6448
DQE and its affiliated companies are Equal
Opportunity Employers.
Reg. U.S. Pat. & Tm. Off.
<PAGE>
[LOGO OF DUQUESNE APPEARS HERE]
[RECYCLABLE LOGO APPEARS HERE] The 1993 DQE Annual Report was printed entirely
on recycled paper and is 100 percent recyclable.
<PAGE>
Exhibit 28.2
1993 GRAPHICS APPENDIX LIST
DQE' Annual Report to Shareholders
_______________________________________________________________________________
PAGE WHERE
GRAPHIC DESCRIPTION OF GRAPHIC OR CROSS-REFERENCE
APPEARS
- --------------------------------------------------------------------------------
1 DQE Earnings per share: Bar graph shows five years
of increasing earnings per share. 1989-$2.03; 1990-
$2.24; 1991-$2.50; 1992-$2.67; 1993-$2.72.
1 DQE Annualized Dividends per share: Bar graph shows
five years of annualized dividends per share.
1989 $1.36
1990 $1.44
1991 $1.52
1992 $1.60
1993 $1.68
2 Photo appears of Wesley W. von Schack
Chairman of the Board and
Chief Executive Officer
10 Duquesne Customer Sales 1993 vs. 1992 bar graph in
millions of KWH.
1993 1992 Difference
Residential 3,231 3,069 +162
Commercial 5,490 5,358 +132
Industrial 3,046 3,059 -13
11 Duquesne Customer Revenues bar graph
(Millions of Dollars)
1989 1990 1991 1992 1993
Residential $ 383 $ 380 412 393 401
Commercial 444 455 477 477 470
Industrial 200 203 195 196 187
----- ----- ----- ----- -----
$1,027 $1,038 $1,084 1,066 1,058
11 Duquesne Other Operating and Maintenance Expense bar
graph (Millions of Dollars)
1989-$356
1990-$366
1991-$373
1992-$358
1993-$365
(Excludes one time lease termination charge.)
12 DQE Interest Expense and Other Charges bar graph
(Millions of Dollars)
1989-$167.8
1990-$159.7
1991-$144.6
1992-$135.3
1993-$121.2
13 DQE Net Cash Flow from Operations bar graph
(Millions of Dollars)
Net Cash Flow Capital Expenditures
1989 $208.3 $ 85.4
1990 $278.6 $103.7
1991 $345.3 $125.4
1992 $396.6 $112.4
1993 $383.1 $100.6
(Excludes working capital and other-net charges.)
13 DQE Ratio of Earnings to Fixed Charges bar graph
showing:
1989 $1.78
1990 $1.89
1991 $2.09
1992 $2.22
1993 $2.33
14 DQE Net Income bar graph showing (Millions of Dollars)
data which appears in the "Selected Financial Data"
on page 41 of the DQE 1993 Annual Report to
Shareholders.
