<PAGE>
(PP&L LOGO
APPEARS HERE)
PP&L Resources, Inc.
Pennsylvania Power & Light Company
FORM 10 - K
Annual Report
to the Securities
and Exchange
Commission
For the Year Ended
December 31, 1995
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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, 1995
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 File Registrant;State of Incorporation; IRS Employer
Number Address and Telephone Number Identification No.
1-11459 PP&L Resources, Inc. 23-2758192
(Exact name of Registrant as
specified in its charter)
(Pennsylvania)
Two North Ninth Street
Allentown, PA 18101
(610) 774-5151
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
Common Stock New York & Philadelphia Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act: None
Commission File Registrant;State of Incorporation; IRS Employer
Number Address and Telephone Number Identification No.
1-905 PENNSYLVANIA POWER & LIGHT COMPANY 23-0959590
(Exact name of Registrant as
specified in its charter)
(Pennsylvania)
Two North Ninth Street
Allentown, PA 18101
(610) 774-5151
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Preferred Stock
4-1/2% New York & Philadelphia Stock Exchanges
3.35% Series Philadelphia Stock Exchange
4.40% Series New York & Philadelphia Stock Exchanges
4.60% Series Philadelphia Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 Registrants' 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.
PP&L Resources, Inc. [ X ]
Pennsylvania Power & Light Company [ X ]
Indicate by check mark whether the Registrants (1) have filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrants were required to file
such reports), and (2) have been subject to such filing requirements
for the past 90 days.
PP&L Resources, Inc. Yes X No
Pennsylvania Power & Light Company Yes X No
The aggregate market value of the voting common stock held by non-
affiliates of PP&L Resources, Inc. at January 31, 1996 was
$4,100,165,025. PP&L Resources, Inc. held all 157,300,382
outstanding common shares, no par value,of Pennsylvania Power & Light
Company. The aggregate market value of the voting preferred stock
held by non-affiliates of Pennsylvania Power & Light Company at
January 31, 1996 was $431,564,683.
The number of shares of PP&L Resources, Inc. Common Stock, $.01 par
value, outstanding on January 31, 1996 was 160,006,440.
Documents incorporated by reference:
Registrants have incorporated herein by reference certain
sections of their 1996 Notices of Annual Meetings and Proxy
Statements which will be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1995. Such
Proxy Statements will provide the information required by Part III of
this Report.
<PAGE>
PP&L RESOURCES, INC.
PENNSYLVANIA POWER & LIGHT COMPANY
FORM 10-K ANNUAL REPORT TO
THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1995
TABLE OF CONTENTS
This combined Form 10-K is separately filed by PP&L
Resources, Inc. and Pennsylvania Power & Light Company. Prior to
the filing of the combined Form 10-Q for the quarter ended June
30, 1995, PP&L Resources, Inc. was not a reporting company for
the purposes of the Securities Exchange Act of 1934 and
Pennsylvania Power & Light Company filed its own separate reports
on Form 10-K. Information contained herein relating to
Pennsylvania Power & Light Company is filed by PP&L Resources,
Inc. and separately by Pennsylvania Power & Light Company on its
own behalf. Pennsylvania Power & Light Company makes no
representation as to information relating to PP&L Resources, Inc.
or its subsidiaries, except as it may relate to Pennsylvania
Power & Light Company.
Item Page
PART I
1. Business 1
2. Properties 17
3. Legal Proceedings 17
4. Submission of Matters to a Vote of Security Holders 21
Executive Officers of the Registrants 22
PART II
5. Market for the Registrants' Common Equity and Related
Stockholder Matters 24
6. Selected Financial Data 24
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 24
8. Financial Statements and Supplementary Data 25
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 26
PART III
10. Directors and Executive Officers of the Registrants 93
11. Executive Compensation 93
12. Security Ownership of Certain Beneficial
Owners and Management 93
13. Certain Relationships and Related Transactions 94
PART IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 95
Signatures 96
Exhibit Index 97
Computation of Ratio of Earnings to Fixed Charges 109
Schedule of Property, Plant and Equipment 111
<PAGE>
PART I
ITEM 1. BUSINESS
BACKGROUND
PP&L is an operating electric utility, incorporated under the
laws of the Commonwealth of Pennsylvania in 1920.
To take advantage of new business opportunities, both
domestically and in foreign countries, PP&L formed a holding company
structure, effective April 27, 1995, after receiving all necessary
regulatory approvals and shareowner approval at PP&L's 1995 annual
meeting. As a result of this restructuring, PP&L became a direct
subsidiary of Resources.
In 1995, Resources also became the parent holding company of a
new subsidiary, PMDC, which engages in unregulated business
activities through investments in world-wide power markets. During
1995, PMDC invested $10.6 million as part of a consortium that is
part owner of an electric generating company in Bolivia and committed
to invest up to $10 million as a partner in a fund which will invest
in Latin American generation, transmission and distribution
businesses. PMDC also committed to invest up to $24 million as part
of a consortium to develop an integrated gas, power and transmission
facility in Peru. This project will be funded during 1996 and 1997.
In July 1995, Resources formed another unregulated subsidiary,
Spectrum, to pursue opportunities to offer energy-related products
and services to PP&L's existing customers and to others outside of
PP&L's service territory. Other subsidiaries may be formed to take
advantage of new business opportunities.
PP&L remains Resources' principal subsidiary (approximately 97%
of consolidated assets as of December 31, 1995), and the financial
condition and results of operation of PP&L are currently the
principal factors affecting the financial condition and results of
operations of Resources.
The electric utility industry, including PP&L, has experienced
and will continue to experience a significant increase in the level
of competition in the energy supply market. The Energy Act amended
the PUHCA to create a new class of independent power producers, and
amended the Federal Power Act to provide open access to electric
transmission systems for wholesale transactions. In response to this
increased competition, several strategic initiatives have been put in
place to improve financial performance and enhance PP&L's competitive
position. See "Financial Condition" below for a discussion of these
initiatives. PP&L has announced its support for full customer choice
of their energy supplier for all customer classes. See "Increasing
Competition" on page 41 for a discussion of pending PUC and FERC
proceedings on industry competition and PP&L's involvement in those
proceedings.
PP&L is subject to regulation as a public utility by the PUC and
is subject in certain of its activities to the jurisdiction of the
FERC under Parts I, II and III of the Federal Power Act. Resources
and PP&L have been exempted by the SEC from the provisions of PUHCA
applicable to them as holding companies.
PP&L is subject to the jurisdiction of the NRC in connection
with the operation of the two nuclear-fueled generating units at
PP&L's Susquehanna station. PP&L owns a 90% undivided interest in
each of the Susquehanna units and Allegheny Electric Cooperative,
Inc. owns a 10% undivided interest in each of those units.
PP&L is also subject to the jurisdiction of certain federal,
regional, state and local regulatory agencies with respect to air and
water quality, land use and other environmental matters. The
operations of PP&L are subject to the Occupational Safety and Health
Act of 1970 and the coal cleaning and loading operations of a PP&L
subsidiary are subject to the Federal Mine Safety and Health Act of
1977.
PP&L serves approximately 1.2 million customers in a 10,000
square mile territory in 29 counties of central eastern Pennsylvania
(see Map on page 16), with a population of approximately 2.6 million
persons. This service area has 129 communities with populations over
5,000, the largest cities of which are Allentown, Bethlehem,
Harrisburg, Hazleton, Lancaster, Scranton, Wilkes-Barre and
Williamsport.
During 1995, about 98% of total operating revenue was derived
from electric energy sales, with 34% coming from residential
customers, 29% from commercial customers, 20% from industrial
customers, 12% from contractual sales to other major utilities, 2%
from energy sales to members of the PJM and 3% from others.
Wholly-owned subsidiary companies of PP&L principally are
engaged in oil pipeline operations and passive financial investing.
PP&L operates its generation and transmission facilities as part
of the PJM. The PJM, one of the world's largest power pools,
includes 11 companies serving about 21 million people in a 50,000
square mile territory covering all or part of Pennsylvania, New
Jersey, Maryland, Delaware, Virginia and Washington, D.C.
In November 1995, all but one PJM company supported the plan
that PJM presented to the FERC to increase competition in the region.
The other company presented a separate plan. The PJM plan would
offer to all generators and wholesale buyers of electricity a PJM
Pool-wide energy market and open access to Pool-wide high-voltage
transmission lines.
The PJM plan contains a number of key components, including: 1)
new Pool-wide transmission tariffs to provide open access, comparable
service to all wholesale customers; 2) implementation of a regional
energy market with price-based dispatch, open to all wholesale bulk
power buyers and sellers; and 3) an Independent System Operator to
administer Pool operations and transmission service, and to operate
the regional energy market.
The PJM plan is designed to further develop a truly competitive
wholesale market with broader participation. The PJM companies
propose to submit a comprehensive filing to the FERC for approval in
May 1996, with implementation of the new structure by the end of
1996.
FINANCIAL CONDITION
Earnings per share of Resources' common stock were $2.05 in
1995, $1.41 in 1994 and $2.07 in 1993. The following table
highlights the major items that impacted earnings for each of the
years:
1995 1994 1993
Earnings per share - excluding
workforce reduction
programs and one-time
adjustments $1.79 $2.02 $2.19
Workforce reduction programs:
VERP 0.24 (0.28)
Other (0.12)
One-time adjustments:
Postretirement benefits other
than pensions 0.10 (0.04)
Disallowance-Susquehanna
Unit No. 1 deferred costs (0.13)
ECR purchased power costs 0.04 (0.06)
Gain/(loss) on subsidiary coal
reserves 0.12 (0.26)
ECR settlement (0.06)
Rate reduction - FERC (0.04)
Other 0.01 0.03 (0.02)
Earnings per share - reported $2.05 $1.41 $2.07
The decline in earnings excluding workforce reduction programs
and one-time adjustments for 1995 was primarily due to increases in
other operating costs, depreciation for the Susquehanna station and
costs associated with the review of PECO's proposals to acquire
Resources. The decline in earnings excluding workforce reduction
programs and one-time adjustments for 1994 was primarily due to the
increase in depreciation for the Susquehanna station and for
postretirement benefits other than pensions.
Resources earned a 12.81% return on average common equity during
1995, an increase from the 8.73% earned in 1994. The ratio of
Resources' pre-tax income to interest charges increased from 2.7 in
1994 to 3.6 in 1995. The annual per share dividend rate on
Resources' common stock remained unchanged at $1.67 per share. The
book value per share of Resources' common stock increased 3.2% from
$15.79 at the end of 1994 to $16.29 at the end of 1995. The ratio of
the market price to book value of Resources' common stock was 153% at
the end of 1995 compared with 120% at the end of 1994.
PP&L system, or service area, sales were 32.7 billion kwh in
1995, an increase of 357 million kwh, or 1.1%, over 1994. This
increase was primarily due to increased economic activity in central
eastern Pennsylvania in 1995. If normal weather had been experienced
in both 1995 and 1994, system sales for 1995 would have increased by
about 529 million kwh, or 1.7%, over 1994.
Actual sales to residential customers in 1995 decreased 144
million kwh, or 1.3%, from 1994, while actual sales to residential
customers in 1994 increased 401 million kwh, or 3.6%, from 1993. The
change in residential sales for both periods was primarily due to the
extreme cold weather in early 1994. Under normal weather conditions
in both 1995 and 1994, residential sales would have remained
essentially unchanged.
For the period 1992-1995, industrial sales have increased in
each quarter as compared to the same quarter in the prior year.
Industrial sales are an important indicator of the economic health of
PP&L's service area.
On September 27, 1995, the PUC issued a final order with respect
to the base rate case filed by PP&L on December 30, 1994. PP&L's
request sought to increase PUC-jurisdictional revenues by $261.6
million, or about 11.7%. The PUC Decision in the rate case granted
PP&L a $107 million increase based on test year conditions. At the
same time, PP&L's ECR was reduced by $22 million related to capacity
credit sales resulting in a net increase of $85 million, or about
3.8%, in PUC-jurisdictional revenues effective September 28, 1995. A
detailed discussion of the PUC Decision, along with other rate
matters, is presented in Financial Note 3.
With the completion of PP&L's base rate case, several key
initiatives have been put in place to improve Resources' financial
performance. These initiatives include:
o A $671 million reduction in PP&L's construction expenditures
over the five-year period 1996-2000, including reductions of $93
million and $220 million for 1996 and 1997, respectively. These
reductions reflect, among other things, a decision to not install FGD
at PP&L's Montour station;
o A planned $50-$60 million (about 8%) reduction in PP&L's
operation and maintenance costs from previously budgeted amounts by
the year 2000;
o Marketing and economic development activities to achieve an
average compound annual growth rate of about 2% in sales to PP&L's
service area customers through the year 2000; and
o Except for common equity capital to be provided through
sales of Resources' common stock under the DRIP and ESOP, Resources
expects to meet all of PP&L's construction expenditures and debt
maturities through internally generated funds during the five-year
period 1996-2000.
Resources believes that the PUC Decision, the above initiatives
and the expected financial performance of PMDC and Spectrum will
permit Resources to increase shareowner value, including growth in
earnings per share and the dividend rate on Resources' common stock
over the long term. Actual sales growth and improvement in earnings
and financial performance will depend upon economic conditions,
energy consumption, the impact of increasing competition in the
electric utility industry, the effects of regulation, investment
opportunities and performance and other factors. Additionally, PP&L
remains committed to a corporate objective of keeping its prices as
stable as possible and maintaining customer rates that compare
favorably with those of neighboring utilities.
CAPITAL EXPENDITURE REQUIREMENTS AND FINANCING
See "Financial Condition - Reduction in Capital Expenditure
Requirements-PP&L" on page 35 for information concerning PP&L's
estimated capital expenditure requirements for the years 1996-2000.
See "Environmental Matters" on page 37 and Note 15 to Financial
Statements for information concerning PP&L's estimate of the cost to
comply with the federal clean air legislation enacted in 1990, to
address groundwater degradation and waste water control at PP&L
facilities and to comply with solid waste disposal regulations
adopted by the DEP.
PP&L anticipates the issuance of $116 million of unsecured notes
in early 1996 in order to redeem higher-cost bonds through the
maintenance and replacement fund provisions of PP&L's Mortgage.
Resources will continue to obtain common equity capital through
the DRIP and PP&L's ESOP. It is expected that the DRIP will be
continued during the years 1996 and 1997, resulting in proceeds of
about $70 million annually, and that the ESOP will be continued
through 2000, with expected proceeds of about $8 million annually.
Except for funds derived from sales of Resources' common stock,
Resources expects that internally generated funds (after provision
for dividends and capital lease payments) will be adequate to meet
PP&L's capital requirements and $415 million of debt maturities for
the years 1996-2000. PP&L has no preferred stock sinking fund
requirements during 1996-2000.
Additional outside financing, in amounts not currently
determinable, or the liquidation of certain financial investments may
be required over the next five years to finance investment
opportunities in worldwide power projects by PMDC.
Neither Resources' nor PP&L's ability to issue securities during
the next three years is expected to be limited by earnings or other
issuance tests.
POWER SUPPLY
PP&L's system capacity (winter rating) at December 31, 1995 was
as follows:
Net
Kilowatt
Plant Capacity
Nuclear-fueled steam station
Susquehanna 1,995,000 (a)
Coal-fired steam stations
Montour 1,525,000
Brunner Island 1,469,000
Sunbury 389,000
Martins Creek 300,000
Keystone 210,000 (b)
Conemaugh 194,000 (c)
Holtwood 73,000
Total coal-fired 4,160,000
Oil-fired steam station
Martins Creek 1,592,000
Combustion turbines and diesels 508,000
Hydroelectric 146,000
Total generating capacity 8,401,000
Firm purchases
Hydroelectric 139,000 (d)
Qualifying facilities 474,000 (e)
Total firm purchases 613,000
Total system capacity 9,014,000
_____________________________
(a) PP&L's 90% undivided interest.
(b) PP&L's 12.34% undivided interest.
(c) PP&L's 11.39% undivided interest.
(d) From Safe Harbor Water Power Corporation.
(e) From non-utility generating companies.
The system capacity shown in the preceding tabulation does not
reflect: (i) sales of capacity and energy to Atlantic through March
1998; (ii) sales of capacity and energy to BG&E through 2001; (iii)
sales of capacity and energy to JCP&L through 1999; or (iv) sales of
capacity credits to GPU Service Corporation and BG&E for PJM
installed capacity accounting purposes only, which capacity credit
sales aggregated 454,000 kilowatts at December 31, 1995. Giving
effect to the sales to Atlantic (129,000 kilowatts), BG&E (132,000
kilowatts) and JCP&L (945,000 kilowatts), PP&L's net system capacity
at December 31, 1995 was 7,354,000 kilowatts.
The capacity of generating units is based upon a number of
factors, including the operating experience and physical condition of
the units, and may be revised from time to time to reflect changed
circumstances.
During 1995, PP&L produced about 39.1 billion kwh in plants it
owned. PP&L purchased 5.5 billion kwh under purchase agreements and
received 0.9 billion kwh as power pool interchange. During the year,
PP&L delivered about 2.4 billion kwh as pool interchange and about
1.7 billion kwh under purchase agreements.
During 1995, 59.1% of the energy generated by PP&L's plants came
from coal-fired stations, 35.9% from nuclear operations at the
Susquehanna station, 2.7% from the Martins Creek oil-fired steam
station and 2.3% from hydroelectric stations.
The maximum one-hour demand recorded on PP&L's system is
6,607,000 kilowatts, which occurred on February 6, 1996. The maximum
recorded one-hour summer demand is 6,021,000 kilowatts, which
occurred on August 2, 1995. The peak demands do not include energy
sold to Atlantic, BG&E or JCP&L.
PP&L purchases energy from other utilities and FERC-certified
power marketers (marketers) when it is economically desirable to do
so. From time-to-time, PP&L purchases energy from systems outside the
PJM on a daily, weekly or monthly basis, at advantageous prices. The
amount of energy purchased depends on a number of factors, including
cost and the import capability of the transmission network. When it
has been economical to do so, PP&L has sold portions of its
entitlement to use the bulk power transmission system to import
energy from utilities outside the PJM.
In 1995, the FERC accepted a PP&L wholesale generating services
tariff (tariff). This tariff enables PP&L to sell to other utilities
and marketers reservations of output from PP&L's generating units
during certain periods, with the option to purchase energy from these
units. As of the end of 1995, about 30 utilities and marketers have
signed service agreements under the tariff. Typically, a reciprocal
agreement will enable PP&L to purchase energy from these same
utilities and marketers. Transactions under these agreements will
continue to allow PP&L to make more efficient use of its generating
resources, and provide benefits to customers of both PP&L and the
other utilities.
See Note 4 to Financial Statements for additional information
concerning the sale of capacity and energy to Atlantic, BG&E and
JCP&L, the sale of capacity credits (but not energy) to other
electric utilities in the PJM and the sale of transmission
entitlements and the reservation of output from the Martins Creek
units. See "Rate Matters" on page 30 and Note 3 to Financial
Statements for information concerning a settlement agreement between
PP&L and ECR complainants with respect to capacity-related
transactions.
In addition to the 474,000 kilowatts of non-utility generation
shown in the preceding tabulation, PP&L is purchasing about 3,000
kilowatts of output from various other non-utility generating
companies. The payments made to non-utility generating companies,
all of whose facilities are located in PP&L's service area, are
recovered from customers through the ECR applicable to PUC-
jurisdictional customers and base rate charges applicable to FERC-
jurisdictional customers.
The PJM companies had 56.5 million kilowatts of installed
generating capacity at December 31, 1995, and transmission line
connections with neighboring power pools have the capability of
transferring an additional 4 to 5 million kilowatts between the PJM
and neighboring power pools. Through December 31, 1995, the maximum
one-hour demand recorded on the PJM was approximately 48.5 million
kilowatts, which occurred on August 2, 1995. PP&L is also a party to
the Mid-Atlantic Area Coordination Agreement, which provides for the
coordinated planning of generation and transmission facilities by the
companies included in the PJM.
PP&L has begun converting the two oil-fired generating units at
its Martins Creek steam electric station to burn both oil and natural
gas. The DEP has approved a change to the station's air permit to
allow the burning of either or both fuels. The current schedule is
to complete conversion construction work and begin dual fuel
operation by June 1996. Interstate Energy Company (IEC), a PP&L
subsidiary, has received approval from the PUC to also transport
natural gas through the existing oil pipeline to Martins Creek.
Conversion of IEC's facilities has begun and the pipeline should be
able to transport natural gas by June 1996. Another party, who
opposed IEC's PUC application on the grounds that it had the sole
authority to provide such gas service to PP&L, has appealed the PUC
approval to the Commonwealth Court of PA. PP&L cannot predict the
outcome of this proceeding.
FUEL SUPPLY
Coal
During 1995, PP&L's generating stations burned about 8.6 million
tons of bituminous coal and about 1.0 million tons of anthracite and
petroleum coke.
During 1995, 75% of the coal delivered to PP&L's generating
stations was purchased under contracts and 25% was obtained through
open market purchases.
The amount of bituminous coal carried in inventory at PP&L's
generating stations varies from time to time depending on market
conditions and plant operations. As of December 31, 1995, PP&L's
bituminous coal supply was sufficient for about 26 days of
operations.
Contracts with non-affiliated coal producers provided PP&L with
about 4.7 million tons of bituminous coal in 1995 and are expected to
provide PP&L with about 5.0 million tons in both 1996 and 1997.
The coal burned in PP&L's generating stations contains both
organic and pyritic sulfur. Mechanical cleaning processes are
utilized to reduce the pyritic sulfur content of the coal. The
reduction of the pyritic sulfur content by either mechanical cleaning
or blending has lowered the total sulfur content of the coal burned
to levels which permit compliance with current sulfur dioxide
emission regulations established by the DEP. For information
concerning PP&L's plans to achieve compliance with the federal clean
air legislation enacted in 1990, see "Environmental Matters" on page
37 and Note 15 to Financial Statements.
PP&L owns a 12.34% undivided interest in the Keystone station
and an 11.39% undivided interest in the Conemaugh station, both of
which are generating stations located in western Pennsylvania. The
owners of the Keystone station have a long-term contract with a coal
supplier to provide at least two-thirds of that station's
requirements through 1999 and declining amounts thereafter until the
contract expires at the end of 2004. The balance of the Keystone
station requirements are purchased in the open market. The coal
supply requirements for the Conemaugh station are being met from
several sources through a blend of long-term and short-term contracts
and spot market purchases.
At December 31, 1995, PP&L's inventory of anthracite was about
4.3 million tons. PP&L's requirements for petroleum coke and any
additional anthracite that may be required over the remainder of the
expected useful lives of PP&L's anthracite-fired generating stations
are expected to be obtained by contract and market purchases.
Nuclear
The nuclear fuel cycle consists of the mining of uranium ore and
its milling to produce uranium concentrates; the conversion of
uranium concentrates to uranium hexafluoride; the enrichment of
uranium hexafluoride; the fabrication of fuel assemblies; the
utilization of the fuel assemblies in the reactor; the temporary
storage of spent fuel; and the permanent disposal of spent fuel.
PP&L has entered into uranium supply agreements that, together
with options to extend, satisfy 100% of the uranium concentrate
requirements for the Susquehanna units through 1997 and approximately
60% of the requirements for the period 1998-1999. Deliveries under
these agreements are expected to provide sufficient quantities of
uranium concentrates to permit Unit 1 to operate into the first
quarter of 2000 and Unit 2 to operate into the first quarter of 1999.
PP&L has entered into agreements that satisfy approximately 80%
of its conversion requirements through 1997 and approximately 25% of
the conversion requirements for the period 1998-1999.
PP&L also has entered into agreements for other segments of the
nuclear fuel cycle. Based upon the current operating plans for each
of the Susquehanna units, the following tabulation shows the years
through which contracts, including options to extend, could provide
the indicated segments of the nuclear fuel cycle:
Enrichment 2014
Fabrication 2006
PP&L has elected to cancel all or a portion of deliveries under
its existing enrichment contract during the period 1999 through 2002,
and plans to competitively bid those requirements on the open market.
Additional arrangements will be necessary to satisfy the remaining
fuel requirements of the Susquehanna units over their anticipated
useful lives.
PP&L estimates that there is sufficient storage capability in
the spent fuel pools at Susquehanna to accommodate the fuel that is
expected to be discharged through the year 1997. Federal law
requires the federal government to provide for the permanent disposal
of commercial spent nuclear fuel. Pursuant to the requirements of
that law, DOE has initiated an analysis of a site in Nevada for a
permanent nuclear waste repository. Progress on characterization of
a proposed disposal facility has been slow, and the repository is not
expected to be operational before 2010. Congress is considering new
legislation designed to re-establish a schedule for the spent fuel
disposal program. This legislation would authorize an above-ground
interim storage facility, along with the permanent disposal facility,
as part of an integrated disposal program. Even if this legislation
is enacted and DOE is successful in building and operating the
interim storage facility, it is unlikely that any spent fuel will be
shipped from Susquehanna until well after the year 2000 because of
the large volume of other utilities' spent fuel that is scheduled to
be shipped before PP&L's spent fuel. Therefore, expansion of
Susquehanna's spent fuel storage capability is necessary. To support
this expansion, a contract was recently signed providing for the
design and construction of a new spent fuel storage facility
employing dry fuel storage technology at the Susquehanna plant. The
facility will be modular so that additional storage capacity can be
added as needed. PP&L currently estimates that construction of the
facility will be completed in the spring of 1997.
Federal law also provides that the costs of spent nuclear fuel
disposal are the responsibility of the generators of such wastes.
PP&L includes in customer rates the fees charged by the DOE to fund
the permanent disposal of spent nuclear fuel.
For a discussion of the assessment on PP&L pursuant to the
Energy Act for the Uranium Enrichment Decontamination and
Decommissioning Fund, see the discussion under that caption on page
40.
Oil
PP&L has agreements with two suppliers under which it can
purchase its expected oil requirements for the Martins Creek units.
However, if there are price advantages to be realized from purchasing
oil in the spot market, these contracts permit PP&L to acquire up to
one-half of its expected oil requirements for the Martins Creek units
in that manner. One oil purchase agreement expired in mid-1995 and
was replaced with a similar two-year agreement which will expire in
mid-1997. The other agreement expires in mid-1996.
During 1995, approximately 71% of the oil requirements for the
Martins Creek units was purchased under PP&L's oil contracts and the
balance was purchased on the spot market.
See "POWER SUPPLY" on page 6 for information concerning the
ongoing conversion of the two oil-fired generating units at the
Martins Creek station to burn both oil and natural gas.
ENVIRONMENTAL MATTERS
PP&L is subject to certain present and developing federal,
regional, state and local laws and regulations with respect to air
and water quality, land use and other environmental matters. See
"Financial Condition - Reduction in Capital Expenditure Requirements-
PP&L" on page 35 for information concerning environmental
expenditures during 1995 and PP&L's estimate of those expenditures
during the years 1996-2000. PP&L believes that it is presently in
substantial compliance with applicable environmental laws and
regulations.
See "Environmental Matters" on page 37 and Note 15 to Financial
Statements for information concerning federal clean air legislation
enacted in 1990, groundwater degradation and waste water control at
PP&L facilities, DEP's solid waste disposal regulations, PP&L's
agreement with the DEP concerning remediation at certain sites of
past operations, the issue of electric and magnetic fields and DEP's
order that a PP&L subsidiary abate seepage from a former mine. Other
environmental laws, regulations and developments that may have a
substantial impact on PP&L are discussed below.
Air
The Clean Air Act includes, among other things, provisions that:
(a) require the prevention of significant deterioration of existing
air quality in regions where air quality is better than applicable
ambient standards; (b) restrict the construction of and revise the
performance standards for new coal-fired and oil-fired generating
stations; and (c) authorize the EPA to impose substantial
noncompliance penalties of up to $25,000 per day of violation for
each facility found to be in violation of the requirements of an
applicable state implementation plan. The DEP administers the EPA's
air quality regulations through the Pennsylvania State Implementation
Plan and has concurrent authority to impose penalties for
noncompliance. At this time, PP&L is meeting all requirements of
Phase I of the Clean Air Act.
As a result of computer dispersion modeling of the effects of
PP&L's Martins Creek station (located in Pennsylvania) on ambient air
quality in New Jersey, the EPA redesignated Warren County, New Jersey
to non-attainment status for sulfur dioxide, effective February 1,
1988. However, the EPA withheld further regulatory action until
PP&L, the EPA, the DEP and the New Jersey Department of Environmental
Protection (NJDEP) could agree upon and apply a computer model that
will more accurately predict the actual ambient air quality of the
area. PP&L negotiated with the EPA, the DEP and the NJDEP on a study
to allow the use of a more accurate model. This study began in May
1992 and is expected to be concluded in 1996. In addition, the
regulatory agencies have required PP&L to expand the study area
beyond the designated sulfur dioxide non-attainment area to include
any predicted "areas of concern" in the vicinity of the plant. PP&L
is developing a study to address this expanded area. If it is
determined that the Martins Creek operations are causing ambient air
violations, PP&L may be required to make changes to reduce sulfur
dioxide emissions. However, it is currently expected that the
reductions planned to meet the requirements of the Clean Air Act acid
rain provisions should be adequate to meet any reduction that may be
required as a result of these studies. See "Environmental Matters"
on page 37 and Note 15 to Financial Statements.
Water
To implement the requirements established by the Federal Water
Pollution Control Act of 1972, as amended by the Clean Water Act of
1977 and the Water Quality Act of 1987, the EPA has adopted
regulations including effluent standards for steam electric stations.
The DEP administers the EPA's effluent standards through state laws
and regulations relating, among other things, to effluent discharges
and water quality. The standards adopted by the EPA pursuant to the
Clean Water Act may have a significant impact on PP&L's existing
facilities depending on the DEP's interpretation and future
amendments to its regulations.
The EPA and DEP limitations, standards and guidelines for the
discharge of pollutants from point sources into surface waters are
enforced through the issuance of NPDES permits. PP&L has NPDES
permits necessary for the operation of its facilities.
Pursuant to the Surface Mining and Reclamation Act of 1977
(Reclamation Act), the United States Office of Surface Mining (OSM)
has adopted effluent guidelines which are applicable to PP&L
subsidiaries as a result of their past coal mining and continued coal
processing activities. The EPA and the OSM limitations, guidelines
and standards also are enforced through the issuance of NPDES
permits. In accordance with the provisions of the Clean Water Act
and the Reclamation Act, the EPA and the OSM have authorized the DEP
to implement the NPDES program for Pennsylvania sources. Compliance
with applicable water quality standards is assured by DEP review of
NPDES permit conditions. PP&L's subsidiaries have received NPDES
permits for their mines and related facilities.
Solid and Hazardous Waste
The 1976 Resource Conservation and Recovery Act (RCRA) regulates
the generation, transportation, treatment, storage and disposal of
hazardous wastes. RCRA also imposes joint and several liability on
generators of solid or hazardous waste for clean-up costs. A
revision of RCRA in late 1984 lowered the threshold for the amount
of on-site hazardous waste generation requiring regulation and
incorporated underground tanks used for the storage of petroleum and
petroleum products as regulated units. Based upon the results of a
survey of its solid waste practices, PP&L in the past has filed
notices with the EPA indicating that hazardous waste is occasionally
generated at all of its steam electric generating stations and
service centers. PP&L has established specific operating procedures
for handling this hazardous waste. Therefore, at this time RCRA and
related DEP regulations are not expected to have a significant
additional impact on PP&L.
The provisions of Superfund authorize the EPA to require past
and present owners of contaminated sites and generators of any
hazardous substance found at a site to clean up the site or pay the
EPA or the state for the costs of clean-up. The generators and past
owners can be liable even if the generator contributed only a minute
portion of the hazardous substances at the site. Present owners can
be liable even if they contributed no hazardous substances to the
site.
The Pennsylvania Superfund law also gives the DEP broad
authority to identify hazardous or contaminated sites in Pennsylvania
and to order owners or responsible parties to clean up the sites. If
responsible parties cannot or will not perform the clean-up, the DEP
can hire contractors to clean up the sites and then require
reimbursement from the responsible parties after the clean-up is
completed. To date, PP&L has principally been involved in federal,
rather than state, Superfund sites.
In 1981, PP&L was notified by the EPA that PP&L could be liable
for the cost of removing coal tar deposits discovered at a former
coal gasification plant site owned by PP&L along Brodhead Creek in
Monroe County, Pennsylvania, and on adjacent property owned by a
company unrelated to PP&L. The EPA used Superfund monies to
construct a slurry wall which was paid for by the adjacent property
owner. PP&L removed approximately 8,000 gallons of coal tar from its
property. To determine whether additional work needed to be done, a
Remedial Investigation and a Risk Assessment were conducted by PP&L
and the adjacent property owner and submitted to the EPA and the DEP.
Although the Risk Assessment showed acceptable risk levels, the EPA
and the DEP required a Feasibility Study to identify whether
additional remedial action was required.
Based on the results of that Feasibility Study and other
investigations, PP&L and the adjacent property owner signed a consent
decree with the EPA in November 1991. Under the terms of that
consent decree, PP&L and the adjacent property owner have paid EPA's
past costs and are undertaking removal of two subsurface coal tar
accumulations. PP&L and the adjacent property owner also will
monitor the site for up to 30 years, as well as pay all future EPA
oversight costs. PP&L's share of the costs associated with the
consent decree is estimated to be about $2 million, all of which has
been spent or accrued.
In May 1992, PP&L and the adjacent property owner signed a
consent order from the EPA directing that an additional Remedial
Investigation and Feasibility Study be performed to address
groundwater contamination at the site. This investigation is now
complete and has determined that further action is not feasible.
Accordingly, a notice has been submitted to EPA stating that all
actions required by the consent order to address groundwater
contamination have been completed and requesting that the order be
terminated.
The EPA has placed the site of a former PP&L gas plant in
Columbia, Pennsylvania on the national Superfund list. PP&L and
another potentially responsible party (PRP) had previously conducted
a detailed investigation of the site, and PP&L removed a substantial
amount of coal tar from a pedestrian tunnel at the rear of the
property. However, coal tar remains in two brick pits on the site.
There also is coal tar contamination of the soil and groundwater at
the site and of river sediment adjacent to the site. PP&L is
negotiating a consent order with the DEP to remediate the brick pits
and conduct additional investigations. The costs of investigation
and remediation of the areas of the site where the agencies have
required action are estimated at $1.2 million, all of which has been
spent or is accrued. Further remediation of other areas of the site
may be required, the costs of which are not now determinable but
could be material.
PP&L at one time also owned and operated several other gas
plants in its service area. None of these sites is presently on the
Superfund list. However, a few of them may be possible candidates
for listing at a future date. PP&L expects to continue to investigate
and, if necessary, remediate these sites. The cost of this work is
not now determinable but could be material.
See "LEGAL PROCEEDINGS" on page 17 for information concerning an
EPA order and a complaint filed by the EPA in federal district court
against PP&L and 35 unrelated parties for remediation of a Superfund
site in Berks County, Pennsylvania; a complaint filed by PP&L and 16
unrelated parties in federal district court against other parties for
contribution under Superfund relating to a landfill site in Lehigh
County, Pennsylvania; an EPA complaint in federal district court
against PP&L and 10 unrelated parties to recover all past and future
EPA costs of investigating and remediating the Heleva landfill site
in Lehigh County, Pennsylvania; and action by the EPA for
reimbursement of the EPA's past response costs and remediation at the
site of a former metal salvaging operation in Montour County,
Pennsylvania.
PP&L is involved in several other sites where it may be
required, along with other parties, to contribute to investigation
and remediation. Some of these sites have been listed by the EPA
under Superfund, and others may be candidates for listing at a future
date. Future investigation or remediation work at sites currently
under review, or at sites currently unknown, may result in material
additional operating costs which PP&L cannot estimate at this time.
In addition, certain federal and state statutes, including Superfund
and the Pennsylvania Hazardous Sites Cleanup Act, empower certain
governmental agencies, such as the EPA and the DEP, to seek
compensation from the responsible parties for the lost value of
damaged natural resources. The EPA and the DEP may file such
compensation claims against the parties, including PP&L, held
responsible for cleanup of such sites. Such natural resource damage
claims against PP&L could result in material additional liabilities.
Low-Level Radioactive Waste
Under federal law, each state is responsible for the disposal of
low-level radioactive waste generated in that state. States may join
in regional compacts to jointly fulfill their responsibilities. The
states of Pennsylvania, Maryland, Delaware and West Virginia are
members of the Appalachian States Low-Level Radioactive Waste
Compact. Efforts to develop a regional disposal facility in
Pennsylvania are currently underway. Low-level radioactive wastes
resulting from the operation of Susquehanna are currently being sent
to Barnwell, South Carolina for disposal. In the event that this
disposal option becomes unavailable or no longer cost effective, the
low-level radioactive waste will be stored onsite at Susquehanna.
PP&L cannot predict the future availability of low-level waste
disposal facilities or the cost of such disposal.
General
In addition to the matters described above, PP&L and its
subsidiaries have been cited from time to time for temporary
violations of the DEP and EPA regulations with respect to air and
water quality and solid waste disposal in connection with the
operation of their facilities and may be cited for such violations in
the future. As a result, PP&L and its subsidiaries may be subject to
certain penalties which are not expected to be material in amount.
PP&L is unable to predict the ultimate effect of evolving
environmental laws and regulations upon its existing and proposed
facilities and operations. In complying with statutes, regulations
and actions by regulatory bodies involving environmental matters,
including the areas of water and air quality, hazardous and solid
waste handling and disposal and toxic substances, PP&L may be
required to modify, replace or cease operating certain of its
facilities. PP&L may also incur material capital expenditures and
operating expenses in amounts which are not now determinable.
FRANCHISES AND LICENSES
PP&L has authority to provide electric public utility service
throughout its entire service area as a result of grants by the
Commonwealth of Pennsylvania in corporate charters to PP&L and
companies to which it has succeeded and as a result of certification
thereof by the PUC. PP&L has been granted the right to enter the
streets and highways by the Commonwealth subject to certain
conditions. In general, such conditions have been met by ordinance,
resolution, permit, acquiescence or other action by an appropriate
local political subdivision or agency of the Commonwealth.
PP&L operates Susquehanna Unit 1 and Unit 2 pursuant to NRC
operating licenses which expire in 2022 and 2024, respectively. PP&L
operates two hydroelectric projects pursuant to licenses which were
renewed by the FERC in 1980: Wallenpaupack (44,000 kilowatts
capacity) and Holtwood (102,000 kilowatts capacity). The
Wallenpaupack license expires in 2004 and the Holtwood license
expires in 2014.
PP&L also owns one-third of the capital stock of Safe Harbor
Water Power Corporation, which holds a project license which extends
until 2030 for the operation of its hydroelectric plant. The total
capability of the Safe Harbor plant is 417,500 kilowatts, and PP&L is
entitled by contract to one-third of the total capacity (139,000
kilowatts).
EMPLOYEE RELATIONS
As of December 31, 1995, approximately 4,228 of PP&L's 6,661
full-time employees were represented by the IBEW under a three-year
agreement which expires in May 1997.
<PAGE>
Page 16 contains a map of PP&L's service territory which shows its
location, the location of each of PP&L's coal-fired, oil-fired, hydro and
nuclear-fueled generating stations and the location of major population
centers.
<PAGE>
ITEM 2. PROPERTIES
The accompanying Map shows the location of PP&L's service
area and generating stations.
Reference is made to Exhibit 99 - Schedule of Property,
Plant and Equipment for information concerning PP&L's investment
in property, plant and equipment. Substantially all electric
utility plant is subject to the lien of PP&L's first mortgage.
Additional information concerning capital leases is set forth in
Note 8 to Financial Statements.
For additional information concerning the properties of PP&L
see Item 1, "BUSINESS - Power Supply" and "BUSINESS - Fuel
Supply".
ITEM 3. LEGAL PROCEEDINGS
Reference is made to Notes to Financial Statements for
information concerning rate matters.
Reference is made to Notes to Financial Statements for
information concerning a complaint filed against PP&L by fuel oil
dealers alleging that PP&L's promotion of electric heat pumps and
off-peak storage systems had violated and continues to violate
the federal antitrust laws.
Reference is made to Notes to Financial Statements for
information concerning a DEP order that a PP&L subsidiary abate
seepage from a former mine.
In October 1995, a shareowner of Resources sent a letter to
the Board of Directors (Demand Letter) which, among other things,
requested that Resources "commence legal proceedings" against
each of the directors "for failing to prudently exercise [their]
fiduciary duties to Resources and its shareholders" in regard to
the Board's rejection of an unsolicited proposal by PECO to
acquire Resources. The Board considered the Demand Letter at
meetings held in October and November 1995, and determined
unanimously in the exercise of its business judgment that
commencement by Resources of legal proceedings against the
directors as requested in the letter would not be in the best
interests of Resources. Resources filed an action for
declaratory judgment in the Court of Common Pleas for Lehigh
County, Pennsylvania against this shareowner. This action
sought, among other things, a judgment that the Board's
determination to refuse the shareowner's demand was a valid
exercise of its business judgment.
In December 1995, Resources dismissed this action without
prejudice on the basis of a letter in which the shareowner,
through his attorney, represented that he had no plans to pursue
any type of claim against Resources such as the one referred to
in the Demand Letter and that all shares beneficially owned by
the shareowner had been sold.
In August 1995, Schuylkill Energy Resources, Inc. (SER), one
of the non-utility generating companies from which PP&L purchases
power under PURPA, brought suit against PP&L in the District
Court of PA. SER alleges that, since July 1994, PP&L has
improperly curtailed power purchases from SER under the power
purchase agreement between the parties. SER claims that such
activity breached the power purchase agreement and violated the
federal antitrust laws, among other counts. SER alleges that
PP&L's actions resulted in loss of revenue from power sales of
$1.6 million and an unquantified increase in its costs of
operation. SER is requesting compensatory and punitive damages,
as well as treble damages and attorneys' fees for alleged
antitrust violations. In November 1995, PP&L filed a motion to
dismiss the complaint. In January 1996, the District Court
stayed the SER action pending consideration by the PUC. After
PUC consideration, the stay will be lifted and the federal
proceedings will resume. PP&L cannot predict the outcome of this
proceeding.
In addition, in September 1995 PP&L's Corporate Audit
Services Department released an audit of SER which raised
questions regarding SER's compliance with the pricing provisions
of the power purchase agreement between SER and PP&L. The
principal issue is whether SER and an affiliate of SER properly
used the steam generated by the plant in accordance with the
terms of the contract. Under the contract, if the steam was used
properly, SER is entitled to a rate of 6.6 cents/KWH; if not, it
is entitled to a rate of only 5.0 cents/KWH. The total annual
difference in payment under the two rates is about $9 million.
SER has refused to provide any of the documentation requested by
PP&L based on its claim that the information is in the possession
of its affiliate, not SER. The information that PP&L has been
able to develop without access to internal SER documentation
tends to support a conclusion that SER was not in compliance with
the terms of the contract and is not entitled to the higher
contract rate. Accordingly, in November 1995, PP&L instituted a
separate civil action in the Lehigh County, Pennsylvania Court of
Common Pleas seeking a judgment against SER in an amount to be
determined.
In April 1991, the U.S. Department of Labor through its Mine
Safety and Health Administration (MSHA) issued citations to one
of PP&L's coal-mining subsidiaries for alleged coal-dust sample
tampering at one of the subsidiary's mines. The MSHA at the same
time issued similar citations to more than 500 other coal-mine
operators. Based on a review of its dust sampling procedures,
the subsidiary is contesting all of the citations. It is
believed at this time, based on the information available, that
the MSHA allegations are without merit. Citations were also
issued against the independent operator of another subsidiary
mine, who is also contesting the citations issued with respect to
that mine. The Administrative Law Judge (Judge) assigned to the
proceedings ordered that one case be tried against a single mine
operator unrelated to PP&L to determine whether the MSHA could
prove its general allegations regarding sample tampering. In
April 1994, the Judge ruled in favor of the mine operator and
vacated the 75 citations against it. The MSHA appealed the
Judge's decision to the Mine Safety and Health Review Commission.
In November 1995, the Commission affirmed the Judge's rulings in
favor of the operator. The Secretary of Labor has not yet made a
final decision on whether to appeal. The other cases, including
those involving PP&L's subsidiaries, have been stayed pending the
outcome of the appeal.
On July 25, 1994, Mon Valley Steel Company, Inc. (Mon
Valley) filed suit in the Court of Common Pleas of Fayette
County, Pennsylvania, against PP&L and two of its subsidiaries,
claiming that PP&L and those subsidiaries made fraudulent
misrepresentations during negotiations for the 1992 sale to Mon
Valley of Tunnelton Mining Company (Tunnelton). Tunnelton was a
coal-mining operation formerly owned by PP&L's subsidiary,
Pennsylvania Mines Corporation. Specifically, Mon Valley alleges
that PP&L and those subsidiaries misrepresented Tunnelton's
capability to produce coal, as well as the amount of funding
Tunnelton would receive for mine closing costs. Mon Valley is
claiming about $6 million to cover mine closing costs as well as
punitive damages in an unspecified amount. In July 1994, PP&L
and those subsidiaries filed a legal action in the Court of
Common Pleas of Allegheny County, Pennsylvania, requesting a
judicial determination that they had not breached any of their
contractual obligations to Mon Valley. PP&L cannot predict the
outcome of these proceedings.
In August 1991, PP&L and 35 other unrelated parties received
an EPA order under Section 106 of Superfund, requiring that
certain remedial actions be taken at a former oil recovery site
in Berks County, Pennsylvania, which has been included on the
federal Superfund list. PP&L had been identified by the EPA as a
potentially responsible party, along with over 100 other parties.
The EPA order required remediation by the 36 named parties of
four specific areas of the site. Remedial action under this
order has been completed at a cost of approximately $2 million,
of which PP&L's interim share was approximately $50,000.
The EPA at the same time filed a complaint under Section 107
of Superfund in the United States District Court for the Eastern
District of Pennsylvania (District Court) against PP&L and the
same 35 unrelated parties. The complaint asks the District Court
to hold the parties jointly and severally liable for all EPA's
past costs at the site and future costs of remediating some of
the remaining areas of the site. The EPA claims it has spent
approximately $21 million to date. PP&L and a group of the other
named parties have sued in District Court approximately 460 other
parties that have contributed waste to the site, demanding that
these companies contribute to the clean-up costs.
In July 1993, PP&L and 33 of the 35 unrelated parties
received an EPA order under Section 106 of Superfund requiring
remediation of the remaining areas of the site identified by EPA.
Current estimates of remediating the remainder of the site range
from $50 million to $200 million. These costs would be shared
among the responsible parties. PP&L is negotiating with the
federal government to settle both the Section 107 and Section 106
actions, for an amount which currently is not expected to be
material.
In October 1993, DEP moved to intervene in the EPA suit,
seeking to hold 16 of the original named parties, including PP&L,
liable for all past and future DEP costs of remediating the site
and for any natural resource damages at the site. The DEP has
recently informed PP&L that it does not presently intend to
pursue the natural resource damage claim. PP&L's share of DEP's
past-cost claim is not expected to be material.
In December 1991, PP&L and 16 unrelated parties filed
complaints against 64 other parties in District Court seeking
reimbursement under Superfund for costs the plaintiffs have
incurred and will incur to investigate and remediate the Novak
landfill site in Lehigh County, Pennsylvania. The complaints
allege that the 64 defendants generated or transported substances
disposed of at the Superfund site. A Remedial Investigation and
Draft Feasibility Study for the site has been completed at a cost
of approximately $3 million of which PP&L's share was
approximately $200,000. EPA's selected remedy is currently
estimated to cost approximately $20 million. EPA has issued a
106 Order against PP&L and several other parties to implement
this remedy. PP&L currently does not expect its share of these
costs to be material.
In March 1993, the EPA filed a complaint under Section 107
of Superfund in District Court against PP&L and 10 unrelated
parties to recover all past and future EPA costs of investigating
and remediating the Heleva landfill site in Lehigh County,
Pennsylvania. The EPA alleges it has spent approximately $10
million to date at this site. PP&L has filed an answer to the
complaint denying liability based on the absence of evidence that
PP&L sent any hazardous substances to the site. PP&L expects to
settle this matter for a sum which currently is not expected to
be material.
In April 1993, PP&L received an order under Section 106 of
Superfund requiring that actions be taken at the site of a former
metal salvaging operation in Montour County, Pennsylvania. The
EPA has taken similar action with two other potentially
responsible parties at the site. The cost of compliance with the
order is currently estimated to be approximately $37 million.
The EPA currently estimates that additional remediation work not
covered by the order will cost an additional $36 million. In
addition, the EPA has already incurred clean-up costs of
approximately $5 million to date. The EPA had indicated that it
will seek to recover these additional costs at a later date.
PP&L's records indicate that scrap metal, wire and transformers
were sold to the salvage operator between 1969 and 1971. Current
information indicates that PP&L's contribution to the site, if
any, is de minimis.
As a result of its ongoing re-engineering and cost reduction
efforts, PP&L expects further reductions in the number of full-
time employees. In this regard, PP&L and Local Union No. 1600 --
which represents approximately 4,000 PP&L employees -- have
agreed to submit to arbitration under their collective bargaining
agreement the issue of whether PP&L can eliminate bargaining unit
positions while utilizing outside contractors for certain
functions. A decision from the arbitrator is expected by mid-
year. PP&L cannot predict the outcome of this proceeding or the
effect it may have on the continuing workforce reduction effort.
PP&L has been notified by the NRC that it is proposing a
$100,000 fine for an incident in which a security officer at the
Susquehanna nuclear plant was subjected to adverse action after
he reported personnel concerns to the NRC. The NRC proposed the
fine for violation of a commission regulation forbidding adverse
employment action against an employee who raises such concerns.
PP&L is not contesting the NRC decision and will pay the fine.
PP&L also has taken significant measures to prevent reoccurrence
of the problem.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Neither Resources nor PP&L submitted any matter to a vote of
security holders during the fourth quarter of the fiscal year
ended December 31, 1995.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANTS
Officers of Resources and PP&L are elected annually by their
Boards of Directors to serve at the pleasure of the respective
Boards. There are no family relationships among any of the
executive officers, or any arrangement or understanding between
any executive officer and any other person pursuant to which the
officer was selected.
There have been no events under any bankruptcy act, no
criminal proceedings and no judgments or injunctions material to
the evaluation of the ability and integrity of any executive
officer during the past five years.
Listed below are the executive officers of:
PP&L Resources, Inc.
Effective Date of
Election to
Name Age Position Present Position
William F. Hecht 52 Chairman, President
and Chief Executive February 24, 1995
Officer
Francis A. Long 55 Executive Vice
President February 24, 1995
Robert G. Byram* 50 Senior Vice President-
Nuclear - PP&L December 20, 1995
Ronald E. Hill 53 Senior Vice President-
Financial & Treasurer April 10, 1995
Robert D. Fagan* 50 President - Power Markets
Development Company December 20, 1995
Robert J. Grey** 45 Vice President,
General Counsel and
Secretary April 10, 1995
Joseph J. McCabe 45 Vice President and
Controller August 1, 1995
Pennsylvania Power & Light Company:
Effective Date of
Election to
Name Age Position Present Position
William F. Hecht 52 Chairman, President
and Chief Executive
Officer January 1, 1993
Francis A. Long 55 Executive Vice
President and Chief
Operating Officer January 1, 1993
Robert G. Byram 50 Senior Vice President-
Nuclear March 26, 1993
Ronald E. Hill 53 Senior Vice President-
Financial January 1, 1994
John R. Biggar 51 Vice President-
Finance & Treasurer August 1, 1995
Robert J. Grey** 45 Vice President,
General Counsel and
Secretary March 6, 1995
Joseph J. McCabe 45 Vice President and
Controller August 1, 1995
* Mr. Byram and Mr. Fagan have been designated executive
officers of Resources by virtue of their respective
positions at Resources subsidiaries.
** Mr. Grey has been elected Senior Vice President, General
Counsel and Secretary of Resources and PP&L, effective March
1, 1996.
Each of the above officers, with the exception of Mr. Fagan,
Mr. Grey, and Mr. McCabe, have been employed by PP&L for more
than five years as of December 31, 1995. Mr. Fagan joined PMDC -
then a PP&L subsidiary - in November 1994. Prior to that time,
he was Vice President and General Manager at Mission Energy
Company. Mr. McCabe joined PP&L in May 1994 and was previously
employed by Deloitte & Touche LLP as a partner. Mr. Grey joined
PP&L in March 1995. He had been General Counsel of Long Island
Lighting Company since 1992. Prior to that time, he held the
position of partner at the law firm of Preston Gates & Ellis.
Prior to election to the positions shown above, the
following executive officers held other positions with PP&L since
January 1, 1991: Mr. Hecht was Senior Vice President-System
Power and Engineering, Executive Vice President-Operations and
President and Chief Operating Officer; Mr. Long was Vice
President-Power Supply and Senior Vice President - System Power &
Engineering; Mr. Byram was Vice President - Nuclear Operations
and Senior Vice President - System Power & Engineering; Mr. Hill
was Vice President and Comptroller; and Mr. Biggar was Vice
President - Finance.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S
COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Additional information for this item is set forth in the
section entitled "Shareowner and Investor Information" on pages
87 through 89 of this report, and the number of common
shareowners is set forth in the section entitled "Selected
Financial and Operating Data" on page 85.
ITEM 6. SELECTED FINANCIAL DATA
Information for this item is set forth in the section
entitled "Selected Financial and Operating Data" on pages 85 and
86 of this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information for this item is set forth in the section
entitled "Review of the Financial Condition and Results of
Operations of PP&L Resources, Inc. and Pennsylvania Power & Light
Company" on pages 28 through 43 of this report.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
Financial statements and supplementary data are set forth on
the pages indicated below.
Page
Independent Auditors' Reports 45
Management's Report on Responsibility for Financial
Statements 47
Financial Statements:
PP&L Resources, Inc.
Consolidated Statement of Income for the Three Years
Ended December 31, 1995 49
Consolidated Statement of Cash Flows for the Three
Years Ended December 31, 1995 50
Consolidated Balance Sheet at December 31, 1995 and
1994 51
Consolidated Statement of Shareowners' Common Equity
for the Three Years Ended December 31, 1995 53
Consolidated Statement of Preferred and Preference
Stock at December 31, 1995 and 1994 53
Pennsylvania Power & Light Company
Consolidated Statement of Income for the Three Years
Ended December 31, 1995 55
Consolidated Statement of Cash Flows for the Three
Years Ended December 31, 1995 56
Consolidated Balance Sheet at December 31, 1995 and
1994 57
Consolidated Statement of Shareowner's Common Equity
for the Three Years Ended December 31, 1995 59
Consolidated Statement of Preferred and Preference
Stock at December 31, 1995 and 1994 59
Consolidated Statement of Long-Term Debt at
December 31, 1995 and 1994 61
Notes to Financial Statements 62
Supplemental Financial Statement Schedule:
II - Valuation and Qualifying Accounts and
Reserves for the Three Years Ended
December 31, 1995 92
Selected Financial and Operating Data for the Five
Years Ended December 31, 1995 85
Quarterly Financial, Common Stock Price and
Dividend Data 90
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Based upon a recommendation of its Audit Committee, PP&L's
Board of Directors decided on January 25, 1995 that Deloitte &
Touche LLP (Deloitte) would not be retained as the independent
auditors for 1995. On February 22, 1995, PP&L's Board of
Directors, based upon a recommendation of PP&L's Audit Committee,
appointed Price Waterhouse LLP as PP&L's new independent
auditors.
The auditors' report of Deloitte on PP&L's financial
statements for each of the two fiscal years ending December 31,
1993 and 1994, did not contain any adverse opinion or disclaimer
of opinion, nor were the reports modified or qualified in any
manner.
During the period of such two fiscal years and the period
from December 31, 1994 through January 25, 1995, there were no
disagreements with Deloitte on any matter of accounting
principles or practices, financial statement disclosure or
auditing scope or procedure. During such periods, there were no
"reportable events" as that term is defined in Item 304(a)(1)(v)
of Regulation S-K.
Deloitte provided a letter to PP&L regarding this matter,
dated February 1, 1995, indicating that they agreed with the
statements in the two preceding paragraphs.
<PAGE>
Glossary of Terms and Abbreviations
AFUDC (Allowance for Funds Used During Construction) - the cost of equity
and debt funds used to finance construction projects that is capitalized
as part of construction cost.
Atlantic - Atlantic City Electric Company
Bankruptcy Court - United States Bankruptcy Court for the Middle District
of Pennsylvania
BG&E - Baltimore Gas & Electric Company
Clean Air Act (Federal Clean Air Act Amendments of 1990) - legislation
passed by Congress to address environmental issues including acid rain,
ozone and toxic air emissions.
Continental - Continental Energy Associates
D&D Fund - a fund established by the Energy Act for the decontamination
and decommissioning of DOE's uranium enrichment facilities.
DEP - Pennsylvania Department of Environmental Protection
DOE - Department of Energy
DRIP (Dividend Reinvestment Plan) - program available to shareowners of
Resources' common stock and PP&L preferred stock to reinvest dividends in
Resources' common stock instead of receiving dividend checks.
ECR (Energy Cost Rate) - a tariff applied to PUC-jurisdictional customers
to recover fuel and other energy costs. Differences between actual and
estimated amounts are collected or refunded to customers.
EMF - Electric and Magnetic Fields
Energy Act (Energy Policy Act of 1992) - legislation passed by Congress
to promote competition in the electric energy market for bulk power.
EPA - Environmental Protection Agency
ESOP - Employee Stock Ownership Plan
FASB (Financial Accounting Standards Board) - a rulemaking organization
that establishes financial accounting and reporting standards.
FGD - Flue gas desulfurization equipment installed at coal-fired power
plants to reduce sulfur dioxide emissions.
FERC (Federal Energy Regulatory Commission) - government agency that
regulates interstate transmission and sale of electricity and related
matters.
IBEW - International Brotherhood of Electrical Workers
JCP&L - Jersey Central Power & Light Company
Major utilities - Atlantic, BG&E and JCP&L
NOPR (Notice of Proposed Rulemaking) - proposed rules and regulations
issued by FERC for comment by interested parties.
NPDES - National Pollutant Discharge Elimination System
NRC - Nuclear Regulatory Commission
NUG (Non-Utility Generator) - generating plants not owned by regulated
utilities. If the NUG meets certain criteria, its electrical output must
be purchased by public utilities as required by PURPA.
OCA - Pennsylvania Office of Consumer Advocate
OTS - PUC Office of Trial Staff
Pa. CNI - Pennsylvania Corporate Net Income Tax
PCB (Polychlorinated Biphenyl) - additive to oil used in certain
electrical equipment up to the late 1970s. Now classified as a hazardous
chemical.
PECO - PECO Energy Company (the former Philadelphia Electric Company)
PJM (Pennsylvania - New Jersey - Maryland Interconnection Association) -
Mid-Atlantic power pool consisting of 11 operating electric utilities,
including PP&L.
Plan - PP&L's noncontributory defined benefit pension plan.
PMDC (Power Markets Development Company) - Resources' unregulated
subsidiary formed to invest in and develop world-wide power markets.
PP&L - Pennsylvania Power & Light Company
PSE&G - Public Service Electric & Gas Company
PUC (Pennsylvania Public Utility Commission) - agency that regulates
certain ratemaking, accounting, and operations of Pennsylvania utilities.
PUC Decision - final order issued by the PUC on September 27, 1995
pertaining to PP&L's base rate case filed in December 1994.
PUHCA - Public Utility Holding Company Act of 1935
PURPA (Public Utility Regulatory Policies Act of 1978) - legislation
passed by Congress to encourage energy conservation, efficient use of
resources, and equitable rates.
Resources (PP&L Resources, Inc.) - parent holding company of PP&L, PMDC
and Spectrum.
SBRCA - Special Base Rate Credit Adjustment
SEC - Securities and Exchange Commission
SFAS (Statement of Financial Accounting Standards) - accounting and
financial reporting rules issued by the FASB.
Small utilities - utilities subject to FERC jurisdiction whose billings
include base rate charges and a supplemental charge or credit for fuel
costs over or under the levels included in base rates.
Spectrum (Spectrum Energy Services Corporation) - Resources' unregulated
subsidiary formed to offer energy related products and services.
STAS (State Tax Adjustment Surcharge) - rate adjustment mechanism to
customer bills for changes in certain state taxes.
Superfund - Federal and state legislation that addresses remediation of
contaminated sites.
UGI - UGI Corporation
VEBA (Voluntary Employee Benefit Association Trust) - trust accounts for
health and welfare plans for future payments to employees, retirees or
their beneficiaries.
VERP - Voluntary Early Retirement Program
Wheeling - transmitting power from one system to another over the
transmission facilities of a system not party to the transaction.
<PAGE>
REVIEW OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF PP&L RESOURCES, INC. AND PENNSYLVANIA POWER & LIGHT COMPANY
In 1995, Resources became the parent holding company of PP&L, PMDC
and Spectrum. Resources' principal subsidiary, PP&L, is an operating
public utility providing electric service in central eastern Pennsylva-
nia. PMDC was formed to engage in unregulated business activities
through investments in world-wide power markets. Spectrum, another un-
regulated subsidiary, was formed to pursue opportunities to offer energy-
related products and services to PP&L's existing customers and to others
beyond PP&L's service territory.
The financial condition and results of operations of PP&L are cur-
rently the principal factors affecting the financial condition and re-
sults of operations of Resources. All nonutility operating transactions
are included in "Other Income and Deductions -- Other-net" on the Con-
solidated Statement of Income.
Terms and abbreviations appearing in the Review of the Financial
Condition and Results of Operations are explained in the glossary on
page 27.
Results of Operations
Earnings - Resources
Earnings per share of common stock were $2.05 in 1995, $1.41 in 1994
and $2.07 in 1993. The following table highlights the major items that
impacted earnings for each of the years:
1995 1994 1993
Earnings per share - excluding
costs of workforce reduction
programs and one-time
adjustments $1.79 $2.02 $2.19
Workforce reduction programs:
Voluntary early retirement
program 0.24 (0.28)
Other (0.12)
One-time adjustments:
Postretirement benefits other
than pensions 0.10 (0.04)
Disallowance-Susquehanna
Unit No. 1 deferred costs (0.13)
ECR purchased power costs 0.04 (0.06)
Gain/(loss) on subsidiary coal
reserves 0.12 (0.26)
ECR settlement (0.06)
Rate reduction - FERC (0.04)
Other 0.01 0.03 (0.02)
Earnings per share - reported $2.05 $1.41 $2.07
The decline in earnings excluding the cost of workforce reduction
programs and one-time adjustments for 1995 was primarily due to increases
in other operating costs, depreciation for the Susquehanna station and
costs associated with the review of PECO's proposals to acquire Re-
sources. The decline in earnings excluding workforce reduction programs
and one-time adjustments for 1994 was primarily due to the increase in
depreciation for the Susquehanna station and for postretirement benefits
other than pensions.
Several key initiatives have been put in place to improve financial
performance. These initiatives include:
o A $671 million reduction in PP&L's construction expenditures over
the five-year period 1996-2000, including reductions of $93 million
and $220 million for 1996 and 1997, respectively. These reductions
reflect, among other things, a decision to not install FGD at PP&L's
Montour station;
o A planned $50-$60 million (about 8%) reduction in PP&L's operation
and maintenance costs from previously budgeted amounts by the year
2000;
o Marketing and economic development activities to achieve an average
compound annual growth rate of about 2% in sales to PP&L's service
area customers through the year 2000; and
o Except for common equity capital to be provided through sales of
common stock under the DRIP and PP&L's ESOP, Resources expects to
meet all of PP&L's construction expenditures and debt maturities
through internally generated funds during the five-year period 1996-
2000.
Resources believes that the PUC Decision, the above initiatives and
the expected financial performance of PMDC and Spectrum will permit Re-
sources to increase shareowner value, including growth in earnings per
share and the dividend rate on common stock over the long term. Actual
sales growth and improvement in earnings and financial performance will
depend upon economic conditions, energy consumption, the impact of in-
creasing competition in the electric utility industry, the effects of
regulation, investment opportunities and other factors. Additionally,
PP&L remains committed to a corporate objective of keeping its prices as
stable as possible and maintaining customer rates that compare favorably
with those of neighboring utilities.
Electric Energy Sales - PP&L
Changes in PP&L's electric energy sales were as follows:
1995 1994
vs vs
1994 1993
(Millions of KWH)
Electric energy sales
Residential (144) 401
Commercial 232 342
Industrial 309 437
Other (including UGI) (40) 84
System sales 357 1,264
Sales to other major utilities 1,368 (835)
PJM energy sales (800) (983)
925 (554)
System, or service area, sales were 32.7 billion kwh in 1995, an in-
crease of 357 million kwh, or 1.1%, over 1994. This increase was primar-
ily due to increased economic activity in central eastern Pennsylvania in
1995. If normal weather had been experienced in both 1995 and 1994, sys-
tem sales for 1995 would have increased by about 529 million kwh, or
1.7%, over 1994.
Actual sales to residential customers in 1995 decreased 144 million
kwh, or 1.3%, from 1994, while actual sales to residential customers in
1994 increased 401 million kwh, or 3.6%, from 1993. The change in resi-
dential sales for both periods was primarily due to the extreme cold
weather in early 1994. Under normal weather conditions in both 1995 and
1994, residential sales would have remained essentially unchanged.
For the period 1992-1995, industrial sales have increased in each
quarter as compared to the same quarter in the prior year. Industrial
sales are an important indicator of the economic health of PP&L's service
area.
See "Operating Revenues" for more information.
Rate Matters - PP&L
Base Rate Filing with the PUC
On September 27, 1995, the PUC issued a final order with respect to
the base rate case filed by PP&L on December 30, 1994.
PP&L's request sought to increase PUC-jurisdictional revenues by
$261.6 million, or about 11.7%. The PUC Decision in the rate case
granted PP&L a $107 million increase in base rates based on test year
conditions. At the same time, PP&L's ECR was reduced by $22 million re-
lated to capacity credit sales resulting in a net increase of $85 mil-
lion, or about 3.8%, in PUC-jurisdictional revenues effective September
28, 1995. A detailed discussion of the PUC Decision is presented in Fi-
nancial Note 3.
Energy Cost Rate Issues
As a result of the PUC Decision, a new ECR, which reflects the roll-
in of all test year energy costs into base rates, became effective as of
September 28, 1995.
In April 1994, the PUC reduced PP&L's 1994-95 ECR claim by approxi-
mately $15.7 million to reflect costs associated with replacement power
during a portion of the time that Unit 1 of the PP&L Susquehanna station
was out of service for refueling and repairs. As a result of the PUC's
action, PP&L recorded a charge against income in the first quarter of
1994 for the $15.7 million of unrecovered replacement power costs. This
charge adversely affected net income by about $9.0 million or 6 cents per
share of common stock.
PP&L filed a complaint with the PUC objecting to the decision to ex-
clude these replacement power costs from the 1994-95 ECR and subsequently
reached a settlement with the OTS and other parties to the proceeding on
this matter which reduced the disallowed costs by $9.7 million.
The PUC approved the settlement agreement and in the first quarter
of 1995, PP&L recorded a credit to income of $9.7 million which increased
earnings by 4 cents per share of common stock.
Proposed Buyout of Power Purchase Contract
In February 1996, PP&L signed agreements with Continental Energy As-
sociates (Continental) to terminate the 1985 power purchase contract un-
der which PP&L purchases up to 100 MW of power from Continental's cogen-
eration project. The Continental project is a qualifying facility from
which PP&L has been required to purchase power under PURPA. In 1985, the
PUC approved ECR recovery of the amounts paid to Continental under the
power purchase contract. In 1994, Continental filed for protection from
creditors under Chapter 11 of the U.S. Bankruptcy Code. Under the Febru-
ary agreements, PP&L would pay Continental $91.2 million over five years
to cancel the power purchase contract. Also, Continental agrees to waive
its rights under PURPA or similar legislation or regulations to require
PP&L to purchase power from the plant in the future.
The agreements are conditioned upon PUC approval of full recovery of
the buyout cost through the ECR and approval of the agreements by the
United States Bankruptcy Court for the Middle District of Pennsylvania
(Bankruptcy Court). PP&L will file a petition with the PUC seeking such
ECR recovery of the $91.2 million buyout cost over a five-year period.
PP&L's request for recovery will state that the buyout would save retail
customers approximately $113.6 million over the next 13 years by elimi-
nating the need to buy this power from Continental. At the same time,
Continental will file with the Bankruptcy Court for approval of the
agreements.
FERC-Major Utilities' Rates
In October 1995, the FERC approved PP&L's request to recover postre-
tirement benefits other than pensions through its contractual agreements
with other major electric utilities, subject to refund after FERC review.
PP&L is billing these utilities their share of postretirement costs other
than pensions incurred since January 1993. See Financial Notes 3 and 4
for more details on these contracts.
In an October 1995 order, the FERC also ordered hearings to evaluate
the justness and reasonableness of PP&L's rates in its contractual agree-
ments with JCP&L, Atlantic, BG&E and UGI.
In January 1996, PP&L filed a request with the FERC to incorporate a
change in the method of calculating decommissioning in several of its
contractual agreements with other major utilities. PP&L also requested
to increase its decommissioning rate to reflect the projected cost of de-
commissioning the Susquehanna station and fossil plants.
PP&L cannot predict the outcome of these proceedings.
Operating Revenues - PP&L
Changes in PP&L's total operating revenues were attributable to the
following:
1995 1994
vs vs
1994 1993
(Millions of Dollars)
Sales volume & sales mix $ 34.5 $ 31.3
Weather (8.4) 10.8
Energy revenues 3.6 1.4
Rate increase 21.0
Reduction in Pa. CNI rate (11.9) (13.6)
Sales to other major utilities & PJM (5.0) (34.4)
Other (7.1) 2.6
$ 26.7 $ (1.9)
Energy revenues increased $3.6 million in 1995. This increase is
the net effect of lower energy revenues of $21.8 million and the effects
of regulatory action regarding recovery of certain replacement power
costs during 1994 and 1995. See "Rate Matters - Energy Cost Rate Issues"
for more details.
The decrease in 1995 revenues from sales to other major utilities
and PJM was due to declining market prices resulting from improved avail-
ability of lower cost PJM generation.
Other revenues in 1995 were lower than 1994 due to the expiration of
a long-term contract for capacity credit sales.
The increase in energy revenues of $1.4 million in 1994 was the net
effect of higher energy revenues partially offset by unrecovered replace-
ment power costs. See "Rate Matters - Energy Cost Rate Issues" for more
details.
The decrease in 1994 revenues from sales to other major utilities
and PJM was primarily due to lower availability of PP&L's coal-fired
units in 1994.
Tariffs subject to PUC jurisdiction accounted for approximately 84%
of PP&L's revenues from energy sales in 1995. The remaining 16% of such
revenues resulted from sales regulated by the FERC and PP&L's PJM energy
sales.
Fuel Expense - PP&L
Fuel expense for 1995 and 1994 decreased by $24.3 million and $33.3
million, respectively, from the prior year. These decreases exclude the
write-off of $11 million of deferred retired miners' health care benefits
in 1993 and a related credit to expense of $3.6 million in 1994. The de-
creases in fuel expense were due to:
1995 1994
vs vs
1994 1993
(Millions of Dollars)
Decrease due to change in
fuel prices $(19.7) $ (4.8)
Decrease due to fuel mix (4.6) (28.5)
$(24.3) $(33.3)
The decrease in 1995 was attributable to lower use of oil-fired gen-
eration due to increased nuclear and coal-fired generation and lower unit
fuel costs for nuclear generation. Fuel costs decreased in 1994 due to a
3.5% decrease in total generation primarily due to lower availability of
coal-fired generation which resulted in lower sales to PJM and other
utilities. Lower fuel costs for off-system sales were partially offset
by higher cost oil-fired generation for base load during the first quar-
ter of 1994.
Taxes - Resources/PP&L
Income tax expense increased $106 million, or 59%, from 1994. This
was primarily due to an increase in pre-tax book income of $212 million
and a charge of $12 million applicable to the disallowance of Susquehanna
Unit No. 1 deferred operating and capital costs. Partially offsetting
these increases was an $8.1 million decrease resulting from the reduction
of the Pa. CNI rate from 11.99% for 1994 to 9.99% for 1995. See Finan-
cial Note 3 - "Refund of State Tax Decrease".
Other Operation, Maintenance and Depreciation - PP&L
Other operating costs increased $30.0 million in 1995 and $26.9 mil-
lion in 1994. Both periods were impacted by the regulatory effects of
accounting for postretirement benefits costs. Excluding these effects,
other operating expenses increased $73.8 and $6.6 million, respectively,
for 1995 and 1994.
The increase in 1995 was primarily due to: $31.3 million for PP&L's
workforce reductions; $18.4 million for increased efforts for computer
support that will increase productivity; $7.9 million due to an increase
in the reserve for uncollectible accounts; and $6.2 million of increased
leasing costs. See Financial Note 12 - "Workforce Reductions" for fur-
ther information.
Maintenance expense increased $5.6 million in 1995 and decreased
$13.2 million in 1994. In 1995, PP&L incurred a charge of $19.2 million
for obsolete and excess inventory at its fossil-fueled and nuclear gener-
ating stations. Excluding this write-off, maintenance expense decreased
$13.6 million in 1995. The decrease in maintenance expense for 1995 was
primarily due to PP&L's continued efforts to reduce costs and achieve
longer operating cycles at its generating stations. The decrease in 1994
was the net result of lower costs associated with maintaining PP&L's gen-
erating stations in 1994 and a $6.9 million write-off of obsolete and ex-
cess inventory at its fossil-fueled generating stations in 1993.
Depreciation expense increased $34.2 million in 1995 and $29.4 mil-
lion in 1994. Higher depreciation expense reflected increases associated
with the Susquehanna station and the depreciation of new property, plant
and equipment placed in service. As a result of the PUC Decision, Sus-
quehanna depreciation applicable to property placed in service prior to
January 1, 1989, will be recorded at an annual level of $173 million
through 1998 at which time depreciation is scheduled to decline by about
$71 million.
PP&L is continuing its ongoing re-engineering and cost reduction ef-
forts, which are expected to impact the size of its workforce. As a re-
sult of these efforts, PP&L announced in the fourth quarter of 1995 that
about 300 bargaining unit positions will be eliminated. Although no spe-
cific targets have been set, PP&L currently expects that the year-end
1995 level of 6,661 full-time employees will decline to 6,000 or fewer
employees over the next few years. As the workforce declines, additional
costs may be incurred due to the reductions, in amounts that are not cur-
rently determinable.
Voluntary Early Retirement Program - PP&L
As part of its continuing efforts to reduce costs, PP&L offered a
VERP to 851 employees who were age 55 or older by December 31, 1994. A
total of 640 employees elected to retire under the program, at a total
cost of $75.9 million. The VERP provided for a lump sum payment based on
an employee's years of service, no reduction in retirement benefits for
age, and supplemental monthly payments. PP&L recorded the cost of the
program as a charge against income in the fourth quarter of 1994, which
reduced net income by $43.4 million, or 28 cents per share of common
stock.
As a result of the PUC Decision, PP&L was allowed to recover through
customer rates the PUC-jurisdictional amount, $65.7 million, of the cost
of its VERP over a period of five years. Consequently, PP&L recorded a
$37.8 million after-tax credit to income, or 24 cents per share of common
stock, in the third quarter of 1995 to reverse the PUC-jurisdictional
portion of the charge for this program that was recorded in the fourth
quarter of 1994. The estimated annual savings of $35 million from the
program also are included in rates.
Subsidiary Coal Reserves - PP&L
In connection with a 1994 review by PP&L of its non-core business
assets, a subsidiary of PP&L initiated an evaluation of the carrying
value of its $83.5 million investment in undeveloped coal reserves in
western Pennsylvania. Outside appraisal firms completed the evaluation
and indicated that due to changing market conditions an impairment of
these assets had occurred. Accordingly, the carrying value of this in-
vestment was written down to its estimated net realizable value of $9.8
million. This write-down resulted in an after-tax charge to income of
$40 million in 1994, which reduced 1994 earnings by approximately 26
cents per share of common stock.
These reserves were acquired in 1974 with the intention of supplying
future coal-fired generating stations. PP&L concluded that it would not
develop these reserves. In November 1995, the coal reserves were sold
for $52 million, which resulted in a $41.7 million gain, or $20.3 million
after-tax, and increased 1995 earnings by approximately 12 cents per
share of common stock.
Other Income and Deductions - Other-Net - Resources
"Other - net" decreased $19.1 million in 1995 and $8.9 million in
1994. The decrease in 1995 was primarily due to $14.5 million of costs
associated with evaluating and responding to PECO's unsolicited proposals
to acquire Resources and an $8.9 million write-off of the Susquehanna
Unit No. 1 deferred operating and capital costs that were disallowed in
the PUC Decision. The decrease in 1994 was primarily due to a decrease in
the income from passive financial investments.
Financing Costs - Resources/PP&L
In 1995, PP&L continued to take advantage of opportunities to reduce
its financing costs by retiring long-term debt with the proceeds from the
sales of securities at a lower cost. Interest on long-term debt and
dividends on preferred and preference stock decreased from $281 million
in 1992 to $241 million in 1995, for a total decrease of $40 million.
Financial Condition
Reduction in Capital Expenditure Requirements - PP&L
The following schedule shows PP&L's current capital expenditure pro-
jections for the years 1996-2000 and reflects a $671 million reduction in
capital expenditures from previously budgeted amounts over the period
1996 through 2000.
PP&L's Capital Expenditure Requirements (a)
Actual -------------Projected----------------
1995 1996 1997 1998 1999 2000
(Millions of Dollars)
Construction expenditures
Generating facilities $100 $ 80 $ 63 $ 68 $ 56 $ 61
Transmission and
distribution facilities 166 146 140 142 145 150
Environmental 34 33 25 33 25 3
Other 55 49 30 22 18 17
355 308 258 265 244 231
Nuclear fuel owned and
leased 46 88 62 62 63 64
Other leased property 28 7 7 7 8 8
Total $429 $403 $327 $334 $315 $303
(a) Construction expenditures include AFUDC which is expected to be less
than $20 million in each of the years 1996-2000.
A significant portion of the reduction in construction expenditures
from the amounts projected in 1995 reflects PP&L's decision to not in-
stall FGD -- at an estimated capital cost of $413 million -- on the two
generating units at the Montour station. Instead of relying on the FGD
to achieve compliance with the Phase II requirements of the Clean Air
Act, PP&L plans to purchase low sulfur coal, utilize banked emission al-
lowances and purchase additional emission allowances.
PP&L also has reduced its projected construction expenditures for
transmission and distribution facilities during this period by about $120
million and reduced its expenditures for capital improvements at fossil-
fueled and hydro generating stations by $78 million from the previous es-
timate.
Financing and Liquidity - Resources/PP&L
Net cash provided by operating activities for 1995 was essentially
unchanged and decreased $58.7 million in 1994. The decrease in 1994 was
primarily due to lower earnings, increases in income tax payments, higher
fuel inventories and a reduction in accounts payable.
Net cash used in investing activities was $183.5 million lower in
1995 than 1994. This decrease was due primarily to lower construction
expenditures and the proceeds from the sale of coal reserves. Net cash
used in investing activities was $78.7 million higher in 1994 than 1993
due to higher construction expenditures and an increase in financial in-
vestments by a Resources' subsidiary.
For the years 1993-1995, PP&L issued $1.8 billion of long-term debt
and $380 million of preferred stock. For the same period, PP&L and Re-
sources issued a total of $157 million of common stock. Proceeds from
security sales were used to retire $1.6 billion of long-term debt and
$463 million of preferred and preference stock to lower PP&L's financing
costs, reduce short-term debt and finance construction expenditures.
During the years 1993-1995, PP&L also incurred $220 million of obliga-
tions under capital leases (primarily nuclear fuel). In 1995, PP&L sold
$55 million principal amount of first mortgage bonds while Resources is-
sued $81 million of common stock of which $74 million was issued through
its DRIP and the remaining $7 million issued to PP&L's ESOP. During the
year, PP&L retired $140 million of long-term debt.
PP&L anticipates the issuance of $116 million of unsecured notes in
early 1996 in order to redeem higher-cost bonds through the maintenance
and replacement fund provisions of PP&L's Mortgage.
Resources will continue to obtain common equity capital through the
DRIP and PP&L's ESOP. It is expected that the DRIP will be continued
during the years 1996 and 1997, resulting in proceeds of about $70 mil-
lion annually, and that PP&L's ESOP will be continued through 2000, with
expected proceeds of about $8 million annually.
Except for funds derived from sales of common stock, Resources ex-
pects that internally generated funds (after provision for dividends and
capital lease payments) will be adequate to meet PP&L's capital require-
ments and $415 million of debt maturities for the years 1996-2000. PP&L
has no preferred stock sinking fund requirements during 1996-2000.
Additional outside financing, in amounts not currently determinable,
or the liquidation of certain financial investments may be required over
the next five years to finance investment opportunities in world-wide
power projects by PMDC.
To enhance financing flexibility, a $250 million revolving credit
arrangement is maintained with a group of banks and is used principally
as a back-up for PP&L's commercial paper. In addition, $45 million in
credit arrangements are maintained with a group of banks to provide back-
up for PP&L's commercial paper and short-term borrowings of certain of
its subsidiaries. No borrowings were outstanding at December 31, 1995
under these arrangements. See Financial Note 10 for further information.
Financial Indicators - Resources
Resources earned a 12.81% return on average common equity during
1995, an increase from the 8.73% earned in 1994. The ratio of Resources'
pre-tax income to interest charges increased from 2.7 in 1994 to 3.6 in
1995. The annual per share dividend rate on common stock remained un-
changed at $1.67 per share. The book value per share of common stock in-
creased 3.2% from $15.79 at the end of 1994 to $16.29 at the end of 1995.
The ratio of the market price to book value of common stock was 153% at
the end of 1995 compared with 120% at the end of 1994.
Environmental Matters - PP&L
Air
The Clean Air Act deals, in part, with acid rain under Title IV, at-
tainment of federal ambient ozone standards under Title I, and toxic air
emissions under Title III. The acid rain provisions specified Phase I
sulfur dioxide emission limits for about 55% of PP&L's coal-fired gener-
ating capacity by January 1995, and more stringent Phase II sulfur diox-
ide emission limits for all of PP&L's fossil-fueled generating units by
January 2000. PP&L has complied with the Phase I acid rain provisions
under Title IV. To meet the Phase II limits, PP&L plans to purchase
lower sulfur coal, utilize banked emission allowances and purchase addi-
tional emission allowances instead of relying on FGD. PP&L's decision
not to install FGD, with an estimated capital cost of $413 million, on
the two generating units at the Montour station represents a significant
reduction in previously planned capital expenditures. PP&L filed appli-
cations for Phase II permits for its fossil-fuel fired plants in December
1995. The permit applications state that PP&L will comply with applica-
ble requirements and obtain emission allowances for each ton of sulfur
dioxide emitted.
PP&L has met the initial requirements under Title I to install rea-
sonably available control technology to reduce nitrogen oxide emissions.
An additional two-phase reduction in nitrogen oxides from pre-Clean Air
Act levels has been proposed for the area where PP&L's plants are lo-
cated, a 55% reduction by May 1999 and a 75% reduction by 2003, unless
scientific studies expected to be completed by 1997 indicate a different
reduction is appropriate. The reductions would be required during a
five-month ozone season from May through September. Expenditures to meet
the 1999 requirements are included in the table of projected construction
expenditures in "Financial Condition - Reduction in Capital Expenditure
Requirements".
In addition to acid rain and ambient ozone attainment provisions,
the clean air legislation requires the EPA to conduct a study of hazard-
ous air emissions from power plants. EPA is also studying the health ef-
fects of fine particulates which are emitted from power plants and other
sources. Adverse findings from either study could cause the EPA to man-
date additional ultra high efficiency particulate removal baghouses or
specialized flue gas scrubbing to remove certain vaporous trace metals
and certain gaseous emissions.
PP&L currently estimates that additional capital expenditures and
operating costs for environmental compliance under the Clean Air Act will
be incurred beyond 2000 in amounts which are not now determinable but
could be material.
The Pennsylvania Air Pollution Control Act implements the Clean Air
Act. The state legislation essentially requires that new state air emis-
sion standards be no more stringent than federal standards. This legis-
lation is not expected to significantly affect PP&L's plans for compli-
ance with the Clean Air Act.
The PUC's policy regarding the trading and usage of, and the rate-
making treatment for, emission allowances by Pennsylvania electric utili-
ties provides, among other things, that the PUC will not require approval
of specific transactions and that the cost of allowances will be recog-
nized as energy-related power production expenses and recoverable through
the ECR.
Water and Residual Waste
The DEP regulations governing the handling and disposal of indus-
trial (or residual) solid waste require PP&L to upgrade and repermit ex-
isting ash basins at all of its coal-fired generating stations by apply-
ing updated standards for waste disposal. Ash basins that cannot be
repermitted are required to close by July 1997. Any groundwater contami-
nation caused by the basins must also be addressed. Any new ash disposal
facility must meet the rigid siting and design standards set forth in the
regulations. In addition, the siting of future facilities could be af-
fected.
To address the DEP regulations, PP&L is moving forward with its plan
to install dry fly ash handling systems at the Brunner Island, Sunbury
and Holtwood stations similar to Montour's facilities. Dry fly ash han-
dling provides new opportunities for its beneficial use as opposed to
disposing of it on-site.
Groundwater degradation related to fuel oil leakage from underground
facilities and seepage from coal refuse disposal areas and coal storage
piles has been identified at several PP&L generating stations. Many re-
quirements of the DEP regulations address these groundwater degradation
issues. PP&L has reviewed its remedial action plans with the DEP. Reme-
dial work is substantially completed at two generating stations. At
this time, there is no indication that remedial work will be required at
other PP&L generating stations.
The DEP regulations to implement the toxic control provisions of the
Federal Water Quality Act of 1987 and to advance Pennsylvania's toxic
control program authorize the DEP to use both biomonitoring and a water
quality-based chemical-specific approach in the NPDES permits to control
toxics. The current Montour station NPDES permit contains stringent lim-
its for certain toxic metals and increased monitoring requirements.
Toxic reduction studies are being conducted at the Montour station before
the permit limits become effective. Depending on the results of the
studies, additional water treatment facilities may be needed at the Mon-
tour station. Improvements and upgrades are being planned for the Sun-
bury, Brunner Island and Holtwood stations' waste water treatment systems
to meet the anticipated NPDES permit requirements.
Capital expenditures through 2000 to comply with the residual waste
regulations, correct groundwater degradation at fossil-fueled generating
stations and address waste water control at PP&L facilities, are included
in the table of construction expenditures in "Financial Condition - Re-
duction in Capital Expenditure Requirements". PP&L currently estimates
that about $68 million of additional capital expenditures could be re-
quired in 2000 and beyond. Actions taken to correct groundwater degrada-
tion, to comply with the DEP's regulations and to address waste water
control are also expected to result in increased operating costs in
amounts which are not now determinable but could be material.
Superfund and Other Remediation
PP&L has signed a consent order with the DEP to address a number of
sites where PP&L may be liable for remediation of contamination. This
may include potential PCB contamination at certain of PP&L's substations
and pole sites; potential contamination at a number of coal gas manufac-
turing facilities formerly owned and operated by PP&L; and oil or other
contamination which may exist at some of PP&L's former generating facili-
ties. As a current or past owner or operator of these sites, PP&L may be
liable under Superfund or other laws for the costs associated with ad-
dressing any hazardous substances at these sites.
These sites have been prioritized based upon a number of factors,
including any potential human health or environmental risk posed by the
site, the public's interest in the site, and PP&L's plans for the site.
Under the consent order, PP&L will not be required to spend more than $5
million per year on investigation and remediation at those sites covered
by the consent order. PP&L will not be required to spend additional
money under the consent order in any year that its total remediation
costs for sites both within and outside the scope of the consent order
exceeds $5 million.
At December 31, 1995, PP&L had accrued $11.2 million, representing
the amount PP&L can reasonably estimate it will have to spend to remedi-
ate sites involving the removal of hazardous or toxic substances includ-
ing those covered by the consent order mentioned above. PP&L is involved
in several other sites where it may be required, along with other par-
ties, to contribute to such remediation. Some of these sites have been
listed by the EPA under Superfund, and others may be candidates for list-
ing at a future date. Future cleanup or remediation work at sites cur-
rently under review, or at sites not currently identified, may result in
material additional operating costs which PP&L cannot estimate at this
time. In addition, certain federal and state statutes, including Super-
fund and the Pennsylvania Hazardous Sites Cleanup Act, empower certain
governmental agencies, such as the EPA and the DEP, to seek compensation
from the responsible parties for the lost value of damaged natural re-
sources. The EPA and the DEP may file such compensation claims against
the parties, including PP&L, held responsible for cleanup of such sites.
Such natural resource damage claims against PP&L could result in material
additional liabilities.
Electric and Magnetic Fields
Concerns have been expressed by some members of the scientific com-
munity and others regarding the potential health effects of EMFs. These
fields are emitted by all devices carrying electricity, including elec-
tric transmission and distribution lines and substation equipment. Fed-
eral, state and local officials are focusing increased attention on this
issue. PP&L is actively participating in the current research effort to
determine whether EMFs cause any human health problems and is taking
steps to reduce EMFs, where practical, in the design of new transmission
and distribution facilities. PP&L is unable to predict what effect the
EMF issue might have on PP&L operations and facilities and the associated
cost.
Subsidiary Issues
In June 1995, the DEP ordered a PP&L subsidiary to abate seepage al-
legedly discharged from a mine formerly operated by that subsidiary. The
subsidiary currently does not believe that it is responsible for this
seepage and has appealed the order to DEP's Environmental Hearing Board,
which has scheduled evidentiary hearings on the matter. A consultant has
been hired to perform additional testing to determine the source of the
seepage. If no connection exists between the mine water and the seepage,
no abatement is required. However, if abatement ultimately is required,
the PP&L subsidiary may be responsible for an extensive and protracted
program to pump water from the mine at a cost which could be material.
Other Environmental Matters
In addition to the issues discussed above, PP&L may be required to
modify, replace or cease operating certain of its facilities to comply
with other statutes, regulations and actions by regulatory bodies involv-
ing environmental matters, including the areas of water and air quality,
hazardous and solid waste handling and disposal and toxic substances. As
a result, PP&L may also incur material capital expenditures and operating
expenses in amounts which are not now determinable.
Uranium Enrichment Decontamination and Decommissioning Fund - PP&L
The Energy Act established the D&D Fund and provides for an assess-
ment on domestic utilities with nuclear power operations, including PP&L.
Assessments are based on the amount of uranium a utility had processed
for enrichment prior to enactment of the Energy Act and the assessments
are expected to be paid to the D&D Fund by such utilities over a 15-year
period. Amounts paid to the D&D Fund are to be used for the ultimate de-
contamination and decommissioning of the DOE's uranium enrichment facili-
ties. The Energy Act states that the assessment shall be deemed a neces-
sary 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.
As of December 31, 1995, PP&L's recorded liability for its total as-
sessment amounted to about $29.7 million. The liability is subject to
adjustment for inflation. The corresponding charge to expense was de-
ferred because PP&L includes its annual payments to the D&D Fund in the
ECR which is in PP&L's PUC tariffs and in the fuel adjustment clause
which is in PP&L's FERC tariffs. As a result, the assessment does not
affect net income.
New Accounting Standards - Resources
Effective January 1, 1996, Resources adopted SFAS 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." SFAS 121 requires a company to review certain assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If an asset is deter-
mined to be impaired, an impairment loss is recognized. Resources does
not anticipate any impairment as a result of adopting SFAS 121.
Also effective January 1, 1996, Resources adopted SFAS 123,
"Accounting for Stock-Based Compensation." SFAS 123 addresses the recom-
mended accounting and required disclosures for stock-based employee com-
pensation plans, which include all arrangements by which employees re-
ceive shares of stock or other equity instruments of the employer or the
employer incurs liabilities to employees in amounts based on the price of
the employer's stock. Resources' current accounting for restricted stock
awards conforms to the requirements as defined in SFAS 123.
The adoption of SFAS 121 and 123 will not have a significant impact
on net income.
Increasing Competition - Resources/PP&L
The electric utility industry, including PP&L, has experienced and
will continue to experience a significant increase in the level of compe-
tition in the energy supply market. The Energy Act amended the Public
Utility Holding Company Act of 1935 to create a new class of independent
power producers, and amended the Federal Power Act to provide open access
to electric transmission systems for wholesale transactions. In response
to this increased competition, PP&L has undertaken strategic initiatives
to improve financial performance and enhance its competitive position.
See "Earnings" for a discussion of these initiatives.
PUC Investigation on Competition - PP&L
In May 1994, the PUC ordered a generic investigation to examine the
role of competition in Pennsylvania's electric utility industry. The
purpose of the investigation is to solicit input regarding the potential
impact of competition on the state's electric utilities and their custom-
ers. The first phase of the investigation gathered and analyzed data at
both the wholesale and retail levels of the electric utility industry.
Interested parties filed written comments addressing the following spe-
cific topics: issues and impact of wheeling, consumer issues, safety and
reliability, the impact of market structure changes and legal issues.
PP&L submitted comments in response to the PUC order.
The second phase of the investigation involves hearings to accept
testimony from interested parties. These hearings, which began in Decem-
ber 1995, are presided over by the PUC Commissioners and an Administra-
tive Law Judge. In January 1996, PP&L testified before this panel to ex-
press support for full customer choice of their energy supplier for all
customer classes. PP&L will be involved in efforts to encourage a smooth
transition to full competition. PP&L believes that this transition to
full competition should allow for the recovery of a utility's stranded
investments, which are those costs incurred by a utility because of fed-
eral or state regulatory requirements and, also, any portion of prudent
investments made in generating facilities which would not be recoverable
in a competitive market.
Open Access and Stranded Costs - PP&L
In March 1995, the FERC issued a NOPR, primarily dealing with open
access to transmission lines and recovery of stranded costs. If adopted
as proposed, the NOPR would require all utilities to file open access
tariffs available to all wholesale sellers and buyers of electricity.
The tariffs must offer point-to-point and network services, as well as
ancillary services. A utility would have to offer these services to all
eligible wholesale customers on a basis comparable to the services the
utility provides to itself. A utility must take service under its trans-
mission access tariff for its own wholesale sales and purchases. The
NOPR would not affect existing transmission agreements.
The NOPR also provides that utilities are entitled to recover all
"legitimate, prudent and verifiable stranded costs" incurred as a result
of rendering transmission services pursuant to their tariffs. The FERC
proposes to provide recovery mechanisms for wholesale stranded costs, in-
cluding stranded costs resulting from municipalization. The NOPR con-
tains filing requirements for utilities to seek recovery of wholesale
stranded costs. Wholesale contracts signed after July 11, 1994 must con-
tain explicit provisions authorizing recovery of stranded costs. For
contracts signed before this date, a utility may seek recovery if it can
show that it had a reasonable expectation of continuing to serve the cus-
tomer after the contract term and that it has made reasonable efforts to
mitigate any stranded costs. PP&L's contracts with its 18 FERC wholesale
customers were signed before July 11, 1994.
The states have responsibility for adopting policies concerning re-
covery of stranded costs resulting from retail wheeling transactions.
Under the NOPR, the FERC will assert jurisdiction over such costs only if
the states lack authority to deal with stranded costs.
Initial comments on the open access and stranded cost recovery por-
tions of the NOPR were due in August 1995. PP&L filed comments on the
NOPR. The FERC is expected to issue a final ruling on the NOPR in 1996.
New Markets - Resources
One of Resources' strategic initiatives is to invest in power-
related businesses outside of PP&L's service territory, both domestically
and in foreign countries. To take advantage of these new business oppor-
tunities, PP&L formed a holding company structure, effective April 27,
1995, after receiving all necessary regulatory approvals and shareowner
approval at PP&L's 1995 annual meeting. As a result of this restructur-
ing, PP&L became a direct subsidiary of Resources.
In March 1994, a new subsidiary, PMDC, was incorporated and received
an initial capital contribution of $50 million. PMDC engages in unregu-
lated business activities through investments in world-wide power mar-
kets. In 1995, PMDC invested $10.6 million as part of a consortium that
is part owner of an electric generating company in Bolivia and committed
to invest up to $10 million as a partner in a fund which will invest in
Latin American generation, transmission and distribution businesses.
PMDC also committed to invest up to $24 million as part of a consortium
to develop an integrated gas, power and transmission facility in Peru.
This project will be funded during 1996 and 1997.
In July 1995, Resources formed another unregulated subsidiary, Spec-
trum, to pursue opportunities to offer energy-related products and serv-
ices to PP&L's existing customers and to others beyond PP&L's service
territory. Other subsidiaries may be formed to take advantage of new
business opportunities.
PJM Proposed Restructuring Plan - PP&L
In November 1995, all but one PJM company supported the plan that
PJM presented to the FERC to increase competition in the region. The
other company presented a separate plan. The PJM plan would offer to all
generators and wholesale buyers of electricity a PJM Pool-wide energy
market and open access to Pool-wide high-voltage transmission lines.
The PJM plan contains a number of key components, including: 1) new
Pool-wide transmission tariffs to provide open access, comparable service
to all wholesale customers; 2) implementation of a regional energy market
with price-based dispatch, open to all wholesale bulk power buyers and
sellers; and 3) an Independent System Operator to administer Pool opera-
tions and transmission service, and to operate the regional energy mar-
ket.
The PJM plan is designed to further develop a truly competitive
wholesale market with broader participation. The PJM companies propose
to submit a comprehensive filing to the FERC for approval in May 1996,
with implementation of the new structure by the end of 1996.
Proposed Acquisition by PECO Energy Company - Resources
In August 1995, PECO publicly announced a proposal to acquire Re-
sources. Under this proposal, each share of Resources' common stock
would have been converted into 0.865 of a share of PECO's common stock.
In September 1995, Resources' Board of Directors, after due consid-
eration and review of the proposal, unanimously voted to reject the pro-
posal. The Board concluded that the proposal was not in the best inter-
ests of Resources, its shareowners, customers, employees or the
communities it serves.
In October 1995, PECO made a revised acquisition proposal for con-
sideration by Resources' Board. Under the revised proposal, Resources'
shareowners would have received 0.921 shares of PECO's common stock for
each share of Resources' common stock which they owned. PECO stated that
the revised proposal was its "final offer." On November 1, 1995, Re-
sources' Board, after a comprehensive analysis, unanimously voted to re-
ject the revised proposal. The Board concluded that the revised proposal
was not in the best interests of Resources and its shareowners, custom-
ers, employees or the communities it serves. Later that same day, PECO
withdrew its proposal to acquire Resources and stated that it would take
no further action to pursue such a transaction.
<PAGE>
(Address and phone number appears here)
Thirty South Seventeenth Street
Philadelphia, PA 19103-4094
Telephone 215 575 5000
(Price Waterhouse LLP logo appears here)
Independent Auditors' Report
February 1, 1996
To the Shareowners and Board of Directors of
PP&L Resources, Inc. and to the Shareowners and
Board of Directors of Pennsylvania Power & Light Company
In our opinion, the consolidated financial statements
listed in the index appearing under Item 8 on page 25 and
the supplemental financial statement schedule appearing
under the Exhibit Index on page 107 as Exhibit 99, present
fairly, in all material respects, the consolidated
financial position of PP&L Resources, Inc. and its
subsidiaries (Resources) at December 31, 1995 and their
consolidated results of operations and their cash flows
for the year then ended and the consolidated financial
position of Pennsylvania Power & Light Company and its
subsidiaries (PP&L) at December 31, 1995 and their
consolidated results of operations and their cash flows
for the year then ended in conformity with generally
accepted accounting principles. These financial
statements and the financial statement schedule are the
responsibility of management; our responsibility is to
express an opinion on these financial statements and
financial statement schedule based on our audit. We
conducted our audit of these statements in accordance with
generally accepted auditing standards which 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, assessing the
accounting principles used and significant estimates made
by management, and evaluating the overall financial
statement presentation. We believe that our audit
provides a reasonable basis for the opinion expressed
above. The consolidated financial statements of PP&L for
the years ended December 31, 1994 and 1993, prior to
restatement (not presented separately herein), were
audited by other independent accountants whose report
dated February 3, 1995 expressed an unqualified opinion on
those financial statements.
As discussed in Note 1 to the consolidated financial
statements, effective April 27, 1995, Resources, which had
been a wholly-owned subsidiary of PP&L, became the parent
holding company of PP&L. The accompanying consolidated
financial statements reflect this reorganization on a
retroactive basis. We have audited the adjustments that
were applied to restate the 1994 and 1993 PP&L
consolidated financial statements. In our opinion, such
adjustments are appropriate and have been properly applied
to the 1994 and 1993 PP&L consolidated financial
statements.
(Signed) Price Waterhouse LLP
<PAGE>
(Deloitte & Touche LLP Logo appears here)
(Address and phone number appear here)
Two Hilton Court
P.O. Box 319
Parsippany, New Jersey 07054-0319
Telephone: (201) 631-7000
Facsimile: (201) 631-7459
INDEPENDENT AUDITORS' REPORT
Pennsylvania Power & Light Company:
We have audited the consolidated balance sheet and
statements of preferred and preference stock and long-term
debt of Pennsylvania Power & Light Company and its
subsidiaries as of December 31, 1994, and the related
consolidated statements of income, shareowners' common
equity, and cash flows for each of the two years in the
period ended December 31, 1994, prior to restatement and not
presented separately herein. Our audits also included the
financial statement schedules for the years ended December
31, 1994 and 1993 listed in the Index at Item 8 and in the
Exhibit Index as Exhibit 99. These financial statements and
the financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express
an opinion on the 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,
prior to restatement and not presented separately herein,
present fairly, in all material respects, the financial
position of the Pennsylvania Power & Light Company and its
subsidiaries at December 31, 1994, and the results of their
operations and their cash flows for each of the two years in
the period ended December 31, 1994 in conformity with
generally accepted accounting principles. Also, in our
opinion, the financial statement schedules for the years
ended December 31, 1994 and 1993, 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 7 to the consolidated 1994 financial
statements, prior to restatement and not presented
separately herein, in 1994 the Company changed its method of
accounting for certain investments in debt and equity
securities to conform with Statement of Financial Accounting
Standards Number 115.
(Signed) Deloitte & Touche LLP
February 3, 1995
(Deloitte Touche
Tohmatsu
International logo appears here)
<PAGE>
PP&L Resources, Inc.
Management's Report on Responsibility for Financial Statements
The management of PP&L Resources, Inc. is responsible for the
preparation, integrity and objectivity of the consolidated financial
statements and all other sections of this annual report. The financial
statements were prepared in accordance with generally accepted accounting
principles and the Uniform System of Accounts prescribed by the Federal
Energy Regulatory Commission. In preparing the financial statements,
management makes informed estimates and judgments of the expected effects
of events and transactions based upon currently available facts and
circumstances. Management believes that the financial statements are free
of material misstatement and present fairly the financial position, results
of operations and cash flows of Resources.
Resources' consolidated financial statements have been audited by
Price Waterhouse LLP (Price Waterhouse), independent certified public
accountants, whose report with respect to the financial statements appears
on page 45. Price Waterhouse's appointment as auditors was previously
ratified by the shareowners. Management has made available to Price
Waterhouse all Resources' financial records and related data, as well as
the minutes of shareowners' and directors' meetings. Management believes
that all representations made to Price Waterhouse during its audit were
valid and appropriate.
Resources maintains a system of internal control designed to provide
reasonable, but not absolute, assurance as to the integrity and reliability
of the financial statements, the protection of assets from unauthorized use
or disposition and the prevention and detection of fraudulent financial
reporting. The concept of reasonable assurance recognizes that the cost of
a system of internal control should not exceed the benefits derived and
that there are inherent limitations in the effectiveness of any system of
internal control.
Fundamental to the control system is the selection and training of
qualified personnel, an organizational structure that provides appropriate
segregation of duties, the utilization of written policies and procedures
and the continual monitoring of the system for compliance. In addition,
Resources maintains an internal auditing program to evaluate Resources'
system of internal control for adequacy, application and compliance.
Management considers the internal auditors' and Price Waterhouse's
recommendations concerning its system of internal control and has taken
actions which are believed to be cost-effective in the circumstances to
respond appropriately to these recommendations. Management believes that
Resources' system of internal control is adequate to accomplish the
objectives discussed in this report.
The Board of Directors, acting through its Audit Committee, oversees
management's responsibilities in the preparation of the financial
statements. In performing this function, the Audit Committee, which is
composed of four independent directors, meets periodically with management,
the internal auditors and the independent certified public accountants to
review the work of each. The independent certified public accountants and
the internal auditors have free access to the Audit Committee and to the
Board of Directors, without management present, to discuss internal
accounting control, auditing and financial reporting matters.
Management also recognizes its responsibility for fostering a strong
ethical climate so that Resources' affairs are conducted according to the
highest standards of personal and corporate conduct. This responsibility
is characterized and reflected in Resources' Standards of Integrity, which
is publicized throughout Resources. The Standards of Integrity addresses:
the necessity of ensuring open communication within Resources; potential
conflicts of interest; proper procurement activities; compliance with all
applicable laws, including those relating to financial disclosure; and the
confidentiality of proprietary information. Resources maintains a
systematic program to assess compliance with these policies.
(Signed) William F. Hecht
William F. Hecht
Chairman, President and Chief Executive Officer
(Signed) R. E. Hill
R. E. Hill
Senior Vice President - Financial and Treasurer
<PAGE>
Pennsylvania Power & Light Company
Management's Report on Responsibility for Financial Statements
The management of Pennsylvania Power & Light Company is responsible
for the preparation, integrity and objectivity of the consolidated
financial statements and all other sections of this annual report. The
financial statements were prepared in accordance with generally accepted
accounting principles and the Uniform System of Accounts prescribed by the
Federal Energy Regulatory Commission. In preparing the financial
statements, management makes informed estimates and judgments of the
expected effects of events and transactions based upon currently available
facts and circumstances. Management believes that the financial statements
are free of material misstatement and present fairly the financial
position, results of operations and cash flows of PP&L.
PP&L's consolidated financial statements have been audited by Price
Waterhouse LLP (Price Waterhouse), independent certified public
accountants, whose report with respect to the financial statements appears
on page 45. Price Waterhouse's appointment as auditors was previously
ratified by the shareowners. Management has made available to Price
Waterhouse all PP&L's financial records and related data, as well as the
minutes of shareowners' and directors' meetings. Management believes that
all representations made to Price Waterhouse during its audit were valid
and appropriate.
PP&L maintains a system of internal control designed to provide
reasonable, but not absolute, assurance as to the integrity and reliability
of the financial statements, the protection of assets from unauthorized use
or disposition and the prevention and detection of fraudulent financial
reporting. The concept of reasonable assurance recognizes that the cost of
a system of internal control should not exceed the benefits derived and
that there are inherent limitations in the effectiveness of any system of
internal control.
Fundamental to the control system is the selection and training of
qualified personnel, an organizational structure that provides appropriate
segregation of duties, the utilization of written policies and procedures
and the continual monitoring of the system for compliance. In addition,
PP&L maintains an internal auditing program to evaluate PP&L's system of
internal control for adequacy, application and compliance. Management
considers the internal auditors' and Price Waterhouse's recommendations
concerning its system of internal control and has taken actions which are
believed to be cost-effective in the circumstances to respond appropriately
to these recommendations. Management believes that PP&L's system of
internal control is adequate to accomplish the objectives discussed in this
report.
The Board of Directors, acting through Resources' Audit Committee,
oversees management's responsibilities in the preparation of the financial
statements. In performing this function, the Audit Committee, which is
composed of four independent directors, meets periodically with management,
the internal auditors and the independent certified public accountants to
review the work of each. The independent certified public accountants and
the internal auditors have free access to Resources'Audit Committee and to
the Board of Directors, without management present, to discuss internal
accounting control, auditing and financial reporting matters.
Management also recognizes its responsibility for fostering a strong
ethical climate so that PP&L's affairs are conducted according to the
highest standards of personal and corporate conduct. This responsibility
is characterized and reflected in PP&L's Standards of Integrity, which is
publicized throughout PP&L. The Standards of Integrity addresses: the
necessity of ensuring open communication within PP&L; potential conflicts
of interest; proper procurement activities; compliance with all applicable
laws, including those relating to financial disclosure; and the
confidentiality of proprietary information. PP&L maintains a systematic
program to assess compliance with these policies.
(Signed) William F. Hecht
William F. Hecht
Chairman, President and Chief Executive Officer
(Signed) R. E. Hill
R. E. Hill
Senior Vice President - Financial
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
PP&L Resources, Inc. and Subsidiaries
(Thousands of Dollars, except per share data)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Operating Revenues (Notes 1, 2, 3 and 4)................... $2,751,798 $2,725,099 $2,727,002
Operating Expenses
Operation
Fuel.................................................... 438,229 458,932 506,900
Power purchases......................................... 290,940 287,316 278,800
Other................................................... 517,461 487,431 460,482
Maintenance............................................... 185,555 179,992 193,242
Depreciation (Notes 1 and 9).............................. 302,237 288,759 271,390
Amortized depreciation (Notes 1 and 9).................... 47,007 26,258 14,249
Income taxes (Note 5)..................................... 261,620 218,229 235,164
Taxes, other than income (Note 5)......................... 200,634 201,161 203,967
Voluntary early retirement program
(Note 12) ............................................... (65,661) 75,859
2,178,022 2,223,937 2,164,194
Operating Income............................ 573,776 501,162 562,808
Other Income and (Deductions)
Allowance for equity funds used during
construction (Note 1)................................... 4,164 4,686 7,981
Income tax credits (expense)
(Notes 5 and 14)......................................... (23,891) 38,647 1,280
Gain (loss) on subsidiary coal reserves
(Note 14)................................................ 41,622 (73,670)
Other -- net.............................................. (19,358) (228) 8,700
2,537 (30,565) 17,961
Income Before Interest Charges and Dividends on
Preferred and Preference Stock ........................... 576,313 470,597 580,769
Interest Charges
Long-term debt............................ 213,413 214,390 225,800
Short-term debt and other................................. 20,387 20,259 14,443
Allowance for borrowed funds used during
construction and interest capitalized
(Note 1)................................................ (7,908) (8,392) (7,600)
225,892 226,257 232,643
Preferred and Preference Stock Dividend
Requirements.............................................. 27,768 28,405 33,885
Net Income.................................. $322,653 $215,935 $314,241
Earnings Per Share of Common Stock (a)...... $2.05 $1.41 $2.07
Average Number of Shares Outstanding
(thousands)............................................... 157,649 153,458 151,904
Dividends Declared Per Share of Common Stock.......... $1.67 $1.67 $1.65
(a) Based on average number of shares outstanding.
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
PP&L Resources, Inc. and Subsidiaries
(Thousands of Dollars)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income............................................ $322,653 $215,935 $314,241
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation............................................................. 351,478 317,287 289,055
Amortization of property under
capital leases.......................................................... 79,160 86,271 83,868
Preferred and preference stock dividend requirements 27,768 28,405 33,885
Amortization of contract settlement proceeds and
deferred cost of power plant spare parts............................... (37,538) (37,793) (38,602)
Deferred income taxes and investment tax credits......................... 15,765 (70,336) 12,229
Voluntary early retirement program ...................................... (65,661) 75,859
Write-down of coal reserves ........................................................... 73,670
Change in current assets and current liabilities
Unbilled and refundable electric revenues.............................. (2,367) 31,365 (10,291)
Fuel inventories....................................................... 43,312 (29,843) 46,672
Accounts payable....................................................... (17,776) (25,229) 9,991
Other.................................................................. (9,653) (10,876) 11,441
Other operating activities -- net........................................ (14,882) 56,283 17,244
Net cash provided by operating activities............................ 692,259 710,998 769,733
Cash Flows From Investing Activities
Property, plant and equipment expenditures............ (402,789) (505,029) (487,836)
Proceeds from sale of nuclear fuel to trust................................ 44,410 35,790 63,431
Proceeds from sale of coal reserves........................................ 52,000
Purchases of available-for-sale securities ................................ (302,965) (203,622)
Sales and maturities of available-for-sale securities ..................... 300,296 148,202
Other investing activities -- net.......................................... (4,427) 27,694 6,120
Net cash used in investing activities................................ (313,475) (496,965) (418,285)
Cash Flows From Financing Activities
Issuance of long-term debt............................ 55,000 918,750 850,000
Issuance of common stock................................................... 80,523 69,744 6,635
Issuance of preferred stock.............................................................. 80,000 300,000
Retirement of long-term debt............................................... (140,250) (637,350) (809,000)
Retirement of preferred and preference stock...................................... (120,000) (342,837)
Payments on capital lease obligations...................................... (79,160) (86,271) (83,868)
Common, preferred and preference dividends paid............................ (289,745) (283,650) (284,642)
Net increase (decrease) in short-term debt................................. 14,977 (128,092) 42,912
Costs associated with issuance and retirement
of securities............................................................ (10,286) (25,317) (37,448)
Other financing activities -- net.......................................... (39) (39) (39)
Net cash used in financing activities................................ (368,980) (212,225) (358,287)
Net Increase (Decrease) in Cash and
Cash Equivalents............................................................. 9,804 1,808 (6,839)
Cash and Cash Equivalents at Beginning of Period............................. 10,079 8,271 15,110
Cash and Cash Equivalents at End of Period................................... $19,883 $10,079 $8,271
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest (net of amount capitalized)..................................... $217,785 $200,140 $205,090
Income taxes............................................................. $257,415 $264,198 $221,049
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET AT DECEMBER 31
PP&L Resources, Inc. and Subsidiaries
(Thousands of Dollars)
<CAPTION>
Assets 1995 1994
<S> <C> <C>
Property, Plant and Equipment
Electric utility plant in service -- at
original cost.............................. $9,637,401 $9,306,519
Accumulated depreciation (Notes 1 and 9).................... (3,113,374) (2,871,129)
Deferred depreciation (Notes 1 and 9) ...................... 209,330 256,021
6,733,357 6,691,411
Construction work in progress -- at cost ..................... 170,446 211,288
Nuclear fuel owned and leased -- net of
amortization (Note 8) ...................................... 133,447 143,591
Other leased property -- net of
amortization (Note 8) ...................................... 84,575 80,385
Electric utility plant -- net .............................. 7,121,825 7,126,675
Other property -- (net of depreciation,
amortization and depletion 1995, $55,628;
1994, $54,199) (Note 14).................................... 57,120 67,850
7,178,945 7,194,525
Investments
Associated company -- at equity (Note 1)..... 17,169 17,088
Nuclear plant decommissioning trust fund
(Notes 1 and 6).............................................. 109,400 87,490
Financial investments (Notes 1 and 7) ........................ 141,987 119,632
Other -- at cost or less (Note 7) ............................ 20,742 8,654
289,298 232,864
Current Assets
Cash and cash equivalents (Note 1) .......... 19,883 10,079
Current financial investments (Notes 1 and 7)................. 95,998 100,537
Accounts receivable (less reserve: ...................................
1995, $34,911; 1994, $29,083)
Customers .................................................. 197,071 189,771
Other ...................................................... 14,077 14,471
Unbilled revenues............................................. 92,139 88,668
Fuel (coal and oil) -- at average cost ....................... 82,233 125,545
Materials and supplies -- at average cost ................... 108,052 123,630
Prepayments .................................................. 10,406 11,015
Deferred income taxes (Note 5)................................ 41,864 27,572
Other ........................................................ 30,883 26,916
692,606 718,204
Deferred Debits
Taxes recoverable through future rates
(Notes 5 and 9)............................ 1,002,902 986,292
Other (Notes 1, 3, 5, 9, 11 and 12)........................... 327,935 239,796
1,330,837 1,226,088
$9,491,686 $9,371,681
<FN>
See accompanying Notes to Financial Statements.
Liabilities 1995 1994
Capitalization
Common equity
Common stock ............................................... $1,594 $1,555
Capital in excess of par value ............................ 1,513,430 1,432,946
Earnings reinvested......................................... 1,083,135 1,024,127
Capital stock expense and other ............................ (1,050) (4,160)
2,597,109 2,454,468
Preferred stock
With sinking fund requirements ............................. 295,000 295,000
Without sinking fund requirements .......................... 171,375 171,375
Long-term debt ............................................... 2,828,728 2,940,750
5,892,212 5,861,593
Current Liabilities
Commercial paper (Note 10) .................. 68,000 64,000
Bank loans (Note 10) ......................................... 21,145 10,168
Long-term debt due within one year ........................... 30,000 39
Capital lease obligations due within
one year (Note 8) .......................................... 81,017 73,682
Accounts payable ............................................. 128,297 146,073
Taxes accrued ................................................ 46,719 46,741
Interest accrued ............................................. 65,499 63,958
Dividends payable ............................................ 73,379 71,710
Other ........................................................ 86,233 101,924
600,289 578,295
Deferred Credits and Other Noncurrent Liabilities
Deferred investment tax credits (Note 5) .... 219,250 230,064
Deferred income taxes (Note 5) ............................... 2,106,538 2,046,861
Capital lease obligations (Note 8) ........................... 138,624 151,083
Other (Notes 1, 3, 6, and 11)................................. 534,773 503,785
2,999,185 2,931,793
Commitments and Contingent Liabilities (Note 15) ..............
$9,491,686 $9,371,681
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF SHAREOWNERS' COMMON EQUITY
PP&L Resources, Inc. and Subsidiaries
(Thousands of Dollars)
<CAPTION>
Capital
Common Stock Capital Stock
Outstanding in Excess Earnings Expense
Shares (a) Amount of Par Value Reinvested & Other
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 151,885,335 $1,519 $1,362,629 $1,014,760 $(11,969)
Net income.................................... 314,241
Cash dividends declared on
common stock ............................ (250,611)
Stock redemption costs................ (12,432)
Common stock issued (b)............ 246,754 2 6,633
Other............................................. 1,063
Balance at December 31, 1993 152,132,089 $1,521 $1,369,262 $1,065,958 $(10,906)
Net income.................................... 215,935
Cash dividends declared on
common stock............................. (256,545)
Stock redemption costs................ (1,221)
Common stock issued (b) ........... 3,349,873 34 63,684
Other............................................. 6,746
Balance at December 31, 1994 155,481,962 $1,555 $1,432,946 $1,024,127 $(4,160)
Net income.................................... 322,653
Cash dividends declared on
common stock............................. (263,645)
Common stock issued (b) ........... 3,921,304 39 80,484
Other............................................. 3,110
Balance at December 31, 1995 159,403,266 $1,594 $1,513,430 $1,083,135 $(1,050)
(a) $.01 par value, 170,000,000 shares authorized. Each share entitles the holder to one vote on
any question presented to any shareowners' meeting.
(b) In 1993, Common Stock was issued through the Employee Stock Ownership Plan. In 1994
and 1995, Common Stock was issued through the ESOP and the Dividend Reinvestment Plan.
Consolidated Statement of Preferred and Preference Stock at December 31,
PP&L Resources, Inc. and Subsidiaries (a)
(Thousands of Dollars)
Shares
Outstanding Outstanding Shares
1995 1994 1995 Authorized
PP&L
Preferred Stock -- $100 par, cumulative
4-1/2%................. $53,019 $53,019 530,189 629,936
Series......................................... 413,356 413,356 4,133,556 10,000,000
$466,375 $466,375
(a) Each share of PP&L's preferred stock entitles the holder to one vote
on any question presented to PP&L's shareowners' meetings. There were
10,000,000 shares of Resources' preferred stock and 5,000,000 shares
of PP&L's preference stock authorized; none were outstanding at December 31, 1995 and 1994,
respectively.
(b) The involuntary liquidation price of the preferred stock is $100 per share. The optional
voluntary liquidation price is the optional redemption price per share in effect, except for
the 4-1/2% Preferred Stock for which such price is $100 per share (plus in each case
any unpaid dividends).
(c) PP&L does not have any sinking fund requirements through 2000.
(d) These series of preferred stock are not redeemable prior to the following years:
5.95%, 2001; 6.05%, 2002; 6.125%, 6.15%, 6.33% and 6.75%, 2003.
(e) Shares to be redeemed in full on April 1 as follows: 5.95%, 2001; 6.05%, 2002; and 6.15%,
2003.
(f) Shares to be redeemed annually on October 1 as follows: 2003-2007, 57,500; 2008, 862,500.
(g) Shares to be redeemed annually on July 1 as follows: 2003-2007, 50,000; 2008, 750,000.
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Details of Preferred Stock (b)
<CAPTION>
Optional Sinking Fund
Redemption Provisions (c)
Shares Price Per Shares to be
Outstanding Outstanding Share Redeemed Redemption
1995 1994 1995 1995 Annually Period
<S> <C> <C> <C> <C> <C> <C>
With Sinking Fund Requirements
Series Preferred
5.95% ................................... $30,000 $30,000 300,000 (d) (e) 2001
6.05%.................................... 25,000 25,000 250,000 (d) (e) 2002
6.125% .................................. 115,000 115,000 1,150,000 (d) (f) 2003-2008
6.15%.................................... 25,000 25,000 250,000 (d) (e) 2003
6.33% ................................... 100,000 100,000 1,000,000 (d) (g) 2003-2008
$295,000 $295,000
Without Sinking Fund Requirements
4-1/2% Preferred........................... $53,019 $53,019 530,189 $110.00
Series Preferred
3.35%.................................... 4,178 4,178 41,783 103.50
4.40%.................................... 22,878 22,878 228,773 102.00
4.60%.................................... 6,300 6,300 63,000 103.00
6.75%.................................... 85,000 85,000 850,000 (d)
$171,375 $171,375
Increases (Decreases) in Preferred and Preference Stock
1995 1994 1993
Shares Amount Shares Amount Shares Amount
Series Preferred Stock
5.95% ..................................................... 300,000 $30,000
6.05% ..................................................... 250,000 25,000
6.125% ................................................... 1,150,000 $115,000
6.15% ..................................................... 250,000 25,000
6.33% ..................................................... 1,000,000 100,000
6.75% ..................................................... 850,000 85,000
6.875% ................................................... (400,000) (40,000) (100,000) (10,000)
7.00% ..................................................... (800,000) (80,000) (200,000) (20,000)
7.375% ................................................... (500,000) (50,000)
7.40% ..................................................... (176,000) (17,600)
7.82% ..................................................... (500,000) (50,000)
7.927% ................................................... (30,000) (3,000)
8.00% ..................................................... (250,000) (25,000)
8.60% ..................................................... (222,370) (22,237)
8.75%...................................................... (300,000) (30,000)
Preference Stock
$8.00 ...................................................... (350,000) (35,000)
$8.40 ...................................................... (400,000) (40,000)
$8.70....................................................... (400,000) (40,000)
Decreases in Preferred and Preference Stocks represent: (i) the redemption of stock pursuant to
sinking fund requirements; or (ii) shares redeemed pursuant to optional redemption provisions
There were no issuances nor redemptions of preferred or preference stock in 1995.
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
Pennsylvania Power & Light Company and Subsidiaries
(Thousands of Dollars, except per share data)
<CAPTION> 1995 1994(a) 1993
<S> <C> <C> <C>
Operating Revenues (Notes 1, 2, 3 and 4)............................ $2,751,798 $2,725,099 $2,727,002
Operating Expenses
Operation
Fuel............................................................ 438,229 458,932 506,900
Power purchases................................................. 290,940 287,316 278,800
Other........................................................... 517,461 487,431 460,482
Maintenance....................................................... 185,555 179,992 193,242
Depreciation (Notes 1 and 9)...................................... 302,237 288,759 271,390
Amortized depreciation (Notes 1 and 9)............................ 47,007 26,258 14,249
Income taxes (Note 5)............................................. 261,620 218,229 235,164
Taxes, other than income (Note 5)................................. 200,634 201,161 203,967
Voluntary early retirement program (Note 12) ..................... (65,661) 75,859
2,178,022 2,223,937 2,164,194
Operating Income.................................................... 573,776 501,162 562,808
Other Income and (Deductions)
Allowance for equity funds used during
construction (Note 1)........................................... 4,164 4,686 7,981
Income tax credits (expense) (Notes 5 and 14)..................... (25,410) 38,437 1,280
Gain(loss) on subsidiary coal reserves (Note 14).................. 41,622 (73,670)
Other -- net...................................................... (16,176) (915) 8,700
4,200 (31,462) 17,961
Income Before Interest Charges...................................... 577,976 469,700 580,769
Interest Charges
Long-term debt.................................. 213,413 214,390 225,800
Short-term debt and other......................................... 20,387 20,259 14,443
Allowance for borrowed funds used during
construction and interest capitalized (Note 1).................. (7,908) (8,392) (7,600)
225,892 226,257 232,643
Net Income.......................................................... 352,084 243,443 348,126
Dividends on Preferred and Preference Stock......................... 27,768 28,405 33,885
Earnings Available to PP&L Resources, Inc. .................... $324,316 $215,038 $314,241
<FN>
(a) Restated to reflect the retroactive dividend of PMDC
to Resources, as described in Financial Note 1.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Pennsylvania Power & Light Company and Subsidiaries
(Thousands of Dollars)
<CAPTION>
1995 1994(a) 1993
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income............................................ $352,084 $243,443 $348,126
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation............................................................ 351,478 317,287 289,055
Amortization of property under capital leases........................... 79,160 86,271 83,868
Amortization of contract settlement proceeds and
deferred cost of power plant spare parts.............................. (37,538) (37,793) (38,602)
Deferred income taxes and investment tax credits........................ 15,758 (70,336) 12,229
Voluntary early retirement program ..................................... (65,661) 75,859
Write down of coal reserves ......................................................... 73,670
Change in current assets and current liabilities
Unbilled and refundable electric revenues............................. (2,367) 31,365 (10,291)
Fuel inventories...................................................... 43,312 (29,843) 46,672
Accounts payable...................................................... (17,460) (25,579) 9,991
Other................................................................. (8,156) (10,239) 11,441
Other operating activities -- net....................................... (14,877) 56,042 17,244
Net cash provided by operating activities........................... 695,733 710,147 769,733
Cash Flows From Investing Activities
Property, plant and equipment expenditures............ (402,789) (505,029) (487,836)
Proceeds from sales of nuclear fuel to trust.............................. 44,410 35,790 63,431
Proceeds from sale of coal reserves....................................... 52,000
Purchases of available-for-sale securities ............................... (81,458) (95,091)
Sales and maturities of available-for-sale securities .................... 79,774 89,552
Net purchases and sales of other financial investments.................... 2,295 7,662 (705)
Other investing activities -- net......................................... 5,147 20,032 6,825
Net cash used in investing activities............................... (300,621) (447,084) (418,285)
Cash Flows From Financing Activities
Issuance of long-term debt............................ 55,000 918,750 850,000
Issuance of common stock and capital
contribution from parent................................................ 60,586 69,744 6,635
Issuance of preferred stock............................................................ 80,000 300,000
Retirement of long-term debt.............................................. (140,250) (637,350) (809,000)
Retirement of preferred and preference stock...................................... (120,000) (342,837)
Payments on capital lease obligations..................................... (79,160) (86,271) (83,868)
Common, preferred and preference dividends paid........................... (289,745) (283,650) (284,642)
Dividends for capitalization of PMDC .................................................. (50,000)
Net increase (decrease) in short-term debt................................ 14,977 (128,092) 42,912
Costs associated with issuance and retirement
of securities........................................................... (10,286) (25,317) (37,448)
Other financing activities -- net......................................... (39) (39) (39)
Net cash used in financing activities............................... (388,917) (262,225) (358,287)
Net Increase (Decrease) in Cash and
Cash Equivalents............................................................ 6,195 838 (6,839)
Cash and Cash Equivalents at Beginning of Period............................ 9,109 8,271 15,110
Cash and Cash Equivalents at End of Period.................................. $15,304 $9,109 $8,271
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for
Interest (net of amount capitalized).................................... $217,785 $200,140 $205,090
Income taxes............................................................ $257,648 $264,198 $221,049
<FN>
(a) Restated to reflect the retroactive dividend of PMDC
to Resources, as described in Financial Note 1.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET AT DECEMBER 31
Pennsylvania Power & Light Company and Subsidiaries
(Thousands of Dollars)
<CAPTION> 1995 1994(a)
<S> <C> <C>
Assets
Property, Plant and Equipment
Electric utility plant in service -- at original cost......... $9,637,401 $9,306,519
Accumulated depreciation (Notes 1 and 9)........................................... (3,113,374) (2,871,129)
Deferred depreciation (Notes 1 and 9) ............................................. 209,330 256,021
6,733,357 6,691,411
Construction work in progress -- at cost ............................................ 170,446 211,288
Nuclear fuel owned and leased -- net of amortization (Note 8) ....................... 133,447 143,591
Other leased property -- net of amortization (Note 8) ............................... 84,575 80,385
Electric utility plant -- net ...................................................... 7,121,825 7,126,675
Other property -- net of depreciation, amortization
and depletion (1995, $55,628; 1994, $54,199) (Note 14)............................. 57,120 67,850
7,178,945 7,194,525
Investments
Associated company -- at equity (Note 1) ..................... 17,169 17,088
Nuclear plant decommissioning trust fund (Notes 1 and 6)............................. 109,400 87,490
Financial investments (Notes 1 and 7) ............................................... 132,270 118,115
Other -- at cost or less (Note 7) ................................................... 8,673 8,654
267,512 231,347
Current Assets
Cash and cash equivalents (Note 1) ........................... 15,304 9,109
Marketable securities (Notes 1 and 7)................................................ 55,218 52,544
Accounts receivable (less reserve: 1995, $34,911; 1994, $29,083)
Customers ......................................................................... 197,071 189,771
Other ............................................................................. 13,233 14,000
Unbilled revenues.................................................................... 92,139 88,668
Fuel (coal and oil) -- at average cost .............................................. 82,233 125,545
Materials and supplies -- at average cost .......................................... 108,052 123,630
Prepayments ......................................................................... 10,395 11,015
Deferred income taxes (Note 5)....................................................... 41,889 27,524
Other ............................................................................... 30,967 26,916
646,501 668,722
Deferred Debits
Taxes recoverable through future rates (Notes 5 and 9)........ 1,002,902 986,292
Other (Notes 1, 3, 5, 9, 11 and 12) ................................................. 327,935 239,796
1,330,837 1,226,088
$9,423,795 $9,320,682
<FN>
(a) Restated to reflect the retroactive dividend of PMDC
to Resources, as described in Financial Note 1.
See accompanying Notes to Financial Statements.
</FN>
Liabilities 1995 1994(a)
Capitalization
Common equity
Common stock ...................................................................... $1,476,048 $1,440,527
Additional paid-in capital ........................................................ 25,065
Earnings reinvested ............................................................... 1,033,900 973,230
Capital stock expense and other .................................................. (7,117) (10,112)
2,527,896 2,403,645
Preferred stock
With sinking fund requirements .................................................... 295,000 295,000
Without sinking fund requirements ................................................. 171,375 171,375
Long-term debt ...................................................................... 2,828,728 2,940,750
5,822,999 5,810,770
Current Liabilities
Commercial paper (Note 10) ................................... 68,000 64,000
Bank loans (Note 10) ................................................................ 21,145 10,168
Long-term debt due within one year .................................................. 30,000 39
Capital lease obligations due within one year (Note 8) .............................. 81,017 73,682
Accounts payable .................................................................... 128,263 145,723
Taxes accrued ....................................................................... 48,220 46,907
Interest accrued .................................................................... 65,499 63,958
Dividends payable ................................................................... 73,379 71,710
Other ............................................................................... 86,091 101,924
601,614 578,111
Deferred Credits and Other Noncurrent Liabilities
Deferred investment tax credits (Note 5) ..................... 219,250 230,064
Deferred income taxes (Note 5) ...................................................... 2,106,535 2,046,869
Capital lease obligations (Note 8) .................................................. 138,624 151,083
Other (Notes 1, 3, 6 and 11) ........................................................ 534,773 503,785
2,999,182 2,931,801
Commitments and Contingent Liabilities (Note 15) ............................
$9,423,795 $9,320,682
<FN>
(a) Restated to reflect the retroactive dividend of PMDC
to Resources, as described in Financial Note 1.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF SHAREOWNER'S COMMON EQUITY
Pennsylvania Power & Light Company and Subsidiaries
(Thousands of Dollars)
<CAPTION> Capital
Common Stock Additional Stock
Outstanding Paid-in Earnings Expense &
Shares (a) Amount Capital Reinvested Other
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992......... 151,885,335 $1,364,148 $1,014,760 $(11,969)
Net income....................................................... 348,126
Cash dividends declared
Preferred stock............................................... (29,065)
Preference stock............................................ (4,820)
Common stock................................................ (250,611)
Stock redemption costs.................................... (12,432)
Common stock issued (b)......................... 246,754 6,635
Other................................................................. 1,063
Balance at December 31, 1993......... 152,132,089 $1,370,783 $0 $1,065,958 $(10,906)
Net income....................................................... 243,443
Cash dividends declared
Preferred stock............................................... (28,405)
Common stock................................................ (256,545)
Dividends for capitalization (50,000)
of PMDC(c)....................................................
Stock redemption costs.................................... (1,221)
Common stock issued (b) ........................ 3,349,873 69,744
Other................................................................. 794
Balance at December 31, 1994......... 155,481,962 $1,440,527 $0 $973,230 $(10,112)
Net income....................................................... 352,084
Cash dividends declared
Preferred stock............................................... (27,768)
Common stock................................................ (263,646)
Common stock issued (b) ........................ 1,818,420 35,521
Capital contribution from Resources............... 25,065
Other................................................................. 2,995
Balance at December 31, 1995......... 157,300,382 $1,476,048 $25,065 $1,033,900 $(7,117)
<FN>
(a) No par value. 170,000,000 shares authorized. Effective April 27, 1995,
all holders of PP&L common stock became holders of Resources common
stock; therefore, all PP&L common stock is now held by Resources.
(b) In 1993, Common Stock was issued through the ESOP. In 1994 and 1995,
Common Stock was issued through the ESOP and DRIP.
(c) Restated to reflect the retroactive dividend of PMDC to Resources, as
described in Financial Note 1.
</TABLE>
<TABLE>
Consolidated Statement of Preferred and Preference Stock at December 31
Pennsylvania Power & Light Company and Subsidiaries(a)
(Thousands of Dollars)
<CAPTION>
Shares
Outstanding Outstanding Shares
1995 1994 1995 Authorized
<S> <C> <C> <C> <C>
Preferred Stock -- $100 par, cumulative
4-1/2%.......................... $53,019 $53,019 530,189 629,936
Series....................................................... 413,356 413,356 4,133,556 10,000,000
$466,375 $466,375
<FN>
(a) Each share of PP&L's preferred stock entitles the holder to one vote on any
question presented to PP&L's shareowners' meetings. There were
5,000,000 shares of PP&L's preference stock authorized; none were
outstanding at December 31, 1995 and 1994, respectively.
(b) The involuntary liquidation price of the preferred stock is $100 per share.
The optional voluntary liquidation price is the optional redemption price
per share in effect, except for the 4-1/2% Preferred Stock for which such
price is $100 per share (plus in each case any unpaid dividends).
(c) PP&L does not have any sinking fund requirements through 2000.
(d) These series of preferred stock are not redeemable prior to the following
years: 5.95%, 2001; 6.05%, 2002; 6.125%, 6.15%, 6.33% and 6.75%, 2003.
(e) Shares to be redeemed in full on April 1 as follows: 5.95%, 2001; 6.05%,
2002; and 6.15%, 2003.
(f) Shares to be redeemed annually on October 1 as follows: 2003-2007,
57,500; 2008, 862,500.
(g) Shares to be redeemed annually on July 1 as follows: 2003-2007, 50,000;
2008, 750,000.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Details of Preferred Stock (b)
<CAPTION>
Optional Sinking Fund
Redemption Provisions (c)
Shares Price Per Shares to be
Outstanding Outstanding Share Redeemed Redemption
1995 1994 1995 1995 Annually Period
<S> <C> <C> <C> <C> <C> <C>
With Sinking Fund Requirements
Series Preferred
5.95% ................... $30,000 $30,000 300,000 (d) (e) 2001
6.05%.................... 25,000 25,000 250,000 (d) (e) 2002
6.125% .................. 115,000 115,000 1,150,000 (d) (f) 2003-2008
6.15%.................... 25,000 25,000 250,000 (d) (e) 2003
6.33% ................... 100,000 100,000 1,000,000 (d) (g) 2003-2008
$295,000 $295,000
Without Sinking Fund Requirements
4-1/2% Preferred........... $53,019 $53,019 530,189 $110.00
Series Preferred
3.35%.................... 4,178 4,178 41,783 103.50
4.40%.................... 22,878 22,878 228,773 102.00
4.60%.................... 6,300 6,300 63,000 103.00
6.75%.................... 85,000 85,000 850,000 (d)
$171,375 $171,375
Increases (Decreases) in Preferred and Preference Stock
1995 1994 1993
Shares Amount Shares Amount Shares Amount
Series Preferred Stock
5.95% ............................. 300,000 $30,000
6.05% ............................. 250,000 25,000
6.125% ........................... 1,150,000 $115,000
6.15% ............................. 250,000 25,000
6.33% ............................. 1,000,000 100,000
6.75% ............................. 850,000 85,000
6.875% ........................... (400,000) (40,000) (100,000) (10,000)
7.00% ............................. (800,000) (80,000) (200,000) (20,000)
7.375% ........................... (500,000) (50,000)
7.40% ............................. (176,000) (17,600)
7.82% ............................. (500,000) (50,000)
7.927% ........................... (30,000) (3,000)
8.00% ............................. (250,000) (25,000)
8.60% ............................. (222,370) (22,237)
8.75%.............................. (300,000) (30,000)
Preference Stock
$8.00 .............................. (350,000) (35,000)
$8.40 .............................. (400,000) (40,000)
$8.70............................... (400,000) (40,000)
Decreases in Preferred and Preference Stocks represent: (i) the redemption of stock pursuant to
sinking fund requirements; or (ii) shares redeemed pursuant to optional redemption provisions.
There were no issuances nor redemptions of preferred or preference stock in 1995.
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF LONG-TERM DEBT AT DECEMBER 31
Pennsylvania Power & Light Company
(Thousands of Dollars)
<CAPTION>
Outstanding
1995 1994 Maturity(b)
<S> <C> <C> <C>
First Mortgage Bonds (a)
5 5/8% .......................... $30,000 $30,000 June 1, 1996
6 3/4% ........................................ 30,000 30,000 November 1, 1997
5 1/2%......................................... 150,000 150,000 April 1, 1998
7%............................................. 40,000 40,000 January 1, 1999
8 1/8%......................................... 40,000 40,000 June 1, 1999
6%............................................. 125,000 125,000 June 1, 2000
6.5% to 7.75%.................................. 740,000 740,000 2001-2005
6.55% to 7.70%................................. 350,000 350,000 2006-2010 (c)
7 3/8%......................................... 100,000 100,000 2011-2015
9 1/4%......................................... 215,000 250,000 2016-2020 (d)
6 3/4% to 9 3/8%............................... 749,750 800,000 2021-2025(d)
First Mortgage Pollution
Control Bonds (a)
9-3/8% Series G ................. 55,000
6.40% Series H................................. 90,000 90,000 November 1, 2021
5.50% Series I................................. 53,250 53,250 February 15, 2027
6.40% Series J................................. 115,500 115,500 September 1, 2029
6.15% Series K................................. 55,000 August 1, 2029
2,883,500 2,968,750
Miscellaneous promissory notes .................. 39
2,883,500 2,968,789
Unamortized (discount) and
premium -- net ............................... (24,772) (28,000)
2,858,728 2,940,789
Less amount due within one year.................. 30,000 39
Total long-term debt .......................... $2,828,728 $2,940,750
<FN>
__________________________________________
(a) Substantially all owned electric utility plant is subject to the lien of
PP&L's first mortgage.
(b) Aggregate long-term debt maturities through 2000 are (thousands of
dollars): 1996, $30,000; 1997, $30,000; 1998, $150,000; 1999, $80,000;
2000, $125,000. Maximum sinking fund requirements aggregate $16.5
million through 2000 and may be met with property additions or
retirement of bonds.
(c) Includes $200 million principal amount of First Mortgage Bonds, 7.70%
Series due 2009. Any registered owner of these bonds has the right to
require PP&L to redeem such owner's bonds on October 1, 1999 at a price
of 100% of the principal amount.
(d) In 1995, PP&L repurchased and retired $35 million of First Mortgage Bonds,
9-1/4% Series due 2019, and $50.25 million of First Mortgage Bonds,
9-3/8% Series due 2021.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies - Resources/PP&L
Glossary of Terms
Terms and abbreviations appearing in Notes to Financial Statements
are explained in the glossary on page 27.
Business and Consolidation
In 1995, Resources became the parent holding company of PP&L, PMDC
and Spectrum. These consolidated financial statements have been restated
to reflect the formation of the holding company on a retroactive basis.
PP&L's financial condition and results of operation are currently
the principal factors affecting Resources' financial condition and re-
sults of operations. All nonutility operating transactions are included
in "Other Income and Deductions -- Other-net" on the Consolidated State-
ment of Income.
The consolidated financial statements include the accounts of Re-
sources and its direct and indirect wholly owned subsidiaries. All sig-
nificant intercompany transactions have been eliminated.
Less than 50% owned subsidiaries are accounted for using the equity
method. These subsidiaries consist principally of Safe Harbor Water
Power Corporation and investments held by PMDC.
Reclassification
Certain amounts from prior years' financial statements have been re-
classified to conform to the current year presentation.
Management's Estimates
These financial statements have been prepared using information
available to Resources including certain information which represents
management's best estimates of existing conditions.
Accounting Records
The accounting records for PP&L, the principal subsidiary of Re-
sources, are maintained in accordance with the Uniform System of Accounts
prescribed by the FERC and adopted by the PUC.
Regulation
PP&L prepares its financial statements in accordance with the provi-
sions of SFAS 71, "Accounting for the Effects of Certain Types of Regula-
tion." SFAS 71 requires a rate-regulated entity to reflect the effects
of regulatory decisions in its financial statements. In accordance with
SFAS 71, PP&L has deferred certain costs pursuant to the rate actions of
the PUC and the FERC and is recovering or expects to recover such costs
in electric rates charged to customers. These deferred costs or
"regulatory assets" are enumerated and discussed in Note 9.
To the extent that PP&L concludes that recovery of a regulatory as-
set is no longer probable due to regulatory treatment, the effects of
competition or other factors, the amount would have to be written off
against income.
Utility Plant
Additions to utility plant and replacement of units of property are
capitalized at cost. As provided in the Uniform System of Accounts, the
cost of funds used to finance construction projects or AFUDC is capital-
ized as part of construction cost.
The cost of units of property retired or replaced is charged to ac-
cumulated depreciation. Expenditures for maintenance and repairs of
property and the cost of replacing items determined to be less than an
entire unit of property are charged to operating expense.
For financial statement purposes, depreciation is being provided
over the estimated useful lives of property using a straight-line method
for all property except for certain property at the Susquehanna steam
station. Prior to October 1995, PUC and FERC rate orders provided for
increasing amounts of annual depreciation for certain property at the
Susquehanna station. As a result of the PUC Decision, Susquehanna depre-
ciation applicable to property placed in service prior to January 1,
1989, will be recorded at an annual level of $173 million through 1998 at
which time depreciation is scheduled to decline by about $71 million to
the level that would have been recorded if the straight-line method had
been used since the Susquehanna units were placed in service.
Deferred depreciation shown on the Consolidated Balance Sheet is the
accumulated difference between the straight-line depreciation that would
have been recorded on property placed in service at the Susquehanna sta-
tion prior to January 1, 1989 and the amount of depreciation on such
property provided for financial reporting purposes and included in rates.
The annual difference is shown as amortized depreciation on the Consoli-
dated Statement of Income. Provisions for depreciation, as a percent of
average depreciable property, approximated 3.7% in 1995, 3.5% in 1994 and
3.3% in 1993.
Nuclear Decommissioning and Fuel Disposal
An annual provision for PP&L's share of the future cost to decommis-
sion the Susquehanna station, equal to the amount allowed for ratemaking
purposes, is charged to operating expense. Such amounts are invested in
external trust funds which can be used only for future decommissioning
costs. See Notes 3 and 6.
The DOE is responsible for the permanent storage and disposal of
spent nuclear fuel removed from nuclear reactors. PP&L currently pays
DOE a fee for future disposal services and recovers such costs in cus-
tomer rates.
Financial Investments
In January 1994, Resources adopted SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS 115 addresses the ac-
counting and reporting for investments in equity securities that have
readily determinable fair values and for all investments in debt securi-
ties.
Securities subject to the requirements of SFAS 115 are carried at
fair value, determined at the balance sheet date. Net unrealized gains
on available-for-sale securities are included in common equity and to-
taled, after applicable income taxes, $3.4 million and $0.3 million at
December 31, 1995 and 1994, respectively. Net unrealized gains and
losses on trading securities are included in income and amounted to $0.6
million and $(0.2) million for 1995 and 1994, respectively. Net unreal-
ized gains and losses on securities that are not available for unre-
stricted use by Resources due to regulatory or legal reasons are re-
flected in the related asset and liability accounts. Realized gains and
losses on the sale of securities are recognized utilizing the specific
cost identification method. The adoption of SFAS 115 did not have a ma-
terial effect on Resources' net income. Investments in financial limited
partnerships are accounted for under the equity method of accounting and
venture capital investments are recorded at cost. See Note 7.
Premium on Reacquired Long-Term Debt
As provided in the Uniform System of Accounts, the premium paid and
expenses incurred by PP&L to redeem long-term debt are deferred and amor-
tized over the life of the new debt issue or the remaining life of the
retired debt when the redemption is not financed by a new issue.
Capital Leases
Leased property of PP&L capitalized on the Consolidated Balance
Sheet is recorded at the present value of future lease payments and is
amortized so that the total of interest on the lease obligation and amor-
tization of the leased property equals the rental expense allowed for
ratemaking purposes. See Note 8.
Revenues
Electric revenues are recorded based on the amounts of electricity
delivered to customers through the end of each accounting period. This
includes amounts customers will be billed for electricity delivered from
the time meters were last read to the end of the respective period. For
information on the ECR, SBRCA and STAS, see Note 3.
PP&L's PUC tariffs contain an ECR under which customers are billed
an estimated amount for fuel and other energy costs. Any difference be-
tween the actual and estimated amount for such costs is collected from,
or refunded to, customers in a subsequent period. Revenues applicable to
ECR billings are recorded at the level of actual energy costs and the
difference between amounts billed to customers and the cost of fuel is
recorded as payable to, or receivable from, customers.
Income Taxes
Resources and its wholly owned subsidiaries file a consolidated fed-
eral income tax return. Income taxes are allocated to operating expenses
and other income and deductions on the Consolidated Statement of Income.
The provision for PP&L's deferred income taxes included on the Con-
solidated Statement of Income is based upon the ratemaking principles re-
flected in rates established by the PUC and FERC. The difference in the
provision for deferred income taxes and the amount that otherwise would
be recorded under generally accepted accounting principles is deferred
and included in taxes recoverable through future rates on the Consoli-
dated Balance Sheet. See Note 5.
Investment tax credits were deferred when utilized and are amortized
over the average lives of the related property.
Pension Plan and Other Postretirement and Postemployment Benefits
PP&L has a noncontributory pension plan covering substantially all
employees, and subsidiary companies of PP&L formerly engaged in coal min-
ing have a noncontributory pension plan for substantially all non-
bargaining, full-time employees. Funding is based upon actuarially de-
termined computations that take into account the amount deductible for
income tax purposes and the minimum contribution required under the Em-
ployee Retirement Income Security Act of 1974.
For information on other postretirement and postemployment benefits
see Note 11.
Cash Equivalents
Resources considers all highly liquid debt instruments purchased
with original maturities of three months or less to be cash equivalents.
New Accounting Standards
Effective January 1, 1996, Resources adopted SFAS 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." SFAS 121 requires a company to review certain assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If an asset is deter-
mined to be impaired, an impairment loss is recognized. Resources does
not anticipate any impairment as a result of adopting SFAS 121.
Also effective January 1, 1996, Resources adopted SFAS 123,
"Accounting for Stock-Based Compensation." SFAS 123 addresses the recom-
mended accounting and required disclosures for stock-based employee com-
pensation plans, which include all arrangements by which employees re-
ceive shares of stock or other equity instruments of the employer or the
employer incurs liabilities to employees in amounts based on the price of
the employer's stock. Resources' current accounting for restricted stock
awards conforms to requirements as defined in SFAS 123.
The adoption of SFAS 121 and 123 will not have a significant impact
on net income.
2. Sources of Revenues - PP&L
PP&L is an operating electric utility serving about 1.2 million cus-
tomers in a 10,000 square-mile territory of central eastern Pennsylvania
with a population of approximately 2.6 million persons. Substantially
all of PP&L's operating revenues are derived from the sale of electric
energy subject to PUC and FERC regulation.
During 1995, about 98% of total operating revenues were derived from
electric energy sales, with 34% coming from residential customers, 29%
from commercial customers, 20% from industrial customers, 12% from con-
tractual sales to other major utilities, 2% from energy sales to members
of the PJM and 3% from others.
3. Rate Matters - PP&L
Base Rate Filing with the PUC
On September 27, 1995, the PUC issued a final order with respect to
the base rate case filed by PP&L on December 30, 1994.
PP&L's request to increase base rates, which was its first in ten
years, sought to increase annual PUC-jurisdictional revenues by $261.6
million, or about 11.7%. The PUC's decision granted PP&L a $107 million
increase in base rates based on test year conditions. At the same time,
PP&L's ECR was reduced by $22 million related to capacity credit sales
resulting in a net increase of $85 million, or about 3.8%, in PUC-
jurisdictional revenues effective September 28, 1995.
The PUC Decision allowed PP&L to levelize the annual amount of de-
preciation on pre-1989 property for its Susquehanna station at $173 mil-
lion for the period October 1, 1995 through December 31, 1998. This lev-
elization eliminates the previously scheduled annual increase in
depreciation expense resulting from use of the modified sinking fund
method of depreciation.
The PUC determined that all of PP&L's generating capacity is neces-
sary to meet customer needs, rejecting the arguments of some intervenors
that an excess capacity adjustment should be imposed on PP&L. As a re-
sult of the PUC's action in this regard, PP&L's base rates include a full
return on all of its generating facilities used to serve retail custom-
ers, as well as all operating expenses associated with those facilities.
Also, the PUC Decision permitted recovery of the PUC-jurisdictional
amount of retiree health care costs resulting from the adoption of SFAS
106, "Employers' Accounting for Postretirement Benefits Other Than Pen-
sions". In addition, the PUC Decision permitted PP&L to recover, over a
period of about 17 years, the amount of SFAS 106 costs that would have
been deferred from January 1, 1993, through September 30, 1995, pursuant
to a PUC order but for a Commonwealth Court decision that PP&L could not
recover these deferred costs. As a result of the PUC Decision, which
provided for recovery of $27 million of previously expensed SFAS 106
costs, PP&L recorded a $15.7 million after-tax credit to income, or 10
cents per share of common stock, in the third quarter of 1995.
In addition, the PUC Decision permitted PP&L to recover through cus-
tomer rates the PUC-jurisdictional amount, $65.7 million, of the cost of
its 1994 VERP over a period of five years. As a result, PP&L recorded a
$37.8 million after-tax credit to expense, or 24 cents per share of com-
mon stock, in the third quarter of 1995 to reverse the charge for this
program that was recorded in the fourth quarter of 1994. The estimated
annual savings of $35 million from the program also are reflected in the
allowed rates.
The PUC Decision also permitted recovery over a 10-year period of
certain deferred operating and capital costs, net of energy savings, in-
curred from the time Susquehanna Unit No. 2 was placed in commercial op-
eration until the effective date of base rate recognition for that Unit,
but the PUC denied recovery of similar costs for Susquehanna Unit No. 1.
As a result of the PUC Decision with respect to Susquehanna Unit No. 1,
PP&L recorded a one-time charge in the third quarter of 1995 which, after
taxes, reduced net income by $20.4 million, or 13 cents per share of com-
mon stock.
The PUC Decision made adjustments to the amount requested by PP&L
for the currently estimated cost of decommissioning the Susquehanna sta-
tion. These adjustments include the elimination of the $106.6 million
contingency amount included in the decommissioning cost estimate, an in-
crease in the earnings assumption on the decommissioning fund from 5.5%
to 7.5% and a reflection of post-shutdown earnings on the fund in calcu-
lating the total amount necessary to decommission the Susquehanna sta-
tion. After giving effect to these adjustments, the total amount of the
Susquehanna station decommissioning costs included in PUC-jurisdictional
rates is $9.5 million annually.
The PUC Decision granted PP&L a return on common equity of 11.5%.
In its decision, the PUC ruled that PP&L cannot include in its ECR
the cost of capacity, currently being billed to other utilities pursuant
to contractual arrangements, as those contracts terminate and the capac-
ity returns to PP&L. The PUC did rule that PP&L was not required to flow
back to PUC-jurisdictional customers through the ECR the revenues re-
ceived for off-system sales of capacity and energy attributable to such
returning capacity. Accordingly, the PUC Decision permitted the benefits
that can be achieved from sales of the returning capacity to accrue to
shareowners.
The OCA has appealed certain aspects of the PUC Decision to the Com-
monwealth Court. PP&L cannot predict the final outcome of this matter.
Energy Cost Rate Issues
As a result of the PUC Decision, PP&L adopted a new ECR effective as
of September 28, 1995 that reflects the roll-in of all test year energy
costs into base rates.
In April 1994, the PUC reduced PP&L's 1994-95 ECR claim by approxi-
mately $15.7 million to reflect costs associated with replacement power
during a portion of the period that Susquehanna Unit 1 was out of service
for refueling and repairs. As a result of the PUC's action, PP&L re-
corded a charge against income in the first quarter of 1994 for the $15.7
million of unrecovered replacement power costs which reduced earnings by
6 cents per share of common stock.
PP&L filed a complaint with the PUC objecting to the decision to ex-
clude these replacement power costs from the 1994-95 ECR, and subse-
quently reached a settlement with the OTS and other parties to the pro-
ceeding reducing the amount of disallowed costs.
The PUC approved the settlement agreement and in the first quarter
of 1995, PP&L recorded a credit to income of $9.7 million which increased
earnings by 4 cents per share of common stock.
Special Base Rate Credit Adjustment
The SBRCA, which has been in effect since April 1, 1991, reduces
PUC-jurisdictional customers' bills for the effects of two nonrecurring
items. The first item is the annual amortization over a five-year period
of a credit to income associated with PP&L's use of an inventory method
of accounting for power plant spare parts. This credit will expire March
31, 1996.
The second relates to the proceeds from the settlement of outstand-
ing contract claims arising from construction of the Susquehanna station.
In accordance with approval of the settlement by the PUC, PP&L began, on
April 1, 1992, to return the settlement proceeds to PUC customers through
the SBRCA. This credit will expire March 31, 1997.
A third nonrecurring item ended with the implementation of the new
PUC rates and related to costs that were being recovered from Atlantic
pursuant to the sale of 125,000 kilowatts of capacity (summer rating) and
related energy from PP&L's wholly owned coal-fired stations beginning Oc-
tober 1, 1991. As a result of the PUC Decision, PP&L's SBRCA was changed
to exclude that portion of the credit associated with the Atlantic con-
tract, since the costs recovered from Atlantic were excluded from PUC-
jurisdictional base rates.
Refund of State Tax Decrease
In accordance with PP&L's tariffs, PUC-jurisdictional rates are ad-
justed for changes in certain state taxes.
Due to the two state legislation changes decreasing the Pa. CNI rate
as described in Note 5, and the PUC Decision which reflected a 10.99% Pa.
CNI rate in base rates, PP&L filed three changes to its STAS in 1995.
The final STAS filing, which was approved on October 26, 1995, is ex-
pected to reduce customer rates by about $12.9 million through March
1996. This change has no effect on net income.
FERC-Major Utilities' Rates
In October 1995, the FERC approved PP&L's request to recover postre-
tirement benefits other than pensions through its contractual agreements
with other major electric utilities, subject to refund after FERC review.
PP&L is billing these utilities their share of postretirement costs other
than pensions incurred since January 1993. See Note 4 for more details
on these contracts.
In an October 1995 order, the FERC also ordered hearings to evaluate
the justness and reasonableness of PP&L's rates in its contractual agree-
ments with JCP&L, Atlantic, BG&E and UGI.
In January 1996, PP&L filed a request with the FERC to incorporate a
change in the method of calculating decommissioning in several of its
contractual agreements with other major utilities. PP&L also requested
to increase its decommissioning rate to reflect the projected cost of de-
commissioning the Susquehanna station and fossil plants.
PP&L cannot predict the outcome of these proceedings.
Uranium Enrichment Decontamination and Decommissioning Fund
The Energy Act established the D&D Fund and provides for an assess-
ment on domestic utilities with nuclear power operations, including PP&L.
Assessments are based on the amount of uranium a utility had processed
for enrichment prior to enactment of the Energy Act and the assessments
are expected to be paid to the D&D Fund by such utilities over a 15-year
period. Amounts paid to the D&D Fund are to be used for the ultimate de-
contamination and decommissioning of the DOE's uranium enrichment facili-
ties. The Energy Act states that the assessment shall be deemed a neces-
sary 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.
As of December 31, 1995, PP&L's recorded liability for its total as-
sessment amounted to about $29.7 million. The liability is subject to
adjustment for inflation. The corresponding charge to expense was de-
ferred because PP&L includes its annual payments to the D&D Fund in the
ECR which is in PP&L's PUC tariffs and in the fuel adjustment clause
which is in PP&L's FERC tariffs. As a result, the assessment does not
affect net income.
4. Sales to Other Major Electric Utilities - PP&L
PP&L provides Atlantic with 125,000 kilowatts of capacity (summer
rating) and related energy from its wholly owned coal-fired stations.
The agreement with Atlantic originally provided for sales to continue
through September 2000.
On March 20, 1995, Atlantic notified PP&L that it will terminate the
agreement on March 20, 1998, pursuant to termination provisions in the
agreement. PP&L expects to be able to resell the capacity and energy at
market prices.
PP&L provided JCP&L with 945,000 kilowatts of capacity and related
energy from all of its generating units. Sales to JCP&L were at the
945,000 kilowatt level in 1995, and the amount will decline uniformly
each year beginning January 1996 (189,000 kilowatts per year) until the
end of the agreement on December 31, 1999.
In August 1995, JCP&L filed a complaint against PP&L with the FERC
regarding billings under the agreement. In its complaint, JCP&L alleges
that PP&L inappropriately allocated certain costs to JCP&L that should
not have been billed and seeks other adjustments. JCP&L is seeking both
refunds (with interest) in an unspecified amount and an amendment to the
agreement. PP&L has denied JCP&L's allegations and requested that FERC
dismiss the complaint. PP&L cannot predict the final outcome of this
proceeding.
In April 1995, PP&L entered into a new agreement with JCP&L whereby
PP&L would provide JCP&L increasing amounts of capacity credits and en-
ergy from all of its generating units. Sales to JCP&L under this agree-
ment begin in June 1997 and continue through May 2004. Under this agree-
ment, PP&L would provide JCP&L 150,000 kilowatts of capacity credits and
energy from June 1997 through May 1998, 200,000 kilowatts from June 1998
through May 1999 and 300,000 kilowatts from June 1999 through May 2004.
Sales under the new agreement are priced based on a predetermined demand
rate that escalates over time, plus an energy component based on PP&L's
actual fuel-related costs. This agreement with JCP&L must be approved by
the FERC and the New Jersey Board of Public Utilities.
PP&L provides BG&E with 129,000 kilowatts or 6.6 percent of its
share of capacity and related energy from the Susquehanna station. Sales
to BG&E will continue through May 2001.
See Note 3 for more information about these contracts.
In December 1995, PP&L entered into a one year agreement with PSE&G,
which provides PSE&G with 245,000 kilowatts of delivered output from Mar-
tins Creek Units 1 & 2. PP&L will continue to seek additional opportuni-
ties to market its capacity and energy in the bulk power markets that
will produce revenues in excess of the amount that would be realized
through economy energy sales on the PJM.
5. Taxes - Resources/PP&L
The corporate federal income tax rate from 1993 to 1995 was 35%.
In June 1994, state legislation was enacted that decreased the Pa.
CNI rate from 12.25% to 11.99% retroactive to January 1, 1994, with fur-
ther reductions to 10.99%, 10.75% and 9.99% in 1995, 1996 and 1997, re-
spectively. In June 1995, state legislation was enacted that accelerated
the tax decrease to 9.99% retroactive to January 1, 1995. For 1995 and
1994, Resources recorded a decrease in income tax expense of $8.1 million
and $0.8 million respectively, substantially all of which was reflected
in lower customer rates through the STAS. For 1995 and 1994 Resources
also recorded a decrease in deferred income tax liabilities and taxes re-
coverable through future rates of $1.1 million and $124.0 million respec-
tively to reflect the new tax rates.
The tax effects of significant temporary differences comprising Re-
sources' net deferred income tax liability were as follows (thousands of
dollars):
1995 1994
Deferred tax assets
Deferred investment
tax credits $90,101 $ 94,650
Accrued pension
costs 53,859 67,327
Other 87,122 107,830
Valuation allowance (5,920) (8,183)
225,162 261,624
Deferred tax liabilities
Electric utility plant
- net 1,787,975 1,790,378
Other property - net 11,728 13,829
Taxes recoverable
through future
rates 416,110 409,417
Reacquired debt
costs 48,301 46,934
Other 25,722 20,355
2,289,836 2,280,913
Net deferred tax
liability $2,064,674 $2,019,289
Details of the components of income tax expense, a reconciliation of
federal income taxes derived from statutory tax rates applied to income
from continuing operations for accounting purposes and details of taxes,
other than income are as follows (thousands of dollars):
Income Tax Expense 1995 1994 1993
Included in operating expenses
Provision - Federal $195,028 $198,777 $162,795
State 62,388 76,903 63,508
257,416 275,680 226,303
Deferred - Federal 9,020 (34,177) 22,491
State 5,998 (11,021) (124)
15,018 (45,198) 22,367
Investment tax credit,
net - Federal (10,814) (12,253) (13,506)
261,620 218,229 235,164
Included in other income
and deductions
Provision (credit) - Federal 8,127 (18,453) (5,134)
State 4,203 (7,309) 486
12,330 (25,762) (4,648)
Deferred - Federal 9,450 (8,688) 4,047
State 2,111 (4,197) (679)
11,561 (12,885) 3,368
23,891 (38,647) (1,280)
Total income tax
expense - Federal 210,811 125,206 170,693
State 74,700 54,376 63,191
$285,511 $179,582 $233,884
Reconciliation of Income
Tax Expense
Indicated federal income tax on
pre-tax income at statutory
tax rate - 35% $222,576 $148,373 $203,704
Increase (decrease) due to:
State income taxes 50,141 35,017 41,829
Flow through of depreciation
differences not previously
normalized 16,479 14,883 8,470
Amortization of investment
tax credit (10,814) (12,253) (13,506)
Other 7,129 (6,438) (6,613)
62,935 31,209 30,180
Total income tax expense $285,511 $179,582 $233,884
Effective income tax rate 44.9% 42.4% 40.2%
Taxes, Other Than Income
State gross receipts $101,783 $ 99,311 $ 98,280
State utility realty 45,940 46,556 45,292
State capital stock 32,545 34,739 35,943
Social security and other 20,366 20,555 24,452
$200,634 $201,161 $203,967
6. Nuclear Decommissioning Costs - PP&L
PP&L's most recent estimate of the cost to decommission the Susque-
hanna station was completed in 1993 and was a site-specific study, based
on immediate dismantlement and decommissioning of each unit following fi-
nal shutdown. The study indicates that PP&L's 90% share of the total es-
timated cost of decommissioning the Susquehanna station is approximately
$724 million in 1993 dollars. The estimated cost includes decommissioning
the radiological portions of the station and the cost of removal of non-
radiological structures and materials. The operating licenses for Units
1 and 2 expire in 2022 and 2024, respectively.
Decommissioning costs charged to operating expense were $8.5 million
in 1995, $7.2 million in 1994 and $6.9 million in 1993 and are based upon
amounts included in customer rates. The increase in 1995 is a result of
the PUC Decision in which recovery of decommissioning costs was based on
the cost estimates in the 1993 site-specific study. Rates charged to
other small FERC wholesale customers reflect the estimated cost of decom-
missioning in the 1993 study. In January 1996, PP&L filed with the FERC
to increase its decommissioning rate to reflect the projected cost of de-
commissioning the Susquehanna station. See Note 3 for further informa-
tion.
Amounts collected from customers for decommissioning, less applica-
ble taxes, are deposited in external trust funds for investment and can
be used only for future decommissioning costs. The market value of secu-
rities held and accrued income in the trust funds at December 31, 1995
and 1994 aggregated approximately $109.4 million, including $7.0 million
of net unrealized gains, and $87.5 million, including $0.7 million of net
unrealized losses, respectively. The trust funds experienced, on a fair
market value basis, a $14.0 million net gain in 1995, which includes net
unrealized appreciation of $7.7 million, and a net loss in 1994 of $2.3
million, which includes net unrealized depreciation of $6.7 million. The
trust fund activity is reflected in the nuclear plant decommissioning
trust fund and in other noncurrent liabilities on the Consolidated Bal-
ance Sheet. Accrued nuclear decommissioning costs were $112.2 million
and $89.7 million at December 31, 1995 and 1994, respectively.
The FASB issued an exposure draft on the accounting for liabilities
related to closure and removal of long-lived assets, including decommis-
sioning of nuclear power plants. As a result, current electric utility
industry accounting practices for decommissioning may change, including
the possibility that the estimated cost for decommissioning could be re-
corded as a liability on a basis other than an accrual over the estimated
life of the power plant.
7. Financial Instruments - Resources
The carrying amount shown on the Consolidated Balance Sheet and the
estimated fair value of Resources' financial instruments are as follows
(thousands of dollars):
December 31, 1995 December 31, 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets
Nuclear plant decommis-
sioning trust fund (a) $109,400 $109,400 $ 87,490 $ 87,490
Financial investments (a) 237,985 236,069 220,169 219,038
Other investments 20,742 20,742 8,654 8,654
Cash and cash equivalents 19,883 19,883 10,079 10,079
Other financial instru-
ments included in
other current assets 3,163 3,163 2,435 2,435
Liabilities
Preferred stock with
sinking fund require-
ments (b) 295,000 294,825 295,000 265,275
Long-term debt (b) 2,858,728 3,032,742 2,940,789 2,756,131
Commercial paper and
bank loans 89,145 89,145 74,168 74,168
(a) The carrying value of financial instruments generally is based on
established market prices and approximates fair value.
(b) The fair value generally is based on quoted market prices for the
securities where available and estimates based on current rates offered
to Resources where quoted market prices are not available.
8. Leases - PP&L
PP&L has entered into capital leases consisting of the following
(thousands of dollars):
December 31
1995 1994
Nuclear fuel, (net of
accumulated amortization
1995, $147,587; 1994,
$196,617) $135,066 $144,380
Vehicles, oil storage tanks
and other property,
(net of accumulated amortization
1995, $91,914; 1994, $84,330) 84,575 80,385
Net property under capital leases $219,641 $224,765
Capital lease obligations incurred for the acquisition of nuclear
fuel and other property were (millions of dollars): 1995, $74.0; 1994,
$62.0 and 1993, $84.0.
Nuclear fuel lease payments, which are charged to expense as the
fuel is used for the generation of electricity, were (millions of dol-
lars): 1995, $63.2; 1994, $71.8 and 1993, $67.6. Future nuclear fuel
lease payments are based on the quantity of electricity produced by the
Susquehanna station. The maximum amount of unamortized nuclear fuel
available for lease under current arrangements is $200 million.
Future minimum lease payments under capital leases in effect at De-
cember 31, 1995 (excluding nuclear fuel) aggregate $99.7 million, includ-
ing $15.2 million in imputed interest. During the five years ending
2000, such payments decrease from $31.3 million per year to $7.1 million
per year.
Interest on capital lease obligations was recorded as operating ex-
penses on the Consolidated Statement of Income in the following amounts
(millions of dollars): 1995, $14.4; 1994, $11.1 and 1993, $9.1.
Generally, capital leases obligate PP&L to pay maintenance, insur-
ance and other related costs and contain renewal options. Various oper-
ating leases have also been entered into which are not material with re-
spect to PP&L's financial position.
9. Regulatory Assets - PP&L
The following regulatory assets were reflected in the Consolidated
Balance Sheet (thousands of dollars):
1995 1994
Deferred depreciation $ 209,330 $ 256,021
Deferred operating and carrying
costs - Susquehanna 18,390 39,215
Reacquired debt costs 116,954 113,466
Taxes recoverable through future
rates 1,002,902 986,292
Assessment for decommissioning
uranium enrichment facilities 31,686 33,492
Postretirement benefits other
than pensions 31,406
Voluntary early retirement program 62,377
Other 56,632 52,307
$1,529,677 $1,480,793
As of December 31, 1995, all of PP&L's regulatory assets are being
recovered through rates charged to customers over periods ranging from 3
to 29 years.
For a discussion of taxes recoverable through future rates, postre-
tirement benefits other than pensions, assessment for decommissioning
uranium enrichment facilities, VERP, and additional information on the
PUC Decision, see Notes 3, 5, 11, and 12.
10. Credit Arrangements - PP&L
PP&L issues commercial paper and, from time to time, borrows from
banks to provide short-term funds required for general corporate pur-
poses. In addition, certain subsidiaries also borrow from banks to ob-
tain short-term funds. Bank borrowings generally bear interest at rates
negotiated at the time of the borrowing. PP&L's weighted average inter-
est rate on short-term borrowings was 6.0% and 6.1% at December 31, 1995
and 1994, respectively.
PP&L has entered into a $250 million revolving credit arrangement
with a group of banks. Any loans made under this credit arrangement
would mature in September 1999 and, at the option of PP&L, interest rates
would be based upon certificate of deposit rates, Eurodollar deposit
rates or the prime rate. PP&L has additional credit arrangements with
another group of banks. The banks have committed to lend PP&L up to $45
million under these credit arrangements, which mature in November 1996,
at interest rates based upon Eurodollar deposit rates or the prime rate.
These credit arrangements produce a total of $295 million of lines of
credit to provide back-up for PP&L's commercial paper and short-term bor-
rowings of certain subsidiaries. No borrowings were outstanding at De-
cember 31, 1995 under these credit arrangements.
PP&L leases its nuclear fuel from a trust. The maximum financing
capacity of the trust under existing credit arrangements is $200 million.
11. Pension Plan and Other Postretirement and
Postemployment Benefits - PP&L
Pension Plan
PP&L has a funded noncontributory defined benefit pension plan cov-
ering substantially all employees. Benefits are based upon a partici-
pant's earnings and length of participation in the Plan, subject to meet-
ing certain minimum requirements.
PP&L also has two unfunded supplemental retirement plans for certain
management employees and directors. Benefit payments pursuant to these
supplemental plans are made directly by PP&L. At December 31, 1995, the
projected benefit obligation of these supplemental plans was approxi-
mately $19.2 million. Effective December 1, 1994, PMDC has a non-
qualified retirement plan for its corporate officers. The cost of the
plan was immaterial in 1995.
The components of PP&L's net periodic pension cost for the three
plans were (thousands of dollars):
1995 1994 1993
Service cost-benefits earned
during the period $ 27,549 $ 33,527 $ 31,381
Interest cost 57,711 51,330 48,266
Actual return on plan assets (241,075) 28,680 (92,085)
Net amortization and deferral 166,758 (96,413) 29,696
Net periodic pension cost $ 10,943 $ 17,124 $ 17,258
The net periodic pension cost charged to operating expenses was $6.4
million in 1995, $9.9 million in 1994 and $10.1 million in 1993. The
balance was charged to construction and other accounts. The funded
status of PP&L's Plan was (thousands of dollars):
December 31
1995 1994
Fair value of plan assets $1,086,236 $ 888,214
Actuarial present value of benefit obligations:
Vested benefits 673,264 573,564
Nonvested benefits 1,343 1,396
Accumulated benefit obligation 674,607 574,960
Effect of projected future compensation 194,203 173,311
Projected benefit obligation 868,810 748,271
Plan assets in excess of projected
benefit obligation 217,426 139,943
Unrecognized transition assets (being
amortized over 23 years) (63,277) (67,796)
Unrecognized prior service cost 58,598 61,941
Unrecognized net gain (394,105) (288,105)
Accrued expense $(181,358) $(154,017)
The weighted average discount rate used in determining the actuarial
present value of projected benefit obligations was 6.75% and 7.5% on De-
cember 31, 1995 and 1994, respectively. The rate of increase in future
compensation used in determining the actuarial present value of projected
benefit obligations was 5.0% and 5.7% on December 31, 1995 and 1994, re-
spectively. The assumed long-term rates of return on assets used in de-
termining pension cost in 1995 and 1994 was 8.0%. Plan assets consist
primarily of common stocks, government and corporate bonds and temporary
cash investments.
PP&L's subsidiaries formerly engaged in coal mining have a noncon-
tributory defined benefit pension plan covering substantially all non-
bargaining unit, full-time employees which is fully funded, primarily by
group annuity contracts with insurance companies. In addition, the com-
panies are liable under federal and state laws to pay black lung benefits
to claimants and dependents with respect to approved claims, and are mem-
bers of a trust which was established to facilitate payment of such li-
abilities. Such costs were not material in 1995, 1994 and 1993.
Postretirement Benefits Other Than Pensions
Substantially all employees of PP&L and its subsidiaries will become
eligible for certain health care and life insurance benefits upon retire-
ment. PP&L sponsors four health and welfare benefit plans that cover
substantially all management and bargaining unit employees upon retire-
ment. One plan provides for retiree health care benefits to certain man-
agement employees, another plan provides retiree health care benefits to
bargaining unit employees, a third plan provides retiree life insurance
benefits to certain management employees up to a specified amount and a
fourth plan provides retiree life insurance benefits to bargaining unit
employees.
Dollar limits have been established for the amount PP&L will con-
tribute annually toward the cost of retiree health care for employees re-
tiring after March 1993.
In January 1993, PP&L adopted SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," which requires PP&L to ac-
crue, during the years that the employees render the necessary service,
the expected cost of providing retiree health care and life insurance
benefits. The adoption of SFAS 106 did not have a material effect on
PP&L's net income. In accordance with a PUC order, PP&L had deferred the
PUC-jurisdictional accrued cost of retiree health and life insurance
benefits in excess of actual claims paid pending recovery of the in-
creased cost in retail rates. As a result of a decision of the Common-
wealth Court, in 1994 PP&L started to expense the increased costs appli-
cable to operations that were previously being deferred and wrote off
such costs deferred in 1993.
The PUC Decision permitted recovery of the PUC-jurisdictional amount
of retiree health care costs resulting from the adoption of SFAS 106. In
addition, the PUC Decision permitted PP&L to recover, over a period of
about 17 years, the amount of SFAS 106 costs that would have been de-
ferred from January 1, 1993 through September 30, 1995, pursuant to a PUC
order but for a Commonwealth Court decision that PP&L could not recover
these deferred costs. As a result of the PUC Decision, which provided
for recovery of $27 million of previously expensed SFAS 106 costs, PP&L
recorded a $15.7 million after-tax credit to income, or 10 cents per
share of common stock, in the third quarter of 1995.
In December 1993, PP&L established a separate VEBA for each of the
four health and welfare benefit plans for retirees. After making initial
contributions, additional funding of the trusts was deferred pending
resolution of PP&L's ability to recover the costs of the plans in rates.
In December 1995, as a result of the PUC Decision, PP&L resumed funding
of these trusts.
The following table sets forth the plans' combined funded status
reconciled with the amount shown on Resources' Consolidated Balance Sheet
as of December 31 (thousands of dollars):
1995 1994
Accumulated postretirement benefit obligation:
Retirees $127,926 $124,484
Fully eligible active plan participants 18,184 13,604
Other active plan participants 78,790 68,828
224,900 206,916
Plan assets at fair value, primarily
temporary cash investments 29,208 23,506
Accumulated postretirement benefit obligation
in excess of plan assets 195,692 183,410
Unrecognized prior service costs (5,208)
Unrecognized net loss (18,275) (13,770)
Unrecognized transition obligation (being
amortized over 20 years) (147,750) (156,448)
Accrued postretirement benefit cost $ 24,452 $ 13,192
The net periodic postretirement benefit cost included the following
components (thousands of dollars):
1995 1994 1993
Service cost - benefits attributed
to service during the period $ 3,711 $ 4,286 $ 3,699
Interest cost on accumulated
postretirement benefit obligation 15,339 14,189 13,008
Actual return on plan assets (1,737) (435)
Net amortization and deferral 8,544 7,645 8,691
Net periodic postretirement
benefit cost $ 25,857 $ 25,685 $25,398
Retiree health and benefits costs charged to operating expenses were
a net credit of approximately $16.5 million in 1995, reflecting a $32.1
million credit due to the PUC Decision and costs applicable to contrac-
tual agreements with other major utilities, $27.2 million in 1994 (which
includes $10.8 million of retiree health and benefits costs previously
deferred in 1993) and $6.9 million in 1993. Costs in excess of the
amount charged to expense were charged to construction and other ac-
counts.
For measurement purposes, a 9% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1996; the
rate was assumed to decrease gradually to 6% by 2006 and remain at that
level thereafter. Increasing the assumed health care cost trend rates by
1% in each year would increase the accumulated postretirement benefit ob-
ligation as of December 31, 1995, by about $10.4 million and the aggre-
gate of the service and interest cost components of net periodic postre-
tirement benefit cost for the year then ended by about $1.0 million.
In determining the accumulated postretirement benefit obligation,
the weighted average discount rate used was 6.75% and 7.5% on December
31, 1995 and 1994, respectively. The trusts that are holding the plan
assets, except for retiree health care benefits to certain management em-
ployees, are tax-exempt. The expected long-term rate of return on plan
assets for the tax-exempt trusts was 6.5% on December 31, 1995 and 1994.
In 1992, as a result of the Energy Act, PP&L's subsidiaries formerly
engaged in coal mining accrued an additional liability for the cost of
health care of retired miners previously employed by them. The new li-
ability, based on the present value of future benefits, was estimated at
$58 million. As of December 31, 1995, this estimate remains unchanged.
Postemployment Benefits
PP&L provides health and life insurance benefits to disabled employ-
ees and income benefits to eligible spouses of deceased employees. In
December 1993, the Company adopted SFAS 112, "Employers' Accounting for
Postemployment Benefits," which requires a company to accrue, during the
years that the employees render the necessary service, the expected cost
of providing benefits to former or inactive employees after employment
but before retirement. The adoption of SFAS 112 did not have a material
effect on PP&L's net income. Postemployment benefits charged to operat-
ing expenses were $0.2 million, $2.1 million and $6.5 million for 1995,
1994 and 1993, respectively. Postemployment benefits charged to operat-
ing expenses decreased in 1995 from 1994 due to a change in assumptions
used in the 1995 actuarial study.
12. Workforce Reductions - PP&L
PP&L continued to reduce the size of its workforce in 1995 as part
of ongoing efforts to reduce costs. During 1995, PP&L offered a volun-
tary severance program to employees who are members of the IBEW Local
1600 and continued re-engineering efforts that reduced the management
workforce. Total employment declined in 1995 by approximately 225 due to
these two initiatives. In addition, PP&L expects, and has accrued costs
for, additional management workforce reductions in the first half of
1996. The costs of the workforce reductions in 1995 amounted to about
$18.6 million after-tax, or 12 cents per share of common stock.
During 1994, PP&L offered a voluntary early retirement program to
851 employees who were age 55 or older by December 31, 1994. A total of
640 employees elected to retire under the program, at a total cost of
$75.9 million. PP&L recorded the cost of the program as a charge against
income in the fourth quarter of 1994, which reduced net income by $43.4
million, or 28 cents per share of common stock. As a result of the PUC
Decision, which permitted recovery of the PUC-jurisdictional amount
through customer rates, PP&L recorded in 1995 a $37.8 million after-tax
credit to expense, or 24 cents per share of common stock, to reverse the
charge for this program that was recorded in 1994. PP&L estimates annual
savings of $35 million from this program which were included in the re-
cently decided rate case.
13. Jointly Owned Facilities - PP&L
At December 31, 1995, PP&L or a subsidiary owned undivided interests
in the following facilities (millions of dollars):
Merrill
-----Generating Stations------ Creek
Susquehanna Keystone Conemaugh Reservoir
Ownership interest 90.00% 12.34% 11.39% 8.37%
Electric utility plant in
service $4,068 $64 $101
Other property $22
Accumulated depreciation 851 32 32 7
Construction work in progress 35 1 1
Each participant in these facilities provides its own financing.
PP&L receives a portion of the total output of the generating stations
equal to its percentage ownership. PP&L's share of fuel and other oper-
ating costs associated with the stations is reflected on the Consolidated
Statement of Income. The Merrill Creek Reservoir provides water during
periods of low river flow to replace water from the Delaware River used
by PP&L and other utilities in the production of electricity.
14. Subsidiary Coal Reserves - PP&L
In connection with a review by PP&L of its non-core business assets
performed in 1994, a subsidiary of PP&L initiated an evaluation of the
carrying value of its $83.5 million investment in undeveloped coal re-
serves in western Pennsylvania. Outside appraisal firms completed the
evaluation and indicated that due to changing market conditions an im-
pairment had occurred. Accordingly, the carrying value of this invest-
ment was written down to its estimated net realizable value of $9.8 mil-
lion, resulting in a $73.7 million pre-tax charge to income. This write
down resulted in an after-tax charge to income of $40 million in 1994,
which reduced 1994 earnings by approximately 26 cents per share of common
stock.
These reserves were acquired in 1974 with the intention of supplying
future coal-fired generating stations. PP&L concluded that it would not
develop these reserves. In November 1995, the coal reserves were sold
for $52 million, which resulted in a $41.7 million gain, or $20.3 million
after-tax, and increased 1995 earnings by approximately 12 cents per
share of common stock.
15. Commitments and Contingent Liabilities - PP&L
Construction Expenditures
PP&L's construction expenditures are estimated to aggregate $308
million in 1996, $258 million in 1997 and $265 million in 1998, including
AFUDC. For discussion pertaining to construction expenditures, see Re-
view of Resources' Financial Condition and Results of Operations under
the caption "Financial Condition -- Reduction in Capital Expenditure Re-
quirements" on page 35.
Nuclear Operations
PP&L is a member of certain insurance programs which provide cover-
age for property damage to members' nuclear generating stations. Facili-
ties at the Susquehanna station are insured against property damage
losses up to $2.75 billion under these programs. PP&L is also a member
of an insurance program which provides insurance coverage for the cost of
replacement power during prolonged outages of nuclear units caused by
certain specified conditions. Under the property and replacement power
insurance programs, PP&L could be assessed retrospective premiums in the
event of the insurers' adverse loss experience. The maximum amount PP&L
could be assessed under these programs at December 31, 1995 was about
$40.0 million.
NRC regulations require that in the event of an accident, where the
estimated cost of stabilization and decontamination exceeds $100 million,
proceeds of property damage insurance be segregated and used, first, to
place and maintain the reactor in a safe and stable condition and, sec-
ond, to complete required decontamination operations before any insurance
proceeds would be made available to PP&L or the trustee under the Mort-
gage. PP&L's on-site property damage insurance policies for the Susque-
hanna station conform to these regulations.
PP&L's public liability for claims resulting from a nuclear incident
at the Susquehanna station is limited to about $8.9 billion under provi-
sions of The Price Anderson Amendments Act of 1988. PP&L is protected
against this liability by a combination of commercial insurance and an
industry assessment program. A utility's liability under the assessment
program will be indexed not less than once during each five-year period
for inflation and will be subject to an additional surcharge of 5% in the
event the total amount of public claims and costs exceeds the basic as-
sessment. In the event of a nuclear incident at any of the reactors cov-
ered by The Price Anderson Amendments Act of 1988, PP&L could be assessed
up to $151 million per incident, payable at a rate of $20 million per
year, plus the additional 5% surcharge, if applicable.
Fuel Oil Dealers' Litigation
In August 1991, a group of fuel oil dealers in PP&L's service area
filed a complaint against PP&L in District Court alleging that PP&L's
promotion of electric heat pumps and off-peak thermal storage systems had
violated, and continues to violate, the federal antitrust laws. Specifi-
cally, the complaint alleged that PP&L's use of its PUC-filed tariff to
provide a lower electric rate for newly constructed residences equipped
with thermal storage systems, combined with PP&L's program of providing
cash grants to developers and contractors for the installation of high
efficiency heat pumps in these residences allowed PP&L to illegally cap-
ture at least 70% of the market for heating in new residential construc-
tion within its service area.
The complaint requests judgment against PP&L for a sum in excess of
$10 million for the alleged antitrust violations, treble the damages al-
leged to have been sustained by the plaintiffs over the past four years.
The complaint also requests a permanent injunction against all activities
found to be illegal, including the cash grant program.
PP&L filed a motion for summary judgment seeking to dispose of
plaintiffs' claims in this case, and in September 1992, the judge ruled
on this motion and dismissed all counts against PP&L. The plaintiffs ap-
pealed to the Court of Appeals for the Third Circuit. In April 1994, the
Court of Appeals issued a decision which in part affirmed the lower
court's grant of summary judgment for PP&L, but reversed the grant of
summary judgment as to PP&L's payment of cash grants to developers based
upon all-electric builder agreements.
The district court judge has reacquired jurisdiction over this case,
and a trial date has been set for September 1996. PP&L cannot predict
the outcome of this litigation.
Environmental Matters
Air
The Clean Air Act deals, in part, with acid rain under Title IV, at-
tainment of federal ambient ozone standards under Title I, and toxic air
emissions under Title III. The acid rain provisions specified Phase I
sulfur dioxide emission limits for about 55% of PP&L's coal-fired gener-
ating capacity by January 1995, and more stringent Phase II sulfur diox-
ide emission limits for all of PP&L's fossil-fueled generating units by
January 2000. PP&L has complied with the Phase I acid rain provisions
under Title IV. To meet the Phase II limits, PP&L plans to purchase
lower sulfur coal, utilize banked emission allowances and purchase addi-
tional emission allowances instead of relying on FGD. PP&L's decision
not to install FGD, with an estimated capital cost of $413 million, on
the two generating units at the Montour station represents a significant
reduction in previously planned capital expenditures. PP&L filed appli-
cations for Phase II permits for its fossil-fuel fired plants in December
1995. The permit applications state that PP&L will comply with applica-
ble requirements and obtain emission allowances for each ton of sulfur
dioxide emitted.
PP&L has met the initial requirements under Title I to install rea-
sonably available control technology to reduce nitrogen oxide emissions.
An additional two-phase reduction in nitrogen oxides from pre-Clean Air
Act levels has been proposed for the area where PP&L's plants are lo-
cated, a 55% reduction by May 1999 and a 75% reduction by 2003, unless
scientific studies expected to be completed by 1997 indicate a different
reduction is appropriate. The reductions would be required during a
five-month ozone season from May through September. Expenditures to meet
the 1999 requirements are included in the table of projected construction
expenditures in "Financial Condition - Reduction in Capital Expenditure
Requirements" on page 35.
In addition to acid rain and ambient ozone attainment provisions,
the clean air legislation requires the EPA to conduct a study of hazard-
ous air emissions from power plants. EPA is also studying the health ef-
fects of fine particulates which are emitted from power plants and other
sources. Adverse findings from either study could cause the EPA to man-
date additional ultra high efficiency particulate removal baghouses or
specialized flue gas scrubbing to remove certain vaporous trace metals
and certain gaseous emissions.
PP&L currently estimates that additional capital expenditures and
operating costs for environmental compliance under the Clean Air Act will
be incurred beyond 2000 in amounts which are not now determinable but
could be material.
The Pennsylvania Air Pollution Control Act implements the Clean Air
Act. The state legislation essentially requires that new state air emis-
sion standards be no more stringent than federal standards. This legis-
lation is not expected to significantly affect PP&L's plans for compli-
ance with the Clean Air Act.
The PUC's policy regarding the trading and usage of, and the rate-
making treatment for, emission allowances by Pennsylvania electric utili-
ties provides, among other things, that the PUC will not require approval
of specific transactions and that the cost of allowances will be recog-
nized as energy-related power production expenses and recoverable through
the ECR.
Water and Residual Waste
The DEP regulations governing the handling and disposal of indus-
trial (or residual) solid waste require PP&L to upgrade and repermit ex-
isting ash basins at all of its coal-fired generating stations by apply-
ing updated standards for waste disposal. Ash basins that cannot be
repermitted are required to close by July 1997. Any groundwater contami-
nation caused by the basins must also be addressed. Any new ash disposal
facility must meet the rigid siting and design standards set forth in the
regulations. In addition, the siting of future facilities could be af-
fected.
To address the DEP regulations, PP&L is moving forward with its plan
to install dry fly ash handling systems at the Brunner Island, Sunbury
and Holtwood stations similar to Montour's facilities. Dry fly ash han-
dling provides new opportunities for its beneficial use as opposed to
disposing of it on-site.
Groundwater degradation related to fuel oil leakage from underground
facilities and seepage from coal refuse disposal areas and coal storage
piles has been identified at several PP&L generating stations. Many re-
quirements of the DEP regulations address these groundwater degradation
issues. PP&L has reviewed its remedial action plans with the DEP. Reme-
dial work is substantially completed at two generating stations. At
this time, there is no indication that remedial work will be required at
other PP&L generating stations.
The DEP regulations to implement the toxic control provisions of the
Federal Water Quality Act of 1987 and to advance Pennsylvania's toxic
control program authorize the DEP to use both biomonitoring and a water
quality-based chemical-specific approach in the NPDES permits to control
toxics. The current Montour station NPDES permit contains stringent lim-
its for certain toxic metals and increased monitoring requirements.
Toxic reduction studies are being conducted at the Montour station before
the permit limits become effective. Depending on the results of the
studies, additional water treatment facilities may be needed at the Mon-
tour station. Improvements and upgrades are being planned for the Sun-
bury, Brunner Island and Holtwood stations' waste water treatment systems
to meet the anticipated NPDES permit requirements.
Capital expenditures through 2000 to comply with the residual waste
regulations, correct groundwater degradation at fossil-fueled generating
stations and address waste water control at PP&L facilities, are included
in the table of construction expenditures in "Financial Condition - Re-
duction in Capital Expenditure Requirements" on page 35. PP&L currently
estimates that about $68 million of additional capital expenditures could
be required in 2000 and beyond. Actions taken to correct groundwater
degradation, to comply with the DEP's regulations and to address waste
water control are also expected to result in increased operating costs in
amounts which are not now determinable but could be material.
Superfund and Other Remediation
PP&L has signed a consent order with the DEP to address a number of
sites where PP&L may be liable for remediation of contamination. This
may include potential PCB contamination at certain of PP&L's substations
and pole sites; potential contamination at a number of coal gas manufac-
turing facilities formerly owned and operated by PP&L; and oil or other
contamination which may exist at some of PP&L's former generating facili-
ties. As a current or past owner or operator of these sites, PP&L may be
liable under Superfund or other laws for the costs associated with ad-
dressing any hazardous substances at these sites.
These sites have been prioritized based upon a number of factors,
including any potential human health or environmental risk posed by the
site, the public's interest in the site, and PP&L's plans for the site.
Under the consent order, PP&L will not be required to spend more than $5
million per year on investigation and remediation at those sites covered
by the consent order. PP&L will not be required to spend additional
money under the consent order in any year that its total remediation
costs for sites both within and outside the scope of the consent order
exceeds $5 million.
At December 31, 1995, PP&L had accrued $11.2 million, representing
the amount PP&L can reasonably estimate it will have to spend to remedi-
ate sites involving the removal of hazardous or toxic substances includ-
ing those covered by the consent order mentioned above. PP&L is involved
in several other sites where it may be required, along with other par-
ties, to contribute to such remediation. Some of these sites have been
listed by the EPA under Superfund, and others may be candidates for list-
ing at a future date. Future cleanup or remediation work at sites cur-
rently under review, or at sites not currently identified, may result in
material additional operating costs which PP&L cannot estimate at this
time. In addition, certain federal and state statutes, including Super-
fund and the Pennsylvania Hazardous Sites Cleanup Act, empower certain
governmental agencies, such as the EPA and the DEP, to seek compensation
from the responsible parties for the lost value of damaged natural re-
sources. The EPA and the DEP may file such compensation claims against
the parties, including PP&L, held responsible for cleanup of such sites.
Such natural resource damage claims against PP&L could result in material
additional liabilities.
Electric and Magnetic Fields
Concerns have been expressed by some members of the scientific com-
munity and others regarding the potential health effects of EMFs. These
fields are emitted by all devices carrying electricity, including elec-
tric transmission and distribution lines and substation equipment. Fed-
eral, state and local officials are focusing increased attention on this
issue. PP&L is actively participating in the current research effort to
determine whether EMFs cause any human health problems and is taking
steps to reduce EMFs, where practical, in the design of new transmission
and distribution facilities. PP&L is unable to predict what effect the
EMF issue might have on PP&L operations and facilities and the associated
cost.
Subsidiary Issues
In June 1995, the DEP ordered a PP&L subsidiary to abate seepage al-
legedly discharged from a mine formerly operated by that subsidiary. The
subsidiary currently does not believe that it is responsible for this
seepage and has appealed the order to DEP's Environmental Hearing Board,
which has scheduled evidentiary hearings on the matter. A consultant has
been hired to perform additional testing to determine the source of the
seepage. If no connection exists between the mine water and the seepage,
no abatement is required. However, if abatement ultimately is required,
the PP&L subsidiary may be responsible for an extensive and protracted
program to pump water from the mine at a cost which could be material.
Other Environmental Matters
In addition to the issues discussed above, PP&L may be required to
modify, replace or cease operating certain of its facilities to comply
with other statutes, regulations and actions by regulatory bodies involv-
ing environmental matters, including the areas of water and air quality,
hazardous and solid waste handling and disposal and toxic substances. As
a result, PP&L may also incur material capital expenditures and operating
expenses in amounts which are not now determinable.
<PAGE>
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C><C> <C><C> <C> <C>
PP&L RESOURCES, INC.
Income Items -- thousands
Operating revenues .................. $2,751,798 $2,725,099 $2,727,002 $2,744,122 $2,740,715
Operating income.................................. 573,776 501,162 562,808 573,431 582,331
Net Income (e).................................... 322,653 (d) 215,935 (d) 314,241 306,229 303,727
Balance Sheet Items -- thousands (a)
Property, plant and equipment........ 7,178,945 7,194,525 7,145,581 7,019,504 6,929,578
Total assets...................................... 9,491,686 9,371,681 9,454,113 8,191,768 7,934,595
Long-term debt.................................... 2,858,728 2,940,789 2,662,570 2,627,159 2,582,233
Preferred and preference stock
With sinking fund requirements.................. 295,000 295,000 335,000 325,600 364,590
Without sinking fund requirements............... 171,375 171,375 171,375 223,612 231,375
Common equity..................................... 2,597,109 2,454,468 2,425,835 2,366,939 2,298,010
Short-term debt................................... 89,145 74,168 202,260 159,348 147,170
Total capital provided by investors............... 6,011,357 5,935,800 5,797,040 5,702,658 5,623,378
Capital lease obligations ........................ 219,641 224,765 249,025 251,058 271,976
Financial Ratios
Return on average common equity -- % 12.81 8.73 13.06 13.11 13.42
Embedded cost rates (a)
Long-term debt -- %............................. 7.95 8.07 8.63 9.36 9.72
Preferred and preference stock -- %............. 6.09 6.07 6.30 7.36 7.51
Times interest earned before
income taxes.................................... 3.56 2.73 3.33 3.18 3.06
Ratio of earnings to fixed charges --
total enterprise basis (b)...................... 3.47 2.70 3.31 3.15 3.04
Ratio of earnings to fixed charges
and dividends on preferred
and preference stock--total
enterprise basis (b)........................... 2.91 2.27 2.71 2.53 2.43
Common Stock Data
Number of shares
outstanding--thousands
Year-end........................................ 159,403 155,482 152,132 151,885 151,655
Average......................................... 157,649 153,458 151,904 151,676 151,382
Number of shareowners (a)......................... 128,075 132,632 130,677 129,394 127,272
Earnings per share ............................... $2.05 (d) $1.41 (d) $2.07 $2.02 $2.01
Dividends declared per share...................... $1.67 $1.67 $1.65 $1.60 $1.55
Book value per share (a).......................... $16.29 $15.79 $15.95 $15.58 $15.15
Market price per share (a)........................ $25 $19 $27 $27-1/4 $26-3/8
Dividend payout rate -- %......................... 82 119 80 79 77
Dividend yield -- % (c)........................... 7.86 7.74 5.64 6.07 6.69
Price earnings ratio (c).......................... 10.38 15.33 14.14 13.05 11.55
<FN>
(a) At Year-end
(b) Computed using earnings and fixed charges of Resources and its subsidiaries.
Fixed charges consist of interest on short- and long-term debt, other interest charges,
interest on capital lease obligations and the estimated interest
component of other rentals.
(c) Based on average of month-end market prices.
(d) 1995 and 1994 earnings were affected by several one-time adjustments.
See Financial Notes 3, 12, and 14.
(e) Prior years restated to reflect formation of the holding company.
</TABLE>
<PAGE>
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA
<caption
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Pennsylvania Power & Light Company
Income Items -- thousands
Operating revenues ............ $2,751,798 $2,725,099 $2,727,002 $2,744,122 $2,740,715
Operating income............................. 573,776 501,162 562,808 573,431 582,331
Earnings available to PP&L
Resources, Inc. (d)........................ 324,316 (c) 215,038 (c) 314,241 306,229 303,727
Balance Sheet Items -- thousands (a)
Property, plant and equipment.. 7,178,945 7,194,525 7,145,581 7,019,504 6,929,578
Total assets................................. 9,423,795 9,320,682 9,454,113 8,191,768 7,934,595
Long-term debt............................... 2,858,728 2,940,789 2,662,570 2,627,159 2,582,233
Preferred and preference stock
With sinking fund requirements............. 295,000 295,000 335,000 325,600 364,590
Without sinking fund requirements.......... 171,375 171,375 171,375 223,612 231,375
Common equity................................ 2,527,896 2,403,645 2,425,835 2,366,939 2,298,010
Short-term debt.............................. 89,145 74,168 202,260 159,348 147,170
Total capital provided by investors.......... 5,942,144 5,884,977 5,797,040 5,702,658 5,623,378
Capital lease obligations ................... 219,641 224,765 249,025 251,058 271,976
Financial Ratios
Return on average common equity -- % 13.10 8.83 13.06 13.11 13.42
Embedded cost rates (a)
Long-term debt -- %........................ 7.95 8.07 8.63 9.36 9.72
Preferred and preference stock -- %........ 6.09 6.07 6.30 7.36 7.51
Times interest earned before income taxes.... 3.58 2.73 3.33 3.18 3.06
Ratio of earnings to fixed charges -- total
enterprise basis (b)....................... 3.48 2.70 3.31 3.15 3.04
Ratio of earnings to fixed charges and ...........
dividends on preferred and preference
stock -- total enterprise basis (b)....... 2.92 2.26 2.71 2.53 2.43
Revenue Data
Average price per kwh billed for
system sales - cents.................... 7.10 7.14 7.27 7.39 7.30
Sales Data
Customers(a)................... 1,226,089 1,213,023 1,203,139 1,186,682 1,173,680
Electric energy sales billed --
millions of kwh
Residential ............................... 11,300 11,444 11,043 10,604 10,385
Commercial ................................ 9,948 9,716 9,373 9,039 8,861
Industrial ................................ 9,845 9,536 9,100 8,746 8,456
Other ..................................... 1,578 1,618 1,534 1,366 1,334
System sales ............................ 32,671 32,314 31,050 29,755 29,036
Contractual sales to other
major utilities ......................... 7,676 6,307 7,142 7,327 7,183
PJM energy sales .......................... 2,358 3,158 4,142 5,160 7,553
Total electric energy sales billed ...... 42,705 41,779 42,334 42,242 43,772
Number of Full-Time Employees (a).............. 6,661 7,431 7,677 7,882 8,043
<FN>
(a) At Year-end
(b) Computed using earnings and fixed charges of PP&L and its subsidiaries.
Fixed charges consist of interest on short- and long-term debt, other
interest charges, interest on capital lease obligations and the estimated
interest component of other rentals.
(c) 1995 and 1994 earnings were affected by several one-time adjustments.
See Financial Notes 3, 12, and 14.
(d) Prior years restated to reflect formation of the holding company.
</TABLE>
<PAGE>
SHAREOWNER AND INVESTOR INFORMATION
The following information is provided as a service to shareowners and other
investors. For any questions you may have or additional information you
may require about PP&L Resources and its subsidiaries, please feel free to
call the toll-free number listed below, or write to:
George I. Kline, Manager
Investor Services Department
Pennsylvania Power & Light Co.
Two North Ninth Street
Allentown, PA 18101-1179
Toll-Free Phone Number: For information regarding your investor account,
or other inquiries, call toll-free: 1-800-345-3085.
Annual Meeting: The annual meetings of shareowners are held each year on
the fourth Wednesday of April. The 1996 annual meetings will be held on
Wednesday, April 24, 1996, at Lehigh University's Stabler Arena, Lower
Saucon Valley Goodman Campus Complex, Bethlehem, PA. A reservation card
for meeting attendance is included with shareowners' proxy material.
Proxy Material: A proxy statement, a proxy and a reservation card for
Resources' and PP&L's annual meetings are mailed to all shareowners of
record as of February 28, 1996.
Dividends: For 1996, the dates on which the declaration of dividends will
be considered by the board or its executive committee are: February 28,
May 22, August 28, and November 27, for payment on April 1, July 1 and
October 1, 1996, and January 1, 1997, respectively. Dividend checks are
mailed ahead of those dates with the intention they arrive as close as
possible to the payment dates.
Record Dates: The 1996 record dates for dividends are March 9, June 10,
September 10 and December 10.
Direct Deposit of Dividends: Shareowners may choose to have their dividend
checks deposited directly into their checking or savings account.
Quarterly dividend payments are electronically credited on the dividend
date, or the first business day thereafter.
Dividend Reinvestment Plan: Shareowners may choose to have dividends on
their Resources' common stock or PP&L preferred stock reinvested in
Resources' common stock instead of receiving the dividend by check.
Certificate Safekeeping: Shareowners participating in the Dividend
Reinvestment Plan may choose to have their common stock certificates
forwarded to PP&L for safekeeping. These shares will be registered in the
name of PP&L as agent for plan participants and will be credited to the
participants' accounts.
Lost Dividend or Interest Checks: Dividend or interest checks lost by
investors, or those that may be lost in the mail, will be replaced if the
check has not been located by the 10th business day following the payment
date.
Transfer of Stock or Bonds: Stock or bonds may be transferred from one
name to another or to a new account in the name of another person. Please
call or write regarding transfer instructions.
Bondholder Information: Much of the information and many of the procedures
detailed here for shareowners also apply to bondholders. Questions related
to bondholder accounts should be directed to Investor Services.
Lost Stock or Bond Certificates: Please call or write to Investor Services
for an explanation of the procedure to replace lost stock or bond
certificates.
Publications: Several publications are prepared each year and sent to all
investors of record and to others who request their names be placed on our
mailing lists. These publications are:
PP&L Resources
Annual Report -- published and mailed to all shareowners of record of
Resources in mid-March.
Shareowners' Newsletter -- an easy-to-read newsletter containing current
items of interest to shareowners -- published and mailed at the beginning
of each quarter. Additionally, a special year-end edition containing
unaudited results of the year's operations is mailed in early February.
Quarterly Review -- published in May, July and October to provide quarterly
financial information to investors.
Periodic Mailings: Letters regarding new investor programs, special items
of interest, or other pertinent information are mailed on a non-scheduled
basis as necessary.
Duplicate Mailings: Annual reports and other investor publications are
mailed to each investor account. If you have more than one account, or if
there is more than one investor in your household, you may call or write to
request that only one publication be delivered to your address. Please
provide account numbers for all duplicate mailings.
Form 10-K: Resources' annual report, filed with the Securities and
Exchange Commission on Form 10-K, is available about mid-March. Investors
may obtain a copy, at no cost, by calling or writing to Investor Services.
Listed Securities: Fiscal Agents:
New York Stock Exchange Stock Transfer Agents and Registrars
PP&L Resources, Inc.: Norwest Bank Minnesota, N.A.
Common Stock (Code: PPL) Shareowner Services
161 North Concord Exchange
Pennsylvania Power & Light Co.: South St. Paul, MN 55075
4-1/2% Preferred Stock
(Code: PPLPRB) Pennsylvania Power & Light Co.
4.40% Series Preferred Stock Investor Services Department
(Code: PPLPRA) Dividend Disbursing Office and
Dividend Reinvestment Plan Agent
Philadelphia Stock Exchange Pennsylvania Power & Light Co.
PP&L Resources, Inc.: Investor Services Department
Common Stock Mortgage Bond Trustee
Bankers Trust Co.
Pennsylvania Power & Light Co.: Attn: Security Transfer Unit
4-1/2% Preferred Stock P.O. Box 291569
3.35% Series Preferred Stock Nashville, TN 37229
4.40% Series Preferred Stock Bond Interest Paying Agent
4.60% Series Preferred Stock Pennsylvania Power & Light Co.
Investor Services Department
<PAGE>
<TABLE>
QUARTERLY FINANCIAL, COMMON STOCK PRICE AND DIVIDEND DATA (Unaudited)
PP&L Resources, Inc. and Subsidiaries
(Thousands of Dollars, except per share data)
<CAPTION>
For the Quarters Ended (a)
March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
1995
Operating revenues..................... $727,485 $609,213 $682,249 $732,851
Operating income............................ 161,427 104,272 179,122 128,955
Net income.................................. 101,320 44,719 87,180 89,434
Earnings per common share (b)............... 0.65 0.28 0.55 0.56
Dividends declared per common share (c)..... 0.4175 0.4175 0.4175 0.4175
Price per common share
High...................................... 20 7/8 19 7/8 23 1/2 26 1/2
Low....................................... 19 1/8 17 7/8 18 5/8 21 5/8
1994
Operating revenues..................... $769,453 $640,218 $661,142 $654,286
Operating income............................ 169,306 108,378 131,933 91,545
Net income (loss) (d)....................... 106,088 47,057 70,012 (7,222)
Earnings (loss) per common share (b)........ 0.70 0.31 0.46 (0.05)
Dividends declared per common share (c)..... 0.4175 0.4175 0.4175 0.4175
Price per common share
High...................................... 27 1/4 24 7/8 21 7/8 20 3/4
Low....................................... 22 5/8 19 1/2 19 1/4 18 5/8
(a) PP&L's electric utility business is seasonal in nature with peak sales
periods generally occurring in the winter months. In addition earnings in
several quarters were affected by several one-time adjustments.
Accordingly, comparisons among quarters of a year may not be indicative of
overall trends and changes in operations.
(b) The sum of the quarterly amounts may not equal annual earnings per share
due to changes in the number of common shares outstanding during the
year or rounding.
(c) Resources has paid quarterly cash dividends on its common stock in every
year since 1946. The dividends paid per share in 1995 and 1994 were $1.67
and $1.665, respectively. The most recent regular quarterly dividend paid
by Resources was 41.75 cents per share (equivalent to $1.67 per annum)
paid January 1, 1996. Future dividends will be dependent upon future
earnings, financial requirements and other factors.
(d) Restated to reflect formation of the holding company.
</TABLE>
<PAGE>
<TABLE>
QUARTERLY FINANCIAL DATA (Unaudited)
Pennsylvania Power & Light Company and Subsidiaries
(Thousands of Dollars)
<CAPTION>
For the Quarters Ended (a)
March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
1995
Operating revenues.......................... $727,485 $609,213 $682,249 $732,851
Operating income.................................. 161,427 104,272 179,122 128,955
Net income ....................................... 108,207 51,887 94,762 97,228
Earnings available to PP&L Resources.............. 101,265 44,945 87,820 90,286
1994 (b)
Operating revenues.......................... $769,453 $640,218 $661,142 $654,286
Operating income.................................. 169,306 108,378 131,933 91,545
Net income (loss)................................. 113,634 53,643 76,598 (432)
Earnings (loss) available to PP&L Resources....... 106,056 46,701 69,656 (7,375)
<FN>
(a) PP&L's electric utility business is seasonal in nature with peak sales
periods generally occurring in the winter months. Accordingly, comparisons
among quarters of a year may not be indicative of overall trends
and changes in operations.
(b) Restated to reflect the retroactive dividend of PMDC to PP&L Resources as
described in Financial Note 1.
</TABLE>
<PAGE>
<TABLE>
PP&L Resources, Inc.
Pennsylvania Power & Light Company
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
Column B Column C Column D Column E
Column A Deductions
from
Balance Additions Reserves -
at Charges Losses or Balance at
Beginning Charged to Other Expenses End of
of Period to Income Accounts Applicable Period
Description
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
Reserves deducted from assets in
the Balance Sheet
Uncollectible accounts ............................ $29,083 $24,916 $19,088 $34,911
Obsolete inventory - Materials and supplies........ 0 14,700 14,700
Year Ended December 31, 1994
Reserves deducted from assets in
the Balance Sheet
Uncollectible accounts ............................ 29,429 16,942 17,288 29,083
Obsolete inventory - Materials and supplies........ 172 172 0
Year Ended December 31, 1993
Reserves deducted from assets in
the Balance Sheet
Uncollectible accounts ............................ 27,660 18,660 16,891 29,429
Obsolete inventory - Materials and supplies ....... 1,406 1,234 172
</TABLE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information for this item concerning directors of
Resources will be set forth in the sections entitled
"Nominees for Directors" and "Directors Continuing in
Office" in Resources' 1996 Notice of Annual Meeting and
Proxy Statement, which will be filed with the SEC not later
than 120 days after December 31, 1995, and which information
is incorporated herein by reference. Information required
by this item concerning the executive officers of Resources
is set forth on page 22 through 23 of this report.
Information for this item concerning directors of PP&L
will be set forth in the sections entitled "Nominees for
Directors" and "Directors Continuing in Office" in PP&L's
1996 Notice of Annual Meeting and Proxy Statement, which
will be filed with the SEC not later than 120 days after
December 31, 1995, and which information is incorporated
herein by reference. Information required by this item
concerning the executive officers of PP&L is set forth on
page 22 through 23 of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information for this item for Resources will be set
forth in the sections entitled "Compensation of Directors,"
"Summary Compensation Table" and "Retirement Plans for
Executive Officers" in Resources' 1996 Notice of Annual
Meeting and Proxy Statement, which will be filed with SEC
not later than 120 days after December 31, 1995, and which
information is incorporated herein by reference.
Information for this item for PP&L will be set forth in
the sections entitled "Compensation of Directors," "Summary
Compensation Table" and "Retirement Plans for Executive
Officers" in PP&L's 1996 Notice of Annual Meeting and Proxy
Statement, which will be filed with SEC not later than 120
days after December 31, 1995, and which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Information for this item for Resources will be set
forth in the section entitled "Stock Ownership" in
Resources' 1996 Notice of Annual Meeting and Proxy
Statement, which will be filed with the SEC not later than
120 days after December 31, 1995, and which information is
incorporated herein by reference.
Information for this item for PP&L will be set forth in
the section entitled "Stock Ownership" in PP&L's 1996 Notice
of Annual Meeting and Proxy Statement, which will be filed
with the SEC not later than 120 days after December 31,
1995, and which information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements - included in response to Item 8.
PP&L Resources, Inc.
Independent Auditors' Reports
Consolidated Statements of Income for the Three
Years Ended December 31, 1995
Consolidated Statements of Cash Flows for
the Three Years Ended December 31, 1995
Consolidated Balance Sheet at December 31, 1995
and 1994
Consolidated Statement of Shareowners' Common Equity
for the Three Years Ended December 31, 1995
Consolidated Statement of Preferred and Preference
Stock at December 31, 1995 and 1994
Notes to Financial Statements
Pennsylvania Power & Light Company
Independent Auditors' Reports
Consolidated Statements of Income for the Three
Years Ended December 31, 1995
Consolidated Statements of Cash Flows for
the Three Years Ended December 31, 1995
Consolidated Balance Sheet at December 31, 1995
and 1994
Consolidated Statement of Shareowner's Common Equity
for the Three Years Ended December 31, 1995
Consolidated Statement of Preferred and Preference
Stock at December 31, 1995 and 1994
Consolidated Statement of Long-Term Debt at
December 31, 1995 and 1994
Notes to Financial Statements
2. Supplementary Data and Supplemental Financial Statement
Schedule - included in response to Item 8.
Schedule II - Valuation and Qualifying Accounts and
Reserves for the Three Years Ended
December 31, 1995
All other schedules are omitted because of the absence
of the conditions under which they are required or
because the required information is included in the
financial statements or notes thereto.
3. Exhibits
Exhibit Index on page 97.
(b) Reports on Form 8-K:
None.
<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.
PP&L Resources, Inc.
(Registrant)
Pennsylvania Power & Light Company
(Registrant)
By (Signed) William F. Hecht
William F. Hecht - Chairman, President
and Chief Executive
Officer(PP&L Resources,
Inc. and Pennsylvania
Power & Light Company)
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 date indicated.
TITLE
By (Signed) William F. Hecht Principal Executive
William F. Hecht - Chairman, President Officer and Director
and Chief Executive
Officer (PP&L Resources,
Inc. and Pennsylvania
Power & Light Company)
By (Signed) R. E. Hill Principal Financial
R. E. Hill - Senior Vice President- Officer
Financial and Treasurer
(PP&L Resources, Inc.)
Senior Vice President-
Financial (Pennsylvania
Power & Light Company)
By (Signed) J. J. McCabe Chief Accounting
J. J. McCabe - Vice President and Officer
Controller(PP&L Resources,
Inc. and Pennsylvania Power
& Light
E. Allen Deaver Clifford L. Jones
Nance K. Dicciani John T. Kauffman
William J. Flood Robert Y. Kaufman
Daniel G. Gambet Francis A. Long Directors
Elmer D. Gates Norman Robertson
Derek C. Hathaway David L. Tressler
Stuart Heydt
By (Signed) William F. Hecht
William F. Hecht, Attorney-in-fact Date: March 1, 1996
<PAGE>
EXHIBIT INDEX
The following Exhibits indicated by an asterisk preceding
the Exhibit number are filed herewith. The balance of the
Exhibits have heretofore been filed with the Commission and
pursuant to Rule 12(b)-32 are incorporated herein by
reference. Exhibits indicated by a # are filed or listed
pursuant to Item 601(b)(10)(iii) of Regulation S-K.
3(i)-1 - Articles of Incorporation of Resources
(Exhibit B to Proxy Statement of PP&L and
Prospectus of Resources, dated March 9,
1995)
3(i)-2 - Restated Articles of Incorporation of PP&L
(Exhibit A to the Proxy Statement of PP&L
and Prospectus of Resources dated March 9,
1995)
3(ii)-1 - By-laws of Resources (Exhibit 3.2 to
Registration Statement No. 33-57949)
3(ii)-2 - By-laws of PP&L (Exhibit 3(ii) to PP&L's
Form 10-K Report (File No. 1-905) for the
year ended December 31, 1993)
4(a)-1 - Amended and Restated Employee Stock
Ownership Plan, dated October 26, 1988
(Exhibit 4(b) to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1988)
4(a)-2 - Amendment No. 1 to said Employee Stock
Ownership Plan, effective January 1, 1989
(Exhibit 4(b)-2 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1989)
4(a)-3 - Amendment No. 2 to said Employee Stock
Ownership Plan, effective January 1, 1990
(Exhibit 4(b)-3 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1989)
4(a)-4 - Amendment No. 3 to said Employee Stock
Ownership Plan, effective January 1, 1991
(Exhibit 4(b)-4 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1990)
4(a)-5 - Amendment No. 4 to said Employee Stock
Ownership Plan, effective January 1, 1991
(Exhibit 4(a)-5 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1991)
4(a)-6 - Amendment No. 5 to said Employee Stock
Ownership Plan, effective October 23, 1991
(Exhibit 4(a)-6 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1991)
4(a)-7 - Amendment No. 6 to said Employee Stock
Ownership Plan, effective January 1, 1990
and January 1, 1992 (Exhibit 4(a)-7 to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1991)
4(a)-8 - Amendment No. 7 to said Employee Stock
Ownership Plan, effective January 1, 1992
(Exhibit 4(a)-8 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1991)
4(a)-9 - Amendment No. 8 to said Employee Stock
Ownership Plan, effective July 1, 1992
(Exhibit 4(a)-9 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1992)
4(a)-10 - Amendment No. 9 to said Employee Stock
Ownership Plan, effective January 1, 1993
(Exhibit 4(a)-10 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1992)
4(a)-11 - Amendment No. 10 to said Employee Stock
Ownership Plan, effective January 1, 1993
(Exhibit 4(a)-11 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1993)
4(a)-12 - Amendment No. 11 to said Employee Stock
Ownership Plan, effective January 1, 1994
(Exhibit 4(a)-12 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1994)
4(a)-13 - Amendment No. 12 to said Employee Stock
Ownership Plan, effective January 1, 1994
(Exhibit 4(a)-13 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1994)
*4(a)-14 - Amendment No. 13 to said Employee Stock
Ownership Plan, effective April 27, 1995
4(a)-15 - Amendment No. 14 to said Employee Stock
Ownership Plan, effective January 1, 1989
and January 1, 1995 (Exhibit 4(a)-14 to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1994)
*4(a)-16 - Amendment No. 15 to said Employee Stock
Ownership Plan, effective October 25, 1995
4(b)-l - Mortgage and Deed of Trust, dated as of
October l, 1945, between PP&L and Guaranty
Trust Company of New York (now Morgan
Guaranty Trust Company of New York), as
Trustee (Exhibit 2(a)-4 to Registration
Statement No. 2-60291)
4(b)-2 - Supplement, dated as of July 1, 1954, to
said Mortgage and Deed of Trust (Exhibit
2(b)-5 to Registration Statement
No. 219255)
4(b)-3 - Supplement, dated as of June l, 1966, to
said Mortgage and Deed of Trust (Exhibit
2(a)-l3 to Registration Statement No.
2-60291)
4(b)-4 - Supplement, dated as of November 1, 1967,
to said Mortgage and Deed of Trust (Exhibit
2(a)-14 to Registration Statement No. 2-
60291)
4(b)-5 - Supplement, dated as of January 1, 1969, to
said Mortgage and Deed of Trust (Exhibit
2(a)-16 to Registration Statement No. 2-
60291)
4(b)-6 - Supplement, dated as of June 1, 1969, to
said Mortgage and Deed of Trust (Exhibit
2(a)-17 to Registration Statement No.
2-60291)
4(b)-7 - Supplement, dated as of February 1, 1971,
to said Mortgage and Deed of Trust (Exhibit
2(a)-19 to Registration Statement No. 2-
60291)
4(b)-8 - Supplement, dated as of February 1, 1972,
to said Mortgage and Deed of Trust (Exhibit
2(a)-20 to Registration Statement No. 2-
60291)
4(b)-9 - Supplement, dated as of January 1, 1973, to
said Mortgage and Deed of Trust (Exhibit
2(a)-21 to Registration Statement No. 2-
60291)
4(b)-10 - Supplement, dated as of October 1, 1989, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated November 6, 1989)
4(b)-11 - Supplement, dated as of July 1, 1991, to
said Mortgage and Deed of Trust
(Exhibit 4(a) to PP&L's Form 8-K Report
(File No. 1-905) dated July 29, 1991)
4(b)-12 - Supplement, dated as of May 1, 1992, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated June 1, 1992)
4(b)-13 - Supplement, dated as of November 1, 1992,
to said Mortgage and Deed of Trust (Exhibit
4(b)-29 to PP&L's Form 10-K Report (File 1-
905) for the year ended December 31, 1992)
4(b)-14 - Supplement, dated as of February 1, 1993,
to said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated February 16, 1993)
4(b)-15 - Supplement, dated as of April 1, 1993, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated April 30, 1993
4(b)-16 - Supplement, dated as of June 1, 1993, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated July 7, 1993)
4(b)-17 - Supplement, dated as of October 1, 1993, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated October 29, 1993)
4(b)-18 - Supplement, dated as of February 15, 1994,
to said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated March 11, 1994)
4(b)-19 - Supplement, dated as of March 1, 1994, to
said Mortgage and Deed of Trust (Exhibit
4(b) to PP&L's Form 8-K Report (File No. 1-
905) dated March 11, 1994)
4(b)-20 - Supplement, dated as of March 15, 1994, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated March 30, 1994)
4(b)-21 - Supplement, dated as of September 1, 1994,
to said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K (File No. 1-905)
dated October 3, 1994)
4(b)-22 - Supplement, dated as of October 1, 1994, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated October 3, 1994)
4(b)-23 - Supplement, dated as of August 1, 1995, to
said Mortgage and Deed of Trust (Exhibit
6(a) to PP&L's Form 10-Q Report (File No.
1-905) dated November 14, 1995)
l0(a)-1 - Revolving Credit Agreement, dated as of
August 30, 1994, between PP&L and the Banks
named therein
l0(b) - Pollution Control Facilities Agreement,
dated as of May 1, 1973, between PP&L and
the Lehigh County Industrial Development
Authority (Exhibit 5(z) to Registration
Statement No. 2-60834)
l0(c)-l - Interconnection Agreement, dated September
26, 1956, among Public Service Electric &
Gas Company, Philadelphia Electric Company,
PP&L, Baltimore Gas & Electric Company,
Pennsylvania Electric Company, Metropolitan
Edison Company, New Jersey Power & Light
Company and Jersey Central Power & Light
Company (Exhibit 5(e) to Registration
Statement No. 2-60291)
l0(c)-2 - Supplemental Agreement, dated April 1,
1974, to said Interconnection Agreement
(Exhibit 5(f)-4 to Registration Statement
No. 2-51312)
l0(c)-3 - Supplemental Agreement, dated June 15,
1977, to said Interconnection Agreement
(Exhibit 5(e)-5 to Registration Statement
No. 2-60291)
l0(c)-4 - Agreement of Settlement and Compromise,
dated July 25, 1980, among the parties to
said Interconnection Agreement (Exhibit
20(b)-8 to PP&L's Form l0-Q Report (File
No. l-905) for the quarter ended September
30, 1980)
l0(c)-5 - Supplemental Agreement, dated March 26,
1981, to said Interconnection Agreement
(Exhibit l0(b)-l0 to PP&L's Form l0-K
Report (File No. 1-905) for the year ended
December 31, 1981)
l0(c)-6 - Revisions to Schedules 4.02, 7.01, and
9.01, all effective August 9, 1982, to said
Interconnection Agreement (Exhibit 10(e)-11
to PP&L's Form l0-K Report (File No. l-905)
for the year ended December 31, 1982)
l0(c)-7 - Schedules 4.02, 5.01, 5.02, 5.04, 5.05,
6.01, 6.03, 6.04, 7.01, 7.02 7.03; all
effective February 6, 1984, to said
Interconnection Agreement (Exhibit 10(e)-8
to PP&L's Form l0-K Report (File No. 1-905)
for the year ended December 31, 1985)
l0(c)-8 - Schedule 5.03, Revision l, Exhibit A,
revised May 31, 1985, to said Intercon-
nection Agreement (Exhibit 10(e)-10 to
PP&L's Form l0-K Report (File No. 1-905)
for the year ended December 31, 1985)
10(c)-9 - Schedule 4.02, Revision No. 2, effective
December 4, 1989, to said Interconnection
Agreement (Exhibit 10(d)-13 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1989)
10(c)-10 - Schedule 5.06, Revision No. 1, effective
June 1, 1990, to said Interconnection
Agreement (Exhibit 10(d)-14 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1990)
10(c)-11 - Schedule 2.21, Revision No. 1, effective
June 1, 1990, to said Interconnection
Agreement (Exhibit 10(d)-15 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1990)
10(c)-12 - Schedule 2.212, Revision No. 2, effective
June 1, 1990, to said Interconnection
Agreement (Exhibit 10(d)-16 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1990)
10(c)-13 - Schedule 9.01, Revision No. 4, effective
June 1, 1992, to said Interconnection
Agreement (Exhibit 10(d)-18 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1990)
10(c)-14 - Schedule 3.01, Revision No. 3, effective
June 1, 1992, to said Interconnection
Agreement (Exhibit 10(c)-15 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1991)
10(c)-15 - Schedule 4.01, Revision No. 13, effective
June 1, 1993, to said Interconnection
Agreement (Exhibit 10(c)-15 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1993)
l0(d) - Capacity and Energy Sales Agreement, dated
June 29, 1983, between PP&L and Atlantic
City Electric Company (Exhibit 10(f)-2 to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1983)
10(e)-1 - Capacity and Energy Sales Agreement, dated
March 9, 1984, between PP&L and Jersey
Central Power & Light Company (Exhibit
l0(f)-3 to PP&L's Form l0-K Report (File
No. 1-905) for the year ended December 31,
1984)
10(e)-2 - First Supplement, effective February 28,
1986, to said Capacity and Energy Sales
Agreement (Exhibit 10(e)-4 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1986)
10(e)-3 - Second Supplement, effective January 1,
1987, to said Capacity and Energy Sales
Agreement (Exhibit 10(g)-3 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1989)
10(e)-4 - Amendments to Exhibit A, effective
October 1, 1987, to said Capacity and
Energy Sales Agreement (Exhibit 10(e)-6 to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1987)
10(e)-5 - Third Supplement, effective December 1,
1988, to said Capacity and Energy Sales
Agreement (Exhibit 10(g)-5 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1989)
10(e)-6 - Fourth Supplement, effective December 1,
1988, to said Capacity and Energy Sales
Agreement (Exhibit 10(g)-6 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1989)
10(f)-1 - Capacity and Energy Sales Agreement, dated
December 21, 1989, between PP&L and GPU
Service Corporation (Exhibit 10(h) to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1989)
10(f)-2 - First Supplement, effective June 1, 1991,
to said Capacity and Energy Sales Agreement
(Exhibit 10(f)-2 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1991)
10(g)-1 - Capacity and Energy Sales Agreement, dated
January 28, 1988, between PP&L and
Baltimore Gas and Electric Company (Exhibit
10(e)-7 to PP&L's Form 10-K Report (File
No. 1-905) for the year ended December 31,
1987)
10(g)-2 - First Supplement, effective November 1,
1988, to said Capacity and Energy Sales
Agreement (Exhibit 10(i)-2 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1989)
10(g)-3 - Second Supplement, effective June 1, 1989,
to said Capacity and Energy Sales Agreement
(Exhibit 10(i)-3 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1989)
10(g)-4 - Third Supplement, effective June 1, 1991,
to said Capacity and Energy Sales Agreement
(Exhibit 10(g)-4 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1991)
#10(h)-1 - Amended and Restated Directors Deferred
Compensation Plan, effective July 1, 1995
(Exhibit C to Proxy Statement of PP&L and
Prospectus of Resources, dated March 9,
1995)
*#10(i)-1 - Amended and Restated Directors Retirement
Plan, effective April 27, 1995
#10(j)-1 - Amended and Restated Deferred Compensation
Plan for Executive Officers, effective
January 1, 1990 (Exhibit 10(s) to PP&L's
Form 10-K Report (File No. 1-905) for the
year ended December 31, 1990)
#10(j)-2 - Amendment No. 1 to said Officers Deferred
Compensation Plan, effective January 1,
1991 (Exhibit 10(j)-2 to PP&L's Form 10-K
Report (File No. 1-905) for the year ended
December 31, 1991)
#10(j)-3 - Amendment No. 2 to said Officers Deferred
Compensation Plan, effective October 23,
1991 (Exhibit 10(j)-3 to PP&L's Form 10-K
Report (File No. 1-905) for the year ended
December 31, 1991)
#10(j)-4 - Amendment No. 3 to said Officers Deferred
Compensation Plan, effective January 1,
1992 and April 1, 1992 (Exhibit 10(j)-4 to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1991)
#10(j)-5 - Amendment No. 4 to said Officers Deferred
Compensation Plan, effective January 1,
1995 (Exhibit 10(j)-5 to PP&L's Form 10-K
Report (File No. 1-905) for the year ended
December 31, 1994)
*#l0(k) - Amended and Restated Supplemental Executive
Retirement Plan, effective August 31, 1995
*#10(l) - Amended and Restated Executive Retirement
Security Plan, effective August 31, 1995
#10(m)-1 - Amended and Restated Incentive Compensation
Plan, effective January 1, 1995 (Exhibit D
to Proxy Statement of PP&L and Prospectus
of PP&L Resources, Inc., dated March 9,
1995)
*#10(m)-2 - Amendment No. 1 to said Amended and
Restated Incentive Compensation Plan,
effective April 27, 1995
*#10(n) - Description of Executive Compensation
Incentive Award Program 1/
Footnote 1/
This description is provided pursuant to 17 C.F.R.
Subsection 229.601(b)(10)(iii)(A).
10(o) - Conformed Nuclear Fuel Lease, dated as of
February 1, 1982, between PP&L, as lessee,
and Newton I. Waldman, not in his
individual capacity, but solely as
Cotrustee of the Pennsylvania Power & Light
Energy Trust, as lessor (Exhibit 10(g) to
PP&L's Form l0-K Report (File No. 1-905)
for the year ended December 31, 1981)
*12(a) - Resources' Computation of Ratio of Earnings
to Fixed Charges
*12(b) - PP&L's Computation of Ratio of Earnings to
Fixed Charges
*23(a) - Consent of Price Waterhouse LLP
*23(b) - Consent of Deloitte & Touche LLP
*24 - Power of Attorney
*27 - Financial Data Schedule
*99 - Schedule of Property, Plant and Equipment
________________________
Certain long-term debt instruments of PP&L's consolidated
subsidiaries have been omitted from this filing pursuant to
17 C.F.R. Subsection 229.601(b)(4)(iii)(A). PP&L will
furnish a copy of any such instrument to the Commission upon
request.
<PAGE>
(PP&L LOGO
APPEARS HERE)
PP&L Resources, Inc.
Two North Ninth Street * Allentown, PA 18101
Bulk Rate
U.S. Postage
PAID
Allentown, PA.
Permit No. 104
<PAGE>
AMENDMENT NO. 13
TO
PENNSYLVANIA POWER & LIGHT COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company")
has adopted the Pennsylvania Power & Light Company Employee Stock
Ownership Plan ("Plan") effective January 1, 1975; and
WHEREAS, the Plan was amended and restated effective
January 1, 1987, and subsequently amended by Amendment Nos. 1, 2,
3, 4, 5, 6, 7, 8, 9, 10, 11 and 12; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective as of the "Effective Time" as defined in the
Agreement and Plan of Exchange between Pennsylvania Power & Light
Company and PP&L Resources, Inc. the following sections of
Articles I, II, IV, V, VII, X and XII are amended to read:
1.1 The purpose of this Plan is (a) to provide for a
portion of the present and future capital needs of the Company
(b) to provide Employees some ownership of stock of PP&L
Resources, Inc., substantially in proportion to their relative
incomes, without requiring any reduction in pay or other employee
benefits, or the surrender of any other rights on the part of
Employees, and (c) to invest primarily in the stock of PP&L
Resources, Inc.
2.12 "Dividend-based Contribution" shall mean the
contribution made by the Company or Resources in accordance with
Section 4.4.
2.30 "Resources" shall mean PP&L Resources, Inc. and its
successors.
2.33 "Stock" shall mean the common stock of Resources.
4.4 Dividend-based Contribution. Commencing with the
1990 Plan Year, the Company or Resources may contribute to the
Plan an amount determined at the sole discretion of the Company
or Resources relating to the reduction in taxes arising out of
the payment of dividends to participants and the contribution
thereof to the Plan. The Dividend-based Contribution is in
addition to contributions made pursuant to Sections 4.1, 4.2 and
4.3. All contributions by the Company are expressly conditioned
upon their deductibility for federal income tax purposes.
4.5 Investment in Stock. All TRASOP, PAYSOP, Dividend-
based, and Matching Contributions may be in cash or in Stock;
provided, however, that (a) if a Contribution is in cash, the
Trustee shall use such Contribution to purchase Stock from
Resources or others on or before the last day on which the
Contribution could have been made under Section 4.1(c) and (b) if
a Contribution is in Stock, the number of shares contributed will
be determined by the Market Value of the Stock.
5.3 Allocation of Earnings. Any dividends or other
distributions on the Stock allocated to a Participant's Account
shall be paid no later than 90 days after the close of the Plan
Year to the Participant in cash either by the Trustee or directly
by the Company or Resources.
5.5 Maximum Allocation. The provisions of this Section
shall be construed to comply with Section 415 of the Code.
(a) Notwithstanding anything in this Article to the
contrary, in no event shall the sum of (1) any Company or
Resources contributions and other employer contributions, (2) any
forfeitures and (3) the Participant's own contributions, if any,
allocated for any Limitation Year to any Participant under this
and any other defined contribution plan maintained by the Company
or any 50% Affiliated Company, exceed the lesser of (A) $30,000
plus the lesser of $30,000 or the value of the Stock contributed
to the Plan for such Plan Year or (B) twenty-five percent (25%)
of any Participant's compensation for the Limitation Year.
Amounts described in Sections 415(1) and 419A(d)(2) of the Code
contributed for any Plan Year for the benefit of any Participant
shall be treated as annual additions to the extent provided in
such Sections.
8.3 Reliance on Reports and Certificates. The members of
the Employee Benefit Plan Board and the officers and directors of
the Company and Resources shall be entitled to rely upon all
valuations, certificates and reports made by the Trustee or by
any duly appointed accountant, and upon all opinions given by any
duly appointed legal counsel.
8.5 Indemnification of the Employee Benefit Plan Board.
Each member of the Employee Benefit Plan Board, the
Administrative Committee, and each of their designees shall be
indemnified by the Company against expenses (other than amounts
paid in settlement to which the Company does not consent)
reasonably incurred by him in connection with any action to which
he may be a party by reason of the delegation to him of
administrative functions and duties, except in relation to
matters as to which he shall be adjudged in such action to be
personally guilty of negligence or willful misconduct in the
performance of his duties. The foregoing right to
indemnification shall be in addition to such other rights as the
member of the Employee Benefit Plan Board, the Administrative
Committee, and each of their designees may enjoy as a matter of
law or by reason of insurance coverage of any kind. Rights
granted hereunder shall be in addition to and not in lieu of any
rights to indemnification to which the member of the Employee
Benefit Plan Board, the Administrative Committee and each of
their designees may be entitled pursuant to the bylaws of the
Company. Service on the Employee Benefit Plan Board shall be
deemed in partial fulfillment of the Employee Benefit Plan Board
member's function as an employee, officer and/or director of the
Company or Resources, if he serves in such other capacity as
well.
10.1 Amendment. The Plan and the Trust Agreement may be
amended or terminated at any time by or pursuant to action of the
board of directors of Resources. In addition, the EBPB may make
such amendments to the Plan as it deems necessary or desirable
except those amendments which substantially increase the cost of
the Plan to the Company or significantly alter the benefit design
or eligibility requirements of the Plan. Except as expressly
provided elsewhere in the Plan, prior to the satisfaction of all
liabilities with respect to the benefits provided under this
Plan, no such amendment or termination shall cause any part of
the monies contributed hereunder to revert to the Company or to
be diverted to any purpose other than for the exclusive benefit
of Participants and their beneficiaries. No amendment shall have
the effect of retroactively depriving Participants of benefits
already accrued under the Plan. Upon complete termination of the
Plan without establishment or maintenance of a successor plan
(other than an employee stock ownership plan as defined in
Section 4975(e)(7) of the Code), Participants may receive
distribution of their Accounts. Amendments to the allocation
formulas contained in Article V shall not be made more frequently
than once every six months.
10.2 Termination. The Plan and the Fund forming part of
the Plan may be terminated or contributions completely
discontinued at any time by or pursuant to action of the board
of directors of Resources. In the event of a termination,
partial termination, or a complete discontinuance of
contributions or in the event the Company is dissolved,
liquidated, or adjudicated a bankrupt, the interest of the
Participants, their estates and beneficiaries, shall be
nonforfeitable and shall be fully vested, and distributions shall
be made to them in full shares of Stock and cash in lieu of
fractional shares based on the price at which the Trustee sells
such Stock or the fair market value thereof. When all assets have
been paid out by the Trustee, the Fund shall cease. Any
distribution after termination of the Plan may be made at any
time, and from time to time, in whole or in part in full shares
of Stock and cash in lieu of fractional shares based on the price
at which the Trustee sells such Stock or the fair market value
thereof; provided, however, that no Stock may be distributed to a
Participant within seven years after the month in which such
Stock was allocated to the Participant's Account except in the
case of the Participant's retirement, Total Disability, death or
other termination of employment with the Company. In making such
distributions, any and all determinations, divisions, appraisals,
apportionments and allotments so made shall be final and
conclusive.
10.3 Special Rule. In the event that the Plan is
terminated in accordance with Section 10.2, unallocated amounts
held in a suspense account described in Section 5.5 shall be
allocated among Participants, subject to the limitations of
Section 5.5, in the year of termination and amounts which cannot
be allocated by reason of the limitations of Section 5.5 may be
withdrawn from the Fund and returned to the Company or Resources.
12.2 Source of Benefits. All benefits payable under the
Plan shall be paid or provided for solely from the Fund, and
neither the Company nor Resources assume liability or
responsibility therefor.
12.5 Incapacity. If the Employee Benefit Plan Board
deems any Participant who is entitled to receive payments
hereunder incapable of receiving or disbursing the same by reason
of age, illness or infirmity or incapacity of any kind, the
Employee Benefit Plan Board may direct the Trustee to apply such
payment directly for the comfort, support and maintenance of such
Participant or to pay the same to any responsible person caring
for the Participant as determined by the Employee Benefit Plan
Board to be qualified to receive and disburse such payments for
the Participant's benefit, and the receipt of benefit such person
shall be a complete acquittance for the payment of benefit.
Payments pursuant to this Section 12.5 shall be complete
discharge to the extent thereof of any and all liability of the
Company, Resources, the Employee Benefit Plan Board, the
Administrative Committee (if any), the Trustee, and the Fund.
12.7 Voting Stock. A Participant or a beneficiary may,
in accordance with procedures adopted by the Employee Benefit
Plan Board, instruct the Trustee as to the voting of the shares
of Stock credited to his Account as of the end of the Plan Year
preceding the record date for any shareholders' meeting. Full
shares of Stock shall be voted by the Trustee in accordance with
such instructions. Fractional shares shall be combined and voted
by the Trustee to the extent possible to reflect the instructions
of Participants credited with such shares. Before each meeting
of the shareholders of Resources or other occasion permitting
the exercise of voting rights with respect to Stock, the Employee
Benefit Plan Board shall cause the proxy materials which are sent
to shareholders of record of Resources to be sent to each
Participant who has shares of Stock credited to his Account on or
before the record date for the exercise of such rights.
12.9 Put Option. In the event the Stock is ever not
readily tradeable on an established market (whether or not the
Plan is an employee stock ownership plan at such time), the
Company or Resources shall issue a "put option" to each
Participant or Beneficiary receiving a distribution of Stock from
the Plan. Such put option shall permit the Participant or
Beneficiary to sell such Stock to the Company or Resources, at
any time during two option periods (described below), at the then
fair-market value, as determined by an independent appraiser (as
defined in Section 401(a)(28) of the Code). The first put option
period shall be a period of 60 days commencing on the date the
Stock is distributed to the Participant or Beneficiary. If the
put option is not exercised within that period, it will
temporarily lapse. Upon the close of the Plan Year in which such
temporary lapse of the put option occurs, the Employee Benefit
Plan Board shall establish the value of the Stock, as determined
by an independent appraiser, and shall notify each distributee
who did not exercise the initial put option prior to its
temporary lapse in the preceding Plan Year of the revised value
of the Stock. The second period during which the put option may
be exercised shall commence on the date such notice of
revaluation is given and shall permanently terminate 60 days
thereafter. The Trustee may be permitted by the Company to
purchase Stock tendered to the Company or Resources under a put
option. At the option of the Company, Resources or the Trustee,
as the case may be, the payment for Stock sold pursuant to a put
option shall be made in the following forms:
(a) in substantially equal annual installments
commencing within 30 days from the date of the exercise of the
put option and over a period not exceeding five years, with
interest payable at a reasonable rate on any unpaid installment
balance, with adequate security provided, and without penalty for
any prepayment of such installments; or
(b) in a lump sum as soon as practicable after the
exercise of the put option.
The Trustee, on behalf of the Trust, may offer to purchase
any shares of Stock (which are not sold pursuant to a put option)
from any former Participant or Beneficiary, at any time in the
future, at their then fair-market value as determined by an
independent appraiser.
12.10 Compliance with Rule 16b-3. With respect to
Participants subject to Section 16 of the Securities Exchange Act
of 1934, transactions under this Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successors under
the 1934 Act. To the extent any provision of the Plan or action
by the Board of Directors, the board of directors of Resources or
Employee Benefit Plan Board involving such a Participant is
deemed not to comply with an applicable condition of Rule 16b-3,
it shall be deemed null and void to the extent permitted by law
and deemed advisable by the Board of Directors, the board of
directors of Resources or EmPloyee Benefit Plan Board.
II. Except as provided for in this Amendment No. 13, all other
provisions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment No. 13 is executed this
20th day of October, 1994.
PENNSYLVANIA POWER & LIGHT COMPANY
By:___/s/ John M. Chappelear_______
John M. Chappelear
Vice President, Investments &
Pensions
<PAGE>
AMENDMENT NO. 15
TO
PENNSYLVANIA POWER & LIGHT COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Employee Stock
Ownership Plan ("Plan") effective January 1, 1975; and
WHEREAS, the Plan was amended and restated effective Janu-
ary 1, 1987, and subsequently amended by Amendment Nos. 1, 2, 3,
4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended effective October
25, 1995 as follows:
I. Article VIII, Paragraph 8.1(d) is amended to read:
8.1 Administration by Employee Benefit Plan Board
(d) The Employee Benefit Plan Board may adopt such rules
and regulations as it deems desirable for the conduct of its
affairs. All rules and decisions of the Employee Benefit Plan
Board shall be uniformly and consistently applied. The Employee
Benefit Plan Board shall have the final right of interpretation,
construction and determination under the plan and decisions of
the Employee Benefit Plan Board are final and conclusive for all
purposes.
II. Article X, Paragraph 10.1 is amended to read:
10.1 Amendment. The Plan may be amended or terminated at
any time by or pursuant to action of the board of directors of
Resources. In addition, the EBPB may make such amendments to the
Plan as it deems necessary or desirable except those amendments
which substantially increase the cost of the Plan to the Company
or significantly alter the benefit design or eligibility require-
ments of the Plan. Except as expressly provided elsewhere in the
Plan, prior to the satisfaction of all liabilities with respect
to the benefits provided under this Plan, no such amendment or
termination shall cause any part of the monies contributed here-
under to revert to the Company or to be diverted to any purpose
other than for the exclusive benefit of Participants and their
beneficiaries. No amendment shall have the effect of
retroactively depriving Participants of benefits already accrued
under the Plan. Upon complete termination of the Plan without
establishment or maintenance of a successor plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of
the Code), Participants may receive distribution of their
Accounts. Amendments to the allocation formulas contained in
Article V shall not be made more frequently than once every six
months.
III. Article XII, Paragraph 12.7 is amended to read:
12.7 Voting or Tendering Shares. Each Participant (or,
in the event of his or her death, his or her beneficiary) is, for
purposes of this Section 12.7, hereby designated a "named fidu-
ciary," within the meaning of Section 403(a)(1) of ERISA with
respect to his or her proportionate number of Shares (such pro-
portionate Shares being determined at the respective times such
fiduciary rights are exercisable, as set forth below).
(a) Voting Rights. Each Participant (or beneficiary)
shall have the right, to the extent of his or her proportionate
number of Shares (as determined in the last sentence of this
Section 12.7(a)) to instruct the Trustee in writing as to the
manner in which to vote such Shares at any stockholders' meeting
of the Company. The Company shall use its best efforts to timely
distribute or cause to be distributed to each Participant (or
beneficiary) the information distributed to stockholders of the
Company in connection with any such stockholders' meeting,
together with a form requesting confidential instructions to the
Trustee on how such Shares shall be voted on each such matter.
Upon timely receipt of such instructions, the Trustee shall, on
each such matter, vote as directed the appropriate number of
Shares (including fractional Shares). The instructions received
by the Trustee from individual Participants (or beneficiaries)
shall be held by the Trustee in strict confidence and shall not
be divulged to any person, including employees, officers and
directors of the Company or any affiliate; provided, however,
that, to the extent necessary for the operation of the Plan, such
instructions may be relayed by the Trustee to a recordkeeper,
auditor or other person providing services to the Plan if such
person (i) is not the Company, an affiliate or any employee,
officer or director thereof, and (ii) agrees not to divulge such
directions to any other person, including employees, officers and
directors of the Company and its affiliates. An individual's
proportionate number of Shares shall be equal to the product of
multiplying the total number of Shares by a fraction, the numera-
tor of which shall be the respective number of Shares which are
held in such individual's account for which he or she provides
instructions to the Trustee and the denominator of which shall be
the number of such Shares in all such accounts for which instruc-
tions are provided to the Trustee.
(b) Rights on Tender or Exchange Offer. Each Partici-
pant (or beneficiary) shall have the right, to the extent of his
or her proportionate number (as determined in the last sentence
of this Section 12.7(b)) of Shares to instruct the Trustee in
writing as to the manner in which to respond to a tender or
exchange offer with respect to such Shares. The Company shall
use its best efforts to timely distribute or cause to be distrib-
uted to each such Participant (or beneficiary) the information
distributed to stockholders of the Company in connection with any
such tender or exchange offer. Upon timely receipt of such
instructions, the Trustee shall respond as instructed with
respect to such Shares. If, and to the extent that, the Trustee
shall not have received timely instructions from any individual
given a right to instruct the Trustee with respect to certain
Shares by the first sentence of this Section 12.7(b), such indi-
vidual shall be deemed to have timely instructed the Trustee not
to tender or exchange such shares. The instructions received by
the Trustee from individual Participants (or beneficiaries) shall
be held by the Trustee in strict confidence and shall not be
divulged or released to any person, including employees, officers
and directors of the Company or any affiliate; provided, however,
that, to the extent necessary for the operation of the Plan, such
instructions may be relayed by the Trustee to a recordkeeper,
auditor or other person providing services to the Plan if such
person (i) is not the Company, an affiliate or any employee,
officer or director thereof, and (ii) agrees not to divulge such
instructions to any other person, including employees, officers
and directors of the Company and its affiliates. An individual's
proportionate number of Shares shall be equal to the product of
multiplying the total number of Shares by a fraction, the numera-
tor of which shall be the number of Shares which are held in such
individual's account and the denominator of which shall be the
total number of Shares.
IV. Except as provided for in this Amendment No. 15, all
other provisions of the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment No. 15 is executed this
1st day of November, 1995.
PENNSYLVANIA POWER & LIGHT COMPANY
By:__/s/ John M. Chappelear_______
John M. Chappelear
Vice President-Investments &
Pensions
<PAGE>
PP&L RESOURCES, INC.
DIRECTORS RETIREMENT PLAN
EFFECTIVE JANUARY 1, 1988
Amended & Restated
as of the Effective Time
PP&L RESOURCES, INC.
DIRECTORS RETIREMENT PLAN
EFFECTIVE JANUARY 1, 1988
TABLE OF CONTENTS
ARTICLE PAGE
I Purpose I-1
II Definitions II-1
III Eligibility III-1
IV Retirement Benefits IV-1
V Deferred Compensation V-1
VI Status of Plan VI-1
VII Rights Nonassignable VII-1
VIII Administration VIII-1
IX Termination IX-1
X Amendment X-1
XI Liquidation XI-1
XII Miscellaneous XII-1
XIII Effective Date XIII-1
PP&L RESOURCES, INC.
DIRECTORS RETIREMENT PLAN
ARTICLE I
Purpose
1.1 The purpose of this Retirement Plan is to provide Directors of
PP&L Resources, Inc., who are not employees of PP&L or
Resources, with pension payments after retirement in
recognition of their service to Resources and to assure that
the overall compensation arrangements for Directors are
adequate to attract and retain highly qualified individuals.
ARTICLE II
Definitions
2.1 "Board" or "Board of Directors" means the board of directors
of Resources.
2.2 "Change in Control" - means any one of the following events:
(a) any change in control of Resources of a nature that would
be required to be reported in response to Item 1(a) of Form 8-
K under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); (b) during any period of two consecutive
years, individuals who at the beginning of such period
constitute the Board of Resources cease for any reason to
constitute at least a majority thereof unless the election, or
the nomination for election, of each new director was approved
by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of such period;
(c) any person (within the meaning of Section 13(d) of the
Exchange Act) becomes the beneficial owner, directly or
indirectly, of securities of Resources representing 20% or
more of the combined voting power of Resources' then
outstanding securities entitled to vote generally in the
election of directors; (d) the approval by the stockholders of
Resources of any merger or consolidation of Resources with any
other corporation or the sale or other disposition of all or
substantially all of the assets of Resources to any other
person or persons unless, after giving effect thereto, (1)
holders of Resources' then outstanding securities entitled to
vote generally in the election of directors will own a
majority of the outstanding stock entitled to vote generally
in the election of directors of the continuing, surviving or
transferee corporation or any parent (within the meaning of
Rule 12b-2 under the Exchange Act) thereof and (2) the
incumbent members of the Board of Resources as constituted
immediately prior thereto shall constitute at least a majority
of the directors of the continuing, surviving or transferee
corporation and any parent thereof; or (e) the Board of
Resources adopts a resolution to the effect that a "Change in
Control" has occurred or is anticipated to occur.
2.3 "Director" means an individual serving on the Board of
Directors who is not an employee of Resources, or who served
on the board of directors of PP&L prior to the Effective Time,
and was not an employee of PP&L.
2.4 "EBPB" means the Employee Benefit Plan Board, the members of
which are appointed by the board of directors of PP&L.
2.5 "Effective Time" means the date as defined in the Agreement
and Plan of Exchange between Pennsylvania Power & Light
Company and PP&L Resources, Inc.
2.6 "Participant" means a Director, former Director, or the
beneficiary of such Director or former Director, who is
eligible for or entitled to receive benefits under this Plan.
2.7 "Plan" means this Directors Retirement Plan, originally
effective January 1, 1988.
2.8 "PP&L" means Pennsylvania Power & Light Company.
2.9 "Resources" means PP&L Resources, Inc.
2.10 "Service" means any period during which an individual is
serving on the Board of Directors of Resources or the board
of directors of PP&L but is not an employee of PP&L or
Resources.
ARTICLE III
Eligibility
3.1 All Directors shall be eligible to participate in this Plan as
of the later of January 1, 1988 or the effective date of their
first election as a Director. An employee of PP&L or
Resources who is a member of the Board of Directors who
retires or otherwise terminates his employment but continues
as a member of the Board shall be eligible to participate as
of the date of his termination of employment with PP&L or
Resources.
3.2 A Director shall be eligible for retirement benefits hereunder
upon completion of at least three (3) years of Service.
ARTICLE IV
Retirement Benefits
4.1 Participants shall be paid an annual retirement benefit in
accordance with the terms and conditions of this Plan.
4.2 A Director's annual retirement benefit shall be a percentage
of the annual retainer in effect at the time of the Director's
retirement from the Board as shown below:
Benefit as
Years of Service a % of Retainer
3 15
4 20
5 25
6 30
7 35
8 40
9 45
10 and over 50
4.3 A Director shall be credited with Service for any period
during which he was a Director including Service prior to
January 1, 1988.
4.4 Benefits for partial years of Service will be determined by
interpolating the percent of the annual retainer from the
table in Section 4.2 on the basis of the Director's completed
months of Service. (For example, 3 years and 6 months Service
provides a benefit of 17.5% of retainer.)
4.5 Meeting fees are not considered as a part of the annual
retainer for purposes of this Plan.
4.6 Payment of retirement benefits hereunder shall be in the form
of monthly payments for a period of 120 months commencing on
the first day of the month following the later of the
Director's attainment of age 65 or actual retirement from the
Board.
4.7 In the event of the Director's death prior to receiving full
payment, the present value of the balance of the 120 month
entitlement shall be paid to the Director's beneficiary in a
single sum.
4.8 In the event a Director dies prior to retirement from the
Board, no benefits shall be paid under this Plan.
4.9 In the event a Director dies after retirement from the Board
but before he becomes entitled to receive benefits under
Section 4.6 above, his entire 120 month entitlement shall be
paid to his beneficiary as provided in Section 4.7 above.
ARTICLE V
Deferred Compensation
5.1 Benefits determined under this Plan will be based upon the
Director's full annual retainer entitlement and shall not be
reduced by any amount that a Director may elect to defer under
the Directors Deferred Compensation Plan.
ARTICLE VI
Status of Plan
6.1 This Plan is a nonqualified supplemental retirement plan. As
such, all payments from this Plan shall be made from the
general assets of Resources. This Plan shall not require
Resources to set aside, segregate, earmark, pay into trust or
special account or otherwise restrict the use of its assets in
the operation of its business. A Participant shall have no
greater right or status than as an unsecured creditor of
Resources with respect to any amounts owed to any Participant
hereunder.
ARTICLE VII
Rights Nonassignable
7.1 All payments to persons entitled to benefits hereunder shall
be made to such persons and shall not be grantable, trans-
ferable or otherwise assignable in anticipation of payment
thereof, in whole or in part, by the voluntary or involuntary
acts of any such persons or by operation of law. In addition,
such payments shall not be subject to garnishment, attachment
or any other legal process of creditors of such persons.
Resources will observe the terms of the Plan unless and until
ordered to do otherwise by a state or Federal court. As a
condition of participation, a Participant agrees to hold
Resources harmless from any claim that arises out of
Resources' obeying any such order whether such order effects a
judgment of such court or is issued to enforce a judgment or
order of another court.
ARTICLE VIII
Administration
8.1 Administration. EBPB shall have the discretionary authority
and final right to interpret, construe and make benefit
determinations (including eligibility and amount) under the
Plan. The decisions of EBPB are final and conclusive for all
purposes.
ARTICLE IX
Termination
9.1 The Board of Directors may terminate this Plan at any time.
Upon termination of the Plan, benefits shall be paid in
accordance with Article IV hereof to any Participant who was
entitled to receive retirement benefits under Sections 4.7 or
4.9 prior to the date of termination of the Plan or to any
Director who has prior to the date of termination:
a) satisfied the eligibility requirements of Article III,
b) retired from the Board of Directors and
c) has not commenced benefits.
No other payments shall be made to any person under the Plan
after the date of termination including but not limited to
Directors who meet the eligibility requirements of Article III
but who have not retired from the Board as of the date of Plan
termination.
ARTICLE X
Amendment
10.1 The Board of Directors may, in its discretion, amend this Plan
from time to time. In addition, the EBPB may make such
amendments to the Plan as it deems necessary or desirable
except those amendments which substantially increase the cost
of the Plan to Resources or significantly alter the benefit
design or eligibility requirements of the Plan. No amendment
shall divest any Participant without his consent of rights to
which he would have been entitled under Article VIII if the
Plan had been terminated on the effective date of such
amendment.
ARTICLE XI
Liquidation
11.1 Notwithstanding Articles IX and X, upon a Change in Control,
the EBPB shall have the right to determine the present value
of the total amount payable under Article IV to all
Participants and to cause the amount so determined to be paid
in one or more installments or upon such other terms and
conditions and at such other time as the EBPB determines to be
just and equitable. The present value of the total amount
payable under Article IV shall be determined using the
assumptions used in the most recent actuarial report for the
PP&L Retirement Plan prior to the Change in Control.
ARTICLE XII
Miscellaneous
12.1 If the person to receive payment is deemed by the EBPB or is
adjudged to be legally incompetent, the payments shall be made
to the duly appointed guardian of such incompetent, or they
may be made to such person or persons who the EBPB believes
are caring for or supporting such incompetent; and the receipt
by such person or persons shall be a complete acquittance for
the payment of the benefit.
12.2 The expenses of administration hereunder shall be borne by
Resources.
12.3 This Plan shall be construed, administered and enforced
according to the laws of the Commonwealth of Pennsylvania.
12.4 The masculine pronoun shall be deemed to include the feminine,
and the singular to include the plural, unless a different
meaning is plainly required by context.
ARTICLE XIII
Effective Date
13.1 The effective date of this Plan is January 1, 1988. The
effective date of this Amendment and Restatement is the
Effective Time.
Executed this 23rd day of January, 1995.
PP&L RESOURCES, INC.
By: /s/ John M. Chappelear
John M. Chappelear
Chairman
Employee Benefit Plan Board
<PAGE>
PENNSYLVANIA POWER & LIGHT COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Amended and Restated
Effective as of August 31, 1995
PENNSYLVANIA POWER & LIGHT COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EFFECTIVE JULY 1, 1985
TABLE OF CONTENTS
ARTICLE PAGE
1. Purpose 1
2. Definitions 2
3. Eligibility 9
4. Supplemental Executive Retirement
Benefit 11
5. Method of Payment 13
6. Death Benefit 15
7. Administration 16
8. Miscellaneous 17
9. Termination or Amendment 19
10. Effective Date 20
PENNSYLVANIA POWER & LIGHT COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Pennsylvania Power & Light Company (the "Company") has
adopted the Pennsylvania Power & Light Company Supplemental
Executive Retirement Plan (the "Plan"), effective July 1, 1985, as
amended from time to time, for certain of its employees; and
WHEREAS, the Company desires at this time to amend and restate
the Plan;
NOW, THEREFORE, effective as of August 31, 1995, the Plan is
continued, amended and restated as hereinafter set forth:
1. Purpose. The purpose of this Supplemental Executive Retirement
Plan is to provide certain executive officers of the
Pennsylvania Power & Light Company additional retirement income
so that total retirement income for key officers is competitive
with other employers and in order to facilitate early
retirement from key positions carrying the most important
responsibilities.
2. Definitions.
(a) "Actuarial Equivalent" means having or that which has equal
actuarial value to the Supplemental Executive Retirement
Benefit based on the assumptions and factors described in
Schedule A of the Retirement Plan.
(b) "Board" means the Board of Directors of Pennsylvania Power &
Light Company.
(c) "Cause" for termination of Participant's employment means
(i) the willful and continued failure by Participant to
substantially perform Participant's duties with the Company
(other than any such failure resulting from Participant's
incapacity due to physical or mental illness) after a
written demand for substantial performance is delivered to
Participant by the Board, which demand specifically
identifies the manner in which the Board believes that
Participant has not substantially performed Participant's
duties, or (ii) the willful engaging by Participant in
conduct which is demonstrably and materially injurious to
the Company, monetarily or otherwise. For purposes of
clauses (i) and (ii) of this definition, no act, or failure
to act, on Participant's part shall be deemed "willful"
unless done, or omitted to be done, by Participant not in
good faith and without reasonable belief that Participant's
act, or failure to act, was in the best interest of the
Company. In no event shall the termination of employment of
any Participant be deemed to have been for Cause unless a
copy of a resolution duly adopted by the affirmative vote of
not less than three quarters (3/4) of the entire membership
of the Board at a meeting of the Board which was called and
held for the purpose of considering such termination (after
reasonable notice to Participant and an opportunity for
Participant, together with Participant's counsel, to be
heard before the Board) that, in the good faith opinion of
the Board, Participant was guilty of conduct set forth in
clauses (i) or (ii) of this definition, and specifying the
particulars thereof in detail, is delivered to the
executive.
(d) "Change in Control" - means the occurrence of any one of the
following events: (a) any change in the control of
Resources of a nature that would be required to be reported
in response to Item 1(a) of Form 8-K under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); (b)
during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute
the Board of Directors of Resources and any new director
(other than a director designated by a Person who has
entered into an agreement with Resources to effect a
transaction described in clause (a), (c) or (d) of this
paragraph) whose election by the Board of Directors of
Resources or nomination for election by the shareowners of
Resources was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or
whose election or nomination for election was previously so
approved or recommended, cease for any reason to constitute
at least a majority thereof; (c) any Person becomes the
beneficial owner, directly or indirectly, of securities of
Resources representing 20% or more of the combined voting
power of Resources' then outstanding securities entitled to
vote generally in the election of directors; (d) the
approval by the shareowners of Resources of any merger or
consolidation of Resources with any other corporation or a
plan of complete liquidation of Resources or the sale or
other disposition of all or substantially all of the assets
of Resources to any other person or persons unless, after
giving effect thereto, (1) holders of Resources' then
outstanding securities entitled to vote generally in the
election of directors will own a majority of the outstanding
stock entitled to vote generally in the election of
directors of the continuing, surviving or transferee
corporation or any parent (within the meaning of Rule 12b-2
under the Exchange Act) thereof and (2) the incumbent
members of the Board of Directors of Resources as con-
stituted immediately prior thereto shall constitute at least
a majority of the directors of the continuing, surviving or
transferee corporation and any parent thereof; or (e) the
Board of Directors of Resources adopts a resolution to the
effect that a "Change in Control" has occurred or is
anticipated to occur.
(e) "Company" means Pennsylvania Power & Light Company.
(f) "Early Retirement Reduction Factor" means for Participants
between the ages of 50 and 60 the percentage that appears
adjacent to his age below:
Age at Benefit Percentage
Commencement Applicable
60 100%
59 95%
58 90%
57 85%
56 80%
55 75%
54 70%
53 65%
52 60%
51 55%
50 50%
(g) "EBPB" means the Employee Benefit Plan Board, the members
of which are appointed by the Board.
(h) "Officers Deferred Compensation Plan" means the
Pennsylvania Power & Light Company Officers Deferred
Compensation Plan, as amended from time to time .
(i) "Participant" means an eligible officer of the Company
entitled to receive benefits under this Plan.
(j) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d)
and 14(d) thereof; however, a Person shall not include (i)
Resources or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee
benefit plan of Resources or any of its subsidiaries, (iii)
an underwriter temporarily holding securities pursuant to
an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareowners of
Resources in substantially the same proportions as their
ownership of stock of Resources.
(k) "Plan" means this Supplemental Executive Retirement Plan,
as amended from time to time.
(l) "Prior Plan" means any defined benefit plan, as defined
in Section 3(35) of the Employee Retirement Income Security
Act of 1974, as amended, which at any time satisfies the
applicable requirements of Section 401(a) of the Internal
Revenue Code of 1986, as amended, provided that (i) such
plan has a sponsor other than the Company, and (ii)
Participant was a participant in such plan prior to
employment with the Company.
(m) "Projected Years of Service" means the number of full or
partial twelve-month periods beginning on the date on which
Participant attains the age of 30 and ending on the date
Participant has his final Hour of Service under the
Retirement Plan.
(n) "Resources" shall mean PP&L Resources, Inc.
(o) "Retirement Plan" means the Retirement Plan of Pennsylvania
Power & Light Company, as amended from time to time.
(p) "SERB" means the Supplemental Executive Retirement Benefit
payable under this Plan calculated under paragraph 4.
(q) "Supplemental Final Average Earnings" means the following:
(1) Participant's Final Average Earnings as determined under
the Retirement Plan except
(A) using Cash Compensation (as defined by the Officers
Deferred Compensation Plan) instead of Monthly Rate of
Earnings (as defined by the Retirement Plan) and
(B) increasing the amount of Cash Compensation for each
month by the value of
(i) any Awards (including any dividends distributed on
Restricted Stock during the Restriction Period)
granted to Participant under the Incentive
Compensation Plan attributable to such month, and
(ii) any cash grants awarded to Participant pursuant to
the executive incentive awards program initially
approved by the Board on October 25, 1989. For the
purposes of determining the amount by which Cash
Compensation is increased, the EBPB will determine
(I) the value of any Award under the Incentive
Compensation Plan as of the Award's Date of Grant
(as defined by the Incentive Compensation Plan)
and prorate such value over the year for which
the Award was granted;
(II) the amount of any dividends distributed on
Restricted Stock during the Restriction Period and
prorate such amount over the period for which such
dividends are paid; and
(III) the amount of any cash grant awarded under the
executive incentive awards program and prorate
such amount over the year for which the award was
granted.
(r) "Years of Service" means the number of full and partial
years used to calculate Participant's accrued benefit under
the Retirement Plan beginning at the Participant's age 30.
3. Eligibility.
(a) All officers of the Company who are in positions in Company
Salary Groups I through IV immediately prior to the date of
their termination of employment from the Company (or death
if earlier) shall receive such benefits as they are
entitled to under this Plan. Notwithstanding the
foregoing, except for the death benefit provided for in
paragraph 6 below, Participant shall have no right to
receive any payment from this Plan and shall have no rights
whatsoever regarding this Plan if such Participant:
(i) terminates employment with the Company for any reason
other than total disability, as determined by the EBPB
in its sole discretion, prior to reaching age 50 and
attaining 10 Years of Service; or
(ii) is terminated by the Company for Cause.
(b) All officers who are eligible for benefits under subsection
(a) of Paragraph 3 of the Plan and who are entitled to
annual benefits of at least $44,000 in the aggregate from
all Company-sponsored pension, profit-sharing, savings or
deferred compensation plans, shall terminate their
employment with the Company no later than the first day of
the month following attainment of age 65, unless the
Company requests that employment be extended for up to one
year. In such event, Participant must retire at the end of
the extension, unless the Company requests additional
extensions, at the end of which Participant must retire.
Any Participant requested to serve beyond the mandatory
retirement date may decline to do so without affecting his
benefit status under this Plan or any other Company benefit
program. Failure to accept benefits provided for in this
Plan shall not affect the requirements of this paragraph.
4. Supplemental Executive Retirement Benefit.
(a) Subject to paragraph 3(a) hereof, upon termination of
employment from the Company, Participant will be paid a
SERB subject to the terms and conditions of this Plan. The
SERB for Participant shall be calculated as an annual
amount payable for the life of Participant as follows:
(b) the greater of (1) or (2):
(1)(A) 2.7% of Participant's Supplemental Final Average
Earnings times his Years of Service up to 20, plus
(B) 1.0% of Participant's Supplemental Final Average
Earnings times his Years of Service in excess of 20 but
not more than 30 Years of Service,
or
(2)(A) 2.7% of Participant's Supplemental Final Average
Earnings times his Projected Years of Service up to 20,
plus
(B) 1.0% of Participant's Supplemental Final Average
Earnings times his Projected Years of Service in excess
of 20 but not more than 30 Projected Years of Service,
less
(C) the annual amount payable to Participant from a Prior
Plan,
(c) less
the annual amount payable as the maximum primary Social
Security benefit payable to an individual aged 65 in the
year of Participant's retirement whether or not received by
Participant,
(d) times
the applicable Early Retirement Reduction Factor,
(e) less
annual amounts provided by the Retirement Plan (but not
including any temporary supplemental amounts payable under
Section 5.3(d)(2) of the Retirement Plan) and supplemental
payments under paragraph 7(a) of the Officers Deferred
Compensation Plan. In the event Participant commences
benefits under this Plan prior to commencing benefits under
the Retirement Plan, deductions will be made under this
subparagraph (e) as if Participant had commenced benefits
under the Retirement Plan at the later of age 55 or
commencement of benefits under this Plan. The amount of
the deduction will not thereafter be changed upon
Participant's actual commencement of benefits under the
Retirement Plan.
(f) Annual amounts provided by the Retirement Plan and para-
graph 7(a) of the Officers Deferred Compensation Plan shall
be calculated as if Participant had chosen a straight life
annuity under such Plan.
(g) The annual amount payable to Participant from a Prior Plan
as described in paragraph 4(b)(2)(C) above shall be
calculated as if the Participant commenced benefits from
the Prior Plan at the time benefits commence under this
Plan. The benefit payable under this Plan shall not be
adjusted upon actual commencement of benefits from any
Prior Plan.
5. Method of Payment.
(a) For a Participant who is eligible to receive benefits
under the Retirement Plan and who elects to receive such
benefits at the time SERB payments begin, SERB payments
shall be made in accordance with all the terms and
conditions applicable to Participant's benefits under the
Retirement Plan, including any optional form of payment
he may have elected, provided, however, if any monthly
payment would be one hundred dollars ($100) or less, the
EBPB, in its discretion, may elect to make such payments
in such installments as the EBPB may determine or in a
single sum payment.
(b) In the event that a Participant's benefits under the
Retirement Plan are subject in whole or in part to a
qualified domestic relations order, SERB payments shall
be calculated and paid without regard to such order.
(c) For a Participant who is not eligible to receive benefits
under the Retirement Plan or who has elected not to
receive such benefits under the Retirement Plan at the
time SERB payments begin, the Participant may elect one
of the following Actuarial Equivalent forms of benefit:
(1) a single life annuity with equal monthly installments
payable to the Participant for his lifetime; or
(2) a joint and survivor annuity with the Participant's
designated beneficiary, payable in monthly installments
to the Participant for his lifetime and with a specified
percentage of the amount of such monthly installment
payable after the death of the Participant to the
designated beneficiary of such Participant, if then
living, for the life of such designated beneficiary; or
(3) a single life annuity payable in equal monthly
installments to the Participant for his lifetime, with
60, 120 or 180 monthly payments guaranteed.
(d) A Participant described in Section (c) above may elect a
form of benefit hereunder by filing written notice with
the EBPB at anytime prior to the first day of the
calendar month for which a SERB is first payable to
Participant. If a Participant fails to elect a form of
benefit, the benefit shall be paid in the form of a
single-life annuity if the Participant does not have a
spouse on the date of benefit commencement and in the
form of a 50% joint and survivor annuity with
Participant's spouse as the beneficiary if the
Participant has a spouse on the date of benefit
commencement.
6. Death Benefit. If a pre-retirement spouse's annuity is payable
under the Retirement Plan on account of Participant's death,
the Participant's surviving spouse will be paid a supplemental
spouse's annuity based on the SERB and made in accordance with
all the terms and conditions applicable to such pre-retirement
spouse's annuities under the Retirement Plan.
7. Administration. The EBPB shall have the discretionary
authority and final right to interpret, construe and make
benefit determinations (including eligibility and amount) under
the Plan. The decisions of the EBPB are final and conclusive
for all purposes. If one or more members of the EBPB are
disqualified by personal interest from taking part in a
particular decision, the remaining member or members of the
EBPB (although less than a quorum) shall have full authority to
act on the matter.
8. Miscellaneous.
(a) If any person to receive payment is a minor, or is
deemed by the EBPB or is adjudged to be legally incompe-
tent, the payments shall be made to the duly appointed
guardian or committee of such minor or incompetent, or
they may be made to such person or persons who the EBPB
believes are caring for or supporting such minor or
incompetent.
(b) All payments to persons entitled to benefits under this
Plan shall be made to such persons and shall not be
grantable, transferable or otherwise assignable in
anticipation of payment thereof, in whole or in part, by
the voluntary or involuntary acts of any such persons,
or by operation of law, and shall not be liable or taken
for any obligation of such person. The Company will
observe the terms of the Plan unless and until ordered
to do otherwise by a state or Federal court. As a con-
dition of participation, Participant agrees to hold the
Company harmless from any claim that arises out of the
Company's obeying any such order whether such order
effects a judgment of such court or is issued to enforce
a judgment or order of another court.
(c) Nothing in this Plan shall confer any right on any Par-
ticipant to continue in the Company's employ or to
receive compensation, nor shall anything in this Plan
affect in any way the right of the Company to terminate
any Participant's employment at any time.
(d) The expenses of administration hereunder shall be borne
by the Company.
(e) This Plan shall be construed, administered and enforced
according to the laws of the Commonwealth of Pennsylvania.
(f) All payments from this Plan shall be made from the general
assets of the Company. This Plan shall not require the
Company to set aside, segregate, earmark, pay into trust or
special account or otherwise restrict the use of its assets
in the operation of the business. Participant shall have no
greater right or status than as an unsecured creditor of the
Company with respect to any amounts owed to Participant
hereunder.
(g) The masculine pronoun shall be deemed to include the
feminine and the singular to include the plural unless a
different meaning is plainly required by the context.
9. Termination or Amendment. The Board may, in its sole
discretion, terminate and amend this Plan from time to time
provided, however, that the Plan may not be terminated or
amended to the prejudice or detriment of any Participant during
the three (3) year period immediately following a Change in
Control (or, if later, thirty six (36) months from the
consummation of the transaction giving rise to the Change in
Control). Without limiting the generality of the foregoing,
the proviso of the preceding sentence shall not, at any time or
in any event, be amended or deleted. Subject to the foregoing,
the EBPB may make such amendments to the Plan as it deems
necessary or desirable except those amendments which
substantially increase the cost of the Plan to the Company
or significantly alter the benefit design or eligibility
requirements of the Plan. No termination or amendment shall
(without Participant's consent) alter Participant's right to
monthly payments which have commenced prior to the effective
date of such termination or amendment. Prior to a Change in
Control, the Board specifically reserves the right to terminate
or amend this Plan to eliminate the right of any Participant to
receive payment hereunder prior to the time when payments are
in pay status under this Plan. Notwithstanding the foregoing,
if the Company is liquidated, the EBPB shall cause the amounts
due hereunder to be paid in one or more installments or upon
such other terms and conditions and at such other time as the
EBPB determines to be just and equitable, but in no event later
than the time such amounts would otherwise have been paid.
10. Effective Date. The original effective date of this Plan is
July 1, 1985. The effective date of this amended and restated
Plan is August 31, 1995, the date of its approval by the Board.
Executed this 22nd day of September, 1995.
PENNSYLVANIA POWER & LIGHT COMPANY
By: /s/ John M. Chappelear
John M. Chappelear
Vice President-Investments &
Pensions
08/31/95
<PAGE>
PENNSYLVANIA POWER & LIGHT COMPANY
EXECUTIVE RETIREMENT SECURITY PLAN
Amended and Restated
Effective as of August 31, 1995
ARTICLE I
Purpose
1.1 The purpose of this Plan is to provide additional retire-
ment income security to certain senior managers of the
Company so that the total retirement income intended to be
paid to such senior managers is not reduced as a result of
a change in the ownership of Resources. It is also intend-
ed to assure that these individuals will be able to assess
any proposal or other issue affecting the shareowners of
Resources in a manner which is in the best interest of such
shareowners.
ARTICLE II
Definitions
2.1 "Actuarial Equivalent" means having or that which has equal
actuarial value to the Security Benefit based on the
assumptions and factors described in Schedule A of the
Retirement Plan. For purposes of Section 4.2(B) and
calculating the present value of benefits to determine the
value of any Lump Sum payable under the Plan, the Actuarial
Equivalent will be based on an interest rate equal to the
United States Government 30 year bond rate for the second
month prior to Retirement as published in the Federal
Reserve Board Statistical Bulletin and the 1983 Group
Annuity Mortality Table.
2.2 "Annual Base Salary" means the greater of Participant's
annual base salary for the twelve months immediately prior
to the occurrence of the event or circumstance upon which
the Notice of Termination is based or in effect immediately
prior to the Change in Control.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Bonus" means the higher of the average amount paid to
Participant (including as an amount so paid any amount that
would have been so paid but for Participant's request that
the amount not be paid) pursuant to any bonus or incentive
compensation plan or program of the Company ("Incentive
Plans") with respect to the three years (or such shorter
period for which Participant was covered under a Company
sponsored bonus program) preceding the year in which the
Date of Termination occurs or the average amount paid (in-
cluding as an amount so paid any amount that would have
been so paid but for Participant's request that the amount
not be paid) with respect to the three years (or such
shorter period for which Participant was covered under a
Company sponsored bonus program) preceding the year in
which the Change in Control occurs.
2.5 "Cause" for termination by the Company of Participant's
employment means (i) the willful and continued failure by
Participant to substantially perform Participant's duties
with the Company (other than any such failure resulting
from Participant's incapacity due to physical or mental
illness) after a written demand for substantial performance
is delivered to Participant by the Board, which demand
specifically identifies the manner in which the Board
believes that Participant has not substantially performed
Participant's duties, or (ii) the willful engaging by
Participant in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For
purposes of clauses (i) and (ii) of this definition, no act
or failure to act, on Participant's part shall be deemed
"willful" unless done, or omitted to be done, by Par-
ticipant not in good faith and without reasonable belief
that Participant's act, or failure to act, was in the best
interest of the Company. In no event shall the termination
of employment of any Participant be deemed to have been for
Cause unless a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters (3/4) of
the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of
considering such termination (after reasonable notice to
Participant and an opportunity for Participant, together
with Participant's counsel, to be heard before the Board)
that, in the good faith opinion of the Board, Participant
was guilty of conduct set forth in clauses (i) or (ii) of
this definition, and specifying the particulars thereof in
detail, is delivered to the executive.
2.6 "Change in Control" means the occurrence of any one of the
following events: (a) any change in the control of Re-
sources of a nature that would be required to be reported
in response to Item 1(a) of Form 8-K under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); (b)
during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute
the Board of Resources and any new director (other than a
director designated by a Person who has entered into an
agreement with Resources to effect a transaction described
in clause (a), (c) or (d) of this paragraph) whose election
by the Board of Directors of Resources or nomination for
election by Resources' shareowners was approved or
recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved or recommended,
cease for any reason to constitute at least a majority
thereof; (c) any Person becomes the beneficial owner,
directly or indirectly, of securities of Resources
representing 20% or more of the combined voting power of
Resources' then outstanding securities entitled to vote
generally in the election of directors; (d) the approval by
the shareowners of Resources of any merger or consolidation
of Resources with any other corporation or a plan of
complete liquidation of Resources or the sale or other dis-
position of all or substantially all of the assets of Re-
sources to any other person or persons unless, after giving
effect thereto, (1) holders of Resources' then outstanding
securities entitled to vote generally in the election of
directors will own a majority of the outstanding stock
entitled to vote generally in the election of directors of
the continuing, surviving or transferee corporation or any
parent (within the meaning of Rule 12b-2 under the Exchange
Act) thereof and (2) the incumbent members of the Board of
Directors of Resources as constituted immediately prior
thereto shall constitute at least a majority of the di-
rectors of the continuing, surviving or transferee corpora-
tion and any parent thereof; or (e) the Board of Directors
of Resources adopts a resolution to the effect that a
"Change in Control" has occurred or is anticipated to
occur.
2.7 "Company" means Pennsylvania Power & Light Company.
2.8 "Continuation of Coverage" means the benefit provided under
Section 4.3.
2.9 "Disability" shall be deemed the reason for the termination
by the Company of Participant's employment, if, as a result
of Participant's incapacity due to physical or mental
illness, Participant shall qualify for coverage under the
Company's Long-Term Disability Plan in effect immediately
prior to a Change in Control, the Company shall have given
Participant a Notice of Termination for Disability, and,
within thirty (30) days after such Notice of Termination is
given, Participant shall not have returned to the full-time
performance of Participant's duties.
2.10 "EBPB" means the Employee Benefit Plan Board, the members
of which are appointed by the Board.
2.11 "Good Reason" for termination of Participant's employment
with the Company by such Participant means the occurrence
(without Participant's express written consent) of any one
of the following acts by the Company:
(a) the assignment to Participant of any duties
inconsistent with Participant's status as an executive
officer or key employee of the Company or a substantial
adverse alteration in the nature or status of Participant's
responsibilities from those in effect immediately prior to
a Change in Control;
(b) a reduction by the Company of Participant's
annual base salary as in effect on the Effective Date of
this restated Plan, or as the same may be increased from
time to time;
(c) the relocation of the Participant's principal
work location to a location more than 30 miles from such
work location immediately prior to a Change in Control;
(d) the failure by the Company to pay to Participant
any portion of Participant's current compensation or to pay
to Participant any portion of an installment of deferred
compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensa-
tion is due;
(e) the failure by the Company to continue in effect
any compensation or benefit plan in which Participant
participates immediately prior to a Change in Control which
is material to Participant's total compensation, or any
substitute plans adopted prior to a Change in Control, un-
less an equitable arrangement (embodied in an ongoing sub-
stitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue
Participant's participation therein (or in such substitute
or alternative plan) on a basis not materially less favor-
able, both in terms of the amount of benefits provided and
the level of Participant's participation relative to other
participants, as existed at the time of a Change in Con-
trol, or
(f) the failure by the Company to continue to provide
Participant with benefits substantially similar to those
enjoyed by Participant under any of the Company's pension,
retirement, savings, life insurance, medical, health and
accident, or disability plans in which Participant was par-
ticipating immediately prior to a Change in Control, the
taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or
deprive Participant of any material fringe benefit enjoyed
by Participant immediately prior to a Change in Control, or
the failure by the Company to provide Participant with the
number of paid vacation days to which Participant is enti-
tled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in
effect immediately prior to a Change in Control.
Participant's right to terminate his or her employment
with the Company for Good Reason shall not be affected by
Participant's incapacity due to physical or mental illness.
Participant's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act
or failure to act constituting Good Reason hereunder.
2.12 "Officers Deferred Compensation Plan" means the
Pennsylvania Power & Light Company Officers Deferred
Compensation Plan, as amended from time to time.
2.13 "Participant" means an eligible officer of the Company
entitled to receive benefits under this Plan under Article
III.
2.14 "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d)
and 14(d) thereof; however, a Person shall not include (i)
Resources or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee
benefit plan of Resources or any of its subsidiaries, (iii)
an underwriter temporarily holding securities pursuant to
an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareowners of
Resources in substantially the same proportions as their
ownership of stock of Resources.
2.15 "Plan" means this Executive Retirement Security Plan, as
amended from time to time.
2.16 "Potential Change in Control" means the occurrence of any
one of the following events or conditions:
(a) Resources enters into an agreement, the
consummation of which would result in the occurrence of a
Change in Control;
(b) any Person publicly announces an intention to
take or to consider taking actions which if consummated
would constitute a Change in Control;
(c) any Person is or becomes the beneficial owner,
directly or indirectly, of securities of Resources
representing 5% or more of the combined voting power of
Resources' then outstanding securities entitled to vote
generally in the election of directors.
(d) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change in
Control has occurred.
2.17 "Prior Plan" means any defined benefit plan, as defined in
section 3(35) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), which at anytime
satisfies the applicable requirements of section 401(a) of
the Internal Revenue Code of 1986, as amended, provided
that: (a) such plan has a sponsor other than the Company,
and (b) Participant was a participant in such plan prior to
employment with the Company.
2.18 "Projected Years of Service" means the number of full or
partial twelve-month periods beginning on the date on which
a Participant attains the age of 30 and ending on the date
a Participant has his final Hour of Service under the
Retirement Plan.
2.19 "Resources" shall mean PP&L Resources, Inc.
2.20 "Retirement Plan" means The Retirement Plan of Pennsylvania
Power & Light Company, as amended from time to time.
2.21 "Security Benefit" means the security benefit payable under
this Plan calculated under Article IV.
2.22 "SERP" means the Pennsylvania Power & Light Supplemental
Executive Retirement Plan, as amended from time to time.
2.23 "Supplemental Final Average Earnings" means twelve times
the monthly average of a Participant's Cash Compensation
(as defined by the Officers Deferred Compensation Plan) for
the 12 full consecutive months in the final 60 (or fewer)
full consecutive months of employment with the Company
which yield the highest average. For this purpose, non-
consecutive months interrupted by periods in which the
Participant receives no Cash Compensation shall be treated
as consecutive. If a Participant does not have 12 full
consecutive months of employment with the Company, his
Supplemental Final Average Earnings shall be the total of
the Cash Compensation earned for the number of months of
employment. The amount of Cash Compensation for each month
shall be increased by the value of (1) any Awards (includ-
ing any dividends distributed on Restricted Stock during
the Restriction Period) granted to Participant under the
Incentive Compensation Plan attributable to such month, and
(2) any cash grants awarded to Participant pursuant to the
executive incentive awards program initially approved by
the Board on October 25, 1989. For the purpose of
determining the amount by which Cash Compensation is
increased, the EBPB will determine (a) the value of any
Award under the Incentive Compensation Plan prorated over
the 12 consecutive month period for which the Award was
granted; (b) the amount of any dividends distributed on
Restricted Stock during the Restriction Period and prorate
such amount over the period for which such dividends are
paid; and (c) the amount of any cash grant awarded under
the executive incentive awards program and prorate such
amount over the 12 consecutive month period for which the
Award was granted.
2.24 "Years of Service" means the number of full and partial
years used to calculate Participant's accrued benefit under
the Retirement Plan, beginning at the Participant's age 30.
ARTICLE III
Eligibility
3.1 All officers of the Company (i) who are in positions in
Company Salary Grades I through IV any time within six
months prior to the occurrence of a Change in Control and
(ii) whose employment with the Company is terminated either
(A) by the Company for any reason other than for Cause or
Disability, or (B) by Participant for Good Reason, in
either case within three (3) years following a Change in
Control, shall be entitled to receive benefits under this
Plan. Participant's employment shall be deemed to have
been terminated following a Change in Control by the
Company without Cause or by Participant for Good Reason if
Participant's employment is terminated prior to a Change in
Control without Cause at the direction of a Person who has
entered into an agreement with the Company the consummation
of which will constitute a Change in Control or if
Participant terminates his employment with Good Reason
prior to a Change in Control (determined by treating a Po-
tential Change in Control as a Change in Control in ap-
plying the definition of Good Reason) if the circumstance
or event which constitutes Good Reason occurs at the
direction of such Person.
ARTICLE IV
Security Benefit
4.1 A Participant who satisfies the condition of Section 3.1
will be paid a Security Benefit and will be provided the
Continuation of Coverage, subject to the terms and condi-
tions of this Plan.
4.2 The Security Benefit for Participant shall be calculated as
an annual amount payable for the life of Participant
(except as otherwise provided in Section 7.3, below), equal
to the greater of (A) or (B) as follows:
(A)(a) the greater of (1) or (2):
(1)(A) 2.7% of Participant's Supplemental Final
Average Earnings times his Years of Service
up to 20, plus
(B) 1.0% of Participant's Supplemental Final
Average Earnings times his Years of Service
in excess of 20 but not more than 30 Years of
Service,
or
(2)(A) 2.7% of Participant's Supplemental Final
Average Earnings times his Projected Years of
Service up to 20, plus
(B) 1.0% of Participant's Supplemental Final
Average Earnings times his Projected Years of
Service in excess of 20 but not more than 30
Projected Years of Service, less
(C) the annual amount payable to a Participant
from a Prior Plan,
(b) less:
(1) the annual amount payable as the maximum
primary Social Security benefit payable to an
individual aged 65 in the year of
Participant's retirement whether or not
received by Participant,
(2) the annual amount provided by the Retirement
Plan and supplemental payments under
paragraph 7(a) of the Officers Deferred
Compensation Plan, and
(3) the annual amount payable to a Participant
from the SERP.
or
(B)(a) For Participants in Company Salary Grades
I, II or III anytime within six months prior to a
Change in Control, an annual payment for the life of
the Participant, the Actuarial Equivalent of which is
equal to the product of (i) the sum of such
Participant's Annual Base Salary and Bonus and (ii) a
factor of three (3), or
(b) For Participants in Company Salary Grade IV
anytime within six months prior to a Change in
Control, an annual payment for the life of the
Participant, the Actuarial Equivalent of which is
equal to the product of (i) the sum of such
Participant's Annual Base Salary and Bonus and (ii) a
factor of two (2).
In the event the Participant commences benefits on or after
age 50, the Security Benefit calculated pursuant to Section
4.2(A) shall be unreduced. In the event the Participant
commences benefits prior to attainment of age 50, the
Security Benefit shall be calculated pursuant to Section
4.2(A), as a benefit payable for the life of the
Participant commencing at the Participant's age 50, using
the Participant's Years of Service on the Date of
Termination, and then reduced on an Actuarially Equivalent
basis from age 50 to reflect the actual benefit
commencement date.
4.3 For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide
Participants not eligible to retire under the Supplemental
Executive Retirement Plan with the Continuation of
Coverage. A Participant entitled to the Continuation of
Coverage shall be provided by the Company with life,
disability, accident and health insurance benefits substan-
tially similar to those which Participant is receiving
immediately prior to the Notice of Termination (without
giving effect to any reduction in such benefits subsequent
to a Change in Control which reduction constitutes Good
Reason). Benefits otherwise receivable by Participant
pursuant to this Section 4.3 shall be reduced to the extent
comparable benefits are actually received by or made avail-
able to Participant without cost during the thirty-six (36)
month period following Participant's termination of employ-
ment (and any such benefits actually received by
Participant shall be reported to the Company by Partici-
pant). If the benefits provided to the Participant under
this Section 4.3 shall result in a decrease, pursuant to
Article XIII, in the Security Benefit and these Section 4.3
benefits are thereafter reduced pursuant to the immediately
preceding sentence because of the receipt of comparable
benefits, the Company shall, at the time of such reduction,
pay to Participant the lesser of (a) the amount of the
decrease made in the Security Benefit pursuant to Article
XIII, or (b) the maximum amount which can be paid to the
Participant without being, or causing any other payment to
be, nondeductible by reason of section 280G of the Code.
4.4 The benefits under this Plan are in lieu of any severance
benefit otherwise payable to the Participant (including but
not limited to all benefits payable under the Supervisors
Personnel Manual Policy 606 - Displaced Managers).
ARTICLE V
Termination Procedures
5.1 During the three (3) year period immediately following a
Change in Control, any purported termination of
Participant's employment (other than by reason of death)
shall be communicated by written Notice of Termination from
one party hereto to the other party hereto. A "Notice of
Termination" shall mean a notice which shall indicate the
specific termination provision in the Plan relied upon and
shall set forth in reasonable detail the facts and cir-
cumstances claimed to provide a basis for termination of
Participant's employment under the provision so indicated.
Further, a Notice of Termination for Cause is required to
include a copy of a resolution duly adopted by the affir-
mative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board
which was called and held for the purpose of considering
such termination (after reasonable notice to Participant
and an opportunity for Participant, together with
Participant's counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board,
Participant was guilty of conduct set forth in clause (i)
or (ii) of the definition of Cause herein, and specifying
the particulars thereof in detail.
5.2 "Date of Termination", with respect to any purported ter-
mination of the Participant's employment after a Change in
Control, shall mean (i) if the Participant's employment is
terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that Participant shall not
have returned to the full-time performance of Participant's
duties during such thirty (30) day period), and (ii) if the
Participant's employment is terminated for any other rea-
son, the date specified in the Notice of Termination
(which, in the case of a termination by the Company, shall
not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by
Participant, shall not be less than fifteen (15) days nor
more than sixty (60) days, respectively, from the date such
Notice of Termination is given).
5.3 If within fifteen (15) days after any Notice of Termination
is given, or, if later, prior to the Date of Termination
(as determined without regard to this Section 5.3), the
party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termina-
tion, the Date of Termination shall be the date on which
the dispute is finally resolved, either by mutual written
agreement of the parties or by a final judgment, order or
decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal
therefrom has expired and no appeal has been perfected);
provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable
diligence.
5.4 If a purported termination occurs following a Change in
Control, and such termination is disputed in accordance
with Section 5.3 hereof, the Company shall continue to pay
Participant the full compensation in effect when the notice
giving rise to the dispute was given (including, but not
limited to, salary) and continue Participant as a partici-
pant in all compensation, benefit and insurance plans in
which Participant was participating when the notice giving
rise to the dispute was given, until the dispute is finally
resolved in accordance with Section 5.3 hereof. Amounts
paid under this Section 5.4 are in addition to all other
amounts due under this Plan and shall not be offset against
or reduce any other amounts due under this Plan.
ARTICLE VI
Time of Payment
6.1 Security Benefit payments (including payment of the Lump
Sum, if applicable) shall begin as soon as practicable fol-
lowing the Participant's termination of employment with the
Company.
ARTICLE VII
Method of Payment
7.1 (a) For a Participant who is eligible to receive benefits
under the Retirement Plan and who elects to receive
such benefits at the time Security Benefit payments
begin, Security Benefit payments shall be made in
accordance with all the terms and conditions
applicable to the Participant's benefits under the Re-
tirement Plan, including any optional form of payment
he may have elected, provided, however, if any monthly
payment would be one hundred dollars ($100) or less,
the EBPB, in its discretion, may elect to make such
payments in such installments (not less frequently
than annually) as the EBPB may determine or in a
single sum payment.
(b) In the event that a Participant's benefits under the
Retirement Plan are subject in whole or in part to a
qualified domestic relations order, Security Benefit
payments shall be calculated and paid without regard
to such order.
7.2 (a) For a Participant who is not eligible to receive
benefits under the Retirement Plan or who has elected
not to receive such benefits under the Retirement Plan
at the time Security Benefit payments begin, the Par-
ticipant may elect one of the following Actuarial
Equivalent forms of benefit:
(1) a single life annuity with equal monthly
installments payable to the Participant for
his lifetime; or
(2) a joint and survivor annuity with the
Participant's designated beneficiary, payable
in monthly installments to the Participant
for his lifetime and with a specified per-
centage of the amount of such monthly in-
stallment payable after the death of the
Participant to the designated beneficiary of
such Participant, if then living, for the
life of such designated beneficiary; or
(3) a single life annuity payable in equal
monthly installments to the Participant for
his lifetime, with 60, 120 or 180 monthly
payments guaranteed; or
(b) A Participant described in Section 7.2(a) above may
elect a form of benefit hereunder by filing written
notice with the EBPB at anytime prior to the first day
of the calendar month for which a Security Benefit is
first payable to the Participant. If a Participant
fails to elect a form of benefit, the benefit shall be
paid in the form of a single-life annuity if the
Participant does not have a spouse on the date of
benefit commencement and in the form of a 50% joint
and survivor annuity with Participant's spouse as the
beneficiary if the Participant has a spouse on the
date of benefit commencement.
7.3 (a) Notwithstanding any provision contained in this Arti-
cle VII, Participant shall be entitled to elect to re-
ceive a portion of the Security Benefit in the form of
a lump sum distribution (the "Lump Sum"). The Lump
Sum shall equal the product of (A) the sum of
Participant's Annual Base Salary and Bonus and (B) a
factor of either one (1) or two (2), whichever
Participant elects in accordance with subsection (b)
below. In the event that Participant elects to re-
ceive the Lump Sum, such Participant's Security
Benefit shall be offset by an amount equal to the
Actuarial Equivalent of such Lump Sum. The remainder
of the Security Benefit (if any) shall be distributed
to Participant in a form of payment set forth in
Article VII and in accordance with the provisions of
the Plan.
(b) A Participant may elect to receive a Lump Sum in
accordance with such administrative procedures as may
be established by the Company from time to time. Any
election made before the fifteenth day of October in
any calendar year shall be effective for distributions
scheduled to commence on or after the first day of
January of the following year. Any election made on
or after the fifteenth day of October in any calendar
year shall be effective for distributions scheduled to
commence on or after the first day of January of the
second following year. Notwithstanding the foregoing,
no election made after the occurrence of a Change in
Control shall be effective.
7.4 Annual amounts provided by the Retirement Plan, paragraph
7(a) of the Officers Deferred Compensation Plan, the SERP
and any Prior Plan shall be calculated as of the earliest
date of payment of those respective benefits adjusted to
the Actuarial Equivalent as if Participant had chosen a
straight life annuity under such plans payable at the time
the Security Benefit begins.
7.5 The Security Benefit shall be calculated as if the
Participant commenced benefits from the Retirement Plan,
the SERP and a Prior Plan at the time benefits commence
under this Plan, and this benefit shall not be adjusted
upon actual commencement of benefits from the Retirement
Plan, Social Security, the SERP and any Prior Plan.
ARTICLE VIII
Miscellaneous
8.1 If any person to receive payment under this Plan is a mi-
nor, or is deemed by the EBPB or is adjudged to be legally
incompetent, the payments shall be made to the duly
appointed guardian or committee of such minor or
incompetent, or they may be made to such person or persons
who the EBPB believes are caring for or supporting such
minor or incompetent.
8.2 All payments to persons entitled to benefits under this
Plan shall be made to such persons and shall not be
grantable, transferable or otherwise assignable in
anticipation of payment thereof, in whole or in part, by
the voluntary or involuntary acts of any such persons, or
by operation of law, and shall not be liable or taken for
any obligation of such person. The Company will observe
the terms of the Plan unless and until ordered to do
otherwise by a state or Federal court. As a condition of
participation, a Participant agrees to hold the Company
harmless from any claim that arises out of the Company's
obeying any such order whether such order effects a
judgment of such court or is issued to enforce a judgment
or order of another court.
8.3 The EBPB shall have authority for the management, control
and administration of the Plan, including the power to
interpret the terms hereof.
8.4 The Board shall make all determinations as to Participant's
right to a Security Benefit. Any denial by the Board of a
claim for a Security Benefit under the Plan shall be stated
in writing and delivered or mailed to Participant and such
notice shall set forth the specific reasons for the denial,
written in a manner that may be understood without legal or
actuarial counsel. In addition, the Board shall afford a
reasonable opportunity to Participant for a review of the
decision denying such claim and, in the event of continued
disagreement, Participant may appeal within a period of 60
days after receipt of notification of denial. Failure to
perfect an appeal within the 60-day period shall make the
decision conclusive. Any further dispute or controversy
arising under or in connection with the Plan shall be set-
tled exclusively by arbitration in Allentown, Pennsylvania
in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction;
provided, however, that Participant shall be entitled to
seek specific performance of Participant's right to be paid
until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with
the Plan.
8.5 The Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds.
To the extent any person holds any rights under the Plan,
such rights shall be no greater than the rights of an
unsecured general creditor of the Company.
8.6 Nothing in this Plan shall confer any right on any
Participant to continue in the Company's employ, nor shall
anything in this Plan affect in any way the right of the
Company to terminate any Participant's employment at any
time.
8.7 The expenses of administration hereunder shall be borne by
the Company. The Company also shall pay to Participant all
legal fees and expenses incurred by Participant in
disputing any termination of Participant's employment here-
under or in seeking to obtain or enforce any benefit or
right provided by the Plan or in connection with any tax
audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made
within five (5) business days after delivery of
Participant's written requests for payment accompanied with
such evidence of fees and expenses incurred as the Company
reasonably may require. The Employee shall be required to
repay any such amounts to Employer to the extent that
arbitrators or a court of competent jurisdiction issues a
final, unappealable order setting forth a determination
that the position taken by the Employee was frivolous or
advanced in bad faith.
8.8 This Plan shall be construed, administered and enforced
according to the laws of the Commonwealth of Pennsylvania.
8.9 All payments from this Plan shall be made from the general
assets of the Company. This Plan shall not require the
Company to set aside, segregate, earmark, pay into trust or
special account or otherwise restrict the use of its assets
in the operation of the business.
8.10 This Plan shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns. The
term "the Company" as used herein shall include such
successors and assigns. Neither this Plan nor any right or
interest hereunder shall be assignable or transferable by a
Participant or by the Participant's beneficiaries or legal
representatives, except by will or by the laws of descent
and distribution. This Plan shall inure to the benefit of
and be enforceable by a Participant's legal representative.
8.11 Notices and all other communications provided for in the
Plan shall be in writing and shall be deemed to have been
duly given when delivered or mailed by United States regis-
tered mail, return receipt requested, postage prepaid,
addressed, to Participant at the last known address
maintained by the Company's personnel records, and to the
Company and Resources, to the respective addresses set
forth below, or to such other address as either party may
have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Company:
Pennsylvania Power & Light Company
Two North 9th Street
Allentown, Pennsylvania 18101
Attention: Corporate Secretary
To Resources:
PP&L Resources, Inc.
Two North 9th Street
Allentown, Pennsylvania 18101
Attention: Corporate Secretary
8.12 The masculine pronoun shall be deemed to include the
feminine and the singular to include the plural unless a
different meaning is plainly required by the context.
ARTICLEIX
Termination or Amendment
9.1 The Board may, in its discretion, terminate or amend this
Plan from time to time, provided, however, that the Plan
may not be terminated or amended to the prejudice or
detriment of any Participant during the pendency of any
potential Change in Control or during the three (3) year
period following a Change in Control (or, if later, thirty
six (36) months from the consummation of the transaction
giving rise to the Change in Control). Without limiting
the generality of the foregoing, the proviso of the
preceding sentence shall not, at any time or in any event,
be amended or deleted. Subject to the foregoing, the EBPB
may make such amendments to the Plan as it deems necessary
or desirable except those amendments which substantially
increase the cost of the Plan to the Company or
significantly alter the benefit design or eligibility
requirements of the Plan. No termination or amendment
shall (without Participant's consent) alter Participant's
right to monthly payments which have commenced prior to the
effective date of such termination or amendment.
ARTICLE X
Effective Date
10.1 The original effective date of this Plan was January 1,
1987. The effective date of this amended and restated Plan
is August 31, 1995, the date of its adoption by the Board.
ARTICLE XI
Limitation on Payments
11.1 Notwithstanding any other provisions of this Plan to the
contrary, in the event that any payment or benefit received
or to be received by Participant in connection with a
Change in Control or the termination of Participant's
employment (whether pursuant to the terms of this Plan or
any other plan, arrangement or agreement with the Company,
any person whose actions result in a Change in Control or
any person affiliated with the Company or such person) (all
such payments and benefits, including under the Plan, being
hereinafter called "Total Payments") would be subject (in
whole or part), to the excise tax imposed under Section
4999 of the Code (the "Excise Tax"), then the Security
Benefit shall be reduced to the extent necessary so that no
portion of the Total Payments is subject to the Excise Tax
(after taking into account any reduction in the Total
Payments provided by reason of Section 280G of the Code in
such other plan, arrangement or agreement) if, and only if
(A) the net amount of such Total Payments, as so reduced,
(and after deduction of the net amount of federal, state
and local income tax on such reduced Total Payments) is
greater than (B) the excess of (i) the net amount of such
Total Payments, without reduction (but after deduction of
the net amount of federal, state and local income tax on
such Total Payments), over (ii) the amount of Excise Tax to
which Participant would be subject in respect of such Total
Payments. For purposes of determining whether and the ex-
tent to which the Total Payments will be subject to the
Excise Tax, (i) no portion of the Total Payments the
receipt or enjoyment of which Participant shall have effec-
tively waived in writing prior to the date of Participant's
termination of employment shall be taken into account, (ii)
no portion of the Total Payments shall be taken into
account which in the opinion of tax counsel selected by the
Company does not constitute a "parachute payment" within
the meaning of Section 280G(b)(2) of the Code, (including
by reason of Section 280G(b)(4)(A) of the Code) and, in
calculating the Excise Tax, no portion of such Total
Payments shall be taken into account which constitutes
reasonable compensation for services actually rendered,
within the meaning of section 280G(b)(4)(B) of the Code, in
excess of the Base Amount (within the meaning of Section
280G(b)(3) of the Code) allocable to such reasonable com-
pensation, and (iii) the value of any non-cash benefit or
any deferred payment or benefit included in the Total Pay-
ments shall be determined by the Company in accordance with
the principles of Sections 280G(d)(3) and (4) of the Code.
Prior to the payment of benefits under the Plan, the Com-
pany shall provide Participant with its calculation of the
amounts referred to in this Section and such supporting
materials as are reasonably necessary for Participant to
evaluate the Company's calculations.
Executed this 22nd day of September, 1995.
PENNSYLVANIA POWER & LIGHT COMPANY
By: /s/ John M. Chappelear
John M. Chappelear
Vice President-Investments &
Pensions
PENNSYLVANIA POWER & LIGHT COMPANY
EXECUTIVE RETIREMENT SECURITY PLAN
TABLE OF CONTENTS
ARTICLE PAGE
I Purpose 1
II Definitions 2
III Eligibility 12
IV Security Benefit 13
V Termination Procedures 17
VI Time of Payment 20
VII Method of Payment 21
VIII Miscellaneous 25
IX Termination or Amendment 30
X Effective Date 31
XI Limitation on Payments 32
08/31/95
<PAGE>
AMENDMENT NO. 1
To
PENNSYLVANIA POWER & LIGHT COMPANY
INCENTIVE COMPENSATION PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Employee Savings
Plan ("Plan") effective January 1, 1987; and
WHEREAS, the Plan was amended and restated effective July 1,
1992; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective as of the "Effective Time" as defined in the
Agreement and Plan of Exchange between Pennsylvania Power & Light
Company and PP&L Resources, Inc., the following provisions of
Sections 1, 2, 5, 7, 8, 9 and 10 are amended to read:
SECTION 1. PURPOSE OF THE PLAN.
The purpose of the Incentive Compensation Plan (the "Plan")
is to provide a method whereby officers and other key employees
of Pennsylvania Power & Light Company (the "Company") may be
awarded additional remuneration for performance in meeting
specific Company objectives in a form that increases their
ownership interest and encourages them to remain in the employ of
the Company.
SECTION 2. DEFINITIONS.
B. "Board" means the Board of Directors of Resources.
E. "Common Stock" means the Common Stock of Resources.
J. "Eligible Employee" means any person employed by the
Company, its subsidiaries or affiliates on a regularly scheduled
basis during any portion of a period for which an Award is made
and who satisfies all of the requirements of Section 6.
O. "Option" or "Stock option" means either an Incentive
Stock Option or a nonqualified stock option granted under Section
8 with respect to Common Stock.
S. "PP&L" means the Company.
T. "Resources" means PP&L Resources, Inc.
SECTION 5. GRANT OF AWARDS AND LIMITATION OF NUMBER OF SHARES
AWARDED.
The Committee may, from time to time, grant Awards to one or
more Eligible Employees, provided that: (i) subject to any
adjustment pursuant to Section 10G, the aggregate number of
shares of Common Stock subject to Awards (including Incentive
Stock Options) may not exceed 200,000 shares; (ii) to the extent
that an Award lapses or is forfeited or the rights of the
Participant to whom an Award was granted terminate, any shares of
Common Stock subject to such Award shall again be available for
the grant of an Award under the Plan; and (iii) shares delivered
under the Plan may be authorized and unissued Common Stock,
Common Stock held in the treasury of Resources or Common Stock
purchased on the open market (including private purchases) in
accordance with applicable securities laws. In determining the
size of the Awards, the Committee shall assess the performance of
the Eligible Employees against criteria to be established by the
Committee from time to time based on corporate performance,
including shareowner and customer-related factors, and shall take
into account the Participant's responsibility level, potential,
cash compensation level and the Fair Market Value of the Common
Stock at the time of Awards, as well as such other matters as the
Committee deems appropriate.
SECTION 7. RESTRICTED STOCK.
B. Restriction Period. At the time a Restricted Stock
Award is granted, the Committee shall establish a Restriction
Period applicable to such Award which shall be not less than
three years and not more than ten years from the Date of Grant,
subject to the provisions of Section 7C. Each Restricted Stock
Award may have a different Restriction Period.
Notwithstanding the other provisions of this Section 7: (i)
in the event of a public tender offer for all or any portion of
the Common Stock or in the event that any proposal to merge or
consolidate Resources with another company is submitted to the
shareowners of Resources for a vote, the Committee in its sole
discretion may change or eliminate the Restriction Period and;
(ii) the Committee is authorized in its sole discretion to
accelerate the time at which any or all of the restrictions on
all or any part of a Restricted Stock Award shall lapse or to
remove any or all of such restrictions whenever the Committee may
decide that changes in tax or other laws or other circumstances
arising after the granting of a Restricted Stock Award make such
action appropriate; provided, however, that no acceleration or
removal of restrictions shall result in payout of stock to the
Participant less than six months after the Date of Grant except
pursuant to Section 7C below upon the termination, death,
disability or retirement of the Participant.
C. Forfeiture or Payout of Award. Restricted-Stock Awards
are subject to forfeiture or payout (i.e., removal of
restrictions) as follows:
(i) Termination - the Restricted Stock Award will be
completely forfeited.
(ii) Retirement - payout of the Restricted Stock Award
will be Prorated for service durinq the restriction period.
(iii) Early Retirement - payout of the Restricted
Stock Award will be prorated for service during the restriction
period.
(iv) Disability - payout of the Restricted Stock Award
will be prorated as if the Participant had maintained active
employment until the Normal Retirement Date.
(v) Death - payout of the Restricted Stock Award will
be prorated as if the Participant had maintained active
employment until the Normal Retirement Date.
In any instance where payout of a Restricted Stock Award is
to be prorated, the Committee may choose to provide the
Participant (or the Participant's estate) with the entire Award
rather than the prorated portion thereof.
Any Restricted Stock which is forfeited will be transferred
to Resources.
SECTION 8. STOCK OPTIONS.
J. Early Disposition of Common Stock. If a Participant
shall dispose of any shares of Common Stock purchased pursuant to
an Incentive Stock Option within one year from the date the
shares were acquired or within two years from the Date of Grant
of the Option under which such shares of Common Stock were
purchased, then, to provide the Company or Resources with the
opportunity to claim the benefit of any income tax deduction
which may be available to it under the circumstances, the
Participant shall within ten days of such disposition notify the
Company of the dates of acquisition and disposition of such
shares of Common Stock, the number of shares so disposed and the
consideration, if any, received therefor.
SECTION 9. AMENDMENT OF THE PLAN.
The Committee may at any time and from time to time alter,
amend, suspend or terminate the Plan in whole or in part, except:
(i) no such action may be taken without approval by the
shareowners of Resources which materially increases the benefits
accruing to Participants pursuant to the Plan, increases the
number of shares of Common Stock which may be issued pursuant to
the Plan (except as provided in Section 10G) or materially
modifies the requirements as to eligibility for participation in
the Plan; and (ii) no such action may be taken without the
consent of the Participant to whom any Award shall theretofore
have been granted, which adversely affects the rights of such
Participant concerning such Award, except as such termination or
amendment of the Plan is required by statute, or rules and
regulations promulgated thereunder.
SECTION 10. MISCELLANEOUS PROVISIONS.
E. Indemnification. Each person who is or at any time
serves as a member of the Board, the Committee or PP&L's Board of
Directors shall be indemnified and held harmless by the Company
against and from: (i) any loss, cost, liability or expense that
may be imposed upon or reasonably incurred by such person in
connection with or resulting from any claim, action, suit or
proceeding to which such person may be a party or in which such
person may be involved by reason of any action or failure to act
under the Plan; and (ii) any and all amounts paid by such person
in satisfaction of judgment in any such action, suit or
proceeding relating to the Plan. Each person covered by this
indemnification shall give the Company an opportunity, at its own
expense, to handle and defend the same before such person
undertakes to handle and defend it on such person's own behalf.
The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be
entitled under the bylaws of Resources, as a matter of law, or
otherwise, or any power that Resources may have to indemnify such
person or hold such person harmless.
F. Reliance on Reports. Each member of the Board, the
Committee and PP&L's Board of Directors shall be fully justified
in relying or acting in good faith upon any report made by the
independent public accountants of, or counsel for, the Company or
Resources and upon any other information furnished in connection
with the Plan. In no event shall any person who is or shall have
been a member of the Board, the Committee or PP&L's Board of
Directors be liable for any determination made or other action
taken or any omission to act in reliance upon any such report or
information or for any action taken, including the furnishing of
information, or failure to act, if in good faith.
H. Company Successors. In the event Resources becomes a
party to a merger, consolidation, sale of substantially all of
its assets or any other corporate reorganization in which
Resources will not be the surviving corporation or in which the
holders of the Common Stock will receive securities of another
corporation, then such other corporation shall assume the rights
and obligations of Resources under this Plan.
II. Except as provided for in this Amendment No. 1, all other
provisions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment No. 1 is executed this
7th day of October, 1994.
PENNSYLVANIA POWER & LIGHT COMPANY
By:___/s/ John M. Chappelear_____
John M. Chappelear
Vice President-Investments &
Pensions
<PAGE>
Exhibit 10(n)
Executive Compensation Incentive Award Program
The Company's Executive Compensation Incentive Award
Program is designed to promote the success of the Company by
providing a method whereby officers may be awarded additional
remuneration based on specific Company objectives and the
Company's overall return on equity. The program has two
separate components. A short-term incentive plan makes cash
awards to eligible employees based on the achievement of
independent financial, operational and strategic goals
established annually by the Company's Board of Directors, as
well as individual goals for officers who are not members of
the Company's Corporate Leadership Committee (CLC). A long-
term incentive plan grants restricted Company stock to eligible
employees based on the achievement of other goals established
by the Board.
Awards under the program are made by the Management
Development and Compensation Committee of the Board of
Directors, except that cash awards are made by CLC in the case
of non-CLC members.
<PAGE>
<TABLE>
Exhibit 12(a)
PP&L RESOURCES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt .................. $213,413 $214,390 $225,800 $240,260 $232,092
Interest on short-term debt
and other interest ....................... 18,043 18,108 12,645 11,955 20,875
Amortization of debt discount, expense
and premium - net.......................... 2,344 2,151 1,798 1,447 1,379
Interest on capital lease
obligations
Charged to expense ...................... 14,385 11,097 9,059 10,473 20,518
Capitalized ............................. 1,619 1,037 927 1,618 2,894
Estimated interest component of
operating rentals ......................... 8,134 6,016 5,411 5,357 4,854
Proportionate share of fixed charges
of 50-percent-or-less-owned
persons ................................... 1,014 1,142 1,299 1,456 1,567
Total fixed charges ................. $258,952 $253,941 $256,939 $272,566 $284,179
Earnings, as defined:
Net income .................................. $322,653 $215,935 $314,241 $306,229 $303,727
Preferred and Preference Stock Dividend
Requirements............................... 27,768 28,405 33,885 40,495 44,687
Less undistributed income of less
than 50-percent-owned persons ............ -
350,421 244,340 348,126 346,724 348,414
Add (Deduct):
Federal income taxes ........................ 195,028 198,777 162,795 144,546 114,904
State income taxes .......................... 62,388 76,903 63,508 64,648 49,534
Deferred income taxes ....................... 15,018 (45,198) 22,367 33,175 51,772
Investment tax credit - net ................. (10,814) (12,253) (13,506) (14,029) 1,156
Income taxes on other income and
deductions - net .......................... 23,891 (38,647) (1,280) 322 (903)
Amortization of capitalized
interest on capital leases ................ 5,510 9,271 11,696 12,820 16,965
Total fixed charges as above
(excluding capitalized interest
on capital lease obligations) ............. 257,333 252,904 256,012 270,948 281,285
Total earnings ...................... $898,775 $686,097 $849,718 $859,154 $863,127
Ratio of earnings to fixed
charges ..................................... 3.47 2.70 3.31 3.15 3.04
</TABLE>
<PAGE>
<TABLE>
Exhibit 12(b)
PENNSYLVANIA POWER & LIGHT COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
<CAPTION>
1995 1994(a) 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt .................. $213,413 $214,390 $225,800 $240,260 $232,092
Interest on short-term debt
and other interest ....................... 18,043 18,108 12,645 11,955 20,875
Amortization of debt discount, expense
and premium - net.......................... 2,344 2,151 1,798 1,447 1,379
Interest on capital lease
obligations
Charged to expense ...................... 14,385 11,097 9,059 10,473 20,518
Capitalized ............................. 1,619 1,037 927 1,618 2,894
Estimated interest component of
operating rentals ......................... 8,134 6,016 5,411 5,357 4,854
Proportionate share of fixed charges
of 50-percent-or-less-owned
persons ................................... 1,014 1,142 1,299 1,456 1,567
Total fixed charges ................. $258,952 $253,941 $256,939 $272,566 $284,179
Earnings, as defined:
Net income .................................. $352,084 $243,443 $348,126 $346,724 $348,414
Less undistributed income of less
than 50-percent-owned persons ............ -
352,084 243,443 348,126 346,724 348,414
Add (Deduct):
Federal income taxes ........................ 195,028 198,777 162,795 144,546 114,904
State income taxes .......................... 62,388 76,903 63,508 64,648 49,534
Deferred income taxes ....................... 15,018 (45,198) 22,367 33,175 51,772
Investment tax credit - net ................. (10,814) (12,253) (13,506) (14,029) 1,156
Income taxes on other income and
deductions - net .......................... 25,410 (38,437) (1,280) 322 (903)
Amortization of capitalized
interest on capital leases ................ 5,510 9,271 11,696 12,820 16,965
Total fixed charges as above
(excluding capitalized interest
on capital lease obligations) ............. 257,333 252,904 256,012 270,948 281,285
Total earnings ...................... $901,957 $685,410 $849,718 $859,154 $863,127
Ratio of earnings to fixed
charges ..................................... 3.48 2.70 3.31 3.15 3.04
<FN>
(a) Restated to reflect the retroactive dividend
of PMDC to Resources.
</TABLE>
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statement on
Form S-3 (No. 33-59405) and in the Registration Statement on Form
S-8 (No. 33-50031) of PP&L Resources, Inc. of our report dated
February 1, 1996 appearing on page 45 of this Form 10-K.
(Signed) Price Waterhouse LLP
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
March 1, 1996
<PAGE>
(Deloitte &
Touche LLP
logo appears here)
Exhibit 23(b)
Two Hilton Court Telephone: (201) 631-7000
P.O. Box 319 Facsimile: (201) 631-7459
Parsippany, New Jersey 07054-0319
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-59405 of PP&L Resources, Inc. on Form S-3
and Registration Statement No. 33-50031 of PP&L Resources,
Inc. on Form S-8 of our report dated February 3, 1995,
appearing in the Annual Report on Forms 10-K of PP&L
Resources, Inc. and Pennsylvania Power & Light Company for
the year ended December 31, 1995.
March 1, 1996
(Deloitte Touche
Tohmatsu International
logo appears here)
<PAGE>
Exhibit 24
PP&L RESOURCES, INC.
PENNSYLVANIA POWER & LIGHT COMPANY
l995 ANNUAL REPORT
TO THE SECURITIES AND EXCHANGE COMMISSION
ON FORM l0-K
POWER OF ATTORNEY
The undersigned directors of PP&L Resources, Inc. and
Pennsylvania Power & Light Company, both Pennsylvania
corporations, which are to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the
Securities Exchange Act of l934, as amended, their 1995 Annual
Report on Form l0-K, do hereby appoint William F. Hecht, R. E.
Hill and Robert J. Grey their true and lawful attorney, and each
of them their true and lawful attorney, with power to act without
the other and with full power of substitution and resubstitution,
to execute for them and in their names said Form l0-K Report and
any and all amendments thereto, whether said amendments add to,
delete from or otherwise alter said Form l0-K Report, or add or
withdraw any exhibits or schedules to be filed therewith and any
and all instruments in connection therewith. The undersigned
hereby grant to said attorneys and each of them full power and
authority to do and perform in the name of and on behalf of the
undersigned, and in any and all capacities, any act and thing
whatsoever required or necessary to be done in and about the
premises, as fully and to all intents and purposes as the
undersigned might do, hereby ratifying and approving the acts of
said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned have hereunto set
their hands and seals this 28th day of February, l996.
/s/ E. Allen Deaver L.S. /s/ Stuart Heydt L.S.
E. Allen Deaver Stuart Heydt
/s/ Nance K. Dicciani L.S. /s/ Clifford L. Jones L.S.
Nance K. Dicciani Clifford L. Jones
/s/ William J. Flood L.S. /s/ John T. Kauffman L.S.
William J. Flood John T. Kauffman
/s/ Daniel G. Gambet L.S. /s/ Robert Y. Kaufman L.S.
Daniel G. Gambet Robert Y. Kaufman
/s/ Elmer D. Gates L.S. /s/ F. A. Long L.S.
Elmer D. Gates F. A. Long
/s/ Derek C. Hathaway L.S. /s/ Norman Robertson L.S.
Derek C. Hathaway Norman Robertson
/s/ William F. Hecht L.S. /s/ David L. Tressler L.S.
William F. Hecht David L. Tressler
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME, CONSOLIDATED BALANCE SHEET, CONSOLIDATED
STATEMENT OF CASH FLOWS FOR THE FORM 10-K DATED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000317187
<NAME> PENNSYLVANIA POWER & LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 7,121,825
<OTHER-PROPERTY-AND-INVEST> 331,922
<TOTAL-CURRENT-ASSETS> 639,211
<TOTAL-DEFERRED-CHARGES> 1,330,837
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 9,423,795
<COMMON> 1,476,048
<CAPITAL-SURPLUS-PAID-IN> 17,948
<RETAINED-EARNINGS> 1,033,900
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,527,896
295,000
171,375
<LONG-TERM-DEBT-NET> 2,828,728
<SHORT-TERM-NOTES> 21,145
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 68,000
<LONG-TERM-DEBT-CURRENT-PORT> 30,000
0
<CAPITAL-LEASE-OBLIGATIONS> 138,624
<LEASES-CURRENT> 81,017
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,262,010
<TOT-CAPITALIZATION-AND-LIAB> 9,423,795
<GROSS-OPERATING-REVENUE> 2,751,798
<INCOME-TAX-EXPENSE> 261,620
<OTHER-OPERATING-EXPENSES> 1,916,402
<TOTAL-OPERATING-EXPENSES> 2,178,022
<OPERATING-INCOME-LOSS> 573,776
<OTHER-INCOME-NET> 4,200
<INCOME-BEFORE-INTEREST-EXPEN> 577,976
<TOTAL-INTEREST-EXPENSE> 225,892
<NET-INCOME> 352,084
27,768
<EARNINGS-AVAILABLE-FOR-COMM> 324,316
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 213,413
<CASH-FLOW-OPERATIONS> 695,733
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME, CONSOLIDATED BALANCE SHEET, CONSOLIDATED
STATEMENT OF CASH FLOWS FOR THE FORM 10-K DATED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000922224
<NAME> PP&L RESOURCES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 7,121,825
<OTHER-PROPERTY-AND-INVEST> 346,418
<TOTAL-CURRENT-ASSETS> 692,606
<TOTAL-DEFERRED-CHARGES> 1,330,837
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 9,491,686
<COMMON> 1,594
<CAPITAL-SURPLUS-PAID-IN> 1,512,380
<RETAINED-EARNINGS> 1,083,135
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,597,109
295,000
171,375
<LONG-TERM-DEBT-NET> 2,828,728
<SHORT-TERM-NOTES> 21,145
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 68,000
<LONG-TERM-DEBT-CURRENT-PORT> 30,000
0
<CAPITAL-LEASE-OBLIGATIONS> 138,624
<LEASES-CURRENT> 81,017
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,260,688
<TOT-CAPITALIZATION-AND-LIAB> 9,491,686
<GROSS-OPERATING-REVENUE> 2,751,798
<INCOME-TAX-EXPENSE> 261,620
<OTHER-OPERATING-EXPENSES> 1,916,402
<TOTAL-OPERATING-EXPENSES> 2,178,022
<OPERATING-INCOME-LOSS> 573,776
<OTHER-INCOME-NET> 2,537
<INCOME-BEFORE-INTEREST-EXPEN> 576,313
<TOTAL-INTEREST-EXPENSE> 225,892
<NET-INCOME> 350,421
27,768
<EARNINGS-AVAILABLE-FOR-COMM> 322,653
<COMMON-STOCK-DIVIDENDS> 263,645
<TOTAL-INTEREST-ON-BONDS> 213,413
<CASH-FLOW-OPERATIONS> 692,259
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 2.05
</TABLE>
<PAGE>
<TABLE>
PP&L Resources, Inc.
Pennsylvania Power & Light Company
Exhibit 99
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Other Changes Balance at
Beginning Additions Retirements Add End of
Description of Period at Cost or Sales (Deduct) (A) Period
<S> <C> <C> <C> <C> <C>
(Thousands of Dollars)
Year Ended December 31, 1995
Electric Plant in Service
Intangible ................................. $21,423 $166 $285 $21,304
Steam Production ........................... 1,962,444 115,103 11,320 $22 2,066,249
Nuclear Production ......................... 3,996,746 59,324 10,927 4,045,143
Hydraulic Production ....................... 97,394 6,475 796 103,073
Other Production ........................... 35,797 915 96 36,616
Transmission ............................... 431,638 19,941 3,397 (73,833) 374,349
Distribution ............................... 2,450,189 144,038 17,742 75,565 2,652,050
General .................................... 275,543 30,747 4,152 (87) 302,051
Held for Future Use ........................ 35,345 3,190 (1,969) 36,566
Total Electric Plant in Service .......... 9,306,519 379,899 48,715 (302) 9,637,401
Construction Work in Progress ................ 211,288 (40,842)(B) 170,446
Nuclear Fuel-Owned ........................... 76 44,459 (44,410) 125
Leased Property
Nuclear Fuel ............................... 340,997 1,650 (59,994) 282,653
Other ...................................... 164,715 27,975 16,201 176,489
Total Leased Property..................... 505,712 29,625 16,201 (59,994) 459,142
Total Electric Utility Plant ............. 10,023,595 413,141 64,916 (104,706) 10,267,114
Other Property ............................... 122,049 7,466 11,171 (5,596) 112,748
Total Property, Plant and Equipment ...... 10,145,644 420,607 76,087 (110,302) 10,379,862
Utility Plant Carrying Charges (C) ........... 29,401 29,401
Total .................................... $10,175,045 $420,607 $76,087 $(110,302) $10,409,263
Year Ended December 31, 1994
Electric Plant in Service
Intangible ................................. $15,006 $6,417 $21,423
Steam Production ........................... 1,794,602 195,919 $27,928 $(149) 1,962,444
Nuclear Production ......................... 3,967,484 58,663 27,431 (1,970) 3,996,746
Hydraulic Production ....................... 79,952 17,447 12 7 97,394
Other Production ........................... 34,817 1,164 184 35,797
Transmission ............................... 423,732 12,701 7,406 2,611 431,638
Distribution ............................... 2,291,839 174,931 16,293 (288) 2,450,189
General .................................... 272,170 10,182 6,792 (17) 275,543
Held for Future Use ........................ 32,871 2,675 (201) 35,345
Total Electric Plant in Service .......... 8,912,473 480,099 86,046 (7) 9,306,519
Construction Work in Progress ................ 238,600 (27,312)(B) 211,288
Nuclear Fuel-Owned ........................... 1,584 34,352 (35,860) 76
Leased Property
Nuclear Fuel ............................... 365,207 1,073 (25,283) 340,997
Other ...................................... 158,854 25,149 19,288 164,715
Total Leased Property..................... 524,061 26,222 19,288 (25,283) 505,712
Total Electric Utility Plant ............. 9,676,718 513,361 105,334 (61,150) 10,023,595
Other Property ............................... 197,917 1,067 453 (76,482)(D) 122,049
Total Property, Plant and Equipment ...... 9,874,635 514,428 105,787 (137,632) 10,145,644
Utility Plant Carrying Charges (C) ........... 29,401 29,401
Total .................................... $9,904,036 $514,428 $105,787 $(137,632) $10,175,045
PP&L Resources, Inc.
Pennsylvania Power & Light Company
Exhibit 99
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT
Column A Column B Column C Column D Column E Column F
Balance at Other Changes Balance at
Beginning Additions Retirements Add End of
Description of Period at Cost or Sales (Deduct) (A) Period
(Thousands of Dollars)
Year Ended December 31, 1993
Electric Plant in Service
Intangible ................................. $14,856 $150 $15,006
Steam Production ........................... 1,687,011 124,346 $17,063 $308 1,794,602
Nuclear Production ......................... 3,940,623 42,070 15,213 4 3,967,484
Hydraulic Production ....................... 70,713 9,338 99 79,952
Other Production ........................... 33,263 1,772 218 34,817
Transmission ............................... 409,798 18,946 5,583 571 423,732
Distribution ............................... 2,154,914 156,481 18,722 (834) 2,291,839
General .................................... 250,046 25,943 3,872 53 272,170
Held for Future Use ........................ 30,320 2,837 60 (226) 32,871
Total Electric Plant in Service .......... 8,591,544 381,883 60,830 (124) 8,912,473
Construction Work in Progress ................ 211,534 27,066 (B) 238,600
Nuclear Fuel-Owned ........................... 2,467 62,548 (63,431) 1,584
Leased Property
Nuclear Fuel ............................... 362,903 968 1,336 365,207
Other ...................................... 162,191 19,618 22,955 158,854
Total Leased Property .................... 525,094 20,586 22,955 1,336 524,061
Total Electric Utility Plant ............. 9,330,639 492,083 83,785 (62,219) 9,676,718
Other Property ............................... 229,057 2,629 21,537 (12,232) 197,917
Total Property, Plant and Equipment ...... 9,559,696 494,712 105,322 (74,451) 9,874,635
Utility Plant Carrying Charges(C) ............ 29,401 29,401
Total .................................... $9,589,097 $494,712 $105,322 $(74,451) $9,904,036
<FN>
(A) Unless otherwise noted, amounts generally reflect transfers of land and facilities to and
from other categories of property, plant and equipment, sale and leaseback of nuclear fuel
and reacquisition of leased nuclear fuel.
(B) Net of transfers to electric plant.
(C) Represents utility plant carrying charges of $28,502 transferred from Nuclear Production and $899
transferred from Steam Production to a Deferred Debit Account in 1986 per Federal Energy
Regulatory Commission (FERC) order FA84-12-001.
(D) Includes a $73.7 million write down in the carrying value of a subsidiary's investment in
undeveloped coal reserves.
</TABLE>
