UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
1-6047 General Public Utilities Corporation 13-5516989
(a Pennsylvania corporation)
100 Interpace Parkway
Parsippany, New Jersey 07054-1149
Telephone (201) 263-6500
1-3141 Jersey Central Power & Light Company 21-0485010
(a New Jersey corporation)
300 Madison Avenue
Morristown, New Jersey 07962-1911
Telephone (201) 455-8200
1-446 Metropolitan Edison Company 23-0870160
(a Pennsylvania corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19605
Telephone (610) 929-3601
1-3522 Pennsylvania Electric Company 25-0718085
(a Pennsylvania corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19605
Telephone (610) 929-3601
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
The number of shares outstanding of each of the issuer's classes of
voting stock, as of April 30, 1996, was as follows:
Shares
Registrant Title Outstanding
General Public Utilities Corporation Common Stock, $2.50 par value 120,476,040
Jersey Central Power & Light Company Common Stock, $10 par value 15,371,270
Metropolitan Edison Company Common Stock, no par value 859,500
Pennsylvania Electric Company Common Stock, $20 par value 5,290,596
<PAGE>
General Public Utilities Corporation and Subsidiary Companies
Quarterly Report on Form 10-Q
March 31, 1996
Table of Contents
Page
PART I - Financial Information
Consolidated Financial Statements:
General Public Utilities
Balance Sheets 3
Statements of Income 5
Statements of Cash Flows 6
Jersey Central Power & Light Company
Balance Sheets 7
Statements of Income 9
Statements of Cash Flows 10
Metropolitan Edison Company
Balance Sheets 11
Statements of Income 13
Statements of Cash Flows 14
Pennsylvania Electric Company
Balance Sheets 15
Statements of Income 17
Statements of Cash Flows 18
Notes to Financial Statements 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 38
PART II - Other Information 49
Signatures 50
_________________________________
The financial statements (not examined by independent accountants)
reflect all adjustments (which consist of only normal recurring
accruals) which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods presented.
This combined Quarterly Report on Form 10-Q is separately filed by
General Public Utilities Corporation, Jersey Central Power & Light
Company, Metropolitan Edison Company and Pennsylvania Electric Company.
Information contained herein relating to any individual registrant is
filed by such registrant on its own behalf. None of these registrants
make any representations as to information relating to the other
registrants. This combined Form 10-Q supplements and updates the 1995
Annual Report on Form 10-K, filed by the individual registrants with the
Securities and Exchange Commission and should be read in conjunction
therewith.
2<PAGE>
<TABLE>
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
<CAPTION>
In Thousands
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $ 9,366,784 $9,295,630
Less, accumulated depreciation 3,505,818 3,433,240
Net utility plant in service 5,860,966 5,862,390
Construction work in progress 308,005 313,471
Other, net 198,667 193,356
Net utility plant 6,367,638 6,369,217
Other Property and Investments:
Nuclear decommissioning trusts 385,479 362,957
EI Group investments, net 275,146 288,044
Nuclear fuel disposal fund 96,816 95,393
Other, net 41,859 39,505
Total other property and investments 799,300 785,899
Current Assets:
Cash and temporary cash investments 112,207 18,422
Special deposits 8,710 14,877
Accounts receivable:
Customers, net 297,746 278,643
Other 127,904 69,773
Unbilled revenues 107,532 128,749
Materials and supplies, at average cost or less:
Construction and maintenance 195,892 194,769
Fuel 32,738 39,795
Deferred energy costs 8,014 13,208
Deferred income taxes 23,408 27,064
Prepayments 96,888 42,746
Other 17,715 -
Total current assets 1,028,754 828,046
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 366,561 368,712
Unamortized property losses 104,390 105,729
Income taxes recoverable through future rates 515,057 527,584
Other 436,952 437,683
Total regulatory assets 1,422,960 1,439,708
Deferred income taxes 335,099 330,186
Other 130,723 116,642
Total deferred debits and other assets 1,888,782 1,886,536
Total Assets $10,084,474 $9,869,698
The accompanying notes are an integral part of the consolidated financial statements.
3
</TABLE>
<PAGE>
<TABLE>
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
<CAPTION>
In Thousands
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 314,458 $ 314,458
Capital surplus 747,563 746,449
Retained earnings 2,106,608 2,004,072
Total 3,168,629 3,064,979
Less, reacquired common stock, at cost 89,522 90,345
Total common stockholders' equity 3,079,107 2,974,634
Cumulative preferred stock:
With mandatory redemption 124,000 134,000
Without mandatory redemption 98,116 98,116
Subsidiary-obligated mandatorily
redeemable preferred securities 330,000 330,000
Long-term debt 2,510,040 2,567,898
Total capitalization 6,141,263 6,104,648
Current Liabilities:
Securities due within one year 148,044 131,246
Notes payable 227,379 123,890
Obligations under capital leases 167,885 159,565
Accounts payable 322,576 318,394
Taxes accrued 154,166 46,613
Interest accrued 55,414 69,456
Other 209,617 259,280
Total current liabilities 1,285,081 1,108,444
Deferred Credits and Other Liabilities:
Deferred income taxes 1,456,314 1,466,060
Unamortized investment tax credits 142,655 145,375
Three Mile Island Unit 2 future costs 417,200 413,031
Regulatory liabilities 164,265 97,999
Other 477,696 534,141
Total deferred credits and other liabilities 2,658,130 2,656,606
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $10,084,474 $9,869,698
The accompanying notes are an integral part of the consolidated financial statements.
4
</TABLE>
<PAGE>
<TABLE>
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Statements of Income
(Unaudited)
<CAPTION>
In Thousands
Three Months
Ended March 31,
1996 1995
<S> <C> <C>
Operating Revenues $1,022,934 $913,972
Operating Expenses:
Fuel 98,495 89,227
Power purchased and interchanged 277,397 250,923
Deferral of energy costs, net 3,154 1,148
Other operation and maintenance 226,597 219,713
Depreciation and amortization 96,586 89,541
Taxes, other than income taxes 91,489 86,061
Total operating expenses 793,718 736,613
Operating Income Before Income Taxes 229,216 177,359
Income taxes 68,010 43,699
Operating Income 161,206 133,660
Other Income and Deductions:
Allowance for other funds used during
construction 1,229 1,205
Other income/(expense), net 10,309 (800)
Income taxes (4,002) 155
Total other income and deductions 7,536 560
Income Before Interest Charges and
Preferred Dividends 168,742 134,220
Interest Charges and Preferred Dividends:
Interest on long-term debt 46,612 45,113
Other interest 4,308 6,849
Allowance for borrowed funds used
during construction (1,861) (2,107)
Dividends on subsidiary-obligated mandatorily
redeemable preferred securities 7,222 4,547
Preferred stock dividends of subsidiaries 4,208 4,321
Total interest charges and
preferred dividends 60,489 58,723
Net Income $ 108,253 $ 75,497
Earnings Per Average Common Share $ .90 $ .65
Average Common Shares Outstanding 120,640 115,340
Cash Dividends Paid Per Share $ .47 $ .45
The accompanying notes are an integral part of the consolidated financial statements.
5
</TABLE>
<PAGE>
<TABLE>
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
In Thousands
Three Months
Ended March 31,
1996 1995
<S> <C> <C>
Operating Activities:
Net income $108,253 $ 75,497
Adjustments to reconcile income to cash provided:
Depreciation and amortization 101,971 91,815
Amortization of property under capital leases 15,027 14,154
Nuclear outage maintenance costs, net 7,575 8,187
Deferred income taxes and investment tax
credits, net (5,737) (27,975)
Deferred energy costs, net 2,953 1,141
Accretion income (2,903) (3,130)
Allowance for other funds used
during construction (1,230) (1,205)
Changes in working capital:
Receivables (56,018) 22,117
Materials and supplies 5,697 266
Special deposits and prepayments (47,737) (17,874)
Payables and accrued liabilities 122,588 1,958
Other, net (19,035) 420
Net cash provided by operating activities 231,404 165,371
Investing Activities:
Cash construction expenditures (104,470) (122,138)
Contributions to decommissioning trusts (10,084) (8,382)
Nonregulated investments (19,765) 756
Other, net 12,699 1,589
Net cash used for investing activities (121,620) (128,175)
Financing Activities:
Issuance of long-term debt - 139,115
Increase/(Decrease) in notes payable, net 103,489 (101,886)
Retirement of long-term debt (51,103) -
Capital lease principal payments (13,667) (11,218)
Dividends paid on common stock (54,718) (51,843)
Net cash required by financing activities (15,999) (25,832)
Net increase in cash and temporary
cash investments from above activities 93,785 11,364
Cash and temporary cash investments, beginning of year 18,422 26,731
Cash and temporary cash investments, end of period $ 112,207 $ 38,095
Supplemental Disclosure:
Interest and preferred dividends paid $ 78,313 $ 75,407
Income taxes paid $ 6,334 $ 28,569
New capital lease obligations incurred $ 21,929 $ 8,207
Common stock dividends declared but not paid $ - $ -
The accompanying notes are an integral part of the consolidated financial statements.
6
</TABLE>
<PAGE>
<TABLE>
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
Consolidated Balance Sheets
<CAPTION>
In Thousands
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $4,351,349 $4,311,458
Less, accumulated depreciation 1,710,542 1,669,893
Net utility plant in service 2,640,807 2,641,565
Construction work in progress 158,866 157,885
Other, net 122,753 111,023
Net utility plant 2,922,426 2,910,473
Other Property and Investments:
Nuclear decommissioning trusts 237,223 225,200
Nuclear fuel disposal fund 96,816 95,393
Other, net 7,333 7,218
Total other property and investments 341,372 327,811
Current Assets:
Cash and temporary cash investments 85,899 922
Special deposits 3,985 7,358
Accounts receivable:
Customers, net 156,912 150,002
Other 23,330 21,912
Unbilled revenues 56,408 66,389
Materials and supplies, at average cost or less:
Construction and maintenance 96,104 95,949
Fuel 13,318 18,693
Deferred income taxes 9,097 12,142
Prepayments 20,928 20,869
Total current assets 465,981 394,236
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 135,548 138,472
Unamortized property losses 98,827 100,176
Income taxes recoverable through future rates 134,110 134,787
Other 309,052 311,293
Total regulatory assets 677,537 684,728
Deferred income taxes 122,908 122,082
Other 22,812 20,359
Total deferred debits and other assets 823,257 827,169
Total Assets $4,553,036 $4,459,689
The accompanying notes are an integral part of the consolidated financial statements.
7
<PAGE>
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
Consolidated Balance Sheets
<CAPTION>
In Thousands
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 153,713 $ 153,713
Capital surplus 510,769 510,769
Retained earnings 867,680 816,770
Total common stockholder's equity 1,532,162 1,481,252
Cumulative preferred stock:
With mandatory redemption 124,000 134,000
Without mandatory redemption 37,741 37,741
Company-obligated mandatorily
redeemable preferred securities 125,000 125,000
Long-term debt 1,162,997 1,192,945
Total capitalization 2,981,900 2,970,938
Current Liabilities:
Securities due within one year 50,010 35,710
Notes payable - 800
Obligations under capital leases 103,764 90,329
Accounts payable:
Affiliates 15,240 31,885
Other 101,544 111,225
Taxes accrued 92,433 10,516
Deferred energy credits 1,127 (5,290)
Interest accrued 29,239 28,718
Other 67,608 75,069
Total current liabilities 460,965 378,962
Deferred Credits and Other Liabilities:
Deferred income taxes 604,939 607,188
Unamortized investment tax credits 65,361 66,874
Three Mile Island Unit 2 future costs 104,325 103,271
Nuclear Fuel Disposal Fee 122,692 121,121
Regulatory liabilities 36,634 37,597
Other 176,220 173,738
Total deferred credits and
other liabilities 1,110,171 1,109,789
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $4,553,036 $4,459,689
The accompanying notes are an integral part of the consolidated financial statements.
8<PAGE>
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
Consolidated Statements of Income
(Unaudited)
<CAPTION>
In Thousands
Three Months
Ended March 31,
1996 1995
<S> <C> <C>
Operating Revenues $529,274 $468,034
Operating Expenses:
Fuel 28,287 20,366
Power purchased and interchanged:
Affiliates 3,583 1,098
Others 163,860 168,271
Deferral of energy and capacity
costs, net 4,216 (8,571)
Other operation and maintenance 116,479 113,634
Depreciation and amortization 49,952 47,681
Taxes, other than income taxes 59,972 55,994
Total operating expenses 426,349 398,473
Operating Income Before Income Taxes 102,925 69,561
Income taxes 25,564 12,334
Operating Income 77,361 57,227
Other Income and Deductions:
Allowance for other funds used during
construction 1,003 228
Other income/(expense), net 2,142 3,618
Income taxes (1 051) (1,439)
Total other income and deductions 2,094 2,407
Income Before Interest Charges and
Dividends on Preferred Securities 79,455 59,634
Interest Charges and Dividends
on Preferred Securities:
Interest on long-term debt 22,514 22,499
Other interest 923 1,993
Allowance for borrowed funds used
during construction (1,153) (1,069)
Dividends on company-obligated mandatorily
redeemable preferred securities 2,675 -
Total interest charges and dividends
on preferred securities 24,959 23,423
Net Income 54,496 36,211
Preferred stock dividends 3,586 3,699
Earnings Available for Common Stock $ 50,910 $ 32,512
The accompanying notes are an integral part of the consolidated financial statements.
9<PAGE>
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
In Thousands
Three Months
Ended March 31,
1996 1995
<S> <C> <C>
Operating Activities:
Net income $ 54,496 $ 36,211
Adjustments to reconcile income to cash provided:
Depreciation and amortization 53,629 52,074
Amortization of property under capital leases 8,137 6,636
Nuclear outage maintenance costs, net 5,342 5,796
Deferred income taxes and investment tax
credits, net (5,870) (22,785)
Deferred energy and capacity costs, net 4,211 (8,599)
Accretion income (2,903) (3,130)
Allowance for other funds used
during construction (1,004) (229)
Changes in working capital:
Receivables 1,653 17,581
Materials and supplies 5,220 (3,296)
Special deposits and prepayments 3,314 25,588
Payables and accrued liabilities 52,646 35,620
Other, net (4,824) (3,712)
Net cash provided by operating activities 174,047 137,755
Investing Activities:
Cash construction expenditures (46,241) (47,697)
Contributions to decommissioning trusts (4,500) (4,516)
Other, net (806) 1,038
Net cash used for investing activities (51,547) (51,175)
Financing Activities:
Issuance of long-term debt - 49,625
Decrease in notes payable, net (800) (110,500)
Retirement of long-term debt (25,701) -
Capital lease principal payments (7,436) (3,785)
Dividends paid on preferred stock (3,586) (3,699)
Net cash required by financing activities (37,523) (68,359)
Net increase in cash and temporary cash
investments from above activities 84,977 18,221
Cash and temporary cash investments, beginning of year 922 1,041
Cash and temporary cash investments, end of period $ 85,899 $ 19,262
Supplemental Disclosure:
Interest paid $ 24,642 $ 24,433
Income taxes paid $ 303 $ (4,555)
New capital lease obligations incurred $ 21,177 $ 1,951
The accompanying notes are an integral part of the consolidated financial statements.
10<PAGE>
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
<CAPTION>
In Thousands
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $2,254,998 $2,240,951
Less, accumulated depreciation 783,355 763,921
Net utility plant in service 1,471,643 1,477,030
Construction work in progress 80,825 83,353
Other, net 41,821 45,587
Net utility plant 1,594,289 1,605,970
Other Property and Investments:
Nuclear decommissioning trusts 103,137 95,317
Other, net 10,948 9,899
Total other property and investments 114,085 105,216
Current Assets:
Cash and temporary cash investments 3,055 1,810
Special deposits 1,075 1,256
Accounts receivable:
Customers, net 64,039 60,739
Other 18,255 22,151
Unbilled revenues 24,270 31,509
Materials and supplies, at average cost or less:
Construction and maintenance 40,218 39,337
Fuel 7,984 9,817
Deferred income taxes 8,443 7,868
Prepayments 31,139 6,549
Total current assets 198,478 181,036
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 148,831 149,004
Income taxes recoverable through future rates 168,276 178,513
Other 114,391 112,458
Total regulatory assets 431,498 439,975
Deferred income taxes 93,922 91,356
Other 15,679 13,612
Total deferred debits and other assets 541,099 544,943
Total Assets $2,447,951 $2,437,165
The accompanying notes are an integral part of the consolidated financial statements.
11<PAGE>
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
<CAPTION>
In Thousands
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 66,273 $ 66,273
Capital surplus 370,200 370,200
Retained earnings 263,088 248,434
Total common stockholder's equity 699,561 684,907
Cumulative preferred stock 23,598 23,598
Company-obligated mandatorily redeemable
preferred securities 100,000 100,000
Long-term debt 603,269 603,268
Total capitalization 1,426,428 1,411,773
Current Liabilities:
Securities due within one year 15,019 15,019
Notes payable 30,183 22,390
Obligations under capital leases 40,361 43,600
Accounts payable:
Affiliates 15,553 10,559
Other 78,995 91,538
Taxes accrued 31,006 19,615
Deferred energy credits 3,536 1,417
Interest accrued 12,553 19,359
Other 36,259 40,635
Total current liabilities 263,465 264,132
Deferred Credits and Other Liabilities:
Deferred income taxes 374,019 380,135
Unamortized investment tax credits 32,867 33,387
Three Mile Island Unit 2 future costs 208,550 206,489
Nuclear fuel disposal fee 27,715 27,360
Regulatory liabilities 26,545 26,461
Other 88,362 87,428
Total deferred credits and other liabilities 758,058 761,260
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $2,447,951 $2,437,165
The accompanying notes are an integral part of the consolidated financial statements.
12
<PAGE>
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
Consolidated Statements of Income
(Unaudited)
<CAPTION>
In Thousands
Three Months
Ended March 31,
1996 1995
<S> <C> <C>
Operating Revenues $237,688 $205,749
Operating Expenses:
Fuel 25,913 22,392
Power purchased and interchanged:
Affiliates 6,900 8,958
Others 53,425 43,514
Deferral of energy costs, net 2,084 (1,105)
Other operation and maintenance 50,529 52,641
Depreciation and amortization 24,002 22,670
Taxes, other than income taxes 15,587 13,659
Total operating expenses 178,440 162,729
Operating Income Before Income Taxes 59,248 43,020
Income taxes 20,856 11,865
Operating Income 38,392 31,155
Other Income and Deductions:
Allowance for other funds used during
construction 43 455
Other income/(expense), net 226 (2,161)
Income taxes (33) 791
Total other income and deductions 236 (915)
Income Before Interest Charges and
Dividends on Preferred Securities 38,628 30,240
Interest Charges and Dividends on
on Preferred Securities:
Interest on long-term debt 11,467 11,012
Other interest 1,099 989
Allowance for borrowed funds used during
construction (225) (395)
Dividends on company-obligated mandatorily
redeemable preferred securities 2,250 2,250
Total interest charges and dividends
on preferred securities 14,591 13,856
Net Income 24,037 16,384
Preferred stock dividends 236 236
Earnings Available for Common Stock $ 23,801 $ 16,148
The accompanying notes are an integral part of the consolidated financial statements.
13
<PAGE>
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
In Thousands
Three Months
Ended March 31,
1996 1995
<S> <C> <C>
Operating Activities:
Net income $ 24,037 $ 16,384
Adjustments to reconcile income to cash provided:
Depreciation and amortization 23,381 20,075
Amortization of property under capital leases 3,941 3,795
Nuclear outage maintenance costs, net 1,491 1,638
Deferred income taxes and investment tax
credits, net (947) (139)
Deferred energy costs, net 2,084 (1,105)
Accretion income - -
Allowance for other funds used
during construction (43) (455)
Changes in working capital:
Receivables 7,835 (2,424)
Materials and supplies 952 1,958
Special deposits and prepayments (24,410) (16,758)
Payables and accrued liabilities 10,197 (36,543)
Other, net (4,378) 3,501
Net cash provided (required) by operating
activities 44,140 (10,073)
Investing Activities:
Cash construction expenditures (31,449) (37,999)
Contributions to decommissioning trusts (4,268) (2,550)
Other, net (1,050) 41
Net cash used for investing activities (36,767) (40,508)
Financing Activities:
Issuance of long-term debt - 29,820
Increase in notes payable, net 7,793 57,300
Retirement of long-term debt - -
Capital lease principal payments (3,449) (3,832)
Dividends paid on common stock (10,000) (40,000)
Dividends paid on preferred stock (472) (236)
Net cash provided by financing activities (6,128) 43,052
Net increase (decrease) in cash and temporary
cash investments from above activities 1,245 (7,529)
Cash and temporary cash investments, beginning of year 1,810 9,246
Cash and temporary cash investments, end of period $ 3,055 $ 1,717
Supplemental Disclosure:
Interest paid $ 21,363 $ 24,329
Income taxes paid $ 2,911 $ 29,344
New capital lease obligations incurred $ 497 $ 1,858
The accompanying notes are an integral part of the consolidated financial statements.
14
<PAGE>
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
<CAPTION>
In Thousands
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $2,684,320 $2,667,842
Less, accumulated depreciation 986,545 974,992
Net utility plant in service 1,697,775 1,692,850
Construction work in progress 68,314 72,233
Other, net 28,981 30,876
Net utility plant 1,795,070 1,795,959
Other Property and Investments:
Nuclear decommissioning trusts 45,119 42,440
Other, net 6,601 6,545
Total other property and investments 51,720 48,985
Current Assets:
Cash and temporary cash investments 2,208 1,367
Special deposits 2,795 2,718
Accounts receivable:
Customers, net 76,391 67,454
Other 21,160 29,033
Unbilled revenues 26,854 30,851
Materials and supplies, at average cost or less:
Construction and maintenance 53,561 53,237
Fuel 11,436 11,285
Deferred energy costs 12,677 9,335
Deferred income taxes 4,928 4,602
Prepayments 38,956 10,328
Total current assets 250,966 220,210
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 82,182 81,236
Income taxes recoverable through future rates 212,671 214,284
Other 19,072 19,485
Total regulatory assets 313,925 315,005
Deferred income taxes 77,259 78,754
Other 17,653 14,657
Total deferred debits and other assets 408,837 408,416
Total Assets $2,506,593 $2,473,570
The accompanying notes are an integral part of the consolidated financial statements.
15
<PAGE>
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
<CAPTION>
In Thousands
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 105,812 $ 105,812
Capital surplus 285,486 285,486
Retained earnings 338,370 327,814
Total common stockholder's equity 729,668 719,112
Cumulative preferred stock 36,777 36,777
Company-obligated mandatorily
redeemable preferred securities 105,000 105,000
Long-term debt 642,477 642,487
Total capitalization 1,513,922 1,503,376
Current Liabilities:
Securities due within one year 50,009 75,009
Notes payable 88,471 27,100
Obligations under capital leases 21,126 22,751
Accounts payable:
Affiliates 17,955 13,806
Others 54,720 66,687
Taxes accrued 29,904 16,019
Interest accrued 11,678 19,567
Vacations accrued 5,706 9,976
Other 11,453 19,448
Total current liabilities 291,022 270,363
Deferred Credits and Other Liabilities:
Deferred income taxes 463,331 462,354
Unamortized investment tax credits 44,427 45,114
Three Mile Island Unit 2 future costs 104,325 103,271
Nuclear fuel disposal fee 13,858 13,680
Regulatory liabilities 33,621 33,941
Other 42,087 41,471
Total deferred credits and other liabilities 701,649 699,831
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $2,506,593 $2,473,570
The accompanying notes are an integral part of the consolidated financial statements.
16
<PAGE>
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
Consolidated Statements of Income
(Unaudited)
<CAPTION>
In Thousands
Three Months
Ended March 31,
1996 1995
<S> <C> <C>
Operating Revenues $269,329 $253,412
Operating Expenses:
Fuel 44,295 46,469
Power purchased and interchanged:
Affiliates 1,357 1,627
Others 60,112 39,138
Deferral of energy costs, net (3,146) 10,824
Other operation and maintenance 59,899 54,146
Depreciation and amortization 22,632 19,190
Taxes, other than income taxes 15,930 16,408
Total operating expenses 201,079 187,802
Operating Income Before Income Taxes 68,250 65,610
Income taxes 21,590 19,500
Operating Income 46,660 46,110
Other Income and Deductions:
Allowance for other funds used during
construction 183 522
Other income/(expense), net (861) (1,223)
Income taxes (2) 370
Total other income and deductions (680) (331)
Income Before Interest Charges and
Dividends on Preferred Securities 45,980 45,779
Interest Charges and Dividends
on Preferred Securities:
Interest on long-term debt 12,631 11,602
Other interest 1,020 1,957
Allowance for borrowed funds used
during construction (483) (643)
Dividends on company-obligated mandatorily
redeemable preferred securities 2,297 2,297
Total interest charges and dividends on
preferred securities 15,465 15,213
Net Income 30,515 30,566
Preferred stock dividends 386 386
Earnings Available for Common Stock $ 30,129 $ 30,180
The accompanying notes are an integral part of the consolidated financial statements.
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<PAGE>
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
In Thousands
Three Months
Ended March 31,
1996 1995
<S> <C> <C>
Operating Activities:
Net income $ 30,515 $ 30,566
Adjustments to reconcile income to cash provided:
Depreciation and amortization 22,207 18,675
Amortization of property under capital leases 2,191 2,485
Nuclear outage maintenance costs, net 742 753
Deferred income taxes and investment tax
credits, net 1,997 (4,699)
Deferred energy costs, net (3,342) 10,845
Allowance for other funds used
during construction (183) (521)
Changes in working capital:
Receivables 2,933 517
Materials and supplies (475) 1,604
Special deposits and prepayments (28,705) (25,767)
Payables and accrued liabilities (12,510) 7,258
Other, net 2,345 (525)
Net cash provided by operating activities 17,715 41,191
Investing Activities:
Cash construction expenditures (28,529) (36,213)
Contributions to decommissioning trusts (1,316) (1,316)
Other, net (992) -
Net cash used for investing activities (30,837) (37,529)
Financing Activities:
Issuance of long-term debt - 59,670
Increase (decrease) in notes payable, net 61,371 (36,486)
Capital lease principal payments (2,024) (2,363)
Retirement of long-term debt (25,000) -
Dividends paid on common stock (20,000) (20,000)
Dividends paid on preferred stock (384) (386)
Net cash provided by financing activities 13,963 435
Net increase in cash and temporary
cash investments from above activities 841 4,097
Cash and temporary cash investments, beginning of year 1,367 1,191
Cash and temporary cash investments, end of period $ 2,208 $ 5,288
Supplemental Disclosure:
Interest paid $ 23,539 $ 20,409
Income taxes paid $ 2,900 $ 2,903
New capital lease obligations incurred $ 255 $ 1,660
The accompanying notes are an integral part of the consolidated financial statements.
18
</TABLE>
<PAGE>
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Public Utilities Corporation (GPU or the Corporation) is a
holding company registered under the Public Utility Holding Company Act of
1935. The Corporation does not directly operate any utility properties, but
owns all the outstanding common stock of three electric utilities -- Jersey
Central Power & Light Company (JCP&L), Metropolitan Edison Company (Met-Ed),
and Pennsylvania Electric Company (Penelec) (collectively, the
"Subsidiaries"). The Subsidiaries' business is the generation, transmission,
distribution and sale of electricity. The Subsidiaries serve areas of New
Jersey and Pennsylvania with a population of approximately five million, with
revenues about equally divided between New Jersey and Pennsylvania customers.
The Corporation also owns all of the common stock of Energy Initiatives, Inc.,
EI Power, Inc. and EI Energy, Inc., (collectively, the "EI Group") which
develop, own and operate generation, transmission and distribution facilities
in the United States and in foreign countries; GPU Service Corporation
(GPUSC), a service company; GPU Nuclear Corporation (GPUN), which operates and
maintains the nuclear units of the Subsidiaries; and GPU Generation
Corporation (Genco), which operates and maintains the fossil-fueled and
hydroelectric units of the Subsidiaries. All of these companies considered
together with their subsidiaries are referred to as the "GPU System."
Met-Ed owns all of the common stock of York Haven Power Company, the
owner of a small hydroelectric generating station, and Penelec owns all of the
common stock of Waverly Electric Light & Power Company and Nineveh Water
Company.
These notes should be read in conjunction with the notes to consolidated
financial statements included in the 1995 Annual Report on Form 10-K. The
year-end condensed balance sheet data contained in the attached financial
statements was derived from audited financial statements. For disclosures
required by generally accepted accounting principles, see the 1995 Annual
Report on Form 10-K.
1. COMMITMENTS AND CONTINGENCIES
NUCLEAR FACILITIES
The Subsidiaries have made investments in three major nuclear projects--
Three Mile Island Unit 1 (TMI-1) and Oyster Creek, both of which are operating
generation facilities, and Three Mile Island Unit 2 (TMI-2), which was damaged
during a 1979 accident. TMI-1 and TMI-2 are jointly owned by JCP&L, Met-Ed
and Penelec in the percentages of 25%, 50% and 25%, respectively. Oyster
Creek is owned by JCP&L. At March 31, 1996 and December 31, 1995 the
Subsidiaries' net investment in TMI-1 and Oyster Creek, including nuclear
fuel, was as follows:
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<PAGE>
Net Investment (Millions)
TMI-1 Oyster Creek
March 31, 1996
JCP&L $163 $791
Met-Ed 312 -
Penelec 153 -
Total $628 $791
Net Investment (Millions)
TMI-1 Oyster Creek
December 31, 1995
JCP&L $166 $785
Met-Ed 318 -
Penelec 156 -
Total $640 $785
The Subsidiaries' net investment in TMI-2 at March 31, 1996 was
$94 million (JCP&L, Met-Ed and Penelec's shares are $84 million, $2 million,
and $8 million, respectively). The Subsidiaries' net investment in TMI-2 at
December 31, 1995 was $95 million (JCP&L, Met-Ed and Penelec's shares are
$85 million, $2 million, and $8 million, respectively). JCP&L is collecting
revenues for TMI-2 on a basis which provides for the recovery of its remaining
investment in the plant by 2008. Met-Ed and Penelec are collecting revenues
for TMI-2 from their wholesale customers.
Costs associated with the operation, maintenance and retirement of
nuclear plants have continued to be significant and less predictable than
costs associated with other sources of generation, in large part due to
changing regulatory requirements, safety standards, availability of nuclear
waste disposal facilities and experience gained in the construction and
operation of nuclear facilities. The GPU System may also incur costs and
experience reduced output at its nuclear plants because of the prevailing
design criteria at the time of construction and the age of the plants' systems
and equipment. In addition, for economic or other reasons, operation of these
plants for the full term of their now-assumed lives cannot be assured. Also,
not all risks associated with the ownership or operation of nuclear facilities
may be adequately insured or insurable. Consequently, the ability of electric
utilities to obtain adequate and timely recovery of costs associated with
nuclear projects, including replacement power, any unamortized investment at
the end of each plant's useful life (whether scheduled or premature), the
carrying costs of that investment and retirement costs, is not assured (see
NUCLEAR PLANT RETIREMENT COSTS). Management intends, in general, to seek
recovery of any such costs through the ratemaking process, but recognizes that
recovery is not assured (see COMPETITION AND THE CHANGING REGULATORY
ENVIRONMENT).
TMI-2:
The 1979 TMI-2 accident resulted in significant damage to, and
contamination of, the plant and a release of radioactivity to the environment.
The cleanup program was completed in 1990, and after receiving Nuclear
Regulatory Commission (NRC) approval, TMI-2 entered into long-term monitored
storage in 1993.
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<PAGE>
As a result of the accident and its aftermath, individual claims for
alleged personal injury (including claims for punitive damages), which are
material in amount, have been asserted against the Corporation and the
Subsidiaries. Approximately 2,100 of such claims are pending in the United
States District Court for the Middle District of Pennsylvania. Some of the
claims also seek recovery for injuries from alleged emissions of radioactivity
before and after the accident.
At the time of the TMI-2 accident, as provided for in the Price-Anderson
Act, the Subsidiaries had (a) primary financial protection in the form of
insurance policies with groups of insurance companies providing an aggregate
of $140 million of primary coverage, (b) secondary financial protection in the
form of private liability insurance under an industry retrospective rating
plan providing for up to an aggregate of $335 million in premium charges under
such plan, and (c) an indemnity agreement with the NRC for up to $85 million,
bringing their total primary, secondary and tertiary financial protection up
to an aggregate of $560 million. Under the secondary level, the Subsidiaries
are subject to a retrospective premium charge of up to $5 million per reactor,
or a total of $15 million (JCP&L, Met-Ed and Penelec's shares are $7.5
million, $5 million and $2.5 million, respectively).
The insurers of TMI-2 had been providing a defense against all TMI-2
accident-related claims against the Corporation and the Subsidiaries and their
suppliers (the defendants) under a reservation of rights with respect to any
award of punitive damages. However, in 1994 the defendants in the TMI-2
litigation and the insurers agreed that the insurers would withdraw their
reservation of rights with respect to any award of punitive damages. A trial
of ten allegedly representative cases is scheduled to begin in June 1996.
In October 1995, the U.S. Court of Appeals for the Third Circuit ruled
that the Price-Anderson Act provides coverage under its primary and secondary
levels for punitive as well as compensatory damages, but that punitive damages
could not be recovered against the Federal Government under the third level of
financial protection. In so doing, the Court of Appeals referred to the
"finite fund" (the $560 million of financial protection under the Price-
Anderson Act) to which plaintiffs must resort to get compensatory as well as
punitive damages.
The Court of Appeals also ruled that the standard of care owed by the
defendants to a plaintiff was determined by the specific level of radiation
which was released into the environment, as measured at the site boundary,
rather than as measured at the specific site where the plaintiff was located
at the time of the accident (as the Corporation and its Subsidiaries
proposed). The Court of Appeals also held that each plaintiff still must
demonstrate exposure to radiation released during the TMI-2 accident and that
such exposure had resulted in injuries.
The U.S. Supreme Court has denied petitions filed by the Corporation and
its Subsidiaries to review the Court of Appeals' rulings with respect to the
availability of punitive damages and the standard of care.
Based on the above, the Corporation and its Subsidiaries believe that any
liability to which they might be subject by reason of the TMI-2 accident will
not exceed their financial protection under the Price-Anderson Act.
There can be no assurance as to the outcome of this litigation.
21
<PAGE>
NUCLEAR PLANT RETIREMENT COSTS
Retirement costs for nuclear plants include decommissioning the
radiological portions of the plants and the cost of removal of nonradiological
structures and materials. The disposal of spent nuclear fuel is covered
separately by contracts with the U.S. Department of Energy (DOE).
In 1990, the Subsidiaries submitted a report, in compliance with NRC
regulations, setting forth a funding plan (employing the external sinking fund
method) for the decommissioning of their nuclear reactors. Under this plan,
the Subsidiaries intend to complete the funding for Oyster Creek and TMI-1 by
the end of the plants' license terms, 2009 and 2014, respectively. The TMI-2
funding completion date is 2014, consistent with TMI-2's remaining in long-
term storage and being decommissioned at the same time as TMI-1. Based on NRC
studies, a comparable funding target has been developed for TMI-2 which takes
the accident into account. Under the NRC regulations, the funding targets (in
1996 dollars) are as follows:
(Millions)
Oyster
Creek TMI-1 TMI-2
JCP&L $191 $ 40 $ 63
Met-Ed - 79 127
Penelec - 40 63
Total $191 $159 $253
The NRC continues to study the levels of these funding targets. Management
cannot predict the effect that the results of this review will have on the
funding targets. The funding targets, while not considered cost estimates,
are reference levels designed to assure that licensees demonstrate adequate
financial responsibility for decommissioning. While the regulations address
activities related to the removal of the radiological portions of the plants,
they do not establish residual radioactivity limits nor do they address costs
related to the removal of nonradiological structures and materials.
The Subsidiaries charge to expense and contribute to external trusts
amounts collected from customers for nuclear plant decommissioning and
nonradiological costs. In addition, JCP&L has contributed amounts written off
for TMI-2 nuclear plant decommissioning in 1990, and Met-Ed and Penelec have
contributed amounts written off for TMI-2 nuclear plant decommissioning in
1991, to TMI-2's external trust (see TMI-2 Future Costs). Amounts deposited
in external trusts, including the interest earned on these funds, are
classified as Nuclear Decommissioning Trusts on the Balance Sheet.
In 1995, a consultant to GPUN performed site-specific studies of the TMI
site, including both Units 1 and 2, and of Oyster Creek, that considered
various decommissioning methods and estimated the cost of decommissioning the
radiological portions and the cost of removal of the nonradiological portions
of each plant, using the prompt removal/dismantlement method. GPUN management
has reviewed the methodology and assumptions used in the site-specific
studies, is in agreement with them, and believes the results are reasonable as
follows (in 1996 dollars):
22
<PAGE>
(Millions)
Oyster
GPU System Creek TMI-1 TMI-2
Radiological decommissioning $351 $299 $363
Nonradiological cost of removal 34 74 37*
Total $385 $373 $400
* Net of $4 million spent as of March 31, 1996.
(Millions)
Oyster
JCP&L Creek TMI-1 TMI-2
Radiological decommissioning $351 $75 $ 91
Nonradiological cost of removal 34 18 9*
Total $385 $93 $100
* Net of $1 million spent as of March 31, 1996.
(Millions)
Met-Ed TMI-1 TMI-2
Radiological decommissioning $149 $181
Nonradiological cost of removal 38 19 *
Total $187 $200
* Net of $2 million spent as of March 31, 1996.
(Millions)
Penelec TMI-1 TMI-2
Radiological decommissioning $75 $ 91
Nonradiological cost of removal 18 9 *
Total $93 $100
* Net of $1 million spent as of March 31, 1996.
The ultimate cost of retiring the GPU System's nuclear facilities may be
different from the cost estimates contained in these site-specific studies.
Such costs are subject to (a) the quarterly escalation of various cost
elements (including, but not limited to, general inflation), (b) the further
development of regulatory requirements governing decommissioning, (c) the
technology available at the time of decommissioning, and (d) the availability
of nuclear waste disposal facilities.
In February 1996 the Financial Accounting Standards Board (FASB) issued
an Exposure Draft titled "Accounting for Certain Liabilities Related to
Closure or Removal of Long-Lived Assets," which includes nuclear plant
retirement costs. If the Exposure Draft's current provisions are finalized,
Oyster Creek and TMI-1 future retirement costs will have to be recognized as a
liability currently, rather than recorded over the life of the plants (as is
currently the practice), with an offsetting asset recorded for amounts
collectible through rates. Any amounts not collectible through rates will
have to be charged to expense. For TMI-2, a liability has already been
recognized, based on the 1995 site-specific study (in 1996 dollars) since the
23
<PAGE>
plant is no longer operating (see TMI-2 Future Costs). A final statement is
expected to be effective for fiscal years beginning after December 15, 1996.
TMI-1 and Oyster Creek:
JCP&L is collecting revenues for decommissioning, which are expected to
result in the accumulation of its share of the NRC funding target for each
plant. JCP&L is also collecting revenues, based on its share ($3.83 million)
of an estimate of $15.3 million for TMI-1 and $31.6 million for Oyster Creek
adopted in previous rate orders issued by the New Jersey Board of Public
Utilities (NJBPU), for its share of the cost of removal of nonradiological
structures and materials. The Pennsylvania Public Utility Commission (PaPUC)
previously granted Met-Ed revenues for decommissioning costs of TMI-1 based on
its share ($37.5 million) of the NRC funding target and nonradiological cost
of removal estimated in an earlier 1988 site-specific study to be $75 million
(in 1996 dollars). The PaPUC also permitted Penelec to increase the
collection of revenues for decommissioning costs for TMI-1 to a basis
equivalent to that granted Met-Ed. Collections from customers for retirement
expenditures are deposited in external trusts. Provision for the future
expenditure of these funds has been made in accumulated depreciation,
amounting to $80 million (JCP&L, Met-Ed and Penelec's shares are $25 million,
$39 million and $16 million, respectively) for TMI-1 and $146 million for
Oyster Creek at March 31, 1996. TMI-1 and Oyster Creek retirement costs are
charged to depreciation expense over the expected service life of each nuclear
plant, and amounted to $4 million (JCP&L, Met-Ed and Penelec's shares are $1
million, $2 million and $1 million, respectively) and $3 million,
respectively, for the first quarter of 1996.
Management believes that any TMI-1 and Oyster Creek retirement costs, in
excess of those currently recognized for ratemaking purposes, should be
recoverable under the current ratemaking process.
TMI-2 Future Costs:
The estimated liabilities for TMI-2 Future Costs (reflected as Three Mile
Island Unit 2 Future Costs on the Balance Sheet) as of March 31, 1996 and
December 31, 1995 are as follows:
(Millions)
GPU JCP&L Met-Ed Penelec
March 31, 1996
Radiological Decommissioning $363 $ 91 $181 $ 91
Nonradiological Cost of Removal 37* 9 19 9
Incremental Monitored Storage 18 4 9 5
Total $418 $104 $209 $105
* Net of $4 million (JCP&L, Met-Ed and Penelec's shares are $1 million, $2
million and $1 million, respectively) spent as of March 31, 1996.
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<PAGE>
(Millions)
GPU JCP&L Met-Ed Penelec
December 31, 1995
Radiological Decommissioning $358 $90 $179 $89
Nonradiological Cost of Removal 37* 9 19 9
Incremental Monitored Storage 18 4 9 5
Total $413 $103 $207 $103
* Net of $3 million spent (JCP&L, Met-Ed and Penelec's shares are $.75
million, $1.5 million and $.75 million, respectively) as of
December 31, 1995.
Offsetting the $418 million liability is $273 million (JCP&L, Met-Ed and
Penelec's shares are $51 million, $147 million and $75 million, respectively)
which is probable of recovery from customers and included in Three Mile Island
Unit 2 Deferred Costs on the Balance Sheet, and $151 million (JCP&L, Met-Ed
and Penelec's shares are $63 million, $61 million and $27 million,
respectively) in trust funds for TMI-2 and included in Nuclear Decommissioning
Trusts on the Balance Sheet. Earnings on trust fund deposits collected from
customers are included in amounts shown on the Balance Sheet under Three Mile
Island Unit 2 Deferred Costs. TMI-2 decommissioning costs charged to
depreciation expense for the first quarter of 1996 amounted to $3 million
(JCP&L, Met-Ed and Penelec's shares are $0.8 million, $2 million and $0.2
million, respectively).
The NJBPU and PaPUC have granted JCP&L and Met-Ed, respectively,
decommissioning revenues for the remainder of the NRC funding target and
allowances for the cost of removal of nonradiological structures and
materials. Based on Met-Ed's rate order, Penelec has recorded a regulatory
asset for that portion of such costs which it believes to be probable of
recovery.
At March 31, 1996 the accident-related portion of TMI-2 radiological
decommissioning costs is considered to be $64 million (JCP&L, Met-Ed and
Penelec's shares are $16 million, $32 million and $16 million, respectively),
which is the difference between the 1995 TMI-1 and TMI-2 site-specific study
estimates (in 1996 dollars) of $299 million and $363 million, respectively
(JCP&L, Met-Ed and Penelec's shares are $75 million and $91 million, $149
million and $181 million, and $75 million and $91 million, respectively). In
connection with rate case resolutions at the time, JCP&L, Met-Ed and Penelec
made contributions to irrevocable external trusts relating to their shares of
the accident-related portions of the decommissioning liability. In 1990,
JCP&L contributed $15 million and in 1991, Met-Ed and Penelec contributed
$40 million and $20 million respectively, to irrevocable external trusts.
These contributions were not recovered from customers and have been expensed.
The Subsidiaries will not pursue recovery from customers for any of these
amounts contributed in excess of the $64 million accident-related portion
referred to above.
JCP&L intends to seek recovery for any increases in TMI-2 retirement
costs, and Met-Ed and Penelec intend to seek recovery for any increases in the
nonaccident-related portion of such costs, but recognize that recovery cannot
be assured.
As a result of TMI-2's entering long-term monitored storage in 1993, the
Subsidiaries are incurring incremental storage costs of approximately
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$1 million (JCP&L, Met-Ed and Penelec's shares are $.25 million, $.5 million,
and $.25 million, respectively) annually. The Subsidiaries estimate that the
remaining storage costs will total $18 million through 2014, the expected
retirement date of TMI-1. JCP&L's rates reflect its share of these costs.
INSURANCE
The GPU System has insurance (subject to retentions and deductibles) for
its operations and facilities including coverage for property damage,
liability to employees and third parties, and loss of use and occupancy
(primarily incremental replacement power costs). There is no assurance that
the GPU System will maintain all existing insurance coverages. Losses or
liabilities that are not completely insured, unless allowed to be recovered
through ratemaking, could have a material adverse effect on the financial
position of the GPU System.
The decontamination liability, premature decommissioning and property
damage insurance coverage for the TMI station and for Oyster Creek totals
$2.7 billion per site. In accordance with NRC regulations, these insurance
policies generally require that proceeds first be used for stabilization of
the reactors and then to pay for decontamination and debris removal expenses.
Any remaining amounts available under the policies may then be used for repair
and restoration costs and decommissioning costs. Consequently, there can be
no assurance that in the event of a nuclear incident, property damage
insurance proceeds would be available for the repair and restoration of that
station.
The Price-Anderson Act limits the GPU System's liability to third parties
for a nuclear incident at one of its sites to approximately $8.9 billion.
Coverage for the first $200 million of such liability is provided by private
insurance. The remaining coverage, or secondary financial protection, is
provided by retrospective premiums payable by all nuclear reactor owners.
Under secondary financial protection, a nuclear incident at any licensed
nuclear power reactor in the country, including those owned by the GPU System,
could result in assessments of up to $79 million per incident for each of the
GPU System's two operating reactors, subject to an annual maximum payment of
$10 million per incident per reactor. In addition to the retrospective
premiums payable under Price-Anderson, the GPU System is also subject to
retrospective premium assessments of up to $68 million (JCP&L, Met-Ed and
Penelec's shares are $41 million, $18 million and $9 million, respectively) in
any one year under insurance policies applicable to nuclear operations and
facilities.
The GPU System has insurance coverage for incremental replacement power
costs resulting from an accident-related outage at its nuclear plants.
Coverage commences after the first 21 weeks of the outage and continues for
three years beginning at $1.8 million for Oyster Creek and $2.6 million for
TMI-1 per week for the first year, decreasing to 80 percent of such amounts
for years two and three.
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<PAGE>
COMPETITION AND THE CHANGING REGULATORY ENVIRONMENT
Nonutility Generation Agreements:
Pursuant to the requirements of the federal Public Utility Regulatory
Policies Act (PURPA) and state regulatory directives, the Subsidiaries have
entered into power purchase agreements with nonutility generators (NUGs) for
the purchase of energy and capacity for periods up to 25 years each for JCP&L
and Penelec, and 26 years for Met-Ed. The majority of these agreements
contain certain contract limitations and subject the NUGs to penalties for
nonperformance. While a few of these facilities are dispatchable, most are
must-run and generally obligate the Subsidiaries to purchase, at the contract
price, the net output up to the contract limits. As of March 31, 1996,
facilities covered by these agreements having 1,624 MW (JCP&L, Met-Ed and
Penelec's shares are 892 MW, 335 MW and 397 MW, respectively) of capacity were
in service. Actual payments from 1993 through 1995, and estimated payments
from 1996 through 2000 to NUGs, assuming that all facilities which have
existing agreements, or which have obtained orders granting them agreements,
enter service, are as follows:
Payments Under NUG Agreements
(Millions)
Total JCP&L Met-Ed Penelec
1993 $ 491 $ 292 $ 95 $ 104
1994 528 304 101 123
1995 670 381 131 158
* 1996 695 368 151 176
* 1997 719 379 156 184
* 1998 794 385 212 197
* 1999 882 391 213 278
* 2000 933 405 219 309
* Estimate
Of these amounts, payments to the projects which are not in service at
March 31, 1996 are estimated as follows:
Payments Under NUG Agreements Not In Service
(Millions)
Total JCP&L Met-Ed Penelec
1997 $ 17 $ 1 $16 $ -
1998 76 3 68 5
1999 149 3 69 77
2000 175 3 74 98
In the year 2000 NUG agreements, in the aggregate, will provide
approximately 1,962 MW (JCP&L 902 MW, Met-Ed 485 MW and Penelec 575 MW) of
capacity and energy to the GPU System, at varying prices.
The emerging competitive generation market has created uncertainty
regarding the forecasting of the System's energy supply needs which has caused
the Subsidiaries to change their supply strategy to seek shorter-term
27
<PAGE>
agreements offering more flexibility. Due to the current availability of
excess capacity in the marketplace, the cost of near- to intermediate-term
(i.e., one to eight years) energy supply from generation facilities now in
service is currently and is expected to continue to be priced below the costs
of new supply sources, at least for some time. The projected cost of energy
from new generation supply sources has also decreased due to improvements in
power plant technologies and reduced forecasted fuel prices. As a result of
these developments, the rates under virtually all of the Subsidiaries' NUG
agreements are substantially in excess of current and projected prices from
alternative sources.
The Subsidiaries are seeking to reduce the above market costs of these
NUG agreements by (1) attempting to convert must-run agreements to
dispatchable agreements; (2) attempting to renegotiate prices of the
agreements; (3) offering contract buyouts while seeking to recover the costs
through their energy adjustment clauses (see Managing Nonutility Generation,
in Management's Discussion and Analysis of Financial Condition and Results of
Operations) and (4) initiating proceedings before federal and state agencies,
and in the courts, where appropriate. In addition, the Subsidiaries intend to
avoid, to the maximum extent practicable, entering into any new NUG agreements
that are not needed or not consistent with current market pricing and are
supporting legislative efforts to repeal PURPA. These efforts may result in
claims against the GPU System for substantial damages. There can, however, be
no assurance as to the extent to which the Subsidiaries' efforts will be
successful in whole or in part.
While the Subsidiaries thus far have been granted recovery of their NUG
costs (including substantially all buyout costs) from customers by the PaPUC
and NJBPU, there can be no assurance that the Subsidiaries will continue to be
able to recover similar costs which may be incurred in the future. The GPU
System currently estimates that for 1998, when substantially all of these NUG
projects are scheduled to be in service, above market payments (benchmarked
against the expected cost of electricity produced by a new gas-fired combined
cycle facility) will range from $225 million to $330 million (JCP&L $85 to
$130 million; Met-Ed $50 million to $80 million; and Penelec $90 million to
$120 million). The amount of these estimated above-market payments may
increase or decrease substantially based upon, among other things, payment
escalations in the contract terms, changes in fuel prices and changes in the
capital and operating cost of new generating equipment.
Regulatory Assets and Liabilities:
In accordance with Statement of Financial Accounting Standards No. 71
(FAS 71), "Accounting for the Effects of Certain Types of Regulation," the GPU
System's financial statements reflect assets and costs based on current cost-
based ratemaking regulation. Continued accounting under FAS 71 requires that
the following criteria be met:
a) A utility's rates for regulated services provided to its customers
are established by, or are subject to approval by, an independent
third-party regulator;
b) The regulated rates are designed to recover specific costs of
providing the regulated services or products; and
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c) In view of the demand for the regulated services and the level of
competition, direct and indirect, it is reasonable to assume that
rates set at levels that will recover a utility's costs can be
charged to and collected from customers. This criteria requires
consideration of anticipated changes in levels of demand or
competition during the recovery period for any capitalized costs.
A utility's operations can cease to meet those criteria for various
reasons, including deregulation, a change in the method of regulation, or a
change in the competitive environment for the utility's regulated services.
Regardless of the reason, a utility whose operations cease to meet those
criteria should discontinue application of FAS 71 and report that
discontinuation by eliminating from its Balance Sheet the effects of any
actions of regulators that had been recognized as assets and liabilities
pursuant to FAS 71, but which would not have been recognized as assets and
liabilities by enterprises in general.
In accordance with the provisions of FAS 71, the Subsidiaries have
deferred certain costs pursuant to actions of the NJBPU, PaPUC and Federal
Energy Regulatory Commission (FERC) and are recovering or expect to recover
such costs in electric rates charged to customers. Regulatory assets are
reflected in the Deferred Debits and Other Assets section of the Consolidated
Balance Sheet, and regulatory liabilities are reflected in the Deferred
Credits and Other Liabilities section of the Consolidated Balance Sheet.
Regulatory assets and liabilities, as of March 31, 1996 and December 31, 1995,
were as follows:
GPU System Assets (in thousands)
March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $ 515,057 $ 527,584
TMI-2 deferred costs 366,561 368,712
Unamortized property losses 104,390 105,729
NUG contract termination costs 84,132 84,132
Other postretirement benefits 63,695 58,362
N.J. unit tax 50,146 51,518
Unamortized loss on reacquired debt 48,980 50,198
Load and demand-side management programs 47,412 48,071
DOE enrichment facility decommissioning 37,728 38,519
Manufactured gas plant remediation 30,134 29,608
Nuclear fuel disposal fee 21,974 21,946
N.J. low-level radwaste disposal 20,415 21,778
Storm damage 19,558 18,294
Other 12,778 15,257
Total $1,422,960 $1,439,708
Liabilities (in thousands)
March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $93,254 $94,931
Other 3,546 3,068
Total $96,800 $97,999
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Assets (in thousands)
JCP&L March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $134,110 $134,787
TMI-2 deferred costs 135,548 138,472
Unamortized property losses 98,827 100,176
NUG contract termination costs 17,482 17,482
Other postretirement benefits 35,311 32,390
N.J. unit tax 50,146 51,518
Unamortized loss on reacquired debt 33,573 34,285
Load and demand side management programs 47,412 48,071
DOE enrichment facility decommissioning 24,008 24,503
Manufactured gas plant remediation 30,134 29,608
Nuclear fuel disposal fee 23,314 23,165
N.J. low-level radwaste disposal 20,415 21,778
Storm damage 19,558 18,294
Other 7,699 10,199
Total $677,537 $684,728
Liabilities (in thousands)
March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $35,522 $36,343
Other 1,112 1,254
Total $36,634 $37,597
Assets (in thousands)
Met-Ed March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $168,276 $178,513
TMI-2 deferred costs 148,831 149,004
Unamortized property losses 3,241 3,273
NUG contract termination costs 66,650 66,650
Other postretirement benefits 28,384 25,972
Unamortized loss on reacquired debt 6,764 6,945
DOE enrichment facility decommissioning 9,147 9,344
Nuclear fuel disposal fee (1,080) (1,025)
Other 1,285 1,299
Total $431,498 $439,975
Liabilities (in thousands)
March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $24,396 $24,765
Other 2,149 1,696
Total $26,545 $26,461
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Assets (in thousands)
Penelec March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $212,671 $214,284
TMI-2 deferred costs 82,182 81,236
Unamortized property losses 2,322 2,280
Unamortized loss on reacquired debt 8,643 8,968
DOE enrichment facility decommissioning 4,573 4,672
Nuclear fuel disposal fee (260) (194)
Other 3,794 3,759
Total $313,925 $315,005
Liabilities (in thousands)
March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $33,336 $33,823
Other 285 118
Total $33,621 $33,941
Income taxes recoverable/refundable through future rates: Represents amounts
deferred due to the implementation of FAS 109, "Accounting for Income Taxes,"
in 1993.
TMI-2 deferred costs: Represents costs that are recoverable through rates for
the Subsidiaries' remaining investment in the plant and fuel core,
radiological decommissioning and the cost of removal of nonradiological
structures and materials in accordance with the 1995 site-specific study (in
1996 dollars) and JCP&L's share of long-term monitored storage costs. For
additional information, see TMI-2 Future Costs.
Unamortized property losses: Consists mainly of costs associated with JCP&L's
Forked River Project, which are included in rates.
NUG contract termination costs: Represents one-time costs incurred for
terminating power purchase contracts with NUGs, for which rate recovery has
been granted or is probable (see Managing Nonutility Generation, in
Management's Discussion and Analysis of Financial Condition and Results of
Operations).
Other postretirement benefits: Includes costs associated with the adoption of
FAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," which are deferred in accordance with Emerging Issues Task Force
Issue 92-12, "Accounting for OPEB Costs by Rate-Regulated Enterprises."
N.J. unit tax: JCP&L received NJBPU approval in 1993 to recover, with
interest, over a ten-year period on an annuity basis, $71.8 million of Gross
Receipts and Franchise Tax not previously recovered from customers.
Unamortized loss on reacquired debt: Represents premiums and expenses incurred
in the early redemption of long-term debt. In accordance with FERC
regulations, reacquired debt costs are amortized over the remaining original
life of the retired debt.
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Load and demand-side management (DSM) programs: Consists of load management
costs that are currently being recovered, with interest, through JCP&L's
retail base rates pursuant to a 1993 NJBPU order, and other DSM program
expenditures that are recovered annually, with interest. Also includes
provisions for lost revenues between base rate cases and performance
incentives.
DOE enrichment facility decommissioning: These costs, representing payments
to the DOE over a 15-year period beginning in 1994, are currently being
collected through the Subsidiaries' energy adjustment clauses.
Manufactured gas plant remediation: Consists of costs which are probable of
recovery, with interest, associated with the investigation and remediation of
several gas manufacturing plants. For additional information, see
ENVIRONMENTAL MATTERS.
Nuclear fuel disposal fee: Represents amounts recoverable through rates for
estimated future disposal costs for spent nuclear fuel at Oyster Creek and
TMI-1 in accordance with the Nuclear Waste Policy Act of 1982.
N.J. low-level radwaste disposal: Represents the accrual of the estimated
assessment for the siting of a disposal facility for low-level waste from
Oyster Creek, less amortization as allowed in JCP&L's rates.
Storm damage: Relates to incremental noncapital costs associated with various
storms in the JCP&L service territory that are not recoverable through
insurance. These amounts were deferred based upon past rate recovery
precedent. An annual amount for recovery of storm damage expense is included
in JCP&L's retail base rates.
Amounts related to the decommissioning of TMI-1 and Oyster Creek, which
are not included in Regulatory Assets on the Balance Sheet, are separately
disclosed in NUCLEAR PLANT RETIREMENT COSTS.
The Subsidiaries continue to be subject to cost-based ratemaking
regulation. However, in the event that either all or a portion of their
operations are no longer subject to these provisions, the related regulatory
assets, net of regulatory liabilities, would have to be written off. In
addition, any above market costs of purchased power commitments would have to
be expensed (see Nonutility Generation Agreements), and additional
depreciation expense would have to be recorded for any differences created by
the use of a regulated depreciation method that is different from that which
would have been used under generally accepted accounting principles for
enterprises in general. At this time, the Corporation is unable to determine
when and to what extent FAS 71 may no longer be applicable.
ENVIRONMENTAL MATTERS
As a result of existing and proposed legislation and regulations, and
ongoing legal proceedings dealing with environmental matters, including but
not limited to acid rain, water quality, air quality, global warming,
electromagnetic fields, and storage and disposal of hazardous and/or toxic
wastes, the GPU System may be required to incur substantial additional costs
to construct new equipment, modify or replace existing and proposed equipment,
remediate, decommission or clean up waste disposal and other sites currently
or formerly used by it, including formerly owned manufactured gas plants, mine
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refuse piles and generating facilities, and with regard to electromagnetic
fields, postpone or cancel the installation of, or replace or modify, utility
plant, the costs of which could be material.
To comply with the federal Clean Air Act Amendments of 1990 (Clean Air
Act), the Subsidiaries expect to spend up to $410 million (JCP&L, Met-Ed and
Penelec's shares are $42 million, $163 million, and $205 million,
respectively) for air pollution control equipment by the year 2000, of which
approximately $237 million (JCP&L, Met-Ed and Penelec's shares are $42
million, $96 million, and $99 million, respectively) has already been spent.
In developing its least-cost plan to comply with the Clean Air Act, the GPU
System will continue to evaluate major capital investments compared to
participation in the emission allowance market and the use of low-sulfur fuel
or retirement of facilities. In 1994, the Ozone Transport Commission (OTC),
consisting of representatives of 12 northeast states (including New Jersey and
Pennsylvania) and the District of Columbia, proposed reductions in nitrogen
oxide (NOx) emissions it believes necessary to meet ambient air quality
standards for ozone and the statutory deadlines set by the Clean Air Act. The
Subsidiaries expect that the U.S. Environmental Protection Agency (EPA) will
approve state implementation plans consistent with the proposal, and that as a
result, they will spend an estimated $60 million (Met-Ed and Penelec's shares
are $14 million and $46 million, respectively) (included in the Clean Air Act
total), beginning in 1997, to meet the seasonal reductions agreed upon by the
OTC. The OTC has stated that it anticipates that additional NOx reductions
will be necessary to meet the Clean Air Act's 2005 National Ambient Air
Quality Standard for ozone. However, the specific requirements that will have
to be met at that time have not been finalized. The Subsidiaries are unable
to determine what additional costs, if any, will be incurred.
The GPU System companies have been formally notified by the EPA and state
environmental authorities that they are among the potentially responsible
parties (PRPs) who may be jointly and severally liable to pay for the costs
associated with the investigation and remediation at 11 hazardous and/or toxic
waste sites, broken down by company as follows:
JCP&L MET-ED PENELEC GPUN GPU TOTAL
PRPs 6 4 2 1 1 11*
* In some cases, the Subsidiaries are named separately for the same site.
In addition, the Subsidiaries have been requested to participate in the
remediation or supply information to the EPA and state environmental
authorities on several other sites for which they have not been formally named
as PRPs, although the EPA and state authorities may nevertheless consider the
Subsidiaries as PRPs. The Subsidiaries have also been named in lawsuits
requesting damages for hazardous and/or toxic substances allegedly released
into the environment. The ultimate cost of remediation will depend upon
changing circumstances as site investigations continue, including (a) the
existing technology required for site cleanup, (b) the remedial action plan
chosen and (c) the extent of site contamination and the portion attributed to
the GPU System companies.
JCP&L has entered into agreements with the New Jersey Department of
Environmental Protection (NJDEP) for the investigation and remediation of 17
formerly owned manufactured gas plant (MGP) sites. JCP&L has also entered
into various cost-sharing agreements with other utilities for most of the
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sites. As of March 31, 1996 JCP&L has an estimated environmental liability of
$29 million recorded on its Balance Sheet relating to these sites, as well as
two other properties. The estimated liability is based upon ongoing site
investigations and remediation efforts, including capping the sites and
pumping and treatment of ground water. If the periods over which the
remediation is currently expected to be performed are lengthened, JCP&L
believes that it is reasonably possible that the future costs may range as
high as $50 million. Estimates of these costs are subject to significant
uncertainties because: JCP&L does not presently own or control most of these
sites; the environmental standards have changed in the past and are subject to
future change; the accepted technologies are subject to further development;
and the related costs for these technologies are uncertain. If JCP&L is
required to utilize different remediation methods, the costs could be
materially in excess of $50 million.
In 1993, the NJBPU approved a mechanism similar to JCP&L's Levelized
Energy Adjustment Clause (LEAC) for the recovery of future MGP remediation
costs when expenditures exceed prior collections. The NJBPU decision also
provided for interest on any overrecovery to be credited to customers until
the overrecovery is eliminated and for future costs to be amortized over seven
years with interest. JCP&L is pursuing reimbursement of the remediation costs
from its insurance carriers. In 1994, JCP&L filed a complaint with the
Superior Court of New Jersey against several of its insurance carriers,
relative to these MGP sites. JCP&L requested the Court to order the insurance
carriers to reimburse JCP&L for all amounts it has paid, or may be required to
pay, in connection with the remediation of the sites. Pretrial discovery has
begun in this case.
OTHER COMMITMENTS AND CONTINGENCIES
In 1994, the energy services and delivery businesses of Met-Ed and
Penelec were functionally combined. In March 1996, plans were announced to
combine the operations of JCP&L and certain divisions of GPUSC with those of
Met-Ed/Penelec.
In connection with this combination, in April 1996, management announced
that it intends to offer a voluntary enhanced retirement program to more than
400 non-bargaining employees in Pennsylvania and New Jersey, and that a
similar program will be discussed with the bargaining units. If between 60%
and 80% of the eligible bargaining and non-bargaining employees were to accept
the offer, depending on the age and years of service of those employees, the
program could result in a 1996 pre-tax charge to earnings of between $90
million and $125 million.
The GPU System's construction programs, for which substantial commitments
have been incurred and which extend over several years, contemplate
expenditures of $491 million (JCP&L, Met-Ed, Penelec and GPUSC's shares are
$256 million, $97 million, $124 million and $14 million, respectively) during
1996. As a consequence of reliability, licensing, environmental and other
requirements, additions to utility plant may be required relatively late in
their expected service lives. If such additions are made, current
depreciation allowance methodology may not make adequate provision for the
recovery of such investments during their remaining lives. Management intends
to seek recovery of such costs through the ratemaking process, but recognizes
that recovery is not assured.
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The Subsidiaries have entered into long-term contracts with nonaffiliated
mining companies for the purchase of coal for certain generating stations in
which they have ownership interests. The contracts, which expire at various
dates between 1996 and 2004, require the purchase of either fixed or minimum
amounts of the stations' coal requirements. The price of the coal under the
contracts is based on adjustments of indexed cost components. One of
Penelec's contracts for the Homer City station also includes a provision for
the payment of postretirement benefit costs. The Subsidiaries' share of the
cost of coal purchased under these agreements is expected to aggregate $116
million (JCP&L, Met-Ed and Penelec's shares are $22 million, $18 million and
$76 million, respectively) for 1996.
JCP&L has entered into agreements with other utilities to purchase
capacity and energy for various periods through 2004. These agreements will
provide for up to 1,085 MW in 1996, declining to 878 MW in 1999 and 696 MW in
2004. Payments pursuant to these agreements are estimated to be $174 million
in 1996, $164 million in 1997, $147 million in 1998, $123 million in 1999 and
$105 million in 2000.
Genco is constructing a 141 MW gas-fired combustion turbine at JCP&L's
Gilbert generating station. This estimated $50 million project, of which $35
million has been spent, is expected to be in-service by mid-1996. In 1995,
the NJDEP issued an air permit for the facility based, in part, on the NJBPU's
1994 order which found that New Jersey's Electric Facility Need Assessment Act
is not applicable and that construction of this facility, without a market
test, is consistent with New Jersey energy policies. An industry trade group
representing NUGs has appealed the NJDEP's issuance of the air permit and the
NJBPU's order to the Appellate Division of the New Jersey Superior Court.
There can be no assurance as to the outcome of this proceeding.
The NJBPU has instituted a generic proceeding to address the appropriate
recovery of capacity costs associated with electric utility power purchases
from NUG projects. The proceeding was initiated, in part, to respond to
contentions of the Division of the Ratepayer Advocate that by permitting
utilities to recover such costs through the LEAC, an excess or "double"
recovery may result when combined with the recovery of the utilities' embedded
capacity costs through their base rates. In 1994, the NJBPU ruled that the
LEAC periods prior to March 1991 were considered closed but subsequent LEAC
periods remain open for further investigation. This matter is pending before
a NJBPU Administrative Law Judge. JCP&L estimates that the potential refund
liability for the LEAC periods from March 1991 through February 1996, the end
of the most recent LEAC period, is $55 million. There can be no assurance as
to the outcome of this proceeding.
JCP&L's two operating nuclear units are subject to the NJBPU's annual
nuclear performance standard. Operation of these units at an aggregate annual
generating capacity factor below 65% or above 75% would trigger a charge or
credit based on replacement energy costs. At current cost levels, the maximum
annual effect on net income of the performance standard charge at a 40%
capacity factor would be approximately $10 million before tax. While a
capacity factor below 40% would generate no specific monetary charge, it would
require the issue to be brought before the NJBPU for review. The annual
measurement period, which begins in March of each year, coincides with that
used for the LEAC. Legislation has been proposed in New Jersey which would
require the NJBPU to conduct a formal investigation whenever a nuclear plant
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is, or is anticipated to be, out of service for more than three months, to
determine whether costs associated with the outage should be excluded from
rates.
As of March 31, 1996, approximately 53% of the GPU System's workforce was
represented by unions for collective bargaining purposes. JCP&L employees'
collective bargaining agreement is due to expire in October 1996, representing
44% of the GPU System's union employees.
Niagara Mohawk Power Corporation (NIMO) has filed with the New York
Public Service Commission a proposed restructuring plan that it claims may be
needed to avoid seeking reorganization under Chapter XI of the Bankruptcy
Code. Energy Initiatives has ownership interests, with an aggregate book
value of approximately $35 million, in three NUG projects which have long-term
purchase power agreements with NIMO. In the restructuring plan, NIMO has
insisted on renegotiating all of its contracts with NUGs, and has claimed that
it has the right to use eminent domain to condemn NUG facilities, if such
negotiations are not successful. There can be no assurance as to the outcome
of this matter.
NIMO has also initiated actions in federal and state court seeking to
invalidate numerous NUG contracts or limit the amount of annual generation
produced by the NUG, and is withholding allegedly "excess" payments made in
respect of "over generation" under these contracts, including the contracts
for one of Energy Initiatives' projects. NIMO alleges to have overpaid Energy
Initiatives approximately $7 million for the years 1993 through 1995. Energy
Initiatives has filed motions to dismiss the complaint and is vigorously
defending these actions. There can be no assurance as to the outcome of these
proceedings.
At March 31, 1996, the EI Group had investments totalling $163 million in
facilities located in four foreign countries. Although management attempts to
mitigate the risk of investing in certain foreign countries by securing
political risk insurance, the EI Group faces additional risks inherent to
operating in such locations, including foreign currency fluctuations (see EI
GROUP, in Management's Discussion and Analysis of Financial Condition and
Results of Operations).
In 1995, the FASB issued FAS 121, "Accounting for the Impairment of Long-
Lived Assets," which is effective for fiscal years beginning after June 15,
1995. FAS 121 requires that long-lived assets, identifiable intangibles,
capital leases and goodwill be reviewed for impairment whenever events occur
or changes in circumstances indicate that the carrying amount of the assets
may not be recoverable. In addition, FAS 121 requires that regulatory assets
meet the recovery criteria of FAS 71, "Accounting for the Effects of Certain
Types of Regulation," on an ongoing basis in order to avoid a writedown (see
Regulatory Assets and Liabilities).
The implementation of FAS 121 by the GPU System in 1995 did not have an
impact on results of operations because management believes the carrying
amounts of all assets are probable of recovery from customers. However, as
the Subsidiaries enter a more competitive environment, some assets could be
subject to impairment, thereby necessitating writedowns, which could have a
material adverse effect on the GPU System's results of operations and
financial condition.
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The FASB exposure draft relating to closure and removal of long-lived
assets (see NUCLEAR PLANT RETIREMENT COSTS), applies to all long-lived assets,
including fossil-fueled generating plants. For these assets, a liability will
have to be recognized whenever a legal or constructive obligation exists to
perform dismantlement or removal activities.
During the normal course of the operation of their businesses, in
addition to the matters described above, the GPU System companies are from
time to time involved in disputes, claims and, in some cases, as defendants in
litigation in which compensatory and punitive damages are sought by the
public, customers, contractors, vendors and other suppliers of equipment and
services and by employees alleging unlawful employment practices. While
management does not expect that the outcome of these matters will have a
material effect on the GPU System's financial position or results of
operations, there can be no assurance that this will continue to be the case.
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General Public Utilities Corporation and Subsidiary Companies
Management's Discussion and Analysis of Financial Condition
and Results of Operations
General Public Utilities Corporation (GPU or the Corporation) owns all
the outstanding common stock of three electric utilities -- Jersey Central
Power & Light Company (JCP&L), Metropolitan Edison Company (Met-Ed) and
Pennsylvania Electric Company (Penelec) (the Subsidiaries). The Corporation
also owns all the common stock of Energy Initiatives, Inc., EI Power, Inc. and
EI Energy, Inc. (the EI Group); GPU Service Corporation (GPUSC); GPU Nuclear
Corporation (GPUN); and GPU Generation Corporation (Genco). All of these
companies considered together with their subsidiaries are referred to as the
"GPU System" (see NOTES TO CONSOLIDATED FINANCIAL STATEMENTS).
The following is management's discussion of significant factors that
affected the interim financial condition and results of operations. This
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the combined GPU and
Subsidiary companies' 1995 Annual Report on Form 10-K.
GPU RESULTS OF OPERATIONS
GPU's earnings for the first quarter ended March 31, 1996 were $108.3
million, or $0.90 per share, compared to 1995 first quarter earnings of $75.5
million or $0.65 per share. The increase in first quarter earnings was due
primarily to higher sales from colder winter weather this year compared to
last year and lower reserve capacity expense. Also contributing to the
earnings increase were gains on the sale of securities.
OPERATING REVENUES:
Total revenues for the first quarter of 1996 increased 11.9% to $1.0
billion, as compared to the first quarter of 1995. The components of the
changes are as follows:
(In Millions)
Kilowatt-hour (KWH) revenues
(excluding energy portion) $ 23.7
Energy revenues 72.9
Other revenues 12.4
Increase in revenues $109.0
Kilowatt-hour revenues
The increase in KWH revenues for the three month period was due primarily
to higher residential customer sales from colder winter weather in 1996.
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GPU RESULTS OF OPERATIONS (continued)
Energy revenues
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. The increase in energy revenues for the three month period was due
primarily to higher energy cost rates in effect at JCP&L and Met-Ed and
increased sales to other utilities and to residential customers.
Other revenues
Generally, changes in other revenues do not affect earnings as they are
offset by corresponding changes in expense, such as taxes other than income
taxes.
OPERATING EXPENSES:
Power purchased and interchanged
Generally, changes in the energy component of power purchased and
interchanged (PP&I) expense do not significantly affect earnings since these
cost increases are substantially recovered through the Subsidiaries' energy
adjustment clauses. However, lower reserve capacity expense (which is a
component of PP&I) contributed to the three month period earnings increase.
Fuel and Deferral of energy costs, net
Generally, changes in fuel expense and deferral of energy costs do not
affect earnings as they are offset by corresponding changes in energy
revenues. However, earnings for the three month period increased due to a
$6.3 million (pre-tax) performance award earned by JCP&L for the efficient
operation of its nuclear generating stations.
Other operation and maintenance (O&M)
The increase in other O&M for the three month period was due primarily to
higher emergency and winter storm repair work.
Depreciation and amortization
The increase in depreciation and amortization expense for the three month
period was due primarily to additions to plant in service.
Taxes, other than income taxes
Generally, changes in taxes other than income taxes do not significantly
affect earnings as they are substantially recovered in revenues.
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GPU RESULTS OF OPERATIONS (continued)
OTHER INCOME AND DEDUCTIONS:
Other income, net
The increase in other income for the three month period was due primarily
to gains on the sale of securities held by the EI Group of $9.5 million (pre-
tax).
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Other interest
The decrease in other interest expense for the three month period was due
primarily to lower short-term debt levels.
Dividends on subsidiary-obligated mandatorily redeemable preferred securities
In May 1995, JCP&L issued $125 million stated value of monthly income
preferred securities through a special-purpose finance subsidiary.
JCP&L RESULTS OF OPERATIONS
JCP&L's earnings for the first quarter ended March 31, 1996 were $50.9
million, compared to 1995 first quarter earnings of $32.5 million. The
increase in first quarter earnings was due to higher sales from colder winter
weather this year compared to last year, lower reserve capacity expense and a
performance award for the efficient operation of the Company's nuclear
generating stations.
OPERATING REVENUES:
Total revenues for the first quarter of 1996 increased 13.1% to $529
million, as compared to the first quarter of 1995. The components of the
changes are as follows:
(In Millions)
Kilowatt-hour (KWH) revenues
(excluding energy portion) $ 9.5
Energy revenues 44.8
Other revenues 6.9
Increase in revenues $ 61.2
Kilowatt-hour revenues
The increase in KWH revenues for the three month period was due primarily
to higher residential and commercial customer sales from colder winter weather
in 1996.
40
<PAGE>
JCP&L RESULTS OF OPERATIONS (continued)
Energy revenues
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. The increase in energy revenues for the three month period was due
to higher energy cost rates in effect and increased sales to customers and to
other utilities.
Other revenues
Generally, changes in other revenues do not affect earnings as they are
offset by corresponding changes in expense, such as taxes other than income
taxes.
OPERATING EXPENSES:
Power purchased and interchanged
Generally, changes in the energy component of power purchased and
interchanged (PP&I) expense do not significantly affect earnings since these
cost increases are substantially recovered through the Company's energy
adjustment clause. However, lower reserve capacity expense (which is a
component of PP&I) contributed to the three month period earnings increase.
Fuel and Deferral of energy and capacity costs, net
Generally, changes in fuel expense and deferral of energy and capacity
costs do not affect earnings as they are offset by corresponding changes in
energy revenues. However, earnings for the three month period increased due
to a $6.3 million (pre-tax) performance award for the efficient operation of
the Company's nuclear generating stations.
Other operation and maintenance
The increase in other O&M for the three month period was due primarily to
higher emergency and winter storm repair work.
Depreciation and amortization
The increase in depreciation and amortization expense for the three month
period was due primarily to additions to plant in service.
Taxes, other than income taxes
Generally, changes in taxes other than income taxes do not significantly
affect earnings as they are substantially recovered in revenues.
41
<PAGE>
JCP&L RESULTS OF OPERATIONS (continued)
INTEREST CHARGES AND DIVIDENDS ON PREFERRED SECURITIES:
Other interest
The decrease in other interest expense for the three month period was due
primarily to lower short-term debt levels.
Dividends on company-obligated mandatorily redeemable preferred securities
In May 1995, JCP&L issued $125 million stated value of monthly income
preferred securities through a special-purpose finance subsidiary.
MET-ED RESULTS OF OPERATIONS
Met-Ed's earnings for the first quarter ended March 31, 1996 were $23.8
million, compared to 1995 first quarter earnings of $16.1 million. The
increase in first quarter earnings was due primarily to higher sales from
colder winter weather this year compared to last year and lower reserve
capacity expense.
OPERATING REVENUES:
Total revenues for the first quarter of 1996 increased 15.5% to $238
million, as compared to the first quarter of 1995. The components of the
changes are as follows:
(In Millions)
Kilowatt-hour (KWH) revenues
(excluding energy portion) $ 7.8
Energy revenues 21.4
Other revenues 2.7
Increase in revenues $ 31.9
Kilowatt-hour revenues
The increase in KWH revenues for the three month period was due primarily
to higher residential customer sales from colder winter weather in 1996.
Energy revenues
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. The increase in energy revenues for the three month period was due
primarily to higher energy cost rates in effect and increased sales to other
utilities.
42
<PAGE>
MET-ED RESULTS OF OPERATIONS (continued)
Other revenues
Generally, changes in other revenues do not affect earnings as they are
offset by corresponding changes in expense, such as taxes other than income
taxes.
OPERATING EXPENSES:
Power purchased and interchanged
Generally, changes in the energy component of power purchased and
interchanged (PP&I) expense do not significantly affect earnings since these
cost increases are substantially recovered through the Company's energy
adjustment clause. However, lower reserve capacity expense (which is a
component of PP&I) contributed to the three month period earnings increase.
Fuel and Deferral of energy costs, net
Generally, changes in fuel expense and deferral of energy costs do not
affect earnings as they are offset by corresponding changes in energy
revenues.
Other operation and maintenance
The decrease in other O&M for the three month period was due primarily to
lower production costs.
Depreciation and amortization
The increase in depreciation and amortization expense for the three month
period was due to additions to plant in service.
Taxes, other than income taxes
Generally, changes in taxes other than income taxes do not significantly
affect earnings as they are substantially recovered in revenues.
PENELEC RESULTS OF OPERATIONS
Penelec's earnings for the first quarter ended March 31, 1996 were $30.1
million, compared to 1995 first quarter earnings of $30.2 million. Although
sales in the quarter were higher due primarily to colder winter weather this
year compared to last year and reserve capacity expense decreased, these were
offset by higher other O&M expense and depreciation expense.
43
<PAGE>
PENELEC RESULTS OF OPERATIONS (continued)
OPERATING REVENUES:
Total revenues for the first quarter of 1996 increased 6.3% to $269
million, as compared to the first quarter of 1995. The components of the
changes are as follows:
(In Millions)
Kilowatt-hour (KWH) revenues
(excluding energy portion) $ 5.7
Energy revenues 7.5
Other revenues 2.7
Increase in revenues $ 15.9
Kilowatt-hour revenues
The increase in KWH revenues for the three month period was due primarily
to higher residential customer sales from colder winter weather in 1996.
Energy revenues
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. The increase in energy revenues for the three month period was due
primarily to increased sales to other utilities.
Other revenues
Generally, changes in other revenues do not affect earnings as they are
offset by corresponding changes in expense, such as taxes other than income
taxes.
OPERATING EXPENSES:
Power purchased and interchanged
Generally, changes in the energy component of power purchased and
interchanged (PP&I) expense do not significantly affect earnings since these
cost increases are substantially recovered through the Company's energy
adjustment clause. However, lower reserve capacity expense (which is a
component of PP&I) contributed to the three month period earnings.
Fuel and Deferral of energy costs, net
Generally, changes in fuel expense and deferral of energy costs do not
affect earnings as they are offset by corresponding changes in energy
revenues.
Other operation and maintenance
The increase in other O&M for the three month period was due primarily to
higher generation maintenance.
44
<PAGE>
PENELEC RESULTS OF OPERATIONS (continued)
Depreciation and amortization
The increase in depreciation and amortization expense for the three month
period was due to additions to plant in service.
Taxes, other than income taxes
Generally, changes in taxes other than income taxes do not significantly
affect earnings as they are substantially recovered in revenues.
INTEREST CHARGES AND DIVIDENDS ON PREFERRED SECURITIES:
Interest on long-term debt
The increase in interest on long-term debt for the three month period was
due to higher levels of long-term debt.
Other interest
The decrease in other interest expense for the three month period was due
primarily to lower short-term debt levels.
EI GROUP
The EI Group is engaged in the development, ownership and operation of
generation, transmission and distribution facilities in the United States and
foreign countries. Through March 31, 1996, GPU's aggregate investment in the
EI Group was $209 million; GPU has also guaranteed $231 million of EI Group
obligations. GPU has obtained Securities and Exchange Commission (SEC)
approval to finance investments in foreign utility companies and exempt
wholesale generators (both domestically and internationally) up to an
aggregate amount equal to 50% of GPU's average consolidated retained earnings.
The EI Group currently has ownership interests in eleven operating
combined-cycle cogeneration plants located in the United States totaling 932
MW of capacity and five operating generating facilities located in Canada and
South America totaling 480 MW of capacity. The EI Group also has ownership
interest in a distribution business in Australia serving more than 230,000
customers. The EI Group is continuing to pursue investment opportunities and
has a number of projects at various stages of development, including a 300 MW
gas-fired project and a 180 MW gas-fired project for which long-term power
purchase agreements have been executed with Georgia Power Company and
Wisconsin Public Service Company, respectively.
The following sections of MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS are being presented for GPU and
the Subsidiaries on a combined basis.
45
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Capital Needs
The GPU System's capital needs for the three months ended March 31, 1996
consisted of cash construction expenditures of $104 million (JCP&L $46
million; Met-Ed $31 million; Penelec $29 million). Construction expenditures
for the year are forecasted to be $491 million (JCP&L $256 million; Met-Ed $97
million; Penelec $124 million; Other $14 million). Expenditures for maturing
obligations will total $131 million (JCP&L $36 million; Met-Ed $15 million;
Penelec $75 million; Other $5 million) in 1996. GPU and the Subsidiaries
estimate that a substantial portion of their anticipated capital needs in 1996
will be satisfied through internally generated funds.
Financing
The Subsidiaries have regulatory authority to issue and sell first
mortgage bonds (FMBs), which may be issued as secured medium-term notes, and
preferred stock through various periods into 1997. Under existing
authorizations, JCP&L, Met-Ed and Penelec may issue these senior securities in
aggregate amounts of $225 million, $190 million and $160 million,
respectively, of which $100 million for each Subsidiary may consist of
preferred stock. The Subsidiaries also have regulatory authority to incur
short-term debt, a portion of which may be through the issuance of commercial
paper.
In the first quarter of 1996, JCP&L and Penelec redeemed prior to
maturity $25.7 million principal amount and $25 million principal amount of
FMBs, respectively. Both series of FMBs were scheduled to mature later in
1996 and were redeemed with short-term debt. On May 1, 1996, JCP&L redeemed
$20 million stated value of 8.48% cumulative preferred stock pursuant to
mandatory and optional sinking fund provisions.
The Subsidiaries' bond indentures and articles of incorporation include
provisions that limit the amount of long-term debt, preferred stock and short-
term debt the Subsidiaries may issue. The Subsidiaries' interest and
preferred dividend coverage ratios are currently in excess of indenture and
charter restrictions.
GPU is seeking SEC approval to issue and sell up to $300 million
aggregate principal amount of unsecured debentures through December 31, 2001.
The net proceeds from the sale of these securities would be used to acquire
interests in exempt wholesale generators, foreign utility companies and
qualifying facilities, make cash capital contributions to the Subsidiaries,
repay short-term debt and for other GPU corporate purposes.
Capitalization
On April 4, 1996, the Board of Directors of GPU declared a quarterly
dividend on the common stock of 48.5 cents per share, an increase of 3.2%. The
increased dividend is payable May 29, 1996 to the shareholders of record April
26, 1996.
46
<PAGE>
COMPETITIVE ENVIRONMENT:
In April 1996, the Federal Energy Regulatory Commission (FERC) issued an
order adopting the rules proposed in its Notice of Proposed Rulemaking on open
access nondiscriminatory transmission services by utilities. In 1995, the
Subsidiaries had filed open access transmission tariffs with the FERC
providing for both firm and interruptible service on a point-to-point basis.
The FERC has accepted these tariffs for filing. The Subsidiaries are
currently reviewing the order to determine what tariff changes and other
actions may be required to comply with the FERC order.
In March 1996, legislation was introduced in the Pennsylvania legislature
that would allow all consumers to choose their electric provider by 1999.
Under the proposed legislation, consumers could buy electricity by contracting
through a distribution power pool for rates based on average pool prices;
contracting directly with a generator; working through a power broker; or
remaining with their current supplier. Met-Ed and Penelec support retail
competition provided they are able to recover their stranded costs that result
from customer choice.
In 1994, the energy services and delivery businesses of Met-Ed and
Penelec were functionally combined. In March 1996, plans were announced to
combine the operations of JCP&L and certain divisions of GPUSC with those of
Met-Ed/Penelec.
In connection with this combination, in April 1996, management announced
that it intends to offer a voluntary enhanced retirement program to more than
400 non-bargaining employees in Pennsylvania and New Jersey, and that a
similar program will be discussed with the bargaining units. If between 60%
and 80% of the eligible bargaining and non-bargaining employees were to accept
the offer, depending on the age and years of service of those employees, the
program could result in a 1996 pre-tax charge to earnings of between $90
million and $125 million.
In March 1996, Met-Ed and Penelec received approval from the Pennsylvania
Public Utility Commission (PaPUC) to implement a new pricing plan for large
customers that will enable customers to make decisions about their electric
energy usage based on hourly market pricing (real time pricing) instead of
paying a fixed rate for each kilowatt-hour used. Customers who choose real
time pricing will be able to reduce their electric energy costs by adjusting
their business operations based on the market price of electricity.
THE GPU SUPPLY PLAN:
Managing Nonutility Generation
The Subsidiaries have contracts and anticipated commitments with
nonutility generation suppliers under which a total of 1,624 MW (JCP&L 892 MW;
Met-Ed 335 MW; Penelec 397 MW) of capacity are currently in service and an
additional 338 MW (JCP&L 10 MW; Met-Ed 150 MW; Penelec 178 MW) are currently
scheduled to be in service by 2000.
The Subsidiaries are seeking to reduce the above market costs of
nonutility generation agreements, including (1) attempting to convert must-run
agreements to dispatchable agreements; (2) attempting to renegotiate prices of
47
<PAGE>
the agreements; (3) offering contract buyouts while seeking to recover the
costs through their energy adjustment clauses and (4) initiating proceedings
before federal and state administrative agencies, and in the courts, where
appropriate. In addition, the Subsidiaries intend to avoid, to the maximum
extent practicable, entering into any new nonutility generation agreements
that are not needed or not consistent with current market pricing and are
supporting legislative efforts to repeal the Public Utility Regulatory
Policies Act of 1978 (PURPA). These efforts may result in claims against the
GPU System for substantial damages. There can, however, be no assurance as to
what extent the Subsidiaries' efforts will be successful in whole or in part.
In 1994, MidAtlantic Cogen Inc. requested the PaPUC to order Met-Ed to
enter into a long-term agreement to buy 322 MW of capacity and energy from its
Fairless Cogeneration Project. The PaPUC subsequently ordered that hearings
be held and assigned the matter to an Administrative Law Judge (ALJ). Met-Ed
moved to dismiss MidAtlantic's petition and, in February 1996, an ALJ issued a
recommended decision granting Met-Ed's request. On April 25, 1996, the PaPUC
adopted the ALJ's recommended decision.
In April 1996, JCP&L entered into an agreement with Freehold Cogeneration
Associates, the developers of a proposed 100 MW gas-fired cogeneration
project, that terminates JCP&L's long-term obligation to purchase power from
the project. JCP&L expects that the buyout will save customers $1.2 billion
over the term of the power purchase contract based on the projected cost of
alternative sources of energy. JCP&L will pay Freehold $125 million over
three years and is seeking to recover these costs through its energy
adjustment clause. Associated with this buyout are certain payments to third
parties, currently being negotiated, which could be material in amount. JCP&L
also has pending before the NJBPU a request to recover through its energy
adjustment clause its $17 million buyout costs for the proposed 200 MW
Crown/Vista project.
In August 1995, the developers of a proposed 100 MW Scranton facility
agreed to cancel the project and terminate the power purchase agreement for up
to a $30 million payment from Met-Ed. In March 1996, the PaPUC granted Met-Ed
recovery of these buyout costs through its energy adjustment clause over a
four year period, which began April 1, 1996.
Conservation and Load Management
In March 1996, JCP&L received NJBPU approval for its two year demand side
management (DSM) plan covering programs for 1996 and 1997. The $27 million of
costs to be incurred under the plan each year will be recovered through
JCP&L's energy adjustment clause. DSM includes utility-sponsored activities
designed to improve efficiency in customer electricity use and load-management
programs that reduce peak demand.
48
<PAGE>
PART II
ITEM 1 - LEGAL PROCEEDINGS
Information concerning the current status of certain legal
proceedings instituted against the Corporation and its
subsidiaries as a result of the March 28, 1979 nuclear accident at
Unit 2 of the Three Mile Island nuclear generating station
discussed in Part I of this report in Notes to Consolidated
Financial Statements is incorporated herein by reference and made
a part hereof.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedules
(b) Reports on Form 8-K:
General Public Utilities Corporation:
Dated April 2, 1996, under Item 5 (Other Events).
Jersey Central Power & Light Company:
Dated April 2, 1996, under Item 5 (Other Events).
49
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
GENERAL PUBLIC UTILITIES CORPORATION
April 30, 1996 By: /s/ J. G. Graham
J. G. Graham, Senior Vice President
(Chief Financial Officer)
April 30, 1996 By: /s/ F. A. Donofrio
F. A. Donofrio, Vice President
and Comptroller
(Chief Accounting Officer)
JERSEY CENTRAL POWER & LIGHT COMPANY
April 30, 1996 By: /s/ D. Baldassari
D. Baldassari, President
April 30, 1996 By: /s/ D. W. Myers
D. W. Myers, Vice President -
Operations Support and Comptroller
(Principal Accounting Officer)
METROPOLITAN EDISON COMPANY
April 30, 1996 By: /s/ F. D. Hafer
F. D. Hafer, President
April 30, 1996 By: /s/ D. L. O'Brien
D. L. O'Brien, Comptroller
(Principal Accounting Officer)
PENNSYLVANIA ELECTRIC COMPANY
April 30, 1996 By: /s/ F. D. Hafer
F. D. Hafer, President
April 30, 1996 By: /s/ D. L. O'Brien
D. L. O'Brien, Comptroller
(Principal Accounting Officer)
50<PAGE>
Exhibit 12
Page 1 of 2
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
UNAUDITED
Three Months Ended
March 31, 1996 March 31, 1995
OPERATING REVENUES $529,274 $468,034
OPERATING EXPENSES 426,349 398,473
Interest portion
of rentals (A) 2,762 3,359
Net expense 423,587 395,114
OTHER INCOME:
Allowance for funds
used during
construction 2,156 1,297
Other income, net 2,142 3,618
Total other income 4,298 4,915
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $109,985 $ 77,835
FIXED CHARGES:
Interest on funded
indebtedness $ 22,514 $ 22,499
Other interest (B) 3,598 1,993
Interest portion
of rentals (A) 2,762 3,359
Total fixed charges $ 28,874 $ 27,851
RATIO OF EARNINGS TO
FIXED CHARGES 3.81 2.79
Preferred stock dividend
requirement 3,586 3,699
Ratio of income before
provision for income
taxes to net income (C) 148.8% 138.0%
Preferred stock dividend
requirement on a pretax
basis 5,336 5,104
Fixed charges, as above 28,874 27,851
Total fixed charges
and preferred
stock dividends $ 34,210 $ 32,955
RATIO OF EARNINGS TO
COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS 3.21 2.36
<PAGE>
Exhibit 12
Page 2 of 2
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
UNAUDITED
NOTES:
(A) The Company has included the equivalent of the interest portion of all
rentals charged to income as fixed charges for this statement and has
excluded such components from Operating Expenses.
(B) Includes dividends on company-obligated mandatorily redeemable preferred
securities of $2,675 for 1996.
(C) Represents income before provision for income taxes of $81,111 and
$49,984, for the three months ended March 31, 1996 and March 31, 1995,
respectively, divided by net income of $54,496 and $36,211, respectively.
<PAGE>
Exhibit 12
<TABLE>
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
UNAUDITED
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
<S> <C> <C>
OPERATING REVENUES $237,688 $205,749
OPERATING EXPENSES (excluding
taxes based on income) 178,440 162,729
Interest portion of rentals (A) 1,179 1,144
Net expense 177,261 161,585
OTHER INCOME:
Allowance for funds used
during construction 268 850
Other income/(expense), net 226 (2,161)
Total other income 494 (1,311)
EARNINGS AVAILABLE FOR FIXED CHARGES $ 60,921 $ 42,853
FIXED CHARGES:
Interest on funded indebtedness $ 11,467 $ 11,012
Other interest (B) 3,349 3,239
Interest portion of rentals (A) 1,179 1,144
Total fixed charges $ 15,995 $ 15,395
RATIO OF EARNINGS TO FIXED CHARGES 3.81 2.78
Preferred stock dividend requirement $ 236 $ 236
Ratio of income before provision for
income taxes to net income (C) 186.9% 167.6%
Preferred stock dividend requirement
on a pre-tax basis 441 396
Fixed Charges, as above 15,995 15,395
Total fixed charges and preferred
stock dividends $ 16,436 $ 15,791
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS 3.71 2.71
NOTES:
(A) The Company has included the equivalent of the interest portion of all rentals
charged to income as fixed charges for this statement and has excluded such
components from Operating Expenses.
(B) Includes dividends on company-obligated mandatorily redeemable preferred
securities of $2,250 for 1996 and 1995.
(C) Represents income before provision for income taxes of $44,926 and $27,458 for
1996 and 1995, respectively, divided by net income of $24,037 and $16,384.
</TABLE>
<PAGE>
Exhibit 12
Page 1 of 2
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
UNAUDITED
Three Months Ended
March 31, March 31,
1996 1995
OPERATING REVENUES $269,329 $253,412
OPERATING EXPENSES 201,079 187,802
Interest portion of rentals (A) 1,329 1,237
Net expense 199,750 186,565
OTHER INCOME:
Allowance for funds used
during construction 666 1,165
Other (expense), net (861) (1,223)
Total other income (195) (58)
EARNINGS AVAILABLE FOR FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS (excluding
taxes based on income) $ 69,384 $ 66,789
FIXED CHARGES:
Interest on funded indebtedness $ 12,631 $ 11,602
Other interest (B) 3,317 4,254
Interest portion of rentals (A) 1,329 1,237
Total fixed charges $ 17,277 $ 17,093
RATIO OF EARNINGS TO FIXED CHARGES 4.02 3.91
Preferred stock dividend requirement 386 386
Ratio of income before provision for
income taxes to net income (C) 170.8% 162.6%
Preferred stock dividend requirement
on a pretax basis 659 628
Fixed charges, as above 17,277 17,093
Total fixed charges and
preferred stock dividends $ 17,936 $ 17,721
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS 3.87 3.77
<PAGE>
Exhibit 12
Page 2 of 2
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
UNAUDITED
NOTES:
(A) The Company has included the equivalent of the interest portion
of all rentals charged to income as fixed charges for this statement
and has excluded such components from Operating Expenses.
(B) Includes dividends on company-obligated mandatorily redeemable preferred
securities $2,297 for 1996 and 1995.
(C) Represents income before provision for income taxes of $52,107 and
$49,696, for the three months ended March 31, 1996 and March 31, 1995,
respectively, divided by net income of $30,515 and $30,566,
respectively.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000040779
<NAME> GENERAL PUBLIC UTILITIES CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,367,638
<OTHER-PROPERTY-AND-INVEST> 799,300
<TOTAL-CURRENT-ASSETS> 1,028,754
<TOTAL-DEFERRED-CHARGES> 1,888,782
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 10,084,474
<COMMON> 314,458
<CAPITAL-SURPLUS-PAID-IN> 747,563
<RETAINED-EARNINGS> 2,106,608
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,079,107 <F1>
454,000 <F2>
98,116
<LONG-TERM-DEBT-NET> 2,510,040
<SHORT-TERM-NOTES> 205,415
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 21,964
<LONG-TERM-DEBT-CURRENT-PORT> 128,044
20,000
<CAPITAL-LEASE-OBLIGATIONS> 10,274
<LEASES-CURRENT> 167,885
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,389,629
<TOT-CAPITALIZATION-AND-LIAB> 10,084,474
<GROSS-OPERATING-REVENUE> 1,022,934
<INCOME-TAX-EXPENSE> 68,010
<OTHER-OPERATING-EXPENSES> 793,718
<TOTAL-OPERATING-EXPENSES> 861,728
<OPERATING-INCOME-LOSS> 161,206
<OTHER-INCOME-NET> 7,536
<INCOME-BEFORE-INTEREST-EXPEN> 168,742
<TOTAL-INTEREST-EXPENSE> 60,489 <F3>
<NET-INCOME> 108,253
0
<EARNINGS-AVAILABLE-FOR-COMM> 108,253
<COMMON-STOCK-DIVIDENDS> 54,718
<TOTAL-INTEREST-ON-BONDS> 189,820
<CASH-FLOW-OPERATIONS> 231,404
<EPS-PRIMARY> .90
<EPS-DILUTED> .90
<FN>
<F1> INCLUDES REACQUIRED COMMON STOCK OF $89,522.
<F2> INCLUDES SUBSIDIARY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
<F2> SECURITIES OF $330,000.
<F3> INCLUDES DIVIDENDS ON SUBSIDIARY-OBLIGATED MANDATORILY REDEEMABLE
<F3> PREFERRED SECURITIES OF $7,222 AND PREFERRED STOCK DIVIDENDS OF
<F3> SUBSIDIARIES OF $4,208.
</FN>
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000053456
<NAME> JERSEY CENTRAL POWER & LIGHT COMPANY
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,922,426
<OTHER-PROPERTY-AND-INVEST> 341,372
<TOTAL-CURRENT-ASSETS> 465,981
<TOTAL-DEFERRED-CHARGES> 823,257
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 4,553,036
<COMMON> 153,713
<CAPITAL-SURPLUS-PAID-IN> 510,769
<RETAINED-EARNINGS> 867,680
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,532,162
249,000 <F1>
37,741
<LONG-TERM-DEBT-NET> 1,162,997
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 30,010
20,000
<CAPITAL-LEASE-OBLIGATIONS> 2,007
<LEASES-CURRENT> 103,764
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,415,355
<TOT-CAPITALIZATION-AND-LIAB> 4,553,036
<GROSS-OPERATING-REVENUE> 529,274
<INCOME-TAX-EXPENSE> 25,564
<OTHER-OPERATING-EXPENSES> 426,349
<TOTAL-OPERATING-EXPENSES> 451,913
<OPERATING-INCOME-LOSS> 77,361
<OTHER-INCOME-NET> 2,094
<INCOME-BEFORE-INTEREST-EXPEN> 79,455
<TOTAL-INTEREST-EXPENSE> 24,959 <F2>
<NET-INCOME> 54,496
3,586
<EARNINGS-AVAILABLE-FOR-COMM> 50,910
<COMMON-STOCK-DIVIDENDS> 0 <F3>
<TOTAL-INTEREST-ON-BONDS> 92,617
<CASH-FLOW-OPERATIONS> 174,047
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> INCLUDES COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
<F1> SECURITIES OF $125,000.
<F2> INCLUDES DIVIDENDS ON COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F2> PREFERRED SECURITIES OF $2,675.
<F3> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000065350
<NAME> METROPOLITAN EDISON COMPANY
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,594,289
<OTHER-PROPERTY-AND-INVEST> 114,085
<TOTAL-CURRENT-ASSETS> 198,478
<TOTAL-DEFERRED-CHARGES> 541,099
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,447,951
<COMMON> 66,273
<CAPITAL-SURPLUS-PAID-IN> 370,200
<RETAINED-EARNINGS> 263,088
<TOTAL-COMMON-STOCKHOLDERS-EQ> 699,561
100,000 <F1>
23,598
<LONG-TERM-DEBT-NET> 603,269
<SHORT-TERM-NOTES> 25,990
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 4,193
<LONG-TERM-DEBT-CURRENT-PORT> 15,019
0
<CAPITAL-LEASE-OBLIGATIONS> 827
<LEASES-CURRENT> 40,361
<OTHER-ITEMS-CAPITAL-AND-LIAB> 935,133
<TOT-CAPITALIZATION-AND-LIAB> 2,447,951
<GROSS-OPERATING-REVENUE> 237,688
<INCOME-TAX-EXPENSE> 20,856
<OTHER-OPERATING-EXPENSES> 178,440
<TOTAL-OPERATING-EXPENSES> 199,296
<OPERATING-INCOME-LOSS> 38,392
<OTHER-INCOME-NET> 236
<INCOME-BEFORE-INTEREST-EXPEN> 38,628
<TOTAL-INTEREST-EXPENSE> 14,591 <F2>
<NET-INCOME> 24,037
236
<EARNINGS-AVAILABLE-FOR-COMM> 23,801
<COMMON-STOCK-DIVIDENDS> 10,000 <F3>
<TOTAL-INTEREST-ON-BONDS> 46,299
<CASH-FLOW-OPERATIONS> 44,140
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> REPRESENTS COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
<F1> SECURITIES.
<F2> INCLUDES DIVIDENDS ON COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F2> PREFERRED SECURITIES OF $2,250.
<F3> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000077227
<NAME> PENNSYLVANIA ELECTRIC COMPANY
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,795,070
<OTHER-PROPERTY-AND-INVEST> 51,720
<TOTAL-CURRENT-ASSETS> 250,966
<TOTAL-DEFERRED-CHARGES> 408,837
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,506,593
<COMMON> 105,812
<CAPITAL-SURPLUS-PAID-IN> 285,486
<RETAINED-EARNINGS> 338,370
<TOTAL-COMMON-STOCKHOLDERS-EQ> 729,668
105,000 <F1>
36,777
<LONG-TERM-DEBT-NET> 642,477
<SHORT-TERM-NOTES> 70,700
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 17,771
<LONG-TERM-DEBT-CURRENT-PORT> 50,009
0
<CAPITAL-LEASE-OBLIGATIONS> 4,964
<LEASES-CURRENT> 21,126
<OTHER-ITEMS-CAPITAL-AND-LIAB> 828,101
<TOT-CAPITALIZATION-AND-LIAB> 2,506,593
<GROSS-OPERATING-REVENUE> 269,329
<INCOME-TAX-EXPENSE> 21,590
<OTHER-OPERATING-EXPENSES> 201,079
<TOTAL-OPERATING-EXPENSES> 222,669
<OPERATING-INCOME-LOSS> 46,660
<OTHER-INCOME-NET> (680)
<INCOME-BEFORE-INTEREST-EXPEN> 45,980
<TOTAL-INTEREST-EXPENSE> 15,465 <F2>
<NET-INCOME> 30,515
386
<EARNINGS-AVAILABLE-FOR-COMM> 30,129
<COMMON-STOCK-DIVIDENDS> 20,000 <F3>
<TOTAL-INTEREST-ON-BONDS> 50,904
<CASH-FLOW-OPERATIONS> 17,715
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> REPRESENTS COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
<F1> SECURITIES.
<F2> INCLUDES DIVIDENDS ON COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F2> PREFERRED SECURITIES OF $2,297.
<F3> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
<PAGE>
</TABLE>
