SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 15, 1995
----------------------
GULF POWER COMPANY
- ----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maine 0-2429 59-0276810
- ----------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
500 Bayfront Parkway, Pensacola, Florida 32501
- ----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (904) 444-6111
--------------------
N/A
- ----------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
23 - Consent of Arthur Andersen LLP.
27 - Financial Data Schedule.
99 - Audited Financial Statements of Gulf Power
Company as of December 31, 1994.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GULF POWER COMPANY
By /s/ Wayne Boston
Wayne Boston
Assistant Secretary
Date: March 1, 1995
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated February 15, 1995 on the financial statements of Gulf Power
Company, included in this Form 8-K, into Gulf Power Company's previously filed
Registration Statement File No. 33-50165.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 1, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from
the financial statements filed as Exhibit 99 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000044545
<NAME> GULF POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,057,744
<OTHER-PROPERTY-AND-INVEST> 7,997
<TOTAL-CURRENT-ASSETS> 148,278
<TOTAL-DEFERRED-CHARGES> 101,523
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,315,542
<COMMON> 38,060
<CAPITAL-SURPLUS-PAID-IN> 218,461
<RETAINED-EARNINGS> 168,951
<TOTAL-COMMON-STOCKHOLDERS-EQ> 425,472
1,000
89,602
<LONG-TERM-DEBT-NET> 319,444
<SHORT-TERM-NOTES> 53,500
<LONG-TERM-NOTES-PAYABLE> 50,388
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> (13,439)
(1,000)
<CAPITAL-LEASE-OBLIGATIONS> 0
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<OTHER-ITEMS-CAPITAL-AND-LIAB> 390,575
<TOT-CAPITALIZATION-AND-LIAB> 1,315,542
<GROSS-OPERATING-REVENUE> 578,813
<INCOME-TAX-EXPENSE> 33,957
<OTHER-OPERATING-EXPENSES> 452,643
<TOTAL-OPERATING-EXPENSES> 486,600
<OPERATING-INCOME-LOSS> 92,213
<OTHER-INCOME-NET> 1,194
<INCOME-BEFORE-INTEREST-EXPEN> 93,407
<TOTAL-INTEREST-EXPENSE> 32,253
<NET-INCOME> 61,154
5,925
<EARNINGS-AVAILABLE-FOR-COMM> 55,229
<COMMON-STOCK-DIVIDENDS> 44,000
<TOTAL-INTEREST-ON-BONDS> 23,777
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</TABLE>
<PAGE>
1
MANAGEMENT'S REPORT
Gulf Power Company 1994 Annual Report
The management of Gulf Power Company has prepared and is responsible for the
financial statements and related information included in this report. These
statements were prepared in accordance with generally accepted accounting
principles appropriate in the circumstances and necessarily include amounts that
are based on the best estimates and judgments of management. Financial
information throughout this annual report is consistent with the financial
statements.
The Company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that books and records
reflect only authorized transactions of the Company. Limitations exist in any
system of internal controls, however, based on a recognition that the cost of
the system should not exceed its benefits. The Company believes its system of
internal accounting controls maintains an appropriate cost/benefit relationship.
The Company's system of internal accounting controls is evaluated on an
ongoing basis by the Company's internal audit staff. The Company's independent
public accountants also consider certain elements of the internal control system
in order to determine their auditing procedures for the purpose of expressing an
opinion on the financial statements.
The audit committee of the board of directors, composed of five directors who
are not employees, provides a broad overview of management's financial reporting
and control functions. Periodically, this committee meets with management, the
internal auditors, and the independent public accountants to ensure that these
groups are fulfilling their obligations and to discuss auditing, internal
controls, and financial reporting matters. The internal auditors and independent
public accountants have access to the members of the audit committee at any
time.
Management believes that its policies and procedures provide reasonable
assurance that the Company's operations are conducted according to a high
standard of business ethics.
In management's opinion, the financial statements present fairly, in all
material respects, the financial position, results of operations, and cash flows
of Gulf Power Company in conformity with generally accepted accounting
principles.
/s/ Travis J. Bowden
Travis J. Bowden
President
and Chief Executive Officer
/s/ Arlan E. Scarbrough
Arlan E. Scarbrough
Chief Financial Officer
<PAGE>
2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of Gulf Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Gulf Power Company (a Maine corporation and a wholly owned subsidiary of The
Southern Company) as of December 31, 1994 and 1993, and the related statements
of income, retained earnings, paid-in capital, and cash flows for each of the
three years in the period ended December 31, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements (pages 10 through 27) referred to
above present fairly, in all material respects, the financial position of Gulf
Power Company as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for the periods stated, in conformity with
generally accepted accounting principles.
As explained in Notes 2 and 8 to the financial statements, effective January
1, 1993, Gulf Power Company changed its methods of accounting for postretirement
benefits other than pensions and for income taxes.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 15, 1995
<PAGE>
3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Gulf Power Company 1994 Annual Report
RESULTS OF OPERATIONS
Earnings
Gulf Power Company's net income after dividends on preferred stock for 1994
totaled $55.2 million, representing a $0.9 million increase from the prior year.
Major factors affecting earnings were a decrease in interest charges on
long-term debt as a result of security refinancings and an increase in
customers. These positive factors were offset by lower revenues primarily due to
mild summer weather, and an increase in other operation expenses and taxes.
Also, earnings decreased approximately $3.0 million, reflecting the first full
year of decreased industrial sales due to the Company's largest industrial
customer, Monsanto, installing its own cogeneration facility in August, 1993.
Earnings for 1994 increased from the 1993 level, even though 1993 earnings
included $4.0 million of unusual items pertaining to the gain on sale of Gulf
States Utilities Company (Gulf States) stock and the reversal of a wholesale
rate refund discussed below.
In 1993, earnings were $54.3 million, representing a $0.2 million increase
compared to the prior year. This increase resulted primarily from a $2.3 million
gain on the sale of Gulf States' stock and the reversal of a $1.7 million
wholesale rate refund as the result of a court order. The Company also
experienced growth in residential and commercial sales and a decrease in
interest expense on long-term debt as a result of security refinancings. These
positive events were offset by higher operation and maintenance expense and
decreased industrial sales, reflecting the loss of Monsanto, which is discussed
above.
The Company's return on average common equity was 13.15 percent for 1994, a
slight decrease from the 13.29 percent return earned in 1993.
Revenues
Changes in operating revenues over the last three years are the result of the
following factors:
===========================================================
Increase (Decrease)
From Prior Year
-------------------------------
1994 1993 1992
-------------------------------
(in thousands)
Retail --
Change in base rates $ 0 $ 1,571 $ 722
Sales growth 7,126 7,671 12,965
Weather (4,631) 4,049 (6,448)
Regulatory cost
recovery and other 8,938 (3,079) (1,839)
- -----------------------------------------------------------
Total retail 11,433 10,212 5,400
- -----------------------------------------------------------
Sales for resale--
Non-affiliates (6,098) 2,131* 442
Affiliates (5,813) (909) (5,268)
- -----------------------------------------------------------
Total sales for resale (11,911) 1,222 (4,826)
- -----------------------------------------------------------
Other operating
revenues (3,851) 806 5,121
- -----------------------------------------------------------
Total operating
revenues $(4,329) $12,240 $ 5,695
===========================================================
Percent change (0.7)% 2.1% 1.0%
- -----------------------------------------------------------
* Includes the non-interest portion of the wholesale rate refund
reversal discussed in "Earnings."
Retail revenues of $483.1 million in 1994 increased $11.4 million or 2.4
percent from last year, compared with an increase of 2.2 percent in 1993 and 1.2
percent in 1992. Revenues increased in the residential and commercial classes
primarily due to customer growth and favorable economic conditions, partially
offset by the effect of milder weather. Revenues in the industrial class
declined in 1994 and 1993 primarily due to the loss of Monsanto as discussed in
"Earnings." Also, in 1994, industrial sales decreased due to an unexpected six
month plant shutdown -- which ended in October 1994 -- by another major
industrial customer. The change in base rates for 1993 and 1992 reflects the
expiration of a retail rate penalty in September 1992.
The increase in regulatory cost recovery and other retail revenue is
primarily attributable to the first year of recovery under the Environmental
Cost Recovery (ECR) clause. Regulatory cost recovery and other primarily
includes recovery provisions for fuel expense and the energy component of
purchased power costs; energy conservation costs; purchased power capacity
<PAGE>
4
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1994 Annual Report
costs; and environmental compliance costs. The recovery provisions equal the
related expenses and have no material effect on net income. See Notes 1 and 3 to
the financial statements under "Revenues and Regulatory Cost Recovery Clauses"
and "Environmental Cost Recovery," respectively, for further information.
Sales for resale were $83.5 million in 1994, decreasing $11.9 million or 12.5
percent from 1993. The majority of non-affiliated energy sales arise from
long-term contractual agreements. Non-affiliated long-term contracts include
capacity and energy components. Capacity revenues reflect the recovery of fixed
costs and return on investment. Energy is sold at its variable cost. The
capacity and energy components under these long-term contracts were as follows:
===========================================================
1994 1993 1992
------------------------------------
(in thousands)
Capacity $30,926 $33,805 $34,180
Energy 18,456 21,202 22,933
- -----------------------------------------------------------
$49,382 $55,007 $57,113
===========================================================
Capacity revenues decreased in 1994, reflecting the decline in capacity under
long-term contracts.
Sales to affiliated companies vary from year to year depending on demand and
the availability and cost of generating resources at each company. These sales
have little impact on earnings.
The changes in other operating revenues for 1994 and 1993 are primarily due
to adjustments of regulatory cost recovery clauses for differences between
recoverable costs and the amounts actually reflected in revenues. See Notes 1
and 3 to the financial statements under "Revenues and Regulatory Cost Recovery
Clauses" and "Environmental Cost Recovery," respectively, for further
discussion.
Kilowatt-hour sales for 1994 and percent changes in sales since 1992 are
reported below.
=============================================================
(millions of Amount Percent Change
kilowatt-hours) ------ ----------------------
1994 1994 1993 1992
------ ----------------------
Residential 3,752 1.1% 3.2% 4.1%
Commercial 2,549 4.8 2.7 4.2
Industrial 1,847 (9.0) (6.9) 2.9
Other 17 - - (2.7)
------
Total retail 8,165 (0.3) 0.4 3.8
Sales for resale
Non-affiliates 1,419 (2.8) 2.0 (7.7)
Affiliates 874 (15.2) (14.8) (2.2)
------
Total 10,458 (2.1) (1.1) 1.4
=============================================================
Retail sales decreased in 1994 primarily due to mild summer weather and a
decline in sales in the industrial class, which reflects the loss of Monsanto
and a lengthy shutdown of another major customer. The decline in sales was
partially offset by a 2.4 percent increase in residential customers, a 2.9
percent increase in commercial customers, and an improving economy. Retail sales
were relatively flat in 1993.
In 1994, energy sales for resale to non-affiliates decreased 2.8 percent and
are predominantly related to unit power sales under long-term contracts to
Florida utilities, which are discussed above. Energy sales to affiliated
companies vary from year to year as mentioned previously.
Expenses
Total operating expenses for 1994 decreased $4.0 million or 0.8 percent from
1993. The decrease is primarily due to decreased fuel and purchased power
expenses, offset by an increase in other operation expenses and taxes. In 1993,
total operating expenses increased $16.6 million or 3.5 percent from 1992
primarily due to increased operation and maintenance expenses and higher taxes.
Fuel and purchased power expenses for 1994 declined $13.4 million or 6.5
percent from 1993. The decline reflects the decrease in generation due to the
mild weather experienced in 1994 and the lower cost of fuel. In 1993, fuel and
purchased power expenses decreased $3.8 million or 1.8 percent from 1992,
reflecting the lower cost of fuel.
<PAGE>
5
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1994 Annual Report
In 1994, other operation expenses increased $4.7 million or 4.3 percent from
the 1993 level. The increase is primarily attributable to additional costs of
$6.4 million related to the buyouts and renegotiation of coal supply contracts
and $1.3 million for the Company's pro rata share of affiliated companies'
workforce reduction costs. These costs are further discussed in Notes 2 and 5 to
the financial statements under "Work Force Reduction Programs" and "Fuel
Commitments," respectively. The increase in coal buyouts and workforce
reductions costs were partially offset by a decrease in various administrative
and general expenses. In 1993, other operation expenses increased $11.9 million
or 12.2 percent from the previous year, reflecting $7.4 million of additional
costs related to the buyouts and renegotiation of coal supply contracts. In
addition, in 1993, other operation expenses increased $3.5 million due to higher
employee benefit costs, the Company's pro rata share of the Southern electric
system's environmental cleanup costs of a research facility site, and costs
related to an automotive fleet reduction program.
Maintenance expense remained relatively flat in 1994 reflecting no major
changes in the scheduling of maintenance of production facilities. In 1993,
maintenance expense increased $4.1 million or 9.7 percent over 1992 due to
scheduled maintenance of production facilities.
Federal and state income taxes increased $1.2 million or 3.8 percent in 1994
primarily due to an increase in taxable income. Other taxes increased $1.5
million or 3.7 percent due to higher property taxes, gross receipt taxes, and
franchise fee collections. In 1993, federal income taxes increased $0.7 million
primarily due to a corporate federal income tax rate increase from 34 percent to
35 percent. Taxes other than income taxes increased $2.3 million in 1993, an
increase of 6.1 percent over the 1992 expense primarily due to increases in
property and gross receipt taxes. Changes in gross receipt taxes and franchise
fee collections, which are collected from customers, have no impact on earnings.
In 1994, interest expense decreased $3.8 million or 10.5 percent under the
prior year. Interest expense in 1993 decreased $3.2 million or 8.1 percent from
the 1992 level. The decrease in both years is primarily attributable to the
refinancing of some of the Company's higher-cost securities.
Effects of Inflation
The Company is subject to rate regulation and income tax laws that are based on
the recovery of historical costs. Therefore, inflation creates an economic loss
because the Company is recovering its cost of investments in dollars that have
less purchasing power. While the inflation rate has been relatively low in
recent years, it continues to have an adverse effect on the Company because of
the large investment in long-lived utility plant. Conventional accounting for
historical cost does not recognize this economic loss nor the partially
offsetting gain that arises through financing facilities with fixed-money
obligations, such as long-term debt and preferred stock. Any recognition of
inflation by regulatory authorities is reflected in the rate of return allowed.
Future Earnings Potential
The results of operations for the past three years are not necessarily
indicative of future earnings potential. The level of future earnings depends on
a number of factors ranging from growth in energy sales to the effects of a less
regulated, more competitive environment.
Future earnings in the near term will depend upon growth in energy sales,
which is subject to a number of factors. Traditionally, these factors included
changes in contracts with neighboring utilities, energy conservation practiced
by customers, the elasticity of demand, weather, competition, and the rate of
economic growth in the Company's service area. However, the Energy Policy Act of
1992 (Energy Act) is beginning to have a dramatic effect on the future of the
electric utility industry. The Energy Act promotes energy efficiency,
alternative fuel use, and increased competition for electric utilities. The
Company is posturing the business to meet the challenge of this major change in
the traditional practice of selling electricity. The Energy Act allows
independent power producers (IPPs) to access the Company's transmission network
in order to sell electricity to other utilities. This may enhance the incentive
for IPPs to build cogeneration plants for industrial and commercial customers
and sell excess energy generation to utilities. Presently, Florida law does not
permit retail wheeling. Although the Energy Act does not require transmission
access to retail customers, retail wheeling initiatives are rapidly evolving and
becoming very prominent issues in several states. In order to address these
initiatives, numerous questions must be resolved, with the most complex ones
<PAGE>
6
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1994 Annual Report
relating to transmission pricing and recovery of stranded investments. As the
initiatives become a reality, the structure of the utility industry could
radically change. Therefore, unless the Company remains a low-cost producer and
provides quality service, the Company's retail energy sales growth could be
limited and this could significantly erode earnings. Conversely, being the
low-cost producer could provide significant opportunities to increase market
share and profitability.
The future effect of cogeneration and small-power production facilities
cannot be fully determined at this time. One effect of cogeneration which the
Company has experienced is the loss of its largest industrial customer,
Monsanto, which is discussed in "Earnings." The Company's strategy is to
identify and pursue profitable cogeneration projects in Northwest Florida.
The Florida Public Service Commission (FPSC) has set conservation goals for
the Company to reduce 148 megawatts of peak demand by the year 2003. The Company
will file conservation programs in 1995 to accomplish these goals. In response
to these goals and seeking to remain competitive with other electric utilities,
the Company has developed initiatives which emphasize price flexibility and
competitive offering of energy efficiency products and services. These
initiatives will enable customers to lower or alter their peak energy
requirements. Besides promoting energy efficiency, another benefit of these
initiatives could be the ability to defer the need to construct some generating
facilities further into the future.
The Company is subject to the provisions of Financial Accounting Standards
Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. In the event that a portion of the Company's operations is no longer
subject to these provisions, the Company would be required to write off related
regulatory assets and liabilities. See Note 1 to the financial statements under
"Regulatory Assets and Liabilities" for additional information.
The Federal Energy Regulatory Commission (FERC) regulates wholesale rate
schedules and power sales contracts that the Company has with its sales for
resale customers. The FERC is currently reviewing the rate of return on common
equity included in these schedules and contracts that have a return on common
equity of 13.75 percent or greater, and may require such returns to be lowered,
possibly retroactively. See Note 3 to the financial statements under "FERC
Reviews Equity Returns" for additional information.
Compliance costs related to the Clean Air Act Amendments of 1990 (Clean Air
Act) could reduce earnings if such costs are not fully recovered. The Clean Air
Act is discussed later under "Environmental Matters." Also, state of Florida
legislation adopted in 1993 that provides for recovery of prudent environmental
compliance costs is discussed in Note 3 to the financial statements under
"Environmental Cost Recovery."
FINANCIAL CONDITION
Overview
The principal changes in the Company's financial condition during 1994 were
gross property additions of $78.9 million and an increase of $47.4 million in
notes payable. Funds for the property additions were provided by internal
sources. The Company continued to refinance higher-cost securities to lower the
Company's cost of capital. See "Financing Activities" below and the Statements
of Cash Flows for further details.
Financing Activities
The Company continued to lower its financing costs by issuing new securities and
other debt, and retiring higher-cost issues in 1994. The Company sold through
public authorities, $42 million of pollution control revenue bonds and obtained
$32.1 million of long-term bank notes. Retirements, including maturities during
1994, totaled $48.9 million of first mortgage bonds, $42.1 million of pollution
control bonds, $24.2 million of bank notes and other long-term debt, and $1
million of preferred stock. (See the Statements of Cash Flows for further
details.)
<PAGE>
7
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1994 Annual Report
Composite financing rates for the years 1992 through 1994 as of year end were
as follows:
===========================================================
1994 1993 1992
-------------------------
Composite interest rate on
long-term debt 6.5% 7.1% 8.0%
Composite preferred stock
dividend rate 6.6% 6.5% 7.3%
===========================================================
The continued decrease in the composite interest rate on long-term debt
reflects the Company's continued efforts to refinance higher-cost debt, which is
discussed above. The slight increase in the composite preferred dividend rate is
primarily due to an increase in dividends on the Company's adjustable rate
preferred stock, reflecting the recent rise in interest rates.
Capital Requirements for Construction
The Company's gross property additions, including those amounts related to
environmental compliance, are budgeted at $222 million for the three years
beginning 1995 ($62 million in 1995, $76 million in 1996, and $84 million in
1997). The estimates of property additions for the three-year period include $13
million committed to meeting the requirements of the Clean Air Act, the cost of
which is expected to be recovered through the ECR clause, which is discussed in
Note 3 to the financial statements under "Environmental Cost Recovery." Actual
construction costs may vary from this estimate because of factors such as the
granting of timely and adequate rate increases; changes in environmental
regulations; revised load projections; the cost and efficiency of construction
labor, equipment, and materials; and the cost of capital. The Company does not
have any baseload generating plants under construction. However, significant
construction related to maintaining and upgrading transmission and distribution
facilities and generating plants will continue.
Other Capital Requirements
In addition to the funds needed for the construction program, approximately
$74.3 million will be required by the end of 1997 in connection with maturities
of long-term debt and preferred stock subject to mandatory redemption. Also, the
Company plans to continue a program to retire higher-cost debt and preferred
stock and replace these obligations with lower-cost capital as market conditions
and terms of the instruments permit.
Environmental Matters
In November 1990, the Clean Air Act was signed into law. Title IV of the Clean
Air Act -- the acid rain compliance provision of the law -- will have a
significant impact on the Company. Specific reductions in sulfur dioxide and
nitrogen oxide emissions from fossil-fired generating plants will be required in
two phases. Phase I compliance began in 1995 and affects eight generating plants
- -- some 10,000 megawatts of capacity or 35 percent of total capacity -- in the
Southern electric system. Phase II compliance is required by 2000, and all
fossil-fired generating plants in the Southern electric system will be affected.
In 1993, the Florida Legislature adopted legislation that allows a utility to
petition the FPSC for recovery of prudent environmental compliance costs that
are not being recovered through base rates or any other rate-adjustment clause.
The legislation is discussed in Note 3 to the financial statements under
"Environmental Cost Recovery." Substantially all of the costs for the Clean Air
Act and other new legislation discussed below is expected to be recovered
through the Environmental Cost Recovery clause.
In 1995, the Environmental Protection Agency (EPA) will begin issuing annual
sulfur dioxide emission allowances through the allowance trading program. An
emission allowance is the authority to emit one ton of sulfur dioxide during a
calendar year. The method for issuing allowances is based on the fossil fuel
consumed from 1985 through 1987 for each affected generating unit. Emission
allowances are transferable and can be bought, sold, or banked and used in the
future.
The sulfur dioxide emission allowance program is expected to minimize the
cost of compliance. The Southern Company's sulfur dioxide compliance strategy is
designed to use allowances as a compliance option.
The Southern Company expects to achieve Phase I sulfur dioxide compliance at
the eight affected plants by switching to low-sulfur coal, which has required
some equipment upgrades. This compliance strategy is expected to result in
unused emission allowances being banked for later use. Additional construction
<PAGE>
8
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1994 Annual Report
expenditures are required to install equipment for the control of nitrogen oxide
emissions at these eight plants. Also, continuous emissions monitoring equipment
has been installed on all fossil-fired units. Construction expenditures for
Phase I are estimated to total approximately $300 million for The Southern
Company through 1995. Through 1994, the Company's construction expenditures for
Phase I were approximately $51 million.
For Phase II sulfur dioxide compliance, The Southern Company could use
emission allowances banked during Phase I, increase fuel switching, install flue
gas desulfurization equipment at selected plants, and/or purchase more
allowances depending on the price and availability of allowances. Also, in Phase
II, equipment to control nitrogen oxide emissions will be installed on
additional system fossil-fired plants as required to meet anticipated Phase II
limits. Therefore, during the period 1996 to 2000, the current compliance
strategy could require total construction expenditures of approximately $150
million for The Southern Company, including approximately $19 million for the
Company. However, the full impact of Phase II compliance cannot be determined
with certainty, pending the continuing development of a market for emission
allowances, the completion of EPA regulations, and the possibility of new
emission reduction technologies.
Following adoption of legislation in April of 1992 allowing electric
utilities in Florida to seek FPSC approval of their Clean Air Act Compliance
Plans, the Company filed its petition for approval. The FPSC approved the
Company's plan for Phase I compliance, deferring until a later date approval of
its Phase II Plan.
An average increase of up to 4 percent in annual revenue requirements from
the Company's customers could be necessary to fully recover the cost of
compliance for both Phase I and Phase II of Title IV of the Clean Air Act.
Compliance costs include construction expenditures, increased costs for
switching to low-sulfur coal, and costs related to emission allowances.
Title III of the Clean Air Act requires a multi-year EPA study of power plant
emissions of hazardous air pollutants. The EPA is scheduled to submit a report
to Congress on the results of this study by November 1995. The report will
include a decision on whether additional regulatory control of these substances
is warranted. Compliance with any new control standards could result in
significant additional costs. The impact of new standards -- if any -- will
depend on the development and implementation of applicable regulations.
The EPA continues to evaluate the need for a new short-term ambient air
quality standard for sulfur dioxide. Preliminary results from an EPA study on
the impact of a new standard indicate that a number of plants could be required
to install sulfur dioxide controls. These controls would be in addition to the
controls already required to meet the acid rain provision of the Clean Air Act.
The EPA issued proposed rules in November 1994 and is required to take final
action on this issue in 1996. The impact of any new standard will depend on the
level chosen for the standard and cannot be determined at this time.
In addition, the EPA is evaluating the need to revise the ambient air quality
standards for particulate matter, nitrogen oxides, and ozone. The impact of any
new standard will depend on the level chosen for the standard and cannot be
determined at this time.
In 1995, the EPA may issue revised rules on air quality control regulations
related to stack height requirements of the Clean Air Act. The full impact of
the final rules cannot be determined at this time, pending their development and
implementation.
In 1993, the EPA issued a ruling confirming the non-hazardous status of coal
ash. However, the EPA has until 1998 to classify co-managed utility wastes --
coal ash and other utility wastes -- as either non-hazardous or hazardous. If
the EPA classifies the co-managed wastes as hazardous, then substantial
additional costs for the management of such wastes may be required. The full
impact of any change in the regulatory status will depend on the subsequent
development of co-managed waste requirements.
The Company must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur costs to clean up properties currently or
previously owned. The Company conducts studies to determine the extent of any
required cleanup costs and has recognized in the financial statements costs to
clean up known sites. For additional information, see Note 3 to the financial
statements under "Environmental Cost Recovery."
<PAGE>
9
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1994 Annual Report
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Water Act;
the Comprehensive Environmental Response, Compensation, and Liability Act; the
Resource Conservation and Recovery Act; and the Endangered Species Act. Changes
to these laws could affect many areas of the Company's operations. The full
impact of these requirements cannot be determined at this time, pending the
development and implementation of applicable regulations.
Compliance with possible new legislation related to global climate change,
electromagnetic fields, and other environmental and health concerns could
significantly affect the Company. The impact of new legislation -- if any --
will depend on the subsequent development and implementation of applicable
regulations. In addition, the potential for lawsuits alleging damages caused by
electromagnetic fields exists.
Sources of Capital
At December 31, 1994, the Company had $0.9 million of cash and cash equivalents
to meet its short-term cash needs.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from operations; the sale of additional first mortgage bonds, pollution control
bonds, and preferred stock; bank notes; and capital contributions from The
Southern Company. The Company is required to meet certain coverage requirements
specified in its mortgage indenture and corporate charter to issue new first
mortgage bonds and preferred stock. The Company's coverage ratios are sufficient
to permit, at present interest and preferred dividend levels, any foreseeable
security sales. The amount of securities which the Company will be permitted to
issue in the future will depend upon market conditions and other factors
prevailing at that time.
<PAGE>
10
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1994, 1993, and 1992
Gulf Power Company 1994 Annual Report
=========================================================================================
1994 1993 1992
- -----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Revenues:
Revenues $ 561,460 $ 559,976 $ 546,827
Revenues from affiliates 17,353 23,166 24,075
- -----------------------------------------------------------------------------------------
Total operating revenues 578,813 583,142 570,902
- -----------------------------------------------------------------------------------------
Operating Expenses:
Operation-
Fuel 161,168 170,485 182,754
Purchased power from non-affiliates 6,761 4,386 1,394
Purchased power from affiliates 25,819 32,273 26,788
Other 113,879 109,164 97,310
Maintenance 46,700 46,004 41,947
Depreciation and amortization 56,615 55,309 53,758
Taxes other than income taxes 41,701 40,204 37,898
Federal and state income taxes (Note 8) 33,957 32,730 32,078
- -----------------------------------------------------------------------------------------
Total operating expenses 486,600 490,555 473,927
- -----------------------------------------------------------------------------------------
Operating Income 92,213 92,587 96,975
Other Income (Expense):
Allowance for equity funds used during
construction (Note 1) 450 512 14
Interest income 1,429 1,328 2,733
Other, net (780) (1,238) (1,487)
Gain on sale of investment securities - 3,820 -
Income taxes applicable to other income 95 (921) 187
- -----------------------------------------------------------------------------------------
Income Before Interest Charges 93,407 96,088 98,422
- -----------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 27,124 31,344 35,792
Other interest charges 2,442 2,877 1,410
Interest on notes payable 1,509 870 1,041
Amortization of debt discount, premium, and expense, net 1,834 1,412 1,032
Allowance for debt funds used during
construction (Note 1) (656) (454) (46)
- -----------------------------------------------------------------------------------------
Net interest charges 32,253 36,049 39,229
- -----------------------------------------------------------------------------------------
Net Income 61,154 60,039 59,193
Dividends on Preferred Stock 5,925 5,728 5,103
- -----------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 55,229 $ 54,311 $ 54,090
=========================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
11
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1994 and 1993
Gulf Power Company 1994 Annual Report
========================================================================================
ASSETS 1994 1993
- ----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Utility Plant:
Plant in service (Notes 1 and 6) $ 1,656,367 $ 1,611,704
Less accumulated provision for depreciation 622,911 610,542
- ----------------------------------------------------------------------------------------
1,033,456 1,001,162
Construction work in progress 24,288 34,591
- ----------------------------------------------------------------------------------------
Total 1,057,744 1,035,753
- ----------------------------------------------------------------------------------------
Other Property and Investments 7,997 13,242
- ----------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 902 5,576
Receivables-
Customer accounts receivable 57,637 57,226
Other accounts and notes receivable 2,268 5,904
Affiliated companies 1,079 1,241
Accumulated provision for uncollectible accounts (600) (447)
Fossil fuel stock, at average cost 35,686 20,652
Materials and supplies, at average cost 35,257 36,390
Current portion of deferred coal contract costs (Note 5) 2,521 12,535
Regulatory clauses under recovery (Note 1) 5,002 3,244
Prepayments 4,354 2,160
Vacation pay deferred (Note 1) 4,172 4,022
- ----------------------------------------------------------------------------------------
Total 148,278 148,503
- ----------------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes (Note 8) 30,433 31,334
Debt expense and loss, being amortized 22,119 21,247
Deferred coal contract costs (Note 5) 38,169 52,884
Miscellaneous 10,802 4,846
- ----------------------------------------------------------------------------------------
Total 101,523 110,311
- ----------------------------------------------------------------------------------------
Total Assets $ 1,315,542 $ 1,307,809
========================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
12
<TABLE>
<CAPTION>
BALANCE SHEETS (continued)
At December 31, 1994 and 1993
Gulf Power Company 1994 Annual Report
========================================================================================
CAPITALIZATION AND LIABILITIES 1994 1993
- ----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Capitalization (See accompanying statements):
Common stock equity (Note 11) $ 425,472 $ 414,196
Preferred stock 89,602 89,602
Preferred stock subject to mandatory redemption - 1,000
Long-term debt 356,393 369,259
- ----------------------------------------------------------------------------------------
Total 871,467 874,057
- ----------------------------------------------------------------------------------------
Current Liabilities:
Preferred stock due within one year 1,000 1,000
Long-term debt due within one year (Note 10) 13,439 41,552
Notes payable 53,500 6,053
Accounts payable-
Affiliated companies 9,132 18,560
Other 14,524 20,139
Customer deposits 13,609 15,082
Taxes accrued-
Federal and state income 5,990 10,330
Other 7,475 2,685
Interest accrued 6,106 5,420
Regulatory clauses over recovery (Note 1) 3,960 840
Vacation pay accrued (Note 1) 4,172 4,022
Miscellaneous 7,828 8,527
- ----------------------------------------------------------------------------------------
Total 140,735 134,210
- ----------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 151,681 151,743
Deferred credits related to income taxes (Note 8) 71,964 76,876
Accumulated deferred investment tax credits 38,391 40,770
Accumulated provision for property damage (Note 1) 11,522 10,509
Accumulated provision for postretirement benefits (Note 2) 13,680 10,749
Miscellaneous 16,102 8,895
- ----------------------------------------------------------------------------------------
Total 303,340 299,542
- ----------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, and 7)
Total Capitalization and Liabilities $ 1,315,542 $ 1,307,809
========================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
13
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1994 and 1993
Gulf Power Company 1994 Annual Report
=================================================================================================
1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
<S> <C> <C> <C> <C>
Common Stock Equity:
Common stock, without par value --
Authorized and outstanding --
992,717 shares in 1994 and 1993 $ 38,060 $ 38,060
Paid-in capital 218,380 218,282
Premium on preferred stock 81 81
Retained earnings (Note 11) 168,951 157,773
- -------------------------------------------------------------------------------------------------
Total common stock equity 425,472 414,196 48.8 % 47.4 %
- -------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$10 par value, authorized 10,000,000 shares,
Outstanding 2,580,000 shares at December 31, 1994
$25 stated capital --
6.72% 20,000 20,000
7.00% 14,500 14,500
7.30% 15,000 15,000
Adjustable Rate -- at January 1, 1995: 6.07% 15,000 15,000
$100 par value --
Authorized -- 791,626 shares
Outstanding -- 251,026 shares at December 31, 1994
4.64% 5,102 5,102
5.16% 5,000 5,000
5.44% 5,000 5,000
7.52% 5,000 5,000
7.88% 5,000 5,000
- -------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $5,901,300) 89,602 89,602 10.3 10.3
- -------------------------------------------------------------------------------------------------
Cumulative Preferred Stock Subject to Mandatory Redemption:
$100 par value --
Authorized -- 10,000 shares
Outstanding -- 10,000 shares at December 31, 1994
11.36% Series 1,000 2,000
- -------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $113,600) 1,000 2,000
- -------------------------------------------------------------------------------------------------
Less amount due within one year 1,000 1,000
- -------------------------------------------------------------------------------------------------
Total excluding amount due within one year - 1,000 - 0.1
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
14
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1994 and 1993
Gulf Power Company 1994 Annual Report
=================================================================================================
1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
<S> <C> <C> <C> <C>
First mortgage bonds --
Maturity Interest Rates
-------- --------------
October 1, 1994 4.625% - 12,000
June 1, 1996 6% - 15,000
August 1, 1997 5.875% 25,000 25,000
April 1, 1998 9.20% - 19,486
April 1, 1998 5.55% 15,000 15,000
July 1, 1998 5.00% 30,000 30,000
July 1, 2003 6.125% 30,000 30,000
September 1, 2008 9% 2,680 5,050
December 1, 2021 8.75% 50,000 50,000
- -------------------------------------------------------------------------------------------------
Total first mortgage bonds 152,680 201,536
Pollution control obligations (Note 9) 169,755 169,855
Other long-term debt (Note 9) 50,388 42,520
Unamortized debt premium (discount), net (2,991) (3,100)
- -------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $23,777,000) 369,832 410,811
Less amount due within one year (Note 10) 13,439 41,552
- -------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 356,393 369,259 40.9 42.2
- -------------------------------------------------------------------------------------------------
Total Capitalization $871,467 $874,057 100.0 % 100.0 %
=================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
15
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1994, 1993, and 1992
Gulf Power Company 1994 Annual Report
========================================================================================
1994 1993 1992
- ----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at Beginning of Year $ 157,773 $ 146,771 $ 134,372
Net income after dividends on preferred stock 55,229 54,311 54,090
Cash dividends on common stock (44,000) (41,800) (39,900)
Preferred stock transactions, net (51) (1,509) (1,791)
- ----------------------------------------------------------------------------------------
Balance at End of Year (Note 11) $ 168,951 $ 157,773 $ 146,771
========================================================================================
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1994, 1993, and 1992
Gulf Power Company 1994 Annual Report
========================================================================================
1994 1993 1992
- ----------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Year $ 218,282 $ 218,271 $ 218,150
Contributions to capital by parent company 98 11 121
- ----------------------------------------------------------------------------------------
Balance at End of Year $ 218,380 $ 218,282 $ 218,271
========================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
16
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1994, 1993, and 1992
Gulf Power Company 1994 Annual Report
=================================================================================================
1994 1993 1992
- -------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Activities:
Net income $ 61,154 $ 60,039 $ 59,193
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 86,098 72,111 68,021
Deferred income taxes and investment tax credits (6,986) 5,347 3,322
Allowance for equity funds used during construction (450) (512) (14)
Other, net 4,898 (864) (735)
Changes in certain current assets and liabilities --
Receivables, net 3,540 12,867 (11,041)
Inventories (13,901) 5,574 23,560
Payables (10,159) 5,386 1,580
Other 610 (9,504) (13,637)
- -------------------------------------------------------------------------------------------------
Net cash provided from operating activities 124,804 150,444 130,249
- -------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (78,869) (78,562) (64,671)
Other (3,493) (5,328) 3,970
- -------------------------------------------------------------------------------------------------
Net cash used for investing activities (82,362) (83,890) (60,701)
- -------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred stock - 35,000 29,500
First mortgage bonds - 75,000 25,000
Pollution control bonds 42,000 53,425 8,930
Capital contributions from parent 98 11 121
Other long-term debt 32,108 25,000 -
Retirements:
Preferred stock (1,000) (21,060) (15,500)
First mortgage bonds (48,856) (88,809) (117,693)
Pollution control bonds (42,100) (40,650) (9,205)
Other long-term debt (24,240) (7,736) (5,783)
Notes payable, net 47,447 (37,947) 44,000
Payment of preferred stock dividends (5,925) (5,728) (5,103)
Payment of common stock dividends (44,000) (41,800) (39,900)
Miscellaneous (2,648) (6,888) (8,760)
- -------------------------------------------------------------------------------------------------
Net cash used for financing activities (47,116) (62,182) (94,393)
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (4,674) 4,372 (24,845)
Cash and Cash Equivalents at Beginning of Year 5,576 1,204 26,049
- -------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 902 $ 5,576 $ 1,204
=================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $30,139 $28,470 $38,164
Income taxes $43,089 $27,865 $37,569
- -------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
17
NOTES TO FINANCIAL STATEMENTS
At December 31, 1994, 1993, and 1992
Gulf Power Company 1994 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Gulf Power Company is a wholly owned subsidiary of The Southern Company, which
is the parent company of five operating companies, a system service company,
Southern Communications Services (Southern Communications), Southern Electric
International (Southern Electric), Southern Nuclear Operating Company (Southern
Nuclear) and The Southern Development and Investment Group (SDIG). The operating
companies (Alabama Power Company, Georgia Power Company, Gulf Power Company,
Mississippi Power Company, and Savannah Electric and Power Company) provide
electric service in four Southeastern states. Contracts among the companies --
dealing with jointly owned generating facilities, interconnecting transmission
lines, and the exchange of electric power -- are regulated by the Federal Energy
Regulatory Commission (FERC) or the Securities and Exchange Commission (SEC).
The system service company provides, at cost, specialized services to The
Southern Company and subsidiary companies. Southern Communications, beginning in
mid-1995, will provide digital wireless communications services -- over the
800-megahertz frequency band--to The Southern Company's subsidiaries and also
will market these services to the public within the Southeast. Southern Electric
designs, builds, owns and operates power production facilities and provides a
broad range of technical services to industrial companies and utilities in the
United States and a number of international markets. Southern Nuclear provides
services to The Southern Company's nuclear power plants. SDIG develops new
business opportunities related to energy products and services.
The Southern Company is registered as a holding company under the Public
Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its
subsidiaries are subject to the regulatory provisions of the PUHCA. The Company
is also subject to regulation by the FERC and the Florida Public Service
Commission (FPSC). The Company follows generally accepted accounting principles
and complies with the accounting policies and practices prescribed by the FPSC.
Certain prior years' data presented in the financial statements have been
reclassified to conform with current year presentation.
Regulatory Assets and Liabilities
The Company is subject to the provisions of Financial Accounting Standards Board
(FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are to be credited to
customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to:
===========================================================
1994 1993
-----------------------
(in thousands)
Current & deferred fuel charges $ 40,690 $ 65,419
Deferred income taxes 30,433 31,334
Premium on reacquired debt 18,494 17,554
Environmental remediation 7,800 -
Vacation pay 4,172 4,022
Regulatory clauses under (over)
recovery, net 1,042 2,404
Deferred income tax credits (71,964) (76,876)
Accumulated provision for
property damage (11,522) (10,509)
Other, net (2,691) (1,697)
- -----------------------------------------------------------
Total $ 16,454 $ 31,651
===========================================================
In the event that a portion of the Company's operations are no longer subject
to the provisions of Statement No. 71, the Company would be required to write
off related regulatory assets and liabilities. In addition, the Company would be
required to determine any impairment to other assets, including plant, and write
down the assets to their fair value.
<PAGE>
18
NOTES (continued)
Gulf Power Company 1994 Annual Report
Revenues and Regulatory Cost Recovery Clauses
The Company accrues revenues for service rendered but unbilled at the end of
each fiscal period. The Company's electric rates include provisions to
periodically adjust billings for fluctuations in fuel and the energy component
of purchased power costs; purchased power capacity costs; energy conservation
costs; and environmental compliance costs. Revenues are adjusted monthly for
differences between recoverable costs and amounts actually reflected in current
rates.
Depreciation and Amortization
Depreciation of the original cost of depreciable utility plant in service is
provided primarily by using composite straight-line rates which approximated 3.8
percent in 1994, 1993, and 1992. When property subject to depreciation is
retired or otherwise disposed of in the normal course of business, its cost --
together with the cost of removal, less salvage -- is charged to the accumulated
provision for depreciation. Minor items of property included in the original
cost of the plant are retired when the related property unit is retired.
Income Taxes
The Company provides deferred income taxes for all significant income tax
temporary differences. Investment tax credits utilized are deferred and
amortized to income over the average lives of the related property.
Effective January 1, 1993, the Company adopted FASB Statement No. 109,
Accounting for Income Taxes. Statement No. 109 required, among other things,
conversion to the liability method of accounting for accumulated deferred income
taxes. See Note 8 for additional information about Statement No. 109. The
Company is included in the consolidated federal income tax return of The
Southern Company.
Allowance for Funds Used During Construction
(AFUDC)
AFUDC represents the estimated debt and equity costs of capital funds that are
necessary to finance the construction of new facilities. While cash is not
realized currently from such allowance, it increases the revenue requirement
over the service life of the plant through a higher rate base and higher
depreciation expense. The FPSC-approved composite rate used to calculate AFUDC
was 7.27 percent for 1994 and the second half of 1993, and 8.03 percent for the
first half of 1993 and all of 1992. AFUDC amounts for 1994, 1993, and 1992 were
$1.1 million, $966 thousand, and $60 thousand, respectively. The increase in
1994 and 1993 is primarily due to an increase in construction projects at Plant
Daniel.
Utility Plant
Utility plant is stated at original cost. Original cost includes: materials;
labor; minor items of property; appropriate administrative and general costs;
payroll-related costs such as taxes, pensions, and other benefits; and the
estimated cost of funds used during construction. The cost of maintenance,
repairs, and replacement of minor items of property is charged to maintenance
expense. The cost of replacements of property (exclusive of minor items of
property) is charged to utility plant.
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
<PAGE>
19
NOTES (continued)
Gulf Power Company 1994 Annual Report
Financial Instruments
In accordance with FASB Statement No. 107, Disclosure About Fair Values of
Financial Instruments, all financial instruments of the Company -- for which the
carrying amount does not approximate fair value -- are shown in the table below
as of December 31:
============================================================
1994
-----------------------
Carrying Fair
Amount Value
-----------------------
(in thousands)
Long-term debt $369,832 $355,019
Preferred stock subject to
mandatory redemption 1,000 1,030
============================================================
============================================================
1993
-----------------------
Carrying Fair
Amount Value
-----------------------
(in thousands)
Long-term debt $410,811 $431,251
Preferred stock subject to
mandatory redemption 2,000 2,040
============================================================
The fair values for long-term debt and preferred stock subject to mandatory
redemption were based on either closing market prices or closing prices of
comparable instruments.
Materials and Supplies
Generally, materials and supplies include the cost of transmission,
distribution, and generating plant materials. Materials are charged to inventory
when purchased and then expensed or capitalized to plant, as appropriate, when
installed.
Vacation Pay
The Company's employees earn their vacation in one year and take it in the
subsequent year. However, for ratemaking purposes, vacation pay is recognized as
an allowable expense only when paid. Consistent with this ratemaking treatment,
the Company accrues a current liability for earned vacation pay and records a
current asset representing the future recoverability of this cost. The amount
was $4.2 million and $4.0 million at December 31, 1994, and 1993, respectively.
In 1995, an estimated 81.3 percent of the 1994 deferred vacation cost will be
expensed and the balance will be charged to construction and other accounts.
Provision for Injuries and Damages
The Company is subject to claims and suits arising in the ordinary course of
business. As permitted by regulatory authorities, the Company provides for the
uninsured costs of injuries and damages by charges to income amounting to $1.2
million annually. The expense of settling claims is charged to the provision to
the extent available. The accumulated provision of $2.5 million and $2.2 million
at December 31, 1994, and 1993, respectively, is included in miscellaneous
current liabilities in the accompanying Balance Sheets.
Provision for Property Damage
Due to a significant increase in the cost of traditional insurance, effective in
1993, the Company became self-insured for the full cost of storm and other
damage to its transmission and distribution property. As permitted by regulatory
authorities, the Company provides for the estimated cost of uninsured property
damage by charges to income amounting to $1.2 million annually. At December 31,
1994, and 1993, the accumulated provision for property damage amounted to $11.5
million and $10.5 million, respectively. The expense of repairing such damage as
occurs from time to time is charged to the provision to the extent it is
available.
2. RETIREMENT BENEFITS
Pension Plan
The Company has a defined benefit, trusteed, non-contributory pension plan that
covers substantially all regular employees. Benefits are based on the greater of
amounts resulting from two different formulas: years of service and final
average pay or years of service and a flat-dollar benefit. The Company uses the
"entry age normal method with a frozen initial liability" actuarial method for
funding purposes, subject to limitations under federal income tax regulations.
Amounts funded to the pension trust fund are primarily invested in equity and
fixed-income securities. FASB Statement No. 87, Employers' Accounting for
Pensions, requires use of the "projected unit credit" actuarial method for
financial reporting purposes.
<PAGE>
20
NOTES (continued)
Gulf Power Company 1994 Annual Report
Postretirement Benefits
The Company also provides certain medical care and life insurance benefits for
retired employees. Substantially all employees may become eligible for these
benefits when they retire. A qualified trust for medical benefits is funded to
the extent deductible under federal income tax regulations. Amounts funded are
primarily invested in debt and equity securities.
Effective January 1, 1993, the Company adopted FASB Statement No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, on a
prospective basis. Statement No. 106 requires that medical care and life
insurance benefits for retired employees be accounted for on an accrual basis
using a specified actuarial method, "benefit/years-of-service." The costs of
such benefits recognized by the Company in 1994 and 1993 were $4.3 million and
$3.9 million, respectively.
Prior to 1993, the Company recognized these benefit costs on an accrual basis
using the "aggregate cost" actuarial method, which spreads the expected cost of
such benefits over the remaining periods of employees' service as a level
percentage of payroll costs. The cost of such benefits recognized by the Company
in 1992 was $3.1 million.
Status and Cost of Benefits
Shown in the following tables are actuarial results and assumptions for pension
and postretirement medical and life insurance benefits as computed under the
requirements of FASB Statement Nos. 87 and 106, respectively. The funded status
of the plans at December 31 was as follows:
=================================================================
Pension
-------------------------
1994 1993
-------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Vested benefits $ 73,552 $ 73,925
Non-vested benefits 3,016 3,217
- -----------------------------------------------------------------
Accumulated benefit obligation 76,568 77,142
Additional amounts related to
projected salary increases 29,451 25,648
- -----------------------------------------------------------------
Projected benefit obligation 106,019 102,790
Less:
Fair value of plan assets 151,337 159,192
Unrecognized net gain (36,599) (49,376)
Unrecognized prior service cost 2,802 3,152
Unrecognized transition asset (8,034) (8,765)
- -----------------------------------------------------------------
Prepaid asset recognized in
the Balance Sheets $ 3,487 $ 1,413
=================================================================
=================================================================
Postretirement Medical
-------------------------
1994 1993
-------------------------
(in thousands)
Actuarial present value of benefit obligation:
Retirees and dependents $ 7,768 $ 7,857
Employees eligible to retire 4,043 4,054
Other employees 14,598 14,927
- -----------------------------------------------------------------
Accumulated benefit obligation 26,409 26,838
Less:
Fair value of plan assets 5,655 5,638
Unrecognized net loss (gain) 615 2,653
Unrecognized transition
obligation 12,714 13,420
- -----------------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $ 7,425 $ 5,127
=================================================================
<PAGE>
21
NOTES (continued)
Gulf Power Company 1994 Annual Report
=================================================================
Postretirement Life
--------------------
1994 1993
--------------------
(in thousands)
Actuarial present value of benefit obligation:
Retirees and dependents $3,032 $2,929
Employees eligible to retire - -
Other employees 5,041 5,058
- -----------------------------------------------------------------
Accumulated benefit obligation 8,073 7,987
Less:
Fair value of plan assets 85 52
Unrecognized net loss (gain) (1,073) (641)
Unrecognized transition
obligation 2,806 2,954
- -----------------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $6,255 $5,622
=================================================================
The weighted average rates assumed in the actuarial calculations were:
=================================================================
1994 1993 1992
---------------------------
Discount 8.0% 7.5% 8.0%
Annual salary increase 5.5% 5.0% 6.0%
Long-term return on plan
assets 8.5% 8.5% 8.5%
=================================================================
An additional assumption used in measuring the accumulated postretirement
medical benefit obligation was a weighted average medical care cost trend rate
of 10.5 percent for 1994, decreasing to 6.0 percent through the year 2000 and
remaining at that level thereafter. An annual increase in the assumed medical
care cost trend rate of 1 percent would increase the accumulated medical benefit
obligation at December 31,1994, by $4.8 million and the aggregate of the service
and interest cost components of the net retiree medical cost by $660 thousand.
Components of the plans' net costs are shown below:
=================================================================
Pension
-----------------------------------
1994 1993 1992
-----------------------------------
(in thousands)
Benefits earned during
the year $ 3,775 $ 3,710 $ 3,550
Interest cost on projected
benefit obligation 7,484 7,319 6,939
Actual (return) loss on
plan assets 3,721 (20,672) (6,431)
Net amortization
and deferral (17,054) 8,853 (4,054)
- -----------------------------------------------------------------
Net pension cost
(income) $ (2,074) $ (790) $ 4
=================================================================
Of the above net pension amounts, pension expense/(income) of $(1.5) million
in 1994, $(601) thousand in 1993, and $3 thousand in 1992, were recorded in
operating expenses, and the remainder was recorded in construction and other
accounts.
=================================================================
Postretirement Medical
-----------------------
1994 1993
-----------------------
(in thousands)
Benefits earned during the year $1,092 $ 874
Interest cost on accumulated
benefit obligation 1,952 1,714
Amortization of transition
obligation 706 706
Actual (return) loss on plan assets 117 (726)
Net amortization and deferral (575) 309
- -----------------------------------------------------------------
Net postretirement cost $3,292 $2,877
=================================================================
=================================================================
Postretirement Life
-----------------------
1994 1993
-----------------------
(in thousands)
Benefits earned during the year $270 $ 292
Interest cost on accumulated
benefit obligation 583 625
Amortization of transition
obligation 148 148
Actual (return) loss on plan assets 12 (5)
Net amortization and deferral (16) 1
- -----------------------------------------------------------------
Net postretirement cost $997 $1,061
=================================================================
<PAGE>
22
NOTES (continued)
Gulf Power Company 1994 Annual Report
Of the above net postretirement medical and life insurance amounts, $3.1
million in 1994 and $3.0 million in 1993, were charged to operating expenses,
and the remainder was recorded in construction and other accounts.
Work Force Reduction Programs
The Company has not had a work force reduction program but has incurred its pro
rata share of affiliated companies' costs. The costs related to these programs
were $1.3 million, $109 thousand, and $138 thousand for the years 1994, 1993,
and 1992, respectively.
3. LITIGATION AND REGULATORY MATTERS
FERC Reviews Equity Returns
In May 1991, the FERC ordered that hearings be conducted concerning the
reasonableness of the Southern electric system's wholesale rate schedules and
contracts that have a return on common equity of 13.75 percent or greater. The
contracts that could be affected by the hearings include substantially all of
the transmission, unit power, long-term power and other similar contracts. Any
change in the rate of return on common equity that may require refunds as a
result of this proceeding would be substantially for the period beginning in
July 1991 and ending in October 1992.
In August 1992, a FERC administrative law judge issued an opinion that
changes in rate schedules and contracts were not necessary and that the FERC
staff failed to show how any changes were in the public interest. The FERC staff
has filed exceptions to the administrative law judge's opinion, and the matter
remains pending before the FERC.
In August 1994, the FERC instituted another proceeding based on substantially
the same issues as in the 1991 proceeding. The second period under review for
possible refunds began in October 1994 and is scheduled to continue until
January 1996.
If the rates of return on common equity recommended by the FERC staff were
applied to all of the schedules and contracts involved in both proceedings and
refunds were ordered, the amount of refunds could range up to approximately $5.4
million at December 31, 1994. Although the final outcome of this matter cannot
now be determined, in management's opinion, the final outcome will not result in
changes that would have a material adverse effect on the Company's financial
statements.
Environmental Cost Recovery
In April 1993, the Florida Legislature adopted legislation for an Environmental
Cost Recovery (ECR) clause, which allows a utility to petition the FPSC for
recovery of all prudent environmental compliance costs that are not being
recovered through base rates or any other rate-adjustment clause. Such
environmental costs include operation and maintenance expense, depreciation, and
a return on invested capital.
On January 12, 1994, the FPSC approved the Company's initial petition under
the ECR clause for recovery of environmental costs that were projected to be
incurred from July 1993 through September 1994. After this initial period,
recovery under the ECR clause is determined semi-annually and includes a true-up
of the prior period and a projection of the ensuing six month period. During
1994 and 1993, the Company recorded $7.2 million and $2.6 million, respectively,
of ECR revenues net of over/under recovery true-up amounts.
In 1994, the Company accrued a liability of $7.8 million for the estimated
costs of environmental remediation projects for known sites. These estimated
costs are expected to be expended during the period 1995 to 1999. These projects
have been approved by the FPSC for recovery through the ECR clause discussed
above. Therefore, the Company recorded $2.1 million in current assets and $5.7
million in deferred charges representing the future recoverability of these
costs.
4. CONSTRUCTION PROGRAM
The Company is engaged in a continuous construction program, the cost of which
is currently estimated to total $62 million in 1995, $76 million in 1996, and
$84 million in 1997. The construction program is subject to periodic review and
revision, and actual construction costs may vary from the above estimates
because of numerous factors. These factors include changes in business
conditions; revised load growth estimates; changes in environmental regulations;
increasing costs of labor, equipment and materials; and cost of capital. At
December 31, 1994, significant purchase commitments were outstanding in
connection with the construction program. The Company does not have any new
<PAGE>
23
NOTES (continued)
Gulf Power Company 1994 Annual Report
baseload generating plants under construction. However, significant construction
will continue related to transmission and distribution facilities and the
upgrading and extension of the useful lives of generating plants.
See Management's Discussion and Analysis under "Environmental Matters" for
information on the impact of the Clean Air Act Amendments of 1990 and other
environmental matters.
5. FINANCING AND COMMITMENTS
General
Current projections indicate that funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
primarily from internal sources. Requirements not met from internal sources will
be financed from the sale of additional first mortgage bonds and preferred
stock; bank notes; and capital contributions from The Southern Company. In
addition, the Company may issue additional long-term debt and preferred stock
primarily for the purposes of debt maturities and redemptions of higher-cost
securities. If the attractiveness of current short-term interest rates
continues, the Company may maintain a higher level of short-term indebtedness
than has historically been true.
Bank Credit Arrangements
At December 31, 1994, the Company had $25 million in revolving credit lines
subject to renewal June 1, 1997, and $22 million of lines of credit with banks
subject to renewal June 1 of each year. In connection with these credit lines,
the Company has agreed to pay certain fees and/or maintain compensating balances
with the banks. The compensating balances, which represent substantially all the
cash of the Company except for daily working funds and like items, are not
legally restricted from withdrawal. The Company had $19 million of these lines
of credit committed at December 31, 1994. In addition, the Company has bid-loan
facilities with fourteen major money center banks that total $275 million, of
which $34.5 million was committed at December 31, 1994.
Assets Subject to Lien
The Company's mortgage, which secures the first mortgage bonds issued by the
Company, constitutes a direct first lien on substantially all of the Company's
fixed property and franchises.
Fuel Commitments
To supply a portion of the fuel requirements of its generating plants, the
Company has entered into long-term commitments for the procurement of fuel. In
most cases, these contracts contain provisions for price escalations, minimum
purchase levels, and other financial commitments. Total estimated long-term
obligations were approximately $1.1 billion at December 31, 1994. Additional
commitments will be required in the future to supply the Company's fuel needs.
To take advantage of lower-cost coal supplies, agreements were reached in
1986 to terminate two long-term contracts for the supply of coal to Plant
Daniel, which is jointly owned by the Company and Mississippi Power, an
operating affiliate. The Company's portion of this payment was $60 million. This
amount is being amortized to expense on a per ton basis over a nine-year period
ending in 1995. The remaining unamortized amount was $10.1 million at December
31, 1994.
In 1988, the Company made an advance payment of $60 million to another coal
supplier under an arrangement to lower the cost of future coal purchased under
an existing contract. This amount is being amortized to expense on a per ton
basis over a ten-year period. The remaining unamortized amount was $30.5 million
at December 31, 1994.
Also, in 1993, the Company made a payment of $16.4 million to a coal supplier
under an arrangement to suspend the purchase of coal under an existing contract
for one year. This amount was amortized to expense on a per ton basis during
1993 and 1994, with a remainder of $118 thousand to be amortized to expense in
the first quarter of 1995.
The amortization expense of these contract buyouts and renegotiations is
being recovered through the fuel cost recovery clause discussed under "Revenues
and Regulatory Cost Recovery Clauses" in Note 1.
<PAGE>
24
NOTES (continued)
Gulf Power Company 1994 Annual Report
Lease Agreements
In 1989, the Company and Mississippi Power Company jointly entered into a
twenty-two year operating lease agreement for the use of 495 aluminum railcars.
In 1995, a second lease agreement for the use of 250 additional aluminum
railcars will begin and continue for twenty-two years. Both of these leases are
for the transportation of coal to Plant Daniel. The Company, as a joint owner of
Plant Daniel, is responsible for one half of the lease costs. The lease costs
are charged to fuel inventory and are allocated to fuel expense as the fuel is
used. The Company's share of the lease costs charged to fuel inventory were $1.2
million in 1994, 1993, and 1992. For the year 1995, the Company's annual lease
payments associated with both leases will be approximately $2.6 million. The
Company's annual lease payments for 1996 through 1999 will be approximately $1.7
million and after 1999, lease payments total approximately $26.0 million. The
Company has the option after three years from the date of the original contract
on each lease to purchase the respective number of railcars at the greater of
the termination value or the fair market value. Additionally, at the end of each
lease term, the Company has the option to renew the lease.
6. JOINT OWNERSHIP AGREEMENTS
The Company and Mississippi Power jointly own Plant Daniel, a steam-electric
generating plant, located in Jackson County, Mississippi. In accordance with an
operating agreement, Mississippi Power acts as the Company's agent with respect
to the construction, operation, and maintenance of the plant.
The Company and Georgia Power jointly own Plant Scherer Unit No. 3, a
steam-electric generating plant, located near Forsyth, Georgia. In accordance
with an operating agreement, Georgia Power acts as the Company's agent with
respect to the construction, operation, and maintenance of the unit.
The Company's pro rata share of expenses related to both plants is included
in the corresponding operating expense accounts in the Statements of Income.
At December 31, 1994, the Company's percentage ownership and its amount of
investment in these jointly owned facilities were as follows:
================================================================
Plant Scherer Plant
Unit No. 3 Daniel
(coal-fired) (coal-fired)
----------------------------
(in thousands)
Plant-In Service $185,339(1) $220,125
Accumulated Depreciation $45,814 $93,110
Construction Work in Progress $941 $1,163
Nameplate Capacity (2)
(In megawatts) 205 500
Ownership 25% 50%
================================================================
(1) Includes net plant acquisition adjustment.
(2) Total megawatt nameplate capacity:
Plant Scherer Unit No. 3: 818
Plant Daniel: 1,000
7. LONG-TERM POWER SALES AGREEMENTS
General
The Company and the other operating affiliates of The Southern Company entered
into long-term contractual agreements for the sale of capacity and energy to
certain non-affiliated utilities located outside the system's service area. The
agreements for non-firm capacity expired in 1994. Other agreements, expiring at
various dates discussed below, are firm and pertain to capacity related to
specific generating units. Because the energy is generally sold at cost under
these agreements, revenues from capacity sales primarily affect profitability.
The Company's capacity revenues have been as follows:
================================================================
Other
Unit Long-
Year Power Term Total
- ---- -----------------------------------------
(in thousands)
1994 $29,653 $1,273 $30,926
1993 31,162 2,643 33,805
1992 32,679 1,501 34,180
================================================================
<PAGE>
25
NOTES (continued)
Gulf Power Company 1994 Annual Report
In 1994, long-term non-firm power of 200 megawatts was sold to Florida Power
Corporation (FPC) under a contract that expired at year-end. Capacity and energy
sales under these long-term non-firm power sales agreements were made from
available power pool capacity, and the revenues from the sales were shared by
the operating affiliates.
Unit power from specific generating plants is currently being sold to FPC,
Florida Power & Light Company (FP&L), Jacksonville Electric Authority (JEA), and
the City of Tallahassee, Florida. Under these agreements, 210 megawatts of net
dependable capacity were sold by the Company during 1994, and sales will remain
at that level until the expiration of the contracts in 2010, unless reduced by
FPC, FP&L and JEA after 1999.
Capacity and energy sales to FP&L, the Company's largest single customer,
provided revenues of $29.3 million in 1994, $39.5 million in 1993, and $46.2
million in 1992, or 5.1 percent, 6.8 percent, and 8.1 percent of operating
revenues, respectively.
8. INCOME TAXES
Effective January 1, 1993, the Company adopted FASB Statement No. 109,
Accounting for Income Taxes. The adoption resulted in the recording of
additional deferred income taxes and related regulatory assets and liabilities.
At December 31, 1994, the tax-related regulatory assets to be recovered from
customers were $30.4 million. These assets are attributable to tax benefits
flowed through to customers in prior years and to taxes applicable to
capitalized AFUDC. At December 31, 1994, the tax-related regulatory liabilities
to be refunded to customers were $72.0 million. These liabilities are
attributable to deferred taxes previously recognized at rates higher than
current enacted tax law and to unamortized investment tax credits.
Details of the federal and state income tax provisions are as follows:
=================================================================
1994 1993 1992
-----------------------------
(in thousands)
Total provision for income taxes:
Federal--
Currently payable $34,941 $24,354 $24,287
Deferred--current year 18,556 26,396 18,173
--reversal of
prior years (24,787) (22,102) (15,506)
- -----------------------------------------------------------------
28,710 28,648 26,954
- -----------------------------------------------------------------
State--
Currently payable 5,907 3,950 4,282
Deferred--current year 2,549 3,838 2,662
--reversal of
prior years (3,304) (2,785) (2,007)
- -----------------------------------------------------------------
5,152 5,003 4,937
- -----------------------------------------------------------------
Total 33,862 33,651 31,891
Less income taxes charged
(credited) to other income (95) 921 (187)
- -----------------------------------------------------------------
Federal and state income
taxes charged
to operations $33,957 $32,730 $32,078
=================================================================
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities, are as follows:
=====================================================================
1994 1993
-----------------------
(in thousands)
Deferred tax liabilities:
Accelerated depreciation $146,686 $146,657
Property basis differences 18,468 15,140
Coal contract buyout 6,896 15,427
Other 11,846 6,724
- ---------------------------------------------------------------------
Total 183,896 183,948
- ---------------------------------------------------------------------
Federal effect of state deferred taxes 9,732 10,136
Postretirement benefits 4,383 3,406
Property insurance 5,200 4,730
Other 7,566 6,500
- ---------------------------------------------------------------------
Total 26,881 24,772
- ---------------------------------------------------------------------
Net deferred tax liabilities 157,015 159,176
Portion included in current liabilities, net 5,334 7,433
- ---------------------------------------------------------------------
Accumulated deferred income
taxes in the Balance Sheets $151,681 $151,743
=====================================================================
<PAGE>
26
NOTES (continued)
Gulf Power Company 1994 Annual Report
Deferred investment tax credits are amortized over the life of the related
property with such amortization normally applied as a credit to reduce
depreciation in the Statements of Income. Credits amortized in this manner
amounted to $2.3 million in 1994, 1993 and 1992. At December 31, 1994, all
investment tax credits available to reduce federal income taxes payable had been
utilized.
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
=============================================================
1994 1993 1992
--------------------------
Federal statutory rate 35% 35% 34%
State income tax,
net of federal deduction 4 3 4
Non-deductible book
depreciation 1 1 1
Difference in prior years'
deferred and current tax rate (2) (2) (2)
Other (2) (1) (2)
- -------------------------------------------------------------
Effective income tax rate 36% 36% 35%
=============================================================
The Company and the other subsidiaries of The Southern Company file a
consolidated federal tax return. Under a joint consolidated income tax
agreement, each company's current and deferred tax expense is computed on a
stand-alone basis, and consolidated tax savings are allocated to each company
based on its ratio of taxable income to total consolidated taxable income.
9. POLLUTION CONTROL OBLIGATIONS AND OTHER LONG-TERM DEBT
Details of long-term debt are as follows:
==============================================================
December 31,
1994 1993
----------------------
(in thousands)
Obligations incurred in
connection with the sale by
public authorities of
tax-exempt pollution control
revenue bonds:
Collateralized
6% due 2006* $ 12,200 $ 12,300
8.25% due 2017 32,000 32,000
7.125% due 2021 21,200 21,200
6.75% due 2022 8,930 8,930
5.70% due 2023 7,875 7,875
5.80% due 2023 32,550 32,550
6.20% due 2023 13,000 13,000
6.30% due 2024 22,000 -
Variable Rate
Remarketed daily 20,000 -
Non-collateralized
10.50% due 2014 - 42,000
- --------------------------------------------------------------
$169,755 $169,855
- --------------------------------------------------------------
Notes payable:
5.39% due 1995 4,500 -
5.72% due 1995 4,500 -
4.69% due 1996 25,000 25,000
6.44% due 1994-1998 16,388 -
8.25% due 1995 - 17,520
- --------------------------------------------------------------
50,388 42,520
- --------------------------------------------------------------
Total $220,143 $212,375
==============================================================
* Sinking fund requirement applicable to the 6 percent pollution control
bonds is $125 thousand for 1995 with increasing increments thereafter through
2005, with the remaining balance due in 2006.
Pollution control obligations represent installment purchases of pollution
control facilities financed by funds derived from sales by public authorities of
revenue bonds. With respect to the collateralized pollution control revenue
bonds, the Company has authenticated and delivered to trustees a like principal
amount of first mortgage bonds as security for obligations under collateralized
installment agreements. The principal and interest on the first mortgage bonds
will be payable only in the event of default under the agreements.
<PAGE>
27
NOTES (continued)
Gulf Power Company 1994 Annual Report
The 5.39 percent and 5.72 percent notes payable are the Company's portion of
notes payable issued in connection with the termination of Plant Daniel coal
contracts (see Note 5 under "Fuel Commitments" for further information). These
notes refinanced the remaining balance of the 8.25 percent note payable. The
proceeds from the 6.44 percent note were used to refinance the remaining balance
of the 9.2 percent first mortgage bond, which was redeemed in June, 1994. The
estimated annual maturities of the notes payable through 1998 are as follows:
$13.3 million in 1995, $29.6 million in 1996, $4.9 million in 1997, and $2.6
million in 1998.
10. LONG-TERM DEBT DUE WITHIN ONE YEAR
A summary of the improvement fund requirement and scheduled maturities and
redemptions of long-term debt due within one year is as follows:
==============================================================
December 31
1994 1993
--------------------
(in thousands)
Bond improvement fund requirement $ 1,750 $ 2,370
Less: Portion to be satisfied by cash
or certifying property
additions 1,750 -
- --------------------------------------------------------------
Cash sinking fund requirement - 2,370
Maturities of first mortgage bonds - 3,676
Redemptions of first mortgage bonds - 27,000
Current portion of notes payable 13,314 8,406
(Note 9)
Pollution control bond maturity 125 100
(Note 9)
- --------------------------------------------------------------
Total $13,439 $41,552
==============================================================
The first mortgage bond improvement (sinking) fund requirement amounts to 1
percent of each outstanding series of bonds authenticated under the indenture
prior to January 1 of each year, other than those issued to collateralize
pollution control obligations. The requirement may be satisfied by depositing
cash, reacquiring bonds, or by pledging additional property equal to 1 and 2/3
times the requirement.
11. COMMON STOCK DIVIDEND
RESTRICTIONS
The Company's first mortgage bond indenture contains various common stock
dividend restrictions which remain in effect as long as the bonds are
outstanding. At December 31, 1994, $101 million of retained earnings was
restricted against the payment of cash dividends on common stock under the terms
of the mortgage indenture.
The Company's charter limits cash dividends on common stock to 50 percent of
net income available for such stock during a prior period of 12 months if the
capitalization ratio is below 20 percent, and to 75 percent of such net income
if such ratio is 20 percent or more but less than 25 percent. The capitalization
ratio is defined as the ratio of common stock equity to total capitalization,
including retained earnings, adjusted to reflect the payment of the proposed
dividend. At December 31, 1994, the ratio was 47.2 percent.
12. QUARTERLY FINANCIAL DATA (Unaudited)
Summarized quarterly financial data for 1994 and 1993 are as follows:
=================================================================
Net Income
After Dividends
Operating Operating on Preferred
Quarter Ended Revenues Income Stock
- -----------------------------------------------------------------
(in thousands)
March 31, 1994 $138,088 $19,154 $10,117
June 30, 1994 146,769 19,957 8,886
Sept. 30, 1994 162,143 31,123 21,831
Dec. 31, 1994 131,813 21,979 14,395
March 31, 1993 $127,036 $17,646 $10,426
June 30, 1993 138,863 19,562 7,312
Sept. 30, 1993 175,964 32,783 22,366
Dec. 31, 1993 141,279 22,596 14,207
=================================================================
The Company's business is influenced by seasonal weather conditions and the
timing of rate changes, among other factors.
<PAGE>
28
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1994 Annual Report
====================================================================================================
1994 1993 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $578,813 $583,142 $570,902
Net Income after Dividends
on Preferred Stock (in thousands) $55,229 $54,311 $54,090
Cash Dividends on Common Stock (in thousands) $44,000 $41,800 $39,900
Return on Average Common Equity (percent) 13.15 13.29 13.62
Total Assets (in thousands) $1,315,542 $1,307,809 $1,062,699
Gross Property Additions (in thousands) $78,869 $78,562 $64,671
- ----------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $425,472 $414,196 $403,190
Preferred stock 89,602 89,602 74,662
Preferred stock subject to mandatory redemption - 1,000 2,000
Long-term debt 356,393 369,259 382,047
- ----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $871,467 $874,057 $861,899
- ----------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 48.8 47.4 46.8
Preferred stock 10.3 10.4 8.9
Long-term debt 40.9 42.2 44.3
- ----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
====================================================================================================
First Mortgage Bonds (in thousands):
Issued - 75,000 25,000
Retired 48,856 88,809 117,693
Preferred Stock (in thousands):
Issued - 35,000 29,500
Retired 1,000 21,060 15,500
- ----------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A2 A2 A2
Standard and Poor's A A A
Duff & Phelps A+ A+ A
Preferred Stock -
Moody's a2 a2 a2
Standard and Poor's A- A- A-
Duff & Phelps A A A-
- ----------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 280,859 274,194 267,591
Commercial 40,398 39,253 37,105
Industrial 283 274 270
Other 106 86 74
- ----------------------------------------------------------------------------------------------------
Total 321,646 313,807 305,040
====================================================================================================
Employees (year-end) 1,540 1,565 1,613
</TABLE>
<PAGE>
29A
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1994 Annual Report
====================================================================================================
1991 1990 1989
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $565,207 $567,825 $527,821
Net Income after Dividends
on Preferred Stock (in thousands) $57,796 $38,714 $37,361
Cash Dividends on Common Stock (in thousands) $38,000 $37,000 $37,200
Return on Average Common Equity (percent) 15.17 10.51 10.32
Total Assets (in thousands) $1,095,736 $1,084,579 $1,093,430
Gross Property Additions (in thousands) $64,323 $62,462 $70,726
- ----------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $390,981 $371,185 $365,471
Preferred stock 55,162 55,162 55,162
Preferred stock subject to mandatory redemption 7,500 9,250 11,000
Long-term debt 434,648 475,284 484,608
- ----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $888,291 $910,881 $916,241
- ----------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 44.0 40.8 39.9
Preferred stock 7.1 7.1 7.2
Long-term debt 48.9 52.1 52.9
- ----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
====================================================================================================
First Mortgage Bonds (in thousands):
Issued 50,000 - -
Retired 32,807 6,455 9,344
Preferred Stock (in thousands):
Issued - - -
Retired 2,500 1,750 1,250
- ----------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A2 A2 A1
Standard and Poor's A A A
Duff & Phelps A A AA-
Preferred Stock -
Moody's a2 a2 a1
Standard and Poor's A- A- A-
Duff & Phelps A- A- A+
- ----------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 261,210 256,111 251,341
Commercial 34,685 34,019 33,678
Industrial 264 252 240
Other 72 67 67
- ----------------------------------------------------------------------------------------------------
Total 296,231 290,449 285,326
====================================================================================================
Employees (year-end) 1,598 1,615 1,614
</TABLE>
<PAGE>
29B
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1994 Annual Report
====================================================================================================
1988 1987 1986
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $550,827 $587,860 $542,919
Net Income after Dividends
on Preferred Stock (in thousands) $45,698 $42,217 $46,421
Cash Dividends on Common Stock (in thousands) $35,400 $34,200 $33,100
Return on Average Common Equity (percent) 13.41 13.23 15.06
Total Assets (in thousands) $1,097,225 $1,051,182 $1,028,864
Gross Property Additions (in thousands) $67,042 $97,511 $90,160
- ----------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $358,310 $323,012 $314,995
Preferred stock 55,162 55,162 55,162
Preferred stock subject to mandatory redemption 12,750 14,000 16,500
Long-term debt 497,069 474,640 482,869
- ----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $923,291 $866,814 $869,526
- ----------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 38.8 37.2 36.2
Preferred stock 7.4 8.0 8.3
Long-term debt 53.8 54.8 55.5
- ----------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
====================================================================================================
First Mortgage Bonds (in thousands):
Issued 35,000 - 50,000
Retired 9,369 - 46,640
Preferred Stock (in thousands):
Issued - - -
Retired 1,750 2,500 750
- ----------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A A A+
Duff & Phelps 4 4 4
Preferred Stock -
Moody's a1 a1 a1
Standard and Poor's A- A- A
Duff & Phelps 5 5 5
- ----------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 246,450 241,138 235,329
Commercial 33,030 32,139 31,142
Industrial 206 206 197
Other 61 61 62
- ----------------------------------------------------------------------------------------------------
Total 279,747 273,544 266,730
====================================================================================================
Employees (year-end) 1,601 1,603 1,544
</TABLE>
<PAGE>
29C
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1994 Annual Report
======================================================================================
1985 1984
- --------------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues (in thousands) $562,068 $505,812
Net Income after Dividends
on Preferred Stock (in thousands) $45,484 $40,336
Cash Dividends on Common Stock (in thousands) $30,800 $27,200
Return on Average Common Equity (percent) 15.61 15.11
Total Assets (in thousands) $921,635 $892,924
Gross Property Additions (in thousands) $92,541 $156,443
- --------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $301,674 $280,990
Preferred stock 55,162 55,162
Preferred stock subject to mandatory redemption 18,250 19,000
Long-term debt 410,917 394,859
- --------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $786,003 $750,011
- --------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 38.4 37.5
Preferred stock 9.3 9.9
Long-term debt 52.3 52.6
- --------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0
======================================================================================
First Mortgage Bonds (in thousands):
Issued - -
Retired 2,860 10,415
Preferred Stock (in thousands):
Issued - -
Retired 750 1,500
- --------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1
Standard and Poor's A+ A+
Duff & Phelps 4 4
Preferred Stock -
Moody's a1 a1
Standard and Poor's A A
Duff & Phelps 5 5
- --------------------------------------------------------------------------------------
Customers (year-end):
Residential 227,845 217,138
Commercial 29,603 27,939
Industrial 183 177
Other 62 63
- --------------------------------------------------------------------------------------
Total 257,693 245,317
======================================================================================
Employees (year-end) 1,509 1,460
</TABLE>
<PAGE>
30
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1994 Annual Report
====================================================================================================
1994 1993 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $252,598 $244,967 $235,296
Commercial 146,394 137,308 133,071
Industrial 82,169 87,526 91,320
Other 1,955 1,882 1,784
- ----------------------------------------------------------------------------------------------------
Total retail 483,116 471,683 461,471
Sales for resale - non-affiliates 66,111 72,209 70,078
Sales for resale - affiliates 17,353 23,166 24,075
- ----------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 566,580 567,058 555,624
Other revenues 12,233 16,084 15,278
- ----------------------------------------------------------------------------------------------------
Total $578,813 $583,142 $570,902
====================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 3,751,932 3,712,980 3,596,515
Commercial 2,548,846 2,433,382 2,369,236
Industrial 1,847,114 2,029,936 2,179,435
Other 17,354 16,944 16,649
- ----------------------------------------------------------------------------------------------------
Total retail 8,165,246 8,193,242 8,161,835
Sales for resale - non-affiliates 1,418,977 1,460,105 1,430,908
Sales for resale - affiliates 874,050 1,029,787 1,208,771
- ----------------------------------------------------------------------------------------------------
Total 10,458,273 10,683,134 10,801,514
====================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.73 6.60 6.54
Commercial 5.74 5.64 5.62
Industrial 4.45 4.31 4.19
Total retail 5.92 5.76 5.65
Sales for resale 3.64 3.83 3.57
Total sales 5.42 5.31 5.14
Average Annual Kilowatt-Hour Use Per Residential Customer 13,486 13,671 13,553
Average Annual Revenue Per Residential Customer $907.92 $901.96 $886.66
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174
Maximum Peak-Hour Demand (megawatts):
Winter 1,801 1,571 1,533
Summer 1,795 1,898 1,828
Annual Load Factor (percent) 56.7 54.5 55.0
Plant Availability - Fossil-Steam (percent) 92.2 88.9 91.2
- ----------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 87.2 84.5 87.7
Oil and gas 0.2 0.5 0.1
Purchased power -
From non-affiliates 2.8 1.5 0.8
From affiliates 9.8 13.5 11.4
- ----------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
====================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,614 10,390 10,347
Cost of fuel per million BTU (cents) 189.55 197.37 200.30
Average cost of fuel per net kilowatt-hour generated (cents) 2.01 2.05 2.07
====================================================================================================
</TABLE>
<PAGE>
31A
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1994 Annual Report
====================================================================================================
1991 1990 1989
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $231,220 $217,843 $203,781
Commercial 130,691 124,066 118,897
Industrial 92,300 91,041 84,671
Other 1,860 1,805 1,586
- ----------------------------------------------------------------------------------------------------
Total retail 456,071 434,755 408,935
Sales for resale - non-affiliates 69,636 73,855 67,554
Sales for resale - affiliates 29,343 38,563 39,244
- ----------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 555,050 547,173 515,733
Other revenues 10,157 20,652 12,088
- ----------------------------------------------------------------------------------------------------
Total $565,207 $567,825 $527,821
====================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 3,455,100 3,360,838 3,293,750
Commercial 2,272,690 2,217,568 2,169,497
Industrial 2,117,408 2,177,872 2,094,670
Other 17,118 18,866 17,209
- ----------------------------------------------------------------------------------------------------
Total retail 7,862,316 7,775,144 7,575,126
Sales for resale - non-affiliates 1,550,018 1,775,703 1,640,355
Sales for resale - affiliates 1,236,223 1,435,558 1,461,036
- ----------------------------------------------------------------------------------------------------
Total 10,648,557 10,986,405 10,676,517
====================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.69 6.48 6.19
Commercial 5.75 5.59 5.48
Industrial 4.36 4.18 4.04
Total retail 5.80 5.59 5.40
Sales for resale 3.55 3.50 3.44
Total sales 5.21 4.98 4.83
Average Annual Kilowatt-Hour Use Per Residential Customer 13,320 13,173 13,173
Average Annual Revenue Per Residential Customer $891.38 $853.86 $815.00
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174
Maximum Peak-Hour Demand (megawatts):
Winter 1,418 1,310 1,814
Summer 1,740 1,778 1,691
Annual Load Factor (percent) 57.0 55.2 52.6
Plant Availability - Fossil-Steam (percent) 92.2 89.2 89.1
- ----------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 82.0 69.8 78.3
Oil and gas 0.1 0.5 0.2
Purchased power -
From non-affiliates 0.5 0.6 0.4
From affiliates 17.4 29.1 21.1
- ----------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
====================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,636 10,765 10,621
Cost of fuel per million BTU (cents) 203.60 206.06 193.70
Average cost of fuel per net kilowatt-hour generated (cents) 2.17 2.22 2.06
====================================================================================================
</TABLE>
<PAGE>
31B
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1994 Annual Report
====================================================================================================
1988 1987 1986
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $184,036 $199,701 $200,725
Commercial 107,615 116,057 116,253
Industrial 72,634 80,295 79,873
Other 1,402 1,357 1,343
- ----------------------------------------------------------------------------------------------------
Total retail 365,687 397,410 398,194
Sales for resale - non-affiliates 117,466 134,456 106,892
Sales for resale - affiliates 48,277 55,955 27,113
- ----------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 531,430 587,821 532,199
Other revenues 19,397 39 10,720
- ----------------------------------------------------------------------------------------------------
Total $550,827 $587,860 $542,919
====================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 3,154,541 3,055,041 2,963,502
Commercial 2,088,598 1,986,332 1,913,139
Industrial 1,968,091 1,839,931 1,745,074
Other 16,257 15,241 14,903
- ----------------------------------------------------------------------------------------------------
Total retail 7,227,487 6,896,545 6,636,618
Sales for resale - non-affiliates 1,911,759 2,138,390 1,609,146
Sales for resale - affiliates 2,326,238 2,689,487 1,078,500
- ----------------------------------------------------------------------------------------------------
Total 11,465,484 11,724,422 9,324,264
====================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 5.83 6.54 6.77
Commercial 5.15 5.84 6.08
Industrial 3.69 4.36 4.58
Total retail 5.06 5.76 6.00
Sales for resale 3.91 3.94 4.99
Total sales 4.64 5.01 5.71
Average Annual Kilowatt-Hour Use Per Residential Customer 12,883 12,763 12,729
Average Annual Revenue Per Residential Customer $751.60 $834.31 $862.16
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 1,969
Maximum Peak-Hour Demand (megawatts):
Winter 1,395 1,354 1,406
Summer 1,613 1,617 1,678
Annual Load Factor (percent) 56.5 54.4 50.5
Plant Availability - Fossil-Steam (percent) 88.2 92.8 90.5
- ----------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 93.2 93.5 85.8
Oil and gas 0.4 0.4 0.5
Purchased power -
From non-affiliates 0.4 0.4 1.9
From affiliates 6.0 5.7 11.8
- ----------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
====================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,461 10,512 10,639
Cost of fuel per million BTU (cents) 178.00 197.53 239.26
Average cost of fuel per net kilowatt-hour generated (cents) 1.86 2.08 2.55
====================================================================================================
</TABLE>
<PAGE>
31C
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1994 Annual Report
======================================================================================
1985 1984
- --------------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues (in thousands):
Residential $186,415 $174,302
Commercial 109,631 98,408
Industrial 81,621 83,538
Other 1,346 1,334
- --------------------------------------------------------------------------------------
Total retail 379,013 357,582
Sales for resale - non-affiliates 126,789 106,802
Sales for resale - affiliates 43,844 35,712
- --------------------------------------------------------------------------------------
Total revenues from sales of electricity 549,646 500,096
Other revenues 12,422 5,716
- --------------------------------------------------------------------------------------
Total $562,068 $505,812
======================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 2,736,432 2,560,648
Commercial 1,777,418 1,559,344
Industrial 1,770,587 1,771,100
Other 14,702 14,555
- --------------------------------------------------------------------------------------
Total retail 6,299,139 5,905,647
Sales for resale - non-affiliates 2,388,591 2,183,631
Sales for resale - affiliates 1,562,452 1,308,410
- --------------------------------------------------------------------------------------
Total 10,250,182 9,397,688
======================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.81 6.81
Commercial 6.17 6.31
Industrial 4.61 4.72
Total retail 6.02 6.05
Sales for resale 4.32 4.08
Total sales 5.36 5.32
Average Annual Kilowatt-Hour Use Per Residential Customer 12,221 12,057
Average Annual Revenue Per Residential Customer $832.55 $820.71
Plant Nameplate Capacity Ratings (year-end) (megawatts) 1,969 1,969
Maximum Peak-Hour Demand (megawatts):
Winter 1,517 1,209
Summer 1,448 1,381
Annual Load Factor (percent) 53.4 54.9
Plant Availability - Fossil-Steam (percent) 84.8 87.7
- --------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 79.7 83.9
Oil and gas 0.2 0.2
Purchased power -
From non-affiliates 0.4 (1.4)
From affiliates 19.7 17.3
- --------------------------------------------------------------------------------------
Total 100.0 100.0
======================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,609 10,639
Cost of fuel per million BTU (cents) 254.53 240.40
Average cost of fuel per net kilowatt-hour generated (cents) 2.70 2.60
=======================================================================================
</TABLE>
