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 21, 1996
---------------------------
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, 1995.
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
/s/ Wayne Boston
By Wayne Boston
Assistant Secretary
Date: March 1, 1996
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated February 21, 1996 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
February 28, 1996
<PAGE>
<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> 044545
<NAME> GULF POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,063,309
<OTHER-PROPERTY-AND-INVEST> 740
<TOTAL-CURRENT-ASSETS> 177,684
<TOTAL-DEFERRED-CHARGES> 100,126
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,341,859
<COMMON> 38,060
<CAPITAL-SURPLUS-PAID-IN> 218,519
<RETAINED-EARNINGS> 179,663
<TOTAL-COMMON-STOCKHOLDERS-EQ> 436,242
0
89,602
<LONG-TERM-DEBT-NET> 317,850
<SHORT-TERM-NOTES> 80,500
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<GROSS-OPERATING-REVENUE> 619,077
<INCOME-TAX-EXPENSE> 34,065
<OTHER-OPERATING-EXPENSES> 493,850
<TOTAL-OPERATING-EXPENSES> 527,915
<OPERATING-INCOME-LOSS> 91,162
<OTHER-INCOME-NET> 1,531
<INCOME-BEFORE-INTEREST-EXPEN> 92,693
<TOTAL-INTEREST-EXPENSE> 29,726
<NET-INCOME> 62,967
5,813
<EARNINGS-AVAILABLE-FOR-COMM> 57,154
<COMMON-STOCK-DIVIDENDS> 46,400
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<PAGE>
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<PAGE>
1
EXHIBIT 99
MANAGEMENT'S REPORT
Gulf Power Company 1995 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 consolidated 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
February 21, 1996
<PAGE>
2
REPORT OF INDEPENDENT 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, 1995 and 1994, 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, 1995. 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 11-28) referred to above
present fairly, in all material respects, the financial position of Gulf Power
Company as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the periods stated, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 21, 1996
<PAGE>
3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Gulf Power Company 1995 Annual Report
RESULTS OF OPERATIONS
Earnings
Gulf Power Company's 1995 net income after dividends on preferred stock was
$57.2 million, an increase of $2 million over the prior year. This improvement
is primarily attributable to higher retail revenues due to exceptionally hot
summer weather and lower interest charges on long-term debt. This improvement
was partially offset by higher maintenance expenses and reduced capacity
revenues from non-affiliated utilities under long-term contracts. Costs related
to a work force reduction program implemented in the fourth quarter of 1995
decreased earnings by $4.3 million. These costs are expected to be recovered
through future savings over approximately two years.
In 1994, earnings were $55.2 million, representing an increase of $0.9
million compared to the prior year. Earnings in 1994 were significantly affected
by lower financing costs, an increase in customers, and milder than normal
temperatures. Also, earnings decreased approximately $3.0 million, reflecting
the first full year of lower industrial sales due to the Company's largest
industrial customer, Monsanto, installing its own cogeneration facility in
August, 1993.
The return on average common equity for 1995 was 13.27 percent, a slight
increase from the 13.15 percent return earned in 1994.
Revenues
Operating revenues increased in 1995 and decreased in 1994 as a result of the
following factors:
Increase (Decrease)
From Prior Year
-------------------------------------
1995 1994 1993
-------------------------------------
(in thousands)
Retail --
Change in base rates $ - $ - $ 1,571
Sales growth 3,647 7,126 7,671
Weather 9,749 (4,631) 4,049
Regulatory cost
recovery and other 22,502 8,938 (3,079)
- -----------------------------------------------------------------
Total retail 35,898 11,433 10,212
- -----------------------------------------------------------------
Sales for resale--
Non-affiliates (5,698) (6,098) 2,131
Affiliates 1,266 (5,813) (909)
- -----------------------------------------------------------------
Total sales for resale (4,432) (11,911) 1,222
Other operating
revenues 8,798 (3,851) 806
- -----------------------------------------------------------------
Total operating
revenues $40,264 $(4,329) $12,240
=================================================================
Percent change 7.0% (0.7)% 2.1%
- -----------------------------------------------------------------
Retail revenues of $519 million in 1995 increased $35.9 million or 7.4
percent from last year, compared with an increase of 2.4 percent in 1994 and 2.2
percent in 1993. Residential and commercial revenues surged upward as a result
of hotter-than-normal summer weather in 1995, compared with the extremely mild
summer of 1994. The Company set an all-time peak demand for energy in 1995.
The increase in regulatory cost recovery and other retail revenue is
primarily attributable to the recovery of increased fuel costs. Regulatory cost
recovery and other includes recovery provisions for fuel expense and the energy
component of purchased power costs; energy conservation costs; purchased power
capacity 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.
<PAGE>
4
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1995 Annual Report
Sales for resale were $79 million in 1995, decreasing $4.4 million or 5.3
percent from 1994. Revenues from sales to utilities outside the service area
under long-term contracts consist of capacity and energy components. Capacity
revenues reflect the recovery of fixed costs and a return on investment under
the contracts. Energy is generally sold at variable cost. The capacity and
energy components under these long-term contracts were as follows:
1995 1994 1993
----------------------------------------
(in thousands)
Capacity $25,870 $30,926 $33,805
Energy 18,598 18,456 21,202
============================================================
Total $44,468 $49,382 $55,007
============================================================
Capacity revenues decreased in 1995 and 1994, reflecting the scheduled
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 increase in other operating revenues for 1995 is primarily due to
increased amounts collected to recover newly-imposed county franchise fees.
These collections are also included in taxes other than income taxes and have no
impact on earnings. Other changes for 1995 and the change in 1994 are primarily
attributable to adjustments in the 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 1995 and percent changes in sales since 1993 are
reported below.
KWH Percent Change
------------ ---------------------------
1995 1995 1994 1993
------------ ---------------------------
(millions)
Residential 4,014 7.0% 1.1% 3.2%
Commercial 2,708 6.3 4.8 2.7
Industrial 1,795 (2.8) (9.0) (6.9)
Other 17 (0.1) - -
------------
Total retail 8,534 4.5 (0.3) 0.4
Sales for resale
Non-affiliates 1,397 (1.6) (2.8) 2.0
Affiliates 759 (13.1) (15.2) (14.8)
------------
Total 10,690 2.2 (2.1) (1.1)
==================================================================
Retail sales increased in 1995 due to hot summer weather, a 0.9 percent
increase in residential customers, and a 2.2 percent increase in commercial
customers. Industrial sales were lower due to the reclassification of a major
customer from the industrial to commercial class and temporary production delays
of other industrial customers. In 1994, retail sales decreased from the prior
year primarily due to mild summer weather and a decline in sales in the
industrial class, which reflected the loss of Monsanto and a lengthy shutdown of
another major customer.
In 1995, energy sales for resale to non-affiliates decreased 1.6 percent and
are predominantly related to unit power sales under long-term contracts to
Florida utilities. Energy sales to affiliated companies vary from year to year
as mentioned previously.
Expenses
Total operating expenses for 1995 increased $41.3 million or 8.5 percent from
1994. The increase is due to higher fuel and purchased power expenses, higher
maintenance expenses, and higher taxes other than income taxes, offset by lower
depreciation and amortization expenses. In 1994, total operating expenses
decreased $4.0 million or 0.8 percent from 1993 primarily due to decreased fuel
and purchased power expenses, offset by an increase in other operation expenses
and taxes.
Fuel and purchased power expenses for 1995 increased $30.1 million or 15.5
percent from 1994. The change reflects the increase in generation due to the
extreme weather conditions during the summer of 1995 and slightly higher fuel
<PAGE>
5
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1995 Annual Report
costs. In 1994, fuel and purchased power expenses declined $13.4 million or 6.5
percent from 1993 reflecting the decrease in generation due to the mild weather
and the lower cost of fuel.
The amount and sources of generation and the average cost of fuel per net
kilowatt-hour generated were as follows:
1995 1994 1993
-----------------------------
Total generation
(millions of kilowatt-hours) 9,828 9,559 9,558
Sources of generation
(percent)
Coal 99.5 99.8 99.4
Oil and gas .5 .2 .6
Average cost of fuel per net
kilowatt-hour generated
(cents)
Coal 2.08 2.00 2.03
Oil and gas 3.56 6.93 4.50
Total 2.09 2.01 2.05
- ------------------------------------------------------------------
In 1995, other operation expenses decreased $0.5 million or 0.4 percent from
the 1994 level. The decrease is primarily attributable to a $9.4 million
reduction in the amortization costs of coal buyouts and renegotiation of coal
supply contracts. This was offset by a $7 million accrual for benefits to be
provided by the Company under a work force reduction program implemented during
the fourth quarter of 1995. These costs are further discussed in Notes 2 and 5
to the financial statements under "Work Force Reduction Programs" and "Fuel
Commitments," respectively. In 1994, other operation expenses increased $4.7
million due to additional costs related to the buyouts and renegotiation of coal
supply contracts and the Company's pro rata share of affiliated companies' work
force reduction costs.
Maintenance expense in 1995 increased $5.2 million or 11.2 percent from the
prior year. This is attributable to higher power production maintenance related
to non-recurring items and higher distribution maintenance. In 1994, maintenance
expense remained relatively flat reflecting no major changes in the scheduling
of maintenance of production facilities.
Depreciation and amortization expenses decreased $1.5 million or 2.7 percent
from 1994. The change is attributable to property which was fully amortized by
December 1994. Refer to Note 1 to the financial statements under "Depreciation
and Amortization" for further discussion.
Federal and state income taxes increased $0.1 million or 0.3 percent in 1995
due to a slight increase in taxable income. Taxes other than income taxes
increased $7.9 million or 18.9 percent due to an increase in county franchise
fees as mentioned previously. In 1994, federal income taxes increased $1.2
million 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. Changes in gross receipt taxes and franchise fee collections,
which are collected from customers, have no impact on earnings.
In 1995, interest expense decreased $2.5 million or 7.8 percent below the
prior year. The decline is mainly attributable to lower interest on long-term
debt reflecting a lower average principal balance outstanding. The decrease in
interest on long-term debt was partially offset by an increase in interest on
notes payable as a result of a higher average amount of short-term notes
outstanding. Interest expense in 1994 decreased $3.8 million or 10.5 percent
under the prior year. The decrease was a result of refinancing 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.
<PAGE>
6
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1995 Annual Report
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
numerous factors ranging from energy sales growth to a less regulated more
competitive environment.
A work force reduction program was implemented in the fourth quarter of 1995
that reduced earnings by $4.3 million. This action will assist in efforts to
control growth in future operating expenses.
The Florida Public Service Commission (FPSC) approved the Company's request
in December to increase the amount of its annual accrual to the accumulated
provision for property damage account from $1.2 million to $3.5 million due to
significant hurricane-related charges to the account during 1995. The approved
accrual increase is intended to restore the account balance to a reasonable
level within five years. Refer to Note 1 to the financial statements under
"Provision for Property Damage" for further discussion.
Future earnings in the near term will depend upon growth in energy sales,
which is subject to a number of factors. Traditionally, these factors have
included weather, competition, changes in contracts with neighboring utilities,
energy conservation practiced by customers, the elasticity of demand, 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 positioning 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. Also, electricity
sales for resale rates are being driven down by wholesale transmission access
and numerous potential new energy suppliers, including power marketers and
brokers. The Company is aggressively working to maintain and expand its share of
wholesale sales in the Southeastern power markets.
Currently, 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. Potential new federal legislation is being discussed, and legislation
allowing customer choice has already been introduced in Florida. In order to
address these initiatives, numerous questions must be resolved, with the most
complex ones 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 by seeking new markets that evolve
with the changing regulation.
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 was the loss in 1993 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 FPSC has set conservation goals for the Company, beginning in 1995, which
require programs to reduce 154 megawatts of summer peak demand and 65,000 KWH of
sales by the year 2004. In 1995, the FPSC approved the Company's programs to
accomplish these goals. The Company can experience net growth as long as the
filed programs achieve the intended reductions in peak demand and KWH sales. 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.
<PAGE>
7
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1995 Annual Report
On September 27, 1995, the Company filed a petition with the FPSC which seeks
approval for a new optional Commercial/Industrial Service (CIS) rider, which
would be applicable to the rate schedules serving the Company's largest and most
at-risk customers who are able to show they have viable alternatives for
electric power supply. The CIS rider would provide the flexibility needed to
enable the Company to offer its services in a more competitive manner to these
customers. The FPSC approval process is expected to take approximately 8 months.
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."
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 and determine if any other assets have been
impaired. See Note 1 to the financial statements under "Regulatory Assets and
Liabilities" for additional information.
New Accounting Standards
The FASB has issued Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of. This statement
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount for an asset may not
be recoverable. This statement also imposes stricter criteria for regulatory
assets by requiring that such assets be probable of future recovery at each
balance sheet date. The Company adopted the new rules January 1, 1996, with no
material effect on the financial statements. However, this conclusion may change
in the future as competitive factors influence wholesale and retail pricing in
the utility industry.
FINANCIAL CONDITION
Overview
The principal changes in the Company's financial condition during 1995 were
gross property additions of $63.1 million and an increase of $27 million in
notes payable. Funds for the property additions were provided by internal
sources. The increase in short-term notes payable is primarily attributable to a
$22 million note issued in relation to a payment made to a coal supplier for a
new arrangement under an existing coal contract. See the Statements of Cash
Flows and Note 5 to the financial statements under "Fuel Commitments" for
further details.
Financing Activities
The Company continued to lower its financing costs by retiring issues in 1995.
Retirements, including maturities during 1995, totaled $1.8 million of first
mortgage bonds, $0.1 million of pollution control bonds, $13.3 million of bank
notes and other long-term debt, and $1 million of preferred stock. (See the
Statements of Cash Flows for further details.)
Composite financing rates for the years 1993 through 1995 as of year end were
as follows:
1995 1994 1993
------------------------------
Composite interest rate on
long-term debt 6.5% 6.5% 7.1%
Composite preferred stock
dividend rate 6.4% 6.6% 6.5%
- ----------------------------------------------------------------
The composite interest rate on long-term debt remained constant at 6.5% from
1994 primarily due to no new issues or refinancings during 1995. The decrease in
the composite interest rate from 1993 to 1994 reflects the Company's efforts to
refinance higher-cost debt. The decrease in the composite preferred dividend
rate in 1995 is primarily due to a decrease in dividends on the Company's
adjustable rate preferred stock, reflecting lower interest rates.
<PAGE>
8
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1995 Annual Report
Capital Requirements for Construction
The Company's gross property additions, including those amounts related to
environmental compliance, are budgeted at $209 million for the three years
beginning in 1996 ($71 million in 1996, $67 million in 1997, and $71 million in
1998). The estimates of property additions for the three-year period include $9
million committed to meeting the requirements of the Clean Air Act, the cost of
which is expected to be recovered through the Environmental Cost Recovery Clause
(ECRC), 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 changes in business conditions; changes in
environmental regulations; revised load projections; the cost and efficiency of
construction labor, equipment, and materials; and the cost of capital. In
addition, there can be no assurance that costs related to capital expenditures
for the Company will be fully recovered. The Company does not have any baseload
generating plants under construction, and current energy demand forecasts do not
indicate a need for any additional baseload facilities until well into the
future. 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 $109
million will be required by the end of 1998 in connection with maturities of
long-term debt. 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 -- has significantly
impacted the Company. Specific reductions in sulfur dioxide and nitrogen oxide
emissions from fossil-fired generating plants are required in two phases. Phase
I compliance began in 1995 and initially affected 28 generating units of The
Southern Company. As a result of The Southern Company's compliance strategy, an
additional 22 generating units were brought into compliance with Phase I
requirements. Phase II compliance is required by 2000, and all fossil-fired
generating plants 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 recovery mechanism. 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 ECRC.
In 1995, the Environmental Protection Agency (EPA) began 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 achieved Phase I sulfur dioxide compliance at the
affected plants by switching to low-sulfur coal, which required some equipment
upgrades. This compliance strategy resulted in unused emission allowances being
banked for later use. Compliance with nitrogen oxide emission limits was
achieved by the installation of new control equipment at 22 generating units.
Construction expenditures for Phase I compliance totaled approximately $320
million for The Southern Company, including approximately $50 million for the
Company through 1995.
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 units as required to meet Phase II limits.
Therefore, during the period 1996 to 2000, the current compliance strategy could
<PAGE>
9
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1995 Annual Report
require total construction expenditures of approximately $150 million for The
Southern Company, including approximately $10 million for the Company. However,
the full impact of Phase II compliance cannot now 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 2 percent in 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 in 1996. 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 is evaluating the need to revise the ambient air quality standards
for particulate matter 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 1996, 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. Additional sites may require environmental remediation for
which the Company may be liable for a portion or all required cleanup costs. For
additional information, see Note 3 to the financial statements under
"Environmental Cost Recovery."
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances
Control 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 additional 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 exists for liability as the result of
lawsuits alleging damages caused by electromagnetic fields.
<PAGE>
10
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1995 Annual Report
Sources of Capital
At December 31, 1995, the Company had $0.7 million of cash and cash equivalents
and $25 million of unused committed lines of credit with banks to meet its
short-term cash needs. See Note 5 to the financial statements under "Bank Credit
Arrangements" for additional information.
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>
11
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1995, 1994, and 1993
Gulf Power Company 1995 Annual Report
=================================================================================================
1995 1994 1993
- -------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Revenues:
Revenues $600,458 $561,460 $559,976
Revenues from affiliates 18,619 17,353 23,166
- -------------------------------------------------------------------------------------------------
Total operating revenues 619,077 578,813 583,142
- -------------------------------------------------------------------------------------------------
Operating Expenses:
Operation-
Fuel 185,274 161,168 170,485
Purchased power from non-affiliates 8,594 6,761 4,386
Purchased power from affiliates 29,966 25,819 32,273
Other 113,397 113,879 109,164
Maintenance 51,917 46,700 46,004
Depreciation and amortization 55,104 56,615 55,309
Taxes other than income taxes 49,598 41,701 40,204
Federal and state income taxes (Note 8) 34,065 33,957 32,730
- -------------------------------------------------------------------------------------------------
Total operating expenses 527,915 486,600 490,555
- -------------------------------------------------------------------------------------------------
Operating Income 91,162 92,213 92,587
Other Income (Expense):
Allowance for equity funds used during
construction (Note 1) 36 450 512
Interest income 2,877 1,429 1,328
Other, net (1,261) (780) (1,238)
Gain on sale of investment securities - - 3,820
Income taxes applicable to other income (121) 95 (921)
- -------------------------------------------------------------------------------------------------
Income Before Interest Charges 92,693 93,407 96,088
- -------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 23,294 27,124 31,344
Other interest charges 1,674 2,442 2,877
Interest on notes payable 2,931 1,509 870
Amortization of debt discount, premium, and expense, net 2,014 1,834 1,412
Allowance for debt funds used during
construction (Note 1) (187) (656) (454)
- -------------------------------------------------------------------------------------------------
Net interest charges 29,726 32,253 36,049
- -------------------------------------------------------------------------------------------------
Net Income 62,967 61,154 60,039
Dividends on Preferred Stock 5,813 5,925 5,728
- -------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 57,154 $ 55,229 $ 54,311
=================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
12
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994, and 1993
Gulf Power Company 1995 Annual Report
<S> <C> <C> <C>
=============================================================================================================
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 62,967 $ 61,154 $ 60,039
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 75,293 86,098 72,111
Deferred income taxes and investment tax credits 390 (6,986) 5,347
Allowance for equity funds used during construction (36) (450) (512)
Accumulated provision for property damage (19,024) 1,013 817
Deferred costs of 1995 coal contract renegotiation (12,177) - -
Other, net 4,664 3,885 (1,681)
Changes in certain current assets and liabilities --
Receivables, net (12,210) 3,540 12,867
Inventories (618) (13,901) 5,574
Payables 18,258 (10,159) 5,386
Taxes accrued (2,803) 2,548 (3,280)
Current costs of 1995 coal contract renegotiation (9,859) - -
Other (4,894) (1,938) (6,224)
- -------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 99,951 124,804 150,444
- -------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (63,113) (78,869) (78,562)
Other 4,401 (3,493) (5,328)
- -------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (58,712) (82,362) (83,890)
- -------------------------------------------------------------------------------------------------------------
Financing Activities and Capital Contributions:
Proceeds:
Preferred stock - - 35,000
First mortgage bonds - - 75,000
Pollution control bonds - 42,000 53,425
Capital contributions from parent 58 98 11
Other long-term debt - 32,108 25,000
Retirements:
Preferred stock (1,000) (1,000) (21,060)
First mortgage bonds (1,750) (48,856) (88,809)
Pollution control bonds (125) (42,100) (40,650)
Other long-term debt (13,314) (24,240) (7,736)
Notes payable, net 27,000 47,447 (37,947)
Payment of preferred stock dividends (5,813) (5,925) (5,728)
Payment of common stock dividends (46,400) (44,000) (41,800)
Miscellaneous (117) (2,648) (6,888)
- -------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (41,461) (47,116) (62,182)
- -------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (222) (4,674) 4,372
Cash and Cash Equivalents at Beginning of Year 902 5,576 1,204
- -------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 680 $ 902 $ 5,576
=============================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $26,161 $30,139 $28,470
Income taxes $38,537 $43,089 $27,865
- -------------------------------------------------------------------------------------------------------------
( ) Denotes use of cash.
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
13
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1995 and 1994
Gulf Power Company 1995 Annual Report
<S> <C> <C>
Utility Plant:
================================================================================
ASSETS 1995 1994
- --------------------------------------------------------------------------------
(in thousands)
Plant in service (Notes 1 and 6) $1,695,814 $1,656,367
Less accumulated provision for depreciation 658,806 622,911
- --------------------------------------------------------------------------------
1,037,008 1,033,456
Construction work in progress 26,301 24,288
- --------------------------------------------------------------------------------
Total 1,063,309 1,057,744
- --------------------------------------------------------------------------------
Other Property and Investments 740 7,997
- --------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 680 902
Receivables-
Customer accounts receivable 69,166 57,637
Other accounts and notes receivable 3,393 2,268
Affiliated companies 802 1,079
Accumulated provision for uncollectible accounts (768) (600)
Fossil fuel stock, at average cost 37,875 35,686
Materials and supplies, at average cost 33,686 35,257
Current portion of deferred coal contract costs (Note 5) 12,767 2,521
Regulatory clauses under recovery (Note 1) 3,432 5,002
Prepaid income taxes (Note 8) 4,232 -
Other prepayments 8,000 4,354
Vacation pay deferred 4,419 4,172
- --------------------------------------------------------------------------------
Total 177,684 148,278
- --------------------------------------------------------------------------------
Deferred Charges:
Deferred charges related to income taxes (Note 8) 29,093 30,433
Debt expense and loss, being amortized 20,459 22,119
Deferred coal contract costs (Note 5) 33,768 38,169
Deferred storm charges (Note 1) 7,502 -
Miscellaneous 9,304 10,802
- --------------------------------------------------------------------------------
Total 100,126 101,523
- --------------------------------------------------------------------------------
Total Assets $1,341,859 $1,315,542
================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
14
<TABLE>
<CAPTION>
BALANCE SHEETS (continued)
At December 31, 1995 and 1994
Gulf Power Company 1995 Annual Report
<S> <C> <C>
========================================================================================
CAPITALIZATION AND LIABILITIES 1995 1994
- ----------------------------------------------------------------------------------------
(in thousands)
Capitalization (See accompanying statements):
Common stock equity (Note 11) $ 436,242 $ 425,472
Preferred stock 89,602 89,602
Long-term debt 323,376 356,393
- ----------------------------------------------------------------------------------------
Total 849,220 871,467
- ----------------------------------------------------------------------------------------
Current Liabilities:
Preferred stock due within one year - 1,000
Long-term debt due within one year (Note 10) 31,548 13,439
Notes payable 80,500 53,500
Accounts payable-
Affiliated companies 14,447 9,132
Other 27,196 14,524
Customer deposits 13,195 13,609
Taxes accrued-
Federal and state income - 5,990
Other 9,547 7,475
Interest accrued 5,719 6,106
Regulatory clauses over recovery (Note 1) 2,800 3,960
Vacation pay accrued 4,419 4,172
Miscellaneous 7,356 7,828
- ----------------------------------------------------------------------------------------
Total 196,727 140,735
- ----------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 162,345 151,681
Deferred credits related to income taxes (Note 8) 67,481 71,964
Accumulated deferred investment tax credits 36,052 38,391
Accumulated provision for property damage (Note 1) - 11,522
Accumulated provision for postretirement benefits (Note 2) 16,301 13,680
Miscellaneous 13,733 16,102
- ----------------------------------------------------------------------------------------
Total 295,912 303,340
- ----------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, and 7)
Total Capitalization and Liabilities $1,341,859 $1,315,542
========================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
15
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1995 and 1994
Gulf Power Company 1995 Annual Report
<S> <C> <C> <C> <C>
==================================================================================================
1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Common Stock Equity:
Common stock, without par value --
Authorized and outstanding --
992,717 shares in 1995 and 1994 $ 38,060 $ 38,060
Paid-in capital 218,438 218,380
Premium on preferred stock 81 81
Retained earnings (Note 11) 179,663 168,951
- --------------------------------------------------------------------------------------------------
Total common stock equity 436,242 425,472 51.4% 48.8%
- --------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$10 par value --
Authorized -- 10,000,000 shares,
Outstanding -- 2,580,000 shares at December 31, 1995
$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, 1996: 4.67% 15,000 15,000
$100 par value --
Authorized -- 801,626 shares
Outstanding -- 251,026 shares at December 31, 1995
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 -- $5,691,300) 89,602 89,602 10.5 10.3
- --------------------------------------------------------------------------------------------------
Cumulative Preferred Stock Subject to Mandatory Redemption:
$100 par value --
Authorized -- 0 shares
Outstanding -- 0 shares at December 31, 1995
11.36% Series - 1,000
- --------------------------------------------------------------------------------------------------
Total - 1,000
- --------------------------------------------------------------------------------------------------
Less amount due within one year - 1,000
- --------------------------------------------------------------------------------------------------
Total excluding amount due within one year - - - -
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
16
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1995 and 1994
Gulf Power Company 1995 Annual Report
<S> <C> <C> <C> <C> <C>
============================================================================================================================
1995 1994 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
First mortgage bonds --
Maturity Interest Rates
August 1, 1997 5.875% 25,000 25,000
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 9.00% 930 2,680
December 1, 2021 8.75% 50,000 50,000
- ----------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 150,930 152,680
Pollution control obligations (Note 9) 169,630 169,755
Other long-term debt (Note 9) 37,074 50,388
Unamortized debt premium (discount), net (2,710) (2,991)
- ----------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $23,154,000) 354,924 369,832
Less amount due within one year (Note 10) 31,548 13,439
- ----------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 323,376 356,393 38.1 40.9
- ----------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 849,220 $ 871,467 100.0% 100.0%
============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
17
<TABLE>
<CAPTION>
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1995, 1994, and 1993
Gulf Power Company 1995 Annual Report
<S> <C> <C> <C>
===========================================================================================================================
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at Beginning of Year $168,951 $157,773 $146,771
Net income after dividends on preferred stock 57,154 55,229 54,311
Cash dividends on common stock (46,400) (44,000) (41,800)
Preferred stock transactions, net (42) (51) (1,509)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at End of Year (Note 11) $179,663 $168,951 $157,773
===========================================================================================================================
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1995, 1994, and 1993
Gulf Power Company 1995 Annual Report
===========================================================================================================================
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Year $218,380 $218,282 $218,271
Contributions to capital by parent company 58 98 11
- ---------------------------------------------------------------------------------------------------------------------------
Balance at End of Year $218,438 $218,380 $218,282
===========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
18
NOTES TO FINANCIAL STATEMENTS
Gulf Power Company 1995 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), The Southern Development and Investment Group (Southern Development),
and other direct and indirect subsidiaries. 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. Gulf Power Company provides electric service to the
Northwest Panhandle of Florida. 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 provides digital wireless
communications services to the operating companies and also markets these
services to the public within the Southeast. Southern Electric designs, builds,
owns and operates power production and delivery 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. Southern Development 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.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates, and the actual results may
differ from those estimates.
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:
1995 1994
------------------------
(in thousands)
Current & deferred
coal contract costs $ 46,535 $ 40,690
Deferred income taxes 29,093 30,433
Deferred loss on reacquired debt 17,015 18,494
Environmental remediation 5,789 7,800
Vacation pay 4,419 4,172
Regulatory clauses under
recovery, net 632 1,042
Deferred income tax credits (67,481) (71,964)
Deferred storm charges 7,502 -
Accumulated provision for
property damage - (11,522)
Other, net (1,510) (2,691)
- ----------------------------------------------------------------
Total $ 41,994 $ 16,454
================================================================
In the event that a portion of the Company's operations is 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, if impaired, to their fair values.
<PAGE>
19
NOTES (continued)
Gulf Power Company 1995 Annual Report
Revenues and Regulatory Cost Recovery Clauses
The Company accrues revenues for service rendered but unbilled at the end of
each fiscal period. Fuel costs are expensed as the fuel is used. The Company's
electric rates include provisions to periodically adjust billings for
fluctuations in fuel and the energy component of purchased power costs. The
Company also has similar cost recovery clauses for energy conservation costs,
purchased power capacity costs, and environmental compliance costs. Revenues are
adjusted monthly for differences between recoverable costs and amounts actually
reflected in current rates.
The Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. In 1995, uncollectible
accounts continued to average significantly less than 1 percent of revenues.
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
3.6 percent in 1995 and 3.8 percent in 1994 and 1993. 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. Also, the provision for depreciation expense includes an amount
for the expected cost of removal of facilities. The decrease in 1995 is
attributable to property which was fully amortized by December 1994.
Income Taxes
The Company uses the liability method of accounting for deferred income taxes
and 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. The Company is included
in the consolidated federal income tax return of The Southern Company. See Note
8 for further information related to income taxes.
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 1995, 1994, and the second half of 1993 and 8.03 percent
for the first half of 1993. AFUDC amounts for 1995, 1994, and 1993 were $223
thousand, $1.1 million, and $966 thousand, respectively. The decrease in 1995 is
primarily due to the completion of major construction projects at Plant Daniel
at the end of 1994.
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>
20
NOTES (continued)
Gulf Power Company 1995 Annual Report
Financial Instruments
In accordance with FASB Statement No. 107, Disclosure About Fair Values of
Financial Instruments, financial instruments of the Company, for which the
carrying amounts do not approximate fair value, are shown in the table below as
of December 31:
1995
----------------------------
Carrying Fair
Amount Value
----------------------------
(in thousands)
Long-term debt $354,924 $365,305
- -------------------------------------------------------------
1994
----------------------------
Carrying Fair
Amount Value
----------------------------
(in thousands)
Long-term debt $369,832 $355,019
Preferred stock subject to
mandatory redemption 1,000 1,030
- -------------------------------------------------------------
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.
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 $1.7 million and $2.5 million
at December 31, 1995 and 1994, respectively, is included in miscellaneous
current liabilities in the accompanying Balance Sheets.
Provision for Property Damage
The Company is self-insured for the full cost of storm and other damage to its
transmission and distribution property. At December 31, 1995, in accordance with
the FPSC's order, the accumulated provision for property damage had a negative
balance of $7.5 million as the result of charges for expenses relating to
Hurricanes Erin and Opal. The negative balance was reclassified to deferred
storm charges in the accompanying Balance Sheets. The FPSC approved the
Company's request in December to increase the amount of its annual accrual to
the accumulated provision for property damage account from $1.2 million to $3.5
million, effective October 1, 1995. The approved accrual increase is intended to
restore the account balance to a reasonable level within five years. The FPSC
also ordered the Company to file within six months a study addressing the
appropriate accumulated provision account balance and annual accrual amount. At
December 31, 1994, the accumulated provision for property damage amounted to
$11.5 million. The expense of repairing damages from major storms and other
uninsured property damages are charged to the provision account.
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 one of the
following 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>
21
NOTES (continued)
Gulf Power Company 1995 Annual Report
Postretirement Benefits
The Company provides certain medical care and life insurance benefits for
retired employees. Substantially all employees may become eligible for these
benefits when they retire. Trusts are funded to the extent deductible under
federal income tax regulations or to the extent required by the Company's
regulatory commissions. Amounts funded are primarily invested in equity and
fixed-income securities. FASB Statement No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, 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."
Funded Status and Cost of Benefits
The following tables show actuarial results and assumptions for pension and
postretirement 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
-------------------------
1995 1994
-------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Vested benefits $ 87,652 $ 73,552
Non-vested benefits 4,284 3,016
- ------------------------------------------------------------------
Accumulated benefit obligation 91,936 76,568
Additional amounts related to
projected salary increases 29,073 29,451
- ------------------------------------------------------------------
Projected benefit obligation 121,009 106,019
Less:
Fair value of plan assets 180,980 151,337
Unrecognized net gain (48,438) (36,599)
Unrecognized prior service cost 2,578 2,802
Unrecognized transition asset (7,187) (8,034)
- ------------------------------------------------------------------
Prepaid asset recognized in
the Balance Sheets $ 6,924 $ 3,487
==================================================================
Postretirement Benefits
---------------------------
1995 1994
---------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Retirees and dependents $ 9,759 $10,800
Employees eligible to retire 4,921 4,043
Other employees 17,646 19,639
- ----------------------------------------------------------------
Accumulated benefit obligation 32,326 34,482
Less:
Fair value of plan assets 7,050 5,740
Unrecognized net loss (gain) 1,538 (458)
Unrecognized transition
obligation 7,437 15,520
- ----------------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $16,301 $13,680
================================================================
In 1995, the Company announced a cost sharing program for postretirement
benefits. The program establishes limits on amounts the Company will pay to
provide future retiree postretirement benefits. This change reduced the 1995
accumulated postretirement benefit obligation by approximately $7.1 million.
The weighted average rates assumed in the actuarial calculations were:
1995 1994 1993
-----------------------------
Discount 7.3% 8.0% 7.5%
Annual salary increase 4.8% 5.5% 5.0%
Long-term return on plan
assets 8.5% 8.5% 8.5%
- ---------------------------------------------------------------
An additional assumption used in measuring the accumulated postretirement
benefit obligation was a weighted average medical care cost trend rate of 9.8
percent for 1995, decreasing to 5.3 percent through the year 2005 and remaining
at that level thereafter. An annual increase in the assumed medical care cost
trend rate of 1 percent would increase the accumulated benefit obligation at
December 31, 1995, by $2.5 million and the aggregate of the service and interest
cost components of the net retiree cost by $610 thousand.
<PAGE>
22
NOTES (continued)
Gulf Power Company 1995 Annual Report
Components of the plans' net costs are shown below:
Pension
------------------------------------
1995 1994 1993
------------------------------------
(in thousands)
Benefits earned during
the year $ 3,867 $ 3,775 $ 3,710
Interest cost on projected
benefit obligation 8,042 7,484 7,319
Actual (return) loss on
plan assets (33,853) 3,721 (20,672)
Net amortization
and deferral 19,619 (17,054) 8,853
- ------------------------------------------------------------------
Net pension cost (income) $ (2,325) $(2,074) $ (790)
==================================================================
Of the above net pension amounts, pension income of $1.8 million in 1995,
$1.5 million in 1994, and $601 thousand in 1993 were recorded in operating
expenses, and the remainder was recorded in construction and other accounts.
Postretirement Benefits
--------------------------------
1995 1994 1993
--------------------------------
(in thousands)
Benefits earned during the year $1,259 $1,362 $1,166
Interest cost on accumulated
benefit obligation 2,520 2,535 2,339
Amortization of transition
obligation 853 854 854
Actual (return) loss on plan (1,268) 129 (731)
assets
Net amortization and deferral 742 (591) 310
- -------------------------------------------------------------------
Net postretirement cost $4,106 $4,289 $3,938
===================================================================
Of the above net postretirement costs recorded, $3.1 million in 1995 and 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 implemented a voluntary work force reduction program in the fourth
quarter of 1995 and recorded $7 million in December for the total cost related
to the program. These costs are expected to be recovered through future savings
over approximately two years. The Company has also incurred its pro rata share
for the costs of affiliated companies' programs. The costs related to these
programs were $1 million, $1.3 million, and $109 thousand for the years 1995,
1994, and 1993, 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 operating companies' 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 was substantially from October 1994 through December 1995. In
November 1995, a FERC administrative law judge issued an opinion that the FERC
staff failed to meet its burden of proof, and therefore, no change in the equity
return was necessary. The FERC staff has filed exceptions to the administrative
law judge's opinion, and the matter remains pending before the FERC.
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 $120
million for The Southern Company, including approximately $8 million for the
Company at December 31, 1995. However, management believes that rates are not
excessive and that refunds are not justified.
<PAGE>
23
NOTES (continued)
Gulf Power Company 1995 Annual Report
FPSC Review of Earnings
As a result of an investigation of Gulf's 1995 earnings by the FPSC, Gulf
presented a 1995 earnings proposal, which required deferring any jurisdictional
revenues contributing to annual earnings in excess of a 12.75%
jurisdictional-adjusted return on equity. The proposal was approved by the FPSC
in August 1995. Gulf was to petition the FPSC to determine the disposition of
any deferred revenues by April 1996. Based on 1995 actual results, no revenues
were deferred.
Environmental Cost Recovery
In April 1993, the Florida Legislature adopted legislation for an Environmental
Cost Recovery Clause (ECRC), 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 recovery mechanism. Such environmental
costs include operation and maintenance expense, emission allowance expense,
depreciation, and a return on invested capital.
On January 12, 1994, the FPSC approved the Company's initial petition under
the ECRC for recovery of environmental costs that were projected to be incurred
from July 1993 through September 1994. Since this initial period, recovery under
the ECRC has been determined semi-annually and includes a true-up of the prior
period and a projection of the ensuing six month period. During 1995 and 1994,
the Company recorded ECRC revenues of $11.8 million and $7.2 million,
respectively.
At December 31, 1995, the Company's liability for the estimated costs of
environmental remediation projects for known sites was $5.8 million. These
estimated costs are expected to be expended during the period 1996 to 1999.
These projects have been approved by the FPSC for recovery through the ECRC
discussed above. Therefore, the Company recorded $2.0 million in current assets
and $3.8 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 $71 million in 1996, $67 million in 1997, and
$71 million in 1998. 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, 1995, significant purchase commitments were outstanding in
connection with the construction program. The Company does not have any new
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, pollution control
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, 1995, the Company had $20 million in revolving credit lines that
expire May 31, 1998, $5 million in revolving credit lines subject to renewal
June 1, 1997, and $21.5 million of lines of credit with banks subject to renewal
June 1 of each year, of which $25 million remained unused. In connection with
these credit lines, the Company has agreed to pay commitment fees and/or to
<PAGE>
24
NOTES (continued)
Gulf Power Company 1995 Annual Report
maintain compensating balances with the banks. The compensating balances, which
represent substantially all of the cash of the Company except for daily working
funds and like items, are not legally restricted from withdrawal. In addition,
the Company has bid-loan facilities with fourteen major money center banks that
total $250 million, of which $37 million was committed at December 31, 1995.
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 at December 31, 1995, were as follows:
Year Fuel
------- ---------------
(in millions)
1996 $ 125
1997 126
1998 95
1999 86
2000 80
2001 - 2007 557
-------------------------------------------------------
Total commitments $1,069
=======================================================
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.
The remaining unamortized amount was $1.5 million at December 31, 1995.
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 $23 million
at December 31, 1995.
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,
1994, and the first quarter of 1995.
In December 1995, the Company made a payment of $22 million to a coal
supplier under an arrangement to lower the cost of future coal and/or to suspend
the purchase of coal under an existing contract for 25 months. This amount is to
be amortized to expense on a per ton basis during 1996, 1997, and the first
quarter of 1998.
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.
Lease Agreements
In 1989, the Company and Mississippi Power jointly entered into a twenty-two
year operating lease agreement for the use of 495 aluminum railcars. In 1994, a
second lease agreement for the use of 250 additional aluminum railcars was
entered into 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 was $1.7
million in 1995 and $1.2 million in 1994 and 1993. The Company's annual lease
payments for 1996 through 2000 will be approximately $1.7 million and after
2000, lease payments total approximately $22.4 million. The Company has the
option after three years from the date of the original contract on the second
lease agreement to purchase the 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.
<PAGE>
25
NOTES (continued)
Gulf Power Company 1995 Annual Report
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, an operating affiliate, jointly own Plant
Scherer Unit No. 3. Plant Scherer is 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, 1995, the Company's percentage ownership and its 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 $185,755(1) $222,515
Accumulated Depreciation $49,982 $97,033
Construction Work in Progress $288 $683
Nameplate Capacity (2)
(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
The Company and the other operating affiliates have 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. The unit power sales 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)
1995 $25,870 $ - $25,870
1994 29,653 1,273 30,926
1993 31,162 2,643 33,805
- ----------------------------------------------------------
Unit power from specific generating plants of The Southern Company is
currently being sold to Florida Power Corporation (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 1995, 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 $25.4 million in 1995, $29.3 million in 1994, and $39.5
million in 1993, or 4.1 percent, 5.1 percent, and 6.8 percent of operating
revenues, respectively.
<PAGE>
26
NOTES (continued)
Gulf Power Company 1995 Annual Report
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, 1995, the tax-related regulatory assets to be recovered from
customers were $29.1 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, 1995, the tax-related regulatory liabilities
to be refunded to customers were $67.5 million. These liabilities are
attributable to deferred taxes previously recognized at rates higher than
current enacted tax law and to unamortized investment tax credits.
At December 31, 1995, the Company's current federal and state income taxes
accrued, including the current portion of deferred income taxes, were equal to a
debit balance of $4.2 million as a result of the early settlement of taxes owed.
This amount was reclassified to current assets to reflect the tax prepayment and
will be used to satisfy taxes accrued during 1996.
Details of the federal and state income tax provisions are as follows:
1995 1994 1993
----------------------------------
(in thousands)
Total provision for
income taxes:
Federal--
Currently payable $29,018 $34,941 $24,354
Deferred--current year 23,172 18,556 26,396
--reversal of
prior years (23,116) (24,787) (22,102)
- ------------------------------------------------------------------
29,074 28,710 28,648
- ------------------------------------------------------------------
State--
Currently payable 4,778 5,907 3,950
Deferred--current year 3,313 2,549 3,838
--reversal of
prior years (2,979) (3,304) (2,785)
- ------------------------------------------------------------------
5,112 5,152 5,003
- ------------------------------------------------------------------
Total 34,186 33,862 33,651
Less income taxes charged
(credited) to other income 121 (95) 921
- ------------------------------------------------------------------
Federal and state income
taxes charged
to operations $34,065 $33,957 $32,730
==================================================================
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:
1995 1994
-----------------------
(in thousands)
Deferred tax liabilities:
Accelerated depreciation $146,926 $146,686
Property basis differences 19,976 18,468
Coal contract buyouts 3,838 6,896
Property insurance 3,039 -
Other 10,573 11,846
- -------------------------------------------------------------------
Total 184,352 183,896
- -------------------------------------------------------------------
Deferred tax assets:
Federal effect of state deferred taxes 10,212 9,732
Postretirement benefits 5,494 4,383
Property insurance - 5,200
Other 6,313 7,566
- -------------------------------------------------------------------
Total 22,019 26,881
- -------------------------------------------------------------------
Net deferred tax liabilities 162,333 157,015
Less current portion, net (12) 5,334
- -------------------------------------------------------------------
Accumulated deferred income
taxes in the Balance Sheets $162,345 $151,681
===================================================================
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 1995, 1994 and 1993. At December 31, 1995, 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:
1995 1994 1993
-----------------------------
Federal statutory rate 35% 35% 35%
State income tax,
net of federal deduction 4 4 3
Non-deductible book
depreciation 1 1 1
Difference in prior years'
deferred and current tax rate (3) (2) (2)
Other (2) (2) (1)
- ---------------------------------------------------------------
Effective income tax rate 35% 36% 36%
===============================================================
The Company and the other subsidiaries of The Southern Company file a
consolidated federal tax return. Under a joint consolidated income tax
agreement, each subsidiary's current and deferred tax expense is computed
<PAGE>
27
NOTES (continued)
Gulf Power Company 1995 Annual Report
on a stand-alone basis. Tax benefits from losses of the parent company are
allocated to each subsidiary based on the ratio of taxable income to total
consolidated taxable income.
9. POLLUTION CONTROL OBLIGATIONS AND OTHER LONG-TERM DEBT
Details of pollution control bonds and other long-term debt at December 31 are
as follows:
1995 1994
--------------------------
(in thousands)
Obligations incurred in
connection with the sale by
public authorities of
tax-exempt pollution control
revenue bonds:
Collateralized
6% due 2006* $ 12,075 $ 12,200
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 22,000
Variable Rate
Remarketable daily 20,000 20,000
- ---------------------------------------------------------------
$169,630 $169,755
- ---------------------------------------------------------------
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 12,074 16,388
- ---------------------------------------------------------------
37,074 50,388
- ---------------------------------------------------------------
Total $206,704 $220,143
===============================================================
* Sinking fund requirement applicable to the 6 percent pollution control
bonds is $200 thousand for 1996 with increasing increments periodically
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.
The 5.39 percent and 5.72 percent notes payable were 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). The
estimated annual maturities of the notes payable through 2000 are as follows:
$29.6 million in 1996, $4.9 million in 1997, $2.6 million in 1998, and none in
1999 and 2000.
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 at December 31 is as follows:
1995 1994
----------------------
(in thousands)
Bond improvement fund requirement $ 1,750 $ 1,750
Less: Portion to be satisfied by cash
or certifying property
additions - 1,750
- ---------------------------------------------------------------
Cash sinking fund requirement 1,750 -
Current portion of notes payable 29,598 13,314
(Note 9)
Pollution control bond maturity 200 125
(Note 9)
- ---------------------------------------------------------------
Total $31,548 $13,439
===============================================================
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.
<PAGE>
28
NOTES (continued)
Gulf Power Company 1995 Annual Report
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, 1995, retained earnings of $101 million were
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, 1995, the ratio was 48.7 percent.
12. QUARTERLY FINANCIAL DATA (Unaudited)
Summarized quarterly financial data for 1995 and 1994 are as follows:
Net Income
After Dividends
Operating Operating on Preferred
Quarter Ended Revenues Income Stock
- ------------------------------------------------------------------
(in thousands)
March 31, 1995 $140,918 $19,503 $10,880
June 30, 1995 153,057 23,390 14,096
Sept. 30, 1995 184,251 35,187 26,588
Dec. 31, 1995 140,851 13,082 5,590
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
- ------------------------------------------------------------------
The Company's business is influenced by seasonal weather conditions and the
timing of rate changes, among other factors.
<PAGE>
29
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1995 Annual Report
<S> <C> <C> <C>
=========================================================================================================
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $619,077 $578,813 $583,142
Net Income after Dividends
on Preferred Stock (in thousands) $57,154 $55,229 $54,311
Cash Dividends on Common Stock (in thousands) $46,400 $44,000 $41,800
Return on Average Common Equity (percent) 13.27 13.15 13.29
Total Assets (in thousands) $1,341,859 $1,315,542 $1,307,809
Gross Property Additions (in thousands) $63,113 $78,869 $78,562
- ---------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $436,242 $425,472 $414,196
Preferred stock 89,602 89,602 89,602
Preferred stock subject to mandatory redemption - - 1,000
Long-term debt 323,376 356,393 369,259
- ---------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $849,220 $871,467 $874,057
- ---------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 51.4 48.8 47.4
Preferred stock 10.5 10.3 10.4
Long-term debt 38.1 40.9 42.2
- ---------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
=========================================================================================================
First Mortgage Bonds (in thousands):
Issued - - 75,000
Retired 1,750 48,856 88,809
Preferred Stock (in thousands):
Issued - - 35,000
Retired 1,000 1,000 21,060
- ---------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 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 283,421 280,859 274,194
Commercial 41,281 40,398 39,253
Industrial 278 283 274
Other 134 106 86
- ---------------------------------------------------------------------------------------------------------
Total 325,114 321,646 313,807
=========================================================================================================
Employees (year-end) 1,501 1,540 1,565
</TABLE>
<PAGE>
30A
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1995 Annual Report
<S> <C> <C> <C>
=============================================================================================================
1992 1991 1990
- ------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $570,902 $565,207 $567,825
Net Income after Dividends
on Preferred Stock (in thousands) $54,090 $57,796 $38,714
Cash Dividends on Common Stock (in thousands) $39,900 $38,000 $37,000
Return on Average Common Equity (percent) 13.62 15.17 10.51
Total Assets (in thousands) $1,062,699 $1,095,736 $1,084,579
Gross Property Additions (in thousands) $64,671 $64,323 $62,462
- ------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $403,190 $390,981 $371,185
Preferred stock 74,662 55,162 55,162
Preferred stock subject to mandatory redemption 2,000 7,500 9,250
Long-term debt 382,047 434,648 475,284
- ------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $861,899 $888,291 $910,881
- ------------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 46.8 44.0 40.8
Preferred stock 8.9 7.1 7.1
Long-term debt 44.3 48.9 52.1
- -------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
============================================================================================================
First Mortgage Bonds (in thousands):
Issued 25,000 50,000 -
Retired 117,693 32,807 6,455
Preferred Stock (in thousands):
Issued 29,500 - -
Retired 15,500 2,500 1,750
- ------------------------------------------------------------------------------------------------------------
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 267,591 261,210 256,111
Commercial 37,105 34,685 34,019
Industrial 270 264 252
Other 74 72 67
- ------------------------------------------------------------------------------------------------------------
Total 305,040 296,231 290,449
============================================================================================================
Employees (year-end) 1,613 1,598 1,615
</TABLE>
<PAGE>
30B
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1995 Annual Report
<S> <C> <C> <C>
==============================================================================================================
1989 1988 1987
- --------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands) $527,821 $550,827 $587,860
Net Income after Dividends
on Preferred Stock (in thousands) $37,361 $45,698 $42,217
Cash Dividends on Common Stock (in thousands) $37,200 $35,400 $34,200
Return on Average Common Equity (percent) 10.32 13.41 13.23
Total Assets (in thousands) $1,093,430 $1,097,225 $1,051,182
Gross Property Additions (in thousands) $70,726 $67,042 $97,511
- --------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $365,471 $358,310 $323,012
Preferred stock 55,162 55,162 55,162
Preferred stock subject to mandatory redemption 11,000 12,750 14,000
Long-term debt 484,608 497,069 474,640
- --------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $916,241 $923,291 $866,814
- --------------------------------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 39.9 38.8 37.2
Preferred stock 7.2 7.4 8.0
Long-term debt 52.9 53.8 54.8
- --------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
==============================================================================================================
First Mortgage Bonds (in thousands):
Issued - 35,000 -
Retired 9,344 9,369 -
Preferred Stock (in thousands):
Issued - - -
Retired 1,250 1,750 2,500
- --------------------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A A A
Duff & Phelps AA- 4 4
Preferred Stock -
Moody's a1 a1 a1
Standard and Poor's A- A- A-
Duff & Phelps A+ 5 5
- --------------------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 251,341 246,450 241,138
Commercial 33,678 33,030 32,139
Industrial 240 206 206
Other 67 61 61
- --------------------------------------------------------------------------------------------------------------
Total 285,326 279,747 273,544
==============================================================================================================
Employees (year-end) 1,614 1,601 1,603
</TABLE>
<PAGE>
30C
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA
Gulf Power Company 1995 Annual Report
<S> <C> <C>
=======================================================================================
1986 1985
- ---------------------------------------------------------------------------------------
Operating Revenues (in thousands) $542,919 $562,068
Net Income after Dividends
on Preferred Stock (in thousands) $46,421 $45,484
Cash Dividends on Common Stock (in thousands) $33,100 $30,800
Return on Average Common Equity (percent) 15.06 15.61
Total Assets (in thousands) $1,028,864 $921,635
Gross Property Additions (in thousands) $90,160 $92,541
- ---------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $314,995 $301,674
Preferred stock 55,162 55,162
Preferred stock subject to mandatory redemption 16,500 18,250
Long-term debt 482,869 410,917
- ---------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $869,526 $786,003
- ---------------------------------------------------------------------------------------
Capitalization Ratios (percent):
Common stock equity 36.2 38.4
Preferred stock 8.3 9.3
Long-term debt 55.5 52.3
- ---------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0
=======================================================================================
First Mortgage Bonds (in thousands):
Issued 50,000 -
Retired 46,640 2,860
Preferred Stock (in thousands):
Issued - -
Retired 750 750
- ---------------------------------------------------------------------------------------
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 235,329 227,845
Commercial 31,142 29,603
Industrial 197 183
Other 62 62
- ---------------------------------------------------------------------------------------
Total 266,730 257,693
=======================================================================================
Employees (year-end) 1,544 1,509
</TABLE>
<PAGE>
31
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1995 Annual Report
<S> <C> <C> <C>
=========================================================================================================
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $276,155 $252,598 $244,967
Commercial 159,260 146,394 137,308
Industrial 81,606 82,169 87,526
Other 1,993 1,955 1,882
- ---------------------------------------------------------------------------------------------------------
Total retail 519,014 483,116 471,683
Sales for resale - non-affiliates 60,413 66,111 72,209
Sales for resale - affiliates 18,619 17,353 23,166
- ---------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 598,046 566,580 567,058
Other revenues 21,031 12,233 16,084
- ---------------------------------------------------------------------------------------------------------
Total $619,077 $578,813 $583,142
=========================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 4,014,142 3,751,932 3,712,980
Commercial 2,708,243 2,548,846 2,433,382
Industrial 1,794,754 1,847,114 2,029,936
Other 17,345 17,354 16,944
- ---------------------------------------------------------------------------------------------------------
Total retail 8,534,484 8,165,246 8,193,242
Sales for resale - non-affiliates 1,396,474 1,418,977 1,460,105
Sales for resale - affiliates 759,341 874,050 1,029,787
- ---------------------------------------------------------------------------------------------------------
Total 10,690,299 10,458,273 10,683,134
=========================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.88 6.73 6.60
Commercial 5.88 5.74 5.64
Industrial 4.55 4.45 4.31
Total retail 6.08 5.92 5.76
Sales for resale 3.67 3.64 3.83
Total sales 5.59 5.42 5.31
Average Annual Kilowatt-Hour Use Per Residential Customer 14,148 13,486 13,671
Average Annual Revenue Per Residential Customer $973.35 $907.92 $901.96
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174
Maximum Peak-Hour Demand (megawatts):
Winter 1,732 1,801 1,571
Summer 2,040 1,795 1,898
Annual Load Factor (percent) 53.0 56.7 54.5
Plant Availability - Fossil-Steam (percent) 84.0 92.2 88.9
- ---------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 86.8 87.2 84.5
Oil and gas 0.4 0.2 0.5
Purchased power -
From non-affiliates 4.0 2.8 1.5
From affiliates 8.8 9.8 13.5
- ---------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
=========================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,609 10,614 10,390
Cost of fuel per million BTU (cents) 196.62 189.55 197.37
Average cost of fuel per net kilowatt-hour generated (cents) 2.09 2.01 2.05
=========================================================================================================
</TABLE>
<PAGE>
32A
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1995 Annual Report
<S> <C> <C> <C>
===============================================================================================================
1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $235,296 $231,220 $217,843
Commercial 133,071 130,691 124,066
Industrial 91,320 92,300 91,041
Other 1,784 1,860 1,805
- ---------------------------------------------------------------------------------------------------------------
Total retail 461,471 456,071 434,755
Sales for resale - non-affiliates 70,078 69,636 73,855
Sales for resale - affiliates 24,075 29,343 38,563
- ---------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 555,624 555,050 547,173
Other revenues 15,278 10,157 20,652
- ---------------------------------------------------------------------------------------------------------------
Total $570,902 $565,207 $567,825
===============================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 3,596,515 3,455,100 3,360,838
Commercial 2,369,236 2,272,690 2,217,568
Industrial 2,179,435 2,117,408 2,177,872
Other 16,649 17,118 18,866
- ---------------------------------------------------------------------------------------------------------------
Total retail 8,161,835 7,862,316 7,775,144
Sales for resale - non-affiliates 1,430,908 1,550,018 1,775,703
Sales for resale - affiliates 1,208,771 1,236,223 1,435,558
- ---------------------------------------------------------------------------------------------------------------
Total 10,801,514 10,648,557 10,986,405
===============================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.54 6.69 6.48
Commercial 5.62 5.75 5.59
Industrial 4.19 4.36 4.18
Total retail 5.65 5.80 5.59
Sales for resale 3.57 3.55 3.50
Total sales 5.14 5.21 4.98
Average Annual Kilowatt-Hour Use Per Residential Customer 13,553 13,320 13,173
Average Annual Revenue Per Residential Customer $886.66 $891.38 $853.86
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174
Maximum Peak-Hour Demand (megawatts):
Winter 1,533 1,418 1,310
Summer 1,828 1,740 1,778
Annual Load Factor (percent) 55.0 57.0 55.2
Plant Availability - Fossil-Steam (percent) 91.2 92.2 89.2
- ---------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 87.7 82.0 69.8
Oil and gas 0.1 0.1 0.5
Purchased power -
From non-affiliates 0.8 0.5 0.6
From affiliates 11.4 17.4 29.1
- ---------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
===============================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,347 10,636 10,765
Cost of fuel per million BTU (cents) 200.30 203.60 206.06
Average cost of fuel per net kilowatt-hour generated (cents) 2.07 2.17 2.22
===============================================================================================================
</TABLE>
<PAGE>
32B
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1995 Annual Report
<S> <C> <C> <C>
================================================================================================================
1989 1988 1987
- ----------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $203,781 $184,036 $199,701
Commercial 118,897 107,615 116,057
Industrial 84,671 72,634 80,295
Other 1,586 1,402 1,357
- ----------------------------------------------------------------------------------------------------------------
Total retail 408,935 365,687 397,410
Sales for resale - non-affiliates 67,554 117,466 134,456
Sales for resale - affiliates 39,244 48,277 55,955
- ----------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 515,733 531,430 587,821
Other revenues 12,088 19,397 39
- ----------------------------------------------------------------------------------------------------------------
Total $527,821 $550,827 $587,860
================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 3,293,750 3,154,541 3,055,041
Commercial 2,169,497 2,088,598 1,986,332
Industrial 2,094,670 1,968,091 1,839,931
Other 17,209 16,257 15,241
- ----------------------------------------------------------------------------------------------------------------
Total retail 7,575,126 7,227,487 6,896,545
Sales for resale - non-affiliates 1,640,355 1,911,759 2,138,390
Sales for resale - affiliates 1,461,036 2,326,238 2,689,487
- ----------------------------------------------------------------------------------------------------------------
Total 10,676,517 11,465,484 11,724,422
================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.19 5.83 6.54
Commercial 5.48 5.15 5.84
Industrial 4.04 3.69 4.36
Total retail 5.40 5.06 5.76
Sales for resale 3.44 3.91 3.94
Total sales 4.83 4.64 5.01
Average Annual Kilowatt-Hour Use Per Residential Customer 13,173 12,883 12,763
Average Annual Revenue Per Residential Customer $815.00 $751.60 $834.31
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,174 2,174 2,174
Maximum Peak-Hour Demand (megawatts):
Winter 1,814 1,395 1,354
Summer 1,691 1,613 1,617
Annual Load Factor (percent) 52.6 56.5 54.4
Plant Availability - Fossil-Steam (percent) 89.1 88.2 92.8
- ----------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 78.3 93.2 93.5
Oil and gas 0.2 0.4 0.4
Purchased power -
From non-affiliates 0.4 0.4 0.4
From affiliates 21.1 6.0 5.7
- ----------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
================================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,621 10,461 10,512
Cost of fuel per million BTU (cents) 193.70 178.00 197.53
Average cost of fuel per net kilowatt-hour generated (cents) 2.06 1.86 2.08
================================================================================================================
</TABLE>
<PAGE>
32C
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA (continued)
Gulf Power Company 1995 Annual Report
<S> <C> <C>
===========================================================================================
1986 1985
- ------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
Residential $200,725 $186,415
Commercial 116,253 109,631
Industrial 79,873 81,621
Other 1,343 1,346
- ------------------------------------------------------------------------------------------
Total retail 398,194 379,013
Sales for resale - non-affiliates 106,892 126,789
Sales for resale - affiliates 27,113 43,844
- ------------------------------------------------------------------------------------------
Total revenues from sales of electricity 532,199 549,646
Other revenues 10,720 12,422
- ------------------------------------------------------------------------------------------
Total $542,919 $562,068
==========================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 2,963,502 2,736,432
Commercial 1,913,139 1,777,418
Industrial 1,745,074 1,770,587
Other 14,903 14,702
- ------------------------------------------------------------------------------------------
Total retail 6,636,618 6,299,139
Sales for resale - non-affiliates 1,609,146 2,388,591
Sales for resale - affiliates 1,078,500 1,562,452
- ------------------------------------------------------------------------------------------
Total 9,324,264 10,250,182
==========================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.77 6.81
Commercial 6.08 6.17
Industrial 4.58 4.61
Total retail 6.00 6.02
Sales for resale 4.99 4.32
Total sales 5.71 5.36
Average Annual Kilowatt-Hour Use Per Residential Customer 12,729 12,221
Average Annual Revenue Per Residential Customer $862.16 $832.55
Plant Nameplate Capacity Ratings (year-end) (megawatts) 1,969 1,969
Maximum Peak-Hour Demand (megawatts):
Winter 1,406 1,517
Summer 1,678 1,448
Annual Load Factor (percent) 50.5 53.4
Plant Availability - Fossil-Steam (percent) 90.5 84.8
- ------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 85.8 79.7
Oil and gas 0.5 0.2
Purchased power -
From non-affiliates 1.9 0.4
From affiliates 11.8 19.7
- ------------------------------------------------------------------------------------------
Total 100.0 100.0
==========================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,639 10,609
Cost of fuel per million BTU (cents) 239.26 254.53
Average cost of fuel per net kilowatt-hour generated (cents) 2.55 2.70
==========================================================================================
</TABLE>
