|
|
|
|
|
|
|
|
|
|
Previous: MONMOUTH REAL ESTATE INVESTMENT CORP, 10-Q, 1995-05-12 |
Next: MDU RESOURCES GROUP INC, 10-Q, 1995-05-12 |
Page 1 of 14
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter ended March 31, 1995
Commission File Number 1-5164
MONONGAHELA POWER COMPANY
(Exact name of registrant as specified in its charter)
Ohio 13-5229392
(State of Incorporation) (I.R.S. Employer Identification No.)
1310 Fairmont Avenue, Fairmont, West Virginia 26554
Telephone number 304-366-3000
The registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months and (2) has been subject to such filing requirements for the past 90
days.
At May 12, 1995, 5,891,000 shares of the common stock ($50 par value) of
the registrant were outstanding, all of which is held by Allegheny Power
System, Inc., the Company's parent.
<PAGE>
- 2 -
MONONGAHELA POWER COMPANY
Form 10-Q for Quarter Ended March 31, 1995
__________________________________________
Index
_____
Page
No.
____
PART I - FINANCIAL INFORMATION:
______________________________
Statement of income -
Three months ended March 31, 1995 and 1994 3
Balance sheet -
March 31, 1995 and December 31, 1994 4
Statement of cash flows -
Three months ended March 31, 1995 and 1994 5
Notes to financial statements 6 - 7
Management's discussion and analysis of financial condition
and results of operations 8 - 12
PART II - OTHER INFORMATION 13 - 14
___________________________
<PAGE>
- 3 -
MONONGAHELA POWER COMPANY
Statement of Income
_________________________
<TABLE>
<CAPTION>
Three Months Ended
March 31
__________________
1995 1994
____ ____
(Thousands of Dollars)
ELECTRIC OPERATING REVENUES:
<S> <C> <C>
Residential $ 56,818 $ 56,386
Commercial 31,736 29,551
Industrial 54,486 50,571
Nonaffiliated utilities 23,177 27,182
Other, including affiliates 21,485 24,219
________ ________
Total Operating Revenues 187,702 187,909
________ ________
OPERATING EXPENSES:
Operation:
Fuel 35,235 42,811
Purchased power and exchanges, net 45,149 45,259
Deferred power costs, net 6,512 3,603
Other 18,782 17,355
Maintenance 18,830 17,909
Depreciation 14,488 14,759
Taxes other than income taxes 9,817 10,841
Federal and state income taxes 12,213 11,078
________ ________
Total Operating Expenses 161,026 163,615
________ ________
Operating Income 26,676 24,294
________ ________
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 39 569
Other income, net 2,179 1,831
________ ________
Total Other Income and Deductions 2,218 2,400
________ ________
Income Before Interest Charges 28,894 26,694
________ ________
INTEREST CHARGES:
Interest on long-term debt 8,888 8,738
Other interest 750 798
Allowance for borrowed funds used during
construction (214) (422)
________ ________
Total Interest Charges 9,424 9,114
________ ________
Income Before Cumulative Effect of Accounting Change 19,470 17,580
Cumulative Effect of Accounting Change, Net - 7,945
________ ________
NET INCOME $ 19,470 $ 25,525
________ ________
________ ________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- 4 -
MONONGAHELA POWER COMPANY
Balance Sheet
_________________________
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
________ ___________
ASSETS: (Thousands of Dollars)
Property, Plant, and Equipment:
At original cost, including $34,381,000 and
<S> <C> <C>
$35,856,000 under construction $1,778,535 $1,763,533
Accumulated depreciation (713,669) (701,271)
__________ __________
1,064,866 1,062,262
__________ __________
Investments:
Allegheny Generating Company - common stock at equity 59,494 60,137
Other 487 509
__________ __________
59,981 60,646
__________ __________
Current Assets:
Cash 120 132
Accounts receivable:
Electric service, net of $1,939,000 and $1,912,000
uncollectible allowance 63,918 62,631
Affiliated and other 7,920 9,483
Materials and supplies - at average cost:
Operating and construction 25,593 24,563
Fuel 23,391 23,678
Prepaid taxes 13,026 17,599
Other 6,904 7,180
__________ __________
140,872 145,266
__________ __________
Deferred Charges:
Regulatory assets 187,753 186,109
Unamortized loss on reacquired debt 11,317 11,500
Other 9,557 10,700
__________ __________
208,627 208,309
__________ __________
Total Assets $1,474,346 $1,476,483
__________ __________
__________ __________
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common stock $ 294,550 $ 294,550
Other paid-in capital 2,517 2,517
Retained earnings 203,820 198,626
__________ __________
500,887 495,693
Preferred stock - not subject to mandatory redemption 114,000 114,000
Long-term debt 451,704 470,131
__________ __________
1,066,591 1,079,824
__________ __________
Current Liabilities:
Short-term debt 24,789 39,470
Long-term debt due within 1 year 18,500 -
Accounts payable 20,572 31,871
Accounts payable to affiliates 5,261 6,021
Taxes accrued:
Federal and state income 15,764 118
Other 14,393 20,193
Interest accrued 10,537 10,927
Other 23,308 16,455
__________ __________
133,124 125,055
__________ __________
Deferred Credits and Other Liabilities:
Unamortized investment credit 24,198 24,734
Deferred income taxes 220,916 216,264
Regulatory liabilities 18,748 19,974
Other 10,769 10,632
__________ __________
274,631 271,604
__________ __________
Total Capitalization and Liabilities $1,474,346 $1,476,483
__________ __________
__________ __________
See the accompanying notes to financial statements.
</TABLE>
<PAGE>
- 5 -
MONONGAHELA POWER COMPANY
Statement of Cash Flows
_________________________
<TABLE>
<CAPTION>
Three Months Ended
March 31
___________________
1995 1994
____ ____
(Thousands of Dollars)
CASH FLOWS FROM OPERATIONS:
<S> <C> <C>
Net income $ 19,470 $ 25,525
Depreciation 14,488 14,759
Deferred investment credit and income taxes, net 448 (2,088)
Deferred power costs, net 6,512 3,603
Unconsolidated subsidiaries' dividends in excess of earnings 666 502
Allowance for other than borrowed funds used during construction (39) (569)
Cumulative effect of an accounting change before income taxes - (13,279)
Changes in certain current assets and liabilities:
Accounts receivable, net, excluding cumulative effect of
accounting change 276 (4,653)
Materials and supplies (743) (610)
Accounts payable (12,059) (7,473)
Taxes accrued 9,846 11,674
Interest accrued (390) (144)
Other, net 8,435 7,571
________ ________
46,910 34,818
________ ________
CASH FLOWS FROM INVESTING:
Construction expenditures (18,005) (19,937)
Allowance for other than borrowed funds used
during construction 39 569
________ ________
(17,966) (19,368)
________ ________
CASH FLOWS FROM FINANCING:
Issuance of long-term debt - 971
Short-term debt, net (14,681) (1,828)
Dividends on capital stock:
Preferred stock (2,081) (1,115)
Common stock (12,194) (13,490)
________ ________
(28,956) (15,462)
________ ________
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS $ (12) $ (12)
Cash and Temporary Cash Investments at January 1 132 135
________ ________
Cash and Temporary Cash Investments at March 31 $ 120 $ 123
________ ________
________ ________
Supplemental cash flow information:
Cash paid during the quarter for:
Interest (net of amount capitalized) $ 9,519 $ 8,967
Income taxes - -
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- 6 -
MONONGAHELA POWER COMPANY
Notes to Financial Statements
_____________________________
1. The Company's Notes to Financial Statements in the Allegheny
Power System companies' combined Annual Report on Form 10-K
for the year ended December 31, 1994, should be read with the
accompanying financial statements and the following notes.
With the exception of the December 31, 1994 balance sheet in
the aforementioned annual report on Form 10-K, the
accompanying financial statements appearing on pages 3 through
5 and these notes to financial statements are unaudited. In
the opinion of the Company, such financial statements together
with these notes thereto contain all adjustments (which
consist only of normal recurring adjustments) necessary to
present fairly the Company's financial position as of
March 31, 1995, and the results of operations and cash flows
for the three months ended March 31, 1995 and 1994.
2. The Statement of Income reflects the results of past
operations and is not intended as any representation as to
future results. For purposes of the Balance Sheet and
Statement of Cash Flows, temporary cash investments with
original maturities of three months or less, generally in the
form of commercial paper, certificates of deposit, and
repurchase agreements, are considered to be the equivalent of
cash.
3. Earnings for the first quarter of 1994 have been restated to
reflect retroactively the cumulative effect of an accounting
change adopted in January 1994 to record unbilled revenues.
4. The Company owns 27% of the common stock of Allegheny
Generating Company (AGC), and affiliates of the Company own
the remainder. AGC owns an undivided 40% interest, 840 MW, in
the 2,100-MW pumped-storage hydroelectric station in Bath
County, Virginia operated by the 60% owner, Virginia Power
Company, a nonaffiliated utility. Following is a summary of
income statement information for AGC:
<TABLE>
<CAPTION>
Three Months Ended
March 31
___________________
1995 1994
____ ____
(Thousands of Dollars)
<S> <C> <C>
Electric operating revenues $22,096 $22,431
_______ _______
Operation and maintenance expense 1,796 1,833
Depreciation 4,224 4,236
Taxes other than income taxes 1,299 1,340
Federal income taxes 3,223 3,513
Interest charges 4,985 4,426
Other income, net - (2)
_______ _______
Net income $ 6,569 $ 7,085
_______ _______
_______ _______
</TABLE>
<PAGE>
- 7 -
The Company's share of the equity in earnings above was
$1.8 million and $1.9 million for the three months ended
March 31, 1995 and 1994, respectively, and was included in
other income, net, on the Statement of Income.
5. Common stock dividends per share declared and paid during the
periods for which income statements are included are as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
______________________
1995 1994
____ ____
<S> <C> <C>
Number of Shares 5,891,000 5,891,000
Amount per Share $2.07 $2.29
</TABLE>
Earnings per share are not reported inasmuch as the common
stock of the Company is 100% owned by its parent, Allegheny
Power System, Inc.
<PAGE>
- 8 -
MONONGAHELA POWER COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
___________________________________________________________
COMPARISON OF FIRST QUARTER OF 1995 WITH FIRST QUARTER OF 1994
NET INCOME
Net income for the first quarter of 1995 was $19.5
million compared with $17.6 million for the corresponding 1994 period,
before the cumulative effect of an accounting change to record unbilled
revenues. Increased retail revenues in the first quarter of 1995,
resulting from previously reported rate increases, more than offset the
effect of a decrease in retail sales due to mild weather.
SALES AND REVENUES
Retail kilowatthour (kWh) sales to residential
customers decreased 6% and sales to commercial and industrial customers
increased 2% and 3%, respectively. The decrease in kWh sales to
residential customers was primarily due to a decrease in weather-related
sales. Mild temperatures in the first quarter of 1995 resulted in below
normal heating degree days, as compared to some of the coldest
temperatures ever recorded in much of the Company's service territory
during the first quarter of 1994. The increase in kWh sales to industrial
customers was primarily due to higher sales to chemical and iron and steel
customers. The 5% increase in revenues from retail customers resulted
from the following:
<TABLE>
<CAPTION>
Change from Prior Period
________________________
(Millions of Dollars)
<S> <C>
Decreased kWh sales $(1.3)
Fuel and energy cost adjustment clauses(1) (.4)
Rate increases(2) 8.2
_____
$ 6.5
_____
_____
</TABLE>
(1) Changes in revenues from fuel and energy cost
adjustment clauses have little effect on net income.
(2) Reflects a base rate increase in West Virginia of
$23.5 million on an annual basis effective
November 16, 1994. This is in addition to
$6.9 million of Clean Air Act Amendments of 1990
(CAAA) recovery granted effective July 1, 1994, in
West Virginia. These rate increases included
recovery of carrying charges on investment,
depreciation, and operating costs required to comply
with Phase I of the CAAA in West Virginia, and other
increasing levels of expense. See page 11 for
further information on the West Virginia rate case.
<PAGE>
- 9 -
KWh sales to and revenues from nonaffiliated utilities are
comprised of the following items:
<TABLE>
<CAPTION>
Three Months Ended
March 31
_____________________
1995 1994
____ ____
KWh sales (in billions):
<S> <C> <C>
From Company generation .1 .1
From purchased power .7 .8
_____ _____
.8 .9
_____ _____
_____ _____
Revenues (in millions):
From Company generation $ 1.1 $ 3.0
From sales of purchased power 22.1 24.2
_____ _____
$23.2 $27.2
_____ _____
_____ _____
</TABLE>
Decreased sales to nonaffiliated utilities resulted primarily from
decreased demand, continuing price competition, and generating unit
outages which reduced the amount available for sale.
The decrease in other revenues resulted primarily from a decrease
in sales of energy and spinning reserve to other affiliated companies.
About 90% of the aggregate benefits from sales to affiliated and
nonaffiliated utilities is passed on to retail customers and has little
effect on net income.
OPERATING EXPENSES
Fuel expenses decreased 18%, due primarily to a 10% decrease in kWh
generated and a 7% decrease in average coal prices. The reduced average
coal prices are expected to continue as a result of renegotiations of
long-term fuel contracts which reduced fuel prices effective January 1995.
Fuel expenses are primarily subject to deferred power cost accounting
procedures with the result that changes in fuel expenses have little
effect on net income.
"Purchased power and exchanges, net" represents power purchases
from and exchanges with nonaffiliated utilities and qualified facilities
under the Public Utility Regulatory Policies Act of 1978 (PURPA), capacity
charges paid to Allegheny Generating Company (AGC), and other transactions
with affiliates made pursuant to a power supply agreement whereby each
company uses the most economical generation available in the Allegheny
Power System at any given time, and is comprised of the following items:
<PAGE>
- 10 -
<TABLE>
<CAPTION>
Three Months Ended
March 31
_________________
1995 1994
____ ____
(Millions of Dollars)
Nonaffiliated transactions:
Purchased power:
<S> <C> <C>
For resale to other utilities $19.7 $21.4
From PURPA generation 16.8 14.5
Other 2.3 3.2
Power exchanges, net .8 .8
Affiliated transactions:
AGC capacity charges 5.2 5.3
Energy and spinning reserve charges .3 .1
_____ _____
$45.1 $45.3
_____ _____
_____ _____
</TABLE>
The amount of power purchased from nonaffiliated utilities for
use by the Company and for resale to nonaffiliated utilities depends upon
the availability of the Company's generating equipment, transmission
capacity, and fuel, and its cost of generation and the cost of operations
of nonaffiliated utilities from which such purchases are made. The cost
of power and capacity purchased for use by the Company, including power
from PURPA generation and affiliated transactions, is mostly recovered
from customers currently through the regular fuel and energy cost recovery
procedures followed by the Company's regulatory commissions and is
primarily subject to deferred power cost procedures with the result that
changes in such costs have little effect on net income.
The increase in other operation expense resulted primarily from
increases in employee benefit costs and salaries and wages, and increased
power station operating costs, including expenses related to the Harrison
scrubbers which became available for service in November 1994, offset in
part by environmental liabilities recorded in the first quarter of 1994.
Maintenance expenses represent costs incurred to maintain the
power stations, the transmission and distribution (T&D) system, and
general plant, and reflect routine maintenance of equipment and rights-of-
way as well as planned major repairs and unplanned expenditures, primarily
from forced outages at the power stations and periodic storm damage on the
T&D system. The Company is also experiencing, and expects to continue to
experience, increased expenditures due to the aging of its power stations.
Variations in maintenance expense result primarily from unplanned events
and planned major projects, which vary in timing and magnitude depending
upon the length of time equipment has been in service without a major
overhaul and the amount of work found necessary when equipment is
dismantled.
The decrease in depreciation expense was the net result of a
decrease in depreciation rates in West Virginia concurrent with the West
Virginia base rate increase effective in November 1994, offset by
additions to electric plant, primarily because of the Harrison scrubbers
which became available for service in November 1994.
<PAGE>
- 11 -
Taxes other than income taxes decreased $1.0 million primarily
from a decrease in West Virginia Business and Occupation taxes (B&O
taxes). West Virginia B&O taxes are expected to continue to decrease in
future years due to an amendment to the B&O tax recently enacted by the
State of West Virginia effective June 1, 1995, which reduces the Company's
tax liability. The net increase of $1.1 million in federal and state
income taxes resulted primarily from an increase in income before taxes.
The combined decrease of $.7 million in allowance for funds used
during construction (AFUDC) reflects a decrease in capital expenditures
upon substantial completion of Phase I of the CAAA.
Fluctuations in other interest expense as well as other income,
net, reflect changes in the levels of temporary investments and short-term
debt maintained by the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's discussion on Liquidity and Capital Resources in
the Allegheny Power System companies' combined Annual Report on Form 10-K
for the year ended December 31, 1994, should be read with the following
information.
In March 1995, the Public Service Commission of West Virginia
(PSC) issued an order in the rate case filed by the Company that
authorized recovery of certain post-1994 costs associated with the
scrubbers at the Harrison Power Station through the energy cost recovery
procedure rather than base rates, and upheld the recommendation by an
Administrative Law Judge that a 10.85% return on equity (ROE) was
reasonable. The Company has petitioned the West Virginia Supreme Court of
Appeals to review the PSC's order as to various issues, including the low
ROE allowed.
In the normal course of business, the Company is subject to
various contingencies and uncertainties relating to its operations and
construction programs, including cost recovery in the regulatory process,
laws, regulations and uncertainties related to environmental matters, and
legal actions.
As previously reported, the Company is currently named as a
defendant along with multiple other affiliated and nonaffiliated
defendants in 2,766 pending asbestos cases involving one or more
plaintiffs, including 425 new cases filed in 1995 to date. While the
cumulative number of claims appears to be significant, previous cases have
been settled for an amount substantially less than the anticipated cost of
defense. Also as previously reported, the Company and its affiliates and
approximately 875 others have been identified by the Environmental
Protection Agency as potentially responsible parties in a superfund site
subject to cleanup. The Company believes that provisions for liabilities
and insurance recoveries are such that final resolution of these matters
will not have a material effect on its financial position.
<PAGE>
- 12 -
In March 1995, the Federal Energy Regulatory Commission (FERC)
published a Notice of Proposed Rulemaking (NOPR) that would mandate
sweeping changes to promote increased competition in the wholesale
electric industry. The proposals would require that utilities file
nondiscriminatory open access transmission tariffs and offer comparable
transmission services to eligible third parties. It also would allow
utilities the opportunity to recover stranded costs. The Company is
currently examining the effects of the NOPR on the System and the entire
electric utility industry, and plans to submit comments to the FERC.
<PAGE>
- 13 -
MONONGAHELA POWER COMPANY
Part II-Other Information to Form 10-Q
for Quarter Ended March 31, 1995
______________________________________
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER
_______ __________________________________________________
1. (a) Date and Kind of Meeting:
The annual meeting of shareholders was held
at Fairmont, West Virginia, on April 17,
1995. No proxies were solicited.
(b) Election of Directors:
The holder of all 5,891,000 shares of common
stock voted to elect the following Directors
of the Company to hold office until the next
annual meeting of shareholders and until
their successors are duly chosen and
qualified:
Eleanor Baum Frank A. Metz, Jr.
William L. Bennett Alan J. Noia
Klaus Bergman Jay S. Pifer
Stanley I. Garnett, II Steven H. Rice
Wendell F. Holland Gunnar E. Sarsten
Phillip E. Lint Peter L. Shea
Edward H. Malone Peter J. Skrgic
ITEM 5. OTHER INFORMATION
_______ _________________
On May 2, 1995, Washington Power Company, LP, the
developer of the Burgettstown PURPA project, filed suit in federal court
in the Western District of Pennsylvania against the West Penn Power
Company, Allegheny Power System, Inc., and Allegheny Power Service
Corporation, affiliates of the Company, alleging antitrust violations,
unfair competition, breach of contract and intentional interference with a
contract. The lawsuit seeks recovery of lost profits and out-of-pocket
costs as well as treble and punitive damages. The companies cannot
predict the outcome of this proceeding. In May 1995, the complaint filed
in November 1994 by Washington Power Company, LP against West Penn in the
Court of Common Pleas of Washington County, Pennsylvania, was dismissed
without prejudice.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
_______ ________________________________
(a) Exhibits
27 Financial Data Schedule
(b) On February 15, 1995, the Company filed a
Form 8-K containing an Employment Contract for
Jay S. Pifer.
<PAGE>
- 14 -
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.
MONONGAHELA POWER COMPANY
May 12, 1995 RICHARD E. MYERS
_________________________
Richard E. Myers,
Comptroller
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 120
<SECURITIES> 0
<RECEIVABLES> 73,777
<ALLOWANCES> 1,939
<INVENTORY> 48,984
<CURRENT-ASSETS> 140,872
<PP&E> 1,778,535
<DEPRECIATION> 713,669
<TOTAL-ASSETS> 1,474,346
<CURRENT-LIABILITIES> 133,124
<BONDS> 451,704
<COMMON> 294,550
0
114,000
<OTHER-SE> 206,337
<TOTAL-LIABILITY-AND-EQUITY> 1,474,346
<SALES> 187,702
<TOTAL-REVENUES> 187,702
<CGS> 124,508
<TOTAL-COSTS> 148,813
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,424
<INCOME-PRETAX> 31,683
<INCOME-TAX> 12,213
<INCOME-CONTINUING> 19,470
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,470
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>All common stock is owned by Parent. No EPS required.
</FN>
</TABLE>
|
|